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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO

SECTIONS 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934



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

For the fiscal year ended December 31, 2008

or



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

Commission File Number: 000-24539

ECLIPSYS CORPORATION

(Exact name of registrant as specified in its charter)



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

Three Ravinia Drive

Atlanta, Georgia

30346

(Address of principal executive offices)

(404) 847-5000

(Registrants telephone number, including area code)

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



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

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

None

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

Yes  þ    No   ̈

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

Yes   ̈    No  þ

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

Yes  þ    No   ̈

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

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

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

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

Yes   ̈    No  þ

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

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



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









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Part I

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

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

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



|Item 1. | Business
|------- | --------

Overview

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



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



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



| |  |  | supports clinical and financial planning and analysis; and
| | - |  | ----------------------------------------------------------



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

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

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

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

Available Information

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



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

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

Segments

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

Recent Developments

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

EPSi

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

MediNotes

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

Premise

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

Initiatives and Challenges for 2009

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



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

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

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

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

Healthcare Industry Factors

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

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



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

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

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

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

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

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

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



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

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

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

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

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

Eclipsys Offerings

We provide the following software
and services:



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



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



| |  |  | Professional services related to implementation and use of our software;
| | - |  | ------------------------------------------------------------------------



| |  |  | Consulting services to help our clients improve their operations;
| | - |  | -----------------------------------------------------------------



| |  |  | IT outsourcing; and
| | - |  | -------------------



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



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Software

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



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



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



| |  |  | Gather patient demographic information and support appropriate resource utilization through integrated scheduling and registration solutions;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



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



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



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

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

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

Sunrise EnterpriseTMcomprises the following clinical, access, financial and departmental solutions:



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



| |  |  | Sunrise Access Manager TM, which also shares the Sunrise Clinical Manager platform and health data repository, includes Sunrise Enterprise SchedulingTMand Sunrise Enterprise RegistrationTM. It enables healthcare providers to
identify a patient at any time within a hospital and to collect and maintain patient information on an enterprise-wide basis.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

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



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



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



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



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

Other Clinical/Ancillary solutions include:



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



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



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

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



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



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| |  |  | PeakPractice EMRTMis an electronic medical record solution that interfaces with existing practice management systems.
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | PeakPractice PMTMis an independent practice management solution.
| | - |  | ----------------------------------------------------------------



| |  |  | Eclipsys PeakPractice SCTM(supply chain) is a web-based inventory management application that electronically tracks and orders medical supplies and inventory for physician practices.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | MediNotes eTMis an electronic medical record solution that helps physicians automate practices, including e-prescribing capabilities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------

Services

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

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

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

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

Sales and Marketing

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

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

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



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Seasonality

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

International

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

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

Research and Development

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

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

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

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

Competition

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

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



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

Employees

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

Financial Information about Geographic Areas

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



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

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



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



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|ITEM 1A.RISK | FACTORS
|------------ | -------

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

RISKS RELATING TO DEVELOPMENT AND OPERATION OF OUR SOFTWARE

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

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

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

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

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



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

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

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

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

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

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

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

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

RISKS RELATED TO SALES AND IMPLEMENTATION OF OUR SOFTWARE

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

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



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

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

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

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

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

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

Our earnings can vary significantly depending on periodic software revenues.

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



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RISKS RELATED TO OUR INFORMATION TECHNOLOGY (IT) OR TECHNOLOGY SERVICES

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

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

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

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

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

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

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

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



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RISKS RELATED TO THE HEALTHCARE IT INDUSTRY AND MARKET

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

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

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

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

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

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

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



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

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

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

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

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

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

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

RISKS RELATED TO OUR BUSINESS STRATEGY

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

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



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

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

RISKS RELATED TO OUR OPERATING RESULTS, ACCOUNTING CONTROLS AND FINANCES

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

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

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

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

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

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



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



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



| |  |  | the timing, size and complexity of our software sales and implementations;
| | - |  | --------------------------------------------------------------------------



| |  |  | healthcare industry conditions and the overall demand for healthcare information technology;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | variations in periodic software license revenues;
| | - |  | -------------------------------------------------



| |  |  | the financial condition of our clients and potential clients;
| | - |  | -------------------------------------------------------------



