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, 2008

or

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

Commission File Number: 000-24539

ECLIPSYS CORPORATION

(Exact name of registrant as specified in its charter)

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

Three Ravinia Drive

Atlanta, Georgia

30346

(Address of principal executive offices)

(404) 847-5000

(Registrant’s telephone number, including area code)

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

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value	The NASDAQ Stock Market LLC (NASDAQ Global Select)

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

None

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

Yes  þ    No  ¨

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

Yes  ¨    No  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 the definitions 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, 2008 based upon the closing price of the Common Stock on the NASDAQ Global Select Market for such date was $988,920,163.

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

Class	Shares Outstanding as of February 23, 2009
Common Stock, $0.01 par value	56,154,784

Part I

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

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

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

Item 1. Business

Overview

Eclipsys is a leading provider of advanced integrated clinical, revenue cycle and performance management software, and professional services that help healthcare organizations improve clinical, financial, and operational outcomes. We develop and license proprietary software and content that is designed for use in connection with many of the key clinical, financial and operational functions that healthcare organizations require. Among other things, our software:

• enables physicians, nurses and other clinicians to coordinate care through shared electronic medical records, place orders and access and share information about patients;

• helps our clients optimize the healthcare revenue cycle, including patient admissions, scheduling, invoicing, inventory control and cost accounting;

• supports clinical and financial planning and analysis; and

• provides information for use by physicians, nurses and other clinicians through clinical content, which is integrated with our software.

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

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

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

Available Information

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

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

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

Segments

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

Recent Developments

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

EPSi

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

MediNotes

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

Premise

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

Initiatives and Challenges for 2009

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

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

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

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

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

Healthcare Industry Factors

Healthcare organizations are under increased pressure to reduce medical errors and increase operational efficiencies. Our software and services are designed to help clients achieve these objectives. Government regulations and the advancement of industry standards are requiring changes within the healthcare industry. We believe that these changes and enhanced regulation and standards will increase demand for healthcare information technology software and services such as ours, but will also require further research and development investments in our software.

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

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CCHIT. The U.S. Department of Health & Human Services initiatives have, among other things, led to the creation of the private-sector Certification Commission for Health Information Technology, or CCHIT, which consists of a 21-member Board of Commissioners from across the healthcare industry and is the recognized certification body in the United States for certifying health information technology products. CCHIT develops a set of private sector determined criteria for electronic health record functionality, interoperability, reliability and security, and is inspecting electronic health record software to determine its performance against these criteria. Eclipsys’ Sunrise Ambulatory Care™ 4.5 met CCHIT’s ambulatory electronic health record criteria for 2006. Sunrise Ambulatory 5.0 Service Pack 1 has been awarded pre-market conditional certification on 2007 criteria, and when a client reference site is available with the required configuration elements, we will be submitting for full CCHIT certification. Full certification requires that a product is verified to be in production use for a minimum of 45 calendar days at one or more live client sites.

In November 2007, we announced that Eclipsys’ Sunrise Acute Care release 4.5 Service Pack 4 is certified by CCHIT and meets the inpatient electronic health record criteria for 2007. Inpatient electronic health records are designed for use in acute care hospitals.

Currently we have a large scale product development effort underway to build features into our solutions in preparation for applying in early 2010 for multiple CCHIT product certifications on 2009 criteria. However, CCHIT requirements may diverge from our software’s characteristics and our software development direction, and we may choose not to apply for CCHIT certification of certain modules of our software or to delay applying for certification. The CCHIT application process requires conformity with 100% of all criteria applicable to each module in order to achieve certification and there is no assurance that we will receive or retain certification for any particular module notwithstanding application. Certification for a software module lasts for two years and must then be re-secured, and certification requirements evolve, so even certifications we receive may be lost.

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

The creation of the HITSP interoperability specifications has developed faster than the CCHIT criteria and the 2009 CCHIT criteria include three of the 13 HITSP interoperability specifications. These 13 total HITSP interoperability specifications now have a total of 25 different versions, all with specified criteria to be built into electronic health records such that vendor products can share information and also share information with organizations in the Federal Health Architecture, such as the Social Security Administration and the Centers for Disease Control and Prevention. Beginning in early 2009, the Social Security Administration expects to receive medical records for some disability applicants electronically through the Nationwide Health Information Network gateway and to start receiving electronic health records from MedVirginia, Virginia's Regional Health Information Organization.

Economic stimulus legislation is expected to include support to cover additional healthcare software and related devices that apply all recognized standards by the Secretary of the Department Health and Human Services of the HITSP interoperability specifications and are CCHIT-certified. The enhancement of our software to include these specifications will require further research and development investments in our software.

Health Insurance Portability and Accountability Act. The U.S. Health Insurance Portability and Accountability Act of 1996 or HIPAA, seeks to impose national health data standards on covered entities. The HIPAA standards prescribe, among other things, transaction formats and code sets for electronic health transactions, in order to protect individual privacy by limiting the uses and disclosure of individually identifiable health information. HIPAA also requires covered entities to implement administrative, physical and technological safeguards to ensure the confidentiality, integrity, availability and security of individually identifiable health information in electronic form.

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We believe that the need for healthcare organizations to become HIPAA compliant and maintain HIPAA compliance will continue to create demand for software and services such as ours. We follow changes in the HIPAA regulations and adjust the affected software such that our solutions comply with HIPAA requirements. As we advance into the era of healthcare enterprises exchanging protected health information, we anticipate having to further enhance our solutions to accommodate new requirements related to privacy and security, and the exchange of information over secure networks outside of an enterprise.

The Joint Commission. The Joint Commission (formerly known as the Joint Commission on Accreditation of Healthcare Organizations or JCAHO) is an independent non-profit organization that provides voluntary evaluation and accreditation for more than 15,000 healthcare organizations in the United States. The Joint Commission periodically introduces new process improvement initiatives, standards and performance measurements that are used to assess hospitals. The Joint Commission has also established patient safety standards and each year approves annual National Patient Safety Goals that include specific recommendations for improving patient safety. Most of our clients seek to comply with The Joint Commission standards, and we believe that our software and services help them in this regard. In addition, federal tax dollars used to pay for Medicare cannot be used in an organization that is not accredited by The Joint Commission.

Joint Commission International. The Joint Commission International or JCI, has been working with health care organizations, ministries of health, and global organizations in over 80 countries since 1994. Over 220 public and private health care organizations in 33 countries have received JCI accreditation. JCI provides accreditation for hospitals, ambulatory care facilities, clinical laboratories, care continuum services, medical transport organizations, and primary care services, as well as certification for disease or condition specific care. As Eclipsys expands in the global healthcare market, we must now monitor for changes needed in the software to meet JCI standards for the international client base, as well as the Joint Commission Standards for our customer base in the United States.

Canada Health Infoway. Canada Health Infoway collaborates with Canadian federal, provincial, and territorial governments to accelerate the use of electronic health record systems across Canada. More significant to Eclipsys is Infoway's Standards Collaborative, which supports and sustains health information standards and fosters collaboration to accelerate the implementation of pan-Canadian standards based solutions. The role of this Standards Collaborative is similar to the function of HITSP in the United States. Meeting these Canadian standards for our software will require research and development investments.

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

Eclipsys Offerings

We provide the following software and services:

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

• Outpatient (clinic and physician office) software with electronic medical records and independent practice management functionality;

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

• Consulting services to help our clients improve their operations;

• IT outsourcing; and

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

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Software

We offer a suite of enterprise solutions that help our clients improve their clinical, financial, and operational outcomes. The underlying Eclipsys XA architecture and ObjectsPlus/XA^TM application development technology provide a solid foundation for improved performance across the enterprise. Among other things, our software is designed to:

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

• Reconcile orders related to the patient’s care between departments and units within one healthcare location, as well as between caregivers across different venues and locations, including ambulatory settings, for improved efficiency and safety during patient handoffs, admission and discharge;

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

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

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

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

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

Our XA-based solutions are designed to prevent the isolation of information and duplication of functionality that can occur with other information technology systems. We believe that this approach helps to enable a faster, more cost-effective implementation of our software, simplify software maintenance and provide a lower total cost of ownership.

Sunrise Enterprise^TMcomprises the following clinical, access, financial and departmental solutions:

• Sunrise Clinical Manager^TM includes the major integrated modules Sunrise Acute Care™, Sunrise Ambulatory Care™, Sunrise Critical Care™, Sunrise Emergency Care™ and Sunrise Pharmacy™. Sunrise Clinical Manager enables a physician or other authorized clinician to view patient data and enter orders quickly from any point in the enterprise, providing evidence-based clinical decision support at the time of order entry.

• Sunrise Access Manager ^TM, which also shares the Sunrise Clinical Manager platform and health data repository, includes Sunrise Enterprise 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.

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

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gather, analyze and display enterprise-wide information. These solutions also enable hospital’s senior and department level management to more easily identify areas requiring intervention, leading to improvements in clinical quality, regulatory compliance, cost-efficiency and patient satisfaction. Core components of the Eclipsys Performance Management solution suite are:

• Sunrise EPSi ^TMis an integrated performance improvement solution that provides comprehensive enterprise business decision support to help healthcare organizations take control of their financial, clinical and operational performance. Sunrise EPSi features an integrated database, enabling hospitals to leverage data across all functional areas — budgeting/planning, cost accounting, patient financial/clinical analysis and productivity.

• Sunrise Patient Flow ^TMis a set of integrated and clinically focused software solutions and services that helps hospitals to optimize patient flow, bed management, bed turnover and patient transport. The solutions support streamlined communications, enhanced operating efficiency, and empower knowledge based decision making.

• Sunrise Clinical Analytics ^TMautomates surveillance and regulatory reports to help hospitals improve quality and reduce costs associated with hospital-acquired conditions and substandard utilization by enabling them to act in the moment during a patient visit – not just review reports retrospectively to track trending. This flexible multi-layered clinical intelligence application allows for clinical, financial, and performance improvement through near real-time reporting and helps organizations eliminate the labor-intensive process associated with manually extracting chart data.

Other Clinical/Ancillary solutions include:

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

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

• Sunrise eLink™ provides tools to enable the integration of clinical and financial data from disparate existing systems within an integrated health network. Sunrise Radiology™, a comprehensive radiology information system, and Sunrise PACS™ picture archiving and communications system can be implemented together, separately, or part of an image-enabled clinical information system to deliver imaging data as an integrated part of the overall patient record that is accessible to clinicians at the point of care or other points of decision making using any Sunrise Enterprise-enabled device.

Eclipsys’ Electronic Medical Record and Practice Management solutions are a comprehensive set of Web-based physician practice information solutions that help physicians operate their practices, and help health systems better connect with physicians, and physicians with their patients. Solutions include:

• Eclipsys PeakPractice^TM is an integrated electronic medical record and practice management solution that enables the automation of key workflows in a physician’s practice. The electronic medical record element supports electronic orders and results, point-of-care documentation, e-prescribing and instant access to patient information. The practice management element includes a comprehensive and workflow-based dashboard, up-to-date information on appointments, patient insurance, current billing and accounts receivable status, viewed and updated in real time. The solutions can also be implemented independently.

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• PeakPractice EMR^TM is an electronic medical record solution that interfaces with existing practice management systems.

• PeakPractice PM^TM is an independent practice management solution.

• Eclipsys PeakPractice SC^TM (supply chain) is a web-based inventory management application that electronically tracks and orders medical supplies and inventory for physician practices.

• MediNotes e^TMis an electronic medical record solution that helps physicians automate practices, including e-prescribing capabilities.

Services

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

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

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

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

Sales and Marketing

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

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

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

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Seasonality

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

International

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

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

Research and Development

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

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

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

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

Competition

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

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

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

Employees

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

Financial Information about Geographic Areas

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

	Year ended December 31,
	2008		2007		2006
United States	$	484,240	$	444,474	$	394,536
Canada		26,410		31,761		30,592
Other		5,112		1,298		2,414
Total	$	515,762	$	477,533	$	427,542

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

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

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ITEM 1A.  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 an investment in or ownership of our stock. We have attempted to organize the description of these risks into logical groupings to enhance readability, but many of the risks interrelate or could be grouped or ordered in other ways, so no special significance should be attributed to these groupings or order. The occurrence of any of these risks could have a significant adverse effect on our reputation, business, financial condition or results of operations.

RISKS RELATING TO DEVELOPMENT AND OPERATION OF OUR SOFTWARE

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

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

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

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

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

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

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

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

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

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

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

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

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

RISKS RELATED TO SALES AND IMPLEMENTATION OF OUR SOFTWARE

Our sales process can be long and expensive and may not result in revenues. In addition, the length of our sales and implementation cycles may adversely affect our operating results.

We typically experience long sales and implementation cycles. How and when to implement, replace, expand or substantially modify an information system, or modify or add business processes, are major decisions for healthcare organizations, our target client market. Furthermore, our software generally requires significant capital expenditures by our clients. The sales cycle for our software ranges from 6 to 18 months or more from initial contact to contract execution. Our implementation cycle has generally ranged from 6 to 36 months from contract execution to completion of implementation. During the sales and implementation cycles, we will expend substantial time, effort

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

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

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

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

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

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

Our earnings can vary significantly depending on periodic software revenues.

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

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

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

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

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

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

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

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

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

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

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RISKS RELATED TO THE HEALTHCARE IT INDUSTRY AND MARKET

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

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

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

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

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

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

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

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

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

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

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

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

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

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

RISKS RELATED TO OUR BUSINESS STRATEGY

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

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

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

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

RISKS RELATED TO OUR OPERATING RESULTS, ACCOUNTING CONTROLS AND FINANCES

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

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

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

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

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

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

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

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

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

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

• variations in periodic software license revenues;

• the financial condition of our clients and potential clients;

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

• client decisions regarding renewal or termination of their contracts;

• software and price competition;

• investment required to support our international expansion efforts;

• personnel changes and other organizational changes and related expenses;

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

• healthcare reform measures and healthcare regulation in general;

• lower investment returns due to recent disruptions in U.S. and international financial markets; and

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

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

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

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

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

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

We recognize a significant portion of our revenues from clients monthly over the terms of their agreements, which are typically 5-7 years and can be up to 10 years. As a result, much of the revenue that we report each quarter is attributable to agreements executed during prior quarters. Consequently, a decline in sales, client renewals, or market acceptance of our software in one quarter may negatively affect our revenues and profitability in future quarters. In addition, we may be unable to rapidly adjust our cost structure to compensate for reduced revenues. This monthly revenue recognition also makes it more difficult for us to rapidly increase our revenues through additional sales in any period, as a significant portion of revenues from new clients or new sales may be recognized over the applicable agreement term.

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

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

Impairment of intangible assets could increase our expenses.

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

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

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

Funds invested in auction rate securities may not be liquid or accessible for in excess of 12 months, and our auction rate securities may experience further fair value adjustments or other-than-temporary declines in value, which would adversely affect our financial condition, cash flow and reported earnings.

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

Our commercial credit facility subjects us to operating restrictions and risks of default.

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

The conditions of the U.S. and international financial markets may adversely affect our ability to draw on our credit facility.

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

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

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

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

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

RISKS OF LIABILITY TO THIRD PARTIES

Our software and content are used by clinicians in the course of treating patients. If our software fails to provide accurate and timely information or is associated with faulty clinical decisions or treatment, clients, clinicians or their patients could assert claims against us that could result in substantial cost to us, harm our reputation in the industry and cause demand for our software to decline.

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

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

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

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

RISKS RELATED TO OUR STRATEGIC RELATIONSHIPS AND INITIATIVES

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

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

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

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

Any acquisitions we undertake may be disruptive to our business and could have an adverse effect on our future operations and the market price of our common stock.

An important element of our business strategy has been expansion through acquisitions and while there is no assurance that we will identify and complete any future acquisitions, any acquisitions would involve a number of risks, including the following:

• The anticipated benefits from the acquisition may not be achieved, including as a result of loss of customers or personnel of the target.

• The identification, acquisition and integration of acquired businesses require substantial attention from management. The diversion of management’s attention and any difficulties encountered in the transition process could hurt our business.

• The identification, acquisition and integration of acquired businesses requires significant investment, including to harmonize product and service offerings, expand management capabilities and market presence, and improve or increase development efforts and software features and functions.

• In future acquisitions, we could issue additional shares of our common stock, incur additional indebtedness or pay consideration in excess of book value, which could dilute future earnings.

• Acquisitions also expose us to the risk of assumed known and unknown liabilities.

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

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RISKS RELATED TO INDUSTRY REGULATION

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

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

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

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

• comply with the FDC Act regarding general controls, including establishment registration, device listing, compliance with good manufacturing practices, reporting of specified device malfunctions and adverse device events.

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

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

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

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

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

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RISKS RELATED TO OUR PERSONNEL AND ORGANIZATION

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

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

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

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

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

RISKS RELATED TO OUR EQUITY STRUCTURE

Provisions of our charter documents and Delaware law may inhibit potential acquisition bids that stockholders may believe are desirable, and the market price of our common stock may be lower as a result.

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

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

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

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

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

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

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

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

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

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

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

Item 3. Legal Proceedings

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

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

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

Part II

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

Price Range of Common Stock

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

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

Dividends

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

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Shares Available Under Equity Compensation Plans

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

Comparative Stock Performance

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

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Eclipsys Corporation, The NASDAQ Composite Index

And The NASDAQ Computer & Data Processing Index

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

Fiscal year ending December 31.

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

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

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

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Holders of Record

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

Issuer Purchases of Equity Securities

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

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, 2008	—			—	—	—
November 1-30, 2008	—			—	—	—
December 1-31, 2008	30,232	1	$	12.18	—	—
Total	30,232		$	12.18	—	—

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

Item 6. Selected Financial Data

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

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

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Consolidated Statements of Operations

(in thousands, except per share data)

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

Balance Sheet Data

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

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

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

EXECUTIVE OVERVIEW

About the Company

Eclipsys is a leading provider of advanced integrated clinical, revenue cycle and performance management software, and professional services that help healthcare organizations improve clinical, financial, and operational outcomes. We develop and license proprietary software and content that is designed for use in connection with many of the key clinical, financial and operational functions that healthcare organizations require. Among other things, our software:

• enables physicians, nurses and other clinicians to coordinate care through shared electronic medical records, place orders and access and share information about patients;

• helps our clients optimize the healthcare revenue cycle, including patient admissions, scheduling, invoicing, inventory control and cost accounting;

• supports clinical and financial planning and analysis; and

• provides information for use by physicians, nurses and other clinicians through clinical content, which is integrated with our software.

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

With the exception of hardware revenues, we classify our revenues in one caption (systems and services) in our statement of operations since the amount of license revenue related to traditional software contracts is less than 10% of total revenues and the remaining revenue types included in this caption relate to bundled subscription arrangements and other services arrangements that have similar attribution patterns for revenue recognition. Our income statement items of revenue are as follows:

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

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

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

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

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

• In February 2008, we acquired EPSi, a provider of business performance improvement solutions that help healthcare executives better manage the business of healthcare by providing actionable financial management and decision support data from all functional areas, which include budgeting/planning, cost accounting, patient and financial/clinical analysis.

• In October 2008, we acquired MediNotes, an industry leader in physician practice information solutions. This addition helps us more effectively support healthcare enterprises’ community strategies, to better coordinate care between clinicians and patients, and puts us in one of the fastest growing markets in healthcare, practice management and electronic medical records.

• In December 2008, we acquired Premise, expanding our portfolio of solutions that help our clients improve operational performance, which also includes EPSi software and our growing portfolio of analytics solutions. This acquisition expands our range of solutions to help our clients improve operational performance. Premise’s software solutions and services for bed management, bed turnover, and transport help optimize patient flow, streamline communications, and enhance operational efficiency.

Business Environment

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

New Accounting Pronouncements

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

Critical Accounting Policies

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

Revenue Recognition

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

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

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

• whether collection of our fees is considered probable;

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

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

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

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

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

Subscription Contracts

Our subscription contracts typically include the following elements:

• Software license;

• Maintenance;

• Professional services; and

• Third party hardware or remote hosting services.

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

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

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

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

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

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

Traditional Software Contracts

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

• Software license;

• Maintenance;

• Professional services; and

• Third party hardware or remote hosting services.

Revenue for each of the elements is recognized as follows:

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

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

Software Contracts Requiring Contract Accounting

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

Stand-Alone Software and Service

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

• Software license;

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• Maintenance;

• Professional services;

• Hardware;

• Outsourcing; and

• Remote Hosting services.

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

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

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

Hardware is recognized upon delivery pursuant to SAB 104.

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

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

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

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

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

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

Allowance for Doubtful Accounts

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

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Capitalized Software Development Costs

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

Stock-Based Compensation

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

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

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

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Income Taxes

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

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

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

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

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

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

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

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Goodwill

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

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RESULTS OF OPERATIONS

Statement of Operations Data

(in thousands, except percentages and per share data)

	For The Years Ended December 31,						Change ($)			Change (%)		For The Years Ended December 31,						Change ($)			Change (%)
	2008			2007								2007			2006
Revenues:
Systems and services	$	495,643		$	460,853		$	34,790		7.5	%	$	460,853		$	409,450		$	51,403		12.6	%
Hardware		20,119			16,680			3,439		20.6	%		16,680			18,092			(1,412	)	-7.8	%
Total revenues		515,762			477,533			38,229		8.0	%		477,533			427,542			49,991		11.7	%
Costs and expenses:
Cost of systems and services (excluding depreciation and amortization shown below)		280,694			263,557			17,137		6.5	%		263,557			237,617			25,940		10.9	%
Cost of hardware		16,945			12,230			4,715		38.6	%		12,230			14,592			(2,362	)	-16.2	%
Sales and marketing		85,911			76,172			9,739		12.8	%		76,172			63,391			12,781		20.2	%
Research and development		61,435			56,480			4,955		8.8	%		56,480			57,768			(1,288	)	-2.2	%
General and administrative		38,457			32,677			5,780		17.7	%		32,677			24,972			7,705		30.9	%
Depreciation and amortization		22,098			17,924			4,174		23.3	%		17,924			15,736			2,188		13.9	%
In-process research and development charge		850			—			850		*			—			—			—		*
Restructuring charge		—			1,175			(1,175	)	*			1,175			14,670			(13,495	)	-92.0	%
Total costs and expenses		506,390			460,215			46,175		10.0	%		460,215			428,746			31,469		7.3	%
Income (loss) from operations		9,372			17,318			(7,946	)	-45.9	%		17,318			(1,204	)		18,522		*
Gain on sale of assets		4,370			12,761			(8,391	)	*			12,761			—			12,761		*
Gain (loss) on investments		(609	)		—			(609	)	*			—			—			—		*
Interest expense		(2,117	)		—			(2,117	)	*			—			—			—		*
Interest income		6,074			7,070			(996	)	-14.1	%		7,070			5,335			1,735		32.5	%
Income before taxes		17,090			37,149			(20,059	)	-54.0	%		37,149			4,131			33,018		799.3	%
Provision for income taxes		(82,416	)		(3,992	)		(78,424	)	*			(3,992	)		38			(4,030	)	*
Net income	$	99,506		$	41,141		$	58,365		141.9	%	$	41,141		$	4,093		$	37,048		905.2	%
Basic net income per common share	$	1.84		$	0.78		$	1.08				$	0.78		$	0.08		$	0.70
Diluted net income per common share	$	1.81		$	0.76		$	1.07				$	0.76		$	0.08		$	0.68

* Not meaningful

2008 compared to 2007

Revenues

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

Systems and Services Revenues

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

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

• Periodic Revenues - Periodic revenues for software related fees, third party software related fees and networking services (only 2007) were $37.1 million for the year ended December 31, 2008, as compared to $39.5 million for the year ended December 31, 2007, a decrease of $2.3 million. The table below summarizes the components of periodic revenues (in thousands):

	For The Years Ended December 31,				Change			% Change
	2008		2007
Eclipsys software related fees	$	28,242	$	21,505	$	6,737		31.3	%
Third party software related fees		8,879		9,096		(217	)	-2.4	%
Networking services		—		8,854		(8,854	)	-100.0	%
Total periodic revenues	$	37,121	$	39,455	$	(2,334	)	-5.9	%

In any period, some software revenues can be considered one time in nature for that period, and we do not recognize these revenues on a ratable basis. These revenues include traditional license fees associated with new contracts signed in the period, including add-on licenses to existing clients and new client transactions, as well as revenues from contract backlog that had not previously been recognized pending contract performance that occurred or was completed during the period, and certain other activities during the period associated with client relationships. In the aggregate, these periodic revenues can contribute significantly to earnings in the period because relatively little in-period costs are associated with such revenues (other than those costs associated with networking services, which is applicable only to 2007). We expect these periodic revenues to continue to fluctuate as a result of significant variations in the type and magnitude of sales and other contract and client activity in any period, and these variations make it difficult to predict the nature and amount of these periodic revenues. The acquisition of EPSi in February 2008 contributed periodic software related fees revenues of $7.5 million for the year ended December 31, 2008. In addition, the acquisition of MediNotes in October 2008 contributed periodic software related fees revenues of $1.5 million for the year ended December 31, 2008.

Our periodic revenues may vary significantly, and fall below prior-period levels, if challenging economic conditions continue to motivate clients to defer capital investments, conserve cash and prefer software subscription contracting to traditional licensing arrangements. Periodic revenue from traditional software license arrangements carries high margins and contributes significantly to overall profitability in the transaction period, and increasing periodic software license revenue beyond 2008 levels is important to our ability to improve profitability. We believe economic conditions, and resulting cash conservation by clients, adversely affected our periodic software related fees revenues in the second half of 2008, and continuation of these conditions and client reactions will adversely affect our results of operations in 2009.

During 2007, we exited our networking services business and shifted any residual client network hardware needs to third party hardware providers. The related revenues are included in hardware revenues for the year ended December 31, 2008.

• Professional Services Revenues - Professional services revenues, which include implementation, training and consulting related services, were $124.3 million for the year ended December 31, 2008, an increase of

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

Hardware Revenues

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

Operating Expenses

Stock-based compensation

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

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

Cost of Systems and Services

Our cost of systems and services increased $17.1 million, or 6.5%, for the year ended December 31, 2008 as compared to the year ended December 31, 2007. The increase reflects:

• Labor related costs increased by $8.7 million, which includes higher wages and benefits of $9.3 million, higher stock-based compensation of $2.7 million, higher severance expenses of $2.2 million, partially offset by lower annual incentive compensation expense of $5.5 million. The increase in wages reflects higher average headcount supporting growth in the business. Growth slowed in our services business leading to headcount reductions in early 2009. Higher stock-based compensation was primarily due to factors discussed in the previous paragraph. Our reorganization of the services organization in the third quarter 2008 drove the increase in severance expense. The reduction in annual incentive compensation expense resulted from failure to meet minimum operating results required to fund payment of incentive compensation under our corporate bonus plan.

• Third party software cost of services increased by $7.0 million included growth in our third party business and amounts recognized in the third quarter 2008 related to nonrecurring adjustments from prior periods and more contract activity requiring third party services as a result of exiting our network business.

• Amortization of capitalized software increased by $3.6 million as a result of the release of SunriseXA 5.0 in December of 2007.

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

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Cost of Hardware

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

Sales and Marketing

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

Research and Development

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

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

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

	For The Year Ended December 31,				Change ($)			Change (%)
	2008		2007
Research and development expenses	$	61,435	$	56,480	$	4,955		8.8	%
Capitalized software and development costs		18,177		20,943		(2,766	)	-13.2	%
Gross research and development expenditures	$	79,612	$	77,423	$	2,189		2.8	%
Amortization of capitalized software development costs	$	18,668	$	15,039	$	3,629		24.1	%

General and Administrative

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

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

Depreciation and Amortization

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

In-Process Research and Development Charge

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

Restructuring Charges

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

Gain on Sale of Assets

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

Loss on Auction Rate Security (ARS)

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

Interest Expense

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

Outstanding Debt	Interest Rate
$  51,000	3.95	%
16,000	3.97	%
38,000	4.00	%
$105,000	3.97	%

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

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Interest Income

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

Provision for Income Taxes

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

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

2007 compared to 2006

Revenues

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

Systems and Services Revenues

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

• Revenues Recognized Ratably - Revenues recognized ratably from software, maintenance, outsourcing and remote hosting were $301.5 million, for the year ended December 31, 2007, an increase of $24.5 million, or 8.8%, as compared to year ended December 31, 2006. The increase was due to new sales bookings in previous periods for our solutions, remote hosting related services, and outsourcing, in previous periods, resulting in growth in our recurring revenue base. Future growth in these revenues depends upon future bookings in excess of previous levels.

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

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

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

• Professional Services Revenues - Professional services revenues, which include implementation, training and consulting related services, were $120.0 million for the year ended December 31, 2007, an increase of $20.9 million, or 21.1%, as compared to the year ended December 31, 2006. The increase in both periods resulted primarily from higher utilization of our professional services team and increased activity associated with implementation of our software following increases in previous period software sales.

Hardware Revenues

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

Operating Expenses

Cost of Systems and Services

Cost of systems and services increased by $25.9 million, or 10.9%, to $263.2 million, for the year ended December 31, 2007. The increase in cost of systems and services in 2007 was primarily attributable to the following:

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

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

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

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

Cost of Hardware

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

Sales and Marketing

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

Research and Development

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

In summary, research and development expense was as follows:

	For The Year Ended December 31,				Change ($)			Change (%)
	2007		2006
Research and development expenses	$	56,480	$	57,768	$	(1,288	)	-2.2	%
Capitalized software and development costs	$	20,943	$	14,106	$	6,837		48.5	%
Gross research and development expenditures	$	77,423	$	71,874	$	5,549		7.7	%
Amortization of capitalized software development costs	$	15,039	$	17,494	$	(2,455	)	-14.0	%

General and Administrative

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

Depreciation and Amortization

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

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Restructuring Charges

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

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

Gain on Sale of Assets

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

(in thousands):

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

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

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

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

Interest Income

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

(Benefit) Provision for Income Taxes

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

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

Liquidity and Capital Resources

Overview

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

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

2008

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

Net changes in operating assets and liabilities contributed an adjustment of $5.3 million to reconcile net income to cash provided by operating activities. This adjustment comprises the following changes year over year:

• an increase in accounts receivable of $20.9 million related to increased revenue in 2008 and higher 2009 maintenance activity billed in December 2008;

• a decrease in prepaid expenses and other current assets of $2.1 million related to timing of cash payments;

• an increase in accounts payable and other current liabilities of $9.0 million related to timing of our contractual obligations and payments;

• a decrease in accrued compensation of $10.6 million due to payment of 2007 annual incentive compensation in 2008 and no accrual of expense for 2008 annual incentive compensation resulting from failure to meet minimum operating results required to fund payment under our corporate bonus plan;

• an increase in other long term liabilities of $12.5 million due to recording of a FIN 48 liability and an increase in deferred rent primarily related to our Atlanta location; and

• an increase in deferred revenue of $13.5 million due to higher 2009 maintenance activity billed in December 2008.

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

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

2007

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

Net changes in operating assets and liabilities contributed an adjustment of $1.8 million to reconcile net income to cash provided by operating activities. This adjustment comprises the following changes year over year:

• an increase in accounts receivable of $5.7 million related to increased revenue in 2007;

• an increase in prepaid expenses and other current assets of $4.6 million due to timing of cash payments;

• a decrease in accounts payable and other current liabilities of $9.1 million related to timing of our contractual obligations and payments, as well as payments of $4.7 million in connection with our restructuring activities;

• an increase in accrued compensation of $11.1 million due primarily to an increase in sales commissions and bonuses;

• a decrease in inventory of $1.0 million due to our exit of the networking services business;

• an increase in other long term liabilities of $2.5 million; and

• an increase in deferred revenue of $1.4 million and a decrease in other assets of $1.4 million each due to timing of our customer billing cycles.

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

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

2006

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

Net changes in operating assets and liabilities contributed an adjustment of $29.8 million to reconcile net income to cash provided by operating activities. This adjustment comprises the following changes year over year:

• an increase in accounts receivable of $14.5 million related to increased revenue in 2006;

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• an increase in prepaid expenses and other current assets of $3.8 million due to timing of cash payments;

• an decrease in accrued compensation of $4.9 million due timing of payroll transactions;

• a decrease in inventory of $1.2 million due to phasing out our networking services business;

• a decrease in deferred revenue of $10.6 million due to timing of our customer billing cycles and a decline in up-front billing contracts; and

• a decrease in other assets of $2.6 million primarily representing deferred expenses, due to timing of our customer billing cycles.

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

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

Future Capital Requirements

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

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

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

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

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

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

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

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

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

49

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

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

SFAS 157 “Fair Value Measurements”

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

Contingencies

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

50

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

Off-Balance Sheet Arrangements

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

Contracts and Commitments

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

	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	$	40,359	$	9,128	$	12,542	$	8,567	$	10,122
Long-Term Debt Obligations	$	105,000	$	—	$	105,000	$	—	$	—
Unconditional Purchase Obligations	$	121,401		47,796		50,740		22,865		—
Total	$	266,760	$	56,924	$	168,282	$	31,432	$	10,122

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

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

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

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

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

51

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

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

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

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

Hypothetical Interest Rate	Hypothetical ARS balances (in thousands)
	$95,000	$105,000	$115,000
0.0%	—	—	—
0.5%	475	525	575
1.0%	950	1,050	1,150
1.5%	1,425	1,575	1,725
2.0%	1,900	2,100	2,300
2.5%	2,375	2,625	2,875

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

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

52

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements:

Financial Statements:

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

53

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Eclipsys Corporation:

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

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

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

/s/ PricewaterhouseCoopers

Atlanta, Georgia

February 24, 2009

54

ECLIPSYS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share data)

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

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

55

ECLIPSYS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)

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

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

56

ECLIPSYS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

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

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

57

ECLIPSYS CORPORATION AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income

(in thousands, except share data)

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

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

58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS

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

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Segment Information

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

Use of Estimates

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

Cash and Cash Equivalents

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

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Restricted Cash

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

Marketable Securities

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

Accounts Receivable and Unbilled Receivables

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

Allowance for Doubtful Accounts

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

Property and Equipment

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

Capitalized Software Development Costs and Acquired Technology

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

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

Intangible Assets, including Goodwill

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

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

Long-Lived Assets

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

Fair Value of Financial Instruments

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

Revenue Recognition

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

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

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

• whether collection of our fees is considered probable;

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

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

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

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

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

Subscription Contracts

Our subscription contracts typically include the following elements:

• Software license;

• Maintenance;

• Professional services; and

• Third party hardware or remote hosting services.

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

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

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

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

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

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

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

Traditional Software Contracts

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

• Software license;

• Maintenance;

• Professional services; and

• Third party hardware or remote hosting services.

Revenue for each of the elements is recognized as follows:

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

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

Software Contracts Requiring Contract Accounting

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

Stand-Alone Software and Services

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

• Software license;

• Maintenance;

• Professional services;

• Hardware;

• Outsourcing; and

• Remote Hosting services.

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

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

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

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

Hardware revenue is recognized upon delivery pursuant to SAB 104.

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

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

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

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

Costs of Revenues

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

Shipping Costs

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

Sales Taxes

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

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Research and Development

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

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

Income Taxes

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

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

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

Stock-Based Compensation

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

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

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

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

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

Concentration of Credit Risk

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

Foreign Currency

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

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

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

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New Accounting Pronouncements

Recently Issued Standards

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

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

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

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

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

Recently Adopted Standards

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

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

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

In October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” which clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. Some of the key principles illustrated include:

• determining fair value in a dislocated market depends on facts and circumstances, and may require the use of significant judgment about whether individual market transactions are forced liquidations or distressed sales and therefore poor indicators of fair value;

• when relevant observable market data is not available, the use of assumptions about future cash flows and discount rates may be appropriate in determining fair value; and

• the value of broker quotes in determining fair value depends on facts and circumstances, particularly when an active market does not exist.

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

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NOTE C - BASIC AND DILUTED NET INCOME PER SHARE

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

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

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

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NOTE D - INVESTMENTS

Investment balances consist of the following (in thousands):

	December 31, 2008		December 31, 2007
Security Type:
Auction rate securities
UBS purchased (1)		32,413		44,053
Goldman Sachs purchased (2)		71,499		122,164
Auction rate securities put option (3)		3,303		—
Other securities (4)		154		2,708
Total	$	107,369	$	168,925

(1) These securities are classified as trading, and the changes in fair value of these securities are included in earnings.

(2) As of December 31, 2008 the maturity date of our Goldman purchased ARS range from August 1, 2027 to November 1, 2047. These securities are classified as available for sale, and the changes in fair value of these securities are included in accumulated other comprehensive income.

(3) Our auction rate securities put option is exercisable from June 30, 2010 to July 30, 2012. We have accounted for the put option as a freestanding financial instrument and elected to record the value under the fair value option of SFAS No. 159. Therefore, the changes in fair value of the put option are included in earnings.

(4) As of December 31, 2008 the maturity date of our other securities is less than one year. These securities are classified as available for sale, and the changes in fair value of these securities are included in accumulated other comprehensive income. As these securities are currently in an unrealized gain position, they have not been evaluated for impairment.

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

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

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

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

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

Description of Securities	Less than 12 Months
	Fair Value		Unrealized Losses
Auction rate securities:
Goldman Sachs purchased	$	71,499	$	8,751

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

NOTE E - FAIR VALUE MEASUREMENT

We measure our financial assets and liabilities at fair value in accordance with SFAS 157. The fair value framework prescribed in SFAS 157 requires the categorization of assets into three levels based upon the assumptions (inputs) used to determine the estimated fair value of the assets. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

• Level 1: Unadjusted quoted prices in active markets for identical assets.

• Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets in active markets or quoted prices for identical assets in inactive markets.

• Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in estimating the value of the asset.

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

	December 31, 2008		Identical Assets (Level 1)		Observable Inputs (Level 2)		Inputs (Level 3)
Cash equivalents:
Money market funds	$	90,838	$	90,838
Marketable securities:
Treasuries		154		154
Long-term investments:
Auction rate securities (1)		103,912						103,912
Put Option (2)		3,303						3,303
	$	198,207	$	90,992	$	—	$	107,215

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

(2) Our put option, categorized as level 3, became effective November 2008 and was recorded as a $3.3 million asset with a corresponding unrealized gain to “Gain (Loss) on Investments” for the value of the put option for the year ended December 31, 2008.

