10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO

SECTIONS 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

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

For the fiscal year ended December 31, 2007

or

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

Commission File Number: 000-24539

ECLIPSYS CORPORATION

(Exact name of registrant as specified in its charter)

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

Three Ravinia Drive

Atlanta, Georgia

30346

(Address of principal executive offices)

(404) 847-5000

(Registrant’s telephone number, including area code)

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

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $.01 par value, and	The NASDAQ Stock Market LLC
Preferred Stock Purchase Rights	(NASDAQ Global Select)

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

None

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

Yes  ¨    No  þ    

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

Yes  ¨    No  þ    

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

Yes  þ    No  ¨    

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

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

Large accelerated filer  þ    Accelerated filer  ¨    Non-accelerated filer  ¨    Smaller reporting company  ¨    

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

Yes  ¨    No  þ    

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2007 based upon the closing price of the Common Stock on the NASDAQ Global Select Market for such date was $951,756,676.

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 February 25, 2008
Common Stock, $0.01 par value	53,996,260

Part I

This report contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about our company and our industry. These statements are not guarantees of future performance and actual outcomes may differ materially from what is expressed or forecasted. When used in this report, the words “may,” “will,” “should,” “predict,” “continue,” “plans,” “expects,” “anticipates,” “estimates,” “intends,” “believe,” “could,” and similar expressions are intended to identify forward-looking statements. These statements may include, but are not limited to, statements concerning our anticipated performance, including revenue, margin, cash flow, balance sheet and profit expectations; development and implementation of our software; duration, size, scope and revenue expectations associated with client contracts; business mix; sales and growth in our client base; market opportunities; industry conditions; 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, including those described in this report under the heading “Risk Factors” and in our other filings we make from time to time with the U.S. Securities and Exchange Commission. Except as required by law, 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.

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

Item 1. Business

Overview

Eclipsys is a leading provider of advanced integrated clinical, revenue cycle and access management software, and professional services that help healthcare organizations improve their clinical, financial, operational and patient satisfaction outcomes. We develop and license proprietary software and clinical content that is designed for use in connection with many of the key clinical, financial and operational functions that healthcare organizations require. Among other things, our software enables physicians, nurses and other clinicians to coordinate care through a shared electronic medical record, place orders and access and share information about patients. Our software also helps clients optimize the healthcare revenue cycle, including patient admissions, scheduling, invoicing, inventory control and cost accounting. It also supports records maintenance and assessment of the profitability of specific medical procedures and personnel. Clinical content, which is integrated with our software, provides evidence-based guidelines for use by physicians, nurses and other clinicians.

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

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

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

Available Information

Our website address is www.eclipsys.com. We make available free of charge, on or through our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the U.S. Securities and Exchange Commission or SEC. The information on our website is not incorporated into this annual report. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549. These filings can also be accessed at the SEC’s website address at www.sec.gov. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

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

Segments

Eclipsys operates in one segment, as further described in Note 2, “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements.

Recent Developments

Software

We delivered Release 5.0 of Sunrise Clinical Manager™ and Sunrise Access Manager™ as part of the Sunrise Enterprise™ solution suite in late December 2007. Sunrise Enterprise is the Eclipsys suite of enterprise solutions that help our clients improve their clinical, financial, operational and patient-satisfaction outcomes across the healthcare continuum. The underlying Eclipsys XA™ architecture and ObjectsPlus/XA™ application development technology integrate clinical, access and financial solutions.

Release 5.0 contains significant incremental features that continue to enhance the capabilities of our offerings in all major clinical areas. The release includes integrated end-to-end order reconciliation capabilities, and incremental functionality in Sunrise Emergency Care™, Sunrise Ambulatory Care™, Sunrise Acute Care™, Sunrise Critical Care™, Sunrise Access Manager, Sunrise Enterprise Registration™, Sunrise Enterprise Scheduling™ and our business intelligence platform, Sunrise Analytics™. Sunrise Access Manager is now delivered on the same XA architecture as Sunrise Clinical Manager™, connecting revenue-cycle and clinical processes. XA is the open, scalable platform for the Sunrise Enterprise solution set. XA enables solutions based on its platform to be easier to integrate with other systems, more customizable to meet a client organization’s unique needs, and more cost-effective to maintain. Additionally, we have added a Web-based portal framework called Sunrise Clinician Portal™, providing clinicians with remote access to our software. Release 5.0 also enables healthcare providers to go beyond medication reconciliation to improve patient safety throughout the care process. The new orders reconciliation capability allows caregivers to reconcile all orders related to a patient’s care at all handoffs between caregivers and units, as well as admission and discharge.

Sale of Assets

In December 2007, as part of our strategy to expand and enhance content integration in Sunrise Knowledge-Based Charting™ and our other Sunrise Clinical Manager™ integrated solutions, we sold our Clinical Practice Model Resource Center (“CPMRC”) to Elsevier Inc. (“Elsevier”), a publisher of scientific, technical and health information products and services. The Company continues to include CPMRC content in its Sunrise Knowledge-Based Charting solution, in exchange for license fees payable to Elsevier. In addition, Elsevier will take over responsibility for maintenance and consulting services related to the CPMRC content, so our clients will have continuity in their relationships with the CPMRC professionals who perform those services. Going forward, the clinical content embedded within the Company’s Knowledge-Based Charting will continue to be enhanced through an ongoing strategic relationship between the Company and Elsevier.

Initiatives and Challenges for 2008

Eclipsys just released version 5.0 of Sunrise Clinical Manager and Sunrise Access Manager, part of the Sunrise Enterprise solution suite. We plan to implement this new release at several client sites in 2008. If our new software does not continue to achieve market acceptance, we experience any significant delays in implementing our new releases, or the software does not function as expected, our results of operations could be negatively affected, including a delay or loss in closing future new sales transactions.

Historically, Eclipsys has been perceived by the market primarily as a vendor of clinical solutions, including Computerized Physician Order Entry (CPOE), despite our strong revenue cycle offerings and experience. In 2008, we have launched a company-wide campaign to expand Eclipsys’ capabilities and brand name recognition as a provider of enterprise solutions that include integrated clinical, revenue cycle, and access management software, and professional services that help healthcare organizations improve their clinical, financial, operational and patient satisfaction outcomes. We believe the success of this initiative is important to our growth because we anticipate increased demand for revenue cycle and access management software, particularly integrated with clinical software. If we are not credible as a provider of these integrated solutions, our competitiveness may suffer.

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We are focused on expanding our international business, including our operations in India and sales of our solutions in other parts of the world, such as the Asia-Pacific region and the Middle East. We achieved some initial success with our sale to SingHealth, the largest healthcare provider in Singapore, which selected Eclipsys Sunrise Clinical Manager as its electronic medical record platform, replacing its legacy clinical system. These initiatives are important to our ability to increase our development and client support capabilities in a high-quality and cost-effective manner, and to grow our business, and we expect to face challenges building brand-name recognition as we enter new international markets.

Healthcare Industry Factors

Healthcare organizations are under increased pressure to reduce medical errors and increase operational efficiencies. Our software and services are designed to help clients achieve these objectives. Government regulation is also requiring changes within the healthcare industry. We believe that these changes may increase demand for healthcare information technology software and services such as ours.

Centers for Medicare and Medicaid Services. In August 2007, the Centers for Medicare and Medicaid Services in the U.S. published the Fiscal Year 2008 Inpatient Prospective Payment System Final Rule identifying several “hospital-acquired conditions” the treatment for which will no longer be reimbursed by Medicare, starting in October 2008.

This new rule implements a provision of the Deficit Reduction Act of 2005 that aims to eliminate reimbursement for the treatment of these hospital-acquired conditions, unless the condition was present on admission. Starting in October 2008, Medicare claims that do not report secondary diagnoses that are present on admission will be returned to the hospital for correct submission of present on admission information. In order to avoid significant delays in Medicare reimbursement, hospitals must make significant changes to their admission and claims-submission procedures. If this hospital-acquired condition rule proves effective, private insurers are likely to implement similar guidelines. Eclipsys has developed and made available four Outcomes Toolkits that provide our clients proven methods of using our solutions effectively to improve outcomes in defined areas. We believe these toolkits will help our clients measure, reduce and report their incidence of hospital-acquired conditions, so our clients can reduce incidence of conditions that will soon be unreimbursed.

CCHIT. The U.S. Department of Health & Human Services initiatives have, among other things, led to the creation of the private-sector Certification Commission for Health Information Technology, or CCHIT, which consists of 15 commissioners from across the healthcare industry and is the recognized certification body in the United States for certifying health information technology products. CCHIT develops a set of private sector determined criteria for electronic health record functionality, interoperability, reliability and security, and is inspecting electronic health record software to determine its performance against these criteria. Eclipsys’ Sunrise Ambulatory Care™ 4.5 met CCHIT’s ambulatory electronic health record criteria for 2006, and is currently undergoing evaluation for certification on 2007 criteria.

In November 2007, we announced that Eclipsys’ Sunrise Acute Care release 4.5 Service Pack 4 is certified by CCHIT and meets the newly launched inpatient electronic health record criteria for 2007. Inpatient electronic health records are designed for use in acute care hospitals. It is not yet clear what effect CCHIT and decisions by vendors like us regarding whether and when to conform to CCHIT standards for various software modules will be, however we expect conformity to CCHIT standards to require significant and increasing investment.

Recognition of certain Interoperability Specifications of the Healthcare Information Technology Standards Panel. In January 2008, the U.S. Department of Health & Human Services recognized certain Interoperability Specifications of the Healthcare Information Technology Standards Panel, or HITSP, including electronic health record laboratory results reporting, biosurveillance and consumer empowerment. As a result, federal agencies will be required to appropriately consider health information technology systems and products that comply with these Interoperability Specifications when purchasing, implementing, or upgrading such items.

These HITSP specifications are expected to be added to CCHIT criteria in 2008 and 2009, requiring all electronic health record vendors to comply with these standards in order to obtain certification. This will further increase the research and development and administrative investments required to meet the CCHIT criteria.

Health Insurance Portability and Accountability Act. The U.S. Health Insurance Portability and Accountability Act of 1996 or HIPAA, seeks to impose national health data standards on covered entities. Under HIPAA, a covered entity includes (i) healthcare providers that conduct electronic health transactions; (ii) healthcare clearinghouses that convert health data between HIPAA-compliant and non-compliant formats; and (iii) health plans. The HIPAA standards prescribe, among other things, transaction formats and code sets for electronic health transactions, in order to protect individual privacy by limiting the uses and disclosure of individually identifiable health information. HIPAA also requires covered entities to implement administrative, physical and technological safeguards to ensure the confidentiality, integrity, availability and security of individually identifiable health information in electronic form.

We believe that the need for software that helps healthcare organizations become HIPAA compliant and maintain HIPAA compliance will continue to create demand for software and services such as ours. While we are not a covered entity under HIPAA, it does apply to many of our clients. Accordingly, we have developed our software to facilitate HIPAA compliance.

The Joint Commission. The Joint Commission (formerly known as the Joint Commission on Accreditation of Healthcare Organizations or JCAHO) is an independent non-profit organization that provides voluntary evaluation and accreditation for more

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than 15,000 healthcare organizations in the United States. The Joint Commission periodically introduces new process improvement initiatives, standards and performance measurements that are used to assess hospitals. The Joint Commission has also established patient safety standards and each year approves annual National Patient Safety Goals that include specific recommendations for improving patient safety. Most of our clients seek to comply with The Joint Commission standards. We believe that clients use our software and services to help them meet The Joint Commission standards.

The Internet. The Internet enables consumers to be more involved in their healthcare choices, and provides increased availability of medical information to physicians, clinicians and healthcare workers. As consumers adopt web-centric lifestyles, we believe that software and services like ours will become more appealing to a wider client base.

Eclipsys Offerings

We provide the following software and services:

• Enterprise solutions that include clinical and financial software for use by healthcare organizations and clinicians;

• Outpatient (clinic and physician office) software with enterprise clinical records and independent practice management software;

• Professional services related to implementation and use of our software;

• Consulting services to help our clients improve their operations;

• IT outsourcing; and

• Remote hosting of client IT systems, including our software and third-party software.

Software

Eclipsys software provides comprehensive functionality that helps healthcare organizations and care providers address many of their key clinical, financial and operational needs. Among other things, our software is designed to:

• Integrate clinical, financial and access processes throughout the healthcare enterprise for increased quality, cost-efficiency, revenue, and client satisfaction;

• Reconcile all orders between units and venues, including ambulatory settings, for improved safety during patient handoffs, admission and discharge;

• Gather patient demographic information and support appropriate resource utilization through integrated scheduling and registration solutions;

• Improve financial performance through reduced days in accounts receivable and increased cash collections;

• Provide clinicians with access to patient information, evidence-based clinical content and supporting references, such as medical journals, as well as information regarding costs and effects of patient tests and treatments; and

• Permit simultaneous access to real-time patient information by multiple users from access points throughout the clinical environment and from remote locations.

We have been committed to building our software on, and re-engineering and migrating existing software to, an open architecture based on the Microsoft.NET Framework and other industry-standard technologies. We believe this approach allows our software to be more extensible and easier to integrate with a client’s legacy and ancillary systems, and enables healthcare organizations to continue to derive value from their existing technology investments, and add other software as functional needs and resources dictate.

Sunrise Enterprise software built upon the Eclipsys XA architecture, which is based on the Microsoft.NET Framework, shares a common database model known as a Healthcare Data Repository. The Healthcare Data Repository can be used by all components within XA-based Eclipsys software, regardless of where inside or outside the healthcare organization a physician, nurse or other healthcare team member is located. Our XA-based solutions are designed to prevent the isolation of information and duplication of functionality that can occur with other information technology systems. We believe that this approach will enable a faster, more cost-effective implementation of our software, simplify software maintenance and provide a lower total cost of ownership.

Sunrise Enterprise is the Eclipsys suite of enterprise solutions that help our clients improve their clinical, financial, operational and patient-satisfaction outcomes throughout the continuum of care. The underlying Eclipsys XA architecture and ObjectsPlus/XA application development technology integrate clinical, access and financial solutions, providing a solid foundation for improved performance across the enterprise. Sunrise Enterprise is comprised of the following clinical, access, financial and departmental solutions.

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Sunrise Clinical Manager provides a shared electronic health record platform and includes major integrated modules of Sunrise Acute Care™, Sunrise Ambulatory Care™, Sunrise Critical Care™, Sunrise Emergency Care™ and Sunrise Pharmacy™ — all of which share a common health data repository and real-time patient data. Sunrise Clinical Manager enables a physician or other authorized clinician to view patient data and enter orders quickly from any point in the enterprise, providing third-party evidence-based clinical decision support at the time of order entry.

Sunrise Access Manager ^TM, which also shares the Sunrise Clinical Manager platform and Health Data Repository, includes Sunrise Enterprise Scheduling ^TM and Sunrise Enterprise Registration ^TM. It enables healthcare providers to identify a patient at any time within a hospital and to collect and maintain patient information on an enterprise-wide basis.

Sunrise Patient Financials ^TM provides centralized enterprise-wide business office capabilities that help healthcare organizations improve financial workflows and more effectively manage their patient billing, accounts receivable, and contract management functions. This helps them reduce costs for this important function and maximize and accelerate appropriate reimbursements from patients and other parties.

Sunrise Decision Support™ integrates data from throughout the enterprise to create a clinical and financial data repository that can be used as a tool to analyze and measure clinical process and outcome data. It helps to determine the patient-level costs of care and to identify the practice patterns that result in high quality care at a low cost. It facilitates enterprise-wide cost and profitability analysis and strategic planning, modeling and forecasting.

Sunrise Record Manager™ provides comprehensive, enterprise health information management document and image-management functions. It enables healthcare organizations to effectively manage patient medical records, ranging from Joint Commission-compliance deficiency and chart completion management functions, and medical records abstracting, utilizing industry-standard encoders.

Sunrise Laboratory™ provides a comprehensive set of tools that help manage the data surrounding the testing of samples that are received in the laboratory. It is designed to streamline workflow and improve productivity, cost effectiveness and quality of the different processes within inpatient or outpatient laboratories. Sunrise Laboratory™ results are transmitted to the Sunrise Clinical Manager Health Data Repository to become part of the patient’s comprehensive electronic medical record. Sunrise Laboratory™ also has the related Sunrise Blood Bank™ solution to support the information and workflow needs of blood bank operations.

Sunrise eLink™ provides tools to enable the integration of clinical and financial data from disparate existing systems within an integrated health network.

Sunrise Radiology™, a comprehensive radiology information system, and Sunrise PACS™ picture archiving and communications system can be implemented together, separately, or part of an image-enabled clinical information system to deliver imaging data as an integrated part of the overall patient record that is accessible to clinicians at the point of care or other points of decision making using any Sunrise Enterprise-enabled device.

Services

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

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

Information Technology Outsourcing. Eclipsys provides full, partial or transitional IT outsourcing services to our clients. We assume partial to total responsibility for a healthcare organization’s IT operations using our employees and assets. These services include facilities management, by which we assume responsibility for all aspects of client internal IT operations, as well as network outsourcing, which relieves our clients of the need to secure and maintain an expensive IT infrastructure in a rapidly changing technological environment and transition management, which offers our clients a solution for migrating their IT to new processes, technologies or platforms without interfering with healthcare delivery.

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

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Sales and Marketing

Our sales and marketing efforts target healthcare providers of a variety of sizes and specialties, including small, stand-alone hospitals, large multi-entity healthcare systems, academic medical centers, community hospitals and other healthcare organizations. We sell our software and services primarily in North America and are expanding into international markets, exclusively through our direct sales force, which is structured in geographic regions, with sales staff dedicated to either new business or existing client sales. Sales teams focusing on certain specialty solution areas, such as ancillary department software (such as Pharmacy, Laboratory and Radiology), outsourcing and/or remote hosting, etc., further support the regionalized sales teams. Sales to North Shore Long Island Jewish Health System represented 10% of our revenues in 2007.

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

Seasonality

Our revenues have historically been lower in the first quarter of the year and greater in the fourth quarter of the year.

International

We commenced operations in India in 2006, through an acquisition of a small producer of laboratory software. By December 2007, our India operations, named Eclipsys (India) Private Limited, have expanded to include two offices and over 300 employees. We believe that India provides access to educated professionals to work on research development and support of our software, at an economically effective cost.

In October 2007, SingHealth, the largest healthcare provider in Singapore, selected Eclipsys Sunrise Clinical Manager as its electronic medical record platform. We are working to further expand into international markets.

Research and Development

We seek to maintain technological competitiveness and respond to market trends and our clients’ evolving needs. Our software is based on Microsoft’s .NET Framework and other industry standards. We are also creating new functionality for our existing software. We have reduced our reliance on outside vendors that have historically aided our internal personnel in software development. We use Microsoft’s Solutions Framework development methodology to gauge the quality and performance of our software development efforts. As part of these processes, we have also involved clients in our software design process, enabling them in some cases to have direct and regular access to the development staff, including its senior leadership.

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

Our spending on research and development (including capitalized software development costs) was $77.7 million, $71.9 million and $71.9 million in 2007, 2006 and 2005, respectively.

Competition

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

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

Employees

As of December 31, 2007, we had approximately 2,400 employees — 2,100 in North America and 300 in India. Our success depends significantly on our continued ability to attract and retain highly skilled and qualified personnel. Competition for such personnel is intense in our industry, particularly for software developers, implementation and service consultants and sales and marketing personnel. We cannot be assured that we will continue to attract and retain qualified personnel. Our employees are not represented by any labor unions. We consider our relations with our employees to be good.

Financial Information about Geographic Areas

Revenues from U.S. operations totaled $444.4 million, $394.5 million, and $359.3 million in 2007, 2006, and 2005, respectively. Revenues from outside the United States totaled $33.1 million, $33.1 million, and $24.0 million in 2007, 2006, and 2005, respectively. Long-lived assets in the United States totaled $133.8 million, $109.8 million, and $108.4 million in 2007, 2006, and 2005, respectively. Long-lived assets in other countries totaled $4.4 million, $3.8 million, and $2.9 million in 2007, 2006, and 2005, respectively. See Note 17 to the Consolidated Financial Statements for additional information.

ITEM 1A. RISK FACTORS

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

RISKS RELATING TO DEVELOPMENT AND OPERATION OF OUR SOFTWARE

Our software may not operate properly, which could damage our reputation and impair our sales.

Software development is time consuming, expensive and complex. Unforeseen difficulties can arise. We may encounter technical obstacles, and it is possible that we could discover additional problems that prevent our software from operating properly. If our software contains errors or does not function consistent with software specifications or client expectations, clients could assert liability claims against us and/or attempt to cancel their contracts with us. These risks are generally more significant for newer software, until it has been used for enough time in enough client locations for us to have addressed issues that are discovered through use in disparate circumstances and environments. Due to our development efforts, we generally have significant software that could be considered relatively new and therefore more vulnerable to these risks, including at present our medication management and ambulatory software, among other things. It is also possible that future releases of our software, which would typically include additional features, may be delayed or may require additional work to address issues that may be discovered as the software comes into use in our client base. If we fail to deliver software with the features and functionality promised to our clients, we could be subject to significant contractual damages, face serious harm to our reputation and our results of operations could be negatively impacted.

Our software development efforts may be inefficient or ineffective, which could adversely affect our results of operations.

We strive to develop new software, and improve our existing software 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,

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resource availability, regulatory requirements, or other factors. All of this can result in acceleration of some initiatives and delay of others. These factors place significant demands upon our software development organization and require complex planning and decision making. If we make the wrong choices or do not manage our development efforts well, we may fail to produce software that responds appropriately to our clients' needs, or we may fail to meet client expectations regarding new or enhanced features and functionality.

Market changes or mistaken development decisions could decrease the demand for our software, which could harm our business and decrease our revenues.

The healthcare information technology market is characterized by rapidly changing technologies, evolving industry standards and new software introductions and enhancements that may render existing software obsolete or less competitive. Our position in the market could erode rapidly due to the development of regulatory or industry standards that our software may not fully meet, or due to changes in the features and functions of competing software, as well as the pricing models for such software. Our future success will depend in part upon our ability to enhance our existing software and services, and to timely develop and introduce competing new software and services with features and pricing that meet changing client and market requirements. As we evolve our offering in an attempt to anticipate and meet market demand, clients and potential clients may find our software and services less appealing. If software development for the healthcare information technology market becomes significantly more expensive due to changes in regulatory requirements or healthcare industry practices, or other factors, we may find ourselves at a disadvantage to larger competitors with more financial resources to devote to development. If we are unable to enhance our existing software or develop new software to meet changing client requirements in a timely manner, demand for our software could suffer.

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

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

Any failure by us to protect our intellectual property, or any misappropriation of it, could enable our competitors to market software with similar features, which could reduce demand for our software.

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

Failure of security features of our software could expose us to significant expense and harm our reputation.

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

RISKS RELATED TO SALES AND IMPLEMENTATION OF OUR SOFTWARE

The length of our sales and implementation cycles may adversely affect our future operating results.

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 healthcare organizations, our target client market.

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Furthermore, our software generally requires significant capital expenditures by our clients. The sales cycle for our software ranges from 6 to 18 months or more from initial contact to contract execution. Our implementation cycle has generally ranged from 6 to 36 months from contract execution to completion of implementation. During the sales and implementation cycles, we will expend substantial time, effort and 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. Additionally, any decision by our clients to delay purchasing or implementing our software would likely adversely affect our revenues.

We may experience implementation delays that could harm our reputation and violate contractual commitments.

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

Implementation costs may exceed expectations, which can negatively affect our operating results.

Each client’s circumstances may include unforeseen issues that make it more difficult or costly than anticipated to implement our software. We may fail to project, price or manage our implementation services correctly. If we do not have sufficient qualified personnel to fulfill our implementation commitments in a timely fashion, related revenue may be delayed, and if we must supplement our capabilities with expensive third-party consultants, our costs will increase.

Our earnings can vary significantly depending on periodic software revenue.

Periodic software revenue include traditional license fees associated with new contracts signed in the financial reporting period, add-on licenses to existing clients and new client transactions, as well as revenue from contract backlog that had not previously been recognized pending contract performance that occurred or was completed during the period, and certain other activities during the period associated with existing client relationships. These periodic revenues generally have high margins given there are relatively little in-period costs associated with such revenues, and we therefore rely upon these revenues as an important element of our earnings in any period. These periodic revenues can fluctuate as a result of significant variations in the type and magnitude of sales and other contract and client activity in any period, and these variations make it difficult to predict the nature and amount of these periodic revenues. If periodic software revenues in any period decline from prior periods or fall short of our expectations, our earnings in that period will be adversely affected.

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

Various risks could interrupt clients’ access to their data residing in our service center, exposing us to significant costs.

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

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Any breach of confidentiality of client or patient data in our service center could expose us to significant expense and harm our reputation.

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

Recruiting challenges and higher than anticipated costs in outsourcing our clients' IT operations may adversely affect our profitability.

We provide outsourcing services that involve operating clients' IT departments using our employees. At the initiation of these relationships, clients often require us to hire, at substantially the same compensation, the entire IT staff that had been performing the services we take on. In these circumstances, our costs may be higher than we target unless and until we are able to transition the workforce, methods and systems to a more scalable model. Various factors can make this difficult, including geographic dispersion of client facilities and variation in client needs, IT environments, and system configurations. Also, under some circumstances, we may incur unanticipated costs as a successor employer by inheriting obligations of that client. Further, facilities management contracts require us to provide the IT services specified by contract, and in some places it can be difficult to recruit qualified IT personnel. Changes in circumstances or failure to assess the client's environment and scope our services accurately can mean we must hire more staff than we anticipated in order to meet our responsibilities. If we have to increase salaries or relocate personnel, or hire more people than we anticipated, our costs may increase under fixed fee contracts.

Inability to obtain consents needed from third parties could impair our ability to provide remote IT or technology services.

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

RISKS RELATED TO THE HEALTHCARE IT INDUSTRY AND MARKET

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

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

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

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Clients that use our legacy software are vulnerable to sales efforts of our competitors.

A significant part of our revenue comes from relatively high-margin legacy software that was installed by our clients many years ago. We attempt to convert these clients to our newer generation software, but such conversions may require significant investments of time and resources by clients. Our competitors also aggressively target these clients. If we are not successful in retaining a large portion of these clients by continuing to support legacy software - which is increasingly expensive to maintain - or by converting them to our newer software, our results of operations will be negatively affected.

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

The healthcare industry faces significant financial constraints. For example, managed healthcare puts pressure on healthcare organizations to reduce costs, and regulatory changes have reduced Medicare reimbursement to healthcare organizations. In addition, the Fiscal Year 2008 Inpatient Prospective Payment System Final Rule, published by the Centers for Medicare and Medicaid in the U.S., identified several “hospital-acquired conditions” the treatment for which will no longer be reimbursed by Medicare, starting in October 2008. Our software often involves a significant financial commitment by our clients. Our ability to grow our business is largely dependent on our clients' information technology budgets. If healthcare information technology spending declines or increases more slowly than we anticipate, demand for our software could be adversely affected.

Healthcare industry consolidation could put pressure on our software prices, reduce our potential client base and reduce demand for our software.

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

Potential changes in standards applicable to our software could require us to incur substantial additional development costs.

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

For example, the Certification Commission for Healthcare Information Technology, or CCHIT, is developing comprehensive sets of criteria for the functionality, interoperability, and security of healthcare software in the U.S. Achieving CCHIT certification is evolving as a de facto competitive requirement, resulting in increased research and development and administrative expense to conform to these requirements. Similar dynamics are evolving in international markets. CCHIT requirements may diverge from our software’s characteristics and our development direction. We may choose not to apply for CCHIT certification of certain modules of our software or to delay applying for certification. The CCHIT application process requires conformity with 100% of all criteria applicable to each module in order to achieve certification and there is no assurance that we will receive or retain certification for any particular module notwithstanding application. If our software is not consistent with emerging standards our market position and sales could be impaired and we will have to upgrade our software to remain competitive in the market.

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RISKS RELATED TO OUR BUSINESS STRATEGY

Our business strategy includes expansion into markets outside North America, which will require increased expenditures and if our international operations are not successfully implemented, such expansion may cause our operating results and reputation to suffer.

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

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

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

RISKS RELATED TO OUR OPERATING RESULTS, ACCOUNTING CONTROLS AND FINANCES

Our past stock option practices and related accounting issues have caused costly derivative litigation and may result in additional litigation, regulatory proceedings and governmental enforcement actions.

As a result of the voluntary review of historical stock option practices we undertook from February to May 2007, we concluded that incorrect measurement dates were used for accounting for certain prior stock option grants. As a result, we recorded additional non-cash stock-based compensation expense, and related tax effects, with regard to certain past stock option grants, and we restated certain previously filed financial statements.

We believe these restatements reflect appropriate judgments in determining the correct measurement dates for our stock option grants, and to date those judgments have not been challenged. However, as with other aspects of our financial statements, the results of our stock option review are subject to regulatory review and there is a risk that we may have to further restate prior period results as a result of such a review.

In July and August of 2007, four purported stockholder derivative complaints were filed in the United States District Court for the Southern District of Florida against certain current and former directors and officers of Eclipsys and Eclipsys as a nominal defendant, alleging that during the period from at least 1999 until 2006 certain of Eclipsys’ option grants were backdated and that as a result of this alleged backdating our financial statements were misstated, and stock sales by the named defendants constituted improper insider selling. These complaints were consolidated in November 2007. We are currently unable to predict the outcome of the litigation or to reasonably estimate the range of potential loss, if any. However, dealing with this litigation has required us to incur substantial legal expenses, which affected our financial results for 2007 and will continue to affect our 2008 results as well. The derivative litigation also could result in management distraction and adverse publicity and resulting reputational harm, which could impair our sales and marketing efforts.

The option review and conclusions and related litigation may result in additional claims by stockholders or employees, regulatory proceedings, government enforcement actions and related investigations and litigation. These risks include significant expenses, management distraction and potential damages, penalties, other remedies, or adverse findings, which could harm our business, financial condition, results of operations and cash flows.

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

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

Our operating results may fluctuate significantly and may cause our stock price to decline.

We have experienced significant variations in revenues and operating results from quarter to quarter. Our operating results may continue to fluctuate due to a number of factors, including:

• the performance of our software and our ability to promptly and efficiently address software performance shortcomings or warranty issues;

• the cost, timeliness and outcomes of our software development and implementation efforts, including expansion of our presence in India;

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

• healthcare industry conditions and the overall demand for healthcare information technology;

• the financial condition of our clients and potential clients;

• market acceptance of our new services, software and software enhancements by us or our competitors;

• client decisions regarding renewal or termination of their contracts;

• software and price competition;

• personnel changes and other organizational changes and related expenses;

• significant judgments and estimates made by management in the application of generally accepted accounting principles;

• healthcare reform measures and healthcare regulation in general; and

• fluctuations in general economic and financial market conditions; including interest rates.

It is difficult to predict the timing of revenues that we receive from software sales, because the sales cycle can vary depending upon several factors. These include the size and terms of the transaction, the changing business plans of the client, the effectiveness of the client's management, general economic conditions and the regulatory environment. In addition, the timing of our revenue recognition could vary considerably depending upon whether our clients license our software under our subscription model or our traditional licensing arrangements. 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.

Early termination of client contracts or contract penalties could adversely affect results of operations.

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

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Because in many cases we recognize revenues for our software monthly over the term of a client contract, downturns or upturns in sales will not be fully reflected in our operating results until future periods.

We recognize a significant portion of our revenues from clients monthly over the terms of their agreements, which are typically 5-7 years and can be up to 10 years. As a result, much of the revenue that we report each quarter is attributable to agreements executed during prior quarters. Consequently, a decline in sales, client renewals, or market acceptance of our software in one quarter 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 a significant portion of revenues from new clients may be recognized over the applicable agreement term.

Loss of revenue from large clients could have significant negative impact on our results of operations and overall financial condition.

During the fiscal year ended December 31, 2007, approximately 40% of our revenues were attributable to our 20 largest clients. In addition, approximately 38% of our accounts receivable as of December 31, 2007 were attributable to 20 clients. One client represents 10% of our revenues. Loss of revenue from significant clients or failure to collect accounts receivable, whether as a result of client payment default, contract termination, or other factors could have a significant negative impact on our results of operation and overall financial condition.

Impairment of intangible assets could increase our expenses.

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

Failure to maintain effective internal controls could adversely affect our operating results and the market price of our common stock.

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

Funds associated with certain of our investments in auction rate securities may not be liquid or accessible for in excess of 12 months, and our auction rate securities may experience temporary or other-than-temporary decline in value, which would adversely affect our financial condition, cash flow and reported earnings.

A substantial portion of our short-term investment portfolio is invested in auction rate securities, or ARS, that are “AAA” rated notes backed by pools of insured student loans with long-term nominal maturities (up to 30 years) for which the interest rates are reset through a dutch auction process every 7, 28, or 35 days, pursuant to the security’s terms. On these reset dates, the holders of the securities have the opportunity to increase (buy), decrease (sell) or hold their investment.

Negative conditions in the credit and capital markets in February 2008 resulted in failed auctions of certain of our ARS because the amount of securities submitted for sale exceeded the amount of related purchase orders. If uncertainties in the credit and capital markets continue, these markets deteriorate further or we experience any rating downgrades on any investments in our portfolio (including on ARS), funds associated with these securities may not be liquid or accessible for in excess of 12 months and we may incur temporary or other-than-temporary impairments in the carrying value of our investments, which could negatively affect our financial condition, cash flow and reported earnings. Additionally, a continued deterioration in market conditions that cause us to conclude that our marketable securities are not available to fund current operations would result in classifying our ARS as noncurrent assets.

In February 2008, we entered into an agreement with an investment bank, pursuant to which we received $45 million in exchange for a transfer to the bank (as a form of collateral) of ARS with a nominal value of $90 million in the aggregate. We intend to replace this short-term arrangement with proceeds from a longer-term commercial credit facility, or sale of ARS, or both, but there is no assurance that these alternative sources of liquidity will be available on reasonable terms, if at all. If the market value of our ARS deteriorates significantly, our short-term financing arrangement, or any credit facility we enter into to replace the short-term arrangement, may become under-collateralized, which would require us to post additional security to maintain contractually required margins. If we failed to meet margin requirements, we could face liquidation of the underlying collateral at substantial discounts. See Item 7A, Quantitative and Qualitative Disclosures about Market Risk, and Note 19 to the Consolidated Financial Statements for further information.

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Inability to obtain other financing could limit our ability to conduct necessary development activities and make strategic investments.

While our available cash and cash equivalents and the cash we anticipate generating from operations appear at this time to be adequate to meet our foreseeable needs, we could incur significant expenses as a result of unanticipated events in our business or competitive, regulatory, or other changes in our market. As a result, we may in the future need to obtain other financing. If other financing is not available on acceptable terms, we may not be able to respond adequately to these changes, which could adversely affect our operating results and the market price of our common stock.

RISKS OF LIABILITY TO THIRD PARTIES

Our software and content are used to assist clinical decision-making and provide information about patient medical histories and treatment plans. If our software fails to provide accurate and timely information or is associated with faulty clinical decisions or treatment, clients, clinicians or their patients could assert claims against us that could result in substantial cost to us, harm our reputation in the industry and cause demand for our software to decline.

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

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

Our software and our vendors' software that we include in our offering could infringe third-party intellectual property rights, exposing us to costs that could be significant.

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

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RISKS RELATED TO OUR STRATEGIC RELATIONSHIPS AND INITIATIVES

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

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

Our software offering often includes modules provided by third parties, and if these third parties do not meet their commitments, our relationships with our clients could be impaired.

