Exhibit 10.2

EXECUTION VERSION

 

 

 

AGREEMENT AND PLAN OF MERGER

among

MEDINOTES CORPORATION,

THE STOCKHOLDER SIGNATORIES,

THE STOCKHOLDERS’ REPRESENTATIVE,

SIRONA ACQUISITION CORPORATION

and

ECLIPSYS CORPORATION

DATED AS OF SEPTEMBER 19, 2008

 

 

 

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TABLE OF CONTENTS

 

         

Page

ARTICLE I DEFINITIONS

   2

ARTICLE II THE MERGER

   16

2.1

   The Merger    16

2.2

   Closing; Effective Time    16

2.3

   Effects of the Merger    17

2.4

   Certificate of Incorporation and By-laws    17

2.5

   Directors; Officers    17

2.6

   Subsequent Actions    17

2.7

   Effect of Merger on the Capital Stock of MediNotes    18

2.8

   Dissenting Shares    20

2.9

   Payment for Shares, Company Options and Company Warrants    20

2.10

   Calculation of Net Working Capital, Closing Payment and Final Adjustments   
24

2.11

   Dispute Resolution of Calculation of Net Working Capital, the Closing Date
Cash or the Closing Date Debt    26

2.12

   Continuity of Interest Adjustments    26

2.13

   Approval    27

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE MAJOR STOCKHOLDERS

   27

3.1

   Ownership of the Shares, Company Options and Company Warrants    27

3.2

   Authorization, Validity, and Effect of Agreements    28

3.3

   No Violations; Consents    28

3.4

   Related Party Transactions    29

3.5

   Investment Intent    29

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MEDINOTES

   31

4.1

   MediNotes 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    38

4.9

   Taxes    39

4.10

   Certain Employee Plans    42

4.11

   Labor Matters    43

4.12

   Restrictions on Business Activities    45

4.13

   Real Property    45

4.14

   Intellectual Property    45

4.15

   Other Assets    51

 

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4.16

   Environmental Matters    52

4.17

   Insurance    52

4.18

   Warranties    54

4.19

   Customers; Suppliers    55

4.20

   Accounts Receivable    56

4.21

   Accounts Payable    56

4.22

   Bank Accounts    56

4.23

   No Brokers    56

4.24

   Disclosure    57

ARTICLE V REPRESENTATIONS AND WARRANTIES OF ECLIPSYS AND MERGER SUB

   57

5.1

   Existence; Good Standing; Corporate Authority    57

5.2

   Authorization, Validity, and Effect of Agreements    57

5.3

   No Violation    58

5.4

   No Brokers    58

5.5

   Funds    58

5.6

   Valid Issuance    58

5.7

   Exchange Compliance    58

5.8

   SEC Filings; Financials; Absence of Changes    59

5.9

   Tax-Free Reorganization    59

ARTICLE VI COVENANTS

   59

6.1

   Conduct of Business    59

6.2

   Further Action    62

6.3

   Access to Information    63

6.4

   Publicity    63

6.5

   Expenses    64

6.6

   Third-Party Offers    64

6.7

   Restrictive Covenants    65

6.8

   Directors    67

6.9

   Stockholders’ Representative    67

6.10

   Employee Matters    68

6.11

   Release    69

6.12

   Confidentiality    70

6.13

   Covenants Regarding Contracts    72

6.14

   Stockholder Meeting    72

6.15

   Tax-Free Reorganization Status    72

6.16

   Second Merger    72

6.17

   Indemnification of Directors and Officers    73

6.18

   Compliance with Rule 144(c)(1)    73

6.19

   Termination of 401(k) Plan    73

6.20

   Bond Agreement Escrow    73

ARTICLE VII SURVIVAL; INDEMNIFICATION; REMEDIES

   75

7.1

   Survival of Representations and Warranties and Covenants    75

7.2

   Indemnification and Other Rights    75

 

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7.3

   Time Limitations    77

7.4

   Other Limitations    78

7.5

   Set-Off    80

7.6

   Procedures Relating to Indemnification Involving Third-Party Claims    81

7.7

   Other Claims    83

7.8

   Recovery in the Case of Strict Liability or Negligence    83

7.9

   Sole and Exclusive Remedy    83

ARTICLE VIII CONDITIONS

   84

8.1

   Conditions to Each Party’s Obligation to Effect the Closing    84

8.2

   Conditions to Obligations of Eclipsys    84

8.3

   Conditions to the Obligations of MediNotes and the Stockholders    87

ARTICLE IX TERMINATION

   88

9.1

   Termination by Mutual Consent    88

9.2

   Termination by Eclipsys or MediNotes    88

9.3

   Termination by MediNotes    89

9.4

   Termination by Eclipsys    89

9.5

   Effect of Termination    89

ARTICLE X MISCELLANEOUS

   90

10.1

   Entire Agreement; Assignment    90

10.2

   Validity    90

10.3

   Notices    91

10.4

   Governing Law    92

10.5

   Construction    92

10.6

   Counterparts    92

10.7

   Parties In Interest    92

10.8

   Prior Review and Counsel    92

10.9

   Waiver    93

10.10

   Amendments    93

10.11

   Specific Performance    93

10.12

   Further Assurances    93

10.13

   Cumulative Remedies    93

10.14

   Arbitration    93

10.15

   Costs and Fees    95

 

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EXHIBITS

 

Exhibit A    Form of Certificate of Merger Exhibit B    [Intentionally Deleted]
Exhibit C-1    Form of Employment Agreement (Bond) Exhibit C-2    Form of
Employment Agreement (Restricted Stock) Exhibit C-3    Form of Employment
Agreement (Cash) Exhibit C-4    Key Employee Details Exhibit D    Form of Legal
Opinion Exhibit E    [Intentionally Deleted] Exhibit F    Form of Investor
Questionnaire Exhibit G    Form of Royalty Termination Agreement Exhibit H   
Form of Commission Agreement Exhibit I    Form of Consulting Agreement
Termination

SCHEDULES

 

Schedule 1(a)    Key Employees Schedule 1(b)    Stockholder Notes Schedule 1(c)
   Accredited Investors Schedule 2.10    Hypothetical Calculation-Closing Date
Net Worth Schedule 6.10(a)    Continuing Employees

Disclosure Schedule

 

Section 3.1    Ownership of the Shares Section 4.1    Foreign Jurisdictions
Section 4.3(a)(i)    Options and Warrants Section 4.4(a)    Material Contracts
Section 4.5(a)    Financial Statements Section 4.7(b)    Permits
Section 4.7(d)(i)    Litigation Section 4.10(a)    Company Benefit Plans
Section 4.11(b)(i)    Employees Section 4.11(b)(ii)    Independent Contractors
Section 4.13(a)    Leased Real Property Section 4.14(a)(i)    Company Registered
IP Section 4.14(a)(ii)    Other Rights in Company Registered IP Section 4.14(b)
   Company Licensed IP Section 4.14(d)(i)    Form of Assignment Agreements
Section 4.14(d)(ii)    Software Escrow Agreements Section 4.14(m)    Software
Incorporating Encryption Subroutines Section 4.17(a)    Insurance
Section 4.17(c)    Material Open Claims Section 4.18(a)    Warranty Claims
Section 4.18(b)    Documentation

 

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Section 4.19(a)    Customers Section 4.19(c)    Suppliers Section 4.20   
Accounts Receivable Section 4.21    Accounts Payable Section 4.22    Bank
Accounts

 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of September 19, 2008
(this “Agreement”), is entered into among Eclipsys Corporation, a Delaware
corporation (“Eclipsys”), Sirona Acquisition Corporation, an Iowa corporation
and a wholly owned Subsidiary of Eclipsys (“Merger Sub”), MediNotes Corporation,
an Iowa corporation (“MediNotes”), the stockholders of MediNotes named on the
signature page hereto (the “Major Stockholders”) and Danny R. Wipff (as the
“Stockholders’ Representative”);

WHEREAS, the Boards of Directors of each of Eclipsys, MediNotes and Merger Sub
have (i) determined that the merger of Merger Sub with and into MediNotes (the
“Merger”), with MediNotes surviving the Merger, and the Second Merger (as
defined below), are advisable and fair to, 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 States of Iowa and Delaware;

WHEREAS, as soon as practicable following the Merger, Eclipsys shall cause the
Surviving Corporation to be merged with and into a wholly owned limited
liability company Subsidiary of Eclipsys that is treated as a disregarded entity
for tax purposes (the “Second Merger”), with such entity surviving the Second
Merger as a wholly owned Subsidiary of Eclipsys;

WHEREAS, Eclipsys, Merger Sub, MediNotes and the Major Stockholders intend for
federal income tax purposes that the Merger followed by the Second Merger
qualify as a “reorganization” described in Section 368(a) of the Code, and that
this Agreement constitute a “plan of reorganization” within the meaning of
Section 1.368-2(g) of the regulations promulgated under the Code;

WHEREAS, as a condition to and concurrently with the execution of this
Agreement, the Major Stockholders representing approximately 80% of the
outstanding shares of Company Common Stock, approximately 83% of the outstanding
shares of Series A Preferred Stock, 100% of the outstanding shares of Series B
Preferred Stock and approximately 56% of the outstanding shares of Series C
Preferred Stock have entered into a voting agreement with Eclipsys (the “Voting
Agreement”) pursuant to which such Stockholders have agreed, among other
matters, to vote their Shares in favor of the approval and adoption of this
Agreement and the transactions contemplated hereby, including the Merger; 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:

 

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ARTICLE I

DEFINITIONS

As used in this Agreement:

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

“Accounts Payable” means all accounts payable of MediNotes.

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

“Affiliate,” as applied to any Person, shall mean 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 sum of the
following: (i) the Series A Liquidation Preference multiplied by the number of
shares of Series A Preferred Stock outstanding immediately prior to the
Effective Time; (ii) the Series B Liquidation Preference multiplied by the
number of shares of Series B Preferred Stock outstanding immediately prior to
the Effective Time; (iii) the Series C Liquidation Preference multiplied by the
number of shares of Series C Preferred Stock outstanding immediately prior to
the Effective Time; and (iv) the Series D Cash Liquidation Preference multiplied
by the number of shares of Series D 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 Section 2.7(d).

“Aggregate Warrant Consideration” means the aggregate amount of Warrant
Consideration payable in respect of Company Warrants pursuant to Section 2.7(e).

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

“Average Market Price” means the arithmetic mean of the last sale price (or, if
on any day no sale price is reported, the average of the quoted high bid and low
ask price on such day) of a share of Eclipsys Common Stock on the Nasdaq Stock
Market on each of the 10 consecutive trading days ending two trading days
immediately prior to the Closing Date.

 

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“Bond Agreement” means the Asset Purchase Agreement, dated February 25, 2008, by
and among MediNotes, the Bond Entities, Travis Bond as Owners’ Representative
and the equity owners named therein.

“Bond Entities” means Bond Medical Group, Bond SideWinder, LLC and Bond
Technologies, L.L.C.

“Bond Escrow Fund” is defined in Section 6.20.

“Bond Medical Group” is defined in Section 6.7(b).

“Business” means the business of MediNotes of developing, marketing, selling,
and licensing software for physician practice management, electronic health
records and electronic prescriptions, including the Software Products, providing
certain related support and services, and any incidental, related or ancillary
businesses as currently conducted or under development by MediNotes on the
Closing Date.

“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).

“Cash Merger Consideration” means the product of the Purchase Price and the Cash
Percentage.

“Cash Percentage” is thirty-nine percent (39%).

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

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

“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)(ii).

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

 

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

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

“Company Benefit Plans” means each of the following which is sponsored,
maintained, contributed to or required to be contributed to by MediNotes for the
benefit of the current or former employees, officers or directors of MediNotes,
has been so sponsored, maintained, contributed to or required to be contributed
to by MediNotes prior to the Closing Date, or with respect to which MediNotes
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 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, 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 A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, the Company Options and the Company Warrants.

“Company Common Stock” means the common stock, no par value, of MediNotes.

“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 MediNotes.

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

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

“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 United States Patent and
Trademark Office, foreign patent offices, or the United States Copyright Office.

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

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

 

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“Confidential Information” means the disclosing party’s confidential and
proprietary information, including information concerning the disclosing party’s
business, products (including, with respect to MediNotes, 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, customers, suppliers and other technical and
non-technical 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.

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
non-confidential 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
May 2, 2008, between Eclipsys and MediNotes.

“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, 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.

“Costs and fees” is defined in Section 10.15.

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

“Current Assets” means the aggregate assets of MediNotes that would be
categorized as “current assets” on a balance sheet of MediNotes under GAAP, as
of 11:59 p.m. on the Closing Date, but excluding all cash.

“Current Liabilities” means the aggregate liabilities of MediNotes that would be
categorized as “current liabilities” on a balance sheet of MediNotes under GAAP,
as of 11:59 p.m. on the Closing Date, but excluding (i) deferred revenues, other
than deferred revenues, if any, representing accruals for customer claims,
(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) and
(iii) accrued Seller Transaction Expenses unpaid as of the

 

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Closing (provided such expenses are less than or equal to the Stockholder Fund
Amount available for payment thereof). For the avoidance of doubt, Current
Liabilities shall include any amounts payable to MediNotes’ employees as a
result of or in connection with consummation of the Merger or the Second Merger,
including any bonuses, but excluding severance payments, if any, 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
letter 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.

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

“Dissenting Shares” is defined in Section 2.8.

“Dissenting Share Amount” means the product of the Per Share Consideration and
the number of Dissenting Shares.

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

“Eclipsys Common Stock” means the Class A common stock of Eclipsys, par value
$.01 per share.

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

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

“Eclipsys SEC Filings” is defined in Section 5.8.

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

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

“Employee” means employees and other persons filling similar functions.

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

 

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“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.

“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 MediNotes and that, together with MediNotes, is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code.

“Escrow Accounts” is defined in Section 2.9(b).

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

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

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

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

“Estimated Closing Date Net Working Capital” means MediNotes’ good faith
estimate of 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.

 

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“Estimated Purchase Price” means an amount equal to (i) $42,000,000, less
(ii) the Estimated Closing Date Debt, plus (iii) the Estimated Closing Date
Cash, plus (or minus if negative) (iii) any Estimated Closing Date Net Working
Capital Adjustment.

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

“Final Closing Date Cash” means the amount of cash of MediNotes, as of 11:59
p.m. on the Closing Date, less $1,000,000.

“Final Closing Date Debt” means all Debt of MediNotes, as of 11:59 p.m. on the
Closing Date, including capital lease obligations and the obligations under the
Stockholder Notes.

“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.

“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” is the amount equal to the sum of the Indemnification Amount,
the Stockholder Fund Amount and the True-Up Reserve Amount.

“Holdback Escrow Agreement” means the Holdback Escrow Agreement, among Eclipsys,
the Stockholders’ Representative and the Escrow Agent, to be entered into
concurrently with the Closing, relating to the escrow of the Holdback Amount, in
the form mutually agreed by Eclipsys and MediNotes.

 

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“Holdback Termination Date” is defined in Section 2.9(b).

“Indemnification Amount” means (i) shares of Eclipsys Common Stock with an
aggregate value of $2,562,000, valued at the Average Market Price, plus
(ii) cash, with an aggregate value of $1,638,000. For the avoidance of doubt,
the cash amount shall not be less than thirty-nine percent (39%) of the
Indemnification Amount.

“Institutional Major Stockholders” means Iowa Farm Bureau Federation, Iowa First
Capital Fund II LP and Iowa Capital Corporation.

“Instruments” is defined in Section 2.9(c).

“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.

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

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

“Knowledge of Eclipsys” means actual knowledge of the Chief Executive Officer or
Chief Financial Officer of Eclipsys. Actual knowledge of any matter will be
deemed to include such knowledge as such person could have obtained after making
reasonable inquiry and investigation of the matter.

“Knowledge of a Major Stockholder” means (i) actual knowledge of such Major
Stockholder if such Major Stockholder is an individual, (ii) actual knowledge of
the trustee(s) of such Major Stockholder if such Major Stockholder is a trust,
and (iii) the actual knowledge of any director or officer of any Institutional
Major Stockholder. Actual knowledge of any matter will be deemed to include such
knowledge as such persons could have obtained after making reasonable inquiry
and investigation of the matter.

“Knowledge of MediNotes” means the actual knowledge of Donald G. Schoen, Davin
Hills or Travis Bond. Actual knowledge of any matter will be deemed to include
such knowledge as such person could have obtained after making reasonable
inquiry and investigation of the matter.

 

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“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 MediNotes.

“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.