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



| |  |  | client decisions regarding renewal or termination of their contracts;
| | - |  | ---------------------------------------------------------------------



| |  |  | software and price competition;
| | - |  | -------------------------------



| |  |  | investment required to support our international expansion efforts;
| | - |  | -------------------------------------------------------------------



| |  |  | personnel changes and other organizational changes and related expenses;
| | - |  | ------------------------------------------------------------------------



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



| |  |  | healthcare reform measures and healthcare regulation in general;
| | - |  | ----------------------------------------------------------------



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



| |  |  | fluctuations in general economic and financial market conditions, including interest rates.
| | - |  | -------------------------------------------------------------------------------------------

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

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

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

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

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

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



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

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

Impairment of intangible assets could increase our expenses.

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

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

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

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

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

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

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

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

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



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

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

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

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

RISKS OF LIABILITY TO THIRD PARTIES

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

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

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



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

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

RISKS RELATED TO OUR STRATEGIC RELATIONSHIPS AND INITIATIVES

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

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

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

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

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

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



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



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



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



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



| |  |  | Acquisitions also expose us to the risk of assumed known and unknown liabilities.
| | - |  | ---------------------------------------------------------------------------------



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



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RISKS RELATED TO INDUSTRY REGULATION

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

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



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



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



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

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

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

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

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

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



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RISKS RELATED TO OUR PERSONNEL AND ORGANIZATION

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

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

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

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

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

RISKS RELATED TO OUR EQUITY STRUCTURE

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

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

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



| |  |  | only one of the three classes of directors is elected each year;
| | - |  | ----------------------------------------------------------------



| |  |  | the ability of our stockholders to remove directors without cause is limited;
| | - |  | -----------------------------------------------------------------------------



| |  |  | the right of stockholders to act by written consent has been eliminated;
| | - |  | ------------------------------------------------------------------------



| |  |  | the right of stockholders to call a special meeting of stockholders has been eliminated; and
| | - |  | --------------------------------------------------------------------------------------------



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

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



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



|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

Not applicable.



|Item 2. | Properties
|------- | ----------

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



|Item 3. | Legal Proceedings
|------- | -----------------

See Note N,
Commitments and Contingencies in Notes to the Consolidated Financial Statements.



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

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

Part II



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

Price Range of Common Stock

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



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

Dividends

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



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Shares Available Under Equity Compensation Plans

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

Comparative Stock Performance

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

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Eclipsys Corporation, The NASDAQ Composite Index

And The NASDAQ Computer & Data Processing Index

LOGO

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

Fiscal year ending December 31.



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

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

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



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Holders of Record

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

Issuer Purchases of Equity Securities

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



|                    |  |                                                  |   |  |                                              |       |                                                                                                 |   |                                                                                                                             |  
|------------------- |  | ------------------------------------------------ | - |  | -------------------------------------------- | ----- | ----------------------------------------------------------------------------------------------- | - | --------------------------------------------------------------------------------------------------------------------------- | -
|Period              |  | (a)Total Numberof Sharesof CommonStock Purchased |   |  | (b)Average PricePaid PerShare ofCommon Stock |       | (c)Total Number ofShares of Common StockPurchased as Part ofPublicly AnnouncedPlans or Programs |   | (d)Maximum Number (orApproximate Dollar Value) ofShares of Common Stock thatMay Yet Be Purchased Underthe Plans or Programs
|October 1-31, 2008  |  |                                                 |   |  |                                              |      |                                                                                                 |  |                                                                                                                             | 
|November 1-30, 2008 |  |                                                 |   |  |                                              |      |                                                                                                 |  |                                                                                                                             | 
|December 1-31, 2008 |  | 30,232                                           | 1 |  | $                                            | 12.18 |                                                                                                 |  |                                                                                                                             | 
|                    |  |                                                  |   |  |                                              |       |                                                                                                 |   |                                                                                                                             |  
|Total               |  | 30,232                                           |   |  | $                                            | 12.18 |                                                                                                 |  |                                                                                                                             | 
|                    |  |                                                  |   |  |                                              |       |                                                                                                 |   |                                                                                                                             |  