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

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 and while there is no assurance that we will complete any future acquisitions, any acquisitions would involve a number of risks, including the following:

• The anticipated benefits from the acquisition may not be achieved. 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 common stock, incur additional indebtedness or pay consideration in excess of book value, which could dilute future earnings. We also have exposure given the risk of assumed liabilities.

• New business acquisitions generate significant intangible assets that result in substantial related amortization charges to us and possible impairments.

RISKS RELATED TO INDUSTRY REGULATION

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

The U.S. Food and Drug Administration, or FDA, may become increasingly active in regulating computer software or content intended for use in the healthcare setting. The FDA has increasingly focused on the regulation of computer software and computer-assisted products as medical devices under the Food, Drug, and Cosmetic Act, or the FDC Act. If the FDA chooses to regulate any of our software, or third party software that we resell, as medical devices, it could impose extensive requirements upon us, including the following requiring us to:

• seek FDA clearance of pre-market notification submission demonstrating substantial equivalence to a device already legally marketed, or to obtain FDA approval of a pre-market approval application establishing the safety and effectiveness of the software;

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

• 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.

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

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

Clients use our systems to store and transmit highly confidential patient health information and data. State and federal laws and regulations and their foreign equivalents govern the collection, security, use, transmission and other disclosures of health information. These laws and regulations may change rapidly and may be unclear or difficult to apply.

Federal regulations under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, impose national health data standards on healthcare providers that conduct electronic health transactions, healthcare clearinghouses that convert health data between HIPAA-compliant and non-compliant formats and health plans. 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 clients are and require that our software and services adhere to HIPAA standards. Any failure or perception of failure of our software or services to meet HIPAA standards could adversely affect demand for our software and services and force us to expend significant capital, research and development and other resources to modify our software or services to address the privacy and security requirements of our clients.

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

RISKS RELATED TO OUR PERSONNEL AND ORGANIZATION

Our growing operations in India expose us to risks that could have an adverse effect on our results of operations.

We now have a significant workforce employed in India engaged in a broad range of development, support and corporate infrastructure activities that are integral to our business and critical to our profitability. This involves significant challenges that are increased by our lack of prior experience managing operations in India. Further, while there are certain cost advantages to operating in India, significant growth in the technology sector in India has increased competition to attract and retain skilled employees with commensurate increases in compensation costs. We may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for hiring experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. In addition, our operations in India require ongoing capital investments and expose us to foreign currency fluctuations, which may significantly reduce or negate any cost benefit anticipated from such expansion. As a result of these and other factors there can be no assurance that we will successfully integrate our India operations, or that our expansion in India will advance our business strategy and provide a satisfactory return on this investment.

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

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If we fail to attract, motivate and retain highly qualified technical, marketing, sales and management personnel, our ability to execute our business strategy could be impaired.

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

On October 16, 2007 we announced plans to move our corporate headquarters to our existing office in Atlanta, Georgia. Our current facility in Boca Raton, Florida, will be closed and the transition is scheduled to be substantially complete by March 1, 2008. We could experience difficulty in the completion of training and transitioning the new employees, which could affect our operations and financial performance until replacements are independently completing all responsibilities. We will also incur additional costs associated with the relocation of our employees and corporate headquarters.

RISKS RELATED TO OUR EQUITY STRUCTURE

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

• only one of the three classes of directors is elected each year;

• the ability of our stockholders to remove directors without cause is limited;

• the right of stockholders to act by written consent has been eliminated;

• the right of stockholders to call a special meeting of stockholders has been eliminated; and

• advance notice must be given to nominate directors or submit proposals for consideration at stockholders meetings.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

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

Item 3. Legal Proceedings

See Note 12, “Commitments and Contingencies” in Notes to the Consolidated Financial Statements.

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

No matters were submitted to a vote of our stockholders during the fourth quarter of 2007.

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Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Price Range of Common Stock

Our common stock has been publicly traded on the NASDAQ Global Select Market under the symbol “ECLP” since our initial public offering on August 6, 1998. The following table sets forth, for the quarters indicated, the high and low sales prices of our common stock as reported by the NASDAQ Global Select Market.

	High	Low
2006
First quarter	$26.27	$18.36
Second quarter	$24.17	$16.70
Third quarter	$19.73	$13.71
Fourth quarter	$22.46	$17.35
2007
First quarter	$21.93	$17.81
Second quarter	$21.38	$18.17
Third quarter	$25.40	$19.76
Fourth quarter	$26.09	$21.80

Holders of Record

On February 25, 2008, the last reported sale price of our common stock on the NASDAQ Global Select Market was $21.84 per share. Also as of February 25, 2008, we had approximately 309 stockholders of record.

Dividends

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

Shares Available Under Equity Compensation Plans

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

Comparative Stock Performance

The following graph compares the cumulative total stockholder return on our Voting Common Stock from December 31, 2002 to December 31, 2007 with the cumulative total return of (i) the companies traded on the NASDAQ Global Select Market (the “NASDAQ Composite Index”) and (ii) the NASDAQ Computer & Data Processing Index. The graph assumes the investment of $100.00 on December 31, 2002 in (i) our Voting Common Stock, (ii) the NASDAQ Composite Index and (iii) the NASDAQ Computer & Data Processing Index, and assumes that any dividends are reinvested.

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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Eclipsys Corporation, The NASDAQ Composite Index

And The NASDAQ Computer & Data Processing Index

* $100 invested on 12/31/02 in stock or index-including reinvestment of dividends.

Fiscal year ending December 31.

	Cumulative Total Return
	12/02	12/03	12/04	12/05	12/06	12/07
Eclipsys Corporation	100.00	217.57	381.87	353.83	384.30	473.08
NASDAQ Composite	100.00	149.75	164.64	168.60	187.83	205.22
NASDAQ Computer & Data Processing	100.00	124.95	143.03	147.06	166.33	197.68

The Eclipsys Corporation index is based upon the closing prices of Eclipsys Corporation Common Stock on the last trading day of 2002, 2003, 2004, 2005, 2006 and 2007 of $5.35, $11.64, $20.43, $18.93, $20.56, and $25.31, respectively.

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

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Issuer Purchases of Equity Securities

The following table sets forth information with respect to purchases by Eclipsys of its equity securities registered pursuant to Section 12 of the Exchange Act during the quarter ended December 31, 2007:

Period	(a) Total Number  of Shares  of Common Stock Purchased		(b) Average Price  Paid Per Share of  Common Stock		(c) Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares of Common Stock that May Yet Be Purchased Under the Plans or Programs
October 1-31, 2007	—			—	—	—
November 1-30, 2007	—			—	—	—
December 1-31, 2007	17,903	1	$	23.20	—	—
Total	17,903		$	23.20	—	—

¹ These shares were tendered to the Company by employees holding common stock initially issued to them in the form of restricted stock awards in order to reimburse the Company for income tax deposits paid by the Company on their behalf in respect of taxable income resulting from scheduled vesting of restricted shares.

Item 6. Selected Financial Data

The Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005, and the Consolidated Balance Sheet data as of December 31, 2007 and 2006, are derived from our audited Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K. The Consolidated Statements of Operations for the years ended December 31, 2004 and 2003, and the consolidated balance sheet data as of December 31, 2005, 2004, and 2003, are derived from audited Consolidated Financial Statements that have not been included in this filing.

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

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Consolidated Statements of Operations

(in thousands, except per share data)

	Year Ended December 31,
	2007			2006			2005			2004			2003
Revenues:
Systems and services	$	460,853		$	409,450		$	370,380		$	282,124		$	233,971
Hardware		16,680			18,092			12,962			26,951			20,708
Total revenues		477,533			427,542			383,342			309,075			254,679
Costs and expenses:
Cost of systems and services		263,155			237,617			225,131			168,748			143,630
Cost of hardware		12,343			14,592			11,055			22,949			17,252
Sales and marketing		76,074			63,391			64,080			65,599			71,151
Research and development		56,749			57,768			51,771			58,187			58,286
General and administrative		32,959			24,972			19,479			15,951			14,071
Depreciation and amortization		17,760			15,736			14,659			13,284			10,492
Restructuring charge		1,175			14,670			—			—			—
Total costs and expenses		460,215			428,746			386,175			344,718			314,882
Income (loss) from operations		17,318			(1,204	)		(2,833	)		(35,643	)		(60,203	)
Gain on sale of assets		12,761			—			—			—			—
Interest income, net		7,070			5,335			3,102			1,614			2,418
Income (loss) before income taxes		37,149			4,131			269			(34,029	)		(57,785	)
(Benefit) provision for income taxes		(3,992	)		38			—			—			—
Net income (loss)	$	41,141		$	4,093		$	269		$	(34,029	)	$	(57,785	)
Net income (loss) per common share: Basic net income (loss) per common share	$	0.78		$	0.08		$	0.01		$	(0.73	)	$	(1.27	)
Diluted net income (loss) per common share	$	0.76		$	0.08		$	0.01		$	(0.73	)	$	(1.27	)
Basic weighted average common shares outstanding		52,737			51,472			47,947			46,587			45,405
Diluted weighted average common shares outstanding		54,004			52,948			50,638			46,587			45,405

Balance Sheet Data

	(in thousands)
	December 31,
	2007		2006		2005		2004		2003
Cash and cash equivalents	$	22,510	$	41,264	$	76,693	$	122,031	$	151,683
Marketable securities		168,925		89,549		37,455		—		—
Working capital		164,842		89,597		52,245		46,891		78,991
Total assets		465,433		363,278		328,671		296,004		295,998
Stockholder’s equity		258,014		190,656		145,529		122,758		142,806

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis should be read in conjunction with our consolidated financial statements, including the notes thereto, which are included elsewhere in this document.

EXECUTIVE OVERVIEW

About the Company

Eclipsys is a leading provider of advanced integrated clinical, revenue cycle and access management software, and professional services that help healthcare organizations improve their clinical, financial, operational and patient satisfaction outcomes. We develop

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and license proprietary software and content that is designed for use in connection with many of the key clinical, financial and operational functions that healthcare organizations require. Among other things, our software enables physicians, nurses and other clinicians to coordinate care through a shared electronic medical record, place orders and access and share information about patients. Our software helps clients optimize the healthcare revenue cycle, including patient admissions, scheduling, invoicing, inventory control and cost accounting, in addition to providing records maintenance and assessment of the profitability of specific medical procedures and personnel. Clinical content, which is integrated with our software, provides evidence-based practice guidelines for use by physicians, nurses and other clinicians.

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

Our income statement items of revenue are as follows:

• Systems and services revenue includes revenue derived from a variety of sources, including software licenses and contractual software maintenance (under which fees are recognized ratably over the term of the contract), and professional services. Our systems and services revenue includes both “subscription” software license revenue (which is recognized ratably over a contractual term) and license revenue related to “traditional” software contracts (which is generally recognized upon delivery of the software and represents less than 10% of total revenues). For some clients, we host the software applications licensed from us remotely on our own servers, which saves such clients the cost of procuring and maintaining hardware and related facilities. For other clients, we offer an outsourced solution in which we assume partial to total responsibility for a healthcare organization’s information technology operations using our employees. Margins on the license and maintenance revenue are generally significantly higher than those on the professional services revenues.

• Hardware revenue results from our sale of computer hardware to our clients in connection with their implementation of our software. We purchase this hardware from suppliers and resell it to our clients. As clients opt for remote hosted solutions, clients’ need for hardware is reduced and future hardware revenues may be negatively impacted. The amount of hardware revenues, and the proportion of our total revenues that they represent, can vary significantly from period to period. Margins on hardware revenues are generally significantly lower than those on systems and services revenues.

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

We commenced operations in India in 2006 through an acquisition of a small producer of laboratory software. By December 2007, our India operations, now named Eclipsys (India) Private Limited, have expanded to include two offices and over 300 employees. We believe that India provides base access to educated professionals to work on research development and support of our software, at an economically effective cost.

In October 2007, as a result of our efforts to grow internationally, SingHealth, the largest healthcare provider in Singapore, selected Eclipsys Sunrise Clinical Manager as its electronic medical record platform.

In the third quarter of 2007, as part of the ongoing refinement of our business mix, we decided to exit our networking services business. The exit of the business was completed in the fourth quarter of 2007.

In December 2007, we sold our Clinical Practice Model Resource Center (CPMRC) business to Elsevier, a world-leading publisher of scientific, technical and health information products and services.

The decision to exit our networking services business as well as the sale of CPMRC will result in an aggregate reduction of approximately $20.0 million to the Company’s base business revenue stream in 2008 when compared to 2007. We expect to more than offset this loss of revenue with growth in other areas of the business.

Business Environment

The healthcare information technology industry in which Eclipsys conducts its business is highly competitive and subject to numerous government regulations and industry standards. Sales of Eclipsys’ solutions can be affected significantly by many competitive factors, including the features and cost of such solutions, our marketing effectiveness, and the research and development of new solutions. It is anticipated that the healthcare information technology industry will grow and be seen as a way to curb growing healthcare costs while also improving the quality of healthcare.

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Strategy

Our strategy for revenue growth is to (1) increase recurring revenue streams; (2) continue to win new clients both domestically and in international markets; (3) expand product footprint at existing clients; (4) continue to broaden our solution portfolio; and (5) take advantage of market opportunities to replace outdated revenue cycle management solutions.

2008 Outloook

The company currently expects 2008 annual revenues to range from $506 million to $518 million. Excluding stock-based compensation expense, costs associated with our derivative litigation, and costs associated with corporate relocation, non-GAAP earnings per share on a diluted basis are expected to range from $0.98 to $1.02.

New Accounting Pronouncements

See Note 2 to our consolidated financial statements for a description of new accounting pronouncements.

Critical Accounting Policies

We believe there are several accounting policies that are critical to understanding our historical and future performance as these policies affect the reported amount of revenues and expenses and other significant areas involving management’s judgments and estimates. On an ongoing basis, management evaluates and adjusts its estimates and judgments, if necessary. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingencies. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be materially different from those estimates. These critical accounting policies relate to revenue recognition, allowance for doubtful accounts, capitalized software development costs, stock based compensation and income taxes. Please refer to Note 2 of the audited Consolidated Financial Statements for further discussion of our significant accounting policies.

Revenue Recognition

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

We generally contract under multiple element arrangements, which include software license fees, hardware and services, including implementation, integration, training and software maintenance, for periods of 3 to 7 years. We evaluate revenue recognition on a contract-by-contract basis as the terms of each arrangement vary. The evaluation of our contractual arrangements often requires judgments and estimates that affect the timing of revenue recognized in our statements of operations. Specifically, we may be required to make judgments about:

• whether the fees associated with our software and services are fixed or determinable;

• whether collection of our fees is considered probable;

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

• whether we have the ability to make reasonably dependable estimates in the application of the percentage-of-completion method; and

• whether we have verifiable objective evidence of fair value for our software and services.

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

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

Subscription Contracts

Our subscription contracts typically include the following deliverables:

• Software license fees;

• Maintenance;

• Professional services; and

• Third party hardware or remote hosting services.

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

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

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

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

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

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

Traditional Software Contracts

We enter into traditional multiple-element arrangements that include the following elements:

• Software license;

• Maintenance;

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• Professional services; and

• Third party hardware or remote hosting services.

Revenue for each of the elements is recognized as follows:

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

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

Software Contracts Requiring Contract Accounting

We enter into certain multiple element arrangements containing milestone provisions in which the professional services are considered essential to the functionality of the software. Under these arrangements, software license fees and professional service revenues are recognized using the percentage-of-completion method over the implementation period which generally ranges from 12 to 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.

Stand-Alone Software and Service

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

• Software license;

• Maintenance;

• Professional services;

• Hardware;

• Outsourcing; and

• Remote Hosting services.

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

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

Professional services represent incremental services marketed to clients including implementation 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 service arrangements include the assessment, assembly and delivery of a wireless network which may include wireless carts or other wireless equipment to the client. Our network services arrangements are sold to a client for a fixed fee. All services are performed prior to the delivery of the equipment. These contracts are typically 60 to 90 days in length and are recognized pursuant to SAB 104, upon the delivery of the network to the client.

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

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

We record reimbursable out-of-pocket expenses in both systems and services revenues and as a direct cost of systems and services in accordance with EITF 01-14, “Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expenses Incurred.” For 2007, 2006, and 2005 reimbursable out-of-pocket expenses were $11.6 million, $9.0 million, and $9.2 million, respectively.

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

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

Allowance for Doubtful Accounts

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

Capitalized Software Development Costs

We capitalize a portion of our computer software development costs incurred subsequent to establishing technological feasibility. These costs include salaries, benefits, consulting and other directly related costs incurred in connection with programming and testing software. Capitalization ceases when the software is generally released for sale to clients. Management monitors the net realizable value of development costs to ensure that the investment will be recovered through future revenues. Capitalized software development costs were $20.9 million, $14.1 million, and $20.1 million for the years ended December 31, 2007, 2006, and 2005, respectively. These costs are amortized over the greater of the ratio that current revenues are to total and anticipated future revenues for the applicable software or the straight-line method over three years. Amortization of capitalized software development costs, which is included in cost of systems and services, was $15.0 million, $17.5 million, and $14.3 million for the years ended December 31, 2007, 2006, and 2005, respectively. Accumulated amortization of capitalized software development costs was $23.8 million and $27.6 million as of December 31, 2007 and 2006, respectively.

Stock-Based Compensation

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

We elected to adopt SFAS 123(R) using the modified prospective method. Under this method, compensation cost recognized during the year ended December 31, 2007, includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123 amortized

27

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

We have elected to use the simplified method for estimating our expected term equal to the midpoint between the vesting period and the contractual term as allowed by SAB 107, “Share-Based Payment.” We currently estimate volatility by using the weighted average historical volatility of our common stock. The risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term input to the Black-Scholes model. We estimate forfeitures using a weighted average historical forfeiture rate. Our estimate of forfeitures will be adjusted over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from our estimate.

Income Taxes

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

We assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. Accordingly, we have recorded a valuation allowance against our total net deferred tax asset related to our U.S. and Indian operations.

To the extent we establish a valuation allowance or change this allowance in a period, we include an expense or a benefit within the tax provision in the Statement of Operations. We are required to reverse the valuation allowance and record a benefit for the net deferred tax asset if and to the extent that we conclude that it is more likely than not that we will realize the asset. This will result in a non-recurring benefit in the period that we make the determination. In the fourth quarter of 2007, we concluded that it is more likely than not that the deferred tax assets in Canada will be recovered from taxable income. Accordingly, in 2007, we recorded a tax benefit related to reversing a tax valuation allowance associated with our Canadian operation.

As of December 31, 2007, a valuation allowance of approximately $87 million has been established against the U.S. deferred tax assets that management does not believe are more likely than not to be realized. This determination is based primarily on the Company’s recent history of taxable losses, operating losses and uncertainty with respect to its forecasted results. We will continue to assess the requirement for a valuation allowance on a quarterly basis. Should the Company achieve its 2008 forecasted results, we may determine from our valuation allowance assessment that the positive evidence outweighs the negative resulting in the release of all or a portion of the allowance.

As of December 31, 2007, we had U.S. net operating loss carryforwards for federal income tax purposes of approximately $308 million. Of this amount, $11 million expires in 2012 and $21 million expires in 2018; the balance expires in varying amounts through 2026. Of the total U.S. net operating loss carryforward, approximately $89 million relates to stock option tax deductions which will be tax-effected and the benefit credited as additional paid-in-capital when realized. Additionally, the Company has Canadian net operating loss carryovers of approximately $21 million that expire in varying amounts through 2026. Our Indian subsidiary is entitled to a tax holiday which expires in 2009.

28

RESULTS OF OPERATIONS

Statement of Operations Data

(in thousands, except percentages and per share data)

	2007			2007 % of Total Revenue		2006			2006 % of Total Revenue		Change $			Change %
Revenues:
Systems and services	$	460,853		96.5	%	$	409,450		95.8	%	$	51,403		12.6	%
Hardware		16,680		3.5	%		18,092		4.2	%		(1,412	)	-7.8	%
Total revenues		477,533		100.0	%		427,542		100.0	%		49,991		11.7	%
Costs and expenses:
Cost of systems and services		263,155		55.1	%		237,617		55.6	%		25,538		10.7	%
Cost of hardware		12,343		2.6	%		14,592		3.4	%		(2,249	)	-15.4	%
Sales and marketing		76,074		15.9	%		63,391		14.8	%		12,683		20.0	%
Research and development		56,749		11.9	%		57,768		13.5	%		(1,019	)	-1.8	%
General and administrative		32,959		6.9	%		24,972		5.8	%		7,987		32.0	%
Depreciation and amortization		17,760		3.7	%		15,736		3.7	%		2,024		12.9	%
Restructuring charge		1,175		0.2	%		14,670		3.4	%		(13,495	)	-92.0	%
Total costs and expenses		460,215		96.4	%		428,746		100.3	%		31,469		7.3	%
Income (loss) from operations		17,318		3.6	%		(1,204	)	-0.3	%		18,522			*
Gain on sale of assets		12,761		2.7	%		—		0.0	%		12,761			*
Interest income, net		7,070		1.5	%		5,335		1.2	%		1,735		32.5	%
Income before income taxes		37,149		7.8	%		4,131		1.0	%		33,018		799.3	%
(Benefit) provision for income taxes		(3,992	)	-0.8	%		38		0.0	%		(4,030	)		*
Net income	$	41,141				$	4,093				$	37,048
Basic net income per common share	$	0.78				$	0.08				$	0.70
Diluted net income per common share	$	0.76				$	0.08				$	0.68

* not meaningful

Year Ended December 31, 2007 compared to December 31, 2006

Revenues

Total revenues increased by $50.0 million, or 11.7% to $477.5 million, for the year ended December 31, 2007 compared with $427.5 million for the year ended December 31, 2006.

Systems and Services Revenues

Systems and services revenues increased by $51.4 million, or 12.6%, for the year ended December 31, 2007 compared with 2006. Of this increase, $24.5 million was attributable to revenue recognized on a ratable basis, $20.9 million was attributable to revenue from professional services and $6.0 million was attributable to periodic revenues related to software licenses and other in-period related activities:

• Revenues Recognized Ratably. Revenues recognized ratably from software, maintenance, outsourcing and remote hosting were $301.5 million, an increase of $24.5 million or 8.8%, when compared to 2006. The increase was due to higher sales bookings in previous periods of our software, outsourcing and remote hosting related services resulting in the growth in our recurring revenue base.

29

• Professional Services Revenues. Professional services revenues, which include implementation and consulting related services, were $120.0 million, which represented an increase of $20.9 million or 21.1% over the prior year. The increase resulted from additional client implementation activity and an improvement in utilization of our professional services staff.

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

	Year Ended December 31,
	2007		2006		Change			% Change
Eclipsys software related fees	$	21,505	$	12,975	$	8,530		65.7	%
Third party software related fees		9,096		7,952		1,144		14.4	%
Networking services		8,854		12,550		(3,696	)	-29.5	%
Total periodic revenues	$	39,455	$	33,477	$	5,978		17.9	%

The increase in periodic revenues in 2007 compared to 2006 was primarily attributable to increased software related fees. In any period, these revenues can be considered one time in nature for that period, and we do not recognize this revenue on a ratable basis. This revenue includes periodic traditional license fees associated with new contracts signed in the period, including add-on licenses to existing clients and new client transactions, as well as revenue from contract backlog that had not previously been recognized pending contract performance that occurred or was completed during the period, and certain other activities during the period associated with existing client relationships. In the aggregate, these periodic revenues can contribute significantly to earnings in the period given there are relatively little in-period costs associated with such revenues (other than those costs associated with networking services). We expect these periodic revenues to continue to fluctuate on a yearly basis as a result of significant variations in the type and magnitude of sales and other contract and client activity in any period, and these variations make it difficult to predict the nature and amount of these periodic revenues. The increase in software related fees in 2007 was partially offset by lower revenues from networking services due to management’s decision in the third quarter of 2007 to stop selling networking products.

The decision to exit our networking services business as well as the sale of CPMRC will result in an aggregate reduction of approximately $20.0 million to the Company’s base business revenue stream in 2008 when compared to 2007. We expect to more than offset this loss of revenue with growth in other areas of the business.

Hardware Revenues

Hardware revenues decreased by $1.4 million during 2007 to $16.7 million. The decrease in revenues resulted from more clients choosing other hardware sources and/or reducing their hardware needs by opting for remote hosted solutions. As remote hosting reduces clients’ need for hardware, future hardware revenues may be negatively impacted. We expect hardware revenues to continue to fluctuate on an annual basis.

Operating Expenses

Cost of systems and services increased by $25.5 million, or 10.7%, to $263.2 million, for the year ended December 31, 2007. The increase in cost of systems and services in 2007 was primarily attributable to the following:

• Higher labor related costs of $20.3 million, mainly associated with an increase in headcount and higher incentive compensation on improved financial performance;

• Higher travel costs of $3.3 million associated with increased level of sales activity; and

• Higher consulting, software maintenance and software license costs associated with incremental implementation and software-related revenues.

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

Cost of hardware decreased $2.2 million, or 15.4%, in 2007. The decrease in these costs was directly related to the lower hardware volumes discussed above, slightly offset by more favorable product margins. The gross margin percentage on hardware revenue increased to 26.0% in 2007 compared to 19.3% in 2006 impacted by changes in product mix.

30

Sales and marketing expenses increased $12.7 million, or 20.0%, in 2007. The increase in sales and marketing expenses was primarily due to increased labor-related costs of $9.5 million on higher headcount, higher commissions on increased sales volumes and increased incentive compensation on improved financial performance. The increase was also related to additional expenses for tradeshows and marketing events designed to enhance market awareness of the Company’s solutions.

Research and development expenses were $56.7 million in 2007 compared to $57.8 million in 2006, a decrease of $1.0 million over the prior year. Research and development expense decreased due to the higher level of internal labor cost capitalization of $6.8 million associated with development work related to SunriseXA 5.0. SunriseXA 5.0 was released in December of 2007. The impact of higher cost capitalization was somewhat offset by higher labor-related costs of $6.2 million on increased headcount and higher incentive compensation on improved financial performance. Our gross research and development spending, which consists of research and development expenses and capitalized software development costs, increased $5.8 million to $77.7 million in 2007 compared to $71.9 million in 2006.

In summary, research and development expense was as follows:

	(in thousands)
	2007		2006		$Change			% Change
Research and development expenses	$	56,749	$	57,768	$	(1,019	)	-1.8	%
Capitalized software development costs		20,943		14,106		6,837		48.5	%
Gross research and development expenses	$	77,692	$	71,874	$	5,818		8.1	%
Amortization of capitalized software development costs	$	15,039	$	17,494	$	(2,455	)	-14.0	%

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

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

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

The 2006 restructuring charges related to the reduction of headcount and the consolidation of office space. In January 2006, we effected a restructuring of our operations which included a reduction in headcount of approximately 100 individuals, as part of the reorganization of our company. This was undertaken to better align our organization, reduce costs, and re-invest some of the cost savings into client-related activities including client support and professional services. In December 2006, we realigned certain management resources and consolidated certain facilities to eliminate excess office space. The 2006 activities resulted in restructuring charges of $14.7 million in the year ended December 31, 2006. See Note 10 to our Consolidated Financial Statements for further information.

Gain on Sale of Assets

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

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(in thousands):

Cash received	$	23,134
CPMRC earnout settlement payment		(5,100	)
Net assets sold		(4,755	)
Other costs		(518	)
Gain on sale	$	12,761

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

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

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

Interest Income, Net

Interest income increased $1.7 million, or 32.5%, in 2007 compared to 2006. The increase was due to interest received on higher marketable securities balances and an improvement in yields on marketable securities in 2007. Interest income in 2008 is expected to be offset in part by interest obligations on borrowings under short-term financing arrangements we entered into in February 2008, and any longer-term financing arrangements we may enter into in the future. See “Liquidity and Capital Resources” below for more information.

(Benefit) Provision for Income Taxes

The income tax benefit was $4.0 million in 2007 compared to a provision of $38,000 in 2006. The 2007 benefit resulted from the reversal of the valuation allowance related to our Canadian operations, offset by alternative minimum tax, as well as non-cash expense related to the utilization of pre-acquisition net operating losses pursuant to SFAS 109 “Accounting for Income Taxes.” The utilization of the pre-acquisition loss resulted in a corresponding reduction to goodwill. The 2007 benefit was also offset by accruals of probable foreign taxes and penalties relating to transfer pricing, pursuant to FIN 48, “Accounting for Uncertainty in Income Taxes - an Interpretation of SFAS 109.”

As of December 31, 2007, a valuation allowance of approximately $87 million has been established against the U.S. deferred tax assets that management does not believe are more likely than not to be realized. This determination is based primarily on the Company’s recent history of taxable losses, operating losses and uncertainty with respect to its forecasted results. We will continue to assess the requirement for a valuation allowance on a quarterly basis. Should the Company achieve its 2008 forecasted results we may determine from our valuation allowance assessment that the positive evidence outweighs the negative resulting in the release of all or a portion of the allowance.

The Company is currently analyzing its research and development expenditures for eligibility to qualify for a research and development (“R&D”) tax credit. The Company plans to complete this analysis in 2008 and as a result expects to record a deferred tax asset for this potential tax benefit, net of a reduction of a portion of its deferred tax asset for net operating loss carryforwards. The estimated amount of the R&D credit is not determinable at this time.

32

Statement of Operations Data

(in thousands, except percentages and per share data)

	2006			2006 % of Total Revenue		2005			2005 % of Total Revenue		Change $			Change %
Revenues:
Systems and services	$	409,450		95.8	%	$	370,380		96.6	%	$	39,070		10.5	%
Hardware		18,092		4.2	%		12,962		3.4	%		5,130		39.6	%
Total revenues		427,542		100.0	%		383,342		100.0	%		44,200		11.5	%
Costs and expenses:
Cost of systems and services		237,617		55.6	%		225,131		58.7	%		12,486		5.5	%
Cost of hardware		14,592		3.4	%		11,055		2.9	%		3,537		32.0	%
Sales and marketing		63,391		14.8	%		64,080		16.7	%		(689	)	-1.1	%
Research and development		57,768		13.5	%		51,771		13.5	%		5,997		11.6	%
General and administrative		24,972		5.8	%		19,479		5.1	%		5,493		28.2	%
Depreciation and amortization		15,736		3.7	%		14,659		3.8	%		1,077		7.3	%
Restructuring charge		14,670		3.4	%		—		0.0	%		14,670		*
Total costs and expenses		428,746		100.3	%		386,175		100.7	%		42,571		11.0	%
Loss from operations		(1,204	)	-0.3	%		(2,833	)	-0.7	%		1,629		-57.5	%
Interest income, net		5,335		1.2	%		3,102		0.8	%		2,233		72.0	%
Income before income taxes		4,131		1.0	%		269		0.1	%		3,862		*
Provision for income taxes		38		0.0	%		—		0.0	%		38		*
Net income	$	4,093				$	269					3,824
Basic net income per common share	$	0.08				$	0.01				$	0.07
Diluted net income per common share	$	0.08				$	0.01				$	0.07

* not meaningful

Year Ended December 31, 2006 compared to December 31, 2005

Revenues

Total revenues for the year ended December 31, 2006 increased $44.2 million, or 11.5%, to $427.5 million, from $383.3 million in 2005.

Systems and Services Revenues

Systems and services revenues increased by $39.1 million, or 10.5%, for the year ended December 31, 2006 compared with 2005. Of this increase, $28.2 million was attributable to revenue recognized on a ratable basis and $15.4 million was attributable to revenue from professional services, which were partly offset by a decrease of $4.3 million attributable to periodic revenues related to software licenses and other in-period related activities:

• Revenues Recognized Ratably. Revenues recognized ratably from software, maintenance, outsourcing and remote hosting were $277.0 million, an increase of $28.2 million or 11.3%, when compared to 2005. The increase was due to higher sales bookings in previous periods of our software, outsourcing and remote hosting related services resulting in the growth in our recurring revenue base.

• Professional Services Revenues. The increase in professional services revenues, which include implementation and consulting related services, also contributed to the increase in systems and services revenues. Professional services revenues were $99.1 million, which represented an increase of $15.4 million or 18.4% over the prior year. The increase in professional services was a result of a higher volume of services being purchased by our clients related to implementation and activation of our software solutions.

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• Periodic Revenues. Periodic revenues related to software related fees, third party software related fees and networking services were $33.5 million, which represented a decrease of $4.3 million or 11.4% over the prior year. The table below summarizes the components of periodic revenues for the years ended December 31, 2006 and 2005 (in thousands):

	Year Ended December 31,
	2006		2005		Change			% Change
Eclipsys software related fees	$	12,975	$	12,052	$	923		7.7	%
Third party software related fees		7,952		8,582		(630	)	-7.3	%
Networking services		12,550		17,168		(4,618	)	-26.9	%
Total periodic revenues	$	33,477	$	37,802	$	(4,325	)	-11.4	%

The decrease in periodic revenues in 2006 compared to 2005 was mainly attributable to lower sales of networking services. In any period, periodic revenues can be considered one time in nature for that period and we do not recognize this revenue on a ratable basis. This revenue includes periodic traditional license fees associated with new contracts signed in the period, including add-on licenses to existing clients and new client transactions, as well as revenue from contract backlog that had not previously been recognized pending contract performance that occurred or was completed during the period, and certain other activities during the period associated with existing client relationships. In the aggregate, these periodic revenues can contribute significantly to earnings in the period given there are relatively little in-period costs associated with such revenues (other than those costs associated with networking services).

Hardware Revenues

Hardware revenues increased approximately $5.1 million, or 39.6% to $18.1 million for the year ended December 31, 2006 compared to $13.0 million in 2005 as a result of higher volumes of client activities in this area. Hardware revenues fluctuate on a periodic basis due to a variety of factors, including competition within the hardware industry, the status of the client implementations and future sales volumes related to hardware and network services.

Operating Expenses

Cost of systems and services increased approximately $12.5 million or 5.5% to $237.6 million, for the year ended December 31, 2006 compared to $225.1 million in 2005. The increase in cost of systems and services in 2006 was related to the following:

• higher payroll related costs associated with an increase in headcount;

• higher amortization of capitalized software development costs associated with the release of Sunrise Clinical Manager 4.5 XA in January 2006;

• higher costs associated with incremental remote hosting and outsourcing revenue;

• increased implementation costs as a result of higher professional service volumes; and

• stock-based compensation expense as a result of the adoption of SFAS 123(R).

Cost of hardware increased $3.5 million or 32.0% to $14.6 million in 2006 compared to $11.1 million in 2005. The increase in these costs was directly related to the higher hardware volumes discussed above. The gross margin percentage on hardware revenue increased to 19.3% in 2006 compared to 14.7% in 2005.

Sales and marketing expenses decreased $0.7 million or 1.1% to $63.4 million in 2006 compared to $64.1 million in 2005. The decrease in sales and marketing expenses was related primarily to reduced sales headcount resulting from a sales force reorganization and changes to our sales incentive compensation plan. This decrease was offset by an increase in stock-based compensation as a result of the adoption of SFAS 123(R) and higher payroll expenses related to health insurance costs.

Research and development expenses were $57.8 million in 2006 compared to $51.8 million in 2005. Gross research and development spending, which consists of research and development expenses and capitalized software development costs, remained consistent at $71.9 million for both 2006 and 2005. Net research and development expense increased primarily as a result of a lower level of capitalization associated with coding and development as a result of the release of SunriseXA 4.5 in January 2006. Amortization of

34

capitalized software development costs, which is included as a component of cost of systems and services, increased by approximately $3.3 million to $17.5 million in 2006 compared to $14.3 million for the same period in 2005, due to increases in capitalized software development costs, in particular SunriseXA 4.5.

