##### 









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


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|x  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended December 31, 2004                                                 
|  
|or
|  
|o  |  | 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)

1750 Clint Moore Road


Boca Raton, Florida


33487


(Address of principal executive offices)


(561)-322-4321


(Registrants telephone number, including area code)


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


None


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


Common Stock, $.01 par value, and Preferred Stock
Purchase Rights


x o


o


x o






|                             |  |                                       
|---------------------------- |  | --------------------------------------
|Class                        |  | Shares Outstanding as of March 4, 2005
|                             |  |                                       
|Common Stock, $.01 par value |  | 47,617,532                            

DOCUMENTS INCORPORATED BY REFERENCE












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##### 



Part I


This report contains forward-looking statements. Any
statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements.
Without limiting the forgoing, the words believes,
anticipates, plans, expects,
intends and similar expressions are intended to
identify forward-looking statements. The important factors
discussed below under the caption Certain Factors That May
Affect Future Operating Results, among others, could cause
actual results to differ materially from those indicated by
forward-looking statements made herein and presented elsewhere
by management from time to time. We undertake no obligation to
publicly update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.




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

Overview








U.S. News & World Report


www.eclipsys.com


Recent Developments




2



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##### 













Challenges and Compliance Pressures in the Healthcare
Industry




The Decade of Health Information Technology.




| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | ensure that appropriate information to guide medical decisions
    is available at the time and place of care;                                                                            
|
| |  | improve healthcare quality, reduce medical errors, and advance
    the delivery of appropriate, evidence-based medical care;                                                              
|
| |  | reduce healthcare costs resulting from inefficiency, medical
    errors, inappropriate care, and incomplete information;                                                                  
|
| |  | promote a more-effective marketplace, greater competition, and
    increased choice through the wider availability of accurate
    information on healthcare costs, quality, and outcomes;

3



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##### 





| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | improve the coordination of care and information among
    hospitals, laboratories, physician offices, and other ambulatory
    care providers through an effective infrastructure for the
    secure and authorized exchange of healthcare
    information; and
|
| |  | ensure that patients individually identifiable health
    information is secure and protected.                                                                                                                                                                 







Institute of Medicine.




The Leapfrog Group.




Health Insurance Portability and Accountability Act.


4



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##### 







Joint Commission on Accreditation of Healthcare
Organizations.


The Internet.


The Eclipsys Solution








| |   |                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | provide hospitals with automated processes that improve clinical
    workflow and support clinical, financial and operational
    decision-making throughout the organization;                                                                                                                        
|
| |  | provide clinicians with access to patient information,
    evidence-based clinical content and supporting references, such
    as medical journals, through a variety of technologies that
    include, among other things, wireless devices within the
    healthcare facility and over the Internet;
|
| |  | provide hospitals with the information that they need to
    negotiate with insurance companies, Medicare and Medicaid, and
    to help them maximize collections and minimize payment denials;                                                                                                       
|
| |  | provide clinicians with real-time information regarding the cost
    and effectiveness of patient tests and treatments;                                                                                                                                                                               
|
| |  | assist our customers in improving processes and implementing
    best practices within their hospitals;                                                                                                                                                                                               
|
| |  | allow healthcare organizations to meet clinical and business
    needs while preserving investments in existing software and
    systems, to the extent possible; and                                                                                                                                 

5



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##### 





| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | encourage faster, more cost-effective implementation of in-house
    or remote-hosted software systems that healthcare organizations
    may operate with a lower total cost of ownership.

The Eclipsys Strategy








| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Software. We are committed to offering flexible products
    and product-delivery options. Our software can be operated at
    the hospital or may be hosted remotely by us. We believe our
    software solves many clinical, financial and administrative
    needs of healthcare organizations. Furthermore, customers can
    purchase our software applications individually or in
    combination. The software may be integrated with a
    customers existing systems to minimize cost and
    disruption. Our software is built on an open architecture
    platform. We believe this open architecture design enables
    customers to share information between their organizations,
    Eclipsys, third-party systems and unaffiliated organizations.
|
| | Content. We have developed, along with our customers,
    evidence-based content that provides guidelines on treatment
    methodologies. Our strategy is to integrate this content into
    our software offerings so it can assist physicians, nurses and
    other clinicians as they deliver care. We also intend to license
    this content to other third parties under re-marketing
    arrangements.                                                                                                                                                                                                                                                                                                                                                     
|
| | Services. We offer a wide range of professional services.
    We believe that the end-user experience and overall customer
    satisfaction is enhanced when our service professionals assist
    with the implementation, training, support, remote hosting and
    maintenance of our products and the networks that support them.
    As part of our expanded service offerings, our outsourcing
    services group can assume full or partial responsibility for a
    healthcare organizations IT operations. We believe
    offering a full array of services will create additional
    opportunities for enterprise software sales.                                                                                                                      



Continued Market Expansion.


Flexible Contracting Model.


Products




6



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##### 





|                                                                         |  |                                                                                                                                                               
|------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|Product                                                                  |  | Primary Functions                                                                                                                                             
|                                                                         |  |                                                                                                                                                               
|Sunrise Clinical Manager                                                 |  |  Computer-based Patient Record providing clinical
    rules, evidence-based clinical content and other information to
    facilitate clinical decision-making
|                                                                        
|                                                                         |  |  In-hospital and remote access to patient records,
    including on wireless handheld devices                                                                
|                                                                        
|                                                                         |  |  On-line ordering of clinical services and
    prescriptions (computerized physician order entry)                                                            
|                                                                        
|                                                                         |  |  Closed-loop medication management capabilities to
    ensure 5 Rights are followed (right patient, right
    drug, right dose, right route, right time)   
|                                                                        
|                                                                         |  |  Specialized workflows and features for the emergency
    department, ambulatory clinic and surgery department environments                                  
|                                                                        
|                                                                         |  |  Clinical documentation with evidence-based clinical
    practice guidelines and patient classification and acuity
    methodology                           
|                                                                        
|Sunrise Access Manager                                                   |  |  Access to patient information and coordination of
    gathering of additional information at each stage of patient care                                     
|                                                                        
|                                                                         |  |  Coordinate scheduling of appointments                                                                                                                       
|                                                                        
|                                                                         |  |  Patient Scheduling                                                                                                                                          
|                                                                        
|Sunrise Patient Financial Manager                                        |  |  Coordinate compliance with managed-care contract
    reimbursement terms, patient billing, and third-party
    reimbursement                                
|                                                                        
|Sunrise Decision Support Manager and Sunrise Discovery                   |  |  Clinical and financial data repository to analyze
    past clinical, operational and financial performance                                                  
|                                                                        
|                                                                         |  |  Model future plans and alternatives                                                                                                                         
|                                                                        
|                                                                         |  |  Measure and monitor performance                                                                                                                             
|                                                                        
|Sunrise Record Manager                                                   |  |  Automate medical record management system                                                                                                                   
|                                                                        
|                                                                         |  |  Manage documents and images throughout the enterprise                                                                                                       
|                                                                        
|eLink                                                                    |  |  Tools to enable integration of data from existing
    systems                                                                                               
|                                                                        
|Eclipsys Diagnostic Imaging Solutions (Sunrise RIS and
    Sunrise PACS) |  |  An integrated diagnostic imaging solution                                                                                                                   

Sunrise Clinical Manager.




| |   |                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Order entry, communication and management, which enable
    physicians to order online prescriptions and laboratory or
    diagnostic tests or procedures, and routes the order to the
    appropriate department or party within the organization for
    fulfillment.

7



---



##### 





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Knowledge-based orders, which is a clinical decision support
    system that automatically provides real-time guidance to
    physicians by alerting them to possible problems with or
    conflicts between newly entered orders and existing patient
    information using the systems rules database. A
    comprehensive set of clinical rules developed by physicians is
    available with knowledge-based orders. Customers can modify
    these existing rules or can develop their own clinical rules.
|
| |  | Clinical decision support, which triggers alerts, including by
    e-mail or pager, upon the occurrence of a specified change in a
    patients condition or any other physician-designated
    event, such as the delivery of unfavorable laboratory results,
    while relating the new information to information already in the
    system for that patient.                                                                                                                                               
|
| |  | Clinical pathways and scheduled activities lists, which provides
    access to standardized patient-care profiles and assists in the
    scheduling of clinical treatment procedures.                                                                                                                                                                                                                                                                                                                           
|
| |  | Clinical documentation, which gathers and presents organized,
    accurate and timely patient information by accepting and
    arranging input from caregivers, laboratories or monitoring
    equipment. Features include an automated patient classification
    and acuity system that facilitates timely adjustment of nursing
    staffing and other resources.                                                                                                                                            
|
| |  | Closed-loop medication management, which links physicians as
    they place orders, pharmacists as they verify and dispense those
    orders, and nurses as they administer medications.                                                                                                                                                                                                                                                                                                                        
|
| |  | Remote access services, which provides physicians with Web-based
    access to patient information from within the healthcare
    facility or at a remote location.                                                                                                                                                                                                                                                                                                                                             
|
| |  | Clinical data repository, which permanently stores clinical and
    financial information in easily accessible patient care records.                                                                                                                                                                                                                                                                                                                                                                            

Sunrise Access Manager.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Comprehensive admission, discharge and transfer, management or
    ADT. Patient registration captures demographic, insurance,
    referral and primary-care provider information and automates
    visit management by collecting and recording visit information
    in compliance with third-party billing regulations and managed
    care contractual requirements.                                                       
|
| |  | Patient scheduling and resource management, which allows
    personnel to schedule patient appointments throughout an
    organization based on patient preferences and resource
    availability. An integrated application, it uses a single
    database with registration, ADT and patient accounting functions
    and provides complex scheduling capabilities such as multiple
    and linked conditional appointments.
|
| |  | Work Quality Monitor, which is a supervisory task that runs in
    the background to continuously match transactions against
    quality protocols to detect transaction errors, mismatches and
    omissions. When it identifies such exceptions, Work Quality
    Monitor sends a real-time alert to the party charged with the
    responsibility for remedying the situation.                                             
|
| |  | Enterprise person identifier, or ePI, which is a single index of
    all patients and healthcare plan members within a healthcare
    providers system that supports searches on the basis of a
    variety of characteristics, such as name, Social Security number
    or other demographic data.                                                                                                                          
|
| |  | Managed-care support features, such as verifying insurance
    eligibility online and compliance with managed-care plan rules
    and procedures.                                                                                                                                                                                                                                                                             
|
| |  | Centralized capabilities for bed management: bed reservations,
    transfers and discharges and tracking in-house patient
    information.                                                                                                                                                                                                                                                                                    

8



---



##### 



Sunrise Patient Financial Manager.




| |   |                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Patient accounting, which automates the patient-billing and
    accounts receivable functions, including bill generation,
    reimbursement calculation, account follow-up and account
    write-offs. Paperless processing is achieved through real-time
    inquiry, editing, sorting, reporting, commenting and updating
    from other applications, including modules in SAM and SCM. 
|
| |  | Contract management, which includes a repository for the payment
    terms, restrictions, approval requirements and other rules and
    regulations of each insurance plan and managed care contract
    accepted by an organization. Contract management is used in
    conjunction with other Sunrise products to ensure that patient
    care complies with these rules and regulations.
|
| |  | Reimbursement management, which facilitates the monitoring of
    receivables, performance of collection activity, reconciliation
    with third parties and analysis of contract compliance and
    performs the following:                                                                                                                                                               



| |   |                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | calculates expected payments and contractual allowances for all
    accounts and reports net receivables by contract, carrier, or
    individual account;
|
| |  | automatically creates third-party logs as a by-product of
    billing; and                                                                               
|
| |  | breaks down and ages each accounts receivables according
    to the responsible payer to facilitate collection activity and
    reporting.              



| |   |                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Multiple entity billing allows multiple entities to use
    single-statement billing and registration across the entire
    enterprise. Patient financial records may be maintained
    indefinitely by the entity and the enterprise, which allows
    enterprise-wide access and outcomes analysis.

Sunrise Decision Support Manager.




| |   |                                                    
| | - | ---------------------------------------------------
| |  | case mix, reimbursement and utilization management;
|
| |  | cost and profitability analysis; and               
|
| |  | strategic planning, modeling and forecasting.      

Sunrise Discovery.


Sunrise Record Manager.


9



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##### 







| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Registration scanning to capture patient identification and
    consent forms and other documents.                                              
|
| |  | Document imaging and document scanning; interfaces with other
    electronic document systems.                                                  
|
| |  | Tools for managing patient medical records, including tracking
    record locations, chart requests, and secured release of
    information.    
|
| |  | Workflow tools for managing record movement between workgroups
    and areas in the operational team.                                           
|
| |  | JCAHO-compliant deficiency and chart completion management
    functions, including HIPAA-compliant electronic signature
    functions.         
|
| |  | Medical records abstracting, working with industry-standard
    encoders.                                                                       
|
| |  | Patient account management functionality, including workflow,
    interfaces, remit processing, forms overlay and document image
    management.
|
| |  | Tools to manage enterprise documents for human resources,
    materials management and other applications not involving
    patient care.       

eLink.