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

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

NOTE F - ACCOUNTS RECEIVABLE AND UNBILLED RECEIVABLES

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

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

NOTE G - PROPERTY AND EQUIPMENT

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

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

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

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NOTE H - ACQUIRED TECHNOLOGY AND INTANGIBLE ASSETS, INCLUDING GOODWILL

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

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

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

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

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

	Carrying Amount		Accumulated Amortization			2008		Carrying Amount		Accumulated Amortization			2007		Estimated Life
						Book Value							Book Value
Intangibles subject to amortization
Acquired technology	$	45,027	$	(5,317	)	$	39,710	$	1,967	$	(1,373	)	$	594	3-4 years
Ongoing customer relationships		9,409		(1,382	)		8,027		2,404		(1,028	)		1,376	5-6 years
Non-compete agreements		2,640		(470	)		2,170								2 years
Total	$	57,076	$	(7,169	)	$	49,907	$	4,371	$	(2,401	)	$	1,970
Intangibles not subject to amortization:
Trade names							60
Goodwill							96,973							7,772
Total						$	97,033						$	7,772

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

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

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

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

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

	2009		2010		2011		2012		2013		Total
Total amortization expense	$	12,999	$	12,628	$	11,610	$	7,783	$	4,885	$	49,907

NOTE I - AUTHORIZED SHARES

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

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NOTE J - STOCK-COMPENSATION PLANS

2008 Omnibus Incentive Plan

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

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

2005 Inducement Grant Stock Incentive Plan

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

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

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

Stock-Options Awards

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

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2008	5,254,121		$	16.58
Options granted	1,195,225		$	19.61
Options exercised	(505,494	)	$	12.78
Options canceled or forfeited	(414,855	)	$	21.63
Outstanding at December 31, 2008	5,528,997		$	17.23	5.36	$	5,442
Vested and expected to vest at December 31, 2008	5,239,016		$	17.10	5.29	$	5,420
Exercisable at December 31, 2008	3,031,304		$	15.19	4.36	$	5,263

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

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

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

	Years Ended December 31,
	2008		2007		2006
Expected term (in years)	4.58		5.91		6.46
Risk free interest rate	2.53	%	4.31	%	4.99	%
Expected volatility	47.2	%	59.3	%	77.1	%
Dividend yield	0	%	0	%	0	%

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

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

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

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

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

Non-Vested Restricted Stock

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

	Non-vested Number of Shares		Weighted Average Grant - Date Fair Value
Nonvested balance at January 1, 2008	382,230		$	18.28
Granted	647,321		$	20.33
Vested	(194,250	)	$	19.46
Forfeited	(75,330	)	$	20.92
Nonvested balance at December 31, 2008	759,971		$	19.47

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

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

Deferred Stock Units

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

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

Employee Stock Purchase Plan

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

Employee Savings Plan

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

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Stock-Based Compensation

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

	Year Ended December 31,
	2008		2007		2006
Cost of systems and services	$	7,346	$	4,597	$	3,215
Sales and marketing		6,244		3,137		3,495
Research and development		1,322		2,175		1,921
General and administrative		2,370		1,358		2,626
Restructuring charge				—		2,846
Total stock-based compensation expense	$	17,282	$	11,267	$	14,103

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

NOTE K - LONG-TERM FINANCING

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

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

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

Outstanding Debt	Interest Rate
$  51,000	3.95	%
16,000	3.97	%
38,000	4.00	%
$105,000	3.97	%

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

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

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

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

NOTE L - RESTRUCTURING

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

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

	Termination Related Benefits
Balance at December 31, 2006	$	—
Restructuring charge		1,175
Payments		(198	)
Balance at December 31, 2007	$	977
Payments		(1,138	)
Other		161
Balance at December 31, 2008	$	—

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

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

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

	One-time Employee-Related Benefits			Facility Closures			Total
Balance at December 31, 2006	$	3,174		$	2,486		$	5,660
Payments		(2,896	)		(1,587	)		(4,483	)
Balance at December 31, 2007	$	278		$	899		$	1,177
Payments		(261	)		(602	)		(863	)
Balance at December 31, 2008	$	17		$	297		$	314

NOTE M - INCOME TAXES

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

	For The Year Ended December 31,
	2008			2007			2006
Current Tax Provision:
Federal	$	530		$	428		$	—
State		5,854			85			—
Foreign		4,231			239			—
	$	10,615		$	752		$	—
Deferred Provision (Benefit):
Federal	$	(79,069	)	$	448		$	34
State		(14,887	)		94			4
Foreign		925			(5,286	)		—
		(93,031	)		(4,744	)		38
Total Provision	$	(82,416	)	$	(3,992	)	$	38

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

	For The Year Ended December 31,
	2008		2007		2006
United States	$	12,705	$	34,152	$	4,929
Foreign	$	4,385	$	2,997	$	(798	)
	$	17,090	$	37,149	$	4,131

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

	2008			2007			2006
Statutory federal income tax rate	$	6,064		$	13,002		$	1,405
State income taxes, net of federal benefit		1,460			1,488			164
Stock compensation		892			(1,045	)		(2,065	)
Federal and state rate change		165			(2,840	)		—
FIN 48 liability		2,407			780			—
Foreign jurisdiction rate differentials		(328	)		(658	)		—
Nondeductible items		884			578			708
Tax credits		(7,090	)		—			—
Other		15			418			(42	)
Valuation allowance		(86,885	)		(15,715	)		(132	)
Income tax provision	$	(82,416	)	$	(3,992	)	$	38

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

NOTE N - COMMITMENTS AND CONTINGENCIES

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

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

Non-cancelable Operating Leases

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

	(in thousands)
Year Ending December 31,
2009		9,128
2010		7,515
2011		5,027
2012		4,452
2013		4,114
Thereafter		10,122
	$	40,358

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

Indemnification clauses

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

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NOTE O - ACQUISITIONS

EPSi

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

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

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

	$ Allocation Amount		Estimated Useful Lives
Net tangible assets acquired	$	2,961
Customer relationships		4,600	6 yrs.
Non-Compete agreements		1,210	3 yrs.
Acquired technology		13,260	4 yrs.
Goodwill		32,670
Purchase Price	$	54,701

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

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

MediNotes

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

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

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

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

	$ Allocation Amount			Estimated Useful Lives
Tangible assets acquired	$	(5,903	)
Customer relationships		2,400		5 yrs.
Non-Compete agreements		1,030		2 yrs.
Acquired technology		12,700		4 yrs.
Goodwill		34,888
Purchase Price	$	45,115

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

Premise

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

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

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

	$ Allocation Amount			Estimated Useful Lives
Tangible assets acquired	$	(1,706	)
Customer relationships		1,100		5 yrs.
Non-Compete agreements		400		2 yrs.
Acquired technology		17,100		5 yrs.
Trade Names		60
Goodwill		21,623
Purchase Price	$	38,577

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NOTE P - SALE OF ASSETS

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

(in thousands):

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

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

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

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

NOTE Q - RELATED PARTY TRANSACTIONS

License Agreement with Partners HealthCare System, Inc.

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

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

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

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

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

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NOTE R - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

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

	For the Year Ended December 31, 2008
	(in thousands, except per share data)
	First Quarter			Second Quarter		Third Quarter		Fourth Quarter			Year
Revenues	$	124,380		$	132,142	$	132,424	$	126,816		$	515,762
Income (loss) from operations		(2,119	)		7,224		6,761		(2,494	)		9,372
Net income		290			8,511		87,396		3,310			99,506
Basic net income per common share	$	0.01		$	0.16	$	1.62	$	0.06		$	1.84
Diluted net income per common share	$	0.01		$	0.16	$	1.59	$	0.06		$	1.81

	For 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 (loss) from operations		906		4,125		7,513		4,774		17,318
Net income (loss)		2,401		5,694		8,864		24,182		41,141
Basic net income (loss) per common share	$	0.05	$	0.11	$	0.17	$	0.45	$	0.78
Diluted net income (loss) per common share	$	0.04	$	0.11	$	0.16	$	0.45	$	0.76

NOTE S - GEOGRAPHIC INFORMATION

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

	Year ended December 31,
	2008		2007		2006
United States	$	484,240	$	444,474	$	394,536
Canada		26,410		31,761		30,592
Other		5,112		1,298		2,414
Total	$	515,762	$	477,533	$	427,542

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

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

NOTE T - SUBSEQUENT EVENTS (UNAUDITED)

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

Item 8. Financial Statements and Supplementary Data

SCHEDULE II — VALUATION OF QUALIFYING ACCOUNTS

For the Years Ended December 31, 2008, 2007 and 2006

(in thousands)

	Balance at Beginning of Period		Additions		Write-offs			Balance at End of Period
December 31, 2008
Allowance for doubtful accounts	$	4,240	$	4,408	$	(3,736	)	$	4,912
Valuation allowance for deferred tax asset	$	87,115	$	—	$	(86,676	)	$	439
December 31, 2007
Allowance for doubtful accounts	$	3,907	$	2,078	$	(1,745	)	$	4,240
Valuation allowance for deferred tax asset	$	131,523	$	6,670	$	(51,078	)	$	87,115
December 31, 2006
Allowance for doubtful accounts	$	5,676	$	1,457	$	(3,226	)	$	3,907
Valuation allowance for deferred tax asset	$	133,182	$	—	$	(1,659	)	$	131,523

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

Not applicable.

90

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Management Report on Internal Control Over Financial Reporting

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

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

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

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

Changes in Internal Control over Financial Reporting

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

Item 9B. Other Information

None.

Part III

Item 10. Directors, Executive Officers and Corporate Governance

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

Item 11. Executive Compensation

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

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

Information regarding security ownership of certain beneficial owners and management will be set forth in the proxy statement for our 2009 annual meeting of stockholders and is incorporated herein by reference.

91

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

	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 (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	4,499,197		$	16.94	3,873,070
Equity compensation plans not approved by security holders (1)	1,029,800	(2)	$	18.52	327,486	(3)
Total	5,528,997				4,200,556	(4)

1 In October 2005, our Board of Directors approved the 2005 Inducement Grant Stock Incentive Plan (the “Inducement Grant Plan”) for use in making inducement grants of stock options and restricted stock to new employees pursuant to the NASDAQ Marketplace Rules. This Inducement Grant Plan was based upon and is substantially similar to our 2005 Stock Incentive Plan as approved by stockholders, except that eligible recipients are limited to prospective and newly hired employees of the Company, consistent with its purpose as an employment inducement tool. The Board initially authorized 1,200,000 shares under the Inducement Grant Plan, which was increased in February 2008 by an additional 400,000 shares and in December 2008 by an additional 350,000 shares. As of December 31, 2008, a total of 1,950,000 shares were authorized under the Inducement Grant Plan.

2 Represents options which were granted as inducement hiring grants in accordance with NASDAQ rules to (i) Mr. Eckert as our President and Chief Executive Officer in 2005; (ii) Mr. Deady as our Executive Vice President, Client Solutions in 2006; and (iii) to founders and employees of Enterprise Performance Systems, Inc. in connection with our acquisition of that company in February 2008. These options were issued pursuant to our 2005 Inducement Grant Stock Inducement Plan.

3 270,138 shares have been reserved for grants of inducement hiring stock options to founders and employees of Premise Corporation, to be issued in the first quarter of 2009 in accordance with Eclipsys’ Stock Option Grant Guidelines.

4 The number of securities remaining available for future issuance under equity compensation plans as of December 31, 2008 included 287,706 shares available for future issuance under Eclipsys’ Employee Stock Purchase Plan, which takes into account the March 2008 reduction of 600,000 shares available under the Employee Stock Purchase Plan.

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

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

Item 14. Principal Accounting Fees and Services

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

92

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:

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

93

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

94

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

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

* Indicates a management contract or compensatory plan or arrangement

95

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 24, 2009
/s/ W. David Morgan W. David Morgan	Interim Chief Financial Officer (Principal Financial and Accounting Officer)	February 24, 2009
/s/ Dan L. Crippen Dan L. Crippen	Director	February 24, 2009
/s/ John T. Casey John T. Casey	Director	February 24, 2009
/s/ Eugene V. Fife Eugene V. Fife	Director	February 24, 2009
/s/ Edward A. Kangas Edward A. Kangas	Director	February 24, 2009
/s/ Craig Macnab Craig Macnab	Director	February 24, 2009
/s/ Philip M. Pead Philip M. Pead	Director	February 24, 2009
/s/ Jay B. Pieper Jay B. Pieper	Director	February 24, 2009

96

EX-2.5

Exhibit 2.5

Execution Version

AGREEMENT AND PLAN OF MERGER

among

PREMISE CORPORATION,

THE STOCKHOLDER SIGNATORIES,

THE STOCKHOLDERS’ REPRESENTATIVE,

PANTHER ACQUISITION CORPORATION

and

ECLIPSYS CORPORATION

DATED AS OF DECEMBER 30, 2008

TABLE OF CONTENTS

		Page
ARTICLE I	DEFINITIONS	1
ARTICLE II	THE MERGER	17
2.1	The Merger	17
2.2	Closing; Effective Time	17
2.3	Effects of the Merger	18
2.4	Certificate of Incorporation and Bylaws	18
2.5	Directors; Officers	18
2.6	Subsequent Actions	18
2.7	Effect of Merger on the Capital Stock of Premise	19
2.8	Dissenting Shares	20
2.9	Payment for Shares, Company Options and Company Warrants	20
2.10	Calculation of Closing Date Net Working Capital, Closing Payment and Final Adjustments	25
2.11	Dispute Resolution of Calculation of Net Working Capital, the Closing Date Cash or the Closing Date Debt	27
2.12	Approval	28
ARTICLE III	REPRESENTATIONS AND WARRANTIES OF THE MAJOR STOCKHOLDERS	28
3.1	Ownership of the Shares, Company Options and Company Warrants	28
3.2	Authorization, Validity and Effect of Agreements	28
3.3	No Violations; Consents	29
3.4	Related Party Transactions	29
3.5	No Brokers	30
3.6	Disclosure	30
ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF PREMISE	31
4.1	Premise Existence; Good Standing	31
4.2	Subsidiaries	31
4.3	Capitalization	31
4.4	Material Contracts; No Violation	32
4.5	Financial Statements; No Undisclosed Liabilities	35
4.6	Authority; No Violations; Consents	36
4.7	Compliance; Permits; Litigation	37
4.8	Absence of Certain Changes	39
4.9	Taxes	40
4.10	Certain Employee Plans	42
4.11	Labor Matters	44
4.12	Restrictions on Business Activities	45
4.13	Real Property	46
4.14	Intellectual Property	46
4.15	Other Assets	53

i

4.16	Environmental Matters	54
4.17	Insurance	54
4.18	Warranties	55
4.19	Customers; Suppliers	56
4.20	Accounts Receivable	57
4.21	Accounts Payable	57
4.22	Bank Accounts	58
4.23	No Brokers	58
4.24	Disclosure	58
ARTICLE V	REPRESENTATIONS AND WARRANTIES OF ECLIPSYS AND MERGER SUB	58
5.1	Existence; Good Standing; Corporate Authority	58
5.2	Authorization, Validity, and Effect of Agreements	59
5.3	No Violation	59
5.4	Legal Proceedings; Orders	59
5.5	No Brokers	60
5.6	Funds	60
ARTICLE VI	COVENANTS	60
6.1	Conduct of Business	60
6.2	Further Action	63
6.3	Access to Information	65
6.4	Publicity	65
6.5	Expenses	65
6.6	Third-Party Offers	66
6.7	Restrictive Covenants	68
6.8	Directors	70
6.9	Stockholders’ Representative	71
6.10	Employee Matters	73
6.11	Release	74
6.12	Confidentiality	75
6.13	Covenants Regarding Contracts	77
6.14	Stockholder Notices	77
6.15	Indemnification of Directors and Officers	78
6.16	Termination of 401(k) Plan	78
6.17	Amendment to the Premise 2004 Plan	79
6.18	Collection of Grady Receivable	79
6.19	Post-Closing Software Development	79
ARTICLE VII	SURVIVAL; INDEMNIFICATION; REMEDIES	82
7.1	Survival of Representations and Warranties and Covenants	82
7.2	Indemnification and Other Rights	82
7.3	Time Limitations	85
7.4	Other Limitations	86
7.5	Procedures Relating to Indemnification Involving Third-Party Claims	89
7.6	Other Claims	91

ii

7.7	Set-Off	91
7.8	Recovery in the Case of Strict Liability or Negligence	92
7.9	Sole and Exclusive Remedy	92
ARTICLE VIII	CONDITIONS	93
8.1	Conditions to Each Party’s Obligation to Effect the Closing	93
8.2	Conditions to Obligations of Eclipsys	94
8.3	Conditions to the Obligations of Premise and the Stockholders	96
ARTICLE IX	TERMINATION	97
9.1	Termination by Mutual Consent	97
9.2	Termination by Eclipsys or Premise	97
9.3	Termination by Premise	98
9.4	Termination by Eclipsys	98
9.5	Effect of Termination	99
ARTICLE X	TAX MATTERS	100
10.1	Responsibility for Filing Tax Returns	100
10.2	Cooperation on Tax Matters	100
10.3	Tax-Sharing Agreements	101
10.4	Certain Taxes and Fees	101
10.5	Refunds or Credits	101
10.6	Amended Tax Returns	101
ARTICLE XI	MISCELLANEOUS	102
11.1	Entire Agreement; Assignment	102
11.2	Validity	102
11.3	Notices	103
11.4	Governing Law	104
11.5	Construction	104
11.6	Counterparts	104
11.7	Parties In Interest	104
11.8	Prior Review and Counsel	104
11.9	Waiver	105
11.10	Amendments	105
11.11	Specific Performance	105
11.12	Cumulative Remedies	105
11.13	Arbitration	105
11.14	Costs and Fees	107
11.15	Counsel to Premise	107
11.16	Disclosure Schedule	107

iii

EXHIBITS
Exhibit A	Form of Certificate of Merger
Exhibit B	Form of Escrow Agreement
Exhibit C	Form of Paying Agency Agreement
Exhibit D-1	Form of Employment Agreement
Exhibit D-2	Key Employee Details
Exhibit E	Form of Legal Opinion
Exhibit F	Form of Termination Agreement
SCHEDULES
Schedule 1(a)	Key Employees
Schedule 1(b)	Severance Obligations
Schedule 1(c)	Institutional Major Stockholder Knowledge Group
Schedule 2.9(b)(i)	Employee Option Holders
Schedule 2.9(b)(ii)	NonEmployee Option Holders
Schedule 2.9(e)	General Release
Schedule 2.10	Hypothetical Calculation-Closing Date Net Worth
Schedule 2.10(b)	Estimated Closing Date Net Working Capital, Estimated Closing Date Cash and Estimated Closing Date Debt
Schedule 5.10	Premise Broker Fees and Expenses
Schedule 6.10(a)	Unused Vacation Benefits
Schedule 6.13	Seller Transaction Expenses to be Paid by Eclipsys at Closing
Schedule 6.16	Company 401(k) Plan Termination Resolution
Schedule 6.17(a)	Amendment to Premise 2004 Plan
Schedule 6.19(i)	Development Activity Categories and Development Plan
Schedule 6.19(ii)	Development Staffing Plan
Disclosure Schedule
Section 3.1	Ownership of the Shares
Section 4.1	Foreign Jurisdictions
Section 4.3(a)(i)	Shares, Options and Warrants
Section 4.3(c)	Convertible Debt
Section 4.3(d)	Breach of Certificate of Incorporation
Section 4.4(a)	Material Contracts
Section 4.4(b)(ii)	Performance of Material Obligations by Premise
Section 4.4(b)(iii)	Performance of Material Obligations by Other Party
Section 4.4(b)(iv)	Notice of Alleged Breach
Section 4.4(c)	Consummation of Merger
Section 4.5(a)	Financial Statements
Section 4.7(b)	Permits
Section 4.7(d)(i)	Litigation
Section 4.8	Absence of Certain Changes
Section 4.10(a)	Company Benefit Plans
Section 4.10(e)	Acceleration

iv

Section 4.10(g)	409A
Section 4.11(b)(i)	Employees
Section 4.11(b)(ii)	Independent Contractors
Section 4.11(b)(iii)	Former Employee Benefits
Section 4.13(a)	Leased Real Property
Section 4.14(a)(i)	Company Scheduled IP
Section 4.14(a)(vi)	Material Information
Section 4.14(b)	Company Licensed IP
Section 4.14(c)	Material Software and Software Documentation
Section 4.14(e)	Software Escrow Contracts
Section 4.14(f)(i)	Planned Products
Section 4.14(j)	Open Source
Section 4.14(o)	Consummation of the Transaction
Section 4.14(m)	Software Incorporating Encryption Subroutines
Section 4.15(a)	Liens
Section 4.17(a)	Insurance
Section 4.17(b)(i)	Termination of Insurance Policies
Section 4.17(b)(ii)	Retrospective Premium Adjustment
Section 4.17(c)	Material Open Claims
Section 4.18(a)	Warranty Claims
Section 4.18(b)	Documentation
Section 4.18(c)(ii)	Customer Cancellations
Section 4.18(d)(ii)	Future Services Without Payment
Section 4.18(d)(iii)	Specific Results or Outcomes
Section 4.18(d)(v)	Delivery Commitments
Section 4.19(a)	Customer Contracts for License of Software
Section 4.19(c)	Suppliers
Section 4.20	Accounts Receivable
Section 4.21	Accounts Payable
Section 4.22	Bank Accounts

v

AGREEMENT AND PLAN OF MERGER

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

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

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

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

ARTICLE I

DEFINITIONS

As used in this Agreement:

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

“Accounts Payable” means all accounts payable of Premise.

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

“ADP” is defined in Section 2.9(b).

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

“Aggregate Exercise Price” means the aggregate exercise price of all outstanding Company Options and Company Warrants.

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

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

“Agreement” is defined in the introductory paragraph.

“BSD” is defined in Section 4.14(j).

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

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

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

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

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

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

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

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

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

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

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

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

2

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Costs and fees” is defined in Section 11.14.

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

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

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

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

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

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

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

“Development Activity Category” is defined in Section 6.19.

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

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

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

“Dissenting Shares” is defined in Section 2.8.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Fraud” means fraud or intentional misrepresentation or omission.

“GAAP” means United States generally accepted accounting principles.

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

“GPL” is defined in Section 4.14(j).

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“Grady” means Grady Health System.

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

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

“Gravina Software Development Bonus” means a cash bonus payable to Craig Gravina in an amount not to exceed $100,000, from the Stockholders’ Fund, if any funds are paid from the Software Development Escrow Fund into such fund. Such bonus will be payable on the terms and conditions set forth in that certain letter agreement, among Premise, the Stockholders’ Representative and Craig Gravina, dated December 30, 2008, and will be based on and in proportion to the achievement of Premise of the Development Plans consistent with the Staffing Plan.

“Hartford Addendum” means the 2^nd Addendum entered into by Premise and Hartford Hospital on December 2, 2008, as an addendum to the Proposal to Implement an EVA/PSA Dashboard and the Transport Dashboard Agreement, dated January 18, 2005.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Merger” is defined in the recitals.

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

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

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

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

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

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

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

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

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

“Option Instruments” means any instrument representing Company Options.

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

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

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

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

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

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

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

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

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

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

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

“POR” is defined in Section 6.19(a).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Stockholders’ Representative” is defined in Section 6.9.

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

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

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

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

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

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

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“Surviving Corporation” is defined in Section 2.1.

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

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

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

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

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

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

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

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

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

“Unrelated Accounting Firm” is defined in Section 2.11.

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

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

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

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

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

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

ARTICLE II

THE MERGER

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

2.2 Closing; Effective Time

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

(b) As soon as practicable on the Closing Date, and immediately prior to the Closing, the parties shall cause a certificate of merger substantially in the form attached as Exhibit A (the “Certificate of Merger”) to be executed and filed with the Secretary of State of the State of Delaware.

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

2.3 Effects of the Merger.

(a) The Merger shall have the effects provided for herein and in the applicable provisions of the Delaware General Corporation Law.

(b) At the Effective Time, each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one (1) validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation. Each stock certificate of Merger Sub evidencing ownership of any such shares of common stock of Merger Sub shall thereafter evidence ownership of such shares of common stock of the Surviving Corporation.

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

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

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

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2.7 Effect of Merger on the Capital Stock of Premise.

(a) Notwithstanding anything to the contrary in this Section 2.7, at the Effective Time, by virtue of the Merger and without any action on the part of Eclipsys, Merger Sub or Premise, each Share that is held by Eclipsys, Premise or any Subsidiary of Eclipsys or Premise immediately prior to the Effective Time, shall be cancelled and extinguished without any consideration paid therefor or in respect thereof.

(b) Notwithstanding anything to the contrary in this Section 2.7, at the Effective Time, Dissenting Shares shall be treated in accordance with Section 2.8.

(c) Subject to Section 2.7(g), at the Effective Time, by virtue of the Merger and without any action on the part of Eclipsys, Merger Sub, Premise or the Stockholders, each Share that is issued and outstanding immediately prior to the Effective Time (other than any Dissenting Shares and any Shares cancelled pursuant to Section 2.7(a)) shall be cancelled and extinguished and shall be converted automatically into the right to receive, subject to the terms and conditions set forth in this Agreement, the following consideration (without interest):

(i) each share of Series B Preferred Stock shall be converted into the right to receive an amount equal to the sum of (A) $8.16 in cash, plus an amount equal to any accrued and unpaid dividends thereon (the “Series B Liquidation Preference”), (B) the Per Share Common Consideration, and (C) the Per Share Escrow Amount; and

(ii) each share of Company Common Stock shall be converted into the right to receive an amount equal to the sum of (A) the Per Share Common Consideration and (B) the Per Share Escrow Amount.

(d) Subject to Section 2.7(g), at the Effective Time, each Company Closing Payment Option then outstanding shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and converted without exercise only into and, subject to the terms and conditions set forth in this Agreement, represent only the right to receive, with respect to each share of Company Common Stock then subject to purchase under such Company Closing Payment Option, an amount equal to the sum of cash equal to (without interest):

(i) the Per Share Common Consideration less the exercise price per share of such Company Option (such difference, the “Option Consideration”); and

(ii) the Per Share Escrow Amount.

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(e) Subject to Section 2.7(g), at the Effective Time, each Company Warrant then outstanding shall by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and converted without exercise only into and, subject to the terms and conditions set forth in this Agreement, represent only the right to receive (without interest), with respect to:

(i) each share of Company Common Stock then subject to purchase under such Company Warrant, an amount equal to the sum of cash equal to (A) the Per Share Common Consideration less the exercise price per share of such Company Warrant and (B) the Per Share Escrow Amount; and

(ii) each share of Series B Preferred Stock then subject to purchase under such Company Warrant, an amount equal to the sum of (A) the sum of the Series B Liquidation Preference and Per Share Common Consideration less the exercise price per share of such Company Warrant and (B) the Per Share Escrow Amount.

(f) At the Effective Time, each Company Deferred Payment Option then outstanding shall be treated as set forth in Sections 2.9(e) and 6.17.

(g) All Merger Consideration payable to an Effective Time Company Holder at any time pursuant to the foregoing provisions shall be aggregated with all other Merger Consideration payable to such Effective Time Company Holder at such time and rounded to the nearest whole cent. Escrow Merger Consideration and payments out of the Software Development Escrow Fund, if any, shall be paid to the Effective Time Company Holders in their Pro Rata Portion (rounded to the nearest whole cent), as set forth in the Escrow Agreement.

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

2.9 Payment for Shares, Company Options and Company Warrants.

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

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(ii) At or prior to the Effective Time, Eclipsys shall, or shall cause the Surviving Corporation to, make available to the Paying Agent, for the benefit of the holders of the Company Deferred Payment Options, the Deferred Payment Amount.

(iii) The “Closing Payment” shall be an amount equal to (A) the Estimated Purchase Price, less (B) the Holdback Amount, less (C) the Dissenting Share Amount, less (D) the Aggregate Option Consideration.

(iv) The “Deferred Payment Amount” shall be an amount equal to the aggregate amount of Option Consideration payable in respect of Company Deferred Payment Options pursuant to Section 2.7(f).

(v) The Closing Payment shall be held by the Paying Agent in accordance with the Paying Agency Agreement for the benefit of Eclipsys or the Surviving Corporation, as the case may be, pending payment therefor by the Paying Agent to the Effective Time Company Holders (other than the holders of Company Closing Payment Options, in their capacity as such). The Deferred Payment Amount shall be held by the Paying Agent in accordance with the Paying Agency Agreement for the benefit of Eclipsys or the Surviving Corporation, as the case may be, pending payment therefor by the Paying Agent to the holders of Company Deferred Payment Options. Earnings from any investment of the Closing Payment or the Deferred Payment Amount pursuant to the Paying Agency Agreement shall be the sole and exclusive property of Eclipsys or the Surviving Corporation, as the case may be, and no part thereof shall accrue to the benefit of Effective Time Company Holders.

(vi) If any Shares become Dissenting Shares after the payment by Eclipsys or the Surviving Corporation to the Paying Agent of the Closing Payment, Eclipsys may instruct the Paying Agent to, and the Paying Agent shall promptly upon receipt of such instruction, remit to Eclipsys the portion of the Closing Payment allocable to such Dissenting Shares.

(b) At or immediately following the Effective Time, Eclipsys shall deposit with the Surviving Corporation the Aggregate Option Consideration payable in respect of all Company Closing Payment Options and the Surviving Corporation shall, as promptly as practicable, pay (i) to Automatic Data Processing, Inc. (“ADP”) the Aggregate Option Consideration payable in respect of Company Closing Payment Options held by each Option Holder listed on Schedule 2.9(b)(i) (the “Employee Option Holders”), and (ii) to each Option Holder listed on Schedule 2.9(b)(ii) (the “NonEmployee Option Holders”), the Option Consideration payable in respect of each share of Company Common Stock then subject to purchase under the Company Closing Payment Options of such NonEmployee Option Holder (net of any applicable tax withholding). The Surviving Corporation shall use all commercially reasonable efforts to cause ADP to pay, as promptly as practicable, to each Employee Option Holder, the Option Consideration with respect to each share of Company Common Stock then subject to purchase under the Company Closing Payment Options of such Employee Option Holder (net of applicable tax withholding).

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

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

(e) As promptly as practicable after the Closing Date, Eclipsys or the Surviving Corporation shall cause the Paying Agent to mail to each holder of Company Deferred Payment Options a notice describing the payment terms for such options, including an ability to elect to execute a general release in the form attached as Schedule 2.9(e), in the event the holder thereof elects to execute and accelerate payment for such options. If, on any day prior to the 60th day after the Closing Date, the Paying Agent receives a general release from a holder of Company Deferred Payment Options in the form of Schedule 2.9(e) (which has not been revoked

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by such holder within seven days after the date of such release), the holder of such Company Deferred Payment Options shall become entitled to receive (as promptly as practicable after such seven day period), the consideration specified in Section 2.7(f) in respect of such Company Deferred Payment Options (without interest thereon). Payment pursuant to this Section 2.9(e) shall be made by the Paying Agent from the Deferred Payment Amount. Promptly following the date that is 60 days after the Closing Date (plus any unexpired revocation period with respect to a general release received prior to such date), Eclipsys shall be entitled to require the Paying Agent to deliver to it any portion of the Deferred Payment Amount that has not been disbursed to holders of Company Deferred Payment Options. Promptly following the first anniversary of the Closing Date, the holders of Company Deferred Payment Options that did not provide an unrevoked general release to the Paying Agent as provided in this Section 2.9(e) shall become entitled to receive from Eclipsys the consideration specified in Section 2.7(f) in respect of such Company Deferred Payment Options (without interest thereon). The interests of a holder of Company Deferred Payment Options in any portion of the Deferred Payment Amount payable to such holder shall not be assignable or transferable, whether directly, indirectly or by operation of law, except in the event of death of such holder to such holder’s estate, personal representative or heirs by will or the laws of descent and distribution; provided, however, that as a condition to any such transfer the transferee(s) shall hold such interests subject to the terms and conditions of this Agreement and the Premise 2004 Plan and the transferee(s) shall execute and deliver to Eclipsys an agreement in form and substance satisfactory to Eclipsys agreeing to be bound by the terms and conditions of this Agreement and the Premise 2004 Plan.

(f) At the Effective Time, the stock transfer books of Premise shall be closed and there shall thereafter be no further registration of transfers of any Shares, Company Options or Company Warrants, or any conversion or exercise thereof. If, after the Effective Time, a Certificate or Instrument (other than a Certificate representing Shares described in Section 2.7(a)) is presented to the Surviving Corporation, it shall be cancelled and exchanged as provided in this Section 2.9 (subject to Section 2.8 with regard to Dissenting Shares).

(g) All Merger Consideration paid upon conversion of the Company Capital Stock, Company Options and Company Warrants in accordance with the terms of this Article II, subject to adjustment as set forth in Section 2.10, shall be deemed to have been paid in full satisfaction of all rights pertaining to such Company Capital Stock, Company Options and Company Warrants. From and after the Effective Time, the holders of Certificates and Instruments shall cease to have any rights with respect to the Company Capital Stock, Company Options and Company Warrants represented thereby, except as otherwise provided herein or by applicable law.

(h) If any Certificate (other than a Certificate representing Dissenting Shares) or Instrument shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the holder thereof, and delivery of a duly executed letter of transmittal, in the case of Shares and Company Warrants, the Surviving Corporation shall pay or cause to be paid in exchange for such lost, stolen or destroyed Certificate or Instrument the relevant portion of the Merger Consideration payable in respect thereof pursuant to Section 2.7 for the Shares, Company Options or Company Warrants represented thereby; provided, however, that the Surviving Corporation or the Paying Agent may, in their discretion, require the delivery of a satisfactory indemnity.

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(i) Promptly following the date that is 180 days after the Effective Time, Eclipsys shall be entitled to require the Paying Agent to deliver to it any funds and other property (including any interest or other income received with respect thereto) that had been made available to the Paying Agent and that have not been disbursed to Effective Time Company Holders, and any Certificates, Warrant Instruments or other documents relating to the Merger in its possession, and thereafter such holders shall be entitled to look to Eclipsys only as general creditors thereof with respect to any portion of the Merger Consideration payable upon due surrender of their Certificates or Warrant Instruments, without interest. Notwithstanding anything to the contrary in this Section 2.9, to the fullest extent permitted by Legal Requirements, none of the Paying Agent, Eclipsys or the Surviving Corporation shall be liable to any holder of a Certificate or Instrument for any amount properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Legal Requirements.

(j) The amount of the Merger Consideration payable to holders of Shares, the Company Warrants and the Company Options and any other applicable numbers or amounts shall be adjusted as necessary to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Shares), reorganization, recapitalization, reclassification or other like change with respect to Company Capital Stock occurring or having a record date on or after the date hereof and prior to the Effective Time.

(k) Eclipsys, the Surviving Corporation, the Escrow Agent, the Paying Agent and ADP shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement or the Escrow Agreement to any holder or former holder of Company Capital Stock, Company Option or Company Warrant such amounts as may be required to be deducted or withheld therefrom under the Code, or any provision of state, local or foreign Tax law or under any applicable Legal Requirement. To the extent that amounts are so deducted or withheld, such amounts shall be treated for all purposes of this Agreement as having been paid to the holders in respect of whom such deduction and withholding were made and shall be duly and timely paid to the proper Governmental Entity.

2.10 Calculation of Closing Date Net Working Capital, Closing Payment and Final Adjustments.

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

(ii) Each line item component or subcomponent of the Current Assets, Current Liabilities, the Final Closing Date Debt, the Estimated Closing Date Debt, the Final Closing Date Cash and the Estimated Closing Date Cash shall be calculated in conformity with GAAP.

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(iii) For purposes of calculating the Current Assets, the Current Liabilities, the Final Closing Date Net Working Capital, the Estimated Closing Date Net Working Capital, the Final Closing Date Debt and the Estimated Closing Date Debt, such calculation shall not take into account the impact of any purchase accounting adjustments relating to Eclipsys’s acquisition of Premise, including any write-up or write-down of assets or liabilities resulting from such purchase accounting.

(iv) At least two Business Days prior to the Closing Date, Premise shall provide Eclipsys with its good faith estimate of the Seller Transaction Expenses that are unpaid as of such date.

(b) Prior to the execution of this Agreement, Premise delivered to Eclipsys its good faith calculations of the Estimated Closing Date Net Working Capital, the Estimated Closing Date Cash and the Estimated Closing Date Debt as set forth on Schedule 2.10(b), and Eclipsys accepted such calculations. For purposes of calculating the Closing Payment, Estimated Closing Date Net Working Capital, Estimated Closing Date Cash and Estimated Closing Date Debt shall be as set forth on Schedule 2.10(b).

(c) (i) Within 60 days following the Closing, Eclipsys shall prepare and deliver to the Stockholders’ Representative a balance sheet of Premise as of the Closing Date showing Eclipsys’ good faith determination of the Final Closing Date Net Working Capital, the Final Closing Date Cash and the Final Closing Date Debt (the “Eclipsys Final Calculations”).

(ii) On or before the date which is 15 days after the date of Eclipsys’ delivery to the Stockholders’ Representative of the Eclipsys Final Calculations, the Stockholders’ Representative shall deliver to Eclipsys a notice of objection, stating in reasonable detail the grounds for such objection and signed by the Stockholders’ Representative (an “Objection Notice”), or a notice of acceptance signed by the Stockholders’ Representative (an “Acceptance Notice”), with respect to the Eclipsys Final Calculations. Eclipsys shall provide the Stockholders’ Representative and any accountants and other representatives engaged by the Stockholders’ Representative, upon reasonable advance notice, access to such books and records of Premise relating to the Eclipsys Final Calculations as may be reasonably requested by the Stockholders’ Representative.

