SEC Info - Eclipsys Corp - IPO: ‘424B4’ on 8/10/98

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Eclipsys Corp – IPO: ‘424B4’ on 8/10/98

As of: Monday, 8/10/98 · Accession #: 950133-98-2911 · File #: 333-50781

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/10/98  Eclipsys Corp                     424B4                  1:433K                                   Bowne - DC/FA

Initial Public Offering (IPO): Prospectus — Rule 424(b)(4)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       424B4 Filing for Eclipsys                            119    739K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Ability to Attract and Retain Key Personnel Acquired In-Process Research and Development Additional Information Alltel Alltel Acquisition and Renegotiation, The Backlog Business Capitalization Cash and cash equivalents Certain Transactions Common Stock Company, The Competition Cost of revenues Delaware Law and Certain Charter and By-Law Provisions Depreciation and amortization Description of Capital Stock Dilution Dividend Policy Employees Employment Agreement Emtek Executive Officers, Directors and Key Employees Experts General and administrative Independent Auditors' Report Index to Financial Statements Legal Matters Limited Protection of Proprietary Rights Liquidity and Capital Resources Management Management's Discussion and Analysis of Financial Condition and Results of Operations Mandatorily redeemable preferred stock Marketing and sales Offering, The Overview Partners License, The Potential Fluctuations in Quarterly Performance Preferred Stock Principal Stockholders Products Prospectus Summary Registration Rights Report of Independent Accountants Research and development Risk Factors Sdk Selected Consolidated Financial Data Shareholders' equity (deficit) Shares Eligible for Future Sale Simione Investment Stockholders' Agreement; Observer Rights Stock Plans Strategy The Alltel Acquisition and Renegotiation The Company The Offering The Partners License Unaudited Pro Forma Financial Information Underwriters Use of Proceeds Warrants
1	1st Page - Filing Submission
"	Common Stock
5	Prospectus Summary
"	The Company
7	Strategy
8	The Offering
"	Risk Factors
12	Ability to Attract and Retain Key Personnel
"	Potential Fluctuations in Quarterly Performance
13	Competition
16	Limited Protection of Proprietary Rights
18	Dilution
"	Shares Eligible for Future Sale
19	Alltel
20	Sdk
"	Emtek
"	Simione Investment
21	Use of Proceeds
"	Dividend Policy
22	Capitalization
24	Unaudited Pro Forma Financial Information
29	Selected Consolidated Financial Data
31	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Overview
32	Cost of revenues
"	Marketing and sales
"	Research and development
33	General and administrative
"	Depreciation and amortization
36	Acquired In-Process Research and Development
38	Liquidity and Capital Resources
40	Backlog
41	Business
44	Products
51	Employees
52	Management
"	Executive Officers, Directors and Key Employees
55	Stockholders' Agreement; Observer Rights
57	Employment Agreement
"	Stock Plans
59	Certain Transactions
"	The Partners License
"	The Alltel Acquisition and Renegotiation
62	Principal Stockholders
64	Description of Capital Stock
"	Preferred Stock
65	Warrants
"	Registration Rights
"	Delaware Law and Certain Charter and By-Law Provisions
69	Underwriters
73	Legal Matters
"	Experts
"	Additional Information
74	Index to Financial Statements
75	Report of Independent Accountants
80	Cash and cash equivalents
85	Mandatorily redeemable preferred stock
95	Shareholders' equity (deficit)
109	Independent Auditors' Report

424B4 1st Page of 119 TOC ↑Top Previous Next ↓Bottom Just 1st

Filed Pursuant to
Rule 424 B4
File # 333-50781

PROSPECTUS

4,200,000 SHARES

[ECLIPSYS CORPORATION LOGO]

COMMON STOCK
------------------------

OF THE 4,200,000 SHARES OF COMMON STOCK BEING OFFERED, 3,260,000 SHARES ARE
BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS
AND 940,000 SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND
CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITERS." ALL OF THE
4,200,000 SHARES OF COMMON STOCK BEING OFFERED HEREBY ARE BEING SOLD BY THE
COMPANY. PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON
STOCK. SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS CONSIDERED IN
DETERMINING THE INITIAL PUBLIC OFFERING PRICE. GENERAL ATLANTIC PARTNERS, LLC, A
SIGNIFICANT STOCKHOLDER OF THE COMPANY, THROUGH CERTAIN OF ITS AFFILIATES, HAS
AGREED TO PURCHASE FOR INVESTMENT 600,000 SHARES OF COMMON STOCK IN THE OFFERING
AT THE INITIAL PUBLIC OFFERING PRICE ON THE SAME TERMS AND CONDITIONS AS ALL
OTHER PURCHASERS.
------------------------

THE COMMON STOCK HAS BEEN APPROVED FOR QUOTATION ON THE NASDAQ NATIONAL MARKET
UNDER THE SYMBOL "ECLP."
------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
PRICE $15 A SHARE
------------------------

[Download Table]

UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------- -------------- -----------

Per Share................................. $15.00 $1.05 $13.95
Total (3)................................. $63,000,000 $4,410,000 $58,590,000

------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."

(2) Before deducting expenses of the Offering payable by the Company,
estimated at $1,700,000.

(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
630,000 additional Shares at the price to public less underwriting
discounts and commissions, for the purpose of covering over-allotments,
if any. If the U.S. Underwriters exercise such option in full, the
total price to public, underwriting discounts and commissions and
proceeds to Company will be $72,450,000, $5,071,500 and $67,378,500,
respectively. See "Underwriters."

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

The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Davis Polk & Wardwell, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about August 12, 1998 at the office of
Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor in
immediately available funds.
------------------------

MORGAN STANLEY DEAN WITTER
BANCAMERICA ROBERTSON STEPHENS
LEHMAN BROTHERS
SALOMON SMITH BARNEY
AUGUST 6, 1998

424B4 2nd Page of 119 TOC 1st Previous Next ↓Bottom Just 2nd

PROSPECTUS [INTERNATIONAL COVER PAGE]

4,200,000 SHARES

[ECLIPSYS CORPORATION LOGO]

COMMON STOCK
------------------------

OF THE 4,200,000 SHARES OF COMMON STOCK BEING OFFERED, 940,000 SHARES ARE BEING
OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS AND 3,260,000 SHARES ARE BEING OFFERED INITIALLY IN THE UNITED
STATES AND CANADA BY THE U.S. UNDERWRITERS. SEE "UNDERWRITERS." ALL OF THE
4,200,000 SHARES OF COMMON STOCK BEING OFFERED HEREBY ARE BEING SOLD BY THE
COMPANY. PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON
STOCK. SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS CONSIDERED IN
DETERMINING THE INITIAL PUBLIC OFFERING PRICE. GENERAL ATLANTIC PARTNERS, LLC, A
SIGNIFICANT STOCKHOLDER OF THE COMPANY, THROUGH CERTAIN OF ITS AFFILIATES, HAS
AGREED TO PURCHASE FOR INVESTMENT 600,000 SHARES OF COMMON STOCK IN THE OFFERING
AT THE INITIAL PUBLIC OFFERING PRICE ON THE SAME TERMS AND CONDITIONS AS ALL
OTHER PURCHASERS.
------------------------

THE COMMON STOCK HAS BEEN APPROVED FOR QUOTATION ON THE NASDAQ NATIONAL MARKET
UNDER THE SYMBOL "ECLP."
------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------

[Download Table]

UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------- -------------- -----------

Per Share................................ $15.00 $1.05 $13.95
Total (3)................................ $63,000,000 $4,410,000 $58,590,000

------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."

(2) Before deducting expenses of the Offering payable by the Company,
estimated at $1,700,000.

(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
630,000 additional Shares at the price to public less underwriting
discounts and commissions, for the purpose of covering over-allotments,
if any. If the U.S. Underwriters exercise such option in full, the
total price to public, underwriting discounts and commissions and
proceeds to Company will be $72,450,000, $5,071,500, and $67,378,500,
respectively. See "Underwriters."

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

MORGAN STANLEY DEAN WITTER
BA ROBERTSON STEPHENS INTERNATIONAL LIMITED
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
SALOMON SMITH BARNEY INTERNATIONAL
AUGUST 6, 1998

424B4 3rd Page of 119 TOC 1st Previous Next ↓Bottom Just 3rd

DESCRIPTION OF ARTWORK

Outside of Gatefold

Artwork shows a map of the 48 contiguous United States, Hawaii and part of
Canada. Heading reads "Eclipsys U.S. and Canadian Customer Sites."

Inside Gatefold

Artwork Shows Five Scenes

Introductory text reads: "Eclipsys' Sunrise Suite of integrated solutions
provides the healthcare enterprise with the information and functionality needed
to enable it to improve clinical, financial and administrative outcomes."

Scene 1 shows a computer screen with patient information with an overlaid
picture of a clinician with a patient.

Text reads: "Access Management applications:
- Provide access to patient information from any point in the healthcare
delivery system
- Coordinate gathering of additional patient data
- Coordinate scheduling of patient appointments throughout the testing
and treatment process"

Scene 2 shows computer screens with patient information with overlaid
pictures of a clinician in a laboratory and a hand holding a prescription
medicine vial.

Text reads: "Clinical Management applications:
- Provide clinical rules to facilitate clinical decisions
- Alert physicians to potential adverse reactions
- Allow caregivers to enter orders on-line for prescriptions and
specialized services"

Scene 3 shows computer screens with patient information with overlaid
pictures of a patient in a hospital bed and two clinicians at a computer screen.

Text reads: "Clinical Management applications also provide:
- Continuous event monitoring
- Immediate physician notification upon a change in the patient's
condition"

Scene 4 shows a computer screen with patient information with an overlaid
picture of a clock.

Text reads: "Patient Financial Management applications:
- Coordinate compliance with managed-care contracts and insurance plan
rules
- Facilitate patient and third-party billing and collection
- Provide financial reporting capabilities"

Scene 5 shows computer screens with charts and graphs with an overlaid
picture of two people standing behind a sign that reads "Prevention/Wellness"

Text reads: "Enterprise Data Warehouse applications consolidate data from
different information systems throughout the enterprise, supporting:
- Reporting
- Strategic planning
- Decision-making"
------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."

424B4 4th Page of 119 TOC 1st Previous Next ↓Bottom Just 4th

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY
SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------

UNTIL AUGUST 31, 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
------------------------

FOR INVESTORS OUTSIDE THE UNITED STATES: No action has been or will be
taken in any jurisdiction by the Company or by any Underwriter that would permit
a public offering of the Common Stock or possession or distribution of this
Prospectus in any jurisdiction where action for that purpose is required, other
than in the United States. Persons into whose possession this Prospectus comes
are required by the Company and the Underwriters to inform themselves about and
to observe any restrictions as to the offering of the Common Stock and the
distribution of this Prospectus.
------------------------

TABLE OF CONTENTS

[Download Table]

PAGE
----

Prospectus Summary..................... 4
Risk Factors........................... 10
The Company............................ 18
Use of Proceeds........................ 20
Dividend Policy........................ 20
Capitalization......................... 21
Dilution............................... 22
Unaudited Pro Forma Financial
Information.......................... 23
Selected Consolidated Financial Data... 28
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 30

[Download Table]

PAGE
----

Business............................... 40
Management............................. 51
Certain Transactions................... 58
Principal Stockholders................. 61
Description of Capital Stock........... 63
Shares Eligible for Future Sale........ 66
Underwriters........................... 68
Legal Matters.......................... 72
Experts................................ 72
Additional Information................. 72
Index to Financial Statements.......... F-1

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

Unless the context otherwise requires, references to the "Company" mean
Eclipsys Corporation and its direct and indirect subsidiaries, including its
predecessor, ALLTEL Healthcare Information Services, Inc.
------------------------

The Company intends to furnish to its stockholders annual reports
containing audited consolidated financial statements examined by an independent
accounting firm and quarterly reports for the first three quarters of each
fiscal year containing interim unaudited consolidated financial information.
------------------------

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS CONTAINED HEREIN UNDER "PROSPECTUS SUMMARY," "RISK
FACTORS," "THE COMPANY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS," INCLUDING, WITHOUT
LIMITATION, THOSE CONCERNING THE COMPANY'S STRATEGY, THE COMPANY'S PRODUCTS AND
THE COMPANY'S EXPANSION PLANS, CONTAIN CERTAIN FORWARD-LOOKING STATEMENTS
CONCERNING THE COMPANY'S OPERATIONS, ECONOMIC PERFORMANCE AND FINANCIAL
CONDITION. BECAUSE SUCH STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE SUCH DIFFERENCES INCLUDE,
BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "RISK FACTORS."

424B4 5th Page of 119 TOC 1st Previous Next ↓Bottom Just 5th

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors," "Unaudited Pro Forma Financial
Information" and the Company's Consolidated Financial Statements and the Notes
thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all
information contained in this Prospectus (i) reflects the redemption of all
outstanding shares of the Company's Series B and Series C 8.5% Cumulative
Redeemable Preferred Stock (the "Redeemable Preferred Stock") using a portion of
the net proceeds of the Offering (the "Preferred Stock Redemption") and the
conversion of all outstanding shares of the Company's Series D, E, F and G
Convertible Preferred Stock (the "Convertible Preferred Stock" and, together
with the Redeemable Preferred Stock, the "Preferred Stock") into an aggregate of
10,033,313 shares of Common Stock, par value $.01 per share (the "Common
Stock"), and Non-Voting Common Stock, par value $.01 per share (the "Non-Voting
Common Stock"), as applicable (the "Preferred Stock Conversion"), both of which
will occur concurrently with the closing of the Offering pursuant to the terms
of the Preferred Stock; (ii) treats all shares of the Company's Non-Voting
Common Stock, which are convertible at any time, subject to certain limitations,
into shares of Common Stock, as if they had been so converted; (iii) gives
effect to a two-for-three reverse stock split effected in June 1998 and (iv)
assumes no exercise of the Underwriters' over-allotment option. See "Description
of Capital Stock" and "Underwriters."

THE COMPANY

Eclipsys is a healthcare information technology company delivering
solutions that enable healthcare providers to achieve improved clinical,
financial and administrative outcomes. The Company offers an integrated suite of
core products in four critical areas -- clinical management, access management,
patient financial management and enterprise data warehouse and analysis. These
products can be purchased in combination to provide an enterprise-wide solution
or individually to address specific needs. The Company's products have been
designed specifically to deliver a measurable impact on outcomes, enabling the
Company's customers to quantify clinical benefits and return on investment in a
precise and timely manner. The Company's products can be integrated with a
customer's existing information systems, which the Company believes reduces
overall cost of ownership and increases the attractiveness of the Company's
products. Eclipsys also provides outsourcing, remote processing and networking
services to assist customers in meeting their healthcare information technology
requirements. The Company was formed in December 1995 and has grown primarily
through its three acquisitions, all completed since January 1997. These
acquisitions, together with internally generated growth, have resulted in total
revenues of $126.5 million in 1997 on the pro forma basis described herein.

The Company markets its products primarily to large hospitals, academic
medical centers and integrated healthcare delivery networks. As of March 31,
1998, Eclipsys had one or more of its products installed or being installed in
over 350 facilities, including large hospitals, academic medical centers and
integrated healthcare delivery networks. To provide direct and sustained
customer contact, the Company maintains decentralized sales, implementation and
customer support teams in each of its five North American regions. The Company's
field sales force has an average of 18 years of experience in the healthcare
industry.

The Company believes that its products and services, focus on physicians'
needs, leading technology, strategic relationships, management team and
well-positioned customer base are competitive strengths that will enable it to
capitalize on continued opportunities for growth.

- Comprehensive Product Offering. The Company's product strategy has
been to acquire or develop industry-leading products in each core
area -- clinical management, access management, patient financial
management and enterprise data warehouse and analysis -- and then
integrate them to provide a comprehensive healthcare information
technology solution.

424B4 6th Page of 119 TOC 1st Previous Next ↓Bottom Just 6th

- Leading Technology. The Company has recently announced the
development of, and has commenced migrating its products to, its new
structured object layered architecture ("SOLA"), which is designed to
facilitate the integration of the Company's products with its
customers' existing systems, as well as with future products developed
or acquired by the Company.

- Strategic Relationships. One of the Company's important strategic
relationships is with Partners HealthCare System, Inc. ("Partners"),
including two of its hospital subsidiaries, Brigham and Women's
Hospital ("Brigham") and Massachusetts General Hospital ("MGH"). This
relationship provides intensive physician-driven research and
development and testing for new and existing products in a potential
forum that provides feedback from medical and administrative users.

- Proven Management Team with Successful Track Record. The Company's
senior management team averages over 22 years in the healthcare and
information technology industries and includes four former chief
executive officers. Harvey J. Wilson, the Chairman of the Board,
President and Chief Executive Officer of the Company, was a co-founder
of Shared Medical Systems Corporation ("SMS"). Upon completion of the
Offering, the senior management team will beneficially own 16.9% of
the outstanding Common Stock.

INDUSTRY

In recent years, the healthcare industry has undergone, and continues to
undergo, radical and rapid change. The increasing cost of providing healthcare
has caused the provider reimbursement environment to move away from the
indemnity model, characterized by fee-for-service arrangements and traditional
indemnity insurance, toward the managed-care model, in which providers are
aligned within networks and healthcare delivery must follow plan-established
rules to qualify for reimbursement. As a result, the emphasis of healthcare
providers has shifted from providing care regardless of cost to providing
high-quality care in the most cost-effective manner possible. The pressures to
achieve successful clinical outcomes more efficiently while managing costs more
effectively have led to significant industry consolidation, resulting in the
development of large integrated healthcare delivery networks.

As these integrated healthcare delivery networks grow larger and more
dispersed, the challenge of effectively managing and delivering information
throughout the enterprise also increases. Healthcare providers are increasingly
demanding integrated solutions that offer all of the core functions -- clinical
management, access management and patient financial management -- required to
manage the entire healthcare delivery process. In addition, large and widely
spread healthcare delivery networks require data warehouse and analysis tools
that permit them to effectively extract and analyze data located throughout the
enterprise. Finally, physician utilization is necessary for a healthcare
information technology solution to improve clinical outcomes. The Company
believes that physician utilization will increase as information technology
solutions provide greater functionality, including alerts, reminders, sub-second
response times, just-in-time clinical decision support, an intuitive graphical
user interface and the ability to log on to the system remotely.

The Company believes that healthcare providers are realizing that a
relatively small investment in healthcare information technology can
significantly reduce variable costs. As a result of industry trends, healthcare
providers are making significant investments in healthcare information
technology solutions that capitalize on evolving information management
technologies. Industry analysts estimate that healthcare organizations spent
approximately $17 billion in 1997 for information technology solutions, and
anticipate that such expenditures will increase to approximately $28 billion
annually by 2002.

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STRATEGY

The Company's objective is to become the leading provider of healthcare
information technology solutions to meet the needs of the healthcare industry as
it consolidates and evolves. Key elements of the Company's strategy to achieve
this objective include:

Provide Comprehensive, Integrated Healthcare Information Technology
Solutions. Eclipsys is focusing on providing a full suite of clinical
management, access management, patient financial management and enterprise data
warehouse and analysis solutions. The Company's products are designed to be
responsive to physicians' needs, outcomes-oriented and user-friendly. The
Company believes that its healthcare information technology solutions facilitate
the clinical and business decision process, enabling its customers to improve
their overall work processes, clinical outcomes and return on investment.

Further Penetrate Existing Customer Base. The Company believes there is a
significant opportunity to sell its integrated healthcare information technology
solutions to its existing customers, only a few of which currently have an
enterprise-wide healthcare information system.

Continue to Enhance and Develop New Solutions. The Company intends to
continue upgrading existing products and developing new solutions to meet the
evolving healthcare information technology needs of its customers. For example,
the Company is currently focusing on migrating its products to its new SOLA
architecture. The Company has a team of more than 300 internal research and
development and technical support professionals dedicated to developing,
enhancing, supporting and commercializing new and enhanced healthcare
information technology products. In addition, the Company's relationship with
Partners allows it to test new and existing products in a potential forum that
provides feedback from medical and administrative users, which the Company
believes gives it a competitive advantage in developing new products.

Pursue Selected Acquisitions and Investments. The Company intends to
continue pursuing selected acquisitions and investments that will enhance its
product line, customer base, technological capabilities and management team. The
Company believes that such transactions will provide it with the opportunity to
leverage its existing sales, marketing and development teams and offer the
potential to achieve operating synergies across the organization.

RECENT DEVELOPMENTS

Although the Company's operating results for the quarter ended June 30,
1998 have not been conclusively determined, the following table sets forth the
Company's preliminary estimate as to certain statement of operations data and
other data for the periods indicated:

[Enlarge/Download Table]

SIX MONTHS ENDED JUNE 30,
--------------------------
1997 1998
--------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)

Total revenues.............................................. $ 41,912 $ 61,583
Loss from operations(1)(2).................................. (116,368) (14,318)
Net loss.................................................... (116,701) (14,822)
Basic and diluted net loss per common share................. (37.56) (3.66)
EBITDA(3)................................................... (2,478) 6,461
---------------

(1) Reflects a write-off of in-process research and development of $99.2
million in the six months ended June 30, 1997 and a $7.2 million
nonrecurring charge related to the buyout of certain obligations under the
MSA during the six months ended June 30, 1998. See footnotes (6) and (7)
to the Summary Consolidated Financial Data below.
(2) Includes $11.0 million of amortization in connection with the Alltel
Acquisition related to acquired technology, ongoing customer relationships
and the MSA in the six months ended June 30, 1997. Includes $10.2 million
of amortization in connection with the Acquisitions related to acquired
technology, ongoing customer relationships, the MSA, the Network Services
Asset and goodwill (which is being amortized over five years) in the six
months ended June 30, 1998. See footnotes (2), (4), (5) and (7) to the
Summary Consolidated Financial Data below.
(3) See footnote (12) to the Summary Consolidated Financial Data below.

424B4 8th Page of 119 TOC 1st Previous Next ↓Bottom Just 8th

Total revenues increased by $19.7 million from $41.9 million in the six
months ended June 30, 1997 to $61.6 million in the six months ended June 30,
1998. The primary reason for this increase is the inclusion in 1998 of the
results from the SDK and Emtek Acquisitions and the inclusion in 1997 of only
five months of the operations of Alltel.

Loss from operations decreased by $102.1 million from $(116.4) million in
the six months ended June 30, 1997 to $(14.3) million in the six months ended
June 30, 1998. The primary reason for this improvement was a decrease in
nonrecurring charges as 1997 reflected a $99.2 million write-off of in-process
research and development compared to a $7.2 nonrecurring charge in 1998 in
connection with the MSA Buyout. Additionally, the Company achieved improved
operating results as a result of reduced expenses related to integration of the
Acquisitions and cost improvements attributable to such integration efforts. In
addition, 1998 operating results benefited from a shift in the mix of revenues
from hardware revenues to higher-margin systems and services revenues as a
result of the addition of marketing and direct sales personnel following the
Acquisitions and the regional realignment of the Company's sales operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

THE OFFERING

[Enlarge/Download Table]

Common Stock offered by the Company................ 4,200,000 shares(1)
Common Stock offered:
U.S. Offering.................................... 3,260,000 shares(1)
International Offering........................... 940,000 shares
----------
Total......................................... 4,200,000 shares(1)
==========
Common Stock to be outstanding after the
Offering......................................... 19,604,035 shares(1)(2)
Use of Proceeds.................................... Redemption of Redeemable Preferred Stock and
repayment of debt.
Proposed Nasdaq National Market symbol............. "ECLP"

---------------
(1) Assumes the U.S. Underwriters' over-allotment option is not exercised. See
"Underwriters."

(2) Excludes (i) an aggregate of 4,333,333 shares of Common Stock reserved for
issuance under the Company's 1996 Stock Plan, 1998 Incentive Stock Plan and
1998 Employee Stock Purchase Plan, of which 2,568,033 shares are subject to
outstanding options at a weighted average exercise price of $10.97 per share
as of July 14, 1998, and (ii) an aggregate of 962,833 shares of Common Stock
issuable upon the exercise of warrants (the "Warrants"). See
"Management -- Stock Plans," "Description of Capital Stock -- Warrants" and
Note 10 of Notes to the Company's Consolidated Financial Statements.

RISK FACTORS

Prospective purchasers should consider all of the information contained in
this Prospectus before making an investment in shares of Common Stock. In
particular, prospective purchasers should consider the factors set forth herein
under "Risk Factors."

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SUMMARY CONSOLIDATED FINANCIAL DATA

[Enlarge/Download Table]

YEAR ENDED DECEMBER 31, 1997 THREE MONTHS ENDED MARCH 31, 1998
--------------------------------------- ---------------------------------------
PRO FORMA AS PRO FORMA AS
ACTUAL(1) PRO FORMA(2) ADJUSTED(3) ACTUAL(1) PRO FORMA(2) ADJUSTED(3)
--------- ------------ ------------ --------- ------------ ------------
(IN THOUSANDS, EXCEPT SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Total revenues................................ $ 94,077 $ 126,524 $ 126,524 $ 29,295 $ 30,275 $ 30,275
--------- --------- ---------- --------- --------- ----------
Costs and expenses:
Cost of revenues(4)......................... 80,036 106,144 106,144 18,819 19,731 19,731
Marketing and sales......................... 13,662 20,893 20,893 4,211 4,791 4,791
Research and development.................... 15,714 29,312 29,312 6,112 6,850 6,850
General and administrative.................. 5,672 13,956 13,956 1,616 1,892 1,892
Depreciation and amortization(5)............ 9,710 11,885 11,885 2,669 2,756 2,756
Write-off of in-process research and
development(6)............................ 99,189 -- -- -- -- --
Write-off of MSA(7)......................... -- -- -- 7,193 -- --
--------- --------- ---------- --------- --------- ----------
Total costs and expenses.............. 223,983 182,190 182,190 40,620 36,020 36,020
--------- --------- ---------- --------- --------- ----------
Loss from operations.......................... (129,906) (55,666) (55,666) (11,325) (5,745) (5,745)
Interest expense (income), net................ 1,154 1,568 (169) 285 391 (94)
--------- --------- ---------- --------- --------- ----------
Net loss(8)................................... (131,060) (57,234) (55,497) (11,610) (6,136) (5,651)
Dividends and accretion on mandatorily
redeemable preferred stock(9)............... (5,850) (4,761) -- (1,335) (1,154) --
Preferred stock conversion(10)................ (3,105) (3,105) (3,105) -- -- --
--------- --------- ---------- --------- --------- ----------
Net loss available to common shareholders..... $(140,015) $ (65,100) $ (58,602) $ (12,945) $ (7,290) $ (5,651)
========= ========= ========== ========= ========= ==========
Basic and diluted net loss per common
share(11)................................... $ (39.73) $ (13.64) $ (3.08) $ (2.83) $ (1.49) $ (.30)
Weighted average common shares
outstanding(11)............................. 3,524,313 4,774,312 19,007,625 4,573,455 4,906,788 18,942,108
OTHER DATA:
EBITDA(12).................................... $ 905 $ (19,312) $ (19,312) $ 2,865 $ 1,407 $ 1,407
Net cash provided by operating activities..... 1,068 10,193
Net cash used in investing activities......... (113,670) (18,542)
Net cash provided by financing activities..... 112,771 9,406

[Download Table]

AS OF MARCH 31, 1998
-----------------------
PRO FORMA AS
ACTUAL ADJUSTED(13)
-------- ------------
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 5,854 $ 2,762
Working capital deficit..................................... (19,559) (18,679)
Total assets................................................ 110,094 112,602
Debt, including current portion............................. 16,588 --
Mandatorily redeemable preferred stock...................... 29,178 --
Shareholders' equity (deficit).............................. (12,771) 35,681

---------------
(1) The Alltel and SDK Acquisitions, described below, were accounted for using
the purchase method of accounting. Accordingly, the actual statement of
operations data reflects the results of operations from these businesses
from their respective acquisition dates. See note 2 below and "The
Company."

(2) Gives effect to the following as if they had occurred on January 1, 1997:
(i) the acquisition, effective January 24, 1997, of ALLTEL Healthcare
Information Services, Inc. ("Alltel"), a wholly owned subsidiary of ALLTEL
Information Services, Inc. ("AIS"), for an aggregate purchase price of
approximately $201.5 million after giving effect to certain purchase price
adjustments (the "Alltel Acquisition"), (ii) the acquisition, effective
June 26, 1997, of SDK Medical Computer Services Corporation ("SDK") for an
aggregate purchase price of $16.5 million (the "SDK Acquisition"),
including the issuance of $7.6 million of subordinated promissory notes
(the "SDK Notes"), (iii) the acquisition, effective January 30, 1998, of
the North American operations of Emtek Healthcare Systems ("Emtek"), a
division of Motorola, Inc. ("Motorola"), for an aggregate purchase price of
approximately $11.7 million (the "Emtek Acquisition"), (iv) the
renegotiation in the first quarter of 1998 of certain matters relating to
the Alltel Acquisition (the "Alltel Renegotiation"), including the return
by AIS to the Company for cancellation of 11,000 shares of Series C
Redeemable Preferred Stock in return for the Company extinguishing claims
against AIS related to the Alltel Acquisition (the "AIS Settlement") and
the MSA Buyout (as defined below), (v) the repayment of $9.0 million of
borrowings under the term loan portion of the Company's commercial credit
facility (the "Term Loan") in February 1998 using the proceeds of the
issuance of 900,000 shares of Series G Convertible Preferred Stock for
total consideration of $9.0 million (the "1998 Preferred Stock Issuance"),
(vi) the SDK Partial Repayment (as defined below), (vii) the January 1998
scheduled $2.0 million payment to AIS under the MSA (as defined below) and
(viii) borrowings under the revolving portion of the Company's commercial
credit facility (the "Revolver") to fund the MSA Buyout and the Simione
Investment (as defined below). See "The Company," "Unaudited Pro Forma
Financial Information," "Certain Transactions" and Notes 6 and 13 of Notes
to the Company's Consolidated Financial Statements.

(3) Adjusted to give effect to (i) the Preferred Stock Conversion and (ii) the
Offering and the application of the net proceeds therefrom as described
under "Use of Proceeds." See "Unaudited Pro Forma Financial Information."

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(4) In 1997, includes $19.7 million (actual) and $19.9 million (pro forma and
pro forma as adjusted) amortization expense related to acquired technology
as a result of the Alltel, SDK and Emtek Acquisitions (collectively, the
"Acquisitions"). In addition, in 1997, includes $2.2 million (actual) and
$2.4 million (pro forma and pro forma as adjusted) amortization expense
related to the Management and Services Agreement (the "MSA") entered into
in connection with the Alltel Acquisition. In 1998, includes $4.1 million
(actual) and $4.0 million (pro forma and pro forma as adjusted)
amortization expense related to acquired technology as a result of the
Acquisitions. The acquired technology costs are being amortized annually
over three to five years either on a straight line basis or, if greater,
based on the ratio that current revenues bear to total anticipated revenues
attributable to the applicable product. In addition, in 1998, includes
$200,000 (actual, pro forma and pro forma as adjusted) amortization expense
related to the MSA.

(5) In 1997, includes $3.5 million (actual) and $4.3 million (pro forma and pro
forma as adjusted) amortization expense related to ongoing customer
relationships and goodwill that arose as a result of the Acquisitions. In
1998, includes $816,000 (actual, pro forma and pro forma as adjusted)
amortization expense related to ongoing customer relationships and goodwill
that arose as a result of the Acquisitions. The value of ongoing customer
relationships and goodwill is being amortized over periods that range from
five to twelve years.

(6) In connection with the Alltel and SDK Acquisitions in 1997, the Company
wrote off in-process research and development of $92.2 million and $7.0
million, respectively, reflecting the appraised values of certain
in-process research and development acquired in these acquisitions. These
nonrecurring charges are excluded from the pro forma and pro forma as
adjusted presentations. See Note 6 of Notes to the Company's Consolidated
Financial Statements.

(7) In connection with the buyout in the first quarter of 1998 of the Company's
obligations under the MSA (the "MSA Buyout"), the Company recorded a charge
of $7.2 million in the first quarter of 1998. This nonrecurring charge is
excluded from the pro forma and pro forma as adjusted presentations. In
connection with the MSA Buyout, the Company recorded an intangible asset of
$5.8 million (the "Network Services Asset"), which is being amortized over
three years. See "Certain Transactions -- The Alltel Acquisition and
Renegotiation" and Note 13 of Notes to the Company's Consolidated Financial
Statements.

(8) The Company has not recorded any benefit for income taxes because
management believes, based on the evidence available at December 31, 1997
and March 31, 1998, it is more likely than not that the Company's net
deferred tax assets will not be realized. Accordingly, the Company has
recorded a valuation allowance against its total net deferred tax assets.

(9) The pro forma amount reflects an adjustment to reduce the dividends and
accretion on mandatorily redeemable preferred stock pursuant to the Alltel
Renegotiation by $1.1 million in 1997 and $181,000 in 1998.

(10) Represents a charge related to the January 1997 issuance of Series F
Convertible Preferred Stock in exchange for the cancellation of Series A
Convertible Preferred Stock.

(11) See Note 2 of Notes to the Company's Consolidated Financial Statements.

(12) Represents earnings before interest expense, income tax expense,
depreciation and amortization and nonrecurring charges ("EBITDA"). EBITDA
is not a measurement in accordance with generally accepted accounting
principles ("GAAP") and should not be considered an alternative to, or more
meaningful than, income from operations, net income or cash flows as
defined by GAAP or as a measure of the Company's profitability or
liquidity. All registrants do not calculate EBITDA in the same manner and
accordingly, EBITDA may not be comparable with other registrants. The
Company has included information concerning EBITDA herein because
management believes EBITDA provides useful information. The following table
summarizes EBITDA on an actual, pro forma and pro forma as adjusted basis:

[Enlarge/Download Table]

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1997 MARCH 31, 1998
------------------------------------ ----------------------------------
PRO FORMA PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED ACTUAL PRO FORMA AS ADJUSTED
--------- ---------- ----------- -------- --------- -----------

Net loss................................... $(131,060) $ (57,234) $ (55,497) $(11,610) $ (6,136) $ (5,651)
Interest expense (income).................. 1,154 1,568 (169) 285 391 (94)
Income tax expense......................... -- -- -- -- -- --
Depreciation and amortization.............. 31,622 36,354 36,354 6,997 7,152 7,152
Write-off of in-process research and
development.............................. 99,189 -- -- -- -- --
Write-off of MSA........................... -- -- -- 7,193 -- --
--------- ---------- --------- -------- -------- --------
EBITDA..................................... $ 905 $ (19,312) $ (19,312) $ 2,865 $ 1,407 $ 1,407
========= ========== ========= ======== ======== ========

(13) Gives effect to the following as if they had occurred on March 31, 1998:
(i) the scheduled repayment in April 1998 of $4.0 million of principal and
accrued interest on the SDK Notes (the "SDK Partial Repayment"); (ii) the
purchase of $5.6 million of the capital stock of Simione Central Holdings,
Inc. ("Simione") in May 1998 (the "Simione Investment"), which was funded
with borrowings under the Revolver, (iii) the Preferred Stock Conversion,
and (iv) the Offering and the application of the net proceeds therefrom as
described under "Use of Proceeds." See "The Company," "Unaudited Pro Forma
Financial Information" and Notes 6 and 13 of Notes to the Company's
Consolidated Financial Statements.

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RISK FACTORS

In addition to the other information in this Prospectus, prospective
investors should carefully consider the following risk factors.

LIMITED COMBINED OPERATING HISTORY; HISTORY OF OPERATING LOSSES

The Company began operations in 1996 and has grown primarily through a
series of acquisitions completed since January 1997. Accordingly, the Company
and its acquired operations have a limited combined operating history upon which
an evaluation of the Company and its prospects can be based. The success of the
Company will depend, in part, on its ability to integrate the operations of
these acquired businesses and to consolidate its product offerings. There can be
no assurance that the operating results of the Company will meet or exceed the
combined individual operating results achieved by the respective businesses
prior to their acquisition, and consequently the pro forma financial information
contained herein may not be indicative of the Company's future operating results
and financial condition. In addition, the Company's senior management group has
been assembled relatively recently. There can be no assurance that the
management group will be able to oversee the combined entity and implement the
Company's operating or growth strategies effectively. See "The Company."

The Company has incurred net losses in each year since its inception,
including net losses of $131.1 million in 1997 and $11.6 million in the first
quarter of 1998. At March 31, 1998, the Company had a shareholders' deficit of
$12.8 million. The Company's losses resulted primarily from certain write-offs
related to the Alltel and SDK Acquisitions which were consummated during 1997
and charges in the first quarter of 1998 related to the MSA Buyout. The Company
expects to continue to incur net losses for the foreseeable future. There can be
no assurance that the Company will achieve profitability. See "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

MANAGEMENT OF GROWTH

The growth in the size and complexity of the Company's business as a result
of the Acquisitions has placed, and is expected to continue to place, a
significant strain on the Company's management and other resources. The
Company's ability to compete effectively and to manage future growth, if any,
will depend on its ability to continue to implement and improve operational and
financial systems on a timely basis and to expand, train, motivate and manage
its work force. There can be no assurance that the Company's personnel, systems,
procedures and controls will be adequate to support the Company's operations. If
the Company's management is unable to manage growth effectively, the Company's
business, financial condition and results of operations could be materially
adversely affected.

RISKS ASSOCIATED WITH FUTURE ACQUISITIONS

An important element of the Company's business strategy has been, and is
expected to continue to be, expansion through acquisitions. The Company's
ability to continue to expand through acquisitions depends on many factors,
including the availability of capital to purchase other businesses and to
support such growth, the successful identification and acquisition of businesses
and management's ability to effectively integrate and operate the new
businesses. The Company currently has no commitments, understandings or
arrangements with respect to any future acquisitions. There is significant
competition for acquisition opportunities in the information technology
industry. Competition may intensify due to consolidation in the industry, which
could increase the costs of future acquisitions. The Company competes for
acquisition opportunities with other companies, some of which may have
significantly greater financial and management resources than the Company.
Further, the anticipated benefits from any acquisition may not be achieved
unless the operations of the acquired business are successfully combined with
those of the Company. The integration of acquired businesses requires
substantial attention from management. The diversion of the attention of
management and any difficulties encountered in the transition process could have
a material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that the Company will be able
to identify suitable acquisition candidates, acquire any such candidates on
reasonable terms or integrate acquired businesses successfully. Future
acquisitions could result in the issuance of additional shares of capital

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stock or the incurrence of additional indebtedness, could entail the payment of
consideration in excess of book value and could have a dilutive effect on the
Company's net income per share. Many business acquisitions must be accounted for
under the purchase method of accounting. Consequently, such acquisitions may
generate significant goodwill or other intangible assets. Consequently,
acquisition of these businesses would typically result in substantial
amortization charges to the Company. Acquisitions could also involve significant
charges reflecting write-offs of acquired in-process research and development.
As a result of acquisitions, the Company recorded amortization expenses for
acquisition-related intangible assets of $25.3 million and wrote off $99.2
million of in-process research and development in 1997. See "The Company,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and "Business -- Strategy."

ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL

The Company's success depends, in significant part, upon the continued
services of its key technical, marketing, sales and management personnel and on
its ability to continue to attract, motivate and retain highly qualified
employees. Competition for technical, marketing, sales and management employees
is intense and the process of recruiting personnel with the combination of
skills and attributes required to execute the Company's strategy can be
difficult, time-consuming and expensive. There can be no assurance that the
Company will be successful in attracting or retaining highly skilled technical,
management, sales and marketing personnel. The failure to attract, hire,
assimilate or retain such personnel could have a material adverse effect on the
Company's business, financial condition and results of operations.

The Company believes that its ability to implement its strategic goals
depends to a considerable degree on its senior management team. The loss of any
member of that team or, in particular, the loss of Harvey J. Wilson, the
Company's founder, Chairman of the Board, President and Chief Executive Officer,
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company does not expect to maintain key
person life insurance on any of its key employees after the Offering. Although
the Company has entered into an employment agreement with Mr. Wilson, he and all
other key employees may voluntarily terminate their respective employment with
the Company at any time. See "Business -- Employees" and "Management."