“Material Adverse Effect” means with respect to any Person, or its business, 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 such Person, taken as a whole with its Subsidiaries, or its
business, or (ii) the ability of such Person (and, in the case of MediNotes, the
Stockholders) to timely (A) perform his or its obligations hereunder, or
(B) consummate the transactions contemplated in this Agreement and the other
Transaction Documents.

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

“MediNotes” is defined in the introductory paragraph of this Agreement, and
unless the context otherwise requires, after the Effective Time shall mean the
Surviving Corporation or the survivor of the Second Merger, as applicable.

“MediNotes Articles of Incorporation” means the Second Amended and Restated
Articles of Incorporation of MediNotes as amended and in effect on the date
hereof.

“Merger Consideration” means the cash and Eclipsys Common Stock 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 $275,000.

 

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“Non-Stock Consideration” is defined in Section 2.12.

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

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

“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.

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

“Participating Cash Percentage” means the percentage calculated by dividing
(A)(x) the product of (i) the Purchase Price less the Indemnification Amount and
(ii) the Cash Percentage, less (y) the sum of the Stockholder Fund Amount, the
True-Up Reserve Amount, the Small Holder Cash, the Aggregate Liquidation
Preference, the Aggregate Option Consideration, the Aggregate Warrant
Consideration and the Dissenting Share Amount by (B)(i) the Purchase Price less
(ii) the sum of the Holdback Amount, the Small Holder Cash, the Aggregate
Liquidation Preference, the Aggregate Option Consideration, the aggregate Series
D Stock Liquidation Preference, Aggregate Warrant Consideration and the
Dissenting Share Amount.

“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 for which
Company Warrants are exercisable immediately prior to the Effective Time, and
(iii) the number of shares of Company Common Stock for which Company Options are
exercisable immediately prior to the Effective Time.

“Per Share Cash Consideration” is defined in Section 2.7(c)(ii).

“Per Share Consideration” means the quotient obtained by dividing (i) the
Purchase Price, plus the Aggregate Exercise Price, less the sum of (x) the
Holdback Amount, (y) the Aggregate Liquidation Preference and (z) the Series D
Stock Liquidation Preference (valued at the Average Market Price), by (ii) the
Participating Shares.

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

“Per Share Stock Consideration” is defined in Section 2.7(c)(ii).

“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

 

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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, (iv) easements,
restrictive covenants and similar encumbrances or impediments against any of
MediNotes’ assets or properties 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, and (v) 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.

“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 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) $42,000,000, less (ii) the Final
Closing Date Debt, plus (or minus if negative) (iii) the Final Closing Date
Cash, plus (or minus if negative) (iv) any Final Closing Date Net Working
Capital Adjustment.

“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 United States
Patent and Trademark Office, foreign patent offices, or the United States
Copyright Office.

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

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

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

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Seller Transaction Expenses” means all costs and expenses (including fees of
attorneys, accountants and brokers or finders) of the Stockholders and MediNotes
incurred or payable in connection with this Agreement and the other Transaction
Documents and the transactions contemplated hereby and thereby, including the
percentage of expenses, if any, owed to the Unrelated Accounting Firm under
Section 2.11 and all amounts owed to the brokers disclosed in

 

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Section 4.23, or any other broker, finder or similar agent employed by or acting
on behalf of MediNotes, any Major Stockholder or any of their respective
Affiliates or agents in connection with this Agreement or any other Transaction
Documents, or the transactions contemplated hereby or thereby.

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

“Series A Preferred Stock” means the Series A Convertible Preferred Stock of
MediNotes.

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

“Series B Preferred Stock” means the Series B Convertible Preferred Stock of
MediNotes.

“Series C Liquidation Preference” is defined in Section 2.7(c)(iii).

“Series C Preferred Stock” means the Series C Convertible Preferred Stock of
MediNotes.

“Series D Cash Liquidation Preference” is defined in Section 2.7(c)(iv).

“Series D Liquidation Preference” is defined in Section 2.7(c)(iv).

“Series D Preferred Stock” means the Series D Non-Voting Preferred Stock of
MediNotes.

“Series D Stock Liquidation Preference” is defined in Section 2.7(c)(iv).

“Settlement Agreement” means that certain Settlement Agreement and Release,
entered into on the date hereof, by and among the Bond Entities, Travis Bond,
Lisa Bond, Nevestis, LLC, Primi, LLC, and MediNotes, in the form provided to
Eclipsys on the date hereof.

“Shares” means shares of Company Common Stock, Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.

“Small Holder” means all Effective Time Company Holders, other than (i) those
who have executed and delivered to Eclipsys an Investor Questionnaire, prior to
the date hereof, certifying that they are an accredited investor under
Regulation D of the Securities Act, and are listed as such on Schedule 1(c), and
(ii) any other Effective Time Company Holder who executes and delivers to
Eclipsys an Investor Questionnaire, within five (5) Business Days after the date
hereof, certifying that they are an accredited investor under Regulation D of
the Securities Act, and that Eclipsys, in its sole discretion, approves be added
to such schedule within such time period.

“Small Holder Cash” means the aggregate cash paid to Small Holders pursuant to
Section 2.7(f).

 

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“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 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 MediNotes for sale or license
to third parties, including, but not limited to MediNotes e EHR, MediNotes
Clinician EHR/PM Suite, MediNotes Rx, MediNotes Clinician PM and MediNotes
Clinician SCM.

“Stock Consideration” is defined in Section 2.12.

“Stock Percentage” is sixty-one percent (61%).

“Stockholder” means a record owner of Company Capital Stock.

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

“Stockholder Fund Amount” means an amount equal to $1,100,000, in cash.

“Stockholder Notes” means those certain promissory notes listed on Schedule
1(b), issued by MediNotes to the Stockholders or their Affiliates.

“Stockholders Agreement” means that certain Amended and Restated Stockholder
Agreement, dated March 07, 2008, among MediNotes and the Stockholders named
therein.

“Stockholders’ Representative” is defined in Section 6.9.

“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.

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

 

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“Surviving Corporation” is defined in Section 2.1, and unless the context
otherwise requires, after the effective time of the Second Merger, shall mean
the survivor of the Second Merger.

“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, (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.

“Testing Price” is defined in Section 2.12.

“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 MediNotes, 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 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 MediNotes to operate the Business and control its assets
substantially as operated and controlled by MediNotes on the date hereof.

“Third-Party Claim” is defined in Section 7.6(a).

“Threatened” a claim, proceeding, dispute or other matter shall be deemed to
have been “threatened” if 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; in each case either made in writing or orally to
Donald G. Schoen, Davin Hills or Travis Bond, or to any other person if Donald
G. Schoen, Davin Hills or Travis Bond has been informed or would have been
informed after making reasonable inquiry; provided that such duty to make
reasonably inquiry shall not be required to be made any more frequently than in
conjunction with MediNotes certifying as to the accuracy of its representations
and warranties made herein, which are as of the date of this Agreement and the
Closing.

“Transaction Documents” means, collectively, this Agreement, the Holdback Escrow
Agreement, the Voting Agreement, the Employment Agreements, the Royalty
Termination Agreement, the Commission Agreement, the Investor Questionnaires and
the letter of transmittal of each Stockholder, and all certificates contemplated
to be delivered hereunder.

 

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“True-Up Reserve Amount” means an amount equal to $250,000, in cash.

“Unrelated Accounting Firm” is defined in Section 2.11.

“Valuation Date” is defined in Section 2.12.

“Value of Stock Consideration” is defined in Section 2.12.

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

“Warrant Consideration” is defined in Section 2.7(e).

“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 MediNotes, 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 Iowa,
Merger Sub shall be merged with and into MediNotes pursuant to which (a) the
separate corporate existence of Merger Sub shall cease, (b) MediNotes shall be
the surviving corporation in the Merger (the “Surviving Corporation”) and shall
continue its corporate existence under the laws of the State of Iowa as a wholly
owned Subsidiary of Eclipsys (until the Second Merger occurs), (c) all of the
properties, rights, privileges, powers and franchises of MediNotes will vest in
the Surviving Corporation, and all of the debts, liabilities, obligations and
duties of MediNotes will 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 will vest in the Surviving Corporation, and
all of the debts, liabilities, obligations and duties of Merger Sub will 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 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), by telecopy exchange of signature pages with originals to follow by
overnight delivery, or in such other manner or at such place as the parties
hereto may agree in writing. The day on which the Closing takes place is
referred to as the “Closing Date.”

 

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(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 Iowa.

(c) The Merger shall become effective upon the filing of the Certificate of
Merger with the Secretary of State of the State of Iowa or at such other time as
the parties 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 Iowa Legal Requirements.

(b) 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 By-laws. From and after the Effective Time,
(a) the Articles of Incorporation of Merger Sub, as in effect immediately prior
to the Effective Time shall be the articles of incorporation of the Surviving
Corporation, until amended in accordance with the provisions thereof and
applicable law, and (b) the by-laws of Merger Sub, as in effect immediately
prior to the Effective Time shall be the by-laws 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 MediNotes 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 MediNotes 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

 

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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. Notwithstanding anything contained herein to the contrary, all rights
granted to and obligations of the Surviving Corporation hereunder shall also be
for the benefit and the obligation of the survivor of the Second Merger.

2.7 Effect of Merger on the Capital Stock of MediNotes.

(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 MediNotes, each Share that is held by Eclipsys,
MediNotes or any Subsidiary of Eclipsys or MediNotes 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(f), at the Effective Time, by virtue of the Merger
and without any action on the part of Eclipsys, Merger Sub, MediNotes 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 (subject to the holdback of the Holdback
Amount), the following consideration:

(i) each share of Series A Preferred Stock will be converted only into the right
to receive $.71 in cash, plus an amount equal to any accrued and unpaid
dividends (the “Series A Liquidation Preference”);

(ii) each share of Series B Preferred Stock will be converted into the right to
receive (a) $4.75 in cash, plus an amount equal to any accrued and unpaid
dividends (the “Series B Liquidation Preference”), (b) cash equal to the product
of the Per Share Consideration and the Participating Cash Percentage (the “Per
Share Cash Consideration”), (c) a number of shares of Eclipsys Common Stock
equal to the quotient obtained by dividing (x) the Per Share Consideration less
the Per Share Cash Consideration by (y) the Average Market Price (the “Per Share
Stock Consideration”) and (d) the Per Share Escrow Amount;

(iii) each share of Series C Preferred Stock will be converted only into the
right to receive $4.75 in cash, plus an amount equal to any accrued and unpaid
dividends (the “Series C Liquidation Preference”);

(iv) each share of Series D Preferred Stock will be converted only into the
right to receive $800 (the “Series D Liquidation Preference”), of which (A) the
Cash Percentage shall be payable in cash (the “Series D Cash Liquidation
Preference”) and (B) the Stock Percentage shall be payable in shares of Eclipsys
Common Stock (with such number of shares of Eclipsys Common Stock equal to such
stock portion value, divided by the Average Market Price) (the “Series D Stock
Liquidation Preference”); and

 

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(v) each share of Company Common Stock will be converted into the right to
receive (a) the Per Share Cash Consideration, (b) the Per Share Stock
Consideration and (c) the Per Share Escrow Amount.

(d) At the Effective Time, each Company Option then outstanding shall, whether
or not then vested, 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 (subject to the holdback of the Holdback Amount), with
respect to each share of Company Common Stock then subject to purchase under
such Company Option:

(i) cash equal to the Per Share Consideration less the exercise price per share
of such Company Option (“Option Consideration”); and

(ii) the Per Share Escrow Amount.

(e) 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
(subject to the holdback of the Holdback Amount), with respect to each share of
Company Common Stock then subject to purchase under such Company Warrant:

(i) cash equal to the Per Share Consideration less the exercise price per share
of such Company Warrant (“Warrant Consideration”); and

(ii) the Per Share Escrow Amount.

(f) Notwithstanding anything to the contrary in this Section 2.7, Small Holders
will receive the entire amount of consideration to which they are each entitled
in respect of the Merger entirely in cash. Notwithstanding anything to the
contrary in this Agreement, if after deduction from the Cash Merger
Consideration of the cash portion of the Holdback Amount, the payment of cash to
the Small Holders pursuant to the foregoing sentence and the payment of cash to
holders of the Company Options and Company Warrants pursuant to the foregoing,
the amount of the Cash Merger Consideration remaining is insufficient to pay the
Aggregate Liquidation Preference entirely in cash, the Series A Liquidation
Preference, Series B Liquidation Preference, Series C Liquidation Preference and
Series D Cash Liquidation Preference may be paid ratably in Eclipsys Common
Stock to the extent the Aggregate Liquidation Preference exceeds the Cash Merger
Consideration available after such deductions, and to the extent the holders of
such shares of preferred stock are not Small Holders. For purposes of
calculating the amount of Merger Consideration payable to each Effective Time
Company Holder pursuant to this Section 2.7, all amounts payable in cash to such
Effective Time Company Holder shall be aggregated and rounded up to the nearest
whole cent, all shares of Eclipsys Common Stock payable to such Effective Time
Company Holder shall be aggregated and rounded down to the nearest whole share.
No fractional shares of Eclipsys Common Stock will be issued by virtue of the
Merger, but in lieu thereof each Effective Time Company Holder that would
otherwise be entitled to a fraction of a share of Eclipsys Common Stock (after

 

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aggregating all fractional shares of Eclipsys Common Stock that otherwise would
be received by such holder) shall, upon surrender of such holder’s
Certificate(s) or Instruments or in the case of a lost, stolen or destroyed
Certificate or Instrument, upon delivery of an affidavit (and bond, if required)
pursuant to Section 2.9(f), receive from Eclipsys an amount of cash (rounded to
the nearest whole cent), without interest, equal to the product of: (i) such
fraction, multiplied by (ii) the Average Market Price (less any applicable
withholding tax).

(g) Escrow Merger Consideration, if any, will be paid: (i) in cash, to Small
Holders and holders of Company Options and Company Warrants with respect to such
Company Options and Company Warrants; and (ii) in cash and Eclipsys Common
Stock, to all Effective Time Company Holders (other than (A) Small Holders, and
(B) in respect of Series A Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock, each of which do not entitle the holder to any portion of the
Escrow Merger Consideration), 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
an Effective Time Company Holder who has not voted in favor of the Merger or
consented thereto in writing and who has properly asserted dissenters’ rights in
accordance with Division XIII of the Iowa Business Corporation Act (“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 Effective Time
Company Holder fails to perfect or withdraws or otherwise loses such holder’s
right to appraisal and payment thereunder. If, after the Effective Time, any
such Effective Time Company Holder 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. MediNotes shall give
Eclipsys (a) prompt notice of any demands received by MediNotes for appraisal of
Shares, attempted written withdrawals of such demands, and any other instruments
served pursuant to Iowa law and received by MediNotes 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 under Iowa law. MediNotes 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 MediNotes, 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 ComputerShare (the “Paying Agent”),
for the benefit of the Effective Time Company Holders, the Closing Payment.

(ii) The “Closing Payment” shall consist of: (A) a number of shares of Eclipsys
Common Stock equal to the quotient of (x) the Closing Payment Amount less the
Closing Payment Cash divided by (y) the Average Market Price; and (B) the
Closing Payment Cash. The “Closing Payment Amount” shall be an amount equal to
the

 

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Estimated Purchase Price, less the sum of the Holdback Amount and the Dissenting
Share Amount. The “Closing Payment Cash” shall be an amount equal to (A) the
product of (x) the Estimated Purchase Price less the Indemnification Amount and
(y) the Cash Percentage, less (B) the sum of the True-Up Reserve Amount, the
Stockholder Fund Amount and the Dissenting Share Amount.

(iii) The cash component of the Closing Payment shall be invested at the
discretion, and 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. Earnings from such investments 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.

