10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

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

For the fiscal year ended December 31, 2006

OR

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

For the transition period from              to             

Commission file number 000-27501

The TriZetto Group, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	33-0761159
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

567 San Nicolas Drive, Suite 360 Newport Beach, California	92660
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (949) 719-2200

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

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $0.001 par value Series A Junior Participating Stock, $0.001 par value	The Nasdaq Global Select Market

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

None.

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of 15(d) of the Act. Yes  ¨    No  x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Exchange Act Rule 12b-2).

Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨

Indicated by check mark whether the registrant is a shell company. Yes  ¨    No  x

As of June 30, 2006, the aggregate market value of voting stock held by non-affiliates of the registrant, based upon the closing sales price for the registrant’s Common Stock, as reported on the NASDAQ Stock Market, was $599.9 million. Shares of Common Stock held by each officer and director and by each person who owns 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for any other purpose.

The number of shares of the registrant’s Common Stock outstanding as of March 13, 2007 was 45,205,070.

Documents Incorporated by Reference

Part III of this Report incorporates by reference information from the definitive Proxy Statement for the registrant’s 2007 Annual Meeting of Stockholders.

THE TRIZETTO GROUP, INC.

ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended December 31, 2006

TABLE OF CONTENTS

		Page
PART I
Item 1	Business	3
Item 1A	Risk Factors	14
Item 1B	Unresolved Staff Comments	21
Item 2	Properties	21
Item 3	Legal Proceedings	21
Item 4	Submission of Matters to a Vote of Security Holders	22
PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
Item 6	Selected Financial Data	25
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	40
Item 8	Financial Statements and Supplementary Data	41
Item 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	41
Item 9A	Controls and Procedures	41
Item 9B	Other Information	42
PART III
Item 10	Directors, Executive Officers and Corporate Governance	43
Item 11	Executive Compensation	43
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	43
Item 13	Certain Relationships and Related Transactions, and Director Independence	43
Item 14	Principal Accounting Fees and Services	43
PART IV
Item 15	Exhibits and Financial Statement Schedules	44
SIGNATURES		48

CAUTIONARY STATEMENT

This report contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “forecasts,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of such terms and other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined in Item 1A under the caption “Risk Factors.” These factors may cause our actual events to differ materially from any forward-looking statement. We do not undertake to update any forward-looking statement.

PART I

Item 1—Business

OVERVIEW

TriZetto is distinctly focused on accelerating healthcare payers’ ability to lead the industry’s transformation by providing information technology solutions that enhance revenue growth, drive administrative efficiency and improve the cost and quality of care for their members. We offer a broad portfolio of proprietary information technology products and services targeted to the payer industry, which is comprised of health insurance plans and third party benefits administrators. These include:

• Enterprise core administration software, including Facets^®, Facts^™, QicLink^™and QNXT, including add-on modules such as Workflow, HealthWeb^®, HIPAA Privacy, CDH Account Management and FXI to provide enhanced functionality for advanced automation, web-based e-business, HIPAA regulations, consumer functionality and inoperability, respectively;

• Cost and quality of care solutions, including our NetworX^™ suite of products for provider network management and CareAdvance^™ suite of care management solutions for both traditional and advanced care management;

• Revenue enhancement software and administrative efficiency solutions for payers that service members in Medicare Advantage, Medicare Part D and Medicaid plans;

• Software hosting services and select business process outsourcing services; and

• Strategic, installation, and optimization consulting services.

In the U.S. healthcare system, payers effectively balance the demands of all the different constituents in the healthcare system including employers, providers, consumers and brokers. As a result, payers are the central aggregation point for data from across the systems and payers are information-intensive businesses. New government regulations, shifting market trends and competition constantly pressure these payers to change their product offerings, business policies and processes. To enable these changes, payers must continually upgrade their information technology systems. Many payers, especially the largest, have traditionally developed their own information systems in-house. But, increasingly in recent years, payers have utilized commercial systems to reduce information technology and business costs, and accelerate their time-to-market for new products and enhanced efficiency.

TriZetto’s large footprint of payers and their members provides unique opportunities to develop and accelerate the adoption of new information technology solutions that will help payers respond and to capitalize on market changes. Including the company’s recent acquisitions, TriZetto technology touches approximately 120 million lives, or nearly half the insured population of the U.S.

We provide products and services to 362 unique customers, including our recent acquisitions, in the health plan and benefits administrator markets. In 2006, these markets represented 90% and 10% of our total revenue, respectively.

The TriZetto Group, Inc. was incorporated in Delaware in May 1997 with the merger of two organizations: System One, a provider of online electronic-funds transfer technology, and Margolis Health Enterprises, a provider of technology consulting to healthcare organizations. The combination created a company dedicated to healthcare information technology products and services. Initially, we focused upon providing hosted software services addressed primarily to the provider market. From 1998 to 2003, we increased our focus on the payer industry. In 2003, we initiated a strategic plan to concentrate exclusively on the payer market and to wind-down our provider business. We completed this plan in 2005 and no longer provide services to the provider market.

We completed our initial public offering in October 1999 and, since that time, have acquired 10 companies: Novalis Corporation, Finserv Health Care Systems, Inc., Healthcare Media Enterprises, Inc., Erisco Managed Care Technologies, Inc. (“Erisco”), Resource Information Management Systems, Inc. (“RIMS”), Infotrust Company, Diogenes, Inc., CareKey, Inc. (“CareKey”), Plan Data Management, Inc. (“PDM”), and Quality Care Solutions, Inc. (“QCSI”).

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Of the 10 acquisitions, the Erisco and RIMS acquisitions completed in the fourth quarter of 2000, the CareKey acquisition completed in the fourth quarter of 2005, and the QCSI acquisition completed in the first quarter of 2007 were our most significant. Erisco’s main product, Facets^® and QCSI’s main product, QNXT, are the leading administrative systems for managed health plans in the country. QicLink^™, developed by RIMS, is the leading automated claims-processing system for benefits administrators. With these acquisitions, TriZetto obtained a customer base with more than 120 million enrollees (48% of the U.S. insured population) and attained a leadership position in two market segments of the payer industry, health plans and benefits administrators. The products developed by CareKey are proven applications and solutions for the rapidly growing consumer-directed healthcare segment.

FINANCIAL INFORMATION

Please refer to Item 6, “Selected Financial Data,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for a review of revenue, net income, and total assets for the last three years.

OUR STRATEGY

Rising healthcare costs and health insurance premiums are causing employers, as well as federal and state government programs, to shift more of the cost of healthcare benefits to consumers in the form of higher premium contributions, deductibles, co-insurance and co-payments. Since 2000, average premiums for family coverage in the United States increased 59%, while wages grew only 12%. Typical family out-of-pocket healthcare costs now exceed 10% of the average annual wage. As a result of increased personal spending on healthcare, healthcare consumers (i.e., employees and their family members, individuals, and retirees) are demanding better service, efficiency, and value from their health plan. This includes improved information regarding health care benefit and insurance coverage options, better information to determine the most efficient methods to fund out-of-pocket costs, real-time information regarding benefits eligibility and accessibility, accurate information at the point-of-service regarding out-of-pocket costs (i.e., patient or consumer financial responsibility), real-time information regarding healthcare fund balances and claims payment status, and increased comparative data and intelligence regarding healthcare provider cost (i.e., pricing) and quality.

We believe that payers will play a central and leading role in the evolution of the U.S. healthcare industry. We also believe that most health plans and benefits administrators must evolve and improve their technology infrastructures, software applications, and business processes to compete in this changing healthcare marketplace. We recognize that the evolution of the healthcare industry to a more retail-like environment may be gradual or in steps. Our strategy, therefore, is to protect our existing customers’ investment in our products and services through ongoing research and development that allows for systematic upgrades of existing capabilities, while providing both existing and new payer customers with innovative information technology products and services that help them strengthen their IT capabilities, and transform their businesses to prosper in this more consumer-centric environment. Key elements of our strategy include:

• Help customers anticipate change and migrate toward a successful future. In 2006, we continued to articulate our vision of the future for health plans and benefits administrators. In 2003, we launched and named these “futures” concepts Health Plan 5.0 and Benefits Administrator 5.0. “5.0” continues to be the centerpiece of our sales strategy, supported by TriZetto’s extensive portfolio of solutions and a clear migration path for customers. Over the course of 2006, we introduced additional products and services that provide our customers with the solution components to achieve level or version “5.0.”

• Offer a compelling value proposition. We are focused on offering a quantified, compelling value proposition that includes such advantages as enhancing payers’ revenue growth, driving their administrative efficiency and improving the cost and quality of care for their members. Other benefits include reduced and more predictable information technology costs, more cost effective business processes, lower administrative costs, lower medical costs, less risk and more rapid return on investment, and faster business transformation. Our internal estimates, based on industry benchmarks and customer data, show that return on investment increases with the use of our proprietary software in combination with one or more of our outsourced services.

• Offer market-leading enterprise administration software for health plans and benefits administrators. As some of the most information-intensive businesses in the U.S., payers spend about 11% of the premiums they collect on administration activities. Efficient and accurate enterprise administration systems are critical to success. In 2003, we introduced new versions of both Facets Extended Enterprise^™ (or Facets e^2™) and QicLink Extended Enterprise (QicLink e^2™) to the marketplace. Facets e^2™ represented a major expansion of our flagship Facets^® enterprise administration software for health plans. Facets e^2™ provides significant new business and technology enhancements aimed at helping health plans meet emerging market demands, including customer-driven market requirements, integrated e-business functionality, regulatory compliance, and advanced open architecture and web services technologies. QicLink e^2™ represented a new generation of our leading QicLink^™ administration software for third-party benefits administrators, with similar consumer-centric enhancements, as well as an enhanced user interface. In 2006, new releases of these systems included new features, functionality and benefits for payers. These products continue to be our flagship core

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enterprise solutions. The acquisition of QCSI’s QNXT in January 2007 further expands TriZetto’s enterprise administration solutions.

• Offer innovative enterprise cost and quality of care application. Payers spend an average of 86% of premiums collected on the cost of care for members. As the economics of running a plan started to shift in 2005 and 2006, payers began looking to new ways to cut waste and improve care. In early 2004, TriZetto partnered with CareKey, Inc. to offer new cost and quality of care solutions to its payer customers. In December 2005, TriZetto acquired CareKey. Today, the company is unique in offering integrated solutions that address both the unit cost of care as well as the volume usage. TriZetto’s suite of cost and quality of care solutions are complementary to our enterprise software solutions and allow us to help payers address the vast majority of healthcare medical costs not focused solely on health plan administration activities. TriZetto’s NetworX Pricer^™ and NetworX Modeler^™ applications allow health plans to improve the provider contracting process, as well as to automate the administration of these provider contracts to reduce the aggregate unit cost of care. Our CareAdvance Enterprise^™ suite of advanced care management solutions addresses traditional utilization, case and disease management, as well as provides secure, portable and personalized health records to facilitate proactive population management. By improving patient wellness, these solutions better control the total usage of healthcare resources and reduce payers’ aggregate usage-driven costs of care for members. While these applications are architecturally engineered to most easily integrate with other TriZetto products such as Facets^®, they are also of high value to customers who run enterprise administration systems not developed by TriZetto.

• Enhance the value of our core enterprise technology with a variety of add-on software solutions and a continuum of services. In addition to offering leading enterprise administration and care solutions, TriZetto has created a number of high-value add-on systems that increase the performance of TriZetto systems and extend the value and return on investment for customers. TriZetto’s enterprise systems are very large applications that require significant work to install and optimize. Like many other enterprise software companies, TriZetto offers complementary services that assist customers in achieving business success, including: professional services, or consulting, for installation and optimization of the company’s software. For customers who desire to reduce their data center or overall processing costs, TriZetto also offers software hosting services and business process outsourcing services. These typically are sold as add-ons following the sale of TriZetto software.

• Organize products and services around the customer’s main business cycles. Our solutions are aligned with the way our customers operate internally. Our individual products and services, and complete solutions address the main business cycles of a health plan, which are: product development, revenue management, reimbursement management, customer service, network management, care management, risk management, and general finance and administration. Benefits administrators have largely similar business cycles.

• Leverage our strategic relationships. We leverage our current strategic relationships and enter into new relationships to expand our customer base and service offerings. We have established co-marketing and sales arrangements with third-party systems integrators and software vendors. As our customer base grows, we intend to expand and strengthen these relationships.

• Selectively pursue acquisitions. We continually evaluate acquisitions of companies that could expand our market share, product offerings or our technical capabilities. Since our initial public offering in 1999, we have made 10 acquisitions. We may pursue additional acquisitions that we believe create shareholder value.

OUR PRODUCTS AND SERVICES

TriZetto’s mission is to be the premier technology provider focused on healthcare payers. We have historically been a leading core administration company, and through acquisitions have expanded our capabilities. We have targeted five strategic areas that will drive healthcare changes including enterprise core administration, care management, network management, consumer retail healthcare and government programs.

In 2006, we derived approximately 47% of our total revenue from license and maintenance fees for our proprietary enterprise core administration software. Our Facets^®, Facts^™ and QicLink^™ applications are recognized in their respective markets for providing advanced solutions that enhance revenue growth, drive administrative efficiencies and improve the cost and quality of care.

Out of our total revenue in 2006, 2005, and 2004, we spent 15%, 14%, and 14% respectively, on software development (expensed and capitalized), primarily for our proprietary software products.

Enterprise Core Administration Software

Facets^®. Facets^® is a comprehensive, flexible, scalable, production-proven, enterprise-wide core administration solution for healthcare payers. Facets^® provides a functionally rich set of modules that allow health care payers to meet their comprehensive business requirements—across claims processing, claims re-pricing, capitation/risk fund accounting, premium billing, provider

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network management, group/membership administration, referral management, hospital and medical pre-authorization, case management, customer service, and electronic data interchange.

Facets^® can also be combined with complementary software to address the enterprise-wide needs of a managed care organization. Facets^® has been expanded through alliances with complementary solutions for physician credentialing, document imaging, workflow management, data warehousing, and decision support.

Facets^® is available to customers on a hosted or non-hosted basis; it includes core functionality and add on modules that provide the following features and benefits for health plans:

• Flexible, integrated technology to support multiple lines of business and in-depth functionality which provide for the essentials of health plan administration;

• Simplified entry of benefit plan information;

• Enhanced views of customer service data;

• Integrated HIPAA functionality to satisfy standard electronic transactions and privacy regulations;

• Consumer directed healthcare, Medicare and Managed Medicaid solutions;

• Functions to support complex provider contracts and automated pricing of claims;

• Integrated Workflow for claims, customer service and group administration

• Extended integration tools to enable customers to access key business logic

• Extensive use of Service-Oriented Architecture (SOA) that emphasizes Web-enabled interoperability to simplify integration of third-party applications; and

• Choice of leading databases — Oracle, Microsoft SQL and Sybase.

At December 31, 2006, we had 74 implementations of Facets^® at customers comprising approximately 80 million member lives under contract. Many customers have purchased or are updating to Facets^® 4.3 and 4.4 to support consumer directed health plans, changes in NPI and workflow improvements. These upgrades are included in customers’ annual release fees. In addition, unspecified upgrades generate opportunities to sell consulting and other services to assist with the upgrades, as well as add-on modules that work exclusively with this new version of Facets^®. In 2006, TriZetto Professional Services created a new Upgrade Service exclusively focused on helping health plans upgrade Facets^® to a newer version to take advantage of the new capabilities.

Facts^™. Introduced in 1980, Facts^™ is designed for the indemnity insurance market, specifically managed indemnity, and group insurance. Facts^™ software, which we acquired in our acquisition of Erisco, is a legacy software application which is used for the essential administrative transactions of an indemnity plan, including enrollment, rating and premium calculation, billing, and claims processing. At December 31, 2006, we had 33 Facts^™ customers totaling more than 48.5 million lives.

QicLink^™. We believe that QicLink^™ is the nation’s most widely-used automated claims administration technology for benefits administrators. Its flexible design is well suited for third party administrators, as well as organizations that self-fund or self-administer their health benefits. QicLink^™ is a full-functioned enterprise system that handles enrollment, customer service, claims adjudication, billing and accounts receivable, re-pricing, and payment process, and is available to customers on a licensed or hosted basis. Recent product releases include functionality improvements designed for the consumer-directed market, debit card processing expanded auto adjudication and web customer service, and technology improvements such as the introduction of the Microsoft.NET framework. At December 31, 2006, we had 135 QicLink^™ customers, totaling more than 7.6 million lives.

Workflow. The add-on Workflow application for Facets e^2™ automates manual processes and streamlines workflows, helping health plans to reduce claims turnaround times, improve customer response and facilitate the creation of employer groups. With Facets e^2™ Workflow, claims are prioritized and routed automatically according to rules established by the plan’s business staff. Faster claims turnaround times allow health plans to realize lower overall operating costs, as well as nearly immediate return on investment through prompt-pay discounts. Facets e^2™ Workflow functionality for Customer Service focuses on the management of work items that are not resolved upon initial contact with customer service representative. Facets e^2™ Workflow functionality for Group Administration allows customers to administer the creation of new groups and facilitates the group renewal process. The application gives health plans a competitive advantage: faster, more accurate claims adjudication and reduced customer response time, which translates directly into improved service for plan members and providers.

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DirectLink^™. DirectLink^™ was added to TriZetto’s component offerings in November 2004, built around technology from the acquisition of Diogenes, Inc. DirectLink^™ helps payers reduce their dependence on clearinghouses and exchange transactions with providers, employers, and other constituents directly over the Internet – at a fraction of the cost of clearinghouse fees. The technology provides point-to-point connectivity and cutting-edge security features, including encryption, authentication, and tamper protection, which exceed the government’s HIPAA security guidelines. DirectLink^™ is designed to be easy to use and can be remotely deployed and installed via the Internet, right to the desktop.

Cost and Quality of Care. As cost and quality of care issues move to center stage, for health plans, the ability to automate care and provider management becomes key to improving care outcomes and decrease costs. TriZetto offers solutions for both care management and network management.

Care management

Health plans are recognizing that care management will quickly become a required competency for connecting to members in an increasingly consumer-retail world of healthcare. The ability to keep the well from getting sick, to keep the sick out of the hospital and to help the hospitalized recover quickly will reduce overall medical costs. TriZetto offers CareAdvance Enterprise^™ to address both personal health records for the consumers and health management for the health plans.

CareAdvance Enterprise^™. Until 2004, the majority of TriZetto’s solutions focused on payers’ administrative costs. In 2004, TriZetto partnered with CareKey to offer the CareAdvance^™ suite of care management solutions. TriZetto completed its acquisition of CareKey in December 2005 and began marketing the CareAdvance suite as TriZetto CareAdvance Enterprise^™. TriZetto CareAdvance Enterprise^™ automates all aspects of care management, including: member identification and assessment; guideline-based care planning; member and provider communications; task and team management; ongoing member monitoring, education and care coaching; and multi-stakeholder granular reporting for a variety of constituents. The system integrates with TriZetto’s Facets^® administrative system as well as other core administration systems to provide real-time access to member administrative data including claims, eligibility, benefits and authorizations. CareAdvance Enterprise^™ extends effective care to more members and allows a health plan to serve all its members’ medical management needs on one platform, including catastrophic care coordination, chronic disease management, wellness, and family care.

Health plans can license and host the care management enterprise software themselves or have it hosted through TriZetto’s Hosting Services. Health plans can also use TriZetto Professional Services to implement and optimize their care management operations. Specific services include: implementation, business process engineering, health program development and launch, and technology and application optimization.

Network management

As cost and quality issues move to center stage for health plans, the ability to automate provider networks, including the contracting and payment cycle becomes key to reducing care costs. Changes to a provider contract by 1% can result in net increases or decreases of millions to a health plan’s bottom line. Increasingly complex contracts and intense financial pressures have made network management critical to a health plan’s success.

NetworX^™. NetworX^™ was the first enterprise-wide management system and claims re-pricing solution for preferred provider organizations. The NetworX^™ product line has been expanded to include a suite of products that addresses the pricing needs of not only PPOs, but also the requirements of health plans for automated pricing of complex facility claims and modeling of contracts. NetworX Pricer^™ is a specialized component application, which automates the claims pricing process for health plans. This product is sold as a separate application that can be interfaced to legacy administration systems, as well as to Facets e2^™. The NetworX Modeler^™ product is a standalone application to support the automated modeling and analysis of contracts to help health plans negotiate with providers in their network. NetworX Pricer^™ and NetworX Modeler^™ have an innovative interface, which allows users to share contract data between the two systems. NetworX^™ complements ClaimsExchange^™, a hosted application service, which provides Internet connections that allow preferred provider organizations and healthcare claims payers to exchange claim information online.

Health plans can license the network management software or host it through TriZetto’s Hosting Services. Health plans can also use TriZetto Professional Services to implement their network management operations. Specific services include implementation, contract loading third-party interface development, and optimization.

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Market Solutions

Two pervasive market drivers are driving dramatic changes in healthcare today:

• A surge in government healthcare programs as baby boomers drop out of private plans and into Medicare programs while the Medicaid-eligible population grows

• Continued pressure on the consumer to pay more of individual healthcare costs to offset the rapidly increasing costs

TriZetto has formed two market solutions groups to help drive the technological transformation needed to support government and consumer programs.

Retail Healthcare Solutions

A change that started with high deductible health plans, the retail healthcare movement is rapidly changing how payers interact with their consumer, provider, broker and employer constituents. TriZetto’s Consumer Retail Healthcare Solutions combine our traditional technology solutions with services and third-party applications. Specific retail healthcare solutions include:

Fund Management. Combining Facets^® CDH Account Management Module, Metavante’s Benefits Card Platform and financial services, TriZetto’s Fund Management solution enables Facets^® users to administer FSA, HRA and HSA plans on the Facets^® platform. Our pre-integrated solutions enables debit card access for FSA, HRA and HSA accounts via a single card. Through Metavante, the fund management solution provides integration with ACS/Mellon, HAS Bank, and other preferred financial institutions, for “one-step” HAS account management. Members can track HSA account spending and manage fund investments while benefiting from the health plan’s education, online services and enrollment capabilities.

HealthWeb^®. HealthWeb^® allows health plans to exchange information and conduct business with physician groups, members, employers, and brokers on a secure basis over the Internet. HealthWeb^® is installed on the health plan’s web servers or offered on a hosted basis and then configured according to customer preferences. The HealthWeb^® applications are easy to use and personalized for each customer, providing access to the business applications and content needed to perform typical healthcare tasks. HealthWeb^® modules are designed to manage online eligibility, authorizations, referrals, benefit verification, claims status, claims adjudication, and many other transactions benefiting physician offices. The modules also support enrollment, billing, benefit cost modeling, demographic changes, primary care physician selection, identification card requests, and other transactions for employers, brokers, and health plan members.

Provider POS Direct. Health plans can use this integrated software solution to enable providers to calculate real-time patient liability or fully adjudicate a claim in real-time before the patient leaves the provider’s office. Provider POS Direct helps providers reduce costs associated with growing accounts receivable and collections by allowing the provider to collect true payment at the time of service.

Professional Services. TriZetto offers a suite of services specifically for Retail Healthcare including Retail Readiness, Implementation and Optimization. Retail Readiness Services combine strategic planning, business process engineering and implementation services to help a health plan ready its operations to support retail solutions, expanding beyond pure technology implementation.

Government Programs

TriZetto offers solutions that assist payers as they compete in the rapidly growing Government programs marketplace. With the influx of new members through the aging of the baby-boomers and the passage of the Medicare Modernization Act providing prescription drug coverage for seniors, plans have entered this marketplace in large numbers. TriZetto government solutions, which are built on our core products, allow our customers to expand their offerings to include Medicare Part D, Medicare Advantage and Managed Medicaid.

Medicare and Medicare Part D. Building on its Facets^® Core Administration platform, TriZetto offers targeted solutions for Managed Medicare and Medicare Part D. TriZetto provides core administration software along with Care Management and Network management tools to assist a plan’s efforts to control their administrative costs while providing high quality and cost effective care for their seniors. Our FastTrak solution integrates Facets^®, Hosting Services and BPO to implement a Medicare or Medicare Part D solution in six months. In addition to implementing and optimizing Facets^® for the Medicare and Medicare Part D business lines, TriZetto also offers a CMS Monitoring Service in which Medicare-knowledgeable TriZetto professionals monitor daily changes in CMS requirements and identify the ramifications of those changes on the health plan’s operations.

Medicaid. TriZetto’s Medicaid solutions can efficiently handle claims processing as well as enrollment, medical-management and workflow processes for Medicaid membership. We continue to enhance our solution to accommodate the evolving Medicaid

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reporting requirements and other administrative demands. Health plans can purchase these solutions in a license, hosted or BPO option, including an integrated solution—FastTrak—that implements in six months.

PDM. In 2006, TriZetto acquired Plan Data Management, the leading business solutions company to the Medicare Advantage industry. PDM provides four key Medicare Advantage solutions including enrollment, data validation and submission, reconciliation, and revenue optimization. Solutions include:

E*ENRL. Includes the steps required to enroll and disenroll members including interfacing to the CMS system for Medicare Advantage and Part D business lines.

E*DATA Module 1. Part of the Data Validation and Submission suite, E*DATA Module 1 submits, tracks and provides the tools to correct and resubmit medical data and encounter data.

E*DATA Module 2. Identifies, from claims data, diagnoses that may indicate the presence of other conditions that may ultimately affect CMS payment and supplies the necessary reporting to allow a payer to submit additional confirmed diagnoses to CMS.

E*RxEVENT. Part of the Data Validation and Submission suite, E*RxEVENT submits, tracks and provides the tools to correct and resubmit pharmacy event data to CMS.

Outsourced Business Services

In 2006, we derived approximately 25% of our total revenue from outsourced business services. Our outsourced business services fall into two categories, software hosting and application management and business process outsourcing, both of which are described in more detail below.

Software Hosting and Application Management. TriZetto Hosting Services include integrating, hosting, monitoring, and managing our proprietary software applications alongside other software applications from third party vendors. We deliver software on a cost-predictable subscription basis, through multi-year contracts that include service levels.

TriZetto Hosting Services include implementing, hosting and supporting Facets^®, CareAdvance Enterprise^™, HealthWeb^®, NetworX^™, QicLink^™ and the third-party applications with which these systems interface. Dedicated teams provide deep knowledge in technical architecture, application support, performance and tuning, operations and release management. The data center operates 24x7x365 and offers a Class 5 (highest level) data center that includes disaster recovery capabilities that support HIPAA and internal control requirements.

Whether adding new members, or adding care and network management capability, TriZetto’s hosting customers turn to us to help them align their strategic and business initiatives. Using TriZetto’s Hosting Services, health plans can deliver new products to market faster and better manage capacity fluctuations, provide higher service levels and focus IT resources on strategic initiatives rather than day-to-day operations.

TriZetto’s hosted solutions provide complete, professionally managed application management and customization that includes desktop and network connections, software applications, specialized third-party software, information management access and sophisticated reporting capabilities to aid in data analysis and decision making. Customers can choose the combination of our products and services to best meet their business requirements including:

Hosting. A comprehensive solution that works for health plans of all sizes. TriZetto Hosting Services include best-practice implementation, and management and support of TriZetto’s products. Standard packages include monitoring and reporting of customers’ equipment, telecommunications, network services and disaster recovery. Also included is the management of daily batch scheduling, reporting, and interfaces to business-critical third-party applications.

On Demand Environments. These services provide pre-configured environments run by experienced Facets^® professionals—to help customers jumpstart their product configuration, testing and training activities, and deliver more features to the market this year than current resources allow.

Disaster Recovery. Because compliance is key to any health plan’s operations, TriZetto also offers multiple disaster recovery options including a Class 5 (highest level) data center. This facility incorporates advanced technology to ensure the maximum possible disaster preparedness. It includes features such as redundant connectivity, cooling, power sources, generator and fuel systems. TriZetto data centers are staffed 24x7x365 by Facets^® experts who know how to recover Facets^® more quickly and efficiently than companies that provide only equipment and floor space.

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InfoTrust^®. The TriZetto Cyber Site also incorporates its powerful InfoTrust^® methodology to allow health plans to use recovery equipment as a pre-production model environment for application testing. With InfoTrust^®, TriZetto provides servers and applications as a non-production environment. If a disaster occurs, TriZetto fails over to these environments to recover customers’ applications in committed recovery times. This “double use” methodology provides a more cost effective solution for health plans because it minimizes equipment needs.

Vendor Partner Relationships. In order to provide our customers with accessibility to other specialty software applications that run integrated and alongside TriZetto solutions, we have acquired rights to license and/or deploy numerous commercially available software applications from a variety of healthcare and other software vendors. These relationships range from perpetual, reusable software licenses and contracts to preferred installer agreements to informal co-marketing arrangements. We enter into relationships with software vendors in order to offer our customers a variety of solutions tailored to their unique information technology needs. Our relationships with our vendor partners are designed to provide both parties with numerous mutual benefits.

Business Process Outsourcing (BPO). To complement our software hosting services, we also provide health plans and benefits administrators with transaction processing services for typical back office functions, including claims, billing, and enrollment. Customers typically outsource to us for the following reasons: to improve or maintain service, for more predictable costs, to take advantage of our larger scale, to reduce risk through our performance guarantees, to gain access to our technical and healthcare business expertise, to increase speed-to-market, to ensure business continuity, and to become HIPAA compliant.

Our business process outsourcing services include:

• Benefit and Provider Configuration Rule Set-Up. We configure, and can maintain, the customer’s software according to the customer’s specific benefit plans and provider payment arrangements.

• Document Imaging/Electronic Data Interchange (EDI) Processing. We accept and process claim forms, enrollment documents and other documents submitted via paper or EDI, and scan all images for electronic retrieval.

• Medical, Dental, and Specialty Claims Processing. We process claims submitted for services under a variety of products and lines of business, adjust payments, and coordinate benefits. We also generate, print, and distribute claims payment checks and remittance notices to appropriate claimants and to health plan members.

• Membership and Enrollment Processing. We set up employer group and individual membership information and process transactions regarding benefit plan selection, assignment of primary care physicians, and membership changes. We also issue member identification cards and perform other related administrative tasks.

• Premium Billing. We generate, print, and mail invoices, post payments received on behalf of the health plan, and reconcile employer group and individual member accounts against billed amounts.

• Print and Mailing Services. We print and mail functional area output documents such as enrollment cards, claims payment checks, remittance notices, premium invoices, broker commission checks, and capitation payments along with supporting documentation.

• Business Continuity Services. We have facilities and personnel available to assist customers using our proprietary products to meet business processing requirements in the event of a loss of a customer site.

Health plans can purchase these services on a retainer or project basis. These business process outsourcing services are generally provided in our centralized processing locations. Approximately 200 employees are located at our various processing sites, providing services for customers using our Facets^®, QicLink^™, and other proprietary and third-party software systems.

Professional Services

We derived approximately 28% of our revenue from professional services in 2006, mainly from consulting and implementations associated with our proprietary software, software hosting, and other outsourcing contracts. As of December 31, 2006, we employed approximately 250 professional services personnel. Our professional services team helps our customers enhance revenue growth, drive administrative efficiencies and improve the cost and quality of care by implementing and optimizing TriZetto solutions. Our team provides expertise in all aspects of TriZetto’s proprietary software products, especially Facets^®, CareAdvance^™, QicLink^™, HealthWeb^®, HIPAA Gateway, and NetworX^™, through onsite services, remote support, and customer training in four key areas:

Product Installation. Product Installation includes a set of pre-bundled services to help a health plan install a TriZetto application. Services include: product training, environment setup, product installation, and project planning and configuration design. Often this phase includes assessments for third-party interface development, business process engineering and data conversion. The by-

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product of this phase is a correctly installed product, and a realistic implementation plan that identifies all of the critical success factors and resource constraints to take a technology from installation through operational use.

Customization. To take full advantage of TriZetto applications, health plans typically customize them to meet their unique operational needs. Customization services include software development (design, coding and testing) of interfaces and extensions to third-party applications; Facets^® configuration; application and technology architecture integration planning; test planning, report development and additional product training. TriZetto professional services team members are experienced in both our applications and healthcare operations. This experience drives faster and more accurate customizations, saves time and money, and reduces the risk of a complex system implementation.

Deployment. In the Deployment phase, health plans move our applications into operations. This typically requires converting legacy data to our new applications, testing the application, training the trainer, training end users and managing the operational turnover. To assist with these tasks, our Professional Services organization has developed a library of toolkits and shortcuts to make operational transition smooth and to increase internal user adoption rates.

Optimization. Once operational, our customers use our Optimization services to increase the effectiveness and efficiencies of our applications. Services include: Business Process Engineering to help our customers engineer their existing operations to achieve higher business performance; data management and warehousing strategies and implementation to help our customers improve information access and build business reports that drive intelligent business decisions; optimization of hardware, software and data exchange capabilities to leverage technology and network investments and maximize data center operations; product optimization, and user effectiveness training. These services optimize existing applications, enable the health plan to scale operations quickly and efficiently and add new lines of business.

SALES AND MARKETING

Our primary sales and marketing approach is to utilize our direct sales force to promote TriZetto as the single source for comprehensive healthcare information technology products and services to payers. As of December 31, 2006, we had approximately 70 sales, sales support, account management and marketing employees throughout the United States. Our professional sales force sells our entire range of offerings to current and prospective customers, including enterprise core administration software, network management and care management, outsourced hosting and business services, and consulting services. We also have specialized sales personnel who focus exclusively on our care management applications. Separate sales teams have been established for the health plan and benefits administration markets. Our solutions architecture team supports application and service sales while our sales support team provides in-depth technical information, provides product demonstrations and negotiates contracts with our customers and prospects. To support the overall sales process, multi-disciplinary pursuit teams are established for each major prospect, spearheaded by a member of executive management.

Our marketing team includes five key areas: Integrated Marketing, Marketing Communications and Events, Sales Channel Programs, Solutions Marketing and Product Marketing. Key functions of Integrated Marketing include branding and naming, integrated marketing planning, market intelligence, relationship marketing, analyst relations, employee communications and the Intranet and Internet. Marketing Communications and Events produces our advertising, collateral and lead generation material, as well as plans and executes TriZetto conferences and trade shows. Sales Channel Programs include customer analytics, loyalty programs, customer satisfaction and customer councils. The Solutions Marketing and Product Marketing teams are responsible for driving a presence in new markets including developing value propositions, sales tools, application beta management, product roadmaps and segmentation planning.

CUSTOMER SERVICE

We believe that personalized support is necessary to maintain long-term relationships with our customers. Because we support multiple applications and technology solutions, our functional and technical support staff are grouped and trained by specific application and by application type. These focused staff groups have concentrated expertise that we can deploy as needed to address customer needs. We cross-train employees to support multiple applications and technology solutions and create economies-of-scale in our support staff.

We further leverage the capabilities of our support staff through the use of sophisticated software that tracks solutions to common computer and software-related problems. This allows our support staff to learn from the experience of other people within the organization and reduces the time it takes to solve problems. In addition, we provide customer support for our business process outsourcing services.

Hosted clients interact most directly with TriZetto’s customer delivery management (CDM) business unit. The CDM provides ongoing customer support and “customer-facing” functions for TriZetto’s hosted customers and reports directly to the senior vice president of Enterprise Infrastructure (i.e., hosting operations). In addition to providing the customer support services identified above, the CDM is primarily responsible for managing service level commitments and supervising the delivery of

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customer’s specific production processing services (e.g., batch processing, online availability, file transfers, connectivity, issue resolution) for hosted customers. This service-oriented business unit is composed of TriZetto’s Customer Support Help Desk and a dedicated customer delivery team composed of customer leads and a customer delivery executive (CDE).

COMPETITION

The market for healthcare information technology services is intensely competitive, rapidly evolving, highly fragmented and subject to rapid technological change. By using proprietary technologies and methods, we develop, integrate and deliver packaged enterprise and component software applications, connectivity solutions for both Internet and direct communication, application hosting, infrastructure outsourced business services and IT consulting services. Our competitors provide some or all of the services that we provide. Our competitors can be categorized as follows:

• information technology and outsourcing companies, such as Perot Systems Corporation, IBM, Affiliated Computer Services, DST (who acquired the healthcare division of Computer Sciences Corporation), Electronic Data Systems Corporation and Infocrossing;

• healthcare information software vendors, including the newly combined DST/Amisys Synertech Inc., Perot Systems Corporation, Electronic Data Systems Corporation, and Plexis in the health plan market, as well as Eldorado and SBPA in the benefits administration market, and MMC 2020, Gorman and Dynamics in the Medicare Advantage market;

• healthcare information technology consulting firms, such as First Consulting Group, Inc., Proxicom (ACS) and the consulting divisions or former affiliates of the major accounting firms, such as Deloitte Consulting and Accenture;

• healthcare e-commerce and portal companies, such as Emdeon Corporation (formerly WebMD Corporation), Healthnation, HealthTrio, Avolent, edocs and BenefitFocus;

• enterprise application integration vendors such as Vitria, SeeBeyond, TIBCO, Fuego and M2;

• care management software and service companies such as HealthTrio, MEDecision, McKesson, Emdeon, HealthAtoZ and Click4Care;

• consumer retail software and services companies such as CareGain and FiServ; and

• health plans, themselves, some of whom are providing hosting and BPO services to the marketplace and leveraging capabilities across the aggregated membership of multiple organizations.

Each of these types of companies can be expected to compete with us within various segments of the healthcare information technology market. Furthermore, major software information systems companies and other entities, including those specializing in the healthcare industry that are not presently offering applications that compete with our products and services, may enter our markets. In addition, some of our third-party software vendors compete with us from time to time by offering their software on a licensed or hosted basis.

We believe companies in our industry primarily compete based on performance, price, software functionality, ease of implementation, level of service, and track record of successful customer installations. Although our competitive position is difficult to characterize due principally to the variety of current and potential competitors and the evolving nature of our market, we believe that we presently compete favorably with respect to all of these factors. While our competition comes from many industry segments, we believe no other single company offers the integrated, single-source solution that we provide to our customers.

To be competitive, we must continue to enhance our products and services, as well as our sales, marketing, and distribution channels to respond promptly and effectively to:

• changes in the healthcare industry, including consolidation;

• constantly evolving standards and government regulation affecting healthcare transactions;

• the challenges of technological innovation and adoption;

• evolving business practices of our customers;

• our competitors’ new products and services;

• new products and services developed by our vendor partners and suppliers; and

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• challenges in hiring and retaining information technology professionals.

BACKLOG

Our total backlog is defined as the revenue we expect to generate in future periods from existing customer contracts. Our 12-month backlog is defined as the revenue we expect to generate from existing customer contracts over the next 12 months. Most of the revenue in our backlog is derived from multi-year service revenue contracts (including software hosting, business process outsourcing, IT outsourcing, and software maintenance with periods up to seven years) and consulting contracts. Consulting revenue is included in the backlog when the revenue from such a consulting contract is expected to be recognized over a period exceeding 12 months.

Backlog can change due to a number of factors, including unforeseen changes in implementation schedules, contract cancellations (subject to penalties paid by the customer), or customer financial difficulties. In such event, unless we enter into new customer agreements that generate enough revenue to replace or exceed the revenue that is recognized in any given quarter, our backlog will decline. Our backlog at any date may not indicate demand for our products and services and may not reflect actual revenue for any period in the future.

Our total backlog at December 31, 2006 was approximately $858.2 million compared to $703.4 million at December 31, 2005. The 12-month backlog at December 31, 2006 was approximately $213.3 million compared to $185.1 million at December 31, 2005.

INTELLECTUAL PROPERTY

Our intellectual property is important to our business. We rely on certain developed software assets and internal methodologies for performing customer services. Our consulting services group develops and utilizes information technology life-cycle methodology and related paper-based and software-based toolsets to perform customer assessments, planning, design, development, implementation, and support services. We rely primarily on a combination of patent, copyright, trademark and trade secret laws, confidentiality procedures, and contractual provisions to protect our intellectual property.

Our efforts to protect our intellectual property may not be adequate. Our competitors may independently develop similar technology or duplicate our products or services. Unauthorized parties may infringe upon or misappropriate our products, services or proprietary information. In addition, the laws of some foreign countries do not protect proprietary rights as well as the laws of the United States. In the future, litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation could be time consuming and costly.

We could be subject to intellectual property infringement claims as we expand our product and service offerings and the number of competitors increases. Defending against these claims, even if not meritorious, could be expensive and divert our attention from operating our company. If we become liable to third parties for infringing upon their intellectual property rights, we could be required to pay a substantial damage award and be forced to develop non-infringing technology, obtain a license or cease using the applications that contain the infringing technology or content. We may be unable to develop non-infringing technology or content or obtain a license on commercially reasonable terms, or at all.

We also rely on a variety of technologies that are licensed from third parties to perform key functions. These third-party licenses are an essential element of our hosted solutions business. These third-party licenses may not be available to us on commercially reasonable terms in the future. The loss of or inability to maintain any of these licenses could delay the introduction of software enhancements and other features until equivalent technology can be licensed or developed. Any such delay could materially adversely affect our ability to attract and retain customers.

SIGNIFICANT CUSTOMERS

As of December 31, 2006 we were providing services to 320 unique customers. One of our customers, The Regence Group, accounted for more than 10% of our consolidated revenue in 2006. No single customer accounted for more than 10% of our accounts receivable in 2006. In 2005, one of our customers, The Regence Group, accounted for more than 10% of our accounts receivable and two of our customers, The Regence Group and United Healthcare Services, Inc., each accounted for more than 10% of our consolidated revenue. No single customer accounted for more than 10% of our accounts receivable and consolidated revenues in 2004.

EMPLOYEES

As of December 31, 2006, we had approximately 1,600 employees. Our employees are not subject to any collective bargaining agreements, and we generally have good relations with our employees.

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AVAILABLE INFORMATION

Our website is located at www.trizetto.com. We make available free of charge through this website all of our SEC filings including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, as soon as reasonably practicable after those reports are electronically filed with the SEC.

Item 1A—RISK FACTORS

We cannot predict if we will be able to sustain our positive net income.

We may not be able to sustain our current level of revenue or increase our revenue in the future. We currently derive our revenue primarily from providing hosted solutions, software licensing and maintenance, and other services such as consulting. We depend on the continued demand for healthcare information technology and related services. We plan to continue investing in administrative infrastructure, research and development, sales and marketing, and acquisitions. If we are not able to sustain our current levels of revenue or maintain our profitability, our operations may be adversely affected.

Revenue from a limited number of customers comprises a significant portion of our total revenue, and if these customers terminate or modify existing contracts or experience business difficulties, it could adversely affect our earnings.

As of December 31, 2006, we were providing services to 320 unique customers. One of our customers, The Regence Group, represented approximately 12% of our consolidated revenue for the year ended December 31, 2006.

Although we typically enter into multi-year customer agreements, a majority of our customers are able to reduce or cancel their use of our services before the end of the contract term, subject to monetary penalties which are not significant. We also provide services to some hosted customers without long-term contracts. In addition, many of our contracts are structured so that we generate revenue based on units of volume, which include the number of members, number of workstations or number of users. If our customers experience business difficulties and the units of volume decline or if a customer ceases operations for any reason, we will generate less revenue under these contracts and our operating results may be materially and adversely impacted.

Our operating expenses are relatively fixed and cannot be reduced on short notice to compensate for unanticipated contract cancellations or reductions. As a result, any termination, significant reduction or modification of our business relationships with any of our significant customers could have a material adverse effect on our business, financial condition, operating results and cash flows.

Our business is changing rapidly, which could cause our quarterly operating results to vary and our stock price to fluctuate.

Our quarterly operating results have varied in the past, and we expect that they will continue to vary in future periods. Our quarterly operating results can vary significantly based on a number of factors, such as:

• our mix of products and services revenue;

• our ability to add new customers and renew existing accounts;

• selling additional products and services to existing customers;

• long and unpredictable sales cycles;

• meeting project milestones and customer expectations;

• seasonality in information technology purchases;

• the timing of new customer sales; and

• general economic conditions.

Variations in our quarterly operating results could cause us to not meet the earnings estimates of securities analysts or the expectations of our investors, which could affect the market price of our common stock in a manner that may be unrelated to our long-term operating performance.

We base our expense levels in part upon our expectations concerning future revenue, and these expense levels are relatively fixed in the short-term. If we do not achieve our expected revenue targets, we may not be able to reduce our short-term spending in response. Any shortfall in revenue would have a direct impact on our results of operations.

The intensifying competition we face from both established entities and new entries in the market may adversely affect our revenue and profitability.

The market for our technology and services is highly competitive and rapidly changing and requires potentially expensive technological advances. Many of our competitors and potential competitors have significantly greater financial, technical, product development, marketing and other resources, and greater market recognition than we have. Many of our competitors also have, or

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may develop or acquire, substantial installed customer bases in the healthcare industry. As a result, our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements or to devote greater resources to the development, promotion, and sale of their applications or services than we can devote.

Our competitors can be categorized as follows:

• information technology and outsourcing companies, such as Perot Systems Corporation, IBM, Affiliated Computer Services, DST (who acquired the healthcare division of Computer Sciences Corporation), Electronic Data Systems Corporation and Infocrossing;

• healthcare information software vendors, including the newly combined DST/Amisys Synertech Inc., Perot Systems Corporation and Electronic Data Systems Corporation and Plexis in the health plan market, as well as Eldorado and SBPA in the benefits administration market and MMC 2020, Gorman and Dynamics in the Medicare Advantage market;

• healthcare information technology consulting firms, such as First Consulting Group, Inc., Proxicom (ACS) and the consulting divisions or former affiliates of the major accounting firms, such as Deloitte Consulting and Accenture;

• healthcare e-commerce and portal companies, such as Emdeon Corporation (formerly WebMD Corporation), HealthTrio, Avolent, edocs and BenefitFocus;

• enterprise application integration vendors such as Vitria, SeeBeyond, TIBCO, Fuego and M2;

• care management software and service companies such as HealthTrio, MEDecision, McKesson, Emdeon, HealthAtoZ and Click4Care;

• consumer retail software and services companies such as, CareGain and FiServ; and

• health plans, themselves, some of whom are providing hosting and BPO services to the marketplace and leveraging capabilities across the aggregated membership of multiple organizations.

Further, other entities that do not presently compete with us may do so in the future, including major software information systems companies and financial services entities.

We believe our ability to compete will depend in part upon our ability to:

• enhance our current technology and services;

• respond effectively to technological changes;

• introduce new capabilities for current and new market segments; and

• meet the increasingly sophisticated needs of our customers.

• maintain and continue to develop partnerships with vendors;

Increased competition may result in price reductions, reduced margins, and loss of market share, any of which could have a material adverse effect on our results of operations. In addition, pricing, margins, and market share could be negatively impacted further as a greater number of available products in the marketplace increases the likelihood that product and service offerings in our markets become more fungible and price sensitive.

Our sales and implementation cycles are long and unpredictable.

We have experienced and continue to experience long and unpredictable sales cycles, particularly for contracts with large customers, or customers purchasing multiple products and services. Enterprise software typically requires significant capital expenditures by customers, and the decision to outsource IT-related services is complicated and time-consuming. Major purchases by large payer organizations typically range from nine to 12 months or more from initial contact to contract execution. The prospects currently in our pipeline may not sign contracts within a reasonable period of time or at all.

In addition, our implementation cycle has ranged from 12 to 24 months or longer from contract execution to completion of implementation. During the sales cycle and the implementation cycle, we will expend substantial time, effort, and financial resources preparing contract proposals, negotiating the contract, and implementing the solution. We may not realize any revenue to offset these expenditures, and, if we do, accounting principles may not allow us to recognize the revenue during corresponding periods, which could harm our future operating results. Additionally, any decision by our customers to delay implementation may adversely affect our revenues.

Consolidation of healthcare payer organizations and benefits administrators could decrease the number of our existing and potential customers.

There has been and continues to be acquisition and consolidation activity among healthcare payers and benefits administrators. Mergers or consolidations of payer organizations in the future could decrease the number of our existing and potential customers. The acquisition of a customer could reduce our revenue and have a negative impact on our results of operations

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and financial condition. A smaller overall market for our products and services could also result in lower revenue and margins. In addition, healthcare payer organizations are increasing their focus on consumer directed healthcare, in which consumers interact directly with health plans through administrative services provided by health plans to employer groups. These services compete with the services provided by benefits administrators and could result in additional consolidation in the benefits administration market.

Some of our significant customers may develop their own software solutions, which could decrease the demand for our products.

Some of our customers in the healthcare payer industry have, or may seek to acquire, the financial and technological resources necessary to develop software solutions to perform the functions currently serviced by our products and services. Additionally, consolidation in the healthcare payer industry could result in additional organizations having the resources necessary to develop similar software solutions. If these organizations successfully develop and utilize their own software solutions, they may discontinue their use of our products or services, which could materially and adversely affect our results of operations.

We depend on our software application vendor relationships, and if our software application vendors terminate or modify existing contracts or experience business difficulties, or if we are unable to establish new relationships with additional software application vendors, it could harm our business.

We depend, and will continue to depend, on our licensing and business relationships with third-party software application vendors. Our success depends significantly on our ability to maintain our existing relationships with our vendors and to build new relationships with other vendors in order to enhance our services and application offerings and remain competitive. Although most of our licensing agreements are perpetual or automatically renewable, they are subject to termination in the event that we materially breach such agreements. We may not be able to maintain relationships with our vendors or establish relationships with new vendors. The software, products or services of our third-party vendors may not achieve or maintain market acceptance or commercial success. Accordingly, our existing relationships may not result in sustained business partnerships, successful product or service offerings or the generation of significant revenue for us.

Our arrangements with third-party software application vendors are not exclusive. These third-party vendors may not regard our relationships with them as important to their own respective businesses and operations. They may reassess their commitment to us at any time and may choose to develop or enhance their own competing distribution channels and product support services. If we do not maintain our existing relationships or if the economic terms of our business relationships change, we may not be able to license and offer these services and products on commercially reasonable terms or at all. Our inability to obtain any of these licenses could delay service development or timely introduction of new services and divert our resources. Any such delays could materially adversely affect our business, financial condition, operating results and cash flows.

Our licenses for the use of third-party software applications are essential to the technology solutions we provide for our customers. Loss of any one of our major vendor agreements may have a material adverse effect on our business, financial condition, operating results and cash flows.

We rely on third-party software vendors for components of our software products.

Our software products contain components developed and maintained by third-party software vendors, and we expect that we may have to incorporate software from third-party vendors in our future products. We may not be able to replace the functions provided by the third-party software currently offered with our products if that software becomes obsolete, defective, or incompatible with future versions of our products or is not adequately maintained or updated. Any significant interruption in the availability of these third-party software products or defects in these products could harm the sale of our products unless and until we can secure or develop an alternative source. Although we believe there are adequate alternate sources for the technology currently licensed to us, such alternate sources may not be available to us in a timely manner, may not provide us with the same functions as currently provided to us or may be more expensive than products we currently use.

We have sustained rapid growth, and our inability to manage this growth could harm our business.

We have rapidly and significantly expanded our operations since inception and may continue to do so in the future. This growth has placed, and may continue to place, a significant strain on our managerial, operational, and financial resources, and information systems. If we are unable to manage our growth effectively, it could have a material adverse effect on our business, financial condition, operating results, and cash flows.

Our acquisition strategy may disrupt our business and require additional financing.

Since our initial public offering in October 1999, we have made ten acquisitions. A significant portion of our historical growth has occurred through acquisitions and we may continue to seek strategic acquisitions as part of our growth strategy. We compete with other companies to acquire businesses, making it difficult to acquire suitable companies on favorable terms or at all.

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Acquisitions may require significant capital, typically entail many risks, and can result in difficulties integrating operations, personnel, technologies, products and information systems of acquired businesses.

We may be unable to successfully integrate companies that we have acquired or may acquire in the future in a timely manner. If we are unable to successfully integrate acquired businesses, we may incur substantial costs and delays or other operational, technical or financial problems. In addition, the integration of our acquisitions may divert our management’s attention from our existing business, which could damage our relationships with our key customers and employees.

To finance future acquisitions, we may issue equity securities that could be dilutive to our stockholders. We may also incur debt and additional amortization expenses related to goodwill and other intangible assets as a result of acquisitions. The interest expense related to this debt and additional amortization expense may significantly reduce our profitability and have a material adverse effect on our business, financial condition, operating results and cash flows. Acquisitions may also result in large one-time charges as well as goodwill and intangible assets and impairment charges in the future that could negatively impact our operating results.

Our need for additional financing is uncertain as is our ability to raise capital if required.

If we are not able to sustain our positive net income, we may need additional financing to fund operations or growth. We may not be able to raise additional funds through public or private financings at any particular point in the future or on favorable terms. Future financings could adversely affect our common stock and debt securities.

Our business will suffer if our software products contain errors.

The proprietary and third party software products we offer are inherently complex. Despite our testing and quality control procedures, errors may be found in current versions, new versions or enhancements of our products. Significant technical challenges may also arise with our products because our customers purchase and deploy those products across a variety of computer platforms and integrate them with a number of third-party software applications and databases. If new or existing customers have difficulty deploying our products or require significant amounts of customer support, our costs would increase. Moreover, we could face possible claims and higher development costs if our software contains undetected errors or if we fail to meet our customers’ expectations. As a result of the foregoing, we could experience:

• loss of or delay in revenue and loss of market share;

• loss of customers;

• damage to our reputation;

• failure to achieve market acceptance;

• diversion of development resources;

• increased service and warranty costs;

• legal actions by customers against us which could, whether or not successful, increase costs and distract our management; and

• increased insurance costs.

We could lose customers and revenue if we fail to meet contractual obligations including performance standards and other material obligations.

Many of our service agreements contain performance standards and other post contract obligations. Our failure to meet these standards or breach other material obligations under our agreements could trigger remedies for our customers including termination, financial penalties and refunds that could have a material adverse effect on our business, financial condition, operating results and cash flows.

If our ability to expand our network and computing infrastructure is constrained in any way, we could lose customers and damage our operating results.