POTENTIAL FLUCTUATIONS IN QUARTERLY PERFORMANCE

The Company's revenues and operating results have varied from quarter to
quarter, primarily due to acquisitions. The Company's quarterly operating
results may continue to fluctuate due to a number of factors, including the
timing and size of future acquisitions; the timing, size and nature of the
Company's product sales and implementations; the length of the sales cycle;
implementation efforts; market acceptance of new services, products or product
enhancements by the Company or its competitors; product and price competition;
the relative proportions of revenues derived from systems and services and from
hardware; changes in the Company's operating expenses; personnel changes; the
performance of the Company's products; and fluctuations in economic and
financial market conditions. The timing of revenues from product sales is
difficult to forecast because the Company's sales cycle can vary depending upon
factors such as the size of the transaction, the changing business plans of the
customer, the effectiveness of the customer's management and general economic
conditions. In addition, because revenue is recognized at various points during
the term of a contract, the timing of revenue recognition varies considerably
based on a number of factors, including the type of contract, the availability
of personnel, the implementation schedule and the complexity of the
implementation process. How and when to implement, replace, expand or
substantially modify an information system, or modify or add business processes
or lines of business, are major decisions for healthcare organizations. The
sales cycle for the Company's systems may range from six to eighteen months or
more from initial contact to contract execution. Historically, the Company's
implementation cycle has ranged from twelve to thirty-six months from contract
execution to completion of implementation. Although the Company believes that
the migration of its products to its new SOLA architecture will significantly
shorten the implementation cycle, there can be no assurance in this regard.
During the sales cycle and the implementation cycle, the Company expends
substantial time, effort and funds preparing contract proposals, negotiating the
contract and implementing the solution. Because a significant percentage of the
Company's expenses are

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relatively fixed, a variation in the timing of sales and implementations can
cause significant variations in operating results from quarter to quarter.

Due to the foregoing factors, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and that
such comparisons cannot be relied upon as indicators of future performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

RAPID TECHNOLOGICAL CHANGE AND EVOLVING MARKET

The market for the Company's products and services is characterized by
rapidly changing technologies, evolving industry standards and new product
introductions and enhancements that may render existing products obsolete or
less competitive. As a result, the Company's position in the healthcare
information technology market could erode rapidly due to unforeseen changes in
the features and functions of competing products, as well as the pricing models
for such products. The Company's future success will depend in part upon the
Company's ability to enhance its existing products and services and to develop
and introduce new products and services to meet changing customer requirements.
The process of developing products and services such as those offered by the
Company is extremely complex and is expected to become increasingly complex and
expensive in the future as new technologies are introduced. The Company has
recently announced the development of, and has commenced migrating its products
to, its new SOLA architecture. There can be no assurance that the development of
SOLA or the migration of products to the SOLA architecture will be successful,
that such products will meet their scheduled release dates, that the Company
will successfully complete the development and release of other new products or
the migration of new or existing products to specific platforms or
configurations in a timely fashion or that the Company's current or future
products will satisfy the needs of potential customers or gain general market
acceptance.

RISKS ASSOCIATED WITH DEVELOPMENT OF INTEGRATED CLINICAL MANAGEMENT SUITE

The Company is currently in the process of integrating selected features
and functionalities from a number of heritage clinical management products
acquired in the Alltel and Emtek Acquisitions and licensed from Partners to
create the Sunrise Clinical Management suite, which is currently undergoing
field trials. Although most of the key functionalities of the Sunrise Clinical
Management suite are currently available in heritage products, the integrated
Sunrise Clinical Management suite is not expected to be generally available
until 1999. There can be no assurance that the Company will be successful in
completing the integration of these functionalities on a timely basis, that the
field trials will be successful or that the Sunrise Clinical Management suite,
if and when generally available, will meet the needs of the marketplace or
achieve market acceptance. Any difficulties or delays in integrating these
functionalities into the Sunrise Clinical Management suite, or the failure of
the Sunrise Clinical Management suite to gain market acceptance, could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Products."

COMPETITION

The market for the Company's products and services is intensely competitive
and is characterized by rapidly changing technologies and user needs and the
frequent introduction of new products. The Company's principal competitors
include Cerner Corp., HBO & Company, IDX Systems Corp. and SMS. The Company also
faces competition from providers of practice management systems, general
decision support and database systems and other segment-specific applications,
as well as from healthcare technology consultants. A number of the Company's
competitors are more established, benefit from greater name recognition and have
substantially greater financial, technical and marketing resources than the
Company. The Company also expects that competition will continue to increase as
a result of consolidation in both the information technology and healthcare
industries. There can be no assurance that the Company will be able to compete
successfully against current and future competitors or that competitive
pressures faced by the Company will not materially adversely affect its
business, financial condition and results of operations. See "Business --
Competition."

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DEPENDENCE ON RELATIONSHIP WITH PARTNERS

The Company has an exclusive license granted by Partners (the "Partners
License") to develop, commercialize, distribute and support certain intellectual
property relating to the BICS clinical information systems software developed at
Brigham. If the Company breaches certain terms of the license, Partners has the
option to convert the license to a non-exclusive license. Such conversion by
Partners could cause the intellectual property and the ability to develop and
commercialize such intellectual property to become more widely available to
competitors of the Company, which could have a material adverse effect on the
Company's business, financial condition and results of operations. No sales have
been made and, consequently, no royalties have been paid by the Company pursuant
to the Partners License because products based on the licensed technology are
still in field trials. See "Certain Transactions -- The Partners License." The
Company also works closely with physicians and research and development
personnel at Brigham and MGH to develop and commercialize new information
technology solutions for the healthcare industry and to test and demonstrate new
and existing products. A breach of the terms of the Partners License could cause
the cooperative working relationship with Brigham and MGH, including future
access to products developed by personnel at Brigham granted under the Partners
License, to become strained or to cease altogether. The loss of good relations
with Brigham or MGH could have a material adverse impact on the Company's
ability to develop new solutions and cause delays in bringing new products to
the market. Additionally, a loss of the relationship with Brigham or MGH could
result in the Company's reputation and status in the industry being diminished.
Any of these events could have a material adverse effect on the Company's
business, financial condition and results of operations. In connection with the
grant of the Partners License, Partners acquired 988,290 shares of Common Stock,
which will represent 5.1% of the outstanding Common Stock following the
Offering.

UNCERTAINTY IN THE HEALTHCARE INDUSTRY

The healthcare industry is subject to changing political, economic and
regulatory influences that may affect the procurement practices and operations
of healthcare industry participants. During the past several years, the U.S.
healthcare industry has been subject to an increase in governmental regulation
and reform proposals. These reforms may increase governmental involvement in
healthcare, continue to reduce reimbursement rates and otherwise change the
operating environment for the Company's customers. Healthcare industry
participants may react to these proposals and the uncertainty surrounding such
proposals by curtailing or deferring investments, including those for the
Company's products and services. In addition, many healthcare providers are
consolidating to create larger healthcare delivery enterprises with greater
market power. Such consolidation could erode the Company's existing customer
base and reduce the size of the Company's target market. In addition, the
resulting enterprises could have greater bargaining power, which may lead to
price erosion. The failure of the Company to maintain adequate price levels or
sales, or the reduction in the size of the Company's target market, as a result
of legislative or market-driven reforms or industry consolidation could have a
material adverse effect on the Company's business, financial condition and
results of operations.

POSSIBLE ADVERSE EFFECTS OF GOVERNMENT REGULATION

The United States Food and Drug Administration (the "FDA") has issued a
draft guidance document addressing the regulation of certain computer products
and computer-assisted products as medical devices under the Federal Food, Drug,
and Cosmetic Act (the "FDC Act") and has recently indicated it may modify such
draft policy or create a new policy. The Company expects that the FDA is likely
to become increasingly active in regulating computer software intended for use
in the healthcare setting. If the FDA chooses to regulate any of the Company's
healthcare software systems as medical devices, it can impose extensive
requirements upon the Company, including the requirement that the Company seek
either FDA clearance of a premarket notification submission demonstrating that
the product is substantially equivalent to a device already legally marketed or
file for and obtain FDA approval of a premarket approval application
establishing the safety and effectiveness of the product. FDA regulations also
govern, among other things, the preclinical and clinical testing, manufacture,
distribution, labeling and promotion of medical devices. In addition, the
Company would be required to comply with the FDC Act's general controls,
including establishment

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registration, device listing, compliance with good manufacturing practices,
reporting of certain device malfunctions and adverse device events.
Noncompliance with applicable requirements can result in, among other things,
fines, injunctions, civil penalties, recalls or product corrections, total or
partial suspension of production, failure of the government to grant premarket
clearance or approval of products, withdrawal of clearances and approvals, and
criminal prosecution. There can be no assurance that any final FDA policy
governing computer products, once issued, or future laws and regulations
concerning the manufacture or marketing of medical devices or healthcare
information systems will not increase the cost and time to market of new or
existing products.

The confidentiality of patient records and the circumstances under which
such records may be released are subject to substantial regulation by state and
federal laws and regulations, which govern both the disclosure and use of
confidential patient medical record information. Regulations governing
electronic health data transmissions are evolving rapidly and are often unclear
and difficult to apply in the rapidly restructuring healthcare market. On August
22, 1996, President Clinton signed the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA"). This legislation requires the Secretary of
Health and Human Services (the "Secretary") to adopt national standards for
certain types of electronic health information transactions and the data
elements used in such transactions and to adopt standards to ensure the
integrity and confidentiality of health information. The Secretary was required
to issue these standards no later than February 21, 1998. The Secretary has
recently issued proposed standards regarding three of the five sets of standards
that are ultimately expected. These proposed standards specify certain provider
and employer identifiers and transactional code sets. Standards governing
identifiers for health plans, as well as general data security standards, have
not yet been proposed. Final standards are expected later this year following a
public comment period for each proposal. Final standards would become mandatory
within 24 to 36 months thereafter. The Company believes that the proposed
standards would not materially affect the Company's business, if adopted as
proposed. There can be no assurance, however, that the standards will be adopted
as proposed or that the standards yet to be proposed, particularly those related
to data security, will not have a material adverse effect on the Company's
business, financial condition and results of operations.

The HIPAA legislation also required the Secretary to submit recommendations
to Congress for legislation to protect privacy and confidentiality of personal
health information. If Congress fails to enact such legislation by August 21,
1998, HIPAA requires the Secretary to promulgate such protections by regulation.
There can be no assurance that such laws or regulations will not materially
restrict the ability of the Company's customers to obtain or disseminate patient
information, which could adversely affect demand for the Company's products.
Legislation governing the dissemination of medical record information is
frequently proposed and debated at both the federal and state levels. Such
legislation, if enacted, could require patient consent before even
non-individually-identifiable (e.g., coded or anonymous) patient information may
be shared with third parties and could also require that holders or users of
such information implement specified security measures. Any material restriction
on the ability of healthcare providers to obtain or disseminate patient
information could adversely affect the Company's business, financial condition
and results of operations.

YEAR 2000 ISSUES

The Company believes that all of its internal management information
systems are currently Year 2000 compliant and, accordingly, does not anticipate
any significant expenditures to remediate or replace existing internal-use
systems. Although all of the products currently offered by the Company are Year
2000 compliant, some of the products previously sold by Alltel and Emtek and
installed in the Company's customer base are not Year 2000 compliant. The
Company has developed and tested solutions for these non-compliant installed
products. The Company currently estimates that the total cost of bringing these
installed products into Year 2000 compliance, in those cases in which the
Company is required to do so at its own expense, will be approximately $1.7
million, all of which is expected to be incurred by mid-1999. In addition,
because the Company's products are often interfaced with a customer's existing
third-party applications, the Company's products may experience difficulties
interfacing with third-party non-compliant applications. Based on currently
available information, the Company does not expect the cost of compliance
related to interactions

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with non-compliant third-party systems to be material. However, any unexpected
difficulties in implementing Year 2000 solutions for the installed Alltel or
Emtek products or difficulties in interfacing with third-party products could
have a material adverse effect on the Company's business, financial condition
and results of operations.

As a result of apprehension in the marketplace over Year 2000 compliance
issues, businesses, including the Company's customers, may elect to defer
significant capital investments in information technology programs and software,
either because they decide to focus their capital budgets on the expenditures
necessary to bring their own existing systems into compliance or because they
wish to purchase only software with a proven ability to process data after 1999.
As a result, the Company may not achieve expected sales revenues and its
business, financial condition and results of operations could be materially
adversely affected.

LIMITED PROTECTION OF PROPRIETARY RIGHTS

The Company is dependent upon its proprietary information and technology.
The Company relies primarily on a combination of copyright, trademark and trade
secret laws and license agreements to establish and protect its rights in its
software products and other proprietary technology. The Company requires third-
party consultants and contractors to enter into nondisclosure agreements to
limit the use of, access to and distribution of its proprietary information. In
addition, the Company currently requires that, in order to receive options under
any of its stock plans, the recipient employee must enter into a nondisclosure
agreement. There can be no assurance that the Company's means of protecting its
proprietary rights will be adequate to prevent misappropriation. The laws of
some foreign countries may not protect the Company's proprietary rights as fully
or in the same manner as do the laws of the United States. Also, despite the
steps taken by the Company to protect its proprietary rights, it may be possible
for unauthorized third parties to copy aspects of the Company's products,
reverse engineer such products or otherwise obtain and use information that the
Company regards as proprietary. In certain limited instances, customers can
access source code versions of the Company's software, subject to contractual
limitations on the permitted use of such source code. Although the Company's
license agreements with such customers attempt to prevent misuse of the source
code, the possession of the Company's source code by third parties increases the
ease and likelihood of potential misappropriation of such software. Furthermore,
there can be no assurance that others will not independently develop
technologies similar or superior to the Company's technology or design around
the proprietary rights owned by the Company.

In addition, although the Company does not believe that its products
infringe the proprietary rights of third parties, there can be no assurance that
infringement or invalidity claims (or claims for indemnification resulting from
infringement claims) will not be asserted or prosecuted against the Company or
that any such assertions or prosecutions will not materially adversely affect
the Company's business, financial condition and results of operations.
Regardless of the validity of such claims, defending against such claims could
result in significant costs and diversion of Company resources, which could have
a material adverse effect on the Company's business, financial condition and
results of operations. In addition, the assertion of such infringement claims
could result in injunctions preventing the Company from distributing certain
products, which could have a material adverse effect on the Company's business,
financial condition and results of operations. If any claims or actions are
asserted against the Company, the Company may seek to obtain a license to such
intellectual property rights. There can be no assurance, however, that such a
license would be available on reasonable terms or at all.

PRODUCT ERRORS; POTENTIAL FOR PRODUCT LIABILITY; SECURITY ISSUES

Highly complex software products, such as those offered by the Company,
often contain undetected errors or failures when first introduced or as new
versions are released. Testing of the Company's products is particularly
challenging because it is difficult to simulate the wide variety of computing
environments in which the Company's customers may deploy these products. Despite
extensive testing, the Company from time to time has discovered defects or
errors in its products. Accordingly, there can be no assurance that such
defects, errors or difficulties will not cause delays in product introductions
and shipments, result in increased costs and diversion of development resources,
require design modifications or decrease market acceptance or customer

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satisfaction with the Company's products. In addition, there can be no assurance
that, despite testing by the Company and by current and potential customers,
errors will not be found after commencement of commercial shipments, resulting
in loss of or delay in market acceptance, which could have a material adverse
effect upon the Company's business, financial condition and results of
operations.

Certain of the Company's products provide applications that relate to
patient medical histories and treatment plans. Any failure of the Company's
products to provide accurate and timely information could result in liability
claims against the Company. Although the Company has not experienced any claims
to date, there can be no assurance that the Company will not be subject to such
claims in the future. The Company attempts to limit contractually its liability
for damages arising from negligent acts, errors, mistakes or omissions in
designing its products and rendering its services. Despite this precaution,
there can be no assurance that the limitations of liability set forth in its
contracts would be enforceable or would otherwise protect the Company from
liability for damages. The Company maintains general liability insurance
coverage, including coverage for errors or omissions. However, there can be no
assurance that such coverage will continue to be available on acceptable terms,
or will be available in sufficient amounts to cover one or more large claims, or
that the insurer will not disclaim coverage as to any future claim. The
successful assertion of one or more large claims against the Company that exceed
available insurance coverage or changes in the Company's insurance policies,
including premium increases or the imposition of large deductible or co-
insurance requirements, could have a material adverse effect on the Company's
business, financial condition and results of operations. Furthermore, litigation
with respect to liability claims, regardless of its outcome, could result in
substantial cost to the Company, divert management's attention from the
Company's operations and decrease market acceptance of the Company's products.
Any product liability claim or litigation against the Company could, therefore,
have a material adverse effect on the Company's business, financial condition
and results of operations.

The Company has included security features in its products that are
intended to protect the privacy and integrity of customer data. Despite the
existence of these security features, the Company's software products may be
vulnerable to break-ins and similar disruptive problems. Such computer break-ins
and other disruptions may jeopardize the security of information stored in and
transmitted through the computer systems of the Company's customers. Addressing
these evolving security issues may require significant expenditures of capital
and resources by the Company, which may have a material adverse effect on the
Company's business, financial condition and results of operations.

CONTROL BY DIRECTORS AND OFFICERS

Upon completion of the Offering, the Company's officers and directors, and
their affiliates, will beneficially own approximately 69.6% of the Company's
outstanding Common Stock (67.4% if the U.S. Underwriters' over-allotment option
is exercised in full). These stockholders, if acting together, would have the
ability to elect the Company's directors and to determine the outcome of
corporate actions requiring stockholder approval, irrespective of how other
stockholders of the Company may vote. This concentration of ownership may also
have the effect of delaying or preventing a change in control of the Company.
See "Management" and "Principal Stockholders."

BENEFITS OF THE OFFERING TO CERTAIN STOCKHOLDERS

The existing stockholders of the Company will benefit from the creation of
a public market for the Common Stock held by them after the closing of the
Offering. Upon the closing of the Offering, the existing stockholders will hold
shares of Common Stock (or Non-Voting Common Stock convertible into Common
Stock), excluding shares purchased in the Offering, having an aggregate value of
$231.1 million, based on the initial public offering price of $15.00 per share.
The existing stockholders paid an average of $8.44 per share (including the
deemed value of shares issued in connection with the Partners License and the
Acquisitions) for the shares of Common Stock they will hold immediately
following the Offering. In addition, First Union Corporation ("First Union") and
BT Investment Partners, Inc. ("BT"), each a significant stockholder of the
Company, will hold Warrants exercisable to purchase an aggregate of 962,833
shares of Common Stock at a price of $.01 per share. All of the net proceeds
received by the Company in the Offering (approximately $56.9 million) will be
paid to certain existing stockholders of the Company or their affiliates to
effect the Preferred Stock Redemption, to repay the SDK Notes and to reduce
amounts outstanding under the Revolver.

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AIS, First Union and BT will receive an aggregate of $38.8 million in the
Preferred Stock Redemption. In addition, an affiliate of First Union Corporation
is a lender under the Revolver. See "Use of Proceeds," "Certain Transactions"
and "Principal Stockholders."

NO PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained after this Offering or that the market price of the Common Stock
will not decline below the initial public offering price. The initial public
offering price will be determined by negotiations among the Company and the
Representatives of the Underwriters and may not be indicative of the market
price of the Common Stock after this Offering. The trading price of the Common
Stock is likely to be highly volatile and may be significantly affected by
factors such as actual or anticipated fluctuations in the Company's operating
results, announcements of technological innovations or acquisitions, new
products or new contracts by the Company or its competitors, developments with
respect to patents, copyrights or propriety rights, conditions and trends in the
software industry, general economic conditions and other factors. It is possible
that in some future quarter the Company's results of operations will be below
the expectations of public market analysts and investors. In addition, the
public equity markets have from time to time experienced significant price and
volume fluctuations that have particularly affected the market prices for the
stock of technology companies as a group but have been unrelated to the
performance of particular companies. These broad market fluctuations, as well as
shortfalls in sales or earnings as compared with securities analysts'
expectations, changes in such analysts' recommendations or projections and
general economic and market conditions, may materially and adversely affect the
market price of the Company's Common Stock. See "Underwriters."

DILUTION

Purchasers of shares of Common Stock in this Offering will suffer immediate
and substantial dilution of $15.11 per share in the pro forma net tangible book
value of the Common Stock from the initial public offering price. See
"Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of shares of Common Stock in the public market
following the Offering could adversely affect the market price of the Common
Stock. See "Shares Eligible for Future Sale" and "Underwriters."

DIVIDENDS

No cash dividends have been paid on the Common Stock to date and the
Company does not anticipate paying cash dividends in the foreseeable future. In
addition, there are certain restrictions on the Company's ability to declare and
pay dividends under the terms of the Company's credit facility and under
applicable state law. See "Dividend Policy" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

ANTITAKEOVER PROVISIONS

The Company's Third Restated Certificate of Incorporation and Amended and
Restated By-laws, which will be in effect immediately following the closing of
the Offering, contain certain provisions, including a staggered Board of
Directors, that could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
control of the Company. These provisions could limit the price that certain
investors might be willing to pay in the future for shares of the Company's
Common Stock. In addition, certain provisions of Delaware corporate law
applicable to the Company could have the effect of delaying, deferring or
preventing a change in control of the Company. See "Description of Capital
Stock -- Delaware Law and Certain Charter and By-Law Provisions."

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THE COMPANY

Eclipsys is a healthcare information technology company delivering
solutions that enable healthcare providers to achieve improved clinical,
financial and administrative outcomes. The Company offers an integrated suite of
core products in four critical areas -- clinical management, access management,
patient financial management and enterprise data warehouse and analysis. These
products can be purchased in combination to provide an enterprise-wide solution
or individually to address specific needs. The Company's products have been
designed specifically to deliver a measurable impact on outcomes, enabling the
Company's customers to quantify clinical benefits and return on investment in a
precise and timely manner. The Company's products can be integrated with a
customer's existing information systems, which the Company believes reduces
overall cost of ownership and increases the attractiveness of its products.
Eclipsys also provides outsourcing, remote processing and networking services to
assist customers in meeting their healthcare information requirements. The
Company was formed in December 1995 and has grown primarily through its three
acquisitions, all completed since January 1997. These acquisitions, together
with internally generated growth, have resulted in total revenues of $126.5
million in 1997 on the pro forma basis described herein.

The Company was founded in December 1995 by Harvey J. Wilson, a co-founder
of SMS, to address an identified opportunity to commercialize integrated
healthcare information technology. In May 1996, the Company acquired the
Partners License to develop, commercialize, distribute and support certain
intellectual property relating to the BICS clinical information systems software
developed at Brigham. In consideration for this license, the Company issued
988,290 shares of Common Stock to Partners. See "Certain Transactions -- The
Partners License." Since acquiring the Partners License, Eclipsys has grown
primarily by acquiring companies or operations with industry-leading products to
complement its existing product offerings and broaden its product line. These
acquisitions are summarized below:

[Enlarge/Download Table]

TOTAL LAST-YEAR KEY PRODUCT
ACQUISITION DATE CONSIDERATION(1) REVENUES(2) CATEGORIES
----------- ---- ---------------- ----------- -----------
(DOLLARS IN MILLIONS)

Alltel January 1997 $201.5 $108.8 -- Clinical management
-- Enterprise data warehouse
SDK June 1997 16.5 6.8 -- Access management
-- Patient financial management
Emtek January 1998 11.7(3) 22.7 -- Clinical management

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

(1) Reflects the total value of consideration paid by the Company, including
cash, stock, promissory notes and assumption of liabilities, as the case may
be and, in the case of Alltel, reflects certain purchase price adjustments.

(2) Reflects total revenues of the acquired operations for the last full fiscal
year prior to acquisition.

(3) Net of a $9.6 million receivable from Motorola.

Alltel. In January 1997, the Company acquired Alltel for a purchase price
consisting of $104.8 million in cash, 20,000 shares of Series C Redeemable
Preferred Stock (having a redemption value of $1,000 per share plus accumulated
dividends) and 2,077,497 shares of Series D Convertible Preferred Stock (each
convertible into one share of Common Stock). Alltel's main products were the TDS
7000, a mainframe-based clinical information program, and an enterprise data
warehouse product. Alltel enjoyed a significant customer base, consisting
primarily of large integrated healthcare delivery networks. Alltel had total
revenues of $108.8 million in its fiscal year ended December 31, 1996. In
October 1997, in connection with certain post-closing adjustments to the
purchase price for the Alltel Acquisition, AIS, the former parent corporation of
Alltel, returned 4,500 shares of Series C Redeemable Preferred Stock to the
Company for cancellation.

In March 1998, the Company and AIS renegotiated in two separate
transactions several matters relating to the Alltel Acquisition. In the AIS
Settlement, AIS returned to the Company 11,000 shares of Series C Redeemable
Preferred Stock in exchange for resolving certain open issues in connection with
the Alltel Acquisition, and AIS agreed that no dividends will accrue on the
remaining 4,500 shares of Series C Redeemable Preferred Stock held by AIS until
July 1, 1998. In the MSA Buyout, the Company paid AIS an aggregate of $14.0
million in exchange for terminating all of the rights and obligations of both
parties under the MSA. See "Certain Transactions -- The Alltel Acquisition and
Renegotiation." A portion of the net

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proceeds of the Offering will be used to redeem the remaining Redeemable
Preferred Stock held by AIS. See "Use of Proceeds" and "Principal Stockholders."

SDK. In June 1997, the Company acquired all of the stock of SDK for
approximately $2.2 million in cash, $7.6 million of SDK Notes, $3.5 million of
assumed liabilities and 499,997 shares of Common Stock valued at $3.2 million.
SDK's key products were a patient information software program and a patient
financial management program. SDK's customers were primarily integrated
healthcare delivery network facilities. SDK had total revenues of $6.8 million
in its fiscal year ended April 30, 1997.

Emtek. In January 1998, the Company acquired Emtek from Motorola for total
consideration of $11.7 million. The consideration included 1,000,000 shares of
Common Stock valued at $9.1 million and the assumption of $12.3 million of
liabilities, reduced by a $9.6 million receivable due from Motorola. Emtek was a
leader in supplying clinical information solutions to the critical care
environment and its key product was Continuum 2000, a point-of-care clinical
information system. Emtek had a strong customer base, consisting primarily of
academic medical centers and large hospitals. Emtek had total revenues of $22.7
million in its fiscal year ended December 31, 1997.

Simione Investment. In April 1998, the Company made a strategic minority
investment in Simione, purchasing approximately 4.9% of Simione's outstanding
common stock from certain stockholders of Simione for approximately $5.6
million. In connection with the Simione Investment, the Company received the
right to designate one member for election to Simione's board of directors and
an option to purchase up to an additional 4.9% of Simione's common stock in the
event Simione proposes to enter into specified change-of-control transactions
prior to October 1998. Concurrently with the Simione Investment, the Company and
Simione entered into a Remarketing Agreement pursuant to which the Company has
certain rights to distribute Simione software products. Simione is a provider of
home healthcare consulting solutions and information systems.

The Company was organized in Delaware in 1995 as Integrated Healthcare
Solutions, Inc. and changed its name to Eclipsys Corporation in 1997. The
Company's principal office is located at 777 East Atlantic Avenue, Suite 200,
Delray Beach, Florida 33483, and its telephone number is (561) 243-1440.

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USE OF PROCEEDS

The net proceeds to the Company from the sale of shares of Common Stock
offered hereby are estimated to be $56.9 million after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by the Company.

The Company expects to use (i) approximately $38.8 million of the net
proceeds from the Offering to redeem the outstanding shares of the Company's
Redeemable Preferred Stock, of which $4.3 million represents estimated accrued
dividends as of the closing date of the Offering, and (ii) approximately $3.8
million to repay the principal balance and accrued interest on the SDK Notes.
The Company will use the remainder of the net proceeds (approximately $14.3
million) to repay amounts outstanding under the Revolver. As of August 6, 1998,
the outstanding balance of the Revolver was $18.5 million, which was borrowed
primarily in connection with the MSA Buyout and the Simione Investment. As of
August 6, 1998, the effective interest rate for the Revolver was 6.7%. The
Redeemable Preferred Stock accrues dividends at the rate of 8.5% annually and is
mandatorily redeemable upon the closing of the Offering. The SDK Notes bear
interest at the rate of 9.5% annually, payable quarterly. The aggregate
principal balance of the SDK Notes is $3.8 million and is due on April 1, 1999.
The SDK Notes are subordinated to the Revolver. The SDK Notes may be prepaid at
any time without penalty.

Any net proceeds received by the Company upon exercise of the U.S.
Underwriters' over-allotment option will be used to repay any remaining
borrowings under the Revolver or for working capital and other general corporate
purposes. In particular, the Company may seek acquisitions of or investments in
businesses, products and technologies that are complementary to those of the
Company. In the event the Company finds suitable businesses, products or
technologies, a portion of the net proceeds may also be used for such
acquisitions or investments. While the Company engages from time to time in
discussions with respect to potential acquisitions and investments, the Company
has no plans, commitments or agreements with respect to any such acquisitions
and investments and there can be no assurance that any acquisitions or
investments will be made.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently intends to retain earnings, if any, to support its
growth strategy and does not anticipate paying cash dividends in the foreseeable
future. In addition, there are certain restrictions on the Company's ability to
declare and pay dividends under the terms of the Company's credit facility and
under applicable state law. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and Note 7 of Notes to the Company's Consolidated Financial
Statements.

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CAPITALIZATION

The following table sets forth the cash and cash equivalents, current
portion of long-term debt and capitalization of the Company as of March 31, 1998
(i) on an actual basis and (ii) on a pro forma as adjusted basis giving effect
to the SDK Partial Repayment, the funding of the Simione Investment, the
Preferred Stock Conversion and the Offering and the application of the net
proceeds therefrom as described under "Use of Proceeds." The information set
forth in the table below is qualified by reference to the Company's Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.

[Enlarge/Download Table]

AS OF MARCH 31, 1998
---------------------------
PRO FORMA
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS EXCEPT SHARE
DATA)

Cash and cash equivalents................................... $ 5,854 $ 2,762
========= =========
Current portion of long-term debt:
SDK Notes................................................. $ 3,794 $ --
========= =========
Long-term debt:
Revolver.................................................. $ 9,000 $ --
SDK Notes................................................. 3,794 --
--------- ---------
Total long-term debt................................ $ 12,794 $ --
========= =========
Series B 8.5% mandatorily redeemable preferred stock, $.01
par value, 30,000 shares
authorized, issued and outstanding (actual); no shares
authorized, issued or outstanding
(pro forma as adjusted)(1)(2)............................. 24,678 --
Series C 8.5% mandatorily redeemable preferred stock, $.01
par value, 25,000 shares authorized, 4,500 shares issued
and outstanding (actual); no shares authorized, issued or
outstanding (pro forma as adjusted)(1)(2)................. 4,500 --

Shareholders' equity (deficit)(1)(2):
Convertible Preferred Stock, $.01 par value; 10,650,000
shares authorized, 10,333,313 shares
issued and outstanding (actual); no shares authorized,
issued or outstanding (pro forma
as adjusted)............................................ 104 --
Undesignated preferred stock, $.01 par value, 1,100,000
shares authorized (actual); 5,000,000 shares authorized
(pro forma as adjusted); no shares issued and
outstanding (actual and pro forma as adjusted).......... -- --
Common Stock, $.01 par value; 50,000,000 shares authorized
(actual); 200,000,000 shares authorized (pro forma as
adjusted); 5,289,098 shares issued and outstanding
(actual); 18,625,980 shares issued and outstanding (pro
forma as adjusted)(3)................................... 53 186
Non-Voting Common Stock, $.01 par value; 3,000,000 shares
authorized (actual); 5,000,000 shares authorized (pro
forma as adjusted); no shares issued and outstanding
(actual); 896,431 shares issued and outstanding (pro
forma as adjusted)...................................... -- 9
Additional paid-in capital(4)............................. 132,888 181,302
Unearned compensation..................................... (232) (232)
Accumulated deficit....................................... (145,623) (145,623)
Accumulated other comprehensive income.................... 39 39
--------- ---------
Total shareholders' equity (deficit).................... (12,771) 35,681
--------- ---------
Total capitalization................................ $ 29,201 $ 35,681
========= =========

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

(1) Gives effect to amendments to the Company's certificate of incorporation
approved by the Company's Board of Directors on April 8, 1998 to increase
the number of shares of Common Stock, Non-Voting Common Stock and
undesignated Preferred Stock authorized and eliminate the authorized shares
of Convertible Preferred Stock and Redeemable Preferred Stock concurrent
with the closing of this Offering.
(2) See Note 5 of Notes to the Company's Consolidated Financial Statements.
(3) Excludes (i) an aggregate of 4,333,333 shares of Common Stock reserved for
issuance under the Company's 1996 Stock Plan, 1998 Incentive Stock Plan and
1998 Employee Stock Purchase Plan, of which 2,115,039 shares were subject to
outstanding options as of March 31, 1998 at a weighted average exercise
price of $5.57 per share, and (ii) an aggregate of 962,833 shares of Common
Stock issuable upon exercise of the Warrants. From April 1, 1998 through
July 14, 1998, options were exercised to purchase an aggregate of 81,630
shares of Common Stock, resulting in shares outstanding at July 14, 1998 of
19,604,035 (after giving effect to the Offering). See "Management -- Stock
Plans" and "Description of Capital Stock -- Warrants".
(4) Included in the adjustments to pro forma as adjusted additional paid-in
capital is a charge of approximately $8.4 million to reflect the difference
between the redemption price of Redeemable Preferred Stock and its carrying
amount. This charge will be recorded as a direct charge to additional
paid-in capital in the period the redemption occurs. Additionally, the
charge will result in an increase in net loss available to common
shareholders in the statement of operations.

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DILUTION

The pro forma net tangible book deficit of the Company as of March 31, 1998
was $(59.0) million, or $(3.85) per share of Common Stock. Pro forma net
tangible book deficit per share is determined by dividing the Company's tangible
net worth (tangible assets less liabilities including Redeemable Preferred
Stock) by the number of shares of Common Stock outstanding, after giving effect
to the SDK Partial Repayment, the Simione Investment and the Preferred Stock
Conversion. After giving effect to the Offering and the application of the net
proceeds therefrom as described under "Use of Proceeds," the pro forma net
tangible book deficit of the Company as of March 31, 1998 would have been $(.11)
per share. This represents an immediate increase in such pro forma net tangible
book value of $3.74 per share to existing stockholders and an immediate dilution
of $15.11 per share to new investors purchasing shares in this Offering. The
following table illustrates the per share dilution:

[Download Table]

Initial public offering price per share................. $15.00
Pro forma net tangible book deficit per share before
the
Offering........................................... $(3.85)
Increase per share attributable to new investors...... 3.74
Pro forma net tangible book deficit per share after the
Offering.............................................. (.11)
------
Dilution per share to new investors..................... $15.11
======

The following table summarizes, as of March 31, 1998, on a pro forma basis
after giving effect to the Preferred Stock Conversion and the Preferred Stock
Redemption, the total number of shares of Common Stock purchased from the
Company, the total consideration paid (including the deemed value of shares
issued in connection with the Partners License and the Acquisitions) and the
average consideration paid per share by the existing stockholders and by the new
investors:

[Enlarge/Download Table]

SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ------------ ------- -------------

Existing stockholders.......... 15,322,411 78.5% $129,386,000 67.3% $ 8.44
New investors.................. 4,200,000 21.5 63,000,000 32.7 $15.00
----------- ----- ------------ -----
Total................ 19,522,411 100.0% $192,386,000 100.0%
=========== ===== ============ =====

The foregoing tables assume no exercise of stock options or warrants
subsequent to March 31, 1998 or of the U.S. Underwriters' over-allotment option.
From April 1, 1998 through July 14, 1998, options were exercised to purchase an
aggregate of 81,630 shares of Common Stock, resulting in shares outstanding at
July 14, 1998 of 19,604,035 (after giving effect to the Offering). As of March
31, 1998, there were options outstanding to purchase an aggregate of 2,115,039
shares of Common Stock at a weighted average exercise price of $5.57 per share.
In addition, Warrants are outstanding to purchase an aggregate of 962,833 shares
of Common Stock at a price of $.01 per share. To the extent these options or
Warrants are exercised, there will be additional dilution to new investors.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma financial information of the Company is based on
the historical audited financial statements of the Company for the year ended
December 31, 1997 and the unaudited financial statements of the Company for the
three months ended March 31, 1998.

The unaudited pro forma financial information of the Company for the year
ended December 31, 1997 and the three months ended March 31, 1998 includes
adjustments to give effect to (i) the Alltel Acquisition, (ii) the SDK
Acquisition, (iii) the Emtek Acquisition, (iv) the AIS Settlement, (v) the MSA
Buyout, (vi) the 1998 Preferred Stock Issuance, (vii) the use of the proceeds
from the 1998 Preferred Stock Issuance to repay $9.0 million under the Term
Loan, (viii) the SDK Partial Repayment, (ix) the January 1998 scheduled $2.0
million payment to AIS under the MSA and (x) borrowings under the Revolver to
fund the MSA Buyout and the Simione Investment. The unaudited pro forma as
adjusted financial information includes adjustments to give effect to the
Preferred Stock Conversion and the Offering and the application of the net
proceeds therefrom as described under "Use of Proceeds."

Alltel was acquired effective January 24, 1997 for an aggregate purchase
price of $201.5 million, including liabilities assumed of $58.4 million and
after giving effect to the cancellation of 4,500 shares of Series C Redeemable
Preferred Stock held by Alltel related to an October 1997 settlement of certain
matters related to the acquisition. Consideration paid consisted of $104.8
million in cash, 15,500 shares of Series C Redeemable Preferred Stock valued at
approximately $10.3 million, 2,077,497 shares of Series D Convertible Preferred
Stock valued at approximately $26.1 million, deferred payments due under the MSA
over four years valued at $9.5 million and transaction costs of approximately
$2.0 million.

SDK was acquired effective June 26, 1997 for an aggregate purchase price of
$16.5 million, including 499,997 shares of Common Stock valued at approximately
$3.2 million, $2.2 million in cash, the SDK Notes aggregating $7.6 million and
assumed liabilities of approximately $3.5 million.

Emtek was acquired effective January 30, 1998 for an aggregate purchase
price of approximately $11.7 million, including 1,000,000 shares of Common Stock
valued at $9.1 million and liabilities assumed of approximately $12.3 million.
In addition, Motorola agreed to pay the Company $9.6 million in cash for working
capital purposes.