Eclipsys Diagnostic Imaging Solutions.




| |   |                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | deliver imaging data as an integrated part of the overall
    patient record  clinicians can access images at the
    point of care on any Sunrise-enabled device;
|
| |  | automate access to medication history, lab data and other
    clinical information for radiology personnel to review;                                              
|
| |  | eliminate the use of film and the costs associated with
    film; and                                                                                              
|
| |  | enable radiology and cardiology image management with a single
    system.                                                                                         

Sunrise on the XA Extended Architecture Initiative






10



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##### 









Hardware and Related Offerings




Services






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Implementation, Integration, Product Support, Training and
    Maintenance  We offer our customers professional
    assistance in the implementation of our software, the conversion
    and integration of their historical data into our software and
    systems, as well as ongoing training and support. Specifically,
    we offer 24-hour software support to customers and provide them
    with regular maintenance releases and comprehensive training
    programs.
|
| | Outsourcing Services  We provide outsourcing
    services to our customers. This means that we assume all
    responsibilities for a healthcare organizations IT
    operations using our employees. Our outsourcing services include
    facilities management, network outsourcing and transition
    management.                                                                                                                                                          



| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Facilities management enables our customers to improve their IT
    operations by allowing us to assume responsibility for all
    aspects of their internal IT operations.                                                                  
|
| |  | Network outsourcing provides our customers with total
    information network support. This relieves our customers of the
    need to secure and maintain an expensive IT infrastructure in a
    rapidly changing technological environment.
|
| |  | Transition management offers our customers a solution for
    migrating their IT to new processes, technologies or platforms
    without interfering with healthcare delivery.                                                               



| |                                                                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Remote Hosting Services  We provide
    remote hosting services to our customers. This means that we
    assume complete processing of a customers IT operations
    using our equipment and personnel at our facilities. This frees
    an organization from maintaining the environment, equipment and
    technical staff required to support their IT operations.
|
| | Network Services  We offer several network
    services. Our professionals assess changes in network
    utilization and function, forecast necessary upgrades to
    accommodate a customers growth, and design the changes
    required to provide our customers with the network performance
    and functionality.                                               
|
| | Solutions Consulting  We also offer consulting
    services to help customers to improve their operations.                                                                                                                                                                                                                                                            

11



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Marketing and Sales






Research and Development




Competition






Employees




12



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##### 





Financial Information About Geographic Areas




Certain Factors That May Affect Future Operating Results






| |                                               
| | ----------------------------------------------
| | We face risks relating to our product strategy





| |   |                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We may encounter technical obstacles and delays in implementing
    this approach. As we continue to implement our strategy, it is
    possible that we could discover additional problems with our
    software.                                                                                                                           
|
| |  | It is possible future releases of SunriseXA, with anticipated
    additional features for our products, may be delayed. This could
    result in delayed or lost sales.                                                                                                                                                                     
|
| |  | Customers who are currently implementing SunriseXA have faced
    delays in their implementations. As a result, existing SunriseXA
    customers could attempt to cancel their contracts with us or
    seek financial or other concessions from us.                                                                                        
|
| |  | As a result of the changes we will make to our SunriseXA product
    offering, potential customers may find such products less
    appealing, which could decrease demand for our products.                                                                                                                                                 
|
| |  | 2003 operating results reflect a $1.2 million write-down of
    capitalized software development costs for certain SunriseXA
    components. Additionally, through December 31, 2004 we have
    recorded warranty related costs of $4.6 million related to
    the anticipated costs associated with the SunriseXA response
    time issue.





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



13



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##### 







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





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





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





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





| |   |                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our progress in implementing our strategy to address our
    SunriseXA response time issues and the level of costs associated
    with that effort;
|
| |  | the timing, size and complexity of our product sales and
    implementations;                                                                      
|
| |  | overall demand for healthcare information technology;                                                                                              
|
| |  | the financial condition of our customers and potential customers;                                                                                  
|
| |  | market acceptance of new services, products and product
    enhancements by us and our competitors;                                                
|
| |  | product and price competition;                                                                                                                     
|
| |  | the relative proportions of revenues we derive from software,
    services and hardware;                                                           
|
| |  | changes in our operating expenses;                                                                                                                 

14



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##### 





| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | the timing and size of future acquisitions;                                                                                   
|
| |  | personnel changes;                                                                                                            
|
| |  | the performance of our products;                                                                                              
|
| |  | significant judgments and estimates made by management in the
    application of generally accepted accounting principles; and
|
| |  | fluctuations in general economic and financial market
    conditions, including interest rates.                               





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





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





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



15



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##### 





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





| |   |                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | requiring us to seek FDA clearance of a pre-market notification
    submission demonstrating that a product is substantially
    equivalent to a device already legally marketed, or to obtain
    FDA approval of a pre-market approval application establishing
    the safety and effectiveness of the product;
|
| |  | requiring us to comply with rigorous regulations governing the
    pre-clinical and clinical testing, manufacture, distribution,
    labeling and promotion of medical devices; and                                                                                                                               
|
| |  | requiring us to comply with the FDC Act regarding general
    controls including establishment registration, device listing,
    compliance with good manufacturing practices, reporting of
    specified device malfunctions and adverse device events.                                                          





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









16



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##### 







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







| |                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we undertake additional acquisitions, they may be
    disruptive to our business and could have an adverse effect on
    our future operations and the market price of our common
    stock







| |   |                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The anticipated benefits from any acquisition may not be
    achieved. The integration of acquired businesses requires
    substantial attention from management. The diversion of
    managements attention and any difficulties encountered in
    the transition process could hurt our business.
|
| |  | In future acquisitions, we could issue additional shares of our
    capital stock, incur additional indebtedness or pay
    consideration in excess of book value, which could have a
    dilutive effect on future net income, if any, per share.                                                   
|
| |  | New business acquisitions must be accounted for under the
    purchase method of accounting. These acquisitions may generate
    significant intangible assets and result in substantial related
    amortization charges to us.                                                                     

17



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##### 





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





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





| |                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on licenses from third parties for rights to the
    technology used in several of our products, and if we are unable
    to continue these relationships and maintain our rights to this
    technology, our business could suffer





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



18



---



##### 







| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Provisions of our charter documents and Delaware law may
    inhibit potential acquisition bids that a stockholder may
    believe is desirable, and the market price of our common stock
    may be lower as a result







| |   |                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------
| |  | only one of the three classes of directors is elected each year;                                                     
|
| |  | the ability of our stockholders to remove directors without
    cause is limited;                                    
|
| |  | the right of stockholders to act by written consent has been
    eliminated;                                         
|
| |  | the right of stockholders to call a special meeting of
    stockholders has been eliminated; and                     
|
| |  | advance notice must be given to nominate directors or submit
    proposals for consideration at stockholder meetings.





19



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##### 



Executive Officers of the Registrant




|                   |  |     |    |  |       |                                                                                                         
|------------------ |  | --- | -- |  | ----- | --------------------------------------------------------------------------------------------------------
|Name               |  | Age |    |  | Title
|                   |  |     |    |  |      
|Paul L. Ruflin     |  |     | 51 |  |       | President and Chief Executive Officer                                                                   
|John A. Adams      |  |     | 50 |  |       | Executive Vice President and Chief Administrative Officer                                               
|John Gomez         |  |     | 40 |  |       | Executive Vice President of Product Development and Delivery and
    Chief Technology & Strategy Officer
|Russ J. Rudish     |  |     | 52 |  |       | Executive Vice President of Sales, Marketing and Customer
    Solutions                                 
|Robert J. Colletti |  |     | 46 |  |       | Senior Vice President and Chief Financial Officer                                                       

Paul L. Ruflin


John A. Adams


John Gomez


Russ J. Rudish


Robert J. Colletti




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



20



---



##### 







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





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



Part II




|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity and Related
    Stockholder Matters

Price Range of Common Stock




|               |  |      |       |  |     |   |       | 
|-------------- |  | ---- | ----- |  | --- | - | ----- | 
|               |  | High |       |  | Low |  
|               |  |      |       |  |     |  
|2003           |  |      |       |  |     |   |       | 
|First quarter  |  | $    | 8.51  |  |     | $ | 5.23  | 
|Second quarter |  | $    | 11.88 |  |     | $ | 6.85  | 
|Third quarter  |  | $    | 18.58 |  |     | $ | 10.05 | 
|Fourth quarter |  | $    | 19.47 |  |     | $ | 8.72  | 
|2004           |  |      |       |  |     |   |       | 
|First quarter  |  | $    | 15.48 |  |     | $ | 11.27 | 
|Second quarter |  | $    | 15.26 |  |     | $ | 11.25 | 
|Third quarter  |  | $    | 16.07 |  |     | $ | 12.75 | 
|Fourth quarter |  | $    | 20.95 |  |     | $ | 14.62 | 

Holders of Record




Dividends




Private Placements




21



---



##### 







Issuer Purchases of Equity Securities


|                                       |  |                 |         |  |                   |                  |                     |                    |                  |                        |                      |  |  |  |   | 
|-------------------------------------- |  | --------------- | ------- |  | ----------------- | ---------------- | ------------------- | ------------------ | ---------------- | ---------------------- | -------------------- |  |  |  | - | 
|                                       |  |                 |         |  |                   |                  |                     | (d) Maximum Number |                 
|                                       |  |                 |         |  |                   | (c) Total Number |                     |                    | (or Approximate  |                       
|                                       |  |                 |         |  |                   | of Shares (or    |                     |                    | Dollar Value) of |                       
|                                       |  | Total Number of |         |  |                   |                  | Units) Purchased as |                    |                  | Shares (or Units) that |                     
|                                       |  | Shares (or      |         |  | (b) Average Price |                  |                     | a Part of Publicly |                  |                        | May Yet be Purchased | 
|                                       |  | Units)          |         |  | Paid per Share    |                  |                     | Announced Plans or |                  |                        | Under the Plans or   | 
|Period                                 |  | Purchased(1)    |         |  | (Unit)            |                  |                     | Programs           |                  |                        | Program              | 
|                                       |  |                 |         |  |                   |                  |                     |                    |                  |                        |                      | 
|October 8, 2004 
    October 22, 2004 |  |                 | 250,669 |  |                   | $                | 3.00                |                    |                  |                        |                     |  |  |  |  | 
|November 2004                          |  |                 |        |  |                   |                  |                    |                    |                  |                        |                     |  |  |  |  | 
|December 5, 2004                       |  |                 | 25,000  |  |                   |                  | 3.00                |                    |                  |                        |                     |  |  |  |  | 
|                                       |  |                 |         |  |                   |                  |                     |                    |                  |                        |                      | 
|TOTAL                                  |  |                 | 275,669 |  |                   | $                | 3.00                |                    |                  |                        |                     |  |  |  |  | 
|                                       |  |                 |         |  |                   |                  |                     |                    |                  |                        |                      | 






|    |                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The repurchases reflected in this table consists of privately
    negotiated repurchases of outstanding options to purchase our
    common stock with specified individuals.

Shares Available Under Equity Compensation Plans






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



22



---



##### 





|                                                   |                               |                                                 |            |         |         |   |            |         |         |   |            |         |         |      |            |         |         |   |            |         |         | 
|-------------------------------------------------- | ----------------------------- | ----------------------------------------------- | ---------- | ------- | ------- | - | ---------- | ------- | ------- | - | ---------- | ------- | ------- | ---- | ---------- | ------- | ------- | - | ---------- | ------- | ------- | 
|                                                   |                               | Year Ended December 31,                         |           
|                                                   |                               |                                                 |           
|                                                   |                               | 2004                                            |            |         | 2003    |   |            | 2002    |         |   | 2001       |         |         | 2000 |           
|                                                   |                               |                                                 |            |         |         |   |            |         |         |   |            |         |         |      |           
|                                                   |                               | (In thousands, except share and per share data) |           
|Statement of Operations Data:                      |                               |                                                 |            |         |         |   |            |         |         |   |            |         |         |      |            |         |         |   |            |        
|Total revenues                                     |                               | $                                               | 309,075    |         |         | $ | 254,679    |         |         | $ | 218,068    |         |         | $    | 239,676    |         |         | $ | 221,318    |        
|Costs and expenses:                                |                               |                                                 |            |         |         |   |            |         |         |   |            |         |         |      |            |         |         |   |            |        
|                                                   | Costs of revenues             |                                                 |            | 191,342 |         |   |            | 161,013 |         |   |            | 131,314 |         |      |            | 137,826 |         |   |            | 155,503 |        
|                                                   | Sales and marketing           |                                                 |            | 65,024  |         |   |            | 69,734  |         |   |            | 53,175  |         |      |            | 42,698  |         |   |            | 40,143  |        
|                                                   | Research and development      |                                                 |            | 58,095  |         |   |            | 58,306  |         |   |            | 46,228  |         |      |            | 37,034  |         |   |            | 37,382  |        
|                                                   | General and administrative    |                                                 |            | 15,524  |         |   |            | 13,528  |         |   |            | 12,434  |         |      |            | 10,278  |         |   |            | 10,380  |        
|                                                   | Depreciation and amortization |                                                 |            | 13,284  |         |   |            | 10,492  |         |   |            | 8,531   |         |      |            | 13,900  |         |   |            | 13,442  |        
|                                                   | Pooling and transaction costs |                                                 |            |        |         |   |            |        |         |   |            |        |         |      |            | (472    | )       |   |            | 1,900   |        
|                                                   | Restructuring charge          |                                                 |            |        |         |   |            |        |         |   |            |        |         |      |            |        |         |   |            | 1,198   |        
|                                                   |                               |                                                 |            |         |         |   |            |         |         |   |            |         |         |      |           
|                                                   |                               | Total costs and expenses                        |            |         | 343,269 |   |            |         | 313,073 |   |            |         | 251,682 |      |            |         | 241,264 |   |            |         | 259,948 | 
|                                                   |                               |                                                 |            |         |         |   |            |         |         |   |            |         |         |      |           
|Loss from operations                               |                               |                                                 | (34,194    | )       |         |   | (58,394    | )       |         |   | (33,614    | )       |         |      | (1,588     | )       |         |   | (38,630    | )      
|Interest income, net                               |                               |                                                 | 1,629      |         |         |   | 2,430      |         |         |   | 4,016      |         |         |      | 5,996      |         |         |   | 1,075      |        
|Other income, net                                  |                               |                                                 |           |         |         |   |           |         |         |   |           |         |         |      |           |         |         |   | 3,596      |        
|                                                   |                               |                                                 |            |         |         |   |            |         |         |   |            |         |         |      |           
|(Loss) income before income taxes                  |                               |                                                 | (32,565    | )       |         |   | (55,964    | )       |         |   | (29,598    | )       |         |      | 4,408      |         |         |   | (33,959    | )      
|Provision for income taxes                         |                               |                                                 |           |         |         |   |           |         |         |   | 165        |         |         |      |           |         |         |   |           |        
|Net (loss) income                                  |                               |                                                 | (32,565    | )       |         |   | (55,964    | )       |         |   | (29,763    | )       |         |      | 4,408      |         |         |   | (33,959    | )      
|                                                   |                               |                                                 |            |         |         |   |            |         |         |   |            |         |         |      |           
|Basic net (loss) income per common share           |                               | $                                               | (0.70      | )       |         | $ | (1.23      | )       |         | $ | (0.67      | )       |         | $    | 0.10       |         |         | $ | (0.92      | )      
|                                                   |                               |                                                 |            |         |         |   |            |         |         |   |            |         |         |      |           
|Diluted net (loss) income per common share         |                               | $                                               | (0.70      | )       |         | $ | (1.23      | )       |         | $ | (0.67      | )       |         | $    | 0.09       |         |         | $ | (0.92      | )      
|                                                   |                               |                                                 |            |         |         |   |            |         |         |   |            |         |         |      |           
|Basic weighted average common shares outstanding   |                               |                                                 | 46,586,754 |         |         |   | 45,404,754 |         |         |   | 44,710,754 |         |         |      | 43,243,512 |         |         |   | 36,765,975 |        
|                                                   |                               |                                                 |            |         |         |   |            |         |         |   |            |         |         |      |           
|Diluted weighted average common shares outstanding |                               |                                                 | 46,586,754 |         |         |   | 45,404,754 |         |         |   | 44,710,754 |         |         |      | 46,795,361 |         |         |   | 36,765,975 |        
|                                                   |                               |                                                 |            |         |         |   |            |         |         |   |            |         |         |      |           