We must continue to expand and adapt our network and technology infrastructure to accommodate additional users, increased transaction volumes, changing customer requirements and technological obsolescence. We may not be able to accurately project the rate or timing of increases, if any, in the use of our hosted solutions or be able to expand and upgrade our systems and infrastructure to accommodate such increases. We may be unable to expand or adapt our network infrastructure to meet additional demand or our customers’ changing needs on a timely basis, at a commercially reasonable cost or at all. Our current information systems, procedures and controls may not continue to support our operations while maintaining acceptable overall performance and may hinder our ability to exploit the market for healthcare applications and services. Service lapses could cause our users to switch to the services of our competitors, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

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Performance or security problems with our systems could damage our business.

Our customers’ satisfaction and our business could be harmed if we, or our customers, experience any system delays, failures, or loss of data.

Although we devote substantial resources to avoid performance problems, errors may occur. Errors in the processing of customer data may result in loss of data, inaccurate information, and delays. Such errors could cause us to lose customers and be liable for damages. We currently process a substantial number of our customers’ transactions and data at our data centers in Colorado. Although we have safeguards for emergencies and we have contracted backup processing for our customers’ critical functions, the occurrence of a major catastrophic event or other system failure at any of our facilities could interrupt data processing or result in the loss of stored data. In addition, we depend on the efficient operation of telecommunication providers that have had periodic operational problems or experienced outages.

A material security breach could damage our reputation or result in liability to us. We retain confidential customer and federally protected patient information in our data centers. Therefore, it is critical that our facilities and infrastructure remain secure and that our facilities and infrastructure are perceived by the marketplace to be secure. Despite the implementation of security measures, our infrastructure may be vulnerable to physical break-ins, computer viruses, programming errors, attacks by third parties, or similar disruptive problems.

Our services agreements generally contain limitations on liability, and we maintain insurance with adequate coverage limits for general liability and professional liability to protect against claims associated with the use of our products and services. However, the contractual provisions and insurance coverage may not provide adequate coverage against all possible claims that may be asserted. In addition, appropriate insurance may be unavailable in the future at commercially reasonable rates. A successful claim in excess of our insurance coverage could have a material adverse effect on our business, financial condition, operating results, and cash flows. Even unsuccessful claims could result in litigation or arbitration costs and may divert management’s attention from our existing business.

Our success depends on our ability to attract, retain and motivate management and other key personnel.

Our success will depend in large part on the continued services of management and key personnel. Competition for personnel in the healthcare information technology market is intense, and there are a limited number of persons with knowledge of, and experience in, this industry. We do not have employment agreements with most of our executive officers, so any of these individuals may terminate his or her employment with us at any time. The loss of services from one or more of our management or key personnel, or the inability to hire additional management or key personnel as needed, could have a material adverse effect on our business, financial condition, operating results, and cash flows. Although we currently experience relatively low rates of turnover for our management and key personnel, the rate of turnover may increase in the future. In addition, we expect to further grow our operations and our needs for additional management and key personnel will increase. Our continued ability to compete effectively in our business depends on our ability to attract, retain, and motivate these individuals.

We rely on an adequate supply and performance of computer hardware and related equipment from third parties to provide services to larger customers and any significant interruption in the availability or performance of third-party hardware and related equipment could adversely affect our ability to deliver our products to certain customers on a timely basis.

As we offer our hosted solution services and software to a greater number of customers and particularly to larger customers, we may be required to obtain specialized computer equipment from third parties that can be difficult to obtain on short notice. Any delay in obtaining such equipment may prevent us from delivering large systems to our customers on a timely basis. We also may rely on such equipment to meet required performance standards. We may have no control over the resources that third parties may devote to service our customers or satisfy performance standards. If such performance standards are not met, we may be adversely impacted under our service agreements with our customers.

Any failure or inability to protect our technology and confidential information could adversely affect our business.

Our success depends in part upon proprietary software and other confidential information. The software and information technology industries have experienced widespread unauthorized reproduction of software products and other proprietary technology. We rely on a combination of copyright, patent, trademark and trade secret laws, confidentiality procedures, and contractual provisions to protect our intellectual property. However, these protections may not be sufficient, and they do not prevent independent third-party development of competitive products or services.

We execute confidentiality and non-disclosure agreements with certain employees and our suppliers, as well as limit access to and distribution of our proprietary information. The departure of any of our management and technical personnel, the breach of their confidentiality and non-disclosure obligations to us, or the failure to achieve our intellectual property objectives could have a material adverse effect on our business, results of operations and financial condition. We have had, and may continue to have, employees leave us and go to work for competitors. If we are not successful in prohibiting the unauthorized use of our proprietary

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technology or the use of our processes by a competitor, our competitive advantage may be significantly reduced which would result in reduced revenues.

Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products.

We cannot be certain that our products do not infringe issued patents or other intellectual property rights of others. In addition, because patent applications in the United States and many other countries are not publicly disclosed until a patent is issued, applications covering technology used in our software products may have been filed without our knowledge. We may be subject to legal proceedings and claims from time to time, including claims of alleged infringement of the patents, trademarks and other intellectual property rights of third parties by us or our licensees in connection with their use of our products. Intellectual property litigation is expensive and time-consuming and could divert our management’s attention away from running our business and seriously harm our business. If we were to discover that our products violated the intellectual property rights of others, we would have to obtain licenses from these parties in order to continue marketing our products without substantial reengineering. We might not be able to obtain the necessary licenses on acceptable terms or at all, and if we could not obtain such licenses, we might not be able to reengineer our products successfully or in a timely fashion. If we fail to address any infringement issues successfully, we would be forced to incur significant costs, including damages and potentially satisfying indemnification obligations that we have with our customers, and we could be prevented from selling certain of our products.

If our consulting services revenue does not grow substantially, our revenue growth could be adversely impacted.

Our consulting services revenue represents a significant component of our total revenue and we anticipate that it will continue to represent a significant percentage of total revenue in the future. The level of consulting services revenue depends upon the healthcare industry’s demand for outsourced information technology services and our ability to deliver products that generate implementation and follow-on consulting services revenue. Our ability to increase services revenue will depend in part on our ability to increase the capacity of our consulting group, including our ability to recruit, train and retain a sufficient number of qualified personnel.

The insolvency of our customers or the inability of our customers to pay for our services could negatively affect our financial condition.

Healthcare payers are often required to maintain restricted cash reserves and satisfy strict balance sheet ratios promulgated by state regulatory agencies. In addition, healthcare payers are subject to risks that physician groups or associations within their organizations become subject to costly litigation or become insolvent, which may adversely affect the financial stability of the payer. If healthcare payers are unable to pay for our services because of their need to maintain cash reserves or failure to maintain balance sheet ratios or solvency, our ability to collect fees for services rendered would be impaired and our financial condition could be adversely affected.

Changes in government regulation of the healthcare industry could adversely affect our business.

During the past several years, the healthcare industry has been subject to increasing levels of government regulation of, among other things, reimbursement rates and certain capital expenditures. In addition, proposals to substantially reform Medicare, Medicaid, and the healthcare system in general have been or are being considered by Congress. These proposals, if enacted, may further increase government involvement in healthcare, lower reimbursement rates, and otherwise adversely affect the healthcare industry which could adversely impact our business. The impact of regulatory developments in the healthcare industry is complex and difficult to predict, and our business could be adversely affected by existing or new healthcare regulatory requirements or interpretations.

Participants in the healthcare industry, such as our payer customers, are subject to extensive and frequently changing laws and regulations, including laws and regulations relating to the confidential treatment and secure transmission of patient medical records, and other healthcare information. Legislators at both the state and federal levels have proposed and enacted additional legislation relating to the use and disclosure of medical information, and the federal government is likely to enact new federal laws or regulations in the near future. Pursuant to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), the Department of Health and Human Services (“DHHS”) has issued a series of regulations setting forth security, privacy and transactions standards for all health plans, clearinghouses, and healthcare providers to follow with respect to individually identifiable health information. DHHS has issued final regulations mandating the use of standard transactions and code sets, which became effective October 16, 2003. DHHS has also issued final HIPAA privacy regulations, which required Covered Entities to be in compliance by April 14, 2003, and final HIPAA security regulations, which required Covered Entities to be in compliance by April 20, 2005. Many of our customers will also be subject to state laws implementing the federal Gramm-Leach-Bliley Act, relating to certain disclosures of nonpublic personal health information and nonpublic personal financial information by insurers and health plans.

Our payer customers must comply with HIPAA, its regulations, and other applicable healthcare laws and regulations. In addition, we may be deemed to be a covered entity subject to HIPAA because we offer our customers products that convert data to a

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HIPAA compliant format. Accordingly, we must comply with certain provisions of HIPAA and in order for our products and services to be marketable, they must contain features and functions that allow our customers to comply with HIPAA and other healthcare laws and regulations. We believe our products currently allow our customers to comply with existing laws and regulations. However, because HIPAA and its regulations have yet to be fully interpreted, our products may require modification in the future. If we fail to offer solutions that permit our customers to comply with applicable laws and regulations, our business will suffer.

We perform billing and claims services that are governed by numerous federal and state civil and criminal laws. The federal government in recent years has imposed heightened scrutiny on billing and collection practices of healthcare providers and related entities, particularly with respect to potentially fraudulent billing practices, such as submissions of inflated claims for payment and upcoding. Violations of the laws regarding billing and coding may lead to civil monetary penalties, criminal fines, imprisonment, or exclusion from participation in Medicare, Medicaid and other federally funded healthcare programs for our customers and for us. Any of these results could have a material adverse effect on our business, financial condition, operating results, and cash flows.

In addition, laws governing healthcare payers are often not uniform among states. This could require us to undertake the expense and difficulty of tailoring our products in order for our customers to be in compliance with applicable state and local laws and regulations.

Part of our business is subject to government regulation relating to the Internet that could impair our operations.

The Internet and its associated technologies are subject to increasing government regulation. A number of legislative and regulatory proposals are under consideration by federal, state, local, and foreign governments, and agencies. Laws or regulations may be adopted with respect to the Internet relating to liability for information retrieved from or transmitted over the Internet, on-line content regulation, user privacy, taxation and quality of products and services. Many existing laws and regulations, when enacted, did not anticipate the methods of the Internet-based hosted, software and information technology solutions we offer. We believe, however, that these laws may be applied to us. We expect our products and services to be in substantial compliance with all material federal, state and local laws and regulations governing our operations. However, new legal requirements or interpretations applicable to the Internet could decrease the growth in the use of the Internet, limit the use of the Internet for our products and services or prohibit the sale of a particular product or service, increase our cost of doing business, or otherwise have a material adverse effect on our business, results of operations and financial conditions. To the extent that we market our products and services outside the United States, the international regulatory environment relating to the Internet and healthcare services could also have an adverse effect on our business.

Increased leverage as a result of our convertible note offering may harm our financial condition and results of operations.

On October 5, 2005, we completed a private placement of $100.0 million aggregate principal amount of our 2.75% Convertible Senior Notes due 2025 (“Notes”). The indebtedness under the Notes constitutes senior unsecured obligations and will rank equally with all of our existing and future unsecured indebtedness. The Notes were issued pursuant to an Indenture dated October 5, 2005 (the “Indenture”) with Wells Fargo Bank, National Association, as trustee.

As of December 31, 2006, our total consolidated long-term debt was $114.0 million. In addition, the Indenture does not restrict our ability to incur additional indebtedness, and we may choose to incur additional debt in the future. Our level of indebtedness could have important consequences to you, because:

• it could affect our ability to satisfy our debt obligations under the Notes or our credit facility;

• a substantial portion of our cash flows from operations will have to be dedicated to interest and principal payments of our debt obligations and may not be available for operations, expansion, acquisitions or other purposes;

• it may impair our ability to obtain additional financing in the future;

• it may limit our flexibility in planning for, or reacting to, changes in our business and industry; and

• it may make us more vulnerable to downturns in our business, our industry or the economy in general.

Our ability to make payments of principal and interest on our indebtedness depends upon our future performance, which will be subject to our success in marketing our products and services, general economic conditions and financial, business and other factors affecting our operations, many of which are beyond our control. If we are not able to generate sufficient cash flow from operations in the future to service our indebtedness, we may be required, among other things:

• to seek additional financing in the debt or equity markets;

• to refinance or restructure all or a portion of our indebtedness;

• to sell assets; and/or

• to reduce or delay planned expenditures on research and development and/or commercialization activities.

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Such measures might not be sufficient to enable us to service our debt. In addition, any such financing, refinancing or sale of assets might not be available on economically favorable terms or at all.

We have certain repurchase and payment obligations under the Notes and we may not be able to repurchase such Notes or pay the amounts due upon conversion of the Notes when necessary.

On each of October 1, 2010, 2015 and 2020, holders of certain of the Notes may require us to purchase, for cash, all or a portion of their Notes at 100% of their principal amount, plus any accrued and unpaid interest. If a fundamental change occurs, as defined in the Indenture, including a change in control transaction, holders of such Notes may also require us to repurchase, for cash, all or a portion of their Notes. In addition, upon conversion of such Notes if we have made an irrevocable election to settle conversion in cash, we would be required to satisfy our conversion obligation up to the principal amount of the Notes in cash. Our ability to repurchase the Notes and settle the conversion of the Notes in cash is effectively subordinated to our senior credit facility and may be limited by law, by the Indenture, by the terms of other agreements relating to our senior debt and by indebtedness and agreements that we may enter into in the future which may replace, supplement or amend our existing or future debt. Our failure to repurchase the Notes or make the required payments upon conversion would constitute an event of default under the Indenture, which would in turn constitute a default under the terms of our senior credit facility and other indebtedness at that time.

Our common stock price has been, and may continue to be, volatile and our shareholders may not be able to resell shares of our stock at or above the price paid for such shares.

The price for shares of our common stock has exhibited high levels of volatility with significant volume and price fluctuations, which makes our common stock unsuitable for many investors. For example, for the year ended December 31, 2006, the closing price of our common stock ranged from a high of $19.15 to a low of $11.96. The fluctuations in price of our common stock have occasionally been related to our operating performance. These broad fluctuations may negatively impact the market price of shares of our common stock. The price of our common stock has also been influenced by:

• fluctuations in our results of operations or the operations of our competitors or customers;

• failure of our results of operations to meet the expectations of stock market analysts and investors;

• changes in stock market analyst recommendations regarding us, our competitors or our customers; and

• the timing and announcements of new products or financial results by us or our competitors.

Future issuances of common stock may depress the trading price of our common stock.

Any future issuance of equity securities, including the issuance of shares upon conversion of the Notes, could dilute the interests of our existing stockholders and could substantially decrease the trading price of our common stock. We may issue equity securities in the future for a number of reasons, including to finance our operations and business strategy, to adjust our ratio of debt to equity, to satisfy our obligations upon the exercise of outstanding warrants or options or for other reasons.

Our stockholder rights plan and charter documents could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our shareholders.

Our stockholder rights plan and certain provisions of our certificate of incorporation and Delaware law are intended to encourage potential acquirers to negotiate with us and allow our Board of Directors the opportunity to consider alternative proposals in the interest of maximizing shareholder value. However, such provisions may also discourage acquisition proposals or delay or prevent a change in control, which in turn, could harm our stock price.

Item 1B—Unresolved Staff Comments

Not applicable.

Item 2—Properties

Facilities

As of December 31, 2006, we were leasing a total of 14 facilities located in the United States. Our principal executive and corporate office is located in Newport Beach, California. Our data center that we use to serve customers is located in Greenwood Village, Colorado. Our leases have expiration dates ranging from 2007 to 2016. We believe that our facilities are adequate for our current operations and that additional leased space can be obtained, if needed.

Item 3—Legal Proceedings

In September 2004, McKesson Information Solutions LLC (“McKesson”) filed a lawsuit against us in the United States District Court for the District of Delaware. In its complaint, McKesson alleged that we made, used, offered for sale, and/or sold a clinical editing software system that infringed McKesson’s United States Patent No. 5,253,164, entitled “System And Method For

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Detecting Fraudulent Medical Claims Via Examination Of Services Codes.” McKesson sought injunctive relief and substantial monetary damages, including treble damages for willful infringement. On April 4, 2006, in response to our motion for summary judgment, the court ruled, as a matter of law, that our software products did not infringe 12 of the 15 claims of McKesson’s patent that were involved in this dispute, leaving claims 1, 2 and 16. On April 17, 2006, a jury trial commenced on the first phase of this case to determine the issue of infringement of the remaining three claims. On April 26, 2006, the jury found that our Facets^®, QicLink^™ and ClaimFacts^® software products infringed claims 1 and 2, but not claim 16 of the patent. On May 4, 2006, the court scheduled the second phase of the trial to commence on October 3, 2006 on the issues of our validity, estoppel and laches defenses and on the issue of McKesson’s damages, if any.

On September 7, 2006, we entered into a Settlement Agreement with McKesson to settle the lawsuit. As part of the Settlement Agreement, we agreed to pay McKesson a one-time royalty fee of $15.0 million for a license in the patent that covers past and future use of our products and services by all existing customers. The $15.0 million, payable in two equal installments on September 30, 2006 and September 30, 2007, was expensed in the third quarter of 2006. Our customers with maintenance agreements also will continue to receive software version upgrades that include clinical editing capabilities. Going forward, we may continue to include our clinical editing functionality in versions of Facets^® sold to new health plan customers with 100,000 or fewer members and in versions of QicLink^™ sold to any new customers. We have agreed to pay McKesson a royalty fee of 5% of the net licensing revenue received from new sales of Facets^® and QicLink^™ containing our clinical editing functionality. However, pursuant to the terms of the Settlement Agreement, we will no longer include clinical editing functionality in versions of Facets^® sold to new customers with more than 100,000 members, beginning November 1, 2006. In these cases, new customers may choose their clinical editing solution from available third-party providers.

In addition to the matters described above, we are involved in litigation from time to time relating to claims arising out of our operations in the normal course of business. Except as discussed above, as of the filing date of this annual report on Form 10-K, we were not a party to any other legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our results of operations, financial position and/or cash flows.

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

No matters were submitted to a vote of our stockholders during the quarter ended December 31, 2006.

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PART II

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

Our common stock has been traded on the NASDAQ Stock Market under the symbol “TZIX” since October 8, 1999.

The following table shows the high and low sales prices of our common stock as reported on the NASDAQ Stock Market for the periods indicated:

Quarters Ended	High		Low
December 31, 2006	$	18.95	$	14.25
September 30, 2006	$	15.53	$	11.89
June 30, 2006	$	17.68	$	12.69
March 31, 2006	$	19.74	$	16.11
December 31, 2005	$	17.49	$	12.77
September 30, 2005	$	17.34	$	13.61
June 30, 2005	$	14.40	$	8.60
March 31, 2005	$	9.94	$	8.00

As of March 13, 2007, there were 214 holders of record based on the records of our transfer agent.

We have never paid cash dividends on our common stock. We currently anticipate that we will retain earnings, if any, to support operations and to finance the growth and development of our business and do not anticipate paying cash dividends in the foreseeable future. The payment of cash dividends by us is restricted by our current bank credit facility, which contains a restriction prohibiting us from paying any cash dividends without the bank’s prior approval.

The following table sets forth all purchases made by us of our common stock during each month within the fourth quarter of 2006. No purchases were made pursuant to a publicly announced repurchase plan or program.

Month	Total Number of Shares (or Units) Purchased(1)	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
October 1, 2006 – October 31, 2006	—	$	—	—	—
November 1, 2006 – November 30, 2006	9,712		16.89	—	—
December 1, 2006 – December 31, 2006	2,472		18.49	—	—
Total	12,184		17.21	—	—

(1) All share acquisitions set forth in this table were made in connection with the satisfaction of employee tax obligations upon the vesting of restricted stock awards.

Recent Sales of Unregistered Securities

In connection with our recent acquisition of Plan Data Management, Inc. (“PDM”), we entered into a Merger Agreement, dated October 26, 2006, with PDM (the “Merger Agreement”). Pursuant to the Merger Agreement, we issued 491,488 shares of TriZetto common stock as part of the closing payment based upon a per share value of $16.28, which represents the average closing price of TriZetto’s common stock for the 20 trading days ending October 27, 2006. Assuming the same per share value and prior to any adjustments that may be required under the Merger Agreement, we may issue up to approximately 798,525 additional shares of common stock in connection with subsequent payments that may become due under the Merger Agreement.

In connection with the issuance of shares to PDM securityholders, we relied upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and Regulation D promulgated thereunder. Each PDM securityholder has represented to us that such securityholder is an “accredited investor,” as such term is defined in Regulation D, or has the requisite knowledge and experience in financial and business matters. In addition, each PDM securityholder has had access to information concerning TriZetto and is acquiring the securities for such securityholder’s own account and not with a view to the distribution thereof.

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Stock Performance Graph

The graph below compares the five-year cumulative total stockholder return on our common stock for the five-year period ended December 31, 2006, with the cumulative total return of (a) the Nasdaq Market Index and (b) Hemscott Industry Group Index 825—Healthcare Information Services over the same period. The graph assumes $100.00 invested at the beginning of the period in our common stock and the stocks represented by the above named indices and the reinvestment of all dividends; we have paid no dividends on our common stock. The performance graph is not necessarily an indicator of future performance. This information has been provided by Hemscott, Inc.

Comparison of Five-Year Cumulative Total Returns to Stockholders

	Year Ended December 31,
Company/Index/Market	2001		2002		2003		2004		2005		2006
The TriZetto Group, Inc.	$	100.00	$	46.80	$	49.16	$	72.41	$	129.50	$	140.02
Hemscott Healthcare Information Services Index		100.00		81.29		96.61		113.36		149.70		160.74
Nasdaq Market Index		100.00		69.75		104.88		113.70		116.19		128.12

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Item 6—Selected Financial Data

The following selected consolidated financial data, except as noted herein, has been taken or derived from our audited consolidated financial statements and should be read in conjunction with the full consolidated financial statements included herein.

	Years Ended December 31,
	2006			2005			2004			2003			2002
	(in thousands, except per share amounts)
Consolidated statement of operations data:
Revenue:
Services and other	$	272,943		$	243,483		$	223,257		$	244,641		$	233,019
Products		74,994			48,736			51,308			45,688			32,131
Total revenue		347,937			292,219			274,565			290,329			265,150
Operating costs and expenses:
Cost of revenue – services and other (1)		165,229			144,318			157,573			217,552			174,073
Cost of revenue – products (excludes amortization of acquired technology)		14,175			14,210			12,025			6,455			3,747
Research and development		42,789			31,655			30,398			24,823			21,911
Selling, general and administrative		103,809			76,758			59,980			52,138			53,966
Restructuring and impairment charges (2)		—			—			—			3,769			651
Impairment of goodwill (3)		—			—			—			—			97,479
Impairment of acquired intangible assets (3)		—			—			—			—			33,540
Amortization of acquired technology		4,120			660			440			7,120			18,335
Amortization of acquired other intangible assets		867			2,225			3,804			3,788			9,692
Total operating costs and expenses		330,989			269,826			264,220			315,645			413,394
Income (loss) from operations		16,948			22,393			10,345			(25,316	)		(148,244	)
Interest income		3,823			1,619			583			970			1,609
Interest expense		(3,342	)		(1,579	)		(1,369	)		(2,005	)		(1,479	)
Other income		180			—			—			—			—
Income (loss) before provision for income taxes		17,609			22,433			9,559			(26,351	)		(148,114	)
Provision for income taxes		(2,494	)		(412	)		(1,101	)		(1,124	)		(250	)
Net income (loss)	$	15,115		$	22,021		$	8,458		$	(27,475	)	$	(148,364	)
Net income (loss) per share:
Basic	$	0.36		$	0.52		$	0.18		$	(0.60	)	$	(3.28	)
Diluted	$	0.33		$	0.48		$	0.18		$	(0.60	)	$	(3.28	)
Shares used in computing net income (loss) per share:
Basic		42,389			41,948			46,794			46,170			45,256
Diluted		45,691			45,503			48,157			46,170			45,256

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	December 31,
	2006		2005		2004		2003		2002
	(in thousands)
Consolidated balance sheet data:
Cash, cash equivalents, restricted cash, and short-term investments	$	107,978	$	108,483	$	73,147	$	76,347	$	81,117
Total assets		382,600		317,739		239,884		233,308		237,996
Total short-term debt and capital lease obligations		1,576		2,099		43,786		34,920		17,921
Total long-term debt and capital lease obligations		114,030		101,065		13,838		7,155		15,116
Total stockholders’ equity		133,907		101,358		86,933		113,523		137,414

(1) Included in cost of revenue are charges associated with loss on contracts. During the fourth quarter of 2003, we decided to wind-down our outsourcing services to physician group customers. As a result of this decision, we estimated that the existing customer agreements would generate a total loss of $11.3 million until the terms of these agreements expired in 2008. We recorded a loss accrual in the fourth quarter of 2003. Through discussions and negotiations, we were able to accelerate the termination of our services agreements with certain physician group customers and implemented cost cutting measures that reduced the expected future costs to support our remaining customers. As a result of these actions, we were able to reverse approximately $5.9 million of previously accrued loss on contracts charges in 2004. Early in the second quarter of 2005, we executed termination agreements with our two remaining physician group customers. We continued to provide outsourced business services through May 2005, when the transition services were completed. The completion of these services to the remaining customers allowed us to reverse the remaining balance in the loss on contracts accrual of $2.9 million in the second quarter of 2005. The total amount of loss actually incurred related to the outsourcing services to physician group customers was $2.1 million in 2004 and $403,000 in the first six months of 2005.

In December 2003, we negotiated a settlement regarding out-of-scope work related to one of our large fixed fee implementation projects. As a result of this settlement, we estimated that this project would generate a total loss of $3.7 million until its completion, which was expected to occur in mid-2004. We recorded a loss accrual in the fourth quarter of 2003. In 2004, we determined that the large fixed fee implementation project would require a greater effort to complete than previously estimated. As a result, we accrued an additional $5.0 million of loss on contracts charges in the first six months of 2004. In the fourth quarter of 2004, we negotiated a settlement of additional out-of-scope work, which decreased the total loss on the project and resulted in the reversal of approximately $455,000 of previously accrued loss on contracts charges. This fixed fee implementation was completed by the end of the first quarter of 2005. The total amount of loss actually incurred on this project was $7.7 million in 2004 and $484,000 in the first quarter of 2005.

(2) In the fourth quarter of 2003, we made a decision to wind-down our outsourcing services to physician groups and to discontinue our outsourcing services to certain non-Facets^® payer customers. We estimated that our future net cash flows from the assets used in these businesses would not recover their net book value. Accordingly, a total charge of $4.0 million was taken as a restructuring and impairment charge in the fourth quarter of 2003, which represented the net book value of these assets. The assets were written off in the first quarter of 2004.

(3) After the end of the fourth quarter of 2002, our market capitalization decreased to a level that required us to perform additional analyses under FASB Statement No. 142 to quantify the amount of impairment to goodwill. This analysis resulted in an impairment charge to goodwill of $97.5 million as of December 31, 2002. The decrease in market capitalization was also an indicator that our other intangible assets might also be impaired as of December 31, 2002, and they were also tested for impairment in accordance with FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The analysis resulted in an additional impairment charge of $33.5 million.

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

Overview

We offer a broad portfolio of proprietary information technology products and services targeted to the payer industry, which is comprised of health insurance plans and third party benefits administrators. We offer enterprise claims administration software, including Facets Extended Enterprise^™ and QicLink Extended Enterprise^™, and enterprise cost and quality of care software, including Clinical CareAdvance^™, Personal CareAdvance^™ and our NetworX^™ suite for provider network management. We also provide a number of component software solutions and add-ons to the enterprise software solutions, including CDH Account Management, Workflow, HealthWeb^® and Benefit Cost Modeler. To support these software products, we provide software hosting services and business process outsourcing services, giving customers variable cost alternatives to licensing software, as well as strategic, implementation and optimization consulting services. As of December 2006, we served 320 unique customers in the health plan and benefits administrator markets, which we refer to as payers. In 2006, these markets represented approximately 90% and 10% of our total revenue, respectively.

We measure financial performance by monitoring revenue, bookings and backlog, and net income. Total revenue for 2006 was $347.9 million compared to $292.2 million for 2005. Services and other revenue for 2006 was $272.9 million compared to $243.5 million for 2005. Products revenue for 2006 was $75.0 million compared to $48.7 million for 2005. Operating costs and expenses for 2006 were $331.0 million compared to $269.8 million for 2005. Bookings for 2006 were $381.6 million compared to $296.6 million for 2005. Backlog at December 31, 2006 was $858.2 million compared to $703.4 million at December 31, 2005. Net income in 2006 was $15.1 million compared to $22.0 million in 2005. These financial comparisons are further explained in the section below, “Results of Operations.”

We generate services revenue from several sources, including the provision of outsourcing services, such as software hosting and business process outsourcing services, the sale of maintenance and support for our proprietary and certain of our non-proprietary software products, and from consulting fees for implementation, installation, configuration, business process engineering, data conversion, testing and training related to the use of our proprietary, and third-party licensed products. We generate products revenue from the licensing of our software. Cost of revenue includes costs related to the products and services we provide to our customers and costs associated with the operation and maintenance of our customer connectivity centers. These costs include salaries and related expenses for consulting personnel, customer connectivity centers’ personnel, customer support personnel, application software license fees, amortization of capitalized software development costs, telecommunications costs, facility costs, and maintenance costs. Research and development (“R&D”) expenses are salaries and related expenses associated with the development of software applications prior to establishing technological feasibility. Such expenses include compensation paid to software engineering personnel and other administrative, infrastructure and facility expenses and fees to outside contractors and consultants. Selling, general and administrative expenses consist primarily of salaries and related expenses for sales, sales commissions, account management, marketing, administrative, finance, legal, human resources and executive personnel, and fees for certain professional services.

As part of our growth strategy, we intend to increase revenue per customer by continuing to introduce new complementary products and services, including new cost and quality of care products and services, to our established enterprise software and hosting and business process outsourcing services. Some of these service offerings, including hosting, business process outsourcing, and consulting have a higher cost of revenue, resulting in lower gross profit margins. Therefore, to the extent that our revenue increases through the sale of these lower margin product and service offerings, our total gross profit margin may decrease.

We are continuing to target larger health plan customers. This has given us the opportunity to sell additional services such as software hosting, business intelligence, and business process outsourcing services. As the technology requirements of our customers become more sophisticated, our service offerings have become more complex. This has lengthened our sales cycles and made it more difficult for us to predict the timing of our software and services sales.

In late 2003, a management decision was made to exit certain non-strategic and less profitable product offerings and business lines. This decision included winding down services related to our physician group customers, as well as the planned elimination of our hosting and business process outsourcing services for two competing third-party software platforms. Early in the second quarter of 2005, we executed termination agreements with the last two of our remaining physician group customers. We continued to provide outsourced business services through May 2005 when the transition services were completed.

On December 22, 2006, we acquired all of the issued and outstanding shares of Plan Data Management, Inc. The estimated purchase price as of December 31, 2006 was approximately $19.6 million, which consisted of 491,488 shares of our common stock with a value of $16.28 per share (which represents the average closing price of TriZetto’s common stock for the 20 trading days ending October 27, 2006), cash payments of $8.0 million, assumed liabilities of $3.1 million and estimated acquisition-related costs of $500,000. Due to the close of the acquisition late in the year, the issuance of the 491,488 shares of common stock and the cash payment of $8.0 million to PDM stockholders and option holders were not completed prior to December 31, 2006. However, these amounts were accrued as of December 31, 2006.

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The computation of earnings per share for the year ended December 31, 2006 did not include the issuance of the 491,488 shares of common stock or the financial operating results of PDM since the impact of these amounts was not material.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Those estimates are based on our experience, terms of existing contracts, observance of trends in the industry, information provided by our customers and information available from other outside sources, which are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

The following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements, and may potentially result in materially different results under different assumptions and conditions. We have identified the following as critical accounting policies to our company:

• Revenue recognition;

• Up-front payments to customers;

• Sales returns and allowance for doubtful accounts;

• Capitalization of software development costs;

• Goodwill and other intangible assets;

• Litigation accruals;

• Self-insurance;

• Bonus accrual;

• Income taxes; and

• Stock-based compensation.

This listing is not a comprehensive list of all of our accounting policies. For a detailed discussion on the application of these and other accounting policies, see Note 2 of Notes to Consolidated Financial Statements.

Revenue Recognition. We recognize revenue when persuasive evidence of an arrangement exists, the product or service has been delivered, fees are fixed or determinable, collection is reasonably assured and all other significant obligations have been fulfilled. Our revenue is classified into two categories: services and other, and products. For the year ended December 31, 2006, approximately 78% of our total revenue was generated from services and other revenue and 22% was from products revenue.

We follow the provisions of the Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition,” AICPA Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended, EITF Issue 00-3, “Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware,” and EITF Issue 00-21, “Revenue Arrangements with Multiple Deliverables.”

We generate services revenue from several sources, including the provision of outsourcing services, such as software hosting and other business services, and the sale of maintenance and support for our proprietary software products. We apply EITF 00-3 to hosting arrangements that include the licensing of software. A software element covered by SOP 97-2 is present in a hosting arrangement if the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty and it is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software. Outsourcing services revenue is typically billed and recognized monthly over the contract term, generally three to seven years. Many of our outsourcing agreements require us to maintain a certain level of operating performance. We record revenue net of estimated penalties resulting from any failure to maintain the level of operating performance. These penalties have not been significant in the past. Software maintenance and support revenues are typically based on one-year renewable contracts and are recognized ratably over the contract period. Payment for software maintenance received in advance is recorded on the balance sheet as deferred revenue. Certain royalty costs paid to third-party software vendors associated with software maintenance are amortized over the software maintenance period.

We also generate services revenue from consulting fees for implementation, installation, configuration, business process engineering, data conversion, testing and training related to the use of our proprietary and third party licensed products. In certain instances, we also generate services revenue from customization services of our proprietary licensed products. We recognize revenue for these services as they are performed. When we cannot reasonably

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estimate the cost to complete, we recognize revenue using the completed contract method, upon completion of all contractual obligations. We also generate services revenue from set-up fees, which are services, hardware, and software associated with preparing our customer connectivity center or a customer’s data center in order to ready a specific customer for software hosting services. The set-up fees are usually separate and distinct from the hosting fees, and performance of the set-up services represents the culmination of the earnings process. We recognize revenue for these services as they are performed. We generate other revenue from certain one-time charges, including certain contractual fees such as termination fees and change of control fees, and we recognize the revenue for these fees once the termination or change of control is guaranteed, there are no remaining substantive performance obligations and collection is reasonably assured. Other revenue is also generated from fees related to our product related conference.

For multiple element arrangements, such as software license, consulting services, outsourcing services and maintenance, and where vendor-specific objective evidence (“VSOE”) of fair value exists for all undelivered elements, we account for the delivered elements in accordance with the “residual method.” VSOE of fair value is determined for each undelivered element based on how it is sold separately, or in the case of maintenance, the renewal rate. For arrangements in which VSOE does not exist for each undelivered element, including specified product and upgrade rights, revenue for the delivered element is deferred and not recognized until VSOE is available for the undelivered element or delivery of each element has occurred. In determining VSOE for the undelivered elements, no portion of the discount is allocated to specified or unspecified product or upgrade rights.

Under the residual method, the arrangement fee is recognized as follows: (1) the total fair value of the undelivered elements, as indicated by VSOE, is deferred and subsequently recognized in accordance with the relevant sections of SOP 97-2 and (2) the difference between the total arrangement fee and the amount deferred for the undelivered elements is recognized as revenue related to the delivered elements.

We generate products revenue from the licensing of our software. Under SOP 97-2, software license revenue is recognized upon the execution of a license agreement, upon delivery of the software, when fees are fixed or determinable, when collectibility is probable and when all other significant obligations have been fulfilled. For software license agreements in which customer acceptance is a significant condition of earning the license fees, revenue is not recognized until acceptance occurs. For software license agreements that require significant customization or modification of the software, revenue is recognized as the customization services are performed.

Up-front Payments to Customers. We may pay certain up-front amounts to our customers in connection with the establishment of our hosting and outsourcing services contracts. Under EITF 01-9, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products),” these payments are capitalized and amortized over the life of the contract as a reduction to revenue, provided that such amounts are recoverable from future revenue under the contract. If an up-front payment is not recoverable from future revenue, or it cannot be offset by contract cancellation penalties paid by the customer, the amount will be expensed in the period it is deemed unrecoverable. Unamortized up-front fees were $6.2 million and $7.7 million as of December 31, 2006 and 2005, respectively.

Sales Returns and Allowance for Doubtful Accounts. We maintain an allowance for sales returns and doubtful accounts to reserve for estimated discounts, pricing adjustments, and other sales allowances. The reserve is charged to revenue in amounts sufficient to maintain the allowance at a level we believe is adequate based on historical experience and current trends. We also maintain an allowance for doubtful accounts to reflect estimated losses resulting from the inability of customers to make required payments. We base this allowance on estimates after consideration of factors such as the composition of the accounts receivable aging and bad debt history and our evaluation of the financial condition of the customers. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional sales allowances and bad debt expense may be required. We typically do not require collateral. Historically, our estimates for sales returns and doubtful account reserves have been adequate to cover accounts receivable exposures. We continually monitor these reserves and make adjustments to these provisions when we believe actual credits or other allowances may differ from established reserves.

For the twelve month period ended December 31, 2006, our allowance for sales returns and doubtful accounts increased by $2.9 million. In December 2006, we entered into a settlement with one of our larger customers that had disputed payments due from a software implementation project. The amounts represented revenue recorded in the first two quarters of 2006 and were included in the allowance for sales returns and a reduction to revenue in the quarter ended September 30, 2006. The settlement fully resolved the issues and resulted in a payment that was less than the amount previously disputed. We do not believe the increase in the allowance for sales returns is a trend or representative of more significant issues in our business.

Capitalization of Software Development Costs. The capitalization of software costs includes developed technology acquired in acquisitions and costs incurred by us in developing our products that qualify for capitalization. We account for our software development costs, other than costs for internal-use software, in accordance with FASB Statement No. 86, “Accounting for Costs of Computer Software to be Sold, Leased or Otherwise Marketed.” We capitalize costs associated with product development, coding and testing subsequent to establishing technological feasibility of the product. Technological feasibility is established after completion of a detailed program design or working model. Capitalization of computer software costs ceases upon a product’s

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general availability release. Capitalized software development costs are amortized over the estimated useful life of the software product starting from the date of general availability.

On a quarterly basis, we monitor the expected net realizable value of the capitalized software for factors that would indicate impairment, such as a decline in the demand, the introduction of new technology, or the loss of a significant customer. As of December 31, 2006, our evaluation determined that the carrying amount of these assets was not impaired.

Goodwill and Other Intangible Assets. Acquisitions are accounted for using the purchase method of accounting. The purchase price is allocated to the tangible and intangible assets acquired and the liabilities assumed on the basis of their estimated fair market values on the acquisition date. The excess of the purchase price over the estimated fair market value of the assets purchased and liabilities assumed is allocated to goodwill and other intangible assets.

Under FASB Statement No. 142, “Goodwill and Other Intangible Assets,” goodwill and intangible assets deemed to have indefinite lives are subject to annual (or more often if indicators of impairment exist) impairment tests using a two-step process. The first step looks for indicators of impairment. If indicators of impairment are revealed in the first step, then the second step is conducted to measure the amount of the impairment, if any. We performed our annual impairment test on March 31, 2006, and this test did not reveal indications of impairment.

Litigation Accruals. Pending unsettled lawsuits involve complex questions of fact and law and may require expenditure of significant funds. From time to time, we may enter into confidential discussions regarding the potential settlement of such lawsuits; however, there can be no assurance that any such discussions will occur or will result in a settlement. Moreover, the settlement of any pending litigation could require us to incur settlement payments and costs. In the period in which a new legal case arises, an expense will be accrued if our liability to the other party is probable and can be reasonably estimated. On a quarterly basis, we review and analyze the adequacy of our accruals for each individual case for all pending litigations. Adjustments are recorded as needed to ensure appropriate levels of reserve. Our attorney fees and other defense costs related to litigation are expensed as incurred.

Self-Insurance. Effective January 1, 2006, we became self-insured for certain losses related to employee health and dental benefits. We record a liability based on an estimate of claims incurred but not recorded determined based on actuarial analysis of historical claims experience and historical industry data. We maintain individual and aggregate stop-loss coverages with a third party insurer to limit our total exposure for these programs. Our self-insurance liability contains uncertainties because the calculation requires management to make assumptions and apply judgment to estimate the ultimate cost to settle reported claims and claims incurred but not reported as of the balance sheet date. We do not believe that there is a reasonable likelihood that there will be a material change in the future assumptions or estimates we use to calculate our self-insurance liability. However, if actual results are not consistent with our assumptions and estimates, we may be exposed to losses or gains that could be material.

Bonus Accrual. Our bonus model is designed to project the level of funding required under the bonus program as approved by the Compensation Committee of the Board of Directors. A significant portion of the bonus program is based on the Company meeting certain financial objectives, such as revenue, earnings per share, and the level of capital spending. The expense related to the bonus program is accrued in the year of performance and paid in the first quarter following the fiscal year end. The bonus model is analyzed and adjusted on a quarterly basis as necessary based on achievement of targets.

Income Taxes. We account for income taxes under FASB Statement No. 109, “Accounting for Income Taxes.” This statement requires the recognition of deferred tax assets and liabilities for the future consequences of events that have been recognized in our financial statements or tax returns. The measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and the tax bases of our assets and liabilities result in a deferred tax asset, FASB Statement No. 109 requires an evaluation of the probability of being able to realize the future benefits indicated by such an asset. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or the entire deferred tax asset will not be realized. During 2006, our valuation allowance decreased by $20.1 million, $15.4 million as a result of purchase accounting and related deferred tax accounting adjustments associated with the acquisition of CareKey, Inc. (“CareKey”) and $4.7 million as a result of the utilization of net operating loss carryovers and true-ups. Of the remaining valuation allowance of $2.1 million, approximately $1.5 million will reverse through the income statement and approximately $600,000 will reverse to goodwill.

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Stock-Based Compensation. Effective January 1, 2006, we adopted the fair value recognition provisions of FASB Statement No. 123R, “Share-Based Payment,” using the modified prospective transition method, and therefore have not restated prior periods’ results. Under this method, we recognize compensation expense for all share-based payments granted after January 1, 2006 and for all share-based payments granted prior to, but not yet vested as of, January 1, 2006. Under the fair value recognition provisions of FASB Statement No. 123R, stock-based compensation cost is estimated at the grant date based on the award’s fair-value and is recognized as expense ratably over the requisite service period. We use the Black-Scholes option-pricing model to calculate fair value which requires the input of highly subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected term”), the estimated volatility of our common stock price over the expected term and the number of options that will ultimately not complete their vesting requirements (“forfeitures”). The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation could be materially different in the future. In addition, if our actual forfeiture rate is materially different from our estimate, stock-based compensation expense could be significantly different from what we have recorded in the current period.

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Recent Accounting Pronouncements

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 applies to all tax positions accounted for under SFAS No. 109, “Accounting for Income Taxes,” and defines the confidence level that a tax position must meet in order to be recognized in the financial statements. The interpretation requires that the tax effects of a position be recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If a tax position is not considered “more-likely-than-not” to be sustained then no benefits of the position are to be recognized. FIN 48 requires additional disclosures and is effective as of the beginning of the first fiscal year beginning after December 15, 2006. We do not expect the adoption of FIN 48 to have a material impact on our consolidated results of operations and financial condition.

Revenue Information

Revenue by customer type and revenue mix for the years ended December 31, 2006, 2005, and 2004, is as follows (amounts in thousands):

	Years Ended December 31,
	2006				2005				2004
Revenue by customer type:
Health plans	$	312,567	90	%	$	256,162	88	%	$	224,806	82	%
Benefits administration		35,370	10	%		35,915	12	%		45,080	16	%
Provider		—	0	%		142	0	%		4,679	2	%
Total revenue	$	347,937	100	%	$	292,219	100	%	$	274,565	100	%
Revenue mix:
Services and other revenue
Outsourced business services	$	86,877	25	%	$	79,418	27	%	$	89,916	33	%
Software maintenance		88,628	25	%		80,719	28	%		69,065	25	%
Consulting services and other		97,438	28	%		83,346	28	%		64,276	23	%
Services and other revenue total		272,943				243,483				223,257
Products revenue
Software license fees		74,994	22	%		48,736	17	%		51,308	19	%
Total revenue	$	347,937	100	%	$	292,219	100	%	$	274,565	100	%

Our total backlog is defined as the revenue we expect to generate in future periods from existing customer contracts. Our 12-month backlog is defined as the revenue we expect to generate from existing customer contracts over the next 12 months. Most of the revenue in our backlog is derived from multi-year service revenue contracts (including software hosting, business process outsourcing, IT outsourcing, and software maintenance with periods up to seven years) and consulting contracts. Consulting revenue is included in the backlog when the revenue from such consulting contract is expected to be recognized over a period exceeding 12 months.

Backlog can change due to a number of factors, including unforeseen changes in implementation schedules, contract cancellations (subject to penalties paid by the customer), or customer financial difficulties. In such event, unless we enter into new customer agreements that generate enough revenue to replace or exceed the revenue we expect to generate from our backlog in any given quarter, our backlog will decline. Our backlog at any date may not indicate demand for our products and services and may not reflect actual revenue for any period in the future. Our 12-month and total backlog data are as follows (in thousands):

	12/31/06		9/30/06		6/30/06		3/31/06		12/31/05		9/30/05		6/30/05		3/31/05		12/31/04
12-month backlog	$	213,300	$	191,600	$	186,100	$	187,300	$	185,100	$	194,500	$	174,800	$	172,000	$	173,100
Total backlog	$	858,200	$	747,800	$	717,500	$	704,700	$	703,400	$	663,100	$	638,900	$	604,800	$	585,000

Total quarterly bookings equal the estimated total dollar value of the contracts signed in the quarter. Bookings can vary substantially from quarter to quarter, based on a number of factors, including the number and type of prospects in our pipeline, the length of time it takes a prospect to reach a decision and sign the contract, and the effectiveness of our sales force. Included in quarterly bookings are up to seven years of maintenance revenue and hosting and other services revenue. Bookings for each of the quarters are as follows (in thousands):

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	12/31/06		9/30/06		6/30/06		3/31/06		12/31/05		9/30/05		6/30/05		3/31/05		12/31/04
Quarterly bookings	$	139,700	$	75,900	$	78,600	$	87,400	$	83,100	$	75,100	$	85,300	$	53,100	$	58,800

Results of Operations

Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005.

Revenue. Total revenue increased $55.7 million, or 19%, to $347.9 million in 2006 from $292.2 million for 2005. Of this increase, $29.4 million related to services and other revenue and $26.3 million related to products revenue.

Services and Other Revenue. Services and other revenue includes outsourced business services (primarily software hosting and business process outsourcing), maintenance fees related to our software license contracts, consulting services and other revenue. Services and other revenue increased $29.4 million, or 12%, to $272.9 million in 2006 from $243.5 million in 2005. This increase was the result of a $14.0 million increase in consulting services and other revenue, a $7.9 million increase in software maintenance revenue, and an increase of $7.5 million in outsourced business services. The increase in consulting services and other revenue was due primarily to new Facets^®, QicLink^™, NetworX^™ and CareAdvance^™ implementations. The increase in software maintenance revenue was attributable primarily to new agreements for certain Facets^®, NetworX^™, HealthWeb^® and CareAdvance^™ customers and annual rate increases from existing customers. The overall increase in outsourced business services revenue was primarily due to new Facets^® and CareAdvance^™ hosted customers and increased membership from existing Facets^® hosted customers.

Products Revenue. Products revenue, which includes software license sales, increased $26.3 million, or 54%, to $75.0 million in 2006 from $48.7 million in 2005 resulting from increased sales for new Facets^®, NetworX^™, HealthWeb^® and CareAdvance^™ license sales to our health plan customers.

Cost of Revenue – Services and Other. Cost of revenue for services and other increased $20.9 million, or 15%, to $165.2 million in 2006 from $144.3 million in 2005 to support the increase in our outsourced business services, software maintenance, and consulting services and other revenue.

Cost of revenue for our outsourced business services and software maintenance revenue increased $6.1 million, primarily attributable to higher compensation costs of $3.0 million, increased investment in infrastructure and technology of $3.0 million, a $2.9 million reversal of a loss on contracts accrual and a $1.7 million increase in other costs, partially offset by a $2.5 million decrease in depreciation expense and lower costs for outside consultants of $1.8 million. Higher compensation costs were impacted by the annual merit increases in early 2006, the adoption of SFAS 123R and a reassignment of product and development leaders and other executives to more appropriately align their responsibilities with our market facing strategy. Higher infrastructure and technology costs were driven by customer and internal upgrades, new operating lease agreements for data center equipment and related maintenance. In 2005, we executed termination agreements with our two remaining physician group customers, allowing us to reverse the remaining balance in our loss on contracts accrual. The overall increase in other costs was primarily related to bad debt expense, postage and freight, telecommunications, and travel. The reduction in depreciation expense related primarily to fully depreciated assets and a lower mix of equipment with longer estimated useful lives, offset in part by depreciation related to new additions in 2006. Reduced fees from our outside consultants were attributable to a higher utilization of internal resources for product support services.

Cost of revenue for our consulting services and other revenue increased $14.8 million, primarily attributable to higher compensation costs of $12.8 million, increased investment in infrastructure and technology of $2.1 million, increased travel costs of $1.1 million and a $1.1 million increase in other costs, partly offset by a $2.6 million reduction in utilization of outside consultants. Compensation costs were impacted by an increase in headcount, the adoption of SFAS 123R and a reassignment of product and development leaders and other executives to more appropriately align their responsibilities with our market facing strategy. Higher infrastructure and technology costs and travel costs were also impacted by increased headcount and the increased level of implementation projects. The overall increase in other costs was primarily related to facilities expense associated with a new facility acquired in the December 2005 acquisition of CareKey and expansion projects for certain of our existing facilities, as well as an increase in telecom usage. Reduced fees from outside consultants were attributable to a higher utilization of internal resources on implementation projects.

As a percentage of total revenue, cost of revenue for services and other approximated 48% in 2006 compared with 49% in 2005.

Cost of Revenue - Products. Cost of revenue for products, which excludes the amortization of acquired technology, remained flat year over year. Amortization of capitalized software development costs increased $1.6 million, partly offset by a decrease in software customer pass-through costs of $1.0 million and a $700,000 decrease in royalty expense. The increase in amortization of capitalized software development costs resulted from new versions of certain of our proprietary software products which were released for sale in mid to late 2005 and in 2006. Software customer pass-through costs decreased due primarily to a decreased volume of customer pass-through agreements. The decrease in royalty expense was due primarily to the elimination of a pre-

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acquisition royalty relationship with CareKey in 2005. As a percentage of total revenue, cost of revenue for products approximated 4% in 2006 compared with 5% in 2005.

Research and Development (R&D) Expenses. R&D expenses increased $11.1 million, or 35%, to $42.8 million in 2006 from $31.7 million in 2005. The overall increase in R&D expenses was due primarily to higher compensation costs which were impacted by our annual merit increases in early 2006, increased headcount related to the development of cost and quality of care solutions following the December 2005 acquisition of CareKey and the adoption of SFAS 123R. As a percentage of total revenue, R&D expenses approximated 12% in 2006 compared with 11% in 2005. R&D expenses, as a percentage of total R&D expenditures (which includes capitalized R&D expenses of $8.6 million in 2006 and 2005), was 83% in 2006 compared with 79% in 2005.

Selling, General and Administrative (SG&A) Expenses. SG&A expenses increased $27.0 million, or 35%, to $103.8 million in 2006 from $76.8 million in 2005. The overall increase resulted primarily from a $15.0 million legal settlement that occurred in the third quarter of 2006, $10.7 million in higher compensation and related costs, increased investment in infrastructure and technology of $1.5 million, and an increase of approximately $700,000 in legal costs. These increases were offset in part by a $1.0 million reduction in utilization of outside consultants and a net decrease of $400,000 related to facilities expense. In the third quarter of 2006, we entered into a settlement agreement with McKesson Information Solutions LLC (“McKesson”) by which we agreed to pay McKesson a one-time royalty fee of $15.0 million. Higher compensation and related costs were impacted by our annual merit increases in early 2006, increased headcount and recruiting fees related to new hires, and our adoption of SFAS 123R, offset in part by a reassignment of product and development leaders and other executives to more appropriately align their responsibilities with our market facing strategy. Investment in infrastructure and technology costs was driven primarily by support for internal growth and upgrades. The $700,000 increase in legal fees was attributable to a $1.1 million insurance reimbursement related to a legal settlement that occurred in 2005, partially offset by a $400,000 decrease in litigation defense costs in 2006. The lower utilization of outside consultants related to strategic planning and process improvement projects in 2005. The net decrease in facilities expense is due to facility closures related to lease termination costs in 2005 of $900,000, offset by a $500,000 increase related primarily to incremental costs associated with the acquisition of CareKey in December 2005 and expansion projects for certain of our existing facilities. As a percentage of total revenue, selling, general and administrative expenses approximated 30% in 2006 compared with 26% in 2005.

Amortization of Intangible Assets. Amortization of intangible assets is comprised of acquired technology and acquired other intangible assets. In total, amortization of intangible assets increased $2.1 million, or 73%, to $5.0 million in 2006 from $2.9 million in 2005.

Amortization of Acquired Technology. The amortization of acquired technology is excluded from cost of revenue – products and consists primarily of amounts amortized with respect to core or completed technology and existing software. Amortization of acquired technology increased $3.4 million, or 524%, to $4.1 million in 2006 from $660,000 in 2005. The increase was due to the amortization of core technology and existing software acquired through the CareKey acquisition.

Amortization of Acquired Other Intangible Assets. Amortization of acquired other intangible assets decreased $1.3 million, or 61%, from $2.2 million in 2005 to $870,000 in 2006. The decrease was due primarily to certain intangible assets acquired in previous years, which were fully amortized in late 2005 and early 2006.

Future amortization expense related to existing intangible assets is estimated to be as follows (in thousands):

For the years ending December 31,	Acquired Technology		Acquired Other Intangible Assets		Total
2007	$	4,120	$	852	$	4,972
2008		4,120		852		4,972
2009		3,680		852		4,532
2010		3,460		852		4,312
2011 and thereafter		4,300		4,259		8,559
Total	$	19,680	$	7,667	$	27,347

Amortization expense related to existing intangible assets will vary from amounts identified above in the event we recognize impairment charges prior to the amortized useful life of any intangible assets. Additionally, amortization expense will vary from amounts identified above when the final accounting for the PDM and QCSI acquisitions are completed, and the allocation between goodwill and identifiable intangible assets is recorded.