In summary, research and development expense was as follows:

	(in thousands)
	2006		2005		$ Change			% Change
Research and development expenses	$	57,768	$	51,771	$	5,997		11.6	%
Capitalized software development costs		14,106		20,144		(6,038	)	-30.0	%
Gross research and development expenses	$	71,874	$	71,915	$	(41	)	-0.1	%
Amortization of capitalized software development costs	$	17,494	$	14,274	$	3,220		22.6	%

General and administrative expenses increased approximately $5.5 million or 28.2% to $25.0 million in 2006 compared to $19.5 million in 2005. The increase was primarily related to the increase in stock-based compensation as a result of the adoption of SFAS 123(R); higher employee related costs; higher professional service fees including legal and accounting; and higher costs associated with the implementation of our new enterprise resource planning system.

Depreciation and amortization increased $1.1 million or 7.3% to $15.7 million in 2006 compared to $14.7 million in 2005. The increase was primarily the result of higher depreciation associated with the activation of our enterprise resource planning solution during the second quarter of 2006.

In 2006, we undertook a restructuring of our operations to better align our organization, reduce costs, and re-invest some of the cost savings into client-related activities including client support and professional services. These actions resulted in restructuring charges of $14.7 million in 2006.

Interest Income, Net

Interest income increased $2.2 million to $5.3 million in 2006 compared to $3.1 million in 2005. The increase was due to an improvement in yields on marketable securities as well as higher marketable securities balances.

Provision for Income Taxes

Income taxes were insignificant in 2006 and no income tax provision was recorded in 2005.

Liquidity and Capital Resources

During the year ended December 31, 2007, operating activities provided $70.2 million of cash. Cash flow from operating activities reflected income generated from operations of $72.1 million, after adjusting for non cash items of $43.7 million, which included depreciation and amortization, stock compensation, provision for bad debt, non cash benefit from income taxes, and gain on sale of assets of $12.8 million. This was offset in part by decrease in net working capital due to increase in accounts receivable ($5.7 million) related to increase in revenue, increase in prepaid expenses and other current assets ($4.6 million) due to timing of cash payments, and decrease in accounts payable and other current liabilities ($9.1 million) related to timing of our contractual obligations and payments, as well as payments of $4.7 million in connection with our restructuring activities. These changes were partly offset by the increase in accrued compensation ($11.1 million) due primarily to an increase in sales commissions and bonuses, decrease in inventory ($1.0 million) due to our exit of the networking business, increase in other long term liabilities ($2.5 million), increase in deferred revenue ($1.4 million) due to timing of our customer billing cycles and decrease in other assets ($1.4 million) due to timing of our customer billing cycles. Investing activities used $102.7 million of cash, and consisted of net purchases of marketable securities of $79.4 million to invest excess cash not needed in daily operations, property and equipment expenditures of $16.6 million related to activities at our Technology Solutions Center, or TSC, for the continued expansion of our remote hosting function, capitalized software development costs of $20.9 million for new product development, $2.0 million used to collateralize a letter of credit on a new building lease, and $6.4 million related to earnout payments on our prior acquisitions, offset by $22.6 million received from sale of CPMRC assets. Financing activities provided cash inflow of $12.9 million, primarily consisting of proceeds from stock option exercises. The timing and amount of cash provided by future stock option exercises are uncertain.

During the year ended December 31, 2006, operating activities provided $26.6 million of cash. Cash flow from operating activities reflected income generated from operations of $56.3 million, after adding back non cash charges of $52.2 million, which included

35

depreciation and amortization, stock compensation and provision for bad debt. This was offset in part by decrease in net working capital due to increase in accounts receivable ($14.5 million) related to increase in revenue, increase in prepaid expenses and other current assets ($3.8 million) due to timing of cash payments, decrease in accrued compensation ($4.9 million) due to timing of payroll transactions, and decrease in deferred revenue ($10.6 million) due to timing of our customer billing cycles and a decline in up-front billing contracts. These changes were partly offset by the decrease in inventory ($1.2 million) due to phasing out the networking business and decrease in other assets ($2.6 million) primarily representing deferred expenses, due to timing of our customer billing cycles. Investing activities used $89.7 million of cash, and consisted of net purchases of marketable securities of $52.1 million to invest excess cash not needed in daily operations, purchases of property and equipment of $17.5 million, capitalized software development costs of $14.1 million for new product development, and $6.0 million related to acquisitions. The property and equipment expenditures were related to activities at our Technology Solutions Center, or TSC, for the continued expansion of our remote hosting function, as well as investments in our enterprise resource planning solution. Financing activities provided cash inflow of $27.7 million and mainly consisted of exercises of stock options. Stock option exercises were above their typical levels during the year ended December 31, 2006 as a result of exercises of options from option holders whose employment was terminated in connection with the restructuring.

During the year ended December 31, 2005, operating activities provided $14.5 million of cash. Cash flow from operating activities reflected income generated from operations of $38.3 million, after adding back non cash charges of $38.0 million, which included depreciation and amortization, stock compensation and provision for bad debt. This was offset in part by decrease in net working capital due to increase in accounts receivable ($19.0 million) related to increase in revenue, increase in prepaid expenses and other current assets ($4.5 million) due to timing of cash payments and increase in other assets ($9.3 million), primarily consisting of deferred expenses, due to timing of our customer billing cycles. These changes were partly offset by the increase in accrued compensation ($2.5 million) due to timing of payroll transactions and the increase in accounts payable, other current liabilities ($4.0 million) related to timing of our contractual obligations of payments and increase in deferred revenue ($2.0 million) due to timing of our customer billing cycles. Investing activities used $77.2 million of cash, and consisted of net purchases of marketable securities of $37.5 million to invest excess cash not needed in daily operations, purchases of property and equipment of $19.3 million, capitalized software development costs of $20.1 million for new product development, and $0.3 million related to earnout payments on our prior acquisitions. The property and equipment expenditures were related to activities at our TSC for the expansion of our remote hosting function and activities in our research and development area, as well as investments in our Oracle ERP solution. Financing activities provided cash inflow of $17.0 million, consisting of $16.9 million from exercises of stock options and $0.2 from the employee stock purchase plan.

Future Capital Requirements

As of December 31, 2007, our principal source of liquidity is our cash and cash equivalents and marketable securities balances of $191.4 million. Of this balance, the Company has approximately $166 million invested in certain “AAA” rated Auction Rate Securities (“ARS”), which generally can be sold via dutch auctions every 7, 28, or 35 days creating a short-term instrument. However, recent uncertainties in the credit markets have disrupted scheduled auctions, resulting in the Company and other investors deciding to continue to hold their ARS until auctions recur or other sources of liquidity for these investments becomes available. Our current plan is to hold the ARS until such time as successful auctions would occur or the secondary market allows for a sufficient price to recover substantially all of our carrying value. There can be no assurance this will occur. However, we believe that our current cash and cash equivalents and our non ARS marketable securities, combined with our anticipated cash flows from operations will be sufficient to fund our operations for the next twelve months.

Our future cash requirements will depend on a number of factors including, among other things, the timing and level of our new sales volumes, the cost of our development efforts, the success and market acceptance of our future product releases, and other related items.

The Company also periodically evaluates business opportunities that fit its strategic plans; such as with our February 2008 acquisition of Enterprise Performance Systems, Inc. (“EPSi”). If an opportunity requiring significant capital investment were to arise, the Company would seek to finance the opportunity through available cash on hand, existing financings, issuance of additional shares of its stock or additional sources of financing, as circumstances warrant. However, there can be no assurance that adequate liquidity would be available to finance extraordinary business opportunities.

In February 2008 we entered into a secured financing agreement with an investment bank, pursuant to which we received $45 million in exchange for a transfer to the bank (as a form of collateral) of ARS with a nominal value of $90 million in the aggregate. The Company entered into this arrangement to provide funds to close our February 2008 acquisition of EPSi. We plan to replace this short-term arrangement with proceeds from a longer-term commercial credit facility, sale of ARS, or a combination of both. Additionally, a secondary market has developed and could become a source of liquidity for our ARS. However, selling our ARS at current prices available in the secondary market would most likely result in receiving an amount less than the carrying value of the ARS and thus resulting in a realized loss on the sale. There is no assurance that these alternative sources of liquidity will be available on reasonable terms, if at all. See Note 19 to the Consolidated Financial Statements and Item 7A for further information.

Off-Balance Sheet Arrangements

As of December 31, 2007, we did not have any off-balance sheet arrangements.

36

Contracts and Commitments

The following table provides information related to our contractual obligations under various financial and commercial agreements as of December 31, 2007:

	Payments Due by Period
	(in thousands)
	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Contractual Obligations
Operating Leases	$	51,090	$	9,640	$	16,168	$	8,895	$	16,387
Unconditional Purchase Obligations		80,177		56,026		13,242		10,909		—
Total	$	131,267	$	65,666	$	29,410	$	19,804	$	16,387

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

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

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We do not currently use derivative financial instruments or enter into foreign currency hedge transactions. Foreign currency fluctuations through December 31, 2007 have not had a material impact on our financial position or results of operations.

We have invested in high quality securities including auction-rate securities (“ARS”). These ARS are debt instruments with long-term nominal maturities that generally can be sold via dutch auctions every 7, 28, or 35 days creating a short-term instrument. In February 2008, broker-dealers holding the Company’s ARS portfolio experienced failed auctions of certain ARS where the amount of securities submitted for sale exceeded the amount of related purchase orders. The ARS held by the Company continue to pay interest according to their stated terms, and have not been downgraded nor have they been placed on credit watch by credit rating agencies. If uncertainties in the credit and capital markets continue and these markets deteriorate further or the Company experiences any rating downgrades on any investments in its portfolio, the Company may incur temporary or other-than-temporary impairments, which could negatively affect the Company’s financial condition, cash flow and reported earnings. See Note 19 to the Consolidated Financial Statements for further information.

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

The following table illustrates potential fluctuation in annualized interest income based upon hypothetical values for blended interest rates for hypothetical marketable securities balances:

Hypothetical Interest Rate		Marketable securities balances (in thousands)
		$	160,000	$	170,000	$	180,000
4.0	%		6,400		6,800		7,200
4.5	%		7,200		7,650		8,100
5.0	%		8,000		8,500		9,000
5.5	%		8,800		9,350		9,900
6.0	%		9,600		10,200		10,800
6.5	%		10,400		11,050		11,700

We estimate that a one-percentage point decrease in interest rates for our marketable securities portfolio as of December 31, 2007 would have resulted in a decrease in interest income of $1.7 million for a twelve month period. This sensitivity analysis contains certain simplifying assumptions, including a constant level and rate of debt securities and an immediate across-the-board increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period, and it does not consider the impact of changes in the portfolio as a result of our business needs or as a response to changes in the market. Therefore, although it gives an indication of our exposure to changes in interest rates, it is not intended to predict future results and our actual results will likely vary.

37

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements:

Financial Statements:

	Page
Report of Independent Registered Public Accounting Firm	39
Consolidated Balance Sheets as of December 31, 2007 and 2006	40
Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005	41
Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005	42
Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income (Loss) for the years ended December 31, 2007, 2006 and 2005	43
Notes to the Consolidated Financial Statements
Financial Statement Schedule:
Schedule II — Valuation of Qualifying Accounts for the years ended December 31, 2007, 2006 and 2005	67
All other schedules are omitted as they are not applicable or the required information is shown in the financial statements or notes thereto.
Signatures	72

38

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Eclipsys Corporation:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Eclipsys Corporation as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 9 to the consolidated financial statements, the Company changed the manner in which it accounts for share-based compensation in 2006.

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

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

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Atlanta, Georgia

February 28, 2008

39

ECLIPSYS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share data)

	December 31,
	2007			2006
Assets
Current assets:
Cash and cash equivalents	$	22,510		$	41,264
Marketable securities		168,925			89,549
Accounts receivable, net of allowance for doubtful accounts of $4,240 and $3,907, respectively		99,260			93,821
Inventory		—			1,076
Prepaid expenses		27,289			22,947
Deferred tax asset		7,524			—
Other current assets		1,759			1,026
Total current assets		327,267			249,683
Property and equipment, net		45,657			45,806
Capitalized software development costs, net		38,206			32,302
Acquired technology, net		594			1,224
Intangible assets, net		1,376			3,307
Goodwill		7,772			12,281
Deferred tax asset		31,187			3,661
Other assets		13,374			15,014
Total assets	$	465,433		$	363,278
Liabilities and Stockholders’ Equity
Current liabilities:
Deferred revenue	$	105,115		$	103,298
Accounts payable		11,679			19,879
Accrued compensation costs		24,473			12,997
Deferred tax liability		1,777			3,699
Other current liabilities		19,381			20,213
Total current liabilities		162,425			160,086
Deferred revenue		9,860			11,289
Deferred tax liability		31,235			—
Other long-term liabilities		3,899			1,247
Total liabilities		207,419			172,622
Commitments and contingencies
Stockholders’ Equity:
Common stock, $0.01 par value, 200,000,000 shares authorized; issued and outstanding, issued and outstanding 53,806,742 and 52,536,853, respectively		538			525
Additional paid-in capital		519,112			495,240
Accumulated deficit		(264,218	)		(305,359	)
Accumulated other comprehensive income		2,582			250
Total stockholders’ equity		258,014			190,656
Total liabilities and stockholders’ equity	$	465,433		$	363,278

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

40

ECLIPSYS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)

	Year Ended December 31,
	2007			2006			2005
Revenues:
Systems and services	$	460,853		$	409,450		$	370,380
Hardware		16,680			18,092			12,962
Total revenues		477,533			427,542			383,342
Cost and expenses:
Cost of systems and services		263,155			237,617			225,131
Cost of hardware		12,343			14,592			11,055
Sales and marketing		76,074			63,391			64,080
Research and development		56,749			57,768			51,771
General and administrative		32,959			24,972			19,479
Depreciation and amortization		17,760			15,736			14,659
Restructuring charge		1,175			14,670			—
Total costs and expenses		460,215			428,746			386,175
Income from operations		17,318			(1,204	)		(2,833	)
Gain on sale of assets		12,761			—			—
Interest income, net		7,070			5,335			3,102
Income before income taxes		37,149			4,131			269
(Benefit) provision for income taxes		(3,992	)		38			—
Net income	$	41,141		$	4,093		$	269
Net income per common share:
Basic net income per common share	$	0.78		$	0.08		$	0.01
Diluted net income per common share	$	0.76		$	0.08		$	0.01
Basic weighted average common shares outstanding		52,737			51,472			47,947
Diluted weighted average common shares outstanding		54,004			52,948			50,638

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

41

ECLIPSYS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

	Year Ended December 31,
	2007			2006			2005
Operating activities:
Net income	$	41,141		$	4,093		$	269
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		35,603			36,681			32,556
Provision for bad debts		2,078			1,457			3,011
Stock compensation expense		11,267			14,103			2,427
Deferred (benefit) provision for income taxes		(5,285	)		38			—
Loss on sale of marketable securities		28			—			—
Gain on sale of assets		(12,761	)		—			—
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Increase in accounts receivable		(5,695	)		(14,489	)		(18,966	)
Increase in prepaid expenses and other current assets		(4,559	)		(3,781	)		(4,507	)
Decrease (increase) in inventory		1,031			1,213			(645	)
Decrease (increase) in other assets		1,421			2,625			(9,283	)
Increase (decrease) in deferred revenue		1,441			(10,571	)		1,965
Increase (decrease) in accrued compensation		11,115			(4,897	)		2,527
(Decrease) increase in accounts payable and other current liabilities		(9,071	)		103			3,973
Increase (decrease) in other long-term liabilities		2,470			(4	)		1,130
Total adjustments		29,083			22,478			14,188
Net cash provided by operating activities		70,224			26,571			14,457
Investing activities:
Purchases of property and equipment		(16,596	)		(17,465	)		(19,288	)
Purchases of marketable securities		(162,358	)		(73,044	)		(117,984	)
Proceeds from sale of marketable securities		82,977			20,950			80,529
Proceeds from sale of assets, net of transaction costs		22,616			—			—
Capitalized software development costs		(20,943	)		(14,106	)		(20,144	)
Restricted cash		(1,950	)		—			—
Cash paid for earnout termination		(5,100	)		—			—
Cash paid for acquisitions and related earnouts		(1,272	)		(6,039	)		(312	)
Net cash used in investing activities		(102,626	)		(89,704	)		(77,199	)
Financing activities:
Proceeds from stock options exercised		12,549			26,712			16,853
Proceeds from employee stock purchase plan		310			990			195
Net cash provided by financing activities		12,859			27,702			17,048
Effect of exchange rates on cash and cash equivalents		789			2			356
Net decrease in cash and cash equivalents		(18,754	)		(35,429	)		(45,338	)
Cash and cash equivalents — beginning of year		41,264			76,693			122,031
Cash and cash equivalents — end of year	$	22,510		$	41,264		$	76,693
Cash paid for income taxes	$	110		$	—		$	—
Non-cash investing activities:
Purchases of property and equipment	$	—		$	2,352		$	—
Common stock issued pursuant to earn-out agreements	$	1,252		$	1,673		$	2,660

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

42

ECLIPSYS CORPORATION AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income (Loss)

(in thousands, except share data)

	Common Stock					Additional Paid-in Capital			Accumulated Deficit			Comprehensive Income		Accumulated Other Comprehensive Income (Loss)			Total
	Shares		Amount
Balance at December 31, 2004	47,496,142			472			432,218			(309,721	)				(212	)		122,757
Exercise of stock options	1,957,912			21			16,827											16,848
Employee stock purchase plan	10,848						195											195
Issuance of restricted stock	372,500			5			(5	)
Stock compensation expense							2,427											2,427
Stock issued for acquisitions	65,923			1			2,660											2,661
Comprehensive income:
Net income										269		$	269					269
Foreign currency translation adjustment													372		372			372
Other comprehensive income													372
Comprehensive income												$	641
Balance at December 31, 2005	49,903,325			499			454,322			(309,452	)				160			145,529
Exercise of stock options	2,583,484			26			26,686											26,712
Employee stock purchase plan	39,638						732											732
Issuance of restricted stock	100,000			1														1
Stock compensation expense							14,103											14,103
Stock issued for acquisitions	76,458			1			727											728
Restricted stock retained for tax withholdings	(166,023	)		(2	)		(1,386	)										(1,388	)
Deferred stock unit grants							56											56
Comprehensive income:
Net income										4,093		$	4,093					4,093
Foreign currency translation adjustment													90		90			90
Other comprehensive income													90
Comprehensive income												$	4,183
Balance at December 31, 2006	52,536,882		$	525		$	495,240		$	(305,359	)			$	250		$	190,656
Exercise of stock options	999,942			10			12,725											12,735
Shares cancelled	(15,924	)					(2	)										(2	)
Employee stock purchase plan	19,568						399											399
Issuance of restricted stock	150,000			1														1
Stock compensation expense							11,267											11,267
Stock issued for acquisitions	62,063			1			222											223
Restricted stock retained for tax withholdings	(39,133	)					(853	)										(853	)
Deferred stock unit grants							114											114
Other	93,344			1														1
Comprehensive income:
Net income										41,141		$	41,141					41,141
Unrealized gain on marketable securities													24		24			24
Foreign currency translation adjustment													2,308		2,308			2,308
Other comprehensive income													2,332
Comprehensive income												$	43,473
Balance at December 31, 2007	53,806,742		$	538		$	519,112		$	(264,218	)			$	2,582		$	258,014

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

43

1. Organization and Description of Business

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

2. Summary of Significant Accounting Policies

Basis of Presentation

The Consolidated Financial Statements include the accounts of Eclipsys and our wholly owned subsidiaries. All material inter-company transactions and balances between the Company and its subsidiaries have been eliminated in consolidation. Eclipsys manages its business as one reportable segment. Certain amounts in the prior period consolidated financial statements have been reclassified to conform with current year presentation.

Segment Information

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

Use of Estimates

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

Cash and Cash Equivalents

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

Restricted Cash

The restricted cash balance was $2.0 million as of December 31, 2007 and represents collateral to secure a letter of credit for our Atlanta facility. The cash collateral is restricted by the terms of the credit agreement and is included in other assets on our Consolidated Balance Sheet as of December 31, 2007.

44

Marketable Securities

The Company accounts for marketable securities in accordance with SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities.” The Company determines the appropriate classification of all marketable securities as held-to-maturity, available-for-sale or trading at the time of purchase, and re-evaluates such classification as of each balance sheet date. As of December 31, 2007 and 2006, all of the Company’s investments in marketable securities were classified as available-for-sale, and as a result, were reported at fair value. Unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity. The Company uses the specific identification method to determine the cost basis in computing realized gains and losses on the sale of its available-for-sale securities.

Accounts Receivable and Unbilled Receivables

The timing of revenue recognition and contractual billing terms under certain multiple element arrangements may not precisely coincide, resulting in the recording of unbilled accounts receivable or deferred revenue. Client payments are due under these arrangements in varying amounts primarily upon the achievement of certain contractual milestones throughout the implementation periods, which generally range from 12 to 24 months. The current portion of unbilled accounts receivable is included in accounts receivable.

Allowance for Doubtful Accounts

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

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are provided for using the straight-line method over the estimated useful lives, which generally range from 2 to 7 years. Computer equipment is depreciated over 2 to 5 years. Office equipment is depreciated over 2 to 7 years. Purchased software for internal use is amortized over 3 years. Expenditures for our resource planning system are depreciated over 8 years. Leasehold improvements are amortized over the shorter of the useful lives of the assets or the remaining term of the lease. When assets are retired or otherwise disposed of, the related costs and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in income. Expenditures for repairs and maintenance not considered to substantially lengthen the property and equipment lives are charged to expense as incurred.

Capitalized Software Development Costs and Acquired Technology

We capitalize a portion of our computer software development costs incurred subsequent to establishing technological feasibility. These costs include salaries, benefits, consulting and other directly related costs incurred in connection with programming and testing software. Capitalization ceases when the software is generally released for sale to clients. Capitalized software development costs were $20.9 million, $14.1 million, and $20.1 million for the years ended December 31, 2007, 2006, and 2005, respectively. These costs are amortized over the greater of the ratio that current revenues are to total and anticipated future revenues for the applicable software or the straight-line method over three years. Amortization of capitalized software development costs, which is included in costs of systems and services revenues, was $15.0 million, $17.5 million, and $14.3 million for the years ended December 31, 2007, 2006, and 2005, respectively. Accumulated amortization of capitalized software development costs was $23.8 million and $27.6 million as of December 31, 2007 and 2006, respectively. Acquired technology is amortized over its estimated useful lives on a straight-line basis. Amortization of the acquired technology is included in the cost of systems and services. Management monitors the net realizable value of development costs and acquired technology to ensure that the investment will be recovered through future revenues.

Intangible Assets, including Goodwill

Intangible assets are amortized over their estimated useful lives on a straight line basis. Goodwill is reviewed annually in accordance with SFAS 142 “Goodwill and Other Intangible Assets.” Testing would be done on a more frequent basis, if impairment indicators arise. The test for impairment is based upon a number of factors, including operating results, business plans and projected future cash flows. No impairment has been identified or recorded in 2007, 2006 or 2005.

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Long-Lived Assets

Long-lived assets, including separate and identifiable intangible assets, are reviewed for potential impairment at such time when events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. Any impairment loss would be recognized when the sum of the expected, undiscounted net cash flows is less than the carrying amount of the asset. If an asset is impaired, the asset is written down to its estimated fair value. We did not record any impairment of long-lived assets in 2007, 2006 or 2005.

Fair Value of Financial Instruments

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

Revenue Recognition

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

We generally contract under multiple element arrangements, which include software license fees, hardware and services including implementation, integration, training and software maintenance, for periods of 3 to 7 years. We evaluate revenue recognition on a contract-by-contract basis as the terms of each arrangement vary. The evaluation of our contractual arrangements often requires judgments and estimates that affect the timing of revenue recognized in our statements of operations. Specifically, we may be required to make judgments about:

• whether the fees associated with our software and services are fixed or determinable;

• whether collection of our fees is considered probable;

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

• whether we have the ability to make reasonably dependable estimates in the application of the percentage-of-completion method; and

• whether we have verifiable objective evidence of fair value for our software and services.

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

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

Subscription Contracts

Our subscription contracts typically include the following deliverables:

• Software license fees;

• Maintenance;

• Professional services; and

• Third party hardware or remote hosting services.

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

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

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

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

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

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

Traditional Software Contracts

We enter into traditional multiple-element arrangements that 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.

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Software Contracts Requiring Contract Accounting

We enter into certain multiple element arrangements containing milestone provisions in which the professional services are considered essential to the functionality of the software. Under these arrangements, software license fees and professional service revenues are recognized using the percentage-of-completion method over the implementation period which generally ranges from 12 to 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.

Stand-Alone Software and Services

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

• Software license;

• Maintenance;

• Professional services;

• Hardware;

• Outsourcing; and

• Remote Hosting services.

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

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

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

Hardware revenue is recognized upon delivery pursuant to SAB 104.

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

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

The Company records reimbursable out-of-pocket expenses in both systems and services revenues and as a direct cost of system and services in accordance with EITF 01-14, “Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expenses Incurred. In 2007, 2006, and 2005 reimbursable out-of-pocket expenses were $11.6 million, $9.0 million, $9.2 million, respectively.

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

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Costs of Revenues

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

Shipping Costs

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

Sales Taxes

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

Research and Development

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

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

Income Taxes

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

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

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

Stock-Based Compensation

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

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

We have elected to use the simplified method for estimating our expected term equal to the midpoint between the vesting period and the contractual term as allowed by SAB 107, “Share-Based Payment.” We currently estimate volatility by using the weighted average historical volatility of our common stock. The risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term input to the Black-Scholes model. We estimate forfeitures using a weighted average historical forfeiture rate. Our estimate of forfeitures will be adjusted over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from our estimate.

Concentration of Credit Risk

Our clients operate primarily in the healthcare industry. We sell our software and services under contracts with varying terms. The accounts receivable amounts are unsecured. We believe that the allowance for doubtful accounts is sufficient to cover credit losses. Revenue related to one of our customers represented 10% of total revenues for the year ended December 31, 2007.

Foreign Currency

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

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

We have not entered into any hedging contracts during the three-year period ended December 31, 2007.

New Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board, or FASB, issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS 159 allows us an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Eclipsys is evaluating the impact on its financial statements from adopting SFAS 159.

In September 2006, the FASB issued SFAS 157 “Fair Value Measurements.” SFAS 157 enhances existing guidance for measuring assets and liabilities using fair value. Prior to the issuance of SFAS 157, guidance for applying fair value was incorporated in several accounting pronouncements. SFAS 157 provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. SFAS 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. Under SFAS 157, fair value measurements are disclosed by level within that hierarchy. Certain provisions of SFAS 157 are effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim

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periods within those fiscal years, while the effective date for certain other provisions has been deferred to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. Eclipsys is evaluating the impact on its financial statements from adopting SFAS 157.

In June 2006, EITF 06-3 “How Sales Taxes Collected from Clients and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That is, Gross Versus Net Presentation),” was issued. EITF 06-3 requires disclosure of the presentation of taxes on either a gross (included in revenues and costs) or a net (excluded from revenue) basis as an accounting policy decision. The provisions of this standard are effective for interim and annual reporting periods beginning after December 15, 2006. The adoption of EITF 06-3 did not have a material impact on our Consolidated Financial Statements.

3. Marketable Securities

Marketable securities balances consist of the following:

	(in thousands) December 31,
	2007		2006
Security Type
Auction Rate Securities(1):
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	$	83,977	$	45,139
Debt securities issued by states of the United States and political subdivisions of the states		36,381		16,834
Other auction rate securities		45,859		4,353
		166,217		66,326
Other Securities(2):
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies		152		11,259
Corporate notes/bonds		2,556		11,554
Other securities		—		410
Total	$	168,925	$	89,549

(1) Auction rate securities are variable-rate debt securities. While the underlying security has a long-term nominal maturity, dutch auctions are typically held every 7, 28, or 35 days. On these reset dates, the holders of the securities have the opportunity to increase (buy), decrease (sell) or hold their investment. If the auctions are successful, they provide an opportunity the Company to sell or reset the interest rate on the security, creating a short-term instrument. The securities generally trade at par and are callable at par on any interest payment date at the option of the issuer. Interest is paid at the end of each auction period. See Note 19 to the Consolidated Financial Statements for subsequent event information related to auction rate securities.

(2) As of December 31, 2007 the maturity dates of other securities range from one to two years.

Eclipsys’ practice for all securities in the portfolio is typically to hold them less than one year, and therefore, we believe that these investments are part of working capital and are appropriately classified as current assets. We classify all of our marketable securities as available for sale.

Gross realized gains and losses for the periods ended December 31, 2007, 2006, and 2005 as well as gross unrealized gains and losses as of December 31, 2007 and 2006 are immaterial to our financial statements.

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4. Accounts Receivable and Unbilled Receivables

Accounts receivable are composed of the following:

	(in thousands) December 31,
	2007		2006
Billed accounts receivable, net	$	75,164	$	77,570
Total unbilled accounts receivable, net		24,096		16,251
Total accounts receivable, net	$	99,260	$	93,821

5. Property and Equipment

The balances for property and equipment were as follows:

	(in thousands) December 31,
	2007			2006
Computer equipment	$	58,263		$	51,595
Office equipment and other		9,852			7,008
Purchased software		32,653			30,108
Leasehold improvements		18,613			14,227
		119,381			102,938
Less: Accumulated depreciation and amortization		(73,724	)		(57,132	)
	$	45,657		$	45,806

Depreciation expense for property and equipment totaled $16.7 million, $14.8 million, and $13.8 million, in 2007, 2006, and 2005, respectively.

6. Acquired Technology and Intangible Assets, including Goodwill

The changes in the carrying amount of goodwill for the years ended December 31, 2007 and 2006 were as follows:

	(in thousands) December 31,
	2007			2006
Beginning Balance	$	12,281		$	6,624
Earnouts		895			1,719
Sysware and Mosum acquisitions		—			3,029
VSA acquisition		—			909
CPMRC Sale		(5,404	)		—
Ending Balance	$	7,772		$	12,281

During the year ended December 31, 2007, we disposed of goodwill of $5.4 million in connection with the sale of CPMRC and recorded additional goodwill of $0.9 million in connection with earnout agreements. See Notes 13 and 14 to our Consolidated Financial Statements for additional information.

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For the year ended December 31, 2007 and 2006, the gross and net amounts for acquired technology, ongoing customer relationships and goodwill consist of the following:

	(in thousands)
	December 31, 2007							December 31, 2006
	Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value		Estimated Life
Intangibles subject to amortization
Acquired technology	$	1,967	$	(1,373	)	$	594	$	1,967	$	(743	)	$	1,224	3-5 years
Ongoing customer relationships		2,404		(1,028	)		1,376		5,644		(2,337	)		3,307	5-7 years
Total	$	4,371	$	(2,401	)	$	1,970	$	7,611	$	(3,080	)	$	4,531
Intangibles not subject to amortization:
Goodwill						$	7,772						$	12,281

During the year ended December 31, 2007, we disposed of intangible assets of $0.9 million in connection with the sale of CPMRC. Amortization expense was $1.7 million for the year ended December 31, 2007, comprised of $0.6 million for acquired technology and $1.1 million for client relationships. Amortization expense was $1.3 million for the year ended December 31, 2006, comprised of $0.4 million for acquired technology and $0.9 million for client relationships. Amortization expense was $1.2 million for the year ended December 31, 2005, comprised of $0.3 million for acquired technology and $0.9 million for client relationships.

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

	(in thousands)
	2008		2009		2010		2011		2012		Total
Total amortization expense	$	832	$	705	$	262	$	171	$	—	$	1,970

7. Stockholders’ Equity

Undesignated Preferred Stock

We have available for issuance, 5,000,000 shares of preferred stock. As discussed below under “Shareholder Rights Plan,” Eclipsys’ Board of Directors has designated 100,000 of the 5,000,000 authorized shares of preferred stock as Series A Junior Participating Preferred Stock. Eclipsys has a balance of 4,900,000 authorized shares of undesignated preferred stock, the Undesignated Preferred. The liquidation, voting, conversion and other related provisions of the Undesignated Preferred will be determined by the Board of Directors at the time of issuance. Currently, there are no outstanding preferred shares.

Shareholder Rights Plan

On July 26, 2000, our Board of Directors declared a dividend of one Right for each outstanding share of Eclipsys’ Common Stock to stockholders of record at the close of business on August 9, 2000. Each Right entitles the registered holder to purchase from Eclipsys one one-thousandth of a share of Series A Junior Participating Preferred Stock, $0.01 par value per share, at a Purchase Price of $65.00 in cash, subject to adjustment. The Rights will initially trade together with Eclipsys’ Common Stock, and will not be exercisable. If a person or group (other than an exempt person) acquires 15% or more of the outstanding shares of Eclipsys Common Stock, the Rights generally will become exercisable and allow the holder (other than the 15% purchaser) to purchase shares of Eclipsys’ Common Stock at a 50% discount to the market price. The effect will be to discourage acquisitions of 15% or more of Eclipsys’ Common Stock without negotiations with the Board of Directors. The terms of the Rights are set forth in a Rights Agreement dated as of July 26, 2000, the Rights Agreement, between Eclipsys and Fleet National Bank, as Rights Agent. The Board has designated 100,000 of the 5,000,000 authorized shares of preferred stock as Series A Junior Participating Preferred Stock.

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8. Employee Benefit Plans

2005 Stock Incentive Plan

At our Annual Meeting of Stockholders held June 29, 2005, our shareholders approved the 2005 Stock Incentive Plan, or the 2005 Plan. Under the 2005 Plan, no further awards will be granted under our prior Stock Incentive Plans which include our 1996, 1998, 1999 and 2000 plans. Awards may be made under the 2005 Plan for a number of shares (subject to adjustment in the event of stock splits and other similar events) equal to the sum of (1) 2,000,000 shares of the Company’s common stock, (2) any shares reserved for issuance under the Amended and Restated 2000 Stock Incentive Plan that remain available for issuance as of the date the 2005 Plan was approved by our stockholders and (3) any shares subject to outstanding awards under our 1996 Stock Plan, the Amended and Restated 1998 Stock Incentive Plan, the Amended and Restated 1999 Stock Incentive Plan and the Amended and Restated 2000 Stock Incentive Plan that expire or are terminated, surrendered or canceled without having been fully exercised, are repurchased or forfeited in whole or part or result in any shares subject to such award not being issued. We expect to satisfy option exercises by issuing the Company’s common stock. As of December 31, 2007, there were 1.1 million shares available for future issuance under the 2005 Plan.

2005 Inducement Grant Stock Incentive Plan

During 2006 we issued 400,000 stock options and 100,000 shares of restricted stock as an inducement grant made without stockholder approval and outside the 2005 Plan.

Awards granted under these plans generally have a contractual life of 7 to 10 years and generally vest over a 3 to 5 year period.

Stock Options

A summary of stock option activity is as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2007	5,631,584		$	15.40
Options granted	938,250		$	21.71
Options exercised	(999,942	)	$	12.89
Options canceled or forfeited	(315,771	)	$	22.23
Outstanding at December 31, 2007	5,254,121		$	16.58	6.32	$	45,856
Vested and expected to vest at December 31, 2007	5,093,168		$	16.47	6.28	$	45,049
Exercisable at December 31, 2007	2,864,886		$	14.04	4.78	$	32,280

As of December 31, 2007, $33.2 million of total unrecognized compensation costs related to stock options is expected to be recognized over a weighted average period of 3.49 years.