|                                |  |                         |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|------------------------------- |  | ----------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  |  | - | ------- | 
|                                |  | Year Ended December 31, |        
|                                |  |                         |        
|                                |  | 2004                    |         |  | 2003 |   |         | 2002 |  |   | 2001    |  |  | 2000 |        
|                                |  |                         |         |  |      |   |         |      |  |   |         |  |  |      |        
|                                |  | (In thousands)          |        
|Balance Sheet Data:             |  |                         |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|Cash and cash equivalents       |  | $                       | 122,031 |  |      | $ | 151,683 |      |  | $ | 183,500 |  |  | $    | 168,942 |  |  | $ | 20,799  | 
|Working capital                 |  |                         | 51,994  |  |      |   | 79,553  |      |  |   | 140,368 |  |  |      | 174,951 |  |  |   | 17,985  | 
|Total assets                    |  |                         | 291,420 |  |      |   | 295,783 |      |  |   | 301,197 |  |  |      | 300,494 |  |  |   | 156,112 | 
|Debt, including current portion |  |                         |        |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   | 1,491   | 
|Stockholders equity            |  | $                       | 123,277 |  |      | $ | 143,153 |      |  | $ | 192,597 |  |  | $    | 218,201 |  |  | $ | 73,404  | 



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



23



---



##### 





Executive Overview


The following should be read in conjunction with our
consolidated financial statements, including the notes thereto,
which are included elsewhere in this document.






| |           
| | ----------
| | Background











24



---



##### 







| |                    
| | -------------------
| | Product Development

tm


tm










| |                        
| | -----------------------
| | Operational Initiatives



25



---



##### 











| |                                                      
| | -----------------------------------------------------
| | Competitive Environment and Other Challenges for 2005



Critical Accounting Policies






| |                    
| | -------------------
| | Revenue Recognition





| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | whether the fees associated with our products and services are
    fixed or determinable;            
|
| |  | whether collection of our fees is reasonably assured;                                                
|
| |  | whether professional services are essential to the functionality
    of the related software product;

26



---



##### 





| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | whether we have the ability to make reasonably dependable
    estimates in the application of the percentage-of-completion
    method; and
|
| |  | whether we have verifiable objective evidence of fair value for
    our products and services.                                            







| |                       
| | ----------------------
| | Subscription Contracts





| |   |                                                
| | - | -----------------------------------------------
| |  | Software license                               
|
| |  | Maintenance                                    
|
| |  | Professional services; and                     
|
| |  | Third party hardware or remote hosting services











27



---



##### 







| |                               
| | ------------------------------
| | Traditional Software Contracts





| |   |                                                
| | - | -----------------------------------------------
| |  | Software license                               
|
| |  | Maintenance                                    
|
| |  | Professional services; and                     
|
| |  | Third party hardware or remote hosting services









| |                                                 
| | ------------------------------------------------
| | Software Contracts Requiring Contract Accounting





| |                                  
| | ---------------------------------
| | Stand-Alone Products and Services





| |   |                      
| | - | ---------------------
| |  | Software license     
|
| |  | Maintenance          
|
| |  | Professional services

28



---



##### 





| |   |                        
| | - | -----------------------
| |  | Hardware               
|
| |  | Network services       
|
| |  | Remote Hosting services
|
| |  | Outsourcing            



















| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts



29



---



##### 





| |                                       
| | --------------------------------------
| | Capitalized Software Development Costs







| |                 
| | ----------------
| | Warranty Reserve



Results of Operations




| |         
| | --------
| | Revenues





| |                  
| | -----------------
| | Costs of Revenues



30



---



##### 







| |                    
| | -------------------
| | Sales and Marketing





| |                         
| | ------------------------
| | Research and Development





| |                           
| | --------------------------
| | General and Administrative





| |                              
| | -----------------------------
| | Depreciation and Amortization





| |      
| | -----
| | Taxes



31



---



##### 



Statement of Operations


|                                  |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |   |        |        |   |  |        |       |   
|--------------------------------- | -------------------------------------- | ---- | ------- | ---------- | ------- | ------------------------------------- | ----- | ----- | ---------- | - | ------- | ------- |  | -------- | ----- | ----- | -------- | - | ------ | ------ | - |  | ------ | ----- | --
|                                  |                                        |      |         | 2004       |         |                                       |       |       | 2003       |   |         |         |  |         
|                                  |                                        |      |         | % of Total |         |                                       |       |       | % of Total |   |         |         |  |         
|                                  |                                        | 2004 |         |            | Revenue |                                       |       | 2003  |            |   | Revenue |         |  | Change $ |       |       | Change % |  
|                                  |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |  
|                                  |                                        |      |         |            |         | (In thousands, except per share data) |       |       |           
|Revenues:                         |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |   |        |        |   |  |        |      
|                                  | Systems and services                   |      | $       | 282,124    |         |                                       |       | 91.3  | %          |   | $       | 233,971 |  |          |       | 91.9  | %        |   | $      | 48,153 |   |  |        | 20.58 | % 
|                                  | Hardware                               |      |         | 26,951     |         |                                       |       | 8.7   | %          |   |         | 20,708  |  |          |       | 8.1   | %        |   |        | 6,243  |   |  |        | 30.15 | % 
|                                  |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |  
|                                  | Total revenues                         |      |         | 309,075    |         |                                       |       | 100.0 | %          |   |         | 254,679 |  |          |       | 100.0 | %        |   |        | 54,396 |   |  |        | 21.36 | % 
|                                  |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |  
|Costs and expenses:               |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |   |        |        |   |  |        |      
|                                  | Costs of systems and services revenues |      |         | 168,393    |         |                                       |       | 54.5  | %          |   |         | 143,276 |  |          |       | 56.3  | %        |   |        | 25,117 |   |  |        | 17.53 | % 
|                                  | Costs of hardware revenues             |      |         | 22,949     |         |                                       |       | 7.4   | %          |   |         | 17,252  |  |          |       | 6.8   | %        |   |        | 5,697  |   |  |        | 33.02 | % 
|                                  | Sales and marketing                    |      |         | 65,024     |         |                                       |       | 21.0  | %          |   |         | 70,381  |  |          |       | 27.6  | %        |   |        | (5,357 | ) |  |        | (7.61 | )%
|                                  | Research and development               |      |         | 58,095     |         |                                       |       | 18.8  | %          |   |         | 58,144  |  |          |       | 22.8  | %        |   |        | (49    | ) |  |        | (0.08 | )%
|                                  | General and administrative             |      |         | 15,524     |         |                                       |       | 5.0   | %          |   |         | 13,528  |  |          |       | 5.3   | %        |   |        | 1,996  |   |  |        | 14.75 | % 
|                                  | Depreciation and amortization          |      |         | 13,284     |         |                                       |       | 4.3   | %          |   |         | 10,492  |  |          |       | 4.1   | %        |   |        | 2,792  |   |  |        | 26.61 | % 
|                                  |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |  
|                                  | Total costs and expenses               |      |         | 343,269    |         |                                       |       | 111.1 | %          |   |         | 313,073 |  |          |       | 122.9 | %        |   |        | 30,196 |   |  |        | 9.65  | % 
|                                  |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |  
|Loss from operations              |                                        |      | (34,194 | )          |         |                                       | (11.1 | )%    |            |   | (58,394 | )       |  |          | (22.9 | )%    |          |   | 24,200 |        |   |  |        |      
|Interest income, net              |                                        |      | 1,629   |            |         |                                       | 0.5   | %     |            |   | 2,430   |         |  |          | 1.0   | %     |          |   | (801   | )      |   |  | (32.96 | )%   
|                                  |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |  
|Loss before income taxes          |                                        |      | (32,565 | )          |         |                                       |       |       |            |   | (55,964 | )       |  |          |       |       |          |   | 23,399 |        |   |  | (41.81 | )%   
|                                  |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |  
|Provision for income taxes        |                                        |      |        |            |         |                                       |       |       |            |   |        |         |  |          |       |       |          |   |        |        |   |  |        |      
|                                  |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |  
|Net loss                          |                                        | $    | (32,565 | )          |         |                                       |       |       |            | $ | (55,964 | )       |  |          |       |       |          | $ | 23,399 |        |   |  | (41.81 | )%   
|                                  |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |  
|Basic net loss per common share   |                                        | $    | (0.70   | )          |         |                                       |       |       |            | $ | (1.23   | )       |  |          |       |       |          | $ | 0.53   |        |   |  | (43.09 | )%   
|                                  |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |  
|Diluted net loss per common share |                                        | $    | (0.70   | )          |         |                                       |       |       |            | $ | (1.23   | )       |  |          |       |       |          | $ | 0.53   |        |   |  | (43.09 | )%   
|                                  |                                        |      |         |            |         |                                       |       |       |            |   |         |         |  |          |       |       |          |  

Year Ended December 31, 2004 compared to
December 31, 2003








32



---



##### 















| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | higher payroll and related costs associated with an increase in
    outsourcing and remote hosting revenues;                                                     
|
| |  | higher amortization of capitalized software development costs
    associated with the release of Sunrise Clinical Manager 3.5 XA
    in June 2004;               
|
| |  | higher costs associated with a higher volume networking services
    revenues;                                                                                   
|
| |  | higher third party costs including royalties and consulting due
    to the higher sales of third party software and increased usage
    of external consultants ;
|
| |  | higher implementation costs associated with an expanded
    implementation team in connection with higher professional
    services volumes;                     
|
| |  | partially offset by a decrease in warranty related costs in 2004.                                                                                                



33



---



##### 





|                                                       |  |                        |        |  |      |   |        |          |  |   |          |   |  |  |       |   
|------------------------------------------------------ |  | ---------------------- | ------ |  | ---- | - | ------ | -------- |  | - | -------- | - |  |  | ----- | --
|                                                       |  | 2004                   |        |  | 2003 |   |        | $ Change |  |   | % Change |  
|                                                       |  |                        |        |  |      |   |        |          |  |   |          |  
|                                                       |  | (Dollars in thousands) |       
|Research and development expenses                      |  | $                      | 58,095 |  |      | $ | 58,144 |          |  | $ | (49      | ) |  |  | (0.1  | )%
|Capitalized software development costs                 |  |                        | 15,194 |  |      |   | 18,249 |          |  | $ | (3,055   | ) |  |  | (16.7 | )%
|                                                       |  |                        |        |  |      |   |        |          |  |   |          |  
|Gross research and development expenses                |  |                        | 73,289 |  |      |   | 76,393 |          |  |   | (3,104   | ) |  |  | (4.1  | )%
|                                                       |  |                        |        |  |      |   |        |          |  |   |          |  
|Amortization of capitalized software development costs |  | $                      | 10,634 |  |      | $ | 8,164  |          |  | $ | 2,470    |   |  |  | 30.3  | % 