Interest Income. Interest income increased $2.2 million, or 136%, to $3.8 million in 2006 from $1.6 million in 2005. The increase is due primarily to higher cash balances in our operating and investment accounts, resulting primarily from the $100.0 million convertible debt issued in 2005.

Interest Expense. Interest expense increased $1.7 million, or 112%, to $3.3 million in 2006 from $1.6 million in 2005. The increase relates primarily to a $2.1 million increase in interest charges incurred on the $100.0 million convertible debt issued in October 2005 and an increase of $100,000 related to our line of credit borrowings. These increases were offset in part by a decrease of $500,000 related primarily to certain capital leases ending in late 2005 and early 2006 and the IMS Health note payable, which was fully repaid in January 2005.

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Provision for Income Taxes. Provision for income taxes was $2.5 million in 2006 compared to $412,000 in 2005. The provision increase is due mostly to an increase in state income taxes as a result of having previously utilized many of our state net operating loss carryovers, net of a release of a portion of our tax contingency reserve and state tax refunds received related to prior years for which income tax benefit was not previously recorded. The effective tax rate was 14.2% for 2006, which was lower than the Federal statutory rate primarily due to the decrease in (release of) valuation allowance, which occurred as a result of utilization of net operating loss carryovers, and the increase in state income taxes. The effective tax rate was 1.8% for 2005.

Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004.

Revenue. Total revenue increased $17.6 million, or 6%, to $292.2 million in 2005 from $274.6 million in 2004. Services and other revenue increased $20.2 million and products revenue decreased $2.6 million.

Services and Other Revenue. Services and other revenue includes outsourced business services (primarily software hosting and business process outsourcing), maintenance fees related to our software license contracts, consulting services and other revenue. Services and other revenue increased $20.2 million, or 9%, to $243.5 million in 2005 from $223.3 million in 2004. This increase was the result of $19.1 million in consulting services and other revenue, $11.6 million in software maintenance, and $12.0 million in software hosting offsetting the loss of $22.5 million of outsourced business services revenue from exited businesses and contracts. The $19.1 million increase in consulting services and other revenue was due primarily to the higher utilization of consulting resources on more profitable implementation projects. The overall increase of $11.6 million in software maintenance revenue primarily resulted from sales of our enterprise and component software in 2005, including Facets Extended Enterprise^™, QicLink Extended Enterprise^™, NetworX^™, CareAdvance^™ and HealthWeb^®, Workflow and HIPAA Gateway^™. The overall decrease of $10.5 million in outsourced business services revenue resulted primarily from (i) a $9.3 million decline caused by the scheduled termination of our services for Altius, (ii) a $5.8 million decline resulting from the wind-down of our services for PHN, (iii) a $4.1 million reduction resulting from the planned wind-down of our services to physician group customers, and (iv) a $3.3 million decrease from the planned elimination of our hosting and business process outsourcing services on certain competitive software platforms. The effect of this $22.5 million decline in outsourced business services revenue was offset in part by a net increase of $12.0 million of additional revenue primarily from new Facets^® hosted customers and increased membership from existing Facets^® hosted and benefits administrator customers.

Products Revenue. Products revenue, which includes software license sales, decreased $2.6 million, or 5%, from $51.3 million in 2004 to $48.7 million in 2005 due to the timing of sales compared to 2004.

Cost of Revenue – Services and Other. Cost of revenue for services and other decreased $13.3 million, or 8%, from $157.6 million in 2004 to $144.3 million in 2005.

Cost of revenue for our outsourced business services and software maintenance revenue decreased $9.1 million, primarily attributable to (i) reduced costs of $7.2 million associated with the scheduled termination of our services for Altius, (ii) a $4.6 million reduction resulting from the planned wind-down of our services to physician group customers, (iii) a decline of $3.5 million related to the wind-down of our services for PHN, (iv) a $3.0 million increase related to the loss on contracts from physician group customers, and (v) a $3.2 million net increase in costs to support the additional outsourced business services revenue from new Facets^® hosted customers and existing benefits administrator customers. We executed termination agreements with our two remaining physician group customers in the second quarter of 2005, allowing us to reverse the remaining balance in our loss on contracts accrual of $2.9 million, which reduced our total cost of revenue by an equal amount. In 2004, we reversed $5.9 million of previously accrued loss on contracts charges due to the accelerated termination of certain physician group contracts and the reduction of costs to support these remaining contracts. The net increase of $3.2 million represented higher incentive and compensation costs, increased royalty expense related to license deals, new software and equipment maintenance agreements, and new operating leases, which were offset in part by reduced outsourced contractor expenses from the completion of certain internal and customer related data center projects and reduced costs related to cost containment efforts.

Cost of revenue for our consulting services and other revenue decreased $4.2 million, primarily attributable to a $4.5 million decrease related to the loss on contracts for a certain fixed fee implementation, partly offset by a $400,000 increase in other costs. In 2004, we recorded a net $4.5 million of loss on contracts charges, which primarily represented incremental hours required to complete a certain fixed fee implementation. This fixed fee implementation project was completed by the end of the first quarter of 2005. The overall increase in other costs was due primarily to higher incentive and compensation costs, partially offset by lower outsourced consulting costs related to the completion of a large fixed fee implementation project, lower facilities expense related to an office closure, and a decrease in overall travel expense.

As a percentage of total revenue, cost of revenue for services and other approximated 49% in 2005 compared with 57% in 2004.

Cost of Revenue – Products. Cost of revenue for products, which excludes the amortization of acquired technology, increased $2.2 million, or 18%, to $14.2 million in 2005 from $12.0 million in 2004. This increase resulted primarily from an increase of $4.3 million in the amortization of capitalized software development products related to the general release of additional products, partly

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offset by reduced royalty expense of $1.0 million and a decrease of $1.1 million in customer software pass-through costs. As a percentage of total revenue, cost of revenue for products approximated 5% in 2005 compared with 4% in 2004.

Research and Development (R&D) Expenses. R&D expenses increased $1.3 million, or 4%, to $31.7 million in 2005 from $30.4 million in 2004. This net increase was due primarily to increased spending related to the development of our proprietary software for the health plan and benefits administrator markets. Most of our R&D expense was used to continue our development of Facets Extended Enterprise^™, which is a substantial upgrade of our flagship software for health plans, and for the development of certain new component software. Several enhancements were also made to QicLink^™, a proprietary software product for benefits administrators and HealthWeb^®, our web-enable platform, which allows health plans to exchange information on a secure basis over the Internet. As a percentage of total revenue, R&D expenses approximated 11% in 2005 and 2004. R&D expenses, as a percentage of total R&D expenditures (which includes capitalized R&D expenses of $8.6 million in 2005 and 2004), was 79% in 2005 and 78% in 2004.

Selling, General and Administrative (SG&A) Expenses. SG&A expenses increased $16.8 million, or 28%, to $76.8 million in 2005 from $60.0 million in 2004. The overall increase resulted primarily from (i) $8.8 million in higher personnel costs, including higher incentive and compensation costs associated with certain senior staff additions in late 2004 and higher commission expenses incurred related to the timing of new contracts signed, (ii) a $3.0 million increase in outsourced services primarily for strategic planning and process improvements, in addition to support and enhancements related to our enterprise reporting system, (iii) a $3.1 million increase related primarily to defense costs for McKesson in 2005 compared to lower costs in 2004, partially offset by a $1.1 million insurance reimbursement received in 2005 related to the ATPA litigation settlement, and (iv) approximately $1.9 million in other expenses such as audit and compliance, executive travel, sales and marketing, and other corporate support costs. SG&A expenses also increased $1.1 million due to the collection of a fully reserved note receivable in the second quarter of 2004, which negatively affected the period comparison. As a percentage of total revenue, selling, general and administrative expenses approximated 26% in 2005 compared with 22% in 2004.

Amortization of Intangible Assets. Amortization of intangible assets is comprised of acquired technology and acquired other intangible assets. Amortization of intangible assets decreased $1.3 million, or 32%, from $4.2 million in 2004 to $2.9 million in 2005.

Amortization of Acquired Technology. The amortization of acquired technology is excluded from cost of revenue - products and consists primarily of amounts amortized with respect to core or completed technology and existing software. Amortization of acquired technology increased $220,000, or 50%, to $660,000 in 2005 from $440,000 in 2004. The increase was related to the Diogenes acquisition in early 2004.

Amortization of Acquired Other Intangible Assets. Amortization of acquired other intangible assets decreased $1.6 million, or 41%, from $3.8 million in 2004 to $2.2 million in 2005. The decrease was due primarily to certain intangible assets acquired in previous years, which were fully amortized in early 2005.

Interest Income. Interest income increased $1.0 million, or 178%, to $1.6 million in 2005 from $583,000 in 2004. The increase is due primarily to higher cash balances attributed to the proceeds from the convertible debt deal, as well as higher interest earned in our investment accounts.

Interest Expense. Interest expense increased $210,000 or 15%, to $1.6 million in 2005 from $1.4 million in 2004. The increase relates primarily to interest incurred on the $100.0 million convertible debt and borrowings on our revolving line of credit facility. The effect of this increase was offset in part by lower balances on our capital leases and notes payable.

Provision for Income Taxes. Provision for income taxes was $412,000 in 2005 compared with $1.1 million in 2004. The provision decrease is due to a decrease in state income taxes from benefits recorded for return to provision adjustments related to 2004 state taxes and refunds received related to prior years for which income tax benefit was not previously recorded, offset partially by an increase in Federal income taxes for alternative minimum tax. The effective tax rate was 1.8% for 2005, which was lower than the Federal statutory rate primarily due to the decrease in (release of) valuation allowance, which occurred as a result of utilization of net operating loss carryovers. The effective tax rate was 11.5% for 2004.

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Selected Quarterly Results of Operations

This data has been derived from unaudited consolidated financial statements that, in the opinion of our management, include all adjustments consisting only of normal recurring adjustments that we consider necessary for a fair presentation of the information when read in conjunction with our audited consolidated financial statements and the attached notes included herein. The operating results for any quarter are not necessarily indicative of the results for any future period. The following table sets forth certain unaudited consolidated statement of operations data for the eight quarters ended December 31, 2006 (in thousands, except per share data):

	Quarters Ended
	December 31, 2006			September 30, 2006			June 30, 2006			March 31, 2006			December 31, 2005			September 30, 2005			June 30, 2005			March 31, 2005
Revenue: (1)
Services and other	$	69,957		$	67,421		$	69,793		$	65,772		$	63,486		$	62,921		$	61,482		$	55,594
Products		18,515			19,016			17,917			19,546			11,354			10,132			11,026			16,224
Total revenue		88,472			86,437			87,710			85,318			74,840			73,053			72,508			71,818
Operating costs and expenses:
Cost of revenue – services and other (2)		41,064			41,838			41,980			40,347			37,011			36,546			34,901			35,860
Cost of revenue – products (excludes amortization of acquired technology)		3,231			3,238			3,232			4,474			3,068			3,188			4,205			3,749
Research and development		10,982			10,586			10,743			10,478			6,992			7,748			8,434			8,481
Selling, general and administrative		22,961			35,505			24,027			21,316			21,296			18,585			18,775			18,102
Amortization of acquired technology		1,030			935			940			1,215			165			165			165			165
Amortization of acquired other intangible assets		213			233			128			293			124			691			692			718
Total operating costs and expenses		79,481			92,335			81,050			78,123			68,656			66,923			67,172			67,075
Income (loss) from operations		8,991			(5,898	)		6,660			7,195			6,184			6,130			5,336			4,743
Interest income		1,051			937			945			890			987			261			182			189
Interest expense		(850	)		(825	)		(835	)		(832	)		(836	)		(206	)		(178	)		(359	)
Other income		—			—			—			180			—			—			—			—
Income (loss) before (provision for) benefit from income taxes		9,192			(5,786	)		6,770			7,433			6,335			6,185			5,340			4,573
(Provision for) benefit from income taxes		(1,646	)		103			(356	)		(595	)		(71	)		295			(361	)		(275	)
Net income (loss)	$	7,546		$	(5,683	)	$	6,414		$	6,838		$	6,264		$	6,480		$	4,979		$	4,298
Net income (loss) per share:
Basic	$	0.18		$	(0.13	)	$	0.15		$	0.16		$	0.15		$	0.15		$	0.12		$	0.10
Diluted	$	0.16		$	(0.13	)	$	0.14		$	0.15		$	0.14		$	0.14		$	0.11		$	0.10
Shares used in computing net income (loss) per share:
Basic		42,744			42,526			42,370			41,899			41,519			42,567			41,988			41,714
Diluted		46,273			42,526			45,394			45,666			45,518			46,921			44,816			43,934

(1) In December 2006, the Company entered into a settlement with one of its larger customers that had disputed payments due from a software implementation project. The amounts represented revenue recorded in the first two quarters of 2006 and were included in the allowance for sales returns and a reduction to revenue in the quarter ended September 30, 2006. The settlement fully resolved the issues and resulted in a payment that was less than the amount previously disputed.

(2) Included in cost of revenue are charges associated with loss on contracts. During the fourth quarter of 2003, we decided to wind-down our outsourcing services to physician group customers. As a result of this decision, we estimated that the existing customer agreements would generate a total loss of $11.3 million until the terms of these agreements expired in 2008. We recorded a loss accrual in the fourth quarter of 2003. Through discussions and negotiations, we were able to accelerate the termination of our services agreements with certain physician group customers and implemented cost cutting measures that reduced the expected future costs to support our remaining customers. As a result of these actions, we were able to reverse approximately $5.9 million of previously accrued loss on contracts charges in 2004. Early in the second quarter of 2005, we executed termination agreements with our two remaining physician group customers. We continued to provide outsourced business services through May 2005, when the transition services were completed. The completion of these services to the remaining customers allowed us to reverse the remaining balance in the loss on contracts accrual of $2.9 million in the second quarter of 2005. The total amount of loss actually incurred related to the outsourcing services to physician group customers was $2.1 million in 2004 and $403,000 in the first six months of 2005.

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Liquidity and Capital Resources

Capital Resources

Our principal sources of liquidity include cash from operations, borrowings under our debt facility, proceeds from the issuance of convertible debt, cash obtained from our acquisitions, employee exercises of stock options and private financings. As of December 31, 2006, we have the following sources of cash available to fund our ongoing operations:

• Cash and cash equivalents totaling $108.0 million, including $921,000 of restricted cash.

• In January 2007, we entered into an amendment to our Credit Agreement established December 21, 2004 to add a term loan of up to $150.0 million and to extend the expiration date of the Credit Agreement, including our $100.0 million revolving credit facility, to January 5, 2011. As of December 31, 2006, we had outstanding borrowings on the revolving line of credit of $12.0 million and were in compliance with all applicable covenants and other restrictions under the Credit Agreement. In January 2007, we borrowed $75.0 million under the term loan to help fund our acquisition of Quality Care Solutions, Inc. (“QCSI”). We can borrow up to an additional $75.0 million under the term loan through June 30, 2007, at which time no additional funds can be borrowed under the term loan. All borrowings under our Credit Agreement bear interest at a per annum rate equal to either (i) the LIBOR rate plus an adjustable applicable margin of between 1.75% and 3.50% or (ii) Wells Fargo’s prime rate plus an adjustable applicable margin of between 0.0% and 2.0%, at our election, subject to specified restrictions. The maximum amount that we may borrow under our revolving credit facility may be limited based upon multiples of EBITDA, as specified in the Credit Agreement. The Credit Agreement is also subject to other customary financial and negative covenants.

• In October 2005, we issued $100.0 million aggregate principal amount of 2.75% Convertible Senior Notes due 2025 (the “Notes”). The Notes bear interest at a rate of 2.75%, which is payable in cash semi-annually. On or after October 5, 2010, we may from time to time at our option redeem the Notes, in whole or in part, for cash, at the applicable redemption date. Additionally, holders of the Notes may require us to purchase all or a portion of their Notes in cash on each October 1, 2010, October 1, 2015 and October 1, 2020.

The Notes are convertible into shares of our common stock at an initial conversion price of $18.85 per share, or 53.0504 shares for each $1,000 principal amount of Notes, subject to certain adjustments set forth in the Indenture. Upon conversion of the Notes, we will have the right to deliver shares of our common stock, cash or a combination of cash and shares of our common stock. The Notes are convertible (i) prior to October 1, 2020, during any fiscal quarter after the fiscal quarter ending December 31, 2005, if the closing sale price of our common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter exceeds 120% of the conversion price in effect on the last trading day of the immediately preceding fiscal quarter, (ii) prior to October 1, 2020, during the five business day period after any five consecutive trading day period (the “Note Measurement Period”) in which the average trading price per $1,000 principal amount of Notes was equal to or less than 97% of the average conversion value of the Notes during the Note Measurement Period, (iii) upon the occurrence of specified corporate transactions, as described in the Indenture, (iv) if we call the Notes for redemption, or (v) any time on or after October 1, 2020.

Based on our current operating plan, we believe that existing cash and cash equivalents balances, cash forecasted by management to be generated by operations and borrowings from existing credit facilities will be sufficient to meet our working capital and capital requirements for at least the next 12 months. However, if events or circumstances occur such that we do not meet our operating plan as expected, we may be required to seek additional capital and/or reduce certain discretionary spending, which could have a material adverse effect on our ability to achieve our business objectives. We may seek additional financing, which may include debt and/or equity financing or funding through third party agreements. There can be no assurance that any additional financing will be available on acceptable terms, if at all. Any equity financing may result in dilution to existing stockholders and any debt financing may include restrictive covenants.

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Summary of Cash Activities

As of December 31, 2006, we had cash and cash equivalents totaling $107.1 million and $921,000 in restricted cash. Significant cash flow activities for the years ended December 31, 2006 and 2005 are as follows (in thousands):

	Year Ended December 31,
	2006			2005
Cash provided by operating activities	$	40,154		$	43,825
Purchase of property and equipment and software licenses		(10,575	)		(7,171	)
Capitalization of software development costs		(8,568	)		(8,608	)
Acquisitions, net of cash acquired		(40,581	)		(26,799	)
Proceeds from notes payable		—			100,000
Proceeds from revolving line of credit, debt financings and capital leases		37,992			79,650
Payments on notes payable		(997	)		(40,991	)
Payments on revolving line of credit and capital leases		(27,316	)		(94,542	)
Payments for repurchase of common stock		—			(19,798	)
Employee exercise of common stock options and purchase of common stock		10,008			10,254

Cash and cash equivalents increased $117,000 in 2006 from $106.9 million at December 31, 2005 to $107.1 million at December 31, 2006. The main contributors of this increase were $40.2 million in cash provided by operating activities, $38.0 million in proceeds from our revolving line of credit and other financing debt, and $10.0 million in proceeds from employee option exercises and stock purchases. These cash inflows were partially offset by net cash payments of $40.6 million which included $42.4 million of payments related to the acquisition of CareKey and $1.8 million of cash acquired from PDM, payments on our debt (including revolving line of credit) of $28.3 million and $19.1 million for capital spending.

Although our acquisition of PDM was consummated on December 22, 2006, the initial closing consideration of $8.0 million and 491,488 shares of common stock was paid and issued, respectively, in January 2007. In January 2007, we also consummated our acquisition of QCSI, pursuant to which we made an aggregate cash payment of $130.0 million, net of cash received in the acquisition.

Commitments and Contingencies

The following tables summarize our estimated contractual obligations and other commercial commitments (in thousands):

	Payments (including interest) Due by Period
Contractual obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Short-term debt	$	115	$	115	$	—	$	—	$	—
Capital lease obligations		3,806		1,618		1,625		563		—
Operating leases		63,363		13,603		19,944		12,703		17,113
Convertible debt		152,281		2,750		5,500		5,500		138,531
Total contractual obligations	$	219,565	$	18,086	$	27,069	$	18,766	$	155,644
Other commercial commitments	Total Amounts Committed		Less Than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Line of credit	$	12,000	$	—	$	—	$	12,000	$	—
Standby letters of credit		921		—		500		308		113
Total other commercial commitments	$	12,921	$	—	$	500	$	12,308	$	113

In the second quarter of 2006, we extended the term of our lease on our Colorado facility for a period of seven years from July 31, 2009 through July 31, 2016. At the same time, we leased an additional 50,862 square feet within this facility.

Convertible debt represents scheduled principal and interest payments for our October 2005 convertible debt offering, which includes $100.0 million aggregate principal amount of our Convertible Senior Notes. The Notes bear interest at a rate of 2.75%, which is payable in cash semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2006, to the holders of record on the preceding March 15 and September 15, respectively. The Notes mature on October 1, 2025. However, on or after October 5, 2010, we may from time to time at our option redeem the Notes, in whole or in part, for cash, at the applicable redemption date. Additionally, holders of the Notes may require us to purchase all or a portion of their Notes in cash on each of October 1, 2010, October 1, 2015 and October 1, 2020.

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As of December 31, 2006, we had outstanding four unused standby letters of credit in the aggregate amount of $921,000 which serve as security deposits for certain operating leases. We are required to maintain a cash balance equal to the outstanding letters of credit, which is classified as restricted cash on our balance sheet.

Excluded from the tables above are certain potential payments to former CareKey stockholders and option holders as these payments are contingent upon the achievement of financial milestones. These amounts are payable in either cash or stock at our election. Former CareKey stockholders and option holders are entitled to receive three contingent consideration payments of $8.3 million each (up to $25.0 million), upon the achievement of certain revenue milestones during the period beginning upon acquisition and ending December 31, 2008. In addition, further consideration payable in cash or stock at our election, may be paid to former CareKey stockholders and option holders if, prior to December 31, 2008, the acquired CareKey products generate revenues in excess of certain revenue milestones and/or if a negotiated multiple of software maintenance revenues of acquired CareKey products during the fiscal year ended December 31, 2009 exceed total purchase consideration made to those former CareKey stockholders and option holders. Also excluded from the tables above are certain potential payments to former PDM and QCSI stockholders and option and warrant holders. In addition to the $8.0 million and 491,488 shares of common stock paid and issued in January 2007, former PDM security holders may be entitled to receive contingent consideration as follows: aggregate payments of up to $5.0 million on or before June 30, 2007, $5.0 million on or before December 31, 2008, and $8.0 million on or before December 31, 2009, each subject to reduction if certain revenue thresholds are not satisfied during the applicable measurement period. Additional contingent consideration may be paid on June 30, 2009 if certain revenue thresholds are satisfied, provided that in no event will the aggregate consideration of all payments exceed $42.0 million. It is expected that 50% of each payment will be made in cash and 50% will be paid in shares of TriZetto’s common stock.

In addition to the net cash payment of $130.0 million paid in January 2007, former QCSI security holders are entitled to an aggregate cash payment of $5.0 million on January 31, 2008, subject to reduction if the parties determine that QCSI had negative working capital under the acquisition agreement as of the date of closing or to the extent that we are entitled to claims for indemnification under the acquisition agreement. In addition, former QCSI security holders will be entitled to receive an aggregate cash payment of $7.0 million on January 31, 2008 if license and software revenues arising from the sale of QCSI products reach specified thresholds during the fiscal year ending on December 31, 2007.

The tables further exclude the long-term debt obligations under our term loan used to help fund the purchase of QCSI in January 2007. As of January 31, 2007, there was $75.0 million outstanding under our term loan. All borrowings under our term loan must be repaid in quarterly installments commencing on July 1, 2007 through January 5, 2010 in amounts equal to the amount outstanding under the term loan on June 30, 2007, divided by 28.

OFF-BALANCE SHEET ARRANGEMENTS

We do not currently have any relationships with unconsolidated entities or financial partnerships, such as entities referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet or other contractually narrow or limited purposes.

Item 7A—Quantitative and Qualitative Disclosures About Market Risk

Market risk associated with adverse changes in financial and commodity market prices and rates could impact our financial position, operating results or cash flows. We are exposed to market risk due to changes in interest rates such as the prime rate and LIBOR. This exposure is directly related to our normal operating and funding activities. Historically, and as of December 31, 2006, we have not used derivative instruments or engaged in hedging activities.

The interest rate on our $100.0 million revolving credit facility is a per annum rate equal to (i) the LIBOR rate plus an applicable margin of between 1.75% and 2.25% or (ii) the lending institution’s prime rate plus an adjustable applicable margin of between 0.0% and 0.5%, at our election, subject to specified restrictions, and is payable monthly in arrears. The revolving credit facility expires in January 2010. As of December 31, 2006, we had outstanding borrowings on the revolving line of credit of $12.0 million.

On September 30, 2005, we entered into a Purchase Agreement with UBS Securities, LLC, Banc of America Securities, LLC and William Blair & Company LLC (the “Initial Purchasers”), to sell $100.0 million aggregate principal amount of our 2.75% Convertible Senior Notes due 2025 (the “Notes”) in a private placement in reliance on Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Notes have been resold by the Initial Purchasers to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The sale of the Notes to the Initial Purchasers was consummated on October 5, 2005. The Notes were issued pursuant to an Indenture, dated October 5, 2005, by and between us and Wells Fargo Bank, National Association, as trustee. The Notes bear interest at a rate of 2.75%, which is payable in cash semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2006, to the holders of record on the preceding March 15 and September 15, respectively.

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We manage interest rate risk by investing excess funds in cash equivalents and short-term investments bearing variable interest rates, which are tied to various market indices. We also manage interest rate risk by closely managing our borrowings on our credit facility based on our operating needs in order to minimize the interest expense incurred. As a result, we do not believe that near-term changes in interest rates will result in a material effect on our future earnings, fair values or cash flows.

Item 8—Financial Statements and Supplementary Data

The financial statements and supplementary data required by this Item 8 are set forth at the pages indicated at Item 15(a)(1).

Item 9—Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A—Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)), as of the end of the period covered by this annual report on Form 10-K. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective.

In addition, no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the fourth quarter of our fiscal year ended December 31, 2006 that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

The management of The TriZetto Group, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a–15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

As of December 31, 2006, management assessed the effectiveness of the Company’s internal control over financial reporting based on the framework established in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management has determined that the Company’s internal control over financial reporting was effective as of December 31, 2006.

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

The scope of management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 includes all of our businesses except for Plan Data Management, Inc. (“PDM”), which was acquired on December 22, 2006. The acquired PDM business constituted approximately $19.6 million of total assets as of December 31, 2006. In accordance with guidance issued by the Securities and Exchange Commission, our management is permitted to exclude PDM from its assessment as of December 31, 2006.

Ernst & Young LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K, has issued an attestation report on management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006. The report, which expresses unqualified opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, is included in this Item under the heading “Attestation Report of Independent Registered Public Accounting Firm.”

41

Attestation Report of Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of The TriZetto Group, Inc.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that The TriZetto Group, Inc. maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The TriZetto Group, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessments of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Plan Data Management, Inc., acquired in 2006, which is included in the 2006 consolidated financial statements of The TriZetto Group, Inc. and represented approximately $19.6 million of total assets as of December 31, 2006. Our audit of internal control over financial reporting of The TriZetto Group, Inc. also did not include an evaluation of the internal control over financial reporting of Plan Data Management, Inc.

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

In our opinion, management’s assessment that The TriZetto Group, Inc. maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, The TriZetto Group, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of The TriZetto Group, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006 of The TriZetto Group, Inc. and our report dated February 16, 2007 expressed an unqualified opinion thereon.

	/s/ ERNST & YOUNG LLP
Orange County, California
February 16, 2007

Item 9B—Other Information

None.

42

PART III

Item 10—Directors, Executive Officers and Corporate Governance

The information required by this Item is set forth under the captions “Election of Directors,” “Compensation of Executive Officers” and “Corporate Governance” in our definitive Proxy Statement, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities and Exchange Act of 1934 and is incorporated herein by reference.

The Company maintains a Code of Ethics, which is applicable to all directors, officers and employees, including the Company’s Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer and persons performing similar functions on the Company’s website at www.trizetto.com. Any amendment or waiver to the Code of Ethics that applies to our directors or executive officers will be posted on our website or in a report filed with the SEC on Form 8-K. A copy of the Code of Ethics is available upon written request to: Investor Relations, The TriZetto Group, 567 San Nicolas Drive, Suite 360, Newport Beach, California 92660.

Item 11—Executive Compensation

The information required by this Item is set forth under the captions “Compensation of Executive Officers” and “Election of Directions” in our definitive Proxy Statement, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities and Exchange Act of 1934 and is incorporated herein by reference.

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

The information required by this Item is set forth under the captions “Security Ownership of Management and Certain Beneficial Owners” and “Equity Compensation Plan Information” in our definitive Proxy Statement, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities and Exchange Act of 1934 and is incorporated herein by reference.

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

The information required by this Item is set forth under the captions “Certain Transactions” and “Director Independence” in our definitive Proxy Statement, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities and Exchange Act of 1934 and is incorporated herein by reference.

Item 14—Principal Accounting Fees and Services

The information required by this Item is set forth under the caption “Independent Registered Public Accountant” in our definitive Proxy Statement, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities and Exchange Act of 1934 and is incorporated herein by reference.

43

PART IV

Item  15—Exhibits and Financial Statement Schedules

(a) List of documents filed as part of this Form 10-K:

(1) Financial Statements.

See Index to Financial Statements and Schedule on page F-1.

(2) Financial Statement Schedules.

See Index to Financial Statements and Schedule on page F-1.

(3) Exhibits.

The following exhibits are filed (or incorporated by reference herein) as part of this Form 10-K:

Exhibit Number	Description of Exhibit
2.1*	Agreement and Plan of Reorganization, dated as of May 16, 2000, by and among TriZetto, Elbejay Acquisition Corp., IMS Health Incorporated and Erisco Managed Care Technologies, Inc. (Incorporated by reference to Exhibit 2.1 of TriZetto’s Form 8-K as filed with the SEC on May 19, 2000, File No. 000-27501)
2.2*	Agreement and Plan of Merger, dated as of November 2, 2000, by and among TriZetto, Cidadaw Acquisition Corp., Resource Information Management Systems, Inc. (“RIMS”), the shareholders of RIMS, Terry L. Kirch and Thomas H. Heimsoth (Incorporated by reference to Exhibit 2.1 of TriZetto’s Form 8-K as filed with the SEC on December 18, 2000, File No. 000-27501)
2.3*	First Amendment to Agreement and Plan of Merger, dated as of December 1, 2000, by and among TriZetto, Cidadaw Acquisition Corp., RIMS, the shareholders of RIMS, Terry L. Kirch and Thomas H. Heimsoth (Incorporated by reference to Exhibit 2.2 of TriZetto’s Form 8-K as filed with the SEC on December 18, 2000, File No. 000-27501)
2.4*	Agreement and Plan of Merger, dated as of December 22, 2005, by and among TriZetto, CK Acquisition Corp., CareKey, Inc. (CareKey”), the shareholders of CareKey, and Ido Schoenberg (Incorporated by reference to Exhibit 2.1 of TriZetto’s Form 8-K as filed with the SEC on December 29, 2005, File No. 000-27501)
2.5*	Agreement and Plan of Merger, dated as of September 12, 2006, by and among TriZetto, Quartz Acquisition Corp., Quality Care Solutions, Inc., and Michael Lee (Incorporated by reference to Exhibit 2.1 of TriZetto’s Form 10-Q as filed with the SEC on November 6, 2006, File No. 000-27501).
2.6*	Agreement and Plan of Merger, dated as of October 26, 2006, by and among TriZetto, PDM Acquisition Corp., Plan Data Management, Inc., and Stephen B.C. Jackson (Incorporated by reference to Exhibit 2.1 of TriZetto’s Form 8-K as filed with the SEC on December 29, 2006).
3.1*	Form of Amended and Restated Certificate of Incorporation of TriZetto, as filed with the Delaware Secretary of State effective as of October 14, 1999 (Incorporated by reference to Exhibit 3.2 of TriZetto’s Registration Statement on Form S-1/A, as filed with the SEC on September 14, 1999, File No. 333-84533)
3.2*	Certificate of Amendment of Amended and Restated Certificate of Incorporation of TriZetto, dated October 3, 2000 (Incorporated by reference to Exhibit 3.1 of TriZetto’s Form 10-Q as filed with the SEC on November 14, 2000, File No. 000-27501)
3.3*	Certificate of Designation of Rights, Preferences and Privileges of Series A Junior Participating Preferred Stock of TriZetto, dated October 17, 2000 (Incorporated by reference to Exhibit 3.2 of TriZetto’s Form 10-Q as filed with the SEC on November 14, 2000, File No. 000-27501)
3.4*	Amended and Restated Bylaws of TriZetto effective as of October 7, 1999 (Incorporated by reference to Exhibit 3.4 of TriZetto’s Registration Statement on Form S-1/A, as filed with the SEC on August 18, 1999, File No. 333-84533)
4.1*	Specimen common stock certificate (Incorporated by reference to Exhibit 4.1 of TriZetto’s Registration Statement on Form S-1/A as filed with the SEC on September 14, 1999, File No. 333-84533)
4.2*	Rights Agreement, dated October 2, 2000, by and between TriZetto and U.S. Stock Transfer Corporation (Incorporated by reference to Exhibit 2.1 of TriZetto’s Form 8-A12G as filed with the SEC on October 19, 2000, File No. 000-27501)
4.3*	First Amendment to Rights Agreement, dated December 21, 2004, between the Company and U.S. Stock Transfer Corporation, as Rights Agent (Incorporated by reference to Exhibit 2 of TriZetto’s Form 8A12G/A as filed with the SEC on December 21, 2004, File No. 000-27501)

45

Exhibit Number	Description of Exhibit
4.4*	Purchase Agreement, dated as of September 30, 2005, by and between the TriZetto Group, Inc. and UBS Securities, LLC, Banc of America Securities, LLC and William Blair & Company LLC, as the Initial Purchasers (Incorporated by reference to Exhibit 4.1 of TriZetto’s Form 10-Q as filed with the SEC on November 7, 2005, File No. 000-27501)
4.5*	Registration Rights Agreement, dated as of October 5, 2005, by and between The TriZetto Group, Inc. and UBS Securities, LLC, Banc of America Securities, LLC and William Blair & Company, LLC, as the Initial Purchasers (Incorporated by reference to Exhibit 4.2 of TriZetto’s Form 10-Q as filed with the SEC on November 7, 2005, File No. 000-27501)
4.6*	Indenture, dated as of October 5, 2005, by and between The TriZetto Group, Inc. and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.3 of TriZetto’s Form 10-Q as filed with the SEC on November 7, 2005, File No. 000-27501)
4.7*	Form of Global 2.75% Convertible Senior Note due 2025 (Included in Exhibit 4.3 Incorporated by reference to Exhibit 4.4 of TriZetto’s Form 10-Q as filed with the SEC on November 7, 2005, File No. 000-27501)
10.1*	First Amended and Restated 1998 Stock Option Plan (Incorporated by reference to Exhibit 4.1 of TriZetto’s Form S-8 as filed with the SEC on August 7, 2000, File No. 333-43220)
10.2*	Form of 1998 Incentive Stock Option Agreement (Incorporated by reference to Exhibit 10.2 of TriZetto’s Registration Statement on Form S-1 as filed with the SEC on August 5, 1999, File No. 333-84533)
10.3*	Form of 1998 Non-Qualified Stock Option Agreement (Incorporated by reference to Exhibit 10.3 of TriZetto’s Registration Statement on Form S-1 as filed with the SEC on August 5, 1999, File No. 333-84533)
10.4*	1999 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.4 of TriZetto’s Registration Statement on Form S-1/A as filed with the SEC on August 18, 1999, File No. 333-84533)
10.5*	RIMS Stock Option Plan (Incorporated by reference to Exhibit 4.1 of TriZetto’s Form S-8 as filed with the SEC on December 21, 2000, File No. 000-27501)
10.6*	Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.7 of TriZetto’s Registration Statement on Form S-1 as filed with the SEC on August 5, 1999, File No. 333-84533)
10.7*	Form of Restricted Stock Agreement between TriZetto and certain consultants and employees (Incorporated by reference to Exhibit 10.3 of TriZetto’s Form 10-Q as filed with the SEC on August 14, 2000, File No. 000-27501)
10.8*	Form of Change of Control Agreement entered into by and between TriZetto and certain executive officers of TriZetto effective as of August 24, 2006 (Incorporated by reference to Exhibit 10.1 of TriZetto’s Form 8-K as filed with the SEC on August 29, 2006, File No. 000-27501)
10.9*	First Amended and Restated Investor Rights Agreement, dated April 9, 1999 by and among Raymond Croghan, Jeffrey Margolis, TriZetto, and Series A and Series B Preferred Stockholders (Incorporated by reference to Exhibit 10.8 of TriZetto’s Registration Statement on Form S-1/A, as filed with the SEC on August 18, 1999, File No. 333-84533)
10.10*	Office Lease Agreement, dated April 26, 1999, between St. Paul Properties, Inc. and TriZetto (including addendum) (Incorporated by reference to Exhibit 10.10 of TriZetto’s Registration Statement on Form S-1 as filed with the SEC on August 5, 1999, File No. 333-84533)
10.11*	Sublease Agreement, dated December 18, 1998, between TPI Petroleum, Inc. and TriZetto (including underlying Office Lease Agreement by and between St. Paul Properties, Inc. and Total, Inc.) (Incorporated by reference to Exhibit 10.11 of TriZetto’s Registration Statement on Form S-1 as filed with the SEC on August 5, 1999, File No. 333-84533)
10.12*	First Modification and Ratification of Lease, dated November 1, 1999, by and between TriZetto and St. Paul Properties, Inc. (Incorporated by reference to Exhibit 10.22 of TriZetto’s Form 10-K as filed with the SEC on March 30, 2000, File No. 000-27501)
10.13*	Second Modification and Ratification of Lease, dated December 1999, by and between TriZetto and St. Paul Properties, Inc. (Incorporated by reference to Exhibit 10.23 of TriZetto’s Form 10-K as filed with the SEC on March 30, 2000, File No. 000-27501)
10.14*	Third Modification and Ratification of Lease, dated January 15, 2000, by and between TriZetto and St. Paul Properties, Inc. (Incorporated by reference to Exhibit 10.16 of TriZetto’s Form 10-K as filed with the SEC on April 2, 2001, File No. 000-27501)
10.15*	Fourth Modification and Ratification of Lease, dated October 15, 2000, by and between TriZetto and St. Paul Properties, Inc. (Incorporated by reference to Exhibit 10.17 TriZetto’s Form 10-K as filed with the SEC on April 2, 2001, File No. 000-27501)
10.16	Fifth Modification and Ratification of Lease, dated October 31, 2002, by and between TriZetto and St. Paul Properties, Inc.

45

Exhibit Number	Description of Exhibit
10.17	Sixth Modification and Ratification of Lease, dated May 19, 2003, by and between TriZetto and St. Paul Properties, Inc.
10.18	Seventh Modification and Ratification of Lease, dated April 12, 2004, by and between TriZetto and St. Paul Properties, Inc.
10.19	Eighth Modification and Ratification of Lease, dated April 7, 2006, by and between TriZetto and St. Paul Properties, Inc.
10.20*	Form of Voting Agreement (Incorporated by reference to Exhibit 2.1 of TriZetto’s Form 8-K as filed with the SEC on May 19, 2000, File No. 000-27501)
10.21*	Stockholder Agreement, dated as of October 2, 2000, by and between TriZetto and IMS Health Incorporated (Incorporated by reference to Exhibit 10.29 of TriZetto’s Form 10-K as filed with the SEC on April 2, 2001, File No. 000-27501)
10.22*	Registration Rights Agreement, dated as of October 2, 2000, by and between TriZetto and IMS Health Incorporated (Incorporated by reference to Exhibit 10.30 of TriZetto’s Form 10-K as filed with the SEC on April 2, 2001, File No. 000-27501)
10.23*	Form of Restricted Stock Agreement Between TriZetto and Certain Employees (Incorporated by reference to Exhibit 10.39 of TriZetto’s Form 10-K as filed with the SEC on March 31, 2003, File No. 000-27501)
10.24*	Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.40 of TriZetto’s Form 10-Q as filed with the SEC on May 15, 2003, File No. 000-27501)
10.25*	Form of Restricted Stock Agreement between TriZetto and Certain Employees (Incorporated by reference to Exhibit 10.2 of Trizetto’s Form 10-Q as filed with the SEC on May 10, 2004, File No. 000-27501)
10.26*	Form of Restricted Stock Agreement between TriZetto and Certain Employees (Incorporated by reference to Exhibit 10.1 of Trizetto’s Form 10-Q as filed with the SEC on August 6, 2004, File No. 000-27501)
10.27*	Form of 1998 Long-term Incentive Plan Stock Option Award Agreement (Incorporated by reference to Exhibit 10.1 of Trizetto’s Form 10-Q as filed with the SEC on November 9, 2004, File No. 000-27501)
10.28*	Credit Agreement, dated December 21, 2004, by and among TriZetto, each of TriZetto’s subsidiaries, and Wells Fargo Foothill, Inc. (Incorporated by reference to Exhibit 10.48 of TriZetto’s Form 10-K as filed with the SC on February 14, 2005, File No. 0-27501)
10.29*	Share Purchase Agreement, dated December 21, 2004, by and between TriZetto and IMS Health, Inc. (Incorporated by reference to Exhibit 10.49 of TriZetto’s Form 10-K as filed with the SC on February 14, 2005, File No. 0-27501)
10.30*	Subordinated Promissory Note, dated December 21, 2004, payable by TriZetto to IMS Health, Inc. (Incorporated by reference to Exhibit 10.50 of TriZetto’s Form 10-K as filed with the SC on February 14, 2005, File No. 0-27501)
10.31*	Letter Agreement between TriZetto and VA Partners, LLC dated December 5, 2004 (Incorporated by reference to Exhibit 10.51 of TriZetto’s Form 10-K as filed with the SC on February 14, 2005, File No. 0-27501)
10.32*	Amended and Restated Executive Employment Agreement, dated January 1, 2006, by and between the Company and Jeffrey H. Margolis (Incorporated by reference to Exhibit 10.1 of TriZetto’s Form 10-Q as filed with the SEC on November 6, 2006, File No. 000-27501)
10.33*	Cash Bonus Plan (Incorporated by reference to Exhibit 10.1 of TriZetto’s Form 8-K as filed with the SEC on May 15, 2006, File No. 000-27501)
10.34*	1998 Long-Term Incentive Plan, dated April 7, 2005 (Incorporated by reference to Appendix B of TriZetto’s proxy statement on Schedule 14A as filed with the SEC on April 15, 2004)
10.35*	2005 Amendment to 1998 Long-Term Incentive Plan, dated April 7, 2005 (Incorporated by reference to Appendix B of TriZetto’s proxy statement on Schedule 14A as filed with the SEC on April 18, 2005)
10.36*	2006 Amendment to 1998 Long-Term Incentive Plan, dated April 7, 2005 (Incorporated by reference to Appendix A of TriZetto’s proxy statement on Schedule 14A as filed with the SEC on April 25, 2006)
10.37*	Amended and Restated Employee Stock Purchase Plan, effective April 7, 2005 (Incorporated by reference to Appendix C of TriZetto’s proxy statement on Schedule 14A as filed with the SEC on April 18, 2005)
10.38*	Executive Deferred Compensation Plan, dated as of June 30, 2005, between TriZetto and Certain Key Employees (Incorporated by reference to Exhibit 10.1 of TriZetto’s Form 8-K as filed with the SEC on December 27, 2005, File No. 000-27501)

46

Exhibit Number	Description of Exhibit
10.39	Amended and Restated Credit Agreement, dated January 10, 2007, by and among TriZetto, each of TriZetto’s subsidiaries, and Wells Fargo Foothill, Inc.
10.40*	Settlement and License Agreement, dated September 7, 2006, by and between TriZetto and McKesson Information Solutions LLC (Incorporated by reference to Exhibit 10.3 of TriZetto’s Form 10-Q as filed with the SEC on November 6, 2006, File No. 000-27501).
10.41	Form of Restricted Stock Award Agreement (Performance Compensation Award) between TriZetto and certain employees.
14.1*	Code of Ethics (Incorporated by reference to Exhibit 14.1 of TriZetto’s Form 10-Q as filed with the SEC on August 14, 2003, File No. 000-27501)
21.1	Current Subsidiaries of TriZetto
23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
31.1	Certification of CEO Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of CFO Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Previously filed.

47

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 16, 2007.

THE TRIZETTO GROUP, INC.
By:	/s/ Jeffrey H. Margolis
	Jeffrey H. Margolis, Chief Executive Officer and Chairman of the Board

POWER OF ATTORNEY

Each of the undersigned hereby constitutes and appoints Jeffrey H. Margolis and James C. Malone, or either of them, his/her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, to sign any or all amendments to the Form 10-K of The TriZetto Group, Inc. for the year ended December 31, 2006 and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his/her substitute or substitutes, may do or cause to be done by virtue hereof in any and all capacities.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature	Title	Date
/s/ Jeffrey H. Margolis
Jeffrey H. Margolis	Chief Executive Officer and Chairman of the Board (principal executive officer)	March 16, 2007
/s/ James C. Malone
James C. Malone	Executive Vice President of Finance and Chief Financial Officer (principal financial and accounting officer)	March 16, 2007
/s/ Lois A. Evans		March 16, 2007
Lois A. Evans	Director
/s/ Thomas B. Johnson		March 16, 2007
Thomas B. Johnson	Director
/s/ L. William Krause		March 16, 2007
L. William Krause	Director
/s/ Paul F. LeFort		March 16, 2007
Paul F. LeFort	Director
/s/ Donald J. Lothrop		March 16, 2007
Donald J. Lothrop	Director
/s/ Jerry P. Widman		March 16, 2007
Jerry P. Widman	Director

48

THE TRIZETTO GROUP, INC.

INDEX TO CONSOLIDATED FINANCIAL INFORMATION

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets—December 31, 2006 and 2005	F-3
Consolidated Statements of Operations—For the years ended December 31, 2006, 2005 and 2004	F-4
Consolidated Statements of Stockholders’ Equity—For the years ended December 31, 2006, 2005 and 2004	F-5
Consolidated Statements of Cash Flows—For the years ended December 31, 2006, 2005 and 2004	F-6
Notes to Consolidated Financial Statements	F-7
Financial Statement Schedule—Valuation and Qualifying Accounts	S-1

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of The TriZetto Group, Inc.

We have audited the accompanying consolidated balance sheets of The TriZetto Group, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the 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 consolidated financial position of The TriZetto Group, Inc. at December 31, 2006 and 2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment.”

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of The TriZetto Group, Inc.’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 16, 2007 expressed an unqualified opinion thereon.

	/s/ ERNST & YOUNG LLP
Orange County, California
February 16, 2007

F-2

THE TRIZETTO GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	December 31,
	2006			2005
Assets
Current assets:
Cash and cash equivalents	$	107,057		$	106,940
Restricted cash		921			1,543
Accounts receivable, less allowances of $3,770 and $855 at December 31, 2006 and 2005, respectively		64,386			41,745
Deferred tax assets		14,100			—
Prepaid expenses and other current assets		11,415			11,375
Total current assets		197,879			161,603
Property and equipment, net		26,777			25,730
Capitalized software development costs, net		27,913			28,724
Goodwill		90,337			87,170
Other intangible assets, net		27,347			3,335
Other assets		12,347			11,177
Total assets	$	382,600		$	317,739
Liabilities and Stockholders’ Equity
Current liabilities:
Notes payable	$	115		$	120
Current portion of capital lease obligations		1,461			1,979
Accounts payable		18,091			14,959
Accrued liabilities		61,595			56,957
Deferred revenue		30,508			35,625
Total current liabilities		111,770			109,640
Long-term convertible debt		100,000			100,000
Long-term revolving line of credit		12,000			—
Other long-term liabilities		2,340			1,752
Capital lease obligations		2,030			1,065
Deferred tax liabilities		14,100			—
Deferred revenue		6,453			3,924
Total liabilities		248,693			216,381
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock: $0.001 par value; shares authorized: 4,000 (5,000 authorized net of 1,000 designated as Series A Junior Participating Preferred); shares issued and outstanding: zero in 2006 and 2005		—			—
Series A Junior Participating Preferred Stock: $0.001 par value; shares authorized: 1,000; shares issued and outstanding: zero in 2006 and 2005		—			—
Common stock: $0.001 par value; shares authorized: 95,000; shares issued and outstanding: 43,497 in 2006 and 42,104 in 2005		43			42
Additional paid-in capital		376,633			362,186
Deferred stock compensation		—			(2,986	)
Accumulated deficit		(242,769	)		(257,884	)
Total stockholders’ equity		133,907			101,358
Total liabilities and stockholders’ equity	$	382,600		$	317,739

See accompanying notes.

F-3

THE TRIZETTO GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Years Ended December 31,
	2006			2005			2004
Revenue:
Services and other	$	272,943		$	243,483		$	223,257
Products		74,994			48,736			51,308
Total revenue		347,937			292,219			274,565
Operating costs and expenses:
Cost of revenue - services and other		165,229			144,318			157,573
Cost of revenue - products (excludes amortization of acquired technology)		14,175			14,210			12,025
Research and development		42,789			31,655			30,398
Selling, general and administrative		103,809			76,758			59,980
Amortization of acquired technology		4,120			660			440
Amortization of acquired other intangible assets		867			2,225			3,804
Total operating expenses		330,989			269,826			264,220
Income from operations		16,948			22,393			10,345
Interest income		3,823			1,619			583
Interest expense		(3,342	)		(1,579	)		(1,369	)
Other income		180			—			—
Income before provision for income taxes		17,609			22,433			9,559
Provision for income taxes		(2,494	)		(412	)		(1,101	)
Net income	$	15,115		$	22,021		$	8,458
Net income per share:
Basic	$	0.36		$	0.52		$	0.18
Diluted	$	0.33		$	0.48		$	0.18
Shares used in computing net income per share:
Basic		42,389			41,948			46,794
Diluted		45,691			45,503			48,157

Certain reclassifications have been made to prior year amounts to conform to current year presentation

with respect to services and products revenue and cost of revenue, with no effect on net income.

See accompanying notes.

F-4

THE TRIZETTO GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended December 31, 2006, 2005 and 2004

(in thousands)

	Common Stock					Additional Paid-in Capital			Deferred Stock Compensation			Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount
Balance, December 31, 2003	46,870		$	47		$	402,702		$	(863	)	$	(288,363	)	$	113,523
Issuance of common stock to ValueAct Capital	6,600			7			44,543			—			—			44,550
Issuance of restricted stock grants	422			—			2,604			(2,604	)		—			—
Stock-based compensation	—			—			—			594						594
Employee exercise of common stock options and purchase of common stock	452			—			1,772			—			—			1,772
Repurchase of common stock from IMS	(12,143	)		(12	)		(81,952	)		—			—			(81,964	)
Net income	—			—			—			—			8,458			8,458
Balance, December 31, 2004	42,201			42			369,669			(2,873	)		(279,905	)		86,933
Employee exercise of common stock options and purchase of common stock	1,370			2			10,252			—			—			10,254
Stock-based compensation	—			—			191			1,206			—			1,397
Issuance of restricted stock grants	100			—			1,319			(1,319	)		—			—
Repurchase of common stock from ValueAct Capital	(600	)		(1	)		(5,297	)		—			—			(5,298	)
Repurchase of common stock related to convertible debt	(1,000	)		(1	)		(14,499	)		—			—			(14,500	)
Issuance of common stock for purchase of software patent	33			—			551			—			—			551
Net income	—			—			—			—			22,021			22,021
Balance, December 31, 2005	42,104			42			362,186			(2,986	)		(257,884	)		101,358
Employee exercise of common stock options and purchase of common stock	1,131			1			10,007			—			—			10,008
Elimination of deferred stock compensation in accordance with SFAS No. 123R	—			—			(2,986	)		2,986			—			—
Stock-based compensation	—			—			7,426			—			—			7,426
Issuance of restricted stock grants	262			—			—			—			—			—
Net income	—			—			—			—			15,115			15,115
Balance, December 31, 2006	43,497		$	43		$	376,633		$	—		$	(242,769	)	$	133,907

See accompanying notes.

F-5

THE TRIZETTO GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years Ended December 31,
	2006			2005			2004
Cash flows from operating activities:
Net income	$	15,115		$	22,021		$	8,458
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (benefit from) doubtful accounts and sales allowance		3,214			(597	)		(2,299	)
Stock-based compensation		7,426			1,397			594
(Gain) loss on disposal of property and equipment		(158	)		70			—
Depreciation and amortization		22,237			23,282			21,106
Amortization of other intangible assets		4,987			2,885			4,244
Recovery from contracts		—			(2,877	)		(1,353	)
Increase in cash surrender value of life insurance policies		(683	)		(151	)		—
Changes in assets and liabilities (net of acquisition):
Restricted cash		622			(88	)		23
Accounts receivable		(23,794	)		12,825			(12,940	)
Prepaid expenses and other current assets		(1,092	)		(3,386	)		(496	)
Other assets		(486	)		(8,384	)		(914	)
Accounts payable		4,911			2,417			1,488
Accrued liabilities		11,746			(2,620	)		939
Deferred revenue		(3,891	)		(2,969	)		17,034
Net cash provided by operating activities		40,154			43,825			35,884
Cash flows from investing activities:
Sale of short-term investments, net		—			1,203			17,640
Purchase of property and equipment and software licenses		(10,575	)		(7,171	)		(8,131	)
Capitalization of software development costs		(8,568	)		(8,608	)		(8,610	)
Purchase of intangible assets		—			(572	)		(2,138	)
Acquisitions, net of cash acquired		(40,581	)		(26,799	)		(89	)
Net cash used in investing activities		(59,724	)		(41,947	)		(1,328	)
Cash flows from financing activities:
Proceeds from revolving line of credit		37,000			78,000			72,000
Proceeds from convertible note		—			100,000			—
Proceeds from debt financing		992			1,511			1,110
Proceeds from capital leases		—			139			1,150
Payments on revolving line of credit		(25,000	)		(90,000	)		(80,000	)
Payments on notes payable		(997	)		(40,991	)		(1,429	)
Payments on term note		—			—			(9,375	)
Payments on capital leases		(2,316	)		(4,542	)		(5,321	)
Proceeds from sale of common stock		—			—			44,550
Payment for repurchase of common stock		—			(19,798	)		(44,550	)
Employee exercises of stock options and purchase of common stock		10,008			10,254			1,772
Net cash provided by (used in) financing activities		19,687			34,573			(20,093	)
Net increase in cash and cash equivalents		117			36,451			14,463
Cash and cash equivalents at beginning of year		106,940			70,489			56,026
Cash and cash equivalents at end of year	$	107,057		$	106,940		$	70,489

See Note 15 for supplemental disclosure of additional cash flow information,

including certain non-cash investing and financing activities.