The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable under the circumstances.
The unaudited pro forma financial information should be read in conjunction with
the historical financial statements of the Company, Alltel and SDK and the
respective notes thereto, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the other financial information
included herein. The unaudited pro forma financial information is provided for
information purposes only and does not purport to be indicative of the results
which would have been obtained had the Offering and the other adjustments been
completed on the dates indicated or which may be expected to occur in the
future.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1997

[Enlarge/Download Table]

HISTORICAL ACQUISITION
------------------------------------------ AND OTHER OFFERING PRO FORMA
COMPANY ALLTEL(1) SDK(2) EMTEK(3) ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
--------- --------- ------- -------- ----------- --------- ----------- -----------
(IN THOUSANDS EXCEPT SHARE DATA)

Revenues:
Systems and services...... $ 89,722 $ 6,064 $3,037 $14,274 $113,097 $113,097
Hardware.................. 4,355 122 486 8,464 13,427 13,427
--------- ------- ------ -------- -------- -------
Total revenues........ 94,077 6,186 3,523 22,738 126,524 126,524
--------- ------- ------ -------- -------- -------
Costs and expenses:
Cost of systems and
services revenues....... 77,083 4,277 2,193 11,459 $ 341(4) 95,353 95,353
Cost of hardware
revenues................ 2,953 104 340 7,394 10,791 10,791
Marketing and sales....... 13,662 660 336 6,235 20,893 20,893
Research and
development............. 15,714 794 -- 12,804 29,312 29,312
General and
administrative.......... 5,672 621 992 6,671 13,956 13,956
Depreciation and
amortization............ 9,710 568 -- 904 703(4) 11,885 11,885
Write-off of in-process
research and
development(5).......... 99,189 -- -- -- (99,189) -- --
--------- ------- ------ -------- -------- -------
Total costs and
expenses............ 223,983 7,024 3,861 45,467 182,190 182,190
--------- ------- ------ -------- -------- -------
Loss from operations........ (129,906) (838) (338) (22,729) (55,666) (55,666)
Interest expense (income),
net....................... 1,154 379 (19) -- 54(6) 1,568 $(1,737)(7) (169)
--------- ------- ------ -------- -------- -------
Loss before income tax
provision................. (131,060) (1,217) (319) (22,729) (57,234) (55,497)
Income tax benefit.......... -- 437 -- -- (437)(8) -- --
--------- ------- ------ -------- -------- -------
Net loss(9)................. (131,060) (780) (319) (22,729) (57,234) (55,497)
Dividends and accretion on
Mandatorily Redeemable
Preferred Stock........... (5,850) -- -- -- 1,089(10) (4,761) 4,761(11) --
Preferred stock
conversion(12)............ (3,105) -- -- -- (3,105) (3,105)
--------- ------- ------ -------- -------- -------
Net loss available to common
shareholders.............. $(140,015) $ (780) $ (319) $(22,729) $(65,100) $(58,602)
========= ======= ====== ======== ======== =======
Basic and diluted net loss
per common share.......... $ (39.73) $ (13.64) $ (3.08)
Weighted average common
shares outstanding........ 3,524,313 4,774,312 19,007,625

---------------
(1) Represents the historical results of operations of Alltel for the period
from January 1, 1997 through January 23, 1997.
(2) Represents the historical results of operations of SDK from January 1, 1997
through June 26, 1997.
(3) Represents the historical results of operations of Emtek from January 1,
1997 through December 31, 1997.
(4) Represents adjustments for amortization expense related to the Acquisitions
and the Alltel Renegotiation as if they had occurred January 1, 1997 as
follows:

[Enlarge/Download Table]

ALLTEL SDK EMTEK TOTAL
------ ----- ------- -------
(IN THOUSANDS)

MSA......................................................... $ 200 $ -- $ -- $ 200
Amortization of capitalized software reflected in the
historical accounts prior to the Acquisitions............. (377) (197) (1,794) (2,368)
Acquired technology......................................... 1,763 321 425 2,509
------ ----- ------- -------
$1,586 $ 124 $(1,369) $ 341
====== ===== ======= =======
Ongoing customer relationships.............................. $ 181 $ -- $ -- $ 181
Goodwill.................................................... 66 456 -- 522
------ ----- ------- -------
$ 247 $ 456 $ -- $ 703
====== ===== ======= =======

The Acquisitions were accounted for using the purchase method of accounting
and accordingly the net assets acquired have been recorded at estimated
fair value on the date of acquisition and the historical statement of
operations data of the Company reflect the

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results of operations from these businesses from the date acquired. In
connection with the Acquisitions, the Company acquired intangible assets as
follows:

[Enlarge/Download Table]

VALUE FIRST YEAR AMORTIZATION
------------------------- -------------------------
ALLTEL SDK EMTEK ALLTEL SDK EMTEK
------- ------ ------ -------- ----- ------
(IN THOUSANDS)

Acquired technology............................. $42,312 $3,205 $2,125 $21,156 $641 $425
MSA............................................. 9,543 -- -- 2,386 -- --
------- ------ ------ ------- ---- ----
$51,855 $3,205 $2,125 $23,542 $641 $425
======= ====== ====== ======= ==== ====
Ongoing customer relationships.................. $10,846 $ -- $ -- $ 2,169 $ -- $ --
Goodwill........................................ 8,997 4,553 -- 788 911 --
------- ------ ------ ------- ---- ----
$19,843 $4,553 $ -- $ 2,957 $911 $ --
======= ====== ====== ======= ==== ====

The acquired technology costs are being amortized annually over three to
five years either on a straight line basis or, if greater, based on the
ratio that current revenues bear to total anticipated revenues attributable
to the applicable product. Ongoing customer relationships are being
amortized over five years. Goodwill is being amortized over five to twelve
years.

(5) In connection with the Alltel and SDK Acquisitions, the Company wrote off
in-process research and development of $92.2 million and $7.0 million,
respectively, related to the appraised values of certain in-process
research and development acquired in these acquisitions.

(6) Includes adjustments to net interest expense to give effect to the
following (in thousands):

[Download Table]

Interest income foregone on $2.2 million cash paid for SDK
Acquisition for the period from January 1, 1997 through
June 25, 1997............................................. $ 94
Additional interest expense on $20.6 million of borrowings
under the Revolver to fund the MSA Buyout, SDK Partial
Repayment and Simione Investment as if they had occurred
as of January 1, 1997..................................... 1,752
Additional interest expense on the SDK Notes as if they
had been issued as of January 1, 1997..................... 360
Reduction of interest expense on $3.8 million of SDK Notes
as if the SDK Partial Repayment had occurred as of January
1, 1997................................................... (360)
Reduction of interest expense as a result of the elimination
of the accretion of the discount recorded in connection
with the MSA as if the MSA Buyout had occurred as of
January 1, 1997........................................... (563)
Reduction of interest expense from the cancellation of
payables to AIS as if the Alltel Acquisition had occurred
as of January 1, 1997 (interest calculated on an average
payables balance of $56.8 million at an annual interest
rate of 8%)............................................... (379)
Reduction of interest expense on the Term Loan as if the
1998 Preferred Stock Issuance had occurred as of January
1, 1997................................................... (850)
-----
Total............................................... $ 54
=====

(7) Represents adjustments to net interest to give effect to the application of
a portion of the net proceeds of the Offering as follows:

[Download Table]

Repayment of a portion of the pro forma balance of the
Revolver as if it had occurred as of January 1, 1997...... $(1,377)
Repayment of the pro forma balance of the SDK Notes as if it
had occurred as of January 1, 1997........................ (360)
-------
Total............................................... $(1,737)
=======

(8) Represents an adjustment to reduce the income tax benefit related to Alltel
for the period from January 1, 1997 through January 23, 1997 as if the
Alltel Acquisition had occurred on January 1, 1997.

(9) The Company has not recorded any benefit for income taxes as management
believes at December 31, 1997 it is more likely than not that the Company's
net deferred tax assets will not be realized. Accordingly, the Company has
recorded a valuation allowance against its total net deferred tax assets.

(10) Represents the reduction of $1.1 million in the dividends and accretion on
Series C Redeemable Preferred Stock held by AIS after giving effect to the
Alltel Renegotiation.

(11) Represents the reduction of $4.7 million in the dividends and accretion on
the Redeemable Preferred Stock with a face value of $34.5 million as if the
proceeds of the Offering were utilized to redeem 34,500 shares of the
Redeemable Preferred Stock on January 1, 1997.

(12) Represents a charge related to the January 1997 conversion of Series A
Convertible Preferred Stock to Series F Convertible Preferred Stock.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 1998

[Enlarge/Download Table]

HISTORICAL ACQUISITION
-------------------- AND OTHER OFFERING PRO FORMA
COMPANY EMTEK(1) ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
--------- -------- ----------- --------- ----------- -----------
(IN THOUSANDS EXCEPT SHARE DATA)

Revenues:
Systems and services.......... $ 27,005 $ 705 $27,710 $27,710
Hardware...................... 2,290 275 2,565 2,565
-------- ------- ------ -----
Total revenues........... 29,295 980 30,275 30,275
-------- ------- ------ -----
Costs and expenses:
Cost of systems and services
revenues.................... 16,842 744 $ (77)(2) 17,509 17,509
Cost of hardware revenues..... 1,977 245 2,222 2,222
Marketing and sales........... 4,211 580 4,791 4,791
Research and development...... 6,112 738 6,850 6,850
General and administrative.... 1,616 276 1,892 1,892
Depreciation and
amortization................ 2,669 87 2,756 2,756
Write-off of MSA(3)........... 7,193 -- (7,193) -- --
-------- ------- ------ -----
Total costs and
expenses............... 40,620 2,670 36,020 36,020
-------- ------- ------ -----
Loss from operations.............. (11,325) (1,690) (5,745) (5,745)
Interest expense (income), net.... 285 -- 106(4) 391 $ (485)(5) (94)
-------- ------- ------ -----
Net loss(6)....................... (11,610) (1,690) (6,136) (5,651)
Dividends and accretion on
mandatorily
redeemable preferred stock...... (1,335) -- 181(7) (1,154) 1,154(8) --
-------- ------- ------ -----
Net loss available to common
shareholders.................... $(12,945) $(1,690) $(7,290) $(5,651)
======== ======= ====== =====
Basic and diluted net loss per
common share.................... $ (2.83) $(1.49) $(.30)
Weighted average common shares
outstanding..................... 4,573,455 4,906,788 18,942,108

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

(1) Represents the historical results of operations of Emtek for the period from
January 1, 1998 through January 30, 1998.
(2) Represents adjustments for amortization expense related to the Emtek
Acquisition as if it had occurred January 1, 1997 as follows (in thousands):

[Download Table]

Amortization of capitalized software development costs
reflected in the historical accounts prior to the Emtek
Acquisition............................................... $(145)
Acquired technology......................................... 68
-----
Total............................................... $ (77)
=====

(3) In connection with the MSA Buyout, the Company recorded a charge of $7.2
million in 1998. See "Certain Transactions -- The Alltel Acquisition and
Renegotiation" and Note 13 of Notes to the Company's Consolidated Financial
Statements.
(4) Includes adjustments to net interest expense to give effect to the
following (in thousands):

[Download Table]

Additional interest expense on $18.6 million of borrowings
under the Revolver to fund the MSA Buyout, SDK Partial
Repayment and Simione Investment as if they had occurred
as of January 1, 1997..................................... $ 395
Reduction of interest expense on $3.8 million of SDK Notes
as if the SDK Partial Repayment had occurred as of January
1, 1997................................................... (90)
Reduction of interest expense as a result of the elimination
of the accretion of the discount recorded in connection
with the MSA as if the MSA Buyout had occurred as of
January 1, 1997........................................... (129)
Reduction of interest expense on the Term Loan as if the
1998 Preferred Stock Issuance had occurred as of January
1, 1997................................................... (70)
-----
Total............................................... $ 106
=====

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(5) Represents adjustments to net interest expense to give effect to the
application of a portion of the net proceeds of the Offering as follows:

[Download Table]

Repayment of the pro forma balance of the Revolver as if it
had occurred as of January 1, 1997........................ $(395)
Repayment of the pro forma balance of the SDK Notes as if it
had occurred as of January 1, 1997........................ (90)
-----
Total............................................... $(485)
=====

(6) The Company has not recorded any benefit for income taxes as management
believes, based on the evidence available at December 31, 1997 and March
31, 1998, it is more likely than not that the Company's net deferred tax
assets will not be realized. Accordingly, the Company has recorded a
valuation allowance against its total net deferred tax assets.
(7) Represents the reduction of $181,000 in the dividends and accretion on
Series C Redeemable Preferred Stock held by AIS after giving effect to the
Alltel Renegotiation as if it had occurred on January 1, 1997.
(8) Represents the reduction of $1.2 million in the dividends and accretion on
the Redeemable Preferred Stock with a face value of $34.5 million as if the
proceeds of the Offering were utilized to redeem 34,500 shares of the
Redeemable Preferred Stock on January 1, 1997.

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SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and notes thereto
included elsewhere in this Prospectus. The statement of operations data for the
years ended December 31, 1996 and 1997 and the balance sheet data at December
31, 1996 and 1997, under the heading "Company" set forth below, are derived
from, and are qualified by reference to, the Company's audited consolidated
financial statements, which appear elsewhere in this Prospectus. Statement of
operations data for the years ended December 31, 1995 and 1996 and the balance
sheet data at December 31, 1995 and 1996, under the heading "Predecessor" are
derived from, and are qualified by reference to, the Alltel audited financial
statements, which appear elsewhere in this Prospectus. The financial data for
the year ended and at December 31, 1994 are derived from audited financial
statements of Alltel not included in this Prospectus. The financial data for the
year ended and at December 31, 1993 are derived from unaudited financial
statements of Alltel not included in this Prospectus. The statement of
operations data for the three months ended March 31, 1997 and 1998 and the
balance sheet at March 31, 1998 are derived from, and are qualified by reference
to, the Company's unaudited consolidated financial statements, which appear
elsewhere in this Prospectus and, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial data for such periods. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results to be expected for the full year or for any future period.

[Enlarge/Download Table]

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------------- ---------------------
PREDECESSOR COMPANY
--------------------------------------- -------------------------------------------------
1993 1994 1995 1996 1996 1997(1) 1997(1) 1998(1)
------- ------- -------- -------- ---------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE DATA)

STATEMENT OF OPERATIONS
DATA:
Total revenues.............. $74,136 $80,204 $100,114 $108,800 $ -- $ 94,077 $ 17,645 $ 29,295
------- ------- -------- -------- ---------- --------- --------- ---------
Costs and expenses:
Cost of revenues.......... 44,209 48,692 61,335 71,483 -- 80,036 17,366 18,819
Marketing and sales....... 13,082 12,541 11,128 11,091 770 13,662 3,128 4,211
Research and development... 10,596 10,186 8,522 10,271 1,704(2) 15,714 4,698 6,112
General and administrative 7,215 7,898 8,168 7,101 603 5,672 784 1,616
Depreciation and
amortization............ 3,032 3,788 6,735 8,135 32 9,710 2,288 2,669
Write-off of in-process
research and
development(3).......... -- -- -- -- -- 99,189 92,201 --
Write-off of MSA(4)....... -- -- -- -- -- -- -- 7,193
------- ------- -------- -------- ---------- --------- --------- ---------
Total costs and
expenses.............. 78,134 83,105 95,888 108,081 3,109 223,983 120,465 40,620
------- ------- -------- -------- ---------- --------- --------- ---------
Income (loss) from
operations................ (3,998) (2,901) 4,226 719 (3,109) (129,906) (102,820) (11,325)
Interest expense (income),
net....................... 983 1,324 2,733 3,758 (156) 1,154 111 285
------- ------- -------- -------- ---------- --------- --------- ---------
Income (loss) before income
taxes..................... (4,981) (4,225) 1,493 (3,039) (2,953) (131,060) (102,931) (11,610)
Income tax benefit
(provision)(5)............ -- 1,373 (887) 843 -- -- -- --
------- ------- -------- -------- ---------- --------- --------- ---------
Net income (loss)........... (4,981) (2,852) 606 (2,196) (2,953) (131,060) (102,931) (11,610)
Dividends and accretion on
mandatorily Redeemable
Preferred Stock........... -- -- -- -- -- (5,850) (1,020) (1,335)
Preferred stock
conversion(6)............. -- -- -- -- -- (3,105) (3,105) --
------- ------- -------- -------- ---------- --------- --------- ---------
Net income (loss) available
to common shareholders.... $(4,981) $(2,852) $ 606 $ (2,196) $ (2,953) $(140,015) $(107,056) $ (12,945)
======= ======= ======== ======== ========== ========= ========= =========
Basic and diluted net loss
per common share(7)....... $ (.98) $ (39.73) $ (32.88) $ (2.83)
Weighted average common
shares outstanding(7)..... 3,022,660 3,524,313 3,256,053 4,573,455

OTHER DATA:
EBITDA(8)................... $ 905 $ (4,406) $ 2,865
Net cash provided by
operating activities...... 1,068 857 10,193
Net cash used by investing
activities................ (113,670) (107,401) (18,542)
Net cash provided by
financing activities...... 112,771 113,764 9,406

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[Enlarge/Download Table]

AS OF
AS OF DECEMBER 31, MARCH 31,
------------------------------------------------------------- ---------
PREDECESSOR COMPANY
----------------------------------------- -----------------------------
1993 1994 1995 1996 1996 1997 1998
-------- -------- -------- -------- ------ -------- ---------
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 2,808 $ 1,672 $ 2,599 $ 2,022 $4,589 $ 4,786 $ 5,854
Working capital (deficit).................. (4,756) (8,561) (3,923) (9,558) 3,956 (31,504) (19,559)
Total assets............................... 56,411 70,338 88,381 100,443 5,740 106,765 110,094
Debt, including current portion............ 1,983 810 260 86 -- 16,588 16,588
Mandatorily Redeemable Preferred Stock..... -- -- -- -- -- 35,607 29,178
Shareholders' equity (deficit)............. (29,310) (23,633) (23,011) (25,387) 4,801 (18,321) (12,771)

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

(1) The Alltel and SDK Acquisitions were accounted for using the purchase method
of accounting and accordingly the statement of operations data of the
Company for 1997 and 1998 reflect the results of operations from these
businesses from the respective acquisition dates.
(2) Includes a write-off of $1.5 million related to licensed technology acquired
from Partners that was not technologically feasible at the time of the
transaction. See Note 4 of Notes to the Company's Consolidated Financial
Statements.
(3) In connection with the Alltel and SDK Acquisitions, the Company wrote off
in-process research and development of $92.2 million and $7.0 million,
respectively, reflecting the appraised values of certain in-process research
and development acquired in these acquisitions in 1997. See Note 6 of Notes
to the Company's Consolidated Financial Statements
(4) In connection with the MSA Buyout, the Company recorded a charge of $7.2
million in 1998. See "Certain Transactions -- The Alltel Acquisition and
Renegotiation" and Note 13 of Notes to the Company's Consolidated Financial
Statements.
(5) The Company has not recorded any benefit for income taxes because management
believes, based on the evidence available at December 31, 1997 and March 31,
1998, it is more likely than not that the Company's net deferred tax assets
will not be realized. Accordingly, the Company has recorded a valuation
allowance against its total net deferred tax assets.
(6) Represents the charge related to the January 1997 issuance of Series F
Convertible Preferred Stock in exchange for the cancellation of Series A
Convertible Preferred Stock.
(7) See Note 2 of Notes to the Company's Consolidated Financial Statements.
(8) Represents earnings before interest expense, income tax expense,
depreciation and amortization and nonrecurring charges. EBITDA is not a
measurement in accordance with GAAP and should not be considered an
alternative to, or more meaningful than, income from operations, net income
or cash flows as defined by GAAP or as a measure of the Company's
profitability or liquidity. All registrants do not calculate EBITDA in the
same manner and accordingly, EBITDA may not be comparable with other
registrants. The Company has included information concerning EBITDA herein
because management believes EBITDA provides useful information.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company was formed in December 1995, but had no significant operations
until 1997. As a result, the following discussion as it relates to 1995 and 1996
reflects the operations of the Company's predecessor, Alltel, a company acquired
by Eclipsys in January 1997. The discussion as it relates to 1997 reflects the
operations of the Company for 1997, which included only 11 months of Alltel
operations. In addition to the Alltel Acquisition, the Company completed the SDK
Acquisition in June 1997 and the Emtek Acquisition in January 1998. As a result,
the following discussion regarding period to period comparisons may not be
indicative of future results.

OVERVIEW

Founded in 1995, the Company has grown to its current position primarily
through a series of strategic acquisitions completed since January 1997. In May
1996, the Company entered into the Partners License for the development,
commercialization, distribution and support of certain intellectual property
relating to the BICS clinical information systems software developed by
Partners. In connection with this license, the Company issued to Partners
988,290 shares of Common Stock.

In January 1997, the Company purchased Alltel from AIS for a total purchase
price of $201.5 million, after giving effect to certain purchase price
adjustments. The Alltel Acquisition was paid for with cash, the issuance of
Series C Redeemable Preferred Stock and Series D Convertible Preferred Stock and
the assumption of certain liabilities. The acquisition was accounted for as a
purchase, and the Company recorded total intangible assets of $154.3 million,
consisting of $92.2 million of acquired in-process research and development,
$42.3 million of acquired technology, $10.8 million to reflect the value of
ongoing customer relationships and $9.0 million of goodwill. The Company wrote
off the acquired in-process research and development as of the date of the
acquisition, and is amortizing the acquired technology over three years on an
accelerated basis. The value of the ongoing customer relationships and the
goodwill are being amortized over five years and twelve years, respectively.

In June 1997, the Company acquired SDK for a total purchase price of $16.5
million. The SDK Acquisition was paid for with cash as well as the issuance of
the SDK Notes and Common Stock. The acquisition was accounted for as a purchase,
and the Company recorded total intangible assets of $14.8 million, consisting of
$7.0 million of acquired in-process research and development, $3.2 million of
acquired technology and $4.6 million of goodwill. The Company wrote off the
acquired in-process research and development as of the date of the acquisition,
and is amortizing both the acquired technology and the goodwill over five years.

In January 1998, the Company acquired Emtek from Motorola for a total
purchase price of $11.7 million, net of a $9.6 million receivable from Motorola.
The Emtek Acquisition was paid for with the issuance of Common Stock and the
assumption of certain liabilities. The acquisition was accounted for as a
purchase, and the Company recorded total intangible assets of $4.1 million,
consisting of acquired technology which is being amortized over five years.

The write-off of acquired in-process research and development of $92.2
million and $7.0 million associated with the Alltel Acquisition and the SDK
Acquisition, respectively, together with the amortization of acquisition-related
intangible assets of $25.3 million, accounted for $124.5 million of the
Company's $131.1 million net loss in 1997. See "-- Acquired In-Process Research
and Development."

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REVENUES

Revenues are derived from sales of systems and services, which include the
licensing of software, software and hardware maintenance, remote processing,
outsourcing, implementation, training and consulting, and from the sale of
computer hardware. The Company's products and services are generally sold to
customers pursuant to contracts which range in duration from five to seven
years.

For contracts in which the Company is required to make significant
production, modification or customization changes, revenues from systems and
services are recognized using the percentage-of-completion method over the
implementation period of the contracts. Other systems and services revenues are
generally recognized on a straight-line basis over the term of licensing and
maintenance agreements. Remote processing and outsourcing services are marketed
under long-term agreements and revenues are recognized monthly as the work is
performed. Revenues related to other support services, such as training,
consulting, and implementation, are recognized when the services are performed.
Revenues from the sale of hardware are recognized upon shipment of the product
to the customer.

The Company's revenues can vary from quarter to quarter due to a number of
factors. See "Risk Factors -- Potential Fluctuations in Quarterly Performance."

COST OF REVENUES

The principal costs of systems and services revenues are salaries, benefits
and related overhead costs for implementation, remote processing, outsourcing
and field operations personnel. As the Company implements its growth strategy,
it is expected that additional operating personnel will be required, which would
lead to an increase in cost of revenues on an absolute basis. Other significant
costs of systems and services revenues are the amortization of acquired
technology and capitalized software development costs. Acquired technology is
amortized over three to five years based upon the estimated economic life of the
underlying asset, and capitalized software development costs are amortized over
three years on a straight-line basis commencing upon general release of the
related product. The Company recorded amortization expenses related to acquired
technology from the Alltel and SDK Acquisitions of $19.7 million in 1997, and
expects to record additional acquired technology amortization from the
Acquisitions of approximately $14.8 million, $10.2 million and $2.1 million in
1998, 1999 and 2000, respectively. No capitalized software development costs
were amortized in 1997.

Cost of revenues related to hardware sales include only the Company's cost
to acquire the hardware from the manufacturer.

MARKETING AND SALES

Marketing and sales expenses consist primarily of salaries, benefits,
commissions and related overhead costs. Other costs include expenditures for
marketing programs, public relations, trade shows, advertising and related
communications. As the Company continues to implement its growth strategy,
marketing and sales expenses are expected to continue to increase on an absolute
basis.

RESEARCH AND DEVELOPMENT

Research and development expenses consist primarily of salaries, benefits
and related overhead associated with the design, development and testing of new
products by the Company. The Company capitalizes internal software development
costs subsequent to attaining technological feasibility. Such costs are
amortized as an element of cost of revenues annually over three to five years
either on a straight line basis or, if greater, based on the ratio that current
revenues bear to total anticipated revenues for the applicable product. The
Company expects to continue to increase research and development spending on an
absolute basis as it migrates its products to the SOLA architecture.

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GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of salaries, benefits
and related overhead costs for administration, executive, finance, legal, human
resources, purchasing and internal systems personnel, as well as accounting and
legal fees and expenses. As the Company implements its business plan, general
and administrative expenses are expected to continue to increase on an absolute
basis.

DEPRECIATION AND AMORTIZATION

The Company depreciates the costs of its tangible capital assets on a
straight-line basis over the estimated economic life of the asset, which is
generally not longer than five years. Acquisition-related intangible assets,
which include the value of ongoing customer relationships and goodwill, are
amortized based upon the estimated economic life of the asset at the time of the
acquisition, and will therefore vary among acquisitions. The Company recorded
amortization expenses for acquisition-related intangible assets of $5.7 million
in 1997.

TAXES

As of December 31, 1997, the Company had operating loss carryforwards for
federal income tax purposes of $13.8 million. The carryforwards expire in
varying amounts through 2012 and are subject to certain restrictions. Based on
evidence then available, the Company did not record any benefit for income taxes
at December 31, 1997, because management believed that the Company would not
realize its net deferred tax assets. Accordingly, the Company has recorded a
valuation allowance against its total net deferred tax assets.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31,
1997

Total revenues increased by $11.7 million, or 66.0%, from $17.6 million for
the first three months of 1997 to $29.3 million for the first three months of
1998. This increase was caused primarily by the inclusion in 1998 of three full
months of the operations of Alltel, as compared to only two months in 1997, as
well as a $1.7 million increase in hardware revenues. Also contributing to the
increase was the inclusion in 1998 of three months of operations of SDK and two
months of operations of Emtek, which were not included in the results of
operations in the first three months of 1997. Adding Alltel results for the 23
days from January 1, 1997 to the closing of the Alltel Acquisition, total
revenues for the first three months of 1997 would have been $23.8 million.

Total cost of revenues increased by $1.5 million, or 8.4%, from $17.4
million, or 98.4% of total revenues, in the first three months of 1997 to $18.8
million, or 64.2% of total revenues, in the first three months of 1998. The
increase in cost was due primarily to the increase in business activity, offset
in part by a reduction in certain expenses related to integrating the
Acquisitions. The reduction in total cost of revenues as a percentage of total
revenues was due to the relatively small increase in costs compared to the
increase in revenues. Adding Alltel results for the period prior to the Alltel
Acquisition, cost of revenues for the first three months of 1997 would have been
$21.8 million.

Marketing and sales expenses increased by $1.1 million, or 34.6%, from $3.1
million, or 17.7% of total revenues, in the first three months of 1997 to $4.2
million, or 14.4% of total revenues, in the first three months of 1998. The
increase was due primarily to the addition of marketing and direct sales
personnel following the Acquisitions and the regional realignment of the
Company's sales operations. Adding Alltel results for the period prior to the
Alltel Acquisition, marketing and sales expenses would have been $3.8 million in
the first three months of 1997.

Total expenditures for research and development, including both capitalized
and non-capitalized portions, increased by $2.3 million, or 49.2%, from $4.7
million, or 26.6% of total revenues, in the first three months of 1997 to $7.0
million, or 23.9% of total revenues, in the first three months of 1998. The
increase was due primarily to the inclusion in 1998 of three full months of the
operations of Alltel and SDK as well as two months of Emtek operations. No
research and development expenditures were capitalized in the first three months
of 1997 and $896,000 were capitalized in the first three months of 1998. The
capitalization of software

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development costs in 1998 was due primarily to product development activities
related to technology acquired in the Alltel and SDK Acquisitions. As a result
of this activity, research and development expense increased $1.4 million, or
30.1%, from $4.7 million in the first three months of 1997 to $6.1 million in
the first three months of 1998. Adding Alltel results for the period prior to
the Alltel Acquisition, research and development expenses would have been $5.5
million in the first three months of 1997.

General and administrative expenses increased by $832,000, or 106.1%, from
$784,000, or 4.4% of total revenues, in the first three months of 1997 to $1.6
million, or 5.5% of total revenues, in the first three months of 1998. The
increase was due primarily to the addition of administrative and finance
personnel following the Acquisitions. Adding Alltel results for the period prior
to the Alltel Acquisition, general and administrative expense would have been
$1.4 million in the first three months of 1997.

Depreciation and amortization expense increased by $381,000, or 16.7%, from
$2.3 million, or 13.0% of total revenues, in the first three months of 1997 to
$2.7 million, or 9.1% of total revenues, in the first three months of 1998. The
increase was due primarily to the amortization of ongoing customer relationships
and goodwill related to the Alltel and SDK Acquisitions. Partially offsetting
this increase was a reduction in goodwill amortization as a result of the Alltel
Renegotiation. Adding Alltel results for the period prior to the Alltel
Acquisition, depreciation and amortization expense would have been $2.8 million
in the first three months of 1997.

The Company recorded a $7.2 million charge in the first three months of
1998 related to the MSA Buyout. In the first three months of 1997, the Company
recorded a charge of $92.2 million related to the write-off of in-process
research and development attributable to the Alltel Acquisition.

As a result of the foregoing, net loss decreased from $102.9 million in the
first three months of 1997 to $11.6 million in the first three months of 1998.

1997 COMPARED TO 1996

In the period-to-period comparison below, the 1997 results reflect the
operations of Eclipsys and the 1996 results reflect the operations of its
predecessor, Alltel.

Following the Alltel and SDK Acquisitions in 1997, the Company's efforts
and resources were focused on integrating the acquisitions into the Company's
operations. Particular emphasis was placed on retaining customers and
integrating the acquired products into the Company's systems and services
offerings in order to position the Company for future business opportunities.
These efforts included refocusing the Company's research and development
operations, realigning the sales departments and reducing general and
administrative overhead. As a result, the Company did not actively seek to
exploit new business opportunities during 1997. The Company believes that the
investment of time and resources in improving the internal structure of the
Company and the integration of its acquisitions have positioned the Company to
capitalize on business opportunities in the future.

Total revenues decreased by $14.7 million, or 13.5%, from $108.8 million in
1996 to $94.1 million in 1997. This decrease was caused primarily by the
inclusion in 1997 of only eleven full months of the operations of Alltel, as
well as a reduction in revenues from hardware sales of $5.2 million, offset in
part by the inclusion of $3.5 million in revenues attributable to SDK. In
addition, in accounting for the Alltel Acquisition, the Company reduced deferred
revenue by $7.3 million to reflect the estimated fair value of certain
contractual obligations. This accounting adjustment had the effect of reducing
revenues by $4.5 million in 1997 compared to 1996 revenues. The Company does not
expect the deferred revenue adjustment to materially impact future periods.
Adding Alltel results for the 23 days from January 1, 1997 to the closing of the
Alltel Acquisition, 1997 total revenues would have been $100.3 million.

Total cost of revenues increased by $6.8 million, or 9.5%, from $71.5
million, or 65.7% of total revenues, in 1996 to $80.0 million, or 85.1% of total
revenues, in 1997. The increase was due primarily to a $19.7 million increase in
amortization of acquired technology and $2.2 million of amortization of the
value of the MSA. This increase was offset, in part, by a $7.2 million decrease
in amortization of capitalized software costs, as no software costs were
amortized in 1997. Further offsetting the increase were the timing of the Alltel
Acquisition

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and the reduction in hardware sales. Adding Alltel results for the period prior
to the Alltel Acquisition, total cost of revenues in 1997 would have been $84.4
million.

Marketing and sales expenses increased by $2.6 million, or 23.2%, from
$11.1 million, or 10.2% of total revenues, in 1996 to $13.7 million, or 14.5% of
total revenues, in 1997. The increase was due primarily to the addition of
marketing and direct sales personnel as part of the Company's investment in its
marketing and sales operations following the Alltel and SDK Acquisitions. This
increase was offset in part by the timing of the Alltel Acquisition. Adding
Alltel results for the period prior to the Alltel Acquisition, 1997 marketing
and sales expenses would have been $14.3 million.

Total expenditures for research and development, including both capitalized
and non-capitalized portions, decreased by $5.1 million, or 22.9%, from $22.4
million, or 20.6% of total revenues in 1996 to $17.3 million, or 18.4% of total
revenues, in 1997. These amounts exclude amortization of previously capitalized
expenditures, which are recorded as cost of revenues. The decrease was due
primarily to the refocusing of the Company's research and development
organization, and, to a lesser extent, the timing of the Alltel Acquisition. The
portion of research and development expenditures that were capitalized decreased
by $10.6 million, from $12.2 million in 1996 to $1.6 million in 1997. The
reduction in capitalized software development costs was due primarily to the
Company's emphasis on enhancing existing technology acquired in the Alltel and
SDK Acquisitions, the costs of which were expensed as incurred. As a result of
this emphasis, research and development expense increased $5.4 million, or
53.0%, from $10.3 million in 1996 to $15.7 million in 1997. Adding Alltel
results for the period prior to the Alltel Acquisition, 1997 research and
development expenses would have been $16.5 million.

General and administrative expenses decreased by $1.4 million, or 20.1%,
from $7.1 million, or 6.5% of total revenues, in 1996 to $5.7 million, or 6.0%
of total revenues, in 1997. The decrease was due primarily to the timing of the
Alltel Acquisition, as well as savings generated by the rationalization of the
Company's administrative, financial and legal organizations. Adding Alltel
results for the period prior to the Alltel Acquisition, 1997 general and
administrative expense would have been $6.3 million.

Depreciation and amortization expense increased by $1.6 million, or 19.4%,
from $8.1 million, or 7.5% of total revenues, in 1996 to $9.7 million, or 10.5%
of total revenues, in 1997. The increase was due primarily to the amortization
of the value of ongoing customer relationships and goodwill related to the
Alltel and SDK Acquisitions. Adding Alltel results for the period prior to the
Alltel Acquisition, 1997 depreciation and amortization expense would have been
$10.3 million.

Write-offs of acquired in-process research and development of $99.2 million
were recorded in 1997, of which $92.2 million was attributable to the Alltel
Acquisition and $7.0 million was attributable to the SDK Acquisition. There were
no write-offs recorded in 1996.

As a result of the foregoing factors, net loss increased from $2.2 million
in 1996 to $131.1 million in 1997.

1996 COMPARED TO 1995

The period-to-period comparison below reflects the operations of Eclipsys'
predecessor, Alltel, for 1996 and 1995.

Total revenues increased by $8.7 million, or 8.7%, from $100.1 million in
1995 to $108.8 million in 1996. This increase was caused primarily by increases
in revenues related to outsourcing contracts.

Total cost of revenues increased by $10.2 million, or 16.5%, from $61.3
million, or 61.3% of total revenues, in 1995 to $71.5 million, or 65.7% of total
revenues, in 1996. The increase was due primarily to increases in staff related
to outsourcing contracts.

Marketing and sales expenses remained constant at $11.1 million in both
periods, representing 11.1% of total revenues in 1995 and 10.2% of total
revenues in 1996.

Total expenditures for research and development, including both capitalized
and non-capitalized portions, increased by $1.0 million, or 4.7%, from $21.4
million, or 21.4% of total revenues, in 1995 to $22.4 million, or

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20.6% of total revenues, in 1996. These amounts exclude amortization of
previously capitalized expenditures, which are recorded as cost of revenues. The
increase was due primarily to wage increases for research and development
personnel. The portion of research and development expenditures that were
capitalized decreased by $735,000, from $12.9 million in 1995 to $12.2 million
in 1996.

General and administrative expenses decreased by $1.1 million, or 13.1%,
from $8.2 million, or 8.2% of total revenues, in 1995 to $7.1 million, or 6.5%
of total revenues, in 1996. The decrease was due primarily to a $1.0 million
decrease in legal fees.

Depreciation and amortization expenses increased by $1.4 million, or 20.8%,
from $6.7 million, or 6.7% of total revenues, in 1995 to $8.1 million, or 7.5%
of total revenues, in 1996. The increase was due primarily to depreciation of
computer equipment acquired for research and development purposes.

As a result of the foregoing factors, net income was $606,000 in 1995 and
net loss was $2.2 million in 1996.

ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT

OVERVIEW

In connection with the Alltel and SDK Acquisitions, the Company wrote off
in-process research and development totaling $92.2 million and $7.0 million,
respectively. These amounts were expensed as non-recurring charges on the
respective acquisition dates. These write-offs were necessary because the
acquired technology had not yet reached technological feasibility and had no
future alternative uses. The Company is using the acquired in-process research
and development to create new clinical management, access management, patient
financial management and data warehousing products which will become part of the
Sunrise product suite over the next several years. The Company anticipates that
certain products using the acquired in-process technology will be generally
released during 1998, with additional product releases in subsequent periods
through 2001. The Company expects that the acquired in-process research and
development will be successfully developed, but there can be no assurance that
commercial viability of these products will be achieved.

The nature of the efforts required to develop the purchased in-process
technology into commercially viable products principally relate to the
completion of all planning, designing, prototyping, verification and testing
activities that are necessary to establish that the product can be produced to
meet its design specifications, including functions, features and technical
performance requirements.

The value of the purchased in-process technology was determined by
estimating the projected net cash flows related to such products, including
costs to complete the development of the technology and the future revenues to
be earned upon commercialization of the products. These cash flows were
discounted back to their net present value. The resulting projected net cash
flows from such projects were based on management's estimates of revenues and
operating profits related to such projects. These estimates were based on
several assumptions, including those summarized below for each of the respective
acquisitions.

If these projects to develop commercial products based on the acquired
in-process technology are not successfully completed, the sales and
profitability of the Company may be adversely affected in future periods.
Additionally, the value of other intangible assets may become impaired.

ALLTEL

The primary purchased in-process technology acquired in the Alltel
Acquisition was the client-server based core application modules of the TDS 7000
product. This project represented an integrated clinical software product whose
functionality included order management, health information management,
physician applications, nursing applications, pharmacy, laboratory and radiology
applications and ancillary support. Additionally, the product included
functionality facilitating the gathering and analysis of data throughout a
healthcare organization, a data integration engine and various other
functionality.

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Revenue attributable to the in-process technology was assumed to increase
over the twelve-year projection period at annual rates ranging from 234% to 5%,
resulting in annual revenues of approximately $27 million to $640 million. Such
projections were based on assumed penetration of the existing customer base, new
customer transactions, historical retention rates and experiences of prior
product releases. The projections reflect accelerated revenue growth in the
first five years (1997 to 2001) as the products derived from the in-process
technology are generally released. In addition, the projections were based on
annual revenue to be derived from long-term contractual arrangements ranging
from seven to ten years. New customer contracts for products developed from the
in-process technology were assumed to peak in 2001, with rapidly declining sales
volume in the years 2002 to 2003 as other new products are expected to enter the
market. The projections assumed no new customer contracts after 2003. Projected
revenue in years after 2003 was determined using a 5% annual growth rate, which
reflects contractual increases.

Operating profit was projected to grow over the projection period at rates
ranging from 1238% to 5%, resulting in incremental annual operating profit
(loss) of approximately $(5) million to $111 million. The operating profit
projections during the years 1997 to 2001 assumed a growth rate slightly higher
than the revenue projections. The higher growth rate is attributable to the
increase in revenues discussed above, together with research and development
costs expected to remain constant at approximately $15 million annually. The
operating profit projections include a 5% annual growth rate for the years after
2003 consistent with the revenue projections.

To date, revenues and operating profit attributable to in-process
technology have been adversely impacted by the deferral of one outsourcing
contract that had been approved but not finalized at the time the projections
were completed. Although it was successful in contracting outsourcing business
in 1997, the Company decided in late March 1997 to focus its efforts on
integrating the products acquired in the Acquisitions and lower its sales
efforts in the outsourcing arena. In late 1997, the Company reorganized the
outsourcing operations and began to refocus on selling such services in the
first quarter of 1998. Revenue attributable to the deferred contract is expected
to be realized in 1999. Management continues to believe the projections used
reasonably estimate the future benefits attributable to the in-process
technology. However, no assurance can be given that deviations from these
projections will not occur.

The projected net cash flows were discounted to their present value using
the weighted average cost of capital (the "WACC"). The WACC calculation produces
the average required rate of return of an investment in an operating enterprise,
based on required rates of return from investments in various areas of the
enterprise. The WACC used in the projections was 21%. This rate was determined
by applying the capital asset pricing model. This method yielded an estimated
average WACC of approximately 16.5%. A risk premium was added to reflect the
business risks associated with the stage of development of the Company, as well
as the technology risk associated with the in-process software, resulting in a
WACC of 21%. In addition, the value of customer relationships was calculated
using a discount rate of 21% and a return to net tangible assets was estimated
using a rate of return of 11.25%. The value of the goodwill was calculated as
the remaining intangible value not otherwise allocated to identifiable
intangible assets (resulting in an implied discount rate on the goodwill of
approximately 28%).