34



---



##### 



Statement of Operations


|                                |                                        |                                       |         |            |         |  |       |       |            |   |         |         |  |          |       |       |          |   |         |        |  |  |       |      |  
|------------------------------- | -------------------------------------- | ------------------------------------- | ------- | ---------- | ------- |  | ----- | ----- | ---------- | - | ------- | ------- |  | -------- | ----- | ----- | -------- | - | ------- | ------ |  |  | ----- | ---- | -
|                                |                                        |                                       |         | 2003       |         |  |       |       | 2002       |   |         |         |  |         
|                                |                                        |                                       |         | % of Total |         |  |       |       | % of Total |   |         |         |  |         
|                                |                                        | 2003                                  |         |            | Revenue |  |       | 2002  |            |   | Revenue |         |  | Change $ |       |       | Change % |  
|                                |                                        |                                       |         |            |         |  |       |       |            |   |         |         |  |          |       |       |          |  
|                                |                                        | (In thousands, expect per share data) |        
|Revenues:                       |                                        |                                       |         |            |         |  |       |       |            |   |         |         |  |          |       |       |          |   |         |        |  |  |       |     
|                                | Systems and services                   |                                       | $       | 233,971    |         |  |       | 91.9  | %          |   | $       | 203,218 |  |          |       | 93.2  | %        |   | $       | 30,753 |  |  |       | 15.1 | %
|                                | Hardware                               |                                       |         | 20,708     |         |  |       | 8.1   | %          |   |         | 14,850  |  |          |       | 6.8   | %        |   |         | 5,858  |  |  |       | 39.4 | %
|                                |                                        |                                       |         |            |         |  |       |       |            |   |         |         |  |          |       |       |          |  
|                                | Total revenues                         |                                       |         | 254,679    |         |  |       | 100   | %          |   |         | 218,068 |  |          |       | 100   | %        |   |         | 36,611 |  |  |       |      |  
|                                |                                        |                                       |         |            |         |  |       |       |            |   |         |         |  |          |       |       |          |  
|Costs and expenses:             |                                        |                                       |         |            |         |  |       |       |            |   |         |         |  |          |       |       |          |   |         |        |  |  |       |     
|                                | Costs of systems and services revenues |                                       |         | 143,276    |         |  |       | 56.3  | %          |   |         | 119,044 |  |          |       | 54.6  | %        |   |         | 24,232 |  |  |       | 20.4 | %
|                                | Costs of hardware revenues             |                                       |         | 17,252     |         |  |       | 6.8   | %          |   |         | 12,270  |  |          |       | 5.6   | %        |   |         | 4,982  |  |  |       | 40.6 | %
|                                | Sales and marketing                    |                                       |         | 70,381     |         |  |       | 27.6  | %          |   |         | 53,175  |  |          |       | 24.4  | %        |   |         | 17,206 |  |  |       | 32.4 | %
|                                | Research and development               |                                       |         | 58,144     |         |  |       | 22.8  | %          |   |         | 46,228  |  |          |       | 21.2  | %        |   |         | 11,916 |  |  |       | 25.8 | %
|                                | General and administrative             |                                       |         | 13,528     |         |  |       | 5.3   | %          |   |         | 12,434  |  |          |       | 5.7   | %        |   |         | 1,094  |  |  |       | 8.8  | %
|                                | Depreciation and amortization          |                                       |         | 10,492     |         |  |       | 4.1   | %          |   |         | 8,531   |  |          |       | 3.9   | %        |   |         | 1,961  |  |  |       | 23.0 | %
|                                |                                        |                                       |         |            |         |  |       |       |            |   |         |         |  |          |       |       |          |  
|                                | Total costs and expenses               |                                       |         | 313,073    |         |  |       | 122.9 | %          |   |         | 251,682 |  |          |       | 115.4 | %        |   |         | 61,391 |  |  |       |      |  
|                                |                                        |                                       |         |            |         |  |       |       |            |   |         |         |  |          |       |       |          |  
|Loss from operations            |                                        |                                       | (58,394 | )          |         |  | (22.9 | )%    |            |   | (33,614 | )       |  |          | (15.4 | )%    |          |   | (24,780 | )      |  |  |       |     
|Interest income, net            |                                        |                                       | 2,430   |            |         |  | 1.0   | %     |            |   | 4,016   |         |  |          | 1.8   | %     |          |   | (1,586  | )      |  |  | (39.5 | )%  
|                                |                                        |                                       |         |            |         |  |       |       |            |   |         |         |  |          |       |       |          |  
|Loss before income taxes        |                                        |                                       | (55,964 | )          |         |  |       |       |            |   | (29,598 | )       |  |          |       |       |          |   | (26,366 | )      |  |  |       |     
|Provision for income taxes      |                                        |                                       |        |            |         |  |       |       |            |   | 165     |         |  |          |       |       |          | $ | (165    | )      |  |  |       |     
|Net loss                        |                                        | $                                     | (55,964 | )          |         |  |       |       |            | $ | (29,763 | )       |  |          |       |       |          | $ | (26,201 | )      |  |  |       |     
|                                |                                        |                                       |         |            |         |  |       |       |            |   |         |         |  |          |       |       |          |  
|Basic net loss per common share |                                        | $                                     | (1.23   | )          |         |  |       |       |            | $ | (0.67   | )       |  |          |       |       |          | $ | (0.56   | )      |  |  |       |     
|                                |                                        |                                       |         |            |         |  |       |       |            |   |         |         |  |          |       |       |          |  
|Diluted net loss per share      |                                        | $                                     | (1.23   | )          |         |  |       |       |            | $ | (0.67   | )       |  |          |       |       |          | $ | (0.56   | )      |  |  |       |     
|                                |                                        |                                       |         |            |         |  |       |       |            |   |         |         |  |          |       |       |          |  

Year Ended December 31, 2003 compared to Year Ended
December 31, 2002








35



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##### 







| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the warranty reserve for anticipated costs, and the write-down
    of capitalized software development costs to net realizable
    value, both related to SunriseXA response time issue;
|
| |  | higher amortization of capitalized software development costs
    related to the release of SunriseXA;                                                                                  
|
| |  | higher third-party costs including royalties and consulting;                                                                                                                            
|
| |  | higher costs associated with providing our outsourcing, remote
    hosting and networking services; and                                                                                 
|
| |  | increased payroll and related costs associated with providing
    our implementation and integration services related to higher
    volumes of new contracts.                           















36



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##### 





Liquidity and Capital Resources










Contracts and Commitments




|                                   |  |                        |        |           |        |   |        |           |           |   |           |  |  |         |       |  |  |   |       | 
|---------------------------------- |  | ---------------------- | ------ | --------- | ------ | - | ------ | --------- | --------- | - | --------- |  |  | ------- | ----- |  |  | - | ----- | 
|                                   |  | Payments Due by Period |       
|                                   |  |                        |       
|                                   |  |                        |        | Less Than |        |   |        |           | More Than |  
|                                   |  | Total                  |        |           | 1 Year |   |        | 1-3 Years |           |   | 3-5 Years |  |  | 5 Years |      
|                                   |  |                        |        |           |        |   |        |           |           |   |           |  |  |         |      
|                                   |  | (In thousands)         |       
|Contractual Obligations            |  |                        |        |           |        |   |        |           |           |   |           |  |  |         |       |  |  |   |       | 
|Operating Leases                   |  | $                      | 36,292 |           |        | $ | 8,766  |           |           | $ | 17,324    |  |  | $       | 6,824 |  |  | $ | 3,378 | 
|Unconditional Purchase Obligations |  |                        | 29,978 |           |        |   | 20,387 |           |           |   | 8,128     |  |  |         | 1,363 |  |  |   | 100   | 
|                                   |  |                        |        |           |        |   |        |           |           |   |           |  |  |         |      
|Total Contractual Cash Obligations |  | $                      | 66,270 |           |        | $ | 29,153 |           |           | $ | 25,452    |  |  | $       | 8,187 |  |  | $ | 3,478 | 
|                                   |  |                        |        |           |        |   |        |           |           |   |           |  |  |         |      





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





37



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##### 







|                           |      |                |                                                                       |   |         |  |  |                 |         |  |  |   |         | 
|-------------------------- | ---- | -------------- | --------------------------------------------------------------------- | - | ------- |  |  | --------------- | ------- |  |  | - | ------- | 
|Hypothetical Interest Rate |      |                | Combined Cash and Cash Equivalents and Marketable Securities Balances |  
|                           |      |                |                                                                       |  
|                           |      | (In thousands) |                                                                      
|                           |      |                |                                                                       | $ | 100,000 |  |  | $               | 120,000 |  |  | $ | 150,000 | 
|                           |      |                |                                                                       |   |         |  |  |                 |         | 
|                           |      |                |                                                                       |   |         |  |  | Interest Income |         |  |  |  
|                           |      |                |                                                                       |   |         |  |  |                 |         | 
|                           | 1.5% |                |                                                                       | $ | 1,500   |  |  | $               | 1,800   |  |  | $ | 2,250   | 
|                           | 2.0% |                |                                                                       |   | 2,000   |  |  |                 | 2,400   |  |  |   | 3,000   | 
|                           | 2.5% |                |                                                                       |   | 2,500   |  |  |                 | 3,000   |  |  |   | 3,750   | 
|                           | 3.0% |                |                                                                       |   | 3,000   |  |  |                 | 3,600   |  |  |   | 4,500   | 
|                           | 3.5% |                |                                                                       |   | 3,500   |  |  |                 | 4,200   |  |  |   | 5,250   | 
|                           | 4.0% |                |                                                                       |   | 4,000   |  |  |                 | 4,800   |  |  |   | 6,000   | 





38



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##### 





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

Index to Consolidated Financial Statements:


Financial Statements:


|                                                                                                                         |                                                                                                                                                       |      |    |  | 
|------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | -- |  | 
|                                                                                                                         |                                                                                                                                                       | Page |   
|                                                                                                                         |                                                                                                                                                       |      |   
|Report of Independent Registered Public Certified Accounting Firm                                                        |                                                                                                                                                       |      | 40 | 
|Consolidated Balance Sheets as of December 31, 2004 and 2003                                                             |                                                                                                                                                       |      | 42 | 
|Consolidated Statements of Operations for the years ended
    December 31, 2004, 2003 and 2002                           |                                                                                                                                                       |      | 43 | 
|Consolidated Statements of Cash Flows for the years ended
    December 31, 2004, 2003 and 2002                           |                                                                                                                                                       |      | 44 | 
|Consolidated Statement of Stockholders Equity for the
    years ended December 31, 2004, 2003 and 2002                  |                                                                                                                                                       |      | 45 | 
|Notes to the Consolidated Financial Statements                                                                           |                                                                                                                                                       |      | 46 | 
|                                                                                                                        
|                                                                                                                         | Financial Statement Schedules:                                                                                                                        |      |    |  | 
|                                                                                                                        
|Schedule II  Valuation of Qualifying Accounts
    for each of the three years in the period ended
    December 31, 2004 |                                                                                                                                                       |      | 62 | 
|                                                                                                                        
|                                                                                                                         | All other schedules are omitted as they are not applicable or
    the required information is shown in the financial statements or
    notes thereto. |      |    |  | 

39



---



##### 



Report of Independent Registered Public Certified Accounting
Firm






Consolidated financial statements and financial statement
schedule




Internal control over financial reporting


Internal Control  Integrated Framework Internal Control 
Integrated Framework




40



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##### 









| |                           
| | --------------------------
| | PricewaterhouseCoopers LLP





41



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##### 



ECLIPSYS CORPORATION


Consolidated Balance Sheets


|                                            |                                                                                                                                      |                             |        |          |         |  |        |          |         | 
|------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------ | --------------------------- | ------ | -------- | ------- |  | ------ | -------- | ------- | 
|                                            |                                                                                                                                      | December 31,                |       
|                                            |                                                                                                                                      |                             |       
|                                            |                                                                                                                                      | 2004                        |        |          | 2003    | 
|                                            |                                                                                                                                      |                             |        |          |         | 
|                                            |                                                                                                                                      | (In thousands, except share |       
|                                            |                                                                                                                                      | and per share data)         |       
|ASSETS                                     
|Current assets:                             |                                                                                                                                      |                             |        |          |         |  |        |         
|                                            | Cash and cash equivalents                                                                                                            |                             | $      | 122,031  |         |  | $      | 151,683  |        
|                                            | Accounts receivable, net of allowance for doubtful accounts of
    $4,952 and $4,807 at December 31, 2004 and 2003,
    respectively |                             |        | 64,862   |         |  |        | 54,903   |        
|                                            | Inventory                                                                                                                            |                             |        | 1,644    |         |  |        | 530      |        
|                                            | Prepaid expenses                                                                                                                     |                             |        | 14,495   |         |  |        | 13,989   |        
|                                            | Other current assets                                                                                                                 |                             |        | 1,091    |         |  |        | 1,004    |        
|                                            |                                                                                                                                      |                             |        |          |         | 
|                                            |                                                                                                                                      | Total current assets        |        |          | 204,123 |  |        |          | 222,109 | 
|Property and equipment, net                 |                                                                                                                                      |                             | 35,002 |          |         |  | 32,304 |         
|Capitalized software development costs, net |                                                                                                                                      |                             | 29,819 |          |         |  | 25,260 |         
|Acquired technology, net                    |                                                                                                                                      |                             | 886    |          |         |  |       |         
|Intangible assets, net                      |                                                                                                                                      |                             | 3,804  |          |         |  |       |         
|Goodwill, net                               |                                                                                                                                      |                             | 2,863  |          |         |  | 454    |         
|Other assets                                |                                                                                                                                      |                             | 14,923 |          |         |  | 15,656 |         
|                                            |                                                                                                                                      |                             |        |          |         | 
|                                            | Total assets                                                                                                                         |                             | $      | 291,420  |         |  | $      | 295,783  |        
|                                            |                                                                                                                                      |                             |        |          |         | 
|                                           
|LIABILITIES AND STOCKHOLDERS EQUITY       
|Current liabilities:                        |                                                                                                                                      |                             |        |          |         |  |        |         
|                                            | Deferred revenue                                                                                                                     |                             | $      | 106,804  |         |  | $      | 91,782   |        
|                                            | Accounts payable                                                                                                                     |                             |        | 21,945   |         |  |        | 18,309   |        
|                                            | Accrued compensation costs                                                                                                           |                             |        | 12,738   |         |  |        | 17,189   |        
|                                            | Other current liabilities                                                                                                            |                             |        | 10,642   |         |  |        | 15,275   |        
|                                            |                                                                                                                                      |                             |        |          |         | 
|                                            | Total current liabilities                                                                                                            |                             |        | 152,129  |         |  |        | 142,555  |        
|Deferred revenue                            |                                                                                                                                      |                             | 15,892 |          |         |  | 9,390  |         
|Other long-term liabilities                 |                                                                                                                                      |                             | 122    |          |         |  | 684    |         
|Commitments and contingencies (See Note 7)  |                                                                                                                                      |                             |        |          |         |  |        |         
|Stockholders Equity:                       |                                                                                                                                      |                             |        |          |         |  |        |         
|                                            | Common stock, $0.01 par value, 200,000,000 shares
    authorized; issued and outstanding, 47,496,142 and 45,976,655                  |                             |        | 472      |         |  |        | 460      |        
|                                            | Additional paid-in capital                                                                                                           |                             |        | 429,001  |         |  |        | 411,634  |        
|                                            | Unearned stock compensation                                                                                                          |                             |        | (5,641   | )       |  |        | (795     | )      
|                                            | Accumulated deficit                                                                                                                  |                             |        | (300,343 | )       |  |        | (267,778 | )      
|                                            | Accumulated other comprehensive income                                                                                               |                             |        | (212     | )       |  |        | (367     | )      
|                                            |                                                                                                                                      |                             |        |          |         | 
|                                            | Total stockholders equity                                                                                                           |                             |        | 123,277  |         |  |        | 143,154  |        
|                                            |                                                                                                                                      |                             |        |          |         | 
|                                            | Total liabilities and stockholders equity                                                                                           |                             | $      | 291,420  |         |  | $      | 295,783  |        
|                                            |                                                                                                                                      |                             |        |          |         | 