(iii) The Eclipsys Final Calculations shall be final and binding on the parties if an Acceptance Notice is delivered to Eclipsys or if no Objection Notice is delivered to Eclipsys with respect to such amounts within the 15-day period required by Section 2.10(c)(ii). If an Objection Notice is delivered, the potential dispute with respect to the Eclipsys Final Calculations shall be resolved as set forth in Section 2.11, and the Final Closing Date Net Working Capital, the Final Closing Date Cash or the Final Closing Date Debt, to the extent in dispute, determined pursuant to such procedures, in addition to the undisputed amounts, shall be final and binding on the parties.

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

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

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

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

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE MAJOR STOCKHOLDERS

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

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

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

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3.3 No Violations; Consents.

(a) The execution and delivery by such Major Stockholder of this Agreement, and the other Transaction Documents to which such Major Stockholder is a party and the consummation of the transactions contemplated herein and therein in accordance with the terms hereof and thereof do not and will not (i) violate any settlement agreement, Order or material Legal Requirement applicable to such Major Stockholder, or such Major Stockholder’s properties or assets, or (ii) violate, or conflict with, or result in a material breach of any provision of, or constitute a material default (or an event which, with notice or lapse of time or both, would constitute a material breach or default) under, any of the terms, conditions or provisions of any Contract to which such Major Stockholder is a party or by which such Major Stockholder’s assets or properties are bound (including the Shares).

(b) Except as has been obtained, no Consent is required to be made by or with respect to such Major Stockholder in connection with the execution, delivery and performance of this Agreement and the other Transaction Documents, or the consummation of the transactions contemplated hereby and thereby.

(c) There are no pending or, to the Knowledge of such Major Stockholder, Threatened lawsuits, arbitrations, proceedings, investigations or other claims against such Major Stockholder that would be reasonably expected to prevent or materially alter or delay the transactions contemplated by this Agreement and the other Transaction Documents.

(d) If the Major Stockholder is not an individual, neither the execution and delivery by such Major Stockholder of this Agreement or the other Transaction Documents, nor the consummation by such Major Stockholder of the transactions contemplated herein and therein in accordance with the terms hereof and thereof, will conflict with or result in a breach of any provisions of its articles of incorporation or bylaws, trust agreement or other governing documents.

(e) There is no pending proceeding by or against such Major Stockholder, or its officers and directors (as such), that challenges or, to the Knowledge of such Major Stockholder, that may have the effect of preventing, delaying, making illegal or otherwise materially interfering with the Merger and any other transactions contemplated in this Agreement. To the Knowledge of such Major Stockholder, no such proceeding has been Threatened.

3.4 Related Party Transactions. Except, if such Major Stockholder is an Institutional Major Stockholder, for commercial or financial transactions negotiated at arms’ length to provide products, services or financing to Premise or any officer, director or employee (including for such purposes persons filling a similar function) of Premise or any other Person on terms and conditions and other trade terms generally available to other customers of such Major Stockholder:

(a) Neither such Major Stockholder nor any Affiliate or any immediate family member thereof:

(i) has, or at any time since January 1, 2007 had, any interest in any assets or property (whether real, personal, or mixed and whether tangible or intangible), used by Premise, or otherwise used in or pertaining to the Business;

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(ii) owns, or at any time since January 1, 2007 has owned (of record or as a beneficial owner) Capital Stock or other financial interest in, any Person that (A) has, or at any time since January 1, 2007 had, business dealings with Premise or a material financial interest in any transaction with Premise, or (B) is, or at any time since January 1, 2007 has, engaged in activities that are, or could reasonably be expected to become, competitive with the Business, except in each case for (1) the acquisition of Company Capital Stock, or (2) ownership (of record or as a beneficial owner) of less than one percent (1%) of the outstanding capital stock of any Person that is publicly traded on any national or foreign stock exchange, or the over-the-counter market; provided, however, that (x) with respect to the matters in clause (A), any Institutional Major Stockholder makes such representation or warranty solely to the Knowledge of such Major Stockholder, and (y) no Institutional Major Stockholder makes any representation or warranty with respect to any matter in clause (B) above; or

(iii) is, or since January 1, 2007 was, a party to any Contract with, or has any claim or right against, Premise, with the exception of the Stockholder Agreements and agreements to purchase Shares, all of which have been fully performed or will be extinguished on or before the Effective Time.

(b) There are no Contracts between (A) such Major Stockholder, or his or its Affiliates (other than Premise), or, if applicable, any immediate family member of such Major Stockholder, on the one hand, and (B) to the Knowledge of such Major Stockholder, any officer, director or employee (including for such purposes persons filling a similar function) of Premise, on the other hand.

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

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

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PREMISE

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

4.1 Premise Existence; Good Standing. Premise is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Premise is licensed or qualified to do business as a foreign corporation and in good standing in each of the jurisdictions listed on Section 4.1 of the Disclosure Schedule, except where the lack of such license or qualification would not reasonably be expected to have a Material Adverse Effect. Premise is not required to be licensed or qualified to do business as a foreign corporation under the laws of any other jurisdiction, except where the lack of such license or qualification would not reasonably be expected to have a Material Adverse Effect. Premise has all requisite corporate power and authority to own, operate and lease its properties and assets and carry on its business as now conducted. The copies of the Premise Certificate of Incorporation and Bylaws of Premise previously delivered, or made available, to Eclipsys are true, correct and complete, and such documents are in full force and effect and have not been supplemented or amended since they were delivered or made available to Eclipsys.

4.2 Subsidiaries. Premise does not hold, nor has it ever held, directly or indirectly, any Capital Stock of any other Person. There are no obligations or other Contracts, contingent or otherwise, of Premise to make any investment (in the form of a loan, capital contribution or otherwise) in any other Person.

4.3 Capitalization.

(a) The authorized Capital Stock of Premise consists solely of 2,469,154 shares of Company Common Stock, of which 863,981 shares are issued and outstanding on the date hereof, and 1,097,827 shares of preferred stock, of which (i) 47,058 shares are designated as Series A Preferred Stock, of which no shares are issued and outstanding on the date hereof, and (ii) 1,050,769 shares are designated as Series B Preferred Stock, of which 1,022,232 shares are issued and outstanding on the date hereof. The Shares, Company Options and Company Warrants are held of record by the Persons and in the amounts set forth in Section 4.3(a)(i) of the Disclosure Schedule, and except as set forth therein, there is no Capital Stock of Premise outstanding. The parties acknowledge that the outstanding shares set forth above may change prior to the Closing Date as a result of conversion of shares of Series B Preferred Stock outstanding on the date hereof according to the terms of such preferred stock or exercise of the Company Options and Company Warrants outstanding on the date hereof according to terms of such Company Options or Company Warrants, as the case may be, in each case for shares of Company Common Stock or Series B Preferred Stock, and Premise agrees to provide the Capitalization Update on or before the Closing Date, which shall set forth an accurate and complete update of all such changes through the Closing Date, arising after the date hereof in the holders of Premise Capital Stock, or the number and class of shares of Premise Capital Stock held by any such holder. Except for the Stockholder Agreements and the Company Options and Company Warrants set forth in Section 4.3(a)(i) of the Disclosure Schedule, and the rights granted to Eclipsys and Merger Sub under this Agreement, there are no outstanding obligations

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of Premise, contingent or otherwise, to issue, sell or transfer or repurchase, redeem or otherwise acquire, or that relate to the holding, voting or disposition of, or that restrict the transfer of, the issued or unissued Capital Stock of Premise. Each share of Series B Preferred Stock is convertible into one share of Company Common Stock. All repurchases of Company Capital Stock have been conducted in compliance with all Legal Requirements and the Stockholder Agreements.

(b) All issued and outstanding Shares are duly authorized, validly issued, fully paid and nonassessable, and none of such Shares has been issued in violation of or, except as specified in the Investor Rights Agreement and Co-Sale and Transfer Agreement, is subject to, any option, call, right of first refusal, preemptive, subscription or similar right. Except for the Company Options set forth in Section 4.3(a)(i) of the Disclosure Schedule and the Company Warrants set forth in Section 4.3(a)(i) of the Disclosure Schedule, there are no options, warrants, calls, subscriptions, convertible securities, convertible debt or other rights or other Contracts which obligate Premise to issue, or Premise or any of the Stockholders to transfer, any Capital Stock of Premise. The outstanding Company Capital Stock has been issued in compliance with all applicable Legal Requirements.

(c) Premise does not have, and has not ever had, any outstanding bonds, debentures, notes or other obligations, the holders of which have the right to vote (or which are convertible into or exercisable or exchangeable for securities having the right to vote) with its Stockholders on any matter and there are no, and have never been any, equity equivalent interests in the ownership or earnings, or distributions upon liquidation or sale of assets, of Premise.

(d) Premise is not in default or breach (and no event has occurred which with notice or lapse of time or both, would constitute a breach or default) of any term or provision of the Premise Certificate of Incorporation or its Bylaws.

4.4 Material Contracts; No Violation.

(a) Except for the Contracts listed in Section 4.4(a) of the Disclosure Schedule, Premise is not a party to, and none of its assets or properties is bound by, any:

(i) Contract that involves performance of services or delivery of Software or other products of Premise or any other Person, except for Contracts providing for payments by or to Premise of less than $25,000 annually or $100,000 in the aggregate;

(ii) Contract with or obligation to any Governmental Entity, including but not limited to development agreements;

(iii) Contract for the future purchase of materials, services or equipment (A) with a future Liability potentially in excess of $25,000 annually or $100,000 in the aggregate, or (B) that are not cancelable by Premise on no more than 60 days’ notice without liability, penalty or premium;

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(iv) license, option, escrow agreement or other Contract relating in whole or in part to Company IP, other than licenses contained in Contracts entered into in the ordinary course of business, consistent with past practice, with resellers and other customers of Premise for the delivery of Software or other products of Premise;

(v) lease, sublease or similar Contract under which (A) it is a lessor or sublessor of real property owned by any other Person, or makes available for use to any Person, any portion of any premises otherwise occupied, leased or subleased by it or (B) it is a lessee or sublessee of, or holds or uses any real property owned by any other Person;

(vi) lease, sublease or similar Contract under which (A) it is a lessee or sublessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by any Person or (B) it is a lessor or sublessor of, or makes available for use by any Person, any tangible personal property owned or leased by it, except in each case for Contracts providing for payments by or to Premise of less than $25,000 annually or $100,000 in the aggregate;

(vii) Contract with any of its officers, directors or employees (including for such purposes persons filling a similar function) or any of its former officers, directors or employees (including for such purposes persons filling a similar function), including employee policies of Premise (including any severance pay or change in control agreement or policy of Premise to provide such payments, and whether such payments are payable upon a termination that is voluntary or nonvoluntary);

(viii) employee collective bargaining agreement or other Contract with any labor union;

(ix) covenant not to compete or other Contract restricting, or imposing requirements related to, the conduct or location of its business, including any restriction on hiring or soliciting of employees (including for such purposes persons filling a similar function);

(x) management, consulting, financial advisory or other similar type of Contract;

(xi) Contract under which it has borrowed any money from, or issued any Debt to, any Person;

(xii) Contract under which it or any other Person has guaranteed Debt or other obligations directly or indirectly;

(xiii) Contract that grants or contemplates the granting of a security interest or other Lien in any of its assets or property;

(xiv) Contract not entered into in the ordinary course of business;

(xv) Contract providing for indemnification of any Person;

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(xvi) power of attorney;

(xvii) Tax sharing or Tax allocation agreement;

(xviii) joint venture or partnership agreement or similar Contract;

(xix) Contract (A) that commits Premise to make any fixed or contingent payment or expenditure or any related series of fixed or contingent payments or expenditures totaling more than $100,000 in the aggregate, or (B) that does not terminate pursuant to its terms within one year of the date hereof, and is not cancelable by Premise within one year without liability, penalty or premium;

(xx) Contract providing for the purchase or other acquisition of any business or operations of another Person, whether through merger, stock purchase, asset purchase or otherwise;

(xxi) Contract to which the Company and one or more of the Stockholders are parties; or

(xxii) any other Contract that is material to it that is not otherwise listed in Section 4.4(a) of the Disclosure Schedule.

The Contracts listed on Section 4.4(a) of the Disclosure Schedule, or required to be listed thereon, are referred to herein as the “Material Contracts.”

(b) (i) Each of the Material Contracts is valid, binding and in full force and effect and is enforceable against Premise, and to the Knowledge of Premise, the other parties thereto, in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or other similar laws relating to creditors’ rights and general principles of equity, whether in equity or at law, (ii) Premise has performed all material obligations required to be performed by it under the Material Contracts and it is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder, (iii) to the Knowledge of Premise, (A) no other party to any Material Contract is (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder, and (B) without limiting the representation contained in clause (ii), no event has occurred or circumstance or condition exists (with or without the lapse of time or the giving of notice, or both) that may contravene, conflict with or result in a violation or breach of any Material Contract, result in the termination or in a right of termination or cancellation of, or accelerate the performance required by, or result in the triggering of any payment obligations under, or result in the creation of any Lien upon any of the assets or properties of Premise under, or result in being declared void, voidable or without further binding effect, or result in any other modification of or trigger any right or obligation under, any Material Contract or provisions thereof, (iv) no party to any Material Contract has given any written notice of an alleged breach thereof or otherwise, to the Knowledge of Premise, Threatened such a breach and (v) Premise has not received any written notice that any party to any Material Contract intends to cancel or terminate such Material Contract, to renegotiate such Material Contract, or to exercise or not exercise any options thereunder, and, to the Knowledge of Premise, no such intent to cancel, terminate, renegotiate or exercise has been otherwise Threatened.

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(c) Neither the execution and delivery by Premise of this Agreement and the other Transaction Documents, nor the consummation of the Merger and any other transactions contemplated herein and therein in accordance with the terms hereof and thereof, will violate, or conflict with, or result in a breach of any provision of, or constitute a material default (or an event that, with notice or lapse of time or both, would constitute a breach or default) under, or result in the termination or in a right of termination or cancellation of, or accelerate the performance required by, or result in the triggering of any payment obligations under, or result in the creation of any Lien upon any of the assets or properties of Premise under, or result in being declared void, voidable or without further binding effect, or result in any other modification of or trigger any right or obligation under, any Material Contract or provision thereof.

(d) No Consent of any party to a Material Contract is required in connection with the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the Merger, and the other transactions contemplated hereby and thereby.

(e) True, complete and accurate copies (or, as to oral Contracts, written summaries of the terms) of the Material Contracts entered into on or prior to the date hereof have been provided to Eclipsys, and true, complete and accurate copies (or, as to oral Contracts, written summaries of the terms) of any Material Contracts entered into after the date hereof and prior to or on the Closing Date will be provided to Eclipsys promptly after being so entered into. There are no terms of any Material Contract not set forth in the copies thereof provided to Eclipsys. The terms and conditions of all of the Material Contracts were negotiated at arm’s length.

4.5 Financial Statements; No Undisclosed Liabilities.

(a) Section 4.5(a) of the Disclosure Schedule sets forth true and complete copies of (i)(A) Premise’s balance sheet, and related statement of income, statement of cash flows and changes in stockholders equity as of and for the twelve-month periods ended February 28, 2005, compiled by Guilio D. Cessario, Certified Public Accountant, P.C., and (B) Premise’s balance sheet, and related statement of income, statement of cash flows and changes in stockholders equity as of and for the twelve-month periods ended December 31, 2007 and 2006, in each case audited by Fiondella, Milone & LaSaracina LLP, independent certified public accountants, with such accountant’s unqualified reports attached thereto (collectively, the financial statements under clauses (A) and (B), the “Year-End Financial Statements”), and (ii) Premise’s balance sheet and related statement of income and cash flows as of and for the eleven months ended November 30, 2008 (the “Interim Financial Statements”). The Year-End Financial Statements and the Interim Financial Statements are collectively referred to herein as the “Financial Statements”).

(b) The Financial Statements (i) were prepared by Premise in accordance with the books and records of Premise, (ii) are true, correct and complete in all material respects, (iii) reflect the consistent application of all accounting principles, practices and methods of Premise

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throughout the periods thereof, except as disclosed therein, and (iv) fairly present the financial condition and results of operation of Premise as of the dates and for the periods covered thereby, all in accordance with GAAP (consistently applied, except as disclosed therein), subject, in the case of the Interim Financial Statements, to the absence of notes and to normal year-end audit adjustments. The Financial Statements do not contain any material items of a special or nonrecurring nature, except as expressly stated therein. No financial statements of any other Person are required by GAAP to be included in the financial statements of Premise.

(c) There are no Liabilities of Premise other than: (i) Liabilities accrued on the balance sheet dated as of November 30, 2008; and (ii) current Liabilities incurred and unpaid since November 30, 2008 that have been incurred in the ordinary course of business consistent with past practice, are accrued on the balance sheet of Premise as of the Closing Date, and are included in the calculations of the Estimated Closing Date Debt, Estimated Closing Date Net Working Capital, Final Closing Date Debt and the Final Closing Date Net Working Capital, as applicable. Deferred revenue amounts indicated on the balance sheet dated as of November 30, 2008 do not, and the Current Liabilities will not, reflect reserves for Threatened claims against Premise or claims that, to the Knowledge of Premise, are likely to be made against Premise.

(d) Premise maintains a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements that are in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to the differences. None of the Stockholders or Premise have been advised by any independent certified public accountant of Premise that there is a significant deficiency or material weakness in the design or operation of Premise’s internal controls, except as set forth in the management letter of Fiondella, Milone & LaSaracina LLP, independent certified public accountants, to the Premise Audit Committee and management, dated June 30, 2008, each of which significant deficiencies and material weaknesses have been remediated.

4.6 Authority; No Violations; Consents.

(a) Premise has full corporate power and authority to execute and deliver this Agreement and each of the Transaction Documents to which it will be a party and, subject to obtaining approval of (i) holders of sixty-six percent (66%) of the outstanding Series B Preferred Stock, voting as a separate class, and (ii) holders of a majority of the outstanding shares of Company Common Stock and Series B Preferred Stock, voting together as a single class (collectively, the “Company Stockholder Approval”), to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Premise of this Agreement and each of the Transaction Documents to which Premise will be party and the consummation by Premise of the transactions contemplated hereby and thereby have been duly and validly authorized by the Board of Directors of Premise. Except for obtaining the Company Stockholder Approval, no other corporate proceedings on the part of Premise are necessary to authorize the execution, delivery or performance of this Agreement or any other Transaction Document or to consummate the

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transactions contemplated hereby and thereby. This Agreement has been, and upon their execution each of the other Transaction Documents to which Premise will be a party will have been, duly executed and delivered by Premise. This Agreement constitutes, and upon their execution each of the Transaction Documents to which Premise will be a party will constitute, the legal, valid and binding obligations of Premise, enforceable against Premise in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or other similar laws relating to creditors’ rights and general principles of equity, whether in equity or at law.

(b) The Board of Directors of Premise has (i) adopted the plan of merger set forth in this Agreement and approved this Agreement, the Merger and the other transactions contemplated by this Agreement; (ii) declared that this Agreement, the Merger and the other transactions contemplated by this Agreement are advisable and in the best interests of Premise and the Stockholders; and (iii) recommended adoption of this Agreement, the Merger and the other transactions contemplated by this Agreement to the Stockholders.

(c) The execution and delivery by Premise of this Agreement, and the other Transaction Documents and the consummation of the transactions contemplated herein and therein in accordance with the terms hereof or thereof will not:

(i) conflict with or result in a breach of any provisions of the Premise Certificate of Incorporation or its bylaws; or

(ii) violate any settlement agreement, Order or material Legal Requirement applicable to Premise, or its properties or assets; or

(iii) result in the imposition of any Lien upon or with respect to any of the assets or properties owned or used by Premise.

(d) No Consent is required to be made by or with respect to Premise in connection with the execution, delivery and performance of this Agreement and the other Transaction Documents, and the consummation of the transactions contemplated hereby and thereby.

4.7 Compliance; Permits; Litigation.

(a) Premise is, and at all times has been, in compliance in all material respects with all settlement agreements, material Permits, Orders and material Legal Requirements to which it or any of its properties, assets, operations or business is subject and all nongovernmental restrictions as to its property or asset use. Without limiting the representation contained in the preceding sentence, to the Knowledge of Premise, no event has occurred or circumstance or condition exists that (with or without the lapse of time, the giving of notice or both) (A) has resulted in or may constitute or result in a violation by Premise of, or a failure on the part of Premise to comply in all material respects with the terms of any settlement agreement, material Permit, Order or material Legal Requirement or (B) has resulted in or may give rise to any obligation of Premise to undertake or bear all or any portion of the cost of any material remedial action of any nature. Neither Premise nor any of the Stockholders has received any written notice or other written communication from any Governmental Entity or other Person regarding

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any actual, alleged, possible or potential violation of, or failure to comply with, the terms of any settlement agreement, material Permit, Order or material Legal Requirement, or that give rise to any obligation of Premise to undertake, or bear all or any portion of the cost of, any material remedial action of any nature, and, to the Knowledge of Premise, no such actual, alleged, possible or potential violation or failure to comply or obligation has been otherwise Threatened.

(b) Premise has at all times obtained all material Permits. Except where the failure to have a Permit would not individually or in the aggregate be material, Premise currently holds all of the Permits necessary to permit Premise to lawfully conduct and operate its business and to own and use its assets and properties in the manner it currently operates the business and owns and uses such assets and properties, and all such Permits are in full force and effect. No suspension, cancellation, modification, revocation or nonrenewal of any Permit is pending or, to the Knowledge of Premise, Threatened. No Permit is held in the name of any current or former employee (including for such purposes persons filling a similar function) of Premise. Section 4.7(b) of the Disclosure Schedule sets forth a list of the material Permits held by Premise. No material Permit held by Premise (A) is scheduled to expire within the period beginning on the date hereof through six months after the Closing, or (B) will be subject to suspension, modification, revocation or nonrenewal as a result of the execution and delivery of this Agreement and the other Transaction Documents, or the consummation of the transactions contemplated hereby and thereby.

(c) To the Knowledge of Premise, there is no proposed plan, proceeding or effort or proposed change to any Legal Requirements, whether or not directly involving Premise, by any Governmental Entity or other Person which in any way challenges or would be reasonably expected to adversely affect Premise or the Business, including any Permits.

(d) (i) Section 4.7(d)(i) of the Disclosure Schedule sets forth a list and description of all pending or, to the Knowledge of Premise, Threatened or reasonably probable, lawsuits, arbitrations, proceedings, investigations or other claims against Premise or any of its properties, assets, operations or business, including but not limited to any action which would be reasonably expected to prevent or materially alter or delay the transactions contemplated by this Agreement and the other Transaction Documents and, to the Knowledge of Premise, no such lawsuit, arbitration, proceeding, investigation or other claim is pending, Threatened or reasonably probable against its officers, directors or employees (including for such purposes persons filling a similar function) (as such).

(ii) There is no lawsuit, arbitration, proceeding, investigation or other claim by Premise pending, threatened or contemplated against any other Person.

(iii) To the Knowledge of Premise, no event has occurred or circumstance or condition exists that may give rise to or serve as the basis for the commencement of any lawsuit, arbitration, proceeding, investigation or other claim described in Section 4.7(d)(i) or (ii).

(e) Premise is not a party to, and its assets and properties are not subject to, any Order, or any settlement agreement with any Governmental Entity or arbitration tribunal or other Person.

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(f) There is no pending proceeding by or against Premise, or its officers and directors (as such), that challenges or, to the Knowledge of Premise, that may have the effect of preventing, delaying, making illegal or otherwise materially interfering with the Merger and any other transactions contemplated in this Agreement. To the Knowledge of Premise, no such proceeding has been Threatened.

4.8 Absence of Certain Changes. Since January 1, 2008, Premise has conducted its business only in the usual, regular and ordinary course of such business consistent with past practice and there has not been:

(a) any event that has occurred or circumstance or condition that exists which, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect;

(b) any declaration, setting aside or payment of any dividend or other distribution with respect to the Company Capital Stock or any redemption or repurchase of any Capital Stock of Premise, any stock split, combination or reclassification of Company Capital Stock or other change in its capitalization, or any other payment by Premise of any kind to any Stockholder or any Affiliate of any Stockholder (other than salary or employment related expenses in the ordinary course of business consistent with past practice);

(c) any material change in the accounting principles, practices or methods of Premise or any revaluation by Premise of any of its assets (whether tangible or intangible);

(d) any amendment to the Premise Certificate of Incorporation or its Bylaws;

(e) any increase in the salaries or other compensation payable to any officer, director or employee (including for such purposes persons filling a similar function) of Premise or any increase in, or addition to, other benefits to which such officer, director or employee may be entitled (except as required by the terms of plans as in effect on the date of this Agreement and which are listed on Section 4.10(a) of the Disclosure Schedule, or as required by law), any new employee benefit plan adopted (including any stock option, restricted stock or stock purchase plan), or any existing employee benefit plan amended in any respect materially adverse to Premise, or any increase in the amount, or expansion of the scope, of any indemnification provided for employees (including for such purposes persons filling a similar function), officers or directors;

(f) any material adverse change or, to the Knowledge of Premise, any Threat of a material adverse change in the relations of Premise with any of the suppliers or customers or employees of Premise or other Persons having business relationships with Premise;

(g) any sale, assignment, transfer, license or other disposal of any Intellectual Property or interest therein, except licenses of the Software Products to customers in the ordinary course of business consistent with past practice;

(h) any termination, cancellation, amendment or waiver of any material Contract or other right material to Premise;

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(i) any material failure to maintain the assets and properties of Premise in the ordinary course of business consistent with past practice or any destruction of, damage to, or loss of any material assets (whether tangible or intangible) of Premise, whether or not covered by insurance;

(j) (i) any Debt incurred or assumed or any Debt securities issued, (ii) any guaranty or endorsement or other assumption (whether directly, indirectly, contingently or otherwise) for the obligations of any other Person, (iii) any modification in any manner adverse to Premise of any outstanding Debt or other obligation of Premise or (iv) any mortgage or pledge of any of its assets, tangible or intangible, or creation of any Lien of any kind in respect to such assets except in the ordinary course of business consistent with past practices;

(k) any settlement or compromise of any pending or threatened suit, proceeding, action or claim or commencement of any litigation;

(l) any change in any material election in respect of Taxes, any adoption or change in any material accounting method in respect of Taxes, any material agreement or settlement of any claim or assessment in respect of Taxes, or any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes;

(m) any transaction by Premise that is material to Premise, except in the ordinary course of business and consistent with past practices;

(n) any capital expenditure or commitment by Premise exceeding $50,000 individually or $100,000 in the aggregate;

(o) any payment, discharge or satisfaction of any Liability in excess of $20,000 individually, or $50,000 in the aggregate, other than payment, discharge or satisfaction of Liabilities in the ordinary course of business; or

(p) any agreement to take any action or omit to take any action (A) described in this Section 4.8, or (B) that would constitute a breach of any of the representations and warranties of Premise or the Major Stockholders contained in this Agreement.

4.9 Taxes.

(a) All Tax Returns that were required to be filed by or with respect to Premise have been accurately prepared in all material respects and timely filed. All such Tax Returns are true, correct, and complete in all material respects and do not contain a disclosure statement under Section 6662 of the Code or any predecessor provision or comparable provision of state, local or foreign Legal Requirements.

(b) Premise has timely paid all material Taxes that have become due or payable (without regard to whether or not such Taxes are shown on any Tax Return) and has established in the Interim Financial Statements an adequate reserve for all Taxes (other than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) that have accrued but are not yet due or payable as of the date of such statements. All Taxes of Premise accrued following the end of the most recent period covered by the Interim

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Financial Statements have been accrued in the ordinary course of business and do not materially exceed comparable amounts incurred in similar periods in prior years, taking into account any changes in Premise’s operating results and changes in Legal Requirements. The provisions for Taxes currently payable on the Interim Financial Statements are at least equal, as of the date thereof, to all unpaid Taxes of Premise as of the date of such statements.

(c) No claim has been made in writing by any taxing authority in any jurisdiction where Premise does not file Tax Returns that Premise is or may be subject to Tax by that jurisdiction and to the Knowledge of Premise no such claim is being contemplated. No extensions or waivers of statutes of limitations with respect to any Tax Returns or Taxes have been given by or requested from Premise. No power of attorney has been granted by Premise with respect to any matter relating to Taxes.

(d) To the Knowledge of Premise (including the knowledge of the employee(s) responsible for Tax matters), no foreign, federal, state or local Tax audits or administrative or judicial Tax proceedings are pending, being conducted or are Threatened with respect to Premise and to the Knowledge of Premise (including the knowledge of the employee(s) responsible for Tax matters) no such action or proceeding is being contemplated. All deficiencies asserted or assessments made against Premise in writing as a result of any examinations, audits or other proceedings by any Taxing authority have been fully paid unless such assessment had been appealed in good faith. To the Knowledge of Premise (including the knowledge of the employee(s) responsible for Tax matters), no issue has been raised in any such examination, audit or other proceeding which by application of the same or similar principles reasonably could be expected to result in a proposed deficiency in Taxes of Premise.

(e) There are no Liens for Taxes (other than for current Taxes not yet due and payable) upon the assets or properties of Premise.

(f) Premise is not a party to or bound by any closing agreement, offer in compromise or other Contract with any Taxing authority that could affect Taxes for which Premise or Eclipsys may be liable. Premise is not a party to or bound by any Tax indemnity, Tax sharing or Tax allocation agreement.

(g) Premise is not and has not been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code, or a member of a combined, consolidated or unitary group for state, local or foreign Tax purposes. Premise has no liability for Taxes of any Person under Treasury Regulations Section 1.1502-6 or any corresponding provision of state, local or foreign income Tax Legal Requirements, as transferee or successor, by Contract or otherwise.

(h) Premise is not a party to any plan or other Contract that has resulted or would result, separately or in the aggregate, in connection with this Agreement, in the payment of any “excess parachute payments” within the meaning of Section 280G of the Code.

(i) Premise has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party.

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(j) There is no taxable income of Premise that is required under applicable Tax Legal Requirements to be reported by Premise for a taxable period beginning after the date hereof which taxable income was realized (and reflects economic income arising) prior to the date hereof or relates to a transaction that occurred prior to the date hereof. Premise has not taken any action that is not in accordance with past practice or required by applicable Legal Requirements that could defer a liability for Taxes of Premise from any taxable period ending on or before the date hereof to any taxable period ending after such date.

(k) Premise will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date (including pursuant to Section 481(a) of the Code or any similar Legal Requirement), (ii) “closing agreement” as described in Code Section 7121 (or any corresponding or similar provision of state, local or foreign Tax law) executed on or prior to the Closing Date or (iii) installment sale or open transaction disposition made on or prior to the Closing Date.

(l) To the Knowledge of Premise (including the knowledge of the employee(s) responsible for Tax matters), Premise has not engaged in a transaction that constitutes a “reportable transaction,” as such term is defined in Treasury Regulation Section 1.6011-4(b)(1).

(m) Premise does not have a permanent establishment in any jurisdiction outside of the United States of America, as defined in any applicable Tax treaty or convention between the United States of America and such foreign jurisdiction.

(n) Premise is not a party to any joint venture, partnership or other arrangement or Contract that could be treated as a partnership for federal income tax purposes.

(o) Premise is not, nor has it ever been, a United States real property holding corporation, as defined in Section 897(c)(2) of the Code.

(p) Premise has not been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code.

(q) Premise does not currently hold, and has not at any time held, an interest in any Subsidiary that was organized under the laws of a jurisdiction outside the United States.

4.10 Certain Employee Plans.

(a) Section 4.10(a) of the Disclosure Schedule lists all Company Benefit Plans. Each Company Benefit Plan is in writing. A true, complete and correct copy of each Company Benefit Plan has been provided to Eclipsys, together with, as applicable: (i) the most recent summary plan descriptions and any summaries of material modifications; (ii) the two most recent annual reports on Form 5500 (including schedules) filed with the Internal Revenue Service; (iii) the most recent favorable Internal Revenue Service determination letter; (iv) a copy of each trust or other funding arrangement; and (v) the most recently prepared actuarial report and financial statement. Premise has no express or implied commitment: (i) to create, incur

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liability with respect to or cause to exist any other employee benefit plan, program or arrangement; (ii) to enter into any Contract to provide compensation or benefits to any individuals; or (iii) to modify, change or terminate any Company Benefit Plan, other than with respect to a modification required by ERISA or the Code.

(b) Neither Premise nor any ERISA Affiliate sponsors, maintains or contributes to or has ever sponsored, maintained, contributed to or incurred an obligation to contribute or incurred any Liability with respect to any “multiemployer plan” (as such term is defined in Section 3(37) of ERISA) or any other employee benefit plan that is subject to Title IV of ERISA, Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code.

(c) Premise does not provide any health, welfare or life insurance benefits to any of its former or retired employees (including for such purposes persons filling a similar function) other than pursuant to Section 4980B of the Code or similar state laws.

(d) (i) Each Company Benefit Plan has been maintained and operated in all material respects in accordance with its terms and all applicable Legal Requirements.

(ii) Premise has in all material respects performed all obligations, whether arising by operation of any Legal Requirements or by Contract, required to be performed by it in connection with the Company Benefit Plans.

(iii) There are no actions, suits or claims pending (other than routine claims for benefits) or, to the Knowledge of Premise, Threatened against, or with respect to, any of the Company Benefit Plans, there is no matter pending with respect to any of the Company Benefit Plans before any Governmental Entity and, to the Knowledge of Premise, there is no basis for any such action, suit or claim.

(iv) Each Company Benefit Plan intended to be qualified under Section 401(a) of the Code has been determined to be so qualified by the Internal Revenue Service (whether by reliance on a prototype determination letter or opinion or otherwise), and since the date of each most recent determination, no event has occurred, and no condition or circumstance exists, that has adversely affected or is reasonably likely to adversely affect such qualified status.

(v) Except as would not reasonably be expected to have a Material Adverse Effect, neither Premise nor, to the Knowledge of Premise, any other fiduciary or party in interest of any Company Benefit Plan has participated in, engaged in or been a party to any transaction that is prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt under Section 4975 of the Code or Section 408 of ERISA, respectively.

(vi) Except as would not reasonably be expected to have a Material Adverse Effect, Premise and, to the Knowledge of Premise, its ERISA Affiliates, have made full and timely payment of all amounts required to be contributed or paid as expenses or accrued such payments in accordance with normal procedures under the terms of each Company Benefit Plan and applicable Legal Requirements.

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(e) The execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby (either alone or in combination with any other action or event) will not (i) require Premise to make a larger contribution to, or pay greater benefits or provide other rights under, any Contract or Company Benefit Plan than it otherwise would, (ii) create or give rise to any additional vested rights or service credits under any Contract or Company Benefit Plan or (iii) entitle any employee (including for such purposes persons filling a similar function), officer or director of Premise to severance, termination allowance or similar payments. Premise is not a party to any Contract, nor has Premise established any other policy or practice, requiring it to make a payment or provide any other form of compensation or benefit to any person performing services for Premise upon termination of such services which would not be payable or provided in the absence of the consummation of the transactions contemplated by this Agreement.

(f) Except as would not reasonably be expected to have a Material Adverse Effect, each current and former employee (including for such purposes persons filling a similar function) of Premise has been correctly classified for purposes of each Company Benefit Plan as an eligible or ineligible employee and any retroactive reclassification will not affect any employee’s benefit under any Company Benefit Plan.

(g) Except as would not reasonably be expected to have a Material Adverse Effect, each Company Benefit Plan that is a nonqualified deferred compensation plan (as defined under Section 409A of the Code) satisfies the applicable requirements of Sections 409A(a)(2), (3) and (4) of the Code, and has, since January 1, 2005, been operated in good faith compliance with Sections 409A(a)(2), (3) and (4) of the Code.

4.11 Labor Matters.

(a) Premise is not a party to, or bound by, any collective bargaining agreement or other Contract with a labor union or labor organization. There is no unfair labor practice or labor arbitration proceeding pending or, to the Knowledge of Premise, Threatened against Premise or relating to its business. There has not been and, to the Knowledge of Premise, there are no organizational efforts with respect to the formation of a collective bargaining unit being made or threatened involving employees of Premise. There are no pending claims or controversies by or between Premise and any of its current or former employees (including for such purposes persons filling a similar function), no such claims or controversies are, to the Knowledge of Premise, Threatened and no event has occurred or circumstances or conditions exist that would support a claim by any current or former employee against Premise. None of the Major Stockholders or Premise has received notice of any strikes, slowdowns, work stoppages, lockouts or threats thereof, by or with respect to any employees of Premise. Premise is and has always been in compliance in all material respects with all applicable Legal Requirements relating to employees (including for such purposes persons filling a similar function) and the employment of labor, including provisions thereof relating to wages, hours, equal opportunity and collective bargaining.

(b) Section 4.11(b)(i) of the Disclosure Schedule sets forth a complete and accurate list of all employees (including for such purposes persons filling a similar function) employed by Premise, including the salaries or wages or other payment terms and positions and

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duties of each such employee, the state in which such employee is located and whether such employee is required to be paid overtime pay under any applicable Legal Requirements. Each employee listed on Section 4.11(b)(i) of the Disclosure Schedule is hired “at will,” meaning Premise or such employee can terminate such employment, with or without cause, at any time, without liability. Section 4.11(b)(ii) of the Disclosure Schedule sets forth a complete and accurate list of independent contractors retained by Premise who (i) assisted with the development of Company IP or (ii) were paid in the aggregate more than $50,000 since January 1, 2007, indicating the purposes or projects for which each was retained. All Persons who have performed services for Premise and have been classified as independent contractors, and all Persons who have performed services for Premise and have been classified as exempt employees not entitled to overtime pay under applicable Legal Requirements, have been at all times properly classified as such in accordance with all Legal Requirements. The classification, job description or duties of the employees of Premise and independent contractors of Premise have not been changed. Section 4.11(b)(iii) of the Disclosure Schedule contains a complete and accurate list of each former employee (including for such purposes persons filling a similar function) of Premise receiving benefits or entitled to receive benefits under any life insurance, medical insurance or other coverage or benefits offered by Premise or which Premise is obligated to provide or fund, other than medical insurance provided, at no cost to Premise, pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985.