The weighted average grant date fair value of our employee stock options granted was $12.63, $15.11 and $11.29 per option during the years ended December 31, 2007, 2006 and 2005, respectively. The intrinsic value of shares exercised was $8.8 million, $30.5 million and $15.4 million during the years ended December 31, 2007, 2006 and 2005, respectively.

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

	Years Ended December 31,
	2007		2006		2005
Expected term (in years)	5.91		6.46		6.01
Risk free interest rate	4.31	%	4.99	%	4.02	%
Expected volatility	59.3	%	77.1	%	80.2	%
Dividend yield	0	%	0	%	0	%

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

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

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

We estimate forfeitures using a weighted average historical forfeiture rate. Our estimate of forfeitures will be adjusted over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from our estimate.

Non-Vested Restricted Stock

From time to time the Company has issued non-vested restricted stock grants to members of senior management. The Company issued 150,000 and 100,000 shares in 2007 and 2006, respectively. Generally, restricted stock grants vest over a five-year period.

Non-vested restricted stock award activity for the year ended December 31, 2007 is summarized as follows:

	Non-vested Number of Shares		Weighted Average Grant - Date Fair Value
Nonvested balance at January 1, 2007	366,128		$	17.29
Granted	150,000		$	19.62
Vested	(124,033	)	$	17.23
Forfeited	(9,865	)	$	15.11
Nonvested balance at December 31, 2007	382,230		$	18.28

Compensation expense for non-vested restricted common stock issued at discounted prices is recognized over the vesting period for the difference between the purchase price and the fair market value on the measurement date. Compensation expense recorded for stock-based awards of restricted stock was $2.3 million, $2.6 million, and $2.4 million, for the years ended December 31, 2007, 2006 and 2005, respectively.

As of December 31, 2007, $6.1 million of total unrecognized compensation costs related to non-vested restricted awards is expected to be recognized over a weighted average period of 3.19 years. The fair value of shares vested in each of the years ended December 31, 2007, 2006 and 2005 was $2.7 million, $6.0 million and $0.8 million, respectively.

Deferred Stock Units

Effective May 10, 2006, we implemented a deferred stock unit plan to provide for equity compensation for our non-employee directors in the form of deferred stock units, or DSUs, granted under the 2005 Plan. As of the date of each annual meeting of the Company’s stockholders, each continuing non-employee director receives a number of DSUs determined by dividing $75,000 by the fair market value of a share of the Company’s common stock on the grant date. These DSUs vest quarterly over the course of the ensuing year. After cessation of board service, the Company will pay the DSUs by issuing to the former director a number of shares of the Company's common stock equal to the number of accumulated vested deferred stock units. In addition, a non-employee director may elect to receive DSUs in lieu of all or a portion of his or her cash fees. All DSUs received for cash fees are fully vested.

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We granted 24,086 and 26,459 deferred stock units at an average market value of $23.44 and $18.91 during the years ended December 31, 2007 and 2006, respectively. The value of these deferred stock units is amortized to compensation expense and director fees ratably over the vesting period. Expense recorded for deferred stock units was $586,000 and $313,000 in the years ended December 31, 2007 and 2006, respectively.

Employee Savings Plan

During 1997, we established a Savings Plan pursuant to Section 401(k) of the Internal Revenue Code, or the Code, whereby employees may contribute a percentage of their compensation, not to exceed the maximum amount allowable under the Code. At the discretion of our Board of Directors, we may elect to make matching contributions, as defined in the Savings Plan. For the years ended December 31, 2007, 2006, and 2005 the Board of Directors approved contributions to the Savings Plan of $1.5 million, $1.3 million, and $0.6 million, respectively.

2005 Employee Stock Purchase Plan

On June 29, 2005, our shareholders approved the 2005 Employee Stock Purchase Plan, or the 2005 Purchase Plan. In connection with the approval, the Second Amended and Restated 1998 Employee Stock Purchase Plan was terminated and no further awards will be made under such plan. Under the provisions of the 2005 Purchase Plan, our employees may purchase shares of our stock at a purchase price of 95% of the closing price of our stock on the final day of the yearly offering period as defined. There were 19,568 shares issued under the 2005 Purchase Plan as a result of employee participation during the year ended December 31, 2007. As of December 31, 2007, there were 929,946 shares available for future issuance under the 2005 Purchase Plan.

9. Stock-Based Compensation

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

	Year Ended December 31,
	2007		2006
Cost of systems and services	$	4,597	$	3,215
Sales and marketing		3,137		3,495
Research and development		2,175		1,921
General and administrative		1,358		2,626
Restructuring charge		—		2,846
Total stock-based compensation expense	$	11,267	$	14,103

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

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Prior to January 1, 2006, we accounted for our stock-based employee compensation arrangements under the intrinsic value method prescribed by APB 25, as allowed by SFAS 123, as amended by SFAS 148. As a result, no expense was recognized for options to purchase our common stock that were granted with an exercise price equal to fair market value at the date of grant. Pro forma information regarding net income and net income per share, as required by SFAS 123, has been determined as if the Company had accounted for its employee stock option plan under the method of SFAS 123. The pro forma information for the year ended December 31, 2005 is as follows (in thousands, except per share data):

	Year ended December 31, 2005
Net income	$	269
Add: stock-based employee compensation expense included in net income, net of related tax effects		2,427
Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(11,599	)
Pro forma net loss	$	(8,903	)
Basic net income (loss) per common share:
As reported	$	0.01
Pro forma	$	(0.19	)
Diluted income (loss) per common share:
As reported	$	0.01
Pro forma	$	(0.19	)

10. Restructuring

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

These activities resulted in total restructuring charges of $14.7 million, which were incurred in the year ended December 31, 2006. Severance charges were $12.2 million, of which $2.8 million was for non-cash stock-based compensation. The excess office space consolidation resulted in charges of $2.5 million related to the closing of three of our facilities. The remaining liability as of December 31, 2007 is expected to be paid out through 2009.

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

	One-time Termination Benefits			Facility Closures			Total
Balance at January 1, 2006	$	—		$	—		$	—
Restructuring charge		12,184			2,486			14,670
Non-cash charges related to stock option modifications		(2,846	)		—			(2,846	)
Payments		(6,164	)		—			(6,164	)
Balance at December 31, 2006		3,174			2,486			5,660
Payments		(2,896	)		(1,587	)		(4,483	)
Balance at December 31, 2007	$	278		$	899		$	1,177

In October 2007, the Company initiated a restructuring plan to relocate its corporate headquarters from Boca Raton, Florida to Atlanta, Georgia. The intent of the restructuring plan is to consolidate more of the Company’s operations in one location, reduce overhead costs, and provide a more accessible location for existing and potential clients as well as employees. The charges related to this plan primarily consist of severance-related expenses associated with the termination of impacted employees and include one-time termination benefits and retention-bonus expenses. Total restructuring expenses in connection with this plan are expected to approximate $2.3 million, of which $1.2 million has been incurred as of December 31, 2007. The relocation of the corporate headquarters is expected to be complete in the first quarter of 2008, with the related payments made during the first and second quarters of 2008.

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The restructuring charges have been recorded in our Consolidated Statements of Operations as “restructuring charge.”

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

	One-time Termination Benefits			Retention Bonus		Other			Total
Balance at January 1, 2007	$	—		$	—	$	—		$	—
Restructuring charge		531			448		196			1,175
Payments		(2	)		—		(196	)		(198	)
Balance at December 31, 2007	$	529		$	448	$	—		$	977

11. Income Taxes

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

	December 31,
	2007			2006		2005
Current Tax Provision:
Federal	$	428		$	—	$	—
State		85			—		—
Foreign		239			—		—
	$	752		$	—	$	—
Deferred Provision (Benefit):
Federal	$	448		$	34	$	—
State		94			4		—
Foreign		(5,286	)		—		—
		(4,744	)		38		—
Total Provision	$	(3,992	)	$	38	$	—

For the year ended December 31, 2007 the Company’s U.S. and foreign income before income taxes totaled $34.2 million and $2.9 million, respectively.

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

	2007			2006			2005
Statutory federal income tax rate	$	13,002		$	1,405		$	91
State income taxes, net of federal benefit		1,488			164			11
Incentive stock options		(1,045	)		(2,065	)		—
Applicable rate changes		(2,840	)		—			—
FIN 48 liability		780			—			—
Foreign jurisdiction rate differential		(658	)		—			—
Other		996			666			636
Valuation allowance		(15,715	)		(132	)		(738	)
Income tax provision	$	(3,992	)	$	38		$	—

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

	(in thousands)
	December 31,
	2007			2006
Deferred tax assets:
Intangible assets	$	17,053		$	20,317
Stock based compensation		6,889			5,797
Allowance for doubtful accounts		1,672			2,181
Accrued expenses		2,112			3,203
Deferred Revenue		3,691			—
Other		—			1,766
Net operating loss carryforwards		92,494			119,791
		123,911			153,055
Deferred tax liabilities:
Unbilled receivables		(9,804	)		(5,109	)
Goodwill amortization		(128	)		(38	)
Depreciation		(3,874	)		(4,161	)
Capitalization of software development costs		(15,065	)		(12,262	)
Other		(2,226	)		—
Net deferred tax asset		92,814			131,485
Valuation allowance		(87,115	)		(131,523	)
	$	5,699		$	(38	)
	(in thousands)
	December 31,
	2007			2006
Balance sheet classification:
Current deferred tax asset	$	7,524		$	—
Noncurrent deferred tax asset		31,187			3,661
Current deferred tax liability		(1,777	)		(3,699	)
Noncurrent deferred tax liability		(31,235	)		—
	$	5,699		$	(38	)

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As of December 31, 2007, the Company had U.S. net operating loss carryforwards for federal income tax purposes of approximately $308 million. Of this amount, $11 million expires in 2012 and $21 million expires in 2018; the balance expires in varying amounts through 2026. Of the total U.S. net operating loss carryforward, $89 million relates to stock option tax deductions which will be tax-effected and the benefit credited as additional paid-in-capital when realized. Additionally, the Company has Canadian net operating loss carryovers of approximately $21 million that expire in varying amounts through 2026. The Company’s Indian subsidiary is entitled to a tax holiday which expires in 2009.

As of December 31, 2007, the Company’s ability to use a portion of its federal and state net operating loss carryforwards to reduce future taxable income is subject to restrictions attributable to equity transactions that resulted in a change of ownership during its 1998 tax year as defined in Internal Revenue Code Section 382. We do not expect that the limitations placed on this portion of the Company’s NOLs as a result of this change in ownership will result in the expiration of its NOL carryforwards. However, future equity transactions could limit the utilization of its existing NOLs.

As of December 31, 2007, a valuation allowance of approximately $87 million has been established against the U.S. deferred tax assets that management does not believe are more likely than not to be realized. This determination is based primarily on the Company’s recent history of taxable losses, operating losses and uncertainty with respect to its forecasted results. We will continue to assess the requirement for a valuation allowance on a quarterly basis. Should the Company achieve its 2008 forecasted results, it may be that we determine from our valuation allowance assessment that the positive evidence outweighs the negative resulting in the release of all or a portion of the allowance.

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

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

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

	2007
Balance at January 1, 2007	$	—
Additions for tax positions of prior years		548
Additions for tax positions related to 2007		168
Reductions for tax positions of prior years		—
Settlements		—
Balance at December 31, 2007	$	716

Of the $0.7 million of additions, $0.6 million would affect the Company’s effective income tax rate in the respective period of change. The Company accounts for any applicable interest and penalties on uncertain tax positions as a component of income tax expense. The liability for uncertain income taxes as of December 31, 2007 and income tax expense for the year ended December 31, 2007 include interest and penalties of $0.2 million.

The Company’s tax returns filed in multiple jurisdictions are subject to audit by taxing authorities. Years with net operating losses that can be carried forward remain open for audit until the net operating loss is utilized or expires. As of December 31, 2007, the earliest years remaining open for audit and/or settlement in our major taxing jurisdictions are as follows: United States – 1997 and Canada – 2001.

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12. Commitments and Contingencies

In July and August of 2007, four purported stockholder derivative complaints were filed in the United States District Court for the Southern District of Florida against certain current and former directors and officers of Eclipsys and Eclipsys as a nominal defendant, alleging that during the period from at least 1999 until 2006 certain of Eclipsys’ option grants were backdated and that as a result of this alleged backdating the Company’s financial statements were misstated, and stock sales by the named defendants constituted improper insider selling. These complaints were consolidated in November 2007. The Company is currently unable to predict the outcome of the litigation or to reasonably estimate the range of potential loss, if any. However, dealing with this litigation has required the Company to incur substantial legal expenses, which affected the Company’s financial results for 2007 and will continue to affect the Company’s 2008 results as well. The derivative litigation also could result in management distraction and adverse publicity and resulting reputational harm, which could impair the Company’s sales and marketing efforts.

In addition to the foregoing, 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 or intellectual property infringement, claims for indemnity arising in the course of our business and claims by persons whose employment with us has been terminated. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Consequently, management is unable to ascertain the ultimate aggregate amount of monetary liability, amounts which may be covered by insurance or recoverable from third parties, or the financial impact with respect to these matters as of December 31, 2007. However, based on our knowledge as of December 31, 2007, 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.

Non-cancelable Operating Leases

We lease office space and certain equipment under non-cancelable operating leases. Rental expense under operating leases was $11.7 million, $8.3 million, and $9.4 million for the years ended December 31, 2007, 2006, and 2005, respectively. Future minimum rental payments under non-cancelable operating leases as of December 31, 2007 are as follows:

	(in thousands)
Year Ending December 31,
2008		9,640
2009		9,286
2010		6,882
2011		4,640
2012		4,255
Thereafter		16,387
	$	51,090

We have unconditional purchase obligations that consist of minimum purchase commitments for telecommunication services, computer equipment, maintenance, consulting and other commitments. In aggregate, these obligations total approximately $80.2 million. These obligations will require payments of $56.0 million in 2008, with the majority of the balance occurring within the next three years.

Indemnification clauses

Our standard software license agreements contain indemnification clauses that are limited in amount. Pursuant to these clauses, we indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party. We account for these clauses under FASB Staff Position FIN 45 45-1: Accounting for Intellectual Property Infringement Indemnifications under FASB Interpretation No. 45. Accordingly, there are no liabilities recorded for these agreements as of December 31, 2007.

13. Acquisitions

In December 2006, we acquired Van Slyck & Associates, Inc., or VSA. VSA is a patient classification, acuity-driven nurse staffing service and software company.

The aggregate purchase consideration included $1.5 million in cash, as well as earnout consideration of up to approximately $2.5 million payable in cash over a two-year period, based on the attainment of conditions defined in the acquisition agreement. All future consideration paid under the earn-out provisions of the agreement, if any, will be recorded as additional goodwill. The operating results of VSA have been combined with those of Eclipsys since December 15, 2006.

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As a result of the VSA acquisition, we recorded non-tax deductible goodwill of $0.9 million and other intangible assets including client relationships of $0.3 million and acquired technology of $0.4 million. Amortizable intangible assets include client relationships and acquired technology, and are being amortized over five and three-year periods on a straight-line basis, respectively, which we believe reflects the estimated expected utility of these assets.

On June 11, 2006, we entered into an agreement to acquire both the assets of Sysware Health Care Systems, Inc., or Sysware, and the stock of Sysware’s sister company Mosum Technology (India) Private Limited, or Mosum. In July 2006, we closed the asset acquisition of Sysware. We closed the stock acquisition of Mosum, which is based in India, in December, 2006, once all the Indian regulatory approvals were received. The acquisition of these affiliated companies enabled us to market Sysware’s laboratory information solution as a core module of Eclipsys’ Sunrise Clinical Manager™ suite of enterprise-wide advanced clinical solutions, and also provided us with the foundation for a development and support organization in India.

The aggregate purchase consideration included $3.7 million in cash, as well as earnout consideration of up to approximately $3.9 million payable in a combination of cash and shares of our common stock over a two-year period, based on the attainment of conditions defined in the acquisition agreement. All future consideration paid under the earn-out provisions of the agreement, if any, will be recorded as additional goodwill. The operating results of Sysware and Mosum have been combined with those of Eclipsys since July 14, 2006. In October 2007, we changed the name of Mosum to Eclipsys (India) Private Limited.

As a result of the Sysware acquisition, we recorded tax deductible goodwill of $3.0 million and other intangible assets including client relationships of $1.0 million and acquired technology of $0.7 million. Amortizable intangible assets include client relationships and acquired technology, and are being amortized over five and three-year periods on a straight-line basis, respectively, which we believe reflect the estimated expected utility of these assets.

In each of these acquisitions, we assigned the total purchase price to the assets, liabilities and identifiable intangible assets acquired with the remaining amount assigned to goodwill.

Under the provisions of the earn-out agreements related to the acquisitions, we recorded incremental goodwill of $0.9 and $1.7 million in 2007 and 2006, respectively. In connection with these earn-outs, we issued 62,063 and 76,458 shares of our common stock in 2007 and 2006, respectively, and paid cash consideration totaling $1.3 million and $1.0 million, respectively.

14. Sale of Assets

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

(in thousands):

Cash received	$	23,134
CPMRC earnout settlement payment		(5,100	)
Net assets sold		(4,755	)
Other costs		(518	)
Gain on sale	$	12,761

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

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

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

15. Related Party Transactions

License Agreement with Partners HealthCare System, Inc.

We have a license agreement with Partners HealthCare System, Inc., or Partners. Mr. Jay Pieper, a director of Eclipsys, is Vice President of Corporate Development and Treasury Affairs for Partners. Under the terms of this license, we may develop, commercialize, distribute and support certain technology of Partners, or the Partners’ Technology, and license it, as well as sell related services, to other healthcare providers and hospitals throughout the world (with the exception of the Boston, Massachusetts metropolitan area). No royalties are payable by us pursuant to the license with Partners. In 2001, Partners entered into a contract with us for the license of a new software application and related professional services. This new software application consisted of an upgrade to an existing software application that Partners had licensed from Transition Systems, Inc, an entity that was acquired by us in December 1998. Under this new contract, Partners paid us the sums of $1.2 million, $0.9 million and $0.9 million, in 2007, 2006 and 2005, respectively. As of December 31, 2007, Partners owed us the sum of approximately $0.1 million related to this contract. Mr. Pieper was not affiliated with Eclipsys at the time of the negotiation of the Partners license from Transition Systems, Inc.

Investment in Healthvision, Inc.

The Company historically held an investment in a related party, Healthvision, Inc, or Healthvision. This investment was accounted for as an equity method investment, which had a zero basis reflecting cumulative losses. In October 2007, Healthvision was acquired by Quovadx Inc. The Company received zero proceeds from this transaction and therefore no gain or loss was recorded on the disposition of our investment. The Company has no continuing ownership in Healthvision.

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

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

During the year ended December 31, 2007, we paid $139,000 to BG Jet Corp. under this arrangement.

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16. Quarterly Financial Information (Unaudited)

The following table presents consolidated statement of operations data for each of the eight quarters in the years ended December 31, 2007 and 2006. The data in the statement of operations is unaudited and, in the opinion of management, includes all adjustments (consisting of normal recurring adjustments) necessary to state fairly the data for such periods.

	For the Year Ended December 31, 2007
	(in thousands, except per share data)
	First Quarter			Second Quarter		Third Quarter		Fourth Quarter		Year
Revenues	$	113,030		$	119,019	$	121,080	$	124,404	$	477,533
Income from operations		906			4,125		7,513		4,774		17,318
Net income		2,401			5,694		8,864		24,182		41,141
Basic net income per common share	$	0.05		$	0.11	$	0.17	$	0.45	$	0.78
Diluted net income per common share	$	0.04		$	0.11	$	0.16	$	0.45	$	0.76
	For the Year Ended December 31, 2006
	(in thousands, except per share data)
	First Quarter			Second Quarter		Third Quarter		Fourth Quarter		Year
Revenues	$	100,891		$	102,397	$	108,566	$	115,688	$	427,542
Income (loss) from operations		(9,061	)		448		4,199		3,210		(1,204	)
Net income (loss)		(7,912	)		1,761		5,577		4,667		4,093
Basic net income (loss) per common share	$	(0.16	)	$	0.03	$	0.11	$	0.09	$	0.08
Diluted net income (loss) per common share	$	(0.16	)	$	0.03	$	0.11		0.09	$	0.08

17. Geographic Information

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

	Year ended December 31,
	2007		2006		2005
United States	$	444,474	$	394,536	$	359,331
Canada		31,761		30,592		21,339
Other		1,298		2,414		2,672
Total	$	477,533	$	427,542	$	383,342

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

	December 31,
	2007		2006
United States	$	133,774	$	109,834
Canada		938		1,144
India		3,454		2,617
Total	$	138,166	$	113,595

18. Basic and Diluted Net Income Per Share

For all periods presented, basic and diluted net income per common share is presented in accordance with SFAS 128 “Earnings per Share,” which provides for the accounting principles used in the calculation of earnings per share. Basic net income per common

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share excludes dilution and is calculated by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share reflects the potential dilution from assumed conversion of all dilutive securities such as stock options and unvested restricted stock using the treasury stock method. When the effects of the outstanding stock options are anti-dilutive, they are not included in the calculation of diluted earnings per common share. For the year ended December 31, 2007, anti-dilutive stock options totaling 3.5 million shares were excluded from the determination of diluted earnings per common share.

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

	(in thousands, except per share data)
	December 31,
	2007		2006		2005
Basic earnings per common share:
Net income	$	41,141	$	4,093	$	269
Weighted average common shares outstanding		52,737		51,472		47,947
Basic net income per common share	$	0.78	$	0.08	$	0.01
Diluted net income per common share:
Net income	$	41,141	$	4,093	$	269
Weighted average common shares outstanding		52,737		51,472		47,947
Dilutive effect of:
Stock options, restricted stock awards, and other stock compensation		1,263		1,442		2,618
Contingent shares issuable pursuant to earn-out agreements		4		34		73
Total shares		54,004		52,948		50,638
Diluted net income per common share	$	0.76	$	0.08	$	0.01

19. Subsequent Event

Auction Rate Securities

As of December 31, 2007, the Company had approximately $191 million of cash, cash equivalents and short-term marketable securities. Of these amounts, approximately $166 million was invested in auction-rate securities (“ARS”), comprising certain “AAA” rated notes backed by insured student loans with long-term nominal maturities for which the interest rates are reset through a dutch auction each month. The monthly auctions historically have provided a liquid market for these securities.

In February 2008, the broker-dealers managing the Company’s ARS portfolio experienced failed auctions of certain of these securities where the amount of securities submitted for sale exceeded the amount of purchase orders. The ARS continue to pay interest according to their stated terms and the ARS held by the Company have not been downgraded nor have they been placed on credit watch.

If uncertainties in the credit and capital markets continue, these markets deteriorate further or the Company experiences any rating downgrades on any investments in its portfolio (including on ARS), the Company may incur temporary or other-than-temporary impairments, which could negatively affect the Company’s financial condition, cash flow and reported earnings. Additionally, a continued deterioration in market conditions that lead us to conclude our marketable securities are not available to fund current operations would result in us classifying our ARS as noncurrent assets.

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Secured Financing

On February 15, 2008, the Company entered into an agreement with an investment bank, pursuant to which the Company received $45 million in exchange for a transfer to the bank of ARS with a nominal value of $90 million in the aggregate. The Company is obligated to repay the bank and the bank is obligated to transfer the ARS back to the Company on May 15, 2008, subject to earlier transfer back to the Company at the Company’s discretion (the “Repayment Date”). The arrangement has been amended to permit the Company to extend the Repayment Date to August 15, 2008 if not in default under the arrangement on May 15, subject to compliance with the margin requirement described below. The repayment obligation includes the original $45 million with interest payable monthly at a rate measured at 3 month LIBOR plus 1.5% through May 15, 2008, increasing to 3 month LIBOR plus 3.5% if the Repayment Date extends beyond May 15, 2008 (collectively and net of any cash payments made, the “Repayment Amount”). If the market value (as determined by the bank in its reasonable discretion) of the ARS falls below 140% of the Repayment Amount, the Company may be required immediately to transfer to the bank additional cash or securities such that the total value of the ARS and all additional transferred cash and securities would be at least 150% of the Repayment Amount, and thereafter to maintain that 150% margin until the Repayment Date, provided that the Company may not extend the Repayment Date to August 15, 2008 as described above if the market value of the ARS and all additional transferred cash and securities is not at least 176% of the Repayment Amount on May 15, 2008. Any such additional cash and securities would be transferred back to the Company, along with the ARS, for the Repayment Amount on the Repayment Date.

The Company entered into this arrangement to provide funds to close the February 2008 acquisition of Enterprise Performance Systems, Inc. (“EPSi”). See EPSi acquisition below for more information.

EPSi acquisition

On February 25, 2008, the Company acquired all of the outstanding capital stock of EPSi, a private company, for $53 million in cash paid at closing, subject to certain holdback arrangements and working capital adjustments. EPSi is a leading provider of business intelligence solutions, including web-based software and related consulting services, that allow clients in the healthcare industry to improve financial performance and operational decision making.

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SCHEDULE II — VALUATION OF QUALIFYING ACCOUNTS

For the Years Ended December 31, 2007, 2006 and 2005

(in thousands)

	Balance at Beginning of Period		Additions		Write-offs			Balance at End of Period
December 31, 2007
Allowance for doubtful accounts	$	3,907	$	2,078	$	(1,745	)	$	4,240
Valuation allowance for deferred tax asset	$	131,523	$	6,670	$	(51,078	)	$	87,115
December 31, 2006
Allowance for doubtful accounts	$	5,676	$	1,457	$	(3,226	)	$	3,907
Valuation allowance for deferred tax asset	$	133,182	$	—	$	(1,659	)	$	131,523
December 31, 2005
Allowance for doubtful accounts	$	4,952	$	3,998	$	(3,274	)	$	5,676
Valuation allowance for deferred tax asset	$	128,745	$	4,437	$	—		$	133,182

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

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Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of December 31, 2007. Our disclosure controls and procedures are designed to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. There is no assurance that our disclosure controls and procedures will operate effectively under all circumstances. Based upon the evaluation described above our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2007, our disclosure controls and procedures were effective.

Management Report on Internal Control Over Financial Reporting

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

Management assessed our internal control over financial reporting as of December 31, 2007. In making this assessment, we used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.

Based on our assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2007 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

The effectiveness of our internal control over financial reporting as of December 31, 2007 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended December 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

On February 25, 2008, we acquired all of the outstanding capital stock of Enterprise Performance Systems, Inc., a private company, for $53 million in cash payable at closing, subject to certain holdback arrangements and working capital adjustments. See Note 19, “Subsequent Events,” to the Consolidated Financial Statements for additional information.

Part III

Item 10. Directors, Executive Officers and Corporate Governance

Information regarding directors, executive officers and corporate governance will be set forth in the proxy statement for our 2008 annual meeting of stockholders and is incorporated herein by reference.

Item 11. Executive Compensation

Information regarding executive compensation will be set forth in the proxy statement for our 2008 annual meeting of stockholders and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding security ownership of certain beneficial owners and management will be set forth in the proxy statement for our 2008 annual meeting of stockholders and is incorporated herein by reference.

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The following table provides information about shares of Eclipsys Common Stock that may be issued under our existing equity compensation plans as of December 31, 2007.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (c)
Equity compensation plans approved by security holders (1)	4,324,529	$	16.27	2,003,706
Equity compensation plans not approved by security holders (2)	925,000	$	18.12	—
Total	5,249,529			2,003,706	(3)

(1) This table excludes an aggregate of 4,592 options issuable upon the exercise of outstanding options assumed by Eclipsys in connection with various acquisitions. The weighted average price of the excluded options is $0.76.

(2) Represents options which were granted in 2005 and 2006 without stockholder approval, as inducement grants, in accordance with NASDAQ rules related to the hiring of Mr. Deady as our Executive Vice President, Client Solutions and Mr. Eckert as our President and Chief Executive Officer.

(3) The number of securities remaining available for future issuance under equity compensation plans includes 929,946 shares available for future issuance under the Employee Stock Purchase Plan as of December 31, 2007.

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Item 13. Certain Relationships and Related Transactions, and Director Independence

Information regarding certain relationships and related transactions will be set forth in the proxy statement for our 2008 annual meeting of stockholders and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

Information regarding principal accounting fees and services will be set forth in the proxy statement for our 2008 annual meeting of stockholders and is incorporated herein by reference.

Part IV

Item 15. Exhibits, Financial Statement Schedules.

(a) The following documents are filed as part of this report:

(1) Consolidated Financial Statements included in Item 8 of this report on Form 10-K

(2) Financial Statement Schedules included in Item 8 of this report on Form 10-K Schedule II - Valuation of Qualifying Accounts

(3) The following exhibits are included in this report:

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit	Filing Date
2.1	Asset Purchase Agreement dated December 19, 2007, by and among the Registrant, Eclipsys Solutions Corporation, CPM Resource Center, Inc., and Elsevier Inc.			Filed herewith
3.1	Third Amended and Restated Certificate of Incorporation of the Registrant	10-Q	3.1	September 21, 1998
3.2	Certificate of Designation of Series A Junior Participating Preferred	8-K	1	August 8, 2000
3.3	Amended and Restated Bylaws of the Registrant	8-K	3.2	November 19, 2007
4.1	Specimen certificate for shares of Common Stock	S-1	4.1	April 23, 1998
4.2	Rights Agreement, dated July 26, 2000, by and between the Registrant and Fleet National Bank, as Rights Agent	8-K	1	August 8, 2000
10.1	Second Amended and Restated Registration Rights Agreement	S-1	10.1	April 23, 1998
10.2	Information Systems Technology License Agreement, dated as of May 3, 1996, by and amount Partners Healthcare System, Inc. and Integrated Healthcare Solutions, Inc.	S-1	10.5	April 23, 1998
10.3*	1996 Stock Plan	S-1	10.7	April 23, 1998
10.4*	Amended and Restated 1998 Employee Stock Incentive Plan	10-Q	10.1	August 13, 2002
10.5*	Amended and Restated 1999 Stock Incentive Plan	10-Q	10.2	August 13, 2002
10.6*	Amended and Restated 2000 Stock Incentive Plan	10-Q	10.1	May 10, 2005
10.7*	2005 Stock Incentive Plan	8-K	10.1	July 6, 2005
10.8*	2005 Employee Stock Purchase Plan	8-K	10.2	July 6, 2005
10.9*	2005 Inducement Grant Stock Incentive Plan	8-K	10.1	October 21, 2005
10.10*	Form of Incentive and/or Non-Qualified Stock Option Agreement under the Amended and Restated 2000 Stock Incentive Plan, as amended	8-K	99.1	December 1, 2004

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10.11*	Form of Restricted Stock Agreement under the Amended and Restated 2000 Stock Incentive Plan, as amended	8-K	99.2	December 1, 2004
10.12*	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-K	10.15	May 23, 2007
10.13*	Form of Notice of Grant of Restricted Stock to be used in connection with issuance of restricted stock to executive officers under the Eclipsys Corporation 2005 Stock Incentive Plan	10-K	10.16	May 23, 2007
10.14*	Form of Notice of Grant of Restricted Stock 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-K	10.17	May 23, 2007
10.15*	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-K	10.18	May 23, 2007
10.16*	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	10-K	10.19	May 23, 2007
10.17*	Form of Indemnification Agreement between the Registrant and each non-employee director	10-K	10.11	March 15, 2004
10.18*	Non-employee Director Deferred Stock Unit Plan	8-K	10.1	May 17, 2006
10.19*	Employment Agreement, effective as of March 15, 2005, by and between the Registrant and John P. Gomez	8-K	99.3	April 7, 2005
10.20*	Employment Agreement between the Registrant and R. Andrew Eckert dated as of October 24, 2005	8-K	10.2	October 21, 2005
10.21*	Agreement re Specified Acts between the Registrant and R. Andrew Eckert dated as of October 24, 2005	8-K	10.3	October 21, 2005
10.22*	Employment Agreement between the Registrant and John E. Deady dated December 22, 2005	10-K	10.31(1)	March 7, 2006
10.23*	Agreement re Specified Acts between the Registrant and John E. Deady dated December 22, 2005	10-K	10.31(1)	March 7, 2006
10.24*	Severance Agreement dated July 31, 2006 between the Registrant and Robert J. Colletti	8-K	10.1	August 4, 2006
10.25*	Severance Agreement dated July 31, 2006 between the Registrant and Frank E. Stearns	8-K	10.2	August 4, 2006
10.26*	Employment Offer Letter with Joseph C. Petro, dated February 8, 2007 (Mr. Petro became a Section 16 executive officer in the second quarter of 2007)	10-Q	10.1	August 8, 2007
10.27*	2006 Bonus Plan for Eligible Employees	8-K	10.1	July 17, 2006
10.28*	2007 Incentive Compensation Plan for Specified Officers	10-Q	10.1	November 8, 2007
21	Subsidiaries of the Registrant			Filed herewith
23	Consent of PricewaterhouseCoopers LLP			Filed herewith
31.1	Certification of R. Andrew Eckert			Filed herewith
31.2	Certification of Robert J. Colletti			Filed herewith
32.1	Certification Pursuant to 18 U.S.C. Section 1350			Filed herewith

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32.2	Certification Pursuant to 18 U.S.C. Section 1350			Filed herewith
99.1	Restatements to the previously reported Yearly Information for 2006 and 2005	10-K	99.1	May 23, 2007

(1) The Registrant has requested confidential treatment with respect to certain portions of this exhibit. Such portions have been omitted from this exhibit and have been filed separately with the United States Securities and Exchange Commission

* Indicates a management contract or compensatory plan or arrangement

Signatures

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

Signature	Title	Date
/s/ R. Andrew Eckert R. Andrew Eckert	President, Chief Executive Officer and Director (Principal Executive Officer)	February 28, 2008
/s/ Robert J. Colletti Robert J. Colletti	Senior Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)	February 28, 2008
/s/ Dan L. Crippen Dan L. Crippen	Director	February 28, 2008
/s/ Steven A. Denning Steven A. Denning	Director	February 28, 2008
/s/ Eugene V. Fife Eugene V. Fife	Director	February 28, 2008
/s/ Edward A. Kangas Edward A. Kangas	Director	February 28, 2008
/s/ Braden R. Kelly Braden R. Kelly	Director	February 28, 2008
/s/ Jay B. Pieper Jay B. Pieper	Director	February 28, 2008

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EX-2.1

Exhibit 2.1

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into as of December 19, 2007, by and among Elsevier Inc., a New York corporation (the “Purchaser”), Eclipsys Corporation, a Delaware corporation (“Eclipsys”), Eclipsys Solutions Corporation, a Delaware corporation and wholly-owned subsidiary of Eclipsys (“Solutions”), and CPM Resource Center, Inc., a Delaware corporation (the “Company”). Eclipsys, the Company and Solutions are sometimes referred to herein as a “Seller,” and collectively as the “Sellers.” Certain capitalized terms used in this Agreement are defined in the attached Exhibit A.

The Sellers own and operate the CPMRC Business and the Sellers have agreed to sell to Purchaser and Purchaser has agreed to buy from Sellers, the Transferred Assets, on the terms and conditions set forth in this Agreement (such sale and purchase, the “Transaction”).