42



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##### 



ECLIPSYS CORPORATION


Consolidated Statements of Operations


|                           |                                                    |                                                 |         |            |      |   |         |            |   |   |         |            |  
|-------------------------- | -------------------------------------------------- | ----------------------------------------------- | ------- | ---------- | ---- | - | ------- | ---------- | - | - | ------- | ---------- | -
|                           |                                                    | Year Ended December 31,                         |        
|                           |                                                    |                                                 |        
|                           |                                                    | 2004                                            |         |            | 2003 |   |         | 2002       |  
|                           |                                                    |                                                 |         |            |      |   |         |            |  
|                           |                                                    | (In thousands, except share and per share data) |        
|Revenues:                  |                                                    |                                                 |         |            |      |   |         |            |   |   |         |           
|                           | Systems and services                               |                                                 | $       | 282,124    |      |   | $       | 233,971    |   |   | $       | 203,218    |  
|                           | Hardware                                           |                                                 |         | 26,951     |      |   |         | 20,708     |   |   |         | 14,850     |  
|                           |                                                    |                                                 |         |            |      |   |         |            |  
|                           | Total revenues                                     |                                                 |         | 309,075    |      |   |         | 254,679    |   |   |         | 218,068    |  
|                           |                                                    |                                                 |         |            |      |   |         |            |  
|Costs and expenses:        |                                                    |                                                 |         |            |      |   |         |            |   |   |         |           
|                           | Costs of systems and services revenues             |                                                 |         | 168,393    |      |   |         | 143,276    |   |   |         | 119,044    |  
|                           | Costs of hardware revenues                         |                                                 |         | 22,949     |      |   |         | 17,252     |   |   |         | 12,270     |  
|                           | Sales and marketing                                |                                                 |         | 65,024     |      |   |         | 70,381     |   |   |         | 53,175     |  
|                           | Research and development                           |                                                 |         | 58,095     |      |   |         | 58,144     |   |   |         | 46,228     |  
|                           | General and administrative                         |                                                 |         | 15,524     |      |   |         | 13,528     |   |   |         | 12,434     |  
|                           | Depreciation and amortization                      |                                                 |         | 13,284     |      |   |         | 10,492     |   |   |         | 8,531      |  
|                           |                                                    |                                                 |         |            |      |   |         |            |  
|                           | Total costs and expenses                           |                                                 |         | 343,269    |      |   |         | 313,073    |   |   |         | 251,682    |  
|                           |                                                    |                                                 |         |            |      |   |         |            |  
|Loss from operations       |                                                    |                                                 | (34,194 | )          |      |   | (58,394 | )          |   |   | (33,614 | )         
|                           |                                                    |                                                 |         |            |      |   |         |            |  
|Interest income, net       |                                                    |                                                 | 1,629   |            |      |   | 2,430   |            |   |   | 4,016   |           
|Loss before income taxes   |                                                    |                                                 | (32,565 | )          |      |   | (55,964 | )          |   |   | (29,598 | )         
|Provision for income taxes |                                                    |                                                 |        |            |      |   |        |            |   |   | 165     |           
|                           |                                                    |                                                 |         |            |      |   |         |            |  
|Net loss                   |                                                    | $                                               | (32,565 | )          |      | $ | (55,964 | )          |   | $ | (29,763 | )         
|                           |                                                    |                                                 |         |            |      |   |         |            |  
|Net loss per common share: |                                                    |                                                 |         |            |      |   |         |            |   |   |         |           
|                           | Basic net loss per common share                    |                                                 | $       | (0.70      | )    |   | $       | (1.23      | ) |   | $       | (0.67      | )
|                           |                                                    |                                                 |         |            |      |   |         |            |  
|                           | Diluted net loss per common share                  |                                                 | $       | (0.70      | )    |   | $       | (1.23      | ) |   | $       | (0.67      | )
|                           |                                                    |                                                 |         |            |      |   |         |            |  
|                           | Basic weighted average common shares outstanding   |                                                 |         | 46,586,754 |      |   |         | 45,404,754 |   |   |         | 44,710,754 |  
|                           |                                                    |                                                 |         |            |      |   |         |            |  
|                           | Diluted weighted average common shares outstanding |                                                 |         | 46,586,754 |      |   |         | 45,404,754 |   |   |         | 44,710,754 |  
|                           |                                                    |                                                 |         |            |      |   |         |            |  



43



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ECLIPSYS CORPORATION


Consolidated Statements of Cash Flows


|                                                      |                                                                                               |                             |                                                     |         |         |         |         |         |         |         |         |         |        |         |  
|----------------------------------------------------- | --------------------------------------------------------------------------------------------- | --------------------------- | --------------------------------------------------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------ | ------- | -
|                                                      |                                                                                               | Year Ended December 31,     |                                                    
|                                                      |                                                                                               |                             |                                                    
|                                                      |                                                                                               | 2004                        |                                                     |         | 2003    |         |         | 2002    |        
|                                                      |                                                                                               |                             |                                                     |         |         |         |         |         |        
|                                                      |                                                                                               | (In thousands)              |                                                    
|Operating activities:                                 |                                                                                               |                             |                                                     |         |         |         |         |         |         |         |         |        
|                                                      | Net loss                                                                                      |                             | $                                                   | (32,565 | )       |         | $       | (55,964 | )       |         | $       | (29,763 | )     
|                                                      | Adjustments to reconcile net loss to net cash (used in) provided
    by operating activities: |                             |                                                     |         |         |         |         |         |         |         |         |         |       
|                                                      | Depreciation and amortization                                                                 |                             |                                                     | 27,410  |         |         |         | 21,902  |         |         |         | 19,576  |       
|                                                      | Write-off of capitalized software development costs                                           |                             |                                                     |        |         |         |         | 1,200   |         |         |         |        |       
|                                                      | Provision for bad debts                                                                       |                             |                                                     | 1,800   |         |         |         | 2,625   |         |         |         | 2,205   |       
|                                                      | Loss on sale of marketable securities                                                         |                             |                                                     | 131     |         |         |         | 424     |         |         |         |        |       
|                                                      | Stock compensation expense                                                                    |                             |                                                     | 477     |         |         |         | 226     |         |         |         | 134     |       
|                                                      | Changes in operating assets and liabilities:                                                  |                             |                                                     |         |         |         |         |         |         |         |         |         |       
|                                                      |                                                                                               | Accounts receivable         |                                                     |         | (11,520 | )       |         |         | (10,706 | )       |         |         | 16,443 |        
|                                                      |                                                                                               | Inventory                   |                                                     |         | (1,079  | )       |         |         | 126     |         |         |         | 11     |        
|                                                      |                                                                                               | Other current assets        |                                                     |         | (534    | )       |         |         | 1,928   |         |         |         | 1,503  |        
|                                                      |                                                                                               | Other assets                |                                                     |         | (2,724  | )       |         |         | (9,232  | )       |         |         | (4,203 | )      
|                                                      |                                                                                               | Deferred revenue            |                                                     |         | 21,403  |         |         |         | 21,094  |         |         |         | 21,233 |        
|                                                      |                                                                                               | Other current liabilities   |                                                     |         | (5,484  | )       |         |         | 22,477  |         |         |         | 5,547  |        
|                                                      |                                                                                               | Other long-term liabilities |                                                     |         | (562    | )       |         |         | 458     |         |         |         | (473   | )      
|                                                      |                                                                                               |                             |                                                     |         |         |         |         |         |        
|                                                      |                                                                                               |                             | Total adjustments                                   |         |         | 29,318  |         |         |         | 52,522  |         |         |        | 61,976  |  
|                                                      |                                                                                               |                             |                                                     |         |         |         |         |         |        
|                                                      |                                                                                               |                             | Net cash (used in) provided by operating activities |         |         | (3,247  | )       |         |         | (3,442  | )       |         |        | 32,213  |  
|Investing activities:                                 |                                                                                               |                             |                                                     |         |         |         |         |         |         |         |         |        
|                                                      | Purchases of property and equipment                                                           |                             |                                                     | (15,333 | )       |         |         | (15,997 | )       |         |         | (12,857 | )     
|                                                      | Purchase of marketable securities                                                             |                             |                                                     | (41,170 | )       |         |         | (73,785 | )       |         |         |        |       
|                                                      | Proceeds from sale of marketable securities                                                   |                             |                                                     | 41,039  |         |         |         | 73,361  |         |         |         |        |       
|                                                      | Capitalized software development costs                                                        |                             |                                                     | (15,194 | )       |         |         | (18,249 | )       |         |         | (8,823  | )     
|                                                      | Cash paid for acquisitions                                                                    |                             |                                                     | (5,458  | )       |         |         |        |         |         |         |        |       
|                                                      |                                                                                               |                             |                                                     |         |         |         |         |         |        
|                                                      |                                                                                               |                             | Net cash used in investing activities               |         |         | (36,116 | )       |         |         | (34,670 | )       |         |        | (21,680 | )
|                                                      |                                                                                               |                             |                                                     |         |         |         |         |         |        
|Financing activities:                                 |                                                                                               |                             |                                                     |         |         |         |         |         |         |         |         |        
|                                                      | Exercises of stock options                                                                    |                             |                                                     | 7,892   |         |         |         | 3,554   |         |         |         | 1,470   |       
|                                                      | Employee stock purchase plan                                                                  |                             |                                                     | 1,664   |         |         |         | 2,709   |         |         |         | 2,552   |       
|                                                      |                                                                                               |                             |                                                     |         |         |         |         |         |        
|                                                      | Net cash provided by financing activities                                                     |                             |                                                     | 9,556   |         |         |         | 6,263   |         |         |         | 4,022   |       
|                                                      |                                                                                               |                             |                                                     |         |         |         |         |         |        
|Effect of exchange rates on cash and cash equivalents |                                                                                               |                             | 155                                                 |         |         |         | 32      |         |         |         | 3       |        
|Net (decrease) increase in cash and cash equivalents  |                                                                                               |                             | (29,652                                             | )       |         |         | (31,817 | )       |         |         | 14,558  |        
|Cash and cash equivalents  beginning of year         |                                                                                               |                             | 151,683                                             |         |         |         | 183,500 |         |         |         | 168,942 |        
|                                                      |                                                                                               |                             |                                                     |         |         |         |         |         |        
|Cash and cash equivalents  end of year               |                                                                                               | $                           | 122,031                                             |         |         | $       | 151,683 |         |         | $       | 183,500 |        
|                                                      |                                                                                               |                             |                                                     |         |         |         |         |         |        
|Cash paid for income taxes                            |                                                                                               | $                           | 133                                                 |         |         | $       | 155     |         |         | $       | 110     |        
|Non-cash investing activities:                        |                                                                                               |                             |                                                     |         |         |         |         |         |         |         |         |        
|Issuance of shares for acquisition (See Note 8)       |                                                                                               | $                           | 2,500                                               |         |         | $       |        |         |         | $       |        |        
|                                                      |                                                                                               |                             |                                                     |         |         |         |         |         |        