The Company used a 21% discount rate for valuing existing technology
because it faces substantially the same risks as the business as a whole.
Accordingly, a rate equal to the WACC of 21% was used. The Company used a 28%
discount rate for valuing in-process technology. The spread over the existing
technology discount rate reflects the inherently greater risk of the research
and development efforts. The spread reflected the nature of the development
efforts relative to the existing base of technology and the potential market for
the in-process technology once the products were released.

The Company estimates that the costs to develop the purchased in-process
technology acquired in the Alltel Acquisition into commercially viable products
will be approximately $75 million in the aggregate through 2001 ($15 million per
year from 1997 to 2001).

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SDK

The purchased in-process technology acquired in the SDK Acquisition
comprised three major enterprise-wide modules in the areas of physician billing,
home health care billing and long-term care billing; a graphical user interface;
a corporate master patient index; and a standard query language module.

Revenue attributable to the in-process technology was assumed to increase
in the first three years of the ten-year projection period at annual rates
ranging from 497% to 83% decreasing over the remaining years at annual rates
ranging from 73% to 14% as other products are released in the marketplace.
Projected annual revenue ranged from approximately $5 million to $56 million
over the term of the projections. These projections were based on assumed
penetration of the existing customer base, synergies as a result of the SDK
Acquisition, new customer transactions and historical retention rates. Projected
revenues from the in-process technology were assumed to peak in 2000 and decline
from 2000 to 2007 as other new products are expected to enter the market.

Operating profit was projected to grow over the projection period at annual
rates ranging from 1497% to 94% during the first three years, decreasing during
the remaining years of the projection period similar to the revenue growth
projections described above. Projected annual operating profit ranged from
approximately $250,000 to $8 million over the term of the projections.

To date, revenues and operating profit attributable to in-process
technology have been consistent with the projections. However, no assurance can
be given that deviations from these projections will not occur in the future.

The WACC used in the analysis was 20%. This rate was determined by applying
the capital asset pricing model and a review of venture capital rates of return
for companies in a similar life cycle stage.

The Company used a 20% discount rate for valuing existing and in-process
technology because both technologies face substantially the same risks as the
business as a whole. Accordingly, a rate equal to the WACC of 20% was used.

The Company estimates that the costs to develop the in-process technology
acquired in the SDK Acquisition will be approximately $1.7 million in the
aggregate through the year 2000 ($500,000 in 1998, $600,000 in 1999 and $600,000
in 2000).

LIQUIDITY AND CAPITAL RESOURCES

For purposes of the following discussion, cash flow data for 1997 and the
first three months of 1998 relate to the Company and cash flow data for 1995 and
1996 relate to Alltel.

The Company was formed in December 1995 and has grown primarily through a
series of acquisitions completed since January 1997. The Company's principal
sources of liquidity have been equity capital contributions, borrowings from
commercial lenders and cash provided by operating activities. The funds
generated by these sources have been applied primarily to acquisitions and
research and development activities.

Cash provided by operating activities totaled $857,000 and $10.2 million in
the three months ended March 31, 1997 and 1998, respectively. The increase in
cash provided by operating activities was the result of increased business
activity and the reduction in certain expenses related to integrating the
Acquisitions. Cash provided by financing activities totaled $113.8 million and
$9.4 million in the three months ended March 31, 1997 and 1998, respectively.
The 1997 period included the issuance of $103.8 million of Preferred Stock in
connection with the Alltel Acquisition. Cash used by investing activities
totaled $107.4 million and $18.5 million in the three months ended March 31,
1997 and 1998, respectively. The 1997 period included $104.8 million applied to
the Alltel Acquisition. As of March 31, 1998, the Company had $5.9 million of
cash and cash equivalents.

Cash provided by operating activities totaled $15.9 million, $15.9 million
and $1.1 million in 1995, 1996 and 1997, respectively. The decrease in cash
provided by operating activities from 1996 to 1997 was primarily

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the result of a greater portion of research and development being expensed as
incurred, rather than being capitalized. Cash provided by financing activities
totaled $5.5 million, $11.9 million and $112.8 million in 1995, 1996 and 1997,
respectively. The increase from 1996 to 1997 was primarily the result of $103.8
million of proceeds from the issuance of Preferred Stock concurrently with the
Alltel Acquisition. Cash used by investing activities totaled $20.5 million,
$28.2 million and $113.7 million in 1995, 1996 and 1997, respectively. The
increase in cash used by investing activities from 1996 to 1997 was the result
of $109.0 million applied to the Alltel and SDK Acquisitions, offset in part by
a $10.6 million reduction in capitalization of software development costs.

The Company invested $7.7 million, $9.2 million and $3.1 million in
computer equipment, leasehold improvements and other capital assets in 1995,
1996 and 1997, respectively. The Company also incurred $21.4 million, $22.4
million and $17.3 million in research and development costs in 1995, 1996 and
1997. The Company expects to invest approximately $6 million and $55 million in
capital expenses and research and development, respectively, through the end of
1999.

In January 1997, the Company entered into a $30 million credit facility,
consisting of a $10 million Term Loan and a $20 million Revolver. The Term Loan
and the Revolver are secured by substantially all of the Company's assets, and
bear interest at a variable rate. See Note 7 of Notes to the Company's
Consolidated Financial Statements. In January 1998, the Term Loan was repaid
with the proceeds of the 1998 Preferred Stock Issuance. In March 1998, pursuant
to the MSA Buyout, the Company paid AIS $14.0 million. Of this payment, $9.0
million was funded through borrowings under the Revolver. In April 1998, the
Company borrowed an additional $5.6 million under the Revolver to fund the
Simione Investment. As of August 6, 1998, the effective interest rate for the
Revolver was 6.7% and the amount available for borrowing thereunder was $31.5
million. The Company will repay certain amounts outstanding under the Revolver
using a portion of the proceeds from the Offering. See "Use of Proceeds." In May
1998, the Revolver was amended to increase the borrowing limit to $50.0 million,
under substantially similar terms and conditions as contained in the original
credit facility.

The Company also had an outstanding balance of $7.6 million on the SDK
Notes at March 31, 1998. The SDK Notes, which bear interest at 9.5%, are payable
to the former shareholders of SDK who were issued the SDK Notes as partial
payment for the SDK Acquisition. On April 1, 1998, the Company made a scheduled
principal payment of $3.8 million on the SDK Notes, and the Company will repay
the remaining $3.8 million principal balance, which is due on April 1, 1999,
with a portion of the proceeds from this Offering.

In March 1998, pursuant to the Alltel Renegotiation, AIS returned to the
Company 11,000 shares of Redeemable Preferred Stock for cancellation in January
1998. As part of this transaction, AIS agreed that no dividends will accrue on
the remaining 4,500 shares of Redeemable Preferred Stock held by it until July
1, 1998. As of March 31, 1998, the Company had Redeemable Preferred Stock with a
face value of $34.5 million and an accreted value of $29.2 million, including
accrued dividends of $3.1 million. The Company will redeem the full $34.5
million face value of the outstanding Redeemable Preferred Stock and all accrued
dividends with a portion of the proceeds from the Offering. A charge to
additional paid-in capital will be recorded in the period in which the
redemption occurs equal to the difference between the redemption price of the
Redeemable Preferred Stock and its carrying amount ($8.4 million at March 31,
1998). In addition, this charge will result in an increase in net loss available
to common stockholders in the statement of operations for the period.

The Company believes that the proceeds of this Offering, together with its
existing cash balances, funds generated by operations and borrowings available
under the Revolver, as it may be amended, will be sufficient to finance the
Company's operations for at least the next twelve months. However, to the extent
acquisitions are completed or anticipated capital and operating requirements
change, the Company may be required to raise additional financing. There can be
no assurance that, if needed, such financing would be available, or would be
available on terms satisfactory to the Company.

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YEAR 2000 ISSUES

The Company believes that all of its internal management information
systems are currently Year 2000 compliant and, accordingly, does not anticipate
any significant expenditures to remediate or replace existing internal-use
systems. Although all of the products currently offered by the Company are Year
2000 compliant, some of the products previously sold by Alltel and Emtek and
installed in the Company's customer base are not Year 2000 compliant. The
Company has developed and tested solutions for its non-compliant installed
products. The Company currently estimates that the total cost of bringing these
installed products into Year 2000 compliance, in those cases in which the
Company is required to do so at its own expense, will be approximately $1.7
million, all of which is expected to be incurred by mid-1999. In addition,
because the Company's products are often interfaced with a customer's existing
third-party applications, the Company's products may experience difficulties
interfacing with third-party non-compliant applications. Based on currently
available information, the Company does not expect the cost of compliance
related to interactions with non-compliant third-party systems to be material.
However, any unexpected difficulties in implementing Year 2000 solutions for the
installed Alltel or Emtek products or difficulties in interfacing with
third-party products could have a material adverse effect on the Company's
business, financial condition and results of operations.

BACKLOG

Backlog consists of revenues the Company expects to recognize over the
following twelve months under existing contracts. The revenues to be recognized
may relate to a combination of one-time fees for software licensing and
implementation, hardware sales and installations and professional services, or
annual or monthly fees for licenses, maintenance, and outsourcing or remote
processing services. As of December 31, 1997, the Company had a backlog of
approximately $108 million. See "Risk Factors -- Potential Fluctuations in
Quarterly Performance."

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued FAS 130,
"Reporting for Comprehensive Income" and FAS 131, "Disclosure about Segments of
an Enterprise and Related Information." In October 1997, the American Institute
of Certified Public Accountants issued Statement of Position 97-2, "Software
Revenue Recognition." All three statements are effective for fiscal years
beginning after December 15, 1997, and are not expected to have a material
impact on the Company's results of operations or financial condition. Effective
January 1, 1998, the Company adopted Statement of Position 97-2 and implemented
FAS 130.

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BUSINESS

OVERVIEW

Eclipsys is a healthcare information technology company delivering
solutions that enable healthcare providers to achieve improved clinical,
financial and administrative outcomes. The Company offers an integrated suite of
healthcare products in four critical areas -- clinical management, access
management, patient financial management and enterprise data warehouse and
analysis. These products can be purchased in combination to provide an
enterprise-wide solution or individually to address specific needs. The
Company's products have been designed specifically to deliver a measurable
impact on outcomes, enabling the Company's customers to quantify clinical
benefits and return on investment in a precise and timely manner. The Company's
products can be integrated with a customer's existing information systems, which
the Company believes reduces overall cost of ownership and increases the
attractiveness of its products. Eclipsys also provides outsourcing, remote
processing and networking services to assist customers in meeting their
healthcare information technology requirements. The Company was formed in
December 1995 and has grown primarily through its three acquisitions, all
completed since January 1997. These acquisitions, together with internally
generated growth, have resulted in revenues of $126.5 million in 1997 on the pro
forma basis described herein.

COMPETITIVE STRENGTHS

- Comprehensive Product Offering. Through both acquisitions and internal
development, the Company has assembled a comprehensive suite of products
that perform core functions in the four areas Eclipsys believes are most
critical to its customers -- clinical management, access management,
patient financial management and enterprise data warehouse and analysis.
The Company's individual products can be integrated to provide a
comprehensive healthcare information technology solution. The Company's
product strategy has been to acquire or develop industry-leading products
in each core category and then integrate them to provide a comprehensive
healthcare information technology solution.

- Physician-Oriented Products. The Company's clinical products are
designed to reflect and support the way physicians work, and include
features such as alerts, reminders, just-in-time clinical decision
support, sub-second response times, an intuitive graphical user
interface, continuous event monitoring and a customizable rules and
protocol engine. This focus on physicians is important because the
Company believes that they are key decision makers in the trend toward
the use of healthcare information technology solutions to improve work
processes and outcomes across the continuum of healthcare delivery.

- Leading Technology. The Company has recently announced the development
of, and has commenced migrating its products to, its new SOLA
architecture. SOLA is a browser-enabled, multi-tiered, database-neutral
architecture that supports multiple platforms and can be used across a
broad range of computing environments from client-server systems to
legacy mainframes. SOLA is designed to facilitate the integration of the
Company's products with its customers' existing systems, as well as with
future products developed or acquired by the Company.

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- Strategic Relationships. One of the Company's important strategic
relationships is with Partners, including two of its hospital
subsidiaries, Brigham and MGH. This relationship provides intensive
physician-driven research and development for new and existing products,
testing and development support. In addition, Brigham and MGH, academic
medical centers affiliated with Harvard Medical School, provide potential
forums for training future users and customers. The Company also has
relationships with other academic medical centers, which also provide
testing and development support.

- Proven Management Team with Successful Track Record. The Company's
senior management team averages over 22 years in the healthcare and
information technology industries and includes four former chief
executive officers. Harvey J. Wilson, Chairman of the Board, President
and Chief Executive Officer of the Company, was a co-founder of SMS. The
Company believes that the range and depth of its senior management team
position it to address the evolving requirements of its customers and to
manage the growth required to meet its strategic goals. Upon completion
of the Offering, the senior management team will beneficially own 16.9%
of the outstanding Common Stock. See "Principal Stockholders."

- Well-positioned Customer Base. Eclipsys' customers include large
hospitals, integrated healthcare delivery networks and academic medical
centers. The Company believes that these entities are generally the first
to adopt new technology and are the drivers of industry consolidation.
Management believes that the Company's commitment to quality, innovation,
rapid product implementation and ongoing customer support has enabled it
to build and maintain strong and stable customer relationships and
positions it to capitalize on the opportunities for growth within its
existing customer base. At December 31, 1997, the Company had a backlog
of approximately $108 million. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Backlog."

INDUSTRY

In recent years, the healthcare industry has undergone, and is continuing
to undergo, radical and rapid change. The increasing cost of providing
healthcare has led the government sector, followed by the private sector, to
develop new payment mechanisms that encourage healthcare providers to contain
costs. This has caused the provider reimbursement environment to move away from
the indemnity model, characterized by fee-for-service arrangements and
traditional indemnity insurance, toward the managed-care model, in which
providers are aligned within networks and healthcare delivery must follow
plan-established rules to qualify for reimbursement. As a result, the emphasis
of healthcare providers has shifted from providing care regardless of cost to
providing high-quality care in the most cost-effective manner possible. Many
providers are realizing that the traditional method of cost
containment -- cutting expenses -- is not by itself enough to maintain their
competitiveness in the face of these pressures. Management believes that
providers must also improve the processes by which healthcare is provided,
including improving the quality of care, the efficiency with which it is
delivered and patient satisfaction. In particular, healthcare providers are
focusing on avoiding costly adverse clinical events.

The pressures to achieve successful clinical outcomes more efficiently
while managing costs more effectively has led to significant industry
consolidation, as healthcare providers seek to offer and control the full
continuum of healthcare. The result has been the development of large integrated
healthcare delivery networks. These are comprehensive vertical networks of
healthcare providers, typically organized around an anchor hospital, and include
physicians, outpatient facilities, laboratories, radiology facilities, home
healthcare providers and long-term and rehabilitative facilities. As these
networks grow larger and more dispersed, the challenge of effectively managing
and delivering information throughout the enterprise also increases.

Traditional healthcare information systems are limited in their ability to
support restructuring of healthcare delivery processes or the evolving
requirements of integrated healthcare delivery networks. Such systems have
generally been financially oriented, focusing primarily on the ability to
capture charges and generate bills. Many information technology vendors have
attempted to apply their existing financially oriented systems to meet the
demand for clinical solutions. However, because these systems were not

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originally developed to address clinical requirements, they often lack the basic
structure and functionality to support better overall management of costs, care
quality, outcome measurement and patient satisfaction across the healthcare
delivery continuum. Moreover, because these vendors historically developed and
marketed such systems primarily to financial managers, physicians, who influence
a significant portion of variable healthcare costs, were often excluded from the
design of healthcare information systems and from the system selection process.
In addition, traditional systems were typically designed to operate in a single
facility, which has made them less effective in today's widely dispersed
integrated healthcare delivery networks.

The growth of the managed care environment and the rise of integrated
healthcare delivery networks has created an opportunity for new healthcare
information technology products and services. Healthcare providers are
increasingly demanding integrated solutions that offer all of the core functions
required to manage the entire healthcare delivery process. These core functions
include clinical management, access management and patient financial management
functions. In addition, large and widely spread healthcare delivery networks
require data warehouse and analysis tools that permit them to effectively
extract and analyze data located throughout the enterprise, both to measure
clinical results and return on investment and to support process improvement.
These solutions must also allow providers to preserve their investment in
existing legacy applications and technologies, which often are significant and
vary from facility to facility. Finally, physician utilization is necessary for
a healthcare information technology solution to improve clinical outcomes. The
Company believes that physician utilization will increase as information
technology solutions provide greater functionality, including alerts, reminders,
sub-second response times, just-in-time clinical decision support, an intuitive
graphical user interface and the ability to log on to the system remotely.

Historically, the healthcare industry has invested relatively less in
technology compared to certain other industries. The Company believes that
healthcare providers are realizing that a relatively small investment in
healthcare information technology can significantly reduce variable costs. As a
result of industry trends, healthcare providers are making significant
investments in healthcare information technology solutions that capitalize on
evolving information management technologies. Industry analysts estimate that
healthcare organizations spent approximately $17 billion in 1997 for information
technology solutions, and anticipate that such expenditures will increase to
approximately $28 billion annually by 2002.

STRATEGY

- responsive to physicians' needs for alerts, reminders, sub-second
response times, continuous event monitoring and practice-specific
clinical information, rules, and protocols which provide just-in-
time clinical decision support;

- outcomes-oriented, so customers can easily determine clinical
benefits and return on investment; and

- user-friendly through an intuitive graphical user interface.

The Company believes that its healthcare information technology solutions
facilitate the clinical and business decision process, enabling its customers to
improve their overall work processes, clinical outcomes and return on
investment.

Further Penetrate Existing Customer Base. The Company believes there is a
significant opportunity to sell its integrated healthcare technology solutions
to its existing customers. The Company has at least one of its products
installed or being installed at over 350 facilities. Of these customers, only a
few currently have an

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enterprise-wide healthcare information system. The Company believes that it is
well-positioned to capitalize on the growth opportunity within its existing
customer base as a result of several factors:

- its broad, integrated product suite;

- the ability of its products to work with a customer's existing
information systems;

- the ability to document clinical benefits and return on investment;

- management's industry experience and relationships;

- alignment of its pricing and payment schedule with the value received
by its customers; and

- its ongoing customer support and service programs.

Employ a Targeted Marketing Approach. The Company's target market
primarily includes large hospitals, integrated healthcare delivery networks and
academic medical centers. The Company believes that these entities are the first
to adopt new technology and are the drivers of industry consolidation. As the
size and complexity of these customers grow, their need for integrated
information technology solutions increases. The Company has identified potential
new customers, including those who are currently relying on legacy systems that
lack the functions and features such customers require, and is targeting
decision makers within these entities. In particular, the Company believes that
physicians are becoming increasingly involved in the information technology
selection process as recent technological developments and the impact of managed
care have increased the utility of information systems to physicians. The
Company believes that its clinically oriented, physician-designed products
provide it with an advantage as it competes for business. The Company also
leverages the extensive industry experience of its senior management and sales
force, as well as its strategic relationships with leading institutions such as
Brigham and MGH, to pursue this opportunity.

Continue to Enhance and Develop New Solutions. The Company intends to
continue upgrading existing products and developing new solutions to meet the
evolving healthcare information needs of its customers. For example, the Company
is currently focusing on migrating its products to its new SOLA architecture,
which is designed to facilitate the integration of new and existing applications
as they are developed or acquired by the Company with legacy systems of its
customers. The Company has a team of more than 300 internal research,
development and technical support professionals dedicated to developing,
enhancing, supporting and commercializing new and enhanced healthcare
information technology products. The Company also has an exclusive right of
first offer to commercialize new information technologies developed in
connection with Partners. In addition, the Company's relationship with Partners
allows it to test new and existing products in a potential forum that provides
feedback from medical and administrative users, which the Company believes gives
it a competitive advantage in developing new products.

Pursue Selected Acquisitions and Investments. The Company intends to
continue pursuing selected acquisitions and investments that will enhance its
product line, customer base, technological capabilities and management team.
Historically, the Company has experienced significant growth through
acquisitions, and intends to continue to target acquisitions and investments
that will help it achieve its overall strategic goals. The Company also believes
that such transactions will provide it with the opportunity to leverage its
existing sales, marketing and development teams and offer the potential to
achieve operating synergies across the organization.

PRODUCTS

The Company's products perform the core information technology functions
required by integrated healthcare delivery networks and other healthcare
providers across the entire continuum of healthcare. These functions include (i)
clinical management, (ii) access management, (iii) patient financial management
and (iv) enterprise data warehouse and analysis.

- Clinical Management products assist the physician and other clinicians
in making clinical decisions throughout the care process. These
systems give physicians and other clinicians immediate access to
complete and up-to-date patient records at all stages, enable
physicians to

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enter on-line orders for specialized services, such as radiology or
laboratory testing and prescriptions, provide clinical rules to
facilitate clinical decisions and alert the physician to potential
adverse reactions.

- Access Management products provide access to patient information from
any point in the healthcare delivery system and coordinate the
gathering of additional patient data at each stage of the patient
encounter. Access management also coordinates the scheduling of
patient appointments throughout the treatment process.

- Patient Financial Management products coordinate compliance with
managed-care contract reimbursement terms, patient billing and
collection and third-party reimbursement. These products support the
growing trend toward the centralized business office, which manages
compliance with managed-care contracts across the entire healthcare
enterprise and for all stages of the healthcare continuum.

- Enterprise Data Warehouse and Analysis products facilitate the
extraction and analysis of all data collected throughout the
organization to support reporting, strategic planning and
decision-making functions.

Eclipsys offers products under the Sunrise name in each of these four core
areas. These products enable the Company to offer a comprehensive line of core
applications that can be purchased individually or combined to form a fully
integrated single-source information technology solution. Most of the Company's
products are functional in several different healthcare settings, including
ambulatory care, critical care and acute care.

The Sunrise Access Management suite, the Sunrise Patient Financial
Management suite and the Sunrise Enterprise Data Warehouse are generally
available to the Company's customers. Most of the key functionalities of the
Sunrise Clinical Management suite are currently available in the Company's
heritage products. The Company is in the process of integrating these key
functionalities into the Sunrise Clinical Management suite, which is currently
in field trials and is expected to be generally available to customers in 1999.

SUNRISE CLINICAL MANAGEMENT

Sunrise Clinical Management is a physician-oriented application that
provides patient information to the physician and other clinicians at the
point-of-care anywhere in the healthcare continuum, allows a physician to
quickly and efficiently enter orders directly into the system and provides
clinical decision support at the time of order entry. The functionality of the
Sunrise Clinical Management suite is derived from the Alltel TDS 7000 Series,
Emtek's Continuum 2000 application and the BICS program developed at Brigham and
licensed from Partners. The Company has selected the best features of these
heritage programs to integrate into its Sunrise Clinical Management suite. The
Company continues to enhance and support these heritage products for its
installed customer base in order to allow these customers to make the transition
to the Sunrise Clinical Management suite over time. Sunrise Clinical Management
includes the following features:

- Clinical Data Repository, which permanently stores clinical and
financial information into patient care records that are easily and
quickly accessible in ambulatory, acute care and other healthcare
settings.

- Clinical View, which provides physicians with access to patient
information, such as complete patient records covering treatments at
both ambulatory and acute care facilities, whether they are accessing
the records from within the healthcare facility or a remote location.

- Clinical Documentation, which gathers and presents organized, accurate
and timely patient information. The application creates an electronic
patient chart, accepting and arranging input from caregivers,
laboratories or monitoring equipment.

- Order Entry, Communication and Management, which enables physicians to
enter on-line prescriptions and orders for laboratory or diagnostic
tests or procedures. The application also routes the order to the
appropriate department or party within the organization for
fulfillment.

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- SOLAssistant, which is a clinical decision support system that is
activated automatically during the order entry process. This
sophisticated system 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 SOLAssistant. Customers can modify
these existing rules or can develop their own clinical rules.

- SOLAsentry, which is a continuous event monitoring system.
SOLAsentry triggers alerts, which can include e-mail or pager
notification, 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. The application
tracks new patient data, relates it to information already in the
system for that patient, identifies significant new relationships,
alerts the physician to the changed relationship and prompts
corrective actions on a real-time basis.

- Clinical Pathways and Scheduled Activities List, which provide
access to standardized patient care profiles and assist in the
scheduling and monitoring of procedures. These applications provide
listings of clinical treatment procedures for individual patient
care and generates scheduled activities lists in each department
based on information from those lists. This allows the resources of
a department to be deployed in the most effective and efficient
manner.

The Company is currently developing a clinical reporting application, which
will provide periodic reports to physicians enabling them to identify their
practice group's clinical performance. The Company is also developing referral
and medical management features, which will allow a physician to refer a patient
instantly to another healthcare provider with appropriate patient information
attached to the referral.

As of March 31, 1998, the Company's heritage clinical management products
were installed in over 200 facilities and in the process of being installed in
more than 50 facilities.

SUNRISE ACCESS MANAGEMENT

Sunrise Access Management enables the healthcare provider to identify the
patient at any point in the healthcare delivery system and to collect and
maintain patient information throughout the entire continuum of patient care on
an enterprise-wide basis. The single database structure of Sunrise Access
Management permits simultaneous access to the entire patient record from any
terminal on the system. The Sunrise Access Management suite is based primarily
on the products acquired in the SDK Acquisition, which the Company has
integrated with its other product offerings and has continued to enhance. The
elements of Sunrise Access Management include:

- Patient Registration/ADT, which is used to register a patient in an
ambulatory setting, and to admit, discharge and transfer patients in
an acute care setting. Patient information -- such as demographics,
personal contacts, primary-care provider, allergies or medications,
health history, employment and insurance coverage -- is taken at the
patient's initial visit and is immediately accessible on-line to all
authorized personnel across the enterprise. Subsequent visits
require only confirmation and updates as necessary. Visit-specific
information, such as the date and the reason for the visit, the care
provided and the caregivers providing service, is collected at each
visit.

- Patient Scheduling and Resource Management, which is used to
schedule patient appointments across an organization from any
location within the enterprise. The application has the flexibility
to provide for patient preferences and resource availability.

- Enterprise Master Person Index, which is a single index of all
patients and healthcare plan members within a healthcare provider's
system. Records can be accessed from the index by searching a
variety of characteristics, such as name, Social Security number or
other demographic data, including a combination of several
characteristics.

Sunrise Access Management also includes managed care support features such
as verifying insurance eligibility on-line and compliance with managed care plan
rules and procedures, as well as medical records

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abstracting, which compiles patient data into statistical information. The
integrated nature of Sunrise Access Management allows healthcare providers to
complete pre-registration as part of the scheduling process and view patient
records from multiple sites within an enterprise. This eliminates the generation
of redundant records, thereby saving both patient and caregiver time, and
permits the efficient scheduling of resources throughout the organization.

As of March 31, 1998, the Company's access management products were
installed in over 60 facilities and in the process of being installed in 13
additional facilities.

SUNRISE PATIENT FINANCIAL MANAGEMENT

Sunrise Patient Financial Management uses a single, integrated database for
patient accounting processes, including the automatic generation of patient
billing and accounts receivable functions, a system of reimbursement management
to monitor receivables, the automation of collection activities and contract
compliance analysis, as well as follow-up processing and reporting functions.
Billing and receivables management activities are automated through rules-based
processing and can be customized to reflect each organization's specific
procedures. This product suite supports the growing trend toward the centralized
business offices for multiple entities, which improves compliance with managed
care contracts across the entire enterprise and at all stages of the healthcare
delivery continuum. The Sunrise Patient Financial Management suite is based
primarily on the products acquired in the SDK Acquisition, which the Company has
integrated with its other product offerings and has continued to enhance.
Sunrise Patient Financial Management includes the following functions:

- Patient Accounting, which automates the patient billing and accounts
receivable functions. For bill generation, the application
incorporates rules-based calculations of expected reimbursement and
provides users with the option for automatic generation of
contractual allowances at the time of billing or the time of
payment. Rules may be generated for each insurance plan accepted by
an organization. Receivables management functions include account
write-offs, on-line work lists of accounts requiring follow-up,
extensive account comments and standard and ad hoc reporting.
Paperless processing is achieved through real-time inquiry, editing,
sorting, reporting, commenting and updating from other applications,
including modules in Sunrise Access Management and Sunrise Clinical
Management.

- 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 monitoring receivables,
performing collection activity, reconciling with third parties and
analyzing contract compliance and performance.

- Executive Information System, which provides immediate access to the
data contained in the Patient Financial Management database.
Executive Information System provides reports in tabular or graphic
formats.

As of March 31, 1998, the Company's patient financial management products
were installed at over 60 facilities and in the process of being installed in an
additional 17 facilities.

SUNRISE ENTERPRISE DATA WAREHOUSE

Sunrise Enterprise Data Warehouse, which consolidates data from different
systems, including all of a client's legacy and third-party systems, into a
single database to facilitate and support data gathering and analysis throughout
an organization. This application enables users to analyze collected data,
identify sources of the data, automate data extraction, map and load data into
relational tables for detailed analysis, assure the consistency of data across
systems and support timely, accurate analysis and reporting of data for specific
applications. Enterprise Data Warehouse is able to house data from other systems
and supports data-mining techniques, allowing a customer to gather data from all
of the organization's systems. Customers can build

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customized reports using the collected data, reducing the need for additional
software and training. Sunrise Enterprise Data Warehouse is an important
component of the customers' ability to measure and document improved clinical
outcomes and return on investment.

OTHER PRODUCTS

The Company's other products include OpenHUB and Orion, both of which the
Company distributes under a license. OpenHUB is the Company's interface engine,
which provides a fast, flexible means of integrating systems and data, allowing
an organization to select the best data processing solution regardless of the
hardware or software platforms. Orion is an electronic document and workflow
management product that permits providers to reduce their dependency on paper
communications, thereby improving workflow processes and reducing the risk of
lost or inaccurate records.

In connection with the Simione Investment, the Company and Simione have
entered into a Remarketing Agreement pursuant to which the Company has the right
to distribute certain Simione software products designed for home healthcare
providers. See "The Company -- Simione Investment."

In connection with providing healthcare information technology solutions,
the Company also sells hardware to its customers.

SOLA ARCHITECTURE

The Company has recently announced the development of, and has commenced
migrating its products to, its new SOLA architecture, which the Company believes
will facilitate integration, enhance automation, increase reliability and
improve security and workflow processes. SOLA draws on a thin-client
architecture to integrate business logic with an intuitive graphical user
interface thereby enhancing automation and reducing the cost of ownership. This
thin-client architecture enables the user interface to be improved without
disturbing the core application set and facilitates integration of the Company's
products with new operating systems, display environments and devices. SOLA also
features a high performance rules engine to implement a sizable portion of the
business logic for the Company's products. These rules guide clinical and
business workflow, clinical decision support for order entry, clinical and
financial event monitoring and screen logic, enabling structured development of
new applications while maintaining consistency across applications. Because the
rules are managed and stored as data, customers are able to update the business
logic without modifying and distributing new code. This enables customers to
reduce programming expenses, while enhancing the flexibility of the Company's
applications and facilitating their rapid adoption. SOLA features a seamless and
consistent architecture which promotes reliability for mission-critical
applications and fault tolerance. The SOLA architecture also uses advanced
technology to maintain security across the Internet and organization Intranets.
This ability to support secure communications and incorporate reliable protocols
for authenticating users and services permits the confidentiality of patient
information to be maintained. Certain products being migrated to the SOLA
architecture are currently undergoing field trials in several locations.

SERVICES

Drawing on the functionality and flexibility of its software products, the
Company offers a range of professional services as part of its healthcare
information technology solutions. These services include outsourcing, remote
processing and network services.

OUTSOURCING SERVICES

Outsourcing Services typically involve the Company assuming the management
of the customer's entire information technology function on-site using the
Company's employees. Outsourcing Services include Facilities Management, Network
Outsourcing and Transition Management.

Facilities Management enables customers to improve their information
technology operations by having the Company assume responsibility for all
aspects of the customer's information technology operations, from equipment to
human resources.

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Network Outsourcing provides customers with total healthcare information
network support, relieving the customer of the need to secure and maintain
expensive resources in a rapidly changing technological environment.

Transition Management offers customers a solution for migrating their
information technology to new processes, technologies or platforms without
interfering with the existing rules and initiatives critical to the delivery of
healthcare.

REMOTE PROCESSING SERVICES

Remote Processing Services include complete processing of an enterprise's
applications from the Company's site using the Company's equipment and
personnel. This service frees an organization from having to maintain the
environment, equipment and technical staff required for systems processing and
offers support for an organization's fault management, configuration management
and utilization management processes.

NETWORK SERVICES

Network Services is a comprehensive package of services allowing the
Company's customers to receive critical data quickly and accurately without
incurring a substantial increase in cost. The Company assesses changes in
network utilization and function, forecasts any necessary upgrades to
accommodate growth of the customer and designs any changes necessary to provide
the customer with the required performance and functionality.

The Company offers its services in various forms ranging from on-site
assistance on a time and expense basis to complete turnkey project deliveries
with guaranteed fixed price rates and outcomes.

IMPLEMENTATION, PRODUCT SUPPORT AND TRAINING

The Company believes that a high level of service and support is critical
to its success. Furthermore, the Company believes that a close and active
service and support relationship is important to customer satisfaction and
provides the Company with important information regarding evolving customer
requirements and additional sales opportunities. To facilitate successful
product implementation, the Company's consultants assist customers with initial
installation of a system, conversion of a customer's historical data and ongoing
training and support. This also includes Year 2000 consulting, programming and
conversion services to help customers prepare for transition and to address Year
2000 compliance and performance issues. In addition, 24-hour telephone support
is available and the Company offers electronic distribution to provide clients
the latest information regarding the Company's products. The Company also
provides regular maintenance releases to its customers. The Company's service
and support activities are supplemented by comprehensive training programs,
including introductory training courses for new customers and seminars for
existing customers, to educate them about the capabilities of the Company's
systems.

PRICING

Historically, the Company has employed a traditional software pricing and
payment model in which the entire software license fee is payable upon
commencement of the license, service fees are paid as performed and maintenance
fees, typically equal to a fixed percentage of the license fee, are paid over
the life of the license. More recently, the Company has begun to offer a variety
of creative pricing models in furtherance of its philosophy that pricing and
payment schedules should be closely aligned with the value received by the
customer. The Company encourages customers to elect a payment schedule that
spreads software license payments, together with service fees and maintenance
fees on a bundled basis, regularly over the life of the license. In addition,
the Company has commenced offering software license and maintenance fees that
vary with the amount of patient traffic serviced by the customer, enabling the
customer to analyze the cost on a per-case basis. The Company also encourages
customers to consider pricing models in which the Company's primary compensation
takes the form of sharing in cost savings or other performance benefits realized
by the customer. The pricing of the Company's contracts can vary significantly,
depending upon the pricing model, product configuration and features, and
implementation.

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CUSTOMERS, MARKETING AND SALES

The Company's marketing and sales efforts focus on large hospitals,
integrated healthcare delivery networks and academic medical centers. At March
31, 1998, the Company had installed or was in the process of installing its
products at more than 325 facilities in North America, including large
hospitals, integrated healthcare delivery network facilities and academic
medical centers. In addition, the Company's products were installed or being
installed at more than 25 facilities outside North America, predominantly in
Europe.

The Company sells its products and services in North America exclusively
through its direct sales force. To provide direct and sustained customer
contact, management of the sales force is decentralized, with the five Regional
Presidents having primary responsibility for sales and marketing within their
regions. Some multi-region accounts are managed by national account
representatives. Within each region, the direct sales force is generally
organized into two groups, one focused principally on generating sales to new
customers and the other focused on additional sales to existing customers. The
direct sales force works closely with the Company's implementation and product
line specialists. The Company's field sales force has an average of 18 years of
experience in the healthcare industry. A significant component of compensation
for all direct sales personnel is performance based, although the Company bases
quotas and bonuses on a number of factors in addition to actual sales, including
customer satisfaction and accounts receivable performance.

The Company has customers in Belgium, France, the Netherlands, the United
Kingdom and Japan. International sales representatives generally report to the
Regional President of the International Region and are responsible for all
customers within their sales regions. The Company may also use sales agents to
market its products internationally.

RESEARCH AND DEVELOPMENT

The Company believes that its future success depends in large part on its
ability to maintain and enhance its current product line, develop new products,
maintain technological competitiveness and meet an expanding range of customer
requirements. A significant portion of the Company's research and development
and product testing effort is performed in conjunction with physicians at
Brigham, MGH and other academic medical centers. The Company's current
development efforts are focused on the migration of its products to the SOLA
architecture and the development of additional functionality and applications
for its existing products. The Company believes that the open, integrated nature
of its SOLA architecture will facilitate the development of applications without
the need for major rewriting or reconfiguration of code. As of March 31, 1998,
the Company's research, development and technical support organization consisted
of more than 300 employees. The Company's research and development expenses were
$29.3 million for 1997, on the pro forma basis described herein.

COMPETITION

The market for the Company's products and services is intensely competitive
and is characterized by rapidly changing technology, evolving user needs and the
frequent introduction of new products. The Company's principal competitors
include Cerner Corp., HBO & Company, IDX Systems Corp. and SMS. The Company also
faces competition from providers of practice management systems, general
decision support and database systems and other segment-specific applications,
as well as from healthcare technology consultants. A number of the Company's
competitors are more established, benefit from greater name recognition and have
substantially greater financial, technical and marketing resources than the
Company. The Company also expects that competition will continue to increase as
a result of consolidation in both the information technology and healthcare
industries. The Company believes that the principal factors affecting
competition in the healthcare information technology market include product
functionality, performance, flexibility and features, use of open standards
technology, quality of service and support, company reputation, price and
overall cost of ownership. See "Risk Factors -- Competition."

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PROPRIETARY RIGHTS

The Company is dependent upon its proprietary information and technology.
The Company relies primarily on a combination of copyright, trademark and trade
secret laws and license agreements to establish and protect its rights in its
software products and other proprietary technology. The Company requires third-
party consultants and contractors to enter into nondisclosure agreements to
limit use of, access to and distribution of its proprietary information. In
addition, the Company currently requires employees who receive option grants
under any of its stock plans to enter into nondisclosure agreements. There can
be no assurance that the Company's means of protecting its proprietary rights
will be adequate to prevent misappropriation. The laws of some foreign countries
may not protect the Company's proprietary rights as fully or in the same manner
as do the laws of the United States. Also, despite the steps taken by the
Company to protect its proprietary rights, it may be possible for unauthorized
third parties to copy aspects of the Company's products, reverse engineer such
products or otherwise obtain and use information that the Company regards as
proprietary. In certain limited instances, customers can access source code
versions of the Company's software, subject to contractual limitations on the
permitted use of such source code. Although the Company's license agreements
with such customers attempt to prevent misuse of the source code, the possession
of the Company's source code by third parties increases the ease and likelihood
of potential misappropriation of such software. Furthermore, there can be no
assurance that others will not independently develop technologies similar or
superior to the Company's technology or design around the proprietary rights
owned by the Company. See "Risk Factors -- Limited Protection of Proprietary
Rights."

EMPLOYEES

As of March 31, 1998, the Company employed 997 people, including 318 in
research, development and technical support, 471 in operations, 128 in marketing
and sales, 62 in finance and administration and 18 in international operations.
The success of the Company depends on its continued ability to attract and
retain highly skilled and qualified personnel. Competition for such personnel is
intense in the information technology industry, particularly for talented
software developers, service consultants, and sales and marketing personnel.
There can be no assurance that the Company will be able to attract and retain
qualified personnel in the future. See "Risk Factors -- Ability to Attract and
Retain Key Personnel."

The Company's employees are not represented by any labor unions. The
Company considers its relations with its employees to be good.

FACILITIES

The Company is headquartered in Delray Beach, Florida, where it leases
office space under two separate leases expiring in March 2000 and July 2002. In
addition, the Company maintains leased office space in Little Rock, Arkansas;
Newport Beach, California; San Jose, California; Atlanta, Georgia; Oak Brook,
Illinois; Boston, Massachusetts; Albany, New York; Saratoga Springs, New York;
Roseland, New Jersey; Malvern, Pennsylvania; and Pittsburgh, Pennsylvania within
the United States and Brussels, Belgium; Paris, France; and London, United
Kingdom. These leases expire at various times ranging from June 1998 to June
2009. Aggregate rental payments under all of the Company's leases were $4.1
million in 1997.