In consideration of the foregoing recitals, the mutual representations, warranties and covenants set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which the parties acknowledge, the parties agree as follows:

ARTICLE 1

PURCHASE AND SALE OF THE TRANSFERRED ASSETS

1.1 Sale of Transferred Assets. Subject to the terms, provisions and conditions contained in this Agreement, at the Closing, Sellers agree to sell, assign, transfer, convey and deliver to Purchaser, and Purchaser agrees to purchase and acquire from Sellers, all right, title and interest in the Transferred Assets, free and clear of all Claims. The “Transferred Assets” shall mean the following items owned or leased by the Sellers or any of them:

(a) all CPMRC Content;

(b) subject to Section 4.2(b), all of Sellers’ rights under license to the Licensed Intellectual Property, including the Licensed Intellectual Property set forth in Section 1.1(b) of the Seller Disclosure Schedule;

(c) all Proprietary Intellectual Property, including the Proprietary Intellectual Property set forth in Section 1.1(c) of the Seller Disclosure Schedule;

(d) all Customer Deliverables, including the Customer Deliverables set forth in Section 1.1(d) of the Seller Disclosure Schedule;

(e) the Internal Systems;

(f) all Business Marks, including the Business Marks set forth in Section 2.13(h) of the Seller Disclosure Schedule;

(g) all items listed in Section 2.13(a) of Seller Disclosure Schedule;

(h) all Domain Names;

(i) copies of portions of the books and records of each Seller relating primarily to the operation of the CPMRC Business and the Transferred Assets, including copies of the Transferring Contracts and all correspondence and memoranda relating thereto applicable to the CPMRC Business;

(j) the agreements listed in Section 1.1(j) of the Seller Disclosure Schedule;

(k) the rights as assignee or subcontractor under the Transferring Contracts pursuant to this Agreement or the Consulting and Subcontracting Agreement;

(l) the Tangible Transferred Assets; and

(m) all other Seller CPMRC Assets.

1.2 Excluded Assets. Notwithstanding anything set forth in this Agreement to the contrary, the Sellers are not selling to the Purchaser and the Purchaser is not purchasing from the Sellers any Excluded Assets. For this purpose, “Excluded Assets” means all assets not expressly provided in Section 1.1. For the avoidance of doubt, Excluded Assets include, but are not limited to, the following assets:

(a) cash or cash equivalents;

(b) bank accounts;

(c) insurance policies;

(d) Tax credits and Tax refunds with respect to the Transferred Assets and the CPMRC Business for Pre-Closing Periods;

(e) Accounts Receivable;

(f) any assets of any Employee Benefit Plan or interest in any Employee Benefit Plan;

(g) all rights under any agreement of any Seller that are not being assigned or subcontracted pursuant to this Agreement or the Consulting and Subcontracting Agreement;

(h) any personnel records or business records of any Seller, including such records that any Seller is required by law to retain in its possession;

(i) all assets used in connection with any of the matters referred to in Section 1.2(i) of the Seller Disclosure Schedule, even if used, but not primarily used, in the CPMRC Business;

(j) Eclipsys Software;

(k) Eclipsys Services Methodologies; and

(l) all other assets, properties, privileges, rights, interests and claims, real and personal, tangible and intangible, of every type and description, of Eclipsys not used primarily in connection with the CPMRC Business.

1.3 Purchase Price and Earnout.

(a) Purchase Price. Subject to the terms and conditions of this Agreement, the aggregate purchase price payable for the Transferred Assets will be Twenty-Seven Million Dollars ($27,000,000), plus any amounts payable by Purchaser pursuant to Section 1.3(b) and Section 1.3(c) hereof, less the Deferred Revenue Amount (the “Purchase Price”). At the Closing, the Purchaser will pay to the Sellers Twenty-Five Million Dollars ($25,000,000) less the Estimated Deferred Revenue Amount

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by wire transfer of immediately available funds to an account designated by Eclipsys no later than two (2) business days prior to the Closing Date, and at the times specified in and subject to Section 4.2(d), the Purchaser will pay to the Sellers Two Million Dollars ($2,000,000) (the “CICC Update Payment”).

(b) Earnout.

(i) As additional consideration for the Transferred Assets, subject to the provisions of Section 1.3(b)(ii), the Purchaser shall pay to the Sellers an amount, if any, determined in accordance with this Section 1.3(b) (the “Earnout Amount”).

(A) Earnout Year 1. In the event that CPMRC Content Orders for the period from the Closing Date to the end of the Purchaser’s fiscal year ending December 31, 2008 (“Earnout Year 1”) is at least $2,700,000 (the “Earnout Year 1 Target”), the Purchaser shall pay to the Sellers an aggregate amount of $1,500,000 (“Year 1 Earnout Amount”) in accordance with the terms of this Agreement. In the event that the CPMRC Content Orders during Earnout Year 1 is less than $2,700,000, the Purchaser shall pay to the Sellers a proportional amount of the Year 1 Earnout Amount that is equal to the product of (1) the Year 1 Earnout Amount multiplied by (2) a fraction, the numerator of which is the amount of CPMRC Content Orders during Earnout Year 1 and the denominator of which is the Earnout Year 1 Target. For example, if CPMRC Content Orders during Earnout Year 1 is $1,800,000, the Purchaser would pay to the Sellers 66.667% of the Year 1 Earnout Amount, or $1,000,000.

(B) Earnout Year 2. In the event that CPMRC Content Orders during the Purchaser’s fiscal year ending December 31, 2009 (“Earnout Year 2”, and together with Earnout Year 1, each, an “Earnout Year”) of at least $3,600,000 (the “Earnout Year 2 Target”), the Purchaser shall pay to the Sellers an aggregate amount of $1,500,000 (“Year 2 Earnout Amount”) in accordance with the terms of this Agreement. In the event that the CPMRC Content Orders during Earnout Year 2 is less than $3,600,000, the Purchaser shall pay to the Sellers a proportional amount of the Year 2 Earnout Amount that is equal to the product of (1) the Year 2 Earnout Amount multiplied by (2) a fraction, the numerator of which is the amount of CPMRC Content Orders during Earnout Year 2 and the denominator of which is the Earnout Year 2 Target.

(C) Earnout Cumulative. Notwithstanding the provisions of Sections 1.3(b)(i)(A) and (B):

(1) in the event that the CPMRC Content Orders during Earnout Year 1 is less than the Earnout Year 1 Target, but the aggregate amount of CPMRC Content Orders reported by CPMRC during Earnout Year 1 and Earnout Year 2 (the “Aggregate CPMRC Content Orders”) is equal to at least $6,300,000, then in addition to the Year 2 Earnout Amount, the Purchaser shall pay to the Sellers, on the date on which the Year 2 Earnout Amount is to be paid by the Purchaser to the Sellers, an additional amount equal to the difference between (1) the Year 1 Earnout Amount minus (2) the amount paid by the Purchaser to the Sellers pursuant to Section 1.3(b)(i)(A); and

(2) in the event that the CPMRC Content Orders during Earnout Year 2 is less than the Earnout Year 2 Target, but the Aggregate CPMRC Content Orders is equal to at least $6,300,000, then in lieu of, and without duplication of, the amount to be paid by the Purchaser to the Sellers pursuant to Section 1.3(b)(i)(B), the Purchaser shall pay to the Sellers the Year 2 Earnout Amount.

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(D) Additional Earnout. In the event that the Aggregate CPMRC Content Orders is greater than $6,300,000, the Purchaser shall pay to the Sellers, on the date on which the Earnout Amount for Earnout Year 2 would be paid by the Purchaser, in addition to the amounts paid by Purchaser to Sellers pursuant to Sections 1.3(b)(i)(B) and/or (C), an amount equal to the product of (1) the difference between the Aggregate CPMRC Content Orders minus $6,300,000 multiplied by (2) 0.50; provided, that in no event shall the aggregate Earnout Amount to be paid to the Sellers pursuant to this Agreement exceed $4,000,000.

(ii) Within thirty (30) days following the completion of the applicable Earnout Year, the Sellers shall deliver to the Purchaser a statement for the Earnout Amount to which it is entitled under this Section 1.3(b), together with the calculation of the applicable Earnout Amount (the “Calculation”). The Calculation shall be determined in good faith by the Sellers and shall include sufficient detail to enable the Purchaser to review the factors included in the Calculation. The Purchaser shall have the later of (a) sixty (60) days following the receipt of the invoice from the Sellers and (b) until March 31, 2007 to review the Calculation (the “Review Period”). During the Review Period, the Purchaser, its independent auditors and other representatives shall, upon two (2) business days’ prior notice, at the Purchaser’s sole cost and expense, be permitted full access during normal working hours to review the books and records of the Sellers for the sole purpose of reviewing the Calculation (including the working papers of the Sellers relating thereto) and shall be permitted to discuss the Calculation with the senior officers and financial management of the Sellers; provided, however, that such access and discussions shall be conducted in a manner that will not unreasonably disrupt the operation of Sellers’ business. In the event that the Purchaser concurs with the Calculation, the Purchaser shall provide the Sellers with written notice of such concurrence (“Earnout Concurrence Notice”), and the Purchaser shall pay to the Sellers the applicable Earnout Amount not later than three (3) business days following the expiration of the Review Period. In the event that the Purchaser disputes all or any portion of the Calculation, the Purchaser shall provide the Sellers with written notice of such dispute (“Earnout Dispute Notice”) not later than the expiration of the Review Period, which Earnout Dispute Notice shall set forth the Purchaser’s proposed calculation of the applicable Earnout Amount. Subject to the terms of this Agreement, the Purchaser shall pay the Sellers the non-disputed amount within three (3) business days of the receipt by the Sellers of the Earnout Dispute Notice, and the parties shall, during the thirty (30) days following the delivery by the Purchaser of such Earnout Dispute Notice (the “Earnout Negotiation Period”), use commercially reasonable efforts to reach agreement as to the disputed amount. If, during such period, the parties are unable to reach agreement, they shall promptly thereafter (but in no event later than thirty (30) days from the end of the Earnout Negotiation Period) engage a firm of independent accountants of national recognized standing, reasonably satisfactory to the Sellers and the Purchaser, to resolve the disagreement, provided, that if the Sellers and the Purchaser are unable to agree upon such firm of independent accountants, such firm shall be any of Ernst & Young, KPMG or Grant Thornton, in that order of priority, provided that such firm does not serve at such time, and has not served during each of the prior two fiscal years, as the independent accountants of either the Purchaser or Eclipsys, and does not have at such time, and has not had during each of the prior two fiscal years, any other significant business relationship with either the Purchaser or Eclipsys. Such independent accountants shall promptly review this Agreement and the Calculation and such other documents and workpapers and shall have access to such personnel as they reasonably deem necessary. Such independent accountants shall, as promptly as practicable, deliver to the Sellers and the Purchaser a report setting forth the amount of the disputed portion of the applicable Earnout Amount. Such report shall be final, conclusive and binding upon the parties hereto, absent fraud or manifest error, and, if applicable, the Purchaser shall pay the Sellers the portion of the applicable Earnout Amount set forth on such report within ten (10) business days of the receipt by the Purchaser of such report. The fees and expenses of the independent accountants referred to in this Section 1.3(b)(ii) shall be apportioned between the Sellers, on the one hand, and the Purchaser, on the other hand, in proportions based upon the relative success of each party’s claims as reflected in the determinations made by the independent accountants pursuant to this Section 1.3(b)(ii).

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(iii) The parties hereto agree that all Earnout Amounts payable pursuant to this Section 1.3(b) are intended to be treated as additional purchase price consideration for the purchase and sale of the Transferred Assets and neither the Sellers nor the Purchaser, nor any of their respective Affiliates, shall take any position in Tax Return or Tax Contest that is inconsistent with such agreement without the consent (not to be unreasonably withheld) of the other party unless required to do so by applicable law.

(c) Additional Purchase Price. If the conditions set forth in Project Schedule D of the Consulting and Subcontracting Agreement are satisfied requiring a payment of additional purchase price by the Purchaser to the Sellers, then not later than five (5) business days following the satisfaction of such conditions, the Purchaser shall pay to the Sellers the amount specified in accordance with the terms of Project Schedule D to the Consulting and Subcontracting Agreement by wire transfer of immediately available funds to the account designated by Eclipsys pursuant to Section 1.3(a) herein.

1.4 Assumption of Liabilities. Except as expressly provided in this Section 1.4, the Purchaser shall assume none of any Sellers’ liabilities or obligations relating to the CPMRC Business, the Transferred Assets or otherwise. In connection with the purchase and sale of the Transferred Assets pursuant to this Agreement, at the Closing, the Purchaser shall assume and agrees to pay, discharge, perform or otherwise satisfy only the following liabilities and obligations relating to the CPMRC Business and the Transferred Assets (the “Assumed Liabilities”): (i) the liabilities and obligations as assignee or subcontractor under the Transferring Contracts, as agreed to by the Purchaser, pursuant to this Agreement or the Consulting and Subcontracting Agreement, but only to the extent such liabilities or obligations (a) relate to any period following the Closing Date and (b) do not otherwise arise out of any breach or alleged breach by any Seller, and (ii) the liabilities arising out of or resulting from the operation of the CPMRC Business and ownership of the Transferred Assets by the Purchaser from and after the Closing Date.

1.5 Excluded Liabilities. Except for assumption at the Closing of the Assumed Liabilities, the Purchaser does not assume (either expressly or implicitly) and shall not be responsible or liable for any of the debts, claims, obligations, expenses, litigation, violations, penalties, assessments, losses, damages or other liabilities of any of the Sellers or any of their Affiliates, of any kind, character or description whatsoever, whether presently in existence or arising hereafter, direct, indirect, known or unknown, absolute or contingent and regardless of any disclosure to the Purchaser, including (i) any accounts payable (including all invoices for the September Consortium that have not yet been received as of the Closing Date) and any intercompany payables arising prior to the Closing, (ii) any indebtedness of the Sellers, (iii) any Taxes of the Sellers for Pre-Closing Periods, (iv) any liabilities or obligations other than the Assumed Liabilities as to which a third party might assert that Purchaser has transferee liability, (v) any liabilities or obligations of the Sellers or any Affiliate of the Sellers to any of their consultants or employees, including liabilities or obligations for overtime, severance, accrued but unused vacation as of the Closing Date, bonuses under the Employee Benefit Plans attributable to the Pre-Closing Periods, (vi) any and all liabilities under any of the Sellers’ Employee Benefits Plans or under any employment agreements with any of the Employees, and (vii) liabilities or expenses relating to, arising out of or resulting from the operation of the CPMRC Business or ownership of the Transferred Assets prior to Closing, including those liabilities set forth in Section 2.8 of the Seller Disclosure Schedule and any amounts payable by Eclipsys to Bonnie L. Wesorick pursuant to the Eclipsys/CPMRC Merger Agreement, including Section 1.5 thereof (collectively, “Excluded Liabilities”).

1.6 Closing. The parties agree to conduct the closing of the Transaction (“Closing”) at the offices of Baker & McKenzie LLP, 130 East Randolph Street, Suite 3900, Chicago, Illinois, on the date hereof (such date of the Closing, the “Closing Date”).

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1.7 Closing Deliveries. At the Closing:

(a) the Sellers will deliver, or will cause to be delivered, to the Purchaser (i) the License Agreement, (ii) the Consulting and Subcontracting Agreement, (iii) the Reseller Agreement, (iv) the Transition Services Agreement, (vi) the Bill of Sale, (vii) the Transferred Assets to the extent tangible and deliverable and (viii) a certification from each Seller stating, under penalty of perjury, such Seller’s U.S. taxpayer identification number and address and that such Seller is not a “foreign person” as defined in Section 1445 of the Code; and

(b) the Purchaser will deliver to the Sellers (i) the License Agreement, (ii) the Consulting and Subcontracting Agreement, (iii) the Reseller Agreement, (iv) the Transition Services Agreement, (v) the Bill of Sale and (vi) that portion of the Purchase Price set forth in the second sentence of Section 1.3(a).

1.8 Deferred Revenue Purchase Price Adjustment. The Purchase Price shall be subject to adjustment as follows:

(a) Not later than sixty (60) days following the Closing, the Sellers will deliver to the Purchaser an unaudited statement of the Deferred Revenue of the CPMRC Business as of the Closing Date (the “Deferred Revenue Statement”), which will show the Deferred Revenue Amount as of the Closing Date. Section 1.8(a) of the Seller Disclosure Schedule sets forth an example of how the Deferred Revenue Amount would be calculated. For the avoidance of doubt, “Deferred Revenue” will be calculated as revenue billed or received but not yet recognized under GAAP. As examples, maintenance revenue received but not yet recognized and prepayments received for consulting services not yet rendered shall be considered “Deferred Revenue.”

(b) Review by the Purchaser. Promptly after delivery to the Purchaser of the Deferred Revenue Statement, the Purchaser shall review the same, and within thirty (30) days after delivery of the Deferred Revenue Statement, deliver a notice to the Sellers either: (i) concurring with the Deferred Revenue Amount as set forth in the Deferred Revenue Statement (“Notice of Concurrence”); or (ii) disagreeing therewith (“Notice of Disagreement”). If the Purchaser shall deliver a Notice of Disagreement, it shall concurrently deliver to the Sellers a statement setting forth its proposed revisions to the Deferred Revenue Statement. Failure by the Purchaser to deliver a Notice of Disagreement and proposed revisions within such 30-day period shall be deemed to constitute a Notice of Concurrence.

(c) Resolution of Disagreements. If a Notice of Disagreement is delivered pursuant to subsection 1.8(b), the parties shall, during the thirty (30) days following such delivery (“Negotiation Period”), use commercially reasonable efforts to reach agreement as to the Deferred Revenue Amount. If, during such period, the parties are unable to reach agreement, they shall promptly thereafter (but in no event later than thirty (30) days from the end of the Negotiation Period) engage a firm of independent accountants of national recognized standing, reasonably satisfactory to Eclipsys and the Purchaser, to resolve the disagreement; provided, that if Eclipsys and the Purchaser are unable to agree upon such firm of independent accountants, such firm shall be any of Ernst & Young, KPMG or Grant Thornton, in that order of priority, provided that such firm does not serve at such time, and has not served during each of the prior two fiscal years, as the independent accountants of either the Purchaser or Eclipsys, and does not have at such time, and has not had during each of the prior two fiscal years, any other significant business relationship with either the Purchaser or Eclipsys. Such independent accountants shall promptly review this Agreement, the Deferred Revenue Statement and the statement accompanying the Notice of Disagreement and such other documents and workpapers and shall have access to such personnel as they reasonably deem necessary. Such independent accountants shall, as promptly as practicable, deliver to Eclipsys and the Purchaser a report setting forth the Deferred Revenue Amount prepared in accordance with the terms of this Agreement. Such report shall be final, conclusive and binding upon the parties hereto, absent fraud or manifest error.

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(d) The date on which the Deferred Revenue Amount is finally determined shall hereinafter be referred to as the “Settlement Date.” In the event the Deferred Revenue Amount is greater than the Estimated Deferred Revenue Amount, the Sellers shall pay to the Purchaser within ten (10) business days after the Settlement Date an amount equal to such excess. In the event the Deferred Revenue Amount is less than the Estimated Deferred Revenue Amount, the Purchaser shall pay to the Sellers within ten (10) business days after the Settlement Date an amount equal to such deficiency. Any amounts that remain unpaid after the time periods set forth for payment in this Section 1.8(d) shall accrue interest at a per annum rate equal to the prime rate as reported in The Wall Street Journal from time to time. Any payment required pursuant to this Section 1.8(d) shall be deemed to be an adjustment to the Purchase Price for all purposes, and shall be made by the wire transfer of immediately available funds for credit to the recipient, to the account designated by such recipient in writing.

(e) Expenses. The out-of-pocket fees and expenses of the preparation of the Deferred Revenue Statement shall be split equally between the Purchaser and the Sellers and the fees and expenses of the independent accountants referred to in Section 1.8(c) shall be apportioned between the Sellers, on the one hand, and the Purchaser, on the other hand, in proportions based upon the relative success of each party’s claims as reflected in the determinations made by the independent accountants pursuant to Section 1.8(c).

1.9 Allocation of Purchase Price. The Sellers and the Purchaser agree that the Purchase Price shall be allocated among the Transferred Assets in accordance with Section 1060 of the Code, as set forth in Section 1.9 of the Seller Disclosure Schedule. Sellers and Purchaser agree (i) to file all Tax Returns and forms (including IRS Form 8594 or any successor form) in accordance with such allocation, (ii) to update such Tax Returns and forms in accordance with Section 1060 of the Code to the extent necessary to reflect adjustments to the Purchase Price and (iii) not to take any position before any Tax authority that is inconsistent with such allocation, unless otherwise required by law.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

Each Seller, jointly and severally, hereby makes to the Purchaser the representations and warranties set forth in this Article 2, as qualified by the section of the Seller Disclosure Schedule that relates thereto. All references to the “Seller Disclosure Schedule” shall mean the disclosure schedule attached as Exhibit B to this Agreement. For the avoidance of doubt, the representations and warranties of the Sellers contained herein are made by the Sellers with respect to the Sellers and the CPMRC Business, as the case may be, and include, with respect to the Company, the predecessor company to the Company, CPM Resource Center, Ltd., a Michigan corporation, which was merged with and into the Company on March 5, 2004. The Seller Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Article 2. For purposes of the representations and warranties of Sellers contained herein: (i) any information disclosed in a section of the Seller Disclosure Schedule (including any exhibits and attachments incorporated therein by reference) shall be deemed to be disclosed with respect to any other section of the Seller Disclosure Schedule if there is a cross-reference in such Seller Disclosure Schedule to another section of such Seller Disclosure Schedule or otherwise it is readily apparent that such information also qualifies or applies to another section of the Seller Disclosure Schedule; and (ii) the inclusion of any information in any section of the Seller Disclosure Schedule or other document delivered by the Sellers pursuant to this Agreement shall not be deemed to be an admission or evidence of the materiality of such item, nor shall it establish a standard of materiality for any purpose whatsoever.

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2.1 Organization, Qualification and Corporate Power. Each of the Sellers is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of the Sellers is duly qualified to conduct business and is in good standing under the laws of each jurisdiction listed in Section 2.1 of the Seller Disclosure Schedule, which jurisdictions constitute the only jurisdictions in which the CPMRC Business or the ownership or leasing of the Transferred Assets requires such qualification, except for those jurisdictions in which the failure to be so qualified or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect. The Sellers collectively have all requisite corporate power and authority to carry on the CPMRC Business that they have conducted and to own and use the Transferred Assets they have owned and used.

2.2 Authorization of Transaction. Each Seller has all requisite power and authority to execute and deliver this Agreement and the Transaction Agreements to which it is a party and to perform its obligations hereunder and thereunder. The execution and delivery by each Seller of this Agreement and the Transaction Agreements to which it is a party and the consummation by each Seller of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of each Seller, and no other corporate action on the part of any Seller is necessary to authorize each Seller’s execution and delivery of this Agreement and the other Transaction Agreements to which it is a party. This Agreement and the Transaction Agreements to which it is a party have been duly and validly executed and delivered by each Seller and constitute valid and binding obligations of each Seller, enforceable against each Seller in accordance with their respective terms, subject to (a) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (b) rules of law governing specific performance, injunctive relief and other equitable remedies.

2.3 Noncontravention. Neither the execution and delivery by each Seller of this Agreement and the Transaction Agreements to which it is a party, nor the consummation by each Seller of the transactions contemplated hereby or thereby, will (a) conflict with or violate any provision of the Certificate of Incorporation or By-laws of any Seller, (b) require on the part of any Seller any notice to or filing with, or any permit, authorization, consent or approval of, any Governmental Entity, (c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party the right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract or instrument to which any Seller is a party or by which any Seller is bound or to which any of their respective assets are subject, except for (i) any conflict, breach, default, acceleration, termination, modification or cancellation which, individually or in the aggregate, would not be material to the CPMRC Business or adversely affect the consummation of the transactions contemplated hereby, (ii) any notice, consent or waiver the absence of which, individually or in the aggregate, would not be material to the CPMRC Business or adversely affect the consummation of the transactions contemplated hereby or (iii) notices, consents or waivers required to transfer or subcontract the Transferring Contracts, (d) result in the imposition of any Security Interest upon any of the Transferred Assets or (e) violate any order, writ, injunction, decree, statute, rule or regulation applicable to any Seller or any of the Transferred Assets or the CPMRC Business.

2.4 Brokers’ Fees. With the exception of the fees and expenses payable to Robert Miller or MTW Studios, Inc., which fees and expenses will be paid by Eclipsys, no Seller has any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the Contemplated Transactions.

2.5 Projections. The projections set forth in Section 2.5 of the Seller Disclosure Schedule that are part of the Future Business Information (the “Projections”) were prepared by Eclipsys in good faith using the same type of information used by the management of Eclipsys in preparing its own projections.

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2.6 Financial Information. Eclipsys has provided to the Purchaser the Financial Information. Except as set forth in Section 2.6(b) of the Seller Disclosure Schedule, the Financial Information fairly presents the financial condition and results of operations of the CPMRC Business as of the respective dates thereof and for the periods referred to therein and is true and correct in all material respects. Except as set forth in Section 2.6(b) of the Seller Disclosure Schedule, the Financial Information is consistent with the books and records of the Sellers, which records are true and correct.

2.7 Absence of Certain Changes. Since the Most Recent Balance Sheet Date, (a) there has not been any event or occurrence, or development which, individually or in the aggregate, has had, or could reasonably be expected to have in the future, a Material Adverse Effect on the CPMRC Business, (b) the Sellers have carried on the CPMRC Business in the Ordinary Course of Business and (c) except for amounts as reflected in the Most Recent Balance Sheet, as any of such items listed in clauses (i)-(xii) relate to the CPMRC Business, no Seller has:

(i) borrowed any money which borrowings are in excess of $100,000 in the aggregate;

(ii) voluntarily incurred any Liability outside the Ordinary Course of Business;

(iii) suffered any damage, destruction or loss of physical property or goods resulting in costs or expenses to the Company in excess of $50,000 whether or not covered by insurance;

(iv) incurred or committed to incur any capital expenditures in excess of $100,000;

(v) leased, licensed, sold, transferred, encumbered or permitted to be encumbered any asset, Intellectual Property or other property (including sales or transfers to Affiliates of the Company but excluding licensing by the Company or Eclipsys of CPMRC Content in the Ordinary Course of Business) or canceled or compromised any of its debts, except in the Ordinary Course of Business;

(vi) entered into or accelerated, terminated, modified or cancelled any material agreement, contract, lease or license (or series of related material agreements, contracts, leases or licenses);

(vii) waived or released any right or claim in excess of $50,000 relating to the CPMRC Business;

(viii) granted any general or specific increase in compensation (including bonuses, profit sharing or deferred compensation) payable to or to become payable to any Employees or Consultants, except as required by law or under existing contractual obligations, or adopted any benefit plan, or granted, increased, augmented or improved the benefits granted to or for the benefit of any Employee of Consultant under any Employee Benefit Plan, except in the Ordinary Course of Business or as required by law;

(ix) failed to maintain their accounts, books and records in the usual, regular and ordinary manner on a basis consistently applied;

(x) changed any of its subscription policies (including subscriber acquisition and retention policies) or materially reduced any of the services provided to subscribers;

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(xi) settled or compromised any Tax liability or agreed to any adjustment of any Tax attribute or made any material election with respect to its Taxes; or

(xii) entered into any transaction or taken any action or failed to enter into any transaction or failed to take any action that would reasonably be expected to have a Material Adverse Effect on the CPMRC Business.

2.8 Undisclosed Liabilities. The Sellers do not have any liabilities with respect to the CPMRC Business, whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated and whether due or to become due, except for (a) liabilities shown on the Most Recent Balance Sheet of the CPMRC Business, (b) liabilities which have arisen since the Most Recent Balance Sheet Date of the CPMRC Business in the Ordinary Course of Business, which liabilities primarily relate to deferred revenue paid annually by clients in advance for maintenance services and which do not in the aggregate exceed $500,000, and (c) liabilities incurred since the Most Recent Balance Sheet Date of the CPMRC Business outside the Ordinary Course of Business set forth in Section 2.8 of the Seller Disclosure Schedule.

2.9 Tax Matters.

(a) Each Seller has filed (or has caused to be filed) on a timely basis all material Tax Returns that it was required to file with respect to the Transferred Assets. Each Seller has paid (or has caused to be paid) on a timely basis all Taxes that were due and payable with respect to the Transferred Assets, whether or not shown on any Tax Return. All material Taxes that each Seller is or was required by law to withhold or collect with respect to the Transferred Assets have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Entity.

(b) No examination or audit of any Tax Return of the Sellers by any Governmental Entity, as such Tax Return relates to the Transferred Assets, is currently in progress or, to the knowledge of the Sellers, threatened or contemplated. No deficiencies for any Taxes with respect to the Transferred Assets have been proposed, asserted or assessed against the Sellers which have not been resolved and paid in full.

(c) There are no liens or other encumbrances with respect to Taxes upon the Transferred Assets, other than with respect to Taxes not yet due and payable.

(d) No Seller is a “foreign person” within the meaning of Section 1445 of the Code, and each Seller will furnish Purchaser with an affidavit that satisfies the requirements of Section 1445 of the Code.

2.10 Assets.

(a) Eclipsys, the Company or Solutions is the true and lawful owner, and has good and marketable title to, or a valid leasehold interest in, or a valid license to, all right, title and interest in and to all of the Transferred Assets, free and clear of all Claims, and upon consummation of the Contemplated Transactions, the Sellers shall have conveyed, assigned and transferred to the Purchaser title to all of the Transferred Assets, free and clear of all Claims. The Transferred Assets, together with the rights made available to the Purchaser pursuant to the Transaction Agreements, are sufficient for the operation of the CPMRC Business by the Purchaser after Closing in substantially the same manner as conducted prior to the Closing. Without limiting the foregoing, the Transferred Assets, together with the rights made available to the Purchaser pursuant to the Transaction Agreements, include all of the tools and applications necessary to render, manage and deliver the CPMRC Content in paper form or in CICC

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format and the Restricted Services to the customers of the CPMRC Business as of the date hereof and immediately following Closing. All of the Transferred Assets are free from material defects, have been maintained in accordance with normal industry practice, are in good operating condition and repair (subject to normal wear and tear), are operated in conformity in all material respects with all applicable laws and regulations. For the avoidance of doubt, the Transferred Assets do not include the assets described in Section 1.2.

(b) Section 2.10(b) of the Seller Disclosure Schedule lists individually (i) all fixed assets (within the meaning of GAAP) that are part of the Transferred Assets having a book value greater than $25,000 and (ii) all other assets of a tangible nature (other than inventories) that are part of the Transferred Assets whose book value exceeds $25,000.

(c) Each item of equipment, motor vehicle and other asset that are part of the Transferred Assets that is pursuant to a lease agreement or other contractual arrangement is in such condition that, upon its return to its lessor or owner under the applicable lease or contract, the obligations of any Seller, as applicable, to such lessor or owner will have been discharged in full.

2.11 Real Property. No Seller owns or has ever owned any real property used or held for use in the operation of the CPMRC Business.

2.12 Real Property Leases. Section 2.12 of the Seller Disclosure Schedule lists all Leases. The Sellers have delivered to the Purchaser complete and accurate copies of the Leases. With respect to each Lease:

(a) such Lease is a legal, valid and binding obligation of Eclipsys, the Company or Solutions, as applicable, and based on Sellers’ reading of such Lease and to the actual knowledge of the Seller Knowledge Persons without further inquiry, the other parties thereto;

(b) no Seller has received any written notice of a dispute with respect to such Lease;

(c) no Seller or, to the Knowledge of the Sellers, any other party, is in material breach or violation of, or default under, any such Lease, and no event has occurred, is pending or, to the Knowledge of the Sellers, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a material breach or default by the Company under such Lease;

(d) the transactions contemplated by this Agreement do not require the consent of any party to such Lease, will not result in a material breach or default under such Lease, and will not otherwise cause such Lease to cease to be legal, valid and binding obligations of the Seller that is party thereto, as applicable, following the Closing;

(e) no security deposit or portion thereof deposited with respect to such Lease has been applied in respect of a breach or default under such Lease;

(f) no Seller owes and, under such Lease, has any obligation to pay, any brokerage commissions or finder’s fees with respect to such Lease;

(g) no Seller or any Affiliate thereof has sublicensed, licensed, assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold of any Lease;

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(h) to the Knowledge of the Sellers, all facilities leased or subleased under each Lease is supplied with utilities and other services adequate for the operation of said facilities; and

(i) to the Knowledge of the Sellers, there is no Security Interest, easement, covenant or other restriction applicable to the real property subject to such Lease which would (or could reasonably be expected to) materially impair the current uses or the occupancy by any Seller of the property subject thereto.

2.13 Intellectual Property.

(a) Section 2.13(a) of the Seller Disclosure Schedule lists each patent, patent application, copyright registration or application therefor, mask work registration or application therefor, and trademark, service mark and domain name registration or application therefor of the Company or related primarily to the CPMRC Business.

(b) Section 2.13(b) of the Seller Disclosure Schedule identifies each license or other agreement pursuant to which any Seller has licensed, distributed or otherwise granted any rights to any third party with respect to any Business-Related Intellectual Property.

(c) Section 2.13(c) of the Seller Disclosure Schedule identifies each license or other agreement (other than licenses for “off-the-shelf” software in an amount representing license, maintenance and other fees less than $10,000, which in the aggregate do not exceed $50,000) pursuant to which any Seller in connection with the CPMRC Business has the right to use Licensed Intellectual Property (each a “Business License Agreement” and collectively, the “Business License Agreements”). Each Business License Agreement is a legal, valid and binding agreement of the Seller that is party thereto, as applicable, and based on Sellers’ reading of such Business License Agreement and to the actual knowledge of the Seller Knowledge Persons without further inquiry, the other party thereto. The Sellers have not received any written notice of any termination of any Business License Agreement as a result of the Contemplated Transactions or otherwise.

(d) All current employees, contractors, consultants and personnel of any Seller who have performed services related to the CPMRC Business have executed written contracts with such Seller, as applicable, that assign all rights to inventions, discoveries, improvements, works of authorship or information relating to the Proprietary Intellectual Property to such Seller, as the case may be. No Seller has received any written notice of a claim by any former employee of any Seller that such person has ownership rights to the Proprietary Intellectual Property except for such matters that have been settled for less than $10,000.

(e) With respect to the Proprietary Intellectual Property, the Sellers collectively are the sole and exclusive owner of the entire right, title and interest in the Proprietary Intellectual Property, free and clear of any Claims. The Business-Related Intellectual Property and all components thereof do not and the use of any of the foregoing by the Purchaser as specified in the Transaction Agreements will not, upon the Closing, infringe upon the Intellectual Property of any third parties located anywhere in the world. None of the Business-Related Intellectual Property is or has been involved in any interference, reissue, reexamination, opposition, invalidation or cancellation action, claim or proceeding and, to the Knowledge of the Sellers, no such action, claim or proceeding has been threatened against the Sellers. No other claim, action, suit, proceeding or investigation with respect to the Business-Related Intellectual Property has ever been instituted, is pending, or to the Knowledge of the Sellers, threatened.

(f) There exists no actual or, to the Knowledge of the Sellers, threatened infringement or misappropriation proceeding by any third party of any Business-Related Intellectual Property or, to the Knowledge of the Sellers, any event that would reasonably be expected to constitute such an infringement or misappropriation.

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(g) Section 2.13(g) of the Seller Disclosure Schedule lists all domain names that are owned by any Seller and used primarily in connection with the CPMRC Business other than those owned by or referencing Eclipsys or Eclipsys’ trademarks or service marks (the “Domain Names”) registered anywhere in the world. The Sellers represent and warrant that the Company or Eclipsys is the owner of all of the Domain Names (including all goodwill attached thereto) and that the Sellers have all rights necessary to transfer the Domain Names hereunder as part of the Transferred Assets.