(iv) 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 the Closing, Eclipsys shall deposit or cause to be deposited the Holdback
Amount with the Escrow Agent. The Holdback Amount shall be held and invested in,
and distributed out of, three (3) separate escrow accounts, all as provided in
the Holdback Escrow Agreement and this Agreement (the “Escrow Accounts”). The
Escrow Account for the Indemnification Amount shall be used to pay Damages, if
any, to the Eclipsys Indemnified Parties. The Escrow Account for the Stockholder
Fund Amount shall be available to pay Seller Transaction Expenses and 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. Notwithstanding
the foregoing, the Stockholders’ Representative may direct in writing that
certain Seller Transaction Expenses be paid at Closing, rather than such amounts
being paid into the Escrow Account for the Stockholder Fund Amount. The Escrow
Account for the True-Up Reserve Amount shall be used to pay to Eclipsys any
shortfall if the Estimated Purchase Price exceeds the Purchase Price, with the
balance of any amount not so used being transferred to the Escrow Account for
the Stockholder Fund Amount upon written instructions of the Stockholders’
Representative to the Escrow Agent, which may be given any time after payments
pursuant to Section 2.10(d) have been made. Promptly following the date that is
456 days after the Closing Date (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 Account for the
Indemnification Amount 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 funds in such Escrow Account to
the Effective Time Company Holders according to Section 2.7(g). Any Claimed
Amount unpaid at the Holdback Termination Date shall be paid pursuant to the
Holdback Escrow Agreement upon a final resolution of the applicable claim.
Promptly following the Holdback Termination Date, the Stockholders’
Representative shall give written instructions to the Escrow Agent to pay any
remaining part of the funds in the Escrow Account for the Stockholder Fund
Amount to the Effective Time

 

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Company Holders according to Section 2.7(g). The interests of the Effective Time
Company Holders in the Escrow Accounts shall not be assignable or transferable,
whether directly, indirectly or by operation of law, except in the event of
death to an 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 Holdback 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
Holdback Escrow Agreement.

(c) 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 whose Company Capital Stock was converted with 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 Options or Company Warrants
(“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 will be cancelled.
Upon receipt of a duly executed and delivered letter of transmittal by Eclipsys
and any associated Instrument, the holder of Company Options or Company Warrants
will become entitled to receive (as promptly as practicable thereafter)
consideration therefor in accordance with Section 2.7(d) or Section 2.7(e), as
applicable. No portion of any Merger Consideration will be paid to the holder of
any Shares, Company Options or Company Warrants until a letter of transmittal
has been validly executed and delivered pursuant hereto, with all Certificates
and related Instruments. Payment pursuant to this Section 2.9(c) will be made
ratably 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 Instrument is to be made to a Person other than
the Person in whose name such Certificate or Instrument is registered, it shall
be a condition of payment that the Certificate or Instrument so surrendered
shall be properly endorsed or shall otherwise be in proper form for transfer,
that the signatures on such Certificate or Instrument or any related stock power
shall be properly guaranteed 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 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 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, including cash, without
interest, as contemplated herein.

 

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(d) At the Effective Time, the stock transfer books of MediNotes 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).

(e) All Merger Consideration paid upon conversion of the Shares in accordance
with the terms of this Article II and all Merger Consideration deposited with
the Escrow Agent pursuant to Section 2.9(b), in each case, 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 Shares. From and after the
Effective Time, the holders of Certificates shall cease to have any rights with
respect to the Shares represented thereby, except as otherwise provided herein
or by applicable law.

(f) 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, 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 2.9(c) 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.

(g) 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,
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 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.

(h) 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.

 

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2.10 Calculation of 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 MediNotes 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.

(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 (A) the impact of any
purchase accounting adjustments relating to Eclipsys’s acquisition of MediNotes,
including any write-up or write-down of assets or liabilities resulting from
such purchase accounting, or (B) any Seller Transaction Expenses unpaid as of
the Closing Date, provided such expenses are (y) less than or equal to the
Stockholder Fund Amount available for payment thereof and (z) paid on or before
the date that is 59 days after the Closing Date.

(iv) At least two Business Days prior to the Closing Date, MediNotes shall
provide Eclipsys with its good faith estimate of the Seller Transaction Expenses
that will not be paid on or before the Closing Date. The Stockholders’
Representative shall give prompt written instructions to the Escrow Agent to pay
any of the Seller Transaction Expenses not paid on or before the Closing Date
out of the Stockholder Fund Amount within 59 days after the Closing Date. If the
Seller Transaction Expenses exceed the amount in the Stockholder Fund Amount,
the portion, if any, of such excess paid by Eclipsys to the creditors thereof
shall be reimbursed to Eclipsys by the Stockholders in their Pro Rata Portion,
in cash, or, at Eclipsys’s option, paid to Eclipsys from the Escrow Account for
the Indemnification Amount.

(b) At least five Business Days prior to the Closing Date, MediNotes shall
deliver 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. Within two Business Days after receipt of such calculations, Eclipsys
shall provide MediNotes with Eclipsys’s written comments thereto, and MediNotes
shall in good faith consider any such comments. Estimated Closing Date Net
Working Capital, Estimated Closing Date Cash and Estimated Closing Date Debt
shall be as agreed by the parties, provided that if they do not agree, then such
amounts shall be as calculated by MediNotes, provided further that if the
Estimated Purchase Price exceeds $42,000,000, then if Eclipsys so elects, the
Closing will be delayed until the parties agree on the Estimated Purchase Price.

 

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(c)(i) Within 60 days following the Closing, Eclipsys shall prepare and deliver
to the Stockholders’ Representative a balance sheet of MediNotes as of the
Closing Date showing Eclipsys’s 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’s
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 MediNotes 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.

(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 (subject to Section 2.12), 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) according to Section 2.7. 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 Amount, and if the shortfall exceeds the
True-Up Reserve Amount, such excess will be paid to Eclipsys by the Effective
Time Company Holders in their Pro Rata Portion, if any, in cash, or, at
Eclipsys’s option, paid to Eclipsys from the Indemnification Amount. Payments
pursuant to this Section 2.10(d) shall be made in cash (subject to Section 2.12)
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 the parties
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 $250,000, then Eclipsys shall deposit with the Escrow
Agent, for addition to the Escrow Account for the Indemnification Amount, such
difference. Further, if the Purchase Price exceeds the Estimated

 

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Purchase Price by more than $250,000, but the Paying Agent has paid to Effective
Time Company Holders more than 50% of the Closing Payment, then Eclipsys may
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 Dallas, Texas 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
the parties 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 Sections 2.10(d), if any. The Effective Time Company Holders
shall promptly pay the entire amount of the expenses of the Unrelated Accounting
Firm 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. 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’
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 some or all of the expenses of the Unrelated
Accounting Firm, the Stockholders’ Representative shall give written
instructions to the Escrow Agent to make any such payment out of the Escrow
Account for the Stockholder Fund Amount. If the remaining funds in the Escrow
Account for the Stockholder Fund Amount are insufficient to make such payment,
such additional cash as may be required to make such payment shall promptly be
paid to the Unrelated Accounting Firm by the Effective Time Company Holders in
their Pro Rata Portion, or, if the Effective Time Company Holders fail to do so,
the expenses or the portion of the expenses of the Unrelated Accounting Firm
allocable to the Effective Time Company Holders may, at Eclipsys’s option, be
paid from the Escrow Account for the Indemnification Amount.

2.12 Continuity of Interest Adjustments. Notwithstanding anything in this
Agreement to the contrary, if the product of (A) the number of shares of
Eclipsys Common Stock to be issued in the Merger in exchange for Shares (without
taking account of any shares of Eclipsys

 

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Common Stock that is transferred into the Escrow Account) (the “Stock
Consideration”) and (B) the Testing Price of Eclipsys Common Stock as reported
on the Nasdaq Stock Market for the trading session that closes immediately
before the Effective Time (or other applicable valuation date under Treasury
Regulation Section 1.368-1(e)(2) for purposes of testing the continuity of
interest requirement under Treasury Regulation Section 1.368-1(e)) (such date
the “Valuation Date” and such product the “Value of Stock Consideration”) is
less than 40% of the sum of the Value of Stock Consideration and the amount of
Non-Stock Consideration (as defined below), then the amount of Non-Stock
Consideration shall be reduced and the number of shares of Eclipsys Common Stock
issued in the Merger in exchange for Shares shall be increased pro rata based on
the cash consideration to which any Effective Time Company Holder is otherwise
entitled pursuant to the Merger so as to cause such percentage to be equal to
40%. The additional shares of Eclipsys Common Stock to be issued in lieu of cash
in exchange for Shares pursuant to the preceding sentence shall be determined
using a per share value equal to the Average Market Price. For purposes of this
paragraph, the “Non-Stock Consideration” shall mean (a) any cash consideration
paid pursuant to the Merger (including cash included in the Holdback Amount and
any adjustment payment pursuant to Section 2.10(d)), (b) any cash and the fair
market value of any property that is distributed, transferred or paid by
MediNotes to its stockholders (whether in a redemption transaction or as a
dividend distribution) in connection with the Merger, and (c) any other cash or
property (other than shares of Eclipsys Common Stock) that is transferred, paid
or distributed by Eclipsys (or any Person related to Eclipsys within the meaning
of Treasury Regulation Section 1.368-1(e)(3)) to holders of Shares in exchange
for such Shares in connection with the Merger (including any payments of
expenses incurred in connection with the disposition of fractional shares in the
Merger). The “Testing Price” shall be the lowest trading price of the Eclipsys
Common Stock on the Valuation Date.

2.13 Approval. 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

Except as set forth in the disclosure schedule delivered to Eclipsys concurrent
herewith, that is arranged in Sections corresponding to the numbered and
lettered Sections contained in this Agreement (the “Disclosure Schedule”), each
Major Stockholder, severally but not jointly, and only as to itself, represents
and warrants to Eclipsys, as of the date of this Agreement and as of the Closing
Date, 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 MediNotes 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). Such Shares are duly registered in the name of such
Major Stockholder on

 

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the stock register of MediNotes. Such Company Options and Company Warrants are
duly registered in the name of such Major Stockholder on the option or warrant
register of MediNotes, as applicable. Except for this Agreement, the
Stockholders 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.

3.3 No Violations; Consents.

(a) The execution and delivery by such Major Stockholder of this Agreement, and
the other Transaction Documents 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) 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 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 by-laws, trust agreement or other governing documents.

 

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3.4 Related Party Transactions.

(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 MediNotes, or otherwise used in or pertaining to the Business;

(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 anytime since January 1, 2007 had, business dealings with
MediNotes or a material financial interest in any transaction with MediNotes, or
(B) is, or at anytime 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; or

(iii) is, or since January 1, 2007 was, a party to any Contract with, or has any
claim or right against, MediNotes, with the exception of (x) any applicable
Stockholder Note, (y) the Stockholders Agreement and agreements to purchase
Shares, all of which have been fully performed or will be extinguished on or
before the Effective Time, and (z) as to Travis Bond only, (A) the royalty
agreement entered into by MediNotes and the Bond Entities, dated December 8,
2007, which was terminated and of no further force and effect on February 25,
2008, and (B) the royalty agreement entered into by MediNotes with the Bond
Entities, pursuant to the Bond Agreement, under which MediNotes has performed
all obligations required to be performed by it and is not in breach or default
thereunder.

(b) There are no Contracts between (i) such Major Stockholder, or his or its
Affiliates (other than MediNotes), or, if applicable, any immediate family
member of such Major Stockholder, on the one hand, and (ii) any officer,
director or employee of MediNotes, on the other hand, provided that if such
Major Stockholder is an Institutional Major Stockholder, the representations in
this Section 3.4(b) shall be made to the Knowledge of such Institutional Major
Stockholder.

(c) If the Major Stockholder holds a Stockholder Note, MediNotes is not in
default with respect to such Stockholder Note, nor do any facts or circumstances
exist that will, or with notice or lapse of time would, constitute a default
under any such Stockholder Note.

3.5 Investment Intent.

(a) Such Major Stockholder represents and acknowledges to Eclipsys that the
Stock Consideration to be received by such Major Stockholder pursuant to this
Agreement is being acquired by such Major Stockholder for its own account and
not with a view to the distribution thereof.

 

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(b) Such Major Stockholder, alone or together with the Persons it has retained
to advise it with respect to the transactions contemplated hereby and the
proposed investment in the Stock Consideration to be received by such Major
Stockholder pursuant to this Agreement, has such knowledge and experience in
business and financial matters that it is capable of evaluating the merits and
risks of such proposed investment. Such Major Stockholder acknowledges and
understands that the Stock Consideration has not been registered under the
Securities Act and therefore, cannot be sold without registration under the
Securities Act or pursuant to an exemption from the registration requirements of
the Securities Act.

(c) Each Major Stockholder understands that shares of Eclipsys Common Stock
issued in certificate form as part of the Merger Consideration will bear, and
any other document that evidences uncertificated shares delivered as part of the
Merger Consideration will bear, the following legend:

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNDER STATE SECURITIES LAWS, AND SUCH SHARES MAY NOT BE
SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER WILL BE EFFECTED IN ACCORDANCE
WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AT THAT
TIME AMENDED, AND SUCH STATE SECURITIES LAWS, OR IN ACCORDANCE WITH AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH STATE SECURITIES LAWS,
WHICH MAY THEN BE AVAILABLE THERETO.”

(d) Such Major Stockholder understands that Eclipsys will remove such legend and
transfer restriction only in the event that (i) such Major Stockholder transfers
the Stock Consideration received as Merger Consideration pursuant to and in the
manner provided for in an effective registration statement covering the transfer
or sale of such shares, or (ii) such Major Stockholder shall have delivered to
Eclipsys a letter from the staff of the SEC, or an opinion of counsel in form
and substance satisfactory to Eclipsys to the effect that such legend is not
required under or for the purposes of the Securities Act and any applicable
state securities laws or (iii) counsel to Eclipsys has advised Eclipsys that
shares that would be subject to removal of the transfer restriction represent
only such number of shares of Eclipsys Common Stock as such Major Stockholder,
in a single transaction, could then sell under Rule 144 promulgated under the
Securities Act.

(e) Such Major Stockholder has delivered to Eclipsys an Investor Questionnaire
in the form attached hereto as Exhibit F, and the information set forth in such
Investor Questionnaire is true, correct and complete. Such Major Stockholder
understands that Eclipsys will rely on such Investor Questionnaire and the other
representations of such Major Stockholder set forth herein in issuing the Stock
Consideration to be received as Merger Consideration by such Major Stockholder.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF MEDINOTES

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

4.1 MediNotes Existence; Good Standing. MediNotes is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Iowa. MediNotes 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. MediNotes 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 on MediNotes or the
Business. MediNotes 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 MediNotes Articles of Incorporation and by-laws
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. MediNotes 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 MediNotes 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 MediNotes consists solely of 50,000,000
shares of Company Common Stock, of which 3,473,959 shares are issued and
outstanding on the date hereof, and 25,000,000 shares of preferred stock, of
which (i) 1,250,000 shares are designated as Series A Preferred Stock, of which
422,654 shares are issued and outstanding on the date hereof, (ii) 1,100,000
shares are designated as Series B Preferred Stock, of which 936,842 shares are
issued and outstanding on the date hereof, (iii) 1,000,000 shares are designated
as Series C Preferred Stock, of which 729,271 shares are issued and outstanding
on the date hereof, and (iv) 1,000 shares are designated as Series D Preferred
Stock, of which no 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 MediNotes
outstanding. The parties acknowledge that the outstanding shares set forth above
may change prior to the Closing Date as a result of (A) conversion of shares of
Series A Preferred Stock, Series B Preferred Stock and Series C 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, and (B) the
issuance of 1,000 shares of Series D Preferred Stock pursuant to the terms and
conditions of the Settlement Agreement, and MediNotes 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

 

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MediNotes Capital Stock, or the number and class of shares of MediNotes Capital
Stock held by any such holder. Except for the Stockholders Agreement, the
Settlement Agreement 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 of
MediNotes, 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 MediNotes. Each share of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock is convertible into one share of Company
Common Stock. Shares of Series D Preferred Stock are not convertible.

(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 Stockholders Agreement, is subject to, any
option, call, right of first refusal, preemptive, subscription or similar right.
Except for the Settlement Agreement, 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 MediNotes to issue, or MediNotes or any of the
Stockholders to transfer, any Capital Stock of MediNotes. The outstanding
Company Capital Stock has been issued in compliance with all applicable Legal
Requirements.

(c) MediNotes does not have 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 equity equivalent
interests in the ownership or earnings, or distributions upon liquidation or
sale of assets, of MediNotes.

(d) MediNotes 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 MediNotes Articles of Incorporation or its by-laws.

4.4 Material Contracts; No Violation.

(a) Except for the Contracts listed in Section 4.4(a) of the Disclosure
Schedule, MediNotes 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 MediNotes or any other Person, except for Contracts providing
for payments by or to MediNotes of less than $25,000 in any instance 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 in any instance or
$100,000 in the aggregate, or (B) that are not cancelable by MediNotes 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 MediNotes for the delivery of Software or other products
of MediNotes;

(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 MediNotes of less than $25,000 in any instance or $100,000 in
the aggregate;

(vii) Contract with any of its officers, directors or employees or any of its
former officers, directors or employees, including employee policies of
MediNotes (including any severance pay or change in control agreement or policy
of MediNotes to provide such payments, and whether such payments are payable
upon a termination that is voluntary or non-voluntary);

(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;

(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
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 MediNotes 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 MediNotes 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; or

(xxi) 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 MediNotes, and to the Knowledge of MediNotes,
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) MediNotes 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
MediNotes, (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) 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 MediNotes 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 Threatened such a
breach; and (v) MediNotes 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 no such intent to cancel, terminate, renegotiate or exercise has
been otherwise Threatened.