LEGAL PROCEEDINGS

The Company is involved from time to time in routine litigation that arises
in the ordinary course of its business, but is not currently involved in any
litigation that the Company believes could reasonably be expected to have a
material adverse effect on the Company.

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MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The executive officers, directors and other key employees of the Company,
their respective ages as of March 31, 1998 and their positions with the Company
are as follows:

[Enlarge/Download Table]

NAME AGE POSITION
---- --- --------

Executive Officers and Directors:
Harvey J. Wilson............................. 59 President, Chief Executive Officer and Chairman
of the Board of Directors
James E. Hall................................ 64 Senior Vice President, Field Operations and
Chief Operating Officer
Robert J. Vanaria............................ 52 Senior Vice President, Administration, Chief
Financial Officer and Treasurer
T. Jack Risenhoover, II...................... 32 Vice President, General Counsel and Secretary
Steven A. Denning(1)......................... 49 Director
G. Fred DiBona(1)............................ 47 Director
Eugene Fife(1)............................... 57 Director
William E. Ford(2)........................... 36 Director
Jeffrey H. Fox(3)............................ 36 Director
Jay B. Pieper(2)............................. 54 Director
Richard D. Severns(2)........................ 52 Director

Other Key Employees:
Peter J. Camp................................ 39 Regional President, Mid-Atlantic Region
James Carter................................. 54 Senior Vice President, Customer Support and
Research & Development
John Depierro................................ 61 Regional President, International Region
Michael B. Kaufman........................... 46 Senior Vice President, Business Development
Terrence S. Macaleer......................... 47 Senior Vice President, Field Support
Richard D. Mager............................. 48 Regional President, Midwest Region
Stephanie P. Massengill...................... 57 Senior Vice President, Corporate Development
Michael T. McGuire........................... 49 President, Services Division
John H. Munley, Jr........................... 56 Regional President, Northeast Region
John T. Patton, Jr. ......................... 48 Regional President, Western Region
Robert C. Robbins, Jr. ...................... 47 Regional President, Southeast Region
Anthony Stefanis............................. 58 Senior Vice President, Sales
Gregory L. Wilson............................ 29 Vice President, Mergers and Acquisitions

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

(1) Member of the Executive Development and Compensation Committee.
(2) Member of the Audit Committee.
(3) It is anticipated that Mr. Fox will not continue to serve as a director
following the effectiveness of this Offering.

Harvey J. Wilson, the Company's founder, has served as President, Chief
Executive Officer and Chairman of the Board of Directors of the Company since
the Company was formed in December 1995. From January 1993 to December 1995, Mr.
Wilson invested privately in software and technology companies. Mr. Wilson was a
co-founder of SMS, a healthcare information systems provider. Mr. Wilson is a
director of Philadelphia Suburban Corporation, a water utility company.

James E. Hall has served as Senior Vice President, Field Operations and
Chief Operating Officer since January 1997. From August 1995 to January 1997,
Mr. Hall was Senior Vice President of Sales and Marketing for Multimedia Medical
Systems, Inc., a telemedicine company ("MMS"). From January 1991 to August 1995,
Mr. Hall was President of Asia Pacific Partners Ltd., a consulting firm.

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Robert J. Vanaria has served as Senior Vice President, Administration,
Chief Financial Officer and Treasurer since December 1997. From March 1995 to
December 1997, Mr. Vanaria was Senior Vice President and Chief Financial Officer
of Greenwich Air Services, Inc., an aviation services subsidiary of General
Electric Company. From September 1994 to February 1995, Mr. Vanaria was a
self-employed business consultant. From March 1982 to August 1994, Mr. Vanaria
was Senior Vice President and Chief Financial Officer of Foamex International,
Inc., a manufacturing company.

T. Jack Risenhoover, II has served as Vice President and General Counsel
since February 1997. From May 1994 to January 1997, Mr. Risenhoover was general
counsel for The Right Angle, Inc., a marketing firm. Mr. Risenhoover was awarded
his J.D. from Vanderbilt University School of Law in April 1994.

Steven A. Denning has served on the Company's Board of Directors since
March 1997. Mr. Denning is a Managing Member of General Atlantic Partners, LLC,
a private investment company, and has been with General Atlantic since 1980. Mr.
Denning is also a director of GT Interactive Software Corp., an interactive
entertainment software development company.

G. Fred DiBona has served on the Company's Board of Directors since May
1996. Since 1990, Mr. DiBona has been the President and Chief Executive Officer
of Independence Blue Cross and its subsidiaries. Mr. DiBona is also a director
of Magellan Health Services, Inc., a specialized managed healthcare company;
PECO Energy Company, a public energy company; Philadelphia Suburban Corporation,
a water utility company; Tasty Baking Company, a packaged foods company; and the
Pennsylvania Savings Bank.

Eugene Fife has served on the Company's Board of Directors since May 1997.
Since September 1996, Mr. Fife has been the President and Chief Executive
Officer of MMS. Mr. Fife was a general partner in Goldman Sachs & Co. from June
1970 to November 1995, at which time he became a limited partner. Mr. Fife
remains a limited partner in Goldman Sachs & Co. Mr. Fife is also a director of
Baker, Fentress Company, an investment company.

William E. Ford has served on the Company's Board of Directors since May
1996. Mr. Ford is a Managing Member of General Atlantic Partners, LLC and has
been with General Atlantic since 1991. Mr. Ford also serves as a director of GT
Interactive Software Corp., an interactive entertainment software company;
MAPICS, Inc., a resources planning software applications company; Envoy
Corporation, an electronic data processing company; LHS Group Inc., a billing
solutions company; and E-Trade Group, Inc., an on-line discount broker.

Jeffrey H. Fox has served on the Company's Board of Directors since January
1997. Mr. Fox has been with AIS since February 1996, serving as President since
August 1996. From June 1986 to February 1996, Mr. Fox was an investment banker
with Stephens Inc.

Jay B. Pieper has served on the Company's Board of Directors since May
1996. Since May 1995, Mr. Pieper has served as Vice President of Corporate
Development and Treasury Affairs for Partners. From March 1986 to May 1995, Mr.
Pieper was Senior Vice President and Chief Financial Officer for Brigham.

Richard D. Severns has served on the Company's Board of Directors since
January 1998. Mr. Severns has been Senior Vice President and Director of Finance
for the GM Network Services and Strategy Group of Motorola since August 1991.

Peter J. Camp joined the Company in April 1996 and has served as Regional
President, Mid-Atlantic Region since April 1997. From October 1983 to March
1996, Mr. Camp served in a variety of positions with SMS including Regional
Marketing Manager and Regional Manager.

James Carter has served as Senior Vice President, Customer Support and
Research & Development since April 1997. From August 1996 to April 1997, Mr.
Carter was a healthcare information technology consultant. From 1970 to August
1996, Mr. Carter was employed by SMS, where he last served as Vice President of
Operations/Development.

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John Depierro has been Regional President, International Region since
January 1997. From October 1994 to January 1997, Mr. Depierro served as Senior
Vice President of Alltel. From October 1980 through October 1994, Mr. Depierro
served as President of Medical Data Technology, Inc., which was acquired by
Alltel in October 1994.

Michael B. Kaufman, Senior Vice President, Business Development, joined the
Company in June 1997 following the SDK Acquisition. Mr. Kaufman was employed by
SDK beginning in 1972 and served as its President from 1988 until the SDK
Acquisition.

Terrence S. Macaleer has served as Senior Vice President, Field Support
since March 1996. From January 1973 to January 1996, Mr. Macaleer was Vice
President of Field Operations for SMS.

Richard D. Mager has been Regional President, Midwest Region since April
1997. From July 1989 to April 1997, Mr. Mager was employed by Ernst & Young,
LLP, where he served as a healthcare consulting partner from 1993 to 1997.

Stephanie P. Massengill has served as Senior Vice President, Corporate
Development since September 1996. From July 1988 to September 1996, Ms.
Massengill was the Chief Executive Officer of Imaging Concepts, Inc., an
electronic document management company.

Michael T. McGuire has been President, Services Division since July 1997.
From January 1995 to February 1997, Mr. McGuire was the officer in charge of
technology for National HealthTech, an outsourcing company. From May 1985 to
August 1994, Mr. McGuire was the vice president of outsourcing services for HBO
& Company.

John H. Munley, Jr. has been Regional President, Northeast Region since
April 1997. From August 1995 to April 1997, Mr. Munley was Vice President, Sales
for Compucare, a healthcare information technology company. From April 1990 to
July 1995, Mr. Munley was Senior Vice President of Sales for First Data Health
Services, a healthcare information technology company.

John T. Patton, Jr. has been Regional President, Western Region since May
1997. From June 1976 to May 1997, Mr. Patton served as a Regional Manager for
SMS.

Robert C. Robbins, Jr. joined the Company in April 1996 and has served as
Regional President, Southeast Region since April 1997. From January 1994 to
March 1996, Mr. Robbins served as Chief Operating Officer of Mainline Physicians
Org., a management services organization, and Atlantic Physicians Systems, an
independent practitioners association. Mr. Robbins worked for SMS from January
1983 to January 1994, serving in a variety of positions.

Anthony Stefanis has served as Senior Vice President, Sales since December
1997. From June 1997 to November 1997, Mr. Stefanis was self-employed as a
healthcare information technology consultant. From July 1992 to June 1997, Mr.
Stefanis served as Chairman and Chief Executive Officer of High Integrity
Systems Inc., an information services division of EQUIFAX Information Services,
Inc.

Gregory L. Wilson has served as Vice President, Mergers and Acquisitions
since April 1997. From March 1996 to April 1997 Mr. Wilson was a Vice President
of Lehman Brothers, where he worked as an equity analyst. From May 1995 to March
1996, Mr. Wilson was a Vice President of Needham & Co. From May 1994 to May
1995, Mr. Wilson also served as Senior Vice President of Brean Murray & Co., an
investment bank. Mr. Wilson was awarded his J.D. from Vanderbilt University
School of Law in April 1994.

Following this Offering, the Board of Directors of the Company will be
divided into three classes, each of whose members will serve for a staggered
three-year term. The Board will consist of two Class I Directors (Messrs. Fife
and Ford), two Class II Directors (Messrs. Pieper and Severns) and three Class
III Directors (Messrs. Denning, DiBona and Wilson). At each annual meeting of
stockholders, a class of directors will be elected for a three-year term to
succeed the directors of the same class whose terms are then expiring. The terms
of the Class I Directors, Class II Directors and Class III Directors expire upon
the election and qualification of successor directors at the annual meeting of
stockholders held during the calendar years 1999, 2000 and 2001, respectively.

Each officer serves at the discretion of the Board of Directors and holds
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal. Other than Mr. Harvey J. Wilson and

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Mr. Gregory L. Wilson, who are father and son, there are no family relationships
among any of the directors, executive officers or key employees of the Company.

STOCKHOLDERS' AGREEMENT; OBSERVER RIGHTS

Pursuant to the Second Amended and Restated Stockholders' Agreement dated
January 24, 1998, by and among the Company and certain stockholders of the
Company (the "Stockholders Agreement"), such stockholders were granted the
right, subject to certain conditions, to designate representatives to the
Company's Board of Directors. Under this agreement, Mr. Pieper was elected as
the representative of Partners, Mr. Fox was elected as the representative of
AIS, Mr. Severns was elected as the representative of Motorola and Mr. Wilson
was elected as the representative of certain stockholders, including Mr. Wilson,
Wilfam Ltd. ("Wilfam") and Michael B. Kaufman.

Mr. Ford and Mr. Denning were elected as the representatives of General
Atlantic Partners, LLC and its affiliates pursuant to rights granted to the
holders of Series D Preferred Stock, Series F Preferred Stock and Series G
Preferred Stock in the Second Amended and Restated Certificate of Incorporation.
In the event the Second Amended and Restated Certificate of Incorporation is
amended to terminate the representation rights of the holders of Series D
Preferred Stock, Series F Preferred Stock and Series G Preferred Stock, General
Atlantic Partners, LLC and its affiliates would have the ability to designate
two representatives to the Board of Directors pursuant to the Stockholders
Agreement.

All rights to designate representatives to the Board of Directors granted
under the Stockholders Agreement terminate upon the closing of the Offering.

After the Offering and subject to certain conditions, Motorola has the
right under the Stockholders Agreement to have an observer present at all
regular and special meetings of the Board of Directors so long as it owns at
least 3.5% of the total number of shares of Common Stock outstanding (on an as
converted and as exercised basis).

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has an Executive Development and Compensation
Committee composed of Messrs. Denning (Chairman), DiBona and Fife, which makes
recommendations concerning salaries and incentive compensation for executive
officers of the Company and administers and grants stock options and awards
pursuant to the Company's stock option plans, and an Audit Committee composed of
Messrs. Pieper (Chairman), Ford and Severns, which reviews the results and scope
of the audit and other services provided by the Company's independent public
accountants. Mr. Harvey J. Wilson is an ex-officio member of both the Audit
Committee and the Executive Development and Compensation Committee.

DIRECTOR COMPENSATION

Directors of the Company are reimbursed for any expenses incurred in
connection with attendance at meetings of the Board of Directors or any
committee of the Board of Directors, but are not otherwise compensated for such
service. On April 8, 1998, the seven non-employee directors of the Company were
each granted a non-qualified stock option to purchase 13,333 shares of Common
Stock at a purchase price of $13.50 per share under the Company's 1998 Stock
Incentive Plan. These options vest annually over a four year period. See
"-- Stock Plans."

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EXECUTIVE COMPENSATION

The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1997 for the Company's Chief Executive Officer and
its two other executive officers whose total annual salary and bonus exceeded
$100,000 for 1997 (together, the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE

[Enlarge/Download Table]

LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(1)
--------------------------- -------- -------- ------------

Harvey J. Wilson.......................................... $150,000(2) -- --
Chairman of the Board, President and Chief Executive
Officer

James E. Hall............................................. 177,971 $ 50,000 50,000
Senior Vice President, Field Operations and Chief
Operating Officer

Robert J. Vanaria......................................... 7,692(3) 150,000 99,999
Senior Vice President, Administration and Chief Financial
Officer

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

(1) Represents the number of shares covered by options to purchase shares of the
Company's Common Stock granted during 1997.

(2) Includes $84,000 of deferred compensation.

(3) Mr. Vanaria joined the Company in December 1997.

Option Grants During 1997

The following table sets forth grants of stock options to each of the Named
Executive Officers during the year ended December 31, 1997.

OPTION GRANTS IN LAST FISCAL YEAR

[Enlarge/Download Table]

INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
---- ---------- ------------ ----------- ---------- --------- -----------

Harvey J. Wilson............................. -- -- -- -- -- --
James E. Hall................................ 4,000 0.3% $0.20 1/20/07 $ 491 $ 1,243
46,000 3.5 6.50 1/25/07 187,895 976,162
Robert J. Vanaria............................ 99,999 7.6 7.50 2/8/07 471,671 1,195,307

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

(1) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the Common Stock on the date of option grant over the
term of the options. These numbers are calculated based on rules promulgated
by the Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price growth. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the timing of such
exercise and the future performance of the Common Stock. There can be no
assurance that the rates of appreciation assumed in this table can be
achieved or that the amounts reflected will be received by the individuals.

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Year-End Option Values

The following table sets forth certain information concerning the number
and value of unexercised options held by each of the Named Executive Officers on
December 31, 1997. None of the Named Executive Officers exercised any stock
options during the year ended December 31, 1997.

FISCAL YEAR END OPTION VALUES

[Enlarge/Download Table]

NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT THE-MONEY OPTIONS
FISCAL YEAR END AT FISCAL YEAR END(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------

Harvey J. Wilson............................... -- -- -- --
James E. Hall.................................. -- 50,000 -- $75,450
Robert J. Vanaria.............................. 33,333 66,666 -- --

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

(1) Represents the difference between the exercise price and the fair market
value of the Common Stock at fiscal year end as determined by the Board of
Directors of the Company.

EMPLOYMENT AGREEMENT

Pursuant to an Employment Agreement between Harvey J. Wilson and the
Company dated as of May 1, 1996, the Company agreed to employ Mr. Wilson as the
Company's Chief Executive Officer until May 1, 1999, with an annual salary of
$150,000, subject to deferral until the Company has reached certain milestones
and subject to adjustment from time to time thereafter. In January 1998, Mr.
Wilson's annual salary was increased to $200,000. Upon termination of his
employment, unless terminated for cause, Mr. Wilson shall be entitled to payment
of his salary and continuation of his benefits for a period of months determined
by the Board of Directors which is consistent with its practice for senior
executives. Mr. Wilson has agreed not to compete with the Company during his
term of employment and for three years thereafter.

STOCK PLANS

A total of 4,333,333 shares of Common Stock have been reserved for issuance
in the aggregate under the Company's three stock plans described below.

The Company's 1996 Stock Plan (the "1996 Stock Plan") provided for grants
of stock options and awards of restricted and unrestricted Common Stock. As of
July 14, 1998, options to purchase 2,079,705 shares of Common Stock were
outstanding and 124,999 restricted shares of Common Stock had been granted under
the 1996 Stock Plan. Following the Offering, the Board of Directors has provided
that no additional grants or awards will be made under the 1996 Stock Plan.

Under the Company's 1998 Stock Incentive Plan (the "Incentive Plan"), a
variety of awards, including incentive stock options intended to qualify under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
nonstatutory stock options, stock appreciation rights, restricted and
unrestricted stock awards and other stock-based awards, may be granted to
officers, employees, directors, consultants and advisors of the Company and its
subsidiaries. The Board of Directors has authorized the Executive Development
and Compensation Committee to administer the Incentive Plan. While the Company
currently anticipates that most grants under the Incentive Plan will consist of
stock options, the Company may also grant stock appreciation rights, which
represent the right to receive any excess in value of the shares of Common Stock
over the exercise price; restricted stock awards, which entitle recipients to
acquire shares of Common Stock, subject to the right of the Company to
repurchase all or part of such shares at their purchase price in the event that
the conditions specified in the award are not satisfied; or unrestricted stock
awards, which represent grants of shares to participants free of any
restrictions under the Incentive Plan. Options or other awards that are granted
under the Incentive Plan but expire unexercised are available for future grants.
To date, options to purchase 478,328 shares of Common Stock have been granted
under the Incentive Plan,

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including a nonstatutory option to purchase up to 333,333 shares of Common Stock
granted to Harvey J. Wilson on April 8, 1998. Mr. Wilson's option covers (i)
66,666 shares at a purchase price of $15.00 per share, vesting over three years
following the grant date, (ii) 66,667 shares at a purchase price of $30.00 per
share, vesting over four years, (iii) 100,000 shares at a purchase price of
$45.00 per share, vesting over five years, and (iv) 100,000 shares at a purchase
price of $60.00, vesting over five years. Vesting under Mr. Wilson's option is
subject to acceleration at the discretion of the Board of Directors under
certain circumstances.

Under the Company's 1998 Employee Stock Purchase Plan (the "Purchase
Plan"), employees of the Company, including directors of the Company who are
employees, are eligible to participate in quarterly plan offerings in which
payroll deductions may be used to purchase shares of Common Stock. The purchase
price of such shares is the lower of 85% of the fair market value of the Common
Stock on the day the offering commences and 85% of the fair market value of the
Common Stock on the day the offering terminates. The first offering period under
the Purchase Plan will not commence until after the completion of the Offering.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Denning, Mr. DiBona and Mr. Fife served during the year ended December
31, 1997 as members of the Executive Development and Compensation Committee of
the Board of Directors. Mr. Harvey J. Wilson, an executive officer of the
Company, was an ex-officio member of the Executive Development and Compensation
Committee and in such capacity participated in certain deliberations of the
Committee. Mr. Wilson was a director of MMS during the year ended December 1997.
Mr. Fife, one of the Company's directors and a member of the Executive
Development and Compensation Committee, is, and was during 1997, the President
and Chief Executive Officer of MMS. None of Mr. Denning, Mr. DiBona or Mr. Fife
was at any time during the year ended December 31, 1997, or at any other time,
an officer or employee of the Company. See "Certain Transactions" for a
description of certain relationships and transactions between the Company and
affiliates of Mr. Denning and Mr. Wilson.

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CERTAIN TRANSACTIONS

THE PARTNERS LICENSE

In May 1996, the Company acquired the Partners License. In consideration
for this license, the Company issued to Partners 988,290 shares of Common Stock
(5.1% of the Common Stock to be outstanding at the close of the Offering) and
agreed to pay to Partners a royalty in connection with sales of the BICS system
until the Company completes an initial public offering of Common Stock with a
per share offering price of $10.00 or higher. Under the terms of the Partners
License, the Company may further develop, commercialize, distribute and support
the original technology and license it, as well as sell related services, to
other healthcare providers and hospitals throughout the world (with the
exception of the Boston, Massachusetts metropolitan area). No sales of the BICS
system have been made and, consequently, no royalties have been paid by the
Company pursuant to the Partners License because products based on the licensed
technology are still in field trials. The Company is obligated to offer to
Partners and certain of its affiliates an internal use license, granted on most
favored customer terms, to all new software applications developed by the
Company, whether or not derived from the licensed technology, and major
architectural changes to the licensed technology. After May 3, 1998, Partners
and certain of its affiliates are also entitled to receive internal use licenses
for any changes to any module or application included in the licensed technology
requiring at least one person year of technical effort. The Company has an
exclusive right of first offer to commercialize new information technologies
developed in connection with Partners. If the Company fails to pay the royalties
required under the license or breaches any material term of the license, or if
Mr. Harvey J. Wilson voluntarily terminates his employment with the Company
prior to May 1999, the license may become non-exclusive, at Partners' option. If
Partners converts the current license to a non-exclusive license, it must return
370,609 shares of Common Stock to the Company. The Company has the option to
purchase the technology it licenses from Partners upon the completion by the
Company of an initial public offering. The Company has decided that it will not
exercise such option.

As part of the Partners License, the Company provided certain development
services to Partners. Fees for these development services paid by Partners to
the Company totaled $2.0 million, $2.5 million and $325,000 for 1996, 1997 and
the first three months of 1998, respectively. Mr. Jay Pieper, a director of the
Company, is Vice President of Corporate Development and Treasury Affairs for
Partners and was elected as Partners' representative pursuant to the
Stockholders Agreement. Partners was not affiliated with the Company at the time
of the negotiation of the Partners License.

THE ALLTEL ACQUISITION AND RENEGOTIATION

In January 1997, the Company completed the Alltel Acquisition for aggregate
consideration of $201.5 million (after giving effect to certain purchase price
adjustments) consisting of $104.8 million in cash and 20,000 shares of Series C
Redeemable Preferred Stock (with a redemption value of $1,000 per share plus
accumulated dividends) and 2,077,497 shares of Series D Convertible Preferred
Stock (each convertible into one share of Common Stock) issued to AIS. In
connection with the Alltel Acquisition, the Company entered into the Management
and Services Agreement (the "MSA") with AIS pursuant to which AIS was to receive
an aggregate of $11.0 million in fees from the Company over a period of three
years, ending December 31, 2000. Under the MSA, AIS was designated as the
exclusive provider of certain network services to the Company and a preferred
provider of certain other services to the Company and its clients. The MSA also
obligated Alltel to provide designated management services. Under the MSA, the
Company was precluded from competing in the network services business and other
related businesses. In October 1997, AIS returned for cancellation 4,500 shares
of Series C Redeemable Preferred Stock as part of an adjustment of the purchase
price for the Alltel Acquisition. Jeffrey H. Fox, the President of AIS, is a
director of the Company and was elected as AIS' representative pursuant to the
Stockholders Agreement. It is anticipated that Jeffrey H. Fox will not continue
to serve as a director of the Company following the effectiveness of the
Offering. AIS was not affiliated with the Company at the time of the negotiation
of the Alltel Acquisition.

In March 1998, the Company and AIS entered into the Alltel Renegotiation
which consisted of two elements: the AIS Settlement and the MSA Buyout. In the
AIS Settlement, pursuant to a Settlement of

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Claims Agreement dated as of March 13, 1998 between AIS and the Company, AIS
returned to the Company for cancellation 11,000 shares of Series C Redeemable
Preferred Stock in return for the Company extinguishing claims against AIS
asserted pursuant to the Merger Agreement dated January 24, 1997 relating to the
Alltel Acquisition. These claims related to disputes regarding representations
made by AIS at the time of the acquisition regarding the estimated future
revenue potential of certain customer relationships. The Company will use $4.5
million of the net proceeds from the Offering to redeem the remaining shares of
Series C Redeemable Preferred Stock held by AIS. AIS also agreed that, until
July 1, 1998, no dividends will accrue on shares of Redeemable Preferred Stock
held by AIS.

In the MSA Buyout in March 1998, the Company paid $14.0 million to AIS in
consideration for the cancellation of the MSA and the Company's obligations
under the MSA. The decision to terminate the MSA was based on management's
evaluation of the expected future benefits of the MSA in view of the January
1998 Emtek Acquisition and the resulting relationship with Motorola and the
evaluation of the benefits to the Company of being able to compete in the
network services business.

In connection with the Alltel Renegotiation, AIS has agreed, subject to
certain exceptions, that it will not effect any public sale or distribution of
any of the Common Stock or securities convertible into or exchangeable for such
Common Stock for a period of 360 days following the effective date of the
Offering. See "Shares Eligible for Future Sale."

THE EMTEK ACQUISITION

In January 1998, the Company completed the Emtek Acquisition for aggregate
consideration of $11.7 million (net of a $9.6 million receivable from Motorola),
consisting of 1,000,000 shares of Common Stock issued to Motorola and the
assumption of $12.3 million in liabilities. In connection with the Emtek
Acquisition, the Company entered into a software and support agreement with
Motorola pursuant to which the Company agreed to provide certain software and
support services to Motorola's international customers for a minimum period of
one year in exchange for negotiated annual payments. As of March 31, 1998,
payments from Motorola totaled $3.0 million on the $9.6 million receivable owed
and $350,000 under the software and support agreement. Mr. Richard Severns, a
Senior Vice President of Motorola, is a director of the Company and was elected
as Motorola's representative pursuant to the Stockholders Agreement. Emtek was
not affiliated with the Company at the time of the negotiation of the Emtek
Acquisition.

STOCK PURCHASES BY AFFILIATES

Mr. Harvey J. Wilson, President, Chief Executive Officer and Chairman of
the Board of the Company, is the managing general partner of Wilfam, a limited
partnership whose limited partners are members of Mr. Wilson's immediate family.
Mr. Gregory L. Wilson, a general partner, is the investment manager for Wilfam.
In December 1995, upon the incorporation of the Company, Wilfam purchased
2,022,700 shares of Common Stock and Mr. Harvey J. Wilson purchased 505,675
shares of Common Stock for a purchase price of $.10 per share. In January 1997,
Wilfam purchased 103,588 shares of Series D Convertible Preferred Stock (each
convertible into one share of Common Stock) at a purchase price of $12.55 per
share of Preferred Stock.

Affiliates of General Atlantic Partners, LLC purchased (i) in May 1996, an
aggregate of $5.0 million of Series A Convertible Participating Preferred Stock
of the Company, which were subsequently converted into 1,231,747 shares of
Series F Convertible Preferred Stock (each convertible into one share of Common
Stock), (ii) in January 1997, 4,423,509 shares of Series D Convertible Preferred
Stock (each convertible into one share of Common Stock) for an aggregate of
$55.5 million and (iii) in February 1998, an aggregate of 900,000 shares of
Series G Convertible Preferred Stock (each convertible into two-thirds of one
share of Common Stock) for an aggregate of $9.0 million. Messrs. William Ford
and Steven Denning, both of whom are directors of the Company, are Managing
Members of General Atlantic Partners, LLC, and were elected as representatives
of the affiliates of General Atlantic Partners, LLC pursuant to the terms of the
Convertible Preferred Stock.

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Wilfam is a limited partner in certain affiliates of General Atlantic
Partners, LLC. As such, Wilfam participated in the May 1996 and February 1998
investments. The Wilfam indirect investments were approximately $12,600 in
shares of Series A Convertible Participating Preferred Stock, which were
subsequently converted into shares of Series F Convertible Preferred Stock, and
$185,000 in Series G Convertible Preferred Stock.

OTHER TRANSACTIONS WITH AFFILIATES

During the year ended December 31, 1997 and the three months ended March
31, 1998, the Company from time to time chartered an airplane for corporate
purposes from an aircraft charter company. The Company paid $336,000 to the
charter company during 1997 and $126,000 in the first three months of 1998. The
aircraft provided for the Company's use was leased by the charter company from
RMSC of West Palm Beach ("RMSC"), a company that is wholly owned by Mr. Harvey
J. Wilson. In connection with these charters, RMSC invoiced the charter company
$219,000 in 1997 and $71,000 in 1998. Mr. Wilson has no ownership interest in
the charter company. The Company believes that the terms of the charters were at
least as favorable to the Company as those that could have been negotiated with
unaffiliated third parties.

During 1997 and the first three months of 1998, the Company paid AIS $1.7
million and $64,000, respectively, for certain transition services provided by
AIS related to accounting services, computer processing and other various
activities.

During 1997, the Company paid a total of $348,000 to certain subsidiaries
of AIS and ALLTEL Corporation, the parent of AIS, related to the purchase of
various goods and services.

During the three months ended March 31, 1998, the Company paid AIS $2.0
million in scheduled payments under the MSA. In addition, the Company paid AIS
$14.0 million in 1998 pursuant to the MSA Buyout.

See "Description of Capital Stock -- Registration Rights" for a description
of registration rights granted to certain significant stockholders by the
Company.

See "Management -- Stockholders' Agreement; Observer Rights" for a
description of the Stockholders Agreement among the Company and certain of its
significant stockholders.

See "Management -- Employment Agreement" for a description of Mr. Harvey J.
Wilson's employment agreement with the Company.

The Company has adopted a policy that future transactions between the
Company and its executive officers, directors and affiliates must (i) be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties and (ii) be approved by a majority of the members of the Company's
Board of Directors and by a majority of the disinterested members of the
Company's Board of Directors.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of July 14, 1998, by (i) each
person or entity known to the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each of the directors of the Company, (iii) each of
the Named Executive Officers and (iv) all directors and executive officers as a
group. The information contained in the following table reflects the beneficial
ownership of such persons, giving effect to the Preferred Stock Conversion and
treating all shares of the Company's Non-Voting Common Stock, which are
convertible at any time, subject to certain limitations, into shares of Common
Stock, as if they had been so converted. Unless otherwise indicated, each person
or entity named in the table has sole voting power and investment power (or
shares such power with his or her spouse) with respect to all shares of capital
stock listed as owned by such person or entity.

[Enlarge/Download Table]

SHARES SHARES TO BE
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING(1) AFTER OFFERING(1)
----------------------- -----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER PERCENTAGE
------------------------ ---------- ---------- ---------- ----------

General Atlantic Partners, LLC(2)(3)................ 6,255,255 40.6% 6,855,255 35.0%
c/o General Atlantic Service Corporation
Three Pickwick Plaza
Greenwich, CT 06830
Steven A. Denning(2)(3)............................. 6,255,255 40.6 6,855,255 35.0
c/o General Atlantic Service Corporation
Three Pickwick Plaza
Greenwich, CT 06830
William E. Ford(2)(3)............................... 6,255,255 40.6 6,855,255 35.0
c/o General Atlantic Service Corporation
Three Pickwick Plaza
Greenwich, CT 06830
Wilfam Ltd.(4)...................................... 2,126,288 13.8 2,126,288 10.8
c/o Eclipsys Corporation
777 East Atlantic Avenue
Suite 200
Delray Beach, FL 33483
Alltel Information Services, Inc.(5)................ 2,077,497 13.5 2,077,497 10.6
4001 Rodney Parham Road
Little Rock, AR 72212
First Union Corporation(6).......................... 1,199,392 7.5 1,199,392 5.9
One First Union Center
Floor 18
Charlotte, NC 28288
Motorola, Inc....................................... 1,000,000 6.5 1,000,000 5.0
1303 East Algonquin Road
Schaumburg, IL 6019
Partners HealthCare System, Inc. ................... 988,290 6.4 988,290 5.1
Prudential Tower, Suite 1150
800 Boylston Street
Boston, MA 02199
BT Investment Partners, Inc.(7)..................... 659,872 4.2 659,872 3.3
130 Liberty Street
New York, NY 10006
Harvey J. Wilson(8)................................. 2,626,963 17.1 2,626,963 13.4
James E. Hall(9).................................... 16,666 * 16,666 *
Robert J. Vanaria(10)............................... 44,443 * 44,443 *
T. Jack Risenhoover, II(11)......................... 4,295 * 4,295 *
G. Fred DiBona...................................... 31,666 * 31,666 *
Eugene Fife(12)..................................... 31,666 * 31,666 *
Jeffrey H. Fox(13).................................. 2,077,497 13.5 2,077,497 10.6

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Jay B. Pieper(14)................................... 988,290 6.4% 988,290 5.0%
Richard D. Severns(15).............................. 1,000,000 6.5 1,000,000 5.1
All executive officers and directors as a group
(11 persons)........................................ 13,076,741 84.6 13,676,741 69.6

---------------
* Less than 1%.

(1) The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the individual or entity has sole or shared voting power or
investment power and any shares as to which the individual or entity has
the right to acquire beneficial ownership within 60 days after June 1, 1998
through the exercise of any stock option, warrant or other right. The
inclusion herein of such shares, however, does not constitute an admission
that the named stockholder is a direct or indirect beneficial owner of such
shares. Shares to be beneficially owned after the Offering assumes no
exercise of the U.S. Underwriters' over-allotment option.

(2) Consists of 1,052,661 shares held by General Atlantic Partners 28, L.P.
("GAP 28"), 3,768,830 shares held by General Atlantic Partners 38, L.P.
("GAP 38"), 504,674 shares held by General Atlantic Partners 47, L.P. ("GAP
47") and 929,090 shares held by GAP Coinvestment. The general partner of
GAP 28, GAP 38 and GAP 47 is General Atlantic Partners, LLC, a Delaware
limited liability company. The managing members of General Atlantic
Partners, LLC are the general partners of GAP Coinvestment Partners, L.P.
("GAP Coinvestment"). Messrs. Denning and Ford are both managing members of
General Atlantic Partners, LLC. Messrs. Denning and Ford disclaim
beneficial ownership of shares owned by GAP 28, GAP 38, GAP 47 and GAP
Coinvestment. Certain shares of Series D Convertible Preferred Stock held
by GAP 38, which are convertible into 60,236 shares of Common Stock upon
the closing of the Offering, are subject to options granted by GAP 38 to
AIS, and 10,463 shares of Series D Convertible Preferred Stock held by GAP
Coinvestment, which are convertible into 10,463 shares of Common Stock upon
the closing of the Offering, are subject to options granted by GAP
Coinvestment to AIS. See footnote (5) below.

(3) Certain affiliates of General Atlantic Partners, LLC, a significant
stockholder of the Company, have agreed to purchase for investment 600,000
shares of Common Stock in the Offering at the initial public offering price
on the same terms and conditions as all other purchasers.

(4) Mr. Harvey J. Wilson is the managing general partner of Wilfam and Mr.
Gregory L. Wilson, Mr. Harvey Wilson's son, is the investment manager for
Wilfam. Mr. Harvey J. Wilson and Mr. Gregory L. Wilson share voting and
dispositive control of the shares held by Wilfam.

(5) In connection with the Alltel Acquisition, affiliates of General Atlantic
Partners, LLC and Harvey Wilson agreed in January 1997 to grant to AIS
options to purchase 103,602 shares of Series D Convertible Preferred Stock,
at an exercise price of $.01 per share and pursuant to option agreements to
be entered into after the closing of the Alltel Acquisition. Specifically,
(i) GAP 38 granted to AIS an option to purchase 60,236 shares of Series D
Convertible Preferred Stock held by GAP 38, (ii) GAP Coinvestment granted
to AIS an option to purchase 10,463 shares of Series D Convertible
Preferred Stock held by GAP Coinvestment and (iii) Wilfam granted to AIS an
option to purchase 32,904 shares of Series D Convertible Preferred Stock
held by Wilfam. AIS may only exercise these options if either of the
holders of the Warrants exercises them to purchase shares of Non-Voting
Common Stock, in which case AIS may exercise the options to purchase on an
aggregate basis one share of Series D Convertible Preferred Stock (each
convertible into one share of Common Stock upon the closing of the
Offering) for each approximately 6.67 shares of Non-Voting Common Stock
issued pursuant to the Warrants. Following the Offering, the options will
be exercisable in the aggregate to purchase one share of Common Stock for
every approximately 6.67 shares of Non-Voting Common Stock issued upon
exercise of the Warrants. To the extent that AIS exercises the options, the
option shares will be transferred to AIS by GAP 38, GAP Coinvestment and
Wilfam on a pro rata basis. See "Description of Capital Stock -- Warrants."

(6) Includes 601,771 shares of Non-Voting Common Stock issuable upon the
exercise of a warrant, all of which Non-Voting Common Stock is convertible
into Common Stock on a one-for-one basis. See "Description of Capital
Stock -- Warrants."

(7) Includes 361,062 shares of Non-Voting Common Stock issuable upon the
exercise of a warrant, all of which Non-Voting Common Stock is convertible
into Common Stock on a one-for-one basis. See "Description of Capital
Stock -- Warrants."

(8) Includes 2,126,288 shares held by Wilfam, Ltd. for which Mr. Wilson is the
managing general partner. Certain shares of Series D Convertible Preferred
Stock held by Wilfam, which are convertible into 32,903 shares of Common
Stock upon the closing of the Offering, are subject to options granted by
Wilfam to AIS. See footnote (5) above.

(9) Consists of 16,666 shares issuable upon exercise of stock options which are
exercisable within 60 days of July 14, 1998.

(10) Includes 11,110 shares issuable upon exercise of stock options which are
exercisable within 60 days of July 14, 1998.

(11) Consists of 4,295 shares issuable upon the exercise of stock options which
are exercisable within 60 days of July 14, 1998.

(12) Includes 16,666 shares issuable upon the exercise of stock options which
are exercisable within 60 days of July 14, 1998.

(13) These shares are held by AIS. Mr. Fox is President of AIS. Mr. Fox
disclaims beneficial ownership of these shares.

(14) These shares are held by Partners. Mr. Pieper is a Vice President of
Partners. Mr. Pieper disclaims beneficial ownership of these shares.

(15) These shares are held by Motorola. Mr. Severns is a Senior Vice President
of Motorola. Mr. Severns disclaims beneficial ownership of these shares.

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DESCRIPTION OF CAPITAL STOCK

After the filing of the Company's Third Amended and Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") upon the closing of
the Offering, the authorized capital stock of the Company will consist of
200,000,000 shares of Common Stock, 5,000,000 shares of Non-Voting Common Stock
and 5,000,000 shares of Preferred Stock, $.01 par value per share. As of July
14, 1998 (after giving effect to the Preferred Stock Redemption and the
Preferred Stock Conversion to be effected concurrently with the closing of the
Offering), there were outstanding (i) 14,507,604 shares of Common Stock held by
53 stockholders of record, (ii) 896,431 shares of Non-Voting Common Stock held
by two stockholders of record and (iii) no shares of Preferred Stock. Shares of
Non-Voting Common Stock may generally be converted at any time into shares of
Common Stock on a one-for-one basis, except as described below.

The following summary of certain provisions of the Common Stock, Non-Voting
Common Stock, Preferred Stock, Warrants, Restated Certificate of Incorporation
and Amended and Restated By-laws (the "By-laws") is not intended to be complete
and is qualified by reference to the provisions of applicable law and to the
Restated Certificate of Incorporation and By-laws and the Warrants included as
exhibits to the Registration Statement of which this Prospectus is a part. See
"Additional Information."