(c) To the Knowledge of Premise, no employee (including for such purposes persons filling a similar function) of Premise is a party to, or is otherwise bound by, any Contract, including any confidentiality, noncompetition or proprietary rights agreement, between such employee and any other Person that in any way adversely affects or will affect (i) the performance of his or her duties as an employee of Premise or (ii) the ability of Premise to conduct its business. No Key Employee has threatened to terminate his or her employment with Premise as a result of the transaction contemplated hereby or otherwise.

(d) There has not been and there is no pending or, to the Knowledge of Premise, Threatened discrimination, wrongful termination or wage and hour proceedings, claims, charges or complaints against or involving Premise before the National Labor Relations Board, the Occupational Safety & Health Administration (OSHA), the Equal Employment Opportunity Commission (EEOC) or any other Governmental Entity, and no event has occurred or circumstances or conditions exist that would support such a claim.

4.12 Restrictions on Business Activities.

(a) There is no currently effective Order or Legal Requirement, or any Order, or, to the Knowledge of Premise, any Legal Requirement or other action by a Governmental Entity, pending before a Governmental Entity or, to the Knowledge of Premise, being considered by a Governmental Entity, which has or would have the effect of restricting the conduct of the Business.

(b) Neither Premise nor any officer of Premise, nor, to the Knowledge of Premise, any director or other agent, employee, consultant or contractor of Premise, has directly or indirectly: (i) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback or other payment to any Person, private or public, regardless of form, whether in money, property or services, that (A) is illegal or (B) violates any policy of Premise; or (ii) established or maintained any fund or asset that has not been recorded in the books and records of Premise.

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4.13 Real Property.

(a) Section 4.13(a) of the Disclosure Schedule provides a true, correct and complete list of all of the Contracts relating to all real property leased to Premise (which property includes Premise’s right title and interest in any leasehold improvements thereon and personal property and fixtures therein, and in each case all of Premise’s rights and interest in any other rights, subleases, licenses, permits, deposits and profits appurtenant or related to such Lease, the “Leased Real Property”). The Leased Real Property constitutes all the fee and leasehold interests in real property (A) held by Premise or (B) used in connection with the Business.

(b) Premise has valid and enforceable Leases relating to the Leased Real Property under which Premise is entitled to occupy and use such Leased Real Property in connection with the operation of the Business, and there is no breach or default on the part of Premise under any such Lease or, to the Knowledge of Premise, any other party to any such Lease.

(c) To the Knowledge of Premise, all of the buildings, fixtures and other improvements respecting the Leased Real Property are in good operating condition and repair, and the operation thereof as presently conducted is not in violation of any applicable building code, zoning ordinance or other Legal Requirements.

4.14 Intellectual Property.

(a) Section 4.14(a) of the Disclosure Schedule sets forth a true, complete and accurate list of both the Company Registered IP that is currently active, and any material unregistered trademarks for which no applications are pending (collectively, the “Company Scheduled IP”), indicating for each item of the listed Company Scheduled IP: (i) the record owner thereof; and (ii) the status of each such listed Company Registered IP, including the date and description of any action that is due or recommended within 90 days of the date hereof. Premise represents and warrants: (i) that no Person other than Premise holds any current, future, contingent or partial interest or license in any of the Company Scheduled IP (other than in the ordinary course of business pursuant to written, nonexclusive licenses granted to end-users or distribution rights granted to resellers or distributors); (ii) all maintenance, annuity and other fees with respect to the Company Registered IP have been fully paid and all filings applicable thereto have been properly made; (iii) that the copyright registration referred to on Section 4.14(a) of the Disclosure Schedule is valid, enforceable (including without limitation against the Stockholders and third parties) and in full force and effect; (iv) that no trademark registration issuing from any of the trademark applications would be unenforceable due to inequitable conduct or violation of the duty of candor owed to, as applicable, the United States Patent and Trademark Office (“USPTO”) or any similar foreign registering authority; (v) that no patent issuing from any of the patent applications would be unenforceable due to inequitable conduct or violation of the duty of candor owed to, as applicable, the USPTO or any similar foreign registering authority; (vi) that, except for those patent applications where information disclosure statement (IDS) submissions are identified as needing to be filed, preferably within the next 90 days, as set forth

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on Section 4.14(a) of the Disclosure Schedule, neither Premise nor any agent or representative of Premise has failed to disclose any material information or prior art to, as applicable, the USPTO or any similar foreign registering authority; (vii) that, except as set forth on Section 4.14(a) of the Disclosure Schedule, Premise has not claimed small entity status in any registrations, applications or filings made with the USPTO; (viii) that Premise is not, and will not with the passage of time or satisfaction of conditions become, obligated to make any payment to any Person in connection with the exploitation of any of the listed Company Scheduled IP; (ix) that Premise has good and valid title to all of the listed Company Scheduled IP, free and clear of any Liens, except for Permitted Liens; (x) that there is no trademark included in the listed Company Registered IP that is now involved in, or has been involved in, any opposition or cancellation proceeding and, with respect to trademarks included in Company Scheduled IP, Premise has not received any notice of any third party having superior rights to Premise concerning the use of such trademarks; and (xi) that no patent or patent application included in the listed Company Registered IP is now involved in any interference, reissue or reexamination proceeding. Except as set forth on Section 4.14(a) of the Disclosure Schedule, within the past twelve (12) months, no Company Registered IP has lapsed or become abandoned for any reason.

(b) Section 4.14(b) of the Disclosure Schedule (i) sets forth a true, complete and accurate list of all Company Licensed IP (including without limitation Software, Software Documentation and trade secrets) that is (A) incorporated into the products of Premise or provided to customers by Premise in connection with products or services of Premise, indicating which of the Software Products such Company Licensed IP is incorporated into, (B) “resold” or sublicensed to customers by Premise, (C) used by Premise in the development of Software Products or used as a development tool (excluding commercially available, noncustomized software and PC applications at an aggregate cost of less than $15,000 for current use by Premise, such as Word or Windows, that are not incorporated into Premise’s products (“Off-the-Shelf Software”)) or (D) material to the Business and is not covered under clauses (A), (B) or (C); (ii) identifies the license or other Contract pursuant to which such Company Licensed IP is being licensed to or used by Premise (each, a “License-In Agreement”); (iii) identifies, to the extent applicable, any material limitation on the use or distribution of Company Licensed IP; (iv) sets forth, to the extent applicable, the number or quantity of copies of the Company Licensed IP that Premise is permitted to use or distribute and the number or quantity that Premise is using or distributing; and (v) sets forth a complete and accurate list of the amount of any remaining unused prepaid royalty and identifies those License-In Agreements under which such royalty or license fee (excluding fees for maintenance and support) was paid or will become payable by Premise by reason of the passage of time, use or exploitation of the Intellectual Property licensed thereunder. True, complete and accurate copies (or, as to oral Contracts, written summaries of the terms) of all License-In Agreements entered into by Premise on or prior to the date hereof have been provided to Eclipsys and true, complete and accurate copies (or, as to oral Contracts, written summaries of the terms) of any License-In Agreements entered into by Premise after the date hereof and prior to or on the Closing Date will be provided to Eclipsys promptly after being so entered into. There are no terms of any License-In Agreements not set forth in the copies thereof provided to Eclipsys. The terms and conditions of all of the License-In Agreements were negotiated at arm’s length. Without limiting the foregoing, Premise has acquired rights to all Company Licensed IP (including without limitation Off-the-Shelf Software) in sufficient quantities and of sufficient scope to cover all of Premise’s past and current use(s) and copies of the Company Licensed IP and those reasonably anticipated to be needed (x) for internal use

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during the year after the Closing Date in accordance with current business plans and (y) for the duration of the terms (including during any periods subject to a renewal right) of any Contract with or binding on Premise or its properties pursuant to which Company Licensed IP is used by third parties. Furthermore, the rights licensed under each License-In Agreement shall be exercisable by Premise on and after the Closing Date to the same extent and at the same cost as Premise had prior to the Closing Date, and no Person granting rights under any License-In Agreement has threatened or given notice in writing or in such other form as permitted by such License-In Agreement to the Major Stockholders or Premise or that it intends to terminate such License-In Agreement prior to the expiration of the existing term thereof or to deny any request for an extension of such term and Premise has not breached and is not in breach of any material term of any License-In Agreement.

(c) Section 4.14(c) of the Disclosure Schedule sets forth a true, complete and accurate list of the material Software and Software Documentation of Premise, with respect to which Premise represents and warrants: (i) that no Person other than Premise (including without limitation any Stockholder) holds any current, future, contingent or partial interest or license in any of the listed Software or Software Documentation (excluding rights granted under (x) and (y) hereof); (ii) Premise has good and valid title to all Software and Software Documentation, free and clear of any Liens, except for Permitted Liens; (iii) that Premise is not, and will not with the passage of time or satisfaction of conditions become, obligated to make any payment to any Person in connection with the manufacture, use, sale, importation, distribution, display, modification or other exploitation of the listed Software or Software Documentation; and (iv) that Premise is free to make, use, modify, copy, distribute, sell, license, import, export and otherwise exploit the Software and Software Documentation on an exclusive basis subject only to nonexclusive: (x) use pursuant to end-user licenses granted to customers; (y) distribution rights granted to the resellers or distributors pursuant to written agreements and listed in Section 4.14(c) of the Disclosure Schedule; and (z) nondisclosure or confidentiality agreements pursuant to which any Person has been granted access to the listed Software but in which such agreement does not grant the right to exploit such listed Software; in each case of (x) through (z) in the ordinary course of business consistent with past practice and disclosed to Eclipsys prior to the date hereof, including without limitation the provision of true and accurate copies of such applicable form(s) and agreement(s).

(d) All Company Owned IP was created solely by employees or contractors of Premise and without any participation or funding by any Governmental Entity or other Person. Premise has where necessary required each Person who has contributed to, or participated in the creation or development of, any of the Software Products or other Company Owned IP to execute and deliver to Premise an agreement assigning all rights in the Software Products and other Company Owned IP to Premise, in form(s) delivered to Eclipsys.

(e) Premise has taken reasonable measures and precautions to protect, preserve and maintain the confidentiality and secrecy of all Premise trade secrets and other confidential information material to the Business, including at a minimum: (i) maintaining the security of its facilities and systems so that confidential information and trade secrets are not available to Persons who are not authorized to have access; (ii) policing the use of such information; and (iii) taking appropriate action to address any misuse or compromise of the confidentiality of such information. None of the Major Stockholders or Premise has disclosed or

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delivered or has permitted to be disclosed or delivered to any Person, and no Person has access to (other than employees or agents of Premise) or has any rights with respect to, Premise trade secrets and other confidential or proprietary information material to the Business, the source code or any portion of the source code related to the Software Products or otherwise material to the Business or any proprietary information or algorithm contained in any source code related to the Software Products or of any other Software that comprises Company Owned IP, other than instances where (A) such trade secrets, confidential information and source code have been disclosed subject to and in accordance with the terms of a written agreement with any Person pursuant to which such Person is required to maintain, and has not breached, the confidentiality thereof, or where (B) such trade secrets, confidential information or source code have been disclosed in any of the Company Registered IP. Without limiting the generality of the foregoing, and with respect to instances of disclosure under 4.14(e)(A), true and correct copies of such form(s) of such agreements have been provided to Eclipsys; all such agreements are valid, enforceable and in full force and effect. Section 4.14(e) of the Disclosure Schedule sets forth all Software escrow Contracts relating to the Software Products or any other Software that comprises Company Owned IP, the parties to such escrow Contracts and the code escrowed pursuant to such escrow Contracts. No code has ever been released pursuant to any such escrow Contract. True, complete and accurate copies (or, as to oral Contracts, written summaries of the terms) of all such escrow Contracts have been provided to Eclipsys.

(f) Premise represents and warrants that:

(i) The making, using, selling, offering for sale, exporting or importing of the Software Products and services offered by Premise (including current Software Products as well as the planned products and services of Premise set forth on Section 4.14(f)(i) of the Disclosure Schedule as currently designed and intended to be implemented, marketed and used) has not (whether directly, indirectly or contributorily) infringed, misappropriated, diluted or otherwise used without authorization, is not (whether directly, indirectly or contributorily) infringing, misappropriating, diluting or otherwise using without authorization, and will not (whether directly, indirectly or contributorily) infringe, misappropriate, dilute or otherwise use without authorization any intellectual property rights (other than foreign patents) of any other Person or, to the Knowledge of Premise, any foreign patent.

(ii) Premise has not received (A) any notice or claim (oral or written) in the past six (6) years, and no Person has threatened during such period to provide a notice or claim alleging or asserting that any such infringement, misappropriation, violation, dilution or unauthorized use is or may be occurring, or has or may have occurred, or (B) any written notice or claim alleging or asserting that any such infringement, misappropriation, violation, dilution or unauthorized use is or may be occurring, has or may have occurred or will occur under any circumstances.

(iii) No confidential information, invention or other Intellectual Property owned by any current or former employee or consultant of Premise, or by any third-party employer or customer any current or former employee or consultant of Premise, is incorporated into, used or relied upon in the products or services of Premise.

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(iv) There is no pending or threatened claim or demand that challenges the ownership, legality, validity, enforceability, use, exploitation or modification by Premise of Company Owned IP or any of the products or services of Premise or, to the Knowledge of Premise, the Intellectual Property used by Premise in its operations or Software Products (including the Company Licensed IP) not included in Company Intellectual Property, and, to the Knowledge of Premise, no facts or circumstances exist that could reasonably be expected to result in such a claim or demand. No Company Owned IP or any of the products or services of Premise or, to the Knowledge of Premise, the Intellectual Property used by Premise in its operations or Software Products (including the Company Licensed IP) not included in Company Intellectual Property is subject to any outstanding Order restricting the use thereof by Premise or, in the case of any Intellectual Property licensed by Premise to others, restricting the sale, transfer, assignment or licensing thereof by Premise to any Person.

(v) Premise has the right to grant the licenses it grants in the course of its business.

(vi) The Company IP held by Premise: (A) constitutes all of the Intellectual Property used in or necessary for the conduct of the Business; and (B) constitutes all of the Intellectual Property necessary to operate the Business after the Closing in substantially the same manner as the Business has heretofore been operated by Premise (including for such purposes, current Software Products as well as the planned products and services of Premise set forth on Section 4.14(f)(i) of the Disclosure Schedule as currently designed and intended to be implemented, marketed and used), except in each case, for the development work of Premise that has not been completed for the planned products and services of Premise set forth on Section 4.14(f)(i) of the Disclosure Schedule.

(g) To the Knowledge of Premise, no Person is infringing or misappropriating any Company Owned IP in any respect or making any unlawful use of any products of Premise in any respect. None of the Major Stockholders or Premise (including its representatives) has given notice to any Person in the last three years of any such infringement, misappropriation or unlawful use or alleged infringement, misappropriation or unlawful use. Premise has not initiated, nor is it maintaining before a court or in an arbitration proceeding, claims or causes of action against any other Person for infringement or misappropriation by such Person of Company Owned IP (including claims for past infringement or misappropriation of Intellectual Property). Premise has not, during the last twelve months, threatened in a writing sent by the legal counsel of Premise to initiate such proceeding.

(h) No Software Product, contains any “back door,” “time bomb,” “Trojan horse,” “worm,” “drop dead device,” “virus” or other Software routines or hardware components designed to permit unauthorized access or to disable or erase Software, hardware or data without the consent of the user.

(i) The existing and currently manufactured and marketed products of Premise, including the Software Products, in all material respects, have the features and perform the functions described in (i) any agreed specifications, responses by Premise to requests for

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proposals or end user documentation provided to customers (including potential customers who later become customers) of Premise and (ii) any Contracts or representations made by Premise or its representatives (either orally or in writing) that such customers could reasonably rely on in deciding to purchase the products (notwithstanding any subsequent disclaimer of any representations or warranties) or would reasonably be expected to rely upon when licensing or otherwise acquiring such products, in each case, subject to subsequent changes requested by the customer and to standard nonmaterial error and maintenance items addressed by Premise in the ordinary course of business. Excluding error and maintenance items resolved by Premise in the ordinary course of business, Premise has not received any notice or complaints alleging that such products do not perform as described. There are no material errors or omissions in the design, creation, implementation or maintenance of any of the Software Products. Premise has performed all obligations (legal and contractual) required to be performed by it under the Contracts with customers and it is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder, and, with respect to material obligations required to be performed under such Contracts that are not yet due, there is no reason to expect that such obligations will not be fulfilled when they become due.

(j) No current Software Product and none of the planned products and services of Premise set forth on Section 4.14(f)(i) of the Disclosure Schedule as currently designed and intended to be implemented, marketed and used is, in whole or in part, subject to the provisions of any open source, quasi-open source or other source code license agreement that (i) requires the distribution of source code in connection with the distribution of the licensed Software in object code form; (ii) prohibits or limits Premise or any Affiliate from charging a fee or receiving consideration in connection with sublicensing or distributing such licensed Software (whether in source code or object code form); or (iii) allows a customer or requires that a customer have the right to decompile, disassemble or otherwise reverse engineer the Software by its terms and not by operation of law, including without limitation, any version of any of the following: (A) GNU’s General Public License (“GPL”) or Lesser/Library GPL, (B) The Artistic License (e.g., PERL), (C) the Mozilla Public License, (D) the Netscape Public License, (E) the Berkeley software design (“BSD”) license including Free BSD or BSD-style license, (F) the Sun Community Source License, (G) an Open Source Foundation License (e.g., CDE and Motif UNIX user interfaces), and (H) the Apache Server license.

(k) Premise has taken all reasonable actions customary in the United States software industry to document any Software and its operation that is part of the Company Owned IP, such that the Software, including the source code, and Software Documentation:

(i) have been written in a clear and professional manner so that they may be understood, modified, maintained, enhanced and debugged in an efficient manner by programmers of ordinary skill in the art and comply with all applicable contractual requirements;

(ii) fully describe the programming of the Software, including specifications, functional and flow diagrams, tracked changes to each version of the Software; and

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(iii) allow debugging of the software and addition and changes of personnel who maintain and enhance the Software without undue experimentation and exploration.

(l) Premise has not exported or transmitted Software, trade secrets or any other technical information, including any technical data, or the direct product of such data, to or in any country to which such export or transmission or creation is restricted by any applicable Legal Requirement, without first having obtained all necessary and appropriate United States or other Government Entity Permit(s).

(m) Section 4.14(m) of the Disclosure Schedule identifies all Software Products and any other Software that comprises Company Owned IP that incorporate encryption subroutines, listing for each applicable Software Product or other Software the modules upon which such subroutines operate and the type of encryption employed with respect to each such module.

(n) (i) Each Contract relating to Company IP (each, a “Company IP Contract”) is valid, binding and in full force and effect and is enforceable by Premise in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or other similar laws relating to creditors’ rights and general principles of equity, whether in equity or at law;

(ii) Premise has performed all material obligations required to be performed by it under the Company IP Contracts and it is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder;

(iii) To the Knowledge of Premise, no other party to any of the Company IP Contracts is (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder; and

(iv) True, complete and accurate copies (or, as to oral Contracts, written summaries of the terms) of the Company IP Contracts entered into on or prior to the date hereof have been provided to Eclipsys, and true, complete and accurate copies (or, as to oral Contracts, written summaries of the terms) of any Company IP Contracts entered into after the date hereof will be provided to Eclipsys promptly after being so entered into.

(o) Neither the execution and delivery by Premise or the Major Stockholders of this Agreement and the other Transaction Documents, nor the consummation of the transactions contemplated herein and therein in accordance with the terms hereof and thereof, will violate, or conflict with, or result in a breach of any provision of, or constitute a material default (or an event that, with notice or lapse of time or both, would constitute a breach or default) under, or result in the termination or in a right of termination or cancellation of, or accelerate the performance required by, or result in the triggering of any payment obligations under or additional grant, or vesting of any grant, of rights by Premise under, or result in the impairment or diminution of rights granted to Premise by, or result in the creation of any Lien

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upon any of the material properties of Premise under, or result in being declared void, voidable or without further binding effect, any of the provisions of any Company IP Contract. Premise has not (i) transferred ownership of, or granted any exclusive license of, or exclusive right to use, or authorized the retention of any exclusive rights to use, or joint ownership of, any material Intellectual Property that is or was Company Owned IP to any other Person or (ii) permitted the Company’s rights in such material Company Owned IP to lapse or enter into the public domain.

(p) With respect to third-party Software provided by Premise to customers:

(i) the rights provided by Premise to the customer are within the scope of what Premise is permitted to provide pursuant to Premise’s Contract with the third-party provider thereof;

(ii) Premise has obtained from the customer all end-user agreements and other commitments required by the third-party provider thereof; and

(iii) any obligations undertaken by Premise in respect of the third-party Software (for example, but without limitation, representations regarding features or functionality, maintenance commitments and indemnities) are consistent with, and do not exceed, the corresponding obligations of the third-party provider thereof to Premise.

(q) The Software Products will, in their intended and ordinary use, not cause the violation of any applicable Legal Requirements restricting the collection, use, retention or distribution of personally identifiable information, including without limitation the Health Insurance Portability and Accountability Act of 1996 and the regulations issued by the United States Department of Health and Human Services thereunder (collectively, “Privacy Regulations”). Premise has not violated and is not violating any Privacy Regulations, and the continuation of the Business substantially consistent with past practices, including the continued use of all Company Owned IP, after the consummation of the transactions contemplated by this Agreement and the other Transaction Documents, will not violate any Privacy Regulations.

4.15 Other Assets.

(a) Premise owns beneficially and of record, and has good and valid title to, all assets reflected on the balance sheet of Premise as of December 31, 2007, contained in the Year-End Financial Statements or thereafter acquired (except those sold or otherwise disposed of since December 31, 2007 in the ordinary course of business consistent with past practice and not in violation of this Agreement), in each case subject only to Permitted Liens.

(b) All the material tangible personal property used or owned by Premise has been maintained in accordance with generally accepted industry practice and is in good operating condition and repair, ordinary wear and tear excepted.

(c) All of the books and records of Premise (including without limitation, the financial records and minute books of Premise) are true, complete and accurate in all material respects and have been maintained in accordance with generally accepted business practices. Premise has made true, complete and accurate copies of such books and records available to Eclipsys, and at the Closing, all of such books and records will be in the possession of Premise.

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4.16 Environmental Matters. Except as has not and would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect: (a) Premise is now and always has been in compliance with all Environmental Laws; (b) Premise has all Permits necessary under Environmental Laws for the conduct and operation of the business as now being conducted by Premise and, to the Knowledge of Premise, all such Permits are in good standing; (c) there is not now, and to the Knowledge of Premise there has not been, any Hazardous Material used, generated, treated, stored, transported, disposed of, released, handled or otherwise existing on, under, about or emanating from or to any property owned, leased or operated by Premise except in compliance with all applicable Environmental Laws; (d) neither Premise nor, to the Knowledge of Premise, any of the Major Stockholders (with respect to Premise or the Business) has received any notice of alleged, actual or potential responsibility for, or any inquiry or investigation regarding, any release or threatened release of Hazardous Material or alleged violation of, or noncompliance with, any Environmental Law, nor to the Knowledge of Premise is there any basis for such a notice or claim; (e) there is no site to which Premise has transported or arranged for the transport of Hazardous Material, which, to the Knowledge of Premise, is or may become the subject of any environmental action; and (f) to the Knowledge of Premise, no event has occurred, and no circumstance or condition exists that, with or without notice or lapse of time, or both, might form the basis of any Liability of Premise pursuant to Environmental Laws.

4.17 Insurance.

(a) Section 4.17(a) of the Disclosure Schedule contains a true and complete list of all liability, property, workers’ compensation, directors’ and officers’ liability, life and other insurance policies in effect at any time since January 1, 2005 that insure or did insure the business, operations, directors or employees (including for such purposes persons filling a similar function) of Premise or affect or relate to the ownership, use or operation of any of the property or assets (both past and present) of Premise, whether issued to Premise or to any other Person for the benefit of Premise (collectively, the “Insurance Policies”). For each Insurance Policy, Section 4.17(a) of the Disclosure Schedule lists (i) the names and addresses of the insurers, (ii) the names of the Persons to whom such policies have been issued (including additional insureds), (iii) the expiration dates thereof, (iv) whether the policies are currently in effect, (v) the annual premiums and payment terms thereof, (vi) whether it is a “claims made” or an “occurrence” policy, (vii) any self insured retention or deductible, (viii) the aggregate limit of the policy and the currently available limit and (ix) a brief description of the interests insured thereby. Premise has provided Eclipsys with true, accurate and complete copies of each Insurance Policy.

(b) With respect to Insurance Policies currently in effect: (i) the insurance coverage provided by the Insurance Policies will not terminate or lapse by reason of consummation of the transactions contemplated by this Agreement and the other Transaction Documents; (ii) to the Knowledge of Premise, the Insurance Policies are sufficient for compliance with all applicable Legal Requirements and Contracts to which Premise is a party or by which its property or assets are bound; (iii) the Insurance Policies do not provide for any retrospective premium adjustment or other experienced-based liability on the part of Premise; and (iv) no side agreements or other Contracts exist that alter the terms of the Insurance Policies. Each current Insurance Policy is valid and binding and in full force and effect, no premiums due thereunder have not been paid and neither Premise nor, to the Knowledge of Premise, any Major Stockholder or Person to whom such policy has been issued has received any notice of cancellation or termination in respect of any such policy or is in default thereunder.

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(c) Section 4.17(c) of the Disclosure Schedule contains a listing of all material open claims made or otherwise asserted by Premise or its officers, directors or employees (including for such purposes persons filling a similar function) against any Insurance Policy. Neither Premise nor, to the Knowledge of Premise, any Major Stockholder or Person to whom any Insurance Policy has been issued, has received written notice that any insurer under such Insurance Policy is denying liability with respect to a claim thereunder or defending under a reservation of rights clause or, to the Knowledge of Premise, indicated any intent to do so or not to renew any such policy. All material claims under the Insurance Policies have been filed in a timely fashion. To the Knowledge of Premise, the activities and operations of Premise have been conducted in a manner so as to conform in all material respects to all applicable provisions of the Insurance Policies. Neither Premise nor, to the Knowledge of Premise, any Major Stockholder or other Person to whom any Insurance Policy has been issued, has failed to disclose any fact to the insurance companies or failed to take any other action, the consequences of which nondisclosure or failure to take action would render any Insurance Policy void, or voidable, or suspend, impair or defeat in whole or in part the insurance coverage issued thereunder. Neither Premise nor, to the Knowledge of Premise, any Major Stockholder or other Person to whom any Insurance Policy has been issued (with respect to Premise or the Business), has received (A) any refusal of coverage from any insurer from which Premise or such other Person sought coverage, (B) any notice that a defense will be afforded with reservation of rights, (C) any notice of cancellation or termination or any other indication that any insurance policy is no longer in full force or effect or will not be renewed or that the issuer of any policy is not willing or able to perform its obligations thereunder or (D) any notice that Premise or such other Person is in default under any Insurance Policy; and to the Knowledge of Premise, no event has occurred and no circumstance or condition exists that, with or without notice or lapse of time or both, might form the basis of any such notice or refusal.

4.18 Warranties.

(a) Premise has delivered to Eclipsys complete and accurate copies of all written warranties that are in effect with respect to Premise’s products and services, including the Software Products. There have not been any material deviations from such warranties and none of the employees or agents of Premise (i) is authorized to undertake obligations to any customer or to other third parties which expands such warranties, or (ii) to the Knowledge of Premise, has made any oral warranty with respect to such products or services of Premise. Section 4.18(a) of the Disclosure Schedule sets forth a list of all Warranty Claims currently made in writing against Premise or otherwise, to the Knowledge of Premise, Threatened, and Premise’s reasonable judgment of the estimate of the aggregate Liability of Premise in respect of such Warranty Claims. Such estimate was prepared in good faith, based on the Knowledge of Premise, although Premise and the Major Stockholders do not provide any assurance that such aggregate Liability will not be exceeded. The foregoing sentence does not limit the Stockholders’ liability under Article VII.

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(b) Without limiting the foregoing, Section 4.18(b) of the Disclosure Schedule includes all material documentation and other written materials pertaining to the Software Products that has been developed by or for Premise and distributed to any customers of Premise (the “Customer Documentation”). The Software Products conform to the Customer Documentation in all material respects and Premise has not made any material representations or commitments regarding features or functionality of the Software Products other than as set forth in the Customer Documentation.

(c) Since January 1, 2006, no former customer has, and no current customer has at any time, (i) made any claim or assertion that the Software Products do not conform in any material respect to commitments made by Premise, (ii) cancelled any Contract with Premise or (iii) refused to accept, or demanded a full or partial refund or abatement of purchase price for, Software Products delivered by Premise pursuant to any Contract.

(d) Premise has not, with respect to former customers since January 1, 2006, and with respect to current customers at any time, (i) given any rebates or refunds on license, installation or support fees that any customers have contracted to pay, (ii) made any commitments to provide future services or Software without payment by the recipient thereof of Premise’s ordinary fees, other than discounts provided for in sales contracts with customers as a sales term at the time of original sale of products, in the ordinary course of business consistent with past practice, and not as a service credit or other concession, (iii) made any commitment to deliver any specific results or outcomes to any customer, (iv) had a material cost overrun (i.e., costs in excess of estimates) for any consulting services or (v) committed to deliver to any customer any Software, or features or functionality thereof, that did not exist on the date the commitment was made.

4.19 Customers; Suppliers.

(a) Section 4.19(a) of the Disclosure Schedule sets forth a complete and accurate list of all Contracts with customers of Premise for the license of Software and the provision of related services executed from January 1, 2007 to the date hereof, showing for each such Contract: (i) whether it is a subscription license or perpetual license; (ii) the contractual amounts due for the Software license fees; (iii) the aggregate implementation, training, professional and consulting services fees; (iv) the aggregate annual maintenance fees; (v) if a subscription Contract, the subscription fee; (vi) the total revenue expected from the Contract; and (vii) the date the Contract was executed.

(b) Other than nonmaterial occurrences in the ordinary course of business that have been remedied, since January 1, 2006, Premise has not received from: (i) any current or former customer any written notice or assertion of material breach, misrepresentation, breach of warranty (including Warranty Claims), Software defects, design errors or malfunctions or other failures of Premise to deliver upon any promises or legal or contractual obligations, and, to the Knowledge of Premise, no such assertion of breach, misrepresentation, breach of warranty (including Warranty Claims), Software defects, design errors or malfunctions, or other failures have been otherwise Threatened, nor to the Knowledge of Premise, has any event occurred, or does any circumstance or condition exist that, with or without the giving of notice or lapse of time, or both, might form the basis of any such notice or assertion; or (ii) any current customer

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any written notice that such customer has ceased or intends to cease or terminate its use of the products or services of Premise, or materially reduced or intends to materially reduce such use, whether or not as a result of the transactions contemplated hereby, or has sought to reduce the price that it pays for such products and services, and, to the Knowledge of Premise, no customer has otherwise Threatened such a cessation, termination, or material reduction in use or price or intends to provide such notice.

(c) Section 4.19(c) of the Disclosure Schedule sets forth a complete and accurate list of all present and past suppliers of Premise from which Premise ordered supplies or other products or services with an aggregate purchase price of more than $10,000 during the years ended December 31, 2007 and 2006, or during the 11 months ended November 30, 2008, showing for each the type of product or service purchased, and the amount of such purchases, during such periods.

(d) Neither Premise, nor, to the Knowledge of Premise, any of the Major Stockholders, has received from: (i) any current supplier or, since January 1, 2006, any former supplier, any notice or assertion of material breach, misrepresentation, breach of warranty or other failures of Premise to deliver upon any promises or legal or contractual obligations, nor to the Knowledge of Premise, has any event occurred, or does any circumstance or condition exist that, with or without the giving of notice or lapse of time, or both, might form the basis of any such notice or assertion; or (ii) any current supplier any notice that such supplier has ceased or intends to cease or terminate supplying the products or services to Premise, or materially reduced or intends to materially reduce such supply, whether or not as a result of the transactions contemplated hereby, or has sought to increase the price that Premise pays for such products and services, other than general and customary price increases in the ordinary course of business, consistent with past practice, and, to the Knowledge of Premise, no supplier intends to provide such notice.

4.20 Accounts Receivable. Section 4.20 of the Disclosure Schedule sets forth the Accounts Receivable of Premise as of the date of the Interim Financial Statements, with the aging of each such Account Receivable. Such Accounts Receivable represent valid obligations of the obligor thereunder and arose in the ordinary course of business of Premise. The Accounts Receivable of Premise arising after the date of the Interim Financial Statements represent valid obligations of the obligor thereunder and arose in arm’s length transactions in the ordinary course of business. All of such Accounts Receivable, that have not been paid, are collectible in the ordinary course of business, net of the reserves shown on Premise’s balance sheet, provided that Premise makes no representation with respect to the Grady Receivable. No obligor under any Accounts Receivable has disputed or refused to pay all or any portion thereof.

4.21 Accounts Payable. Section 4.21 of the Disclosure Schedule sets forth all Accounts Payable as of a date no more than five Business Days prior to the date hereof, with the date incurred, creditor and amount of each Accounts Payable. Such Accounts Payable arose, and as of the Closing, the Accounts Payable reflected in the Estimated Closing Date Net Working Capital calculation (the list of which, in the same format as Section 4.21 of the Disclosure Schedule, will be provided to Eclipsys on or before the Closing) and the Final Closing Date Net Working Capital calculation, will have arisen in arm’s length transactions in the ordinary course of business of Premise. No Accounts Payable are delinquent, and there are no bills representing amounts alleged to be owed by Premise, or other alleged obligations of Premise, which Premise has disputed or determined to dispute or refuse to pay all or any portion thereof.

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4.22 Bank Accounts. Section 4.22 of the Disclosure Schedule sets forth the names and locations of all banks and other financial institutions at which Premise maintains accounts of any nature and the names of all persons authorized to draw thereon or make withdrawals therefrom.

4.23 No Brokers. Except for Montgomery & Co., no broker, finder or similar agent has been employed by or acted on behalf of, directly or indirectly, Premise or any of its Affiliates or agents, in connection with this Agreement or the other Transaction Documents or the transactions contemplated hereby or thereby. Neither Premise nor any of its Affiliates has entered into any arrangement or other Contract with any Person, or taken any other actions, which could obligate any Stockholder, Eclipsys, Premise or any of their respective Affiliates to pay any brokerage commission, finder’s fee or any similar compensation in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereby and thereby, except for the letter agreement, dated June 3, 2008, with Montgomery & Co.

4.24 Disclosure.

(a) None of the information included in any information statement relating to a meeting of the Stockholders to be held in connection with the Merger, or action by written consent in lieu thereof will, at the date delivered to the Stockholders and at the date of such meeting or consent, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

(b) No representation or warranty of Premise contained in this Agreement, the Transaction Documents to which it is a party or the certificates delivered pursuant to this Agreement or such Transaction Documents, and no statement contained in the Disclosure Schedule or such certificates, contains, or will contain upon delivery as set forth herein, any untrue statement of a material fact, or omits, or will omit upon delivery, to state any material fact necessary in order to make the statements herein or therein, in light of the circumstances under which it was or will be made, not misleading.

(c) To the Knowledge of Premise, there is no fact or circumstance existing or event that has occurred that has specific application to Premise that has had or is reasonably likely to have a Material Adverse Effect that has not been set forth in this Agreement, including the Disclosure Schedule.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF ECLIPSYS AND MERGER SUB

Eclipsys and Merger Sub, jointly and severally, represent and warrant to Premise, as of the date of this Agreement and as of the Closing Date, as follows:

5.1 Existence; Good Standing; Corporate Authority. Each of Eclipsys and Merger Sub is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each of Eclipsys and Merger Sub is duly licensed or qualified to do business as a foreign corporation and is in good standing under the laws of each other state of the United States in which such qualification is required, except where the failure to be so qualified or in good standing would not have a material adverse effect on Eclipsys and its subsidiaries, taken as a whole.

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5.2 Authorization, Validity, and Effect of Agreements. Each of Eclipsys and Merger Sub has the requisite corporate power and authority to execute and deliver this Agreement and the other Transaction Documents to be executed by it and the consummation by Merger Sub of the Merger, and by Eclipsys and Merger Sub of the other transactions contemplated herein and therein, has been duly authorized by all requisite corporate action on the part of each of Eclipsys and Merger Sub. This Agreement constitutes, and the other Transaction Documents to be executed by Eclipsys and Merger Sub (when executed and delivered pursuant hereto) will constitute, the valid and legally binding obligations of Eclipsys and Merger Sub, respectively, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or other similar laws relating to creditors’ rights and general principles of equity, whether in equity or at law.

5.3 No Violation. Neither the execution and delivery by each of Eclipsys and Merger Sub of this Agreement or the Transaction Documents, nor the consummation by either of Eclipsys or Merger Sub of the transactions contemplated herein and therein in accordance with the terms hereof and thereof, will:

(i) conflict with or result in a breach of any provisions of the certificate of incorporation or bylaws of Eclipsys or Merger Sub, as applicable;

(ii) violate, or conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or in a right of termination or cancellation of, or accelerate the performance required by, or result in the creation of any Lien upon any of the material properties of Eclipsys or Merger Sub under, or result in being declared void, voidable or without further binding effect, any of the terms, conditions or provisions of any material Contract to which Eclipsys or its Subsidiaries is a party, or by which any of their respective assets or properties are bound; or

(iii) require any Consent to be made by or with respect to Eclipsys or Merger Sub (other than approvals by their respective boards of directors, and the stockholder of Merger Sub, each of which have been obtained).

5.4 Legal Proceedings; Orders. There is no pending proceeding by or against Eclipsys or Merger Sub, or their respective officers and directors (as such), that challenges or, to the knowledge of Eclipsys and Merger Sub, that may have the effect of preventing, delaying, making illegal or otherwise materially interfering with the Merger and any other transactions contemplated in this Agreement. To Eclipsys’ and Merger Sub’s knowledge, no such proceeding has been Threatened.