(c) Neither the execution and delivery by MediNotes of this Agreement and the
other Transaction Documents, nor the consummation of the Merger and Second
Merger, and any other transactions contemplated herein and therein in accordance
with the terms hereof and

 

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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 MediNotes 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 Second Merger, and
any 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, or will be provided to Eclipsys
within five Business Days after the date hereof, 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) MediNotes’ 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, 2006, and 2005, in each case
audited by LWBJ, LLP, independent certified public accountants, with such
accountant’s unqualified reports attached thereto (the “Year-End Financial
Statements”), and (ii) MediNotes’ balance sheet and related statement of income
and cash flows as of and for the six months ended June 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 MediNotes in accordance with
the books and records of MediNotes, (ii) are true, correct and complete in all
material respects, and (iii) reflect the consistent application of all
accounting principles, practices and methods of MediNotes throughout the periods
thereof, except as disclosed therein, and (iv) fairly present the financial
condition and results of operation of MediNotes as of the dates and for the
periods covered thereby, all in accordance with GAAP (consistently applied,
except as disclosed therein). 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 MediNotes.

 

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(c) There are no Liabilities of MediNotes other than: (i) Liabilities accrued on
the balance sheet dated as of June 30, 2008; and (ii) current Liabilities
incurred and unpaid since June 30, 2008 that have been incurred in the ordinary
course of business consistent with past practice, are accrued on the balance
sheet of MediNotes as of the Closing Date, and are included in the calculations
of the Estimated Current Liabilities, Estimated Closing Date Net Working
Capital, Final Current Liabilities and the Final Closing Date Net Working
Capital, as applicable. Deferred revenue amounts indicated on the balance sheet
dated as of June 30, 2008 do not, and Current Liabilities will not, reflect
reserves for Threatened claims against MediNotes or claims that, to the
Knowledge of MediNotes, are likely to be made against MediNotes.

(d) None of the Stockholders or MediNotes have been advised by any independent
certified public accountant of MediNotes that there is a significant deficiency
or material weakness in the design or operation of MediNotes’ internal controls.

4.6 Authority; No Violations; Consents.

(a) MediNotes 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 the Stockholders, voting separately by each
class and series representing a majority of the outstanding Company Common
Stock, the Series A Preferred Stock, the Series B Preferred Stock and the Series
C Preferred Stock, respectively (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
MediNotes of this Agreement and each of the Transaction Documents to which
MediNotes will be party and the consummation by MediNotes of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Board of Directors of MediNotes. Except for obtaining the Company Stockholder
Approval, no other corporate proceedings on the part of MediNotes are necessary
to authorize the execution, delivery or performance of this Agreement or any
other Transaction Document or to consummate the transactions contemplated hereby
and thereby. This Agreement has been, and upon their execution each of the other
Transaction Documents to which MediNotes will be a party will have been, duly
executed and delivered by MediNotes. This Agreement constitutes, and upon their
execution each of the Transaction Documents to which MediNotes will be a party
will constitute, the legal, valid and binding obligations of MediNotes,
enforceable against MediNotes 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 execution and delivery by MediNotes 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 MediNotes
Articles of Incorporation or its by-laws; or

(ii) violate any settlement agreement, Order or material Legal Requirement
applicable to MediNotes, or its properties or assets; or

 

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(iii) result in the imposition of any Lien upon or with respect to any of the
assets or properties owned or used by MediNotes.

(c) No Consent is required to be made by or with respect to MediNotes 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) MediNotes 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 non-governmental restrictions as to its property or
asset use. To the Knowledge of MediNotes, no event has occurred or circumstance
or condition exists that (with or without the lapse of time, the giving of
notice, or both) (A) may constitute or result in a violation by MediNotes of, or
a failure on the part of MediNotes to comply in all material respects with the
terms of any settlement agreement, material Permit, Order, or material Legal
Requirement, or (B) may give rise to any obligation of MediNotes to undertake or
bear all or any portion of the cost of any material remedial action of any
nature. Neither MediNotes nor any of the Stockholders has received any written
notice or other written communication from any Governmental Entity or other
Person regarding 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
MediNotes to undertake, or bear all or any portion of the cost of, any material
remedial action of any nature, and no such actual, alleged, possible or
potential violation or failure to comply or obligation has been otherwise
Threatened.

(b) MediNotes 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,
MediNotes currently holds all of the Permits necessary to permit MediNotes 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.
Section 4.7(b) of the Disclosure Schedule sets forth a list of the material
Permits held by MediNotes. No material Permit held by MediNotes (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 MediNotes, there is no proposed plan, proceeding or
effort or proposed change to any Legal Requirements, whether or not directly
involving MediNotes, by any Governmental Entity or other Person which in any way
challenges or would be reasonably expected to adversely affect MediNotes 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, Threatened, or to the Knowledge of MediNotes
reasonably probable, lawsuits, arbitrations, proceedings, investigations or
other claims against

 

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MediNotes, its officers, directors or employees (as such), 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.

(ii) There is no lawsuit, arbitration, proceedings, investigations or other
claim by MediNotes pending, threatened or contemplated against any other Person.

(iii) To the Knowledge of MediNotes, 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) MediNotes 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.

4.8 Absence of Certain Changes.

(a) Since January 1, 2008, MediNotes has conducted its business only in the
ordinary course of such business consistent with past practice and there has not
been:

(i) 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 on MediNotes or the Business;

(ii) 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 MediNotes, or, any other payment by MediNotes
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);

(iii) any material change in the accounting principles, practices or methods of
MediNotes;

(iv) any amendment to the MediNotes Articles of Incorporation or its by-laws,
except for amendments expressly contemplated in the Bond Agreement;

(v) any increase in the salaries or other compensation payable to any officer,
director or employee of MediNotes 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, as required by
law, or, with respect to the employment terms of former employees of the Bond
Entities who were employed by MediNotes in connection with the asset purchase
transaction contemplated by the Bond Agreement, changes made contemporaneously
with and as a result of that transaction);

 

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(vi) any material adverse change, or to the Knowledge of MediNotes, any threat
of a material adverse change, in the relations of MediNotes with, or any loss or
threat of loss of, any of the suppliers or customers or employees of MediNotes;

(vii) 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;

(viii) any termination, cancellation, amendment or waiver of any material
Contract or other right material to MediNotes, except for note and royalty
cancellations expressly contemplated in the Bond Agreement; or

(ix) 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 MediNotes or the Major Stockholders contained
in this Agreement.

(b) No actions or events have occurred that would violate the provisions of
Sections 6.1(a) through (t).

4.9 Taxes.

(a) All Tax Returns that were required to be filed by or with respect to
MediNotes have been accurately prepared and timely filed. All such Tax Returns
are true, correct, and complete in all 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. MediNotes
has at all times complied with applicable Legal Requirements pertaining to
Taxes, including, without limitation, all applicable Legal Requirements relating
to record retention.

(b) MediNotes has timely paid all 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 in
accordance with GAAP 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 MediNotes accrued following the end of the most recent period covered
by the Interim Financial Statements have been accrued in the ordinary course of
business and do not exceed comparable amounts incurred in similar periods in
prior years, taking into account any changes in MediNotes’ operating results.
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 MediNotes as
of the date of such statements.

(c) No claim has been made by any taxing authority in any jurisdiction where
MediNotes does not file Tax Returns that MediNotes is or may be subject to Tax
by that jurisdiction and to the Knowledge of MediNotes 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 MediNotes. No
power of attorney has been granted by MediNotes with respect to any matter
relating to Taxes.

 

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(d) No foreign, federal, state or local Tax audits or administrative or judicial
Tax proceedings are pending, being conducted or are Threatened with respect to
MediNotes and to the Knowledge of MediNotes no such action or proceeding is
being contemplated. All deficiencies asserted or assessments made against
MediNotes as a result of any examinations, audits, or other proceedings by any
Taxing authority have been fully paid. 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 MediNotes.

(e) There are no Liens for Taxes (other than for current Taxes not yet due and
payable) upon the assets or properties of MediNotes. No asset or property of
MediNotes (i) is property that is required to be treated as being owned by any
other Person pursuant to the so-called “safe harbor lease” provisions of former
Section 168(f)(8) of the Code; (ii) directly or indirectly secures any debt the
interest on which is Tax exempt under Section 103(a) of the Code; or (iii) is
“tax-exempt use property” within the meaning of Section 168(h) of the Code.

(f) MediNotes 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 MediNotes or Eclipsys may be liable. MediNotes is not a party to or
bound by any tax indemnity, tax sharing or tax allocation agreement.

(g) MediNotes 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. MediNotes 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) MediNotes 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) MediNotes 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.

(j) There is no taxable income of MediNotes that is required under applicable
Tax Legal Requirements to be reported by MediNotes 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. MediNotes has not taken any action that
is not in accordance with past practice that could defer a liability for Taxes
of MediNotes from any taxable period ending on or before the date hereof to any
taxable period ending after such date.

(k) MediNotes 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

 

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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) MediNotes 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) MediNotes is not subject to Tax, is not engaged in a business, and does not
have a permanent establishment in any jurisdiction outside of the United States
of America.

(n) MediNotes 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) MediNotes 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) MediNotes has not been a “distributing corporation” or a “controlled
corporation” in connection with a distribution described in Section 355 of the
Code.

(q) None of the shares of MediNotes’ outstanding Capital Stock constitutes
“restricted stock” (i.e., stock that is subject to a risk of forfeiture) for
purposes of Section 83 of the Code with respect to which an election under
Section 83(b) of the Code has not been made.

(r) MediNotes does not currently hold, and has not at anytime held, an interest
in any Subsidiary that was organized under the laws of a jurisdiction outside
the United States.

(s) Neither MediNotes nor, to the Knowledge of MediNotes, any of its Affiliates
or shareholders has taken or has agreed to take any action that would prevent
the Merger followed by the Second Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.

(t) All of MediNotes’ indebtedness, instruments, contracts, financial positions
and other arrangements that MediNotes has treated as debt for U.S. federal
income tax purposes (by deducting interest or otherwise) are properly classified
as debt rather than as equity for such purposes, and have not been treated as
other than debt for any other purpose. None of MediNotes’ options and warrants
are properly classified as stock of MediNotes for U.S. federal income tax
purposes.

(u) MediNotes has not made, and will not make, any distributions to its
shareholders prior to, in contemplation of, or otherwise in connection with, the
transactions contemplated by this Agreement. Neither MediNotes nor any Person
related to MediNotes (as defined in Treasury Regulation Section 1.368-1(e)) has
acquired or has any plan or intention to acquire any stock of MediNotes in
contemplation of the transactions contemplated by this Agreement or otherwise as
part of a plan of which these transactions are part.

 

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4.10 Certain Employee Plans.

(a) Section 4.10(a) of the Disclosure Schedule lists all Company Benefit Plans.
With respect to each Company Benefit Plan, true, complete and correct copies of
such plans and the most recent summary plan descriptions thereof and any
summaries of material modifications, if any, have been furnished to Eclipsys,
along with the two most recent annual reports on Form 5500 (including schedules)
filed with the Internal Revenue Service for each Company Benefit Plan where such
report is required and the most recent favorable IRS determination letter for
each Company Benefit Plan that is intended to be qualified pursuant to
Section 401(a) of the Code.

(b) Neither MediNotes 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 (contingent or otherwise) 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) MediNotes does not provide any health, welfare or life insurance benefits to
any of its former or retired employees 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) MediNotes 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) To the Knowledge of MediNotes, there have been no defaults or violations
by any other party to the Company Benefit Plans.

(iv) There are no actions, suits, or claims pending (other than routine claims
for benefits) or 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 MediNotes,
there is no basis for any such action, suit or claim.

(v) 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,
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.

(vi) Neither MediNotes, nor, to the Knowledge of MediNotes, 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.

 

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(vii) MediNotes and, to the Knowledge of MediNotes, 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.

(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 MediNotes 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, officer or director of MediNotes to severance, termination allowance
or similar payments. MediNotes is not a party to any Contract, nor has MediNotes
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 MediNotes 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) In connection with the consummation of the transactions contemplated by this
Agreement (either alone or in combination with any other action or event), no
payments of money or other property, acceleration of benefits, or provisions of
other rights have or will be made under any Contract, Company Benefit Plan or
otherwise that would result in the imposition of the sanctions imposed under
Section 4999 of the Code.

(g) Each current and former employee of MediNotes has been correctly classified
for purposes of each Company Benefit Plan as an eligible or ineligible employee
and any retroactive re-classification will not affect any employee’s benefit
under any Company Benefit Plan.

(h) 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) MediNotes 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 Threatened
against MediNotes or relating to its business. There has not been and there are
no organizational efforts with respect to the formation of a collective
bargaining unit being made or threatened involving employees of MediNotes. There
are no pending claims or controversies by or between MediNotes and any of its
current or former employees, no such claims or controversies are Threatened and
no event has occurred or circumstances or conditions exist that would support a
claim by any current or

 

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former employee against MediNotes. None of the Major Stockholders or MediNotes
has received notice of any strikes, slowdowns, work stoppages, lockouts, or
threats thereof, by or with respect to any employees of MediNotes. MediNotes is
and has always been in compliance in all material respects with all applicable
Legal Requirements relating to employees 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 employed by MediNotes, including, the salaries or
wages or other payment terms, and positions and 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 MediNotes 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 MediNotes who (i) assisted with the development of
Company IP or (ii) were paid in the aggregate more than $25,000 since January 1,
2007, indicating the purposes or projects for which each was retained. All
Persons who have performed services for MediNotes and have been classified as
independent contractors, and all Persons who have performed services for
MediNotes 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 MediNotes and
independent contractors of MediNotes have not been changed. Section 4.11(b)(iii)
of the Disclosure Schedule contains a complete and accurate list of each former
employee of MediNotes receiving benefits or entitled to receive benefits under
any life insurance, medical insurance or other coverage or benefits offered by
MediNotes or which MediNotes is obligated to provide or fund, other than medical
insurance provided pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985, at no cost to MediNotes.

(c) To the Knowledge of MediNotes, no employee of MediNotes 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 MediNotes, or (ii) the ability of MediNotes to conduct
its business. No Key Employee has threatened to terminate his or her employment
with MediNotes, as a result of the transaction contemplated hereby or otherwise.

(d) There has not been and is no pending or Threatened discrimination, wrongful
termination or wage and hour proceedings, claims, charges or complaints against
or involving MediNotes 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.

 

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4.12 Restrictions on Business Activities.

(a) There is no currently effective Order or Legal Requirement, or any Order,
or, to the Knowledge of MediNotes, any Legal Requirement or other action by a
Governmental Entity, pending before a Governmental Entity or, to the Knowledge
of MediNotes, being considered by a Governmental Entity, which has or would have
the effect of restricting the conduct of the Business.

(b) Neither MediNotes nor any director, officer, agent, employee or, to the
Knowledge of MediNotes, any consultant or contractor of MediNotes, 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 is (A) illegal or
(B) violates any policy of MediNotes; or (ii) established or maintained any fund
or asset that has not been recorded in the books and records of MediNotes.

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
MediNotes (which property includes MediNotes’ right title and interest in any
leasehold improvements thereon and personal property and fixtures therein, and
in each case all of MediNotes’ 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 MediNotes or
(B) used in connection with, necessary for the conduct of, or otherwise material
to, the Business.

(b) MediNotes has valid and enforceable Leases relating to the Leased Real
Property under which MediNotes 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 MediNotes under any such Lease or, to the
Knowledge of MediNotes, any other party to any such Lease.

(c) To the Knowledge of MediNotes, 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)(i) of the Disclosure Schedule sets forth a true, complete
and accurate list of the following Company Owned IP (other than trade secrets
and know how): Company Registered IP, material Software and material
unregistered Trademarks, indicating for each: (i) for each item thereof the
beneficial owner thereof and, if different, the record owner thereof;
(ii) whether such Company Owned IP is Company Registered IP; and (iii) for
Company Registered IP, (A) the applicable registration or application, issuance
or other identifying number, (B) the date, status, and applicable territories of
such registration, issuance or filing, as applicable, and (C) the status,
including the date and description of any action that is due within 90 days of
the date hereof in connection with such registration, issuance or filing, as
applicable.