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



|Item 6. | Selected Financial Data
|------- | -----------------------

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

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



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Consolidated Statements of Operations

(in thousands, except per share data)



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

Balance Sheet Data



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



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|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

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

EXECUTIVE OVERVIEW

About the Company

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



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



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



| |  |  | supports clinical and financial planning and analysis; and
| | - |  | ----------------------------------------------------------



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

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

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



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



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

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



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

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



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



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



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

Business Environment

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

New Accounting Pronouncements

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

Critical Accounting Policies

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

Revenue Recognition

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



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



| |  |  | whether the fees associated with our software and services are fixed or determinable;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | whether collection of our fees is considered probable;
| | - |  | ------------------------------------------------------



| |  |  | whether professional services are essential to the functionality of the related software;
| | - |  | -----------------------------------------------------------------------------------------



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



| |  |  | whether we have verifiable objective evidence of fair value for our software and services.
| | - |  | ------------------------------------------------------------------------------------------

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

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

Subscription Contracts

Our subscription contracts typically include the following elements:



| |  |  | Software license;
| | - |  | -----------------



| |  |  | Maintenance;
| | - |  | ------------



| |  |  | Professional services; and
| | - |  | --------------------------



| |  |  | Third party hardware or remote hosting services.
| | - |  | ------------------------------------------------

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

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

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

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



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

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

Traditional Software Contracts

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



| |  |  | Software license;
| | - |  | -----------------



| |  |  | Maintenance;
| | - |  | ------------



| |  |  | Professional services; and
| | - |  | --------------------------



| |  |  | Third party hardware or remote hosting services.
| | - |  | ------------------------------------------------

Revenue for each of the elements is recognized as follows:

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

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

Software Contracts
Requiring Contract Accounting

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

Stand-Alone Software and Service

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



| |  |  | Software license;
| | - |  | -----------------



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| |  |  | Maintenance;
| | - |  | ------------



| |  |  | Professional services;
| | - |  | ----------------------



| |  |  | Hardware;
| | - |  | ---------



| |  |  | Outsourcing; and
| | - |  | ----------------



| |  |  | Remote Hosting services.
| | - |  | ------------------------

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

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

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

Hardware is recognized upon delivery pursuant to SAB 104.

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

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

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

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

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

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

Allowance for Doubtful Accounts

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



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Capitalized Software Development Costs

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

Stock-Based Compensation

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

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

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



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##### Table of Contents

Income Taxes

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

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

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

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

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

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

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



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##### Table of Contents

Goodwill

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



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RESULTS OF OPERATIONS

Statement of Operations Data

(in thousands, except percentages and per share data)



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



|* | Not meaningful
|- | --------------

2008 compared to 2007

Revenues

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

Systems and Services Revenues

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



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



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



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

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

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

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



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



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

Hardware Revenues

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

Operating Expenses

Stock-based compensation

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

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

Cost of Systems and Services

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



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



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



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

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



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##### Table of Contents

Cost of Hardware

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

Sales and Marketing

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

Research and Development

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

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

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



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

General and Administrative

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



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##### Table of Contents

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

Depreciation and Amortization

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

In-Process Research and Development Charge

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

Restructuring Charges

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

Gain on Sale of Assets

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

Loss on Auction Rate Security (ARS)

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

Interest Expense

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



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

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



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Interest Income

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

Provision for Income Taxes

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

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

2007 compared to 2006

Revenues

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

Systems and Services Revenues

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



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



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



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

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



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

Hardware
Revenues

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

Operating Expenses

Cost of Systems and Services

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



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



| |  |  | Higher travel costs of $3.3 million associated with increased level of sales activity; and
| | - |  | ------------------------------------------------------------------------------------------



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



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

Cost of Hardware

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

Sales and Marketing

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

Research and Development

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

In summary, research and development expense was as follows:



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

General and Administrative

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

Depreciation and Amortization

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



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Restructuring Charges

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

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

Gain on Sale of Assets

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

(in thousands):



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

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

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

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

Interest Income

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

(Benefit) Provision for Income Taxes

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



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

Liquidity and Capital Resources

Overview

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

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

2008

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

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



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



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



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



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



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



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

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



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

2007

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

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



| |  |  | an increase in accounts receivable of $5.7 million related to increased revenue in 2007;
| | - |  | ----------------------------------------------------------------------------------------



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



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



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



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



| |  |  | an increase in other long term liabilities of $2.5 million; and
| | - |  | ---------------------------------------------------------------



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

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

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

2006

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

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



| |  |  | an increase in accounts receivable of $14.5 million related to increased revenue in 2006;
| | - |  | -----------------------------------------------------------------------------------------



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



| |  |  | an decrease in accrued compensation of $4.9 million due timing of payroll transactions;
| | - |  | ---------------------------------------------------------------------------------------



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



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



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

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

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

Future Capital Requirements

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

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

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

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



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

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

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

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

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



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

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

SFAS 157 Fair Value Measurements

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

Contingencies

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



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

Off-Balance Sheet Arrangements

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

Contracts and Commitments

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



|                                   |  |                        |         |                 |   |           |  |           |         |                  |   |        |  |   |       
|---------------------------------- |  | ---------------------- | ------- | --------------- | - | --------- |  | --------- | ------- | ---------------- | - | ------ |  | - | ------
|                                   |  | Payments Due by Period
|                                   |  | (in thousands)        
|                                   |  | Total                  |         | Less than1 year |   | 1-3 years |  | 4-5 years |         | More than5 years
|Contractual Obligations            |  |                        |         |                 |   |           |  |           |         |                  |   |        |  |   |       
|Operating Leases                   |  | $                      | 40,359  |                 | $ | 9,128     |  | $         | 12,542  |                  | $ | 8,567  |  | $ | 10,122
|Long-Term Debt Obligations         |  | $                      | 105,000 |                 | $ |          |  | $         | 105,000 |                  | $ |       |  | $ |      
|Unconditional Purchase Obligations |  | $                      | 121,401 |                 |   | 47,796    |  |           | 50,740  |                  |   | 22,865 |  |   |      
|                                   |  |                        |         |                 |   |           |  |           |         |                  |   |        |  |   |       
|Total                              |  | $                      | 266,760 |                 | $ | 56,924    |  | $         | 168,282 |                  | $ | 31,432 |  | $ | 10,122
|                                   |  |                        |         |                 |   |           |  |           |         |                  |   |        |  |   |       

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

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



|Item 7A. | Quantitative and Qualitative Disclosures about Market Risk
|-------- | ----------------------------------------------------------

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

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



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

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

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

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



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

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

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



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|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

Index to Consolidated Financial Statements:

Financial Statements:



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



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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Eclipsys Corporation:

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

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

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

/s/ PricewaterhouseCoopers

Atlanta, Georgia

February 24, 2009



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ECLIPSYS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in
thousands, except share data)



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

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



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ECLIPSYS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)



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

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



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ECLIPSYS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)



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

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



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ECLIPSYS CORPORATION AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders Equity and Comprehensive Income

(in thousands, except share data)



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

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



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS

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

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Segment Information

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

Use of Estimates

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

Cash and Cash Equivalents

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



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Restricted Cash

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

Marketable Securities

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

Accounts Receivable and Unbilled Receivables

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

Allowance for Doubtful Accounts

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

Property and Equipment

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

Capitalized Software Development Costs and Acquired Technology

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



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

Intangible Assets, including
Goodwill

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

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

Long-Lived Assets

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

Fair Value of Financial Instruments

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

Revenue Recognition

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

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



| |  |  | whether the fees associated with our software and services are fixed or determinable;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | whether collection of our fees is considered probable;
| | - |  | ------------------------------------------------------



| |  |  | whether professional services are essential to the functionality of the related software;
| | - |  | -----------------------------------------------------------------------------------------