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5.5 No Brokers. Neither Eclipsys nor any of its Subsidiaries has entered into any Contract with any Person, or taken any other action, which may result in the obligation of any other party to this Agreement to pay any finder’s fees, brokerage or agent’s commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby, except for the engagement letter with Piper Jaffray & Co., for which all obligations thereunder Eclipsys shall be solely liable.

5.6 Funds. Eclipsys will have at the Closing Date the funds necessary to pay the Closing Payment and the Deferred Payment Amount in accordance with this Agreement.

ARTICLE VI

COVENANTS

6.1 Conduct of Business. Except as expressly consented to in writing by Eclipsys, from the date hereof to the earlier of the termination of this Agreement or the Closing Date, Premise shall:

(a) to conduct its business according to the usual, regular and ordinary course in substantially the same manner as heretofore conducted;

(b) to preserve intact its business organization and goodwill, and use its commercially reasonable efforts to (i) keep available the services of its officers and employees (including for such purposes persons filling a similar function), and (ii) maintain satisfactory relationships with its customers, suppliers and other Persons having business relationships with it in substantially the same manner as heretofore maintained;

(c) to confer on a regular basis with one or more representatives of Eclipsys, including to report material operational matters and any proposals of Premise to engage in material transactions, and to provide such other information as Eclipsys may reasonably request;

(d) not to amend the organizational documents of Premise;

(e) to notify Eclipsys within one Business Day of (i) any material change in the condition (financial or otherwise) of the business, properties, assets, Liabilities or prospects of Premise, (ii) any material litigation or material complaints, investigations or hearings of any Governmental Entity or other Person (or communications indicating that the same may be contemplated) against Premise or involving the business, operations or properties of Premise, or (iii) the breach in any material respect of any representation or warranty or covenant contained herein;

(f) to deliver to Eclipsys within one Business Day any material report, statement, schedule or correspondence (i) filed or submitted by Premise, or (ii) received by or, to the Knowledge of Premise, on behalf of Premise from, any Governmental Entity;

(g) not to (i) issue any Capital Stock (other than the issuance of Company Common Stock or Series B Preferred Stock (1) upon exercise of the Company Options and Company Warrants pursuant to the terms thereof and (2) upon conversion of the Series B Preferred Stock pursuant to the Premise Certificate of Incorporation), effect any stock split or

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combination, reclassify the Shares or otherwise change its capitalization from that which existed on the date of the Interim Financial Statements, (ii) grant, confer or award any option, warrant, conversion right or other right to acquire any of its Capital Stock, (iii) increase any compensation or benefits or enter into or amend any employment, severance, termination or similar Contract with any of its present or future employees (including for such purposes persons filling a similar function), officers or directors, except for normal increases in compensation and benefits to employees consistent with past practice, (iv) adopt any new employee benefit plan (including any stock option, restricted stock or stock purchase plan) or amend any existing employee benefit plan in any respect materially adverse to Premise, except for changes which may be required by applicable Legal Requirements, or (v) increase the amount, or expand the scope, of any indemnification currently provided for employees (including for such purposes persons filling a similar function), officers or directors;

(h) not to (i) declare, set aside or pay any dividend or make any other distribution or payment with respect to any of its Shares, or (ii) directly or indirectly redeem, purchase or otherwise acquire any of its Capital Stock;

(i) not to sell, lease, license or otherwise dispose of any assets, or enter into any commitment to do so (other than licenses of its products in the ordinary course of business consistent with past practice);

(j) except in the ordinary course of business consistent with past practice, to use commercially reasonable efforts to maintain the assets and properties of Premise in substantially the same condition existing as of the date of this Agreement;

(k) not to (i) incur or assume any Debt or issue any Debt securities, (ii) assume, guaranty, endorse or otherwise become liable or responsible (whether directly, indirectly, contingently or otherwise) for the obligations of any other Person, (iii) modify in any manner adverse to Premise any outstanding Debt or other obligation of Premise, (iv) pledge or otherwise encumber any Shares, or (v) mortgage or pledge any of its assets, tangible or intangible, or create or suffer to create any Lien of any kind in respect to such assets except in the ordinary course of business consistent with past practices;

(l) not to change any of its accounting principles or practices, except as required by GAAP;

(m) not to:

(i) acquire (by merger, consolidation or acquisition of stock or assets) any Person or division thereof or any Capital Stock of any Person,

(ii) except (i) in the ordinary course of business consistent with past practices and (ii) as contemplated by Section 6.13(b), enter into any Contract which would be required to be listed on Section 4.4(a) of the Disclosure Schedule if entered into prior to the date hereof, terminate any Material Contract or amend any Material Contract in any respect materially adverse to Premise; or

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(iii) authorize any new capital expenditure or expenditures (except in the ordinary course of business consistent with past practice or pursuant to Contracts listed in Section 4.4(a) of the Disclosure Schedule), which, individually or in the aggregate, is in excess of $50,000;

(n) not to pay, discharge or satisfy any Liabilities, other than the payment, discharge or satisfaction in the ordinary course of business of Liabilities reflected, reserved against or disclosed in the Interim Financial Statements, incurred in the ordinary course of business thereafter consistent with past practice or contemplated by Section 6.13;

(o) not to settle or compromise any pending or threatened suit, proceeding, action or claim or commence any litigation that is not fully covered by insurance maintained by Premise on the date hereof;

(p) except as required by applicable Legal Requirements, not to make any material Tax election (other than in a manner consistent with prior practice), or take any material position on any material Tax Return filed on or after the date of this Agreement, change any method of accounting for Tax purposes, amend any material Tax Return, settle or compromise any Tax liability or liabilities for an amount in excess of $10,000, in the aggregate, agree to an extension of a statute of limitations, or fail to file in a timely manner any Tax Returns (except as to filings for which a proper extension has been obtained) that become due or fail to pay any material Taxes that become due;

(q) not to loan or advance any amount to, or enter into any Contract or other transaction with, or otherwise make any payments to any Stockholder, or any of their respective Affiliates or, with the exception of payments of salary or expense advancement in the ordinary course of business, consistent with past practice, in their capacity as employees of Premise, any officer or director thereof;

(r) except in the ordinary course of business, not to delay or postpone the payment of any Accounts Payable or other expenses, or accelerate collection of any Accounts Receivable;

(s) not to take any action that would knowingly result in a breach of any representation, warranty or covenant of Premise or the Major Stockholders contained in this Agreement;

(t) take such action as is necessary under the terms of all Company Benefit Plans and any other documents governing the Company Options to permit all Company Options to be treated in the Merger in accordance with Section 2.7(d) or (f), as applicable;

(u) take such action, if any, as is necessary under the documents governing the Company Warrants to permit all Company Warrants to be treated in the Merger in accordance with Section 2.7(e); and

(v) except as contemplated by Section 6.6, not to take any action or fail to take any reasonable action, or agree in writing or otherwise to take or not take any such actions, (i) having the same or similar effect, or being of the same or similar nature, as any of the actions

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described in Sections 6.1(a) through (u), or (ii) that would or would be reasonably expected to (A) prevent or materially delay Premise or the Major Stockholders from performing its covenants hereunder, or (B) cause or result in any closing condition not being satisfied.

The parties acknowledge and agree that (i) nothing contained in this Agreement shall give Eclipsys, directly or indirectly, the right to control or direct Premise’s operations prior to the Effective Time, and (ii) prior to the Effective Time, Premise shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its operations.

6.2 Further Action.

(a) Except as contemplated by Section 6.6, upon the terms and subject to the conditions of this Agreement, Premise, Eclipsys and Merger Sub shall use all commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all other things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated in this Agreement, to obtain and file in a timely manner all Consents required to consummate the transactions contemplated hereby, and otherwise to satisfy or cause to be satisfied in all material respects all conditions precedent to their obligations under this Agreement, provided, however, that none of Eclipsys, Merger Sub nor Premise shall be required to agree to any divestiture, transfer or license by Eclipsys, Merger Sub or Premise or any of their respective Subsidiaries or Affiliates, of any shares of Capital Stock or of any business, assets or property.

(b) (i) From the date of this Agreement until the termination of this Agreement or the Closing Date, Premise and the Major Stockholders, on the one hand, and Eclipsys and Merger Sub, on the other hand, shall promptly notify the other of any fact, change, circumstance, condition or occurrence that is reasonably likely to (A) materially adversely affect the ability of such party to obtain or file any Consents required for the transactions contemplated in this Agreement and the other Transaction Documents or (B) materially adversely affect the ability of such party to perform its covenants and agreements under this Agreement or the other Transaction Documents.

(ii) Each party shall promptly notify the other parties orally and in writing if such party becomes aware of:

(A) (1) a material inaccuracy at any time of any representation or warranty contained in this Agreement of such party; or (2) the breach of any covenant or agreement under this Agreement of such party or the inability of such party to comply with or satisfy in any material respect any covenant, condition or agreement under this Agreement; provided, however, that no such notification under clauses (1) or (2) shall affect the representations, warranties, covenants or agreements of any party or the conditions to the obligations of any party hereunder; and

(B) except to the extent the facts alleged in such allegation are not disputed and expressly known by the parties, any notice or other communication from any third party alleging that the Consent of such third party is or may be required in connection with the transactions contemplated in this Agreement or the other Transaction Documents or that such third party has a right to any portion of the Purchase Price.

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(c) (i) If any such changes from the capitalization set forth in Section 4.3 of the Disclosure Schedule have occurred, Premise shall deliver a supplement to Section 4.3 of the Disclosure Schedule on or before the Closing Date that sets forth the capitalization of Premise and holders of all outstanding Capital Stock of Premise as of the Closing Date, which supplement may solely reflect changes from the capitalization set forth in Section 4.3 of the Disclosure Schedule as a result of the exercise of Company Options and Company Warrants outstanding on the date hereof or conversion of shares of Series B Preferred Stock outstanding as of the date hereof, in each case, between the date hereof and the Effective Time, provided, that such exercise or conversion is in conformity with the agreements governing such exercise delivered to Eclipsys prior to the date hereof, the Premise Certificate of Incorporation and the terms and conditions of this Agreement (the “Capitalization Update”).

(ii) Without limiting any other obligations hereunder, at least one Business Day prior to the Closing Date, Premise shall give Eclipsys written notice of any matter, fact, event or circumstance, which if existing, occurring or known on the date hereof would have been required to be set forth in the Disclosure Schedule.

(iii) Notwithstanding the foregoing, except for the Capitalization Update, no notice under this Section 6.2 shall affect or be deemed to modify any representation or warranty contained herein or affect any rights of Eclipsys under Article VII.

(d) During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, each Major Stockholder agrees that (i) it will not take any affirmative action that would prevent Premise from performing or complying with, in any material respect, any covenant or agreement of Premise under this Agreement, and (ii) it will vote any Shares held by such Major Stockholder against any matter submitted to the Stockholders for their approval that, if implemented, would prevent Premise from performing or complying with, in any material respect, any covenant or agreement of Premise under this Agreement.

(e) In case at any time, including after the Closing, any further action is necessary or desirable to carry out the purposes of this Agreement, the parties agree (i) to furnish upon request to each other such further information, (ii) to execute and deliver to each other such other documents and (iii) to use its commercially reasonable efforts to do such other acts and things, or cause to be taken such other acts and things, all as any other party hereto may reasonably request for the purpose of carrying out the transactions contemplated by this Agreement pursuant to the terms hereof.

(f) The Surviving Corporation shall use commercially reasonable efforts to collect, in the ordinary course of business, and consistent with the collection policies of Eclipsys, the Accounts Receivable outstanding as of the Closing Date. Until the Holdback Termination

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Date, the Surviving Corporation shall consult regularly with the Stockholders’ Representative on its efforts to collect the Accounts Receivable and give the Stockholders’ Representative the opportunity to provide input into material decisions affecting such collection and the handling thereof, including any decision to commence legal actions to collect such receivables, and shall in good faith consider such input.

6.3 Access to Information. From the date hereof until the earlier of termination of this Agreement or the Closing Date, upon reasonable notice and subject to applicable Legal Requirements, Premise shall provide Eclipsys and its accountants, counsel and other representatives, (A) during normal business hours, access to all of the properties and assets, books, Contracts and other records of Premise reasonably requested by Eclipsys and (B) any other information concerning the Business (including suppliers and customers), properties and personnel of Premise reasonably requested by Eclipsys; provided, however, that neither Eclipsys nor any of its Affiliates, or any of their respective agents or advisors, shall communicate with any employee, consultant, customer or supplier of Premise without the prior authorization of Premise (which shall not be unreasonably withheld or delayed), except for communications made in the ordinary course of business. Eclipsys shall, and shall cause its advisors and representatives to:

(i) conduct its investigation in such a manner that will not unreasonably interfere with the normal operations, customers or employee relations of Premise; and

(ii) treat as confidential in accordance the terms hereof all information obtained hereunder or in connection herewith regarding Premise and not otherwise known to them prior to disclosure hereunder.

No information or knowledge obtained pursuant to this Section 6.3 shall affect or be deemed to modify any representations or warranty contained herein or affect any rights of Eclipsys under Article VII.

6.4 Publicity. The initial press release relating to this Agreement shall be in the form approved by Premise and Eclipsys. Thereafter until the Closing Date, none of Premise, the Major Stockholders, the Stockholders’ Representative, Eclipsys or Merger Sub may make any public statement with respect to the transactions contemplated by this Agreement or the other Transaction Documents, without the prior written consent of Eclipsys on the one hand, and Premise, on the other hand, except to the extent disclosure is legally required (including the requirements and rules of any stock exchange on which the common stock of Eclipsys is traded), in which case Premise and Eclipsys shall consult with each other, and use reasonable efforts to agree upon the text prior to any such disclosure, to the extent reasonably feasible under the circumstances.

6.5 Expenses. Except as set forth herein, including Section 9.5, all costs and expenses (including fees of attorneys, accountants and brokers or finders) incurred in connection with this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby shall be paid by the party incurring such expenses. Without limiting the foregoing, (a) Eclipsys shall pay the fees and expenses of any broker engaged by Eclipsys and its Affiliates,

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including any disclosed in Section 5.5, (b) each Major Stockholder shall pay the fees and expenses of any broker engaged by such Major Stockholder or its Affiliates, and (c) Premise shall pay the fees and expenses of any broker engaged by Premise and its Affiliates, including any disclosed in Section 4.23, and if unpaid as of the Closing Date, shall be (i) Seller Transaction Expenses that reduce that Estimated Purchase Price and the Purchase Price, and (ii) listed in Schedule 5.10 and payable in full at the Closing.

6.6 Third-Party Offers.

(a) From and after the date of this Agreement, until the earlier of the Closing or termination of this Agreement, Premise and each of the Major Stockholders shall, and shall cause each of their Affiliates and their respective officers, directors, employees, representatives (including, without limitation, any investment banker, attorney or accountant) and agents to immediately cease any discussions or negotiations with any Persons with respect to any Third-Party Acquisition, and none of the Major Stockholders or Premise shall, or shall authorize or permit any of its respective Affiliates or their respective officers, directors, employees, representatives (including, without limitation, any investment banker, attorney or accountant) or agents to, directly or indirectly, encourage, solicit, participate in or initiate any inquiries, discussions or negotiations with or provide any information or access to any Person concerning any potential Third-Party Acquisition or that may reasonably be expected to lead to any Third-Party Acquisition or attempted Third-Party Acquisition, or otherwise facilitate any effort or attempt to make or implement a Third-Party Acquisition. Premise shall, within 24 hours, communicate to Eclipsys the existence or occurrence and the terms of any potential Third-Party Acquisition or contact or inquiry related to any potential Third-Party Acquisition that the Major Stockholders, Premise or any of their respective Affiliates, or their respective officers, directors, employees, representatives or agents, receive in respect of such a proposed transaction, and the identity of the Person from whom such proposal, inquiry, or other contact was received.

(b) Notwithstanding the foregoing, if at any time following execution of this Agreement and prior to obtaining the Company Stockholder Approval, (i) Premise receives a written proposal for a Third-Party Acquisition that the Board of Directors of Premise believes in good faith to be bona fide, (ii) such proposal was unsolicited and did not otherwise result from a breach of this Section 6.6, (iii) the Board of Directors of Premise determines in good faith (after consultation with outside counsel and its financial advisor) that such proposal constitutes or could reasonably lead to a Superior Proposal and (iv) the Board of Directors of Premise determines in good faith (after consultation with outside counsel and its financial advisor) that the failure to take the actions referred to in clause (x), (y) or (z) below would constitute a breach of its fiduciary duties to the Stockholders under applicable law, then Premise may (x) furnish information with respect to Premise to the Person making such proposal pursuant to a customary confidentiality agreement containing terms substantially similar to, and no less favorable to Premise than, those set forth herein and in the Confidentiality Agreement; provided, that any nonpublic information provided to any Person given such access shall have been previously provided to Eclipsys or shall be provided to Eclipsys prior to or concurrently with the time it is provided to such Person, (y) participate in discussions or negotiations with the Person making such proposal regarding such proposal and (z) make or authorize any statement, recommendation or solicitation in support of such proposal.

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(c) The Board of Directors of Premise shall not withdraw, amend or modify its approval of this Agreement, the Merger and the transactions contemplated by this Agreement, including its recommendation in favor of this Agreement, the Merger and the transactions contemplated by this Agreement, provided however, that the Board of Directors of Premise may withdraw, amend or modify its recommendation with respect to the Merger and the other transactions contemplated hereby if (i) such withdrawal, amendment or modification is prior to receipt by Premise of the Company Stockholder Approval, (ii) the Board of Directors of Premise determines in good faith, after consultation with outside counsel and its financial advisors, that its fiduciary obligations require it to do so, (iii) the Board of Directors of Premise provides notice of such proposed action to Eclipsys prior to taking such action, and if such withdrawal, amendment or modification is due to the existence of a proposal for a Third-Party Acquisition, specifying the material terms and conditions of such Third Party Acquisition and identifying the Person making such proposal for a Third-Party Acquisition, (iv) Premise provides at least five (5) Business Days following receipt by Eclipsys of the notice required pursuant to clause (iii) above, for Eclipsys, in its sole discretion, to make any revised proposal, and (v) after such five Business Day period, and taking into account any such revised proposal, the Board of Directors of Premise maintains its determination described in clause (ii) above. Notwithstanding the foregoing, nothing in this Section 6.6(c) shall be deemed to affect any other obligation of Premise under this Agreement not inconsistent herewith, regardless of whether the Board of Directors of Premise has withdrawn or modified its recommendation.

(d) (i) Premise represents and warrants to Eclipsys that (i) Premise and its Affiliates, officers, directors and employees, and to the Knowledge of Premise, the representatives (including, without limitation, any investment banker, attorney or accountant) and other agents of Premise, have terminated any and all existing discussions with third parties relating to a Third-Party Acquisition, and (ii) Premise has instructed all of its officers, directors, employees, representatives and agents to terminate all discussions relating to a Third-Party Acquisition.

(ii) Each of the Major Stockholders, as to itself, severally but not jointly, represents and warrants, to Eclipsys that (A) such Major Stockholder, and its Affiliates, officers, directors and employees and, to the Knowledge of such Major Stockholder, the representatives (including, without limitation, any investment banker, attorney or accountant) and other agents of such Major Stockholder, have terminated any and all existing discussions with third parties relating to a Third-Party Acquisition, and (B) such Major Stockholder has instructed all of its officers, directors, employees, representatives and agents to terminate all discussions relating to a Third-Party Acquisition.

(e) Premise agrees that any violation of the restrictions set forth in this Section 6.6 by Premise, the Major Stockholders or any representative of Premise or the Major Stockholders, whether or not such Person is purporting to act on behalf of Premise or otherwise, shall be deemed to be a material breach of this Agreement by Premise and the Major Stockholders.

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6.7 Restrictive Covenants.

(a) The Major Stockholders recognize that the covenants of the Major Stockholders contained in this Section 6.7 are an essential part of this Agreement and that but for the agreement of each Major Stockholder to comply with such covenants Eclipsys would not enter into this Agreement. The Major Stockholders acknowledge and agree that the covenants set forth in this Section 6.7 are necessary to protect the legitimate business interests of the Business acquired by Eclipsys pursuant to this Agreement, including without limitation, trade secrets and other confidential information and goodwill, and that irreparable harm and damage will be done to Eclipsys if any Major Stockholder takes any action in any way prohibited by such covenants. In addition, the Major Stockholders acknowledge that the Purchase Price is paid in part as consideration for customer contacts and marketplace reputation developed by Premise for the Business and such covenants are necessary for Eclipsys to receive the full benefit of this Agreement.

(b) From and after the Closing, each Major Stockholder shall not individually, or in concert with any other Person, directly or indirectly:

(i) engage or become interested in, as owner, employee, partner, through equity ownership (not including up to a five percent passive equity interest in a company for which such Major Stockholder does not serve as an officer, director, employee or consultant), investment of capital, lending of money or property, rendering of services, including as a director (or equivalent), or otherwise create or initiate, any business competitive with the Business;

(ii) take, or assist any other Person in taking, any action intended to advance an interest of any competitor or potential competitor of the Business, or encourage any other Person to take such action; or

(iii) take, or assist any other Person in taking, any material action intended to cause any customer or prospective customer of the Business to use the services or purchase or license the products of any competitor of the Business.

The covenants of the Major Stockholders set forth in this Section 6.7(b) are referred to herein as the “Covenant Not to Compete.”

The Covenant Not to Compete shall cover all of the counties and other political subdivisions of the states of the United States. The Covenant Not to Compete shall bind each Major Stockholder for the three year period immediately following the Closing Date, as the same may be extended pursuant to the terms of Section 6.7(f) (the “Restrictive Period”). The Major Stockholders agree that the duration and area for which the Covenant Not to Compete set forth in this Section 6.7(b) is to be effective are reasonable.

Each of the Major Stockholders hereby acknowledges and agrees that the benefit of the Covenant Not to Compete may be assigned by Eclipsys to any Subsidiary of Eclipsys in connection with any corporate restructuring or reorganization of Eclipsys of the Business, without the further consent of such Major Stockholder.

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(c) In addition, and not in limitation of the prohibitions described in Section 6.7(b), for the Restrictive Period, each of the Major Stockholders shall not, and shall cause such Major Stockholder’s Affiliates and family members not to, directly or indirectly, and shall not cause, encourage or assist any other Person to, divert or attempt to divert or take advantage of or attempt to take advantage of any actual or potential business or opportunities of Eclipsys, Premise or their Affiliates of which any of the Major Stockholders become aware which relate to the Business, or any part thereof, and which are located in any county or any other political subdivision of the states of the United States of America.

(d) During the Restrictive Period, each of the Major Stockholders shall not, and each Major Stockholder shall cause its Affiliates not to, and shall not, cause or encourage or assist any other Persons to, directly or indirectly:

(i) perform any action, activity or course of conduct consisting of or encouraging the following: (A) soliciting, or recruiting any employees of Premise listed on Section 4.11(b) of the Disclosure Schedules (the “Restricted Employees”) to leave the employment of Premise or its Affiliates; (B) hiring any Restricted Employees; or (C) soliciting or encouraging any such Restricted Employee to leave the employment of Premise or its Affiliates; or

(ii) cause, solicit or encourage any customer, or contractor, subcontractor or other supplier of Premise to terminate or adversely alter any relationship such customer or supplier may have with Premise.

Notwithstanding the foregoing, nothing herein shall prohibit general solicitations by the Major Stockholders or their Affiliates not directed at any specific employees of Eclipsys or Premise or their respective Affiliates, including any newspaper advertisements.

(e) The covenants set forth in this Section 6.7 are in addition to and not by way of limitation of any other duties any Major Stockholder may have to Eclipsys, Premise or their Affiliates. The Major Stockholders acknowledge that the covenants contained in this Section 6.7 impose a reasonable restraint on the Major Stockholders in light of the activities and business and future plans of Eclipsys. The Major Stockholders acknowledge that if they violate any of the covenants contained in this Section 6.7 (collectively, the “Restrictive Covenants”), it will be difficult to determine the resulting damages to Eclipsys, Premise and their Affiliates and, in addition to any other remedies Eclipsys, Premise and their Affiliates may have, Eclipsys, Premise and their Affiliates shall be entitled to temporary injunctive relief and permanent injunctive relief without the necessity of proving actual damages in the event of any breach or threatened breach of such covenants. The nonprevailing party or parties shall be liable to pay all costs, including reasonable attorneys’ fees and expenses, that the prevailing party or parties may incur in enforcing or defending, to any extent, any of the Restrictive Covenants, whether or not litigation is actually commenced and including litigation of any appeal. Eclipsys, Premise and their Affiliates may elect to seek one or more remedies at their discretion on a case-by-case basis. Failure to seek any or all remedies in one case shall not restrict Eclipsys, Premise and their Affiliates from seeking any remedies in another situation or for a continuing breach. Such action by Eclipsys, Premise and their Affiliates shall not constitute a waiver of any of their rights.

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(f) Each of the Restrictive Covenants shall be read and interpreted with every reasonable inference given to its enforceability. However, if any term, provision or condition of the Restrictive Covenants is held by a court or arbitrator to be invalid, void or unenforceable, the remainder of the provisions thereof shall remain in full force and effect and shall in no way be affected, impaired or invalidated. If a court or arbitrator determines that any of the Restrictive Covenants are unenforceable, in whole or in part, then the court or arbitrator shall modify such covenant so as to make it enforceable to the fullest extent the court or arbitrator deems enforceable under the prevailing circumstances. As to each Major Stockholder, the Covenant Not to Compete shall be deemed to be a series of separate covenants, one for each and every county or other political subdivision of the states of the United States of America, which is where the Covenant Not to Compete is intended to be effective. Any violation of the provisions of this Section 6.7 shall automatically toll the passage of the three-year period with respect to the breaching Major Stockholder and extend the Restrictive Period for the duration of such violations with respect to the breaching Major Stockholder.

(g) At any time during the Restrictive Period, each or any of the Major Stockholders shall, within five (5) days of the written request of Eclipsys, certify to Eclipsys in writing (in form and substance reasonably satisfactory to Eclipsys) that such Major Stockholder is in full compliance with the covenants contained in this Section 6.7.

(h) Nothing contained in this Section 6.7 is intended to confer upon any Major Stockholder any right to employment with Eclipsys, Premise or their Affiliates at any time after the Closing Date.

(i) Notwithstanding the foregoing, the Restrictive Covenants shall not apply to any Institutional Major Stockholder and its Affiliates as follows: (i) to the extent that such Restrictive Covenants would prevent such Institutional Major Stockholder and its Affiliates from conducting its business in the ordinary course as such business is currently conducted, provided that the exception set forth in this Section 6.7(i)(i) shall not apply to any Affiliates of such Institutional Major Stockholders if such Affiliates are also Major Stockholders; (ii) the Restrictive Covenants shall apply to the Institutional Major Stockholder and its Affiliates, but shall not apply to any Portfolio Company of such Major Stockholder or any investor in such Institutional Major Stockholder (solely in such investor’s capacity as such); and (iii) in the case of each of Aetna Ventures. LLC and Connecticut Innovations, Inc., the Restrictive Covenants shall apply only to such entity and its direct and indirect subsidiaries, but not to any Person controlling or under common control with such entity; provided that in the cases of clauses (ii) and (iii), such Institutional Major Stockholder does not perform any action, activity or course of conduct consisting of or encouraging the following: (y) soliciting or recruiting any Restricted Employees for hire by any such Portfolio Company, investor, or controlling Person or Person under common control; or (z) soliciting or encouraging any such employee of Premise to leave the employment of Eclipsys, Premise or their Affiliates.

6.8 Directors. Effective as of the Closing Date, the Major Stockholders shall cause each director to resign from their position as a director of the Board of Directors of Premise.

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6.9 Stockholders’ Representative.

(a) The Stockholders shall at all times maintain a representative (the “Stockholders’ Representative”) for the purposes described in this Agreement, including the taking of actions and the giving of consents on behalf of the Major Stockholders prior to the Closing and the Effective Time Company Holders from and after the Closing as specified herein. The Major Stockholders hereby appoint Richard Dumler as the initial Stockholders’ Representative. The approval and adoption of this Agreement by the Stockholders and the acceptance of the Merger Consideration by the Effective Time Company Holders shall constitute, to the fullest extent permitted by law, the irrevocable authorization, direction and appointment of Richard Dumler as the initial Stockholders’ Representative (or any then acting successor pursuant to the terms hereof) as the attorney-in-fact and agent of each Effective Time Company Holder for such purposes. This appointment and grant of power and authority by each Effective Time Company Holder is coupled with an interest and is irrevocable and shall not be terminated by any act of any Effective Time Company Holder or by operation of law, whether by the death or incapacity of any individual Effective Time Company Holder or by the occurrence of any other event. Another person shall be appointed as the Stockholders’ Representative if the person so designated (or any successor thereof) is unwilling or unable to so act. The Stockholders’ Representative hereby accepts such appointment. Accordingly, the Stockholders’ Representative shall have full power and authority to:

(i) take any action on behalf of the Major Stockholders or the Effective Time Company Holders, as applicable, to facilitate or administer the transactions contemplated hereby, including, without limitation, amending this Agreement, and executing such other documents or instruments as the Stockholders’ Representative deems appropriate;

(ii) (A) dispute or refrain from disputing, or approve, any claim made by an Eclipsys Indemnified Party under this Agreement that may be satisfied from the Escrow Fund, (B) authorize payment of any claim to an Eclipsys Indemnified Party under Article VII of this Agreement, (C) negotiate and compromise any dispute that may arise under Article VII of this Agreement or arise under this Agreement generally and be satisfied from the Escrow Fund and (D) execute any settlement agreement, release or other document with respect to such dispute or remedy;

(iii) (A) dispute or refrain from disputing, or approve, the Eclipsys Final Calculations, (B) authorize payment of any Purchase Price shortfall determined under Sections 2.10 and 2.11 of this Agreement or any expenses of an Unrelated Accounting Firm contemplated by Section 2.11 of this Agreement, (C) negotiate and compromise any dispute that may arise with respect to the Eclipsys Final Calculations and (D) execute any settlement agreement, release or other document with respect to such dispute or remedy;

(iv) engage attorneys, accountants and agents and authorize payment of the amount of the expenses for such Persons from the Stockholders’ Fund;

(v) exercise all rights of, and take all actions that may be taken on behalf of the Effective Time Company Holders under the Escrow Agreement;

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(vi) give such instructions and take such action or refrain from taking such action as the Stockholders’ Representative deems, in his or her discretion, necessary or appropriate to carry out the provisions of this Section 6.9; and

(vii) to the extent not prohibited or otherwise provided by this Agreement, distribute funds from the Stockholders’ Fund for the Emerson Software Development Bonus, the Gravina Software Development Bonus and the Stockholders’ Fund and the True-Up Reserve Fund, in their Pro Rata Portion, to the Effective Time Company Holders.

(b) To the fullest extent permitted by applicable law, each of the Effective Time Company Holders hereby (i) irrevocably appoints the Stockholders’ Representative as such Effective Time Company Holder’s agent for service of any and all legal process, summons, notices and documents which may be served in any action or proceeding under or pursuant to this Agreement and (ii) waives any requirement of personal notice or any claim that service on the Stockholders’ Representative is invalid or insufficient to constitute valid personal service on such Effective Time Company Holder.

(c) Each of the Effective Time Company Holders acknowledges that actions taken, consents given and representations made by the Stockholders’ Representative on behalf of the Effective Time Company Holders pursuant hereto shall be binding upon the Major Stockholders and the Effective Time Company Holders, as applicable, including all actions and consents under the Escrow Agreement.

(d) The Stockholders’ Representative may resign at any time, and may be removed for any reason or no reason by the vote or written consent of, as applicable, (i) if prior to the Effective Time, the Major Stockholders holding a majority of the then outstanding fully diluted Shares held by the Major Stockholders, or (ii) from and after the Effective Time, the Effective Time Company Holders holding a majority of the outstanding fully diluted Shares at the Effective Time.

(e) The approval and adoption of this Agreement by the Stockholders and the acceptance of the Merger Consideration by the Effective Time Company Holders shall constitute, to the fullest extent permitted by law, the irrevocable agreement of each of them (i) that the Stockholders’ Representative shall not be liable to any of them for Damages with respect to any action taken or any omission by the Stockholders’ Representative pursuant to this Section 6.9, except to the extent such Damages are caused by the Stockholders’ Representative’s bad faith, fraud or criminal misconduct and (ii) to indemnify the Stockholders’ Representative against any Damages that the Stockholders’ Representative may suffer or incur in connection with any action taken or any omission by the Stockholders’ Representative, except to the extent such Damages are caused by the Stockholders’ Representative’s bad faith, fraud or criminal misconduct.

(f) To the fullest extent permitted by applicable law, each of the Effective Time Company Holders hereby (i) irrevocably appoints the Stockholders’ Representative as such Effective Time Company Holder’s agent for service of any and all legal process, summons, notices and documents which may be served in any action or proceeding under or pursuant to

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this Agreement, (ii) waives any requirement of personal notice or any claim that service on the Stockholders’ Representative is invalid or insufficient to constitute valid personal service on such Effective Time Company Holder and (iii) ratifies and confirms, and agrees to be bound by, all actions taken by the Stockholders’ Representative on its behalf pursuant to the foregoing authorization.

6.10 Employee Matters.

(a) The employees of Premise shall, subject to Section 6.10(b), continue as at-will employees of Premise or Eclipsys or another Subsidiary of Eclipsys following the Closing, on terms to be determined by Eclipsys. If employment is continued by Eclipsys or another Subsidiary of Eclipsys other than Premise, the new employer shall assume any accrued but unused vacation benefits as listed on Schedule 6.10(a). Employees of Premise who continue in the employ of Premise, Eclipsys or a Subsidiary of Eclipsys shall, following a reasonable transition period determined by Eclipsys, have benefits and be employed on terms consistent with those provided by Eclipsys to its other employees at comparable levels in the organization, including annual base compensation, as applicable based on employment level, plus an opportunity to receive equity based compensation and an annual bonus pursuant to the performance-based corporate bonus plan, if established by Eclipsys’s Board of Directors. Following the Closing, to the extent permitted by Legal Requirements, applicable Tax qualification requirements and the terms of the applicable employee benefit plans and policies of Eclipsys, and subject to any generally applicable break in service or similar rule, Eclipsys shall recognize the years of service of each continuing employee of Premise with Premise prior to the Closing Date for purposes of vesting and eligibility to participate (but not benefit accrual) under the employee benefit plans and policies of Eclipsys; provided, however, that such service shall not be recognized if recognition would result in a duplication of benefits for the same period of service or to the extent that such service was not recognized under the corresponding Company Benefit Plan.

(b) Nothing contained in this Agreement confers upon any employee (including for such purposes persons filling a similar function) of Premise any right to continued employment or participation in any Company Benefit Plan (other than the Premise 2004 Plan to the extent provided by Section 6.17) or any employee benefit plan or policy of Eclipsys or its Subsidiaries at any time after the Closing Date, nor shall anything contained herein be deemed an amendment or modification of any Company Benefit Plan or any employee benefit plan or policy of Eclipsys or its Subsidiaries.

(c) Eclipsys shall be solely responsible for any required notice and payments under the Worker Adjustment Retraining and Notification Act of 1988 (the “WARN Act”) and any similar state statutes, and otherwise to comply with any such statute with respect to any “plant closing” or “mass layoff” (as defined in the WARN Act) or group termination or similar event affecting any continuing employees of Premise occurring after the Closing Date. Premise shall provide any required notice and payments under the WARN Act, and any similar state statutes, and otherwise to comply with any such statute with respect to any “plant closing” or “mass layoff” (as defined in the WARN Act) or group termination or similar event affecting any employees of Premise on or before the Closing Date.

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6.11 Release. In consideration of the payments to the Major Stockholders by Eclipsys of their share of the Purchase Price and as a condition to the execution and delivery of this Agreement by Eclipsys, each Major Stockholder hereby gives the following general release effective as of the Closing Date:

(a) Each Major Stockholder on behalf of such Major Stockholder and such Major Stockholder’s agents, heirs, successors and assigns, hereby irrevocably and unconditionally releases, acquits and forever discharges Premise, Eclipsys, each of their respective Affiliates and their respective partners, members, managers, stockholders, directors, officers and agents, and their respective successors and assigns (collectively, the “Released Parties”), to the fullest extent permitted by applicable Legal Requirements, from any and all charges, complaints, claims, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, remedies, costs, losses, debts, expenses and fees, of every type, kind, nature, description or character, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, that such Major Stockholder has, owns or holds, or claims to have, hold or own, including but not limited to those arising out of or in connection with (i) the Major Stockholder’s employment, or other relationship with Premise, (ii) the Major Stockholder’s right to or interest in any Intellectual Property or other assets or properties of Premise, (iii) the Major Stockholder’s right to or any interest in or under any Contract (including the Stockholder Agreements) with Premise, or (iv) any equity or other interests the Major Stockholder may have or claim to have in, or any other claims the Major Stockholder may have against, Premise or its predecessors (collectively, the “Claims”). Each Major Stockholder represents that such Major Stockholder has not assigned or transferred or purported to have assigned or transferred to any Person any Claims. This general release set forth in this Section 6.11 shall not affect any rights that the Major Stockholder may have (x) that arise solely under this Agreement (including payment of the Purchase Price) or the Escrow Agreement, (y) that arise after the Closing Date or (z) based on any claim, demand or cause of action such Major Stockholder may have against Eclipsys or any of its Affiliates (other than Premise) that is not related to Premise (including the Business), the Merger, this Agreement or the other transactions contemplated by this Agreement.

(b) Each Major Stockholder acknowledges and agrees that the releases made herein constitute final and complete releases of the Released Parties with respect to all Claims. Each Major Stockholder expressly acknowledges and agrees that this general release is intended to include in its effect, without limitation, all Claims that such Major Stockholder does not know or suspect to exist at the time hereof, and this general release contemplates the extinguishment of any and all such Claims. Furthermore, each Major Stockholder hereby expressly waives and relinquishes any rights and benefits that such Major Stockholder may have under any Legal Requirements, including any state law or any common law principles limiting waivers of unknown claims. Each Major Stockholder understands that the facts and circumstances under which such Major Stockholder gives this full and complete release and discharge of the Released Parties set forth herein may hereafter prove to be different than now known or believed by such Major Stockholder and such Major Stockholder hereby accepts and assumes the risk thereof and agrees that such Major Stockholder’s full and complete release and discharge of the Released Parties with respect to the Claims shall remain effective in all respects and not be subject to termination, rescission or modification by reason of any such difference in facts and circumstances.