(h) Section 2.13(h) of the Seller Disclosure Schedule sets forth all of the names, trademarks, designs and logos owned by the Company and all of the names, trademarks, designs and logos previously or currently used by any Seller as it relates primarily to the CPMRC Business (collectively, the “Business Marks”). The Sellers represent and warrant that the Company or Eclipsys is the owner of all of the Business Marks (including all goodwill attached thereto) and that the Sellers have all rights necessary to transfer the Business Marks hereunder as part of the Transferred Assets.

(i) As of the Closing Date, the CPRMC Content (i) has been recently updated to reflect current standards of clinical practice, (ii) conforms with all published specifications therefor, and (iii) is compliant with all laws, rules and regulations that impose requirements or restrictions on the CPMRC Content. As of the Closing Date, the CICC has not been updated to reflect changes made to the Clinical Practice Guidelines since June 2007, but when the CICC Updates described in Section 4.2(d) have been completed, the CICC expression of the Clinical Practice Guidelines will be as current and complete as the expression of the Clinical Practice Guidelines in the current version of KBC released on or about September 30, 2007, as such version has been updated as of the Closing Date.

(j) Each Seller has all rights necessary to use the Business Related Intellectual Property it uses and has all rights necessary to transfer such rights in and to the Business Related Intellectual Property to Purchaser as part of the Transferred Assets. Except for any Business Related Intellectual Property that is Licensed Intellectual Property, the Sellers (or any of them) is/are the sole and exclusive owners(s) of, the entire right, title and interest in the Business Related Intellectual Property, free and clear of any Claims.

(k) No federal, state, local or other government funding or university or college facilities were used in the development of any Proprietary Intellectual Property (including any CPMRC Content). For the avoidance of doubt, the information in Section 2.13(k) of the Seller Disclosure Schedule does not affect the representations and warranties being made by the Sellers in Section 2.13(e) of this Agreement.

(l) To the Knowledge of the Sellers, the Internal Systems are free from significant defects or programming errors and conform in all material respects to the written documentation and specifications therefor.

2.14 Contracts.

(a) Section 2.14(a) of the Seller Disclosure Schedule lists the following agreements (written or oral) (i) to which any Seller is a party and that are material to the CPMRC Business or (ii) to which the Purchaser will have rights specifically provided under any of the Transaction Agreements:

(i) all agreements with customers that include the provision of Customer Deliverables for which payments are or may become due or payable after the Closing;

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(ii) any agreement (or group of related agreements) for the lease of personal property from or to third parties providing for lease payments in excess of $25,000 per annum or having a remaining term longer than twelve months;

(iii) any agreement (or group of related agreements) for the purchase or sale of products or for the furnishing or receipt of services (A) which calls for performance over a period of more than one year or (B) which involves more than the sum of $25,000 in the aggregate;

(iv) any agreement relating to the Business-Related Intellectual Property;

(v) any agreement with distributors, resellers, independent suppliers, contractors, vendors, manufacturers and outsourcers which involves more than the sum of $25,000 in the aggregate;

(vi) any agreement concerning the establishment or operation of a partnership, joint venture or limited liability company;

(vii) any agreement (or group of related agreements) under which any Seller has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including capitalized lease obligations) involving more than $25,000 or under which any Seller has imposed (or may impose) a Security Interest on any of the Transferred Assets;

(viii) any agreement for the disposition of any assets or business (other than sales licenses to the CPMRC Content made in the Ordinary Course of Business), any agreement for the grant to any person of any preferential rights to purchase any of the Transferred Assets or portion of the CPMRC Business, or any agreement for the acquisition of the Transferred Assets or the CPMRC Business (other than purchases of inventory or components in the Ordinary Course of Business);

(ix) any note, bond, indenture, credit facility, mortgage, security agreement or other instrument or document relating to or evidencing indebtedness for money borrowed (all of which indebtedness is prepayable currently at the option of the Company without premium or penalty) or a security interest or mortgage in the Transferred Assets;

(x) any agreement under which any warranty, indemnity or guaranty is issued (other than customary product warranties, indemnities and guaranties provided in the Ordinary Course of Business);

(xi) any agreement concerning non-disclosure, confidentiality, trade secret, invention assignment or other assignment of Intellectual Property provisions;

(xii) any agreement involving any of the Employees;

(xiii) any agreement relating to money advanced or loaned (i) to any of the Employees, or (ii) in an amount exceeding $25,000 in the aggregate to any other person;

(xiv) any agreement under which the consequences of a default or termination would reasonably be expected to have a Material Adverse Effect on the CPMRC Business; and

(xv) any other agreement (or group of related agreements) either involving more than $25,000 or not entered into in the Ordinary Course of Business.

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(b) The Sellers have delivered or made available to the Purchaser a complete and accurate copy of each agreement listed in Section 2.14(a) of the Seller Disclosure Schedule and a written summary setting forth the terms and conditions of each oral agreement referred to in Section 2.14(a) of the Seller Disclosure Schedule. With respect to each such agreement that is part of the Transferred Assets or to which the Purchaser will have rights specifically provided under any of the Transaction Agreements, (i) the agreement is a legal, valid and binding obligation of the Seller that is party thereto, as the case may be, and based on Sellers’ reading of such agreement and to the actual knowledge of the Seller Knowledge Persons without further inquiry, the other parties thereto; and (ii) no Seller, as the case may be, or, to the Knowledge of the Sellers, any other party, is in material breach or violation of, or default under, any such agreement, and no event has occurred, is pending or, to the Knowledge of the Sellers, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a material breach or default by any Seller, as the case may be, or, to the Knowledge of the Sellers, any other party under such agreement; (iii) there are no material disputes or material disagreements between any Seller, as the case may be and any other party with respect to any such agreement; (iv) no Seller, as the case may be, nor any other party has sent a written notice of termination or non-renewal or claim with respect to any such agreement and (v)(i) each agreement set forth in Section 1.1(j) of the Seller Disclosure Agreement and (ii) each other Transferring Contract shall remain in full force and effect immediately following the consummation of the Contemplated Transactions, subject in the case of clause (v)(ii) to any consent required to be obtained with respect to such Transferring Contract under this Agreement or the Consulting and Subcontracting Agreement.

2.15 Books and Records. The minute books and stock ledger of the Company are true and correct in all material respects. The books and records of each Seller as they relate to the CPMRC Business accurately reflect in all material respects the portions of the assets, liabilities, financial condition and results of operations of the CPMRC Business that they purport to depict.

2.16 Powers of Attorney. There are no outstanding powers of attorney executed on behalf of any Seller with respect to the CPMRC Business.

2.17 Insurance. The Seller maintains insurance policies (including fire, theft, casualty, comprehensive general liability, workers compensation, business interruption, environmental, product liability and automobile insurance policies and bond and surety arrangements) that provide coverage for the CPMRC Business, all of which are in full force and effect. The insurance policies maintained by the Seller (taken together) are of such types and in such amounts and for such risks, casualties and contingencies as is reasonably adequate to insure the CPMRC Business against insurable losses, damages and claims to its business, properties, assets and operations for risks normally insured against by a person carrying on a similar business to the CPMRC Business. There is no claim pending under any such policy as to which coverage has been questioned, denied or disputed by the underwriter of such policy. All premiums due and payable under all such policies on or prior to the date of this Agreement have been paid, and to the Knowledge of the Sellers, no event has occurred that is reasonably likely to give rise to a claim for retroactive premiums by the insurer. The Sellers have no Knowledge of any threatened termination of, or premium increase with respect to, any such policy.

2.18 Litigation. As of the date of this Agreement, there is no Legal Proceeding pending or that has been threatened in writing (a) against any Seller relating to the CPMRC Business that seeks either damages in excess of $25,000 or equitable relief or (b) against any Seller in any manner that challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement. There are no judgments, orders or decrees outstanding that relate to the CPMRC Business.

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2.19 Warranties. No Customer Deliverables manufactured, sold, leased, licensed or delivered by any Seller is subject to any guaranty, warranty, right of return, right of credit or other indemnity other than the applicable standard terms and conditions of sale or license of the Customer Deliverables, which are set forth in Section 2.19 of the Seller Disclosure Schedule. To Sellers’ Knowledge, there are no claims from a third party that the Customer Deliverables violate the terms of any agreements to which they are subject.

2.20 Employees.

(a) Section 2.20(a)(i) of the Seller Disclosure Schedule contains a complete list of all employees of any Seller primarily or exclusively engaged in the CPMRC Business (the “Employees”), including, (1) their titles/positions; (2) their dates of hire; and (3) their current salaries or wages and all bonuses, commissions and incentives paid at any time during the past twelve (12) months; and (4) their target bonus for 2007. Section 2.20(a)(ii) of the Seller Disclosure Schedule contains a list of all consultants and independent contractors of any Seller primarily or exclusively engaged in the CPMRC Business (the “Consultants”), along with the per-hour consulting rate paid to each such person.

(b) The Sellers have provided the Purchaser with copies of all standard forms of employee trade secret, non-compete, non-disclosure and invention assignment agreements applicable to the Employees.

(c) Except for any employment, termination, severance and/or change of control agreement or severance plan or policy set forth in Section 2.20(a)(i) of the Seller Disclosure Schedule, all Employees may be terminated at any time with or without cause and without any severance or other liability. Except as provided in Section 2.20(a)(i) of the Seller Disclosure Schedule, all Consultants may be terminated at any time without liability.

(d) The Sellers have delivered to Purchaser accurate and complete copies of all Company written manuals, handbooks, and policies relating to the employment of the Employees.

(e) To the Knowledge of the Sellers, except as set forth in Section 2.20(e) of the Seller Disclosure Schedule, no Employee or significant group of Employees has informed any Seller of his, her or their current intent to terminate employment with Eclipsys. No Seller has implemented any layoff of Employees that could implicate the Worker Adjustment and Retraining Notification Act of 1988, as amended, or any similar foreign, state or local law, regulation or ordinance (collectively, the “WARN Act”). Sellers shall be solely responsible for complying with the WARN Act, including issuing any notices required thereunder, to the extent required on or before the Closing Date.

(f) No Seller as it relates to the CPMRC Business is a party to or bound by any collective bargaining agreement and none of the Employees are represented by any labor union or organization, nor has any Seller experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes in connection with the operation of the CPMRC Business. No Seller has Knowledge of any organizational effort made or threatened, either currently or within the past two years, by or on behalf of any labor union with respect to any of the Employees. There is no unfair labor practice charge or complaint by any Employee against any Seller pending before the National Labor Relations Board.

(g) As to the Employees, each Seller is in compliance in all material respects with all federal and state laws respecting employment and employment practices, terms and conditions of employment and employment practices, immigration, wage and hour, occupational health and safety.

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(h) As to the Employees and the Consultants, there are no claims pending or, to the Sellers’ Knowledge, threatened against any Seller or any of their respective officers or directors, including any unlawful employment practice discrimination charge involving any Employees pending or threatened before the Equal Employment Opportunity Commission (“EEOC”), EEOC recognized state “referral agency” or any other governmental agency and no investigation is pending or, to the Knowledge of the Sellers, threatened by the EEOC or any governmental agency with respect to the Employees and the Consultants.

(i) As to the Employees, each Seller has paid in full all wages, salaries, commissions, bonuses, benefits, compensation, fees and severance due and payable prior to the date of termination of employment. As to the Consultants, each Seller has paid in full all commissions, bonuses and fees due and payable prior to the date of this Agreement.

(j) To the Sellers’ Knowledge, no Employee is a party to or bound by any confidentiality agreement, non-competition agreement or other agreement (with any other person or entity) that restricts the performance by such person of any of his duties or responsibilities as an employee of the Purchaser.

2.21 Employee Benefits.

(a) Section 2.21(a) of the Seller Disclosure Schedule contains a complete and accurate list of all Employee Benefit Plans. Complete and accurate copies of (i) all Employee Benefit Plans which have been reduced to writing, (ii) written summaries of all unwritten Employee Benefit Plans, (iii) all related trust or other funding agreements, insurance contracts and summary plan descriptions, the most recent determination letters with respect to each Employee Benefit Plan that is intended to be tax-qualified under section 401(a) of the Code and (iv) all annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded plans) all plan financial statements for the last five plan years for each Employee Benefit Plan, have been made available to the Purchaser.

(b) Each Employee Benefit Plan has been operated and administered in all material respects in accordance with its terms and with ERISA, the Code and all other applicable laws. Each Seller and each ERISA Affiliate has in all material respects met their obligations with respect to each Employee Benefit Plan and at or before the time when due have made all required contributions thereto.

(c) All the Employee Benefit Plans that are intended to be qualified under Section 401(a) of the Code have received determination letters from the Internal Revenue Service to the effect that such Employee Benefit Plans are qualified and the plans and the trusts related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, no such determination letter has been revoked and revocation has not been threatened, and to the Knowledge of the Sellers, no act or omission has occurred, that would adversely affect its qualification.

(d) Notwithstanding anything to contrary provided in this Agreement, except as required by law, the Purchaser shall not assume, or have any direct or indirect responsibility, liability or obligation whatsoever with respect to, any Employee Benefit Plan. No event has occurred or is reasonably likely to occur that has resulted or would reasonably be expected to result in any current, pending, or to Sellers’ Knowledge, threatened lien or Liability on any of the Transferred Assets pursuant to Section 412(n) of the Code or Sections 4068 or 4201 of ERISA.

2.22 Environmental Matters.

(a) In connection with the operation of the CPMRC Business and the ownership and use of the Transferred Assets, each Seller has complied with all applicable Environmental Laws, except for violations of Environmental Laws that, individually or in the aggregate, have not had and would not

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reasonably be expected to have a Material Adverse Effect. There is no pending or, to the Knowledge of the Sellers, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law involving the operation of the CPMRC Business or the ownership or use of the Transferred Assets.

(b) In connection with the operation of the CPMRC Business or the ownership or use of the Transferred Assets, no Seller has any liabilities or obligations arising from the release of any Materials of Environmental Concern into the environment.

(c) In connection with the operation of the CPMRC Business or the ownership or use of the Transferred Assets, no Seller is a party to or bound by any court order, administrative order, consent order or other agreement with any Governmental Entity entered into in connection with any legal obligation or liability arising under any Environmental Law.

(d) Set forth in Section 2.22(d) of the Seller Disclosure Schedule is a list of all documents (whether in hard copy or electronic form) that contain any environmental reports, investigations and audits relating to premises currently or previously owned or operated in connection with the CPMRC Business by any Seller (whether conducted by or on behalf of Eclipsys, the Company or Solutions or a third party, and whether done at the initiative of Eclipsys, the Company or directed by a Governmental Entity or other third party) which any Seller has possession of or access to. A complete and accurate copy of each such document has been provided to the Purchaser.

(e) No Seller is aware of any material environmental liability of any solid or hazardous waste transporter or treatment, storage or disposal facility that has been used in the operation of the CPMRC Business.

2.23 Legal Compliance. Each Seller is currently conducting, and has at all times since November 1, 2004 conducted, the CPMRC Business in compliance in all material respects with each applicable law (including rules and regulations thereunder) of any federal, state, local or foreign government, or any Governmental Entity. No Seller has received any written notice from any Governmental Entity alleging, as it relates to the CPMRC Business, noncompliance by any Seller, with any applicable law, rule or regulation and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand or notice has been filed or commenced or, to the Knowledge of the Sellers, is threatened as it relates to the CPMRC Business, against any Seller.

2.24 Illicit or Illegal Payments. As it relates to the CPMRC Business, no Seller, nor any Affiliate of the Sellers, has used any corporate funds for any unlawful contribution, gift, entertainment or other expense relating to political activity or made any direct, or indirect, unlawful payment to any United States, federal, state, local or foreign government official or employee from corporate funds or paid or made any bribe, rebate, payoff, influence payment, kickback, or other unlawful payment.

2.25 Customers and Suppliers. Section 2.25 of the Seller Disclosure Schedule sets forth a list of (a) each customer or licensee of the CPMRC Business (including the particular customers of Eclipsys for which services are being subcontracted pursuant to the Consulting and Subcontracting Agreement) that accounted for more than $50,000 in revenue reflected in the Financial Information during the last full fiscal year or the interim period through the Most Recent Balance Sheet Date and the amount of revenues accounted for by such customer during each such period; (b) customers of the CPMRC Business that the Sellers anticipate, based upon revenue to date, shall account for more than $50,000 in revenue for the CPMRC Business for the current fiscal year, and for the fiscal years ending December 31, 2008 and December 31, 2009, provided, however, that Sellers are not making, and nothing in this Section 2.25 shall

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be construed to mean that Sellers are making, any guarantees, or except to the limited extent set forth in Section 2.5 and this Section 2.25, any representations or warranties, with respect to any future business, revenue or projections for the CPMRC Business or attributable to any of the customers or licensees of the CPMRC Business for any period following the Most Recent Balance Sheet Date, and (c) each supplier that is a material supplier of any significant product or service to the CPMRC Business. No such customer or supplier has indicated within the past year that it will stop, or decrease the rate of, buying products or supplying products, as applicable, to the CPMRC Business. No purchase order or commitment of the CPMRC Business is in excess of normal requirements.

2.26 Permits. Section 2.26 of the Seller Disclosure Schedule sets forth a list of all Permits issued to or held by the Company or used primarily in the CPMRC Business. Such listed Permits are the only Permits that are required to conduct the CPMRC Business as presently conducted or as proposed to be conducted, except for those the absence of which, individually or in the aggregate, is not and would not reasonably be expected to be material to the CPMRC Business. Each such Permit is in full force and effect. The Sellers, as the case may be, are in material compliance with the terms of each such Permit. To the Knowledge of the Sellers, no suspension or cancellation of such Permit is threatened and there is no reasonable basis for believing that such Permit will not be renewable upon expiration.

2.27 Certain CPMRC Business Relationships With Affiliates. Except as set forth in Section 2.27 of the Seller Disclosure Schedule, no Affiliate of any Seller (a) owns any property or right, tangible or intangible, which is used primarily in the CPMRC Business, (b) has any claim or cause of action against any Seller, as it relates to the CPMRC Business, or (c) owes any money to, or is owed any money by, any Seller as it relates to the CPMRC Business. Section 2.27 of the Seller Disclosure Schedule describes any transactions or relationships involving amounts in excess of $100,000 per annum related to the CPMRC Business between (i) any Seller and (ii) any Seller and any of their Affiliates that occurred or have existed since the beginning of the time period covered by the Financial Information.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser represents and warrants to the Sellers the following:

3.1 Organization, Qualification and Corporate Power. The Purchaser is a corporation duly organized and validly existing under the laws of the State of New York and has all requisite corporate power and authority to carry on the business in which it is engaged.

3.2 Authorization of Transaction. The Purchaser has all requisite power and authority to execute and deliver this Agreement and the Transaction Agreements to which it is a party and to perform its obligations hereunder and thereunder. The execution and delivery by the Purchaser of this Agreement and the Transaction Agreements to which it is a party and the consummation by the Purchaser of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of the Purchaser. This Agreement and the Transaction Agreements to which it is a party have been duly and validly executed and delivered by the Purchaser and constitute valid and binding obligations of the Purchaser, enforceable against the Purchaser in accordance with their respective terms, subject to (a) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (b) rules of law governing specific performance, injunctive relief and other equitable remedies.

3.3 Noncontravention. Neither the execution and delivery by the Purchaser of this Agreement and the Transaction Agreements to which it is a party, nor the consummation by the Purchaser of the transactions contemplated hereby or thereby, will (a) conflict with or violate any provision of the

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Articles of Incorporation or bylaws of the Purchaser, (b) require on the part of the Purchaser any notice to or filing with, or any permit, authorization, consent or approval of, any Governmental Entity, (c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party the right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract or instrument to which the Purchaser is a party or by which the Purchaser is bound or to which any of its assets is subject, except for (i) any conflict, breach, default, acceleration, termination, modification or cancellation which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect and would not adversely affect the consummation of the transactions contemplated hereby or (ii) any notice, consent or waiver the absence of which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect and would not adversely affect the consummation of the transactions contemplated hereby, or (d) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Purchaser or any of its properties or assets.

3.4 Litigation. As of the date of this Agreement, there is no Legal Proceeding which is pending or has been threatened in writing against the Purchaser which in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement.

3.5 Brokers’ Fees. The Purchaser does not have any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the Contemplated Transactions.

3.6 Projections. The Purchaser acknowledges and agrees that (i) except as specifically provided in Section 2.5 herein, the Sellers are not making any guarantees of any kind, or except to the limited extent set forth in Section 2.5 and Section 2.25, any representations or warranties, with respect to the Projections, the Future Business Information or any likely operating results of the CPMRC Business, or parts thereof, following the Closing, and (ii) the Purchaser has conducted its own due diligence investigation with respect to the Projections and the Future Business Information.

3.7 Adequacy of Funds. The Purchaser has and will maintain during the period in which any amounts may be payable hereunder adequate financial resources to satisfy its monetary and other obligations under this Agreement, including the payment of the Purchase Price in accordance herewith.

ARTICLE 4

ADDITIONAL COVENANTS

4.1 Covenants of the Sellers.

(a) Collection of Proceeds. Following the Closing, (i) to the extent any Seller receives or otherwise comes into possession of cash receipts attributable to the operation of the CPMRC Business due for products and services provided after the Closing (other than products or services that the Sellers are permitted to provide under this Agreement or any of the Transaction Agreements), such Seller shall promptly remit to the Purchaser such cash, and (ii) to the extent the Purchaser receives or otherwise comes into possession of cash receipts attributable to the operation of the CPMRC Business due for products and services provided on or prior to the Closing, the Purchaser shall promptly remit to the Sellers such cash.

(b) Domain Names. The Sellers agree to execute at any time all documents required to transfer and record the transfer of the Domain Names in any and all countries and jurisdictions. The Sellers agree to cooperate with the Purchaser and provide (or cause to be provided) to the Purchaser such reasonable assistance necessary to transition to the Purchaser, or at the Purchaser’s direction, to an Affiliate of Purchaser, the operation of the Sellers’ respective websites located at the Domain Names and

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to otherwise take whatever steps are necessary to transfer the ownership of the websites and the Domain Names for the websites and the web pages located therein, together with any and all related software code and other Intellectual Property owned by any Seller or held under transferable agreements to Purchaser.

(c) Payment of Liabilities Arising Prior to the Closing Date. The Sellers will use commercially reasonable efforts to pay or discharge in full the liabilities and obligations of the Sellers arising prior to the Closing Date that relate specifically to the Transferred Assets or the operation of the CPMRC Business prior to the Closing Date, subject to (i) set-off, (ii) counterclaims, (iii) other rights and remedies of the Sellers, or (iv) course of dealing by or between the parties thereto consistent with past practice.

4.2 Mutual Covenants.

(a) Confidentiality.

(i) Each party agrees not to issue any press release or make any other public announcement relating to this Agreement without the prior written approval of the other party, except that each of the Sellers and the Purchaser reserves the right, without the other party’s prior consent, to make any disclosure it believes in good faith is required by applicable law (including applicable securities laws or securities listing standards). Attached as Exhibit C is a form of letter (the “Client Letter”) that the Sellers and the Purchaser have agreed that the Sellers will send to the Seller clients that are party to the client agreements in Sections 1.1(j) and 4.2(b) of the Seller Disclosure Schedule informing them of the completion of the Contemplated Transactions. The Sellers will send the Client Letter to each of such Seller clients not later than one (1) business day following the Closing. Prior to the second business day following Closing, the Purchaser will not, without the presence of the Sellers, communicate with such Seller clients concerning the completion of the Contemplated Transactions.

(ii) Each party agrees to continue to abide by that certain confidentiality letter agreement executed as of August 29, 2006, by and between Eclipsys and the Purchaser, the terms of which are incorporated by reference in this Agreement, and which terms will survive the Closing or the termination of this Agreement in accordance with its terms.

(iii) Each party at all times has the unlimited ability to consult with any Tax advisor (including a Tax advisor independent from all other entities involved in the transaction) regarding the Tax treatment or Tax structure of the Contemplated Transactions. Each party agrees that (A) it is relying solely upon its own professional advisers for any Tax advice relating to the Contemplated Transactions, and (B) no party is making any representations to the other parties as to the particular Tax consequences that will or will not arise in connection with the Contemplated Transactions.

(b) Consents. The Sellers shall use their reasonable efforts to obtain, as soon as reasonably practicable following the Closing Date, and the Purchaser shall use its reasonable efforts to assist and cooperate with the Sellers to obtain, all consents required in connection with the Contemplated Transactions, including (i) the transfer, assignment, subcontracting or contracting under the Transferring Contracts, as the case may be in accordance with Project Schedules A, C and D to the Consulting and Subcontracting Agreement, and (ii) the transfer of Licensed Intellectual Property. Until such consents are obtained, the Sellers and the Purchaser hereby agree that (i) the Purchaser will obtain the benefits of any claim or right arising under any such Transferring Contracts as they relate to the CPMRC Business and will be responsible for the obligations in respect of such Transferring Contracts as they relate to the CPMRC Business (in each case solely to the extent of assignment or subcontracting attributable to the period following the Closing Date), and (ii) the Sellers will enforce for the benefit of the Purchaser any and all rights of the Sellers under such Transferring Contracts, provided that this sentence is subject to

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Project Schedules A, C and D to the Consulting and Subcontracting Agreement. If there is an inconsistency between this Agreement and Project Schedule A, C or D of the Consulting and Subcontracting Agreement, such Project Schedule shall govern. The parties will use reasonable best efforts to cooperate in preserving the benefits of, and enforcing any and all rights of, the Sellers in such Transferring Contracts. The Sellers will promptly pay to the Purchaser, if and when received, all monies received by the Sellers to which the Purchaser is specifically entitled in respect of any such Transferring Contracts or any claim, right or benefit to which the Purchaser is specifically entitled arising under any such Transferring Contracts attributable to the period following the Closing Date. Notwithstanding the foregoing, in respect of Transferring Contracts that include both elements that relate to the CPMRC Business and elements that do not relate to the CPMRC Business, this Section 4.2(b) applies only to elements that relate to the CPMRC Business. The Sellers and the Purchaser agree that Section 4.2(b) of the Seller Disclosure Schedule contains a list of (a) Transferring Contracts that are client agreements for which the master agreement contains a provision permitting subcontracting of a portion of the Transferring Contract, (b) Transferring Contracts that are client agreements for which the master agreement contains a provision concerning subcontracting requirements or conditions, and (c) Transferring Contracts that are client agreements for which the master agreement is silent concerning subcontracting requirements or conditions. For the avoidance of doubt, the parties acknowledge and agree to the following: (1) the Sellers are not guaranteeing to the Purchaser in any way any future revenues or profits for the CPMRC Business or attributable to any Transferring Contract that is a client agreement and (2) the parties intend to cooperate with one another in good faith following the Closing Date to jointly agree as to which Transferring Contracts that are client agreements may require the consent of the third party to assign or subcontract, as the case may be, and to jointly agree on a manner in which to address such third parties with respect to any consent that may be required.

(c) Mail and Communications. Each party shall promptly remit to the other any mail or other communications, including any written or e-mail inquiries relating to the CPMRC Business, the Transferred Assets, the Excluded Assets, Assumed Liabilities or Excluded Liabilities which are received by a party or its Affiliate from and after the Closing Date and are relevant to the other party because they relate to assets, liabilities or obligations of the other party under this Agreement or any other Transaction Agreement. Purchaser shall promptly remit to Eclipsys any invoices received by Purchaser or any of its Affiliates relating to liabilities other than the Assumed Liabilities which are received by Purchaser or any of its Affiliates from and after the Closing Date. With respect to any mail addressed to any Seller received by Purchaser or any of its Affiliates, or vice versa, from and after the Closing Date which relates to the CPMRC Business, the Transferred Assets, the Excluded Assets, Assumed Liabilities or Excluded Liabilities, each party hereby authorizes the other to receive and open such mail and deal with the contents thereof in any reasonable manner consistent with this Agreement and the other Transaction Agreements.

(d) Updates to CICC Database.

(i) As soon as practicable following the Closing Date but in any event not later than the date that is 150 days following the Closing Date, the Sellers will make the changes, modifications and updates to the CICC database set forth in Section 4.2(d) of the Seller Disclosure Schedule (“CICC Updates”) and will provide corresponding CICC Notices (as defined in (iii) below), provided that (A) verification as to whether any CICC Updates are Complete (as defined below), (B) resolution of any CICC Objection Notices (defined below), (C) corrections that are agreed upon by the parties to any CICC Updates resulting from a CICC Objection Notice, and (D) Supplemental Updates (as defined below) need not be completed within such 150-day period, but, if such matter cannot reasonably be addressed within such 150-day period, then such matter will be addressed by the Sellers to the extent required under this Section as promptly as practicable thereafter. The CICC Updates will be made in the five tranches described in Section 4.2(d) of the Seller Disclosure Schedule, and within two (2) business

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days after the date that each tranche is Complete (as defined below), the Purchaser will pay to the Sellers the sum of $400,000, representing a portion of the CICC Update Payment, by wire transfer in immediately available funds to an account designated by the Sellers. The Purchaser and the Sellers acknowledge and agree that the CICC Updates constitute all of the changes, modifications or updates to the CICC database that the Sellers are obligated to make hereunder. The Purchaser acknowledges and agrees that (i) the Sellers shall not have any obligation to make any changes, modifications or updates except as specifically provided for in Section 4.2(d) of the Seller Disclosure Schedule, (ii) upon completion of each tranche of the CICC Updates in accordance with the terms hereof, the Sellers shall have no further obligation hereunder in respect of such tranche of the CICC Updates and shall be entitled to the payment of $400,000 for that tranche, and (iii) the Purchaser’s sole remedy with respect to any breach by the Sellers of their obligations under this Section 4.2(d) to make the CICC Updates shall be the non-payment of the portion of the CICC Update Payment associated with the portion of the CICC Updates not Completed. The Sellers and the Purchaser will reasonably consult and cooperate with each other with respect to the CICC Updates so as to minimize, to the extent practicable, the time and expense of the Sellers to make the CICC Updates. The Purchaser shall not have any obligation to make any of the CICC Updates, but may do so at its election.

(ii) There shall be a CICC Update Work Group comprising the individuals from Eclipsys (the “Eclipsys Representatives”) and the Company (the “Company Representatives”) who have been responsible for CICC prior to the Closing as well as such individuals as the Purchaser appoints, including at least two technical personnel of the Purchaser (the “Purchaser Representatives”), each as identified in Section 4.2(d)(i) of the Seller Disclosure Schedule, provided that each party has the right to update and amend the list of such party’s representative if any such representative becomes disabled or otherwise such person’s employment is terminated for any reason. The Eclipsys Representatives shall be responsible for performing the work necessary to make the CICC Updates. The Company Representatives shall be responsible for verifying that the CICC Updates have been made by reviewing CICC as changed to verify that the work described in Section 4.2(d) of the Seller Disclosure Schedule has been performed. The Purchaser Representative shall be responsible for monitoring the process and participating in the process to the extent necessary to become educated about CICC. The Purchaser Representatives may but will not be required to assist the Eclipsys Representatives in making the CICC Updates. The entire CICC Update Work Group shall work together cooperatively in an effort to Complete the CICC Updates as promptly as practicable, including by designing a work process that facilitates verification by the Company Representatives and the Purchaser Representatives, and communication to the Eclipsys Representatives of any additional work required to correct errors detected in verification, iteratively and incrementally as the work is completed.

(iii) Eclipsys shall designate one individual from among the Eclipsys Representatives, and the Purchaser shall designate two individuals, one from among the Company Representatives, and the other an employee of the Purchaser who may but need not be a Purchaser Representative. A particular tranche of the CICC Updates will be deemed “Complete” for purposes hereof when these three individuals, acting unanimously, shall determine that the CICC Updates in that tranche have been made as described in Section 4.2(d) of the Seller Disclosure Schedule. It is intended that the determination should be based upon objective verification of completion of the work. These designated individuals by unanimous agreement may design workflows and procedures to facilitate the process, and shall monitor progress with respect to the CICC Updates and serve as the parties’ conduits for communication and initial resolution of any disagreements or disputes concerning the CICC Updates. Absent another agreed process, the individual designated by Eclipsys may, following completion of each tranche of CICC Updates, deliver to the Purchaser’s designated individuals a written notice stating that such tranche of CICC Updates has been made and is ready for verification (a “CICC Notice”). Within ten business days following the receipt of such CICC Notice, the Purchaser’s designated individuals will accept the CICC Notice, in which case that tranche will be deemed Complete, or will deliver a written

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notice to the Eclipsys designated individual stating what additional work needs to be done with respect to that tranche to conform to Section 4.2(d) of the Seller Disclosure Schedule (a “CICC Objection Notice”). If the Purchaser’s designated individuals do not deliver a CICC Objection Notice within the ten business day period above, that tranche of CICC Updates will be deemed Complete. If the Purchaser delivers a CICC Objection Notice within the ten business day period above, then the three designated individuals will attempt to agree upon the additional work to be done and a timetable for completing that work, verification, and subsequent approval. If the three designated individuals are not able to reach agreement on any issue, the matter shall be escalated for decision to an officer designated by each of Eclipsys and the Purchaser (who shall be separate persons from those involved in the CICC Update process), who shall attempt to resolve the matter. If those individuals cannot resolve the matter, it may be submitted to mediation in accordance with Section 9.4.

(iv) The costs of the Sellers’ designee shall be at the Sellers’ expense and the costs of the Purchaser’s designees shall be at the Purchaser’s expense.

(v) Section 4.2(d)(v) of the Seller Disclosure Schedule sets forth a list of items not currently included among the CICC Updates for various reasons as noted therein, including that such items are not in KBC as of the Closing Date. If, during the period specified in Section 4.2(d)(i) in which the Sellers make the CICC Updates, any of the parties hereto discovers that items identified in Section 4.2(d)(v) of the Seller Disclosure Schedule as not in KBC as of the Closing Date are actually in KBC as of the Closing Date, then such items (“Supplemental Updates”) will be added by the Sellers to CICC in the same manner as the CICC Updates.

(e) Further Assurances. Following the Closing, each party agrees to cooperate fully with the other parties and to execute such further instruments, documents and agreements, and to give such further written assurances, as may be reasonably requested by any other party to evidence and reflect better the transactions described and contemplated in this Agreement and the Transaction Agreements and to carry into effect the intents and purposes of this Agreement and the Transaction Agreements. With respect to the agreements listed in Section 1.1(j) of the Seller Disclosure Schedule that comprise part of the Business Related Intellectual Property, if, following the Closing Date, a non-Seller party thereto notifies any Seller or the Purchaser that a consent is or was required to transfer such agreement, (i) the Sellers will, as soon as practicable following its receipt of such notice, obtain any required consent to the transfer to the Purchaser of all of the Sellers’ rights in and to such agreements that comprise part of the Business Related Intellectual Property, and (ii) the parties hereto agree that following the receipt of a consent to the transfer of any such agreement, such agreement will be deemed to be a Transferred Asset hereunder. Nothing in this Section 4.2(e) will limit the Purchaser’s remedies under Section 6.1 herein.

ARTICLE 5

CONCURRENT TRANSACTIONS

5.1 Concurrent Transactions. Concurrently with the Closing, each Seller and the Purchaser are entering into the Transaction Agreements to which they are a party.