See accompanying notes.

F-6

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Formation and Business of the Company

The TriZetto Group, Inc. (the “Company”) was incorporated in the state of Delaware on May 27, 1997. The Company develops, licenses and supports proprietary and third-party software products for the healthcare industry. The Company also provides hosting, applications management, business process management, consulting and other services primarily to the healthcare industry. The Company provides access to its hosted solutions either through the Internet or through traditional networks and sells its software and services to customers primarily in the United States.

2. Summary of Significant Accounting Policies

Basis of consolidation

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

Liquidity and capital resources

The Company has generated net income of $15.1 million, $22.0 million and $8.5 million for the years ended December 31, 2006, 2005 and 2004, respectively, and has an accumulated deficit of $242.8 million at December 31, 2006. The Company has generated cash from operating activities of $40.2 million, $43.8 million and $35.9 million for the years ended December 31, 2006, 2005, and 2004, respectively. The Company has total cash, cash equivalents and restricted cash of $108.0 million and net working capital of $86.1 million at December 31, 2006. Based on the Company’s current operating plan, management believes existing cash, cash equivalents and short-term investment balances, cash forecasted by management to be generated by operations and borrowings from existing credit facilities will be sufficient to meet the Company’s working capital and capital requirements through at least December 31, 2007. However, if events or circumstances occur such that the Company does not meet its operating plan as expected, the Company may be required to seek additional capital and/or to reduce certain discretionary spending, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. The Company may seek additional financing, which may include debt and/or equity financing or funding through third party agreements. There can be no assurance that any additional financing will be available on acceptable terms, or available at all. Any equity financing may result in dilution to existing stockholders and any debt financing may include restrictive covenants.

Company owned life insurance

The Company has purchased life insurance policies to fund its obligations under certain deferred compensation plans for officers, key employees and directors. Cash surrender values of these policies are adjusted for fluctuations in the market value of underlying investments. The cash surrender value is adjusted each reporting period and any gain or loss is included with other income and expense in the Company’s consolidated statements of operations.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Concentration of credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents, short-term investments and accounts receivable. Cash and cash equivalents are deposited in demand and money market accounts in three financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company’s accounts receivable are derived from revenue earned from customers primarily located in the United States. The Company generally requires no collateral from its customers. The Company maintains an allowance for doubtful accounts receivable based upon the expected collectibility of individual accounts.

One customer, The Regence Group, accounted for more than 10% of the Company’s consolidated revenue in 2006. No single customer accounted for more than 10% of the Company’s accounts receivable in 2006. In 2005, one customer, The Regence Group, accounted for more than 10% of the Company’s accounts receivable and two customers, The Regence Group and United Healthcare Services, Inc., each accounted for more than 10% of its consolidated revenue. No single customer accounted for more than 10% of the Company’s accounts receivable and consolidated revenues in 2004.

F-7

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair value of financial instruments

Carrying amounts of certain of the Company’s financial instruments including cash and cash equivalents, short-term investments, accounts receivable and accounts payable approximate fair value due to their short maturities. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its debt obligations approximates fair value.

Cash and cash equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents include money market funds, commercial paper and various deposit accounts.

Short-term investments

Short-term investments include money market funds, commercial paper, and various deposit accounts.

Restricted cash

Restricted cash consists of $921,000 in letters of credit issued for certain operating leases.

Property and equipment

Property and equipment are stated at cost and are depreciated on a straight-line basis over their estimated useful lives: computer equipment, other equipment and software are depreciated over three to twenty years, and furniture and fixtures are depreciated over seven years. Leasehold improvements are amortized over their estimated useful lives or the lease term, if shorter. Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred.

Goodwill

Under Financial Accounting Standards Board (“FASB”) Statement Nos. 141 and 142, “Business Combinations” and “Goodwill and Other Intangible Assets,” respectively, goodwill and intangible assets deemed to have indefinite lives are not amortized but, instead, are tested annually or on an interim basis if events or circumstances indicate that the fair value of the asset has decreased below its carrying value.

Long-lived assets, including other intangible assets

Other intangible assets arising from the Company’s acquisitions consist of customer lists, core technology, consulting contracts, tradenames and intellectual property, which are being amortized on a straight-line basis over their estimated useful lives of five to ten years. Software technology rights are being amortized on a straight-line basis over the lesser of the contract term or five years. Long-lived assets and other intangible assets are reviewed for impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable in accordance with FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long–Lived Assets.” Recoverability is measured by comparison of the asset’s carrying amount to future net undiscounted cash flows the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the assets. The discount rate applied to these cash flows is based on a discount rate commensurate with the risks involved.

Revenue recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, the product or service has been delivered, fees are fixed or determinable, collection is reasonably assured and all other significant obligations have been fulfilled. The Company’s revenue is classified into two categories: services and other, and products. For the year ended December 31, 2006, approximately 78% of the Company’s total revenue was generated from services and other revenue and 22% was from products revenue.

The Company follows the provisions of the Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition,” AICPA Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended, EITF Issue 00-3, “Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware,” and EITF Issue 00-21, “Revenue Arrangements with Multiple Deliverables.”

F-8

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company generates services revenue from several sources, including the provision of outsourcing services, such as software hosting and other business services, and the sale of maintenance and support for its proprietary software products. The Company applies EITF 00-3 to hosting arrangements that include the licensing of software. A software element covered by SOP 97-2 is present in a hosting arrangement if the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty and it is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software. Software hosting and other business services revenue is typically billed and recognized monthly over the contract term, generally three to seven years. Many of the Company’s outsourcing agreements require it to maintain a certain level of operating performance. The Company records revenue net of estimated penalties resulting from any failure to maintain the level of operating performance. These penalties have not been significant in the past. Software maintenance and support revenues are typically based on one-year renewable contracts and are recognized ratably over the contract period. Payment for software maintenance received in advance is recorded on the balance sheet as deferred revenue. Certain royalty costs paid to third-party software vendors associated with software maintenance are amortized over the software maintenance period.

The Company also generates services revenue from consulting fees for implementation, installation, configuration, business process engineering, data conversion, testing and training related to the use of its proprietary and third party licensed products. In certain instances, the Company also generates services revenue from customization services of its proprietary licensed products. The Company recognizes revenue for these services as they are performed. When the Company cannot reasonably estimate the cost to complete, it recognizes revenue using the completed contract method, upon completion of all contractual obligations. The Company also generates services revenue from set-up fees, which are services, hardware, and software associated with preparing its customer connectivity center or a customer’s data center in order to ready a specific customer for software hosting services. The set-up fees are usually separate and distinct from the hosting fees, and performance of the set-up services represents the culmination of the earnings process. The Company recognizes revenue for these services as they are performed. The Company generates other revenue from certain one-time charges, including certain contractual fees such as termination fees and change of control fees, and it recognizes the revenue for these fees once the termination or change of control is guaranteed, there are no remaining substantive performance obligations and collection is reasonably assured. Other revenue is also generated from fees related to the Company’s product related conference.

For multiple element arrangements, such as software license, consulting services, outsourcing services and maintenance, and where vendor-specific objective evidence (“VSOE”) of fair value exists for all undelivered elements, the Company accounts for the delivered elements in accordance with the “residual method.” VSOE of fair value is determined for each undelivered element based on how it is sold separately, or in the case of maintenance, the renewal rate. For arrangements in which VSOE does not exist for each undelivered element, including specified product and upgrade rights, revenue for the delivered element is deferred and not recognized until VSOE is available for the undelivered element or delivery of each element has occurred. In determining VSOE for the undelivered elements, no portion of the discount is allocated to specified or unspecified product or upgrade rights.

Under the residual method, the arrangement fee is recognized as follows: (1) the total fair value of the undelivered elements, as indicated by VSOE, is deferred and subsequently recognized in accordance with the relevant sections of SOP 97-2 and (2) the difference between the total arrangement fee and the amount deferred for the undelivered elements is recognized as revenue related to the delivered elements.

The Company generates products revenue from the licensing of its software. Under SOP 97-2, software license revenue is recognized upon the execution of a license agreement, upon delivery of the software, when fees are fixed or determinable, when collectibility is probable and when all other significant obligations have been fulfilled. For software license agreements in which customer acceptance is a significant condition of earning the license fees, revenue is not recognized until acceptance occurs. For software license agreements that require significant customizations or modifications of the software, revenue is recognized as the customization services are performed.

Research and development expense and capitalized software development costs

Research and development (“R&D”) expenses are salaries and related expenses associated with the development of software applications prior to establishing technological feasibility. Such expenses include compensation paid to engineering personnel and fees to outside contractors and consultants. Costs incurred internally in the development of our software products are expensed as incurred as R&D expenses until technological feasibility has been established, after which production costs are capitalized as software development costs in accordance with FASB Statement No. 86, “Accounting for the Costs of Computer Software to be

F-9

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Sold, Leased, or Otherwise Marketed.” Capitalization ceases and amortization of capitalized software development costs begins when the software product is available for general release to customers.

On a quarterly basis, the Company monitors the expected net realizable value of the capitalized software for factors that would indicate impairment, such as a decline in the demand, the introduction of new technology, or the loss of a significant customer. As of December 31, 2006, the Company’s evaluation determined that the carrying amount of these assets was not impaired.

Capitalized software development costs are amortized to cost of revenue on a straight-line basis over the estimated useful life of the related products, which is generally deemed to be five years. Software development costs of $8.6 million have been capitalized for each of the years ended December 31, 2006, 2005 and 2004. Amortization expense for the years ended December 31, 2006, 2005, and 2004 was $9.4 million, $7.8 million, and $6.2 million, respectively, and is included in cost of revenue—products.

Capitalized software development costs, net consist of the following (in thousands):

	Years Ended December 31,
	2006			2005
Capitalized software development costs	$	55,838		$	47,270
Less: accumulated amortization		(27,925	)		(18,546	)
	$	27,913		$	28,724

Internal-use software

The Company capitalizes direct costs of materials and services used in the development of internal-use software in accordance with Statement of Position (“SOP”) 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” Amounts capitalized are amortized on a straight-line basis over a period of three to five years and are included in software within property, plant and equipment.

Stock-based compensation

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment.” This statement requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. This statement establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value based measurement method in accounting for share-based payment transactions with employees except for equity instruments held by employee share ownership plans.

Prior to the January 1, 2006 adoption of SFAS No. 123R, the Company accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees,” and related interpretations. The Company recognized compensation expense for stock options granted to employees, where the exercise price was lower than the fair market value of the Company’s common stock on the date of grant, and recorded compensation expense accordingly. For stock options granted with an exercise price equal to the fair market value of the Company’s common stock on the date of grant, no compensation expense had been recognized but was included as a pro forma disclosure in the notes to the consolidated financial statements as permitted by SFAS No 123, “Accounting for Stock-Based Compensation.”

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123R, using the modified prospective method. Under this method, the provisions of SFAS No. 123R apply to all awards granted or modified after the date of adoption and all previously granted awards not yet vested as of the date of adoption. Prior periods have not been restated.

F-10

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table is a summary of the amount of stock-based compensation expense recognized in the consolidated statements of operations (in thousands):

	Years Ended December 31,
	2006		2005		2004
Cost of revenue – services and other	$	1,675	$	36	$	4
Research and development		893		34		24
Selling, general and administrative		4,858		1,327		566
Total	$	7,426	$	1,397	$	594

The Company has the following stock-based compensation plans: (i) the 1998 Long-Term Incentive Plan, which is an amendment and restatement of the 1998 Stock Option Plan, permits the Company to grant other types of awards in addition to stock options, (ii) the RIMS Stock Option Plan, a plan the Company assumed through the acquisition of Resource Information Management Systems, Inc. in late 2000, and (iii) the Employee Stock Purchase Plan, which allows full-time employees to purchase shares of the Company’s common stock at a discount to fair market value.

SFAS No. 123R requires disclosure of pro forma information for periods prior to the adoption. The following table illustrates the effect on net income and net income per share if the Company had applied the fair value recognition provisions of SFAS No. 123R to stock-based employee compensation (in thousands, except per share data):

	Year Ended December 31,
	2005			2004
Net income as reported	$	22,021		$	8,458
Add: stock-based employee compensation expense included in reported net income, net of related tax effects		—			—
Deduct: stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(5,782	)		(4,889	)
Pro forma net income	$	16,239		$	3,569
Net income per share
Basic, as reported	$	0.52		$	0.18
Diluted, as reported	$	0.48		$	0.18
Basic, pro forma	$	0.39		$	0.08
Diluted, pro forma	$	0.36		$	0.07

The fair value of option grants was estimated using the Black-Scholes pricing model. The Company evaluates the assumptions used to value stock awards on a quarterly basis. The following weighted average assumptions were used for the periods presented:

	Years Ended December 31,
	2006			2005			2004
Expected volatility		45	%		55	%		50	%
Risk-free interest rate		4.75	%		3.70	%		3.00	%
Expected life		6.25 years			4 years			4 years
Forfeiture rate		6.0	%		—			—
Expected dividends		—			—			—
Weighted average fair value	$	8.49		$	3.99		$	2.81

Expected volatility is based on implied volatility from traded options on the Company’s stock and historical volatility of the Company’s stock. The risk-free interest rate is the U.S. Treasury rate for the week of the grant having a term equal to the expected life of the option. The expected life of options granted represents the period of time that options granted are expected to be outstanding. The Company has determined that historical experience is not a good predictor of future exercise patterns and thus has applied the “simplified” method outlined in Staff Accounting Bulletin No. 107, “Share-Based Payment,” to calculate expected life. The forfeiture rate is the estimated percentage of options granted that are expected to be forfeited or cancelled before becoming

F-11

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

fully vested and is based on historical experience. The Company has not made any dividend payments nor does it have plans to pay dividends in the foreseeable future.

Advertising costs

Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2006, 2005, and 2004 was $644,000, $1.2 million, and $937,000, respectively.

Common stock repurchase program

On January 26, 2006, the Board of Directors approved a repurchase program which allows for the repurchase of up to 1,000,000 shares of the Company’s common stock at a price and time to be determined by the Company’s Chief Executive Office or Chief Financial Officer. As of December 31, 2006, no shares had been repurchased under the plan. Unless extended by the Board of Directors, the current repurchase plan will expire on December 31, 2007. The Company had prior repurchase programs in place in 2004 and 2005, which have since expired, but no shares were repurchased under such plans.

Income taxes

The Company accounts for income taxes under FASB Statement No. 109, “Accounting for Income Taxes.” This statement requires the recognition of deferred tax assets and liabilities for the future consequences of events that have been recognized in the Company’s financial statements or tax returns. The measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and the tax bases of the Company’s assets and liabilities result in a deferred tax asset, FASB Statement No. 109 requires an evaluation of the probability of being able to realize the future benefits indicated by such asset. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized. The Company reviews the need for a valuation allowance on a quarterly basis and believes sufficient uncertainty exists regarding the realizability of the deferred tax assets such that a valuation allowance has been recorded on net deferred tax assets.

Computation of earnings per share

The computation of basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding during each period. The computation of diluted earnings per share is based on the weighted average number of common shares outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to stock options, unvested restricted stock, and shares issued upon conversion of convertible debt.

Emerging Issues Task Force Issue No. 04-08, “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share” (“EITF No. 04-08”) requires companies to account for contingently convertible debt using the “if converted” method set forth in SFAS No. 128 “Earnings Per Share” for calculating diluted EPS. Under the “if converted” method, the after-tax effect of interest expense related to the convertible securities is added back to net income, and convertible debt is assumed to have been converted to equity at the beginning of the period and is added to outstanding common shares, unless the inclusion of such shares is anti-dilutive. For the years ended December 31, 2006 and 2005, the 5,305,040 shares from the assumed conversion of convertible debt are antidilutive.

The following is a reconciliation of the computations of basic and diluted EPS information for each of the three years ended December 31, 2006, 2005 and 2004 (in thousands, except per share data):

	Years Ended December 31,
	2006		2005		2004
Basic and diluted:
Net income	$	15,115	$	22,021	$	8,458
Weighted average shares outstanding (basic)		42,389		41,948		46,794
Effect of dilutive securities:
Unvested common shares outstanding		552		523		295
Unexercised stock options		2,750		3,032		1,068
Adjusted weighted average shares for diluted EPS		45,691		45,503		48,157
Basic earnings per share	$	0.36	$	0.52	$	0.18
Diluted earnings per share	$	0.33	$	0.48	$	0.18

On December 22, 2006, the Company acquired all of the issued and outstanding shares of Plan Data Management, Inc. The estimated purchase price as of December 31, 2006 was approximately $19.6 million, which consisted of 491,488 shares of the Company’s common stock with a value of $16.28 per share (which represents the average closing price of TriZetto’s common stock

F-12

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

for the 20 trading days ending October 27, 2006), cash payments of $8.0 million, assumed liabilities of $3.1 million and estimated acquisition-related costs of $500,000. Due to the close of the acquisition late in the year, the issuance of the 491,488 shares of common stock and the cash payment of $8.0 million to PDM stockholders and option holders were not completed prior to December 31, 2006. However, these amounts were accrued as of December 31, 2006. The computation of earnings per share for the year ended December 31, 2006 did not include the issuance of the 491,488 shares of common stock or the financial operating results of PDM since the impact of these amounts was not material.

Comprehensive income

The Company has adopted the provisions of FASB Statement No. 130, “Comprehensive Income” (“Statement 130”). Statement 130 establishes standards for reporting and display of comprehensive income and its components for general-purpose financial statements. Comprehensive income is defined as net income plus all revenues, expenses, gains and losses from non-owner sources that are excluded from net income in accordance with U.S. generally accepted accounting principles. Comprehensive income was equal to net income for 2006, 2005 and 2004.

Reclassifications

Certain reclassifications, none of which affected net income, have been made to prior year amounts to conform to current year presentation.

Recent accounting pronouncements

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 applies to all tax positions accounted for under SFAS No. 109, “Accounting for Income Taxes” and defines the confidence level that a tax position must meet in order to be recognized in the financial statements. The interpretation requires that the tax effects of a position be recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If a tax position is not considered “more-likely-than-not” to be sustained then no benefits of the position are to be recognized. FIN 48 requires additional disclosures and is effective as of the beginning of the first fiscal year beginning after December 15, 2006. The Company does not expect the adoption of FIN 48 to have a material impact on its consolidated results of operations and financial condition.

3. Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following (in thousands):

	December 31,
	2006			2005
Prepaid expenses—other	$	1,450		$	1,369
Prepaid hardware & software license maintenance		5,484			3,473
Prepaid commission & royalty		145			1,919
Up-front fees		6,198			7,664
Accounts receivable—other		735			1,087
Prepaid insurance		576			551
Prepaid rent & operating leases		830			1,268
Prepaid deposits		5,045			4,293
Cash value of life insurance policies		572			151
Acquisition costs		1,471			—
Other		1,256			777
		23,762			22,552
Less: Current portion		(11,415	)		(11,375	)
	$	12,347		$	11,177

F-13

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

4. Property and Equipment

Property and equipment, net, consist of the following (in thousands):

	December 31,
	2006			2005
Computer equipment	$	37,104		$	32,831
Furniture and fixtures		6,647			5,292
Other equipment		4,878			4,261
Software		36,354			31,518
Leasehold improvements		6,702			3,974
		91,685			77,876
Less: Accumulated depreciation		(64,908	)		(52,146	)
	$	26,777		$	25,730

Depreciation expense for the years ended December 31, 2006, 2005 and 2004 was $12.9 million, $15.5 million and $14.9 million, respectively. Included in property and equipment at December 31, 2006 and 2005 is equipment acquired under capital leases totaling approximately $24.3 million and $22.1 million, and related accumulated depreciation of $20.9 million and $18.7 million, respectively.

Under FASB Statement No. 144, the Company is required to perform an evaluation of its long-lived assets for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. The Company did not perform any evaluation in 2006 or 2005, as management did not believe that any such indicators existed.

5. Goodwill and Other Intangible Assets

Goodwill and other intangible assets, net, consist of the following (in thousands):

	December 31,
	2006			2005
Non-amortizable intangible assets
Goodwill	$	90,337		$	87,170
Amortizable intangible assets
Customer lists	$	9,700		$	2,300
Core technology and intellectual property		28,674			7,074
Tradenames		4,879			4,879
		43,253			14,253
Less: Accumulated amortization		(15,906	)		(10,918	)
	$	27,347		$	3,335

In December 2005, the Company recorded $47.7 million in goodwill in connection with its acquisition of CareKey, Inc., which represented the excess of the purchase price over the estimated fair market value of the assets purchased and liabilities assumed. In the third quarter of 2006, the Company received the final valuation of assets and liabilities assumed. The final valuation of identifiable intangible assets was determined to be $29.0 million. The $29.0 million allocated to identifiable intangible assets includes customer relationships and maintenance agreements of $7.4 million to be amortized over a ten-year life, existing software of $13.0 million to be amortized over a five-year life, and core technology of $8.6 million to be amortized over a ten-year life.

In December 2006, the Company recorded $15.0 million in goodwill in connection with its acquisition of Plan Data Management, Inc. (“PDM”) (Note 14), which represents the excess of the purchase price over the estimated fair market value of the assets purchased and liabilities assumed. Because the acquisition was completed on December 22, 2006, there was not sufficient time to finalize the fair market valuation of assets and liabilities acquired as of December 31, 2006. Goodwill also decreased by $526,000 in December 2006 as a result of the initial recognition of tax benefits obtained in the Diogenes acquisition (Note 14).

The Company tested goodwill using the two-step process prescribed in FASB Statement No. 142. The first required step is a screen for potential impairment, while the second step measures the amount of the impairment, if any. The Company performed its annual impairment test on March 31, 2006, and this test did not reveal any indications of impairment.

F-14

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The amount of amortization expense excluded from cost of revenue – products consists primarily of amounts amortized with respect to acquired technology, which includes core or completed technology and existing software. Amortization expense recorded for the years ended December 31, 2006, 2005, and 2004 related to acquired technology was $4.1 million, $660,000 and $440,000, respectively. Amortization expense recorded for the years ended December 31, 2006, 2005, and 2004 related to acquired other intangible assets was $867,000, $2.2 million and $3.8 million, respectively. The estimated aggregate amortization expense related to these intangible assets for the next five fiscal years and thereafter is as follows (in thousands):

For the Years Ending December 31,	Acquired Technology		Acquired Other Intangible Assets		Total
2007	$	4,120	$	852	$	4,972
2008		4,120		852		4,972
2009		3,680		852		4,532
2010		3,460		852		4,312
2011 and thereafter		4,300		4,259		8,559
Total	$	19,680	$	7,667	$	27,347

Amortization expense related to existing intangible assets will vary from amounts identified above in the event the Company recognizes impairment charges prior to the amortized useful life of any intangible assets. Additionally, amortization expense will vary from amounts identified above when the final accounting for the PDM and QCSI acquisitions are completed, and the allocation between goodwill and identifiable intangible assets is recorded.

6. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	December 31,
	2006		2005
Accrued payroll and benefits	$	29,475	$	20,767
Accrued professional and litigation fees and settlements		8,609		1,590
Accrued acquisition costs		16,500		25,611
Accrued outside services		370		959
Accrued employee relations		602		775
Accrued income and other taxes		2,125		1,253
Other		3,914		6,002
	$	61,595	$	56,957

Effective January 1, 2006, the Company became self-insured for certain losses related to employee health and dental benefits. The Company records a liability based on an estimate of claims incurred but not recorded determined by actuarial analysis of historical claims experience and historical industry data. The Company maintains individual and aggregate stop-loss coverages with a third party insurer to limit its total exposure for these programs.

7. Debt

In December 2004, the Company and IMS Health Incorporated (“IMS Health”) entered into a Share Purchase Agreement pursuant to which the Company purchased all of the 12,142,857 shares of the Company’s common stock owned by IMS Health for an aggregate purchase price of $82.0 million, or $6.75 per share. The purchase price for the repurchase of shares was paid by delivery of $44.6 million in cash and a Subordinated Promissory Note in the principal amount of $37.4 million. The Subordinated Promissory Note bore interest at the rate of 5.75% and was due and paid in full on January 21, 2005 from the Company’s cash accounts. The cash portion of the purchase price was financed with the proceeds of the Company’s sale of 6,600,000 shares of its common stock to ValueAct Capital for $6.75 per share totaling $44.6 million in proceeds.

In January 2006, the Company entered into an amendment to its Credit Agreement established December 21, 2004. The amendment increased the amount of the revolving credit facility from $50.0 million to $100.0 million, subject to certain fixed percentages of its recurring revenues (which includes outsourced business services and software maintenance revenue – see Note 16), and extended the expiration date of the Credit Agreement to January 5, 2010. Principal outstanding under the facility bears interest at a per annum rate equal to either (i) the LIBOR rate plus an adjustable applicable margin of between 1.75% and 2.25% or (ii) the lending institution’s prime rate plus an adjustable applicable margin of between 0.0% and 0.5%, at the Company’s election, subject to specified restrictions. The unused portions of the facility are subject to unused facility fees. In the event the Company terminates the Credit Agreement prior to its expiration, the Company will be required to pay the lending institution a termination fee equal to 2% of the maximum credit amount if the termination is prior to the second anniversary of the Credit Agreement or 1% of the maximum credit amount if the Credit Agreement is terminated thereafter, up to 90 days prior to the expiration of the Credit

F-15

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Agreement, subject to specified exceptions. Management expects to use the proceeds for general working capital purposes and has granted the lending institution a security interest in all of the Company’s assets. The Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with the Company’s affiliates. The Credit Agreement also includes financial covenants including minimum EBITDA, determined on a quarterly basis ranging from $33.4 million at March 31, 2006 and increasing over time to $46.9 million at December 31, 2006. The Company also becomes subject to further restrictions, including minimum liquidity, minimum recurring revenue (which includes outsourced business services and software maintenance revenue – see Note 16) and maximum capital expenditures. As of December 31, 2006, the Company was in compliance with all applicable covenants and other restrictions under the Credit Agreement. As of December 31, 2006, the Company had outstanding borrowings on the revolving line of credit of $12.0 million.

On September 30, 2005, the Company entered into a Purchase Agreement with UBS Securities, LLC, Banc of America Securities, LLC and William Blair & Company LLC (the “Initial Purchasers”), to sell $100 million aggregate principal amount of its 2.75% Convertible Senior Notes due 2025 (the “Notes”) in a private placement in reliance on Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Notes have been resold by the Initial Purchasers to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The sale of the Notes to the Initial Purchasers was consummated on October 5, 2005.

The aggregate net proceeds received by the Company from the sale of the Notes were approximately $82.0 million, after deducting the amount used to repurchase one million shares of its common stock at $14.50 per share in connection with the private placement, the Initial Purchasers’ discount and estimated offering expenses. The indebtedness under the Notes constitutes the Company’s senior unsecured obligations and will rank equally with all of its existing and future unsecured indebtedness.

The Notes were issued pursuant to an Indenture, dated October 5, 2005, by and between the Company and Wells Fargo Bank, National Association, as trustee. The Notes bear interest at a rate of 2.75%, which is payable in cash semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2006, to the holders of record on the preceding March 15 and September 15, respectively.

The Notes are convertible into shares of the Company’s common stock at an initial conversion price of $18.85 per share, or 53.0504 shares for each $1,000 principal amount of Notes, subject to certain adjustments set forth in the Indenture. Upon conversion of the Notes, the Company will have the right to deliver shares of its common stock, cash or a combination of cash and shares of its common stock. The Notes are convertible (i) prior to October 1, 2020, during any fiscal quarter after the fiscal quarter ending December 31, 2005, if the closing sale price of the Company’s common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter exceeds 120% of the conversion price in effect on the last trading day of the immediately preceding fiscal quarter, (ii) prior to October 1, 2020, during the five business day period after any five consecutive trading day period (the “Note Measurement Period”) in which the average trading price per $1,000 principal amount of Notes was equal to or less than 97% of the average conversion value of the Notes during the Note Measurement Period, (iii) upon the occurrence of specified corporate transactions, as described in the Indenture, (iv) if the Company calls the Notes for redemption, or (v) any time on or after October 1, 2020.

The Notes mature on October 1, 2025. However, on or after October 5, 2010, the Company may from time to time at its option redeem the Notes, in whole or in part, for cash, at a redemption price equal to 100% of the principal amount of the Notes the Company redeems, plus any accrued and unpaid interest to, but excluding, the redemption date. On each of October 1, 2010, October 1, 2015 and October 1, 2020, holders may require the Company to purchase all or a portion of their Notes at a purchase price in cash equal to 100% of the principal amount of the Notes to be purchased, plus any accrued and unpaid interest to, but excluding, the purchase date. In addition, holders may require the Company to repurchase all or a portion of their Notes upon a fundamental change, as described in the Indenture, at a repurchase price in cash equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. Additionally, the Notes may become immediately due and payable upon an Event of Default, as defined in the Indenture. Pursuant to a Registration Rights Agreement dated October 5, 2005, the Company filed with the Securities and Exchange Commission, a registration statement under the Securities Act for the purpose of registering for resale, the Notes and all of the shares of its common stock issuable upon conversion of the Notes.

F-16

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Notes payable and line of credit consist of the following at December 31 (in thousands):

	Notes Payable						Line of Credit
	2006			2005			2006		2005
Long-term convertible debt, due 2025, interest at 2.75% fixed rate, payable semi-annually in arrears	$	100,000		$	100,000		$	—	$	—
Revolving credit facility of $100.0 million, interest at the lending institution’s prime rate (8.25% at December 31, 2006), payable monthly in arrears		—			—			12,000		—
Other		115			120			—		—
Total debt	$	100,115		$	100,120		$	12,000		—
Less: Current portion		(115	)		(120	)		—		—
	$	100,000		$	100,000		$	12,000	$	—

Future principal payments of notes payable and line of credit at December 31, 2006 are as follows (in thousands):

For the Periods Ending December 31,	Notes Payable		Line of Credit
2007	$	115	$	—
2008		—		—
2009		—		—
2010		—		12,000
2011		—		—
Thereafter		100,000		—

As of December 31, 2006, the Company had outstanding four unused standby letters of credit in the aggregate amount of $921,000 which serve as security deposits for certain operating leases. The Company is required to maintain a cash balance equal to the outstanding letters of credit, which is classified as restricted cash on the balance sheet.

8. Related Party Transactions

In December 2004, the Company entered into a Share Purchase Agreement with IMS Health (See Note 7).

9. Commitments and Contingencies

The Company leases office space and equipment under non-cancelable operating and capital leases, respectively, with various expiration dates through 2016. Capital lease obligations are collateralized by the equipment subject to the leases. The Company is responsible for maintenance costs and property taxes on certain of the operating leases. Rent expense for the years ended December 31, 2006, 2005 and 2004 was $7.8 million, $6.8 million and $7.5 million, respectively. These amounts are net of sublease income of $331,000, $668,000 and $522,000, respectively.

The aggregate future minimum rentals to be received under non-cancelable subleases as of December 31, 2006 is approximately $7,000. Future minimum lease payments under non-cancelable operating and capital leases at December 31, 2006 are as follows (in thousands):

For the Years Ending December 31,	Capital Leases			Operating Leases
2007	$	1,618		$	13,603
2008		1,119			11,424
2009		506			8,520
2010		404			6,739
2011		159			5,964
Thereafter		—			17,113
Total minimum lease payments		3,806		$	63,363
Less: interest		(315	)
Less: current portion		(1,461	)
	$	2,030

As of December 31, 2006, the Company had three sale-leaseback transactions for certain computer hardware equipment. The leases, which are classified as operation, have lease terms of three years. The Company did not realize any gain or loss on the sale as the fair value approximated the carrying value of the equipment. The future lease payments under these sale-leaseback

F-17

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

transactions for the years ending December 31, 2007, 2008 and 2009, are included in the above table totaling $400,000, $400,000 and $140,000, respectively.

Pursuant to the terms of the Agreement and Plan of Merger in connection with the Company’s acquisition of CareKey, CareKey stockholders and option holders are entitled to receive three contingent consideration payments of $8.3 million each (up to $25.0 million), upon the achievement of certain revenue milestones during the period beginning upon acquisition and ending December 31, 2008. In addition, further consideration payable in cash or stock at our election, may be paid to former CareKey stockholders and option holders if, prior to December 31, 2008, the acquired CareKey products generate revenues in excess of certain revenue milestones and/or if a negotiated multiple of software maintenance revenues of acquired CareKey products during the fiscal year ended December 31, 2009 exceed total purchase consideration made to those former CareKey stockholders and option holders.

Under the Agreement and Plan of Merger with PDM (Note 14), PDM stockholders and option holders may also be entitled to receive contingent consideration as follows: aggregate payments of up to $5.0 million on or before June 30, 2007, $5.0 million on or before December 31, 2008, and $8.0 million on or before December 31, 2009, each subject to reduction if certain revenue thresholds are not satisfied during the applicable measurement period. Additional contingent consideration may be paid on June 30, 2009 if certain revenue thresholds are satisfied, provided that in no event will the aggregate consideration of all payments exceed $42.0 million. The merger consideration is also subject to adjustment based upon minimum cash and working capital balances. It is expected that 50% of any such payment will be made in cash and 50% will be paid in shares of the Company’s common stock.

10. Litigation

On October 26, 2004, a jury in California Superior Court, County of Alameda, delivered its verdict in the case of Associated Third Party Administrators v. The TriZetto Group, Inc., a dispute involving technology agreements between Associated Third Party Administrators (“ATPA”), a former QicLink^™ customer, and the Company. In its verdict, the jury found that the Company made certain misrepresentations to ATPA in connection with the license of QicLink^™ software in 2001 and awarded damages of approximately $1.85 million, representing primarily the amount of the license fee paid by ATPA. In the first quarter of 2005, a judgment was entered by the court, which included, in addition to damages of $1.85 million, approximately $500,000 in pre-judgment interest and recoverable costs. The Company recorded an accrual for the additional $500,000 of costs in the first quarter of 2005 increasing the total accrual for the dispute to $2.35 million. In June 2005, the Company entered into a settlement agreement with ATPA in which the Company agreed to pay ATPA $2.2 million to fully resolve the dispute. The Company paid this amount to ATPA in July 2005. In June 2005, the Company’s insurance carrier agreed to reimburse the Company a total of $1.1 million of the settlement. The reimbursement was received in July 2005 and was recorded as a reduction to expense.

In September 2004, McKesson Information Solutions LLC (“McKesson”) filed a lawsuit against the Company in the United States District Court for the District of Delaware. In its complaint, McKesson alleged that the Company made, used, offered for sale, and/or sold a clinical editing software system that infringed McKesson’s United States Patent No. 5,253,164, entitled “System And Method For Detecting Fraudulent Medical Claims Via Examination Of Services Codes.” McKesson sought injunctive relief and substantial monetary damages, including treble damages for willful infringement. On April 4, 2006, in response to the Company’s motion for summary judgment, the court ruled, as a matter of law, that the Company’s software products did not infringe 12 of the 15 claims of McKesson’s patent that were involved in this dispute, leaving claims 1, 2 and 16. On April 17, 2006, a jury trial commenced on the first phase of this case to determine the issue of infringement of the remaining three claims. On April 26, 2006, the jury found that the Company’s Facets^®, QicLink^™ and ClaimFacts^® software products infringed claims 1 and 2, but not claim 16 of the patent. On May 4, 2006, the court scheduled the second phase of the trial to commence on October 3, 2006 on the issues of the Company’s validity, estoppel and laches defenses and on the issue of McKesson’s damages, if any.

On September 7, 2006, the Company entered into a Settlement Agreement with McKesson to settle the lawsuit. As part of the Settlement Agreement, the Company agreed to pay McKesson a one-time royalty fee of $15.0 million for a license in the patent that covers past and future use of the Company’s products and services by all existing customers. The $15.0 million, payable in two equal installments on September 30, 2006 and September 30, 2007, was expensed in the third quarter of 2006. The Company’s customers with maintenance agreements also will continue to receive software version upgrades that include clinical editing capabilities. Going forward, the Company may continue to include its clinical editing functionality in versions of Facets^® sold to new health plan customers with 100,000 or fewer members and in versions of QicLink^™ sold to any new customers. The Company has agreed to pay McKesson a royalty fee of 5% of the net licensing revenue received from new sales of Facets^® and QicLink^™ containing the Company’s clinical editing functionality. However, pursuant to the terms of the Settlement Agreement, the Company will no longer include its clinical editing functionality in versions of Facets^® sold to new customers with more than 100,000 members, beginning November 1, 2006. In these cases, new customers may choose their clinical editing solution from available third-party providers.

In addition to the matter described above, the Company is involved in litigation from time to time relating to claims arising out of its operations in the normal course of business. Except as discussed above,

F-18

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

the Company was not a party to any other legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on its results of operations, financial position and/or cash flows.

11. Stockholders’ Equity

Common stock

In December 2004, the Company and IMS Health entered into a Share Purchase Agreement pursuant to which, on the same date, the Company purchased all of the 12,142,857 shares (“IMS Shares”) of the Company’s common stock, owned by IMS Health for an aggregate purchase price of $82.0 million, or $6.75 per share. The purchase price was paid by delivery of $44.6 million in cash and a Subordinated Promissory Note in the principal amount of $37.4 million. The Subordinated Promissory Note bore interest at the rate of 5.75% and was due and paid in full on January 21, 2005 from the Company’s cash accounts. Immediately following the purchase of the IMS Shares, the Company placed 6,600,000 of such shares with ValueAct Capital for an aggregate purchase price of $44.6 million, or $6.75 per share.

Pursuant to a letter dated December 5, 2004, the Company was given the right to repurchase up to 600,000 of the shares sold to ValueAct. On September 19, 2005, the Company exercised its repurchase right with respect to all 600,000 shares for an aggregate purchase price of $5.3 million, or $8.83 per share, that was paid for in cash.

On September 30, 2005, the Company entered into a Purchase Agreement with UBS Securities, LLC, Banc of America Securities, LLC and William Blair & Company LLC (the “Initial Purchasers”), to sell $100 million aggregate principal amount of its 2.75% Convertible Senior Notes due 2025 (the “Notes”) in a private placement in reliance on Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Notes have been resold by the Initial Purchasers to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The sale of the Notes to the Initial Purchasers was consummated on October 5, 2005.

The aggregate net proceeds received by the Company from the sale of the Notes were approximately $82.0 million, after deducting the amount used to repurchase 1,000,000 shares of its common stock at $14.50 per share in connection with the private placement, the Initial Purchasers’ discount and estimated offering expenses. The indebtedness under the Notes constitutes the Company’s senior unsecured obligations and will rank equally with all of its existing and future unsecured indebtedness.

Common stockholders are entitled to dividends as and when declared by the Board of Directors subject to the prior rights of preferred stockholders. The holders of each share of common stock are entitled to one vote.

Stock option plans

In May 1998, the Company adopted the 1998 Stock Option Plan (the “1998 Stock Option Plan”) under which the Board of Directors (the “Board”) or the Compensation Committee (the “Committee”) may issue incentive and non-qualified stock options to employees, directors and consultants. The Committee had the authority to determine to whom options will be granted, the number of shares and the term and exercise price. Options were to be granted at an exercise price not less than fair market value for incentive stock options or 85% of fair market value for non-qualified stock options. For individuals holding more than 10% of the voting rights of all classes of stock, the exercise price of incentive stock options will not be less than 110% of fair market value. The options generally vest and became exercisable annually at a rate of 25% of the option grant over a four-year period. The term of the options would be no longer than five years for incentive stock options for which the grantee owns greater than 10% of the voting power of all classes of stock and no longer than ten years for all other options.

On November 30, 2000, in connection with the Resource Information Management Systems, Inc. (“RIMS”) acquisition, the Company adopted the RIMS Stock Option Plan based primarily upon RIMS’ existing non-statutory stock option plan. Unless previously terminated by the stockholders, the Plan shall terminate at the close of business on January 1, 2009, and no options shall be granted under it thereafter. Such termination shall not affect any option previously granted. Upon a business combination by the Company with any corporation or other entity, the Company may provide written notice to optionees that options shall terminate on a date not less than 14 days after the date of such notice unless theretofore exercised. In connection with such notice, the Company may, in its discretion, accelerate or waive any deferred exercise period.

In March 2004, the Board of Directors of the Company amended and restated the 1998 Stock Option Plan, renaming it the 1998 Long-Term Incentive Plan (the “Plan”). As amended, the Plan permits the granting of the following types of awards: options, share appreciation rights, restricted and unrestricted share awards, deferred share units, and performance awards. The principal changes made to the 1998 Stock Option Plan pursuant to this amendment and restatement are as follows: (i) renaming it “The TriZetto Group, Inc. 1998 Long-term Incentive Plan,” (ii) increasing the numbers of shares available for issuance by 2,000,000 (from 11,000,000 to 13,000,000 shares), (iii) adding provisions that permit awards other than options, and (iv) modifying the

F-19

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Committee’s discretion to administer the Plan and past or future awards. The terms and conditions of all options outstanding under the 1998 Stock Option Plan immediately before the effective date of this amendment and restatement shall continue to be governed by the terms and conditions of the 1998 Stock Option Plan (and the respective instruments evidencing each such option) as in effect on the date each such option was granted; provided, however, that any one or more provisions of the amended and restated Plan, may, in the Committee’s discretion, be extended to one or more of such options (subject to the participant’s written consent of any adverse changes).

In April 2006, the Board of Directors of the Company adopted, subject to stockholder approval, amendments to the Plan to (i) increase by 1,500,000 the total number of shares of the Company’s common stock available for issuance under the Plan from 13,000,000 to 14,500,000 and (ii) increase by 500,000 the share limitation on awards other than options and stock appreciation rights from 700,000 to 1,200,000.

Activity under the plans related only to stock options was as follows (in thousands, except per share data):

	Outstanding Options
	Shares Available for Grant		Number of Shares		Exercise Price		Weighted Average Exercise Price
Balances, December 31, 2003	2,761		6,815		$	0.25 – $63.25	$	10.26
Additional options reserved	2,000		—
Granted	(2,442	)	2,442			5.86 – 7.07		6.64
Exercised	—		(255	)		0.25 – 6.50		2.59
Cancelled	1,314		(1,314	)		1.00 – 63.25		10.41
Balances, December 31, 2004	3,633		7,688			0.25 – 63.25		9.33
Granted	(2,214	)	2,214			8.35 – 16.07		8.67
Exercised	—		(1,290	)		0.25 – 15.13		7.51
Cancelled	365		(365	)		3.34 – 15.25		8.71
Balances, December 31, 2005	1,784		8,247			0.25 – 63.25		9.44
Additional options reserved	1,500		—
Granted	(737	)	737			12.75 – 18.36		16.68
Exercised	—		(1,086	)		0.25 – 15.13		8.54
Cancelled	178		(178	)		3.49 – 20.25		9.88
	2,725		7,720		$	0.25 – $63.25	$	10.25
Less: Restricted stock awards granted	(722	)
Balances, December 31, 2006	2,003

At December 31, 2006, the Company had reserved approximately 9,722,983 shares of common stock for issuance upon exercise of stock options and shares issuable under its stock option plans.

F-20

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The options outstanding and currently exercisable by exercise price at December 31, 2006 are as follows (in thousands, except per share data):

	Options Outstanding at December 31, 2006				Options Exercisable at December 31, 2006
	Weighted Average
Range of Exercise Price	Number of Shares	Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number of Shares	Weighted Average Exercise Price
$0.25 - $3.49	807	4.79	$	2.60	662	$	2.41
$4.11 - $6.53	302	5.98		5.78	200		5.84
$6.66 - $6.66	1,309	7.13		6.66	509		6.66
$7.00 - $7.77	295	6.81		7.11	210		7.13
$8.35 - $8.35	1,288	8.12		8.35	202		8.35
$8.48 - $9.25	790	6.56		8.85	270		8.98
$11.14 - $12.50	845	4.83		12.29	675		12.30
$12.69 - $14.50	242	6.34		13.52	132		13.46
$15.13 - $15.13	915	3.75		15.13	915		15.13
$15.25 - $57.50	927	7.50		20.73	235		26.79
	7,720	6.30		10.25	4,010		10.47

At December 31, 2006, 2005, and 2004, options exercisable under the plans were 4,010,132, 3,765,394, and 3,825,989, respectively. The total intrinsic value of options outstanding and options exercisable at December 31, 2006 was $66.0 million and $33.9 million, respectively. The remaining contractual life of options exercisable at December 31, 2006 was 5.02 years.

The total intrinsic value of options exercised during the year ended December 31, 2006 was $9.3 million. As of December 31, 2006, $10.1 million of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted average period of 1.92 years.

Employee Stock Purchase Plan

In August 1999, the Board of Directors of the Company adopted the Employee Stock Purchase Plan (the “Stock Purchase Plan”), which is intended to qualify under Section 423 of the Internal Revenue Code. A total of 600,000 shares of common stock were reserved for issuance under the original Stock Purchase Plan. The Stock Purchase Plan was amended and restated on May 14, 2003 and again on May 11, 2005, ultimately increasing the number of common stock reserved for issuance to 1,500,000 shares, of which 385,052 remain available for issuance at December 31, 2006. Each employee of the Company who customarily works more than 20 hours per week for more than five months per calendar year is eligible to participate in offerings under the Stock Purchase Plan if on the offering date, such employee has been employed by the Company for at least 90 days. Employees who own more than 5% of the Company’s outstanding stock may not participate. The Stock Purchase Plan permits eligible employees to purchase common stock through payroll deductions, which may not exceed the lesser of 15% of an employee’s compensation or $25,000.

The two semi-annual offerings under the Stock Purchase Plan begin on January 1 and July 1 and continue until the end of the six-month period ending on June 30 and December 31 (the “Offering Period”). The first Offering Period commenced on January 1, 2000. Effective July 1, 2005, the purchase price of the common stock under the Stock Purchase Plan will be equal to 95% of the fair market value per share of common stock on the last date of the offering period (or purchase date). The Stock Purchase Plan will terminate in 2009, unless terminated sooner by the Board of Directors. Shares issued under the Stock Purchase Plan in 2006, 2005, and 2004 were 70,866, 89,869, and 196,806, at a weighted average purchase price of $15.82, $8.02, and $5.65 per share, respectively. Shares issued in 2005 represent only one offering period since the purchase date of the second offering period took place in early January 2006.

Shareholder rights plan

In September 2000, the Board of Directors of the Company adopted a shareholder rights plan. The plan provides for a dividend distribution of one preferred stock purchase right (a “Right”) for each outstanding share of common stock, distributed to stockholders of record on or after October 19, 2000. The Rights will be exercisable only if a person or group acquires 15% or more of the Company’s common stock (an “Acquiring Person”) or announces a tender offer for 15% or more of the common stock. Each Right will entitle stockholders to buy one one-hundredth of a share of newly created Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company at an initial exercise price of $75 per Right, subject to adjustment from time to time. However, if any person becomes an Acquiring Person, each Right will then entitle its holder (other than the Acquiring Person) to purchase at the exercise price, common stock of the Company having a market value at that time of twice the Right’s exercise price.

F-21

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

If the Company is later acquired in a merger or similar transaction, all holders of Rights (other than the Acquiring Person) may, for $75.00, purchase shares of the acquiring corporation with a market value of $150.00. Rights held by the Acquiring Person will become void. The Rights Plan excludes from its operation ValueAct Capital with respect to the shares of the Company’s common stock acquired by it on December 21, 2004. As a result, their holdings will not cause the Rights to become exercisable or non-redeemable or trigger the other features of the Rights. The Rights will expire on October 2, 2010, unless earlier redeemed by the Board at $0.001 per Right.

The holders of Series A Junior Participating Preferred Stock in preference to the holders of common stock, shall be entitled to receive, when, as and if declared by the Board of Directors, quarterly dividends payable in cash in an amount per share equal to 100 times the aggregate per share amount of all cash dividends or non-cash dividends other than a dividend payable in share of common stock.

Each share of Series A Junior Participating Preferred Stock shall entitle its holder to 100 votes.

Deferred stock compensation and restricted stock

Prior to the January 1, 2006 adoption of SFAS No. 123R, the Company recorded deferred stock compensation related to stock options granted to employees, where the exercise price is lower than the fair market value of the Company’s common stock on the date of the grant. Additionally, the Company recorded deferred stock compensation for the issuance of restricted stock to certain employees related to acquisitions and to certain employees to encourage continued service with the Company.

The Company recorded a total of $1.4 million and $3.0 million of deferred stock compensation in 2005 and 2004, respectively, for the issuance of restricted stock. The deferred stock compensation charge was then amortized to compensation expense over the vesting period of the underlying stock option or restricted stock awarded. Amortization of deferred stock compensation expense was $1.4 million and $594,000 in 2005 and 2004, respectively. The valuation of restricted stock is calculated based on the fair market value on the date of grant. Pursuant to the restricted stock agreements, the Company shall cancel any unvested shares of common stock upon termination of services. There were approximately 1,086,000 shares of restricted stock outstanding at December 31, 2005, of which 479,400 shares were unvested.

With the adoption of SFAS No. 123R on January 1, 2006, the Company reclassified $3.0 million of unearned deferred stock compensation to additional paid-in capital. There were approximately 1,348,000 shares of restricted stock outstanding at December 31, 2006, of which 545,536 shares were unvested.

The following table summarizes nonvested restricted stock awards as of December 31, 2006 and changes during the year ended December 31, 2006 (in thousands, except per share data):

	Number of Shares		Weighted- Average Grant-Date Fair Value
Nonvested at December 31, 2005	479		$	7.64
Granted	270			16.56
Vested	(195	)		7.30
Forfeited	(8	)		16.81
Nonvested at December 31, 2006	546			12.04

As of December 31, 2006, there was $5.2 million of total unrecognized compensation cost related to nonvested restricted stock awards, which will be amortized over the weighted-average remaining service period of 2.18 years.

F-22

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

12. Income Taxes

The components of the provision for income taxes are as follows (in thousands):

	Years Ended December 31,
	2006		2005			2004
Current:
Federal	$	1,272	$	429		$	—
State		1,222		(17	)		1,101
		2,494		412			1,101
Deferred:
Federal		—		—			—
State		—		—			—
		—		—			—
Provision for income taxes	$	2,494	$	412		$	1,101

Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2006 and 2005, are as follows (in thousands):

	December 31, 2006						December 31, 2005
	Current			Long Term			Current			Long-Term
Deferred tax assets:
Reserves and accruals	$	8,143		$	—		$	2,349		$	—
Deferred compensation		—			2,886			—			130
Other		—			376			6			34
State taxes		729			—			12			—
Deferred revenue		—			—			533			—
Acquired intangible assets		—			—			—			1,137
Depreciation		—			245			—			—
Start-up costs		554			2,440			813			2,440
Net operating losses and capital losses		8,787			—			8,000			19,233
Tax credits		—			2,674			—			1,964
Total deferred tax assets		18,213			8,621			11,713			24,938
Deferred tax liabilities:
Deferred revenue		(1,984	)		—			—			—
Depreciation		—			—			—			(1,272	)
State taxes		—			(40	)		—			(1,204	)
Acquired intangible assets		—			(13,234	)		—			—
Capitalized software		—			(9,447	)		—			(11,949	)
Total deferred tax liabilities		(1,984	)		(22,721	)		—			(14,425	)
Net deferred tax assets before valuation allowance		16,229			(14,100	)		11,713			10,513
Valuation allowance		(2,129	)		—			(11,713	)		(10,513	)
Net deferred taxes	$	14,100		$	(14,100	)	$	—		$	—

The valuation allowance on the deferred tax assets was $2.1 million and $22.2 million as of December 31, 2006 and 2005, respectively. The valuation allowance decreased by $20.1 million during 2006 as a result of current year operating profits which allowed for the utilization of net operating loss carryovers, and also as a result of $15.4 million of net deferred liabilities recorded in connection with the acquisition of CareKey.

At December 31, 2006 and 2005, deferred tax assets do not include $9.5 million and $5.8 million, respectively, of excess tax benefits from employee stock option exercises that are a component of the Company’s net operating loss carryovers. Deferred taxes and the valuation allowance as of December 31, 2005 have been restated in order to conform to the 2006 presentation. Equity will be increased by $9.5 million when such excess tax benefits are realized.

If and when the Company decreases the valuation allowance on its deferred tax asset, approximately $1.5 million will be allocated to income tax benefit and $600,000 will be recorded as an adjustment to goodwill. During 2006, goodwill decreased by $526,000 as a result of the initial recognition of tax benefits obtained in the Diogenes acquisition.

F-23

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s effective tax rate differs from the statutory rate as shown in the following schedule (in thousands):

	Years Ended December 31,
	2006			2005			2004
Tax expense at federal statutory rate	$	6,163		$	7,851		$	3,250
State income taxes		1,970			(17	)		1,101
Change in valuation allowance		(5,926	)		(7,658	)		(3,498	)
Initial recognition of tax benefits allocated to goodwill		526			—			—
Refund of prior year state taxes		(354	)		—			65
Reduction in reserve for uncertain tax positions		(350	)		—			—
Nondeductible items		465			236			183
	$	2,494		$	412		$	1,101

Federal and state tax loss carryforwards at December 31, 2006 are $44.1 million and 42.0 million, respectively. The federal tax loss carryforwards will start to expire beginning in 2010. The state tax loss carryforwards will start to expire beginning in 2007. Approximately $12.0 million of the remaining federal and state tax loss carryforwards are related to net operating losses obtained in connection with the Diogenes and CareKey acquisitions. Such net operating losses are subject to limitations in accordance with IRC Section 382.