COMMON STOCK AND NON-VOTING COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Holders of Non-Voting Common Stock do not have voting rights other than
as provided by statute. Accordingly, holders of a majority of the shares of
Common Stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of Common Stock and Non-Voting Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors out of funds legally available therefor, subject to
any preferential dividend rights of outstanding Preferred Stock. Upon the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock and Non-Voting Common Stock are entitled to receive ratably the net assets
of the Company available after the payment of all debts and other liabilities
and subject to the prior rights of any outstanding Preferred Stock. Holders of
Common Stock and Non-Voting Common Stock have no preemptive, subscription or
redemption rights. The outstanding shares of Common Stock and Non-Voting Common
Stock are, and the shares of Common Stock offered by the Company in this
Offering will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of Preferred Stock which the Company may designate and issue in the
future. Certain holders of Common Stock and Non-Voting Common Stock have the
right to require the Company to effect the registration of their shares of
Common Stock, or the Common Stock into which the Non-Voting Common Stock is
convertible, as the case may be, in certain circumstances. See "-- Registration
Rights."

Shares of Non-Voting Common Stock may be converted, at the holder's option,
into shares of Common Stock at the rate of one share of Common Stock for each
share of Non-Voting Common Stock surrendered for conversion, subject to certain
adjustments. The holder can elect to convert all or any part of its Non-Voting
Common Stock at any time, except that, if the holder is subject to certain
federal banking regulations, the holder may only convert in connection with
specified sales of the Common Stock to be issued upon the conversion.

PREFERRED STOCK

Under the terms of the Restated Certificate of Incorporation, the Board of
Directors is authorized, subject to any limitations prescribed by law, without
stockholder approval, to issue up to 5,000,000 shares of Preferred Stock in one
or more series. Each such series of Preferred Stock shall have such rights,
preferences, privileges and restrictions, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation preferences, as
shall be determined by the Board of Directors. The purpose of authorizing the
Board of Directors to issue Preferred Stock and determine its rights and
preferences is to eliminate delays associated with a stockholder vote on
specific issuances. The issuance of Preferred Stock, while providing

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desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of the Company. The Company has no
present plans to issue any shares of Preferred Stock.

WARRANTS

In January 1997, the Company issued two warrants (the "Warrants"), each
exercisable at a purchase price of $.01 per share, to purchase up to 1,124,822
and up to 674,893 shares of Non-Voting Common Stock, respectively, to First
Union and BT. The number of shares purchasable pursuant to each Warrant is
subject to adjustment based on the timing of the redemption of the Series B
Redeemable Preferred Stock, which will occur upon the closing of the Offering.
Because the Offering will be closed on or prior to December 31, 1998, the
Warrants will be exercisable for an aggregate of 962,833 shares. In lieu of
payment of the exercise price, each warrantholder may elect to convert its
Warrant, in whole or in part, into shares of Non-Voting Common Stock having a
value equal to the value of the shares issuable at the time of the conversion
less the aggregate exercise price for such shares under the Warrant. Both
Warrants expire on the earlier of the third anniversary of the effective date of
the registration statement for the Offering or January 2007.

REGISTRATION RIGHTS

Pursuant to a Second Amended and Restated Registration Rights Agreement
(the "Registration Rights Agreement") dated January 28, 1998 among the Company
and certain of its stockholders (the "Rightsholders"), such Rightsholders will
be entitled, commencing six months after the effective date of the Offering, to
certain rights with respect to the registration under the Securities Act of a
total of approximately 17,290,233 shares of Common Stock (the "Registrable
Shares"), including shares issuable upon exercise of the Warrants. In general,
the Registration Rights Agreement provides the Rightsholders with demand and
incidental registration rights beginning no earlier than six months after the
Company has completed an initial public offering.

Certain of the Rightsholders, holding approximately 16,589,691 Registrable
Shares, may require the Company to prepare and file a registration statement
under the Securities Act with respect to their Registrable Shares if such
registration would result in an offering with net proceeds to the requesting
Rightsholder or Rightsholders of at least $5.0 million. In addition, one of the
Rightsholders may compel registration for a smaller amount if the offering is to
include all the shares of Company stock then owned by such Rightsholder, none of
which are then available for sale pursuant to Rule 144 under the Securities Act.
Two of the Rightsholders may each require the Company to prepare and file two
registration statements. Each of five other Rightsholders are entitled to one
such registration request. The Company is not required to file a demand
registration statement for six months after the effective date of this Offering
or within three months after the effective date of any other registration
statement, subject to certain restrictions.

Following the Offering, if the Company proposes to register any of its
securities under the Securities Act, the Rightsholders will be entitled to
include Registrable Shares in such offering, subject to the right of the
managing underwriter of any underwritten offering to limit for marketing reasons
the number of shares of Registrable Shares included in the offering. See "Shares
Eligible for Future Sale."

DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS

The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.

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The Restated Certificate of Incorporation provides for the division of the
Board of Directors into three classes as nearly equal in size as possible with
staggered three-year terms. See "Management -- Executive Officers, Directors and
Key Employees." In addition, the Restated Certificate of Incorporation provides
that directors may be removed only for cause by the affirmative vote of the
holders of 75% of the shares of capital stock of the Company entitled to vote.
Under the Restated Certificate of Incorporation, any vacancy on the Board of
Directors, however occurring, including a vacancy resulting from an enlargement
of the Board of Directors, may only be filled by vote of a majority of the
directors then in office. The limitations on the removal of directors and
filling of vacancies could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, control
of the Company.

The Restated Certificate of Incorporation also provides that any action
required or permitted to be taken by the stockholders of the Company at an
annual meeting or special meeting of stockholders may only be taken if it is
properly brought before such meeting and may not be taken by written action in
lieu of a meeting. The Restated Certificate of Incorporation further provides
that special meetings of the stockholders may only be called by the Chairman of
the Board, the President or the Board of Directors. Under the Company's By-
laws, in order for any matter to be considered "properly brought" before a
meeting, a stockholder must comply with certain requirements regarding advance
notice to the Company. The foregoing provisions could have the effect of
delaying, until the next stockholders meeting, stockholder actions which are
favored by the holders of a majority of the outstanding voting securities of the
Company. These provisions may also discourage another person or entity from
making a tender offer for the Common Stock, because such person or entity, even
if it acquired a majority of the outstanding voting securities of the Company,
would be able to take action as a stockholder (such as electing new directors or
approving a merger) only at a duly called stockholders' meeting, and not by
written consent.

The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. The Restated Certificate of Incorporation and
the By-laws require the affirmative vote of the holders of at least 75% of the
shares of capital stock of the Company issued and outstanding and entitled to
vote, to amend or repeal any of the provisions described in the prior two
paragraphs.

The Restated Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts, such as the breach of a director's duty of loyalty, or
acts or omissions which involve intentional misconduct or a knowing violation of
law. Further, the Restated Certificate of Incorporation contains provisions to
indemnify the Company's directors and officers to the fullest extent permitted
by the General Corporation Law of Delaware. The Company believes that these
provisions will assist the Company in attracting and retaining qualified
individuals to serve as directors.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is BankBoston, N.A.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this Offering, there has been no public market for the securities
of the Company. Upon completion of the Offering, based upon the number of shares
outstanding at July 14, 1998, there will be 19,604,035 shares of Common Stock of
the Company outstanding (assuming no exercise of the U.S. Underwriters'
over-allotment option or outstanding warrants or options of the Company). Of
these shares, the 4,200,000 shares sold in the Offering will be freely tradeable
without restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"), except that any shares purchased by "affiliates"
of the Company, as that term is defined in Rule 144 ("Rule 144") under the
Securities Act ("Affiliates"), may generally only be sold in compliance with the
limitations of Rule 144 described below.

The remaining 15,404,035 shares of Common Stock are deemed "restricted
securities" under Rule 144. Of the restricted securities, 4,998 shares of Common
Stock, which are not subject to the 180-day lock-up agreements (the "Lock-up
Agreements") with the Representatives of the Underwriters, will be eligible for
immediate sale in the public market pursuant to Rule 144(k) under the Securities
Act. An additional 1,749 shares of Common Stock, which are not subject to
Lock-up Agreements, will be eligible for sale in the public market in accordance
with Rule 144 or Rule 701 under the Securities Act beginning 90 days after the
date of this Prospectus. Upon expiration of the Lock-up Agreements 180 days
after the date of this Prospectus, 13,819,791 additional shares of Common Stock
will be available for sale in the public market, subject to the provisions of
Rule 144 under the Securities Act. Upon the expiration of the lock-up
arrangement described below covering certain shares held by AIS, which will
occur 360 days from the effective date of the Offering, 1,577,497 additional
shares of Common Stock will be available for sale in the public market.

The Company and certain stockholders, including AIS, who will hold
15,397,288 shares of Common Stock in the aggregate immediately following the
closing of the Offering, have agreed that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, they will not,
during the period ending 180 days after the date of this Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (other than any such transaction between any such
stockholder and any affiliate thereof so long as, on or before the date of such
transaction, such affiliate has also agreed to be bound by the restrictions set
forth in this paragraph) or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. Morgan Stanley & Co. Incorporated may release
the Company or these stockholders from these restrictions, in whole or in part,
at any time in its sole discretion.

In addition, AIS has agreed, as part of the Alltel Renegotiation, that,
with respect to 1,577,497 shares of Common Stock held by it following the
closing of the Offering, for an additional period beginning 181 days after the
date of this Prospectus and ending 360 days from the effective date of the
Offering, it will not effect any public sale or distribution of any Common Stock
or securities convertible into or exchangeable or exercisable for Common Stock,
except pursuant to the exercise of incidental registration rights under the
Registration Rights Agreement. See "Certain Transactions -- The Alltel
Acquisition and Renegotiation" and "Description of Capital Stock -- Registration
Rights."

In accordance with the terms of the Stockholders Agreement, Motorola may
not sell or transfer any shares of the Company's capital stock owned by it until
January 28, 2000, except that Motorola may sell or transfer its shares pursuant
to incidental registration rights granted under the Registration Rights
Agreement beginning on October 28, 1999. As of July 14, 1998, Motorola held
1,000,000 shares of Common Stock.

In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of the Registration Statement of which this Prospectus is a
part, a stockholder, including an Affiliate, who has beneficially owned his or
her restricted securities (as that term is defined in Rule 144) for at least one
year

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from the later of the date such securities were acquired from the Company, or
(if applicable) the date they were acquired from an Affiliate, is entitled to
sell, within any three-month period, a number of such shares that does not
exceed the greater of 1% of the then outstanding shares of Common Stock
(approximately 196,040 shares immediately after the Offering) or the average
weekly trading volume in the Common Stock during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. In addition, under Rule 144(k),
if a period of at least two years has elapsed between the later of the date
restricted securities were acquired from the Company, or (if applicable) the
date they were acquired from an Affiliate of the Company, a stockholder who is
not an Affiliate of the Company at the time of sale and has not been an
Affiliate of the Company for at least three months prior to the sale is entitled
to sell the shares immediately without compliance with the foregoing
requirements under Rule 144.

Securities issued in reliance on Rule 701 (such as shares of Common Stock
acquired pursuant to the exercise of certain options granted under the Company's
stock plans) are also restricted securities and, beginning 90 days after the
effective date of the Registration Statement of which this Prospectus is a part,
may be sold by stockholders other than Affiliates of the Company subject only to
the manner of sale provisions of Rule 144 and by Affiliates under Rule 144
without compliance with its one-year holding period requirement.

The Company intends to file registration statements on Form S-8 under the
Securities Act to register all shares of Common Stock issuable under the 1996
Stock Plan, the Incentive Plan and the Purchase Plan. Shares issued upon the
exercise of stock options after the effective date of the Form S-8 registration
statements will be eligible for resale in the public market without restriction,
subject to Rule 144 limitations applicable to Affiliates and the lock-up
agreements noted above, if applicable.

Prior to the Offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that market sales
of shares of Common Stock or the availability of shares for sale will have on
the market price of the Common Stock prevailing from time to time. Nevertheless,
sales of significant numbers of shares of the Common Stock in the public market
could adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise capital through an offering of its equity
securities.

Pursuant to the Registration Rights Agreement, certain holders of the
Company's stock, holding an aggregate of 17,290,233 shares of Common Stock,
including shares issuable on exercise of the Warrants, will have the ability to
require the Company to register their shares of Common Stock, subject to certain
restrictions. See "Description of Capital Stock -- Registration Rights."

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UNDERWRITERS

Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the U.S. Underwriters
named below for whom Morgan Stanley & Co. Incorporated, BancAmerica Robertson
Stephens, Lehman Brothers Inc. and Smith Barney Inc. are acting as U.S.
Representatives, and the International Underwriters named below for whom Morgan
Stanley & Co. International Limited, BA Robertson Stephens International
Limited, Lehman Brothers International (Europe), and Smith Barney Inc. are
acting as International Representatives, have severally agreed to purchase, and
the Company has agreed to sell to them, the respective number of shares of
Common Stock set forth opposite the names of such Underwriters below:

[Download Table]

NUMBER OF
NAME SHARES
---- ---------

U.S. Underwriters:
Morgan Stanley & Co. Incorporated ........................ 590,000
BancAmerica Robertson Stephens............................ 590,000
Lehman Brothers Inc. ..................................... 590,000
Smith Barney Inc. ........................................ 590,000
Adams, Harkness & Hill, Inc. ............................. 40,000
Bear, Stearns & Co. Inc................................... 60,000
Brean Murray, Foster Securities Inc. ..................... 40,000
Chatsworth Securities LLC ................................ 40,000
Dain Rauscher Incorporated
A Division of Dain Rauscher ........................... 40,000
Donaldson, Lufkin & Jenrette Securities Corporation....... 60,000
A.G. Edwards & Sons, Inc. ................................ 60,000
Hambrecht & Quist LLC..................................... 60,000
ING Baring Furman Selz LLC ............................... 60,000
Interstate/Johnson Lane Corporation ...................... 40,000
Janney Montgomery Scott Inc. ............................. 40,000
Jefferies & Company, Inc. ................................ 40,000
Edward D. Jones & Co., L.P. ............................. 40,000
Lowenbaum & Company Incorporated ......................... 40,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated........ 60,000
Needham & Company, Inc. .................................. 40,000
Piper Jaffray Inc. ....................................... 40,000
Punk, Ziegel & Knoell, L.P. .............................. 40,000
SG Cowen Securities Corporation........................... 60,000
---------
Subtotal............................................... 3,260,000
---------
International Underwriters:
Morgan Stanley & Co. International Limited................ 235,000
BA Robertson Stephens International Limited............... 235,000
Lehman Brothers International (Europe).................... 235,000
Smith Barney Inc. ........................................ 235,000
---------
Subtotal............................................... 940,000
---------
Total............................................. 4,200,000
=========

The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for

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and accept delivery of the shares of Common Stock offered hereby are subject to
the approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the shares
of Common Stock offered hereby (other than those covered by the U.S.
Underwriters' over-allotment option described below) if any such shares are
taken.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
Shares or distribute any prospectus relating to the Shares outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions: (i) it is not purchasing any Shares for the account of any United
States or Canadian Person and (ii) it has not offered or sold, and will not
offer or sell, directly or indirectly, any Shares or distribute any prospectus
relating to the Shares in the United States or Canada or to any United States or
Canadian Person. With respect to any Underwriter that is a U.S. Underwriter and
an International Underwriter, the foregoing representations and agreements (i)
made by it in its capacity as a U.S. Underwriter apply only to it in its
capacity as a U.S. Underwriter and (ii) made by it in its capacity as an
International Underwriter apply only to it in its capacity as an International
Underwriter. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Agreement between
U.S. and International Underwriters. As used herein, "United States or Canadian
Person" means any national or resident of the United States or Canada, or any
corporation, pension, profit-sharing or other trust or other entity organized
under the laws of the United States or Canada or of any political subdivision
thereof (other than a branch located outside the United States and Canada of any
United States or Canadian Person), and includes any United States or Canadian
branch of a person who is otherwise not a United States or Canadian Person. All
shares of Common Stock to be purchased by the Underwriters under the
Underwriting Agreement are referred to herein as the "Shares."

Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of Shares as may be mutually agreed. The per share price of any
Shares sold shall be the public offering price set forth on the cover page
hereof, in U.S. dollars, less an amount not greater than the per share amount of
the concession to dealers set forth below.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, and will not
offer or sell, directly or indirectly, any of such Shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and that
any offer or sale of Shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any of such Shares a notice containing
substantially the same statement as is contained in this sentence.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the Shares to the International Underwriters, will not offer or sell, any Shares
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation

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to the Shares in, from, or otherwise involving the United Kingdom; and (iii) it
has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the offering of the
Shares to a person who is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a
person to whom such document may otherwise lawfully be issued or passed on.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or sales
to Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares, a notice stating in substance that, by purchasing
such Shares, such dealer represents and agrees that it has not offered or sold,
and will not offer or sell, any of such Shares, directly or indirectly, in Japan
or to or for the account of any resident thereof except for offers or sales to
Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law, and that
such dealer will send to any other dealer to whom it sells any of such Shares a
notice containing substantially the same statement as is contained in this
sentence.

The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $.61 a share under the public offering price. Any Underwriter
may allow, and such dealers may reallow, a concession not in excess of $.10 a
share to other Underwriters or to certain other dealers. After the initial
offering of the shares of Common Stock, the offering price and other selling
terms may from time to time be varied by the Representatives.

Pursuant to the Underwriting Agreement, the Company has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to 630,000 additional shares of Common Stock at the
public offering price set forth on the cover page hereof, less underwriting
discounts and commissions. The U.S. Underwriters may exercise such option to
purchase solely for the purpose of covering overallotments, if any, made in
connection with the Offering. To the extent such option is exercised, each U.S.
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Common Stock as
the number set forth next to such U.S. Underwriter's name in the preceding table
bears to the total number of shares of Common Stock set forth next to the names
of all U.S. Underwriters in the preceding table.

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "ECLP."

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At the request of the Company, the Underwriters have reserved up to 300,000
shares of Common Stock offered hereby for sale to directors, officers,
employees, business associates and related persons of the Company at the initial
public offering price. The number of shares available in the Offering will be
reduced to the extent any such persons purchase such reserved shares. Any
reserved shares not so purchased will be offered by the Underwriters on the same
basis as the other shares of Common Stock offered hereby.

An affiliate of General Atlantic Partners, LLC, a significant stockholder
of the Company, has agreed to purchase 100,000 of the 300,000 shares reserved as
described above at the request of the Company. In addition, certain affiliates
of General Atlantic Partners, LLC have agreed to purchase an additional 500,000
shares of Common Stock in the Offering at the initial public offering price.
Such purchases will be on the same terms and conditions as all other purchases
in the Offering. If required by the regulations of the National Association of
Securities Dealers, Inc., such purchasers will agree not to offer, sell or
otherwise dispose, directly or indirectly, of such shares for a period of three
months after the date of this Prospectus. In addition, without the prior written
consent of Morgan Stanley & Co. Incorporated, such purchasers may not offer,
sell or otherwise dispose, directly or indirectly, of such shares for 180 days
after the date of this Prospectus. The purchase of shares of Common Stock by
such purchasers will be for investment purposes and not with a view to
distributing such shares to the public. See "Principal Stockholders."

The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.

In order to facilitate the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot in connection with
the Offering, creating a short position in the Common Stock for their own
account. In addition, to cover over-allotments or to stabilize the price of the
Common Stock, the Underwriters may bid for, and purchase, shares of Common Stock
in the open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an Underwriter or a dealer for distributing the Common
Stock in the Offering, if the syndicate repurchases previously distributed
Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.

The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.

PRICING OF OFFERING

Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price was determined by
negotiation between the Company and the Representatives. Among the factors
considered in determining the initial public offering price were the Company's
record of operations, the Company's current financial condition and future
prospects, the experience of its management, the economics of the industry in
general, the general condition of the equity securities markets and the market
prices of similar securities of companies considered comparable to the Company.
There can be no assurance that a regular trading market for the shares of Common
Stock will develop after the Offering or, if developed, that a public trading
market can be sustained. There can be no assurance that the prices at which the
Common Stock will sell in the public market after the Offering will not be lower
than the price at which it is offered by the Underwriters in the Offering.

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LEGAL MATTERS

The validity of the shares of Common Stock offered by the Company hereby
will be passed upon for the Company by Hale and Dorr LLP, Washington, D.C., and
for the Underwriters by Davis Polk & Wardwell, New York, New York.

EXPERTS

The financial statements of Eclipsys Corporation as of December 31, 1997
and 1996 and for each of the two years in the period ended December 31, 1997
included in this Prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

The financial statements of ALLTEL Healthcare Information Services, Inc. as
of January 23, 1997, December 31, 1996 and 1995 and for the period from January
1, 1997 through January 23, 1997 and each of the two years in the period ended
December 31, 1996 included in this Prospectus have been so included in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.

The financial statements of SDK Healthcare Information Systems as of April
30, 1997 and 1996 and for each of the years in the two-year period ended April
30, 1997 included in this registration statement have been examined by KPMG Peat
Marwick LLP, independent certified public accountants. Such financial statements
have been included in the registration statement in reliance upon the reports
with respect thereto of KPMG Peat Marwick LLP, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall include all amendments,
exhibits, schedules and supplements thereto) on Form S-1 under the Securities
Act with respect to the shares of Common Stock offered hereby. This Prospectus,
which constitutes a part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission, to
which Registration Statement reference is hereby made. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. The Registration Statement and the exhibits thereto may be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
In addition, the Company is required to file electronic versions of these
documents with the Commission through the Commission's Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system. The Commission maintains a
World Wide Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.

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INDEX TO FINANCIAL STATEMENTS

[Download Table]

PAGE
----

Eclipsys Corporation:
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets as of December 31, 1996 and
1997, and March 31, 1998 (unaudited).................. F-3
Consolidated Statements of Operations for the years
ended December 31, 1996 and 1997 and the three months
ended March 31, 1997 and 1998 (unaudited)............. F-4
Consolidated Statements of Stockholders' Equity
(Deficit) for the years ended December 31, 1996 and
1997 and the three months ended March 31, 1998
(unaudited)........................................... F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1996 and 1997 and the three months
ended March 31, 1997 and 1998 (unaudited)............. F-6
Notes to Consolidated Financial Statements............. F-7
ALLTEL Healthcare Information Services, Inc.:
Report of Independent Accountants...................... F-24
Consolidated Balance Sheets as of December 31, 1995 and
1996.................................................. F-25
Consolidated Statements of Operations for the years
ended December 31, 1995 and
1996 and the period from January 1, 1997 through
January 23, 1997...................................... F-26
Consolidated Statements of Shareholder's Deficit for
the years ended December 31,
1995 and 1996 and the period from January 1, 1997
through January 23, 1997.............................. F-27
Consolidated Statements of Cash Flows for the years
ended December 31, 1995 and
1996 and the period from January 1, 1997 through
January 23, 1997...................................... F-28
Notes to Consolidated Financial Statements............. F-29
SDK Healthcare Information Systems:
Independent Auditors' Report........................... F-36
Balance Sheets as of April 30, 1997 and 1996........... F-37
Statements of Operations and Retained Earnings for the
years ended April 30, 1997 and 1996................... F-38
Statements of Cash Flows for the years ended April 30,
1997 and 1996......................................... F-39
Notes to Financial Statements.......................... F-40

F-1

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
and Shareholders of Eclipsys Corporation

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in shareholders'
equity (deficit) and of cash flows present fairly, in all material respects, the
financial position of Eclipsys Corporation and its subsidiaries at December 31,
1996 and 1997, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PRICEWATERHOUSECOOPERS LLP

Atlanta, Georgia
April 20, 1998, except as to Note 13,
which is as of June 9, 1998

F-2

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ECLIPSYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

[Enlarge/Download Table]

DECEMBER 31, MARCH 31, 1998
------------------- ---------------------
1996 1997 ACTUAL PRO FORMA
------- --------- --------- ---------
(UNAUDITED)

ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,589 $ 4,786 $ 5,854 $ 5,854
Accounts receivable, net of allowance for doubtful
accounts of $0, $1,739, $1,815 and $1,815............... 190 30,969 33,077 33,077
Inventory................................................. -- 866 666 666
Other current assets...................................... 59 1,114 8,299 8,299
------- --------- --------- ---------
Total current assets.................................... 4,838 37,735 47,896 47,896
Property and equipment, net................................. 322 9,517 11,975 11,975
Capitalized software development costs...................... -- 1,591 2,487 2,487
Acquired technology, net.................................... -- 25,802 25,747 25,747
Intangible assets, net...................................... -- 28,288 18,043 18,043
Other assets................................................ 580 3,832 3,946 3,946
------- --------- --------- ---------
Total assets............................................ $ 5,740 $ 106,765 $ 110,094 $ 110,094
======= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt...................... $ -- $ 12,794 $ 3,794 $ 3,794
Deferred revenue.......................................... -- 25,295 30,418 30,418
Other current liabilities................................. 882 31,150 33,243 33,243
------- --------- --------- ---------
Total current liabilities............................... 882 69,239 67,455 67,455
Deferred revenue............................................ 6,966 9,666 9,666
Other long-term liabilities................................. 57 9,480 3,772 3,772
Long-term debt.............................................. -- 3,794 12,794 12,794
------- --------- --------- ---------
Total liabilities....................................... 939 89,479 93,687 93,687
------- --------- --------- ---------
Mandatorily redeemable preferred stock (Note 5)............. -- 35,607 29,178 29,178
------- --------- --------- ---------
Commitments and contingencies (Note 11)
Shareholders' equity (deficit)
Preferred stock:
Series A, $.01 par value, 1,000,000 shares authorized;
issued and outstanding 1,000,000, $6 per share
liquidation preference................................ 10 -- -- --
Series D, $.01 par value, 7,200,000 shares authorized;
issued and outstanding 7,058,786, $12.55 per share
liquidation preference................................ -- 71 71 --
Series E, $.01 par value, 920,000 shares authorized;
issued and outstanding 896,431, $12.55 per share
liquidation preference................................ -- 9 9 --
Series F, $.01 par value, 1,530,000 shares authorized;
issued and outstanding 1,478,097, $6 per share
liquidation preference................................ -- 15 15 --
Series G, $.01 par value, 900,000 shares authorized;
issued and outstanding 0 and 900,000, $9 per share
liquidation preference................................ -- -- 9 --
Common stock:
Voting, $.01 par value, 30,000,000 and 50,000,000
authorized; issued and outstanding 3,626,662,
4,198,730, 5,289,098 and 14,425,980................... 36 42 53 144
Non-Voting, $.01 par value, 3,000,000 shares authorized;
issued and outstanding 0, 0, 0 and 896,431............ -- -- -- 9
Additional paid-in capital................................ 7,974 115,777 132,888 132,892
Unearned compensation..................................... (266) (250) (232) (232)
Accumulated deficit....................................... (2,953) (134,013) (145,623) (145,623)
Accumulated other comprehensive income.................... -- 28 39 39
------- --------- --------- ---------
Total shareholders' equity (deficit).................... 4,801 (18,321) (12,771) (12,771)
------- --------- --------- ---------
Total liabilities and shareholders' equity (deficit).... $ 5,740 $ 106,765 $ 110,094 $ 110,094
======= ========= ========= =========

The accompanying notes are an integral part of these consolidated financial
statements.
F-3

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ECLIPSYS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)

[Enlarge/Download Table]

YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
--------------------- ---------------------
1996 1997 1997 1998
--------- --------- --------- ---------
(UNAUDITED)

Revenues:
Systems and services........................... $ -- $ 89,722 $ 17,023 $ 27,005
Hardware....................................... -- 4,355 622 2,290
--------- --------- --------- ---------
Total revenues.............................. -- 94,077 17,645 29,295
--------- --------- --------- ---------
Costs and expenses:
Cost of systems and services revenues.......... -- 77,083 16,864 16,842
Cost of hardware revenues...................... -- 2,953 502 1,977
Marketing and sales............................ 770 13,662 3,128 4,211
Research and development....................... 1,704 15,714 4,698 6,112
General and administrative..................... 603 5,672 784 1,616
Depreciation and amortization.................. 32 9,710 2,288 2,669
Write-off of in-process research and
development (Note 6)........................ -- 99,189 92,201 --
Write-off of MSA............................... -- -- -- 7,193
--------- --------- --------- ---------
Total costs and expenses.................... 3,109 223,983 120,465 40,620
--------- --------- --------- ---------
Loss from operations............................. (3,109) (129,906) (102,820) (11,325)
Interest expense (income), net................... (156) 1,154 111 285
--------- --------- --------- ---------
Net loss......................................... (2,953) (131,060) (102,931) (11,610)
Dividends and accretion on mandatorily redeemable
preferred stock................................ -- (5,850) (1,020) (1,335)
Preferred stock conversion....................... -- (3,105) (3,105) --
--------- --------- --------- ---------
Net loss available to common shareholders........ $ (2,953) $(140,015) (107,056) (12,945)
========= ========= ========= =========
Basic and diluted net loss per common share...... $ (.98) $ (39.73) $ (32.88) $ (2.83)
========= ========= ========= =========
Weighted average common shares outstanding....... 3,022,660 3,524,313 3,256,053 4,573,455
========= ========= ========= =========

The accompanying notes are an integral part of these consolidated financial
statements.
F-4

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ECLIPSYS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)

[Enlarge/Download Table]

PREFERRED STOCK
-----------------------------------------------------------
COMMON STOCK SERIES A SERIES D SERIES E
------------------ ------------------- ------------------ ----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------ ---------- ------ --------- ------ ------- ------

Capital contribution at December 22, 1995
(inception date)............................ 520,000 $ 5
--------- --- ---------- ---- --------- --- ------- --
Balance at December 31, 1995................... 520,000 5
Capital contribution.......................... 2,008,373 20
Stock grants.................................. 109,999 1
Issuance of Series A Preferred stock.......... 1,000,000 $ 10
Issuance of common stock...................... 988,290 10
Issuance of stock options.....................
Compensation expense recognized...............
Net loss......................................
--------- --- ---------- ---- --------- --- ------- --
Balance at December 31, 1996................... 3,626,662 36 1,000,000 10
Issuance of Series D Preferred stock.......... 4,981,289 $50
Acquisition of Alltel......................... 2,077,497 21
Issuance of Series E Preferred stock.......... 896,431 $9
Issuance of common stock warrants.............
Exchange of Series A for Series F............. (1,000,000) (10)
Acquisition of SDK............................ 499,997 5
Stock option exercises........................ 57,071 1
Stock grants.................................. 15,000
Dividends and accretion on mandatorily
redeemable preferred stock..................
Issuance of stock options.....................
Compensation expense recognized...............
Comprehensive income:
Net loss....................................
Foreign currency translation adjustment.....
Other comprehensive income..................
Comprehensive Income..........................
--------- --- ---------- ---- --------- --- ------- --
Balance at December 31, 1997................... 4,198,730 42 -- -- 7,058,786 71 896,431 9
--------- --- ---------- ---- --------- --- ------- --
EMTEK acquisition............................. 1,000,000 10
Issuance of Series G Preferred Stock..........
Stock option exercises........................ 90,368 1
Dividends and accretion on mandatorily
redeemable preferred stock..................
Compensation expense recognized...............
Comprehensive income:
Net loss....................................
Foreign currency translation adjustment.....
Other comprehensive income..................
Comprehensive Income..........................
--------- --- ---------- ---- --------- --- ------- --
Balance at March 31, 1998 (unaudited)......... 5,289,098 $53 -- $ -- 7,058,786 $71 896,431 $9
========= === ========== ==== ========= === ======= ==

PREFERRED STOCK
-------------------------------------
SERIES F SERIES G ADDITIONAL
------------------ ---------------- PAID-IN UNEARNED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT
--------- ------ ------- ------ ---------- ------------ -----------

Capital contribution at December 22, 1995
(inception date)............................ $ 45
--------- --- ------- -- -------- ----- ---------
Balance at December 31, 1995................... 45
Capital contribution.......................... 178
Stock grants..................................
Issuance of Series A Preferred stock.......... 5,991
Issuance of common stock...................... 1,472
Issuance of stock options..................... 288 $(288)
Compensation expense recognized............... 22
Net loss...................................... $ (2,953)
--------- --- ------- -- -------- ----- ---------
Balance at December 31, 1996................... 7,974 (266) (2,953)
Issuance of Series D Preferred stock.......... 62,464
Acquisition of Alltel......................... 26,051
Issuance of Series E Preferred stock.......... 11,241
Issuance of common stock warrants............. 10,501
Exchange of Series A for Series F............. 1,478,097 $15 (5)
Acquisition of SDK............................ 3,243
Stock option exercises........................ 6
Stock grants.................................. 97
Dividends and accretion on mandatorily
redeemable preferred stock.................. (5,850)
Issuance of stock options..................... 55 (55)
Compensation expense recognized............... 71
Comprehensive income:
Net loss.................................... (131,060)
Foreign currency translation adjustment.....
Other comprehensive income..................
Comprehensive Income..........................
--------- --- ------- -- -------- ----- ---------
Balance at December 31, 1997................... 1,478,097 15 115,777 (250) (134,013)
--------- --- ------- -- -------- ----- ---------
EMTEK acquisition............................. 9,050
Issuance of Series G Preferred Stock.......... 900,000 $9 8,991
Stock option exercises........................ 405
Dividends and accretion on mandatorily
redeemable preferred stock.................. (1,335)
Compensation expense recognized............... 18
Comprehensive income:
Net loss.................................... (11,610)
Foreign currency translation adjustment.....
Other comprehensive income..................
Comprehensive Income..........................
--------- --- ------- -- -------- ----- ---------
Balance at March 31, 1998 (unaudited)......... 1,478,097 $15 900,000 $9 $132,888 $(232) $(145,623)
========= === ======= == ======== ===== =========

ACCUMULATED
OTHER
COMPREHENSIVE COMPREHENSIVE
INCOME INCOME TOTAL
------------- ------------- --------

Capital contribution at December 22, 1995
(inception date)............................ $ 50
--------- --------
Balance at December 31, 1995................... 50
Capital contribution.......................... 198
Stock grants.................................. 1
Issuance of Series A Preferred stock.......... 6,001
Issuance of common stock...................... 1,482
Issuance of stock options..................... --
Compensation expense recognized............... 22
Net loss...................................... (2,953)
--------- --------
Balance at December 31, 1996................... 4,801
Issuance of Series D Preferred stock.......... 62,514
Acquisition of Alltel......................... 26,072
Issuance of Series E Preferred stock.......... 11,250
Issuance of common stock warrants............. 10,501
Exchange of Series A for Series F............. --
Acquisition of SDK............................ 3,248
Stock option exercises........................ 7
Stock grants.................................. 97
Dividends and accretion on mandatorily
redeemable preferred stock.................. (5,850)
Issuance of stock options..................... --
Compensation expense recognized............... 71
Comprehensive income:
Net loss.................................... (131,060) (131,060)
Foreign currency translation adjustment..... 28 28 28
--------
Other comprehensive income.................. 28
--------
Comprehensive Income.......................... (131,032)
-------- --------- --------
Balance at December 31, 1997................... 28 (18,321)
--------- --------
EMTEK acquisition............................. 9,060
Issuance of Series G Preferred Stock.......... 9,000
Stock option exercises........................ 406
Dividends and accretion on mandatorily
redeemable preferred stock.................. (1,335)
Compensation expense recognized............... 18
Comprehensive income:
Net loss.................................... (11,610) (11,610)
Foreign currency translation adjustment..... 11 11 11
--------
Other comprehensive income.................. 11
--------
Comprehensive Income.......................... (11,599)
-------- --------- --------
Balance at March 31, 1998 (unaudited)......... $ 39 $(12,771)
========= ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-5

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ECLIPSYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

[Enlarge/Download Table]

YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------- --------------------
1996 1997 1997 1998
------- --------- --------- --------
(UNAUDITED)

Operating activities:
Net loss......................................... $(2,953) $(131,060) $(102,931) $(11,610)
------- --------- --------- --------
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization................. 32 31,622 6,213 6,997
Provision for bad debts....................... -- 600 150 225
Loss on disposal of property and equipment.... -- 557 570 --
Write off of in-process research and
development................................. -- 99,189 92,201 --
Write-off of MSA intangible asset............. -- -- -- 7,193
Write-off of contributed technology........... 1,482 -- -- --
Stock compensation expense.................... 22 168 18 18
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable......................... (190) (816) 2,869 2,449
Inventory................................... -- 655 256 200
Other current assets........................ (59) (276) 176 2,665
Other assets................................ (34) (71) 371 (114)
Deferred revenue............................ -- (2,044) (2,815) 2,774
Other current liabilities................... 882 2,196 1,372 (595)
Other long-term liabilities................. 57 348 2,407 (9)
------- --------- --------- --------
Total adjustments........................ 2,192 132,128 103,788 21,803
------- --------- --------- --------
Net cash provided (used) by operating
activities.................................. (761) 1,068 857 10,193
------- --------- --------- --------
Investing activities:
Purchase of property and equipment, net of
acquisitions.................................. (354) (3,096) (579) (1,646)
Capitalized software development costs........... -- (1,591) -- (896)
Acquisitions, net of cash acquired............... -- (108,983) (106,822) --
Changes in other assets.......................... (546) -- -- (16,000)
------- --------- --------- --------
Net cash used in investing activities......... (900) (113,670) (107,401) (18,542)
------- --------- --------- --------
Financing activities:
Borrowings....................................... -- 10,000 10,000 9,000
Payments on borrowings........................... -- (1,000) -- (9,000)
Sale of common stock............................. 199 7 -- 406
Sale of convertible preferred stock.............. 6,001 73,764 73,764 9,000
Sale of mandatorily redeemable preferred stock... -- 30,000 30,000 --
------- --------- --------- --------
Net cash provided by financing activities..... 6,200 112,771 113,764 9,406
------- --------- --------- --------
Effect of exchange rate changes on cash and cash
equivalents...................................... -- 28 5 11
------- --------- --------- --------
Net increase in cash and cash equivalents..... 4,539 197 7,225 1,068
Cash and cash equivalents, beginning of year....... 50 4,589 4,589 4,786
------- --------- --------- --------
Cash and cash equivalents, end of year............. $ 4,589 $ 4,786 $ 11,814 $ 5,854
======= ========= ========= ========
Cash paid for interest............................. $ -- $ 978 $ -- $ 741
======= ========= ========= ========
Cash paid for income taxes......................... $ -- $ -- $ -- $ --
======= ========= ========= ========

The accompanying notes are an integral part of these consolidated financial
statements.
F-6

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Eclipsys Corporation ("Eclipsys") and its subsidiaries (collectively, the
"Company") is a healthcare information technology solutions provider which was
formed in December 1995 and commenced operations in January 1996. The Company
provides, on an integrated basis, enterprise-wide, clinical patient care and
financial software solutions to healthcare organizations. Additionally, Eclipsys
provides other information technology solutions including outsourcing, remote
processing, networking technologies and other related services.

Subsequent to December 31, 1996, the Company made the following
acquisitions (Note 6):

Effective January 24, 1997, ALLTEL Healthcare Information Services, Inc.
("Alltel"), a wholly-owned subsidiary of ALLTEL Information Services,
Inc. ("AIS")

Effective June 26, 1997, SDK Healthcare Information Systems ("SDK")

These acquisitions have been accounted for as purchases and accordingly the
accompanying financial statements reflect the results of operations of these
businesses from the date acquired.

Effective January 30, 1998, the Company acquired the net assets of the
North American operations of the Emtek Healthcare Division of Motorola, Inc.
("Emtek").

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The financial statements include the accounts of Eclipsys and its
wholly-owned subsidiaries. All significant intercompany transactions have been
eliminated in consolidation.

FINANCIAL STATEMENT PRESENTATION

The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and disclosures of contingent assets and liabilities. The
estimates and assumptions used in the accompanying consolidated financial
statements are based upon management's evaluation of the relevant facts and
circumstances as of the date of the financial statements. Actual results could
differ from those estimates.

The unaudited pro forma balance sheet as of March 31, 1998 gives effect to
the conversion of the Company's Series D, E, F and G Convertible Preferred Stock
as if such conversion occurred as of March 31, 1998. Such preferred stock is
automatically convertible upon an initial public offering ("IPO") of the
Company's Common Stock (Notes 5 and 13).

CASH AND CASH EQUIVALENTS

For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with an original maturity of three
months or less to be cash equivalents.