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



| |  |  | whether we have verifiable objective evidence of fair value for our software and services.
| | - |  | ------------------------------------------------------------------------------------------

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

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

Subscription Contracts

Our subscription contracts typically include the following elements:



| |  |  | Software license;
| | - |  | -----------------



| |  |  | Maintenance;
| | - |  | ------------



| |  |  | Professional services; and
| | - |  | --------------------------



| |  |  | Third party hardware or remote hosting services.
| | - |  | ------------------------------------------------

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

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

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

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

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

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



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

Traditional Software Contracts

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



| |  |  | Software license;
| | - |  | -----------------



| |  |  | Maintenance;
| | - |  | ------------



| |  |  | Professional services; and
| | - |  | --------------------------



| |  |  | Third party hardware or remote hosting services.
| | - |  | ------------------------------------------------

Revenue for each of the elements is recognized as follows:

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

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

Software Contracts
Requiring Contract Accounting

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

Stand-Alone Software and Services

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



| |  |  | Software license;
| | - |  | -----------------



| |  |  | Maintenance;
| | - |  | ------------



| |  |  | Professional services;
| | - |  | ----------------------



| |  |  | Hardware;
| | - |  | ---------



| |  |  | Outsourcing; and
| | - |  | ----------------



| |  |  | Remote Hosting services.
| | - |  | ------------------------

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

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



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

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

Hardware revenue is recognized
upon delivery pursuant to SAB 104.

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

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

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

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

Costs of Revenues

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

Shipping Costs

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

Sales Taxes

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



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Research and Development

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

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

Income Taxes

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

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

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

Stock-Based Compensation

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

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

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



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

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

Concentration of Credit Risk

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

Foreign Currency

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

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

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



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New Accounting Pronouncements

Recently Issued Standards

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

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

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



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

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

Recently Adopted Standards

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

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

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

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



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



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



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

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



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NOTE C - BASIC AND DILUTED NET INCOME PER SHARE

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

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



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



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NOTE D - INVESTMENTS

Investment balances consist of the following (in thousands):



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



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



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



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



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

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



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

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

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

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



|                          |           |                     |                  |  |   |      
|------------------------- | --------- | ------------------- | ---------------- |  | - | -----
|Description of Securities |           | Less than 12 Months
|                          | FairValue |                     | UnrealizedLosses
|Auction rate securities:  |           |                     |                  |  |   |      
|Goldman Sachs purchased   |           | $                   | 71,499           |  | $ | 8,751



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

NOTE E - FAIR VALUE MEASUREMENT

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



| |  |  | Level 1: Unadjusted quoted prices in active markets for identical assets.
| | - |  | -------------------------------------------------------------------------



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



| |  |  | Level 3: Unobservable inputs reflecting managements own assumptions about the inputs used in estimating the value of the asset.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

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



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



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



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

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



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

NOTE F - ACCOUNTS RECEIVABLE AND UNBILLED RECEIVABLES

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



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

NOTE G - PROPERTY AND EQUIPMENT

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



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

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



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NOTE H - ACQUIRED TECHNOLOGY AND INTANGIBLE ASSETS, INCLUDING GOODWILL

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



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

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

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



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



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

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

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

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

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

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



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

NOTE I - AUTHORIZED SHARES

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



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NOTE J - STOCK-COMPENSATION PLANS