13. Employee Benefit Plans

In January 1998, the Company adopted a defined contribution plan (the “401(k) Plan”) which qualifies under Section 401(k) of the Internal Revenue Code of 1986. Employees are eligible to participate the first day of the month following 30 days of employment. Eligible employees may make voluntary contributions to the 401(k) Plan of up to 25% of their annual compensation, not to exceed the statutory limit.

Effective January 1, 2001, the Company provides a discretionary matching contribution to the 401(k) Plan in the amount of $0.50 for each $1.00 contributed to the Plan, up to 6% of pay. Employees must be employed on the last day of the Plan Year (December 31) to receive the match. The match has a three-year vesting period after which the employee will be 100% vested. The Company’s cash contributions to the 401(k) plan in 2006, 2005, and 2004 were approximately $2.3 million, $1.9 million, and $2.1 million, respectively.

On December 21, 2005, the Company’s Compensation Committee of the Board of Directors formally adopted the Executive Deferred Compensation Plan (the “Plan”). The Plan is an unfunded deferred compensation plan established and maintained for the purpose of providing key management employees with the opportunity to defer the receipt of compensation and to accumulate earnings on such deferrals on a tax-deferred basis. The Company’s Compensation Committee of the Board of Directors determines which key management employees will be eligible to participate in the Plan. Currently, all of the executive officers of the Company are eligible to participate. The Plan is administered by the Company and became effective as of June 30, 2005.

Under the Plan, each participant may elect to defer, for any calendar year, up to 75% of his or her base salary and/or 100% of any commissions and/or bonuses earned during such calendar year. Amounts deferred for each participant are recorded in a bookkeeping account for such participant. Each participant is allowed to make a hypothetical allocation of the amounts credited to his or her account among investment options/indices that the Company makes available from time to time. Each account is credited at least annually with notational earnings equal to the aggregate/weighted average return on the investment options/indices selected by the participant, less expenses. The Company also may credit each participant’s account with a discretionary company contribution. Company contributions vest after three years of service with the Company. The Company’s cash contribution to the Plan in 2006 was approximately $52,000.

Upon termination of employment, a participant is entitled to a benefit from the Company equal to the amount of vested contributions credited to his or her account, subject to certain restrictions. Alternatively, a participant may elect to have all or a portion the contributions in his or her account paid in one or more installments, subject to certain waiting period and other restrictions set forth in the Plan.

The Company has purchased life insurance policies with the funds in which the executive officers elected to defer in the Plan. The majority of the non-qualified retirement plan assets are held in a company-owned life insurance policy, whose investment assets are a separately-managed portfolio administered by an insurance company. The assets held under this insurance policy are recorded at estimated fair value with changes in estimated value recorded in net earnings. At the end of fiscal year 2006, the

F-24

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Company was the beneficiary of various insurance contracts on some of the participants in the Plans. At December 31, 2006, these life insurance contracts had cash surrender values of approximately $600,000.

14. Acquisitions

Diogenes, Inc.

On April 26, 2004, the Company completed its acquisition of Diogenes, Inc. (“Diogenes”). Diogenes developed and marketed transaction-messaging software, which provides EDI-class transaction processing across the Internet. The Company determined that Diogenes’ software as adapted to handle healthcare claims and other business transactions would broaden and augment its current offerings and strengthen the infrastructure of its current offerings.

The final purchase price as of April 26, 2005 was approximately $5.2 million, which consisted of cash payments of $2.2 million, deferred payments of $2.5 million, and acquisition-related costs of $459,000. The former shareholders of Diogenes received a total payment of $2.5 million on April 26, 2005, which was paid in cash. The acquisition of Diogenes was not significant to the Company’s results of operations and therefore is not required to present pro forma information for the periods prior to acquisition.

The acquisition was accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed on the basis of their estimated fair market values on the acquisition date. The excess of the purchase price over the estimated fair market value of the assets purchased and liabilities assumed was $5.2 million and was allocated to goodwill and other intangible assets. Goodwill, representing the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired in the acquisition, will not be amortized and is not deductible for tax purposes. In 2006, goodwill decreased by $526,000 as a result of the initial recognition of tax benefits obtained in the Diogenes acquisition. Other intangibles are being amortized over a period of 60 months from the date of acquisition.

CareKey, Inc.

On December 22, 2005, the Company acquired all of the issued and outstanding shares of CareKey, Inc. (“CareKey”) for cash. The acquisition was accounted for using the purchase method of accounting. As of December 31, 2005, the excess of the purchase price over the preliminary fair market value of the assets purchased and liabilities assumed was $47.7 million and was allocated to goodwill.

In August 2006, the Company received the final valuation of assets and liabilities assumed. The final valuation of identifiable intangible assets was determined to be $29.0 million. The $29.0 million allocated to identifiable intangible assets includes customer relationships and maintenance agreements of $7.4 million to be amortized over a ten-year life, existing software of $13.0 million to be amortized over a five-year life, and core technology of $8.6 million to be amortized over a ten-year life. CareKey stockholders and option holders are entitled to receive three contingent consideration payments of $8.3 million each (up to $25.0 million), upon the achievement of certain revenue milestones during the period beginning upon acquisition and ending December 31, 2008. In addition, further consideration payable in cash or stock at the Company’s election, may be paid to former CareKey stockholders and option holders if, prior to December 31, 2008, the acquired CareKey products generate revenues in excess of certain revenue milestones and/or if a negotiated multiple of software maintenance revenues of acquired CareKey products during the fiscal year ended December 31, 2009 exceeds total purchase consideration made to those former CareKey stockholders and option holders.

The following unaudited pro forma summary combines the consolidated results of operations of the Company and CareKey for the years ended December 31, 2005 and 2004 as if the acquisition had occurred at the beginning of 2004, after giving effect to certain pro forma adjustments. This pro forma financial information is provided for informational purposes only and may not be indicative of the results of operations as they would have been had the transaction been effected on the assumed date, nor is it indicative of the results of operations which may occur in the future (in thousands, except per share amounts).

	Years Ended December 31, (unaudited)
	2005		2004
Total revenue	$	298,462	$	274,636
Net income	$	16,709	$	1,951
Net income per share (diluted)	$	0.37	$	0.04

F-25

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Plan Data Management, Inc.

On December 22, 2006, the Company acquired all of the issued and outstanding shares of Plan Data Management, Inc. (“PDM”). PDM is a business solutions company focused on providing software and services to the healthcare industry primarily for payers that service members in Medicare Advantage, Medicare Part D and Medicaid plans.

Because the acquisition was completed on December 22, 2006, there was not sufficient time to finalize the fair market valuation of assets and liabilities acquired as of December 31, 2006. Once the Company receives a final valuation, the estimated purchase price will be adjusted and the allocation between goodwill and identifiable intangible assets will be recorded. Portions related to goodwill, representing the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired in the acquisition will not be amortized and is not deductible for tax purposes. Any amounts attributable to identifiable intangible assets will be amortized over their useful life and deductible over varying tax periods. The estimated purchase price as of December 31, 2006 was approximately $19.6 million, which consisted of 491,488 shares of the Company’s common stock with a value of $16.28 per share (which represents the average closing price of TriZetto’s common stock for the 20 trading days ending October 27, 2006), cash payments of $8.0 million, assumed liabilities of $3.1 million and estimated acquisition-related costs of $500,000. Due to the close of the acquisition late in the year, the issuance of the 491,488 shares of common stock and the cash payment of $8.0 million to PDM stockholders and option holders were not completed prior to December 31, 2006. However, these amounts were accrued as of December 31, 2006. The computation of earnings per share for the year ended December 31, 2006 did not include the issuance of the 491,488 shares of common stock or the financial operating results of PDM since the impact of these amounts was not material.

PDM stockholders and option holders will also be entitled to receive contingent consideration under each of the following circumstances: aggregate payments of up to $5.0 million on or before June 30, 2007, $5.0 million on or before December 31, 2008, and $8.0 million on or before December 31, 2009, each subject to reduction if certain revenue thresholds are not satisfied during the applicable measurement period. Additional contingent consideration may be paid on June 30, 2009 if certain revenue thresholds are satisfied, provided that in no event will the aggregate consideration of all payments exceed $42.0 million. The merger consideration is also subject to adjustment based upon minimum cash and working capital balances. It is expected that 50% of each payment will be made in cash and 50% will be paid in shares of the Company’s common stock.

The acquisition was accounted for using the purchase method of accounting. The excess of the purchase price over the preliminary fair market value of the assets purchased and liabilities assumed was $15.0 million and was allocated to goodwill. Once the Company completes its final determination of the fair market value of the assets and liabilities assumed, the estimated purchase price will be adjusted and the allocation between goodwill and identifiable intangible assets will be recorded. The acquisition of PDM was not significant to the Company’s results of operations and therefore no pro forma information for the periods prior to acquisition have been presented.

The purchase price allocations for the acquisitions described above were based on the estimated fair value of the assets and liabilities, on the date of purchase as follows (in thousands):

	Diogenes			CareKey			PDM (1)
Total current assets	$	155		$	13,935		$	3,758
Property, plant, equipment and other non-current assets		834			1,562			861
Goodwill		1,350			36,390			15,018
Other intangible assets		3,300			29,000			—
Total assets acquired		5,639			80,887			19,637
less: liabilities assumed		(433	)		(3,537	)		(3,137	)
Total purchase price of net assets acquired	$	5,206		$	77,350		$	16,500

(1) Allocation is preliminary pending final determination in 2007.

15. Supplemental Cash Flow Disclosures (in thousands)

	For the Years Ended December 31,
	2006		2005		2004
Supplemental disclosures for cash flow information
Cash paid for interest	$	3,280	$	941	$	1,486
Cash paid for income taxes		2,467		1,090		1,189
Non-cash investing and financing activities
Assets acquired through capital lease		2,487		1,424		1,151
Deferred stock compensation (net of cancellations)		—		1,319		2,604
Common stock issued for purchase of intangible assets		—		551		—
Note payable in exchange for repurchase of shares		—		—		37,414

F-26

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16. Segment Information

The Company has adopted FASB Statement No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“Statement 131”). Statement 131 requires enterprises to report information about operating segments in annual financial statements and selected information about reportable segments in interim financial reports issued to stockholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company has only one reportable segment.

The Company classifies its revenue in the following categories: services and other, and products as follows (in thousands):

	For the Years Ended December 31,
	2006		2005		2004
Outsourced business services	$	86,877	$	79,418	$	89,916
Software maintenance		88,628		80,719		69,065
Consulting services and other		97,438		83,346		64,276
Services and other revenue		272,943		243,483		223,257
Software license fees		74,994		48,736		51,308
Products revenue		74,994		48,736		51,308
Total revenue	$	347,937	$	292,219	$	274,565

The Company’s assets are all located in the United States and the Company’s sales were primarily to customers located in the United States.

17. Quarterly Financial Data (unaudited and in thousands, except per share data)

	Net Revenue		Operating Costs and Expenses		Net Income (loss)			Net Income (Loss) Per Share, Basic			Net Income (Loss) Per Share, Diluted
Fiscal year 2006 (1)
First quarter	$	85,318	$	78,123	$	6,838		$	0.16		$	0.15
Second quarter		87,710		81,050		6,414			0.15			0.14
Third quarter		86,437		92,335		(5,683	)		(0.13	)		(0.13	)
Fourth quarter		88,472		79,481		7,546			0.18			0.16
Fiscal year 2005
First quarter		71,818		67,075		4,298			0.10			0.10
Second quarter (2)		72,508		67,172		4,979			0.12			0.11
Third quarter		73,053		66,923		6,480			0.15			0.14
Fourth quarter		74,840		68,656		6,264			0.15			0.14

(1) In December 2006, the Company entered into a settlement with one of its larger customers that had disputed payments due from a software implementation project. The amounts represented revenue recorded in the first two quarters of 2006 and were included in the allowance for sales returns and a reduction to revenue in the quarter ended September 30, 2006.

(2) Included in cost of revenue are charges associated with loss on contracts. During the fourth quarter of 2003, the Company decided to wind-down its outsourcing services to physician group customers. As a result of this decision, the Company estimated that the existing customer agreements would generate a total loss of $11.3 million until the terms of these agreements expired in 2008. The Company recorded a loss accrual in the fourth quarter of 2003. Through discussions and negotiations, the Company was able to accelerate the termination of its services agreements with certain physician group customers and implemented cost cutting measures that reduced the expected future costs to support its remaining customers. As a result of these actions, the Company was able to reverse approximately $5.9 million of previously accrued loss on contracts charges in 2004. Early in the second quarter of 2005, the Company executed termination agreements with its two remaining physician group customers. The Company continued to provide outsourced business services through May 2005, when the transition services were completed. The completion of these services to the remaining customers allowed the Company to reverse the remaining balance in the loss on contracts accrual of $2.9 million in the second quarter of 2005. The total amount of loss actually incurred related to the outsourcing services to physician group customers was $2.1 million in 2004 and $403,000 in the first six months of 2005.

F-27

THE TRIZETTO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

18. Subsequent Events

Quality Care Solutions, Inc.

On January 10, 2007, the Company announced that it had completed the acquisition of privately held Quality Care Solutions, Inc. (“QCSI”). As previously announced, the definitive agreement for the acquisition was executed on September 13, 2006 and the Company received regulatory clearance for the transaction on December 29, 2006. QCSI is a provider of healthcare claims administration platforms and consumer-directed health solutions for payers. Enterprise applications include the QNXT product family, the QMACS product family and the web-based MyHealthBank suite of products.

Under the merger agreement, the Company paid to QCSI stockholders, warrantholders and option holders approximately $130.0 million, net of cash received in the merger. QCSI security holders are entitled to an aggregate cash payment of $5.0 million on January 31, 2008, subject to reduction if the parties determine that QCSI had negative working capital under the acquisition agreement as of the date of closing or to the extent that the Company is entitled to claims for indemnification under the acquisition agreement. In addition, former QCSI security holders will be entitled to receive an aggregate cash payment of $7.0 million on January 31, 2008 if license and software revenues arising from the sale of QCSI products reach specified thresholds during the fiscal year ending on December 31, 2007. The Company also assumed approximately $1.0 million of QCSI’s debt.

In connection with the QCSI acquisition, the Company adopted the Quality Care Solutions, Inc. Stock Option Plan based primarily upon QCSI’s existing stock option plan. Unless previously terminated by the stockholders, the Plan shall terminate at the close of business on December 31, 2007, and no options shall be granted under it thereafter.

Wells Fargo Line of Credit

On January 10, 2007, the Company and each of its subsidiaries (the “Borrowers”) entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with Wells Fargo Foothill, Inc., as the administrative agent and lender (the “Lender”).

The Credit Agreement amends and restates the Borrowers’ current $100.0 million credit facility with the Lender and provides that the Lender shall make available to the Borrowers up to $150.0 million of term debt (the “Term Loan”). The Credit Agreement will expire by its terms on January 5, 2011. All borrowings under the Credit Agreement will bear interest at a per annum rate equal to either (i) the LIBOR rate plus an adjustable applicable margin of between 1.75% and 3.50% or (ii) Wells Fargo’s prime rate plus an adjustable applicable margin of between 0.0% and 2.0%, at the election of the Borrowers, subject to specified restrictions. All borrowings under the Term Loan must be repaid in quarterly installments commencing on April 1, 2007. In the event Borrowers terminate the Credit Agreement prior to its expiration or make certain prepayments, the Borrowers will be required to pay the Lender a termination or prepayment fee equal to 1% of the maximum credit amount in the event of termination or 1% of the prepayment amount in the event of prepayments, subject to specified exceptions.

The Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations on the Borrowers with respect to indebtedness, liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates of the Borrowers. The Credit Agreement also includes financial covenants including minimum EBITDA, minimum liquidity, minimum recurring revenue (which includes outsourced business services and software maintenance revenue – see Note 16) and maximum capital expenditures.

The Company has initially drawn down $75.0 million from the Term Loan to help fund its acquisition of QCSI. The Company expects to use the remaining available credit for general working capital purposes. All borrowings under the Term Loan must be repaid in quarterly installments commencing on July 1, 2007 through January 5, 2010 in amounts equal to the amount outstanding under the term loan on June 30, 2007, divided by 28. Under the Credit Agreement, the Borrowers have granted the Lender a security interest in all of the assets of the Borrowers.

F-28

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

	Balance at Beginning of Period		Additions Charged to Costs and Expenses(1)			Deductions(2)		Balance at End of Period
Allowance for doubtful accounts
Year ended December 31, 2004	$	2,368	$	(1,010	)	$	639	$	719
Year ended December 31, 2005	$	719	$	38		$	433	$	324
Year ended December 31, 2006	$	324	$	(47	)	$	277	$	—
Sales returns
Year ended December 31, 2004	$	2,564	$	(1,289	)	$	302	$	973
Year ended December 31, 2005	$	973	$	(439	)	$	3	$	531
Year ended December 31, 2006	$	531	$	3,261		$	22	$	3,770
Deferred tax valuation allowance
Year ended December 31, 2004	$	26,537	$	1,176		$	—	$	27,713
Year ended December 31, 2005	$	27,713	$	(5,487	)	$	—	$	22,226
Year ended December 31, 2006	$	22,226	$	(20,097	)	$	—	$	2,129

⁽¹⁾ Adjustments to the allowance for doubtful accounts and sales returns were the result of the collections of aged receivables. In December 2006, the Company entered into a settlement with one of its larger customers that had disputed payments due from a software implementation project. The amounts represented revenue recorded in the first two quarters of 2006 and were included in the allowance for sales returns and a reduction to revenue in the quarter ended September 30, 2006.

⁽²⁾ Deductions include the net effect of write-offs and recoveries of uncollectible amounts with respect to accounts receivable.

S-1

EX-10.16

EXHIBIT 10.16

FIFTH MODIFICATION AND RATIFICATION OF LEASE

THIS FIFTH MODIFICATION AND RATIFICATION OF LEASE (this “Modification”) is made and entered into effective the 31^st day of October 2002, by and between ST. PAUL PROPERTIES, INC., a Delaware corporation (“Landlord”), and THE TRIZETTO GROUP, INC., a Delaware corporation (“Tenant”).

WITNESSETH:

WHEREAS, Landlord and Tenant entered into that certain Office Lease dated as of April 26, 1999, as amended by that certain Lease commencement letter signed by Landlord on September 9, 1999, and by Tenant on September 7, 1999, by that certain First Modification and Ratification of Lease entered into effective November 1, 1999, by that certain Second Modification and Ratification of Lease entered into effective December 27, 1999, by that certain Third Modification and Ratification of Lease entered into effective January 15, 2000, and by that certain Fourth Modification and Ratification of Lease entered into effective October 15, 2000 (hereafter collectively the “Lease”), for the rental of certain commercial real property located in the Building known as Atrium I, 6061 S. Willow Drive , Englewood , Colorado, and more particularly described in the Lease as Suites 300 and 310 (the “Premises”); and

WHEREAS, Tenants desires to further expand the Premises through the addition of Suite 233 in the Building, containing approximately 4,805 rentable square feet for the remaining Term of the Lease (for information purposes, the current Termination Date of the Lease is April 30, 2006), which suite id located on the second floor of the Building (the “Second Expansion Premises”) as depicted in Exhibit A-2 attached hereto and incorporated by reference; and

WHEREAS, Landlord is willing to modify the Lease to accommodate such desires subject to the terms and conditions of this Modification and Landlord and Tenant desire to amend the Lease to reflect the addition of the Second Expansion Premises and the increase in Base Rent payable under the Lease.

NOW, THEREFORE, in consideration of the foregoing, the agreements of the parties and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree follows:

1. Definitions. All capitalized terms used herein not otherwise defined in this Modification shall have the meanings given them in the Lease.

2. Incorporation of Recitals. The foregoing recitals are incorporated herein and made a part hereof as if set forth in their entirely.

3. Additional Premises. Effective November 1, 2002 (“Second Expansion Premises Commencement Date”), Landlord shall lease to Tenant and Tenant shall lease form the Landlord the Second Expansion Premises. In addition the identification of the Leased Premises in Section 1.03 of the Lease is hereby further amended by adding immediately after the description of the Leased Premises the following:

SECOND EXPANSION PREMISES:

That part of the second floor of the building outlined on Exhibit A-2, called Suite 233 containing approximately 4,805 rentable square feet.

4. Second Expansion Premises Commencement Date. Section 1.03(D) of the Lease is hereby amended by adding immediately after the description of the commencement date of the Lease the following:

The Second Expansion Premises Commencement Date shall be November 1, 2002.

5. Second Expansion Premises Completion Date. Section 1.03(E) of the Lease is hereby amended by adding immediately after the description of the completion date under the Lease the following:

The Second Expansion Premises Completion Date shall be November 1, 2002.

6. Tenant’s Proportionate Share. Section 1.03(J) of the Lease is amended effective on the Second Expansion Premises Commencement Date by adding immediately after the description of the Tenant’s Proportionate Share under the Lease for the Premises the following:

Tenant’s Proportionate Share of the Second Expansion Premises shall be 3.62%.

7. Parking Spaces. Section 1.03(O) of the Lease is amended effective on the Second Expansion Premises Commencement Date by the addition of the following at the end of the section:

Commencing on the Second Expansion Premises Commencement Date, in the connection with its occupancy of the Second Expansion Premises, Tenant shall be entitled to the additional non-exclusive use in the common with Landlord and others of a maximum of fifteen (15) parking spaces in the Building parking areas at no charge during the primary Term of the Lease. Landlord reserves the right to of this Lease based upon a parking ration of 3.3 parking spaces per 1,000 rentable square feet. Landlord further reserves the right to assign and reassign, from time to time, particularly parking spaces for use by persons selected by Landlord, and to issue and implement rules and regulations with respect to parking spaces for the Building, provided the Tenant’s rights to the number of parking spaces designated herein are preserved.

8. Operating Expenses. Section 2.02 of the Lease, as previously amended, shall be further amended effective on the Second Expansion Premises Commencement Date by adding to the first sentence thereof immediately before the parenthetical reference “(Excess Expenses”)” the following: “and during the 2003 base year with the respect to the Second Expansion Premises”.

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9. Base Rent. Section 1.03(H) of the Lease entitled Base Rent, and Section 1.03(I) of the Lease entitled Monthly Installments of Base Rent, are hereby amended by adding the following:

(c) Second Expansion Premises Base Rent. In addition to the Base Rent payable with respect to the Premises and the Expansion Premises, Tenant shall also pay Base Rent for the Second Expansion Premises, payable monthly in advance, without demand, deduction or set-off, in accordance with the following schedule:

Period	Rentable Square Feet	Lease Rate	Annual Payment	Monthly Payment
(11/1/2002-4/30/2006)	4,805	$17.25/rsf/year	$82,886.25	$6,907.19

10. Termination Option. Paragraph 3 of the Addendum to the Lease, as amended, shall be deleted in its entirely and replaced with the following:

Provided no Event of Default has occurred and is continuing, provided that Tenant has not assigned the Lease or sublet all or any portion of the Premises, the Expansion Premises, or the Second Expansion Premises, and in the event Landlord is unable to accommodate within the Building the growth requirements of the Tenant, Tenant shall have the option, in its sole discretion, to terminate the Lease with respect to the Premises, the Expansion Premises, and the Second Premises, on April 30, 2005, by providing Landlord with one-hundred (180) days’ prior written notice of Tenant’s intent to terminate the Lease with respect to the Premises, the Expansion Premises, and the Second Premises, and provided that by April 30, 2005, Tenant shall pay Landlord a termination fee equal to the sum of all the Landlord’s unamortized costs of leasing the Premises, the Expansion Premises and the Second Premises to Tenant, including but not limited to leasing commissions, tenant improvements and other concessions, plus an amount equal to four (4) months of the then existing Base Rent for the Premises, the Expansion Premises and the Second Premises.

11. Tenant Improvements. Tenant shall take the Second Expansion Premises in their current “as-is” condition and repair.

12. Real Estate Brokers. Each of the parties hereto hereby warrants and represents to the other party that it has not dealt with or been represented by any broker in connection with its execution of this Modification other that Landlord’s listing agent, Cushman and Wakefield of Colorado, Inc., acting as agent of Landlord, and Julien J. Studley, Inc., acting as agent of Tenant. Tenant agrees to indemnify and hold Landlord harmless from and against any other claims for commissions or similar compensation from any other person claiming an entitlement to any such

3

payment as a result of its representative of Tenant. In addition, Landlord agrees to indemnify and hold Tenant harmless from and against any claims for commissions or similar compensation from any other broker or person claiming an entitlement to any such payment as a result of its representation of Landlord.

13. Performance of Obligations. Tenant hereby acknowledges and confirms that, as of the date hereof, Landlord has performed all obligations on the part of the Landlord under the Lease and that Tenant has no claims against Landlord or claims of offset against any rent or other sums payable by Tenant under the Lease.

14. Conflicts and Non-Amended Provisions. In the event of any express conflict or inconsistency between the terms of the Lease and the terms of this Modification, the terms of this Modification shall not control and govern. In all other respects, the terms, covenants and conditions of the Lease are hereby ratified, reaffirmed and republished in their entirety.

15. No Offer. The submission of this Modification by Landlord to the Tenant is not an offer to modify or amend the Lease and is not effective until execution and delivery by both Landlord and Tenant.

16. Entire Agreement. This Modification contains the entire agreement between the parties as to its subject matter and supersedes any and all prior agreements, arrangements or understanding between the parties relating to the subject matter hereof.

17. Counterparts. This Modification may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have entered into this Modification effective as of the date first set forth hereinabove.

Landlord:		Tenant:
ST. PAUL PROPERTIES, INC., a Delaware corporation		THE TRIZETTO GROUP, INC., a Delaware corporation
By:		By:
	Robert W. Cowley	Name:	Michael J. Sunderland
	Senior Asset Manager	Title:	Senior VP/CFO

4

Exhibit A-2

ATRIUM ONE

6061 SOUTH WILLOW DRIVE

GREENWOOD VILLAGE, CO.

EX-10.17

EXHIBIT 10.17

SIXTH MODIFICATION AND RATIFICATION OF LEASE

THIS SIXTH MODIFICATION AND RATIFICATION OF LEASE (this “Modification”) is made and entered into effective the 19^th day of May 2003, by and between ST. PAUL PROPERTIES, INC., a Delaware corporation (“Landlord”), and THE TRIZZETTO GROUP, INC., a Delaware corporation (“Tenant”).

WITNESSETH:

WHEREAS, Landlord and Tenant entered into that certain Office Lease dated as of April 26, 1999, as amended by that certain Lease commencement letter signed by Landlord on September 9, 1999, and by Tenant on September 7, 1999, by that certain First Modification and Ratification of Lease entered into effective November 1, 1999, by that certain Second Modification and Ratification of Lease entered into effective December 27, 1999, by that certain Third Modification and Ratification of Lease entered into effective January 15, 2000, by that certain Fourth Modification and Ratification of Lease entered into October 15, 2000, and by certain of that Fifth Modification and Ratification of Lease entered into effective October 31, 2002 (hereafter collectively the “Lease”), for the rental of certain commercial real property located in the Building known as Atrium I, 6061 S. Willow Drive, Englewood, Colorado, and more particularly described in the Lease as Suites 310 and 300, containing collectively approximately 47,385 rentable square feet (the “Premises” and “Expansion Premises” respectively, which may be collectively referred to herein as the “Premises”) and Suite 233, containing approximately 4,805 rentable square feet (the “Second Expansion Premises”); and

WHEREAS, Tenant desires to extend the term of the Lease for a period of thirty-nine (39) months, from April 30, 2006, to and including July 31, 2009, on the terms and conditions set forth in greater detail in this Modification; and

WHEREAS, Tenant desires to expand the Premises beginning on or about to August 1, 2003, through the addition of the following suites in the Building: Suite 250, containing approximately 4,454 rentable square feet; Suite 235, containing approximately 4,773 rentable square feet; and, Suite 217, containing approximately 2,753 rentable square feet, and including the elimination of the adjacent common area corridor, containing approximately 1,097 rentable square feet (hereafter collectively the “Third Expansion Premises”) as depicted in Exhibit A-3 attached hereto and incorporated by reference; and

WHEREAS, Tenant desires to further expand the Premises beginning on or about August 1, 2003, through the addition of the following suites in the Building: Suite 230 containing approximately 2,297 rentable square feet; and, Suite 260, containing approximately 2,327 rentable square feet (hereafter collectively referred to as the “Fourth Expansion Premises”), as depicted in greater detail in Exhibit A-3 attached hereto and incorporated by reference; and

WHEREAS, Landlord is willing to modify the Lease to accommodate such desires, subject to the terms and conditions of this Modification and Landlord and Tenant desire to amend the Lease to reflect the extension of the Lease Term, the addition of the Third Expansion Premises and the Fourth Expansion Premises, and the increase in Base Rent payable under the Lease.

NOW, THEREFORE, in consideration of the foregoing, the agreements of the parties, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Definitions. All capitalized terms used herein not otherwise defined in this Modification shall have the meanings given them in the Lease.

2. Incorporation of Recitals. The foregoing recitals are incorporated herein and made a part hereof as if set forth in their entirety.

3. Additional Premises. Effective on the earlier of August 1, 2003, or three (3) days after substantial completion of the tenant improvements to be made within the Third Expansion Premises (“Third Expansion Premises Commencement Date”), Landlord shall lease to Tenant and tenant shall lease from Landlord the Third Expansion Premises. Further, effective on August 1, 2003 (the “Fourth Expansion Premises Commencement Date”), Landlord shall lease to Tenant and Tenant shall lease from Landlord the Fourth Expansion Premises. In addition the identification of the Lease Premises in Section 1.03(B) of the Lease is hereby further amended by adding immediately after description of the Second Expansion Premises the following:

THIRD EXPANSION PREMISES:

The following portions of the second floor of the Building outlined on Exhibit A-3: Suite 250, containing approximately 4,454 rentable square feet; Suite 235, containing approximately 4,773 rentable square feet; Suite 217, containing approximately 2,753 rentable square feet; and including the elimination of the common area corridor adjacent to the foregoing spaces, containing approximately 1,097 rentable square feet .

FOURTH EXPANSION PREMISES:

The following portions of the second floor of the Building outlined on Exhibit A-3: Suite 230 containing approximately 2,297 rentable square feet; and, Suite 260, containing approximately 2,327 rentable square feet.

4. Third Expansion Premises Commencement Date and Fourth Expansion Premises Commencement Date. Section 1.03(D) of the Lease is hereby amended by adding immediately after the description of commencement date of the Lease the following:

The Third Expansion Premises Commencement Date shall be August 1, 2003. The foregoing notwithstanding, in the event that the tenant improvements made within the Third Expansion Premises as set forth in Exhibit B-3 attached to

2

the Sixth Modification and Ratification of Lease are substantially complete prior to Agust 1, 2003, and Landlord has obtained a certificate of occupancy for the Third Expansion Premises prior August 1, 2003, Landlord shall allow Tenant to take early occupancy of the Third Expansion Premises, subject to all terms and conditions under the Lease, with the exception of Tenant’s obligation for the payment of Base Rent from the date of such early occupancy until the Third Expansion Premises Commencement Date.

The Fourth Expansion Premises Commencement Date shall be August 1, 2003.

5. Temporary Premises. Upon mutual execution and delivery of this Modification and expiring on September 30, 2003, Landlord shall permit Tenant to occupy up to, but not exceeding, 4,000 rentable square feet in the existing Suite 105, as shown on Exhibit A-4 attached to this Modification and incorporated by reference (the “Temporary Premises”), subject to all of the terms and conditions of the Lease, with the exception of the obligation to pay for Base Rent for the Temporary Premises. Tenant shall be responsible for the payment of all other costs and obligations under the Lease arising as a result of its occupancy and use of the Temporary Premises, including but not limited to the payment of Operating Expenses. Tenant shall occupy the Temporary Premises in their current “as-is” condition and repair. Landlord reserves the right to show Suite 105 to other prospective tenants upon twenty-four (24) hours advance notice to Tenant. Tenant shall have the right to terminate its occupancy of the Temporary Premises prior to September 30, 2003, upon seven (7) days prior written notice to Landlord. In the event that Tenant fails to vacate the Temporary Premises on September 30, 2003, or earlier termination of the Lease, Landlord shall be entitled to exercise all remedies available to Landlord under the Lease in the event of a breach of the Lease, and Tenant shall be responsible for the payment of Base Rent to Landlord for the Temporary Premises in the amount of one and one-half (1 ¹/2) times the Base Rent otherwise payable by Tenant for the Premises, and shall also be liable for all damages suffered by Landlord as a result of Tenant’s failure to vacate the Temporary Premises.

6. Termination Date. Section 1.03(F) of the Lease is hereby amended in its entirety by replacing the existing Termination Date of the Lease of April 30, 2006 with the following:

The Termination Date of the Lease for the Premises, Expansion Premises, Second Expansion Premises, Third Expansion Premises and fourth Expansion Premises, shall be July 31, 2009 (seventy-two (72) months following the Third Expansion Premises Commencement Date), unless sooner terminated as provided in this Lease, or as otherwise extended as provided in Exhibit B-3 to the Sixth Modification and Ratification of Lease.

7. Tenant’s Proportionate Share. Section 1.03(J) of the Lease is amended effective on the Third Expansion Premises Commencement Date by adding immediately after the description of the Tenant’s Proportionate Share under the Lease for the Premises the following:

Tenant’s Proportionate Share for the Third Expansion Premises shall be 9.79%.

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Tenant’s Proportionate Share for the Fourth Expansion Premises shall be 3.46%.

Tenant’s Proportionate Share for the Temporary Premises shall be 2.99%.

8. Security Deposit. Section 1.03 (K) of the Lease is hereby amended by increasing the security deposit under the Lease in the additional amount of Twenty-Three Thousand Six Hundred Sixteen and 08/100 US Dollars ($23,616.08), for a total security deposit of One Hundred Forty Thousand Four Hundred Sixty-Two and 02/100 and US Dollars ($140,462.02), which additional amount shall be payable to Landlord upon execution of this Modification.

9. Parking Spaces. Effective on the Third Expansion Premises Commencement Date, Section 1.03 (O) of the Lease is deleted in its entirety, as amended, and is replaced with the following:

Commencing on the Third Expansion Premises Commencement Date, and in connection with its occupancy of the premises, Expansion Premises, Second Expansion Premises, Third Expansion Premises and Fourth Expansion Premises, Tenant shall be entitled to the non-exclusive use of a maximum of two hundred and thirty (230) parking spaces in the Building parking areas at no charge during the Term of the Lease expiring on July 31, 2009. Landlord reserves the right to strictly enforce the number of parking spaces utilized by Tenant during the term of this Lease based upon a parking ratio 3.3 parking spaces per 1,000 rentable square feet. Landlord further reserves the right to assign and reassign (with the exception of Tenant’s reserved parking spaces described below), from time to time on a non-discriminatory basis, particular parking spaces for use by persons selected by Landlord, and to issue and implement non-discriminatory rules and regulations with respect to Parking spaces for the Building, provided that Tenant’s rights to the number of parking spaces designated herein are preserved. Within the foregoing parking allowance, Tenant shall be entitled to the use of total of ten (10) covered reserved parking spaces in those areas designated by Landlord for such spaces as of the date of this Modification, at no charge during the initial Term of the Lease.

10. Operating Expenses. Section 2.02 of the Lease, as previously amended, shall be further amended effective on the date of this Modification by deleting the first sentence thereof in its entirety, and replacing it with the following:

In the event Landlord’s operating expenses for the Building shall, in any calendar year during the Term, exceed the sum of those expenses accrued during the base year for the Premises, Expansion Premises, Second Expansion Premises, Third Expansion Premises or Forth Expansion Premises, respectively (“Excess Expenses”) Tenant shall pay as additional rent Tenant’s Proportionate Share of Excess Expenses. The base year for the Premises, Expansion Premises, Second Expansion Premises, Third Expansion Premises and Forth Expansion Premises shall be determined in accordance with the following schedule:

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Identification of Premises	Rentable Square Feet	Lease Period	Base Year
Premises	23,610	11/8/99-11/30//04	1999
Premises	23,610	12/1/04-4/30/06	2000
Expansion Premises	23,775	5/1/00-4/30/06	2000
Premises & Expansion Premises	47,385	5/1/06-7/31/06	2003
Second Expansion Premises	4,805	11/1/02-7/31/09	2003
Third Expansion Premises	13,077	8/1/03-7/31/09	2003
Fourth Expansion Premises	4,624	8/1/03-7/31/09	2003

11. Base Rent. Section 1.03 (H) of the Lease entitled Base Rent, and Section 1.03 (I) of the Lease entitled Monthly Installment of Base Rent, are hereby amended by adding the following:

(a) Premises and Expansion Premises Base Rent.

Period	Rentable Square Feet	Lease Rate	Annual Payment	Monthly Payment
(6/1/03-4/30/06)	47,385	$19.50/rsf/year	$924,007.50	$77,000.63
(5/1/06-7/31/09)	47,385	$18.50/rsf/year	$876,622.50	$73,051.88

(c) Second Expansion Premises Base Rent. In addition to the Base Rent payable with respect to the Premises and the Expansion Premises, Tenant shall also pay Base Rent for the Second Expansion Premises, payable monthly in advance, without demand, deduction or set-off, in accordance with the following schedule:

Period	Rentable Square Feet	Lease Rate	Annual Payment	Monthly Payment
(5/1/03-4/30/06)	4,805	$17.25/rsf/year	$82,886.25	$6,907.19
(5/1/06-7/31/09)	4,805	$18.50/rsf/year	$88,892.50	$7,407.71

(d) Third Expansion Premises Base Rent. In addition to the Base Rent payable with respect to the Premises and the Expansion Premises, the Expansion Premises, and the Second Expansion Premises, beginning on the Third Expansion Premises Commencement Date Tenant shall also pay Base Rent for the Third

5

Expansion Premises, payable monthly in advance without demand, deduction or set-off, in accordance with the following schedule:

Period	Rentable Square Feet	Lease Rate	Annual Payment	Monthly Payment
(8/1/03-4/30/04)	13,077	$14.50/rsf/year	$189,616.50	$15,801.38
(5/1/04-4/30/05)	13,077	$14.79/rsf/year	$193,408.83	$16,117.40
(5/1/05-4/30/06)	13,077	$15.09/rsf/year	$197,331.93	$16,444.33
(5/1/06-4/30/07)	13,077	$15.39/rsf/year	$201,255.03	$16,771.25
(5/1/07-4/30/08)	13,077	$15.70/rsf/year	$205,308.90	$17,109.08
(5/1/08-7/31/09)	13,077	$16.01/rsf/year	$209,362.77	$17,446.90

(e) Fourth Expansion Premises Base Rent. In addition to the Base Rent payable with respect to the Premises, the Expansion Premises, the Expansion Premises, the Second Expansion Premises, and the Third Expansion Premises, beginning on the Fourth Expansion Premises Commencement Date Tenant shall also pay Base Rent for the Fourth Expansion Premises, payable monthly in advance, without demand, deduction or set-off, in accordance with the following schedule:

Period	Rentable Square Feet	Lease Rate	Annual Payment	Monthly Payment
(8/1/03-4/30/04)	4,624	$14.50/rsf/year	$67,048.00	$5,587.33
(5/1/04-4/30/05)	4,624	$14.79/rsf/year	$68,388.96	$5,699.08
(5/1/05-4/30/06)	4,624	$15.09/rsf/year	$69,776.16	$5,814.68
(5/1/06-4/30/07)	4,624	$15.39/rsf/year	$71,163.36	$5,930.28
(5/1/07-4/30/08)	4,624	$15.70/rsf/year	$72,596.80	$6,049.73
(5/1/08-7/31/09)	4,624	$16.01/rsf/year	$74,030.24	$6,169.19

12. Base Rent Abatement. The foregoing notwithstanding, and provided that no default (or no event which, with the passage of time or the giving of notice or both, would constitute an event of default under the Lease) shall have occurred under the Lease beyond any applicable period of notice and cure, Base Rent shall be abated as follows: (i) for the Third Expansion Premises Base Rent shall be abated for a period of three (3) months following the Third Expansion Premises Commencement Date for a total Base Rent abatement for the Third Expansion Premises of Forty-Seven Thousand Four Hundred Four and 13/100 US Dollars ($47,404.13); and (ii) for the Fourth Expansion Premises, Base Rent shall be abated for a period

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of three (3) months following the Fourth Expansion Premises Commencement Date for a total Base Rent abatement for the Fourth Expansion Premises of Sixteen Thousand Seven Hundred Sixty-Two and No/100 US Dollars ($16,762.00). In the event of any default by Tenant, the entire amount of Base Rent which was otherwise abated, as set forth above, shall be immediately due and payable.

13. Termination Option. Paragraph 10 in the Fifth Modification and Ratification of Lease shall be deleted in its entirely. Tenant shall no longer have a termination option under the terms of the Lease

14. Tenant Improvements. Landlords agrees to provide Tenant with an allowance for construction by Tenant of certain tenant improvements to be incorporated into the Premises, in the amount of Seven Hundred Nine Thousand One Hundred Thirty-Four and No/100 US Dollars ($709,134.00) (the “Construction Credit”) (which Construction Credit is calculated based upon $6.00 per rentable square foot of Suite 300, and $24.00 per rentable square foot for the Third Expansion Premises and the Fourth Expansion Premises), which Construction Credit may be used by Tenant in the manner set forth in Exhibit B-3, attached to this Modification and incorporated by reference. Landlord shall be paid a construction management supervisory fee out of the Construction Credit equal to one percent (1%) of the hard construction costs of the tenant improvements to be constructed by Tenant, specifically excluding architectural fees, project management fees, permitting, cabling, furniture, fixtures and equipment, which construction management supervisory fee shall not exceed in amount Seven Thousand and No/100 US Dollars ($7,000.00). Landlord’s construction management fee shall be invoiced by and paid to Landlord based upon the invoices submitted by Tenant for reimbursement from Landlord and shall be paid out of the Construction Credit. In the event that Tenant does not use the entire Construction Credit for completion of the improvements to the Premises, the Second Expansion Premises, Third Expansion Premises or the Fourth Expansion Premises, Tenant may apply the unused remainder of the Construction Credit (but in no event exceeding twenty-five percent (25%) of the total Construction Credit) for the payment of Base Rent and other charges next coming due under the Lease, on an amortized basis over the remaining Term of the Lease. Any portion of the Construction Credit not used or committed by Tenant to be applied to Base Rent or other charges coming due under the Lease (in the manner set forth in the foregoing sentence) within eighteen (18) months following the Third Expansion premises Commencement Date shall revert back to Landlord. Landlord, at its option (which option must be exercised, if at all, at the time that Landlord grants its written approval to Tenant’s proposed final construction Plans in the manner described in Exhibit B-3) may require Tenant to remove any physical additions and/or repair any alterations made pursuant to this paragraph or Exhibit B-3, including but not limited to low voltage communications and data cabling, in order to restore the subject portion of the leased premises to the condition existing at the time prior to the commencement of such work, all costs of removal and/or alterations to be done by Tenant. In addition, Tenant shall have the right, at Tenant’s sole cost and expense to remove and relocate from Suite 100 in the Building the following equipment and personal property of Landlord: the UPS unit; two (2) 10-ton Liebert computer room cooling units; and, the raised computer room flooring (“Landlord’s Equipment”). Such removal and relocation of Landlords’s Equipment shall be subject to Landlord’s prior written approval as to the methods and specifications for removal and relocation, which approval shall not be reasonably withheld. In the event that Tenant’s elects

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to relocate Landlord’s Equipment as provided in this paragraph, Tenant shall be responsible, at Tenant’s sole cost and expense, for all costs of restoration and repair of those portions of the Building affected by such removal and relocation. In addition, in the event that Tenant elects to relocate Landlord’s Equipment, Tenant agrees to take and use such equipment in its current “as-is” condition and repair, and Tenant shall be solely responsible for all costs of maintaining, repairing and replacing Landlord’s Equipment during the Term of the Lease.

15. Roof Space. Landlord shall make available to Tenant, free of charged during the primary Term, as it may be extended, a portion of the roof of the Building, and associated Building chases, for Tenant’s use for the installation, operation, repair and maintenance of one satellite dish antenna, which usage shall be subject to the terms and conditions of the Satellite Dish License attached to this Modification and made a part hereof.

16. Extension Option. The Extension Option contained in Paragraph 1 of the Addendum to Lease is hereby deleted in its entirety, and is replaced with the following:

Provided no event of default (or no event which, with the passage of time or the giving of notice or both, would constitute an event of default under the Lease) has occurred and is continuing beyond any applicable period of notice and cure, and provided Tenant has not assigned the Lease or sublet all or any portion of the Premises, Tenant shall have one option to extend the term of this Lease for all of the Premises, Expansion Premises, Second Expansion Premises, Third Expansion Premises and Fourth Expansion Premises (but not separate part thereof) for an additional five (5) year term by giving the Landlord written notice at least eight (8) months, but no more than twelve (12) months, prior to the expiration of the then current term of this Lease. Upon the giving of such notice, this Lease shall be considered as extended for such option term upon the same terms, conditions and covenants as are contained in this Lease except that there shall be no additional extension options, and except that charges for parking and for after hours HVAC shall be calculated at the rates than being charged by Landlord to other tenants in the Building for such services and except that the base rent shall be calculated by multiplying the number of rentable square feet of the Premises by the then-fair-market-base-rental-value, which then-fair-market-base-rental-value shall be determined in the manner set forth below.

(a) Landlord and Tenant will have thirty (30) days after Landlord receives the Tenant’s notice of its intent to exercise any extension within which to agree on the then-fair-market-base-rental-value of the Premises. If they agree on the fair market base rent for the subject option period within thirty (30) days, they will amend this lease by stating the new base rent for the option period.

(b) If Landlord and Tenant are unable to agree on the then-fair-market-base-rental-value of the Premises for the option period within thirty (30) days, then the base rent for the option period will be the then-fair-market-base-rental-value of the Premises as determined in accordance with subparagraph d below.

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(c) The “then-fair-market-rental-value of the Premises” means what a landlord under no compulsion to Lease the Premises and a tenant under no compulsion to lease the Premises would determine as rents (including initial monthly rent and rental increases) for the option period, as of the commencement of the option period and determined according to recent market lease transactions in comparable buildings located in the market area of the Premises, taking into consideration the uses permitted under this Lease, the quality, size, design and location of the Premises, the credit-worthiness of the Tenant, allowances for rental abatement, moving and tenant finish, if any, and any other factor reasonably related to the determination of rental values.

(d) If Landlord and Tenant are unable to agree upon the then fair market base rental value of the Premises, within fifteen (15) days after the expiration of the thirty (30) day period set forth in subparagraph a. above, Landlord and Tenant will each appoint a commercial real estate broker with at least ten (10) years’ full-time commercial experience in the area in which the Premises are located to determine the then-fair market rental value of the Premises. If either Landlord or Tenant does not appoint a commercial real estate broker within ten (10) days after the other has given notice of the name of its broker, the single broker appointed will be the sole appraiser and will set the then-fair market rental value of the Premises. If two commercial real estate brokers are appointed pursuant to this paragraph, they will meet promptly and attempt to set the then-fair market rental value of the Premises. If they are unable to agree within thirty (30) days after the second commercial real estate broker has been appointed, they will attempt to elect a third commercial real estate broker meeting the qualifications stated in this paragraph within ten (10) days after the last day the two commercial real estate brokers are given to set the then fair market rental value of the Premises. If they are unable to agree on a third commercial real estate broker, either Landlord or Tenant, by giving ten (10) days’ prior notice to the other, can apply to the ten presiding judge of the District Court in and for the City and County of Denver for the selection of a third commercial real estate broker who meets the selection of a third commercial real estate broker who meets the qualifications stated in this paragraph. Landlord and Tenant will bear one-half (1/2) of the cost of appointing the third commercial real estate broker and of paying the third commercial real estate broker’s fee. The third commercial real estate broker, however selected, must be a person who has not previously acted in any capacity for either Landlord or Tenant.

(e) Within thirty (30) days after the selection of the third commercial real estate broker, a majority of the brokers will set the then-fair market rental value of the Premises. If a majority of the brokers are unable to set the then-fair market rental value of the Premises

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established by Landlord’s appointed commercial real estate broker, or the Tenant’s appointed commercial real estate broker.

17. Right Of Offer To Lease – First Floor. In addition to the Right of Offer contained in Paragraph 14 of the Second Modification and Ratification of Lease, Tenant shall have the following additional Right of Offer to Lease:

During the initial term of the Lease, and provided that Tenant is not in default beyond any applicable period of notice and cure and has not assigned the Lease nor subleased any portion of the Premises, and subject to the limitations set forth in subparagraph (d) below, Tenant shall have a right of offer, subject to existing rights granted to other tenants as of the date of this Modification, to lease the vacant space located on the first (1st) floor of the Building (the “Offer Space”), if and when the Offer Space becomes “available for lease.” For purposes of this right of first offer, the Offer Space will be considered to be “available for lease” if (i) no bona fide written lease agreement is currently in force or effect with respect to such space, (ii) the space becomes vacant, or will become vacant, because an existing tenant’s lease has or will expire or be terminated with no renewal or extension options subject to being exercised with respect to such space, and (iii) Landlord makes the Offer Space available for leasing to others. Tenant’s right of first offer with respect to such Offer Space shall be upon the following terms and conditions:

(a) In the event that (i) the Offer Space, or any part thereof, becomes or is about to become available for lease provided above, Landlord will notify Tenant of the rental terms on which it would be willing to lease the Offer Space to Tenant or to other third-parties, and Tenant shall have the right of first offer to lease that portion of the Offer Space identified in Landlord’s notice, subject to existing rights granted to other tenants as of the date of this Lease, at the rent and on the terms and conditions contained in Landlord’s notice.

(b) The right of offer will be exercised by Tenant signing a lease amendment with respect to the subject portion of the Offer Space at the rent and on the terms set forth in Landlord’s notice. Tenant shall accept or reject the offer contained in Landlord’s notice within five business (5) days after the receipt of Landlord’s notice. If an amendment incorporating the terms contained in Landlord’s notice is not signed within five business (5) days following receipt of Landlord’s notice, time being strictly of the essence, Landlord will have the right to lease the Offer Space free of the rights of Tenant under this Paragraph 17, and Tenant’s right of offer granted herein shall be null and void. Any space leased by Tenant will be added to the Leased Premises as of the date provided in the proposed amendment.

(c) Landlord is under no obligation to offer for lease all or any portion of the First Offer Space to Tenant or any other person.

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(d) Notwithstanding any other provision set forth above, it is agreed that Tenant shall not be permitted to exercise any of its rights contained in this Paragraph 17 (i) at any time when the Lease is not in effect or at any time when an Event of Default exists, (ii) in the event that Tenant assigns the Lease or sublets any portion of the leased Premises at any time, (iii) Tenant may not exercise the right contained in this Paragraph 17 if the effective date of the addition of the Offer Space to the Premises previously leased would be at any time during the last thirty-six (36) months of the then existing term of Lease, and (iv) Tenant may not exercise the right contained in this Paragraph 17 if Tenant does not have at the time of the exercise One Hundred Million US Dollars ($100,000,000) in total equity.

(e) In the event that Tenant fails to exercise the foregoing right of offer as provided in this Paragraph 17, time being strictly of the essence, Tenant’s right of offer shall be null and void.

(f) Tenant acknowledges that it is only being granted a right of offer that is subject and subordinate to the rights of any existing tenant with pre-existing rights of refusal, rights of offer, or options to lease, as of the date of this Lease.

(g) In no event shall Landlord be responsible for any brokerage commission for any real estate broker retained by Tenant with respect to this right of offer.

18. Second Floor Common Areas—Kiosk/Information Booth. Tenants shall have the right to locate in the common area of the second floor of the building adjacent to either the Second Expansion Premises, Third Expansion Premises or Fourth Expansion Premises, and on a temporary basis only (which shall mean no more than eight (8) days per month), one (1) kiosk/information booth to be used to provide information concerning Tenant’s activities in the Building and to direct Tenant’s visitors to specified locations within Tenant’s leased premises, which kiosk/information booth shall be subject to Landlord’s reasonable advance approval as to size, location, appearance, timing and content.

19. Landlord Repairs. Section 5.01 of the Lease entitled “Landlord Repairs” is amended effective on the date of this Modification by adding the following after the existing second sentence thereof: “In addition, Landlord agrees to maintain the elevators serving the Building in a first class manner during the term of the Lease.”

20. Real Estate Brokers. Each of the parties hereto hereby warrants and represents to the other party that it has not dealt with or been represented by any broker in connection with its execution of this Modification other than Landlord’s listing agent, Cushman & Wakefield of Colorado, Inc., acting as the limited agent of the Landlord, and Julien J. Studley, Inc., acting as the limited agent of Tenant. Tenant agrees to indemnify and hold Landlord harmless from and against any other claims for commissions or similar compensation from any other person claiming an entitlement to any such payment as a result of its representation of Tenant. In

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addition, Landlord agrees to indemnify and hold Tenant harmless from and against any claims for commissions or similar compensation from any other broker or person claiming an entitlement to any such payment as a result of its representation of Landlord.

21. Performance of Obligations. Tenant hereby acknowledges and confirms that, as of the date hereof, Landlord has performed all obligations on the part of the Landlord under the Lease and that Tenant has no claims against Landlord or claims of offset against any rent or other sums payable by Tenant under the Lease.

22. Conflicts and Non-Amended Provisions. In the event of any express conflict or inconsistency between the terms of the Lease and the terms of this Modification, the terms of this Modification shall control and govern. In all other respects, the terms, covenants and conditions of the Lease are hereby ratified, reaffirmed and republished in their entirety.

23. No Offer. The submission of this Modification by Landlord to the Tenant is not an offer to modify or amend the Lease and is not effective until execution and delivery by both Landlord and Tenant.

24. Entire Agreement. This Modification contains the entire agreement between the parties as to its subject matter and supersedes any and all prior agreements, arrangements or understandings between the parties relating to the subject matter hereof.

25. Counterparts. This Modification may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have entered into this Modification effective as of the date first set forth hereinabove.