REVENUE RECOGNITION

The Company's products are sold to customers based on long-term contractual
agreements. Revenues are derived from the licensing of computer software,
software and hardware maintenance, remote processing and outsourcing, training,
implementation assistance, consulting, and the sale of computer hardware.

F-7

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SYSTEMS AND SERVICES

For contracts in which the Company is required to make significant
production, modification, or customization changes, revenues from software
license fees are recognized using the percentage-of-completion method over the
implementation period of the contracts based on implementation hours incurred.
Other software license fees are generally recognized on a straight-line basis
over the term of the licensing and maintenance agreements, which range from five
to seven years. Remote processing and outsourcing services are marketed under
long-term agreements generally over periods from five to seven years and
revenues are recognized monthly as the work is performed. Software maintenance
fees are marketed under annual and multi-year agreements and are recognized
ratably over the term of the agreements. Implementation revenues are recognized
as the services are performed or on a percentage-of-completion basis for fixed
fee arrangements. Hardware maintenance revenues are billed and recognized
monthly over the term of agreements. Revenues related to other support services,
such as training, consulting, and implementation, are recognized when the
services are performed.

The Company warrants its products will perform in accordance with
specifications as outlined in the respective customer contracts. The Company
records a reserve for warranty costs at the time it recognizes revenue.
Historically, warranty costs have been minimal.

The Company accrues for product returns at the time it recognizes revenue,
based on actual experience. Historically, product return costs have been
minimal.

HARDWARE SALES

Hardware sales are recognized upon shipment of the product to the customer.

UNBILLED ACCOUNTS RECEIVABLE

Unbilled accounts receivable represent amounts owed to the Company under
noncancelable agreements for software license fees with extended payment terms
and computer hardware purchases which have been financed over extended payment
terms. The current portion of unbilled accounts receivable of $3.9 million as of
December 31, 1997 is included in accounts receivable in the accompanying
financial statements. The non-current portion of unbilled accounts receivable of
$1.8 million as of December 31, 1997 is included in other assets in the
accompanying financial statements. The non-current portion of unbilled accounts
receivable provides for payment terms that generally range from three to five
years and carry annual interest rates ranging from 7% to 10%. The Company
recognizes revenue in advance of billings under certain of its non-cancelable
long-term contracts that contain extended payment terms. The Company does not
have any obligation to refund any portion of its fees and has a history of
enforcement and collection of amounts due under such arrangements. Payments owed
under contracts with extended payment terms are due in accordance with the terms
of the respective contract. Historically, the Company has had minimal write-offs
of amounts due under such arrangements.

Additionally, included in unbilled accounts receivable are costs and
earnings in excess of billings related to certain software license fee
arrangements which are being recognized on a percentage-of-completion basis.
These amounts totaled approximately $1.0 million as of December 31, 1997.

INVENTORY

Inventory consists of computer parts and peripherals and is stated at the
lower of cost or market. Cost is determined using the first-in, first-out
method.

F-8

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT

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

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

The Company capitalizes a portion of its internal computer software
development costs incurred. Salaries, benefits, and other directly related costs
incurred in connection with programming and testing software products are
capitalized subsequent to establishing technological feasibility. Capitalization
ceases when the products are generally released for sale to customers.
Management monitors the net realizable value of all capitalized software
development costs to ensure that the investment will be recovered through
margins from future sales. These costs are amortized over the greater of the
ratio that current revenues bear to total and anticipated future revenues for
the applicable product or the straight line method over three to five years.
Capitalized costs related to software development were approximately $1.6
million for the year ended December 31, 1997.

ACQUIRED TECHNOLOGY AND INTANGIBLE ASSETS

The intangible assets arose from the Company's acquisitions (Note 6) and
consist of the following as of December 31, 1997 (in thousands):

[Enlarge/Download Table]

ACCUMULATED NET BOOK USEFUL
GROSS AMORTIZATION VALUE LIFE
------- ------------ -------- ------------

Acquired Technology........................ $45,517 $19,715 $25,802 3 - 5 Years
Ongoing customer relationships............. 10,846 1,988 8,858 5 Years
Management and services agreement.......... 9,543 2,197 7,346 4 Years
Goodwill................................... 13,550 1,466 12,084 5 - 12 Years
------- ------- -------
$79,456 $25,366 $54,090
======= ======= =======

The carrying value of the excess of cost over fair value of net assets
acquired is reviewed if the facts and circumstances suggest that it may be
impaired. This review indicates if the assets will not be recoverable as
determined based on future expected cash flows. Based on its review, the Company
does not believe that an impairment of its excess of cost over fair value of net
assets acquired has occurred.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, and other current liabilities,
approximate fair value. The recorded amount of long-term debt approximates fair
value as the debt bears interest at a floating market rate.

F-9

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES

The Company accounts for income taxes utilizing the liability method, and
deferred income taxes are determined based on the estimated future tax effects
of differences between the financial reporting and income tax basis of assets
and liabilities and tax carryforwards given the provisions of the enacted tax
laws.

STOCK-BASED COMPENSATION

The Company has chosen to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees", and related
Interpretations and to elect the disclosure option of Statement of Financial
Accounting Standards ("FAS") No. 123, "Accounting for Stock-Based Compensation".
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the estimated market price of the Company's stock at the date of the
grant over the amount an employee must pay to acquire the stock.

BASIC AND DILUTED NET LOSS PER SHARE

For all periods presented, basic net loss per common share is presented in
accordance with FAS 128, "Earnings per Share", which provides for new accounting
principles used in the calculation of earnings per share and was effective for
financial statements for both interim and annual periods ended after December
15, 1997. Basic net loss per common share is based on the weighted average
number of shares of common stock outstanding during the period. Stock options to
acquire 657,500 and 1,831,652 shares of common stock in 1996 and 1997,
respectively, warrants to acquire up to 1,799,715 shares of common stock in
1997, and convertible preferred stock (convertible into 1,000,000 and 9,433,314
shares of common stock in 1996 and 1997, respectively) were the only securities
issued which would have been included in the diluted earnings per share
calculation had they not been antidilutive due to the net loss reported by the
Company. The Company has excluded 370,609 contingently returnable shares of
common stock from basic and diluted earnings per share computations (Notes 4 and
5).

CONCENTRATION OF CREDIT RISK

The Company's customers operate primarily in the healthcare industry. The
Company sells its products and services under contracts with varying terms. The
accounts receivable amounts are unsecured. Management believes the allowance for
doubtful accounts is sufficient to cover credit losses.

FOREIGN CURRENCY TRANSLATION

The financial position and results of operations of foreign subsidiaries
are measured using the currency of the respective countries as the functional
currency. Assets and liabilities are translated at the foreign exchange rate in
effect at the balance sheet date, while revenue and expenses for the year are
translated at the average exchange rate in effect during the year. Translation
gains and losses are not included in determining net income or loss but are
accumulated and reported as a separate component of shareholders' equity
(deficit). The Company has not entered into any hedging contracts during the two
year period ended December 31, 1997.

COMPREHENSIVE INCOME

Effective January 1, 1998, the Company implemented Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income." This standard
requires that the total changes in equity resulting from revenue, expenses, and
gains and losses, including those which do not affect the accumulated deficit,
be

F-10

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
reported. Accordingly, those amounts which are comprised solely of foreign
currency translation adjustments, are included in other comprehensive income in
the consolidated statement of shareholders' equity (deficit).

UNAUDITED INFORMATION

The interim financial information as of March 31, 1998 and for the three
months ended March 31, 1997 and 1998 is unaudited. However, in the opinion of
management, such information has been prepared on the same basis as the audited
financial statements and includes all adjustments, consisting solely of normal
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations for the periods presented. The interim
results, however, are not necessarily indicative of results for any future
period.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued FAS 131,
"Disclosure about Segments of an Enterprise and Related Information". In October
1997, the American Institute of Certified Public Accountants issued Statement of
Position 97-2 ("SOP 97-2"), "Software Revenue Recognition". All these statements
are effective for fiscal years beginning after December 15, 1997, and are not
expected to have a material impact on the Company's financial statements.
Effective January 1, 1998, the Company adopted S0P 97-2.

3. PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows (in thousands):

[Download Table]

DECEMBER 31,
--------------
1996 1997
---- -------

Computer equipment.......................................... $107 $ 8,467
Office equipment and other.................................. 199 1,834
Purchased software.......................................... -- 3,382
Leasehold improvements...................................... 48 2,122
---- -------
354 15,805
Less: Accumulated depreciation and amortization............. (32) (6,288)
---- -------
$322 $ 9,517
==== =======

Depreciation of property and equipment totaled approximately $32,000 and
$6.3 million in 1996 and 1997, respectively.

4. LICENSING ARRANGEMENT

In May 1996, the Company entered into an exclusive licensing arrangement
with Partners HealthCare System, Inc. ("Partners") to further develop,
commercialize, distribute and support certain intellectual property which was
being developed at Partners. In consideration for the license, the Company
issued 988,290 shares of Common Stock of the Company and agreed to pay royalties
to Partners on sales of the developed product until the Company completes an
initial public offering of common stock with a per share offering price of
$10.00 or higher. There was no revenue recognized by the Company or royalties
paid to Partners under the arrangement in 1996 or 1997. Under the terms of the
license, the Company may further develop, market, distribute and support the
original technology and license it, as well as market related services, to other
healthcare providers and hospitals throughout the world (other than in the
Boston,
F-11

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

4. LICENSING ARRANGEMENT (CONTINUED)
Massachusetts metropolitan area). The Company is obligated to offer to Partners
and certain of their affiliates an internal use license, granted on most favored
customer terms, to any new software applications developed by the Company,
whether or not derived from the licensed technology, and major architectural
changes to the licensed software. After May 3, 1998, Partners and certain of
their affiliates are entitled to receive internal use licenses for any changes
to any modules or applications included in the licensed technology, as defined.
The Company has an exclusive right of first offer to commercialize new
information technologies developed in connection with Partners. If the Company
fails to pay the required royalties, breaches any material term under the
licensing arrangement or if the current Chairman of the Board, President and
Chief Executive Officer of the Company voluntarily terminates his employment
with the Company prior to May 1999, the license may become non-exclusive, at the
option of Partners. If Partners elects to convert the license to non-exclusive,
it must return 370,609 shares of Common Stock to the Company. The Company has
the option to purchase the technology it licenses from Partners upon the
completion of an IPO.

At the time the license arrangement was consummated, the licensed
technology had not reached technological feasibility and had no alternative
future use. The licensed technology being developed consisted of
enterprise-wide, clinical information software. It is expected that the Company
will release certain commercial products derived from the licensed technology in
late 1998. The Company accounted for the license arrangement with Partners by
recording a credit to additional paid-in capital of $1.5 million (representing
the estimated fair value of the licensed technology) and a corresponding charge
to its statement of operations for the year ended December 31, 1996. The charge
was taken because the technology had not reached technological feasibility and
had no alternative future use.

As part of the agreement, the Company has provided development services to
Partners related to commercializing the intellectual property; fees for these
development services totaled $2.0 million, and $2.5 million for the years ended
December 31, 1996 and 1997, respectively, and are included as a reduction in
research and development expenses in the accompanying consolidated statements of
operations.

5. SHAREHOLDERS' EQUITY AND MANDATORILY REDEEMABLE PREFERRED STOCK

STOCK SPLIT

In May 1997, the Company declared a three-for-two split for all Common
Stock and Non-Voting Common Stock issued and outstanding. In addition, the
shareholders approved an increase in the number of authorized shares of Common
Stock from 30,000,000 to 50,000,000. In June 1998, the Company effected a
two-for-three reverse stock split of all Common Stock and Non-Voting Common
Stock outstanding. The accompanying consolidated financial statements give
retroactive effect to the May 1997 and June 1998 stock splits as if they had
occurred at inception of the Company.

MANDATORILY REDEEMABLE PREFERRED STOCK

In connection with its acquisition of Alltel (Note 6), the Company sold
30,000 shares of Series B 8.5% Cumulative Redeemable Preferred Stock ("Series
B") and warrants to purchase up to 1,799,715 shares of Non-Voting Common Stock
at $.01 per share for total consideration of $30.0 million. The number of
warrants to be issued is subject to adjustment in the event the Company redeems
all or a portion of the Series B prior to its mandatory redemption date. The
Series B is non-voting and is entitled to a liquidation preference of $1,000 per
share plus any unpaid dividends. Dividends are cumulative and accrue at an
annual rate of 8.5%. In the event that dividends are not paid when due for
quarters ending after December 31, 1999, the dividend rate will increase to
12.5%.

F-12

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

5. SHAREHOLDERS' EQUITY AND MANDATORILY REDEEMABLE PREFERRED STOCK (CONTINUED)
The Series B is redeemable by the Company at its redemption price at any
time on or before the mandatory redemption date of December 31, 2001. The
redemption price, as defined, equals the liquidation preference amount plus all
accrued and unpaid dividends. With respect to liquidation preferences, the
Series B ranks equal to the Series C 8.5% Cumulative Redeemable Preferred Stock
("Series C") and senior to all other equity instruments. In the event that
certain shareholders cease to continue to own a specified percentage of common
or convertible preferred stock of the Company, the holders of the Series B may
elect to put the securities back to the Company at their redemption price, as
defined. Additionally, the Series B may be put back to the Company at their
redemption value in the event of a change of control, as defined.

In January 1997, 20,000 shares of the Series C were issued to AIS as part
of the consideration paid for Alltel (Note 6). The Series C contains
substantially the same terms, including voting rights, ability to redeem and
liquidation preferences as the Series B. The Series B has preferential rights in
the event of a change of ownership percentages of certain of the Company's
stockholders; the Series C does not have these preferential rights. The Series C
redemption price is determined the same as Series B.

The Series C must be redeemed on or before December 31, 2001. The Series C
may be put back to the Company at their redemption value in the event of a
change in control, as defined.

The Company has accounted for the Series B and C as mandatorily redeemable
preferred stock. Accordingly, the Company is accruing dividends and amortizing
any discount over the redemption period with a charge to additional paid-in
capital ("APIC"). The Company recorded a discount on the Series B at the time of
its issuance for the estimated fair value of the warrants ($10.5 million). The
Company valued the maximum amount of warrants that would be issued up to the
mandatory redemption date of the Series B as of the acquisition date and
December 31, 1997. The Company recorded the Series C on the date of acquisition
of Alltel at $10.3 million (after adjustment for the 4,500 shares returned by
AIS (Note 6)), which included a discount from its face amount of $5.2 million.
The amount charged to APIC related to the Series B and C for the year ended
December 31, 1997 was $4.1 million and $1.8 million, respectively.

The Series B and Series C consist of the following (in thousands):

[Enlarge/Download Table]

DATE OF ISSUE DECEMBER 31, 1997
-------------------------------------- --------------------------------------
FACE VALUE DISCOUNT CARRYING VALUE FACE VALUE DISCOUNT CARRYING VALUE
---------- -------- -------------- ---------- -------- --------------

Series B.................... $30,000 $10,501 $19,499 $30,000 $6,476 $23,524
Series C.................... 15,500 5,242 10,258 15,500 3,417 12,083
------- ------- ------- ------- ------ -------
$45,500 $15,743 $29,757 $45,500 $9,893 $35,607
======= ======= ======= ======= ====== =======

SERIES A CONVERTIBLE PREFERRED STOCK

In May 1996, concurrent with entering into the Partners' licensing
arrangement, the Company sold 1,000,000 shares of Series A Convertible Preferred
Stock ("Series A") for $6.0 million to outside investors. The Series A was
convertible on a one-to-one basis to shares of Common Stock of the Company at
the discretion of the outside investors. The Series A had voting rights
equivalent to Common Stock on an as converted basis and a liquidation preference
of $6 per share. The Company did not declare or pay any dividends on Series A.
In January 1997, the Company issued 1,478,097 shares of Series F Convertible
Preferred Stock ("Series F") in exchange for the cancellation of Series A. The
Company accounted for the transaction analogously to an extinguishment of debt
with a related party and, accordingly, recorded a charge of $3.1 million to
additional paid-in capital at the date of this transaction. In addition, the
charge is recorded as an increase to net loss available to common shareholders
in the accompanying statement of operations.

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

5. SHAREHOLDERS' EQUITY AND MANDATORILY REDEEMABLE PREFERRED STOCK (CONTINUED)
SERIES D CONVERTIBLE PREFERRED STOCK

In January 1997, the Company sold 4,981,289 shares of the Series D
Convertible Preferred Stock ("Series D") for $62.5 million to private investors
and issued 2,077,497 shares to AIS in connection with the acquisition of Alltel.
Each share of Series D is convertible into one share of Common Stock. The Series
D contains voting rights as if it were converted into Common Stock and has a
liquidation preference of $12.55 per share plus any declared but unpaid
dividends. The Series D is equivalent to Series E Convertible Preferred Stock
("Series E") with respect to liquidation preference and rank.

Both the Series D and E rank junior to the Series B and C and senior to
Series F. To date, the Company has not declared or paid any dividends on the
Series D.

SERIES E CONVERTIBLE PREFERRED STOCK

In January 1997, the Company sold 896,431 shares of Series E for $11.3
million. The Series E is non-voting and is identical to the Series D with
respect to liquidation preference and rank. Each share of Series E is
convertible into one share of Non-Voting Common Stock. To date, the Company has
not declared or paid any dividends on the Series E.

SERIES F CONVERTIBLE PREFERRED STOCK

As described above, in January 1997, 1,478,097 shares of Series F were
issued in exchange for the cancellation of the outstanding shares of Series A.
The Series F contains a liquidation preference of $6 per share. The Series F
ranks junior to the Company's other classes of preferred stock with respect to
liquidation preferences. Each share of Series F is convertible into one share of
Common Stock. To date, the Company has not declared or paid any dividends on the
Series F.

COMMON STOCK AND NON-VOTING COMMON STOCK

Holders of Common Stock are entitled to one vote per share. Holders of
Non-Voting Common Stock do not have voting rights other than as provided by
statute.

UNDESIGNATED PREFERRED STOCK

The Company has available for issuance, 1,000,000 shares of undesignated
preferred stock (the "Undesignated Preferred"). The liquidation, voting,
conversion and other related provisions of the Undesignated Preferred will be
determined by the Board at the time of issuance. Currently, there are no
outstanding shares.

6. ACQUISITIONS

Effective January 24, 1997, Eclipsys completed the acquisition of Alltel.
As consideration for this transaction, Eclipsys paid AIS $104.8 million cash,
issued 15,500 (after consideration of the return of 4,500 shares by AIS in
October 1997) shares of Series C valued at approximately $10.3 million and
2,077,497 shares of Series D valued at approximately $26.1 million. Concurrent
with the acquisition, the Company and Alltel entered into the Management and
Services Agreement ("MSA") whereby Alltel agreed to provide certain services to
the Company and its customers together with certain non-compete provisions. In
exchange, the Company agreed to pay Alltel $11.0 million in varying installments
through December 2000. The obligation and equivalent corresponding asset were
recorded at its net present value of $9.5 million at the date of signing. To
finance the transaction, the Company sold, for $30.0 million, 30,000 shares of
Series B and warrants to purchase up to 1,799,715 shares of Non-Voting Common
Stock to private investors. Additionally, the Company sold 4,981,289 shares of
Series D and 896,431 shares of Series E for total proceeds of $73.8 million.

F-14

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

6. ACQUISITIONS (CONTINUED)
The transaction was accounted for as a purchase and accordingly, the
purchase price was allocated based on the fair value of the net assets acquired.
The purchase price is composed of and allocated as follows (in thousands):

[Download Table]

Cash, net of cash acquired.................................. $104,814
Issuance of Series D........................................ 26,072
Issuance of Series C........................................ 10,258
Transaction costs........................................... 2,008
Liabilities assumed......................................... 58,397
--------
201,549
--------
Current assets.............................................. 31,803
Property and equipment...................................... 12,242
Other assets................................................ 3,148
Identifiable intangible assets:
In-process research and development.................... 92,201
Acquired technology.................................... 42,312
Ongoing customer relationships......................... 10,846
--------
192,552
--------
Goodwill.................................................... $ 8,997
========

The acquisition agreement contains certain provisions whereby the purchase
price could be adjusted within twelve months from the acquisition date based on
certain criteria defined in the agreement. Based on these provisions, in October
1997, AIS returned 4,500 shares of Series C to Eclipsys. In December 1997, the
Company presented its final analysis to AIS of items for which, under the
agreement, the Company believed it was entitled to consideration. In March 1998,
the Company negotiated an agreement with AIS, which settled these issues related
to any adjustments that could be made pursuant to the provisions in the
acquisition agreement (Note 13). After accounting for this adjustment, the
Company's total consideration paid for this acquisition was $201.5 million,
including liabilities assumed, net of cash acquired.

In connection with the recording of the acquisition of Alltel, the Company
reduced the predecessor's reported deferred revenue by $7.3 million to the
amount that reflects the estimated fair value of the contractual obligations
assumed. This adjustment results from the Company's requirement, in accordance
with generally accepted accounting principles, to record the fair value of the
obligation assumed with respect to arrangements for which the related revenue
was previously collected by the predecessor company. The Company's liability at
acquisition includes its estimated costs in fulfilling those contract
obligations.

Effective June 26, 1997, the Company acquired all of the common stock of
SDK in exchange for 499,997 shares of Common Stock valued at approximately $3.2
million, $2.2 million in cash and acquisition debt due to SDK shareholders
totaling $7.6 million. The transaction was accounted for as a purchase and,
accordingly, the purchase price was allocated based on the estimated fair value
of the net assets acquired.

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

6. ACQUISITIONS (CONTINUED)
The purchase price is composed of and allocated as follows (in thousands):

[Download Table]

Cash, net of cash acquired.................................. $ 2,161
Issuance of Common Stock.................................... 3,248
SDK acquisition debt........................................ 7,588
Liabilities assumed......................................... 3,514
-------
16,511
-------
Current assets.............................................. 1,061
Property and equipment...................................... 671
Other assets................................................ 33
Identifiable intangible assets:
In-process research and development.................... 6,988
Acquired technology.................................... 3,205
-------
11,958
-------
Goodwill.................................................... $ 4,553
=======

The Company is using the acquired in-process research and development to
create new clinical, patient financial, access management and data warehousing
products which will become part of its Sunrise product suite over the next
several years. The Company anticipates that certain products will be generally
released during 1998, with additional product releases in subsequent periods
through 2001. It is management's expectation that the acquired in-process
research and development will be successfully developed, however there can be no
assurance that commercial viability of these products will be achieved. In the
event that these products are not generally released in a timely manner, the
Company may experience fluctuations in future earnings as a result of such
delays.

In connection with the Alltel and SDK acquisitions, the Company wrote off
in-process research and development charges of $92.2 million and $7.0 million,
respectively, related to the appraised values of certain in-process research and
development acquired in these acquisitions.

Unaudited pro forma results of operations for the years ended December 31,
1996 and 1997, as if the aforementioned acquisitions had occurred on January 1,
1996 is as follows (in thousands, except per share data):

[Download Table]

YEAR ENDED
DECEMBER 31,
--------------------
1996 1997
-------- ---------

Revenues.................................................... $115,606 $ 103,786
Net loss.................................................... (5,696) (132,159)
Basic and diluted loss per share............................ $ (1.62) $ (37.39)

Effective January 30, 1998, the Company acquired the net assets of Emtek
for an aggregate purchase price of approximately $11.7 million, including
1,000,000 shares of Common Stock valued at $9.1 million and liabilities assumed
of approximately $12.3 million. In addition, Motorola agreed to pay the Company
$9.6 million in cash due within one year for working capital purposes.

F-16

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

6. ACQUISITIONS (CONTINUED)
The purchase price is composed of and allocated as follows:

[Download Table]

Issuance of Common Stock.................................... $ 9,060
Receivable from Motorola.................................... (9,600)
Liabilities assumed......................................... 12,275
-------
$11,735
-------
Current assets.............................................. 5,033
Property and equipment...................................... 2,629
-------
$ 7,662
-------
Identifiable intangible assets (acquired technology)........ $ 4,073
=======

7. LONG-TERM DEBT

Long-term debt consists of the following as of December 31, 1997 (in
thousands):

[Download Table]

Term Loan................................................... $ 9,000
SDK acquisition debt, interest payable quarterly at 9.5%,
principal due in two annual installments of $3,794,
commencing April 1998..................................... 7,588
--------
16,588
Less current portion........................................ (12,794)
--------
Long-term debt.............................................. $ 3,794
========

In connection with the Alltel acquisition, the Company entered into a $30
million credit facility (the "Facility"). The Facility included a $10 million
term loan (the "Term Loan") and a $20 million revolving credit facility (the
"Revolver"). Borrowings under the Facility are secured by substantially all of
the assets of the Company. The Term Loan was payable in varying quarterly
installments through January 2000. As more fully discussed in Note 13, the Term
Loan was repaid in full with the proceeds of the sale of Series G Convertible
Preferred Stock in February 1998. As such, the entire balance of the Term Loan
is classified as current in the accompanying financial statements.

Borrowings under the Facility bear interest, at the Company's option, at
(i) LIBOR plus 1% to 3% or (ii) the higher of a) the banks prime lending rate or
b) the Federal Funds Rate plus 0.5%; plus 0% to 1.75%. The interest rates vary
based on the Company's ratio of earnings to consolidated debt, as defined. At
December 31, 1997, the Company's borrowing rate under the Facility was 6.85%.
Under the terms of the Facility, the Company is required to maintain certain
financial covenants related to consolidated debt to earnings, consolidated
earnings to interest expense and consolidated debt to capital. In addition, the
Company has limitations on the amounts of certain types of expenditures and is
required to obtain certain approvals related to mergers and acquisitions, as
defined. The Company was in compliance with all provisions of the Facility as of
December 31, 1997.

As of December 31, 1997, the Company has $20 million available for future
borrowings under the Revolver. The Revolver expires on the third anniversary of
the Facility. Under the terms of the Revolver, the Company pays an annual
commitment fee of .375% for any unused balance, as defined. Additionally, the
Company pays a fee of .125% for any Letters of Credit issued under the
agreement. As of December 31, 1997, unused Letters of Credit totaling
approximately $5.0 million were outstanding against the Revolver. As discussed
in Note 13, in May 1998 the Company increased its borrowings under the Revolver.

F-17

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

8. OTHER CURRENT LIABILITIES

Other current liabilities consist of the following (in thousands):

[Download Table]

DECEMBER 31,
--------------
1996 1997
---- -------

Accounts payable............................................ $120 $ 4,606
Accrued compensation and incentive.......................... 237 7,847
Customer deposits........................................... -- 7,959
Payment due AIS under MSA................................... -- 2,000
Accrued acquisition costs................................... 501 --
Accrued interest............................................ -- 672
Other....................................................... 24 8,066
---- -------
$882 $31,150
==== =======

9. INCOME TAXES

The Company has no current or deferred income tax provision due to the net
losses reported by the Company.

A reconciliation of the federal statutory rate and the effective income tax
rate follows (in thousands):

[Download Table]

YEARS ENDED
DECEMBER 31,
-------------------
1996 1997
-------- --------

Statutory federal income tax rate (34%)..................... $(500) $(45,481)
SDK in-process research and development..................... -- 2,376
Meals and entertainment..................................... 8 460
State income taxes.......................................... (58) (5,163)
Non-deductible amortization................................. -- 747
Valuation allowance......................................... 550 46,976
Other....................................................... -- 85
----- --------
Income tax benefit (provision).............................. $ -- $ --
===== ========

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

9. INCOME TAXES (CONTINUED)
The significant components of the Company's net deferred tax asset were as
follows (in thousands):

[Download Table]

DECEMBER 31,
-------------------
1996 1997
-------- --------

Deferred tax assets:
Alltel in-process research and development.................. $ -- $ 34,969
Intangible assets........................................... -- 5,353
Deferred revenue............................................ -- 3,990
Allowance for doubtful accounts............................. -- 660
Compensation related accrued liabilities.................... 58 249
Accrued expenses............................................ -- 3,569
Depreciation and amortization............................... -- 1,257
Net operating loss carryforwards............................ 504 5,220
----- --------
562 55,267
----- --------
Deferred tax liabilities:
Capitalization of software development costs.............. -- 604
Depreciation and amortization............................. 12 --
Other..................................................... -- --
----- --------
Net deferred tax asset...................................... 550 54,663
----- --------
Valuation allowance......................................... (550) (54,663)
----- --------
$ -- $ --
===== ========

At December 31, 1997, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $13.8 million. The carryforwards
expire in varying amounts through 2012.

In addition, under the Tax Reform Act of 1986, the amounts of, and the
benefits from, net operating loss carryforwards may be impaired or limited in
certain circumstances. The Company experienced an ownership change as defined
under Section 382 of the Internal Revenue Code in January, 1997. As a result of
the ownership change, net operating loss carryforwards of approximately $1.5
million, which were incurred prior to the date of change, are subject to annual
limitation on their future use. As of December 31, 1997, a valuation allowance
has been established against the deferred tax assets which the Company does not
believe are more likely than not to be realized. The future reduction of the
valuation allowance, up to $7.2 million, will be reflected as a reduction of
goodwill.

10. EMPLOYEE BENEFIT PLANS

STOCK OPTION PLAN

In April 1996, the Board of Directors of the Company (the "Board") adopted
the 1996 Stock Plan (the "1996 Stock Plan"). The 1996 Stock Plan, as amended,
provides for grants of stock options, awards of Company stock free of any
restrictions and opportunities to make direct purchases of restricted stock of
the Company. The 1996 Stock Plan allows for the issuance of options or other
awards to purchase up to 2,500,000 shares of Common Stock. Pursuant to the terms
of the 1996 Stock Plan, a committee of the Board

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

10. EMPLOYEE BENEFIT PLANS (CONTINUED)
is authorized to grant awards to employees and non employees and establish
vesting terms. The options expire ten years from the date of grant. The
following table summarizes activity under the Plan:

[Enlarge/Download Table]

1996 1997
------------------------- ---------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
------- --------------- --------- ---------------

Outstanding at beginning of year......... -- $ -- 657,500 $ .11
Granted................................ 657,500 .11 1,309,889 6.52
Exercised.............................. -- (57,071) .11
Forfeited.............................. -- (78,666) 4.81
------- ---- --------- -----
Outstanding at end of year............... 657,500 .11 1,831,652 4.49
------- ---- --------- -----
Options exercisable at end of year....... -- 197,978
------- ---------
Weighted average fair value of options
granted during the year................ $.45 $1.75
==== =====

[Enlarge/Download Table]

1996 1997
------------------------------ ------------------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE EXERCISE FAIR MARKET AVERAGE EXERCISE FAIR MARKET
OPTIONS GRANTED DURING THE YEAR PRICE VALUE PRICE VALUE
------------------------------------ ---------------- ----------- ---------------- -----------

Option price > fair market value $.10 $ -- $6.73 $1.76
Option price = fair market value -- -- -- --
Option price < fair market value .15 1.39 .20 1.35

During 1996 and 1997, pursuant to the 1996 Stock Plan, the Board issued
109,999 and 15,000 shares of Common Stock, respectively, to employees and
nonemployees for services. Compensation expense of approximately $1,000 and
$97,000 was recorded in 1996 and 1997, respectively, related to these
transactions.

In addition, during 1996 and 1997, the Company recorded compensation
expense of $22,000 and $71,000, respectively, related the granting of certain
stock options to employees with exercise prices below the estimated fair market
value of the Common Stock at the date of grant.

The Company has adopted the disclosure only provision of FAS 123. Had
compensation cost for the Company's stock option grants described above been
determined based on the fair value at the grant date for awards in 1996 and 1997
consistent with the provisions of FAS 123, the Company's net loss and loss per
share would have been increased to the pro forma amounts indicated below (in
thousands, except share data):

[Download Table]

YEARS ENDED
DECEMBER 31,
--------------------
1996 1997
-------- ---------

Net loss:
As reported............................................... $(2,953) $(131,060)
Pro forma................................................. (2,954) (131,324)
Basic and diluted net loss per share:
As reported............................................... $ (.98) $ (39.73)
Pro forma................................................. (.98) (39.80)

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1997, respectively:

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

10. EMPLOYEE BENEFIT PLANS (CONTINUED)
dividend yield of 0% for all years, risk-free interest rate of 5.90% and 6.06%
and expected life of 5.0 years and 5.2 years. As a nonpublic entity, the Company
used the minimum value method which does not incorporate a volatility
assumption.

The following table summarizes information about stock options outstanding
at December 31, 1997:

[Enlarge/Download Table]

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICE AT 12/31/97 LIFE PRICE 12/31/97 PRICE
--------------------------------- ----------- ----------- -------- ----------- ----------

$0.10 to $0.20................... 621,929 8.36 $ .12 160,789 $ .11
$6.50 to $7.50................... 1,209,723 9.54 $6.74 37,189 $7.52

EMPLOYEE SAVINGS PLAN

During 1997, the Company established a Savings Plan (the "Plan") pursuant
to Section 401(k) of the Internal Revenue Code (the "Code"), whereby employees
may contribute a percentage of their compensation, not to exceed the maximum
amount allowable under the Code. At the discretion of the Board, the Company may
elect to make matching contributions, as defined in the Plan. For the year end
December 31, 1997, the Board authorized matching contributions totaling
$780,000.

11. COMMITMENTS AND CONTINGENCIES

NONCANCELABLE OPERATING LEASES

The Company leases its office space and certain equipment under
noncancelable operating leases. Rental expense under operating leases was
approximately $70,000 and $6.2 million for the years ended December 31, 1996 and
1997, respectively. Future minimum rental payments for noncancelable operating
leases as of December 31, 1997 are as follows (in thousands):

[Download Table]

YEAR ENDING
DECEMBER 31,
------------

1998........................................................ $ 5,801
1999........................................................ 4,930
2000........................................................ 2,616
2001........................................................ 1,877
2002........................................................ 1,632
Thereafter.................................................. 4,575
-------
$21,431
=======

LITIGATION

The Company is involved in litigation incidental to its business. In the
opinion of management, after consultation with legal counsel, the ultimate
outcome of such litigation will not have a material adverse effect on the
Company's financial position or results of operations or cash flows.

12. RELATED PARTY TRANSACTIONS

During 1997, the Company paid AIS $1.7 million for certain transition
services provided by AIS related to accounting services, computer processing and
other various activities.

F-21

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

12. RELATED PARTY TRANSACTIONS (CONTINUED)
During 1997, Eclipsys paid a total of $348,000 to certain subsidiaries of
AIS and Alltel Corporation related to the purchase of various goods and
services.

The Company leases office space from the former owner of SDK. During the
year ended December 31, 1997 the Company paid $178,000 under this lease. The
lease is noncancelable and expires in 2009.

In 1997, the Company paid $336,000 to a charter company for the use of an
aircraft for corporate purposes. The aircraft provided for the Company's use was
leased by the charter company from a company owned by the Chairman of the Board,
President and Chief Executive Officer of the Company (the "Chairman"). The
Chairman's company received $219,000 for these transactions. The Chairman has no
interest in the charter company. In the opinion of management, the Company
believes that the terms of charters were comparable to rates that would be
charged by unaffiliated parties.

The Company has an employment agreement with the Chairman through May 1,
1999. Under the provisions of the agreement, the Chairman earns an annual salary
of $150,000, subject to adjustment from time to time. The payment of amounts
earned under the agreement were to be deferred until certain earnings were
attained by the Company. During 1997, $66,000 was paid under the agreement.
Effective January 1, 1998, the Chairman's annual salary was increased to
$200,000.

13. SUBSEQUENT EVENTS

SHAREHOLDERS' EQUITY (DEFICIT)

In January 1998, the Company amended its Certificate of Incorporation (the
"Certificate"). Under the amended Certificate, the Company increased the number
of authorized shares of Undesignated Preferred to 1,100,000 and created Series G
Convertible Preferred Stock ("Series G"). There are 900,000 authorized shares of
Series G. The Series G is convertible on a two-for-three basis to shares of
Common Stock. The conversion rate is subject to adjustment in certain
circumstances. The Series G has a liquidation preference of $10 per share. In
the event of an involuntary liquidation of the Company, the Series G will
participate on a pro rata basis with the Series D and E. In February 1998, the
Company sold 900,000 shares of Series G to outside investors for total
consideration of $9 million. The proceeds were utilized to repay the outstanding
Term Loan balance.

In addition, the Company amended the terms of (i) all of its convertible
preferred stock to require that it automatically be converted into Common Stock
or Non-Voting Common Stock, as applicable, upon a qualifying IPO and (ii) all of
its Mandatorily Redeemable Preferred Stock to require that it be mandatorily
redeemed upon a qualifying IPO.

In June 1998, the Company effected a two-for-three reverse stock split of
all Common Stock and Non-Voting Common Stock outstanding.

CREDIT FACILITY

In March 1998, the Company borrowed $9.0 million under the Revolver to pay
a portion of the AIS settlement, described herein.

On May 29, 1998, the Company entered into an agreement to increase the
available borrowings under the Revolver (Note 7) from $20.0 million to $50.0
million (unaudited).

1998 STOCK INCENTIVE PLAN

In January 1998, the Board adopted the 1998 Stock Incentive Plan (the
"Incentive Plan"). The Incentive Plan provides for the granting of stock
options, stock appreciation rights, restricted stock awards or

F-22

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ECLIPSYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED) -- (CONTINUED)

13. SUBSEQUENT EVENTS (CONTINUED)
unrestricted stock awards. Under the provisions of the Incentive Plan, no
options or other awards may be granted after April 2008. There are currently
4,333,333 shares of common stock reserved under the Incentive Plan, together
with the 1996 Stock Plan and the 1998 Employee Stock Purchase Plan. Options
granted under the Incentive Plan will be granted at the fair market value of the
stock as of the date of grant.

1998 EMPLOYEE STOCK PURCHASE PLAN

Under the Company's 1998 Employee Stock Purchase Plan (the "Purchase Plan")
(implemented in April 1998), employees of the Company, including directors of
the Company who are employees are eligible to participate in quarterly plan
offerings in which payroll deductions may be used to purchase shares of Common
Stock. The purchase price of such shares is the lower of 85% of the fair market
value of the Common Stock on the day the offering commences and 85% of the fair
market value of the Common Stock on the day the offering terminates. The first
offering period under the Purchase Plan will not commence until after the
completion of the Offering.

INITIAL PUBLIC OFFERING

In April 1998, the Company's Board of Directors authorized the Company to
file a Form S-1 with the Securities and Exchange Commission under the Securities
Act of 1933 with respect to an IPO.

ALLTEL SETTLEMENT

In the first quarter of 1998, the Company and AIS renegotiated, in two
separate transactions, certain matters relating to the acquisition of Alltel. In
one transaction, AIS returned to the Company, for cancellation, 11,000 shares of
Series C in exchange for resolving certain open issues in connection with the
Alltel acquisition, and the Company agreed, at AIS' option, to redeem the
remaining 4,500 shares of Series C held by AIS for an aggregate price of $4.5
million at the time of the IPO and for a period of 30 days thereafter. The
Company will use a portion of the net proceeds of the IPO to redeem the
remaining Series C held by AIS. In the second transaction, the Company paid AIS
an aggregate of $14.0 million in exchange for terminating all of the rights and
obligations of both parties under the MSA. The Company recorded a charge of
approximately $7.2 million related to the write-off of the MSA intangible asset.
In addition, the Company recorded a reduction to goodwill of approximately $7.8
million related to the final settlement of certain issues related to the Alltel
acquisition resulting in the return of the 11,000 shares of Series C.

F-23

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
and Shareholders of Eclipsys Corporation

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in shareholder's
deficit and of cash flows present fairly, in all material respects, the
financial position of ALLTEL Healthcare Information Services, Inc. (the Company)
(a Delaware corporation, wholly-owned by ALLTEL Information Services, Inc., an
Arkansas corporation) and its subsidiaries at December 31, 1995 and 1996, and
the results of their operations and their cash flows for the years then ended
and for the period from January 1, 1997 through January 23, 1997 in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As discussed in Note 10, effective January 24, 1997, the Company was acquired by
Eclipsys Corporation.