ARTICLE 6

INDEMNIFICATION

6.1 Indemnification by the Sellers. Subject to the terms hereof, the Sellers shall indemnify, defend and hold harmless the Purchaser, its Affiliates and their respective directors, officers, stockholders, employees, attorneys, accountants, representatives and agents and their respective heirs, successors and permitted assigns (collectively, the “Purchaser Indemnitees”) from and against any and all Damages (other than indemnification with respect to Taxes, for which only the provisions of Section 7.1

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will exclusively govern) incurred or suffered by the Purchaser Indemnitees arising or resulting from, directly or indirectly, (i) any breach of any representation or warranty made by the Sellers set forth in Article 2 of this Agreement (other than breaches of representations and warranties contained in Section 2.9 (Tax Matters), for which the provisions of Section 7.1 will govern), (ii) any breach of any covenant or agreement of the Sellers set forth in this Agreement (except for Section 4.2(d) hereunder for which the provisions of Section 4.2(d) will exclusively govern), (iii) any Excluded Liability, including all Damages arising out of the operation of the CPMRC Business or the ownership or use of the Transferred Assets, in each case prior to the Closing, provided, however, that the provisions of Section 7.1 will govern any and all indemnification obligations of the Sellers under this Agreement that relate to any Taxes of any of the Sellers for Pre-Closing Periods, (iv) any claim by an Employee or a Consultant that relates to an act or omission by any Seller prior to Closing, (v) any claims made by any broker, finder, agent, financial advisor or other intermediary employed or alleged to have been employed by any Seller (or its Affiliates), (vi) third party claims relating to the failure by the Sellers to obtain any consents, approvals or other authorizations or the failure to give any notices, in each case that are or were required in accordance with the terms of this Agreement, provided that the indemnification provided by this part (vi) will cover and include Damages excluding lost profits, lost revenue, diminution in value or other consequential damages and provided further that the Sellers shall have no liability under this part (vi) with respect to any of the client agreements set forth in Section 4.2(b) of the Seller Disclosure Schedule if the Purchaser advised and concurred with any Seller expressly in a signed writing and in accordance with Section 4.2(b) herein that consent, approval, authorization or notice was not required or should not be obtained or provided, or (vii) any matter set forth in Section 2.13(k) of the Seller Disclosure Schedule, other than that the Proprietary Intellectual Property includes or reflects information from the public domain.

6.2 Indemnification by the Purchaser. Subject to the terms hereof, the Purchaser shall indemnify, defend and hold harmless each Seller and their respective Affiliates, their respective directors, officers, stockholders, employees, attorneys, accountants, representatives and agents and the respective heirs, successors and permitted assigns (collectively, the “Seller Indemnitees”) from and against any and all Damages (other than indemnification with respect to Taxes, for which the provisions of Section 7.1 will govern) incurred or suffered by the Seller Indemnitees arising or resulting from, directly or indirectly, (i) any breach of any representation or warranty made by the Purchaser set forth in Article 3 of this Agreement, (ii) any breach of any covenant or agreement of the Purchaser set forth in this Agreement (iii) any of the Assumed Liabilities, (iv) in connection with the operation of the CPMRC Business or the use or ownership of any of the Transferred Assets to the extent attributable to the period following the Closing, subject to the terms of the Transaction Agreements, (v) any claim by an Employee or a Consultant that relates to an act or omission by the Purchaser following the Closing, or (vi) any claims made by any broker, finder, agent, financial advisor or other intermediary employed or alleged to have been employed by Purchaser.

6.3 Damages. For purposes of this Article 6, the amount of Damages incurred or suffered by a party arising out of any breach of any representation, warranty or agreement shall be determined without deduction of the amount of any materiality qualification contained therein.

6.4 Claim Procedure.

(a) Claim Notice. A party which seeks indemnity under this Article 6 (an “Indemnified Party”) shall give written notice (a “Claim Notice”) to the party from whom indemnification is sought (an “Indemnifying Party”), whether the Damages sought arise from matters solely between the parties or from third party claims described in Section 6.4(c). The Claim Notice must contain (i) a description and, if known, estimated amount (the “Claimed Amount”) of any Damages incurred or reasonably expected to be incurred by the Indemnified Party, (ii) a reasonable explanation of the basis for the Claim Notice to the extent of facts then known by the Indemnified Party, and (iii) a demand for payment of those Damages.

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(b) Response to Notice of Claim. Within twenty (20) days after delivery of a Claim Notice, the Indemnifying Party shall deliver to the Indemnified Party a written response (the “Response”) in which the Indemnifying Party shall either:

(i) agree that the Indemnified Party is entitled to receive all of the Claimed Amount and the Indemnifying Party shall promptly (but in no event later than ten (10) days thereafter) pay the Claimed Amount in accordance with the terms hereof; or

(ii) dispute that the Indemnified Party is entitled to receive any of the Claimed Amount. If no Response is delivered by the Indemnifying Party to the Indemnified Party within such 20-day period, the Indemnifying Party is deemed to have agreed that an amount equal to the entire Claimed Amount shall be payable to the Indemnified Party and such Claimed Amount shall be paid in accordance with the provisions of this Article 6.

(c) Third Party Claims.

(i) In the event that any written claim or demand for which an Indemnifying Party may have liability to an Indemnified Party hereunder is asserted against or sought to be collected from an Indemnified Party by a third party (a “Third Party Claim”), the Indemnified Party shall promptly give written notification to the Indemnifying Party of the Third Party Claim. Such notification will be accompanied by reasonable supporting documentation submitted by such third party (to the extent then in the possession of the Indemnified Party) and will describe in reasonable detail (to the extent known by the Indemnified Party) the facts constituting the basis for such suit or proceeding and the amount of the claimed damages; provided, however, that no delay or deficiency on the part of the Indemnified Party in so notifying the Indemnifying Party will relieve the Indemnifying Party of any Liability or obligation hereunder except (and to the extent) the Indemnifying Party is materially prejudiced thereby. Within twenty (20) days after delivery of such notification, the Indemnifying Party may, at its own expense, upon written notice thereof to the Indemnified Party, assume control of the defense of such suit or proceeding with counsel reasonably satisfactory to the Indemnified Party; provided, that (A) the Indemnifying Party acknowledges its assumption of the defense in writing to the Indemnified Party and acknowledges (i) that any Damages that are assessed against the Indemnified Party shall be indemnified pursuant to this Article 6 and (ii) any Damages for which the Indemnified Party may be entitled to indemnification hereunder are less than or equal to the amount of Damages for which the Indemnifying Party is liable under this Article 6, (B) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder and (C) the Third Party Claim involves only money damages and does not seek an injunction, other equitable remedy or involve criminal liability. If the Indemnifying Party does not so assume control of such defense, the Indemnified Party will control such defense.

(ii) The party not controlling such defense (the “Non-Controlling Party”) may participate therein at its own expense; provided, however, that if the Indemnifying Party assumes control of such defense and the Indemnified Party concludes, upon the written opinion of counsel, that the Indemnifying Party and the Indemnified Party have conflicting interests or different defenses available with respect to such suit or proceeding and that as a result the Indemnified Party is likely to incur materially greater risk or exposure without its own separate counsel, the reasonable fees and expenses of counsel to the Indemnified Party will be considered “Damages” for purposes of this Agreement. In addition, the fees and expenses of the Indemnified Party with respect to a Third Party Claim will be

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considered “Damages” for purposes of this Agreement if the Indemnified Party controls the defense of such Third Party Claim pursuant to the terms of this Section 6.4(c). The party controlling such defense (the “Controlling Party”) will keep the Non-Controlling Party reasonably advised of the status of such suit or proceeding and the defense thereof and will consider in good faith recommendations made by the Non-Controlling Party with respect thereto. The Non-Controlling Party will furnish the Controlling Party with such information as it may have with respect to such suit or proceeding (including copies of any summons, complaint or other pleading which may have been served on such party and any written claim, demand, invoice, billing or other document evidencing or asserting the same) and will otherwise cooperate with and assist the Controlling Party in the defense of such suit or proceeding.

(iii) The Indemnifying Party will not agree to any settlement of, or the entry of any judgment arising from, any such suit or proceeding without the prior written consent of the Indemnified Party, which will not be unreasonably withheld or delayed; provided, however, that the consent of the Indemnified Party will not be required in connection with the settlement of, or the entry of any judgment solely related to a monetary obligation or liability if the Indemnifying Party agrees in writing to pay in full any amounts payable pursuant to such settlement or judgment and such settlement or judgment includes a full, complete and unconditional release of the Indemnified Party from further Liability. The Indemnified Party will not agree to any settlement of, or the entry of a judgment arising from, any such suit or proceeding without the prior written consent of the Indemnifying Party, which will not be unreasonably withheld or delayed.

(d) Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall (i) survive the Closing and any investigation at any time made by or on behalf of an Indemnified Party and (ii) expire on the date that is eighteen (18) months following the Closing Date, except that the representations and warranties of the Sellers contained in Section 2.9 (Tax Matters) and Section 2.13 (Intellectual Property), and the first sentence of Section 2.10(a) (Assets) shall survive the Closing Date until sixty (60) days after the expiration of the applicable statute of limitations, including any extensions or waivers thereof. If an Indemnified Party delivers to an Indemnifying Party, before expiration of a representation or warranty, either a Claim Notice based upon a breach of such representation or warranty, or a written notice containing a comparable amount of detail and information as that required to be included in a Claim Notice that, as a result of a legal proceeding instituted by or claim made by a third party or any other event or circumstance, the Indemnified Party reasonably expects to incur Damages (an “Expected Claim Notice”), then the applicable representation or warranty will survive until, but only for purposes of, the resolution of the matter covered by such notice. If the legal proceeding, claim, event or circumstance with respect to which an Expected Claim Notice has been given is definitively withdrawn or resolved in favor of the Indemnified Party, the Indemnified Party will promptly so notify the Indemnifying Party. The covenants and agreements of the parties hereto in this Agreement shall survive the Closing Date without any contractual limitation on the period of survival (other than those covenants and agreements that are expressly required to remain in full force and effect for a specified period of time).

6.5 Limitations.

(a) Sellers’ Liability. Except as provided in this Agreement and subject to Section 6.5(b), (1) in no event will the Sellers’ Liability under this Agreement, in the aggregate, exceed $2,000,000, provided that (2) if any Purchaser Indemnitee is seeking, or is entitled to seek, indemnification from the Sellers for Damages due to (A) the breach of the representations and warranties contained in the first sentence of Section 2.10(a) (Assets), the breach of the representations and warranties contained in Section 2.13 (Intellectual Property), or (B) the breach of any covenants of the Sellers set forth in this Agreement, other than Section 8.4 (Non-Competition) or other than Section 4.2(d) (for which the provisions of Section 4.2(d) will exclusively govern), or Damages arising under Section 6.1(iv),

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Section 6.1(vi) or Section 6.1(vii), then Sellers’ Liability under this Agreement shall not in the aggregate exceed the Purchase Price paid to the Sellers hereunder, (C) the breach of the representations and warranties contained in Section 2.9 (Tax Matters), (D) any Excluded Liability or (E) the breach of Section 8.4 (Non-Competition), then solely with respect to (C) through (E) hereunder, the limitations set forth in this Section 6.5(a) with respect to the aggregate amount recoverable by the Purchaser Indemnitees under this Agreement shall not be applicable to or otherwise limit any such Purchaser Indemnitee’s recovery for such claim, and provided further that, (3) subject to the express limitations in Section 6.5(a)(1) and the last sentence of this Section 6.5(a), in no event will Sellers’ cumulative Liability with respect to any or all of the matters set forth in Sections 6.5(a)(1) and 6.5(a)(2)(A) through (B) exceed the Purchase Price paid to the Sellers hereunder. For the avoidance of doubt, if the Sellers breach a covenant in the Agreement (other than Section 8.4, or Section 4.2(d) for which the provisions of Section 4.2(d) will exclusively govern) and such breach results in Damages to the Purchaser equal to the Purchase Price, and the Sellers also breach the representation and warranty in Section 2.7 of this Agreement and such breach results in Damages to the Purchaser equal to $1,500,000, the maximum recovery that the Purchaser shall have hereunder is the Purchase Price (following deduction to give effect of the next sentence). Notwithstanding anything to the contrary in this Agreement, the Purchaser Indemnitees will not be entitled to assert any claims for indemnification (A) under Section 6.1(i) (other than a breach of the representations and warranties contained in the first sentence of Section 2.10(a) (Assets), the breach of the representations and warranties contained in Section 2.9 (Tax Matters), the breach of the representations and warranties contained in Section 2.13 (Intellectual Property)), unless and only to the extent that the aggregate Damages are in excess of $100,000, or (B) under Section 6.1(vii) or with respect to a breach of the representations and warranties contained in Section 2.13 (Intellectual Property), unless and only to the extent that the aggregate Damages with respect to such matters are in excess of $50,000.

(b) No Limit for Fraud. Nothing in this Agreement, including the limitations set forth in this Section 6.5 will (i) limit the Liability (including any Damages) of any person to any other party for intentional fraud or willful misconduct, (ii) prevent a person from seeking injunctive relief, or (iii) subject to the terms of the Transaction Agreements other than this Agreement, limit any claim arising out of the Transaction Agreements other than this Agreement.

(c) Tax Treatment. All payments made by an Indemnifying Party to an Indemnified Party under this Article 6 or Article 7 shall be treated as adjustments to the Purchase Price for Tax purposes, except as otherwise required by law.

(d) Other Benefits. Any and all Damages for which indemnification is provided pursuant to this Article 6, and any indemnification for Taxes pursuant to Article 7, will be net of any Tax benefit to which an Indemnified Party has received by reason of payment of the obligation or Liability for which indemnification is sought (taking into account any Tax cost or reduction in such Tax benefits by reason of receipt of the indemnification payment) and any amount of any insurance proceeds, indemnification payments, contribution payments or reimbursements actually received by the Indemnified Party with respect to the Liability for which indemnification is sought. The Indemnified Party will use reasonable efforts to collect on available insurance to mitigate costs to the Indemnifying Party.

(e) Exclusive Remedy. Subject to the other limitations set forth in this Agreement and except as provided in Section 6.5(b) and except with respect to Section 8.4, or Section 4.2(d) (for which the provisions of Section 4.2(d) will exclusively govern), the indemnities set forth in this Article 6 shall be the exclusive remedies of an Indemnified Party under Section 6.1(vii) or for any misrepresentation, breach of representation or warranty or breach, non-fulfillment or failure to be performed of any covenant or agreement contained in this Agreement.

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(f) No Consequential Damages. In no event will any party be liable for any incidental, consequential, punitive, special, lost profits or similar damages, provided that, if a third party alleges facts that, if true, would give rise to a Thirty Party Claim under Section 6.4(c), then an Indemnified Party may recover incidental, consequential, punitive, special, lost profits or similar damages from the Indemnifying Party if and only to the extent that the Indemnified Party is found liable in a final, non-appealable judgment by a court of competent jurisdiction to the Third Party for such damages.

6.6 Offset. Any and all amounts due from the Sellers to any Purchaser Indemnitee pursuant to this Article 6 may be satisfied by setting off against the payment of any Earnout Amount owed by the Purchaser to the Sellers.

ARTICLE 7

CERTAIN TAX MATTERS

7.1 Liability and Indemnification for Taxes.

(a) The Sellers will indemnify the Purchaser Indemnitees against (i) all Damages for Taxes of the Sellers for any Pre-Closing Period; (ii) all Damages for Taxes attributable to any breach of representation or warranty by the Sellers relating to Taxes; and (iii) any Damages for Taxes imposed on any Purchaser Indemnitee as a result of a breach of any covenant of the Sellers contained in this Article 7 attributable to any Pre-Closing Period.

(b) The Purchaser will indemnify the Seller Indemnitees against all Damages for Taxes imposed on the Seller Indemnitees with respect to the CPMRC Business and the Transferred Assets that are attributable to any Post-Closing Period.

(c) Notwithstanding anything in this Agreement to the contrary, and for the avoidance of doubt, indemnification for Taxes hereunder shall be governed by this Article 7.

7.2 Cooperation. Each of the Sellers and the Purchaser will cooperate fully, as and to the extent reasonably requested by the other, in connection with the filing of any Tax Returns relating to the Transferred Assets and the CPMRC Business, and with respect to any Tax Contests relating to the Transferred Assets and the CPMRC Business. Such cooperation will include the retention and (upon the other party’s request) the provision of records and information, as well as the making of employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Notwithstanding anything to the contrary in this Article 7 and this Agreement, however, the Sellers will control any and all Tax Contests relating to Pre-Closing Periods. The Purchaser will not settle, compromise, concede or take any action with respect to Tax Contests relating to Pre-Closing Periods without consulting the Sellers, and if the Purchaser defends any such Tax Contest after consultation with the Sellers, the Purchaser will defend such Tax Contest diligently and in good faith as if it were the only party in interest in connection with such Tax Contest. The Purchaser will control any and all Tax Contests relating to Post-Closing Periods. The Sellers will not settle, compromise, concede or take any action with respect to Tax Contests relating to Post-Closing Periods without consulting the Purchaser, and if the Sellers defend any such Tax Contest after consultation with the Purchaser, the Sellers will defend such Tax Contest diligently and in good faith as if they were the only party in interest in connection with such Tax Contest.

7.3 Refunds. Any net refunds and credits attributable to the payment of Taxes for a Pre-Closing Period will be for the account of the Sellers, and the Purchaser will promptly pay to the Sellers any such refund or credit (net of any Tax or other cost to the Purchaser resulting from the receipt of such refund or application of such credit). The Purchaser will reasonably cooperate, at Sellers’ sole cost and

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expense, in obtaining any refund that the Sellers reasonably believe is available to them, to the extent permitted by applicable law, including, without limitation through filing the appropriate or required forms with the applicable taxing authorities. Notwithstanding the foregoing, in the event any redetermination by any Governmental Entity reduces any refund or credit described in the first sentence of this Section 7.3 for which the Purchaser made a payment to the Sellers under the first sentence of this Section 7.3, the Sellers shall promptly pay to the Purchaser the amount of such reduction.

7.4 Additional Tax Covenants by Purchaser.

(a) Unless otherwise required by law, the Purchaser will use commercially reasonable efforts to not take any action on or after the Closing Date which increases the Sellers’ Liability for Taxes, including any Liability of the Sellers to indemnify the Purchaser Indemnitees for Taxes pursuant to this Agreement.

(b) Neither the Purchaser nor any Affiliate of the Purchaser will amend, refile or modify any Tax Return, unless otherwise required by law, relating in whole or in part to the CPMRC Business and the Transferred Assets with respect to a Pre-Closing Period, without the prior written consent of the Sellers, which consent cannot be unreasonably delayed or withheld.

7.5 Coordination with Article 6. To the extent not inconsistent with the provisions of this Article 7, Section 6.5 and the procedures of Article 6 will apply in the case of any claim for Taxes.

7.6 Transfer Taxes. To the extent that any federal, state, local or foreign or other excise, sales, use, value added, transfer (including real property transfer or gains), stamp, documentary, notarial, registration, filing, recordation and other similar Taxes and fees are imposed or assessed as a result of the transactions contemplated by this Agreement, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties (“Transfer Taxes”), such Transfer Taxes shall be borne by equally between the Sellers and the Purchaser.

ARTICLE 8

OTHER AGREEMENTS

8.1 Employee Benefits.

(a) The Purchaser intends to make offers of employment to each Employee commencing on the Closing Date, with such Employees who accept such offer of employment being referred to herein as the “Covered Employees.” The Purchaser has provided the Sellers with a list of all Consultants to whom the Purchaser has made an offer of employment or a consulting arrangement that has been accepted to be effective on the Closing Date. Effective immediately following the Closing, and subject to the hiring of such persons by the Purchaser or an Affiliate thereof, Eclipsys will terminate the employment of all of the Covered Employees. The Purchaser shall not be liable for nor shall it have any responsibility to pay severance or termination pay to any employee of any Seller arising in connection with the termination of such employee’s employment with such Seller. Promptly following the Closing, Eclipsys will make a cash payment to each of the Covered Employees listed in Section 8.1(a) of the Seller Disclosure Schedule, in the amount shown for such recipient in such Seller Disclosure Schedule, contingent in each case upon the effectiveness of a full release of claims, in a form consistent with Eclipsys’ past practice, by such recipients and other customary post-employment procedures and covenants as Eclipsys may reasonably require.

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(b) As a condition of employment, Covered Employees shall be required to execute confidentiality, non-compete, non-solicit and invention assignment agreements in a form satisfactory to the Purchaser.

(c) On the Closing Date, Eclipsys or the Company shall have paid in full to each Covered Employee an amount equal to the value of his or her accrued but unused vacation as of the Closing Date. Upon hire, Covered Employees shall be eligible to earn and use vacation and accrue bonuses in accordance with the Purchaser’s policies. As promptly as practicable following the Closing Date but in no event later than ten (10) business days following the Closing Date, Eclipsys or the Company shall pay to each Covered Employee the bonus payable, if any, to such Covered Employee for the period commencing on January 1, 2007 and ending on the Closing Date.

(d) From and after the Closing Date, Covered Employees shall be eligible to participate in the Purchaser’s Plans in accordance with their respective terms on the same basis as similarly situated employees of the Purchaser and its Affiliates. From and after the Closing Date, neither Purchaser nor any of its Affiliates shall have any obligation to continue the employment of any Covered Employee, and nothing in this Agreement shall be interpreted as limiting the ability of Purchaser or any of its Affiliates from amending or terminating any of the Purchaser’s Plans; provided, however, that Covered Employees who, immediately prior to the Closing Date, are enrolled in a group health plan providing medical benefits maintained by the Seller shall be permitted to continue to participate in such plan until December 31, 2007 and shall thereafter be eligible to participate in the Purchaser’s Group Health Plan.

(e) Each Covered Employee shall receive service credit for all periods of employment with Eclipsys or its Affiliates, or any predecessor thereof, prior to the Closing Date for purposes of vesting, eligibility and benefit levels under any of Purchaser’s Plans in which such Covered Employee participates after the Closing Date, to the extent that such service was recognized under any analogous plan of Eclipsys or its Affiliates in effect immediately prior to the Closing Date; provided that no such service credit shall be given for purposes of any equity compensation plan, benefit accruals under any defined benefit pension plan or where such credit would result in a duplication of benefits.

(f) With respect to the coverage of the Covered Employees under Purchaser’s Welfare Plans, (i) subject to limitations required by law, each such Covered Employee’s credited service with Eclipsys and its ERISA Affiliates shall be credited against any waiting period applicable to eligibility for enrollment of new employees under the Purchaser’s Welfare Plans to the same extent such service was credited under the similar Seller Welfare Plan; and (ii) limitations on benefits due to pre-existing conditions under the Purchaser’s Group Health Plan shall be waived for any Covered Employee enrolled in any group health plan maintained by Eclipsys or its ERISA Affiliates as of the Closing Date. With respect to aggregate lifetime maximum benefits available under Purchaser’s Welfare Plans, a Covered Employee’s prior claim experience under the Welfare Plans maintained by Eclipsys and its ERISA Affiliates will not be taken into account unless the insurance carrier has a right to include such prior claim experience when computing the aggregate lifetime maximum benefit. For purposes of this Section 8.1(g), the term “Purchaser’s Welfare Plans” shall mean Welfare Plans sponsored or maintained by the Purchaser or its Affiliates, or any combination thereof, that provide benefits to Covered Employees. For purposes of this Section 8.1(g), the term “Purchaser’s Group Health Plan” shall mean a group health plan sponsored or maintained by the Purchaser or its Affiliates after the Closing Date that provides benefits to Covered Employees.

(g) The Purchaser shall be responsible for and shall assume all liability with respect to providing the notices and making available the health care continuation coverage, all as required by Section 4980B of the Code (“COBRA”), for all of the Covered Employees and their respective covered dependents, whose qualifying events (as defined in Section 4980B of the Code) occur after the Closing

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Date, specifically including any Covered Employee and his or her respective covered dependents whose qualifying events occur while they are covered under a group health plan providing medical benefits maintained by the Sellers as provided in the first sentence of Section 8.1(d). Except as provided in the preceding sentence, nothing in this Section 8.1 shall be construed to transfer any COBRA obligation of Eclipsys or its ERISA Affiliates to the Purchaser or transfer the COBRA obligations related to the Employee Benefit Plans to the Purchaser.

(h) Upon the reasonable determination by the Purchaser that the Eclipsys 401(k) Savings Plan is a tax-qualified plan under Code Section 401(a), the Purchaser or an Affiliate of the Purchaser shall cause a tax-qualified defined contribution plan established or maintained by the Purchaser (the “Purchaser 401(k) Plan”) to accept eligible rollover distributions (as defined in Section 402(c)(4) of the Code, including direct rollovers) by Covered Employees with respect to account balances distributed to them on or as of the Closing Date by the Eclipsys 401(k) Savings Plan. To the extent the rollover of loans is permitted under the Eclipsys 401(k) Savings Plan, rollovers of outstanding loans under such plan will be permitted, but only to the extent that the terms of the loans comply with the terms and conditions of the Purchaser 401(k) Plan. The rollovers described herein shall comply with applicable law, and Eclipsys, the Company and Purchaser shall take any actions required of such party by applicable law in connection therewith.

(i) Eclipsys and the Purchaser will give any notices required by applicable law and take all further actions as may be necessary to carry out the arrangements in this Section 8.1.

(j) Without limiting the generality of Section 9.16 no current, former or future employee (including any Employee) or beneficiary or dependent thereof, of Eclipsys or any ERISA Affiliate or any of any of the heirs, representatives or assigns of any of the foregoing shall have any third party beneficiary rights or rights to any specific levels of compensation or benefits or rights to continued employment as a result of the application of this Section 8.1 or any other provision of this Agreement.

8.2 Trademarks: Name Change.

(a) The Purchaser agrees to use reasonable efforts to (i) remove “Eclipsys” and other marks of Eclipsys identified in Section 8.2(a) of the Seller Disclosure Schedule (the “Eclipsys Marks”) from all buildings and signs of the Purchaser within thirty (30) business days after the Closing, and (ii) cease using the Eclipsys Marks in electronic databases, web sites, product instructions, packaging and other materials, printed or otherwise within thirty (30) business days after the Closing.

(b) The Sellers will cease using the Business Marks (as defined above) as of the Closing Date, including in any invoices, letterhead, office forms and business cards of the Sellers.

(c) The Purchaser acknowledges and agrees that, as between the Purchaser on one hand, and Eclipsys on the other, Eclipsys is the owner of the Eclipsys Marks and all goodwill attached thereto. The Purchaser agrees not to attempt to register the Eclipsys Marks nor to register anywhere in the world a mark same as or substantially similar to the Eclipsys Marks. The Sellers agree not to attempt to register the Business Marks nor to register anywhere in the world a mark same as or substantially similar to the Business Marks.

(d) In no event will the Purchaser or any Affiliate of the Purchaser advertise or hold itself out as Eclipsys or any Affiliate of Eclipsys after the Closing Date; provided, however, that the Purchaser’s (and its Affiliates) use, display, publication or exploitation in any way of the Business Marks shall not be deemed to constitute a violation of this Section and nothing contained herein shall be deemed to restrict in any way, Purchaser’s (and its Affiliates) rights in and to the Business Marks.

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(e) In no event will the Sellers or any Affiliate of the Sellers advertise or hold themselves out as the Purchaser or any Affiliate of the Purchaser after the Closing Date and in no event will the Sellers advertise or hold themselves out to have any right, title or interest in or to the Transferred Assets (including the Business Marks) after the Closing Date, except the express rights granted to the Sellers under the Transaction Agreements.

(f) Notwithstanding anything to the contrary, and without limitation to anything contained in this Section 8.2, the Purchaser may use the Sellers’ names, and the Sellers may use the name of the Purchaser and the Company, to notify third parties of the Contemplated Transactions and the Purchaser’s ownership of the Transferred Assets resulting therefrom.

(g) Not later than ten (10) business days following the Closing Date, Eclipsys shall cause the Company to amend its certificate of incorporation and authorizations to conduct business with applicable secretaries of state to change its corporate name to a name that is not similar to “CPM Resource Center, Inc.”

8.3 Non-Solicitation.

(a) The Sellers shall not, during the period from the Closing Date until the third anniversary of the Closing Date (the “Restricted Period”), either for itself or any other person, directly or indirectly solicit or attempt to solicit, or induce or attempt to induce, any of the Covered Employees to leave the employ of the Purchaser or any of the Consultants or Employees to otherwise cease providing services to the Purchaser or any of its Affiliates; provided, however, that this Section 8.3(a) will not be deemed to prohibit the Sellers from engaging in general media advertising or solicitation that is not targeted towards the Employees.

(b) The Sellers shall not, during the period from the Closing Date until the first anniversary of the Closing Date, either for itself or any other person, directly or indirectly, hire any of the persons listed on Section 8.3(b) of the Seller Disclosure Schedule.

8.4 Non-Competition.

(a) Subject to Section 8.4(d) and the Consulting and Subcontracting Agreement, and except as specifically provided in Section 4(h) of the Reseller Agreement, (i) during the Restricted Period, the Sellers will not, directly or indirectly, sell or license Replacement Content; and (ii) prior to the second anniversary of the Closing Date, the Sellers will not, directly or indirectly, develop or produce Replacement Content. For these purposes, “Replacement Content” means prepackaged clinical practice guidelines that compete with the Clinical Practice Guidelines, as they exist as of the Closing Date, but does not include Eclipsys products, other than Clinical Practice Guidelines, that exist as of the Closing Date or derivatives thereof that are comparable in substance to the Eclipsys products that exist as of the Closing Date (“Eclipsys Other Products”), or content intended primarily for users other than nursing and allied health professionals in the Covered Departments (as defined in subsection (b) below).

(b) Subject to Section 8.4(c) and (d) and the Consulting and Subcontracting Agreement, and except as specifically provided in Section 4(h) of the Reseller Agreement, during the Restricted Period, the Sellers will not, directly or indirectly, provide Restricted Services. For this purpose, “Restricted Services” means change management consulting services related to interdisciplinary practice transformation that have been provided by Eclipsys or its Affiliates prior to the Closing Date related to the Clinical Practice Guidelines as they exist on the Closing Date in the inpatient nursing/allied health professional departments (i.e. Respiratory Therapy, Physical Therapy, Diet, Occupational Therapy, Speech, and Social Work) (the “Covered Departments”) for clients that have obtained a license to KBC that incorporates the Clinical Practice Guidelines.

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(c) Services other than the Restricted Services are not subject to Section 8.4(b). For example, but without limitation, the following are not Restricted Services and are not subject to Section 8.4(b): (i) production or provision of KBC and maintenance and support services therefor; (ii) implementation and integration services; (iii) assessment, outcomes consultation, and related services provided to the Covered Departments and any other substantial portion of an end user’s operations provided that such services are not provided to portions of an end user’s operations other than the Covered Departments as a subterfuge to circumvent the intent of Section 8.4(b); (iv) configuration, design, maintenance or programming services provided to a particular client not part of a broad-based consulting offering; (v) services provided as part of a sales effort for KBC or other Eclipsys products or services prior to a client obtaining a license for KBC; and (vi) services related to Eclipsys Other Products.

(d) Sections 8.4(a) and (b) will not restrict activities of an entity that acquires Eclipsys, or with which Eclipsys combines, which activities are conducted through assets and personnel other than Eclipsys or its Affiliates, or their assets or personnel.

(e) For the avoidance of doubt, this Section 8.4 is intended to protect the goodwill in the CPMRC Business acquired by the Purchaser hereunder, without limiting in any way the pursuit by Sellers of their respective businesses other than the CPMRC Business.

8.5 Eclipsys Stock Options. On or within five (5) business days after the Closing Date, Eclipsys shall pay to each Covered Employee, to the extent such Covered Employee held options to purchase shares of Eclipsys Common Stock that had not vested as of the Closing Date (each such option, an “Unvested Covered Employee Option”), an amount equal to the product of (a) the excess, if any, of (i) the Fair Market Value per share, as of the Closing Date, of the Eclipsys Common Stock subject to such Unvested Covered Employee Option over (ii) the exercise price per share of the Eclipsys Common Stock subject to such Unvested Covered Employee Option, multiplied by (b) the number of shares of Eclipsys Common Stock issuable pursuant to the unexercised portion of such Unvested Covered Employee Option. The payment described herein shall be deemed a release of any and all rights the holder of such Unvested Covered Employee Option had or may have in respect thereof.

8.6 Future Business Information. At the Purchaser’s request, the Sellers have provided to the Purchaser the Projections, estimates and other information related to potential future business that may occur between Eclipsys and the Purchaser (“Future Business Information”). No Seller makes any guarantees of any kind, or except to the limited extent set forth in Section 2.5 and Section 2.25, any representations or warranties, to the Purchaser or any other person with respect to the Future Business Information. No Seller guarantees the Future Business Information and the Purchaser expressly acknowledges and agrees that it has conducted its own due diligence investigation with respect to, and except to the limited extent set forth in Section 2.5 and Section 2.25 is not relying upon, the Future Business Information.

ARTICLE 9

MISCELLANEOUS

9.1 Governing Law. Except as expressly provided in this Agreement (including any exhibit or schedule to this Agreement), the internal laws of the State of New York (without reference to its principles of conflicts of law) govern the construction, interpretation and other matters arising out of or in connection with this Agreement and its exhibits and schedules (whether arising in contract, tort, equity or otherwise).

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9.2 Submission to Jurisdiction. Each party (a) submits to the jurisdiction of any state or federal court sitting in the State of New York in any action or proceeding arising out of or relating to this Agreement or the Contemplated Transactions, (b) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court, (c) waives any claim of inconvenient forum or other challenge to venue in such court, (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement or the Contemplated Transactions in any other court and (e) waives any right it may have to a trial by jury with respect to any action or proceeding arising out of or relating to this Agreement or the Contemplated Transactions. Each party agrees to accept service of any summons, complaint or other initial pleading made in the manner provided for the giving of notices in Section 9.13 provided, that nothing in this Section 9.2 shall affect the right of any party to serve such summons, complaint or other initial pleading in any other manner permitted by law.

9.3 Specific Performance. Each party acknowledges and agrees that the other party would be damaged irreparably in the event any provision of this Agreement is not performed in accordance with its specific terms or otherwise is breached, so that a party shall be entitled to injunctive relief to prevent breaches of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in addition to any other remedy to which such party may be entitled, at law or in equity. In particular, the parties acknowledge that the Business is unique and recognize and affirm that in the event any Seller breaches this Agreement, money damages would be inadequate and the Purchaser would have no adequate remedy at law, so that the Purchaser shall have the right, in addition to any other rights and remedies in its favor, to enforce its rights and the Sellers’ obligations hereunder not only by action for damages but also by action for specific performance, injunctive, and/or other equitable relief.

9.4 Disputes.

(a) Mediation. In case of a dispute between the parties with respect to those matters set forth in Section 4.2(d), Section 6.1(i) or Section 6.2(i) of this Agreement, either party may require the other to participate in non- binding commercial mediation proceedings, whereupon each party shall participate in such mediation in good faith in an effort to resolve their differences. The mediation shall be administered by the American Arbitration Association (“AAA”) under its Commercial Mediation Rules then in effect (insofar as such rules are not inconsistent with the provisions of this Agreement), and shall be conducted at a location mutually agreed to by the Parties (or determined by the mediator, if the parties fail to so agree), before a sole, neutral, and impartial mediator mutually agreed to by the parties or, if the parties fail to so agree, chosen by the AAA. Any person who serves as mediator shall possess the qualifications necessary to serve as an arbitrator under the American Arbitration Association’s Commercial Arbitration Rules for Large, Complex Commercial Disputes (with the intent of the foregoing being to ensure that the person serving as mediator possesses sufficient experience in large, complex commercial disputes to serve a useful role as mediator with respect to disputes described in this Section 9.4(a)) and, more specifically, shall possess significant knowledge and experience in the information technology industry. The mediator shall be selected, as described above, and the mediation commenced, no later than thirty (30) days after the delivery of the applicable written demand for mediation. The mediation shall be concluded, regardless of whether the applicable Dispute has then been resolved, within seventy-five (75) days after delivery of the applicable written demand for mediation. Each party shall pay its own expenses incurred in connection with any mediation, and each party shall share equally the costs of the mediator and AAA and any other third-party costs and expenses of the mediation. The mediation will be treated as a confidential settlement discussion and none of the proposals, counter-proposals or statements made in the course of the mediation will be disclosed to any third party (including any arbitrator) or admissible for any purpose in any other proceeding. The mediator will not testify for either party in any later proceeding related to the dispute. No recording or transcript will be kept of the mediation proceedings. Notwithstanding the foregoing, a party will not be required to engage in mediation of a dispute beyond a time that is ninety (90) days before expiration of the statute of limitations applicable to that dispute.