Landlord:		Tenant:
ST. PAUL PROPERTIES, INC., a Delaware corporation		THE TRIZETTO GROUP, INC., a Delaware corporation
By:	/s/ R. William Inserra	By:	/s/ Michael J. Sunderland
Name:	R. WILLIAM INSERRA	Name:	Michael J. Sunderland
Title:	V. P. ASSET MANAGEMENT	Title:	Senior VP, CFO

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EXHIBIT A-3

DESCRIPTION OF THE THIRD EXPANSION PREMISES AND

FOURTH EXPANSION PREMISES

Exhibit A-3

Third Expansion Premises

ATRIUM I

6061 S. Willow Drive

Greenwood village, CO 80011

Exhibit A-3

Fourth Expansion Premises

ATRIUM I

6061 S. Willow Drive

Greenwood village, CO 80011

EXHIBIT A-4

DESCRIPTION OF THE TEMPORARY PREMISES

Exhibit A-4

Temporary Premises

EXHIBIT B-3

Provisions Relating to Construction of Tenant’s Premises

(Finish Allowance Only)

1. Landlord will provide Tenant with a construction credit in the sum of up to Seven Hundred Nine Thousand One Hundred Thirty-Four and No/100 US Dollars ($709,134.00) (the “Construction Credit”) (which Construction Credit is calculated based upon $6.00 per rentable square foot of space located within Suite 300, and $24.00 per rentable square foot of space located within the Third Expansion Premises and the Fourth Expansion Premises), which may be used only against the cost of design, permitting and construction by Tenant of Improvements or alterations permanently installed and incorporated in the realty of the Premises, including the Expansion Premises, Second Expansion Premises, Third Expansion Premises, and Fourth Expansion Premises and all necessary corridor walls, project management fees and engineering fees, as contemplated under those certain plans and specifications and working drawings to be prepared by McDermott Planning & Design, Inc. (the “architect”), which architect has been selected by Tenant and approved by Landlord, and which plans, specifications and working drawings are to be initiated by Tenant and by Landlord for identification and aprroval (the “Plans”) or, at Tenant’s discretion, Tenant may utilize the Construction Credit to fund Tenant’s other construction-related costs related to the Premises, such as Tenant’s costs of relocation, installation of low voltage cabling and telephone lines.

2. Except as provided in Paragraph 3 below, The Plans shall be submitted to Landlord for its review and written approval prior to the initiation of construction activities within any portion of the Premises, Expansion Premises, Second Expansion Premises, Third Expansion Premises, or Fourth Expansion Premises, which consent shall not be unreasonably withheld or delayed. For the purposes of this Exhibit B-3 only, any Plans for tenant improvements to be submitted to Landlord for review and approval shall be delivered to Landlord by (i) hand delivery, with a signed delivery receipt therefor from the recipient, or (ii) delivered by registered and certified US mail, return receipt requested, and addressed to the following:

Bane Taylor JCA Property Management

6061 S. Willow Drive, Suite 210

Greenwood Village, Colorado 80111

Attn: Mr. Guy Blasi

With a copy to:

Mr. David Banzhaf

Cushman & Wakefield of Colorado, Inc.

1670 Broadway, Suite 3400

Denver, Colorado 80202:

Landlord shall review and approve all Plans submitted by Tenant (and all changes to such Plans, if any) as soon as practicable and in any event within five (5) business days of delivery of the Plans to Landlord’s representatives as identified above. If Landlord fails to provide its

written consent to the proposed Plans, or such reasonable reasons why it is withholding its consent, within five (5) business days after delivery of such Plans to Landlord, Landlord shall be deemed to have consented to and approved of such plans.

3. Tenant has prepared space plan documents for the Third Expansion Premises showing the intended modifications and intended use of the Third Expansion Premises. Those space plans, a copy of which are attached to this Exhibit B-3 as Schedule 1, include anticipated work in the Third Expansion Premises only. Tenant shall also be responsible for preparation of Plans for the Fourth Expansion Premises. As an accomodation to Tenant, and upon mutual execution of the Sixth Modification and Ratification of Lease to which this Exhibit B-3 is attached, Landlord’s approval of space plans for the Third Expansion Premises shall constitute Landlord’s approval for Tenant to commence construction of such work, provided that: (i) Tenant shall perform such work in substantial conformance with Schedule 1, (ii) Landlord shall have received written notification from Tenant of its selection of a general contractor for such work, and (iii) Tenant has otherwise secured all necessary governmental approvals and obtained required certificates of insurance from the contractor(s) performing such work. The foregoing notwithstanding, Landlord’s approval, if any, of Tenant’s space plans for the Third Expansion Premises shall not relieve Tenant of its responsibility and obligation to submit final Plans for the Third Expansion Premises to Landlord, and obtain Landlord’s written approval as required by this Exhibit B-3. Tenant shall thereafter assure that the architect promptly prepares final Plans to be used to complete construction in the Third Expansion Premises in substantial conformance with the space plans approved by Landlord.

4. Tenant will cause such work (the “Work”) to be performed in a good and workmanlike manner and in accordance with the Plans. Landlord shall provide such cooperation as Tenant may reasonably request in connection with all aspects of the Work, provided that the additional cost of such cooperation, if any, shall be paid to Landlord out of the Construction Credit.

5. Tenant and Landlord agree that Tenant shall select, in Tenant’s sole discretion, a general contractor to perform the Work from the following list of Landlord approved general contractors:

(a) Provident Constructors;

(b) CSI, Inc.; or

(c) DSP General Contractors.

6. Landlord shall pay the Construction Credit to Tenant, or any applicable portion thereof, within twenty (20) days of Tenant’s presentation to Landlord of Tenant’s contractor’s invoice(s) for Work performed, together with appropriate lien waivers for such Work (or portion of Work) and written approval of the payment application by the architect.

7. Any work performed by Tenant in excess of the Construction Credit shall be at Tenant’s sole cost and expense and shall also be subject to Landlord’s advance written approval of plans and specifications, unless such Work was included in the Plans previously approved by Landlord as described in this Exhibit B-3.

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8. Failure by Tenant to complete the tenant finish improvements shall not relieve Tenant of its duty to pay rent and perform its obligations under the Lease.

9. Tenant shall be responsible for assuring that any alterations, modifications or improvements made by Tenant to the Premises shall comply with the Americans With Disabilities Act of 1990 (“ADA”), including all alterations, modifications or improvements required: (a) as a result of Tenant (or any subtenant, assignee or concessionaire) being a Public Accomodation (as such term is defined in the ADA); (b) as a result of the Premises being a Commercial Facility (as said term is defined in the ADA); (c) as a result of any leasehold improvements, alterations or additions made to the Premises by or on behalf of Tenant or any subtenant, assignee or concessionaire (whether or not Landlord’s consent to such leasehold improvements or alterations was obtained); or, (d) as a result of the employment by Tenant (or any subtenant, assignees or concessionaire) of any individual with a disability, including but not limited to the acquisition and installation of any auxiliary aids.

10. Landlords agrees to deliver to Tenant, and Tenant agrees to accept from Landlord, possession of the Third Expansion Premises upon substantial completion. The terms “substantial complete” and “substantially completed” mean that construction of the Work is sufficiently completed in accordance with the Plans, as modified by any change orders agreed to by the parites, so that Tenant can occupy the Third Expansion Premises for the use for which it was intended. Landlord agrees to deliver and Tenant agrees to accept from Landlord possession of the Fourth Expansion Premises on the scheduled Fourth Expansion Premises Commencement Date.

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SCHEDULE 1 TO EXHIBIT B-3

Satellite Dish License Agreement

THIS SATELLITE DISH LICENSE AGREEMENT (the “License”), is made and entered into this      day of May 2003, by and between ST. PAUL PROPERTIES, INC., a Delaware corporation (“Licensor”), and THE TRIZETTO GROUP, INC., a Delaware corporation (“Licensee”).

WITNESSETH

WHEREAS, Licensor and Licensee are parties to that certain Lease Agreement dated as of April 26, 1999, as amended by that certain Lease commencement letter signed by Landlord on September 9, 1999, and by Tenant on September 7, 1999, by that certain First Modification and Ratification of Lease entered into effective November 1, 1999, by that certain Second Modification and Ratification of Lease entered into effective December 27, 1999, by that certain Third Modification and Ratification of Lease entered into effective January 15, 2000, by that certain Fourth Modification and Ratification of Lease entered into effective October 15, 2000, by that certain Fifth Modification and Ratification of Lease entered into effective October 31, 2002, and by that certain Sixth Modification and Ratification of Lease entered into effective May 19, 2003 (hereafter collectively the “Lease”), for the rental of certain commercial real property located in the Building known as Atrium I, 6061 S. Willow Drive, Englewood, Colorado (the “Building”), and more particularly described in the Lease (the “Premises”); and

WHEREAS, Licensee wants to locate one (1) satellite dish antenna on the roof of the Building on a temporary basis; and

WHEREAS, Licensor is willing to permit the same upon the following terms and conditions.

NOW, THEREFORE, in consideration of the premises, and other and good and valuable consideration, the amount and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Grant of License. Licensor grants to Licensee a non-exclusive, revocable license for the term of seventy-two (72) months, as described in Section 3 below, for the purpose of installing, maintaining and operating one (1) satellite dish antenna (the “Dish”), on a portion of the roof of the Building (“Roof”), the actual location to be agreed to by Licensor and Licensee (the “Roof Space”). Licensee will not use the Roof Space for any other purpose other than the operation of a satellite dish for Tenant’s sole use and not for any resale to third parties. Licensor specifically reserves the right, among others, to grant additional licenses to others for installation and use of antennae on and in the Building.

2. Installation. Licensee is permitted to install one (1) satellite dish antenna with a non-penetrating base mount (the “Base”) measuring not more than three feet by three feet (3‘x3’) on which the Dish will be erected on the Roof Space. Licensee must install the Dish in accordance

with the specifications, and according the rules and regulations imposed by Licensor for the installation of the Dish. The diameter of the Dish may not exceed twenty-four inches (24”) and the combined weight of the Base and the Dish shall not exceed one hundred pounds (100 lbs). All installation, maintenance and removal expenses will be at Licensee’s sole cost and expense. Installation expenses include all incremental costs related to repairing or replacing the Roof in conjunction with any damage caused by such installation. Prior to commencing the installation of the Base, Dish and any related equipment, conduits, cables and materials to be located on the Roof Space, or in other parts of the Building (collectively the “Related Equipment”), Licensee must submit plans and specifications for installation of the Base, the Dish and the Related Equipment to Licensor for review and approval. The plans and specifications must include load factor, electrical platforms, leading to the Dish, grounding conforming to the Building’s lightning protection system, plenum-rated cabling, and any other specifications as Licensor may require. If Licensor finds it necessary to hire structural, mechanical, roofing and/or other engineers or consultants to review the plans and specifications, Licensor shall first notify Licensee and Licensee will reimburse Licensor for the reasonable costs thereof, whether or not Licensor grants such approval of such plans and specifications. In addition, to the License Fee, Licensee will pay for all utilities required to install, maintain, operate and remove the Dish and Related Equipment, as well as the reasonable costs of any engineers or consultants employed by Licensor to review or monitor the same. Licensee acknowledges that access to the Roof Space and Related Equipment areas, including the telephone and electrical closets, shall be limited to ingress and egress through what may be a secured area of the Building. Tenant, its agents, employees and invitees agree to be accompanied at all times by Landlord’s designated representative when access to the Roof Space or Related Equipment areas is necessary for purposed of installation, repair and maintenance. Licensee shall make every effort to minimize the number of service calls made to the Roof Space or Related Equipment areas and agrees to enter such only for the required maintenance or in case of an emergency. The Related Equipment to be installed in the telephone and electrical closets will consist of wall-mounted telecommunications electronics in a box (the “Electrical Equipment”). The contractor which performs the installation work for the Base, Dish, Related Equipment and Electrical Equipment must maintain insurance coverage with an insurer and in types and amounts reasonably acceptable to Licensor. Licensee agrees that Licensor may, at its sole discretion, require certain aesthetic specifications concerning the appearance of the Dish, the Base and any Related Equipment and the height of any tower on which the Dish is mounted. Prior to the installation of the Dish, Base, Related Equipment and/or Electronic Equipment, Licensee must first secure and at all times thereafter maintain all required approvals and permits of the Federal Communications Commission and all other governmental bodies having jurisdiction over its business, including its communications, operations and facilities. Licensee acknowledges that access to the Roof Space and Related Equipment areas shall be limited to ingress and egress through what may be a secured area of the Building. Tenant, its agents, employees and invitees agree to be accompanied at all times by Landlord’s designated representative when access to the Roof Space or Related Equipment areas is necessary for purposed of installation, repair and/or maintenance. Licensee shall efforts to minimize the number of service calls made to the Roof Space or Related Equipment areas and agrees to enter such only for required maintenance or repair, or in case of an emergency.

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3. Term. Licensee’s right to use the Roof Space shall be free of charge during the term of this License for such use and commences on May 1, 2003 and will terminate on the scheduled termination date, or earlier termination, of the term of the Lease (the “Term”). Licensor may terminate this License Agreement upon written notice to Licensee, in the event that: (a) Licensee defaults in the performance of any of the obligations imposed upon it hereunder or under the Lease and does not, after being notified by Licensor of the existence of such default, immediately take all reasonable steps to cure the same; (b) it is determined that such installation or use materially interferes with the operation of machinery and apparatus of the Building, such as the elevators; (c) it is found by public authority having jurisdiction over the Building that the installation or use constitute a nuisance or hazard to the public or to the occupants of the Building; or (d) the use of such Dish interferes with the use of any tenant’s equipment or data processing machines in the Building; or (e) the use of such Dish interferes with any satellite dish or antennae of any existing or future tenant or licensee of the Building. Upon termination of this License Agreement, Licensee shall, at its sole cost and expense, remove the Dish, Base and Related Equipment and return the Roof Space to the condition existing prior to Licensee’s installation.

4. License Fee. [Intentionally Deleted]

5. Permits. Before commencing installation or removal of the Base, Dish and/or Related Equipment, Licensee, will, at Licensee’s own cost and expense, obtain all permits including building permits for same and deliver copies of them to Licensor. Licensor makes no representations or warranties with respect to the zoning or any other approval. If Licensee cannot obtain the necessary permits or they affect the building or the Roof Space in any way by means of additional requirements then the License shall be deemed null and void and of nor further force and effect, unless Licensor in writing waives the conditions set forth herein.

6. Repair and Maintenance of Dish and Related Equipment. Licensee agrees to keep and maintain the Base, Dish, electrical Equipment and the Related Equipment in good condition and repair, at its sole expense, in a manner that does not conflict or interfere with the use of other facilities installed in the Building or on the Roof. Further, Licensee agrees that it will not damage or permit damage to the Roof or the Building in conjunction with the Dish and the Related Equipment. All transmitters must be equipped with any transmitter isolator device necessary to minimize spurious radiation. Licensee agrees that the Dish and Related Equipment will be of types and frequencies that do not cause interference with other equipment or operations in the Building or surrounding areas. If the Dish, Electrical Equipment or the Related Equipment causes interference, Licensee will take all steps necessary to correct and eliminate the interference. Notwithstanding anything to the contrary set forth in the default section of the Lease, if the interference is not eliminated within eight (8) hours after Licensee receives’ Licensor’s notice of such interference Licensee will be liable for all of Licensor’s and any other licensee’s actual damages resulting therefrom and will temporarily disconnect and shut down the Dish (except for intermittent operation for purpose of correcting the interference) until the interference is eliminated. No abatement of Fees for the period during which the Dish is shut down will be given because of such interference. If Licensee fails to cease operations at the request of Licensor, Licensor will be entitled to injunctive relief, without the requirement of posting a bond, and the cost of obtaining such relief, including attorney’s fees, will be paid by

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Licensee. Landlord makes no warranty that the Roof Space is suitable for the Dish or that it will perform according to the Licensee’s requirements.

7. Indemnification. Licensee will indemnify Licensor, its agents, employees, officers, directors, shareholders, partners, attorneys, and assigns and hold them harmless from any and all demands, claims causes of action, fines, penalties, damages (including consequential and incidental damages) losses, liabilities, judgments, and expenses (including without limitation attorneys’ fees and court costs), arising from: (a) Licensee’s installation, use, operation, or maintenance of the Dish, Electrical Equipment or Related Equipment or exercise of the license granted hereunder, or by any person or entity claiming under Licensee (including but not limited to any such claims or damages related to radio wave or microwave transmissions or radiation): (b) any activity, work, or thing done or permitted by Licensee in or about the Roof Space, the Building, or in any area related to this license (c) any acts, omissions, or negligence of License or any person or entity claiming under Licensee or the employees, agents, contractors, invitees, or visitors of Licensee or any such person; (d) any breach, violation, or nonperformance by Licensee or any person or entity claiming under Licensee or the employees, agents, contractors, invitees, or visitors of licensee or any such person of any term, covenant, or provision of this License, or the Lease, or any law ordinance, or governmental requirement of any kind; or (e) any injury or damage to the person, property or business of Licensee, its employees, agents, contractors, invitees, visitors or any other person entering upon the Roof Space, or the Building, under the express or implied invitation of Licensee. If any action or proceeding is brought against Licensor, its employees, or agents, by reason of any such claim, Licensee, upon notice from Licensor, will defend the claim at Licensee’s sole cost and expense with counsel reasonably satisfactory to Licensor. Unless caused by the gross negligence or intentional misconduct of Licensor, Licensee shall neither hold nor attempt to hold Licensor liable for any injury or damage, either proximate or remote, occurring through or caused by any injury or accident to the Dish, Base, Related Equipment or Electrical Equipment, or arising from the Roof Space or other parts of the Building, or for any injury or damage occasioned by gas, smoke, rain, snow, wind, ice, hail, lightning, earthquake, war civil disorder, strike, defective electrical wiring or the breaking or stoppage of plumbing.

8. Compliance with Laws. Licensee will, at Licensee’s sole cost and expense, comply with all applicable laws, rules, regulations, statutes, or other requirements of any kind or nature of any municipal, state and federal governmental or quasi-governmental authority or the requirement of Licensor’s insurance underwriters relating to the installation, maintenance, height, location, use, operation, and removal of said Dish and Related Equipment.

9. Licensor’s Default. Licensor shall not be in default under this License unless Licensor fails to perform any required obligation for at least thirty (30) days after written demand specifying the exact nature of the obligation that Licensor allegedly has failed to perform. If the nature of Licensor’s obligation is such that more than thirty (30) days is reasonably required for performance, then Licensor will not be in default if Licensor promptly begins performance within such thirty (30) day period and pursues it diligently and continuously to completion.

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10. Limitation of Licensor’s Liability. The obligations of Licensor under this License Agreement do not constitute personal obligations of Licensor or of Licensor’s property management or leasing agents, nor of the individual partners, directors, officers, shareholders or employees of Licensor, or Licensor’s property management or leasing agents, and Licensee shall look solely to the real estate that is the subject of this License and to no other assets of Licensor or Licensor’s property management or leasing agents for satisfaction of any liability in respect, directly or indirectly, of this License and this Licensee will not seek recourse against Licensor or Licensor’s property management agent, or the individual partners, directors, officers, shareholders or employees of Licensor or Licensor’s property management agent, or any of the personal assets of any of them, other than the real estate which is the subject of this License, for such satisfaction or for any deficiency judgment should Licensee be unable to satisfy any liability owed to it.

11. Amendment. This License constitutes the entire agreement between the parties with respect to its subject matter and shall not be amended or modified in any manner except in writing signed by both parties.

12. Construction of License. This License shall be construed according to the laws of the state of Colorado. All terms and provisions contained in this License have been freely negotiated by the parties in good faith after mutual discussion, and shall be interpreted and construed as having been drafted by and for the benefit of all parties. LICENSOR HAS ADVISED LICENSEE TO CONSULT WITH LEGAL COUNSEL REGARDING THE LEGAL EFFECT OF THIS LICENSE. IF LICENSEE FAILS TO DO SO, LICENSEE ASSUMES ALL RISKS OF ANY LEGAL CONSEQUENCES ARISING PURSUANT TO THE TERMS OF THIS LICENSE. EACH TERM AND EACH PROVISION HEREIN HAS BEEN SEPARATELY NEGOTIATED AND AGREED UPON BY BOTH PARTIES. Paragraph headings have been inserted for convenient reference only, and shall not limit, expand or otherwise alter the provisions of this License.

13. Addresses for Notification. All notices to either party shall be in writing, and delivered by U.S. Certified Mail, return receipt requested, by overnight delivery service, by hand delivery or by facsimile transmission addressed to Landlord or Tenants as follows:

St. Paul Properties, Inc.

c/o JCA Property Management

6061 South Willow Drive, Suite 210

Englewood, Colorado 80111

Facsimile: (303) 694-4992

Facsimile:

IN WITNESS WHEREOF, Licensor and Licensee have executed this License the day and year first written above.

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LICENSOR
ST. PAUL PROPERTIES, INC., a Delaware corporation
By:	/s/ R. William Inserra
Name:	R. WILLIAM INSERRA
Title:	V.P. ASSET MANAGEMENT

LICENSEE:
THE TRIZETTO GROUP, INC. a Delaware corporation
By:	/s/ Michael J. Sunderland
Name:	Michael J. Sunderland
Title:	Senior VP, CFO

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EX-10.18

EXHIBIT 10.18

SEVENTH MODIFICATION AND RATIFICATION OF LEASE

THIS SEVENTH MODIFICATION AND RATIFICATION OF LEASE (this “Modification”) is made and entered into effective the 12^th day of April 2004, by and between ST. PAUL PROPERTIES, INC., a Delaware corporation (“Landlord”), and THE TRIZETTO GROUP, INC., a Delaware corporation (“Tenant”).

WITNESSETH:

WHEREAS, Landlord and Tenant entered into that certain Office Lease dated as of April 26, 1999, as amended by that certain Lease commencement letter signed by Landlord on September 9, 1999, and by Tenant on September 7, 1999, by that certain First Modification and Ratification of Lease entered into effective November 1, 1999, by that certain Second Modification and Ratification of Lease entered into effective December 27, 1999, by that certain Third Modification and Ratification of Lease entered into effective January 15, 2000, by that certain Fourth Modification and Ratification of Lease entered into effective October 15, 2000, by that certain Fifth Modification and Ratification of Lease entered into effective October 31, 2002, and by that certain Sixth Modification and Ratification of Lease entered into effective May 19, 2003 (hereafter collectively the “Lease”), for the rental of certain commercial real property located in the Building known as Atrium I, 6061 S. Willow Drive, Englewood, Colorado, and more particularly described in the Lease as: Suites 310 and 300, containing collectively approximately 47,385 rentable square feet (the “Premises” and “Expansion Premises” respectively, which may be collectively referred to herein as the “Premises”); Suite 233, containing approximately 4,805 rentable square feet (the “Second Expansion Premises”); Suites 217, 235 and 250 containing collectively 13,077 rentable square feet (the “Third Expansion Premises); and Suites 230 and 260 containing collectively 4,624 rentable square feet (the “Fourth Expansion Premises”); and

WHEREAS, Tenant desires to further expand the Premises beginning on or about July 1, 2004, through the addition of Suite 100 containing approximately 5,586 rentable square feet (here the “Fifth Expansion Premises”), as depicted in greater detail in Exhibit A-5 attached hereto and incorporated by reference; and

WHEREAS, Landlord is willing to modify the Lease to accommodate such desires, subject to the terms and conditions of this Modification and Landlord and Tenant desire to amend the Lease to reflect the addition of the Fifth Expansion Premises, and the increase in Base Rent payable under the Lease.

NOW, THEREFORE, in consideration of the foregoing, the agreements and undertakings of the parties, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Definitions. All capitalized terms used herein not otherwise defined in this Modification shall have the meanings given them in the Lease.

2. Incorporation of Recitals. The foregoing recitals are incorporated herein and made a part hereof as if set forth in their entirety.

3. Additional Premises. Effective on July 1, 2004 (the “Fifth Expansion Premises Commencement Date”), Landlord shall lease to Tenant and Tenant shall lease from Landlord the Fifth Expansion Premises. Landlord and Tenant acknowledge that all or a portion of the Fifth Expansion Premises shall be used by Tenant as a data/computing center. In addition the identification of the Leased Premises in Section 1.03(B) of the Lease is hereby further amended by adding immediately after the description of the Fourth Expansion Premises the following:

FIFTH EXPANSION PREMISES:

The following portions of the first floor of the Building outlined on Exhibit A-5: Suite 100 containing approximately 5,586 rentable square feet.

4. Fifth Expansion Premises Commencement Date. Section 1.03(D) of the Lease is hereby amended by adding immediately after the description of the commencement date of the Lease the following:

The Fifth Expansion Premises Commencement Date shall be July 1, 2004.

The foregoing notwithstanding, Landlord agrees to permit Tenant and its agents to enter the Fifth Expansion Premises prior to the commencement date to prepare the Fifth Expansion Premises for Tenant’s use and occupancy, which permission shall constitute a license only and shall be conditioned upon Tenant’s compliance with all other terms and conditions as set forth in this Lease, including but not limited to: (i) satisfaction with Tenant’s insurance requirements under this Lease; (ii) obtaining in advance Landlord’s approval of the contractors proposed to be used by Tenant for performing any work within the Fifth Expansion Premises and depositing with Landlord lien waivers from any such contractors and furnishing Landlord with evidence of insurance held by any such contractor in such amounts and for such coverages as Landlord may reasonably require against liabilities that may arise out of such entry. Landlord shall not be liable in any way for any injury, loss or damage which may occur to any Tenant’s property or installations in the Fifth Expansion Premises prior to the Fifth Expansion Premises Commencement Date, except to the extent that any such claims are the result of Landlord’s willful misconduct or gross negligence. Tenant shall protect, defend, indemnify and save harmless Landlord from all liabilities, costs, damages, fees and expenses arising out of the activities of Tenant or its agents, contractors, suppliers or workmen in the Fifth Expansion Premises or the Building.

5. Tenant’s Proportionate Share. Section 1.03(J) of the Lease is amended effective on the Fifth Expansion Premises Commencement Date by adding immediately after the description of the Tenant’s Proportionate Share under the Lease for the Premises the following:

Tenant’s Proportionate Share for the Fifth Expansion Premises shall be 4.18%.

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6. Security Deposit. Section 1.03(K) of the Lease is hereby amended by increasing the security deposit under the Lease in the additional amount of Seven Thousand Six Hundred Eighty and 75/100 US Dollars ($7,680.75), for a total security deposit of One Hundred Forty-Eight Thousand One Hundred Forty-Two and 77/100 US Dollars ($148,142.77), which additional amount shall be payable to Landlord upon execution of this Modification.

7. Parking Spaces. Effective on the Fifth Expansion Premises Commencement Date, Section 1.03(O) of the Lease is deleted in its entirety, as amended, and is replaced with the following:

Commencing on the Fifth Expansion Premises Commence Date, and in connection with its occupancy of the Premises, Expansion Premises, Second Expansion Premises, Third Expansion Premises, Fourth Expansion Premises, and Fifth Expansion Premises, Tenant shall be entitled to the non-exclusive use of a maximum of two hundred and forty-eight (248) parking spaces in the Building parking areas at no charge during the Term of the Lease expiring on July 31, 2009. Landlord, with reasonable advance notice, reserves the right to strictly enforce the number of parking spaces utilized by Tenant during the term of this Lease based upon a parking ration of 3.3 parking spaces per 1,000 rentable square feet Landlord further reserves the right to assign and reassign (with the exception of Tenant’s reserved parking spaces described below), from time to time and on a non-discriminatory basis, particular parking spaces for use by persons selected by Landlord, and to issue and implement non-discriminatory rules and regulations with respect to parking spaces for the Building, provided that Tenant’s rights to the number of parking spaces designated herein are preserved. Within the foregoing parking allowance, Tenant shall be entitled to the use of a total of ten (10) covered reserved parking spaces in those areas designated by Landlord for such spaces as of the date of this Modification, at no charge during the initial Term of the Lease.

8. Operating Expenses. Section 2.02 of the Lease, as previously amended, shall be further amended effective on the date of this Modification by adding to the first sentence thereof after the phrase “Fourth Expansion Premises” the phrse “and Fifth Expansion Premises”. In addition, the schedule of base years to be used to calculate excess expenses incorporated into the Sixth Modification and Ratification of Lease shall be amended by adding thereto the following:

Identification of Premises	Rentable Square Feet	Lease Period	Base Year
Fifth Expansion Premises	5,586	7/1/04-7/31/09	2004

Landlord and Tenant acknowledge that all electricity service to the Fifth Expansion Premises shall be separately metered (with Tenant to install the meter as part of its tenant improvements), and Tenant shall pay Landlord separately for the cost of all electrical usage within the Fifth Expansion Premises. In addition, Tenant shall be solely responsible for any extraordinary costs incurred by Landlord for repair, maintenance or replacements in or around the Fifth Expansion Premises when such extraordinary costs are a result of Tenant’s specific use

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of the Fifth Expansion Premises as a data/computing center, provided that Landlord shall provide Tenant with notice of any such extraordinary costs promptly upon its identification of such costs in order to provide Tenant with the opportunity to mitigate or address such costs, except in the event of an emergency, when no such notice shall be required.

If during any calendar year of this Lease, the occupancy of the Building averages less than one hundred percent (100%), it is agreed that the Operating Expenses that vary depending upon occupancy shall be computed as though the Building had been 95% occupied for such calendar year. If Landlord recovers in excess of 100% of its Operating Expenses that vary depending upon occupancy during any calendar year of this Lease, Landlord shall credit against Tenant’s next ensuing monthly installment or installments of the rent an amount equal to Tenant’s Proportionate Share of such excess until the credit is exhausted, or if the term of the Lease has expired refund to the Tenant the Tenant’s Proportionate Share of such excess.

9. Base Rent. Section 1.03(H) of the Lease entitled Base Rent, and Section 1.03(I) of the Lease entitled Monthly Installments of Base Rent, are hereby amended by adding the following:

Fifth Expansion Premises Base Rent. In addition to the Base Rent payable with respect to the Premises, the Expansion Premises, the Second Expansion Premises, the Third Expansion Premises, and the Fourth Expansion Premises, beginning on the Fifth Expansion Premises Commencement Date Tenant shall also pay Base Rent for the Fifth Expansion Premises, payable monthly in advance, without demand, deduction or set-off, in accordance with the following schedule:

Period	Rentable Square Feet	Lease Rate	Annual Payment	Monthly Payment
(7/1/04-6/30/05)	5,586	$14.50/rsf/year	$80,997.00	$6,749.75
(7/1/05-6/30/06)	5,586	$15.00/rsf/year	$83,790.00	$6,982.50
(7/1/06-6/30/07)	5,586	$15.50/rsf/year	$86,583.00	$7,215.25
(7/1/07-6/30/08)	5,586	$16.00/rsf/year	$89,376.00	$7,448.00
(7/1/08-7/31/09)	5,586	$16.00/rsf/year	$92,169.00	$7,680.75

10. Tenant Improvements. Landlord agrees to provide Tenant with an allowance for construction by Tenant of certain tenant improvements to be incorporated into the Fifth Expansion Premises, in the amount of Eighty-Three Thousand Seven Hundred Ninety and No/100 US Dollars ($83,790.00) (the “Construction Credit”) (which Construction Credit is calculated based upon $15.00 per rentable square foot of the Fifth Expansion Premises), which Construction Credit may be used by Tenant in the manner set forth in Exhibit B-4, attached to this Modification and incorporated by reference. Landlord shall be paid a construction management supervisory fee out of the Construction Credit equal to one percent (1%) of the hard construction costs of the tenant improvements to be constructed by Tenant, specifically

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excluding architectural fees, project management fees, permitting, cabling, furniture, fixtures and equipment. Landlord’s construction management fee shall be invoiced by and paid to Landlord based upon the invoices submitted by Tenant for reimbursement from Landlord and shall be paid out of the Construction Credit. Any portion of the Construction Credit not used by tenant by December 31, 2004, shall revert back to Landlord. Landlord, as its option (which option must be exercised, if at all, at the time that landlord grants its written approval to Tenat’s proposed final construction Plans in the manner described in Exhibit B-4) may require Tenant to remove any physical additions and/or repair any alterations made pursuant to this paragraph or Exhibit B-4, including but not limited to low voltage communications and data cabling, in order to restore the subject portion of the leased premises to the condition existing at the time prior to the commencement of such work, all costs of removal and/or alterations to be borne by Tenant. In addition and subject to Tenant’s rights to relocate such equipment as provided in the Sixth Modification and Ratification of Lease, Tenant shall have the right, at Tenant’s sole cost and expense, to use the following equipment and personal property of the Landlord located within the Fifth Expansion Premises: the UPS unit: two (2) 6-ton Liebert computer room cooling units;and, the raised computer room flooring (“Landlord’s Equipment”). Landlord makes no representation or warranty to Tenant with respect to Landlord’s Equipment, and Tenant agrees to take and use Landlord’s Equipment in its current “as-is” condition and repair, and in the event that Tenant elects to use Landlord’s Equipment Tenant shall be solely responsible for all costs of maintaining and repairing Landlord’s Equipment during Term of the Lease as determined by Tenant. In the event that Tenant elects not to use Landlord’s Equipment at any time during the Term of the Lease, Tenant may dispose of Landlord’s Equipment at Tenant’s sole cost and expense. On termination of the Lease, Tenant may dispose of or return Landlord’s Equipment in the condition it was provided to Tenant, normal wear and tear excepted. Subject to Tenant’s obligations to remove cabling and repair the Premises, and subjects to Landlord’s reasonable consent as to size, location and methods of the construction, Tenant may core drill the floor separating the first and second floors in those areas occupied by Tenant pursuant to the Lease for installation of power and communication cables. Furthermore, Tenant, at its sole cost and expense, and subject to the reasonable advance approval of the Landlord, and subject to all applicable laws, rules and regulations, including but not limited to the requirements of the Denver Technological Center Architectural Control Committee, may replace the existing Building emergency electrical generators with new, larger capacity generators provided that; (i) such new generators shall be and remain Tenant’s personal property, (ii) Tenant shall be responsible for removal of the existing emergency electrical generators, which generators are currently the personal property of Tenant (iii) in the event that such new generators utilize more space on the Building parking lots than the existing emergency electrical generators, any parking spaces lost as a result shall be deducted from the total number of parking spaces allocated to Tenant in Section 1.03(0), as amended; and (iv) Landlord may condition its approval of any changes or additions to (1) the concrete pads located under the emergency electrical and generators and (2) the enclosures and screening around such pads, an agreement by Tenant to remove such changes or additions and enclosures at the end of the term of the Lease, and to the extent set forth in the approval by Landlord provided prior to the commencement by Tenant of such changes or additions, Tenant shall remove such items, and in any event Tenant shall remove the emergency electrical generators and all associated equipment and wiring, and shall repair all damage to Landlord’s Property occasioned by all of such removal.

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11. Roof Space. In addition to the roof space granted to Tenant in the Sixth Modification and Ratification of Lease, and subject to Landlord and Tenant entering into a mutually acceptable modification to the existing Satellite Dish License Agreement for such use, Tenant shall have the right to install additional equipment on the roof of the Building; provided, further, that such use shall be subject to all laws, rules, regulations and code requirements, including but not limited to any screening requirements imposed as a condition of such use by the Denver Technological Center —Architectural Control Committee and the City of Greenwood Village, Colorado.

12. Right Of Offer to Lease - First Floor. Tenant’s Right of Offer contained in Paragraph 17 of the Sixth Modification and Ratification of Lease shall be deleted in its entirety and shall be replaced with the following right of first offer:

During the initial term of the Lease, as extended, and provided that Tenant is not in default beyond any applicable period of notice and cure and has not assigned the Lease nor subleased any portion of the Premises, the Expansion Premises, the Second Expansion Premises, the Third Expansion Premises, the Fourth Expansion Premises or the Fifth Expansion Premises, and subject to the limitations set forth in subparagraph 12(d) below, Tenant shall have a right of offer, subject to existing rights granted to other tenants as of the date of this Modification, to lease the vacant space located on the first (1^st) floor of the Building as shown in greater detail in Exhibit A-6 attached hereto and incorporated by reference (the “Offer Space”), if and when the Offer Space becomes “available for lease”. For purposes of this right of first offer, the Offer Space will be considered to be “available for lease” if (i) no bona fide written lease agreement is currently in force or effect with respect to such space, (ii) the space becomes vacant, or will become vacant, because an existing tenant’s lease has or will expire or be terminated with no renewal or extension options subject to being exercised with respect to such space, and (iii) Landlord makes the Offer Space available for leasing to others. Tenant’s right of first offer with respect to such Offer Space shall be upon the following terms and conditions:

(a) In the event that (i) the Offer Space, or any part thereof, becomes or is about to become available for lease as provided above, Landlord will notify Tenant of the rental terms on which it would be willing to lease the Offer Space to Tenant or to other third-parties, and Tenant shall have the right of first offer to lease that portion of the Offer Space identified in Landlord’s notice, subject to existing rights granted to other tenants as of the date of this Lease, at the rent and on the terms and conditions contained in Landlord’s notice.

(b) The right of offer will be exercised by Tenant signing a lease amendment with respect to the subject portion of the Offer Space at the rent and on the terms set forth in Landlord’s notice. Tenant shall accept or reject the offer contained in Landlord’s notice within five (5) business days after the receipt of Landlord’s notice. If an amendment incorporating the terms contained in Landlord’s notice is not signed within five (5) business days

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following receipt of Landlord’s notice, time being strictly of the essence, Landlord will have the right to lease the Offer Space free of the rights of Tenant under this Paragraph 12, and Tenant’s right of offer granted herein shall be null and void. Any space leased by Tenant will be added to the Leased Premises as of the date provided in the proposed amendment.

(c) Landlord is under no obligation to offer for lease all or any portion of the First Offer Space to Tenant or any other person.

(d) Notwithstanding any other provision set forth above, it is agreed that Tenant shall not be permitted to exercise any of its rights contained in this Paragraph 12 (i) at any time when the Lease is not in effect or at any time when an Event of Default exists, (ii) in the event that Tenant assigns the Lease or sublets any portion of the leased Premises at any time, (iii) Tenant may not exercise the right contained in this Paragraph 12 if the effective date of the addition of the Offer Space to the Premises previously leased would be at any time during the last thirty-six (36) months of the then existing term of the Lease, and (iv) Tenant may not exercise the right contained in this Paragraph 12 if Tenant does not have at the time of the exercise One Hundred Million US Dollars ($100,000,000) in total equity.

(e) In the event that Tenant fails to exercise the foregoing right of offer as provided in this Paragraph 12, time being strictly of the essence, Tenant’s right of offer shall be null and void.

(f) Tenant acknowledges that it is only being granted a right of offer that is subject and subordinate to the rights of any existing tenant with pre-existing rights of refusal, rights of offer, or options to lease, as of the date of this Lease.

(g) In no event shall Landlord be responsible for any brokerage commission for any real estate broker retained by Tenant with respect to this right of offer.

13. Real Estate Brokers. Each of the parties hereto hereby warrants and represents to the other party that it has not dealt with or been represented by any broker in connection with its execution of this Modification other than Landlord’s listing agent, Cushman & Wakefield of Colorado, Inc., acting as the limited agent of Landlord, and Frederick Ross Company, acting as the limited agent of Tenant. Tenant agrees to indemnify and hold Landlord harmless from and against any other claims for commissions or similar compensation from any other person claiming an entitlement to any such payment as a result of its representation of Tenant. In addition, Landlord agrees to indemnify and hold Tenant harmless from and against any claims for commissions or similar compensation from any other broker or person claiming an entitlement to any such payment as a result of its representation of Landlord.

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14. Performance of Obligations. Landlord and Tenant hereby confirm that with respect to the Construction Credit granted to Tenant in the Sixth Modification and Ratification of Lease entered into effective May 19, 2003, the total unused portion of that Construction Credit equals One Hundred Three Thousand Seventy-Four and 85/100 US Dollars ($103,074.85) hereafter the “Unused Construction Credit”), which Unused Construction Credit shall revert back to Landlord if not used or committed by Tenant to be applied to Base Rent or other charges coming due under the Lease (in the manner set forth in the Six Modification and Ratification of Lease) by January 31, 2005, being the date which is eighteen (18) months following the Third Expansion Premises Commencement Date Tenant. Tenant hereby acknowledges and confirms that, as of the date hereof, and except as expressly set forth above, Landlord has performed all obligations on the part of the Landlord under the Lease and that Tenant has no claims against Landlord or claims of offset against any rent or other sums payable by Tenant under the Lease.

15. Conflicts and Non-Amended Provisions. In the event of any express conflict or inconsistency between the terms of the Lease and the terms of this Modification, the terms of this Modification shall control and govern. In all other respects, the terms, covenants and conditions of the Lease are hereby ratified, reaffirmed and republished in their entirety.

16. No Offer. The submission of this Modification by Landlord to the Tenant is not an offer to modify or amend the Lease and is not effective until execution and delivery by both Landlord and Tenant.

17. Entire Agreement. This Modification contains the entire agreement between the parties as to its subject matter and supersedes any and all prior agreements, arrangements or understandings between the parties relating to the subject matter hereof.

18. Counterparts. This Agreement may be executed in a number of identical counterparts. If so executed, each of such counterparts is to be deemed an original for all purpose and all such counterparts shall collectively constitute one agreement, but in making proof of this Agreement it shall not be necessary to produce or account for more than once such counterpart. Execution of this Agreement by facsimile shall be effective to create a binding agreement pursuant to the terms of this Agreement, and, if requested, Landlord and Tenant agree to exchange original signed counterparts.

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IN WITNESS WHEREOF, the parties have entered into this Modification effective as of the date first set forth hereinabove.

Landlord:		Tenant:
ST. PAUL PROPERTIES, INC. a Delaware corporation		THE TRIZETTO GROUP, INC., a Delaware corporation
By:	/s/ Robert W. Cowley	By:	/s/ D. Brian Karr
Name:	Robert W. Cowley	Name:	D. Brian Karr
Title:	Sr. Asset Manager	Title:	VP Finance

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Exhibit A-5

EXHIBIT B-4

Provisions Relating to Construction of Tenant’s Premises

(Finish Allowance Only)

1. Landlord will provide Tenant with a construction credit in the sum of up to Eighty-Three Thousand Seven Hundred Ninety and No/100 US Dollars ($83,790.00) (the “Construction Credit”) (which Construction Credit is calculated based upon $15.00 per rentable square foot of space located within the Fifth Expansion Premises), which may be used only against the cost of design, permitting and construction by Tenant of Improvements or alterations permanently installed and incorporated in the realty of the Fifth Expansion Premises, project management fees and engineering fees, as contemplated under those certain plans and specifications and working drawing to be prepared by an architect selected by Tenant and which is reasonably acceptable to Landlord (the “architect”), and which plans, specifications and working drawing are to be initialed by Tenant and by Landlord for identification and approval (the “Plans”) (provided that Landlord will require the preparation of Plans only if such Plans are required to obtain any necessary building permits for the performance of work or alterations within the Fifth Expansion Premises).

2. Except as provided in Paragraph 3 below, The Plans shall be submitted to Landlord for its review and written approval prior to the initiation of construction activities within any portion of the Fifth Expansion Premises, which consent shall not be unreasonably withheld or delayed. For purposes of the Exhibit B-4 only, any Plans for tenant improvements to be submitted to Landlord for review and approval shall be delivered to Landlord by (i) hand delivery, with a signed delivery receipt therefor from the recipient, or (ii) delivered by registered and certified US mail, return receipt requested, and addressed to the following:

Cushman & Wakefield of Colorado, Inc.

6061 S. Willow Drive, Suite 105

Greenwood Village, Colorado 80111

Attn: Ms. Lisa Stanley

With a copy to:

Mr. Steve Schwab

Cushman & Wakefield of Colorado, Inc

633 Seventeenth Street, Suite 1700

Denver, Colorado 80202

Landlord shall review and approve all Plans submitted by Tenant (and all changes to such Plans, if any) as soon as practicable and in any event within five (5) business days of delivery of the Plans to Landlord’s representatives as identified above. If landlord fails to provide its written consent to the proposed Plans, or such reasonable reasons why it is withholding its consent, within five (5) business days after delivery of such Plans to Landlord, Landlord shall be deemed to have consented to and approved of such plans.

3. Tenant will cause such work (the “Work”) to be performed in a good and workmanlike manner and in accordance with the Plans. Landlord shall provide such cooperation as Tenant may reasonably request in connection with all aspects of the Work, provided that the additional cost of such cooperation, if any, shall be paid to Landlord out of the Construction Credit, including but not limited to the costs of Landlord’s construction management supervisory fee pursuant to Paragraph 10 of this Modification and the costs for engineering fees and consultants’ fees with respect to such Work.

4. Tenant and Landlord agree that Tenant shall select, in Tenant’s sole discretion, a general contractor to perform the Work from the following list of Landlord approved general contractors:

(a) Provident Constructors;

(b) CSI, Inc.; or

(c) DSP General Contractors.

5. Landlord shall pay the Construction Credit to Tenant, or any applicable portion thereof, within twenty (20) days of Tenant’s presentation to Landlord of Tenant’s contractor’s invoice(s) for Work performed, together with appropriate lien waivers for such Work (or portion of Work) and written approval of the payment application by the architect.

6. Any Work performed by Tenant in excess of the Construction Credit shall be at Tenant’s sole cost and expense and shall also be subject to Landlord’s advance written approval of plans and specifications, unless such Work was included in the Plans previously approved by Landlord as described in this Exhibit B-4.

7. Failure by Tenant to complete the tenant finish improvements shall not relieve Tenant of its duty to pay rent and perform its obligations under the Lease.

8. Tenant shall be responsible for assuring that any alterations, modifications or improvements made by Tenant to the Premises shall comply with the Americans With Disabilities Act of 1990 (“ADA”), including all alterations, modifications or improvements required: (a) as a result of Tenant (or any subtenant, assignee or concessionaire) being a Public Accommodation (as such term is defined in the ADA); (b) as a result of the Premises being a Commercial Facility (as said term is defined in the ADA); (c) as a result of any leasehold improvements, alterations or additions made to the Premises by or on behalf of Tenant or any subtenant, assignee or concessionaire (whether or not Landlord’s consent to such leasehold improvements or alterations was obtained); or, (d) as a result of the employment by Tenant (or any subtenant, assignees or concessionaire) of any individual with a disability, including but not limited to the acquisition and installation of any auxiliary aids.

9. Landlord agrees to deliver and Tenant agrees to accept from Landlord possession of the Fifth Expansion Premises on the scheduled Fifth Expansion Premises Commencement Date.

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EX-10.19

EXHIBIT 10.19

EIGHT MODIFICATION AND RATIFICATION OF LEASE

THIS EIGHTH MODIFICATION AND RATIFICATION OF LEASE (this “Modification”) is made and entered into effective the 7^th day of April 2006, by and between ST. PAUL PROPERTIES, INC., a Delaware corporation (“Landlord”), and THE TRIZETTO GROUP, INC., a Delaware corporation (“Tenant”).

WITNESSETH:

WHEREAS, Landlord and Tenant entered into that certain Office Lease dated as of April 26, 1999, as amended by that certain Lease commencement letter signed by Landlord on September 9, 1999, and by Tenant on September 7, 1999, by that certain First Modification and Ratification of Lease entered into effective November 1, 1999, by that certain Second Modification and Ratification of Lease entered into effective December 27, 1999, by that certain Third Modification and Ratification of Lease entered into effective January 15, 2000, by that certain Fourth Modification and Ratification of Lease entered into Effective October 15, 2000, by that certain Fifth Modification and Ratification of Lease entered into effective October 31, 2002, by that certain Sixth Modification and Ratification of Lease entered into effective May 19, 2003, by that certain Seventh Modification and Ratification of Lease entered into effective April 12, 2004 (hereafter collectively the “Lease”), for the rental of certain commercial real property located in the Building known as Atrium I, 6061 S. Willow Drive, Englewood, Colorado, and more particularly described in the Lease as: Suites 310 and 300, containing collectively approximately 47,385 rentable square feet (the “Original Premises” and “Expansion Premises” respectively, which may be collectively referred to herein as the “Original Premises”); Suite 233, containing approximately 4,805 rentable square feet (the “Second Expansion Premises”); Suites 217, 235 and 250 containing collectively 13,077 rentable square feet (the “Third Expansion Premises); and Suites 230 and 260 containing collectively 4,624 rentable square feet (the “Fourth Expansion Premises”), and Suite 100 containing approximately 5,586 rentable square feet (the “Fifth Expansion Premises”); and

WHEREAS, Tenant desires to extend the term of the Lease for a period eighty-four (84) months, from July 31, 2009, to and including July 31, 2016, on the terms and conditions set forth in greater detail in this Modification; and

WHEREAS, Tenant desires to further expand the Premises beginning on or about April 14, 2006, through the addition of Suites 115, 120, 125, 150, and 232 in the Building containing approximately 50,862 rentable square feet (hereafter the “Sixth Expansion Premises”), as depicted in greater detail in Exhibit A-7 attached hereto and incorporated by reference, on the terms and conditions set forth in greater detail in this Modification; and

WHEREAS, Landlord is willing to modify the Lease to accommodate such desires, subject to the terms and conditions of this Modification and Landlord and Tenant desire to amend the Lease to reflect the extension of the Lease Term, the addition of the Sixth Expansion Premises, and the increase in Base Rent payable under the Lease.

NOW, THEREFORE, in consideration of the foregoing, the agreements and undertakings of the parties, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Definitions. All capitalized terms used herein not otherwise defined in this Modification shall have the meanings given them in the Lease.

2. Incorporation of Recitals. The foregoing recitals are incorporated herein and made a part hereof as if set forth in their entirety.

3. Additional Premises. Effective on April 14, 2006 ( the “Sixth Expansion Premises Commencement Date”), Landlord shall lease to Tenant and Tenant shall lease from Landlord the Sixth Expansion Premises. In addition the identification of the Leased Premises in Section 1.03(B) of the Lease is hereby further amended by adding immediately after the description of the Fifth Expansion Premises the following:

SIXTH EXPANSION PREMISES:

The following portions of the first and second floors of the Building outlined on Exhibit A-7: Suites 115, 120, 125, 150, and 232 in the Building containing approximately 50,862 rentable square feet. Following the Sixth Expansion Premises Commencement Date (as such term is defined below) the Original Premises, Second Expansion Premises, Third Expansion Premises, Fourth Expansion Premises, Fifth Expansion Premises and Sixth Expansion Premises, shall collectively be referred to as the “ Premises”.

4. Sixth Expansion Premises Commencement Date. Section 1.03(D) of the Lease is hereby amended by adding immediately after the description of the commencement date of the Fifth Expansion Premises the following:

The Sixth Expansion Premises Commencement Date shall be April 14, 2006.

5. Termination Date. Section 1.03(F) of the Lease is hereby amended in its entirety by replacing the existing Termination Date of the Lease of July 31, 2009, with the following:

The Termination Date of the Lease for the Original Premises, Expansion Premises, Second Expansion Premises, Third Expansion Premises, Fourth Expansion Premises, Fifth Expansion Premises and Sixth Expansion Premises shall be July 31, 2016, unless sooner terminated as provided in this Lease.

6. Tenant’s Proportionate Share. Section 1.03(J) of the Lease is amended effective on the Sixth Expansion Premises Commencement Date by adding immediately after the description of the Tenant’s Proportionate Share under the Lease for the Premises the following:

Tenant’s Proportionate Share for the Sixth Expansion Premises shall be 38.06%.

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7. Security Deposit. Section 1.03(K) of the Lease is hereby amended by increasing the security deposit under the Lease in the additional amount of Forty-One Thousand Seven Hundred Forty-Nine and 23/100 US Dollars ($41,749.23), for a total security deposit of One Hundred Eighty-Nine Thousand Eight Hundred Ninety-Two and No/100 US Dollars ($189,892.00), which additional amount shall be payable to Landlord upon execution of this Modification.

8. Parking Spaces. Effective on the Sixth Expansion Premises Commencement Date, Section 1.03(O) of the Lease is deleted in its entirety, as amended, and is replaced with the following:

Commencing on the Sixth Expansion Premises Commencement Date, and in connection with its occupancy of the entirety of the Premises, Tenant shall be entitled to the non-exclusive use of a maximum of Four Hundred Seventeen (417) parking spaces in the Building parking areas at no charge during the Term of the Lease expiring on July 31, 2016. Landlord, with reasonable advance notice, reserves the right to strictly enforce the number of parking spaces utilized by Tenant during the term of this Lease based upon a parking ratio of 3.3 parking spaces per 1,000 rentable square feet. Landlord further reserves the right to assign and reassign (with the exception of Tenant’s reserved parking spaces described below), from time to time and on a non-discriminatory basis, particular parking spaces for use by persons selected by Landlord, and to issue and implement non-discriminatory rules and regulations with respect to parking spaces for the Building, provided that Tenant’s rights to the number of parking spaces designated herein are preserved. Within the foregoing parking allowance, Tenant shall be entitled to the use of a total of eleven (11) covered reserved parking spaces in those areas designated by Landlord for such spaces as of the date of this Modification, at no charge during the initial Term of the Lease.