PRICEWATERHOUSECOOPERS LLP

Atlanta, Georgia
June 27, 1997

F-24

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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

[Download Table]

DECEMBER 31,
-------------------
1995 1996
-------- --------

ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,599 $ 2,022
Accounts receivable, net of allowance for doubtful
accounts of $749 and $1,274 at December 31, 1995 and
1996, respectively..................................... 29,435 29,713
Inventory................................................. 2,081 1,576
Deferred tax asset........................................ 3,676 3,682
Other current assets...................................... 678 634
-------- --------
Total current assets................................... 38,469 37,627
Property and equipment, net................................. 10,168 10,739
Purchased software, net of accumulated amortization of
$2,985 and $4,453 at December 31, 1995 and 1996,
respectively.............................................. 4,098 2,882
Capitalized software development costs, net of accumulated
amortization of $4,671 and $11,880 at December 31, 1995
and 1996, respectively.................................... 27,632 35,306
Intangible assets, net of accumulated amortization of $1,129
and $2,101 at December 31, 1995 and 1996, respectively.... 5,670 4,698
Other assets................................................ 2,344 9,191
-------- --------
Total assets........................................... $ 88,381 $100,443
======== ========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Deferred revenue.......................................... $ 24,724 $ 26,807
Other current liabilities................................. 17,668 20,378
-------- --------
Total current liabilities.............................. 42,392 47,185
Deferred revenue............................................ 15,913 10,148
Other long-term liabilities................................. 1,250
Deferred income taxes....................................... 7,002 9,294
Intercompany payable to parent.............................. 46,085 57,953
-------- --------
Total liabilities...................................... 111,392 125,830
Shareholder's deficit:
Common stock, $.01 par value, 1,000 shares authorized,
issued and outstanding................................. 1 1
Additional paid-in capital................................ 15,678 15,678
Accumulated deficit....................................... (38,236) (40,432)
Cumulative foreign currency translation adjustment........ (454) (634)
-------- --------
Total shareholder's deficit............................ (23,011) (25,387)
-------- --------
Total liabilities and shareholder's deficit....... $ 88,381 $100,443
======== ========

The accompanying notes are an integral part of these financial statements.
F-25

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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

[Enlarge/Download Table]

YEAR ENDED PERIOD FROM
DECEMBER 31, JANUARY 1, 1997
------------------- THROUGH
1995 1996 JANUARY 23, 1997
-------- -------- ----------------

Revenues:
Service and systems..................................... $ 90,737 $ 99,213 $6,064
Hardware................................................ 9,377 9,587 122
-------- -------- ------
Total revenues....................................... 100,114 108,800 6,186
-------- -------- ------
Costs and expenses:
Cost of service and systems revenues.................... 53,385 63,572 4,277
Cost of hardware revenues............................... 7,950 7,911 104
Marketing and sales..................................... 11,128 11,091 660
Research and development................................ 8,522 10,271 794
General and administrative.............................. 8,168 7,101 621
Depreciation and amortization........................... 6,735 8,135 568
-------- -------- ------
Total costs and expenses............................. 95,888 108,081 7,024
-------- -------- ------
Income (loss) from operations............................. 4,226 719 (838)
Interest expense, net..................................... (2,733) (3,758) (379)
-------- -------- ------
Income (loss) before income taxes......................... 1,493 (3,039) (1,217)
Income tax benefit (provision)............................ (887) 843 437
-------- -------- ------
Net income (loss)......................................... $ 606 $ (2,196) $ (780)
======== ======== ======

The accompanying notes are an integral part of these financial statements.
F-26

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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S DEFICIT
(IN THOUSANDS EXCEPT SHARE DATA)

[Enlarge/Download Table]

EQUITY
ADJUSTMENT
FROM
COMMON STOCK ADDITIONAL FOREIGN
--------------- PAID-IN ACCUMULATED CURRENCY
SHARES AMOUNT CAPITAL DEFICIT TRANSLATION TOTAL
------ ------ ---------- ----------- ----------- --------

Balance at December 31, 1994........ 1,000 $1 $15,678 $(38,842) $ (470) $(23,633)
Net income.......................... 606 606
Foreign translation adjustment...... 16 16
----- -- ------- -------- -------- --------
Balance at December 31, 1995........ 1,000 1 15,678 (38,236) (454) (23,011)
Net loss............................ (2,196) (2,196)
Foreign translation adjustment...... (180) (180)
----- -- ------- -------- -------- --------
Balance at December 31, 1996........ 1,000 1 15,678 (40,432) (634) (25,387)
Net loss............................ (780) (780)
Foreign translation adjustment...... 3 3
----- -- ------- -------- -------- --------
Balance at January 23, 1997......... 1,000 $1 $15,678 $(41,212) $ (631) $(26,164)
===== == ======= ======== ======== ========

The accompanying notes are an integral part of these financial statements.
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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

[Enlarge/Download Table]

YEAR ENDED PERIOD FROM
DECEMBER 31, JANUARY 1, 1997
------------------- THROUGH
1995 1996 JANUARY 23, 1997
-------- -------- ----------------

Operating activities:
Net income (loss)....................................... $ 606 $ (2,196) $ (780)
-------- -------- -------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization........................ 13,205 15,344 945
Deferred income taxes................................ 6,040 2,286 (52)
Changes in assets and liabilities
Accounts receivable................................ (6,574) (278) 325
Inventory.......................................... 566 505 55
Other current assets............................... (74) 44 10
Deferred revenue................................... 1,090 (3,682) 1,951
Other current liabilities.......................... 906 2,710 2,351
Other long term liabilities........................ -- 1,250 (1,250)
Other assets....................................... 162 (43) (81)
-------- -------- -------
Total adjustments............................... 15,321 18,136 4,254
-------- -------- -------
Net cash provided by operating activities..... 15,927 15,940 3,474
-------- -------- -------
Investing activities:
Purchase of property, equipment and software............ (7,716) (9,231) (323)
Capitalized software development costs.................. (12,905) (12,170) (661)
Changes in other assets................................. 96 (6,804) 27
-------- -------- -------
Net cash used in investing activities................ (20,525) (28,205) (957)
-------- -------- -------
Financing activities:
Net change in intercompany payable to parent............ 5,509 11,868 (1,855)
-------- -------- -------
Effect of exchange rate changes on cash and cash
equivalents............................................. 16 (180) 3
-------- -------- -------
Net (decrease) increase in cash and cash equivalents...... 927 (577) 665
Cash and cash equivalents, beginning of year.............. 1,672 2,599 2,022
-------- -------- -------
Cash and cash equivalents, end of year.................... $ 2,599 $ 2,022 $ 2,687
======== ======== =======

The accompanying notes are an integral part of these financial statements.
F-28

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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Alltel Healthcare Information Services, Inc. ("AHIS") and its subsidiaries
(collectively, the "Company") are engaged in one business segment primarily
providing enterprise-wide clinical, patient care and financial software
solutions, as well as outsourcing, remote processing, networking technologies
and other services to healthcare organizations throughout the United States and
Western Europe.

The Company is a wholly owned subsidiary of Alltel Information Services,
Inc. ("AIS") which is a wholly owned subsidiary of Alltel Corporation
("Alltel").

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The financial statements include the accounts of AHIS and its wholly owned
subsidiaries. All significant intercompany transactions have been eliminated in
consolidation.

FINANCIAL STATEMENT PRESENTATION

The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and disclosure of contingent assets and liabilities. The
estimates and assumptions used in the accompanying consolidated financial
statements are based upon management's evaluation of the relevant facts and
circumstances as of the date of the financial statements. Actual results could
differ from those estimates.

The consolidated statements of operations include all revenues and costs
directly attributable to the operations of AHIS, including the costs of
facilities, administration, and other various costs. As more fully described in
Notes 8 and 11, certain costs related to interest, benefits, and other costs
were allocated to AHIS based on usage and other defined criteria.

All of the allocations utilized in the consolidated financial statements
are based on assumptions that AHIS management believes are reasonable under the
circumstances. However, these allocations are not necessarily indicative of the
costs which would have resulted had AHIS been a separate entity.

CASH AND CASH EQUIVALENTS

For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with an original maturity of three
months or less to be cash equivalents.

REVENUE RECOGNITION

The Company's products are sold to customers based on contractual
agreements. Revenues are derived from the licensing of computer software, the
sale of computer hardware, hardware and software maintenance, remote processing
and outsourcing, training, implementation assistance, custom development, and
consulting.

SERVICE AND SYSTEMS

Revenues from software license fees are recognized using the
percentage-of-completion method for contracts in which the Company is required
to make significant production, modification, or customization changes over the
implementation period of the contracts based on implementation hours incurred.
Other software license fees are generally recognized on a monthly basis over the
term of the licensing and maintenance agreements which are generally five years.
Remote processing and outsourcing services are marketed under long-term
agreements generally over periods from five to seven years and revenues are

F-29

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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recognized monthly as the work is performed. Software maintenance fees are
marketed under annual and multiyear agreements and are recognized ratably over
the term of the agreements. Implementation revenues are recognized as the
services are performed or on a percentage-of-completion basis for fixed fee
arrangements. Hardware maintenance revenues are billed and recognized monthly
over the term of the agreements. Revenues related to other support services,
such as training, consulting, and custom development, are recognized when the
services are performed.

The Company accrues for product returns at the time it recognizes revenue,
based on actual experience. Historically, product return costs have been
minimal.

HARDWARE SALES

Hardware sales are recognized upon shipment of the product to the customer.

UNBILLED ACCOUNTS RECEIVABLE

Unbilled accounts receivable represent amounts owed to the Company under
noncancelable agreements for software license fees with extended payment terms
and computer hardware purchases which have been financed over extended payment
terms. The current portion of unbilled accounts receivable of $4,883,000 and
$3,245,000 as of December 31, 1995 and 1996, respectively, is included in
accounts receivable in the accompanying financial statements. The non-current
portion of unbilled accounts receivable of $2,109,000 and $2,151,000 as of
December 31, 1995 and 1996, respectively, is included in other assets in the
accompanying financial statements. The non-current portion of unbilled accounts
receivable provides for payment terms that generally range from three to five
years and carry annual interest rates ranging from 7% to 10%. The Company
recognizes revenue in advance of billings under certain of its non-cancelable
long-term contracts that contain extended payment terms. The Company does not
have any obligation to refund any portion of its fees and has a history of
enforcement and collection of amounts due under such arrangements. Payments owed
under contracts with extended payment terms are due in accordance with the terms
of the respective contract. Historically, the Company has had minimal write-offs
of amounts due under such arrangements.

INVENTORY

Inventory consists of computer parts and peripherals and is stated at the
lower of cost or market. Cost is determined using the first-in, first-out
method.

FOREIGN CURRENCY TRANSLATION

The financial position and results of operations of foreign subsidiaries
are measured using the currency of the respective countries as the functional
currency. Assets and liabilities are translated at the foreign exchange rate in
effect at the balance sheet date, while revenues and expenses for the year are
translated at the average exchange rate in effect during the year. Translation
gains and losses are not included in determining net income or loss but are
accumulated and reported as a separate component of shareholder's deficit. The
Company has not entered into any hedging contracts during the two year period
ended December 31, 1996.

F-30

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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. For financial reporting
purposes, depreciation and amortization are provided using the straight-line
method over the estimated useful lives, which range from two to ten years.
Computer equipment is depreciated over useful lives which range from two to five
years. Office furniture and equipment is depreciated over two to ten years.
Leasehold improvements are amortized over the shorter of the useful lives of the
assets or the remaining term of the lease. When assets are retired or otherwise
disposed of, the related costs and accumulated depreciation are removed from the
accounts and any resulting gain or loss is reflected in income. Expenditures for
repairs and maintenance not considered to substantially lengthen the property
lives are charged to expense as incurred.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

The Company capitalizes a portion of the internal computer software
development costs incurred. Salaries, overhead, and other related costs incurred
in connection with programming and testing software products are capitalized
subsequent to establishing technological feasibility. Management monitors the
net realizable value of all capitalized software development costs to ensure
that the investment will be recovered through margins from future sales. These
costs are amortized utilizing the straight-line method over periods of 36-60
months. Capitalized costs related to software development were approximately
$12,905,000 and $12,170,000, for the years ended December 31, 1995 and 1996,
respectively and $750,000 for the period from January 1, 1997 through January
23, 1997. Amortization of capitalized software development costs amounted to
approximately $6,470,000 and $7,209,000 for the years ended December 31, 1995
and 1996, respectively, and $377,000 for the period from January 1, 1997 through
January 23, 1997 and is included in operating expenses in the accompanying
statements of operations.

INTANGIBLE ASSETS

The intangible assets arose from the acquisition of Medical Data
Technology, Inc. (see Note 5), are stated at cost less accumulated amortization,
and consist of contracts and the excess of cost over fair value of net assets
acquired. The intangible assets are being amortized using the straight-line
method over seven years.

The carrying value of the excess of cost over fair value of net assets
acquired is reviewed if the facts and circumstances suggest that it may be
impaired. This review indicates if the asset will not be recoverable as
determined based on future expected cash flows. Based on its review, the Company
does not believe that an impairment of its excess of cost over fair value of net
assets acquired has occurred.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, and other current liabilities
approximate fair value. The carrying amount of the intercompany payable to
parent balance approximates fair value based on current rates of interest
available to Alltel, and accordingly, the Company, for loans of similar
maturities.

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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 1995 and
1996 (in thousands):

[Download Table]

1995 1996
-------- --------

Computer equipment.......................................... $ 21,106 $ 25,093
Office furniture and equipment.............................. 2,815 4,198
Leasehold improvements and other............................ 2,407 3,461
-------- --------
26,328 32,752
Less: Accumulated depreciation and amortization............. (16,160) (22,013)
-------- --------
$ 10,168 $ 10,739
======== ========

4. OTHER ASSETS

During 1996, the Company entered into a marketing agreement with Integrated
Medical Networks, Inc. ("IMN") for the marketing rights of certain software
which will provide financial and managed care applications for entities within
the healthcare industry. Under the terms of the agreement, IMN will perform
significant enhancements to existing technology over a three year period. AHIS
will retain worldwide, perpetual marketing rights, as defined, for the resulting
technology. For the year ended December 31, 1996, AHIS made payments totaling
approximately $5,811,000 under this agreement and is included in other assets in
the accompanying financial statements. As discussed in Note 12, this agreement
and related asset was transferred to Alltel in conjunction with the sale of the
Company.

5. OTHER CURRENT LIABILITIES

Included in other current liabilities were the following as of December 31,
1995 and 1996 (in thousands):

[Download Table]

1995 1996
------- -------

Accrued compensation and incentives......................... $ 6,434 $ 6,603
Accrued hardware costs...................................... 3,700 3,326
Accrued royalty costs....................................... 1,045 648
Current portion of long-term debt........................... 260 86
Other....................................................... 6,229 9,715
------- -------
$17,668 $20,378
======= =======

6. INCOME TAXES

The Company files its income tax return with AIS which files as part of the
consolidated Alltel group. Income tax expense and related balances shown in the
accompanying financial statements have been determined as if the Company filed
its tax return on a separate company basis.

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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 -- (CONTINUED)

6. INCOME TAXES (CONTINUED)
The income tax benefit (provision) consists of the following (in
thousands):

[Enlarge/Download Table]

PERIOD ENDED
1995 1996 JANUARY 23, 1997
------- ------- ----------------

Current
Federal........................................ $ 4,123 $ 2,503 $ --
State and other................................ 1,030 626 --
------- ------- ----
Deferred......................................... 5,153 3,129 --
------- ------- ----
Federal........................................ (4,833) (1,829) 377
State and other................................ (1,207) (457) 69
------- ------- ----
(6,040) (2,286) 446
------- ------- ----
$ (887) $ 843 $446
======= ======= ====

A reconciliation of the federal statutory rate and the effective income tax
rate follows (in thousands):

[Download Table]

PERIOD ENDED
1995 1996 JANUARY 23, 1997
----- ------ ----------------

Statutory federal income tax rate (34%)......... $(508) $1,033 $413
Meals and entertainment....................... (128) (164) (14)
State income taxes............................ (141) 76 46
Non-deductible amortization................... (91) (101) (8)
Other......................................... (19) (1) --
----- ------ ----
Income tax benefit (provision)................ $(887) $ 843 $437
===== ====== ====

The significant components of the Company's net deferred tax liability were
as follows (in thousands):

[Download Table]

1995 1996
-------- --------

Deferred tax assets
Deferred revenue.......................................... $ 4,009 $ 3,596
Inventory and accounts receivable allowances.............. 710 846
Compensation related accrued expenses..................... 584 806
Accrued expenses.......................................... 1,627 1,624
Deferred rent............................................. 660 484
Other..................................................... 1,949 844
-------- --------
9,539 8,200
-------- --------
Deferred tax liabilities
Capitalization of software development costs.............. (10,298) (11,475)
Depreciation.............................................. (1,039) (856)
Other..................................................... (1,528) (1,481)
-------- --------
(12,865) (13,812)
-------- --------
Net deferred tax liability.................................. $ (3,326) $ (5,612)
======== ========

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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 -- (CONTINUED)

7. EMPLOYEE BENEFIT PLANS

Effective January 1, 1995, through Alltel, employees of the Company may
participate in a noncontributory, trusteed profit-sharing plan which covers
substantially all employees who meet certain length-of-service requirements.
Company contributions are determined annually by the Board of Directors of
Alltel. Contributions to the plan approximated $1,516,000 and $1,781,000 for the
years ended December 31, 1995 and 1996, respectively. During 1994, the Company
maintained a defined contribution profit-sharing plan. This plan was merged into
the Alltel trusteed thrift plan, discussed below during 1995.

Also, effective January 1, 1995, through Alltel, substantially all
employees of the Company may participate in the Alltel trusteed thrift plan.
Employees may contribute up to 10% of the employee's salary and the employer's
matching contribution is the lesser of 25% of the employee's contribution or
1.5% of the employee's salary. The trusteed thrift plan is intended to meet all
requirements of qualifications under Section 401(k) of the Internal Revenue
Code. Company contributions to the trusteed thrift plan were approximately
$412,000 and $452,000 for the years ended December 31, 1995 and 1996,
respectively.

During 1995, employees of the Company became eligible to participate in the
AIS Employee Stock Purchase Plan (the "ESPP") which has reserved for issuance
1,000,000 shares of Alltel common stock. The ESPP provides for the purchase of
shares of common stock by employees through payroll deductions which may not
exceed five percent of employee compensation, as defined. The employee
contributes 85% of the prevailing market price of the shares, which are
purchased on the open market. The remaining 15% is expensed by the Company in
the period the contribution is made. Company contributions to the ESPP were
approximately $104,000 and $48,000 for the years ended December 31, 1995 and
1996, respectively. On June 30, 1996, the ESPP was terminated.

During 1995, the employees of the Company became eligible to participate in
various benefit plans which were administered by Alltel. In addition to the
trusteed profit-sharing plan and trusteed thrift plan, employees were also
eligible to participate in certain benefit plans including group medical, dental
and other various plans. Total expenses related to these plans were
approximately $2,196,000 and $2,328,000 for the years ended December 31, 1995
and 1996, respectively and $194,000 for the period from January 1, 1997 through
January 23, 1997.

8. COMMITMENTS AND CONTINGENCIES

NONCANCELABLE OPERATING LEASES

The Company leases offices and certain equipment under noncancelable
operating leases. Rental expense under operating leases was approximately
$7,014,000 and $5,531,000 for the years ended December 31, 1995 and 1996,
respectively, and $461,000 for the period from January 1, 1997 through January
23, 1997. Future minimum rental payments for noncancelable operating leases as
of December 31, 1996 are as follows (in thousands):

[Download Table]

YEAR ENDING DECEMBER 31,
------------------------

1997................................................... $ 4,877
1998................................................... 4,818
1999................................................... 3,625
2000................................................... 1,535
2001................................................... 1,414
Thereafter............................................. 1,798
-------
$18,067
=======

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ALLTEL HEALTHCARE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 -- (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LITIGATION

9. RELATED PARTY TRANSACTIONS

The intercompany payable to parent balance represents amounts owed to
Alltel related to cash disbursements and receipts activity and certain other
transactions. All vendor related invoices are charged to this account at the
time an invoice is processed and, consequently, the accompanying financial
statements do not reflect an accounts payable balance. The intercompany balance
is reduced upon the posting of cash receipts. Intercompany interest of
approximately $2,833,000 and $3,858,000 for the years ended December 31, 1995
and 1996, respectively, and $379,000 for the period from January 1, 1997 through
January 23, 1997 was charged to this account at interest rates which ranged from
3.5% to 8.0% which represented the incremental borrowing rates of Alltel. As
more fully discussed in Note 12, the intercompany payable balance was converted
to equity on January 24, 1997 in connection with the sale of the Company.

For the years ended December 31, 1995 and 1996, Alltel charged the Company
approximately $2,277,000 and $2,100,000, respectively, and $175,000 for the
period January 1, 1997 through January 24, 1997 for costs related to providing
certain data center charges in conjunction with an outsourcing contract between
the Company and one of its customers.

During 1995 and 1996, legal services and external fees were provided and
paid by Alltel. These costs were approximately $1,869,000 and $964,000 for the
years ended December 31, 1995 and 1996, respectively, and are reflected in
general and administrative expenses in the accompanying financial statements.

During 1996 certain administrative services were performed by AIS, the cost
of which was estimated to be approximately $585,000 and is reflected in general
and administrative expenses in the accompanying financial statements. Prior to
1996, these functions were performed directly by employees of the Company and,
accordingly, the related costs are reflected in the accompanying financial
statements.

10. SUBSEQUENT EVENT

On January 24, 1997, the Company was purchased by Eclipsys Corporation
(formerly Integrated Healthcare Solutions, Inc.) for cash and other
consideration totaling approximately $201,500,000, including liabilities
assumed. Pursuant to the acquisition agreement, Alltel will retain the rights to
certain assets of the Company. These assets include the IMN marketing rights
(Note 4) with a balance of approximately $5,811,000 as of December 31, 1996 and
one of the Company's software products with related net capitalized software
costs as of December 31, 1996 of approximately $6,543,000.

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INDEPENDENT AUDITORS' REPORT

The Board of Directors
SDK Healthcare Information Systems:

We have audited the accompanying balance sheets of SDK Healthcare
Information Systems as of April 30, 1997 and 1996, and the related statements of
operations and retained earnings, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SDK Healthcare Information
Systems at April 30, 1997 and 1996, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.

KPMG PEAT MARWICK LLP

Boston, Massachusetts
June 12, 1997 (except for note 10 which is as of June 26, 1997)

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SDK HEALTHCARE INFORMATION SYSTEMS
BALANCE SHEETS
APRIL 30, 1997 AND 1996

[Download Table]

1997 1996
---------- ----------

ASSETS
Current assets:
Cash and cash equivalents................................. $ 674,047 $ 384,920
Accounts receivable, trade, less allowance for doubtful
accounts of $148,522 in 1997 and 1996 (note 9)......... 1,038,868 1,314,429
Revenue in excess of billings............................. 230,456 473,264
Current portion of notes receivable....................... 72,236 85,836
Prepaid expenses.......................................... 14,480 13,998
---------- ----------
Total current assets.............................. 2,030,087 2,272,447
---------- ----------
Property, plant and equipment (notes 3 and 5)............... 5,268,787 5,210,881
Less accumulated depreciation and amortization............ 4,444,571 4,236,990
---------- ----------
Net property, plant and equipment...................... 824,216 973,891
---------- ----------
Software production costs, net (note 2c).................... 780,829 719,367
Notes receivable, net of current portion.................... 14,264 86,500
Other assets................................................ 32,766 32,356
---------- ----------
Total assets...................................... $3,682,162 $4,084,561
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current capital lease obligation, building (note 5)....... $ 182,499 $ 149,705
Accounts payable.......................................... 285,665 310,275
Accrued expenses.......................................... 332,951 295,467
Income taxes payable...................................... 164,703 232,504
Deferred revenue............................................ 525,186 263,320
Deferred income taxes (note 6).............................. 60,236 47,344
---------- ----------
Total current liabilities......................... 1,551,240 1,298,615
---------- ----------
Capital lease obligation, building, excluding current
installment (note 5)...................................... 264,035 446,534
Deferred income taxes (note 6).............................. 144,210 279,001
---------- ----------
Total liabilities................................. 1,959,485 2,024,150
---------- ----------
Stockholders' equity (note 7):
Preferred stock, $6 noncumulative, no par. Authorized,
issued and outstanding 2,500 shares ($100 per share
liquidation preference)................................ 250,000 250,000
Common stock, voting, no par. Authorized 10,000; issued
and outstanding 5,000 shares........................... 10,000 10,000
Common stock, nonvoting, $.01 par. Authorized 700,000
shares; issued and outstanding 505,500 shares.......... 5,055 5,055
Additional paid-in capital................................ 52,046 52,046
Retained earnings......................................... 1,405,576 1,743,310
---------- ----------
Total stockholders' equity........................ 1,722,677 2,060,411
---------- ----------
Total liabilities and stockholders' equity... $3,682,162 $4,084,561
========== ==========

See accompanying notes to financial statements.
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SDK HEALTHCARE INFORMATION SYSTEMS
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
YEARS ENDED APRIL 30, 1997 AND 1996

[Enlarge/Download Table]

1997 1996
---------- ----------

Revenues (note 9)........................................... $6,801,412 $9,545,114
Operating expenses:
Cost of revenues.......................................... 4,624,029 5,775,035
Sales and marketing....................................... 916,891 1,013,875
General and administrative................................ 1,334,808 1,270,825
Research and development.................................. 308,570 378,574
---------- ----------
Total operating expenses............................... 7,184,298 8,438,309
---------- ----------
Income (loss) from operations.......................... (382,886) 1,106,805
---------- ----------
Other (income) expense:
Interest income........................................... (24,825) (14,077)
Interest expense -- capital leases........................ 105,871 132,773
Interest expense -- other................................. 866 8,144
---------- ----------
Total other expense.................................... 81,912 126,840
---------- ----------
Income (loss) before income taxes...................... (464,798) 979,965
---------- ----------
Income tax expense (benefit) (note 6):
Current................................................... (5,165) 287,315
Deferred.................................................. (121,899) 119,867
---------- ----------
(127,064) 407,182
---------- ----------
Net income (loss)...................................... (337,734) 572,783
Retained earnings at beginning of year...................... 1,743,310 1,170,527
---------- ----------
Retained earnings at end of year............................ $1,405,576 $1,743,310
========== ==========
Earnings (loss) per common share............................ $ (.66) $ 1.12
========== ==========
Weighted average common shares outstanding.................. 510,500 510,500
========== ==========

See accompanying notes to financial statements.
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SDK HEALTHCARE INFORMATION SYSTEMS
STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 1997 AND 1996

[Download Table]

1997 1996
--------- ----------

Cash flows from operating activities:
Net income (loss)......................................... $(337,734) $ 572,783
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 609,405 644,518
Recovery of losses on accounts receivable.............. -- (20,971)
Deferred income taxes.................................. (121,899) 86,855
Changes in operating assets and liabilities:
Accounts receivable, trade........................... 275,561 400,350
Prepaid expenses..................................... (482) 72
Other current assets................................. 242,808 (445,347)
Accounts payable..................................... (24,610) (159,748)
Accrued expenses..................................... 37,484 36,312
Income taxes payable................................. (67,801) 232,504
Deferred revenue..................................... 261,866 85,350
--------- ----------
Net cash provided by operating activities......... 874,598 1,432,678
--------- ----------
Cash flows from investing activities:
Additions to property, plant and equipment................ (65,737) (155,817)
Additions to software production costs.................... (455,455) (448,031)
Other assets.............................................. (410) (988)
--------- ----------
Net cash used for investing activities............ (521,602) (604,836)
--------- ----------
Cash flows from financing activities:
Net repayments under line-of-credit agreement............. -- (633,114)
Payments on obligations under capital leases.............. (149,705) (122,803)
Decrease in notes receivable.............................. 85,836 86,491
--------- ----------
Net cash used for financing activities............ (63,869) (669,426)
--------- ----------
Net increase in cash and cash equivalents................... 289,127 158,416
Cash and cash equivalents at beginning of year.............. 384,920 226,504
--------- ----------
Cash and cash equivalents at end of year.................... $ 674,047 $ 384,920
========= ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest............................................... $ 106,737 $ 140,917
========= ==========
Income taxes........................................... $ 19,725 $ 88,118
========= ==========

See accompanying notes to financial statements.
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SDK HEALTHCARE INFORMATION SYSTEMS
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996

(1) NATURE OF BUSINESS

The Company designs, markets, installs and supports a totally integrated
Patient Financial Management System. This turnkey software solution provides
single facility and multi-entity organizations with the ability to track and
process billing for traditional and managed care patients from initial patient
scheduling through final account resolution. The Company additionally offers
complete installation and training services, as well as facilities management
and remote processing from its corporate based data center. The Company does
business as SDK Healthcare Information Systems; however, its legal name is SDK
Medical Computer Services Corporation. The Company has offices in Boston,
Massachusetts (corporate headquarters) and Albany, New York.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Revenue Recognition

Revenue from software licensing fees is recognized: (a) upon delivery of
the software, if no significant obligations remain; (b) when the software has
been delivered and the obligations have been performed, if significant
obligations are required; and (c) under the percentage-of-completion method of
accounting, if significant production, modification or customization of the
software is required.

The Company recognizes service revenue from its remote data processing
services upon delivery of the service.

Revenues from maintenance agreements are recognized over the term of the
agreement. Advance billings to customers are recorded as deferred revenue until
earned. The Company recognizes revenues from hardware sales upon shipment of the
hardware.

(b) Property, Plant and Equipment

Property, plant and equipment is stated at cost. Property under capital
leases is stated at the lower of the present value of minimum lease payments at
the beginning of the lease term or fair value at the inception of the lease.

Depreciation on property, plant and equipment is calculated using
straight-line and accelerated methods over the estimated useful lives of the
assets. Property held under capital lease and leasehold improvements are
amortized on the straight-line method over the shorter of the lease term or
estimated useful life of the asset.

In accordance with Financial Accounting Standards Board Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of, the Company reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If it is determined that the carrying amount of
an asset cannot be fully recovered, an impairment loss is recognized.

The Company capitalizes the costs of producing software product masters,
which include coding and testing. Direct costs of establishing technological
feasibility (planning and designing, including detailed program design) are
charged to research and development expense as incurred.

The total amount of software production costs capitalized during fiscal
1997 and 1996 amounted to $445,455 and $448,031, respectively. Such costs are
amortized on a product-by-product basis at the greater of the amount computed
using (a) the ratio that current revenues for the product bear to the total of
current and anticipated future revenues for that product or (b) the
straight-line method over the estimated economic life

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SDK HEALTHCARE INFORMATION SYSTEMS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
APRIL 30, 1997 AND 1996

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of the product, generally three years. The recoverability of such costs is
reviewed on an ongoing basis. Amortization totaled $393,993 and $450,251 for
1997 and 1996, respectively.

(d) Research and Development Costs

Research and development costs are charged to operations as incurred. For
the years ended April 30, 1997 and 1996, research and development costs incurred
were $308,570 and $378,574, respectively.

(e) Cash and Cash Equivalents

For purposes of the statement of cash flows, all highly liquid debt
instruments with an original maturity of three months or less are considered to
be cash equivalents.

(f) Income Taxes

The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

(g) Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

(h) Fair Value of Financial Instruments

Financial instruments of the Company consist of cash and cash equivalents,
accounts receivable, notes receivable, accounts payable and notes payable. The
carrying amount of these financial instruments approximates their fair value.

(i) Earnings per share

Net income (loss) per share is computed based on the weighted average
number of equivalent shares of the Company's common stock outstanding during
each period. Fully diluted net income (loss) per share is not significantly
different from primary net income (loss) per share amounts.

(j) Reclassifications

Certain reclassifications were made to the 1996 financial statements to
conform to the 1997 presentation.

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SDK HEALTHCARE INFORMATION SYSTEMS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
APRIL 30, 1997 AND 1996

(3) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following at April 30:

[Download Table]

1997 1996
---------- ----------

Land and buildings.......................................... $1,101,702 $1,101,702
Building improvements....................................... 730,370 730,370
Equipment................................................... 3,113,776 3,071,653
Furniture and fixtures...................................... 236,263 220,480
Motor vehicles.............................................. 86,676 86,676
---------- ----------
$5,268,787 $5,210,881
========== ==========

(4) FINANCING ARRANGEMENT

The Company has available a bank line-of-credit which provides for
unsecured borrowings of up to $1,250,000. There were no borrowings outstanding
at April 30, 1997 or 1996. Interest is payable monthly at an annual rate equal
to the prime rate plus .75%. At April 30, 1997 and 1996, this rate was 8.5% and
9.0%, respectively.

(5) LEASE OBLIGATIONS

The Company leases its principal operating facilities from a trust, the
beneficiaries of which are certain stockholders of the Company. The original
lease, entered into in June 1984, called for expiration in July 1989 and allowed
for renewal of three five-year terms. In April 1990, the lease was revised to
extend the expiration date through July 1999 and reduce the monthly rental
payments. In addition to the basic annual rent, as adjusted for changes in the
Consumer Price Index, the Company is obligated to pay all real estate taxes. The
lease has been accounted for as a capital lease.

The Company leased computer equipment under capital leases which expired at
various dates through 1996. The Company also leases equipment under leases
expiring through 1999, which have been accounted for as operating leases.

The present value of future minimum capital lease payments and the future
minimum lease payments under noncancelable operating leases as of April 30,
1997, are as follows:

[Download Table]

CAPITAL OPERATING
LEASES LEASES
--------- ---------

Year ending April 30:
1998...................................................... $ 255,576 $26,270
1999...................................................... 255,576 3,160
2000...................................................... 42,596 --
--------- -------
Minimum future lease payments.......................... 553,748 $29,430
=======
Less amounts representing interest.......................... (107,214)
---------
Present value of minimum future lease payments......... 446,534
Less current installments................................... (182,499)
---------
Obligations under capital leases, excluding current
installments......................................... $ 264,035
=========

Rent expense under operating leases amounted to $33,787 in 1997 and $61,825
in 1996.

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SDK HEALTHCARE INFORMATION SYSTEMS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
APRIL 30, 1997 AND 1996

(5) LEASE OBLIGATIONS (CONTINUED)
The related assets and accumulated amortization thereon under capital lease
obligations are included in property, plant and equipment at April 30, 1997, as
follows:

[Download Table]

Building.................................................... $ 1,101,702
Equipment................................................... 148,157
-----------
1,249,859
Less accumulated amortization............................... (1,087,775)
-----------
$ 162,084
===========

(6) INCOME TAXES

Income tax expense (benefit) consists of the following at April 30:

[Enlarge/Download Table]

CURRENT DEFERRED TOTAL
-------- --------- ---------

1997:
Federal........................................... $ 3,668 $ (93,221) $ (89,553)
State............................................. (8,833) (28,678) (37,511)
-------- --------- ---------
$ (5,165) $(121,899) $(127,064)
======== ========= =========
1996:
Federal........................................... $195,370 $ 117,104 $ 312,474
State............................................. 91,945 2,763 94,708
-------- --------- ---------
$287,315 $ 119,867 $ 407,182
======== ========= =========

Total income tax expense (benefit) differs from the amounts computed by
applying the U.S. federal income tax rate of 34% as a result of the following:

[Download Table]

1997 1996
--------- --------

Computed "expected" tax expense (benefit)................... $(136,611) $333,188
State and local income taxes (benefit), net of federal tax
benefit................................................... (23,539) 62,507
Research and development credit............................. -- --
Nondeductible expenses...................................... 8,968 5,765
Other....................................................... 24,118 5,722
--------- --------
$(127,064) $407,182
========= ========

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SDK HEALTHCARE INFORMATION SYSTEMS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
APRIL 30, 1997 AND 1996

(6) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at April 30 are
presented below:

[Download Table]

1997 1996
--------- ---------

Current deferred tax assets (liabilities):
Deferred revenues......................................... $ 16,315 $ 45,634
Accounts receivable due to allowance for doubtful
accounts............................................... 59,810 45,716
Cash basis adjustment..................................... (153,438) (153,438)
Other..................................................... 17,077 14,744
--------- ---------
Total net current deferred tax liabilities............. (60,236) (47,344)
--------- ---------
Noncurrent deferred tax assets (liabilities):
Capital lease treated as operating lease for tax
purposes............................................... 117,141 147,302
State net operating loss carryforward..................... 7,176 --
Research credit and alternative minimum tax credits....... 45,119 21,539
Cash basis adjustment..................................... -- (153,438)
Software capitalized for books, expensed for tax
purposes............................................... (314,440) (289,688)
Property, plant and equipment, principally depreciation... 794 (4,716)
--------- ---------
Total net noncurrent deferred tax liabilities.......... (144,210) (279,001)
--------- ---------
Net deferred tax liabilities........................... $(204,446) $(326,345)
========= =========

The Company has research credit carryovers of approximately $45,000
expiring in various amounts through the year 2010 which can be used to offset
future federal taxable income and income taxes.

(7) COMMON STOCK

At April 30, 1986, options to purchase 7,500 shares of nonvoting common
stock of the Company were held by certain key employees under Nonqualified Stock
Option Agreements. The options were exercised in 1987 at prices of $.99-1.39 per
share, the fair market value at the date of grant. Shares issued under these
agreements must be offered to the Company for repurchase at the then current
book value as of the immediately preceding April 30 upon termination of
employment or upon the occurrence of certain other events. There was no activity
during 1996 or 1997 under the agreements.

(8) PROFIT-SHARING PLAN

The Company maintains a profit-sharing plan for the benefit of eligible
employees. The Plan provides that the Company's contribution be determined by a
resolution of the board of directors, and there is no minimum contribution
required. The Company incurred profit-sharing expense of $137,921 and $100,000
in 1997 and 1996, respectively.

(9) BUSINESS AND CREDIT CONCENTRATION

Substantially all of the Company's sales for 1997 and 1996 were to medical
facilities. Accordingly, all of the Company's accounts receivable at April 30,
1997 and 1996, are due from medical facilities.

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SDK HEALTHCARE INFORMATION SYSTEMS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
APRIL 30, 1997 AND 1996

(9) BUSINESS AND CREDIT CONCENTRATION (CONTINUED)
The following table summaries sales to major customers as a percentage of
total sales for the period:

[Download Table]

1997 1996
---- ----

Customer A.................................................. 15% --
Customer B.................................................. 13% 21%
Customer C.................................................. 10% 17%
Customer D.................................................. -- 12%

(10) SUBSEQUENT EVENT

On June 26, 1997, the Company was acquired by Eclipsys Corporation.

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘424B4’ Filing	Date	First	Last	Other Filings

	12/31/01	86		10-K
	12/31/00	59		10-K
	1/28/00	67
	12/31/99	85		10-K, 10-K/A
	10/28/99	67
	5/1/99	57	95
	4/1/99	21	39
	12/31/98	65		10-K, 8-K
	8/31/98	4
	8/21/98	15		SC 13D
	8/12/98	1	2
Filed on:	8/10/98
	8/6/98	1	39
	7/14/98	8	67
	7/1/98	19	60
	6/30/98	7	8	10-Q
	6/9/98	75
	6/1/98	63
	5/29/98	95
	5/3/98	59	85
	4/20/98	75
	4/8/98	22	58
	4/1/98	22	39
	3/31/98	5	96
	3/13/98	60
	2/21/98	15
	1/30/98	9	89
	1/28/98	65
	1/24/98	55
	1/1/98	27	95
	12/31/97	6	96
	12/15/97	40	84
	6/30/97	7	8
	6/27/97	97
	6/26/97	9	118
	6/25/97	26
	6/12/97	109
	4/30/97	20	118
	3/31/97	29	84
	1/24/97	9	108
	1/23/97	25	108
	1/1/97	9	108
	12/31/96	19	108
	8/22/96	15
	6/30/96	107
	5/1/96	57
	4/30/96	73	118
	1/1/96	89
	12/31/95	29	108
	12/22/95	78
	1/1/95	107
	12/31/94	29	100
	12/31/93	29
				List all Filings

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Filing Submission 0000950133-98-002911 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Eclipsys Corp – IPO: ‘424B4’ on 8/10/98

As of: Monday, 8/10/98 · Accession #: 950133-98-2911 · File #: 333-50781

Initial Public Offering (IPO): Prospectus — Rule 424(b)(4)Filing Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Initial Public Offering (IPO): Prospectus — Rule 424(b)(4)
Filing Table of Contents