44



---



##### 



ECLIPSYS CORPORATION


Consolidated Statement of Changes in Stockholders
Equity


|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   |         |  
|--------------------------------------- |  | -------------- | ---------- |  | ---------- | - | --- | -------- |  | - | ------------ |  | ------------- | ------- | ------ | ------------- | ------ | - | -------- | ------ |  | - | ------- | - |  | - | ---- | - |  | - | ------- | -
|                                        |  | Voting and     |            |  |            |   |     |          |  |   |              |  | Accumulated   |         |        |              
|                                        |  | Non-Voting     |            |  |            |   |     |          |  |   |              |  | Other         |         |        |              
|                                        |  | Common Stock   |            |  | Additional |   |     | Unearned |  |   |              |  | Comprehensive |         |        | Comprehensive |        |   |         
|                                        |  |                |            |  | Paid-in    |   |     | Stock    |  |   | Accumulated  |  |               | Income  |        |               | Income |   |          |       
|                                        |  | Shares         |            |  | Amount     |   |     | Capital  |  |   | Compensation |  |               | Deficit |        |               | (Loss) |   |          | (Loss) |  |   | Total   |  
|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |  
|                                        |  | (In thousands) |           
|Balance at December 31, 2001            |  |                | 44,382,413 |  |            | $ | 444 |          |  | $ | 400,242      |  |               | $       | (32    | )             |        | $ | (182,051 | )      |  |   |         |   |  | $ | (402 | ) |  | $ | 218,201 |  
|Exercise of stock options               |  |                | 190,917    |  |            |   | 2   |          |  |   | 1,468        |  |               |         |        |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   | 1,470   |  
|Employee stock purchase plan            |  |                | 365,542    |  |            |   | 4   |          |  |   | 2,548        |  |               |         |        |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   | 2,552   |  
|Issuance of restricted stock            |  |                | 150,000    |  |            |   | 1   |          |  |   | 1,122        |  |               |         | (1,123 | )             |        |   |          |        |  |   |         |   |  |   |      |   |  |   |        |  
|Compensation expense recognized         |  |                |            |  |            |   |     |          |  |   |              |  |               |         | 134    |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   | 134     |  
|Comprehensive income:                   |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   |         |  
|Net loss                                |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   | (29,763  | )      |  |   | (29,763 | ) |  |   |      |   |  |   | (29,763 | )
|Foreign currency translation adjustment |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   | 3       |   |  |   | 3    |   |  |   | 3       |  
|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |  
|Other comprehensive income              |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   | 3       |   |  |   |      |   |  |   |         |  
|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |  
|Comprehensive loss                      |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  | $ | (29,760 | ) |  |   |      |   |  |   |         |  
|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |  
|Balance at December 31, 2002            |  |                | 45,088,872 |  |            | $ | 451 |          |  | $ | 405,380      |  |               | $       | (1,021 | )             |        | $ | (211,814 | )      |  |   |         |   |  | $ | (399 | ) |  | $ | 192,597 |  
|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |  
|Exercise of stock options               |  |                | 430,132    |  |            |   | 4   |          |  |   | 3,550        |  |               |         |        |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   | 3,554   |  
|Employee stock purchase plan            |  |                | 457,651    |  |            |   | 5   |          |  |   | 2,704        |  |               |         |        |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   | 2,709   |  
|Compensation expense recognized         |  |                |            |  |            |   |     |          |  |   |              |  |               |         | 226    |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   | 226     |  
|Comprehensive income:                   |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   |         |  
|Net loss                                |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   | (55,964  | )      |  |   | (55,964 | ) |  |   |      |   |  |   | (55,964 | )
|Foreign currency translation adjustment |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   | 32      |   |  |   | 32   |   |  |   | 32      |  
|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |  
|Other comprehensive income              |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   | 32      |   |  |   |      |   |  |   |         |  
|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |  
|Comprehensive loss                      |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   | (55,932 | ) |  |   |      |   |  |   |         |  
|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |  
|Balance at December 31, 2003            |  |                | 45,976,655 |  |            | $ | 460 |          |  | $ | 411,634      |  |               | $       | (795   | )             |        | $ | (267,778 | )      |  |   |         |   |  | $ | (367 | ) |  | $ | 143,154 |  
|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |  
|Exercise of stock options               |  |                | 872,576    |  |            |   | 8   |          |  |   | 7,884        |  |               |         |        |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   | 7,892   |  
|Employee stock purchase plan            |  |                | 167,709    |  |            |   | 1   |          |  |   | 1,663        |  |               |         |        |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   | 1,664   |  
|Issuance of restricted stock            |  |                | 295,000    |  |            |   | 2   |          |  |   | 5,272        |  |               |         | (5,274 | )             |        |   |          |        |  |   |         |   |  |   |      |   |  |   |        |  
|Compensation expense recognized         |  |                |            |  |            |   |     |          |  |   | 49           |  |               |         | 428    |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   | 477     |  
|Stock issued for Acquisition            |  |                | 184,202    |  |            |   | 1   |          |  |   | 2,499        |  |               |         |        |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   | 2,500   |  
|Comprehensive income:                   |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |   |  |   |      |   |  |   |         |  
|Net loss                                |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   | (32,565  | )      |  |   | (32,565 | ) |  |   |      |   |  |   | (32,565 | )
|Foreign currency translation adjustment |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   | 155     |   |  |   | 155  |   |  |   | 155     |  
|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |  
|Other comprehensive income              |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   | 155     |   |  |   |      |   |  |   |        |  
|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |  
|Comprehensive loss                      |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   | (32,410 | ) |  |   |      |   |  |   |        |  
|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |  
|Balance at December 31, 2004            |  |                | 47,496,142 |  |            | $ | 472 |          |  | $ | 429,001      |  |               | $       | (5,641 | )             |        | $ | (300,343 | )      |  |   |         |   |  | $ | (212 | ) |  | $ | 123,277 |  
|                                        |  |                |            |  |            |   |     |          |  |   |              |  |               |         |        |               |        |   |          |        |  |   |         |  



45



---



##### 









|   |                                         
|-- | ----------------------------------------
|1. | Organization and Description of Business





|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies

Principles of Consolidation




Use of Estimates




Reclassifications




Cash and Cash Equivalents




Revenue Recognition




Systems and Services Revenue


Multiple Element Arrangements




46



---



##### 











| |                       
| | ----------------------
| | Subscription Contracts





| |   |                                                
| | - | -----------------------------------------------
| |  | Software license                               
|
| |  | Maintenance                                    
|
| |  | Professional services; and                     
|
| |  | Third party hardware or remote hosting services













47



---



##### 









| |                               
| | ------------------------------
| | Traditional Software Contracts





| |   |                                                
| | - | -----------------------------------------------
| |  | Software license                               
|
| |  | Maintenance                                    
|
| |  | Professional services; and                     
|
| |  | Third party hardware or remote hosting services









| |                                                 
| | ------------------------------------------------
| | Software Contracts Requiring Contract Accounting





| |                                  
| | ---------------------------------
| | Stand-Alone Products and Services





| |   |                        
| | - | -----------------------
| |  | Software license       
|
| |  | Maintenance            
|
| |  | Professional services  
|
| |  | Hardware               
|
| |  | Network services       
|
| |  | Remote hosting services
|
| |  | Outsourcing            





48



---



##### 



















Warranty Reserve




|                  |                        |      |       |        |      |   |       |       | 
|----------------- | ---------------------- | ---- | ----- | ------ | ---- | - | ----- | ----- | 
|                  |                        | 2004 |       |        | 2003 |  
|                  |                        |      |       |        |      |  
|Beginning Balance |                        | $    | 4,400 |        |      | $ |      |      
|                  | Provision for warranty |      |       | 450    |      |   |       | 4,400 | 
|                  | Provision reduction    |      |       | (252   | )    |   |       |      | 
|                  | Warranty utilized      |      |       | (2,541 | )    |   |       |      | 
|                  |                        |      |       |        |      |  
|Ending Balance    |                        | $    | 2,057 |        |      | $ | 4,400 |      
|                  |                        |      |       |        |      |  

Unbilled Accounts Receivable and Deferred Revenue




49



---



##### 











|                     |                                         |                                |   |        |        |  |   |        |        | 
|-------------------- | --------------------------------------- | ------------------------------ | - | ------ | ------ |  | - | ------ | ------ | 
|                     |                                         | 2004                           |   |        | 2003   | 
|                     |                                         |                                |   |        |        | 
|Accounts Receivable: |                                         |                                |   |        |        |  |   |       
|                     | Billed accounts receivable, net         |                                | $ | 53,698 |        |  | $ | 49,150 |       
|                     | Total unbilled accounts receivable, net |                                |   | 11,164 |        |  |   | 5,753  |       
|                     |                                         |                                |   |        |        | 
|                     |                                         | Total accounts receivable, net |   | $      | 64,862 |  |   | $      | 54,903 | 
|                     |                                         |                                |   |        |        | 

Inventory




Capitalized Software Development Costs




Write-down of Capitalized Software Development Costs




50



---



##### 







Acquired Technology and Intangible Assets






|                                     |                                               |                   |       |       |       |           |     |          |         |  |  |           |  | 
|------------------------------------ | --------------------------------------------- | ----------------- | ----- | ----- | ----- | --------- | --- | -------- | ------- |  |  | --------- |  | 
|                                     |                                               |                   |       |       |       | Estimated |    
|                                     |                                               | 2004              |       |       | 2003  |           |     | Life     |        
|                                     |                                               |                   |       |       |       |           |     |          |        
|Amounts subject to amortization:     |                                               |                   |       |       |       |           |     |          |         |  |  |          
|                                     | Acquired technology                           |                   | $     | 914   |       |           | $   | 95,795   |         |  |  | 3-5 years | 
|                                     | Ongoing customer relationships                |                   |       | 4,335 |       |           |     | 10,690   |         |  |  | 5-7 years | 
|                                     | Network services                              |                   |       |      |       |           |     | 5,764    |         |  |  | 3 years   | 
|                                     |                                               |                   |       |       |       |           |     |          |        
|                                     |                                               | Gross Intangibles |       |       | 5,249 |           |     |          | 112,249 |  |  |           |  | 
|                                     | Accumulated Amortization                      |                   |       | (559  | )     |           |     | (112,249 | )       |  |  |           | 
|                                     |                                               |                   |       |       |       |           |     |          |        
|                                     | Net Acquired Technology and other Intangibles |                   |       | 4,690 |       |           |     |         |         |  |  |           | 
|Amounts not subject to amortization: |                                               |                   |       |       |       |           |     |          |         |  |  |          
|                                     | Goodwill                                      |                   |       | 2,863 |       |           |     | 454      |         |  |  |           | 
|                                     |                                               |                   |       |       |       |           |     |          |        
|                                     |                                               | $                 | 2,863 |       |       | $         | 454 |          |         |  |  |          
|                                     |                                               |                   |       |       |       |           |     |          |        





|                               |  |      |           |  |      |   |           |      |  |   |           |  |  |      |         |  |  |   |         | 
|------------------------------ |  | ---- | --------- |  | ---- | - | --------- | ---- |  | - | --------- |  |  | ---- | ------- |  |  | - | ------- | 
|                               |  | 2005 |           |  | 2006 |   |           | 2007 |  |   | 2008      |  |  | 2009 |        
|                               |  |      |           |  |      |   |           |      |  |   |           |  |  |      |        
|Acquired technology            |  | $    | 305,000   |  |      | $ | 305,000   |      |  | $ | 276,000   |  |  | $    |        |  |  | $ |        | 
|Ongoing customer relationships |  |      | 851,000   |  |      |   | 851,000   |      |  |   | 851,000   |  |  |      | 851,000 |  |  |   | 354,000 | 
|                               |  |      |           |  |      |   |           |      |  |   |           |  |  |      |        
|Total Amortization Expense     |  | $    | 1,156,000 |  |      | $ | 1,156,000 |      |  | $ | 1,127,000 |  |  | $    | 851,000 |  |  | $ | 354,000 | 
|                               |  |      |           |  |      |   |           |      |  |   |           |  |  |      |        



Fair Value of Financial Instruments




Income Taxes




51



---



##### 







Stock-Based Compensation






|                                   |                                                                                                                                            |      |   |         |      |  |   |         |   |  |   |         |  
|---------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------ | ---- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                   |                                                                                                                                            | 2004 |   |         | 2003 |  |   | 2002    |  
|                                   |                                                                                                                                            |      |   |         |      |  |   |         |  
|Net loss:                          |                                                                                                                                            |      |   |         |      |  |   |         |   |  |   |        
|                                   | As reported                                                                                                                                |      | $ | (32,565 | )    |  | $ | (55,964 | ) |  | $ | (29,763 | )
|                                   | Add: Stock-based employee compensation expense included in Net
    loss, net of related tax effects                                        |      |   | 477     |      |  |   | 224     |   |  |   | 134     |  
|                                   | Deduct: Total stock-based compensation expense determined under
    fair value based method for all awards, net of related tax
    effects |      |   | (9,591  | )    |  |   | (16,162 | ) |  |   | (24,182 | )
|                                   |                                                                                                                                            |      |   |         |      |  |   |         |  
|                                   | Pro forma                                                                                                                                  |      | $ | (41,679 | )    |  | $ | (71,902 | ) |  | $ | (53,811 | )
|Basic net loss per common share:   |                                                                                                                                            |      |   |         |      |  |   |         |   |  |   |        
|                                   | As reported                                                                                                                                |      | $ | (0.70   | )    |  | $ | (1.23   | ) |  | $ | (0.67   | )
|                                   | Pro forma                                                                                                                                  |      | $ | (0.90   | )    |  | $ | (1.58   | ) |  | $ | (1.20   | )
|Diluted net loss per common share: |                                                                                                                                            |      |   |         |      |  |   |         |   |  |   |        
|                                   | As reported                                                                                                                                |      | $ | (0.70   | )    |  | $ | (1.23   | ) |  | $ | (0.67   | )
|                                   | Pro forma                                                                                                                                  |      | $ | (0.90   | )    |  | $ | (1.58   | ) |  | $ | (1.20   | )