9. Operating Expenses. Section 2.02 of the Lease, as previously amended, shall be further amended effective on the date of this Modification by adding to the first sentence thereof after the phrase “Fifth Expansion Premises” the phrase “and Sixth Expansion Premises”. In addition, the schedule of base years to be used to calculate excess expenses incorporated into the Sixth Modification and Ratification of Lease shall be amended by adding thereto the following:

Identification of Premises	Rentable Square Feet	Lease Period	Base Year
Sixth Expansion Premises	50,862	4/14/06-7/31/16	2004

10. Base Rent. Section 1.03(H) of the Lease entitled Base Rent, and Section 1.03(I) of the Lease entitled Monthly Installments of Base Rent, are hereby amended by adding the following:

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(a) Original Premises, Expansion Premises, Second Expansion Premises, Third Expansion Premises, Fourth Expansion Premises, and Fifth Expansion Premises Base Rent. In addition to all other Base Rent to be paid by Tenant under the Lease for the Original Premises, Expansion Premises, Second Expansion Premises, Third Expansion Premises, Fourth Expansion Premises, and Fifth Expansion Premises, Tenant shall also pay Base Rent for said Original Premises, Expansion Premises, Second Expansion Premises, Third Expansion Premises, Fourth Expansion Premises, and Fifth Expansion Premises during the extended lease term, payable monthly in advance, without demand, deduction or set-off, in accordance with the following schedule:

Period	Rentable Square Feet	Lease Rate		Annual Payment		Monthly Payment
(8/1/09 – 7/31/10)	75,477	$	19.00/rsf/year	$	1,434,063.00	$	119,505.25
(8/1/10 – 7/31/11)	75,477	$	19.50/rsf/year	$	1,471,801.56	$	122,650.13
(8/1/11 – 7/31/12)	75,477	$	20.00/rsf/year	$	1,509,540.00	$	125,795.00
(8/1/12 – 7/31/13)	75,477	$	21.00/rsf/year	$	1,585,017.00	$	132,084.75
(8/1/13 – 7/31/14)	75,477	$	22.00/rsf/year	$	1,660,494.00	$	138,374.50
(8/1/14 – 7/31/15)	75,477	$	23.00/rsf/year	$	1,735,971.00	$	144,664.25
(8/1/15 – 7/31/16)	75,477	$	24.00/rsf/year	$	1,811,448.00	$	150,954.00

(b) Sixth Expansion Premises Base Rent. In addition to the Base Rent payable with respect to the Original Premises, the Expansion Premises, the Second Expansion Premises, the Third Expansion Premises, the Fourth Expansion Premises, beginning on the Sixth Expansion Premises Commencement Date Tenant shall also pay Base Rent for the Sixth Expansion Premises, payable monthly in advance, without demand, deduction or ser-off, in accordance with the following schedule:

Period	Rentable Square Feet	Lease Rate		Annual Payment		Monthly Payment
(4/14/06 – 7/31/07)	50,862	$	16.70/rsf/year	$	849,395.40	$	70,782.95	*
(8/1/07 – 7/31/08)	50,862	$	17.20/rsf/year	$	874,826.40	$	72,902.20
(8/1/08 – 7/31/09)	50,862	$	17.70/rsf/year	$	900,257.40	$	75,021.45
(8/1/09 – 7/31/10)	50,862	$	18.20/rsf/year	$	925,688.40	$	77,140.70

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(8/1/10 – 7/31/11)	50,862	$18.70/rsf/year	$	951,119.40	$	79,259.95
(8/1/11 – 7/31/12)	50,862	$19.70/rsf/year	$	1,001,981.40	$	83,498.45
(8/1/12 – 7/31/13)	50,862	$21.00/rsf/year	$	1,068,102.00	$	89,008.50
(8/1/13 – 7/31/14)	50,862	$22.00/rsf/year	$	1,118,964.00	$	93,247.00
(8/1/14 – 7/31/15)	50,862	$23.00/rsf/year	$	1,169,826.00	$	97,485.50
(8/1/15 – 7/31/16)	50,862	$24.00/rsf/year	$	1,220,688.00	$	101,724.00

* (subject to proration for the partial month of April 2006)

11. Tenant Improvements. Tenant accepts the Sixth Expansion Premises in their current “as-is” condition and repair. The foregoing notwithstanding, Landlord agrees to provide Tenant with an allowance for construction by Tenant of certain tenant improvements to be incorporated into the Premises, in the amount of Two Hundred Ninety-Six Thousand Eight Hundred Eighty-Seven and 70/100 US Dollars ($296,887.70) (the “Construction Credit”), which Construction Credit may be used by Tenant in the manner set forth in Exhibit B-4, attached to this Modification and incorporated by reference. Landlord shall be paid a construction management supervisory fee out of the Construction Credit equal to one percent (1%) of the hard construction costs of the tenant improvements to be constructed by Tenant, specifically excluding architectural fees, project management fees, permitting, cabling, furniture, fixtures and equipment. Landlord’s construction management fee shall be invoiced by and paid to Landlord based upon the invoices submitted by Tenant for reimbursement from Landlord and shall be paid out of the Construction Credit. The Construction Credit shall be paid by Landlord to Tenant within thirty (30) days of mutual execution of this Modification. Landlord, at its option (which option must be exercised, if at all, at the time that Landlord grants its written approval to Tenant’s proposed final construction Plans in the manner described in Exhibit B-5) may require Tenant to remove any physical additions and/or repair any alterations made pursuant to this paragraph or Exhibit B-4, including but not limited to low voltage communications and data cabling, in order to restore the subject portion of the Premises to the condition existing at the time prior to the commencement of such work, all costs of removal and/or alterations to be borne by Tenant.

In addition to the foregoing, and provided that Tenant is not then in default of the Lease beyond any applicable period of notice and cure, on January 1, 2012, and following written request therefor from Tenant to Landlord, Landlord agrees to provide Tenant with a refurbishment allowance for construction by Tenant of certain tenant improvements to be incorporated into the Premises, in the amount of Two Hundred Fifty Thousand and No/100 US Dollars ($250,000.00) (the “Refurbishment Allowance”), which Refurbishment Allowance shall be used by Tenant subject to the provisions of Article 6.00 of the Lease. Any portion of the Refurbishment Allowance not used by Tenant for improvements to the Premises by December 31, 2012 shall revert back to, and shall be paid by Tenant to Landlord.

12. Right Of Offer To Lease – First Floor. Tenant’s Right of Offer contained in Paragraph 12 of the Seventh Modification and Ratification of Lease shall be deleted in its entirety.

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13. Extension Option. Provided no event of default (or no event which, with the passage of time or the giving of notice or both, would constitute an event of default under the Lease) has occurred and is continuing beyond any applicable period of notice and cure, and provided Tenant has not assigned the Lease or shall then have currently sublet all or any portion of the Premises, Tenant shall have one option to extend the term of this Lease for all of the Original Premises, Expansion Premises, Second Expansion Premises, Third Expansion Premises, Fourth Expansion Premises, Fifth Expansion Premises and Sixth Expansion Premises (but not for any separate part thereof) for an additional five (5) year term by giving the Landlord written notice at least twelve (12) months, but no more than eighteen (18) months, prior to the expiration of the then current term of this Lease. Upon the giving of such notice, this Lease shall be considered as extended for such option term upon the same terms, conditions and covenants as are contained in this Lease except that there shall be no additional extension options, Landlord shall not be obligated to provide Tenant with any tenant improvement allowance (except as otherwise specifically negotiated between Landlord and Tenant) and except that charges for parking and for after hours HVAC shall be calculated at the rates then being charged by Landlord to other tenants in the Building for such services and except that the base rent shall be calculated by multiplying the number of rentable square feet of the Premises by the then-fair-market-base-rental-value, which then-fair-market-base-rental-value shall be determined in the manner set forth below.

(a) Landlord and Tenant will have thirty (30) days after Landlord receives the Tenant’s notice of its intent to exercise any extension within which to agree on the then-fair-market-base-rental-value of the Premises. If they agree on the fair market base rent for the subject option period within thirty (30) days, they will amend this Lease by stating the new base rent for the option period.

(b) If Landlord and Tenant are unable to agree on the then-fair-market-base-rental-value of the Premises for the option period within thirty (30) days, then the base rent for the option period will be the then-fair-market-base-rental-value of the Premises as determined in accordance with subparagraph d below.

(c) The “then-fair-market-rental-value of the Premises” means what a landlord under no compulsion to Lease the Premises and a tenant under no compulsion to lease the Premises would determine as rents (including initial monthly rent and rental increases) for the option period, as of the commencement of the option period and determined according to recent market lease transactions in comparable buildings located in the market area of the Premises, taking into consideration the uses permitted under this Lease, the quality, size, design and location of the Premises, the credit-worthiness of the Tenant, allowances for rental abatement, moving and tenant finish, if any, and any other factor reasonably related to the determination of rental values.

(d) If Landlord and Tenant are unable to agree upon the then fair market base rental value of the Premises, within fifteen (15) days after the expiration of

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the thirty (30) day period set forth in subparagraph a. above, Landlord and Tenant will each appoint a commercial real estate broker with at lease ten (10) years’ full-time commercial experience in the area in which the Premises are located to determine the then-fair market rental value of the Premises. If either Landlord or Tenant does not appoint a commercial real estate broker within ten (10) days after the other has given notice of the name of its broker, the single broker appointed will be the sole appraiser and will set the then-fair market rental value of the Premises. If two commercial real estate brokers are appointed pursuant to this paragraph, they will meet promptly and attempt to set the then-fair market rental value of the Premises. If they are unable to agree within thirty (30) days after the second commercial real estate broker has been appointed, they will attempt to elect a third commercial real estate broker meeting the qualifications stated in this paragraph within ten (10) days after the last day the two commercial real estate brokers are given to set the then fair market rental value of the Premises. If they are unable to agree on a third commercial real estate broker, either Landlord or Tenant, by giving ten (10) days’ prior notice to the other, can apply to the then presiding judge of the District Court in and for the City and County of Denver for the selection of a third commercial real estate broker who meets the qualifications stated in this paragraph. Landlord and Tenant will bear one-half (1/2) of the cost of appointing the third commercial real estate broker and of paying the third commercial real estate broker’s fee. The third commercial real estate broker, however selected, must be a person who has not previously acted in any capacity for either Landlord or Tenant.

(e) Within thirty (30) days after the selection of the third commercial real estate broker, a majority of the brokers will set the then-fair market rental value of the Premises. If a majority of the brokers are unable to set the then-fair market rental value of the Premises within thirty (30) days after selection of the third commercial real estate broker, the third appraiser shall select either the then-fair market rental value for the Premises established by Landlord’s appointed commercial real estate broker, or the Tenant’s appointed commercial real estate broker.

14. Real Estate Brokers. Each of the parties hereto hereby warrants and represents to the other party that it has not dealt with or been represented by any broker in connection with its execution of this Modification other than Landlord’s listing agent, Cushman & Wakefield of Colorado, Inc., acting as the limited agent of Landlord, and The Staubach Company, acting as the limited agent of Tenant. Tenant agrees to indemnify and hold Landlord harmless from and against any other claims for commissions or similar compensation from any other person claiming an entitlement to any such payment as a result of its representation of Tenant. In addition, Landlord agrees to indemnify and hold Tenant harmless from and against any claims for commissions or similar compensation from any other broker or person claiming an entitlement to any such payment as a result of its representation of Landlord.

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15. Performance of Obligations. Tenant hereby acknowledges and confirm that, as of the date hereof Landlord has performed all obligations on the part of the Landlord under the Lease and that Tenant has no claims against Landlord or claims of offset against any rent or other sums payable by Tenant under the Lease.

16. Conditions Precedent. This Modification shall be conditioned upon Landlord entering into a termination agreement acceptable to Landlord, in its sole discretion, for that certain lease agreement between Landlord and HealthTran, LLC, dated October 14, 2003, as amended, for that portion of the Premises constituting the Sixth Expansion Premises. In the event that this condition precedent has not been met by April 30, 2006, this Modification shall be of no further force and effect, both Landlord and Tenant shall be relieved of all obligations hereunder.

17. Conflicts and Non-Amended Provisions. In the event of any express conflict or inconsistency between the terms of the Lease and the terms of this Modification, the terms of this Modification shall control and govern. In all other respects, the terms, covenants and conditions of the Lease are hereby ratified, reaffirmed and republished in their entirety.

18. No Offer. The submission of this Modification by Landlord to the Tenant is not an offer to modify or amend the Lease and is not effective until execution and delivery by both Landlord and Tenant.

19. Entire Agreement. This Modification contains the entire agreement between the parties as to its subject matter and supersedes any and all prior agreements, arrangements or understandings between the parties relating to the subject matter hereof.

20. Counterparts. This Agreement may be executed in a number of identical counterparts. If so executed, each of such counterparts is to be deemed an original for all purposes and all such counterparts shall collectively constitute one agreement, but in making proof of this Agreement it shall not be necessary to produce or account for more than one such counterpart. Execution of this Agreement by facsimile shall be effective to create a binding agreement pursuant to the terms of this Agreement, and, if requested, Landlord and Tenant agree to exchange original signed counterparts.

[Remainder of Page Intentionally Blank, Next Page Signature Page]

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IN WITNESS WHEREOF, the parties have entered into this Modification effective as of the date first set forth hereinabove.

Landlord:		Tenant:
ST. PAUL PROPERTIES, INC., a Delaware corporation		THE TRIZETTO GROUP, INC., a Delaware corporation
By:	/s/ R. WILLIAM INSERRA	By:	/s/ JAMES C. MALONE
Name:	R. WILLIAM INSERRA	Name:	JAMES C. MALONE
Title:	V.P. ASSET MANAGEMENT	Title:	CFO

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EXHIBIT A-7

DESCRIPTION OF THE SIXTH EXPANSION PREMISES

EXHIBIT B-5

Provisions Relating to Construction of Tenant’s Premises

(Finish Allowance Only)

1. Landlord will provide Tenant with a construction credit in the sum of Two Hundred Ninety-Six Thousand Eight Hundred Eighty-Seven and 70/100 US Dollars ($296,887.70) (the “Construction Credit”), which may be used only against the cost of design, permitting and construction by Tenant of Improvements or alterations permanently installed and incorporated in the realty of the Sixth Expansion Premises, project management fees and engineering fees, as contemplated under those certain plans and specifications and working drawings to be prepared by an architect selected by Tenant and which is reasonably acceptable to Landlord (the “architect”), and which plans, specifications and working drawings are to be initialed by Tenant and by Landlord for identification and approval (the “Plans”) (provided that Landlord will require the preparation of Plans only if such Plans are required to obtain any necessary building permits for the performance of work or alterations within the Sixth Expansion Premises).

2. Except as provided in Paragraph 3 below, The Plans shall be submitted to Landlord for its review and written approval prior to the initiation of construction activities within any portion of the Sixth Expansion Premises, which consent shall not be unreasonably withheld or delayed. For purposes of this Exhibit B-5 only, any Plans for tenant improvements to be submitted to Landlord for review and approval shall be delivered to Landlord by (i) hand delivery, with a signed delivery receipt therefor from the recipient, or (ii) delivered by registered and certified US mail, return receipt requested, and addressed to the following:

Cushman & Wakefield of Colorado, Inc.

6061 S. Willow Drive, Suite 105

Greenwood Village, Colorado 80111

Attn: Ms. Lisa Stanley

Landlord shall review and approve all Plans submitted by Tenant (and all changes to such Plans, if any) as soon as practicable and in any event within five (5) business days of delivery of the Plans to Landlord’s representatives as identified above. If Landlord fails to provide its written consent to the proposed Plans, or such reasonable reasons why it is withholding its consent, within five (5) business days after delivery of such Plans to Landlord, Landlord shall be deemed to have consented to and approved of such plans.

3. Tenant will cause such work (the “Work”) to be performed in a good and workmanlike manner and in accordance with the Plans. Landlord shall provide such cooperation as Tenant may reasonably request in connection with all aspects of the Work, provided that the additional cost of such cooperation, if any, shall be paid to Landlord out of the Construction Credit, including but not limited to the costs of Landlord’s construction management supervisory fee pursuant to Paragraph 10 of this Modification and the costs for engineering fees and consultants’ fees with respect to such Work.

4. Tenant and Landlord agree that Tenant shall select, in Tenant’s sole discretion, a general contractor to perform the Work from the following list of Landlord approved general contractors:

(a) Provident Constructors;

(b) CSI, Inc.; or

(c) DSP General Contractors.

The foregoing notwithstanding, Landlord and Tenant each agree that Tenant shall have the right to propose alternative general contractors of Tenant’s choosing, all subject to Landlord’s prior review and approval, which approval shall not be unreasonably withheld, conditioned or delayed.

5. Landlord shall pay the Construction Credit to Tenant, or any applicable portion thereof, within thirty (30) days of mutual execution of that certain Eighth Modification and Ratification of Lease to which this Exhibit B-5 is attached. With respect to all work to be completed within the Premises, and prior to Tenant’s payment of any portion of the Construction Credit to Tenant’s contractors, Tenant shall secure appropriate lien waivers for such Work (or portion of Work) and written approval of the payment application by the architect.

6. Any Work performed by Tenant is excess of the Construction Credit shall be at Tenant’s sole cost and expense and shall also be subject to Landlord’s advance written approval of plans and specifications, unless such Work was included in the Plans previously approved by Landlord as described in this Exhibit B-5.

7. Failure by Tenant to complete the tenant finish improvements shall not relieve Tenant of its duty to pay rent and perform its obligations under the Lease.

8. Tenant shall be responsible for assuring that any alterations, modifications or improvements made by Tenant to the Premises shall comply with the Americans With Disabilities Act of 1990 (“ADA”), including all alterations, modifications or improvements required: (a) as a result of Tenant (or any subtenant, assignee or concessionaire) being a Public Accommodation (as such term is defined in the ADA); (b) as a result of the Premises being a Commercial Facility (as said term is defined in the ADA); (c) as a result of any leasehold improvements, alterations or additions made to the Premises by or on behalf of Tenant or any subtenant, assignee or concessionaire (whether or not Landlord’s consent to such leasehold improvements or alterations was obtained); or, (d) as a result of the employment by Tenant (or any subtenant, assignees or concessionaire) of any individual with a disability, including but not limited to the acquisition and installation of any auxiliary aids.

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EX-10.39

EXHIBIT 10.39

AMENDED AND RESTATED CREDIT AGREEMENT

by and among

THE TRIZETTO GROUP, INC.

and

EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO

as Borrowers,

THE LENDERS THAT ARE SIGNATORIES HERETO

as the Lenders,

and

WELLS FARGO FOOTHILL, INC.

as the Arranger and Administrative Agent

Dated as of January 10, 2007

TABLE OF CONTENTS

			Page
1.	DEFINITIONS AND CONSTRUCTION		1
	1.1	Definitions	1
	1.2	Accounting Terms	1
	1.3	Code	2
	1.4	Construction	2
	1.5	Schedules and Exhibits	2
2.	LOAN AND TERMS OF PAYMENT		2
	2.1	Revolver Advances	2
	2.2	Term Loan	3
	2.3	Borrowing Procedures and Settlements	3
	2.4	Payments	8
	2.5	Overadvances	11
	2.6	Interest Rates: Rates, Payments, and Calculations	11
	2.7	Cash Management	12
	2.8	Crediting Payments	13
	2.9	Designated Account	13
	2.10	Maintenance of Loan Account; Statements of Obligations	14
	2.11	Fees	14
	2.12	Letter of Credit	14
	2.13	LIBOR Option	17
	2.14	Capital Requirements	19
	2.15	Joint and Several Liability of Borrowers	19
3.	CONDITIONS; TERM OF AGREEMENT		21
	3.1	Conditions Precedent to the Initial Extension of Credit	21
	3.2	Conditions Precedent to all Extensions of Credit	21
	3.3	Term	21
	3.4	Effect of Termination	21
	3.5	Early Termination by Borrowers	22
4.	REPRESENTATIONS AND WARRANTIES		22
	4.1	No Encumbrances	22
	4.2	Intentionally Omitted	22
	4.3	Inventory	22
	4.4	Equipment	23
	4.5	Location of Inventory and Equipment	23
	4.6	Inventory Records	23
	4.7	State of Incorporation; Location of Chief Executive Office; Organizational Identification Number; Commercial Tort Claims	23
	4.8	Due Organization and Qualification; Subsidiaries	23
	4.9	Due Authorization; No Conflict	24
	4.10	Litigation	24
	4.11	No Material Adverse Change	24
	4.12	Fraudulent Transfer	25
	4.13	Employee Benefits	25
	4.14	Environmental Condition	25
	4.15	Intellectual Property	25
	4.16	Leases	25

i

TABLE OF CONTENTS

(continued)

			Page
	4.17	Deposit Accounts and Securities Accounts	25
	4.18	Complete Disclosure	25
	4.19	Indebtedness	26
	4.20	Inactive Borrowers	26
	4.21	Material Contracts	26
	4.22	Merger Documents	26
5.	AFFIRMATIVE COVENANTS		26
	5.1	Accounting System	26
	5.2	Collateral Reporting	26
	5.3	Financial Statements, Reports, Certificates	26
	5.4	Intentionally Omitted	27
	5.5	Inspection	27
	5.6	Maintenance of Properties	27
	5.7	Taxes	27
	5.8	Insurance	27
	5.9	Location of Inventory and Equipment	28
	5.10	Compliance with Laws	28
	5.11	Leases	28
	5.12	Existence	28
	5.13	Environmental	28
	5.14	Disclosure Updates	29
	5.15	Control Agreements	29
	5.16	Formation of Subsidiaries	29
	5.17	Intentionally Omitted	29
	5.18	Post-Closing Covenants	29
	5.19	Copyrights	29
	5.20	Assignability of Contracts	29
	5.21	Billing Procedures	30
6.	NEGATIVE COVENANTS		30
	6.1	Indebtedness	30
	6.2	Liens	31
	6.3	Restrictions on Fundamental Changes	31
	6.4	Disposal of Assets	31
	6.5	Change Name	31
	6.6	Nature of Business	31
	6.7	Prepayments and Amendments	31
	6.8	Change of Control	32
	6.9	Consignments	32
	6.10	Distributions	32
	6.11	Accounting Methods	32
	6.12	Investments	32
	6.13	Transactions with Affiliates	32
	6.14	Use of Proceeds	33
	6.15	Inventory and Equipment with Bailees	33
	6.16	Financial Covenants	33

ii

TABLE OF CONTENTS

(continued)

			Page
7.	EVENTS OF DEFAULT		34
8.	THE LENDER GROUP’S RIGHTS AND REMEDIES		36
	8.1	Rights and Remedies	36
	8.2	Remedies Cumulative	36
9.	TAXES AND EXPENSES		36
10.	WAIVERS; INDEMNIFICATION		37
	10.1	Demand; Protest; etc	37
	10.2	The Lender Group’s Liability for Borrower Collateral	37
	10.3	Indemnification	37
11.	NOTICES		37
12.	CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER		38
13.	ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS		41
	13.1	Assignments and Participations	41
	13.2	Successors	43
14.	AMENDMENTS; WAIVERS		43
	14.1	Amendments and Waivers	43
	14.2	Replacement of Holdout Lender	44
	14.3	No Waivers; Cumulative Remedies	45
15.	AGENT; THE LENDER GROUP		45
	15.1	Appointment and Authorization of Agent	45
	15.2	Delegation of Duties	46
	15.3	Liability of Agent	46
	15.4	Reliance by Agent	46
	15.5	Notice of Default or Event of Default	46
	15.6	Credit Decision	47
	15.7	Costs and Expenses; Indemnification	47
	15.8	Agent in Individual Capacity	48
	15.9	Successor Agent	48
	15.10	Lender in Individual Capacity	48
	15.11	Withholding Taxes	48
	15.12	Collateral Matters	50
	15.13	Restrictions on Actions by Lenders; Sharing of Payments	51
	15.14	Agency for Perfection	51
	15.15	Payments by Agent to the Lenders	51
	15.16	Concerning the Collateral and Related Loan Documents	51
	15.17	Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information	52
	15.18	Several Obligations; No Liability	52
	15.19	Bank Product Providers	53
16.	GENERAL PROVISIONS		53
	16.1	Effectiveness	53
	16.2	Section Headings	53

iii

TABLE OF CONTENTS

(continued)

		Page
16.3	Interpretation	53
16.4	Severability of Provisions	53
16.5	Counterparts; Electronic Execution	53
16.6	Revival and Reinstatement of Obligations	53
16.7	Confidentiality	54
16.8	Lender Group Expenses	54
16.9	USA PATRIOT Act	54
16.10	Integration	54
16.11	Parent as Agent for Borrowers	54
16.12	Changes in Accounting Policies	55
16.13	Amendment and Restatement of Original Loan Agreement	55

iv

TABLE OF CONTENTS

(continued)

EXHIBITS AND SCHEDULES

Exhibit A-1	Form of Assignment and Acceptance
Exhibit C-1	Form of Compliance Certificate
Exhibit L-1	Form of LIBOR Notice
Schedule A-1	Agent’s Account
Schedule C-1	Commitments
Schedule D-1	Designated Account
Schedule P-1	Permitted Liens
Schedule 1.1	Definitions
Schedule 2.7(a)	Cash Management Banks
Schedule 3.1	Conditions Precedent
Schedule 4.5	Locations of Inventory and Equipment
Schedule 4.7(a)	States of Organization
Schedule 4.7(b)	Chief Executive Offices
Schedule 4.7(c)	Organizational Identification Numbers
Schedule 4.7(d)	Commercial Tort Claims
Schedule 4.8(b)	Capitalization of Borrowers
Schedule 4.8(c)	Capitalization of Borrowers’ Subsidiaries
Schedule 4.14	Environmental Matters
Schedule 4.15	Intellectual Property
Schedule 4.17	Deposit Accounts and Securities Accounts
Schedule 4.19	Permitted Indebtedness
Schedule 5.2	Collateral Reporting
Schedule 5.3	Financial Statements, Reports, Certificates
Schedule 5.18	Conditions Subsequent

v

CREDIT AGREEMENT

THIS AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”), is entered into as of January 10, 2007, by and among the lenders identified on the signature pages hereof (such lenders, together with their respective successors and permitted assigns, are referred to hereinafter each individually as a “Lender” and collectively as the “Lenders”), and WELLS FARGO FOOTHILL, INC., a California corporation, as the arranger and administrative agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, “Agent”), and THE TRIZETTO GROUP, INC., a Delaware corporation (“Parent”), and each of Parent’s Subsidiaries identified on the signature pages hereof (such Subsidiaries, together with Parent, are referred to hereinafter each individually as a “Borrower”, and individually and collectively, jointly and severally, as the “Borrowers”).

W I T N E S S E T H

WHEREAS, Agent, the Lenders, Parent, and certain of the Borrowers are parties to that certain Credit Agreement, dated as of December 21, 2004 (as amended, supplemented, or otherwise modified from time to time prior to the date hereof, the “Original Credit Agreement”), pursuant to which Agent and certain of the Lenders provided to certain of the Borrowers a revolving loan facility in an aggregate principal amount of $100,000,000;

WHEREAS, Parent has formed Quartz Acquisition Corp., a Delaware corporation (“Acquico”), and Acquico, Parent, Michael Lee, in his capacity as representative, and Quality Care Solutions, Inc. a Nevada corporation (“QCSI”), have entered into that certain Agreement and Plan of Merger, dated as of September 12, 2006 (the “Merger Agreement”), pursuant to which Acquico will merge with and into QCSI with QCSI as the surviving entity (the “QCSI Merger”);

WHEREAS, in order to (a) partially finance the QCSI Merger, (b) pay transactional fees, costs, and expenses incurred in connection with this Agreement, the other Loan Documents, the Merger Documents, and the transactions contemplated hereby and thereby, and (c) finance ongoing working capital, capital expenditure, and general corporate needs of Borrowers, Borrowers have requested that the Original Credit Agreement be amended in its entirety to, among other things (i) restate the existing revolving loan facility in an aggregate principal amount of up to $100,000,000 and (ii) provide Borrowers with a the term loan facility in the principal amount of up to $150,000,000; and

WHEREAS, subject to the foregoing, Agent and the Lenders are willing to so amend and restate the Original Credit Agreement in accordance with the terms and conditions hereof; it being understood that no repayment of the outstanding amounts payable under the Original Credit Agreement as of the Closing Date is being effected hereby but merely an amendment and restatement in accordance with the terms hereof.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to amend and restate the Original Credit Agreement in its entirety as follows:

1. DEFINITIONS AND CONSTRUCTION.

1.1 Definitions. Capitalized terms used in this Agreement shall have the meanings specified therefor on Schedule 1.1.

1.2 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. When used herein, the term “financial statements” shall include the notes and schedules thereto. Whenever the term “Borrowers” or the term “Parent” is used in respect of a financial covenant or a related definition, it shall be understood to mean Parent and its Subsidiaries on a consolidated basis unless the context clearly requires otherwise.

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1.3 Code. Any terms used in this Agreement that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein, provided, however, that to the extent that the Code is used to define any term herein and such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 of the Code shall govern.

1.4 Construction. Unless the context of this Agreement or any other Loan Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms “includes” and “including” are not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document, as the case may be. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement or in the other Loan Documents to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). Any reference herein or in any other Loan Document to the satisfaction or repayment in full of the Obligations shall mean the repayment in full in cash (or cash collateralization in accordance with the terms hereof) of all Obligations other than contingent indemnification Obligations and other than any Bank Product Obligations that, at such time, are allowed by the applicable Bank Product Provider to remain outstanding and that are not required by the provisions of this Agreement to be repaid or cash collateralized. Any reference herein to any Person shall be construed to include such Person’s successors and assigns. Any requirement of a writing contained herein or in the other Loan Documents shall be satisfied by the transmission of a Record.

1.5 Schedules and Exhibits. All of the schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference.

2. LOAN AND TERMS OF PAYMENT.

2.1 Revolver Advances.

(a) Subject to the terms and conditions of this Agreement, and during the term of this Agreement, each Lender with a Revolver Commitment agrees (severally, not jointly or jointly and severally) to make advances (“Advances”) to Borrowers in an amount at any one time outstanding not to exceed such Lender’s Pro Rata Share of an amount equal to, as of any date of determination, the difference of: (A) the lesser of: (i) the EBITDA Revolver Limiter or (ii) the Maximum Revolver Amount minus (B) the sum of: (1) Letter of Credit Usage at such time, (2) the Bank Product Reserve, and (3) the aggregate amount of reserves, if any, established by Agent under Section 2.1(b).

(b) Anything to the contrary in this Section 2.1 notwithstanding, Agent shall have the right to establish reserves in such amounts, and with respect to such matters, as Agent in its Permitted Discretion shall deem necessary or appropriate, against the Maximum Revolver Amount, including reserves (i) with respect to (A) sums that Borrowers are required to pay by any Section of this Agreement or any other Loan Document (such as taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts payable under such leases) and have failed to pay, and (B) amounts due and owing by Borrowers to any Person to the extent secured by a Lien on, or trust over, any of the Collateral (other than a Permitted Lien), which Lien or trust, in the Permitted Discretion of Agent likely would have a priority superior to the Agent’s Liens (such as Liens or trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen, laborers,

2

or suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes where given priority under applicable law) in and to such item of the Collateral, and (ii) after the occurrence and during the continuance of an Event of Default, with respect to such other matters as Agent in its Permitted Discretion shall deem necessary or appropriate.

(c) Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement. The outstanding principal amount of the Advances, together with interest accrued thereon, shall be due and payable on the Maturity Date or, if earlier, on the date on which they are declared due and payable pursuant to the terms of this Agreement.

2.2 Term Loan.

(a) Subject to and upon the terms and conditions of this Agreement, each Lender with a Term Loan Commitment agrees (severally, not jointly or jointly and severally) to make one or more term loans (collectively, all such term loans by all such Lenders, the “Term Loan”) to Borrowers in an aggregate principal amount equal to such Lender’s Pro Rata Share of the Term Loan Amount. The Term Loan may be made pursuant to 2 or more draws by the Borrowers (each a “Term Loan Draw”). The first Term Loan Draw shall be funded on the Closing Date and shall be in a minimum amount of $75,000,000. Borrowers may request additional Term Loan Draws at any time after the Closing Date through and including June 30, 2007. The aggregate outstanding amount of all Term Loan Draws shall not exceed the Term Loan Amount. The maximum amount of any Term Loan Draw may not exceed, when funded, the Term Loan Availability on such date. Each Term Loan Draw shall be in a minimum amount of $10,000,000 and integral multiples of $500,000 in excess thereof, or the remaining unfunded amount of the Term Loan.

(b) Commencing on July 1, 2007 and continuing on the first day of each calendar quarter thereafter through the Maturity Date, Borrowers shall repay the Term Loan in an amount equal to the quotient obtained by dividing (a) the outstanding principal balance of the Term Loan as of the end of business on June 30, 2007 by (b) 28. The outstanding unpaid principal balance and all accrued and unpaid interest on the Term Loan shall be due and payable on the earliest of (i) the Maturity Date, (ii) the date of the acceleration of the Term Loan in accordance with the terms hereof, and (iii) the date of termination of this Agreement pursuant to Section 8.1(c). All principal of, interest on, and other amounts payable in respect of the Term Loan shall constitute Obligations.

(c) Borrowers may make voluntary prepayments of principal with respect to the Term Loan from time to time so long as: (i) Administrative Borrower provides Agent not less than 3 Business Days prior written notice of such prepayment, and (ii) the amount of any prepayment is in a minimum amount of $100,000 and integral multiples thereof, or the remaining principal balance of the Term Loan, if less. Any such voluntary prepayments shall be applied to installments due thereunder in the inverse order of their maturity. Amounts repaid under the Term Loan may not be reborrowed.

2.3 Borrowing Procedures and Settlements.

(a) Procedure for Borrowing. Each Borrowing shall be made by an irrevocable written request by an Authorized Person delivered to Agent (the “Borrowing Notice”). With respect to Borrowings constituting Advances, unless Swing Lender is not obligated to make a Swing Loan pursuant to Section 2.3(b), such Borrowing Notice must be received by Agent no later than 10:00 a.m. (California time) on the Business Day that is the requested Funding Date; provided, however, that if Swing Lender is not obligated to make a Swing Loan as to a requested Borrowing constituting and Advance, such Borrowing Notice must be received by Agent no later than 10:00 a.m. (California time) on the Business Day prior to the date that is the requested Funding Date. With respect to Borrowings constituting Term Loan Draws, the Borrowing Notice must be received by Agent no later than 10:00 a.m. (California time) on the

3

Business Day that is 10 days prior to the requested Funding Date. Every Borrowing Notice must specify: (i) the type of Borrowing (Advances or Term Loan Draw), (ii) the amount of such Borrowing, and (iii) the requested Funding Date, which shall be a Business Day. At Agent’s election, solely with respect to Borrowings constituting Advances, in lieu of delivering the Borrowing Notice, any Authorized Person may give Agent telephonic notice of such request by the required time. In such circumstances, Borrowers agree that any such telephonic notice will be confirmed with a Borrowing Notice within 24 hours of the giving of such telephonic notice, but the failure to provide such Borrowing Notice as confirmation shall not affect the validity of the request.

(b) Making of Swing Loans. In the case of a request for an Advance and so long as either (i) the aggregate amount of Swing Loans made since the last Settlement Date plus the amount of the requested Advance does not exceed $15,000,000, or (ii) Swing Lender, in its sole discretion, shall agree to make a Swing Loan notwithstanding the foregoing limitation, Swing Lender, as a Lender, shall make an Advance in the amount of such requested Advance (any such Advance made solely by Swing Lender as a Lender pursuant to this Section 2.3(b) being referred to as a “Swing Loan” and such Advances being referred to collectively as “Swing Loans”) available to Borrowers on the Funding Date applicable thereto by transferring immediately available funds to Borrowers’ Designated Account. Each Swing Loan shall be deemed to be an Advance hereunder and shall be subject to all the terms and conditions applicable to other Advances, except that all payments on any Swing Loan shall be payable to Swing Lender as a Lender solely for its own account. Subject to the provisions of Section 2.3(d)(ii), Swing Lender as a Lender shall not make and shall not be obligated to make any Swing Loan if Swing Lender has actual knowledge that (i) one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied on the requested Funding Date for the applicable Borrowing, or (ii) the requested Borrowing would exceed the Availability on such Funding Date. Swing Lender as a Lender shall not otherwise be required to determine whether the applicable conditions precedent set forth in Section 3 have been satisfied on the Funding Date applicable thereto prior to making any Swing Loan. The Swing Loans shall be secured by the Agent’s Liens, constitute Obligations hereunder, and bear interest at the rate applicable from time to time to Advances.

(c) Making of Loans.

(i) In the event that Swing Lender is not obligated to make a Swing Loan, then promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent shall notify the Lenders, not later than 1:00 p.m. (California time) on the Business Day: (i) immediately preceding the Funding Date applicable thereto, with respect to Borrowings constituting Advances, and (ii) that is 10 days prior to the requested Funding Date, with respect to Borrowings constituting Term Loan Draws. Such notice may be made by telecopy, telephone, or other similar form of transmission. Each Lender shall make the amount of such Lender’s Pro Rata Share of the requested Borrowing available to Agent in immediately available funds, to Agent’s Account, not later than 10:00 a.m. (California time) on the Funding Date applicable thereto. After Agent’s receipt of the proceeds of such Advances, Agent shall make the proceeds thereof available to Administrative Borrower on the applicable Funding Date by transferring immediately available funds equal to such proceeds received by Agent to Administrative Borrower’s Designated Account; provided, however, that, subject to the provisions of Section 2.3(d)(ii), Agent shall not request any Lender to make, and no Lender shall have the obligation to make, any Advance or Term Loan Draw if Agent shall have actual knowledge that (1) one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied on the requested Funding Date for the applicable Borrowing unless such condition has been waived, or (2) the requested Borrowing would exceed the Availability or the Term Loan Availability, as applicable, on such Funding Date.

(ii) Unless Agent receives notice from a Lender prior to 9:00 a.m. (California time) on the date of a Borrowing, that such Lender will not make available as and when required hereunder to Agent for the account of Borrowers the amount of that Lender’s Pro Rata Share of the Borrowing, Agent may assume that each Lender has made or will make such amount available to Agent in immediately

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available funds on the Funding Date and Agent may (but shall not be so required), in reliance upon such assumption, make available to Borrowers on such date a corresponding amount. If and to the extent any Lender shall not have made its full amount available to Agent in immediately available funds and Agent in such circumstances has made available to Borrowers such amount, that Lender shall on the Business Day following such Funding Date make such amount available to Agent, together with interest at the Defaulting Lender Rate for each day during such period. A notice submitted by Agent to any Lender with respect to amounts owing under this subsection shall be conclusive, absent manifest error. If such amount is so made available, such payment to Agent shall constitute such Lender’s Advance or Term Loan Draw, as applicable, on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to Agent on the Business Day following the Funding Date, Agent will notify Administrative Borrower of such failure to fund and, upon demand by Agent, Borrowers shall pay such amount to Agent for Agent’s account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Advances or Term Loan Draws, as applicable, composing such Borrowing. The failure of any Lender to make any Advance or Term Loan Draw, as applicable, on any Funding Date shall not relieve any other Lender of any obligation hereunder to make an Advance or Term Loan Draw, as applicable, on such Funding Date, but no Lender shall be responsible for the failure of any other Lender to make the Advance or Term Loan Draw, as applicable, to be made by such other Lender on any Funding Date.

(iii) Agent shall not be obligated to transfer to a Defaulting Lender any payments made by Borrowers to Agent for the Defaulting Lender’s benefit, and, in the absence of such transfer to the Defaulting Lender, Agent shall transfer any such payments to each other non-Defaulting Lender member of the Lender Group ratably in accordance with their Commitments (but only to the extent that such Defaulting Lender’s Advance or Term Loan Draw, as applicable, was funded by the other members of the Lender Group) or, if so directed by Administrative Borrower and if no Default or Event of Default had occurred and is continuing (and to the extent such Defaulting Lender’s Advance or Term Loan Draw, as applicable, was not funded by the Lender Group), retain same to be re-advanced to Borrowers as if such Defaulting Lender had made to Borrowers Advances or Term Loan Draws, as applicable. Subject to the foregoing, Agent may hold and, in its Permitted Discretion, re-lend to Borrowers for the account of such Defaulting Lender the amount of all such payments received and retained by Agent for the account of such Defaulting Lender. Solely for the purposes of voting or consenting to matters with respect to the Loan Documents, such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be zero. This Section shall remain effective with respect to such Lender until (x) the Obligations under this Agreement shall have been declared or shall have become immediately due and payable, (y) the non-Defaulting Lenders, Agent, and Administrative Borrower shall have waived such Defaulting Lender’s default in writing, or (z) the Defaulting Lender makes its Pro Rata Share of the applicable Advance or Term Loan Draw, as applicable, and pays to Agent all amounts owing by Defaulting Lender in respect thereof. The operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, to relieve or excuse the performance by such Defaulting Lender or any other Lender of its duties and obligations hereunder, or to relieve or excuse the performance by Borrowers of their duties and obligations hereunder to Agent or to the Lenders other than such Defaulting Lender. Any such failure to fund by any Defaulting Lender shall constitute a material breach by such Defaulting Lender of this Agreement and shall entitle Administrative Borrower at its option, upon written notice to Agent, to arrange for a substitute Lender to assume the Commitment of such Defaulting Lender, such substitute Lender to be an Eligible Transferee. In connection with the arrangement of such a substitute Lender, the Defaulting Lender shall have no right to refuse to be replaced hereunder, and agrees to execute and deliver a completed form of Assignment and Acceptance in favor of the substitute Lender (and agrees that it shall be deemed to have executed and delivered such document if it fails to do so) and shall cease to be party hereto, subject only to being repaid its share of the outstanding Obligations (other than Bank Product Obligations) without any premium or penalty of any kind whatsoever; provided however, that any such assumption of the Commitment of such Defaulting Lender shall not be deemed to constitute a waiver of any of the Lender Groups’ or Borrowers’ rights or remedies against any such Defaulting Lender arising out of or in relation to such failure to fund.

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(d) Protective Advances and Optional Overadvances.

(i) Agent hereby is authorized by Borrowers and the Lenders, from time to time in Agent’s sole discretion, (A) after the occurrence and during the continuance of a Default or an Event of Default, or (B) at any time that any of the other applicable conditions precedent set forth in Section 3 are not satisfied, to make Advances to Borrowers on behalf of the Lenders that Agent, in its Permitted Discretion deems necessary or desirable (1) to preserve or protect the Collateral, or any portion thereof, (2) to enhance the likelihood of repayment of the Obligations (other than the Bank Product Obligations), or (3) to pay any other amount chargeable to Borrowers pursuant to the terms of this Agreement, including Lender Group Expenses and the costs, fees, and expenses described in Section 10 (any of the Advances described in this Section 2.3(d)(i) shall be referred to as “Protective Advances”). Notwithstanding anything to the contrary contained in this Agreement, the aggregate amount of Protective Advances and Overadvances outstanding under this Agreement shall not exceed, at any one time, $7,500,000.

(ii) Any contrary provision of this Agreement notwithstanding, subject to the last sentence of clause (d)(i) above, the Lenders hereby authorize Agent or Swing Lender, as applicable, and either Agent or Swing Lender, as applicable, may, but is not obligated to, knowingly and intentionally, continue to make Advances (including Swing Loans) to Borrowers notwithstanding that an Overadvance exists or thereby would be created, so long as after giving effect to such Advances, the outstanding Revolver Usage (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) does not exceed the Maximum Revolver Amount. In the event Agent obtains actual knowledge that the Revolver Usage exceeds the amounts permitted by the immediately foregoing provisions, regardless of the amount of, or reason for, such excess, Agent shall notify the Lenders as soon as practicable (and prior to making any (or any additional) intentional Overadvances (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) unless Agent determines that prior notice would result in imminent harm to the Collateral or its value), and the Lenders with Revolver Commitments thereupon shall, together with Agent, jointly determine the terms of arrangements that shall be implemented with Borrowers intended to reduce, within a reasonable time, the outstanding principal amount of the Advances to Borrowers to an amount permitted by the preceding paragraph. In such circumstances, if any Lender with a Revolver Commitment disagrees over the proposed terms of reduction or repayment of any Overadvance, the terms of reduction or repayment thereof shall be implemented according to the determination of the Required Lenders. Each Lender with a Revolver Commitment shall be obligated to settle with Agent as provided in Section 2.3(e) for the amount of such Lender’s Pro Rata Share of any unintentional Overadvances by Agent reported to such Lender, any intentional Overadvances made as permitted under this Section 2.3(d)(ii), and any Overadvances resulting from the charging to the Loan Account of interest, fees, or Lender Group Expenses.

(iii) Each Protective Advance and each Overadvance shall be deemed to be an Advance hereunder, except that no Protective Advance or Overadvance shall be eligible to be a LIBOR Rate Loan and all payments on the Protective Advances shall be payable to Agent solely for its own account. The Protective Advances and Overadvances shall be repayable on demand, secured by the Agent’s Liens, constitute Obligations hereunder, and bear interest at the rate applicable from time to time to Advances. The provisions of this Section 2.3(d) are for the exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended to benefit any Borrower in any way.

(e) Settlement. It is agreed that each Lender’s funded portion of the Advances is intended by the Lenders to equal, at all times, such Lender’s Pro Rata Share of the outstanding Advances. Such agreement notwithstanding, Agent, Swing Lender, and the other Lenders agree (which agreement shall not be for the benefit of any Borrower) that in order to facilitate the administration of this Agreement and the other Loan Documents, settlement among the Lenders as to the Advances, the Swing Loans, and the Protective Advances shall take place on a periodic basis in accordance with the following provisions:

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(i) Agent shall request settlement (“Settlement”) with the Lenders on a weekly basis, or on a more frequent basis if so determined by Agent, (1) on behalf of Swing Lender, with respect to each outstanding Swing Loan, (2) for itself, with respect to the outstanding Protective Advances, and (3) with respect to Borrowers’ Collections received, as to each by notifying the Lenders by telecopy, telephone, or other similar form of transmission, of such requested Settlement, no later than 2:00 p.m. (California time) on the Business Day immediately prior to the date of such requested Settlement (the date of such requested Settlement being the “Settlement Date”). Such notice of a Settlement Date shall include a summary statement of the amount of outstanding Advances, Swing Loans, and Protective Advances for the period since the prior Settlement Date. Subject to the terms and conditions contained herein (including Section 2.3(b)(iii)): (y) if a Lender’s balance of the Advances (including Swing Loans and Protective Advances) exceeds such Lender’s Pro Rata Share of the Advances (including Swing Loans and Protective Advances) as of a Settlement Date, then Agent shall, by no later than 12:00 p.m. (California time) on the Settlement Date, transfer in immediately available funds to a Deposit Account of such Lender (as such Lender may designate), an amount such that each such Lender shall, upon receipt of such amount, have as of the Settlement Date, its Pro Rata Share of the Advances (including Swing Loans and Protective Advances), and (z) if a Lender’s balance of the Advances (including Swing Loans and Protective Advances) is less than such Lender’s Pro Rata Share of the Advances (including Swing Loans and Protective Advances) as of a Settlement Date, such Lender shall no later than 12:00 p.m. (California time) on the Settlement Date transfer in immediately available funds to the Agent’s Account, an amount such that each such Lender shall, upon transfer of such amount, have as of the Settlement Date, its Pro Rata Share of the Advances (including Swing Loans and Protective Advances). Such amounts made available to Agent under clause (z) of the immediately preceding sentence shall be applied against the amounts of the applicable Swing Loans or Protective Advances and, together with the portion of such Swing Loans or Protective Advances representing Swing Lender’s Pro Rata Share thereof, shall constitute Advances of such Lenders. If any such amount is not made available to Agent by any Lender on the Settlement Date applicable thereto to the extent required by the terms hereof, Agent shall be entitled to recover for its account such amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate.

(ii) In determining whether a Lender’s balance of the Advances, Swing Loans, and Protective Advances is less than, equal to, or greater than such Lender’s Pro Rata Share of the Advances, Swing Loans, and Protective Advances as of a Settlement Date, Agent shall, as part of the relevant Settlement, apply to such balance the portion of payments actually received in good funds by Agent with respect to principal, interest, fees payable by Borrowers and allocable to the Lenders hereunder, and proceeds of Collateral. To the extent that a net amount is owed to any such Lender after such application, such net amount shall be distributed by Agent to that Lender as part of such next Settlement.

(iii) Between Settlement Dates, Agent, to the extent no Protective Advances or Swing Loans are outstanding, may pay over to Swing Lender any payments received by Agent, that in accordance with the terms of this Agreement would be applied to the reduction of the Advances, for application to Swing Lender’s Pro Rata Share of the Advances. If, as of any Settlement Date, Collections of Borrowers received since the then immediately preceding Settlement Date have been applied to Swing Lender’s Pro Rata Share of the Advances other than to Swing Loans, as provided for in the previous sentence, Swing Lender shall pay to Agent for the accounts of the Lenders, and Agent shall pay to the Lenders, to be applied to the outstanding Advances of such Lenders, an amount such that each Lender shall, upon receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of the Advances. During the period between Settlement Dates, Swing Lender with respect to Swing Loans, Agent with respect to Protective Advances, and each Lender (subject to the effect of agreements between Agent and individual Lenders) with respect to the Advances other than Swing Loans and Protective Advances, shall be entitled to interest at the applicable rate or rates payable under this Agreement on the daily amount of funds employed by Swing Lender, Agent, or the Lenders, as applicable.

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(f) Notation. Agent shall record on its books the principal amount of the Advances owing to each Lender, including the Swing Loans owing to Swing Lender, and Protective Advances owing to Agent, and the interests therein of each Lender, from time to time and such records shall, absent manifest error, conclusively be presumed to be correct and accurate.

(g) Lenders’ Failure to Perform. All Advances (other than Swing Loans and Protective Advances) shall be made by the Lenders contemporaneously and in accordance with their Pro Rata Shares. It is understood that (i) no Lender shall be responsible for any failure by any other Lender to perform its obligation to make any Advance (or other extension of credit) hereunder, nor shall any Commitment of any Lender be increased or decreased as a result of any failure by any other Lender to perform its obligations hereunder, and (ii) no failure by any Lender to perform its obligations hereunder shall excuse any other Lender from its obligations hereunder.

2.4 Payments.

(a) Payments by Borrowers.

(i) Except as otherwise expressly provided herein, all payments by Borrowers shall be made to Agent’s Account for the account of the Lender Group and shall be made in immediately available funds, no later than 11:00 a.m. (California time) on the date specified herein. Any payment received by Agent later than 11:00 a.m. (California time), shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue until such following Business Day.

(ii) Unless Agent receives notice from Administrative Borrower prior to the date on which any payment is due to the Lenders that Borrowers will not make such payment in full as and when required, Agent may assume that Borrowers have made (or will make) such payment in full to Agent on such date in immediately available funds and Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent Borrowers do not make such payment in full to Agent on the date when due, each Lender severally shall repay to Agent on demand such amount distributed to such Lender, together with interest thereon at the Defaulting Lender Rate for each day from the date such amount is distributed to such Lender until the date repaid.

(b) Apportionment and Application.

(i) So long as no Event of Default has occurred and is continuing and except as otherwise provided with respect to Defaulting Lenders, all principal and interest payments shall be apportioned ratably among the Lenders (according to the unpaid principal balance of the Obligations to which such payments relate held by each Lender) and all payments of fees and expenses (other than fees or expenses that are for Agent’s separate account) shall be apportioned ratably among the Lenders having a Pro Rata Share of the type of Commitment or Obligation to which a particular fee or expense relates. All payments to be made hereunder by Borrowers shall be remitted to Agent and all (subject to Section 2.4(b)(iv)) such payments, and all proceeds of Collateral received by Agent, shall be applied, so long as no Event of Default has occurred and is continuing, to reduce the balance of the Advances outstanding and, thereafter, to Borrowers (to be wired to the Designated Account) or such other Person entitled thereto under applicable law.

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(ii) At any time that an Event of Default has occurred and is continuing and except as otherwise provided with respect to Defaulting Lenders, all payments remitted to Agent and all proceeds of Collateral received by Agent shall be applied as follows:

(A) first, to pay any Lender Group Expenses (including cost or expense reimbursements) or indemnities then due to Agent under the Loan Documents, until paid in full,

(B) second, to pay any fees or premiums then due to Agent under the Loan Documents until paid in full,

(C) third, to pay interest due in respect of all Protective Advances until paid in full,

(D) fourth, to pay the principal of all Protective Advances until paid in full,

(E) fifth, ratably to pay any Lender Group Expenses (including cost or expense reimbursements) or indemnities then due to any of the Lenders under the Loan Documents, until paid in full,

(F) sixth, ratably to pay any fees or premiums then due to any of the Lenders under the Loan Documents until paid in full,

(G) seventh, ratably to pay interest due in respect of the Advances (other than Protective Advances), the Swing Loans, and the Term Loan until paid in full,

(H) eighth, ratably (i) to pay the principal of all Swing Loans until paid in full, (ii) to pay the outstanding principal balance of the Term Loan (in the inverse order of the maturity of the installments due thereunder) until the Term Loan is paid in full, (iii) to pay the principal of all Advances until paid in full, (iv) to Agent, to be held by Agent, for the ratable benefit of Issuing Lender and those Lenders having a Revolver Commitment, as cash collateral in an amount up to 105% of the Letter of Credit Usage, and (v) to Agent, to be held by Agent, for the benefit of the Bank Product Providers, as cash collateral in an amount up to the amount of the Bank Product Reserve established prior to the occurrence of, and not in contemplation of, the subject Event of Default,

(I) ninth, to pay any other Obligations (including the provision of amounts to Agent, to be held by Agent, for the benefit of the Bank Product Providers, as cash collateral in an amount up to the amount determined by Agent in its Permitted Discretion as the amount necessary to secure Borrowers’ and their Subsidiaries’ obligations in respect of Bank Products), and

(J) tenth, to Borrowers (to be wired to the Designated Account) or such other Person entitled thereto under applicable law.

(iii) Agent promptly shall distribute to each Lender, pursuant to the applicable wire instructions received from each Lender in writing, such funds as it may be entitled to receive, subject to a Settlement delay as provided in Section 2.3(e).

(iv) In each instance, so long as no Event of Default has occurred and is continuing, Section 2.4(b)(i) shall not apply to any payment made by Borrowers to Agent and specified by Borrowers to be for the payment of specific Obligations then due and payable (or prepayable) under any provision of this Agreement.

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(v) For purposes of Section 2.4(b)(ii), “paid in full” means payment of all amounts owing under the Loan Documents according to the terms thereof, including loan fees, service fees, professional fees, interest (and specifically including interest accrued after the commencement of any Insolvency Proceeding), default interest, interest on interest, and expense reimbursements, whether or not any of the foregoing would be or is allowed or disallowed in whole or in part in any Insolvency Proceeding.

(vi) In the event of a direct conflict between the priority provisions of this Section 2.4 and any other provision contained in any other Loan Document, it is the intention of the parties hereto that such provisions be read together and construed, to the fullest extent possible, to be in concert with each other. In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this Section 2.4 shall control and govern.

(c) Mandatory Prepayments.