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(c) Each Major Stockholder represents and agrees that such Major Stockholder has not filed with any Governmental Entity or arbitrator or any other Person any complaint, charge or lawsuit against any of the Released Parties involving any Claims, and that such Major Stockholder shall not do so at any time hereafter.

(d) Each Major Stockholder represents and acknowledges that in executing this general release such Major Stockholder does not rely and has not relied upon any representation or statement not set forth herein made by any of the Released Parties or by any of the Released Parties’ Affiliates, agents, representatives or attorneys with regard to the subject matter, basis or effect of this general release or otherwise.

(e) Without limiting the foregoing general release, each Major Stockholder agrees that such Major Stockholder shall not, directly or indirectly, (i) bring or cause to be brought, or encourage or participate in the prosecution of, any action, proceeding or suit seeking recovery by or on behalf of any Person from any Released Party of any amount in respect of, or Damages with respect to, any of the Claims, or (ii) defend any action, proceeding or suit in whole or in part on the grounds that any or all of the terms or provisions of this Section 6.11 violate any Legal Requirements, or are illegal, invalid, inequitable, not binding, unenforceable or against public policy.

6.12 Confidentiality.

(a) Each party and such party’s representatives shall (i) use any Confidential Information of any other party solely for the purpose of pursuing the transactions contemplated hereby and (ii) not directly or indirectly use or exploit the Confidential Information of any other party for its own benefit or the benefit of another Person, including to create, adopt or modify products or services which would compete with the disclosing party’s products or services. For purposes of this Agreement, Confidential Information of Eclipsys shall, from and after the Closing Date, include the Confidential Information of Premise and the Business, and, without limiting any other obligations relating thereto, the Major Stockholders shall be subject to all obligations set forth herein with respect to such Confidential Information of Eclipsys and Premise. This provision is not intended to restrict independent business activities, in each case undertaken without use of any other party’s Confidential Information and without violating the Restrictive Covenants, employment terms or other legal or contractual duties (but this sentence does not limit the Restrictive Covenants or any employment terms or other legal or contractual duties).

(b) Each party agrees that (i) the Confidential Information of any other party received or otherwise held by it or any memoranda, notes, analyses, reports, compilations or studies generated by it or its representatives based upon such Confidential Information shall be kept confidential, (ii) except as permitted hereunder, such party and its advisors and other representatives shall not disclose any of the Confidential Information of any other party in any manner whatsoever and (iii) such party and its representatives shall use the same level of care to prohibit disclosure of the other party’s Confidential Information as such party uses to protect its own confidential information, but in no event using less than reasonable care and diligence; provided, however, that (A) such party may make any disclosure of such information to which the other party to whom the Confidential Information belongs gives its prior written consent, and

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(B) any of such information may be disclosed to such party’s representatives who need to know such information for the sole purpose of pursuing the transactions contemplated hereby, and who agree to keep such information confidential. In any event, each party shall be responsible for any breach of this Agreement by its representatives and shall, at its sole expense, take all reasonable measures (including but not limited to court proceedings) to restrain its representatives from prohibited or unauthorized disclosure or use of the Confidential Information of any other party.

(c) The receiving party shall immediately notify the disclosing party upon any loss or unauthorized disclosure of the other party’s Confidential Information.

(d) In the event that any party or any of its representatives are requested or required (by oral questions, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or other similar process) to disclose any of the Confidential Information of any other party, it shall provide the disclosing party with prompt written notice of any such request or requirement, if permitted by law to do so, so that the disclosing party may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. If, in the absence of a protective order or other remedy or the receipt of a waiver by the disclosing party, the receiving party or any of its representatives are nonetheless, in the opinion of its outside counsel, legally compelled to disclose Confidential Information of the disclosing party or else stand liable for contempt or suffer other similar censure or penalty, the receiving party or its representative may, without liability hereunder, disclose only that portion of the Confidential Information of the disclosing party that such counsel advises is legally required to be disclosed, provided that the receiving party and its Affiliates and agents exercise their respective commercially reasonable efforts to preserve the confidentiality of such Confidential Information, including, without limitation, by cooperating with the disclosing party to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded such Confidential Information.

(e) Each party acknowledges that the Confidential Information of the other parties has tangible value and it is further understood and agreed that money damages would not be a sufficient remedy for any breach of the provisions set forth herein by any party or any of their representatives and that the parties hereto shall be entitled to equitable relief, including injunction and specific performance, as a remedy for any such breach or threatened breach. Such remedies shall not be deemed to be the exclusive remedies for a breach of the provisions set forth herein, but shall be in addition to all other remedies available at law or equity to the parties.

(f) The covenants set forth in this Section 6.12 shall survive until the fifth anniversary of the Closing Date, provided, that nothing herein shall limit the obligations of the parties hereto with respect to the Confidential Information of the other parties, whether before or after such date, under any Legal Requirements relating thereto, including state and common laws relating to misappropriation of trade secrets.

(g) Nothing herein shall limit the obligations of the parties under the Confidentiality Agreement, and to the extent of any inconsistency between this Section 6.12 and the Confidentiality Agreement, the Confidentiality Agreement shall govern with respect to the parties thereto.

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6.13 Covenants Regarding Contracts.

(a) On or before the Closing Date, unless waived by Eclipsys, Premise shall use all commercially reasonable efforts to obtain, and Eclipsys shall use commercially reasonable efforts to assist Premise in obtaining, all Consents required under the Material Contracts in connection with the execution, delivery and performance of this Agreement, the other Transaction Documents or the consummation of the transactions contemplated hereby and thereby, on terms that are not materially burdensome to Eclipsys or Premise, and Premise shall deliver copies of such Consents to Eclipsys.

(b) On or before the Closing Date, Premise shall obtain payoff letters for the Debt of Premise to Silicon Valley Bank, including any applicable per diem amounts and any penalty interest, prepayment penalties, exit fees or other penalties due as a result of such Debt payment (the “Payoff Amounts”). At the Closing, Eclipsys shall pay the Payoff Amounts to Silicon Valley Bank, provided that Premise shall be liable for the Payoff Amounts, and such amounts shall be included in the calculation of Estimated Closing Date Debt and Final Closing Date Debt and shall have the effect of decreasing the Estimated Purchase Price and the Purchase Price.

(c) At the Closing or, if such payment is not due until after the Closing, at such later time as such payment is due, Eclipsys shall pay each of the Seller Transaction Expenses listed on Schedule 6.13, provided that Premise shall be liable for all Seller Transaction Expenses, including those listed on Schedule 6.13, and such amounts shall have the effect of decreasing the Estimated Purchase Price and the Purchase Price.

6.14 Stockholder Notices.

(a) Premise shall promptly, but in no event later than five (5) Business Days after the Closing Date or such earlier date as may be required under the Delaware General Corporation Law, deliver notice to its Stockholders of the Company Stockholder Approval and the availability of appraisal rights (along with such other information required under applicable law), pursuant to and in accordance with the applicable provisions of the Delaware General Corporation Law (including Section 228(e)) and the Premise Certificate of Incorporation and Bylaws of Premise (the “Stockholder Notice”).

(b) As soon as practicable following execution of this Agreement, if the Stockholder Written Consents are not delivered within two hours after execution, and without limiting any of the rights of Eclipsys hereunder, Premise shall take all action necessary in accordance with Delaware law and the Premise Certificate of Incorporation and Bylaws of Premise to duly call, give notice of, convene and hold a meeting for Stockholders to consider and vote upon the adoption and approval of this Agreement, the Merger and the other transactions contemplated hereby, including the appointment of the Stockholders’ Representative, or solicit the written consent of Stockholders thereto. Subject to Section 6.6, Premise shall, through its Board of Directors, recommend to the Stockholders the adoption and approval of this Agreement and shall not withdraw, modify or change such recommendation, and shall use reasonable efforts to obtain the Company Stockholders’ Approval.

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6.15 Indemnification of Directors and Officers.

(a) Prior to the Effective Time, Premise may purchase tail coverage under its directors’ and officers’ liability insurance and fiduciary insurance policies covering Premise’s directors, officers and fiduciaries, with respect to claims arising from facts or events that occur at or before the Effective Time. Eclipsys shall use, and cause the Surviving Corporation to use, commercially reasonable efforts to keep any such tail coverage in effect for the term thereof, provided that neither Eclipsys nor the Surviving Corporation shall in any event be obligated to make payments with respect to any such policy beyond the premiums paid by Premise prior to the Closing.

(b) This Section 6.15 is intended for the irrevocable benefit of, and to grant third-party rights to, the directors, officers and fiduciaries of Premise at or prior to the Effective Time, to the extent such persons are covered by any such tail policies purchased by Premise prior to the Effective Time, and shall be binding on all successors and assigns of Eclipsys and the Surviving Corporation. Each director, officer or fiduciary of Premise so covered shall be entitled to enforce the post-closing covenants of Eclipsys and the Surviving Corporation contained in this Section 6.15.

(c) Following the Closing, the organizational documents of the Surviving Corporation shall, to the fullest extent permitted by applicable law, contain provisions in the aggregate no less favorable (in all material respects) with respect to indemnification, advancement of expenses and exculpation of the directors and officers of the Surviving Corporation than are currently set forth in the Premise Certificate of Incorporation and Bylaws of Premise. Any indemnification agreements with the directors and officers of Premise in existence on the date of this Agreement and listed on Section 4.4(a) of the Disclosure Schedule shall remain effective, without any further action, and shall survive the Closing and continue in full force and effect in accordance with their terms.

(d) In the event that the Surviving Corporation (i) consolidates with or merges into any other Person and shall not be the continuing entity after such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that such continuing entity or transferee of such assets, as the case may be, shall assume the obligations set forth in Section 6.15(c).

6.16 Termination of 401(k) Plan. Effective no later than the Closing Date, Premise shall terminate any and all Company Employee Plans intended to include a Code Section 401(k) arrangement (each such plan, a “Company 401(k) Plan”) pursuant to resolutions of Premise’s Board of Directors that are substantially in the form attached hereto as Schedule 6.16. At or prior to the Closing, Premise shall provide Eclipsys with evidence that all Company 401(k) Plans have been terminated (effective no later than the Closing Date) and shall thereafter take such other actions in furtherance of terminating any Company 401(k) Plans as Eclipsys may reasonably require. This Section 6.16 is not intended to require that all assets of such Company 401(k) Plans be fully distributed as of or prior to the Closing Date.

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6.17 Amendment to the Premise 2004 Plan. Prior to the Effective Time, the Board of Directors of Premise shall amend the Premise 2004 Plan as set forth in Schedule 6.17(a) such that each Company Option that could be assumed by Eclipsys pursuant to Section III.A. of Article Two of the Premise 2004 Plan as in effect immediately prior to such amendment (each, a “Company Deferred Payment Option”) shall become fully vested as of immediately prior to the Closing Date and be converted into the right to receive the same amount of Merger Consideration in respect of such Company Deferred Payment Option, as the holder thereof would receive pursuant to Section 2.7(d) if such Company Deferred Payment Option were a Company Closing Payment Option. Such amendment shall also provide that such Merger Consideration shall be payable on the first anniversary of the Closing Date, without interest, except that, to the extent the holder of any Company Deferred Payment Option elects to execute a general release in the form of Schedule 2.9(e) prior to the date that is 60 days after the Closing Date, such Merger Consideration shall be payable promptly after the expiration of any period during which such general release may be revoked.

6.18 Collection of Grady Receivable.

(a) The Surviving Corporation shall use commercially reasonable efforts to collect the Grady Receivable. Until the Grady Collection Date, the Surviving Corporation shall consult regularly with the Stockholders’ Representative on its efforts to collect the Grady Receivable and give the Stockholders’ Representative the opportunity to provide input into material decisions affecting such collection and the handling thereof, including any decision to commence legal actions to collect such receivable, and shall in good faith consider such input.

(b) Promptly after the earlier of (i) complete payment of the Grady Receivable and (ii) the first anniversary of the Closing Date (such earlier date, the “Grady Collection Date”), the Surviving Corporation shall provide the Stockholders’ Representative with a complete accounting of the amount collected on the Grady Receivable as of such date, less any out-of-pocket expenses incurred by Eclipsys and the Surviving Corporation to collect such amounts, including the costs of any legal proceeding (such net amount, the “Net Grady Collection”). If, on or before the Grady Collection Date, Eclipsys enters into any transaction with Grady not in effect on the date of this Agreement and the Grady Receivable is liquidated in whole or part in connection with that transaction, Eclipsys will be deemed for purposes of this Section 6.18 to have received from Grady a payment against the Grady Receivable equal to the amount, if any, by which the total amount payable by Grady in that transaction exceeds Eclipsys list prices for what is being delivered by Eclipsys in the transaction.

6.19 Post-Closing Software Development.

(a) Schedule 6.19(i) sets forth certain “Performance Plans” as of the date hereof for the Premise software development organization (the “Premise Software Development Organization”) for 2009. Schedule 6.19(ii) sets forth Premise’s projection as of the date hereof of Premise’s 2009 Plan of Record (the “POR”) and Premise’s staffing plans for 2009 for the Premise Software Development Organization (the “Staffing Plan”). The Performance Plans and Staffing Plan together reflect plans of Premise, which Premise in good faith believes are realistic and achievable in the ordinary course of business as previously conducted without adding additional headcount, staff overtime, supplemental headcount from Eclipsys or third parties, or other extraordinary efforts, the costs of which in the aggregate exceed, in any material respect, aggregate costs of the Staffing Plan reflected in the POR. It is important to Eclipsys that the Development Plan be achieved within the Staffing Plan.

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(b) For purposes of facilitating the efforts of the Premise Software Development Organization to meet the Performance Plans in accordance with the Staffing Plan, it is agreed that:

(i) Subject to paragraph (c) below, Eric Rosow and Craig Gravina (the “Development Managers”) shall have day-to-day operational control over the Premise Software Development Organization, including without limitation staffing (hiring/firing of employees and consultants), allocation of resources and other employment related issues, subject to reasonable oversight by the executive officers of Eclipsys, consistent with the responsibilities of those officers for management of the business of Eclipsys; and provided that the Development Managers (A) may not deviate from the Performance Plans, the POR or the Staffing Plan in any material respect without prior written consent by the Chief Executive Officer of Eclipsys it being understood that the Development Managers will have flexibility as to how best to allocate resources within the costs contemplated by the Staffing Plan, and (B) shall operate the Premise Software Development Organization consistent with past practices to the extent that doing so is not inconsistent with the Performance Plans, the POR and the Staffing Plan.

(ii) The Development Managers shall prepare reasonable written plans to achieve the Performance Plans within the POR and Staffing Plan (the “Development Plans”), which Development Plans shall (A) include planned resource allocations, schedules, and interim milestones; (B) be of such quality, scope and level of detail at least as good as previous Premise practice and consistent with reasonable professional standards for commercial software development; and (C) be prepared and delivered to Eclipsys management not later than January 31, 2009 and subsequently as materially modified or supplemented by the Development Managers with the written consent of any of the Eclipsys CEO, EVP Client Solutions or SVP Software Development, which consent shall not be unreasonably withheld.

(iii) As and when reasonably requested by the Eclipsys CEO, EVP Client Solutions or SVP Software Development, the Development Managers will report the status of performance against the Development Plans so as to permit Eclipsys to exercise reasonable oversight and evaluate the results of the activities and performance of the Premise Software Development Organization.

(iv) The balance, if any, remaining in the Software Development Escrow Fund shall be liquidated, and paid to the Stockholders’ Fund if, prior to December 31, 2009, either of the Development Managers is terminated without “Cause” without the consent of the Stockholders Representative or resigns for “Good Reason” or “Justification”, as those terms are defined in their respective Employment Agreements and/ or employees’ Proprietary Information Protection Agreement with Eclipsys.

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(v) If there is any material change, modification or additions to the Performance Plans without the approval of the Stockholders Representative, an appropriate and corresponding change shall be made in the POR, as mutually agreed between Eclipsys, on the one hand, and, on the other, the Development Managers and the Stockholders’ Representative.

(vi) The balance, if any, remaining in the Software Development Escrow Fund shall be liquidated, and paid to the Stockholders Fund if Eclipsys (A) does not provide the Premise Software Development Organization with resources reasonably comparable to those as have been employed and as called for by the Staffing Plan and with related operations support and funding substantially consistent with the POR, or (B) otherwise takes any action that in any material respect adversely affects the ability of the Premise Software Development Organization to meet the Performance Plans consistent with the POR and Staffing Plan, without the approval of the Stockholders’ Representative.

(c) During 2009, Eclipsys and the Development Managers shall assess the performance of the Premise Software Development Organization against the Performance Plans. If (i) the Premise Software Development Organization fails to meet in any material respect any of the Performance Plans; (ii) or if any release of Software contemplated by the Performance Plans is of substandard quality, as measured by unreasonable levels of non-acceptance or complaints by clients or by unreasonable inordinate levels of support activity compared to prior Premise Software releases (each of the events described in these items (i) and (ii) a “Precipitating Cause”), then Eclipsys may give notice (a “Change Notice”) to the Development Managers and the Stockholders’ Representative, and shall thereafter promptly consult with the Development Managers regarding appropriate courses of action, and following such consultation Eclipsys may add resources to the Premise Software Development Organization beyond those indicated in the Staffing Plan through additional headcount, staff overtime, supplemental headcount from Eclipsys or third parties, or other measures, as Eclipsys determines in its reasonable discretion are necessary or advisable to remedy the Precipitating Cause and minimize the risk that of subsequent Precipitating Causes, or to remedy issues associated with released Software.

(d) The total direct cost to Eclipsys of such additional resources (including all salaries and wages, incentive compensation, benefits, taxes, and other direct costs) (collectively, “Supplemental Development Costs”) from the date of their engagement until the Scheduled Development End Date, shall be set forth in a notice (a “Supplemental Costs Notice”) which will be sent to the Development Managers and the Stockholders’ Representative within ten (10) days after the end of each month in which they are incurred, and the Stockholders’ Representative and Eclipsys shall provide the Escrow Agent joint instructions to pay such amounts from the Software Development Escrow Fund to Eclipsys promptly after the delivery of each Supplemental Costs Notice, as and when such Supplemental Development Costs are incurred by Eclipsys. The Development Managers or the Stockholders’ Representative may object to any Change Notice or Supplemental Costs Notice within five (5) Business Days of his receipt thereof, and such objection shall be subject to Section 11.13 but shall not delay delivery of joint payment instructions to the Escrow Agent or payment of Supplemental Development Costs from the Software Development Escrow Fund to Eclipsys. Any balance remaining in the

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Software Development Escrow Fund at the Scheduled Development End Date shall be deposited to the Stockholders’ Fund. If the entire Software Development Escrow Fund is exhausted pursuant to this Section 6.19 before the Scheduled Development End Date, no amounts from the Software Development Escrow Fund shall be payable for the benefit of the Effective Time Company Holders. 

(e) It is understood and agreed that no representations or warranties are made in this Section 6.19 or elsewhere in this Agreement or the other Transaction Documents as to the ability to achieve the Performance Plans with the Staffing Plan or otherwise, it being understood that the Staffing Plan and Performance Plans are planning documents prepared by Premise in good faith, and therefore, other than access to the Software Development Escrow Fund by Eclipsys in the manner set forth in this Section 6.19, no additional liability is created by this Section 6.19. Although the failure to achieve the Performance Plans with the Staffing Plan does not cause any other Damages under this Agreement, payments from the Software Development Escrow Fund to Eclipsys shall not prevent Eclipsys making a claim for Damages under this Agreement in excess of amounts recovered by Eclipsys from the Software Development Escrow Fund if and to the extent that the Damages incurred by Eclipsys in excess of amounts recovered by Eclipsys from the Software Development Escrow Fund would be recoverable by Eclipsys other than pursuant to this Section 6.19.

ARTICLE VII

SURVIVAL; INDEMNIFICATION; REMEDIES

7.1 Survival of Representations and Warranties and Covenants.

(a) The representations and warranties made in this Agreement shall survive until the Holdback Termination Date (the “Survival Period”). Notwithstanding the foregoing, the representations and warranties set forth in Sections 3.1, 3.2, 4.2, 4.3, 4.6(a), 4.9, 4.10, 4.11(b), 4.14(a), 4.14(c), 4.14(f)(i), 4.14(f)(iii), 4.14(j), and 4.16 (the “Core Representations”) shall survive until the earlier of (i) 90 days after the expiration of the applicable statute of limitations period or (ii) the seventh anniversary of the Closing Date. The right to indemnification, reimbursement or other remedy based upon such representations, warranties, covenants and obligations shall not be affected by any investigation conducted with respect to, or knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date.

(b) The covenants and agreements of the parties contained in this Agreement shall survive the Closing indefinitely, except as expressly provided otherwise herein.

7.2 Indemnification and Other Rights.

(a) If the Closing occurs, each of the Effective Time Company Holders shall, subject to Sections 7.3 and 7.4(d), indemnify and defend Eclipsys, and its Affiliates (including Premise following the Closing), each of their respective officers, directors, employees, stockholders, agents and representatives, and each of their respective successors and assigns (the “Eclipsys Indemnified Parties”) against and hold them harmless, reimburse and make them whole from and against any and all loss, claim, Liability, cost, damage or expense (including

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reasonable legal and expert fees and expenses incurred in investigation or defense (including any appeal) of any of the same, or in asserting, preserving or enforcing its rights hereunder) actually incurred or claims suffered and not otherwise reimbursed or recovered from any third person (collectively “Damages”) by any such indemnified party, to the extent arising from or in connection with any of the following:

(i) any breach or inaccuracy of any representation or warranty of Premise or the Major Stockholders, or any of them, contained in this Agreement (as modified by the Disclosure Schedule), or any of the other Transaction Documents (without giving effect to (A) any supplement to the Disclosure Schedule after the date hereof, except for the Capitalization Update, or (B) any disclosures set forth in Sections 4.4(e), 4.7(d)(i), 4.14(d), 4.14(e) or 4.19(b) of the Disclosure Schedule or deemed set forth in such sections pursuant to Section 11.16);

(ii) any breach of any covenant of Premise prior to the Closing, or any breach of any covenant of the Major Stockholders, or any of them, contained in this Agreement;

(iii) (x) a Third-Party Claim arising from or in connection with the operations of the Business before the Closing Date, including but not limited to (A) errors and omissions in design, creation, implementation or maintenance of any of the Software Products, (B) any failure of any of the Software Products to conform to commitments made on or before the Closing Date by or on behalf of Premise to customers or third parties, or (C) any failure by Premise prior to the Closing Date to perform all material obligations under the Material Contracts, and in each case notwithstanding disclosures set forth in the Disclosure Schedule; or (y)(A) any return to Stryker Corporation of any amounts previously paid by Stryker Corporation to Premise under the iBed Application Software Development Services Agreement between Premise and Stryker Corporation, dated February 25, 2008, (B) any Excess Hartford Project Hours (which hours, for such purpose, shall be valued consistent with the estimates used to price installation services under the Hartford Addendum), and any Excess Hartford Consulting Services (which consulting services, for such purpose, shall be valued consistent with the estimates used to price installation services under the Hartford Addendum), provided that the value of the Excess Hartford Project Hours and the Excess Hartford Consulting Services, in the aggregate, subject to indemnity under this provision, shall not exceed $150,000, or (C) any deficit in the net amount collected for the Grady Receivable during the period commencing one day after the Closing Date through the Grady Collection Date (that is, the amount by which the Grady Receivable on the date hereof is greater than the Net Grady Collection, if any, through such date).

(iv) any claims by any current or former employees (including for such purposes persons filling a similar function) of Premise or any of its predecessors arising from or in connection with events or circumstances preceding the Closing, or arising from or in connection with the employment policies of Premise in place at any time prior to the Closing, or for the Emerson Software Development Bonus or the Gravina Software Development Bonus, in each case to the extent not satisfied with funds in the Stockholder Development Escrow Fund or the Stockholders’ Fund;

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(v) (A) any and all Taxes of Premise with respect to (x) taxable periods ending on or before the Closing Date or (y) any taxable period that commences before and ends after the Closing Date to the extent attributable to the period prior to Closing, (B) any and all Taxes arising as a result of the transactions contemplated by this Agreement, (C) any and all costs and expenses incurred by Premise in connection with disputes with taxing authorities relating to Taxes covered by this clause (v), including reasonable third-party costs and expenses relating to disputes with taxing authorities; and

(vi) any payments made by the Surviving Corporation, Eclipsys or their successors and assigns pursuant to the indemnification provisions referenced in Section 6.15(c),

provided that Eclipsys shall not be entitled to recover duplicate Damages under clauses (i) through (vi) to the extent claims could be made under more than one of such clauses and such recovery of Damages shall be reduced by any Tax benefit or refund actually received by the Surviving Corporation or Eclipsys as a result of the Damages.

The express written waiver by Eclipsys of any condition set forth in Section 8.2 based on the inaccuracy of any representation or warranty, or on the nonperformance of or noncompliance with any covenant or obligation, will not preclude any right of Eclipsys or any other Eclipsys Indemnified Party to indemnification, payment of Damages, or other remedy based on such representation, warranty, covenant, or obligation to the extent arising from a Third-Party Claim. For purposes of this Agreement, Damages may include in a particular case, to the extent proven, but not be limited to, the amount by which the value of Premise and the Business is less than it would have been but for a breach or inaccuracy of the representations and warranties of Premise or the Major Stockholders, or the failure by Premise or the Major Stockholders to fulfill their obligations hereunder.

(b) Eclipsys shall indemnify the Effective Time Company Holders and their Affiliates and each of their respective officers, directors, employees, stockholders, agents and representatives, and each of their respective successors and assigns (the “Premise Indemnified Parties”) against and hold them harmless, reimburse and make them whole from and against any and all Damages to the extent arising from or in connection with (i) any breach or inaccuracy of any representation or warranty of Eclipsys or Merger Sub contained in this Agreement or any of the other Transaction Documents and (ii) any breach of any covenant of Eclipsys or Merger Sub contained in this Agreement. The express written waiver by Premise of any condition set forth in Section 8.3 based on the inaccuracy of any representation or warranty, or on the nonperformance of or noncompliance with any covenant or obligation, shall not preclude any right of the Premise Indemnified Parties to indemnification, payment of Damages or other remedy based on such representation, warranty, covenant or obligation to the extent arising from a Third-Party Claim.

(d) Any payments made pursuant to this Article VII shall, except as may otherwise be required by applicable Legal Requirements, be treated for all purposes as an adjustment to the Purchase Price for Tax purposes.

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(e) For the sole purpose of appropriately apportioning any Taxes relating to any taxable period that commences before and ends after the Closing Date, the portion of such Tax that is attributable to Premise for the part of such taxable period that ends on the Closing Date shall be (i) in the case of any Taxes other than Taxes based upon income or receipts, the amount of such Tax for the entire Tax period multiplied by a fraction the numerator of which is the number of days in the Tax period ending on the Closing Date and the denominator of which is the number of days in the entire Tax period, and (ii) in the case of any Taxes based upon or related to income or receipts, the amount which would be payable if the relevant Tax period ended as of the close of business on the Closing Date. The Effective Time Company Holders shall reimburse Eclipsys or the Surviving Corporation for any Taxes of Premise that are the responsibility of the Effective Time Company Holders pursuant to this Section 7.2 within fifteen (15) business days after payment of any such Taxes by Eclipsys or the Surviving Corporation.

7.3 Time Limitations.

(a) Neither Eclipsys, nor the Effective Time Company Holders shall have any liability (for indemnification or otherwise) with respect to any representation or warranty contained in this Agreement (other than the Core Representations), except to the extent that on or before the last day of the Survival Period, the party seeking recovery for Damages provides notice in writing pursuant to Section 7.5 or Section 7.6 of a claim for Damages specifying the factual basis of that claim in reasonable detail to the extent then known by such party. In such event, the party giving such notice shall continue to have the right to recover hereunder, and to all other rights and remedies under this Agreement, with respect to the matter or matters to which such claim relates until such claim has been finally resolved and payment made, if any.

(b) A claim with respect to the Core Representations or under Section 7.2(a)(v) must be made at any time prior to the earlier of (i) 90 days after the expiration of the applicable statute of limitations period or (ii) the seventh anniversary of the Closing Date, except to the extent that on or before such date, the party seeking recovery for Damages provides notice in writing pursuant to Section 7.5 or Section 7.6 of a claim for Damages specifying the factual basis of that claim in reasonable detail to the extent then known by such party. In such event, the party seeking recovery for Damages shall continue to have the right to recover hereunder, and to all other rights and remedies under this Agreement, with respect to the matter or matters to which such claim relates until such claim has been finally resolved and payment made, if any.

(c) A claim made under Section 7.2(a)(ii), with respect to actions of Premise or the Major Stockholders prior to the Closing, must be made at any time prior to the last day of the Survival Period, except to the extent that on or before such date, the party seeking recovery for Damages provides notice in writing pursuant to Section 7.5 or Section 7.6 of a claim for Damages specifying the factual basis of that claim in reasonable detail to the extent then known by such party. In such event, the party seeking recovery for Damages shall continue to have the right to recover hereunder, and to all other rights and remedies under this Agreement, with respect to the matter or matters to which such claim relates until such claim has been finally resolved and payment made, if any.

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(d) A claim under Sections 7.2(a)(iii), (iv) or (vi) must be made at any time prior to the earlier of (i) 90 days after the expiration of the applicable statute of limitations period or (ii) the third anniversary of the Closing Date, except to the extent that on or before such date, the party seeking recovery for Damages provides notice in writing pursuant to Section 7.5 or Section 7.6 of a claim for Damages specifying the factual basis of that claim in reasonable detail to the extent then known by such party. In such event, the party seeking recovery for Damages shall continue to have the right to recover hereunder, and to all other rights and remedies under this Agreement, with respect to the matter or matters to which such claim relates until such claim has been finally resolved and payment made, if any.

7.4 Other Limitations.

(a) Notwithstanding anything contained herein to the contrary, the Effective Time Company Holders shall have no liability (for indemnification or otherwise) with respect to any matters under this Agreement unless the total Damages for matters hereunder exceed $200,000, but once such amount has been met, the Effective Time Company Holders shall be liable for all of such Damages, including such $200,000; provided, that, with respect to claims, rights or causes of action arising (i) from Stockholder Fraud, (ii) during the Survival Period from a breach of any of the Core Representations, (iii) from the Emerson Software Development Bonus or the Gravina Software Development Bonus; or (iv) with respect to matters under this Agreement described in Sections 7.2(a)(iii)(y), (v) or (vi): (A) these thresholds shall be inapplicable so that the Effective Time Company Holders have liability from the first dollar of Damages; and (B) all such Damages will be counted toward the threshold described in this Section 7.4(a).

(b) Notwithstanding anything contained herein to the contrary, Eclipsys and Merger Sub shall have no liability (for indemnification or otherwise) with respect to any matters under this Agreement unless the total Damages for matters hereunder exceed $200,000, but once such amount has been met, Eclipsys shall be liable for all of such Damages, including such $200,000; provided, that, with respect to claims, rights or causes of action arising (i) from Fraud by Eclipsys or (ii) during the Survival Period from a breach of the representations and warranties contained in Section 5.5: (A) these thresholds shall be inapplicable so that Eclipsys has liability from the first dollar of Damages; and (B) all such Damages will be counted toward the threshold described in this Section 7.4(b).

(c) For purposes of determining amounts to be indemnified under this Article VII (but not for purposes of determining whether there is any breach or inaccuracy of any representation or warranty contained in this Agreement), the representations and warranties contained herein shall not be deemed qualified by any references herein to materiality generally or to whether any such breach results or may result in a Material Adverse Effect.

(d) Any claims by the Eclipsys Indemnified Parties for claims under Section 7.2(a)(i) through (vi) shall be first made against the Escrow Fund; provided, however, that (1) any claim by the Eclipsys Indemnified Parties against a Major Stockholder under Section 7.2(a)(i), with respect to a breach or inaccuracy of any representation or warranty of such Major Stockholder, or Section 7.2(a)(ii), with respect to a breach of any covenant of such Major Stockholder, shall only be made directly against the Major Stockholder (including the right to

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make a claim with respect to any amounts payable to such Major Stockholder out of the Stockholders’ Fund, the True-Up Reserve Fund, the Software Development Escrow Fund or the Escrow Fund in accordance with the terms and conditions of the Escrow Agreement), and (2) unless otherwise agreed by Eclipsys in writing, any payments to be made to an Eclipsys Indemnified Party in respect of Core Representation Losses out of the Escrow Fund shall only be paid therefrom after payment of all Damages that are not Core Representation Losses have been paid, or if payments are made with respect to Core Representation Losses prior to payment of all non-Core Representation Losses, and the Escrow Fund is depleted as a result of such payments in respect of such Core Representation Losses, then to the extent amounts are used to make payments in respect of such Core Representation Losses out of the Escrow Fund, then the Eclipsys Indemnified Parties shall be entitled to be indemnified by the Major Stockholders as set forth herein for all Damages that are not Core Representation Losses up to such amounts paid out of the Escrow Fund for Core Representation Losses. Liability for claims in excess of the Escrow Fund for which all of the Major Stockholders are responsible shall be apportioned among the Major Stockholders based on their Pro Rata Portion, and subject to the further limits described below. Once the Escrow Fund is exhausted, no Effective Time Company Holder, other than the Major Stockholders, shall have any further liability under this Article VII, but each Major Stockholder shall continue to be severally, but not jointly, liable to the extent provided in this Article VII; provided, however, that each Major Stockholders’ liability (for indemnification or otherwise) with respect to any Damages:

(i) relating to any breach or inaccuracy of a Core Representation for which a claim is made prior to the third anniversary of the Closing Date shall not exceed, in the aggregate, one hundred percent (100%) of the portion of the Purchase Price payable to such Major Stockholder,

(ii) relating to any breach or inaccuracy of a Core Representation for which a claim is made on or after the third anniversary of the Closing Date but prior to the fifth anniversary of the Closing Date, shall not exceed, in the aggregate, fifty percent (50%) of the portion of the Purchase Price payable to such Major Stockholder,

(iii) relating to any breach or inaccuracy of a Core Representation for which a claim is made on or after the fifth anniversary of the Closing Date shall not exceed, in the aggregate, fifteen percent (15%) of the portion of the Purchase Price payable to such Major Stockholder,

(iv) relating to any breach or inaccuracy of a representation or warranty contained in Article III or Article IV (other than the Core Representations) or to any matters under this Agreement described in Section 7.2(a)(ii), with respect to actions of Premise or the Major Stockholders prior to the Closing, or Section 7.2(a)(iii), (iv) or (vi) shall not exceed, in the aggregate, twenty-five percent (25%) of the portion of the Purchase Price payable to such Major Stockholder, and

(v) relating to any matters under this Agreement described in Section 7.2(a)(v) shall not exceed one hundred percent (100%) of the portion of the Purchase Price payable to such Major Stockholder (and such Major Stockholder’s liability shall not be limited by anything contained in clause (iv), even if such liability may also relate to a claim under Sections 7.2(a)(ii), (iii), (iv) or (vi)),

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provided, however, that with respect to a breach or inaccuracy of the representations and warranties of a Major Stockholder under Article III, such Major Stockholder shall only be liable for such Major Stockholder’s breaches or inaccuracies. The Major Stockholders’ liability arising from claims or causes of actions arising from Stockholder Fraud, and with respect to claims arising under Section 7.2(a)(ii) with respect to actions of a Major Stockholder after the Closing, shall not be subject to any cap or limitation on amount, provided, that (1) with respect to claims arising under Section 7.2(a)(ii) with respect to actions of a Major Stockholder, each Major Stockholder shall only be liable for breaches by such Major Stockholder or breaches arising from the concerted action of such Major Stockholder, and (2) with respect to Stockholder Fraud, each Major Stockholder shall only be liable if such Major Stockholder committed, or conspired to commit, such Stockholder Fraud.

(e) Notwithstanding anything herein to the contrary, payments to Eclipsys for Damages shall be limited to the amount of Damages, if any, that remains after deducting therefrom any provision or reserve with respect to such Damages reflected as a Current Liability. Eclipsys and the Surviving Corporation (i) shall use commercially reasonably efforts to attempt to recover insurance proceeds to mitigate Damages under any applicable insurance policies of Premise in place prior to the Effective Time, and shall consult with the Stockholders’ Representative in connection with any such insurance claim and give the Stockholders’ Representative the opportunity to provide input into material decisions affecting such insurance claim and the handling thereof, and shall in good faith consider such input, and (ii) may, but shall have no obligation to, attempt to recover under any insurance policy of Eclipsys in place at any time or under any insurance policy of the Surviving Corporation in place after the Effective Time to mitigate any Damages. In the event of any recovery under clauses (i) or (ii), Damages shall be reduced by the amount of any recovery under such policies, net of any costs of recovery, including any increase in premiums arising from such claim. Notwithstanding anything herein to the contrary, no party shall be entitled to punitive damages unless assessed in connection with a Third-Party Claim.

(f) The liability of Eclipsys (for indemnification or otherwise) with respect to any breach or inaccuracy of its representations, warranties or covenants in this Agreement, shall not exceed, in the aggregate the portion of the Purchase Price remaining unpaid, provided, this limitation on liability shall not be applicable to any Damages incurred by the Effective Time Company Holders with respect to any Third-Party Claim, solely to the extent such Damages arise as a direct and proximate result of any breach or inaccuracy by Eclipsys of its representations, warranties or covenants in this Agreement.

(g) Subject to the terms of this Article VII, each party shall use commercially reasonable efforts to mitigate all Damages relating to a claim for indemnification pursuant to this Article VII; provided, that the costs of mitigation efforts incurred by an indemnified Person may be claimed as an indemnifiable Damages under this Article VII.