Basic and Diluted Net (Loss) Income Per Share




52



---



##### 









|                                    |                                                                           |      |            |            |      |   |            |            |  |   |            |            | 
|----------------------------------- | ------------------------------------------------------------------------- | ---- | ---------- | ---------- | ---- | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                    |                                                                           | 2004 |            |            | 2003 |   |            | 2002       | 
|                                    |                                                                           |      |            |            |      |   |            |            | 
|Basic Earnings Per Common Share:    |                                                                           |      |            |            |      |   |            |            |  |   |            |           
|Net loss (in thousands)             |                                                                           | $    | (32,565    | )          |      | $ | (55,964    | )          |  | $ | (29,763    | )         
|Weighted average shares outstanding |                                                                           |      | 46,586,754 |            |      |   | 45,404,754 |            |  |   | 44,710,754 |           
|Basic net loss per common share     |                                                                           | $    | (0.70      | )          |      | $ | (1.23      | )          |  | $ | (0.67      | )         
|Diluted net Loss Per Common Share:  |                                                                           |      |            |            |      |   |            |            |  |   |            |           
|Net loss (in thousands)             |                                                                           | $    | (32,565    | )          |      | $ | (55,964    | )          |  | $ | (29,763    | )         
|Weighted average shares:            |                                                                           |      |            |            |      |   |            |            |  |   |            |           
|                                    | Outstanding                                                               |      |            | 46,586,754 |      |   |            | 45,404,754 |  |   |            | 44,710,754 | 
|                                    | Effect of dilutive stock options and unvested restricted common
    stock |      |            |           |      |   |            |           |  |   |            |           | 
|                                    |                                                                           |      |            |            |      |   |            |            | 
|                                    | Total shares                                                              |      |            | 46,586,754 |      |   |            | 45,404,754 |  |   |            | 44,710,754 | 
|                                    |                                                                           |      |            |            |      |   |            |            | 
|Diluted net loss per common share   |                                                                           | $    | (0.70      | )          |      | $ | (1.23      | )          |  | $ | (0.67      | )         

Concentration of Credit Risk




Foreign Currency




Comprehensive Income




New Accounting Pronouncements




53



---



##### 











|   |                       
|-- | ----------------------
|3. | Property and Equipment



|                                                |  |      |         |   |      |   |         |  
|----------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                |  | 2004 |         |   | 2003 |  
|                                                |  |      |         |   |      |  
|Computer equipment                              |  | $    | 41,952  |   |      | $ | 34,835  |  
|Office equipment and other                      |  |      | 7,201   |   |      |   | 6,935   |  
|Purchased software                              |  |      | 13,281  |   |      |   | 11,338  |  
|Leasehold improvements                          |  |      | 11,611  |   |      |   | 9,022   |  
|                                                |  |      |         |   |      |  
|                                                |  |      | 74,045  |   |      |   | 62,130  |  
|Less: Accumulated depreciation and amortization |  |      | (39,043 | ) |      |   | (29,826 | )
|                                                |  |      |         |   |      |  
|                                                |  | $    | 35,002  |   |      | $ | 32,304  |  
|                                                |  |      |         |   |      |  





|   |                     
|-- | --------------------
|4. | Stockholders Equity

Restricted Stock Grant








54



---



##### 









Undesignated Preferred Stock




Shareholder Rights Plan




Secondary Offering of Common Stock






|   |             
|-- | ------------
|5. | Income Taxes



|                              |                     |      |   |         |      |   |   |         |   |   |     |         |  
|----------------------------- | ------------------- | ---- | - | ------- | ---- | - | - | ------- | - | - | --- | ------- | -
|                              |                     | 2004 |   |         | 2003 |   |   | 2002    |  
|                              |                     |      |   |         |      |   |   |         |  
|Current Tax Provision:        |                     |      |   |         |      |   |   |         |   |   |     |        
|                              | Federal             |      | $ |        |      |   | $ |        |   |   | $   |        |  
|                              | State               |      |   |         |      |   |   |         |   |   |     | 165     |  
|                              |                     |      |   |         |      |   |   |         |  
|                              |                     | $    |  |         |      | $ |  |         |   | $ | 165 |        
|                              |                     |      |   |         |      |   |   |         |  
|Deferred Provision (Benefit): |                     |      |   |         |      |   |   |         |   |   |     |        
|                              | Federal             |      | $ | (10,755 | )    |   | $ | (18,859 | ) |   | $   | (10,076 | )
|                              | State               |      |   | (1,253  | )    |   |   | (2,197  | ) |   |     | (1,180  | )
|                              | Valuation allowance |      |   | 12,008  |      |   |   | 21,056  |   |   |     | 11,256  |  
|                              |                     |      |   |         |      |   |   |         |  
|                              |                     | $    |  |         |      | $ |  |         |   | $ |    |        
|                              |                     |      |   |         |      |   |   |         |  
|Total Provision               |                     | $    |  |         |      | $ |  |         |   | $ | 165 |        
|                              |                     |      |   |         |      |   |   |         |  

55



---



##### 









|                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|---------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                     |  | 2004 |         |   | 2003 |   |         | 2002 | 
|                                                     |  |      |         |   |      |   |         |      | 
|Statutory federal income tax rate                    |  | $    | (11,072 | ) |      | $ | (19,028 | )    |  | $ | (10,119 | )
|State income taxes                                   |  |      | (1,290  | ) |      |   | (2,216  | )    |  |   | (1,013  | )
|Non-deductible amortization                          |  |      |        |   |      |   |        |      |  |   |        |  
|Other                                                |  |      | 594     |   |      |   | 604     |      |  |   | 479     |  
|Valuation allowance, includes effect of acquisitions |  |      | 11,768  |   |      |   | 20,640  |      |  |   | 10,818  |  
|                                                     |  |      |         |   |      |   |         |      | 
|Income tax provision                                 |  | $    |        |   |      | $ |        |      |  | $ | 165     |  
|                                                     |  |      |         |   |      |   |         |      | 



|                          |                                              |      |         |          |      |   |         |          |  
|------------------------- | -------------------------------------------- | ---- | ------- | -------- | ---- | - | ------- | -------- | -
|                          |                                              | 2004 |         |          | 2003 |  
|                          |                                              |      |         |          |      |  
|Deferred tax assets:      |                                              |      |         |          |      |   |         |         
|                          | Intangible assets                            |      | $       | 29,724   |      |   | $       | 33,673   |  
|                          | Allowance for doubtful accounts              |      |         | 3,219    |      |   |         | 3,085    |  
|                          | Accrued expenses                             |      |         | 1,544    |      |   |         | 3,363    |  
|                          | Other                                        |      |         | 2,259    |      |   |         | 2,547    |  
|                          | Net operating loss carryforwards             |      |         | 113,150  |      |   |         | 88,696   |  
|                          |                                              |      |         |          |      |  
|                          |                                              | $    | 149,896 |          |      | $ | 131,364 |         
|                          |                                              |      |         |          |      |  
|Deferred tax liabilities: |                                              |      |         |          |      |   |         |         
|                          | Intangible assets                            |      |         | (1,990   | )    |   |         |         |  
|                          | Unbilled accounts receivable                 |      |         | (5,847   | )    |   |         | (3,898   | )
|                          | Depreciation                                 |      |         | (3,411   | )    |   |         | (2,557   | )
|                          | Capitalization of software development costs |      |         | (11,320  | )    |   |         | (9,589   | )
|                          |                                              |      |         |          |      |  
|                          | Net deferred tax asset                       |      |         | 127,328  |      |   |         | 115,320  |  
|                          | Valuation allowance                          |      |         | (127,328 | )    |   |         | (115,320 | )
|                          |                                              |      |         |          |      |  
|                          |                                              | $    |        |          |      | $ |        |         
|                          |                                              |      |         |          |      |  





56



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##### 









|   |                       
|-- | ----------------------
|6. | Employee Benefit Plans

1996 Stock Option Plan




1998 Stock Incentive Plan




1999 Stock Incentive Plan




2000 Stock Incentive Plan








|                                     |  |         |           |          |       |   |       |         |          |  |           |   |  |          |       |  |       |  |           |   |  |   |       | 
|------------------------------------ |  | ------- | --------- | -------- | ----- | - | ----- | ------- | -------- |  | --------- | - |  | -------- | ----- |  | ----- |  | --------- | - |  | - | ----- | 
|                                     |  | 2004    |           |          | 2003  |   |       | 2002    |         
|                                     |  |         |           |          |       |   |       |         |         
|                                     |  |         |           | Weighted |       |   |       |         | Weighted |  |           |   |  | Weighted |      
|                                     |  |         |           | Average  |       |   |       |         | Average  |  |           |   |  | Average  |      
|                                     |  |         |           | Exercise |       |   |       |         | Exercise |  |           |   |  | Exercise |      
|                                     |  | Options |           |          | Price |   |       | Options |          |  | Price     |   |  | Options  |       |  | Price | 
|                                     |  |         |           |          |       |   |       |         |          |  |           |   |  |          |       |  |       | 
|Outstanding at beginning of the year |  |         | 9,268,674 |          |       | $ | 11.05 |         |          |  | 9,020,711 |   |  | $        | 11.24 |  |       |  | 8,006,072 |   |  | $ | 12.22 | 
|Granted                              |  |         | 1,530,000 |          |       |   | 16.12 |         |          |  | 1,539,500 |   |  |          | 9.08  |  |       |  | 1,922,925 |   |  |   | 8.20  | 
|Exercised                            |  |         | (872,576  | )        |       |   | 9.04  |         |          |  | (430,132  | ) |  |          | 8.26  |  |       |  | (195,277  | ) |  |   | 7.53  | 
|Forfeited                            |  |         | (787,646  | )        |       |   | 17.84 |         |          |  | (861,405  | ) |  |          | 10.90 |  |       |  | (713,009  | ) |  |   | 15.14 | 
|                                     |  |         |           |          |       |   |       |         |          |  |           |   |  |          |       |  |       | 
|Outstanding at end of year           |  |         | 9,138,452 |          |       |   | 11.50 |         |          |  | 9,268,674 |   |  |          | 11.05 |  |       |  | 9,020,711 |   |  |   | 11.23 | 
|                                     |  |         |           |          |       |   |       |         |          |  |           |   |  |          |       |  |       | 
|Exercisable at end of the year       |  |         | 5,784,506 |          |       |   |       |         |          |  | 5,714,566 |   |  |          |       |  |       |  | 4,960,438 |   |  |   |       | 
|                                     |  |         |           |          |       |   |       |         |          |  |           |   |  |          |       |  |       | 

57



---



##### 









|                                   |  |          |       |  |          |   |       |          |  |   |          |  |  |          |      |  |          |   |      |  |  |   |      | 
|---------------------------------- |  | -------- | ----- |  | -------- | - | ----- | -------- |  | - | -------- |  |  | -------- | ---- |  | -------- | - | ---- |  |  | - | ---- | 
|                                   |  | 2004     |       |  | 2003     |   |       | 2002     | 
|                                   |  |          |       |  |          |   |       |          | 
|                                   |  | Weighted |       |  | Weighted |   |       | Weighted |  |   | Weighted |  |  | Weighted |      |  | Weighted |  
|                                   |  | Average  |       |  | Fair     |   |       | Average  |  |   | Fair     |  |  | Average  |      |  | Fair     |  
|                                   |  | Exercise |       |  | Market   |   |       | Exercise |  |   | Market   |  |  | Exercise |      |  | Market   |  
|Option Granted During the Year     |  | Price    |       |  | Value    |   |       | Price    |  |   | Value    |  |  | Price    |      |  | Value    |  
|                                   |  |          |       |  |          |   |       |          |  |   |          |  |  |          |      |  |          |  
|Option price< Fair market value    |  |          |      |  |          |   |       |          |  |   |         |  |  |          |      |  |          |   |     |  |  |   |      | 
|Option price = Fair market value   |  | $        | 16.12 |  |          |   |       |          |  | $ | 9.08     |  |  |          |      |  |          | $ | 8.20 |  |  |   |      | 
|Option price> Fair market value    |  |          |      |  |          |   |       |          |  |   |         |  |  |          |      |  |          |   |     |  |  |   |      | 
|Weighted Fair Market Value Options |  |          |       |  |          | $ | 11.12 |          |  |   |          |  |  | $        | 6.44 |  |          |   |      |  |  | $ | 6.59 | 



|                        |  |                     |           |          |                     |  |          |          |  |   |             |          |  |          |           |  |  |   |       | 
|----------------------- |  | ------------------- | --------- | -------- | ------------------- |  | -------- | -------- |  | - | ----------- | -------- |  | -------- | --------- |  |  | - | ----- | 
|                        |  | Options Outstanding |           |          |                    
|                        |  |                     |           |          | Options Exercisable | 
|                        |  |                     |           | Weighted |                     |  |          |          |  |  
|                        |  |                     |           | Average  |                     |  | Weighted |          |  |   |             | Weighted | 
|                        |  | Number              |           |          | Remaining           |  |          | Average  |  |   | Number      |          |  | Average  |          
|                        |  | Outstanding at      |           |          | Contractual         |  |          | Exercise |  |   | Exercisable |          |  | Exercise |          
|Range of Exercise Price |  | 12/31/2004          |           |          | Life (in years)     |  |          | Price    |  |   | at 12/31/04 |          |  | Price    |          
|                        |  |                     |           |          |                     |  |          |          |  |   |             |          |  |          |          
|$0.10 - $6.44           |  |                     | 738,901   |          |                     |  | 6.79     |          |  | $ | 5.82        |          |  |          | 454,275   |  |  | $ | 5.80  | 
|$6.50 - $7.50           |  |                     | 1,377,528 |          |                     |  | 6.05     |          |  |   | 7.13        |          |  |          | 814,146   |  |  |   | 7.04  | 
|$8.25 - $8.25           |  |                     | 1,905,822 |          |                     |  | 5.53     |          |  |   | 8.25        |          |  |          | 1,873,822 |  |  |   | 8.25  | 
|$8.88 - $9.13           |  |                     | 916,760   |          |                     |  | 8.13     |          |  |   | 8.95        |          |  |          | 337,092   |  |  |   | 8.98  | 
|$9.53 - $13.20          |  |                     | 856,191   |          |                     |  | 6.66     |          |  |   | 11.61       |          |  |          | 635,372   |  |  |   | 11.51 | 
|$13.21 - $15.13         |  |                     | 1,869,769 |          |                     |  | 7.03     |          |  |   | 14.09       |          |  |          | 933,302   |  |  |   | 14.65 | 
|$15.63 - $23.38         |  |                     | 1,374,259 |          |                     |  | 7.49     |          |  |   | 19.75       |          |  |          | 640,425   |  |  |   | 19.95 | 
|$25.71 - $25.71         |  |                     | 22,049    |          |                     |  | 2.11     |          |  |   | 25.71       |          |  |          | 20,999    |  |  |   | 25.71 | 
|$35.83 - $35.83         |  |                     | 39,374    |          |                     |  | 2.58     |          |  |   | 35.83       |          |  |          | 39,374    |  |  |   | 35.83 | 
|$43.57 - $43.57         |  |                     | 37,799    |          |                     |  | 2.88     |          |  |   | 43.57       |          |  |          | 35,699    |  |  |   | 43.57 | 
|                        |  |                     |           |          |                     |  |          |          |  |   |             |          |  |          |          
|                        |  |                     | 9,138,452 |          |                     |  |          |          |  |   |             |          |  |          |           |  |  |   |       | 
|                        |  |                     |           |          |                     |  |          |          |  |   |             |          |  |          |          