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(b) Fees and Costs. During the pendency of any legal proceeding arising under or related to this Agreement, each party shall bear its own attorneys’ fees and costs. The prevailing party in any legal proceeding under this Agreement will be entitled to recover its reasonable fees and costs incurred in the proceeding including reasonable attorneys’ and experts’ fees and costs from the non-prevailing party.

9.5 Binding Effect and Assignment. This Agreement binds and benefits the parties and their respective successors and assignees. This Agreement shall not be assignable by either party hereto without the prior written consent of the other parties, except that the Purchaser may assign, without the consent of the Sellers, its rights and obligations hereunder (provided that the Purchaser remains liable for all payment obligations by the Purchaser hereunder), in whole or in part, to any directly or indirectly wholly-owned subsidiary of Reed Elsevier Group plc, and all representations, warranties, covenants and agreements made or given by the Sellers hereunder shall inure to the benefit of such assignee.

9.6 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified.

9.7 Entire Agreement. This Agreement and the Transaction Agreements together with their respective exhibits and schedules constitute the final agreement among the parties, and are the complete and exclusive statement of the parties’ agreement on the Contemplated Transactions. All prior and contemporaneous negotiations and agreements among the parties on the matters contained in this Agreement and the Transaction Agreements to which it is a party are superseded by this Agreement and such Transaction Agreements. The parties acknowledge that except as expressly provided in Article 2 or in the Transaction Agreements, the Sellers have not made and are not making, and the Purchaser is not relying upon, any representations, warranties or commitments whatsoever regarding the subject matter of this Agreement or the Contemplated Transactions, express or implied. Without limiting the foregoing and except as provided herein, each party as acknowledging party acknowledges that (i) no counsel or advisor to the other party has undertaken any duty to the acknowledging party; (ii) no counsel or advisor to the other party has made any representations or promises to the acknowledging party; and (iii) the acknowledging party is not relying upon any representation, promise or other statement from or information provided by any counsel or advisor to the other party in connection with this Agreement, the Transaction Agreements, or the Contemplated Transactions. For these purposes, the other party’s counsel includes all lawyers, and all persons working under the supervision of lawyers, who are working on behalf of the other party in connection with this Agreement, the Transaction Agreements, or the Contemplated Transactions, whether employed by the other party or affiliated with the other party’s outside law firm.

9.8 Remedies Cumulative. The rights and remedies provided in this Agreement and the other Transaction Agreements shall be cumulative and not alternative, shall be independent of each other and shall not preclude the assertion by either party hereto of any other rights or the seeking of any other remedies against the other party hereto under this Agreement or any other Transaction Agreement.

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9.9 Counterparts. The parties may execute this Agreement in multiple counterparts, each of which constitutes an original as against the party that signed it, and all of which together constitute one agreement. This Agreement is effective upon delivery of one executed counterpart from each party to the other parties. The signatures of all parties need not appear on the same counterpart. The delivery of signed counterparts by facsimile or email transmission which includes a copy of the sending party’s signature(s) is as effective as signing and delivering the counterpart in person.

9.10 Expenses. Except to the extent specified otherwise in this Agreement, each party will pay its own professional fees and other expenses incurred by it in connection with this Agreement and the transactions contemplated by this Agreement.

9.11 Amendment. The parties may amend this Agreement only by a written agreement signed by each party to be bound by the amendment and that identifies itself as an amendment to this Agreement.

9.12 Waiver. The parties may waive a provision of this Agreement only by a writing signed by the party intended to be bound by the waiver. A party is not prevented from enforcing any right, remedy or condition in the party’s favor because of any failure or delay in exercising any right or remedy or in requiring satisfaction of any condition, except to the extent that the party specifically waives the same in writing. A written waiver given for one matter or occasion is effective only in that instance and only for the purpose stated. A waiver once given is not to be construed as a waiver for any other matter or occasion. Any enumeration of a party’s rights and remedies in this Agreement is not intended to be exclusive, and a party’s rights and remedies are intended to be cumulative to the extent permitted by law and include any rights and remedies authorized in law or in equity.

9.13 Notices. Each party giving any notice required or permitted under this Agreement will give the notice in writing, and use one of the following methods of delivery to the party to be notified, at the address set forth below or another address of which the sending party has been notified in accordance with this Section 9.13: (a) personal delivery, (b) facsimile or telecopy transmission with a reasonable method of confirming transmission, (c) commercial overnight courier with a reasonable method of confirming delivery, or (d) pre-paid, United States of America certified or registered mail, return receipt requested. Notice to a party is effective for purposes of this Agreement only if given as provided in this Section 9.13 and if the intended addressee has actually received the notice.

If to the Sellers:	Eclipsys Corporation Three Ravinia Drive, Suite 1000 Atlanta, GA 30346 Facsimile: 404.847.5777 Attention: General Counsel
With a copy to:	Baker & McKenzie LLP 130 East Randolph Street, Suite 3900 Chicago, IL 60601 Facsimile: 312.698.2290 Attention: Christopher M. Bartoli
If to the Purchaser:	Elsevier Inc. 360 Park Avenue South New York, NY 10010-1710 Facsimile: 212.462.1941 Attention: Maureen McArdle                   Deputy General Counsel

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With a copy to: Thelen Reid Brown Raysman & Steiner LLP 875 Third Avenue New York, NY 10022 Facsimile: 212.603.2001 Attention: Jonathan J. Russo

9.14 Construction of Agreement.

(a) Where this Agreement states that a party “shall” or “will” perform in some manner or otherwise act or omit to act, it means that the party is legally obligated to do so in accordance with this Agreement.

(b) In the negotiation of this Agreement, each party has received advice from its own attorney. This Agreement is not to be construed for or against any party based on which party drafted any of the provisions of this Agreement.

(c) The captions, titles and headings, and table of contents, included in this Agreement are for convenience only, and do not affect this Agreement’s construction or interpretation.

(d) This Agreement does not, and is not intended to, confer any rights or remedies in favor of any person other than the parties signing this Agreement, except as may be specifically set forth in other provisions of this Agreement.

(e) The words “including,” “includes,” or “include” are to be read as listing non-exclusive examples of the matters referred to, whether or not words such as “without limitation” or “but not limited to” are used in each instance. Any reference in this Agreement to wire transfers or other payments requires payment in dollars of the United States of America unless some other currency is expressly stated in that reference.

(f) Any reference in this Agreement to the singular includes the plural where appropriate. Any reference in this Agreement to the masculine, feminine or neuter gender includes the other genders where appropriate.

9.15 No Joint Venture. Nothing in this Agreement or any of the Transaction Agreements creates a joint venture or partnership between the parties. Neither this Agreement nor any of the Transaction Agreements authorizes any party (a) to bind or commit, or to act as an agent, employee or legal representative of, another party, except as may be specifically set forth in other provisions of this Agreement or any of the Transaction Agreements, or (b) to have the power to control the activities and operations of another party. The parties are independent contractors with respect to each other under this Agreement and the Transaction Agreements. Each party agrees not to hold itself out as having any authority or relationship contrary to this Section 9.15.

9.16 No Third Party Beneficiaries. Subject to Section 6.1 and Section 6.2 hereof, nothing herein, express or implied, is intended or shall be construed to confer upon or give to any person, firm, corporation or legal entity, other than the parties hereto, any rights, remedies or other benefits under or by reason of this Agreement.

(This space intentionally left blank –signature page follows)

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.

“Purchaser”		“Eclipsys”
Elsevier Inc., a New York corporation		Eclipsys Corporation, a Delaware corporation
By:	/s/ Brian Naim	By:	/s/ R. Andrew Eckert
Name:	Brian Naim	Name:	R. Andrew Eckert
Title:	Chief Executive Officer Health Sciences Division	Title:	President and Chief Executive Officer
“Solutions”		The “Company”
Eclipsys Solutions Corporation, a Delaware corporation		CPM Resource Center, Inc., a Delaware corporation
By:	/s/ R. Andrew Eckert	By:	/s/ Robert J. Colletti
Name:	R. Andrew Eckert	Name:	Robert J. Colletti
Title:	President and Chief Executive Officer	Title:	SVP and Chief Financial Officer

EXHIBIT A

Certain Definitions

For purposes of the Agreement (including this Exhibit A):

“Accounts Receivable” means (a) all trade accounts receivable and other rights to payment from customers of the Company and the Business related to the period prior to Closing and the full benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped, products sold or services rendered to customers of the Company or the CPMRC Business related to the period prior to Closing, (b) all other accounts or notes receivable of the Company or the CPMRC Business related to the period prior to Closing and the full benefit of all security for such accounts or notes, and (c) any claim, remedy or other right related to any of the foregoing.

“Affiliate” means (A) in the case of an individual, the members of the immediate family (including siblings and children) of (i) the individual and (ii) the individual’s spouse, and (iii) any Business Entity that directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with any of the foregoing individuals, or (B) in the case of a Business Entity, another Business Entity or a person that directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with the Business Entity.

“Affiliated Group” means a group of corporations with which the Company has filed or would be required to file consolidated, combined, unitary or similar Tax Returns.

“Agreement” has the meaning set forth in the introductory paragraph.

“Assumed Liabilities” has the meaning set forth in Section 1.4.

“Bill of Sale” means that certain Bill of Sale and Assignment and Assumption Agreement among the Sellers and the Purchaser to be entered into concurrently with the Closing.

“business day” means any day other than Saturday, Sunday or any day on which banking institutions in the State of New York closed either under applicable law or action of any Governmental Entity.

“Business Entity” means any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.

“Business License Agreement” or “Business License Agreements” has the meaning set forth in Section 2.13(c).

“Business Marks” has the meaning set forth in Section 2.13(h).

“Business-Related Intellectual Property” means the Licensed Intellectual Property and the Proprietary Intellectual Property.

“CERCLA” means the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.

“CICC” means the computer-based interdisciplinary clinical content consisting of a clinical information data base of Clinical Practice Guidelines and associated metadata and relationships that provide a foundation for electronic health record documentation and planning tools based upon the Clinical Practice Guidelines, as such database and associated metadata and relationships exist on the Closing Date.

“Claims” means any security interests, liens, pledges, charges, escrows, options, rights of first refusal, mortgages, indentures, security agreements or other encumbrances, restrictions, claims, agreements, arrangements or commitments of any kind or character, whether written or oral and whether or not relating in any way to credit or the borrowing of money.

“Clinical Practice Guidelines” means the 190 evidence-based recommendations for interdisciplinary clinical practice that have been developed based upon clinical research and best practices written by subject matter experts, and validated by consensus of consortium members, as such guidelines exist on the Closing Date.

“Closing” has the meaning set forth in Section 1.6.

“Closing Date” has the meaning set forth in Section 1.6.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” has the meaning set forth in the paragraph following the introductory paragraph and shall include all predecessor entities to the Company.

“Company Stock Plan” means any stock option plan or other stock or equity-related plan of the Company.

“Consultants” has the meaning set forth in Section 2.20(a).

“Consulting and Subcontracting Agreement” means that certain Consulting and Subcontracting Agreement between Eclipsys and the Purchaser to be entered into concurrently with the Closing.

“Contemplated Transactions” means the Transaction and each of the other transactions contemplated by this Agreement and the Transaction Agreements.

“Covered Employees” has the meaning set forth in Section 8.1(a).

“CPMRC” shall mean the business division of the Purchaser as well as any business or businesses conducted by any subsidiary or affiliated corporations of the Purchaser, in each case that represents a succession to and a continuation of any part of the CPMRC Business, and development and sale of license of versions of the CPMRC Content incorporated in or accessible through software.

“CPMRC Business” means (a) the development and maintenance of CPMRC Content and the marketing and sale of (i) paper versions of the CPMRC Content; (ii) books, journal articles, CDs and videos containing the CPMRC Content; and (iii) the CICC format of the CPMRC Content to Epic Systems Corporation; (b) the provision of Restricted Services; (c) the provision of lecturers and speaking engagements by the Employees concerning the CPMRC Content and related matters; and (d) conduct of the CPMRC client consortium and related activities. Without limitation, the CPMRC Business does not include the Excluded Assets and related activities of Eclipsys or any of its subsidiaries other than the Company, or consulting and other professional services provided by Eclipsys or any of its subsidiaries other than the Company, other than the Restricted Services.

“CPMRC Content” means the information that is, or at any time in the past has been, collected, created, managed, and distributed by the Sellers (or any of them) in the course of the CPMRC Business as of the Closing Date, and all Intellectual Property inherent therein or appurtenant thereto, including without limitation the following components (and the Intellectual Property associated therewith), together with their respective successors as in existence on the Closing Date:

(1) CICC Version 2.0 information (the information contained with the CICC database to date and the CICC Updates described in Section 4.2(d)). Such information consists of the following, provided that some portions of items (b) through (k) may not be expressed directly in CICC but are nevertheless part of the CPMRC Content:

(a) the Clinical Practice Guidelines;

(b) CPMRC patient and family profiles, which are structured data elements used to facilitate the initial interview with the patient;

(c) CPMRC discipline specific evaluations, which are structured data elements used for initial ongoing and discharge patient evaluations;

(d) CPMRC specialized care records, which are structured and flowsheet type data elements used in the care of certain patient populations (including but not limited to mechanical ventilation, I&O, vital signs, labor, delivery);

(e) the CPMRC Plan of Care;

(f) CPMRC patient care summary, which contains assessments, evaluations, interventions, procedures, treatments, patient responses related to the interdisciplinary team’s day-to-day care processes;

(g) CPMRC education outcome records, which is used to record patient/family education outcomes and progress toward goals as well as record education and information provided to a patient/family. The education outcome records correspond to the Clinical Practice Guidelines as well as provide guideline independent teaching topics;

(h) Professional practice framework, which is an organizing model that includes all components of the CPMRC products and professional services;

(i) CPMRC professional exchange, which is a format and methodology for interdisciplinary team communication;

(j) CPMRC guideline assessment/outcome evaluation, which contains assessment content related to the Clinical Practice Guidelines and evaluation of patient outcomes;

(k) CPMRC discharge summaries, which contain data elements related to the patient discharge process.

(2) Associated product reference guide, which is the technical manual and the clinical manual produced by the Employees;

(3) Other guides on how to utilize and implement content, which include the technical manual that describes the database schema;

(4) Paper and multimedia products, including but not limited to books, journal articles, CDs, DVDs, powerpoint presentations, consortium management tools, planning tools, assessment tools, user manuals, guides, mapping and other materials describing or intended to facilitate best use and practice integration of the other elements of CPMRC Content; and

(5) All notes, research, diagrams, explanations, flowcharts, instructions, methodologies, or other documentation pertaining to the development, use or maintenance of the other elements of CPMRC Content.

For avoidance of doubt, CPMRC Content does not include any customized content developed by or on behalf of any Seller pursuant to special orders by individual clients.

“CPMRC Content Orders” means, for any period, the aggregate amount of Content Fees (as defined in the Reseller Agreement) expected to be payable by Eclipsys to the Purchaser in respect of the CPMRC Content licensed by Eclipsys to an End User over the initial term of that End User’s Contract (pursuant to and as such terms are defined in the Reseller Agreement), and as reflected in a Qualified Purchase Order for sales of CPMRC Content made in that period.

“Customer Deliverables” means tangible expressions of (a) the CPMRC Content, (b) the other products of the Company as of March 5, 2004 that remain in existence as of the Closing Date, (c) the other products, if any, of any Seller that have been developed by the Employees or the Consultants since March 5, 2004 in connection with the CPMRC Business, (d) the other products, if any, of any Seller that are used primarily in connection with the CPMRC Business as of the Closing Date, and (e) the Restricted Services, but, for the avoidance of doubt, does not mean or include KBC.

“Damages” means any and all debts, obligations and other liabilities (whether absolute, accrued, contingent, fixed or otherwise, or whether known or unknown, or due or to become due or otherwise), monetary damages, fines, fees, penalties, interest obligations, losses and expenses (including amounts paid in settlement, interest, court costs, reasonable costs of investigators, reasonable fees and expenses of attorneys, accountants, financial advisors and other experts, and other reasonable expenses of litigation).

“Deferred Revenue Amount” means the deferred revenue of the CPMRC Business (including, for the purposes of this calculation, both the current and long-term portions) as of the Closing Date.

“Deferred Revenue Statement” has the meaning set forth in Section 1.8(a).

“Domain Names” has the meaning set forth in Section 2.13(g).

“Earnout Amount” has the meaning set forth in Section 1.3(b)(i).

“Eclipsys Common Stock” means the shares of common stock, $0.01 par value per share, of Eclipsys.

“Eclipsys/CPMRC Merger Agreement” means that certain Agreement and Plan of Merger, dated as of February 20, 2004, by and among Eclipsys, the Company, Bonnie L. Wesorick and CPMRC Resource Center, Ltd., a Michigan corporation.

“Eclipsys Marks” has the meaning set forth in Section 8.2(a).

“Eclipsys Services Methodologies” means all Intellectual Property used in or related to services provided by Eclipsys or its Affiliates other than the Company to clients, and all elements and derivatives thereof, and all Intellectual Property therein, but not including the Restricted Services or any Intellectual Property that is a Transferred Asset.

“Eclipsys Software” means all software provided by Eclipsys or its Affiliates to clients and all elements and derivatives thereof, and all Intellectual Property therein (except to the extent, if any, such Intellectual Property is a Transferred Asset), including, without limitation, KBC. For the avoidance of doubt, CICC is CPMRC Content, not Eclipsys Software.

“Employee Benefit Plan” means any “employee benefit pension plan” (as defined in Section 3(2) of ERISA), any “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), and any other written or oral plan, program, agreement or arrangement involving direct or indirect compensation or other benefits, including, insurance coverage, severance benefits, disability benefits, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation covering current or former Employees or Consultants (or any beneficiary thereof) maintained by any Seller or any ERISA Affiliate thereof.

“Employees” has the meaning set forth in Section 2.20(a).

“Environmental Law” means any law statute, rule or regulation of any Governmental Entity or the common law relating to the environment or occupational health and safety, including, any statute, regulation or order pertaining to (i) treatment, storage, disposal, generation and transportation of toxic or hazardous substances or solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater and soil contamination; (iv) the release or threatened release into the environment of toxic or hazardous substances, or solid or hazardous waste, including emissions, discharges, injections, spills, escapes or dumping of pollutants, contaminants or chemicals; (v) the protection of wild life, marine sanctuaries and wetlands, including all endangered and threatened species; (vi) storage tanks, vessels and containers; (vii) underground and other storage tanks or vessels, abandoned, disposed or discarded barrels, containers and other closed receptacles; (viii) health and safety of employees and other persons; and (ix) manufacture, processing, use, distribution, treatment, storage, disposal, transportation or handling of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or oil or petroleum products or solid or hazardous waste. As used above, the terms “release” and “environment” have the meaning set forth in the CERCLA.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means any entity which is, or at any applicable time was, a member of (1) a controlled group of corporations (as defined in Section 414(b) of the Code), (2) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (3) an affiliated service group (as defined in Section 414(m) of the Code or the regulations under Section 414(o) of the Code), any of which includes or included the Company or the Seller.

“Estimated Deferred Revenue Amount” means $1,867,584, which is the good faith estimate of the deferred revenue of the CPMRC Business (including, for the purposes of this calculation, both the current and long-term portions) as of the Closing Date as mutually determined by the Seller and Purchaser.

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

“Excluded Assets” has the meaning set forth in Section 1.2.

“Excluded Liabilities” has the meaning set forth in Section 1.5.

“Fair Market Value” means, as of a particular date (the “Valuation Date”), the following: (a) if the Eclipsys Common Stock is then listed or quoted on an exchange or is quoted on the National Association of Securities Dealers, Inc. Automated Quotation System (“NASDAQ”), the closing sale price of one share of Eclipsys Common Stock on such exchange on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low asked price quoted thereon on the last trading day prior to the Valuation Date; (b) if the Eclipsys Common Stock is not then listed or quoted on an exchange or on NASDAQ and if prices for the Eclipsys Common Stock are then quoted on the OTC Bulletin Board or such similar exchange or association, the closing sale price of one share of the Eclipsys Common Stock on the OTC Bulletin Board or such other exchange or association on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low asked price quoted thereon on the last trading day prior to the Valuation Date; or (c) if the Eclipsys Common Stock is not then listed or quoted on an exchange or on NASDAQ or quoted on the OTC Bulletin Board or such other exchange or association, the fair market value of one share of Eclipsys Common Stock as of the Valuation Date shall be determined in good faith by the Board of Directors of Eclipsys.

“Financial Information” means the unaudited (i) balance sheet of the CPMRC Business as at September 30, 2007, and (ii) statements of operations of the CPMRC Business for the year ended December 31, 2006, and the nine months ended September 30, 2007, which are attached as Section 2.6(a) of the Seller Disclosure Schedule.

“Future Business Information” has the meaning set forth in Section 8.6.

“GAAP” means generally accepted accounting principles in the United States, consistently applied throughout the periods involved.

“Governmental Entity” means any of the following: (i) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (ii) federal, state, local, municipal, foreign or other government; or (iii) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or entity and any court or other tribunal).

“Indemnified Party” has the meaning set forth in Section 6.4(a).

“Indemnifying Party” has the meaning set forth in Section 6.4(a).

“Intellectual Property” means all of the following anywhere in the world and all legal rights, title, or interest in the following arising under the laws of the United States, any state, or any other country or international treaty regime, whether or not filed, perfected, registered or recorded and whether now or later existing, filed, issued or acquired, including all renewals:

(i) all patents and applications for patents and all related reissues, reexaminations, divisions, renewals, extensions, provisionals, continuations and continuations in part;

(ii) all copyrights, copyright registrations and copyright applications, copyrightable works, and all other corresponding rights;

(iii) all mask works, mask work registrations and mask work applications, and all other rights relating to semiconductor design and topography;

(iv) all industrial designs, industrial models, utility models, certificates of invention and other indices of invention ownership, and any related registrations and applications;

(v) all trade dress and trade names, logos, Internet addresses and domain names, trademarks and service marks and related registrations and applications, including any intent to use applications, supplemental registrations and any renewals or extensions, all other indicia of commercial source or origin, and all goodwill of the person’s business associated with any of the foregoing;

(vi) all inventions (whether patentable or not and whether or not reduced to practice), invention disclosures, invention notebooks, file histories, know how, technology, technical data, trade secrets, confidential business information, manufacturing and production processes and techniques, research and development information, financial, marketing and business data, pricing and cost information, business and marketing plans, and customer, distributor, reseller and supplier lists and information, correspondence, records, and other documentation, and other proprietary information of every kind;

(vii) all computer software including but not limited to all source code, object or executable code, firmware, software compilations, software implementations of algorithms, software tool sets, compilers, software models and methodologies, development tools, files, records, technical drawings, and data relating to the foregoing;

(viii) all databases and data collections and all rights in the same;

(ix) all rights of paternity, integrity, disclosure, and withdrawal, and any other rights that may be known or referred to as “moral rights,” in any of the foregoing;

(x) any rights analogous to those set forth in the preceding clauses and any other proprietary rights relating to intangible property;

(xi) all tangible embodiments of any of the foregoing, in any form and in any media, in the possession of the person (or other persons engaged or retained by the person);

(xii) all versions, releases, upgrades, derivatives, enhancements and improvements of any of the foregoing; and

(xiii) all statutory, contractual and other claims, demands, and causes of action for royalties, fees, or other income from, or infringement, misappropriation or violation of, any of the foregoing, and all of the proceeds from the foregoing which are accrued and unpaid as of, and/or accruing after, the date of this Agreement.

“Internal Systems” means the internal computer system equipment and the software of any Seller used primarily in connection with the CPMRC Business that is specifically set forth in Section 1.1(e) of the Seller Disclosure Schedule.

“KBC” means Eclipsys’ proprietary Knowledge Based Charting software and all fixes, corrections, updates, upgrades, new versions, and derivatives thereof (which, for avoidance of doubt, excludes the CPMRC Content).

The terms “Knowledge” and “Known” will qualify the matter referred to as follows with respect to the Sellers, the actual knowledge of Diane Hanson, Amanda Richardson, Tom Cooke, John McAuley, Chuck Tuchinda or Robert Colletti, or any other knowledge which any of them would have possessed had they made reasonable inquiry with respect to the matters in question.

“law” means any foreign, federal, state or local statute, ordinance, regulation, rule, code, treaty, common law or other form of law.

“Lease” means any lease for real property used primarily in the CPMRC Business.

“Legal Proceeding” means any action, suit, litigation, arbitration proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving any court or other Governmental Entity or any arbitrator or arbitration panel.

“Liability” means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due).

“License Agreement” means that certain License Agreement between Eclipsys and the Purchaser to be entered into concurrently with the Closing.

“Licensed Intellectual Property” means all Intellectual Property licensed by any Seller from a third party as of the Closing Date that was licensed for, and is used primarily in connection with, the CPMRC Business.

“Material Adverse Change” means a change which would or could have a Material Adverse Effect.

A violation or other matter is deemed to have a “Material Adverse Effect” on (i) the Purchaser, if such violation or other matter would have a material adverse effect on the ability of the Purchaser to perform its obligations under this Agreement or on the ability of the Purchaser to consummate the Contemplated Transactions, (ii) the Sellers, if such violation or other matter would have a material adverse effect on the ability of the Sellers to perform their respective obligations under this Agreement or on the ability of the Sellers to consummate the Contemplated Transactions, or (iii) the CPMRC Business, if such violation or other matter either individually or in the aggregate with all other circumstances, changes or effects, has a material adverse effect on the business, assets, condition (financial or otherwise) or results of operations or business prospects of the CPMRC Business, but excluding (a) effects or changes that are generally applicable to the industry in which the Company or the CPMRC Business operates, (b) changes in the United States or world financial markets or general economic conditions, (c) effects or changes resulting from the enactment or implementation of any new law or accounting rule or requirement (including changes in existing laws, rules or requirements), (d) effects or changes resulting from the execution, delivery or performance of this Agreement or any Transaction Agreement (including any announcement relating to this Agreement), (e) effects or changes related to or resulting from natural disasters, acts of war, sabotage or terrorism, military actions or the escalation thereof, or (f) effects or changes resulting from actions of the Purchaser.

“Materials of Environmental Concern” means any: pollutants, contaminants or hazardous substances (as such terms are defined under CERCLA), pesticides (as such term is defined under the Federal Insecticide, Fungicide and Rodenticide Act), solid wastes and hazardous wastes (as such terms are defined under the Resource Conservation and Recovery Act), chemicals, other hazardous, radioactive or toxic materials, oil, petroleum and petroleum products (and fractions thereof), or any other material (or article containing such material) listed or subject to regulation under any law, statute, rule, regulation, order, Permit, or directive due to its potential, directly or indirectly, to harm the environment or the health of humans or other living beings.

“Most Recent Balance Sheet” means the unaudited balance sheet of the CPMRC Business as of the Most Recent Balance Sheet Date.

“Most Recent Balance Sheet Date” means September 30, 2007.

“Ordinary Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect to frequency and amount) of the CPMRC Business.

“Permits” means all permits, licenses, registrations, certificates, orders, approvals, franchises, variances and similar rights issued by or obtained from any Governmental Entity (including those issued or required under Environmental Laws and those relating to the occupancy or use of owned or leased real property).

“person” means any individual, Entity or Governmental Entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).

“Post-Closing Period” means any taxable period or portion of a period that begins after the Closing Date.

“Pre-Closing Period” means any taxable period or portion of a period that begins on or before the Closing Date and ends on the Closing Date.

“Proprietary Intellectual Property” means all Intellectual Property (i) owned by the Company as of March 5, 2004, (ii) developed by the Employees or the Consultants, related primarily to the CPMRC Business, and owned by any Seller since March 5, 2004, or (iii) that is owned by any Seller and is used primarily in connection with the CPMRC Business as of the Closing Date, if any.

“Purchase Price” has the meaning set forth in Section 1.3(a).

“Purchaser” has the meaning set forth in the introductory paragraph.

“Purchaser Indemnitees” has the meaning set forth in Section 6.1.

“Purchaser’s Plans” means the employee benefit plans and programs sponsored, maintained or contributed to by the Purchaser (including any severance plans).

“Qualified Purchase Order” means a purchase order submitted by Eclipsys to the Purchaser pursuant to and in conformity with Section 4(j) of the Reseller Agreement.

“Reseller Agreement” means the Reseller Agreement between Eclipsys and the Purchaser to be entered into concurrently with the Closing.

“Restricted Period” has the meaning set forth in Section 8.3(a).

“Restricted Services” has the meaning set forth in Section 8.4(b).

“Security Interest” means any mortgage, pledge, security interest, encumbrance, charge or other lien (whether written or oral or whether arising by contract or by operation of law), other than (i) mechanic’s, materialmen’s and similar liens, (ii) liens arising under worker’s compensation, unemployment insurance, social security, retirement and similar legislation, and (iii) liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the Ordinary Course of CPMRC Business.

“Seller” and “Sellers” have the respective meanings set forth in the introductory paragraph.

“Seller CPMRC Assets” means all assets, properties, privileges, rights, interests and claims, real and personal, tangible and intangible, of every type and description that (i) were owned, leased, used or held for use by the Company as of March 5, 2004 that remain in existence as of the Closing Date, (ii) were developed by the Employees or the Consultants since March 5, 2004 and are owned, leased, used or held for use by any Seller primarily in the CPMRC Business and remain in existence as of the Closing Date, or (iii) are owned, leased, used or held for use primarily in the CPMRC Business by any Seller, other than the Excluded Assets.

“Seller Disclosure Schedule” has the meaning set forth in introductory language to Article 2.

“Seller Indemnitees” has the meaning set forth in Section 6.2.

“Seller Knowledge Persons” means Diane Hanson, Amanda Richardson, Tom Cooke, Chuck Tuchinda, John McAuley, and Robert Colletti.

“September Consortium” means the meeting of the CPMRC Content licensees held in September 2007.

“Tangible Transferred Assets” means (i) all of the assets listed in Section 2.10(b) of the Seller Disclosure Schedule and (ii) all computer equipment (including all CPUs, peripheral devices, storage devices, servers and cables), office furniture, fixtures and other fixed assets located at the Company’s premises at 600 – 28th St., S.W., Grand Rapids, MI 49609 or otherwise used primarily in connection with the CPMRC Business, all hard copies of the CPMRC Content and all CDs, DVDs, tapes, hard drives and other media containing electronic copies of the CPMRC Content, but for the avoidance of doubt, not KBC.

“Tax” (and, with correlative meaning “Taxes”) means all taxes, including income, gross receipts, ad valorem, value-added, goods and services, excise, real property, personal property, sales, use, transfer, withholding, employment, unemployment, insurance, social security, business license, business organization, environmental, workers compensation, profits, license, lease, service, service use, severance, stamp, occupation, windfall profits, customs, duties, franchise, net worth, commercial profits and other taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof, and including any liability for the Taxes of another person.

“Tax Contest” means any audit, claim, dispute, examination, controversy or proceeding relating to Taxes.

“Tax Returns” means all reports, returns, declarations, statements, estimate, notice, form or other information required to be supplied to a taxing authority in connection with Taxes, including any attachments, schedules or supplements thereto.

“Transaction” has the meaning set forth in the paragraph following the introductory paragraph.

“Transaction Agreements” means this Agreement, the License Agreement, the Consulting and Subcontracting Agreement, the Reseller Agreement, the Transition Services Agreement and the Bill of Sale.

“Transferred Assets” has the meaning set forth in Section 1.1.

“Transferring Contracts” means all contracts, agreements, arrangements and understandings which are set forth in Section 2.14(a) of the Seller Disclosure Schedule and identified therein as a contract to be assigned to and assumed by Purchaser or subcontracted to the Purchaser in whole or in part pursuant to the terms of this Agreement or the Consulting and Subcontracting Agreement.

“Transition Services Agreement” means the Transition Services Agreement between Eclipsys and the Purchaser to be entered into concurrently with the Closing.

“Welfare Plan” means any employee welfare benefit plan within the meaning of Section 3(1) of ERISA, any short-term disability program classified as a “payroll practice,” any group health plan within the meaning of Code Section 105, any cafeteria plan within the meaning of Code Section 125, any dependent care assistance program within the meaning of Code Section 129, any adoption assistance plan within the meaning of Code Section 137, any tuition assistance plan within the meaning of Code Section 127, and any qualified transportation plan within the meaning of Code Section 132.

EX-21

Exhibit 21

Subsidiaries of Eclipsys Corporation

Subsidiary Name	Jurisdiction
4114213 Canada, Inc.	Canada
Eclipsys Holding 1 Corporation	Delaware
Eclipsys Healthcare IT (Singapore) PTE. LTD.	Singapore
Eclipsys (Mauritius) Limited	Mauritius
Eclipsys Canada Corporation	Canada
Eclipsys International Corp.	Delaware
Eclipsys LIS Holdings, LLC	Delaware
Eclipsys RIS Canada, Inc.	Canada
Eclipsys Solutions Corp.	Delaware
Eclipsys Technologies Corporation	Delaware
Enterprise Performance Systems, Inc.	Missouri
HVC Holdings Canada, Ltd.	Canada
HVision, Inc.	Delaware
Eclipsys (India) Private Limited	India
Van Slyck & Associates, Inc.	Arizona

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-149174, 333-127083, 333-121462, 333-92148, 333-45444, 333-33536, 333-89547, 333-77471, 333-70439, and 333-62791) of Eclipsys Corporation of our report dated February 28, 2008 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Atlanta, Georgia

February 28, 2008

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer pursuant to rule 13a-14(a), as adopted

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, R. Andrew Eckert, certify that:

1. I have reviewed this Annual Report on Form 10-K of Eclipsys Corporation (the “registrant”);

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: February 29, 2008

/s/ R. Andrew Eckert

R. Andrew Eckert

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer pursuant to rule 13a-14(a), as adopted

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert J. Colletti, certify that:

1. I have reviewed this Annual Report on Form 10-K of Eclipsys Corporation (the “registrant”);

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: February 29, 2008

/s/ Robert J. Colletti

Robert J. Colletti

Senior Vice President, Chief Financial Officer and

Chief Accounting 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 Annual Report on Form 10-K of Eclipsys Corporation (the “Company”) for the period ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, R. Andrew Eckert, 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: February 29, 2008

/s/ R. Andrew Eckert

R. Andrew Eckert

President and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of Chief Financial 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 Annual Report on Form 10-K of Eclipsys Corporation (the “Company”) for the period ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Robert J. Colletti, Senior Vice President, Chief Financial Officer and Chief Accounting 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: February 29, 2008

/s/ Robert J. Colletti

Robert J. Colletti

Senior Vice President, Chief Financial Officer and

Chief Accounting Officer