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(h) Nothing herein shall limit, or be deemed to limit, the rights of Eclipsys against any Stockholder arising under the letter of transmittal delivered by such Stockholder as described in Section 2.9(d).

(i) In no event shall any Stockholder be entitled to require that any Claim be made or brought against any other Person, including Premise, before any claim for Damages is brought or claim is made by any Eclipsys Indemnified Party against such Stockholder or the Escrow Fund hereunder in accordance with the terms and subject to the limitations of this Agreement.

7.5 Procedures Relating to Indemnification Involving Third-Party Claims.

(a) In order for a party to be entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a claim or demand made by any Person not a party to this Agreement against such party (a “Third-Party Claim”), such indemnified party must promptly notify the indemnifying party in writing, and in reasonable detail, of the Third-Party Claim after receipt by such indemnified party of written notice of the Third-Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent that the indemnifying party is actually prejudiced as a result of such failure. Thereafter, the indemnified party shall promptly deliver to the indemnifying party after the indemnified party’s receipt thereof, copies of all notices and documents (including court papers) received by the indemnified party relating to the Third-Party Claim. In the event that more than one Major Stockholder is an indemnifying party hereunder, the indemnified party may provide the notices and other communications required pursuant to this Section 7.5 solely to the Stockholders’ Representative.

(b) If a Third-Party Claim is made against an indemnified party, the indemnifying party shall be entitled to participate in the defense thereof and, if it promptly so chooses and acknowledges its obligation to indemnify the indemnified party therefor, to assume the defense thereof with counsel selected by the indemnifying party, provided, that such counsel is not reasonably objected to by the indemnified party. Should the indemnifying party assume the defense of a Third-Party Claim, the indemnifying party shall not be liable to the indemnified party for legal expenses subsequently incurred by the indemnified party in connection with the defense thereof. If the indemnifying party assumes such defense, the indemnified party shall have the right to participate in the defense thereof and to employ counsel (not reasonably objected to by the indemnifying party), at its own expense, separate from the counsel employed by the indemnifying party, it being understood that the indemnifying party shall control such defense. However, notwithstanding the foregoing, if Eclipsys or any of its Affiliates is an indemnified party in connection with a Third-Party Claim involving any Company IP, any then current employee or other person filling a similar function, or any then current client or supplier (including the owner of any Intellectual Property then used in the Business), Eclipsys may control the defense, at the cost of the indemnifying party; provided, however, that in such event, that Eclipsys shall in good faith, and to the extent reasonably permitted by any applicable protective or confidentiality orders and subject to the maintenance of all applicable attorney-client and attorney work product privileges, provide updates to the indemnifying party (or if there is more than one indemnified party, the Stockholders’ Representative) to permit the indemnifying party to reasonably monitor and provide the indemnifying party the opportunity to provide input into material decisions affecting such claim and the handling thereof, including, as applicable, the potential settlement of such claim, and shall in good faith consider such input.

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(c) The indemnifying party shall be liable for the reasonable fees and expenses of counsel employed by the indemnified party in connection with a Third-Party Claim for any period during which the indemnifying party has failed to assume or is not entitled to assume the defense thereof; provided, however, that the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to one local counsel, where applicable). In connection with any Third-Party Claim, the indemnified party and the indemnifying party shall cooperate with each other in the defense or prosecution thereof. Such cooperation shall include the retention and (upon the indemnified or indemnifying party’s request) the provision to such party of records and information which are reasonably relevant to such Third-Party Claim, and making employees (including persons filling a similar function) available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, including deposition or trial testimony.

(d) If the indemnifying party shall have assumed the defense of a Third-Party Claim, the indemnifying party may settle, compromise or discharge such Third-Party Claim in good faith with the indemnified party’s prior written consent, which consent shall not be unreasonably withheld or delayed, provided such settlement, compromise or discharge, by its terms, obligates the indemnifying party to pay the full amount of the liability in connection with such Third-Party Claim, releases the indemnified party completely in connection with such Third-Party Claim and does not impose any equitable remedies. If the indemnifying party shall not have assumed the defense of a Third-Party Claim or if the indemnified party assumes the defense thereof, the indemnified party may settle, compromise or discharge such Third-Party Claim in good faith with the indemnifying party’s prior written consent, which consent shall not be unreasonably withheld or delayed.

(e) Notwithstanding the foregoing, the indemnifying party shall not be entitled to assume the defense of any Third-Party Claim (and shall be liable for the reasonable fees and expenses of counsel incurred by the indemnified party in defending such Third-Party Claim) if:

(i) the Third-Party Claim seeks an Order or other equitable relief or relief for other than money damages against the indemnified party, which the indemnified party reasonably determines, after conferring with its outside counsel, cannot be separated from any related claim for money damages, or

(ii) the indemnified party reasonably determines, after conferring with its outside counsel, that joint representation would be expected to give rise to a conflict of interest.

If such equitable relief or other relief portion of the Third-Party Claim can be so separated from that for money damages, the indemnifying party shall be entitled to assume the defense of the portion relating to money damages. All claims under Section 7.2 other than Third-Party Claims shall be governed by Section 7.6.

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(f) Notwithstanding the foregoing, Eclipsys and Premise shall have the sole right to represent the interests of Premise in all Tax audits and administrative and court proceedings and to employ counsel of its choice; provided, however, that, to the extent relating to Taxes for which the Major Stockholders are liable pursuant to Section 7.2(a), the Stockholders’ Representative, in its sole discretion, shall have the right to participate in or control any such proceeding and shall have full control over the resolution or settlement of any such matters; provided, that, in the event that any such adjustment would have an adverse effect on Premise for a period ending after the Closing Date, the Stockholders’ Representative (i) shall permit Eclipsys to participate in the proceeding to the extent the adjustment may affect the Tax liability of Premise for a period ending after the Closing Date and (ii) shall not settle or otherwise compromise such proceeding without the prior written consent of Eclipsys, which consent shall not be unreasonably withheld or delayed. To the extent the Stockholders’ Representative does not assume full control over any such matters, Eclipsys shall use commercially reasonable efforts to defend positions taken on Tax Returns for Taxes for which the Major Stockholders are liable pursuant to Section 7.2(a) and shall keep the Stockholders’ Representative reasonably informed of the progress of any such proceedings and shall not settle or otherwise compromise such proceeding without prior written consent of the Stockholders’ Representative, which shall not be unreasonably withheld or delayed. Eclipsys and the Stockholders’ Representative shall bear their own expenses incurred in connection with audits and other administrative judicial proceedings relating to Taxes for which such party and its Affiliates are liable under Section 7.2(a).

7.6 Other Claims. A claim by any party for reimbursement, make whole or other recovery for Damages arising from any event, circumstance or condition not involving a Third-Party Claim that may be payable under the terms of this Agreement may be asserted by written notice to the party or parties from whom such recovery is sought (or to the Stockholders’ Representative, if such recovery is sought from more than one of the Stockholders) and, unless disputed, shall be paid promptly after receipt of such notice. Notwithstanding the foregoing, no party shall be liable to any other for any punitive damages pursuant to this Section 7.6. Any dispute relating thereto shall be settled in accordance with Section 11.13.

7.7 Set-Off. In addition to any rights of set-off, off-set or other rights that Eclipsys may have at common law, by statute or otherwise, Eclipsys shall have the right to set-off against the Escrow Fund, at any time, and any amounts payable to Major Stockholders out of the True-Up Reserve Fund, the Software Development Escrow Fund and the Stockholders’ Fund held by the Escrow Agent pursuant to the Escrow Agreement, subject to the terms and conditions hereof and the Escrow Agreement, any amounts owing by any Major Stockholder to Eclipsys pursuant to this Article VII; provided, however, that (A) notwithstanding the exercise by Eclipsys of the right to set-off described in this Section 7.7, Eclipsys and the Stockholders shall remain obligated to first comply with their respective obligations described in Section 7.5 and Section 7.6 and (B) with respect to a breach or inaccuracy of the representations and warranties of a Major Stockholder under Article III, Eclipsys shall only have the right of set-off against amounts owed to such breaching Major Stockholder. Neither the exercise of nor failure to exercise any such right of set-off will constitute an election of remedies or limit Eclipsys in any manner in the

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enforcement of other remedies available to it hereunder and the exercise by Eclipsys of the right of set-off against the Escrow Fund or other amounts the Escrow Agent or Eclipsys would otherwise be required to pay to any Major Stockholder shall not be the sole or exclusive remedy of Eclipsys for recovery of any amounts owed by the Stockholders to Eclipsys under this Article VII.

7.8 Recovery in the Case of Strict Liability or Negligence. THE PARTIES HERETO INTEND THAT, SUBJECT TO THE OTHER TERMS AND CONDITIONS IN THIS ARTICLE VII, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION FOR ALL OF ITS DAMAGES, AND THE PROVISIONS OF THIS ARTICLE VII SHALL BE INTERPRETED TO PERMIT RECOVERY OF SUCH DAMAGES TO THE MAXIMUM EXTENT PERMITTED UNDER APPLICABLE LAW, AND SUCH INDEMNIFICATION SHALL NOT BE LIMITED AS A RESULT OF ANY LEGAL REQUIREMENTS (INCLUDING ANY ENVIRONMENTAL LAW OR PRODUCTS LIABILITY LAW), OR AS A RESULT OF SOLE OR CONCURRENT STRICT LIABILITY BEING IMPOSED ON THE PERSON SEEKING SUCH INDEMNIFICATION OR OTHER RECOVERY, AND ANY CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING SUCH INDEMNIFICATION OR OTHER RECOVERY SHALL NOT LIMIT DAMAGES TO THE EXTENT SUCH DAMAGES ARE NOT ATTRIBUTABLE TO SUCH CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE.

7.9 Sole and Exclusive Remedy.

(a) Should the Closing occur (i) the sole and exclusive remedies of Eclipsys and Merger Sub for any breach or inaccuracy of the representations and warranties and covenants of Premise and the Major Stockholders under this Agreement and any other Transaction Documents (except to the extent expressly provided in such Transaction Documents), whether such claims be in contract, tort or otherwise, shall be the remedies provided in this Article VII, and Eclipsys and Merger Sub hereby waive, from and after the Closing, any and all other remedies which may be available at law or equity for any breach or inaccuracy or alleged breach or inaccuracy of the representations and warranties and covenants of Premise and the Major Stockholders hereunder, and (ii) the Stockholders’ sole and exclusive remedies for any breach or inaccuracy of the representations and warranties and covenants of Eclipsys and Merger Sub under this Agreement and any other Transaction Documents (except to the extent expressly provided in such Transaction Documents), whether such claims be in contract, tort or otherwise, shall be the remedies provided in this Article VII, and each of the Stockholders, to the fullest extent permitted by law, hereby waives, and by approval hereof by the Stockholders, shall be deemed to have waived, from and after the Closing, any and all other remedies which may be available at law or equity for any breach or inaccuracy or alleged breach or inaccuracy of the representations and warranties and covenants of Eclipsys and Merger Sub hereunder. If the Closing does not occur, the sole and exclusive remedy of the parties shall be as set forth in Section 9.5, and the provisions of this Article VII shall be inapplicable.

(b) Nothing in this Article VII shall (i) limit the right of any party to seek injunctive or other equitable relief for any breach or alleged or threatened breach of any covenant in this Agreement or any other Transaction Document, provided that the exercise of any

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equitable relief shall be subject to Section 11.11, or (ii) limit the rights of the Major Stockholders to seek any remedies with respect to Fraud by Eclipsys, or Eclipsys to seek any remedies with respect to Stockholder Fraud in connection herewith or transactions contemplated hereby (including limiting the time such claims can be made, or making such claims subject to any deductibles set forth herein).

(c) For the avoidance of doubt, the concept of “indemnity” as used in this Article VII is intended to include claims between or among the parties to this Agreement and not involving any third-party, as well as Third-Party Claims, and the limitation set forth in this Section 7.9 of remedies for breach or inaccuracies of representations and warranties under this Agreement is not intended to preclude claims between or among the parties, including but not limited to claims for breach of contract or Fraud, which claims are, however, intended to be governed by this Article VII.

ARTICLE VIII

CONDITIONS

8.1 Conditions to Each Party’s Obligation to Effect the Closing. The respective obligations of each party to effect the Closing and the other transactions contemplated hereby are subject to the satisfaction or waiver at or prior to the Closing Date of each of the following conditions:

(a) All filings with any Governmental Entity required to be made prior to the Closing Date by Premise, the Major Stockholders, Eclipsys, Merger Sub or any of their respective Affiliates, and all other Consents of any Governmental Entity required to be obtained prior to the Closing Date by Premise, the Major Stockholders, Eclipsys, Merger Sub or any of their respective Affiliates in connection with the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated herein and therein by Premise, the Major Stockholders, Eclipsys and Merger Sub shall have been made or obtained (as the case may be).

(b) No court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Legal Requirement or Order, whether temporary, preliminary or permanent, that is in effect and restrains, enjoins or otherwise prohibits, materially delays, makes illegal or would be violated (provided that with respect to any Legal Requirement, such violation is not immaterial in light of the transactions contemplated hereby) by consummation of the transactions contemplated by this Agreement or the other Transaction Documents.

(c) The Company Stockholder Approval shall have been validly obtained under Delaware law, the Premise Certificate of Incorporation and the Bylaws of Premise.

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8.2 Conditions to Obligations of Eclipsys. The obligations of Eclipsys to effect the Closing are also subject to the satisfaction or waiver by Eclipsys at or prior to the Closing Date of the following conditions:

(a) each of the representations and warranties of Premise and the Major Stockholders set forth in this Agreement qualified as to materiality shall be true and correct, and those not so qualified shall each be true and correct in all material respects, as of the date of this Agreement and as of the Closing Date (without giving effect to any amendment or supplement to the Disclosure Schedule after the date hereof, except for the Capitalization Update), except to the extent such representations and warranties speak as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date;

(b) Premise and the Major Stockholders shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date;

(c) Eclipsys shall have been furnished with a certificate, executed by Premise and the Stockholders’ Representative, dated the Closing Date, certifying as to the fulfillment of the conditions in Sections 8.2(a) and (b);

(d) each of the other Transaction Documents, and such further instruments of sale, transfer, conveyance, assignment, delivery or confirmation, or any part thereof, as Eclipsys may reasonably require, shall have been fully executed and delivered by Premise or the Major Stockholders, as applicable, to Eclipsys and shall remain in full force and effect, and there shall be no default thereunder;

(e) all Consents required under the Material Contracts in connection with the execution, delivery and performance of this Agreement and the other Transaction Documents, and the consummation of the transactions contemplated hereby or thereby, shall have been obtained by Premise on terms that are not materially burdensome to Premise or Eclipsys, shall be in full force and effect and shall have been delivered to Eclipsys;

(f) since the date of this Agreement, there shall have been no event, change, occurrence, condition or circumstance that Eclipsys determines, in good faith, (i) has had or is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect, or (ii) has caused or is reasonably likely to cause, individually or in the aggregate, employees of Premise, of a quantity and having the skills sufficient for the operation of the Business, not to be continuing their affiliation with the Business through employment with Eclipsys or Premise, after the Closing Date;

(g) Eclipsys shall have received the resignations of the directors of Premise pursuant to Section 6.8;

(h) the Escrow Agent and the Stockholders’ Representative shall have executed the Escrow Agreement;

(i) the Paying Agent shall have executed the Paying Agency Agreement;

(j) each of the Key Employees shall have entered into an employment agreement, on the terms set forth in Exhibit D-2, and in the form attached hereto as Exhibit D-1 or another form acceptable to Eclipsys and such Key Employee, with Eclipsys or, in the discretion of Eclipsys, a Subsidiary of Eclipsys (including Premise) (the “Employment Agreements”), and all such agreements shall be in full force such that each of the Key Employees is continuing their affiliation with the Business through employment with Eclipsys or Premise after the Closing Date;

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(k) Eclipsys shall have received an opinion of counsel to Premise in the form attached hereto as Exhibit E;

(l) all required corporate action on the part of Premise and the Stockholders, including without limitation, approval by the board of directors of Premise, shall have been taken (and not rescinded) to approve the execution, delivery and performance of this Agreement and the other Transaction Documents;

(m) the Merger shall be effective;

(n) [intentionally deleted];

(o) the Dissenting Shares shall constitute no more than five percent (5%) of the Shares outstanding as of the Effective Date;

(p) Eclipsys shall have received a certificate from Premise, in form and substance reasonably satisfactory to Eclipsys, to the effect that Premise is not a U.S. real property holding company meeting the requirements of Treasury Regulations 1.1445-2(c)(3) and 1.897-2(h);

(q) the Stockholder Agreements shall have been terminated effective on or before the Closing, and the Stockholders party thereto shall have waived all rights thereunder with respect to the transactions contemplated hereby;

(r) the Engagement Letter Agreement, dated June 3, 2008, between Premise and Montgomery & Co. shall have been terminated effective as of the Closing pursuant to a Termination Agreement in the form attached hereto as Exhibit F;

(s) there shall not be pending or Threatened by any Governmental Entity any suit, action or proceeding (or by any other Person any suit, action or proceeding which Eclipsys determines in good faith has a reasonable likelihood of success): (A) seeking to obtain from Eclipsys, the Surviving Corporation or their Affiliates, in connection with the Merger or the other transactions contemplated hereby or by the other Transaction Documents, any material money damages; (B) seeking to prohibit or limit the ownership or operation by Eclipsys or Premise of any material portion of the Business, or to compel Eclipsys or Premise to dispose of, license or hold separate any material portion of the Business in each case as a result of the Merger or any of the other transactions contemplated by this Agreement or by the other Transaction Documents; (C) seeking to impose limitations on the ability of Eclipsys to acquire or hold, or exercise full rights of ownership of the Capital Stock of Premise, including the right to vote such Capital Stock on all matters properly presented to the equityholders of Premise; (D) seeking to prohibit Eclipsys from effectively controlling in any material respect the Business; (E) claiming that such Person is a beneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any Capital Stock or assets of Premise or is entitled to any portion of the Purchase Price, other than ownership set forth on the Disclosure Schedule; (F) affecting a material portion of the Business, as determined by Eclipsys, in good faith; or (G) that may otherwise have the effect of preventing, materially delaying or otherwise materially interfering with the transactions contemplated by this Agreement and the other Transaction Documents;

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(t) Eclipsys shall have received such other documents as Eclipsys reasonably requests evidencing the satisfaction of any condition referred to in this Section 8.2.

8.3 Conditions to the Obligations of Premise and the Stockholders. The obligations of Premise and the Stockholders to effect the Closing are also subject to the satisfaction or waiver by Premise prior to the Closing Date of the following conditions:

(a) each of the representations and warranties of Eclipsys and Merger Sub set forth in this Agreement qualified as to materiality shall be true and correct, and those not so qualified shall each be true and correct in all material respects, as of the date of this Agreement and as of the Closing Date (except to the extent such representations and warranties speak as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date);

(b) Eclipsys and Merger Sub shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date;

(c) the Stockholders’ Representative shall have been furnished with a certificate, executed by a duly authorized officer of Eclipsys, dated the Closing Date, certifying as to the fulfillment of the conditions in Sections 8.3(a) and (b);

(d) the Escrow Agent and Eclipsys shall have executed the Escrow Agreement;

(e) the Paying Agent and Eclipsys shall have executed the Paying Agency Agreement;

(f) Eclipsys shall have delivered the Closing Payment and the Deferred Payment Amount to the Paying Agent;

(g) Eclipsys shall have delivered the Holdback Amount to the Escrow Agent;

(h) all required corporate action on the part of Eclipsys and Merger Sub, including without limitation, approval by the boards of directors of Eclipsys and Merger Sub, shall have been taken (and not rescinded) to approve the execution, delivery and performance of this Agreement and the other Transaction Documents;

(i) the Stockholders’ Representative shall have received such other documents as the Stockholders’ Representative reasonably requests evidencing the satisfaction of any condition referred to in this Section 8.3; and

(j) there shall not be pending or Threatened by any Governmental Entity any suit, action or proceeding (or by any other Person any suit, action or proceeding which Premise or any Major Stockholder determines in good faith has a reasonable likelihood of success), in each case that is filed or Threatened after the execution of this Agreement by a plaintiff other

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than Premise or any Major Stockholder or any Affiliate of Premise or any Major Stockholder, and without consultation with or assistance of Premise or any Major Stockholder or their respective Affiliates (and provided that Premise and the Major Stockholders and their respective Affiliates may not encourage or assist, and must use commercially reasonable efforts to cause the prompt dismissal or other disposition satisfactory to Eclipsys of, any such suit, action or proceeding): (A) seeking to obtain from Premise or such Major Stockholder, or their respective Affiliates, in connection with the Merger or the other transactions contemplated hereby or by the other Transaction Documents, any material money damages; (B) seeking to prohibit or limit the ownership or operation by Eclipsys or Premise of any material portion of the Business, or to compel Eclipsys or Premise to dispose of, license or hold separate any material portion of the Business in each case as a result of the Merger or any of the other transactions contemplated by this Agreement or by the other Transaction Documents; (C) seeking to impose limitations on the ability of Eclipsys to acquire or hold, or exercise full rights of ownership of the Capital Stock of Premise, including the right to vote such Capital Stock on all matters properly presented to the equityholders of Premise; (D) seeking to prohibit Eclipsys from effectively controlling in any material respect the Business; (E) claiming that such Person is a beneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any Capital Stock or assets of Premise or is entitled to any portion of the Purchase Price, other than ownership set forth on the Disclosure Schedule; (F) affecting a material portion of the Business, as determined by Premise or such Major Stockholder, as the case may be, in good faith; or (G) that may otherwise have the effect of preventing, materially delaying or otherwise materially interfering with the transactions contemplated by this Agreement and the other Transaction Documents (provided, that this condition shall be deemed met to the extent that Eclipsys has agreed to indemnify and defend the Premise Indemnified Parties against and hold them harmless, reimburse and make them whole from and against any Damages (other than Damages for which the Effective Time Company Holders are required to indemnify the Eclipsys Indemnified Parties hereunder), to the extent arising from or in connection with any such suit, action or proceeding).

ARTICLE IX

TERMINATION

9.1 Termination by Mutual Consent. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date, by mutual written consent of Premise and Eclipsys.

9.2 Termination by Eclipsys or Premise. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date by either Eclipsys or Premise if any Order permanently restraining, enjoining or otherwise prohibiting the Merger shall be entered and such Order is or shall have become nonappealable, provided that (i) the party seeking to terminate this Agreement shall have complied with its obligations under Section 6.2 with respect to the removal or lifting of such Order (including, with respect to Premise, the Major Stockholders), and (ii) the noncompliance with this Agreement by the party seeking to terminate this Agreement (including, with respect to Premise, the Major Stockholders) shall not have been the proximate cause of the issuance of the Order.

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9.3 Termination by Premise. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date, by Premise if:

(a) (i) the Closing shall not have been consummated on or before January 15, 2009 (the “Termination Date”), or

(ii) any of the conditions (other than absence of material breach as addressed in Section 9.3(b)) set forth in Section 8.1 or 8.3 shall have become incapable of fulfillment;

provided, however, that the right to terminate this Agreement pursuant to this subsection (a) shall not be available to Premise if Premise or the Major Stockholders or any of them has breached in any material respect their obligations under this Agreement in any manner that shall have proximately contributed to the failure referenced in this subsection (a);

(b) there has been a material breach by Eclipsys or Merger Sub of any representation, warranty, covenant or agreement of Eclipsys or Merger Sub contained in this Agreement that is not curable or, if curable, is not cured prior to the Termination Date; or

(c) the Board of Directors of Premise shall have withdrawn, amended or modified its recommendation, or recommended against adoption of this Agreement and the Merger in accordance with Section 6.6(c) and terminates this Agreement to accept and enter into a definitive binding agreement with respect to a Superior Proposal; provided, that Premise may not effect such termination unless (i) Premise has contemporaneously with such termination paid to Eclipsys the fee pursuant to Section 9.5(a)(ii) and (ii) Premise has not breached the terms of Section 6.6.

9.4 Termination by Eclipsys. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date by Eclipsys if:

(a) (i) the Closing shall not have been consummated on or before the Termination Date, or

(ii) any of the conditions (other than absence of material breach as addressed in Section 9.4(b)) set forth in Section 8.1 or Section 8.2 shall have become incapable of fulfillment;

provided, however, that the right to terminate this Agreement pursuant to this subsection (a) shall not be available to Eclipsys if Eclipsys or Merger Sub has breached in any material respect its obligations under this Agreement in any manner that shall have proximately contributed to the failure referred to in this subsection (a);

(b) there has been a material breach of any representation, warranty, covenant or agreement of Premise or the Major Stockholders or any of them contained in this Agreement that is not curable or, if curable, is not cured prior to the Termination Date;

(c) this Agreement has not been approved and adopted as provided herein pursuant to the Stockholder Written Consents in accordance with applicable law and the Premise Certificate of Incorporation and Bylaws of Premise, and delivery of the Stockholder Written Consents has not been made to Eclipsys, within two (2) hours of the execution of this Agreement, or, at any time, such Stockholder Written Consents are rescinded, terminated or

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otherwise considered or alleged to be null and void so that sufficient Stockholder Written Consents to authorize and approve all actions to be authorized or approved by the Stockholders under this Agreement and under the applicable provisions of Delaware General Corporation Law, the Premise Certificate of Incorporation and Bylaws of Premise no longer remain in full force and effect without any challenge thereto; or

(d) (i) the Board of Directors of Premise shall have withdrawn, or amended or modified, in any manner that is adverse to Eclipsys, its approval or recommendation to the Stockholders with respect to this Agreement and the Merger, or (ii) Premise or the Board of Directors of Premise approves or recommends any Third-Party Acquisition or approves any letter of intent, agreement in principle, acquisition agreement or similar agreement relating to any Third-Party Acquisition (other than a confidentiality agreement consistent with the terms of Section 6.6(b));

provided, however, that the right to terminate this Agreement pursuant to subsection (d)(i) shall not be available to Eclipsys if Eclipsys or Merger Sub has breached in any material respect its obligations under this Agreement in any manner that shall have proximately contributed to the failure referred to in this subsection (d); or

(e) Premise has materially breached its obligations under Section 6.6 or Section 6.14(b).

9.5 Effect of Termination.

(a) Except for termination under Section 9.1, any termination shall be effective upon receipt of written notice thereof given to Eclipsys or Premise, as applicable. If this Agreement is terminated, all obligations of the parties under this Agreement shall terminate, without any Liability on the part of any party hereto to any Person in respect hereof or the transactions contemplated hereby and the other Transaction Documents, and no party shall have any claim against another, whether under contract, tort or otherwise, except that:

(i) Sections 6.3(ii), 6.5 and 6.12, this Section 9.5, and Article XI hereof and the Confidentiality Agreement shall survive;

(ii) if this Agreement is terminated by (A) Premise pursuant to Section 9.3(c) or (B) by Eclipsys pursuant to Section 9.4(d) or (e), Premise shall pay Eclipsys a fee of $1,500,000, in cash, by wire transfer of immediately available funds to an account designated by Eclipsys, and Eclipsys shall have no liability to Premise and the Stockholders. If the fee shall be payable pursuant to clause (B) of the immediately preceding sentence, the fee shall be paid no later than two Business Days after notice of termination of this Agreement, and if the fee shall be payable pursuant to clause (A) of the immediately preceding sentence, the fee shall be paid on the date of and concurrent with termination of this Agreement; and

(iii) except in situations where the termination fee set forth in clause (ii) above is paid, if this Agreement is terminated by a party because of the breach of this Agreement by another party or parties or because one or more of the conditions to the terminating party’s obligations under this Agreement is not satisfied as a result of another

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party’s or parties’ intentional failure to comply with its obligations under this Agreement, the terminating party’s right to pursue all legal remedies for such breach shall survive such termination unimpaired, provided, that Premise and the Major Stockholders each agree that to the extent they have incurred any Damages in connection with termination of this Agreement as set forth in this clause (iii), the maximum liability of Eclipsys and Merger Sub (and the sole and exclusive remedy of Premise and the Stockholders) for such Damages shall be limited in the aggregate to $1,500,000.

(b) The remedies set forth in this Section 9.5 are the sole and exclusive remedies of the parties if this Agreement is terminated, and Premise and the Major Stockholders shall not be entitled to specific performance of the obligations of Eclipsys and Merger Sub to consummate the Merger. Notwithstanding the foregoing, in the event of termination of this Agreement, the parties shall be entitled to specific performance to enforce the provisions that expressly survive termination.

ARTICLE X

TAX MATTERS

The following provisions shall govern the allocation of responsibility as between Eclipsys and the Stockholders for certain Tax matters following the Closing Date:

10.1 Responsibility for Filing Tax Returns. Eclipsys shall prepare or cause to be prepared, and file or cause to be filed, all Tax Returns for Premise for Tax periods described in Section 7.2(a)(v) and that are filed after the Closing Date on a basis consistent with past custom and practice, unless there is not substantial authority for such position. Eclipsys shall deliver, at least 30 days prior to the due date for the filing of such Tax Return (taking into account extensions), to the Stockholders’ Representative a statement setting forth the amount of Tax, if any, for which the Effective Time Company Holders are responsible pursuant to Section 7.2(a), and a copy of such Tax Returns. The Stockholders’ Representative shall have the right to review such Tax Returns and statement prior to the filing of such Tax Returns. The Stockholders’ Representative, on the one hand, and Eclipsys, on the other hand, agree to consult and resolve in good faith any issue arising as a result of the Stockholders’ Representative’s review of such Tax Returns and mutually to consent to the filing of such Tax Returns as promptly as possible.

10.2 Cooperation on Tax Matters.

(a) Subject to Section 7.5(f), Eclipsys, Premise, and Stockholders’ Representative shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns pursuant to this Article X and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information that are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Eclipsys shall permit the Stockholders’ Representative to retain a copy of Premise’s books and records with respect to Tax matters pertinent to Premise relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Eclipsys, any extensions thereof) of the respective taxable periods.

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(b) Eclipsys and the Stockholders’ Representative further agree, upon request, to use their commercially reasonable efforts to obtain any certificate or other document from any Governmental Entity or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby).

10.3 Tax-Sharing Agreements. All tax-sharing agreements or similar agreements with respect to or involving Premise shall be terminated as of the Closing Date and, after the Closing Date, Premise shall not be bound thereby or have any liability thereunder.

10.4 Certain Taxes and Fees. All transfer, documentary, sales, use, stamp, registration and other such Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with consummation of the transactions contemplated by this Agreement shall be paid by the Stockholders when due, and each Stockholder shall, at its own expense, file all necessary Tax Returns and other documentation with respect to all such Taxes, fees and charges, and, if required by applicable law, Eclipsys shall, and shall cause its Affiliates to, join in the execution of any such Tax Returns and other documentation.

10.5 Refunds or Credits. Except to the extent included as Current Asset, any refund or credit of Taxes that are received, recognized or recognizable by the Surviving Corporation, or any of its successors or assignees, or credited against Tax to which the Surviving Corporation, or any of its successors or assignees, become entitled that relate to Tax periods described in Section 7.2(a)(v) shall be for the account of the Effective Time Company Holders and Eclipsys shall cause the Surviving Corporation to pay over to the Effective Time Company Holders, in their Pro Rata Portion, the amount of any such refund or credit on an after-tax basis within fifteen (15) days after receipt, recognition or entitlement thereto.

10.6 Amended Tax Returns.

(a) Any amended Tax Return or claim for Tax refund with respect to a Tax Return filed on or prior to the Closing Date shall be filed, or caused to be filed, only by the Stockholders’ Representative. The Stockholders’ Representative shall not, without the prior written consent of Eclipsys, make or cause to be made any such filing to the extent such filing, if accepted, reasonably might change the Tax liability of Eclipsys or the Surviving Corporation for any Tax period.

(b) Any amended Tax Return or claim for Tax refund with respect to a Tax Return filed after the Closing Date, shall be filed, or caused to be filed, only by Eclipsys. Eclipsys shall not, without the prior written consent of the Stockholders’ Representative, file, or cause to be filed, any amended Tax Return or claim for Tax refund for any such post Closing Date period to the extent that such filing, if accepted, reasonably might change the Tax liability of the Stockholders for any pre-Closing Date period.

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ARTICLE XI

MISCELLANEOUS

11.1 Entire Agreement; Assignment.

(a) This Agreement, including the schedules and exhibits hereto (which are incorporated herein by this reference), the other Transaction Documents and the Confidentiality Agreement constitute the entire agreement, and supersede all prior agreements, understandings and other Contracts, both written and oral, and all contemporaneous oral agreements, understandings and other Contracts, among the parties with respect to the subject matter hereof. Except for express representations, warranties and covenants of Eclipsys, Merger Sub, Premise and the Major Stockholders contained herein, or in the other Transaction Documents, there are no representations or warranties whatsoever by or on behalf of Premise, the Major Stockholders, their Affiliates or agents relating to Premise or their ownership interests therein, on the one hand, and Eclipsys, Merger Sub and their Affiliates or agents relating to Eclipsys or Merger Sub, on the other hand.

(b) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of each of the other parties hereto; provided, however, that Eclipsys may assign all or a portion of its rights and obligations, or those of Merger Sub, under this Agreement to any other Subsidiary of Eclipsys without the consent of Premise or the Major Stockholders (which assignment shall not relieve Eclipsys of any obligation or liability under this Agreement).

(c) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

11.2 Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, each of which shall remain in full force and effect and in lieu of such invalid or unenforceable provision there shall be automatically added as part of this Agreement a valid and enforceable provision as similar in terms to the invalid or unenforceable provision as possible, provided that this Agreement as amended (i) reflects the intent of the parties hereto and (ii) does not change the bargained for consideration or benefits to be received by each party hereto.

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11.3 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by overnight courier or facsimile (provided that such notice is delivered during regular business hours in the location of receipt, and if not, then on the next Business Day) to the respective parties as follows:

If to Eclipsys:

Eclipsys Corporation

Three Ravinia Drive

Suite 1000

Atlanta, GA 30348

Fax: (404) 847-5777

Attn.: General Counsel

with a copy to (which copy shall not constitute notice):

Gibson, Dunn & Crutcher LLP

3161 Michelson Drive

Irvine, CA 92612

Fax: (949) 475-4703

Attn.: Michelle Hodges

If to Premise or the Major Stockholders (prior to the Closing):

Premise Corporation

Pond View Corporate Center

76 Batterson Park Road

Farmington, CT 06032

Fax: (860) 246-3001

Attn.: Eric Rosow, Chief Executive Officer

If to the Stockholders’ Representative:

Richard Dumler

Milestone Venture Partners

551 Madison Avenue, 7th Floor

New York, NY 10022

Fax: (212) 223-0315

in each case, with a copy to (which copy shall not constitute notice):

Wiggin and Dana LLP

One Century Tower

265 Church Street

New Haven, CT 06508-1832

Fax: (203) 782-2889

Attn.: Frank Marco

or to such other address as the Person to whom notice is given may have previously furnished to the others in writing in the manner set forth above.

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11.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws or rules that might otherwise govern under applicable principles of conflicts of laws thereof. In the event of the bringing of any action or suit by a party hereto against another party hereunder arising out of or relating to this Agreement, which claim or suit is not subject to arbitration, as determined pursuant to Section 11.13, then in that event, the sole forum for resolving such disputes shall be the state and federal courts located in Delaware, and each of the parties hereby irrevocably submits to such exclusive jurisdiction. This Section 11.4 shall survive any termination of this Agreement and the Closing.

11.5 Construction.

(a) The headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. Unless the context clearly requires otherwise “or” is not exclusive, and “includes” means “includes, but is not limited to.”

(b) Each of the parties acknowledges that it has been represented by counsel of its choice throughout all negotiations that have preceded the execution of this Agreement and that each party and its counsel cooperated in the drafting and preparation of this Agreement and the other Transaction Documents, and any and all drafts relating thereto exchanged between the parties shall not be construed against any party by reason of its preparation. Accordingly, any ambiguities in this Agreement shall not be interpreted against any party that may have drafted this Agreement.

(c) For purposes of this Agreement, “commercially reasonable efforts” shall not be deemed to require a Person to undertake extraordinary or unreasonable measures, including the payment of amounts in excess of normal and usual filing fees and processing fees.

11.6 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission or PDF by electronic transmission shall be effective delivery of a manually executed counterpart to this Agreement.

11.7 Parties In Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and, except for the Persons expressly set forth in Section 7.2 and Section 11.8, with respect to such sections, nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement, including any employee or former employee of Premise (or any beneficiary or dependent thereof), including for such purposes persons filling a similar function.

11.8 Prior Review and Counsel. Eclipsys and Merger Sub, on the one hand, and Premise and the Major Stockholders, severally and not jointly, on the other hand, each represents and warrants that: (a) it was provided a fair and reasonable time in which to evaluate this Agreement and the other Transaction Documents and to negotiate their respective terms and conditions; (b) it has regularly consulted with and received advice and counsel from one or more

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attorneys of its own choice regarding the Merger, this Agreement, the other Transaction Documents and the negotiation of each and every one of them, which attorney(s) is/are not and was/were not any of the other party’s attorneys; (c) it has not received any legal or other substantive advice or any attorney work product from any of the other party’s attorneys (including in-house attorneys), and it has not relied upon any comment, observation, remark, communication or information (whether oral or written) made or delivered by any of the other party’s attorneys (including in-house attorneys); and (d) it has read and fully understands this Agreement and each of the other Transaction Documents. Each party’s attorneys (including in-house attorneys) shall be entitled to rely on the other party’s representations and warranties made in this Section 11.8 as intended beneficiaries of such representations and warranties.

11.9 Waiver. No waiver of any breach of the provisions of this Agreement shall be deemed to have been made by any party, unless such waiver is expressed in writing and signed by the party against which it is to be enforced (or the Stockholders’ Representative, with respect to matters relating to all Major Stockholders or all Stockholders). The waiver by any party of any right under this Agreement or to a remedy for the breach of any of the provisions herein shall not operate or be construed by the breaching party as a waiver of the nonbreaching party’s remedies with respect to any other or continuing or subsequent breach.