 

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In the case of any Company Registered IP in which a Person other than MediNotes
holds an interest, Section 4.14(a)(ii) of the Disclosure Schedule identifies
such Company Registered IP and Person and accurately and fully describes the
extent of such interest. All Company Owned IP was created solely by employees or
contractors of MediNotes and without any participation or funding by any
Governmental Entity or other Person. No Person has an interest in any Company
Owned IP that would entitle them to exploit the Company Owned IP without the
consent of MediNotes and no such consents have been given by MediNotes.

(b) Section 4.14(b) of the Disclosure Schedule (i) sets forth a true, complete
and accurate list of all Company Licensed IP that is (A) incorporated into the
products of MediNotes provided to customers or provided to customers in
connection with products or services of MediNotes, (B) “resold” or sublicensed
to customers by MediNotes, (C) used by MediNotes as a development tool
(excluding commercially available, non-customized software and PC applications
at a cost of less than $10,000 for current use by MediNotes, such as Word or
Windows, that are not incorporated into MediNotes’ 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 MediNotes
(each, a “License-In Agreement”); (iii) sets forth, to the extent applicable,
the number or quantity of copies of the Company Licensed IP that MediNotes is
permitted to use or distribute, the number or quantity that MediNotes is using
or distributing, and the number or quantity that MediNotes expects to use or
distribute in the next three years; and (iv) 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 may become payable by MediNotes by
reason of the passage of time, use or exploitation of 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 MediNotes 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 MediNotes
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, MediNotes 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 MediNotes’ past
and current use(s) and copies of the Company Licensed IP and those reasonably
anticipated to be needed (y) for internal use during the year after the Closing
Date in accordance with current business plans, and (z) for the duration of the
terms (including during any periods subject to a renewal right) of any Contract
with or binding on MediNotes 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 MediNotes on and after the
Closing Date to the same extent and at the same cost as MediNotes had prior to
the Closing Date, and no Person granting rights under any License-In Agreement
has given notice in writing, or such other form as permitted by such License-In
Agreement, to the Major Stockholders or MediNotes or Threatened 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.

 

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(c) MediNotes has good and valid title to all of the Company Owned IP, free and
clear of any Liens except for Permitted Liens, and (i) all registrations,
applications and filings for the Company Registered IP are valid, enforceable,
and in full force and effect, and (ii) MediNotes has the right to enforce the
Company Owned IP against the Stockholders and third parties. MediNotes 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 any Company Owned IP. MediNotes is free to make, use, modify,
copy, distribute, sell, license, import, export and otherwise exploit all
Company Owned IP 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 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 Company Owned IP but in
which such agreement does not grant the right to exploit such Company Owned IP;
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. No
current or former employee, officer, director, stockholder, consultant or
independent contractor of MediNotes has any valid right, claim or interest in or
with respect to any Company IP which would impair or which could give rise to
the impairment of the use, distribution, license or other exploitation of the
Company IP by MediNotes or Eclipsys or their successors or transferees.

(d) MediNotes has taken reasonable measures and precautions to protect, preserve
and maintain the confidentiality and secrecy of all 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 MediNotes
has disclosed or delivered or has permitted to be disclosed or delivered to any
Person, and no Person has access to (other than employees of MediNotes who need
such information in the course of their employment) or has any rights with
respect to, trade secrets and other confidential or proprietary information
material to the Business, the source code or any portion or aspect 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 such trade secrets, confidential information and
source code have been disclosed subject to an agreement with any Person pursuant
to which such Person is required to maintain, and has not breached, the
confidentiality thereof. Without limiting the generality of the foregoing,
MediNotes has in all cases (A) 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 MediNotes an agreement, in the
form of Section 4.14(d)(i) of the Disclosure Schedule, or another form provided
to Eclipsys prior to the date hereof, assigning all rights in the Software
Products and other Company Owned IP to MediNotes, and all such agreements are in
full force and effect, and (B) marked confidential or trade secret materials as
such prior to disclosure of such materials to any third-party.
Section 4.14(d)(ii) 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 escrow arrangement. 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.

 

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(e) (i) None of the Company Owned IP or any of the products or services of
MediNotes or the Intellectual Property used by MediNotes in its operations
(including the Company Licensed IP), infringe, misappropriate, violate, dilute
or constitute the unauthorized use of any Intellectual Property of any other
Person, and MediNotes 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 or has or may have occurred. No
confidential information or invention owned by any former employer of any
current or former employee or consultant of MediNotes is incorporated into, used
or relied upon in the products or services of MediNotes. There is no pending or
Threatened claim or demand that challenges the ownership, legality, validity,
enforceability, use, exploitation or modification by MediNotes of Company Owned
IP or any of the products or services of MediNotes or the Intellectual Property
used by MediNotes in its operations (including the Company Licensed IP) and, to
the Knowledge of MediNotes, 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 MediNotes or the Intellectual Property
used by MediNotes in its operations (including the Company Licensed IP), is
subject to any outstanding Order restricting the use thereof by MediNotes or, in
the case of any Intellectual Property licensed by MediNotes to others,
restricting the sale, transfer, assignment or licensing thereof by MediNotes to
any Person.

(ii) MediNotes has the right to grant the licenses it grants in the course of
its business.

(iii) The Company IP held by MediNotes: (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 MediNotes. No rights in any Registered Intellectual
Property, and to the Knowledge of MediNotes, no rights in any Intellectual
Property, in each case other than the rights of MediNotes in the Company IP, are
necessary to avoid infringing any Intellectual Property or other legal or
contractual right of any Person in the conduct of the Business as currently or
previously conducted, or as currently contemplated to be conducted by MediNotes.

(f) All Company Registered IP is valid, enforceable to the full extent permitted
by the jurisdiction in which it is registered and in full force and effect,
and all maintenance, annuity and other fees due in respect of such Company
Registered IP have been fully paid and all filings applicable thereto have been
properly made. There is (i) no trademark included in the Company Registered IP
that is now involved in any opposition or cancellation proceeding and no
trademark that is currently used by MediNotes has been involved in any
opposition or cancellation proceeding, and (ii) no patent or patent application
included in the Company Registered IP that is now involved in any interference,
reissue or reexamination proceeding.

 

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(g) To the Knowledge of MediNotes, no Person is infringing or misappropriating
any Company Owned IP in any respect or making any unlawful use of any products
of MediNotes in any respect. None of the Major Stockholders or MediNotes
(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. MediNotes 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). MediNotes has not, during the last
twelve months, threatened in a writing sent by the legal counsel of MediNotes to
initiate such proceeding.

(h) There has not been introduced by, or on behalf of, MediNotes into any
Company IP incorporated into or used in conjunction with any product, system,
program or Software that is or was used in any product of, or that relates to
the assets of, MediNotes, including the Software Products, 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 MediNotes,
including the Software Products, in all material respects have the features and
perform the functions described in (i) any agreed specifications, responses to
requests for proposals or end user documentation, provided to customers or
potential customers of MediNotes, and (ii) any Contracts or representations made
by MediNotes or its representatives (either orally or in writing) that such
customers or potential 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 expressly requested by the customer and to standard error and
maintenance items addressed by MediNotes in the ordinary course of business.
Excluding error and maintenance items adequately addressed by MediNotes in the
ordinary course of business, MediNotes 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. MediNotes has performed all material 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 Company Owned IP 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

 

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code form; (ii) prohibits or limits MediNotes 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) MediNotes has taken all reasonable actions, including all actions customary
in the United States software industry, to document any Software and its
operation that is part of the Company 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

(iii) allow debugging of the software and addition and changes of personnel who
maintain and enhance the Software without undue experimentation and exploration.

(l) MediNotes 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) Without limiting the foregoing, the Software Products are wholly owned by
MediNotes and none of the Stockholders or any third-party has any rights or
interests therein.

(o) (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 MediNotes 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;

 

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(ii) MediNotes 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; and

(iii) to the Knowledge of MediNotes, 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. 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.

(p) Neither the execution and delivery by MediNotes 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 result in the creation of any Lien upon any of the
material properties of MediNotes, or result in being declared void, voidable, or
without further binding effect, any of the provisions of any Company IP
Contract.

(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”). MediNotes 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) MediNotes owns beneficially and of record, and has good and valid title to,
all assets reflected on the balance sheet of MediNotes 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.

 

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(b) All the material tangible personal property used or owned by MediNotes has
been maintained in accordance with generally accepted industry practice and is
in good operating condition and repair, ordinary wear and tear excepted. The
assets owned or leased by MediNotes include all of the material properties and
other assets necessary to conduct the Business as currently conducted and
planned by MediNotes.

(c) All of the books and records of MediNotes (including without limitation, the
financial records and minute books of MediNotes) are true, complete and accurate
in all material respects and have been maintained in accordance with generally
accepted business practices. MediNotes 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 MediNotes.

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 on
MediNotes or the Business: (a) MediNotes is now and always has been in
compliance with all Environmental Laws; (b) MediNotes has all Permits necessary
under Environmental Laws for the conduct and operation of the business as now
being conducted by MediNotes and, to the Knowledge of MediNotes, all such
Permits are in good standing; (c) there is not now, and to the Knowledge of
MediNotes 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
MediNotes except in compliance with all applicable Environmental Laws; (d) none
of the Major Stockholders or MediNotes 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 non-compliance with, any Environmental Law, nor to the
Knowledge of MediNotes is there any basis for such a notice or claim; (e) there
is no site to which MediNotes has transported or arranged for the transport of
Hazardous Material which, to the Knowledge of MediNotes, is or may become the
subject of any environmental action; and (f) 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 MediNotes 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 of MediNotes or affect or relate to the ownership, use or operation
of any of the property or assets (both past and present) of MediNotes, whether
issued to MediNotes or to any other Person for the benefit of MediNotes
(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. MediNotes has provided Eclipsys
with true, accurate and complete copies of each Insurance Policy.

 

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(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) the Insurance Policies were placed with
insurers who are financially sound and reputable and, in light of the business,
operations and assets of MediNotes, are in amounts and have coverages that are
reasonable and customary for Persons engaged in such businesses and operations
and having such assets; (iii) the Insurance Policies are sufficient for
compliance with all applicable Legal Requirements and Contracts to which
MediNotes is a party or by which its property or assets are bound; and do not
provide for any retrospective premium adjustment or other experienced-based
liability on the part of MediNotes; 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 none of MediNotes, the Major Stockholders
or the 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.

(c) Section 4.17(c) of the Disclosure Schedule contains a listing of all
material open claims made or otherwise asserted by MediNotes or its officers,
directors or employees against any Insurance Policy. None of the Major
Stockholders nor MediNotes, nor the 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 MediNotes, 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
MediNotes, the activities and operations of MediNotes have been conducted in a
manner so as to conform in all material respects to all applicable provisions of
the Insurance Policies. None of MediNotes, the Person to whom any Insurance
Policy has been issued or, to the Knowledge of MediNotes, any Major Stockholder,
has failed to disclose any fact to the insurance companies or failed to take any
other action, the consequences of which non-disclosure 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. None of
MediNotes, the Person to whom any Insurance Policy has been issued or, to the
Knowledge of MediNotes, any Major Stockholder, has received (A) any refusal of
coverage from any insurer from which MediNotes 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 MediNotes or such other Person is
in default under any Insurance Policy; and to the Knowledge of MediNotes, 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.

 

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4.18 Warranties.

(a) MediNotes has delivered to Eclipsys complete and accurate copies of all
written warranties that are in effect with respect to MediNotes’ 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 MediNotes
(i) is authorized to undertake obligations to any customer or to other third
parties which expands such warranties, or (ii) has made any oral warranty with
respect to such products or services of MediNotes. Section 4.18(a) of the
Disclosure Schedule sets forth a list of all Warranty Claims currently made in
writing against MediNotes or otherwise Threatened, and MediNotes’ reasonable
judgment of the estimate of the aggregate Liability of MediNotes in respect of
such Warranty Claims. Such estimate was prepared in good faith, based on the
Knowledge of MediNotes, although the Major Stockholders do not provide any
assurance that such aggregate Liability will not be exceeded. The foregoing
sentence does not limit the Major Stockholders’ liability under Article VII.

(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 MediNotes and
distributed to any customers of MediNotes (the “Customer Documentation”). The
Software Products conform to the Customer Documentation in all material
respects, and MediNotes 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 MediNotes, (ii) cancelled
any Contract with MediNotes, or (iii) refused to accept, or demanded a full or
partial refund or abatement of purchase price for, Software Products delivered
by MediNotes pursuant to any Contract.

(d) MediNotes 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 MediNotes’ 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.

(e) With respect to third-party Software provided by MediNotes to customers:

(i) the rights provided by MediNotes to the customer are within the scope of
what MediNotes is permitted to provide pursuant to MediNotes’ Contract with the
third-party provider thereof;

(ii) MediNotes has obtained from the customer all end-user agreements and other
commitments required by the third-party provider thereof; and

 

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(iii) any obligations undertaken by MediNotes in respect of the third-party
Software (for example, but without limitation, representations regarding
features or functionality, maintenance commitments, indemnities) are consistent
with, and do not exceed, the corresponding obligations of the third-party
provider thereof to MediNotes.

4.19 Customers; Suppliers.

(a) Section 4.19(a) of the Disclosure Schedule sets forth a complete and
accurate list of all present and past customers of MediNotes to which MediNotes
supplied and provided products and/or services with an aggregate price of more
than $10,000 in 2007, or expected to be more than $10,000 in 2008, showing for
each, by product and service, (i) the contractual amounts due for Software
license fees, installation and training services and annual maintenance and
support and project consulting services fees and revenue for the year ended
December 31, 2007, and (ii) the contractual amounts due for Software license
fees, installation and training services and annual maintenance and support and
estimated project consulting services fees and anticipated revenue for the years
ended December 31, 2008 and 2009.

(b) Since January 1, 2006, MediNotes has not received from: (i) any current or
former customer any written notice or assertion of material breach,
misrepresentation, breach of warranty, Software defects, design errors or
malfunctions, or other failures of MediNotes to deliver upon any promises or
legal or contractual obligations, and no such assertion of breach,
misrepresentation, breach of warranty, Software defects, design errors or
malfunctions, or other failures have been otherwise Threatened, nor to the
Knowledge of MediNotes, 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 any written notice that such customer has ceased or intends to cease or
terminate its use of the products or services of MediNotes, 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 no customer has otherwise Threatened
such a cessation, termination, or material reduction in use or price; and to the
Knowledge of MediNotes, no customer 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 MediNotes, from which
MediNotes 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 $5,000 during the six months ended June 30, 2008, showing for each, the
type of product or service purchased, and the amount of such purchases, during
such periods.

(d) Neither MediNotes, nor 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 MediNotes to deliver upon any promises or legal or
contractual obligations, nor to the Knowledge of MediNotes, 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) from any current supplier any notice that such
supplier has ceased or intends to cease or terminate supplying the products or
services to MediNotes, or materially reduced or intends to

 

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materially reduce such supply, whether or not as a result of the transactions
contemplated hereby, or has sought to increase the price that MediNotes 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 MediNotes, no supplier intends to provide such notice.

4.20 Accounts Receivable. Section 4.20 of the Disclosure Schedule sets forth the
Accounts Receivable of MediNotes 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 MediNotes. The Accounts Receivable of
MediNotes arising after the date of the Interim Financial Statements represent
valid obligations of the obligor thereunder and arose 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
MediNotes’ balance sheet (including the balance sheet as of the Closing Date,
upon which the Closing Date Net Working Capital shall be based, and which
reserves therein shall not represent a materially greater percentage of the
Accounts Receivable than the reserves reflected in the Interim Financial
Statements).

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 MediNotes. No Accounts
Payable are delinquent, and there are no bills representing amounts alleged to
be owed by MediNotes, or other alleged obligations of MediNotes, which MediNotes
has disputed or determined to dispute or refuse to pay, all or any portion
thereof.

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 MediNotes
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 Joseph R. Dunham II, no broker, finder or similar
agent has been employed by or acted on behalf of, directly or indirectly,
MediNotes, any Major Stockholder, or any of their respective Affiliates or
agents in connection with this Agreement or the other Transaction Documents or
the transactions contemplated hereby or thereby. None of MediNotes, the Major
Stockholders nor any of their respective Affiliates has entered into any
arrangement or other Contract with any Person, or taken any other actions, which
could obligate any Stockholder, Eclipsys, MediNotes 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 Consulting
Agreement dated September 5, 2007 with Joseph R. Dunham II.

 

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4.24 Disclosure.