2008 Omnibus Incentive Plan

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

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

2005 Inducement Grant Stock Incentive Plan

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

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

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

Stock-Options Awards

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



|                                                 |  |                 |   |  |                              |       |                                         |      |                                       |   |      
|------------------------------------------------ |  | --------------- | - |  | ---------------------------- | ----- | --------------------------------------- | ---- | ------------------------------------- | - | -----
|                                                 |  | Number ofShares |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualLife |      | AggregateIntrinsicValue(in thousands)
|Outstanding at January 1, 2008                   |  | 5,254,121       |   |  | $                            | 16.58 |                                         |      |                                       |   |      
|Options granted                                  |  | 1,195,225       |   |  | $                            | 19.61 |                                         |      |                                       |   |      
|Options exercised                                |  | (505,494        | ) |  | $                            | 12.78 |                                         |      |                                       |   |      
|Options canceled or forfeited                    |  | (414,855        | ) |  | $                            | 21.63 |                                         |      |                                       |   |      
|                                                 |  |                 |   |  |                              |       |                                         |      |                                       |   |      
|Outstanding at December 31, 2008                 |  | 5,528,997       |   |  | $                            | 17.23 |                                         | 5.36 |                                       | $ | 5,442
|                                                 |  |                 |   |  |                              |       |                                         |      |                                       |   |      
|Vested and expected to vest at December 31, 2008 |  | 5,239,016       |   |  | $                            | 17.10 |                                         | 5.29 |                                       | $ | 5,420
|                                                 |  |                 |   |  |                              |       |                                         |      |                                       |   |      
|Exercisable at December 31, 2008                 |  | 3,031,304       |   |  | $                            | 15.19 |                                         | 4.36 |                                       | $ | 5,263
|                                                 |  |                 |   |  |                              |       |                                         |      |                                       |   |      

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



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

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



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

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

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

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

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

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

Non-Vested Restricted Stock

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



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



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

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

Deferred Stock Units

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

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

Employee Stock Purchase Plan

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

Employee Savings Plan

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



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Stock-Based Compensation

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



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

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

NOTE K - LONG-TERM FINANCING

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

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

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



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

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

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



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

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

NOTE L - RESTRUCTURING

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

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



|                             |  |                            |        |  
|---------------------------- |  | -------------------------- | ------ | -
|                             |  | TerminationRelatedBenefits |       
|Balance at December 31, 2006 |  | $                          |       |  
|Restructuring charge         |  |                            | 1,175  |  
|Payments                     |  |                            | (198   | )
|                             |  |                            |        |  
|Balance at December 31, 2007 |  | $                          | 977    |  
|                             |  |                            |        |  
|Payments                     |  |                            | (1,138 | )
|Other                        |  |                            | 161    |  
|                             |  |                            |        |  
|Balance at December 31, 2008 |  | $                          |       |  
|                             |  |                            |        |  

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

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



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



|                             |  |                                  |        |   |                  |   |        |       |  |   |        |  
|---------------------------- |  | -------------------------------- | ------ | - | ---------------- | - | ------ | ----- |  | - | ------ | -
|                             |  | One-timeEmployee-RelatedBenefits |        |   | FacilityClosures |   |        | Total | 
|Balance at December 31, 2006 |  | $                                | 3,174  |   |                  | $ | 2,486  |       |  | $ | 5,660  |  
|Payments                     |  |                                  | (2,896 | ) |                  |   | (1,587 | )     |  |   | (4,483 | )
|                             |  |                                  |        |   |                  |   |        |       |  |   |        |  
|Balance at December 31, 2007 |  | $                                | 278    |   |                  | $ | 899    |       |  | $ | 1,177  |  
|                             |  |                                  |        |   |                  |   |        |       |  |   |        |  
|Payments                     |  |                                  | (261   | ) |                  |   | (602   | )     |  |   | (863   | )
|                             |  |                                  |        |   |                  |   |        |       |  |   |        |  
|Balance at December 31, 2008 |  | $                                | 17     |   |                  | $ | 297    |       |  | $ | 314    |  
|                             |  |                                  |        |   |                  |   |        |       |  |   |        |  

NOTE M - INCOME TAXES

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



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

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



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



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



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



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



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

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

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

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



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

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

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

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

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

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

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



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

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



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

NOTE N - COMMITMENTS AND CONTINGENCIES

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

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

Non-cancelable Operating Leases

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



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

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

Indemnification clauses

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



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NOTE O - ACQUISITIONS

EPSi

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

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

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



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

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

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

MediNotes

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

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



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

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



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

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

Premise

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

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

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



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



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NOTE P - SALE OF ASSETS

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

(in thousands):



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

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

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

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

NOTE Q - RELATED PARTY TRANSACTIONS

License Agreement with
Partners HealthCare System, Inc.