11.10 Amendments. No amendment or modification in respect of this Agreement shall be effective unless it shall be in writing and signed by the parties hereto (or the Stockholders’ Representative, with respect to matters relating to all Major Stockholders prior to the Closing or all Stockholders after the Closing Date).

11.11 Specific Performance. The parties agree that irreparable damage would occur in the event any provision of this Agreement were not performed by any other party in accordance with the terms hereof and, except as set forth in Section 9.5(b), that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which the parties are entitled at law or in equity.

11.12 Cumulative Remedies. Except as expressly limited herein, the rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any other rights, remedies, powers and privileges provided by law or equity.

11.13 Arbitration.

(a) Any dispute, claim or controversy arising out of or relating to this Agreement or any other Transaction Document (other than the Employment Agreements) or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this Agreement to arbitrate, shall be determined by arbitration in Washington, D.C., before a sole arbitrator; provided, however, if the claim and any counterclaim, in the aggregate, exceed $750,000, exclusive of interest and attorneys’ fees, the dispute shall be heard and determined by three arbitrators as provided herein. If any such dispute, claim or controversy arises at the same time and relates to the same or similar facts, claims or events as any one or more other disputes, claims or controversies, such disputes, claims or controversies

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(including any dispute, claim or controversy under Section 2.11), shall, to the extent practicable, be combined in one arbitration proceeding under this Section 11.13, and in such event, the provisions of this section governing dispute resolution shall supersede any other provisions relating to such matters in this Agreement or the other Transaction Documents. If any dispute, claim or controversy arising out of or relating to this Agreement or any other Transaction Document (other than the Employment Agreements) arises at the same time and relates to the same or similar facts, claims or events as a dispute, claim or controversy relating to or arising out of the Employment Agreement of any Stockholder, the employment of any Stockholder by Eclipsys or any of its Affiliates including Premise, such disputes, claims or controversies shall, to the extent practicable, be combined in one arbitration proceeding, and in such event, the provisions of this Agreement governing dispute resolution shall supersede any provisions relating to such matters in the Employment Agreement between any such Stockholder and Eclipsys or any Affiliate of Eclipsys. For the avoidance of doubt, no claim under any Employment Agreement shall be governed by this provision, unless it arises at the same time and relates to the same or similar facts, claims or events as a dispute, claim or controversy relating to or arising out of this Agreement or any other Transaction Document (other than the Employment Agreements).

(b) Notwithstanding the foregoing, if any dispute, claim or controversy arises out of or relates to this Agreement or any other Transaction Document (other than a dispute solely relating to any Employment Agreement), the parties shall first try to resolve their dispute through informal and good faith negotiation between an authorized officer of Premise (or, after the Closing, the Stockholders’ Representative) and an authorized officer of Eclipsys, with authority to settle such dispute claim or controversy, before resorting to arbitration. Such persons shall meet for the purpose of endeavoring to resolve such dispute, claim or controversy within ten Business Days after a written request from either Premise (or, after the Closing, the Stockholders’ Representative) or Eclipsys to the other. Such representatives shall discuss the problem and negotiate in good faith in an effort to resolve the dispute promptly and without the necessity of any formal arbitration proceeding relating thereto. The location, format and duration (not to exceed three Business Days, unless mutually agreed by such representatives) of these negotiations shall be left to the discretion of the representatives involved. If such negotiations do not lead to resolution of the underlying dispute, claim or controversy to the satisfaction of any party, then any party may provide notice of the election to pursue resolution by arbitration as set forth herein.

(c) Any arbitration shall be conducted by JAMS pursuant to the Comprehensive Arbitration Rules of JAMS. All arbitrators shall be retired or former district court or appellate court judges of any United States District Court or United States Court of Appeals, other than courts in the States of Connecticut or Georgia, or such other person with such other qualifications as Eclipsys and Premise (or, after the Closing, the Stockholders’ Representative) may agree, and shall be selected within seven Business Days after receipt of notice from one party to another that it intends to seek arbitration hereunder. The Federal Rules of Evidence shall govern the admissibility of evidence during the arbitration. The arbitrator(s) shall have no authority to award punitive or other damages not measured by the prevailing party’s actual damages, except as may be required by statute. The determination of the arbitrator(s) shall be final and binding on the parties and a judgment on such award or determination may be entered in any court of competent jurisdiction and such judgment shall be final and nonappealable. The decision and award of the arbitrator(s) shall be accompanied by a reasoned opinion.

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(d) All parties covenant not to appeal or otherwise litigate or file any court action that would seek to delay, amend, vacate or otherwise alter the determination of the arbitrator(s).

11.14 Costs and Fees. The prevailing party in any arbitration or court proceeding under this Agreement, including any related appeal, shall be entitled to recover its fees and costs incurred in the arbitration or proceeding (including attorneys and arbitration fees and costs) from the nonprevailing party, provided, that the arbitrator or judge has the discretion to determine that there is no prevailing party or to eliminate or reduce the prevailing party’s recovery of its costs and fees to the extent that the arbitrator or judge determines that full recovery thereof would be unreasonable or disproportionate to the harm suffered by the prevailing party. In absence of a determination of a prevailing party, the parties shall split equally all costs and fees. “Costs and fees” mean all reasonable pre-award expenses of the arbitration or other proceeding, including the arbitrators’ fees, administrative fees, travel expenses, out-of-pocket expenses such as copying and telephone, court costs, witness fees, expert costs and fees, and attorneys’ fees, costs and expenses and other costs incurred in enforcing, perfecting and executing such judgment or order. For the purposes of this section, attorneys’ fees, costs and expenses shall include all such fees, costs and expenses incurred in (i) appeals, (ii) post-judgment motions, (iii) contempt proceedings, (iv) garnishment, levy and debtor and third-party examinations, (v) discovery and (vi) bankruptcy litigation.

11.15 Counsel to Premise. Eclipsys and Merger Sub acknowledge and agree that Wiggin and Dana LLP has represented Premise and the Premise Indemnified Parties in connection with this Agreement and all other agreements and instruments contemplated by this Agreement, and Premise hereby waives the conflicts of interest associated with such multiple representation in accordance with the Connecticut Rules of Professional Conduct. Accordingly, Premise has agreed (a) that the attorney-client privilege with respect to the Merger and any other transactions contemplated in this Agreement is held jointly by Premise and the Premise Indemnified Parties and may be waived by the Stockholders’ Representative in accordance with the Connecticut Rules of Professional Conduct and (b) that Wiggin and Dana LLP shall maintain the confidentiality of all attorney-client privileged communications with respect to the negotiation of this Agreement and any other Transaction Documents for the benefit of Premise and the Premise Indemnifying Parties and shall not disclose the content of any such attorney-client privileged communications to Eclipsys, Merger Sub or the Surviving Corporation (or any of their successors or assigns), or any of their directors, officers, employees, agents, consultants, advisors or other representatives, including legal counsel, accountants and financial advisors, before or after the Effective Time without the advance written consent of the Stockholders’ Representative.

11.16 Disclosure Schedule. The exceptions, modifications and disclosures made in any part of the Disclosure Schedule shall be deemed to be disclosed and incorporated by reference in any other section of the Disclosure Schedule as though fully set forth in such section of the Disclosure Schedule to the extent that the applicability of such disclosure in the Disclosure Schedule to another part of the Disclosure Schedule is reasonably apparent on its face.

[Signature page follows]

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed as of the day and year first above written.

“ECLIPSYS” Eclipsys Corporation, a Delaware corporation		“PREMISE” Premise Corporation, a Delaware corporation
By:	/s/ Brian W. Copple	By:	/s/ Eric Rosow
Name:	Brian W. Copple	Name:	Eric Rosow
Title:	Secretary	Title:	Chief Executive Officer

“MERGER SUB” Panther Acquisition Corporation, a Delaware corporation
By:	/s/ Brian W. Copple
Name:	Brian W. Copple
Title:	Secretary
“STOCKHOLDERS’ REPRESENTATIVE”
By:	/s/ Richard Dumler
Name:	Richard Dumler

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]

“MAJOR STOCKHOLDER”
INFLECTION POINT VENTURES II, L.P.
By:	/s/ Jeffrey A. Davison
Name:	Jeffrey A. Davison
Title:	General Partner

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]

“MAJOR STOCKHOLDER”
AETNA VENTURES, LLC
By Aetna Life Insurance Company, its Sole Member
By:	/s/ David M. Clarke
Name:	David M. Clarke
Title:	Investment Manager

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]

“MAJOR STOCKHOLDER”
MILESTONE VENTURE PARTNERS III LP
By Milestone Managers LP
By:	/s/ Richard J. Dumler
Name:	Richard J. Dumler
Title:	General Partner

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]

“MAJOR STOCKHOLDER”
CONNECTICUT INNOVATIONS, INCORPORATED
By:	/s/ George D. Bellas
Name:	George D. Bellas
Title:	VP Finance and Administration

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]

“MAJOR STOCKHOLDER”
By:	/s/ Eric Rosow
Name:	Eric Rosow

“MAJOR STOCKHOLDER”
By:	/s/ Joseph Adam
Name:	Joseph Adam

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]

EX-10.8

Exhibit 10.8

Effective June 11, 2008

ECLIPSYS CORPORATION

2008 OMNIBUS INCENTIVE PLAN

APPENDIX A: DEFERRED STOCK UNITS FOR NON-EMPLOYEE DIRECTORS

1. Purpose

The purpose of this Appendix A to the Eclipsys Corporation 2008 Omnibus Incentive Plan (the “Plan”) is to grant Awards of deferred stock units (“DSUs”) to Non-employee directors of the Company (“Non-employee Directors”). The Awards hereunder are made pursuant to Section 8 of the Plan and are subject to the provisions of the Plan. Terms not specifically defined in this Appendix A shall have the same meaning as in the main body of the Plan.

2. DSU Awards

(a) Initial Awards

In connection with joining the Company’s board of directors (the “Board”), each new Non-employee Director shall be granted:

(i) for inducement and retention purposes, a number of DSUs equal to the quotient obtained by dividing $75,000 by the Fair Market Value of the Company’s Common Stock (as defined in the Plan) on the date of issuance (the “Inducement DSUs”); and

(ii) for compensatory purposes, a number of DSUs equal to the product of $11,000 and the number of full 30-day periods from the date of election or appointment to the Board until the scheduled date of the next regular annual meeting of stockholders (if the next annual meeting has not yet been scheduled, assuming the next annual meeting is scheduled to be held on the same month and day as the immediately preceding annual meeting) (the “Pro-Rata DSUs”).

The Inducement DSUs and the Pro-Rata DSUs will be issued on the date of election or appointment to the Board, but if the date of election or appointment to the Board is during a regular quarterly blackout period under the Company’s Insider Trading Policy, then upon termination of that regular quarterly blackout period, but not earlier than the day after the completion of two full day trading sessions of the principal exchange or market system upon which the Company’s common stock trades following the filing of the SEC report on Form 10-Q or Form 10-K that includes financial statements for the most recently completed fiscal quarter of the Company. Each DSU will represent a notional right to receive one share of Common Stock at the time specified below.

Each Initial DSU shall vest during continuation of Board service in 24 equal consecutive monthly increments following the date of award or, if earlier, upon the occurrence of a DSU Change in Control (as defined below). Each Pro-Rata DSU will vest during continuation of Board service in the same manner as described below for Annual DSUs.

b. Annual Awards

Each individual who is elected as a Non-employee Director at an annual meeting of stockholders of the Company (“Annual Meeting”), or who is a continuing Non-employee Director immediately after such Annual Meeting, will be granted a number of DSUs equal to the quotient obtained by dividing $125,000 by the Fair Market Value of the Company’s Common Stock (as defined in the Plan) on the date of the Annual Meeting (the “Annual DSUs”). However, if the date of the Annual Meeting is during a regular quarterly blackout period under the Company’s Insider Trading Policy, then the Annual DSUs shall be granted upon termination of that regular quarterly blackout period, but not earlier than the day after the completion of two full day trading sessions of the principal exchange or market system upon which the Company’s common stock trades following the filing of the SEC report on Form 10-Q or Form 10-K that includes financial statements for the most recently completed fiscal quarter of the Company. Each DSU will represent a notional right to receive one share of Common Stock at the time specified below.

Each Annual DSU shall vest during continuation of Board service in 12 equal consecutive monthly installments following the date of the Annual Meeting on which such Annual DSUs is issued or, if earlier, upon the occurrence of a DSU Change in Control, or the annual meeting of stockholders immediately following the meeting with respect to which the Annual DSU was granted.

(c) DSU Change in Control

For purposes of this Appendix A, a “DSU Change in Control” shall occur if there is a Change in Control and there also is a change in ownership or a change of effective control of the Company determined as follows:

(i) A change in the ownership of the Company that is a DSU Change in Control shall occur if any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the Company. However, if any one person, or more than one person acting as a group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the Company (or to cause a change in the effective control of the Company (within the meaning of paragraph (ii) below)). An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock for

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purposes of this paragraph. This paragraph applies only when there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company remains outstanding after the transaction.

For purposes of paragraph (i), persons will not be considered to be acting as a group solely because they purchase or own stock of the Company at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. If a person, including an entity, owns stock in both corporations (including the Company) that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in the Company prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

(ii) Notwithstanding that the Company has not undergone a change in ownership that is a DSU Change in Control under paragraph (i), a change in the effective control of the Company that is a DSU Change in Control shall occur on the date that either:

(A) Any one person, or more than one person acting as a group (as determined under paragraph (i)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 35 percent or more of the total voting power of the stock of the Company; or

(ii) A majority of members of the Company’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s board of directors prior to the date of the appointment or election.

(iii) A change in effective control of the Company that is a DSU Change in Control shall also occur as a result of any transaction in which either of the Company or the other corporation involved in the transaction has an event described in paragraph (i) or (vi). For example, assume that the Company transfers more than 40 percent of the total gross fair market value of its assets to company X in exchange for 35 percent of X’s stock. The Company has undergone a change in ownership of a substantial portion of its assets under paragraph (vi) and company X has a change in effective control under paragraph (ii).

(iv) If any one person, or more than one person acting as a group, is considered to effectively control the Company (as described herein), the acquisition of additional control of the Company by the same person or persons is not considered to cause a change in the effective control of the corporation (or to cause a change in the ownership of the Company within the meaning of paragraph (i)).

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(v) For purposes of paragraph (ii), persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. If a person, including an entity, owns stock in both corporations (including the Company) that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in the Company only with respect to the ownership in the Company prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

(vi) The following rules determine whether there has been a change in the ownership of a substantial portion of the Company’s assets so that a DSU Change in Control has occurred:

(A) A change in the ownership of a substantial portion of the Company’s assets occurs on the date that any one person, or more than one person acting as a group (as defined in paragraph (i)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

(B) (1) There is no DSU Change in Control under this paragraph (vi) when there is a transfer to an entity that is controlled by the shareholders of the Company immediately after the transfer, as provided in this subparagraph (vi)(B). A transfer of assets by the Company is not treated as a change in the ownership of such assets if the assets are transferred to:

(I) A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock;

(II) An entity, 50 percent or more of the total value or voting power of which is owned, directly or indirectly, by the Company;

(III) A person, or more than one person acting as a group, that owns, directly or indirectly, 50 percent or more of the total value or voting power of all the outstanding stock of the Company; or

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(IV) An entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a person described in subparagraph (III) immediately above.

(2) For purposes of this subparagraph (vi)(B) and except as otherwise provided, a person’s status is determined immediately after the transfer of the assets. For example, a transfer to a corporation in which the Company has no ownership interest before the transaction, but which is a majority-owned subsidiary of the Company after the transaction is not treated as a change in the ownership of the assets of the Company.

(3) Persons will not be considered to be acting as a group solely because they purchase assets of the Company at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of assets, or similar business transaction with the Company. If a person, including an entity shareholder, owns stock in both corporations (including the Company) that enter into a merger, consolidation, purchase or acquisition of assets, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in the Company only to the extent of the ownership in the Company prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

3. Elective Deferral of Cash Compensation

(a) A Non-employee Director may elect to defer all or a portion of his or her cash annual retainer fees (but not committee chair fees or per-meeting fees). All cash annual retainers that are being deferred to DSUs will be converted to DSUs on the day after the completion of two full day trading sessions of the principal exchange or market system upon which the Company’s common stock trades following the filing of the SEC report on Form 10-Q or Form 10-K that includes financial statements for the fiscal quarter of the Company just ended. Such deferred fees shall be converted to DSUs by dividing (i) the amount of cash deferred by (ii) the Fair Market Value of the Common Stock (as defined in the Plan) as of the date of conversion.

(b) All DSUs issued for deferred cash compensation under this Section 3 shall be fully vested at all times.

(c) A Non-employee Director who wishes to defer the receipt of cash compensation under Section 3(a) shall make an election with respect to a coming calendar year during the time established by the Board, but in no event later than December 31 of the prior year. Notwithstanding the foregoing, with respect to the first year in which a Non-employee Director becomes eligible to participate under this Appendix A, the election to defer with respect to compensation earned for services to be performed subsequent to the election shall be made within thirty (30) days after the date the Non-employee Director becomes eligible to participate. Any election made under Section 3 shall be irrevocable for the year with respect to which it relates.

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4. Dividends; Other Adjustments

In the event of a cash dividend with respect to the Common Stock, the number of DSUs will be increased as if such dividends were reinvested in the Common Stock, based on the Fair Market Value of the shares on the date the dividend is paid. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than an ordinary cash dividend, the number of DSUs will be equitably adjusted to reflect such occurrence.

5. Payment of DSUs

Shares of Common Stock equal to the whole number of vested DSUs credited to a Non-employee Director as of the date the Non-employee Director ceases to serve as a member of the Board (or, if earlier, the date of a DSU Change in Control) shall be issued to the Non-employee Director (or, following the Non-employee Director’s death, his or her Designated Beneficiary) on the earlier of the first business day coincident with or next following (i) the cessation of Board service, or (ii) a DSU Change in Control.

6. Not Outstanding Stock

A Non-employee Director shall have no rights as a stockholder with respect to any shares of Common Stock represented by the DSUs until he or she shall have become the holder of record of such shares.

7. Withholding Taxes

The Company shall have the right to deduct from all payments pursuant to Section 5 hereof an amount necessary to satisfy all federal, state or local taxes as required by law to be withheld with respect thereto, or the Non-employee Director or other person receiving such payment may be required to pay to the Company prior to delivery of such Common Stock or cash, the amount of any such taxes which the Company is required to withhold, if any, with respect to such Common Stock or cash, or the Committee may allow a combination of the two preceding methods.

8. No Right to Transfer

Except as specifically authorized by the Board, a Non-employee Director may not transfer the DSUs, or the rights represented thereby, except by will or the laws of descent and distribution. Except as specifically authorized by the Board, no purported assignment or transfer of the DSUs, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever.

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9. Section 409A

This Appendix A is intended to comply with the rules under Section 409A of the Code. Notwithstanding any other provision hereof, this Appendix A shall be administered in a manner consistent with the requirements of Section 409A of the Code. In addition, if any provision of this Plan would cause Non-employee Directors to incur any additional tax or interest under Section 409A of the Code or any regulations or Treasury guidance promulgated thereunder, the Company may reform such provision to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A of the Code.

10. No Funding

The Company shall have no obligation to set aside, earmark or entrust any fund or money with which to make any payment under this Appendix A. In any event, the payments to the Non-employee Director or to his or her Designated Beneficiary shall be made either in the form of Common Stock or from assets which shall continue, for all purposes, to be a part of the general assets of the Company and no person shall have by virtue of the provisions of this Appendix A, any interest in such Common Stock or assets. To the extent that any person acquires a right to receive cash payments from the Company under the provisions of this Appendix A, such right shall be no greater than the right of any unsecured general creditor of the Company.

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EX-10.14

Exhibit 10.14

RESTRICTED STOCK AGREEMENT

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

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

2. Governing Plan. The Restricted Stock shall be granted pursuant to and (except as specifically set forth herein or in another written agreement between Eclipsys and Recipient) subject in all respects to the applicable provisions of the Eclipsys Corporation 2008 Omnibus Incentive Plan or its successor plan (the “Plan”), which are incorporated herein by reference. Terms not otherwise defined in this Agreement have the meanings ascribed to them in the Plan.

3. Restrictions on the Restricted Stock.

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

(b) Cancellation of Restricted Stock. Notwithstanding Section 3(a), but subject to the Plan, any applicable Grant Notice, and any other separate written agreement between Eclipsys and Recipient, if any Cancellation Event occurs, then (i) vesting of any shares of Restricted Stock originally scheduled to vest after the time that Cancellation Event occurred will cease; (ii) any grant insofar as it relates to Restricted Stock that has not yet vested will be cancelled; (iii) unvested Restricted Stock will be forfeited to Eclipsys and all rights of Recipient as a stockholder of such shares will cease; (iv) Eclipsys shall be obligated to pay to Recipient, by cash or equivalent or by cancellation of amounts owed by Recipient to Eclipsys or any Affiliate, any Acquisition Consideration per share previously received from Recipient in respect of all shares of Restricted Stock that are forfeited to Eclipsys; and (v) Recipient shall have no rights to or in respect of shares of Restricted Stock that are forfeited to Eclipsys except the right to receive any Acquisition Consideration per share previously received from Recipient in respect thereof. In case of

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a Cancellation Event, any partially vested share will be rounded up to the nearest whole share for purposes of determining the number of shares that are forfeited to Eclipsys. For these purposes, if Recipient is an employee of Eclipsys or any of its present or future parent or subsidiary corporations (each an “Affiliate”) as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”), a “Cancellation Event” means, and shall be deemed to occur upon, the cessation of Recipient’s employment with Eclipsys or any of its Affiliates or its successor for any reason, including without limitation resignation by Recipient with or without good reason, or termination of employment by Eclipsys or any Affiliate or its successor with or without cause.

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

5. Handling of Shares.

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

The securities evidenced by this certificate are subject to certain limitations on transfer and other restrictions as set forth in the Eclipsys Corporation 2008 Omnibus Incentive Plan (copies of which are available for inspection at the offices of Eclipsys), and the notice of grant applicable to the securities.

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

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

(d) Conditions to Vesting. At the time for vesting of any shares of Restricted Stock, and as a condition to vesting, Recipient must, if requested by Eclipsys, make appropriate representations in a form satisfactory to Eclipsys that such Restricted Stock will not be sold other than (A) pursuant to an effective

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registration statement under the Securities Act of 1933, as amended, or an applicable exemption from the registration requirements of such Act; (B) in compliance with all applicable state securities laws and regulations; and (C) in compliance with all terms and conditions of the Plan, the applicable Grant Notice, any applicable policy of Eclipsys or any of its Affiliates, and any other written agreement between Recipient and Eclipsys or any of its Affiliates.

6. Tax Matters.

(a) Recipient’s Tax Obligations. The vesting of Restricted Stock generally results in taxable income for employees and is subject to appropriate income tax withholding, deposits, or other deductions required by applicable laws or regulations. Subject to any separate written agreement between Recipient and Eclipsys, Recipient and Recipient’s successors will be responsible for all income and other taxes payable as a result of grant or vesting of Restricted Stock or otherwise in connection with this Agreement. All obligations of Eclipsys or its Affiliates to pay tax deposits to any federal, state or other taxing authority as a result of grant or vesting of Restricted Stock will result in a commensurate obligation of Recipient to reimburse Eclipsys or its Affiliate the amount of such tax deposits. Eclipsys may in its discretion, but is not obligated to, require that such obligation of Recipient be satisfied by the Recipient forfeiting and Eclipsys deducting and retaining from the shares vesting at any particular time that number of shares with a value equal to the amount of the required minimum tax withholdings that Eclipsys or its Affiliate is required to pay as a result of such vesting, with such value measured by the same value per share used by Eclipsys or its Affiliate to determine its tax deposit obligation and based on the minimum statutory withholding rates for federal and state income and payroll tax purposes that are applicable to supplemental wages. If Eclipsys or its Affiliate is required to pay additional tax deposits after the initial issuance to Recipient of the net number of vested shares, Eclipsys or its Affiliate may require Recipient to make up the difference in cash. If the tax deposits paid are less than Recipient’s tax obligations, Recipient is solely responsible for any additional taxes due. If Eclipsys or its Affiliate pays tax deposits in excess of Recipient’s tax obligations, Recipient’s sole recourse will be against the relevant taxing authorities, and Eclipsys and its Affiliates will have no obligation to issue additional shares or pay cash to Recipient in respect thereof. Recipient is responsible for determining Recipient’s actual income tax liabilities and making appropriate payments to the relevant taxing authorities to fulfill Recipient’s tax obligations and avoid interest and penalties.

(b) Section 83(b) Election. Recipient understands that Recipient may make an election pursuant to Section 83(b) of the Code (by filing an election with the Internal Revenue Service within thirty (30) days after the date Recipient acquired the Restricted Stock) to include in Recipient’s gross income the fair market value (as of the date of acquisition) of the Restricted Stock. Recipient may make such an election under Section 83(b), or comparable provisions of any state tax law, only if, prior to making any such election, Recipient (a) notifies Eclipsys of Recipient’s intention to make such election, by delivering to Eclipsys a copy of the fully-executed Section 83(b) Election Form attached hereto as Exhibit A, and (b) pays to Eclipsys an amount sufficient to satisfy any taxes or other amounts required by any governmental authority to be withheld or paid over to such authority for Recipient’s account, or otherwise makes arrangements satisfactory to Eclipsys for the payment of such amounts through withholding or otherwise. Recipient understands that if Recipient has not made a proper and timely Section 83(b) election, at the time the forfeiture restrictions applicable to the Restricted Stock lapse, Section 83 will generally provide that Recipient will recognize ordinary income and be taxed in an amount equal to the fair market value (as of the date the forfeiture restrictions lapse) of the Restricted Stock less any Acquisition Consideration paid for the Restricted Stock. For this purpose, the term “forfeiture restrictions” includes the right of Eclipsys to acquire the Restricted Stock pursuant to its rights under Section 3 of this Agreement. Recipient acknowledges that it is Recipient’s sole responsibility, and not the responsibility of Eclipsys or any of its Affiliates, to file a timely election under Section 83(b), even if Recipient requests Eclipsys or its representative to make this filing on Recipient’s behalf. Recipient is relying solely on Recipient’s own advisors with respect to the decision as to whether or not to file a Section 83(b) election.

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7. Additional Agreements

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

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

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

(d) No Right to Continued Employment or Service; No Positive Inference. Neither this Agreement nor any grant of Restricted Stock confers upon Recipient any right to continue as an employee, director or consultant of, or in any other relationship with, Eclipsys or its Affiliates, or to any particular employment or service tenure or minimum vesting of Restricted Stock, or limits in any way the right of Eclipsys or its Affiliates to terminate Recipient’s services to Eclipsys or any of its Affiliates at any time, with or without cause. Restricted Stock is to motivate and reward future performance, and no grant of Restricted Stock will be interpreted as a reward for past performance that dictates vesting in advance of the vesting schedule specified in the applicable Grant Notice, or an indication that the Recipient has performed well or is entitled to any particular employment or service tenure.

(e) Remedy for Breach of Legal Obligations. As a condition to vesting of any Restricted Stock, Recipient must enter into the Eclipsys Proprietary Interest Protection Agreement, in the form specified by Eclipsys. If Recipient breaches in any material respect the Proprietary Interest Protection Agreement between Recipient and Eclipsys, or any other contract between Recipient and Eclipsys, or

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Recipient’s common law duty of confidentiality or trade secret protection, and Recipient fails to cure that breach in full within ten days of notice and demand for cure by Eclipsys, then such breach shall entitle Eclipsys, in its discretion and in addition to any other legal or equitable remedies available to it, to do any or all of the following:

(1) recover from Recipient any shares of Restricted Stock still owned by Recipient, whether or not vested, solely for payment of any Acquisition Consideration previously paid by Recipient for the recovered shares, whereupon any rights of Recipient to such recovered shares of Restricted Stock will cease;

(2) require Recipient to disgorge to Eclipsys the gross income Recipient earned (i.e. sales price less any Acquisition Consideration) upon transfer by Recipient, at any time from 12 months before such breach until 12 months after the Eclipsys learned of such breach, of any vested shares of Restricted Stock; and/or

(3) obtain injunctive relief or other similar remedy in any court with appropriate jurisdiction in order to specifically enforce the provisions hereof.

Eclipsys may suspend any vesting or transfer of Restricted Stock pending cure of any such breach.

8. General.

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

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

To Eclipsys:	Eclipsys Corporation Three Ravinia Drive, Suite 1000 Atlanta, GA 30346 Attention: General Counsel
To Recipient:	At Recipient’s address of record as maintained in Eclipsys’s employment files

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

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(d) Governing Law; Severability. This Agreement will be construed and interpreted under the laws of the State of Delaware applicable to agreements executed and to be wholly performed within the State of Delaware. If any provision of this Agreement as applied to any party or to any circumstance is adjudged by a court of competent jurisdiction to be void or unenforceable for any reason, the invalidity of that provision shall in no way affect (to the maximum extent permissible by law) the application of such provision under circumstances different from those adjudicated by the court, the application of any other provision of this Agreement, or the enforceability or invalidity of this Agreement as a whole. If any provision of this Agreement becomes or is deemed invalid, illegal or unenforceable in any jurisdiction by reason of the scope, extent or duration of its coverage, then such provision shall be deemed amended to the extent necessary to conform to applicable law so as to be valid and enforceable or, if such provision cannot be so amended without materially altering the intention of the parties, then such provision will be stricken and the remainder of this Agreement shall continue in full force and effect.

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

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

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

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

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

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ECLIPSYS CORPORATION
By:
Name:	[Name]
Title:

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EXHIBIT A

to Restricted Stock Agreement

ELECTION TO INCLUDE VALUE OF RESTRICTED PROPERTY

IN GROSS INCOME IN YEAR OF TRANSFER

INTERNAL REVENUE CODE § 83(b)

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

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

Taxpayer I.D. No.:

2. Description of property with respect to which the election is being made:

             shares of Common Stock of Eclipsys Corporation, a Delaware corporation (the “Company”)

3. Date on which property was transferred:                     

4. Taxable year to which this election relates:                     

5. Nature of the restrictions to which the property is subject:

If the taxpayer’s service to the Company terminates for any reason before the Common Stock vests, the unvested Common Stock is forfeited to the Company. The Common Stock vests according to the following schedule:                             

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

6. Fair market value of the property:

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

7. Amount paid for the property:

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

8. Furnishing statement to employer:

A copy of this statement has been faxed to Attn: Eclipsys Stock Administrator 404-847-5993.

Date:
	Signature
	Printed Name

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

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EX-10.15

Exhibit 10.15

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

[Name]	Award Number:
[Address]	Plan:	2008 Omnibus Incentive Plan
	Employee ID:

Effective                     , you have been granted              shares (the “Shares”) of common stock of Eclipsys Corporation (the “Company”).

This notice is a “Grant Notice” as described in the Restricted Stock Agreement between you and the Company (the “Agreement”). This grant is made under, and this grant and the Shares are subject to and governed by the terms and conditions of, this Grant Notice, the Agreement including the restrictions on transfer set forth therein, the Company’s 2008 Omnibus Incentive Plan (the “Plan”), and any other applicable written agreement between you and the Company. By your acceptance, you agree to such terms and conditions and confirm that your receipt of and payment for the Shares is voluntary.

For purposes of this Grant Notice, there are four “Vesting Dates” as follows:                                                  

                                                     . Subject to the following paragraph, the Shares shall vest in four annual installments, each consisting of 25% of the total number of shares, with one such installment vesting on each of the four Vesting Dates. Only whole Shares shall vest; partial Shares shall accumulate to the next Vesting Date.

Unless otherwise provided in the Agreement or in another written agreement between you and the Company, (i) no Shares will vest before December 1, 2009; (ii) vesting of Shares will occur only on Vesting Dates, without any ratable vesting for periods of time between Vesting Dates; (iii) any termination of your employment for any reason or no reason will result in cessation of vesting, cancellation of this grant, and forfeiture to the Company of any Shares not vested at the time your employment terminates; and (iv) notwithstanding the foregoing, vesting will be suspended during the portion of any leave of absence (LOA) you have in excess of 180 days, and if you return to work following such a LOA, any Vesting Dates that passed during the suspension of vesting will be added to the end of the original vesting schedule, with vesting on each such additional Vesting Date in the amount of shares not vested on the corresponding Vesting Date during the period of the suspension, contingent upon your continued employment.

As a condition to vesting of any Shares, you must enter into the Eclipsys Proprietary Interest Protection Agreement, in the standard form generally used for all new employees who live in your state of residence. If you breach in any material respect the Proprietary Interest Protection Agreement between you and the Company, or any other contract between you and the Company, or your common law duty of confidentiality or trade secret protection, and you fail to cure that breach in full within ten days of notice and demand for cure by the Company, then such breach shall entitle the Company, in its discretion and in addition to any other legal or equitable remedies available to it, to do any or all of the following: (1) cancel any shares of Restricted Stock still owned by you, whether or not vested, whereupon any rights you might otherwise have to such canceled shares of Restricted Stock will cease; (2) require you to disgorge to the Company the income you earned from any Restricted Stock that you transferred at any time from 12 months before such breach until 30 days after the Company learned of such breach, and for this purpose net income means the value at time of transfer less applicable income taxes you paid in connection with such shares; and/or (3) obtain injunctive relief or other similar remedy in any court with appropriate jurisdiction in order to specifically enforce the provisions hereof. The Company may suspend any vesting or transfer of Restricted Stock pending cure of any such breach.

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

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

ECLIPSYS CORPORATION

By:

Name:

Title:

EX-10.16

Exhibit 10.16

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

[Name]	Option Number:
[Address]	Plan:	2008 Omnibus Incentive Plan
	Employee ID:

Effective                      (the “Issuance Date”), you have been granted a non-statutory option to buy                      shares of common stock of Eclipsys Corporation (the “Company”) at an exercise price of              per share. This option vests and becomes exercisable over a four-year vesting period as follows: (i) with respect to 25% of the underlying shares on the first anniversary of the Issuance Date (the “First Vesting Date”); and (ii) with respect to the remaining 75% of the underlying shares in 36 equal consecutive monthly installments on the same day (e.g. the 14^th day) of each calendar month following the First Vesting Date as the day of the month on which the Issuance Date occurs, provided that vesting will not occur if you are not employed with the Company (as defined in the Plan) on the scheduled vesting date. The option expires, to the extent not earlier terminated or exercised, on the seventh anniversary of the Issuance Date or such earlier date as the Plan provides, and the Company has no obligation to notify you before expiration.

The option is granted under and governed by the terms and conditions of this notice, the Company’s 2008 Omnibus Incentive Plan (the “Plan”), and any other applicable written agreement between you and the Company. By your acceptance of this option, and also by its exercise, you agree to such terms and conditions and confirm that your receipt and exercise of this option is voluntary.

Except as otherwise provided in the Plan or a separate written agreement between you and the Company signed by an executive officer of the Company, (i) no vesting will occur before the First Vesting Date, vesting of the option will occur only on scheduled vesting dates, without any ratable vesting for periods of time between vesting dates, and any termination of your employment for any reason or no reason (unless you are then or are becoming a member of the Board of Directors of the Company) will result in cessation of vesting and lapse of the option to the extent not yet vested at the time of termination; (ii) following any termination of your employment, you will have until the earlier of the expiration of the option or the close of business on the first anniversary of the date of termination of your employment to exercise the option, to the extent vested at the time of or as a result of termination of your employment; and (iii) notwithstanding the foregoing, vesting will be suspended during the portion of any leave of absence (LOA) you have in excess of 180 days, and if you return to work following such a LOA, any scheduled vesting dates that passed during the suspension of vesting will be added to the end of the original vesting schedule, with vesting on each such additional vesting date in the amount of shares not vested on the corresponding vesting date during the period of the suspension, contingent upon your continued employment.

As a condition to vesting and exercise of this option, you must enter into the Eclipsys Proprietary Interest Protection Agreement, in the standard form generally used for all new employees who live in your state of residence. If you breach in any material respect the Proprietary Interest Protection Agreement between you and the Company, or any other contract between you and the Company, or your common law duty of confidentiality or trade secret protection, and you fail to cure that breach in full within ten days of notice and demand for cure by the Company, then such breach shall entitle the Company, in its discretion and in addition to any other legal or equitable remedies available to it, to do any or all of the following: (1) cancel and terminate as of the date of such breach any unvested and/or unexercised portion of this stock option; (2) require you to disgorge to the Company the net income you earned from any shares received by you upon exercise of this option that you transferred at any time from 12 months before such breach until 30 days after the Company learned of such breach, and for this purpose net income means the sales price less the exercise price less applicable income taxes you paid in connection with such shares; (3) require you to tender back to the Company any share of Company stock you own that you acquired upon the exercise of this stock option at a price equal to the exercise price you paid for such share; and/or (4) obtain injunctive relief or other similar remedy in any court with appropriate jurisdiction in order to specifically enforce the provisions hereof. The Company may suspend any exercise of this option pending cure of any such breach.

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

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

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

ECLIPSYS CORPORATION

By:

Name:

Title:

EX-21

Exhibit 21

Subsidiaries of Eclipsys Corporation

Subsidiary Name	Jurisdiction
Eclipsys Healthcare IT (Singapore) PTE. LTD.	Singapore
Eclipsys (Mauritius) Limited	Mauritius
Eclipsys Canada Corporation	Canada
Eclipsys International Holdings, LLC	Delaware
Eclipsys ME, FZ-LLC	Dubai, UAE
Eclipsys Practice Solutions, LLC	Delaware
Eclipsys (India) Private Limited	India
Premise Corporation**	Delaware

** Premise Corporation was converted on February 10, 2009 into a limited liability company, named Eclipsys Patient Flow Solutions, LLC

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. 333-152855, 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 24, 2009 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 24, 2009

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 24, 2009

/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, W. David Morgan, 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 24, 2009

/s/ W. David Morgan

W. David Morgan

Interim 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, 2008 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 24, 2009

/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, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, W. David Morgan, Interim 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 24, 2009

/s/ W. David Morgan

W. David Morgan

Interim Chief Financial Officer and

Chief Accounting Officer