(a) None of the information included in any information statement or proxy
statement relating to the meeting of the Stockholders to be held in connection
with the Merger (the “Company Stockholders’ Meeting”), or action by written
consent in lieu thereof will, at the date delivered to such 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 herein or
therein not misleading.

(b) To the Knowledge of MediNotes, no representation or warranty of MediNotes or
the Major Stockholders 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 light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.

(c) To the Knowledge of MediNotes, there is no fact or circumstance existing or
event that has occurred, that has specific application to MediNotes (other than
general economic or industry conditions), that has had or is reasonably likely
to have a Material Adverse Effect on MediNotes or the Business 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
MediNotes, as of the date of this Agreement and as of the Closing Date, as
follows:

5.1 Existence; Good Standing; Corporate Authority. Eclipsys is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware. Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Iowa. 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.

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.

 

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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 by-laws 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, which have
been obtained).

5.4 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.

5.5 Funds. Eclipsys will have at the Closing Date the funds necessary to pay the
cash part of the Closing Payment in accordance with this Agreement.

5.6 Valid Issuance. When issued pursuant to the terms of this Agreement, the
Eclipsys Common Stock constituting part of the Merger Consideration will be duly
authorized, validly issued, fully paid and nonassessable, and none of such
shares of Eclipsys Common Stock will have been issued in violation of or will be
subject to any Lien, option, call, right of first refusal, preemptive,
subscription or similar right, other than as may be created by the actions of
the recipient.

5.7 Exchange Compliance. Eclipsys Common Stock is registered pursuant to the
Exchange Act and is listed on the Nasdaq Global Select Market. Eclipsys has
taken no action that is designed to terminate the registration of the Eclipsys
Common Stock under the Exchange Act and/or the delisting of the Eclipsys Common
Stock from the Nasdaq Global Select Market. Eclipsys is in compliance with all
of the presently applicable requirements for continued listing of the Eclipsys
Common Stock on the Nasdaq Global Select Market in all material respects.

 

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5.8 SEC Filings; Financials; Absence of Changes. Each Form 10-K, Form 10-Q and
any other periodic report and proxy statement required to be filed by Eclipsys
under the Exchange Act, since December 31, 2007 (the “Eclipsys SEC Filings”),
has been duly and timely filed by Eclipsys, and did not, at the time it was
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be included therein or necessary in order to make the
statements therein in light of the circumstances under which they were made not
misleading. The audited financial statements and unaudited interim financial
statements included or incorporated by reference in the Eclipsys SEC Filings
(a) were prepared in accordance with GAAP applied on a consistent basis during
the periods involved (except that the interim financial statements do not
contain footnotes and as may be indicated therein or in the notes thereto, and
except as permitted by SEC rules), (b) complied as of their respective dates in
all material respects with the applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto (except as
otherwise disclosed in the Eclipsys SEC Filings) and (c) fairly present in all
material respects the consolidated financial position of Eclipsys as of the
dates thereof and the income, cash flows and changes in stockholder’s equity for
the periods involved.

5.9 Tax-Free Reorganization. Neither Eclipsys nor, to the Knowledge of Eclipsys,
any of its Affiliates, has taken or has agreed to take any action that would
prevent the Merger followed by the Second Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.

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, MediNotes shall, and the Major Stockholders shall
cause MediNotes:

(a) to conduct its operations 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, 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 MediNotes
to engage in material transactions, and to provide such other information as
Eclipsys may reasonably request;

(d) not to amend the organizational documents of MediNotes;

(e) to notify Eclipsys within two Business Days of (i) any material change in
the condition (financial or otherwise) of the business, properties, assets,
Liabilities or prospects of MediNotes, (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
MediNotes or involving the business, operations or properties of MediNotes, or
(iii) the breach in any material respect of any representation or warranty or
covenant contained herein;

 

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(f) to deliver to Eclipsys within two Business Days any material report,
statement, schedule or correspondence filed or submitted by MediNotes or with
respect to MediNotes or the Business, the Major Stockholders to, or received by
MediNotes or with respect to MediNotes or the Business, the Major Stockholders
from, any Governmental Entity;

(g) not to (i) issue any Capital Stock (other than (A) the issuance of Company
Common Stock (1) upon exercise of the Company Options and Company Warrants
pursuant to the terms thereof, and (2) upon conversion of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock pursuant to the
MediNotes Articles of Incorporation, and (B) the issuance of 1,000 shares of
Series D Preferred Stock pursuant to the terms and conditions of the Settlement
Agreement), effect any stock split or 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, 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, stock benefit or
stock purchase plan) or amend any existing employee benefit plan in any material
respect, 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, 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 Shares;

(i) not to sell, lease 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
MediNotes 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 MediNotes any
outstanding Debt or other obligation of MediNotes (except for entry into the
Royalty Termination Agreement pursuant to which, in conjunction with and
immediately after the Closing, the Secured Promissory Note issued to MediNotes
on March 13, 2008 by the Bond Entities in the principal amount of $600,000 will
be cancelled), (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;

 

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(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 in the ordinary course of business consistent with past practices,
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, or amend or
terminate any Material Contract (except for the Royalty Termination Agreement
and Commission Agreement, which will be entered into as of the Closing), or

(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 $25,000;

(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 or
incurred in the ordinary course of business thereafter consistent with past
practice;

(o) not to settle or compromise any pending or threatened suit, proceeding,
action or claim;

(p) 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 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 Taxes that become due;

(q) not to loan or advance any amount to, or enter into any Contract or other
transaction with (except the Royalty Termination Agreement and the Commission
Agreement with the Bond Entities, each of which will be entered into as of the
Closing), 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 MediNotes, any officer or director thereof;

(r) not to delay or postpone the payment of any Accounts Payable or other
expenses, or accelerate collection of any Accounts Receivable, or other
receivables;

(s) not to take any action that would knowingly result in a breach of any
representation, warranty or covenant of MediNotes or the Major Stockholders
contained in this Agreement;

 

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(t) 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, having the same or
similar effect, or being of the same or similar nature, as any of the actions
described in Sections 6.1(a) through (s);

(u) take such action, if any, 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); and

(v) 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).

6.2 Further Action.

(a) Upon the terms and subject to the conditions of this Agreement, MediNotes
and the Major Stockholders, on the one hand, and Eclipsys and Merger Sub, on the
other hand, 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.

(b) (i) From the date of this Agreement until the termination of this Agreement
or the Closing Date, MediNotes 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) the 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
shall affect the representations, warranties, covenants or agreements of any
party or the conditions to the obligations of any party hereunder; and

(B) 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) MediNotes shall deliver a supplement to Section 4.3 on or before the Closing
Date that sets forth the capitalization of MediNotes and holders of all
outstanding Capital Stock of MediNotes as of the Closing Date, which supplement,
may solely reflect changes from the capitalization set forth in Section 4.3 as a
result of (A) the exercise of Company Options and Company Warrants outstanding
on the date hereof or conversion of shares of Series A Preferred Stock, Series B
Preferred Stock or Series C 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 and the MediNotes
Articles of Incorporation, and the terms and conditions of this Agreement, and
(B) the issuance of 1,000 shares of Series D Preferred Stock pursuant to the
terms and conditions of the Settlement Agreement and this Agreement (the
“Capitalization Update”). Except for the Capitalization Update, no notice under
this Section 6.2 shall affect any rights of Eclipsys under Article VII.

In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, each party, including the
Stockholders’ Representative, shall use its respective commercially reasonable
efforts to take or cause to be taken all such necessary or desirable action.

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, MediNotes shall afford Eclipsys and its
accountants, counsel, and other representatives, during normal business hours,
access to all of the properties and assets, books, Contracts, and other records
of MediNotes reasonably requested by Eclipsys. 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
MediNotes; and

(ii) treat as confidential in accordance the terms hereof all information
obtained hereunder or in connection herewith regarding MediNotes and not
otherwise known to them prior to disclosure hereunder.

6.4 Publicity. The initial press release relating to this Agreement shall be in
the form approved by the parties. Thereafter until the Closing Date, none of
MediNotes, 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 MediNotes, on the other
hand, except to the extent disclosure is legally required (including the
requirements and rules of any stock exchange on which the Eclipsys Common Stock
is traded), in which case MediNotes 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.

 

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6.5 Expenses. Except as set forth herein, 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, and if the Closing is consummated, the Seller Transaction Expenses
shall be paid in accordance with the terms and conditions of the Holdback Escrow
Agreement and as set forth in Section 2.9(b) and Section 2.10(a)(iv). Without
limiting the foregoing, Eclipsys shall pay the fees and expenses of any broker
engaged by Eclipsys and its Affiliates, including any disclosed in Section 5.4,
and the fees and expenses of any brokers engaged by the Stockholders or their
Affiliates (including MediNotes), and including those disclosed in Section 4.23,
shall be paid as part of the Seller Transaction Expenses.

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, MediNotes 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 MediNotes 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. MediNotes 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, MediNotes 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) MediNotes and the Major Stockholders jointly and severally represent and
warrant to Eclipsys that each of the Major Stockholders, MediNotes, and their
respective Affiliates, officers, directors, and employees, and to the Knowledge
of MediNotes, the representatives (including, without limitation, any investment
banker, attorney or accountant) and agents of the Major Stockholders and
MediNotes, have terminated any and all existing discussions with third parties
relating to a Third-Party Acquisition. The Major Stockholders and MediNotes have
instructed all of their respective officers, directors, employees,
representatives and agents to terminate all discussions relating to a
Third-Party Acquisition.

 

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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 MediNotes for the Business and such covenants are necessary for Eclipsys to
receive the full benefit of this Agreement.

(b) 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.

Notwithstanding the foregoing, nothing herein shall prohibit Travis Bond from
rendering services to Bond Medical Corp., Inc., a Florida corporation (“Bond
Medical Group”) for so long as the business of Bond Medical Group is solely that
of (A) acting as a reseller of products and services of MediNotes and
(B) limited servicing of products competitive with those of MediNotes pursuant
to servicing arrangements entered into prior to the date of the Bond Agreement
(which Travis Bond represents is the sole business of Bond Medical Group as
conducted on the Closing Date).

 

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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.

(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,
MediNotes 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, recruiting or hiring any employees of
Eclipsys, MediNotes or their Affiliates; or (B) soliciting or encouraging any
such employee of Eclipsys, MediNotes or their Affiliates to leave the employment
of Eclipsys, MediNotes or their Affiliates; or

(ii) cause, solicit or encourage any customer, or contractor, subcontractor or
other supplier of Eclipsys, MediNotes or their Affiliates to terminate or
adversely alter any relationship such customer or supplier may have with any of
Eclipsys, MediNotes or their Affiliates.

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 MediNotes 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, MediNotes 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, MediNotes and their Affiliates and, in addition to any other remedies
Eclipsys, MediNotes and their Affiliates may have, Eclipsys, MediNotes 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 non-prevailing party
or parties shall be

 

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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, MediNotes 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, MediNotes and their Affiliates from seeking any remedies in
another situation or for a continuing breach. Such action by Eclipsys, MediNotes
and their Affiliates shall not constitute a waiver of any of their rights.

(f) Each of the Restrictive Covenants will 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 Stockholder and extend the
Restrictive Period for the duration of such violations with respect to the
breaching 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) Notwithstanding the foregoing, the Restrictive Covenants shall not apply to
any Institutional Major Stockholder and its Affiliates 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
was conducted in the past; provided that this Section 6.7(h) shall not apply to
any Affiliates of such Institutional Major Stockholders, if such Affiliates are
also Major Stockholders.

(i) Nothing contained in this Section 6.7 is intended to confer upon any
individual Major Stockholder any right to employment with Eclipsys, MediNotes or
their Affiliates at any time after the Closing Date.

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 MediNotes.

6.9 Stockholders’ Representative. The Stockholders shall at all times maintain a
representative (the “Stockholders’ Representative”) for purposes of taking
certain actions and giving certain 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

 

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Stockholders hereby appoint Danny R. Wipff as the initial Stockholders’
Representative, and immediately upon the approval of this Agreement by the
requisite vote or written consent of the Stockholders, each Stockholder shall be
deemed to have consented to such appointment (or any then acting successor
pursuant to the terms hereof) and the terms hereof. 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. Each of the Stockholders
acknowledges that actions taken, consents given and representations made by the
Stockholders’ Representative on behalf of the Stockholders pursuant hereto shall
be binding upon the Major Stockholders and the Effective Time Company Holders,
as applicable, including all actions under Section 7.2(b) and under the Holdback
Escrow Agreement. This appointment and grant of power and authority by each
Stockholder is coupled with an interest and is irrevocable and shall not be
terminated by any act of any Stockholder or by operation of law, whether by the
death or incapacity of any individual Stockholder, or by the occurrence of any
other event. The Stockholders’ Representative is authorized to 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.
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 aggregate 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 aggregate fully diluted Shares at the
Effective Time.

6.10 Employee Matters.

(a) The employees of MediNotes listed on Schedule 6.10(a) will, subject to
Section 6.10(b), continue as at-will employees of MediNotes or Eclipsys or
another Subsidiary of Eclipsys following the Closing, on terms to be determined
by Eclipsys in consultation with MediNotes. If employment is continued by
Eclipsys or another Subsidiary of Eclipsys other than MediNotes, the new
employer shall assume any accrued but unused vacation benefits as listed on
Schedule 6.10(a). Employees of MediNotes who continue in the employ of
MediNotes, or Eclipsys or a Subsidiary of Eclipsys, following a reasonable
transition period determined by Eclipsys in consultation with the Stockholders’
Representative, will 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 MediNotes with MediNotes 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
will 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.

 

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(b) Nothing contained in this Agreement confers upon any employee of MediNotes
any right to continued employment or participation in any Company Benefit Plan
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 MediNotes occurring after the Closing Date. MediNotes 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 MediNotes on or before
the Closing Date.

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 MediNotes, 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 MediNotes, (ii) the
Major Stockholder’s right to or interest in any Intellectual Property or other
assets or properties of MediNotes, or (iii) the Major Stockholder’s right to or
any interest in any Contract with MediNotes, and (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, MediNotes 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
which arise solely under this Agreement (including payment of the Purchase
Price), or that arise after the Closing Date.

(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 which such Major Stockholder does not

 

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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.

(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 will 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 will 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 use any Confidential
Information of any other party solely for the purpose of pursuing the
transactions contemplated hereby, and shall 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 MediNotes
and the Business, and the Stockholders shall be subject to all obligations set
forth herein with respect to such Confidential Information of Eclipsys and
MediNotes. This provision is not intended to restrict independent business
activities, in each case undertaken without use of the 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).

 

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(b) Each party agrees that (i) the Confidential Information of any other party
received or otherwise held by it or 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 will
not disclose any of the Confidential Information of any other party in any
manner whatsoever, and (iii) such party and its representatives will 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 gives its prior written consent, and (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 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 to any
tribunal or else stand liable for contempt or suffer other similar censure or
penalty, the receiving party or its representative may, without liability
hereunder, disclose to such tribunal 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 exercises its
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 by such tribunal.

(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.

 

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(f) 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.

6.13 Covenants Regarding Contracts. On or before the Closing Date, unless waived
by Eclipsys, MediNotes shall use reasonable efforts to obtain, and Eclipsys
shall use reasonable efforts to assist MediNotes 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 MediNotes, and MediNotes shall
deliver copies of such Consents to Eclipsys.

6.14 Stockholder Meeting. As soon as practicable following the date of this
Agreement, MediNotes shall take all action necessary in accordance with Iowa law
and the MediNotes Articles of Incorporation and by-laws to duly call, give
notice of, convene and hold the Company Stockholders’ Meeting for Stockholders
to consider and vote upon the adoption and approval of this Agreement and the
transactions contemplated hereby, including the appointment of the Stockholders’
Representative, or solicit the written consent of Stockholders thereto.
MediNotes will, through its Board of Directors, recommend to the Stockholders
the adoption and approval of this Agreement, shall not withdraw, modify or
change such recommendation, and shall use reasonable efforts to obtain Company
Stockholders’ Approval. The Major Stockholders will use reasonable efforts to
secure the Company Stockholder Approval.

6.15 Tax-Free Reorganization Status.

(a) Each of Eclipsys, Merger Sub, and MediNotes shall use its best efforts to
cause the Merger followed by the Second Merger to qualify as a “reorganization”
within the meaning of Section 368(a) of the Code. None of Eclipsys, Merger Sub,
and MediNotes, or their respective Subsidiaries shall take, or agree to take,
any action that could prevent or impede the Merger followed by the Second Merger
from qualifying as a “reorganization” within the meaning of Section 368(a) of
the Code.