Employee Savings Plan






1998 Employee Stock Purchase Plan




58



---



##### 









|   |                              
|-- | -----------------------------
|7. | Commitments and Contingencies

Noncancelable Operating Leases




|                         |  |   |        | 
|------------------------ |  | - | ------ | 
|Year Ending December 31, |  |  
|                         |  |  
|2005                     |  | $ | 8,766  | 
|2006                     |  |   | 10,660 | 
|2007                     |  |   | 6,664  | 
|2008                     |  |   | 3,147  | 
|2009                     |  |   | 3,677  | 
|Thereafter               |  |   | 3,378  | 
|                         |  |   |       
|                         |  | $ | 36,292 | 
|                         |  |   |       



Indemnification clauses






|   |             
|-- | ------------
|8. | Acquisitions





59



---



##### 

















|   |           
|-- | ----------
|9. | Litigation





|    |                           
|--- | --------------------------
|10. | Related Party Transactions







60



---



##### 















61



---



##### 



ECLIPSYS CORPORATION


SCHEDULE II  VALUATION OF QUALIFYING
ACCOUNTS


For Each of the Three Years in the Period Ended
December 31, 2004


|                  |                                            |                |   |         |           |  |   |            |            |  |        |        |   |  |   |         | 
|----------------- | ------------------------------------------ | -------------- | - | ------- | --------- |  | - | ---------- | ---------- |  | ------ | ------ | - |  | - | ------- | 
|                  |                                            | Balance at     |   |         |           |  |   |            | Balance at | 
|                  |                                            | Beginning      |   |         |           |  |   |            | End of     | 
|                  |                                            | of Period      |   |         | Additions |  |   | Write-Offs |            |  | Period |       
|                  |                                            |                |   |         |           |  |   |            |            |  |        |       
|                  |                                            | (In thousands) |  
|December 31, 2004 |                                            |                |   |         |           |  |   |            |            |  |        |        |   |  |   |        
|                  | Allowance for doubtful accounts            |                | $ | 4,807   |           |  | $ | 4,117      |            |  | $      | (3,972 | ) |  | $ | 4,952   | 
|                  | Valuation allowance for deferred tax asset |                |   | 115,320 |           |  |   | 12,008     |            |  |        |        |   |  |   | 127,328 | 
|December 31, 2003 |                                            |                |   |         |           |  |   |            |            |  |        |        |   |  |   |        
|                  | Allowance for doubtful accounts            |                |   | 3,412   |           |  |   | 4,492      |            |  |        | (3,097 | ) |  |   | 4,807   | 
|                  | Valuation allowance for deferred tax asset |                |   | 94,264  |           |  |   | 21,056     |            |  |        |        |   |  |   | 115,320 | 
|December 31, 2002 |                                            |                |   |         |           |  |   |            |            |  |        |        |   |  |   |        
|                  | Allowance for doubtful accounts            |                |   | 5,572   |           |  |   | 3,533      |            |  |        | (5,693 | ) |  |   | 3,412   | 
|                  | Valuation allowance for deferred tax asset |                |   | 83,008  |           |  |   | 11,256     |            |  |        |        |   |  |   | 94,264  | 

Quarterly Results (Unaudited)




For the Year Ended December 31, 2004


|                                  |  |                                       |         |   |         |   |         |         |  |   |         |   |  |      |        |   |  |   |         |  
|--------------------------------- |  | ------------------------------------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | ---- | ------ | - |  | - | ------- | -
|                                  |  | First                                 |         |   | Second  |   |         | Third   |  |   | Fourth  |   |  |     
|                                  |  | Quarter                               |         |   | Quarter |   |         | Quarter |  |   | Quarter |   |  | Year |       
|                                  |  |                                       |         |   |         |   |         |         |  |   |         |   |  |      |       
|                                  |  | (In thousands, except per share data) |        
|Revenues                          |  | $                                     | 68,384  |   |         | $ | 73,643  |         |  | $ | 79,815  |   |  | $    | 87,233 |   |  | $ | 309,075 |  
|Loss from operations              |  |                                       | (13,516 | ) |         |   | (10,185 | )       |  |   | (7,065  | ) |  |      | (3,428 | ) |  |   | (34,194 | )
|Net loss                          |  | $                                     | (13,063 | ) |         | $ | (9,961  | )       |  | $ | (6,650  | ) |  | $    | (2,891 | ) |  | $ | (32,565 | )
|Basic net loss per common share   |  | $                                     | (0.28   | ) |         | $ | (0.21   | )       |  | $ | (0.14   | ) |  | $    | (0.06  | ) |  | $ | (0.70   | )
|Diluted net loss per common share |  | $                                     | (0.28   | ) |         | $ | (0.21   | )       |  | $ | (0.14   | ) |  | $    | (0.06  | ) |  | $ | (0.70   | )

For the Year Ended December 31, 2003


|                                  |  |                                       |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|--------------------------------- |  | ------------------------------------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                  |  | First                                 |         |   | Second  |   |         | Third   |  |   | Fourth  |   |  |     
|                                  |  | Quarter                               |         |   | Quarter |   |         | Quarter |  |   | Quarter |   |  | Year |        
|                                  |  |                                       |         |   |         |   |         |         |  |   |         |   |  |      |        
|                                  |  | (In thousands, except per share data) |        
|Revenues                          |  | $                                     | 56,836  |   |         | $ | 63,386  |         |  | $ | 68,150  |   |  | $    | 66,307  |   |  | $ | 254,679 |  
|Loss from operations              |  |                                       | (13,924 | ) |         |   | (11,851 | )       |  |   | (11,479 | ) |  |      | (21,140 | ) |  |   | (58,394 | )
|Net loss                          |  | $                                     | (13,025 | ) |         | $ | (11,019 | )       |  | $ | (11,067 | ) |  | $    | (20,853 | ) |  | $ | (55,964 | )
|Basic net loss per common share   |  | $                                     | (0.29   | ) |         | $ | (0.24   | )       |  | $ | (0.24   | ) |  | $    | (0.46   | ) |  | $ | (1.23   | )
|Diluted net loss per common share |  | $                                     | (0.29   | ) |         | $ | (0.24   | )       |  | $ | (0.24   | ) |  | $    | (0.46   | ) |  | $ | (1.23   | )

62



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##### 





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





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

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








| |                                                                     
| | --------------------------------------------------------------------
| | Managements Report on Internal Control Over
    Financial Reporting



Internal Control  Integrated Framework.




Part III






|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant



63



---



##### 





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





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





|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions





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



64



---



##### 



Part IV




|         |                                                                      
|-------- | ---------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules, and Reports on
    Form 8-K.

(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:                                                                                

| |    |        |  |                                                                                                                                                                           
| | -- | ------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3  | .1(2)  |  | Third Amended and Restated Certificate of Incorporation of the
    Registrant                                                                                             
| | 3  | .2(1)  |  | Third Amended and Restated Bylaws of the Registrant                                                                                                                       
| | 3  | .3(3)  |  | Certificate of Designation of Series A Junior Participating
    Preferred                                                                                                 
| | 4  | .1(1)  |  | Specimen certificate for shares of Common Stock                                                                                                                           
| | 4  | .2(3)  |  | Rights Agreement, dated July 26, 2000, by and between
    Eclipsys Corporation and Fleet National Bank, as Rights Agent                                                   
| | 10 | .1(1)  |  | Second Amended and Restated Registration Rights Agreement                                                                                                                 
| | 10 | .2(1)  |  | Information Systems Technology License Agreement, dated as of
    May 3, 1996, by and among Partners Healthcare System, Inc.
    and Integrated Healthcare Solutions, Inc.
| | 10 | .3(1)  |  | 1996 Stock Plan                                                                                                                                                           
| | 10 | .4(4)  |  | Amended and Restated 1998 Employee Stock Incentive Plan                                                                                                                   
| | 10 | .5(4)  |  | Second Amended and Restated 1998 Employee Stock Purchase Plan                                                                                                             
| | 10 | .6(8)  |  | First Amendment to the Second Amended and Restated 1998 Employee
    Stock Purchase Plan                                                                                  
| | 10 | .7(8)  |  | Form of Indemnification Agreement between Eclipsys Corporation
    and each non-employee directors                                                                        
| | 10 | .8(5)  |  | Amendment No. 1 to the Amended and Restated 2000 Stock
    Incentive Plan                                                                                                 
| | 10 | .9(4)  |  | Amended and Restated 1999 Stock Incentive Plan, as amended                                                                                                                
| | 10 | .10(4) |  | Amended and Restated 2000 Stock Incentive Plan                                                                                                                            
| | 10 | .11(8) |  | Employment Agreement between the Registrant and Paul L. Ruflin,
    dated February 3, 2004                                                                                
| | 10 | .12(5) |  | Agreement between the Registrant and Mr. Harvey J. Wilson,
    dated January 24, 2003                                                                                     
| | 10 | .13(5) |  | Consulting Agreement between the Registrant and Mr. Harvey
    J. Wilson, dated January 24, 2003                                                                          
| | 10 | .14(5) |  | Agreement between the Registrant and Mr. John S. Cooper,
    dated February 2, 2002                                                                                       
| | 10 | .19(6) |  | Restricted Stock Agreement between the Registrant and John A.
    Adams, dated December 20, 2004                                                                          
| | 10 | .20(6) |  | Non-Qualified Stock Option Agreement between the Registrant and
    John A. Adams, dated December 20, 2004                                                                
| | 10 | .21(6) |  | Employment Agreement between the Registrant and John A. Adams,
    dated December 20, 2004                                                                                
| | 10 | .22(7) |  | Form of Incentive and/or Non-Qualified Stock Option Agreement
    under the Amended and Restated 2000 Stock Incentive Plan, as
    amended                                
| | 21 | (9)    |  | Subsidiaries of the Registrant                                                                                                                                            
| | 23 |        |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                     
| | 31 | .1     |  | Certification of Paul L. Ruflin                                                                                                                                           
| | 31 | .2     |  | Certification of Robert J. Colletti                                                                                                                                       
| | 32 | .1     |  | Certification Pursuant to 18 U.S.C. Section 1350                                                                                                                          
| | 32 | .2     |  | Certification Pursuant to 18 U.S.C. Section 1350                                                                                                                          






|    |                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the Registrants Registration
    Statement on Form S-1, as amended (File No. 333-50781)

65



---



##### 





|    |                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Incorporated by reference to the Registrants Quarterly
    Report on Form 10-Q for the quarter ended June 30, 1998
    (File No. 000-24539) 
|   
|(3) | Incorporated by reference to the Registrants Current
    Report on Form 8-K dated August 8, 2000 (File
    No. 000-24539)                   
|   
|(4) | Incorporated by reference to the Registrants Quarterly
    Report on Form 10-Q for the quarter ended June 30, 2002
    (File No. 000-24539) 
|   
|(5) | Incorporated by reference to the Registrants Quarterly
    Report on Form 10-Q for the quarter ended March 31, 2003
    (File No. 000-24539)
|   
|(6) | Incorporated by reference to the Registrants Current
    Report on Form 8-K filed on December 23, 2004 (File
    No. 000-24539)             
|   
|(7) | Incorporated by reference to the Registrants Current
    Report on Form 8-K filed on December 1, 2004 (File
    No. 000-24539)              
|   
|(8) | Incorporated by reference to the Registrants Annual Report
    on Form 10-K filed on March, 15 2004 (File
    No. 000-24539)                
|   
|(9) | Incorporated by reference to Exhibit 21 of the
    Registrants Annual Report on Form 10-K filed
    March 25, 2002 (File No. 000-24539)     

66



---



##### 



Signatures




|                                             |  |                                                                                                 |  |                |  | 
|-------------------------------------------- |  | ----------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                    |  | Title                                                                                           |  | Date          
|                                             |  |                                                                                                 |  |               
|                                            
|/s/ Paul L. RuflinPaul
    L. Ruflin         |  | President, Chief Executive Officer and Director (Principal
    Executive Officer)               |  | March 16, 2005
|                                            
|/s/ Robert J. CollettiRobert
    J. Colletti |  | Senior Vice President, Chief Financial Officer (Principal
    Financial and Accounting Officer) |  | March 16, 2005
|                                            
|/s/ Steven A. DenningSteven
    A. Denning   |  | Director                                                                                        |  | March 16, 2005
|                                            
|/s/ Dan L. CrippenDan
    L. Crippen         |  | Director                                                                                        |  | March 16, 2005
|                                            
|/s/ Eugene V. FifeEugene
    V. Fife         |  | Director                                                                                        |  | March 16, 2005
|                                            
|/s/ Braden KellyBraden
    Kelly             |  | Director                                                                                        |  | March 16, 2005
|                                            
|/s/ Jay B. PieperJay
    B. Pieper           |  | Director                                                                                        |  | March 16, 2005
|                                            
|/s/ Edward A. KangasEdward
    A. Kangas     |  | Director                                                                                        |  | March 16, 2005

67