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

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

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

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

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



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NOTE R - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

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



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



|                                           |  |                                       |         |               |   |              |  |               |         |      |   |         |  |   |        
|------------------------------------------ |  | ------------------------------------- | ------- | ------------- | - | ------------ |  | ------------- | ------- | ---- | - | ------- |  | - | -------
|                                           |  | For the Year Ended December 31, 2007 
|                                           |  | (in thousands, except per share data)
|                                           |  | FirstQuarter                          |         | SecondQuarter |   | ThirdQuarter |  | FourthQuarter |         | Year
|Revenues                                   |  | $                                     | 113,030 |               | $ | 119,019      |  | $             | 121,080 |      | $ | 124,404 |  | $ | 477,533
|Income (loss) from operations              |  |                                       | 906     |               |   | 4,125        |  |               | 7,513   |      |   | 4,774   |  |   | 17,318 
|Net income (loss)                          |  |                                       | 2,401   |               |   | 5,694        |  |               | 8,864   |      |   | 24,182  |  |   | 41,141 
|Basic net income (loss) per common share   |  | $                                     | 0.05    |               | $ | 0.11         |  | $             | 0.17    |      | $ | 0.45    |  | $ | 0.78   
|Diluted net income (loss) per common share |  | $                                     | 0.04    |               | $ | 0.11         |  | $             | 0.16    |      | $ | 0.45    |  | $ | 0.76   

NOTE S - GEOGRAPHIC INFORMATION

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



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



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



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

NOTE T - SUBSEQUENT EVENTS (UNAUDITED)

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



|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

SCHEDULE II  VALUATION OF QUALIFYING ACCOUNTS

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

(in thousands)



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



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

Not applicable.



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|Item 9A. | Controls and Procedures
|-------- | -----------------------

Evaluation of
Disclosure Controls and Procedures

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

Management Report on Internal Control Over Financial Reporting

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

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

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

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

Changes in Internal Control over Financial Reporting

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



|Item 9B. | Other Information
|-------- | -----------------

None.

Part III



|Item 10. | Directors, Executive Officers and Corporate Governance
|-------- | ------------------------------------------------------

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



|Item 11. | Executive Compensation
|-------- | ----------------------

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



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

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



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



|                                                               |  |                                                                                              |     |  |                                                                              |       |                                                                                                                                           |           |    
|-------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- | --- |  | ---------------------------------------------------------------------------- | ----- | ----------------------------------------------------------------------------------------------------------------------------------------- | --------- | ---
|                                                               |  | Number of securities to beissued upon exercise
ofoutstanding options, warrantsand rights (a) |     |  | Weighted-average exerciseprice of
outstandingoptions, warrants andrights (b) |       | Number of securities remainingavailable for future issuanceunder equity compensation plans(excludingsecurities reflected incolumn (a))(c) |          
|Equity compensation plans approved by security holders         |  | 4,499,197                                                                                    |     |  | $                                                                            | 16.94 |                                                                                                                                           | 3,873,070 |    
|Equity compensation plans not approved by security holders (1) |  | 1,029,800                                                                                    | (2) |  | $                                                                            | 18.52 |                                                                                                                                           | 327,486   | (3)
|                                                               |  |                                                                                              |     |  |                                                                              |       |                                                                                                                                           |           |    
|Total                                                          |  | 5,528,997                                                                                    |     |  |                                                                              |       |                                                                                                                                           | 4,200,556 | (4)
|                                                               |  |                                                                                              |     |  |                                                                              |       |                                                                                                                                           |           |    



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



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



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



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



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

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



|Item 14. | Principal Accounting Fees and Services
|-------- | --------------------------------------

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



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Part IV



|Item 15. | Exhibits, Financial Statement Schedules.
|-------- | ----------------------------------------



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



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



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



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



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



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



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



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



|* | Indicates a management contract or compensatory plan or arrangement
|- | -------------------------------------------------------------------



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Signatures

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



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



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