(b) Unless otherwise required pursuant to a “determination” within the meaning
of Section 1313(a) of the Code, each of Eclipsys, Merger Sub, and MediNotes
shall report the Merger followed by the Second Merger as a “reorganization”
within the meaning of Section 368(a) of the Code within the manner described in
Revenue Ruling 2001-46.

6.16 Second Merger. As soon as reasonably practicable after the Effective Time,
Eclipsys shall cause the Second Merger to be effected by, among other things,
approving the Second Merger as the sole shareholder of the Surviving
Corporation, adopting and causing the Surviving Corporation to adopt an
agreement and plan of merger pursuant to which the Surviving Corporation shall
be merged with and into a wholly owned limited liability company Subsidiary of
Eclipsys that is treated as a disregarded entity for tax purposes, with such
Subsidiary being the entity surviving the Second Merger as a wholly owned
Subsidiary of Eclipsys. There shall be no conditions to the Second Merger, other
than the consummation of

 

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the Merger. It is intended that the Second Merger shall occur as described in
this Section 6.16, and that the Merger and the Second Merger together qualify as
a reorganization under the provisions of Section 368(a) of the Code, and that
this Agreement constitute a “plan of reorganization” within the meaning of
section 1.368-2(g) of the regulations promulgated under the Code.

6.17 Indemnification of Directors and Officers.

(a) Prior to the Effective Time, MediNotes may purchase tail coverage under its
directors’ and officers’ liability insurance and fiduciary insurance policies
covering MediNotes’ 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 MediNotes to use, commercially reasonable efforts
to keep any such tail coverage in effect for the term thereof, provided that
neither Eclipsys nor MediNotes shall in any event be obligated to make payments
with respect to any such policy beyond the premiums paid by MediNotes prior to
the Closing.

(b) This Section 6.17 is intended for the irrevocable benefit of, and to grant
third-party rights to, the directors, officers and fiduciaries of MediNotes at
or prior to the Effective Time, to the extent such persons are covered by any
such tail policies purchased by MediNotes prior to the Effective Time, and shall
be binding on all successors and assigns of Eclipsys. Each director, officer or
fiduciary of MediNotes so covered shall be entitled to enforce the post-closing
covenants of Eclipsys and MediNotes contained in this Section 6.17.

6.18 Compliance with Rule 144(c)(1). For so long as resales of shares of
Eclipsys Common Stock issued as part of the Merger Consideration are subject to
the resale restrictions set forth in Rule 145 under the Securities Act, Eclipsys
will use commercially reasonable efforts to comply with Rule 144(c)(1) under the
Securities Act.

6.19 Termination of 401(k) Plan. Effective no later than the Business Day
immediately preceding the Closing Date, MediNotes 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 MediNote’s
Board of Directors that are substantially in the form attached hereto as
Schedule 6.19. MediNotes shall provide Eclipsys with evidence that all Company
401(k) Plans have been terminated (effective no later than the Business Day
immediately preceding the Closing Date) and shall take such other actions in
furtherance of terminating any Company 401(k) Plans as Eclipsys may reasonably
require.

6.20 Bond Agreement Escrow. Travis Bond, as the owners’ representative under the
Bond Agreement, hereby represents and covenants as follows:

(a) He is authorized to make the representations, warranties and covenants in
this Section 6.20 under Section 11.01 of the Bond Agreement.

(b) The Merger Consideration received for the shares of Series C Preferred Stock
(or any shares of Company Common Stock into which such shares are converted)
held in escrow pursuant to Sections 2.03 and 10.05 of the Bond Agreement (the
“Bond Escrow Fund”) shall be held in escrow by Eclipsys to serve as a fund for
the potential payment to MediNotes for claims for indemnification pursuant to
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terminate on March 13, 2009, the first anniversary of the closing date of the
transaction contemplated by the Bond Agreement, except that any amounts in
escrow are subject to then pending claims for indemnification will continue to
be held in escrow until such claims are resolved. With respect to any such
claims, the portion of the Bond Escrow Fund that is shares of Eclipsys Common
Stock Merger shall be valued at the Average Market Price.

(c) Each of the Sellers (as defined in the Bond Agreement) shall:

(i) Duly execute and deliver to the Paying Agent a letter of transmittal
pursuant to Section 2.9(c) with respect to such shares, directing the Paying
Agent to pay the Merger Consideration with respect to such shares to Eclipsys as
provided hereunder; and

(ii) Duly execute and deliver to Eclipsys, on or before the Closing Date, three
stock powers in blank providing for the transfer of any or all of the shares of
Eclipsys Common Stock held in the name of such Person in the Bond Escrow Fund to
MediNotes in respect of any claims for indemnification pursuant to Article X of
the Bond Agreement.

(d) Notwithstanding anything contained herein, as an accommodation to the
Sellers under the Bond Agreement, promptly, but in no event more than 10 days
after Eclipsys receives (i) the Merger Consideration for all shares of Series C
Preferred Stock (or any shares of Company Common Stock into which such shares
are converted) held in escrow pursuant to Sections 2.03 and 10.05 of the Bond
Agreement, as set forth in Section 6.20(c)(i), and (ii) the letters of
transmittal and stock powers described in Section 6.20(c), Eclipsys shall
deliver to Travis Bond, as owners’ representative under the Bond Agreement,
fifty percent (50%) of the cash portion of the Merger Consideration received
therefor, provided that Travis Bond has provided Eclipsys with wire instructions
for such transfer at least one Business Day prior to such payment. Such payment
shall not limit the indemnification obligations of the Sellers under the Bond
Agreement.

(e) Promptly after March 13, 2009, or promptly after settlement of all open
claims against such escrowed funds, if later, Eclipsys shall deliver to Travis
Bond, as owners’ representative under the Bond Agreement, all Merger
Consideration not paid to MediNotes for indemnification pursuant to Article X of
the Bond Agreement.

(f) Allocation of amounts distributed from the Bond Escrow Fund as described in
Sections 6.20(d) and 6.20(e) is the responsibility of Travis Bond as owners’
representative under the Bond Agreement, and MediNotes, Eclipsys and the Paying
Agent, and their successors and transferees have no obligations with respect to
such allocation or any actions taken or not taken by Travis Bond.

 

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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 for
456 days after the Closing Date (the “Survival Period”). Notwithstanding the
foregoing, the representations and warranties set forth in Sections 3.1, 3.2,
3.5, 4.3, 4.6(a), 4.9, 4.10, 4.11(b), 4.14 and 4.16 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 Stockholders shall, jointly and severally
(except as stated in Section 7.4(d) below), indemnify and defend Eclipsys, and
its Affiliates (including MediNotes 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 loss, claim, Liability, cost, damage or
expense (including 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 by any such indemnified party (collectively “Damages”), to the
extent arising from or in connection with any of the following:

(i) any breach or inaccuracy of any representation or warranty of MediNotes 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 any supplement to the Disclosure Schedule after the date
hereof, except for the Capitalization Update), provided that disclosures set
forth in the Disclosure Schedules shall be disregarded with respect to any
claims arising from or in connection with any breach or inaccuracy of any of the
representations set forth in Schedules 4.7(d)(i), 4.7(d)(iii), 4.11(a), 4.14(e)
or 4.19(b);

(ii) any breach of any covenant of MediNotes prior to the Closing, or any breach
of any covenant of the Major Stockholders, or any of them, contained in this
Agreement;

 

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(iii) 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 by or on behalf of MediNotes to customers or third parties
before the Closing Date, and (C) any failure by MediNotes 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;

(iv) any claims by any current or former employees of MediNotes 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 MediNotes in place at any time prior to the Closing; and

(v) (A) any and all Taxes of MediNotes 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
MediNotes in connection with compliance matters relating to Taxes covered by
this clause (v), including costs and expenses relating to disputes with taxing
authorities,

provided that Eclipsys shall not be entitled to recover duplicate Damages under
clauses (i) through (v), to the extent claims could be made under more than one
of such clauses.

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 shall include, but
not be limited to, the amount by which the value of MediNotes and the Business
is less than it would have been but for a breach or inaccuracy of the
representations and warranties of MediNotes or the Major Stockholders, or the
failure by MediNotes or the Major Stockholders to fulfill their obligations
hereunder.

(b) Each of the Stockholders hereby (i) irrevocably appoints the Stockholders’
Representative as such Stockholder’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, (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
Stockholder, 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.

(c) Eclipsys shall indemnify the Stockholders and their Affiliates and each of
their respective officers, directors, employees, stockholders, agents and
representatives against and hold them harmless from any Damages to the extent
arising from (i) any breach or inaccuracy of any representation or warranty of
Eclipsys contained in this Agreement or any of the other Transaction Documents;
and (ii) any breach of any covenant of Eclipsys contained in this Agreement. The
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Section 8.3 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 the Stockholders 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. Any indemnity payment under this
Section 7.2(c) shall be satisfied, subject to compliance with Legal
Requirements, with Eclipsys Common Stock to the extent necessary to preserve the
status of the Merger followed by the Second Merger as a reorganization within
the meaning of Section 368(a) of the Code.

(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 Merger Consideration for Tax purposes. For
purposes of this Article VII, shares of Eclipsys Common Stock held by the Escrow
Agent and released to Eclipsys or representing a portion of the Merger
Consideration returned to Eclipsys by the Stockholders as indemnification for
Damages shall be valued at the Average Market Price.

(e) For the sole purpose of appropriately apportioning any Taxes relating to a
period that includes (but that would not end on) the Closing Date, the portion
of such Tax that is attributable to MediNotes 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. Any
Taxes that are the responsibility of the Stockholders pursuant to
Section 7.2(a)(v) shall be paid to Eclipsys or MediNotes no later than five
(5) days prior to the due date for the payment of such Taxes and, to the extent
such Taxes are not paid to Eclipsys or MediNotes on or prior to the applicable
due date, the amount of such Taxes shall bear interest at the rate of ten
percent (10%) per annum or the applicable underpayment rate (if higher),
commencing on the applicable due date until the date of payment.

7.3 Time Limitations.

(a) Neither Eclipsys, nor the Stockholders will have any liability (for
indemnification or otherwise) with respect to any representation or warranty
contained in this Agreement, other than those in Sections 3.1, 3.2, 3.5, 4.3,
4.6(a), 4.9, 4.10, 4.11(b), 4.14 and 4.16, 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 7.6 or Section 7.7 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) Subject to Section 7.4, a claim with respect to Sections 3.1, 3.2, 3.5, 4.3,
4.6(a), 4.9, 4.10, 4.11(b), 4.14 and 4.16, must be made at any time prior to the
earlier of (i) 90 days after the expiration of the applicable statute of
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Closing Date, except to the extent that on or before such date, the party
seeking recovery for Damages provides the notice in writing pursuant to
Section 7.6 or Section 7.7 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) Subject to Section 7.4, a claim made under Section 7.2(a)(ii), with respect
to actions of MediNotes or the Major Stockholders prior to the Closing, or
Sections 7.2(a)(iii), (iv) or (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 the
notice in writing pursuant to Section 7.6 or Section 7.7 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) The Stockholders shall have no liability (for indemnification or otherwise)
with respect to any matters under this Agreement (except for all claims, rights
or causes of action arising from (i) Stockholder Fraud or (ii) a breach of any
of the representations and warranties contained in Section 3.1, 3.2, 3.5, 4.3,
4.6(a), 4.9, 4.10, 4.11(b), 4.14, 4.16 and 4.23, as to which the threshold
described in this Section 7.4(a) shall be inapplicable) unless the total Damages
for matters hereunder exceed $300,000; once such amount has been met, the
Stockholders shall be liable for all amounts of such Damages, in excess of
$200,000.

(b) Eclipsys will have no liability (for indemnification or otherwise) with
respect to any matters under this Agreement (except for Fraud by Eclipsys, or
the representations made in Section 5.4, as to which the threshold described in
this Section 7.4(b) shall be inapplicable) unless the total Damages for matters
hereunder exceed $300,000; once such amount has been met, Eclipsys shall be
liable for all amounts of such Damages, in excess of $200,000.

(c) For purposes of this Article VII, 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 or if a matter be or may not be “reasonably likely” to
occur.

(d) Any claims by the Eclipsys Indemnified Parties for claims under
Section 7.2(a)(i) though (v) shall be first made against the Escrow Account for
the Indemnification Amount, which shall be funded from the Purchase Price by all
Effective Time Company Holders; provided, however that any claim by the Eclipsys
Indemnified Parties against a Major Stockholder under Section 7.2(a)(i), with
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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, in the
discretion of Eclipsys, may first be made directly against the Major
Stockholder. Once the Escrow Account for the Indemnification Amount is
exhausted, no Stockholder, other than the Major Stockholders, shall have any
further liability under this Article VII, but each Major Stockholder shall
continue to be liable, provided however that each Major Stockholders’ liability
(for indemnification or otherwise) with respect to any Damages (i) relating to
(A) any breach or inaccuracy of a representation or warranty contained in
Article III or Article IV, other than those in Sections 3.1, 3.2, 3.5, 4.3,
4.6(a), 4.9, 4.10, 4.11(b), 4.14 and 4.16, or (B) any matters under this
Agreement described in Section 7.2(a)(ii), with respect to actions of MediNotes
or the Major Stockholders prior to the Closing, or Section 7.2(a)(iii) and (iv),
shall not exceed, in the aggregate, twenty five percent (25%) of the portion of
the Purchase Price payable to such Major Stockholder, and provided, further 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. Subject to the
second proviso to the foregoing sentence, each Major Stockholder shall be liable
for up to one hundred percent of the portion of the Purchase Price payable to
such Major Stockholder with respect to a breach of any of the representations
and warranties contained in Sections 3.1, 3.2, 3.5, 4.3, 4.6(a), 4.9, 4.10,
4.11(b), 4.14 and 4.16 (and such Major Stockholder’s liability shall not be
limited by anything contained in clause (i) above, even if such liability may
also relate to a claim under Sections 7.2(a)(ii), (iii) or (iv)). For purposes
of calculating such caps on the liability of a Major Stockholder, any amount
contributed by such Major Stockholder to the Indemnification Amount paid to
Eclipsys shall be counted towards the amount paid by such Major Stockholder. 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, or Section 7.2(a)(v), 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 (i) any insurance proceeds received by Eclipsys or MediNotes
under policies in place prior to the Effective Time and any indemnity
contribution or other similar payment actually recovered by Eclipsys or
MediNotes from any third-party with respect thereto, and (ii) any provision or
reserve with respect to such Damages reflected as a Current Liability.
Notwithstanding anything herein to the contrary, Eclipsys shall not be entitled
to punitive damages unless assessed in connection with a Third-Party Claim.

(f) After Eclipsys receives indemnification as provided in this Agreement,
Eclipsys shall rebate to the Escrow Agent, the Stockholders, or the Major
Stockholders, as applicable, the actual cash tax benefits, if any, realized on
account of the Damages to which such claim relates by Eclipsys in the first tax
year in which such Damages are reflected on Eclipsys’s Tax Returns, to the
extent such benefits are readily identifiable, and provided that the tax
position producing such tax benefits has not been challenged by any tax
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eighteen months after the filing of the initial Tax Return reflecting the tax
benefit. Any such rebate shall be paid within thirty (30) days after the
expiration of such eighteen month period, provided that any such rebate paid by
Eclipsys may be recovered to the extent that the cash benefit upon which the
rebate was based is subsequently invalidated by any tax authority.
Notwithstanding the foregoing, nothing in this Agreement shall limit Eclipsys’s
right to determine its tax position in its sole discretion.

(g) The Stockholders’ remedies (for indemnification or otherwise, whether such
claim is based in contract, tort or any other theory) with respect to any breach
or inaccuracy of Eclipsys’s representations, warranties or covenants in this
Agreement shall be limited to those available under federal securities laws in
connection with a private placement of securities under SEC Rule 506.

(h) Nothing herein shall limit, or be deemed to limit, the rights of Eclipsys
against any Stockholder arising under the Investor Questionnaire delivered by
such Stockholder prior to the date hereof or the letter of transmittal delivered
by such Stockholder as described in Section 2.9(c).

(i) In no event shall any Stockholder be entitled to require that any claim be
made or brought against any other Person, including MediNotes, before any claim
for Damages is brought or claim is made by any Eclipsys Indemnified Party
against such Stockholder or the Escrow Account for the Indemnification Amount
hereunder.

7.5 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 (i) the Escrow Account for the Indemnification
Amount held by the Escrow Agent pursuant to the Holdback Escrow Agreement and
(ii) any amount that Eclipsys would otherwise be required to pay to any Major
Stockholder, 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 7.5, Eclipsys and the
Stockholders shall remain obligated to first comply with their respective
obligations described in Section 7.6 and Section 7.7 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 to set-off
against the Escrow Account for the Indemnification Amount held by the Escrow
Agent pursuant to the Holdback Escrow Agreement or any amounts that Eclipsys
would be required to pay such 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 enforcement of other remedies
available to it hereunder and the exercise by Eclipsys of the right of set-off
against the Escrow Account for the Indemnification Amount held under the
Holdback Escrow Agreement or other amounts 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.

 

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7.6 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
will 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 7.6 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 then current employee, 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, subject
to reasonable input from the indemnifying party, with reasonableness determined
by reference, among other things, to any conflicting interests between the
indemnified party and indemnifying party.

(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 available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder, including deposition or trial testimony.

 

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(d) If the indemnifying party shall have assumed the defense of a Third-Party
Claim, the indemnified party shall not have the right to settle or compromise
such claim, and shall agree to any settlement, compromise or discharge of a
Third-Party Claim that the indemnifying party may recommend and which by its
terms obligates the indemnifying party to pay the full amount of the liability
in connection with such Third-Party Claim, which releases the indemnified party
completely in connection with such Third-Party Claim, which does not impose any
equitable remedies and which the indemnified party reasonably determines would
not otherwise adversely affect the indemnified party. If the indemnifying party
shall not have assumed the defense of a Third-Party Claim, the indemnified party
may settle, compromise or discharge, such Third-Party Claim in good faith
without the indemnifying party’s prior consent.

(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 7.7.

(f) Notwithstanding the foregoing, Eclipsys and MediNotes shall have the sole
right to represent the interests of MediNotes in all Tax audits and
administrative and court proceedings and to employ counsel of its choice (and,
to the extent relating to Taxes for which the Major Stockholders are liable
pursuant to this Agreement, at the Major Stockholders’ expense); provided,
however, that, to the extent relating to Taxes for which the Major Stockholders
are liable pursuant to Section 7.2, the Stockholders’ Representative shall have
the opportunity to participate, subject to the control of Eclipsys and
MediNotes, at its own cost in any defense of such proceeding. Eclipsys and
MediNotes shall not settle any Tax claim to the extent relating to Taxes for
which the Major Stockholders are liable pursuant to Section 7.2 without the
prior written consent of the Stockholders’ Representative, which consent shall
not be unreasonably withheld or delayed. If the Stockholders’ Representative
consents to any such settlement, neither the Stockholders’ Representative nor
any Major Stockholder shall have any power or authority to object to the amount
or validity of any claim by or on behalf of any indemnified party for indemnity
with respect to such settlement.

 

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7.7 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 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 Major
Stockholders) and 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 7.7.

7.8 Recovery in the Case of Strict Liability or Negligence. THE PROVISIONS IN
THIS ARTICLE VII SHALL BE ENFORCEABLE REGARDLESS OF WHETHER THE DAMAGES ARE
BASED ON PAST, PRESENT OR FUTURE CLAIMS OR LEGAL REQUIREMENTS (INCLUDING ANY
ENVIRONMENTAL LAW OR PRODUCTS LIABILITY LAW), AND REGARDLESS OF WHETHER ANY
PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION OR OTHER RECOVERY IS
SOUGHT) ALLEGES OR PROVES THE CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE
OF THE PERSON SEEKING SUCH INDEMNIFICATION OR OTHER RECOVERY, OR THE SOLE OR
CONCURRENT STRICT LIABILITY IMPOSED ON THE PERSON SEEKING SUCH INDEMNIFICATION
OR OTHER RECOVERY.

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 of
MediNotes 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 of MediNotes and the Major
Stockholders hereunder, and (ii) the Stockholders’ sole and exclusive remedies
for any breach or inaccuracy of the representations and warranties 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 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 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 will (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 equitable relief shall be subject to
Section 10.11, 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).

 

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(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 MediNotes, 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 MediNotes, 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 MediNotes, 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 Iowa
state law, MediNotes Articles of Incorporation and the by-laws of MediNotes.

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 MediNotes 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;

 

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(b) MediNotes 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 MediNotes
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 MediNotes or the Major Stockholders 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 MediNotes on terms that are not materially
burdensome to MediNotes or Eclipsys, shall be in full force and effect and shall
have been delivered to Eclipsys;

(f) 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, Merger Sub or any Affiliate
thereof, in connection with the Merger or the other transactions contemplated
hereby or by the other Transaction Documents any money damages; (B) seeking to
prohibit or limit the ownership or operation by Eclipsys or MediNotes, of any
material portion of the Business, or to compel Eclipsys or MediNotes to dispose
of 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 MediNotes, including the right to
vote such Capital Stock on all matters properly presented to the equityholders
of MediNotes; (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 MediNotes or is entitled to any portion of the
Purchase Price; (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;

(g) since the date of this Agreement, there shall have been no event, change,
occurrence, condition or circumstance that Eclipsys determines, in good faith,
has had or is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on MediNotes or the Business;

(h) Eclipsys shall have received the resignations of the directors of MediNotes
pursuant to Section 6.8;

 

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(i) [deliberately deleted]

(j) the Escrow Agent, the Major Stockholders and the Stockholders’
Representative shall have executed the Holdback Escrow Agreement;

(k) Eclipsys shall be reasonably assured that each of the Key Employees and
other employees of MediNotes of a quantity and having the skills sufficient for
the operation of the Business are continuing their affiliation with the Business
through employment with Eclipsys or MediNotes, after the Closing Date;

(l) each of the Key Employees shall have entered into an employment agreement,
on the terms set forth in Exhibit C-4, and in the applicable form attached
hereto as Exhibit C-1, Exhibit C-2, or Exhibit C-3, or another form acceptable
to Eclipsys and such Key Employee, with Eclipsys or, in the discretion of
Eclipsys, a Subsidiary of Eclipsys (including MediNotes) (the “Employment
Agreements”);

(m) Eclipsys’ review of the Contracts, capital structure and other legal due
diligence materials provided or to be provided hereunder by MediNotes shall not
have revealed any fact not disclosed in this Agreement or on the face of the
Disclosure Schedule hereto that represents or could reasonably be expected to
result in a material cost or risk to Eclipsys, or a material reduction in value
to Eclipsys, resulting from the Merger, and such review shall not have revealed
that the Material Contracts with customers (including resellers) vary in any
material respect from the forms provided to Eclipsys on or before the date
hereof;

(n) Eclipsys shall have received an opinion of counsel to MediNotes in the form
attached hereto as Exhibit D;

(o) all required corporate action on the part of MediNotes and the Stockholders,
including without limitation, approval by the board of directors of MediNotes,
shall have been taken (and not rescinded) to approve the execution, delivery and
performance of this Agreement and the other Transaction Documents;

(p) the Merger shall be effective;

(q) the issuance of the Stock Consideration shall not, in the sole judgment of
Eclipsys, violate any Legal Requirement;

(r) Eclipsys shall have received an executed Spousal Consent from the spouse of
each Major Stockholder who is married on the Closing Date, and residing in a
community property state;

(s) the Dissenting Shares shall constitute no more than five percent (5%) of the
Shares outstanding as of the Effective Date;

(t) Eclipsys shall have received a certificate from MediNotes, in form and
substance reasonably satisfactory to Eclipsys, to the effect that MediNotes 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);

 

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(u) the Stockholders Agreement 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;

(v) the Consulting Agreement, dated September 5, 2007, between MediNotes and
Joseph R. Dunham II shall have been terminated effective as of the Closing
pursuant to a Consulting Agreement Termination in the form attached hereto as
Exhibit I;

(w) the Bond Entities shall have executed and delivered the Royalty Termination
Agreement, in the form attached herein as Exhibit G;

(x) the parties to the Bond Agreement shall have executed and delivered the
stock powers referenced in Section 6.20; and

(y) 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 MediNotes and the Stockholders. The
obligations of MediNotes and the Stockholders to effect the Closing are also
subject to the satisfaction or waiver by the Stockholders 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 Holdback Escrow
Agreement;

(e) Eclipsys shall have delivered the Closing Payment to the Paying Agent;

(f) Eclipsys shall have delivered the Holdback Amount to the Escrow Agent;

(g) since the date of this Agreement, there shall have been no event, change,
occurrence, condition or circumstance that MediNotes and the Stockholders’
Representative determines, in good faith, has had or is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Eclipsys;

(h) [deliberately deleted]

 

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(i) there shall not be pending or threatened by any Governmental Entity any
suit, action or proceeding (or by any other Person (other than a Stockholder or
any third-party alleging rights as a holder of Capital Stock of MediNotes), any
suit, action or proceeding which MediNotes determines in good faith has a
reasonable likelihood of success to enjoin or prohibit the consummation of the
transactions contemplated hereby, or to materially limit the rights of the
Stockholders hereunder): (A) seeking to obtain from the Stockholders in
connection with the Merger or the other transactions contemplated hereby or by
the other Transaction Documents money damages in excess of $100,000 that
Eclipsys does not commit to pay; (B) claiming that such Person is an owner of,
or has the right to acquire or to obtain ownership of, any assets of MediNotes
with a value in excess of $100,000; or (C) 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;

(j) 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;

(k) Eclipsys shall have executed a Commission Agreement in the form of Exhibit H
and delivered such agreement to Bond Medical Group;

(l) the Major Stockholders 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.

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 MediNotes and Eclipsys.

9.2 Termination by Eclipsys or MediNotes. 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 MediNotes if any Order permanently
restraining, enjoining or otherwise prohibiting the Merger or the Second 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 MediNotes, the Major Stockholders), and
(ii) the noncompliance with this Agreement by the party seeking to terminate
this Agreement (including, with respect to MediNotes, the Major Stockholders)
shall not have been the proximate cause of the issuance of the Order.

 

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9.3 Termination by MediNotes. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date, by MediNotes if:

(a) (i) the Closing shall not have been consummated on or before November 15,
2008 (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 MediNotes if MediNotes 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); or

(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 earlier of (i) 30 days after written notice of such breach is given
by MediNotes to Eclipsys and (ii) the Termination Date.

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); or

(b) there has been a material breach of any representation, warranty, covenant
or agreement of MediNotes 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
earlier of (i) 30 days after written notice of such breach is given by Eclipsys
to MediNotes, and (ii) the Termination Date.

9.5 Effect of Termination. Except for termination under Section 9.1, any
termination shall be effective upon receipt of written notice thereof given to
Eclipsys or MediNotes, as applicable. If this Agreement is terminated, all
obligations of the parties under this Agreement will 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 and Article X hereof
and the Confidentiality Agreement will survive, and (ii) 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 party’s
or parties’ failure to comply with its obligations under this Agreement, the
terminating party’s

 

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right to pursue all legal remedies for such breach will survive such termination
unimpaired, provided that MediNotes 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 the preceding clause, the maximum liability of
Eclipsys and Merger Sub (and the sole and exclusive remedy of MediNotes and the
Stockholders) for such Damages shall be limited in the aggregate to $800,000.
The remedies set forth in this Section 9.5 are the sole and exclusive remedies
of the parties if this Agreement is terminated, and MediNotes and the Major
Stockholders shall not be entitled to specific performance hereof.

ARTICLE X

MISCELLANEOUS

10.1 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, MediNotes and
the Major Stockholders contained herein, or in the other Transaction Documents,
there are no representations or warranties whatsoever by or on behalf of
MediNotes, the Major Stockholders, their Affiliates or agents relating to
MediNotes 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 will 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 MediNotes 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.

10.2 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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10.3 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 MediNotes or the Major Stockholders (prior to the Closing):

MediNotes Corporation

1025 Ashworth Road, Suite 222

West Des Moines, IA 50265

Fax: (515) 327-8856

Attn.: Donald G. Schoen

If to the Stockholders’ Representative:

Danny R. Wipff

8866 Gulf Freeway, Ste. 335

Houston, TX 77017

dwipf@aol.com

in each case, with a copy to (which copy shall not constitute notice):

Fredrikson & Byron, P.A.

200 South Sixth Street, Suite 4000

Minneapolis, MN 55402

Fax: (612) 492-7077

Attn.: Steven J. Dickinson

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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10.4 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 10.14, 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 10.4 shall survive any termination of this Agreement and the Closing.

10.5 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 will not be interpreted against any party that may have drafted
this Agreement.

(c) For purposes of this Agreement, “commercially reasonable efforts” will 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.

10.6 Counterparts. This Agreement may be executed in counterparts, including
facsimile 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.

10.7 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 10.8, 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 MediNotes (or any
beneficiary or dependent thereof).

10.8 Prior Review and Counsel. Eclipsys and Merger Sub, on the one hand, and
MediNotes and the Major Stockholders 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 attorneys of its own

 

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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 10.8 as intended
beneficiaries of such representations and warranties.

10.9 Waiver. No waiver of any breach of the provisions of this Agreement will 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
non-breaching party’s remedies with respect to any other or continuing or
subsequent breach.

10.10 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 or all Stockholders after the Closing Date).

10.11 Specific Performance. The parties agree that irreparable damage would
occur in the event any provision of this Agreement were not performed by
MediNotes or the Major Stockholders in accordance with the terms hereof and that
Eclipsys shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement by MediNotes and the Major Stockholders 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 it is entitled at law or in equity.

10.12 Further Assurances. The parties agree (a) to furnish upon request to each
other such further information, (b) to execute and deliver to each other such
other documents, and (c) to do 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.

10.13 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.

10.14 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

 

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of the scope or applicability of this Agreement to arbitrate, shall be
determined by arbitration in Dallas, Texas, 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 (including any dispute, claim or
controversy under Section 2.11), shall, to the extent practicable, be combined
in one arbitration proceeding under this Section 10.14, 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 MediNotes, 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 MediNotes (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 MediNotes (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) The 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 Iowa or Georgia, or
such other person with such other qualifications as Eclipsys and MediNotes (or,
after the Closing, the Stockholders’ Representative) may agree, and shall be
selected within seven Business Days after receipt of

 

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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) will 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 non-appealable. The decision and award of the arbitrator(s) shall be
accompanied by a reasoned opinion.

(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).

10.15 Costs and Fees. The prevailing party in any arbitration or court
proceeding under this Agreement, including any related appeal, will be entitled
to recover its fees and costs incurred in the arbitration or proceeding
(including attorneys and arbitration fees and costs) from the non-prevailing
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.

[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”

    “MEDINOTES” Eclipsys Corporation,     MediNotes Corporation, a Delaware
corporation     an Iowa corporation By:    /s/ R. Andrew Eckert     By:    /s/
Donald G. Schoen Name:    R. Andrew Eckert     Name:    Donald G. Schoen Title:
  Chief Executive Officer     Title:   CEO & President

 

“MERGER SUB” Sirona Acquisition Corporation,
an Iowa corporation By:    /s/ R. Andrew Eckert Name:      R. Andrew Eckert
Title:     Chief Executive Officer

 

“STOCKHOLDERS’ REPRESENTATIVE” /s/ Danny R. Wipff Danny R. Wipff

--------------------------------------------------------------------------------

“MAJOR STOCKHOLDERS”     By:    /s/ Donald G. Schoen     Iowa Capital
Corporation By:    /s/ Madelyn K. Schoen     By:    /s/ Terry L. Sullivan  
Donald G. and Madelyn K. Schoen,     Name:   Terry L. Sullivan   as JTWRS    
Title:   Vice President By:   /s/ Donald G. Schoen     Iowa Farm Bureau
Federation   Donald G. Schoen, an individual       By:   /s/ Madelyn K. Schoen  
  By:   /s/ Edward G. Parker   Madelyn K. Schoen, an individual     Name:  
Edward G. Parker       Title:   General Counsel By:   /s/ Travis Bond     IOWA
FIRST CAPITAL FUND II LP   Travis Bond, an individual    

 

By:

 

 

Corridor Management Co. LLC,

its General Partner

        By:   /s/ Davin S. Hills     By:   /s/ Dennis C. Wangeman   Davin S.
Hills, an individual     Name:   Dennis C. Wangeman       Title:   President By:
  /s/ Danny R. Wipff       Danny R. Wipff, an individual       By:   /s/ Suzanne
B. Schoen      

    Suzanne B. Schoen,

       

Sole Trustee of the Sophie B. Berlin

Revocable Trust “B,” EIN #36-6702116

      By:   /s/ Suzanne B. Schoen      

    Suzanne B. Schoen,

       

Sole Trustee of the Suzanne B. Schoen

Revocable Trust U/A 10-08-75

      By:   /s/ Robert C. Westlund      

    Robert C. Westlund,

       

Sole Trustee of the Robert C. Westlund

Trust U/A dated December 28, 1993