(i) If, at any time (A) the sum of the outstanding principal balance of the Term Loan on such date plus the Revolver Usage on such date exceeds (B) the product of (I) the Applicable EBITDA Multiplier times (II) TTM EBITDA calculated as of the most recent month for which financial statements have been delivered pursuant to Section 5.3 (such product being referred to as the “Loan Limit” and such excess being referred to as the “Limiter Excess”), then Borrowers shall, prepay the Obligations in accordance with Section 2.4(d) in an aggregate amount equal to the Limiter Excess immediately after the earlier of: (i) obtaining knowledge that the Obligations have exceeded the Loan Limit or (ii) receiving notice from Agent that the Obligations have exceeded the Loan Limit.

(ii) Immediately upon the receipt by Borrowers or any of their Subsidiaries of the proceeds of any voluntary or involuntary sale or disposition by Borrowers or any of their Subsidiaries of property or assets (including casualty losses or condemnations but excluding: (y) sales or dispositions which qualify as Permitted Dispositions under clauses (a), (b), (c), (d), or (f) of the definition of Permitted Dispositions and (z) proceeds from sale-leaseback transactions in an amount that does not exceed $3,000,000 in the aggregate in any one fiscal year of Parent), Borrowers shall prepay the outstanding principal amount of the Obligations in accordance with Section 2.4(d) in an amount equal to 100% of the Net Cash Proceeds (including condemnation awards and payments in lieu thereof) received by such Person in connection with such sales or dispositions; provided that so long as (A) no Default or Event of Default shall have occurred and is continuing, (B) Administrative Borrower shall have given Agent prior written notice of Borrowers’ intention to apply such monies to the costs of replacement of the properties or assets that are the subject of such sale or disposition or the cost of purchase or construction of other assets useful in the business of Borrowers or their Subsidiaries, (C) the monies are held in a cash collateral account in which Agent has a perfected first-priority security interest, (D) Borrowers or their Subsidiaries, as applicable, complete such replacement, purchase, or construction within 180 days after the initial receipt of such monies, and (E) the aggregate amount of Net Cash Proceeds that are reinvested in any 12 consecutive month period does not exceed $1,000,000, Borrowers and their Subsidiaries shall have the option to apply such monies to the costs of replacement of the property or assets that are the subject of such sale or disposition or the costs of purchase or construction of other assets useful in the business of Borrowers and their Subsidiaries unless and to the extent that such applicable period shall have expired without such replacement, purchase or construction being made or completed, or an Event of Default shall have occurred, in which case, any amounts remaining in the cash collateral account shall be paid to Agent and applied in accordance with Section 2.4(d). Nothing contained in this Section 2.4(c)(ii) shall permit Borrowers or any of their Subsidiaries to sell or otherwise dispose of any property or assets other than in accordance with Section 6.4.

(iii) Immediately upon the receipt by Borrowers or any of their Subsidiaries of any Extraordinary Receipts (other than indemnification payments received in connection with the Merger Agreement or any other merger or stock purchase agreement with respect to a Permitted Acquisition to the extent that such Extraordinary Receipts are paid to a Person that is not an Affiliate of Parent

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or any of its Subsidiaries or received by Parent or such Subsidiary as reimbursement for any payment previously made by such Person), Borrowers shall prepay the outstanding principal amount of the Obligations in accordance with Section 2.4(d) in an amount equal to 100% of such Extraordinary Receipts, net of any reasonable expenses incurred in collecting such Extraordinary Receipts.

(iv) Immediately upon the issuance or incurrence by Borrowers or any of their Subsidiaries of any Indebtedness (other than Indebtedness permitted under Section 6.1(a), (c), (d), (i), (k), or (l)), the issuance by Borrowers or any of their Subsidiaries of any shares of Borrowers’ Stock or their Subsidiaries’ Stock (other than: (y) in the event that Borrowers or any of Subsidiary of a Borrower forms a Subsidiary in accordance with the terms hereof, the issuance by such Subsidiary of Stock to a Borrower or such Subsidiary, as applicable or (z) the issuance of Parent’s Stock in the ordinary course of any Active Borrower’s business, consistent with such Active Borrower’s or Parent’s past practice, to such Active Borrower’s employees and service providers), Borrowers shall prepay the outstanding principal amount of the Obligations in accordance with Section 2.4(d) in an amount equal to 100% of the Net Cash Proceeds received by such Person in connection with such issuance or incurrence. The provisions of this Section 2.4(c)(iv) shall not be deemed to be implied consent to any such issuance or incurrence otherwise prohibited by the terms and conditions of this Agreement.

(d) Application of Payments. Each prepayment pursuant to Section 2.4(c) above shall (A) so long as no Event of Default shall have occurred and be continuing, first, to the outstanding principal amount of the Term Loan until paid in full, second, to the outstanding principal amount of the Advances until paid in full, and (B) if an Event of Default shall have occurred and be continuing, be applied in the manner set forth in Section 2.4(b)(ii). Each such prepayment of the Term Loan shall be applied against the remaining installments of principal of the Term Loan in the inverse order of maturity.

2.5 Overadvances. If, at any time or for any reason, the amount of Obligations owed by Borrowers to the Lender Group pursuant to Section 2.1 or Section 2.12 is greater than any of the limitations set forth in Section 2.1, or Section 2.12, as applicable (an “Overadvance”), Borrowers immediately shall pay to Agent, in cash, the amount of such excess which amount shall be used by Agent to reduce the Obligations in accordance with the priorities set forth in Section 2.4(b), provided, however, that: (i) any intentional Overadvance described in Section 2.3(d)(ii) shall be repaid in accordance with the terms agreed upon by the Lenders pursuant to the terms of that Section and (ii) the amount of Advances that exceed the EBITDA Revolver Limiter shall be repaid in accordance with Section 2.4(d). In addition, Borrowers hereby promise to pay the Obligations (including principal, interest, fees, costs, and expenses) in Dollars in full as and when due and payable under the terms of this Agreement and the other Loan Documents.

2.6 Interest Rates: Rates, Payments, and Calculations.

(a) Interest Rates. Except as provided in clause (c) below, all Obligations (except for Bank Product Obligations) whether or not charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof as follows (i) if the relevant Obligation is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the Applicable Margin for LIBOR Rate Loans, and (ii) otherwise, at a per annum rate equal to the Base Rate plus the Applicable Margin for Base Rate Loans.

The foregoing notwithstanding, at no time shall any portion of the Obligations (other than Bank Product Obligations) bear interest on the Daily Balance thereof at a per annum rate less than 5.00%. To the extent that interest accrued hereunder at the rate set forth herein would be less than the foregoing minimum daily rate, the interest rate chargeable hereunder for such day automatically shall be deemed increased to the minimum rate.

(b) Letter of Credit Fee. Borrowers shall pay Agent (for the ratable benefit of the Lenders with a Revolver Commitment, subject to any agreements between Agent and individual Lenders),

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a Letter of Credit fee (in addition to the charges, commissions, fees, and costs set forth in Section 2.12(e)) which shall accrue at a rate per annum equal to the Applicable Margin with respect to LIBOR Rate Loans times the Daily Balance of the undrawn amount of all outstanding Letters of Credit.

(c) Default Rate. Upon the occurrence and during the continuation of an Event of Default (and at the election of Agent or the Required Lenders), all Obligations (except for Bank Product Obligations) that have been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof at a per annum rate equal to 4 percentage points above the per annum rate otherwise applicable hereunder, and

(d) Payment. Except as provided to the contrary in Section 2.11 or Section 2.13(a), interest, Letter of Credit fees, and all other fees payable hereunder shall be due and payable, in arrears, on the first day of each month at any time that Obligations or Commitments are outstanding. Borrowers hereby authorize Agent, from time to time, without prior notice to Borrowers, to charge all interest and fees (when due and payable), all Lender Group Expenses (as and when incurred), all charges, commissions, fees and costs provided for in Section 2.12(e) (as and when accrued or incurred), all fees and costs provided for in Section 2.11 (as and when accrued or incurred), and all other payments as and when due and payable under any Loan Document (including the amounts due and payable with respect to the Term Loan and including any amounts due and payable to the Bank Product Providers in respect of Bank Products up to the amount of the Bank Product Reserve) to Borrowers’ Loan Account, which amounts thereafter shall constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances that are Base Rate Loans. Any interest not paid when due shall be compounded by being charged to the Loan Account and shall thereafter constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances that are Base Rate Loans.

(e) Computation. All interest and fees chargeable under the Loan Documents shall be computed on the basis of a 360 day year for the actual number of days elapsed. In the event the Base Rate is changed from time to time hereafter, the rates of interest hereunder based upon the Base Rate automatically and immediately shall be increased or decreased by an amount equal to such change in the Base Rate.

(f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the interest rate or rates payable under this Agreement, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable. Borrowers and the Lender Group, in executing and delivering this Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated within it; provided, however, that, anything contained herein to the contrary notwithstanding, if said rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then, ipso facto, as of the date of this Agreement, Borrowers are and shall be liable only for the payment of such maximum as allowed by law, and payment received from Borrowers in excess of such legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess.

2.7 Cash Management.

(a) Borrowers shall (i) establish and maintain cash management services of a type and on terms satisfactory to Agent at one or more of the banks set forth on Schedule 2.7(a) (each a “Cash Management Bank”), and shall request in writing and otherwise take such reasonable steps to ensure that all of the Borrowers’ Account Debtors forward payment of the amounts owed by them directly to such Cash Management Bank, and (ii) deposit or cause to be deposited promptly, and in any event no later than the first Business Day after the date of receipt thereof, all of their Collections (including those sent directly by their Account Debtors to Borrowers) into a bank account in Agent’s name (a “Cash Management Account”) at one of the Cash Management Banks.

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(b) Each Cash Management Bank shall establish and maintain Cash Management Agreements with Agent and the applicable Borrower, in form and substance acceptable to Agent and Administrative Borrower. Each such Cash Management Agreement shall provide, among other things, that (i) if Agent has given the Cash Management Bank a notice of exclusive control (which shall not be given prior to the occurrence of an Event of Default), the Cash Management Bank will comply with any instructions originated by Agent directing the disposition of the funds in such Cash Management Account without further consent by any Borrower, as applicable, (ii) the Cash Management Bank has no rights of setoff or recoupment or any other claim against the applicable Cash Management Account, other than for payment of its service fees and other charges directly related to the administration of such Cash Management Account and for returned checks or other items of payment, and (iii) if Agent has a given the Cash Management Bank a notice of exclusive control (which shall not be given prior to the occurrence of an Event of Default), it will forward by daily sweep all amounts in the applicable Cash Management Account to the Agent’s Account.

(c) So long as no Default or Event of Default has occurred and is continuing, Administrative Borrower may amend Schedule 2.7(a) to add or replace a Cash Management Bank or Cash Management Account; provided, however, that (i) such prospective Cash Management Bank shall be reasonably satisfactory to Agent, and (ii) prior to the time of the opening of such Cash Management Account, the applicable Borrower and such prospective Cash Management Bank shall have executed and delivered to Agent a Cash Management Agreement. The applicable Borrower shall close any of their Cash Management Accounts (and establish replacement cash management accounts in accordance with the foregoing sentence) promptly and in any event within 30 days of notice from Agent that the creditworthiness of any Cash Management Bank is no longer acceptable in Agent’s reasonable judgment, or as promptly as practicable and in any event within 60 days of notice from Agent that the operating performance, funds transfer, or availability procedures or performance of the Cash Management Bank with respect to Cash Management Accounts or Agent’s liability under any Cash Management Agreement with such Cash Management Bank is no longer acceptable in Agent’s reasonable judgment.

(d) The Cash Management Accounts shall be cash collateral accounts subject to Control Agreements.

2.8 Crediting Payments. The receipt of any payment item by Agent (whether from transfers to Agent by the Cash Management Banks pursuant to the Cash Management Agreements or otherwise) shall not be considered a payment on account unless such payment item is a wire transfer of immediately available federal funds made to the Agent’s Account or unless and until such payment item is honored when presented for payment. Should any payment item not be honored when presented for payment, then Borrowers shall be deemed not to have made such payment and interest shall be calculated accordingly. Anything to the contrary contained herein notwithstanding, any payment item shall be deemed received by Agent only if it is received into the Agent’s Account on a Business Day on or before 11:00 a.m. (California time). If any payment item is received into the Agent’s Account on a non-Business Day or after 11:00 a.m. (California time) on a Business Day, it shall be deemed to have been received by Agent as of the opening of business on the immediately following Business Day. The parties acknowledge and agree that the economic benefit of the foregoing provisions of this Section 2.8 shall be for the exclusive benefit of Agent.

2.9 Designated Account. Agent is authorized to make the Advances and the Term Loan Draws under this Agreement based upon telephonic (but solely with respect to Advances) or other instructions received from anyone purporting to be an Authorized Person or, without instructions, if pursuant to Section 2.6(d). Administrative Borrower agrees to establish and maintain the Designated Account with the Designated Account Bank for the purpose of receiving the proceeds of the Advances requested by Borrowers and made by Agent or the Lenders hereunder. Unless otherwise agreed by Agent and Administrative Borrower, any Advance, Protective Advance, or Swing Loan requested by Borrowers and made by Agent or the Lenders hereunder shall be made to the Designated Account.

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2.10 Maintenance of Loan Account; Statements of Obligations. Agent shall maintain an account on its books in the name of Borrowers (the “Loan Account”) on which Borrowers will be charged with the Term Loan Draws and all Advances (including Protective Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to Borrowers or for Borrowers’ account, the Letters of Credit issued by Issuing Lender for Borrowers’ account, and with all other payment Obligations hereunder or under the other Loan Documents (except for Bank Product Obligations), including, accrued interest, fees and expenses, and Lender Group Expenses. In accordance with Section 2.8, the Loan Account will be credited with all payments received by Agent from Borrowers or for Borrowers’ account, including all amounts received in the Agent’s Account from any Cash Management Bank. Agent shall render statements regarding the Loan Account to Administrative Borrower, including principal, interest, fees, and including an itemization of all charges and expenses constituting Lender Group Expenses owing, and such statements, absent manifest error, shall be conclusively presumed to be correct and accurate and constitute an account stated between Borrowers and the Lender Group unless, within 30 days after receipt thereof by Administrative Borrower, Administrative Borrower shall deliver to Agent written objection thereto describing the error or errors contained in any such statements.

2.11 Fees.

(a) Unused Revolver Commitment Fee. On the first day of each month prior to the Termination Date and on the Termination Date, an unused line fee in an amount equal to 0.30% per annum times the result of (i) the Maximum Revolver Amount, less (ii) the average Daily Balance of Advances that were outstanding during the immediately preceding month, provided, however, that the unused line fee due on the Termination Date shall be calculated based on the average Daily Balances during the period from and including the first day of the month in which the Termination Date occurs up to and including the Termination Date.

(b) Unused Term Loan Commitment Fee. On the first day of each month commencing on the first Business Day of the month following the Closing Date and continuing through July 1, 2007, an unused term loan commitment fee in an amount equal to 0.30% per annum times the result of (i) the Term Loan Amount, less (ii) the outstanding balance of the Term Loan on such date.

(c) Fee Letter Fees. In addition to the fees set forth in (a) and (b) above, Borrowers shall pay to Agent, as and when due and payable under the terms of the Fee Letter, the fees set forth in the Fee Letter.

2.12 Letter of Credit.

(a) Subject to the terms and conditions of this Agreement, the Issuing Lender agrees to issue letters of credit for the account of Borrowers (each, an “L/C”) or to purchase participations or execute indemnities or reimbursement obligations (each such undertaking, an “L/C Undertaking”) with respect to letters of credit issued by an Underlying Issuer (as of the Closing Date, the prospective Underlying Issuer is to be Wells Fargo) for the account of Borrowers. Each request for the issuance of a Letter of Credit or the amendment, renewal, or extension of any outstanding Letter of Credit, shall be made in writing by an Authorized Person and delivered to the Issuing Lender and Agent via hand delivery, telefacsimile, or other electronic method of transmission reasonably in advance of the requested date of issuance, amendment, renewal, or extension. Each such request shall be in form and substance satisfactory to the Issuing Lender in its Permitted Discretion and shall specify (i) the amount of such Letter of Credit, (ii) the date of issuance, amendment, renewal, or extension of such Letter of Credit, (iii) the expiration date of such Letter of Credit, (iv) the name and address of the beneficiary thereof (or the beneficiary of the Underlying Letter of Credit, as applicable), and (v) such other information (including, in the case of an amendment, renewal, or extension, identification of the outstanding Letter of Credit to be so amended, renewed, or extended) as shall be necessary to prepare, amend, renew, or extend such Letter of Credit. If requested by the Issuing Lender, Borrowers also

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shall be an applicant under the application with respect to any Underlying Letter of Credit that is to be the subject of an L/C Undertaking. The Issuing Lender shall have no obligation to issue a Letter of Credit if any of the following would result after giving effect to the issuance of such requested Letter of Credit:

(i) the Letter of Credit Usage would exceed the EBITDA Revolver Limiter less the outstanding amount of Advances, or

(ii) the Letter of Credit Usage would exceed $5,000,000, or

(iii) the Letter of Credit Usage would exceed the Maximum Revolver Amount less the outstanding amount of Advances less the Bank Product Reserve, and less the aggregate amount of reserves, if any, established by Agent under Section 2.1(b).

Borrowers and the Lender Group acknowledge and agree that certain Underlying Letters of Credit may be issued to support letters of credit that already are outstanding as of the Closing Date. Each Letter of Credit (and corresponding Underlying Letter of Credit) shall be in form and substance acceptable to the Issuing Lender (in the exercise of its Permitted Discretion), including the requirement that the amounts payable thereunder must be payable in Dollars. If Issuing Lender is obligated to advance funds under a Letter of Credit, Borrowers immediately shall reimburse such L/C Disbursement to Issuing Lender by paying to Agent an amount equal to such L/C Disbursement not later than 11:00 a.m., California time, on the date that such L/C Disbursement is made, if Administrative Borrower shall have received written or telephonic notice of such L/C Disbursement prior to 10:00 a.m., California time, on such date, or, if such notice has not been received by Administrative Borrower prior to such time on such date, then not later than 11:00 a.m., California time, on the Business Day that Administrative Borrower receives such notice, if such notice is received prior to 10:00 a.m., California time, on the date of receipt, and, in the absence of such reimbursement, the L/C Disbursement immediately and automatically shall be deemed to be an Advance hereunder and, initially, shall bear interest at the rate then applicable to Advances that are Base Rate Loans. To the extent an L/C Disbursement is deemed to be an Advance hereunder, Borrowers’ obligation to reimburse such L/C Disbursement shall be discharged and replaced by the resulting Advance. Promptly following receipt by Agent of any payment from Borrowers pursuant to this paragraph, Agent shall distribute such payment to the Issuing Lender or, to the extent that Lenders have made payments pursuant to Section 2.12(b) to reimburse the Issuing Lender, then to such Lenders and the Issuing Lender as their interests may appear.

(b) Promptly following receipt of a notice of L/C Disbursement pursuant to Section 2.12(a), each Lender with a Revolver Commitment agrees to fund its Pro Rata Share of any Advance deemed made pursuant to the foregoing subsection on the same terms and conditions as if Borrowers had requested such Advance and Agent shall promptly pay to Issuing Lender the amounts so received by it from the Lenders. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Lender or the Lenders with Revolver Commitments, the Issuing Lender shall be deemed to have granted to each Lender with a Revolver Commitment, and each Lender with a Revolver Commitment shall be deemed to have purchased, a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk Participation Liability of such Letter of Credit, and each such Lender agrees to pay to Agent, for the account of the Issuing Lender, such Lender’s Pro Rata Share of any payments made by the Issuing Lender under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender with a Revolver Commitment hereby absolutely and unconditionally agrees to pay to Agent, for the account of the Issuing Lender, such Lender’s Pro Rata Share of each L/C Disbursement made by the Issuing Lender and not reimbursed by Borrowers on the date due as provided in Section 2.12(a), or of any reimbursement payment required to be refunded to Borrowers for any reason. Each Lender with a Revolver Commitment acknowledges and agrees that its obligation to deliver to Agent, for the account of the Issuing Lender, an amount equal to its respective Pro Rata Share of each L/C Disbursement made by the Issuing Lender pursuant to this Section 2.12(b) shall be absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an

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Event of Default or Default or the failure to satisfy any condition set forth in Section 3. If any such Lender fails to make available to Agent the amount of such Lender’s Pro Rata Share of each L/C Disbursement made by the Issuing Lender in respect of such Letter of Credit as provided in this Section, such Lender shall be deemed to be a Defaulting Lender and Agent (for the account of the Issuing Lender) shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate until paid in full.

(c) Each Borrower hereby agrees to indemnify, save, defend, and hold the Lender Group harmless from any loss, cost, expense, or liability, and reasonable attorneys fees incurred by the Lender Group arising out of or in connection with any Letter of Credit; provided, however, that no Borrower shall be obligated hereunder to indemnify for any loss, cost, expense, or liability to the extent that it is caused by the gross negligence or willful misconduct of the Issuing Lender or any other member of the Lender Group. Each Borrower agrees to be bound by the Underlying Issuer’s regulations and interpretations of any Underlying Letter of Credit or by Issuing Lender’s interpretations of any L/C issued by Issuing Lender to or for such Borrower’s account, even though this interpretation may be different from such Borrower’s own, and each Borrower understands and agrees that the Lender Group shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following Borrowers’ instructions or those contained in the Letter of Credit or any modifications, amendments, or supplements thereto. Each Borrower understands that the L/C Undertakings may require Issuing Lender to indemnify the Underlying Issuer for certain costs or liabilities arising out of claims by Borrowers against such Underlying Issuer. Each Borrower hereby agrees to indemnify, save, defend, and hold the Lender Group harmless with respect to any loss, cost, expense (including reasonable attorneys fees), or liability incurred by the Lender Group under any L/C Undertaking as a result of the Lender Group’s indemnification of any Underlying Issuer; provided, however, that no Borrower shall be obligated hereunder to indemnify for any loss, cost, expense, or liability to the extent that it is caused by the gross negligence or willful misconduct of the Issuing Lender or any other member of the Lender Group. Each Borrower hereby acknowledges and agrees that neither the Lender Group nor the Issuing Lender shall be responsible for delays, errors, or omissions resulting from the malfunction of equipment in connection with any Letter of Credit.

(d) Each Borrower hereby authorizes and directs any Underlying Issuer to deliver to the Issuing Lender all instruments, documents, and other writings and property received by such Underlying Issuer pursuant to such Underlying Letter of Credit and to accept and rely upon the Issuing Lender’s instructions with respect to all matters arising in connection with such Underlying Letter of Credit and the related application.

(e) Any and all issuance charges, commissions, fees, and costs incurred by the Issuing Lender relating to Underlying Letters of Credit shall be Lender Group Expenses for purposes of this Agreement and immediately shall be reimbursable by Borrowers to Agent for the account of the Issuing Lender; it being acknowledged and agreed by each Borrower that, as of the Closing Date, the issuance charge imposed by the prospective Underlying Issuer is .825% per annum times the undrawn amount of each Underlying Letter of Credit, that such issuance charge may be changed from time to time, and that the Underlying Issuer also imposes a schedule of charges for amendments, extensions, drawings, and renewals.

(f) If by reason of (i) any change after the Closing Date in any applicable law, treaty, rule, or regulation or any change in the interpretation or application thereof by any Governmental Authority, or (ii) compliance by the Underlying Issuer or the Lender Group with any direction, request, or requirement (irrespective of whether having the force of law) of any Governmental Authority or monetary authority including, Regulation D of the Federal Reserve Board as from time to time in effect (and any successor thereto):

(i) any reserve, deposit, or similar requirement is or shall be imposed or modified in respect of any Letter of Credit issued hereunder, or

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(ii) there shall be imposed on the Underlying Issuer or the Lender Group any other condition regarding any Underlying Letter of Credit or any Letter of Credit issued pursuant hereto;

and the result of the foregoing is to increase, directly or indirectly, the cost to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter of Credit or to reduce the amount receivable in respect thereof by the Lender Group, then, and in any such case, Agent may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify Administrative Borrower, and Borrowers shall pay on demand such amounts as Agent may specify to be necessary to compensate the Lender Group for such additional cost or reduced receipt, together with interest on such amount from the date of such demand until payment in full thereof at the rate then applicable to Base Rate Loans hereunder. The determination by Agent of any amount due pursuant to this Section, as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on all of the parties hereto.

2.13 LIBOR Option.

(a) Interest and Interest Payment Dates. In lieu of having interest charged at the rate based upon the Base Rate, Borrowers shall have the option (the “LIBOR Option”) to have interest on all or a portion of the Advances or the Term Loan be charged (whether at the time when made (unless otherwise provided herein), upon conversion from a Base Rate Loan to a LIBOR Rate Loan, or upon continuation of a LIBOR Rate Loan as a LIBOR Rate Loan) at a rate of interest based upon the LIBOR Rate. Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the last day of the Interest Period applicable thereto, (ii) the date on which all or any portion of the Obligations are accelerated pursuant to the terms hereof, or (iii) the date on which this Agreement is terminated pursuant to the terms hereof. On the last day of each applicable Interest Period, unless Administrative Borrower properly has exercised the LIBOR Option with respect thereto, the interest rate applicable to such LIBOR Rate Loan automatically shall convert to the rate of interest then applicable to Base Rate Loans of the same type hereunder. At any time that an Event of Default has occurred and is continuing, Borrowers no longer shall have the option to request that Advances or the Term Loan bear interest at a rate based upon the LIBOR Rate and Agent shall have the right to convert the interest rate on all outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder.

(b) LIBOR Election.

(i) Administrative Borrower may, at any time and from time to time, so long as no Event of Default has occurred and is continuing, elect to exercise the LIBOR Option by notifying Agent prior to 11:00 a.m. (California time) at least 3 Business Days prior to the commencement of the proposed Interest Period (the “LIBOR Deadline”). Notice of Administrative Borrower’s election of the LIBOR Option for a permitted portion of the Advances or the Term Loan and an Interest Period pursuant to this Section shall be made by delivery to Agent of a LIBOR Notice received by Agent before the LIBOR Deadline, or by telephonic notice received by Agent before the LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice received by Agent prior to 5:00 p.m. (California time) on the same day). Promptly upon its receipt of each such LIBOR Notice, Agent shall provide a copy thereof to each of the affected Lenders.

(ii) Each LIBOR Notice shall be irrevocable and binding on Borrowers. In connection with each LIBOR Rate Loan, each Borrower shall indemnify, defend, and hold Agent and the Lenders harmless against any loss, cost, or expense incurred by Agent or any Lender as a result of (A) the payment of any principal of any LIBOR Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (B) the conversion of any LIBOR Rate Loan other than on the last day of the Interest Period applicable thereto, or (C) the failure to borrow, convert, continue or

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prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered pursuant hereto (such losses, costs, or expenses, “Funding Losses”). Funding Losses shall, with respect to Agent or any Lender, be deemed to equal the amount determined by Agent or such Lender to be the excess, if any, of (1) the amount of interest that would have accrued on the principal amount of such LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that would have been applicable thereto, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert, or continue, for the period that would have been the Interest Period therefor), minus (2) the amount of interest that would accrue on such principal amount for such period at the interest rate which Agent or such Lender would be offered were it to be offered, at the commencement of such period, Dollar deposits of a comparable amount and period in the London interbank market. A certificate of Agent or a Lender delivered to Administrative Borrower setting forth any amount or amounts that Agent or such Lender is entitled to receive pursuant to this Section 2.13 shall be conclusive absent manifest error.

(iii) Borrowers shall have not more than 5 LIBOR Rate Loans in effect at any given time. Borrowers only may exercise the LIBOR Option for LIBOR Rate Loans of at least $5,000,000 and integral multiples of $1,000,000 in excess thereof.

(c) Conversion. Borrowers may convert LIBOR Rate Loans to Base Rate Loans at any time; provided, however, that in the event that LIBOR Rate Loans are converted or prepaid on any date that is not the last day of the Interest Period applicable thereto, including as a result of any automatic prepayment through the required application by Agent of proceeds of Borrowers’ and their Subsidiaries’ Collections in accordance with Section 2.4(b) or for any other reason, including early termination of the term of this Agreement or acceleration of all or any portion of the Obligations pursuant to the terms hereof, each Borrower shall indemnify, defend, and hold Agent and the Lenders and their Participants harmless against any and all Funding Losses in accordance with Section 2.13 (b)(ii).

(d) Special Provisions Applicable to LIBOR Rate.

(i) The LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective basis to take into account any additional or increased costs to such Lender of maintaining or obtaining any eurodollar deposits or increased costs, in each case, due to changes in applicable law occurring subsequent to the commencement of the then applicable Interest Period, including changes in tax laws (except changes of general applicability in corporate income tax laws) and changes in the reserve requirements imposed by the Board of Governors of the Federal Reserve System (or any successor), excluding the Reserve Percentage, which additional or increased costs would increase the cost of funding or maintaining loans bearing interest at the LIBOR Rate. In any such event, the affected Lender shall give Administrative Borrower and Agent notice of such a determination and adjustment and Agent promptly shall transmit the notice to each other Lender and, upon its receipt of the notice from the affected Lender, Administrative Borrower may, by notice to such affected Lender (y) require such Lender to furnish to Administrative Borrower a statement setting forth the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment, or (z) repay the LIBOR Rate Loans with respect to which such adjustment is made (together with any amounts due under Section 2.13(b)(ii)).

(ii) In the event that any change in market conditions or any law, regulation, treaty, or directive, or any change therein or in the interpretation of application thereof, shall at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to fund or maintain LIBOR Rate Loans or to continue such funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to Agent and Administrative Borrower and Agent promptly shall transmit the notice to each other Lender and (y) in the case of any LIBOR Rate Loans of such Lender that are outstanding, the date specified in such Lender’s notice shall be deemed to be the last day of the Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such Lender thereafter shall accrue interest at the rate then applicable to Base Rate Loans, and (z) Borrowers shall not be entitled to elect the LIBOR Option until such Lender determines that it would no longer be unlawful or impractical to do so.

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(e) No Requirement of Matched Funding. Anything to the contrary contained herein notwithstanding, neither Agent, nor any Lender, nor any of their Participants, is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues at the LIBOR Rate. The provisions of this Section shall apply as if each Lender or its Participants had match funded any Obligation as to which interest is accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest Period in the amount of the LIBOR Rate Loans.

2.14 Capital Requirements. If, after the date hereof, any Lender determines that (i) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements for banks or bank holding companies, or any change in the interpretation or application thereof by any Governmental Authority charged with the administration thereof, or (ii) compliance by such Lender or its parent bank holding company with any guideline, request or directive of any such entity regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on such Lender’s or such holding company’s capital as a consequence of such Lender’s Commitments hereunder to a level below that which such Lender or such holding company could have achieved but for such adoption, change, or compliance (taking into consideration such Lender’s or such holding company’s then existing policies with respect to capital adequacy and assuming the full utilization of such entity’s capital) by any amount deemed by such Lender to be material, then such Lender may notify Administrative Borrower and Agent thereof. Following receipt of such notice, Borrowers agree to pay such Lender on demand the amount of such reduction of return of capital as and when such reduction is determined, payable within 90 days after presentation by such Lender of a statement in the amount and setting forth in reasonable detail such Lender’s calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed true and correct absent manifest error). In determining such amount, such Lender may use any reasonable averaging and attribution methods.

2.15 Joint and Several Liability of Borrowers.

(a) Each Borrower is accepting joint and several liability hereunder and under the other Loan Documents in consideration of the financial accommodations to be provided by the Lender Group under this Agreement, for the mutual benefit, directly and indirectly, of each Borrower and in consideration of the undertakings of the other Borrowers to accept joint and several liability for the Obligations.

(b) Each Borrower, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers, with respect to the payment and performance of all of the Obligations (including, without limitation, any Obligations arising under this Section 2.15), it being the intention of the parties hereto that all the Obligations shall be the joint and several obligations of each Borrower without preferences or distinction among them.

(c) If and to the extent that any Borrower shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in accordance with the terms thereof, then in each such event the other Borrowers will make such payment with respect to, or perform, such Obligation.

(d) The Obligations of each Borrower under the provisions of this Section 2.15 constitute the absolute and unconditional, full recourse Obligations of each Borrower enforceable against each Borrower to the full extent of its properties and assets.

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(e) Except as otherwise expressly provided in this Agreement, each Borrower hereby waives notice of acceptance of its joint and several liability, notice of any Advances or Letters of Credit issued under or pursuant to this Agreement, notice of the occurrence of any Default, Event of Default, or of any demand for any payment under this Agreement, notice of any action at any time taken or omitted by Agent or Lenders under or in respect of any of the Obligations, any requirement of diligence or to mitigate damages and, generally, to the extent permitted by applicable law, all demands, notices and other formalities of every kind in connection with this Agreement (except as otherwise provided in this Agreement). Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by Agent or Lenders at any time or times in respect of any default by any Borrower in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by Agent or Lenders in respect of any of the Obligations, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of the Obligations or the addition, substitution or release, in whole or in part, of any Borrower. Without limiting the generality of the foregoing, each Borrower assents to any other action or delay in acting or failure to act on the part of any Agent or Lender with respect to the failure by any Borrower to comply with any of its respective Obligations, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder, which might, but for the provisions of this Section 2.15 afford grounds for terminating, discharging or relieving any Borrower, in whole or in part, from any of its Obligations under this Section 2.15, it being the intention of each Borrower that, so long as any of the Obligations hereunder remain unsatisfied, the Obligations of each Borrower under this Section 2.15 shall not be discharged except by performance and then only to the extent of such performance. The Obligations of each Borrower under this Section 2.15 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any Borrower or any Agent or Lender.

(f) Each Borrower represents and warrants to Agent and Lenders that such Borrower is currently informed of the financial condition of Borrowers and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. Each Borrower further represents and warrants to Agent and Lenders that such Borrower has read and understands the terms and conditions of the Loan Documents. Each Borrower hereby covenants that such Borrower will continue to keep informed of Borrowers’ financial condition, the financial condition of other guarantors, if any, and of all other circumstances which bear upon the risk of nonpayment or nonperformance of the Obligations.

(g) The provisions of this Section 2.15 are made for the benefit of Agent, Lenders and their respective successors and assigns, and may be enforced by it or them from time to time against any or all Borrowers as often as occasion therefor may arise and without requirement on the part of any such Agent, Lender, successor or assign first to marshal any of its or their claims or to exercise any of its or their rights against any Borrower or to exhaust any remedies available to it or them against any Borrower or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this Section 2.15 shall remain in effect until all of the Obligations shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by any Agent or Lender upon the insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the provisions of this Section 2.15 will forthwith be reinstated in effect, as though such payment had not been made.

(h) Each Borrower hereby agrees that it will not enforce any of its rights of contribution or subrogation against any other Borrower with respect to any liability incurred by it hereunder or under any of the other Loan Documents, any payments made by it to Agent or Lenders with respect to any of the Obligations or any collateral security therefor until such time as all of the Obligations have been paid in full in cash. Any claim which any Borrower may have against any other Borrower with respect to any payments to any Agent or Lender hereunder or under any other Loan Documents are hereby expressly made

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subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in full in cash of the Obligations and, in the event of any insolvency, bankruptcy, receivership, liquidation, reorganization or other similar proceeding under the laws of any jurisdiction relating to any Borrower, its debts or its assets, whether voluntary or involuntary, all such Obligations shall be paid in full in cash before any payment or distribution of any character, whether in cash, securities or other property, shall be made to any other Borrower therefor.

(i) Each Borrower hereby agrees that, after the occurrence and during the continuance of any Default or Event of Default, the payment of any amounts due with respect to the indebtedness owing by any Borrower to any other Borrower is hereby subordinated to the prior payment in full in cash of the Obligations. Each Borrower hereby agrees that after the occurrence and during the continuance of any Default or Event of Default, such Borrower will not demand, sue for or otherwise attempt to collect any indebtedness of any other Borrower owing to such Borrower until the Obligations shall have been paid in full in cash. If, notwithstanding the foregoing sentence, such Borrower shall collect, enforce or receive any amounts in respect of such indebtedness, such amounts shall be collected, enforced and received by such Borrower as trustee for Agent, and such Borrower shall deliver any such amounts to Agent for application to the Obligations in accordance with Section 2.4(b).

3. CONDITIONS; TERM OF AGREEMENT.

3.1 Conditions Precedent to the Initial Extension of Credit. The obligation of each Lender to make its extension of credit provided for hereunder on the Closing Date, is subject to the fulfillment, to the satisfaction of Agent and each Lender of each of the conditions precedent set forth on Schedule 3.1 (the making of such initial extension of credit by a Lender being conclusively deemed to be its satisfaction or waiver of the conditions precedent).

3.2 Conditions Precedent to all Extensions of Credit. The obligation of the Lender Group (or any member thereof) to make any Advances hereunder at any time (or to extend any portion of the Term Loan or any other credit hereunder) shall be subject to the following conditions precedent:

(a) the representations and warranties contained in this Agreement or in the other Loan Documents shall be true and correct in all material respects on and as of the date of such extension of credit, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date);

(b) no Default or Event of Default shall have occurred and be continuing on the date of such extension of credit, nor shall either result from the making thereof;

(c) no injunction, writ, restraining order, or other order of any nature restricting or prohibiting, directly or indirectly, the extending of such credit shall have been issued and remain in force by any Governmental Authority against any Borrower, Agent, any Lender, or any of their Affiliates; and

(d) no Material Adverse Change shall have occurred.

3.3 Term. This Agreement shall continue in full force and effect for a term ending on January 5, 2011 (the “Maturity Date”). The foregoing notwithstanding, the Lender Group, upon the election of the Required Lenders, shall have the right to terminate its obligations under this Agreement immediately and without notice upon the occurrence and during the continuation of an Event of Default.

3.4 Effect of Termination. On the date of termination of this Agreement, all Obligations (including contingent reimbursement obligations of Borrowers with respect to outstanding Letters of Credit and including all Bank Product Obligations) immediately shall become due and payable without

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notice or demand (including (a) either (i) providing cash collateral to be held by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105% of the Letter of Credit Usage, or (ii) causing the original Letters of Credit to be returned to the Issuing Lender, and (b) providing cash collateral (in an amount determined by Agent as sufficient to satisfy the reasonably estimated credit exposure) to be held by Agent for the benefit of the Bank Product Providers with respect to the Bank Product Obligations). No termination of this Agreement, however, shall relieve or discharge Borrowers of their duties, Obligations, or covenants hereunder or under any other Loan Document and the Agent’s Liens in the Collateral shall remain in effect until all Obligations have been paid in full and the Lender Group’s obligations to provide additional credit hereunder have been terminated. When this Agreement has been terminated and all of the Obligations have been paid in full and the Lender Group’s obligations to provide additional credit under the Loan Documents have been terminated irrevocably, Agent will, at Borrowers’ sole expense, execute and deliver any termination statements, lien releases, mortgage releases, re-assignments of trademarks, discharges of security interests, and other similar discharge or release documents (and, if applicable, in recordable form) as are reasonably necessary to release, as of record, the Agent’s Liens and all notices of security interests and liens previously filed by Agent with respect to the Obligations.

3.5 Early Termination by Borrowers. Borrowers have the option, at any time upon 60 days prior written notice by Administrative Borrower to Agent, to terminate this Agreement by paying to Agent, in cash, the Obligations (including (a) either (i) providing cash collateral to be held by Agent for the benefit of those lenders with a Revolver Commitment in an amount equal to 105% of the Letter of Credit Usage, or (ii) causing the original Letter of Credit to be returned to the Issuing Lender, and (b) providing cash collateral (in an amount determined by Agent as sufficient to satisfy the reasonably estimated credit exposure) to be held by Agent for the benefit of the Bank Product Providers with respect to the Bank Products Obligations), in full. If Administrative Borrower has sent a notice of termination pursuant to the provisions of this Section, then the Commitments shall terminate and Borrowers shall be obligated to repay the Obligations (including (a) either (i) providing cash collateral to be held by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105% of the Letter of Credit Usage, or (ii) causing the original Letters of Credit to be returned to the Issuing Lender, and (b) providing cash collateral (in an amount determined by Agent as sufficient to satisfy the reasonably estimated credit exposure) to be held by Agent for the benefit of the Bank Product Providers with respect to the Bank Products Obligations), in full on the date set forth as the date of termination of this Agreement in such notice.

4. REPRESENTATIONS AND WARRANTIES.

In order to induce the Lender Group to enter into this Agreement, each Borrower makes the following representations and warranties to the Lender Group which shall be true, correct, and complete, in all material respects, as of the date hereof, and shall be true, correct, and complete, in all material respects, as of the Closing Date, and at and as of the date of the making of each Advance (or other extension of credit) made thereafter, as though made on and as of the date of such Advance (or other extension of credit) (except to the extent that such representations and warranties relate solely to an earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement:

4.1 No Encumbrances. Each Borrower has good and indefeasible title to, or a valid leasehold interest in, their personal property assets and good and marketable title to, or a valid leasehold interest in, their Real Property, in each case, free and clear of Liens except for Permitted Liens.

4.2 Intentionally Omitted.

4.3 Inventory. Each item of Inventory is of good and merchantable quality, free from known defects.

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4.4 Equipment. Each material item of Equipment of Borrowers is used or held for use in their business and is in good working order, ordinary wear and tear and damage by casualty excepted.

4.5 Location of Inventory and Equipment. Except as permitted by Section 5.9, The Inventory and Equipment (other than vehicles or Equipment out for repair) of Borrowers are not stored with a bailee, warehouseman, or similar party and are located only at, or in-transit between, the locations identified on Schedule 4.5 (as such Schedule may be updated pursuant to Section 5.9).

4.6 Inventory Records. Each Active Borrower keeps correct and accurate records itemizing and describing the type, quality, and quantity of its Inventory and the book value thereof.

4.7 State of Incorporation; Location of Chief Executive Office; Organizational Identification Number; Commercial Tort Claims.

(a) The jurisdiction of organization of each Borrower is set forth on Schedule 4.7(a).

(b) The chief executive office of each Borrower is located at the address indicated on Schedule 4.7(b) (as such Schedule may be updated pursuant to Section 5.9).

(c) Each Borrower’s tax identification numbers and organizational identification number, if any, are identified on Schedule 4.7(c).

(d) As of the Closing Date, Borrowers do not hold any commercial tort claims, except as set forth on Schedule 4.7(d).

4.8 Due Organization and Qualification; Subsidiaries.

(a) Each Borrower is duly organized and existing and in good standing under the laws of the jurisdiction of its organization and qualified to do business in any state where the failure to be so qualified reasonably could be expected to result in a Material Adverse Change.

(b) Set forth on Schedule 4.8(b), is a complete and accurate description of the authorized capital Stock of each Borrower, by class, and, as of the Closing Date, a description of the number of shares of each such class that are issued and outstanding. Other than as described on Schedule 4.8(b), there are no subscriptions, options, warrants, or calls relating to any shares of each Borrower’s capital Stock, including any right of conversion or exchange under any outstanding security or other instrument. No Borrower is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital Stock or any security convertible into or exchangeable for any of its capital Stock.

(c) Set forth on Schedule 4.8(c), is a complete and accurate list of each Borrower’s direct and indirect Subsidiaries, showing: (i) the jurisdiction of their organization, (ii) the number of shares of each class of common and preferred Stock authorized for each of such Subsidiaries, and (iii) the number and the percentage of the outstanding shares of each such class owned directly or indirectly by the applicable Borrower. All of the outstanding capital Stock of each such Subsidiary has been validly issued and is fully paid and non-assessable.

(d) Except as set forth on Schedule 4.8, there are no subscriptions, options, warrants, or calls relating to any shares of any Borrower’s Subsidiaries’ Capital Stock, including any right of conversion or exchange under any outstanding security or other instrument. No Borrower or any of its respective Subsidiaries is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of any Borrower’s Subsidiaries’ capital Stock or any security convertible into or exchangeable for any such capital Stock.

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4.9 Due Authorization; No Conflict.

(a) As to each Borrower, the execution, delivery, and performance by such Borrower of this Agreement and the other Loan Documents to which it is a party have been duly authorized by all necessary action on the part of such Borrower.

(b) As to each Borrower, the execution, delivery, and performance by such Borrower of this Agreement and the other Loan Documents to which it is a party do not and will not (i) violate any provision of federal, state, or local law or regulation applicable to any Borrower, the Governing Documents of any Borrower, or any order, judgment, or decree of any court or other Governmental Authority binding on any Borrower, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of any Borrower, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of Borrower, other than Permitted Liens, or (iv) require any approval of any Borrower’s interestholders or any approval or consent of any Person under any material contractual obligation of any Borrower, other than consents or approvals that have been obtained and that are still in force and effect.

(c) Other than the filing of financing statements, the execution, delivery, and performance by each Borrower of this Agreement and the other Loan Documents to which such Borrower is a party do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any Governmental Authority, other than consents or approvals that have been obtained and that are still in force and effect.

(d) As to each Borrower, this Agreement and the other Loan Documents to which such Borrower is a party, and all other documents contemplated hereby and thereby, when executed and delivered by such Borrower will be the legally valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.

(e) The Agent’s Liens are validly created, perfected, and first priority Liens, subject only to Permitted Liens.

4.10 Litigation. Other than those matters disclosed in the Parent’s annual report on Form 10-K for the year ended December 31, 2005 and Parent’s quarterly or current reports thereafter filed with the Securities and Exchange Commission on or before the Closing Date, and other than matters arising after the Closing Date that reasonably could not be expected to result in a Material Adverse Change, there are no actions, suits, or proceedings pending or, to the best knowledge of each Borrower, threatened against any Borrower.

4.11 No Material Adverse Change. All financial statements relating to Active Borrowers that have been delivered by Active Borrowers to the Lender Group have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and present fairly in all material respects, Active Borrowers’ financial condition as of the date thereof and results of operations for the period then ended. There has not been a Material Adverse Change with respect to Active Borrowers since the date of the latest financial statements submitted to Agent on or before the Closing Date.

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4.12 Fraudulent Transfer.

(a) Each Active Borrower is Solvent.

(b) No transfer of property is being made by any Borrower and no obligation is being incurred by any Borrower or in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of Borrowers.

4.13 Employee Benefits. None of Borrowers or any of their ERISA Affiliates maintains or contributes to any Benefit Plan.

4.14 Environmental Condition. Except as set forth on Schedule 4.14, (a) to Borrowers’ knowledge, none of Borrowers’ properties or assets has ever been used by Borrowers, or, to the best of Borrowers’ knowledge, by previous owners or operators in the disposal of, or to produce, store, handle, treat, release, or transport, any Hazardous Materials, where such use, production, storage, handling, treatment, release or transport was in violation, in any material respect, of any applicable Environmental Law, (b) to Borrowers’ knowledge, none of Borrowers’ properties or assets has ever been designated or identified in any manner pursuant to any environmental protection statute as a Hazardous Materials disposal site, (c) none of Borrowers have received notice that a Lien arising under any Environmental Law has attached to any revenues or to any Real Property owned or operated by Borrowers, and (d) none of Borrowers have received a summons, citation, notice, or directive from the United States Environmental Protection Agency or any other federal or state governmental agency concerning any action or omission by any Borrower resulting in the releasing or disposing of Hazardous Materials into the environment.

4.15 Intellectual Property. Except as otherwise disclosed pursuant to Section 4.10, each Borrower owns, or holds licenses in, all trademarks, trade names, copyrights that constitute the Required Library, patents, patent rights, and licenses that are necessary to the conduct of its business as currently conducted, and attached hereto as Schedule 4.15 (as updated from time to time) is a true, correct, and complete listing of all material patents, patent applications, trademarks, trademark applications, copyrights relating to the Required Library, and copyright registrations as to which such Borrower is the owner or is an exclusive licensee.

4.16 Leases. Borrowers enjoy peaceful and undisturbed possession under all leases material to their business and to which they are parties or under which they are operating and all of such material leases are valid and subsisting and no material default by Borrowers exists under any of them.

4.17 Deposit Accounts and Securities Accounts. Set forth on Schedule 4.17 is a listing of all of Borrowers’ Deposit Accounts and Securities Accounts, including, with respect to each bank or securities intermediary (a) the name and address of such Person, and (b) the account numbers of the Deposit Accounts or Securities Accounts maintained with such Person.

4.18 Complete Disclosure. All factual information (taken as a whole) furnished by or on behalf of Borrowers in writing to Agent or any Lender (including all information contained in the Schedules hereto or in the other Loan Documents) for purposes of or in connection with this Agreement, the other Loan Documents, or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of Borrowers in writing to Agent or any Lender will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided. On the Closing Date, the Closing Date Projections represent, and as of the date on which any other Projections are delivered to Agent, such additional Projections represent Borrowers’ good faith estimate of their future performance for the periods covered thereby.

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4.19 Indebtedness. Set forth on Schedule 4.19 is a true and complete list of all Indebtedness of each Borrower outstanding immediately prior to the Closing Date that is to remain outstanding after the Closing Date and such Schedule accurately reflects the aggregate principal amount of such Indebtedness and describes the principal terms thereof.

4.20 Inactive Borrowers. Each of the Inactive Borrower is inactive and does not conduct any business operations, except as may be related to the dissolution of such Inactive Borrower or the consolidation or merger of such Inactive Borrower with one or more Active Borrowers as permitted under the terms of this Agreement.

4.21 Material Contracts. Neither the consummation of the QCSI Merger, nor the consummation of the transactions contemplated under the Merger Documents, nor the grant by the Borrowers of security interests in the Collateral as contemplated hereunder and under the other Loan Documents will conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation or material lease of any Borrower.

4.22 Merger Documents. Borrowers have delivered to Agent true and correct copies of the Merger Agreement and the other material documents related to the QCSI Merger (including all schedules, exhibits, amendments, supplements, modifications and assignments) (collectively, together with the Merger Agreement, the “Merger Documents”). The Merger Documents are in full force and effect as of the Closing Date and have not been terminated, rescinded, or withdrawn. No Borrower that is party thereto is in default in the performance of, or compliance with, any provisions of the Merger Documents. The Merger Documents comply in all material respects with, and contemporaneously with the funding of the first Term Loan Draw on the Closing Date, the QCSI Merger will be consummated in accordance with, all applicable laws. The transactions contemplated by the Merger Documents will be, contemporaneously with the funding of the first Term Loan Draw on the Closing Date, consummated in accordance with their respective terms and nothing has come to Borrowers’ attention that would indicate that any of the representations and warranties contained in the Merger Documents are not true and correct. To the best knowledge of the Borrowers, none of the representations or warranties of any other Person in any Merger Document contain any untrue statement of a material fact or omit any fact necessary to make such statements therein not misleading.

5. AFFIRMATIVE COVENANTS.

Each Borrower covenants and agrees that, until termination of all of the Commitments and payment in full of the Obligations, Borrowers shall do all of the following:

5.1 Accounting System. Maintain a system of accounting that enables Borrowers to produce financial statements in accordance with GAAP and maintain records pertaining to the Collateral that contain information as from time to time reasonably may be requested by Agent. Borrowers also shall keep a reporting system that shows all additions, sales, claims, returns, and allowances with respect to their sales.

5.2 Collateral Reporting. Provide Agent (and if so requested by Agent, with copies for each Lender) with each of the reports set forth on Schedule 5.2 at the times specified therein. In addition, each Borrower agrees to cooperate fully with Agent to facilitate and implement a system of electronic collateral reporting in order to provide electronic reporting of each of the items set forth above.

5.3 Financial Statements, Reports, Certificates. Deliver to Agent, with copies to each Lender, each of the financial statements, reports, or other items set forth on Schedule 5.3 at the time specified herein. In addition, Parent agrees that no Subsidiary of Parent will have a fiscal year different from that of Parent.

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5.4 Intentionally Omitted.

5.5 Inspection. Permit Agent, each Lender, and each of their duly authorized representatives or agents to visit any of its properties and inspect any of its assets or books and records, to examine and make copies of its books and records, and to discuss its affairs, finances, and accounts with, and to be advised as to the same by, its officers and employees at such reasonable times and intervals as Agent or any such Lender may designate and, so long as no Default or Event of Default exists, with reasonable prior notice to Administrative Borrower.

5.6 Maintenance of Properties. Maintain and preserve all of their properties which are necessary or useful in the proper conduct to their business in good working order and condition, ordinary wear, tear, and casualty excepted (and except where the failure to do so could not be expected to result in a Material Adverse Change), and comply at all times with the provisions of all material leases to which it is a party as lessee, so as to prevent any loss or forfeiture thereof or thereunder.

5.7 Taxes. Cause all assessments and taxes, whether real, personal, or otherwise, due or payable by, or imposed, levied, or assessed against Borrowers, or any of their respective assets to be paid in full, before delinquency or before the expiration of any extension period, except to the extent that the validity of such assessment or tax shall be the subject of a Permitted Protest. Borrowers will make timely payment or deposit of all tax payments and withholding taxes required of them by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request, furnish Agent with proof satisfactory to Agent indicating that the applicable Borrower has made such payments or deposits.

5.8 Insurance.

(a) At Borrowers’ expense, maintain insurance respecting their assets wherever located, covering loss or damage by fire, theft, explosion, and all other hazards and risks as ordinarily are insured against by other Persons engaged in the same or similar businesses, other than earthquake insurance. Borrowers also shall maintain business interruption, public liability, and product liability insurance, as well as insurance against larceny, embezzlement, and criminal misappropriation. All such policies of insurance shall be in such amounts and with such insurance companies as are reasonably satisfactory to Agent. Borrowers shall deliver copies of all such policies to Agent with an endorsement naming Agent as the sole loss payee (under a satisfactory lender’s loss payable endorsement) or additional insured, as appropriate. Each policy of insurance or endorsement shall contain a clause requiring the insurer to give not less than 30 days prior written notice to Agent in the event of cancellation of the policy for any reason whatsoever.

(b) Administrative Borrower shall give Agent prompt notice of any loss exceeding $50,000 covered by such insurance. So long as no Event of Default has occurred and is continuing, Borrowers shall have the exclusive right to settle any losses payable under any such insurance policies which are less than $200,000. Following the occurrence and during the continuation of an Event of Default, or in the case of any losses payable under such insurance exceeding $200,000, Agent shall have the exclusive right to settle any losses payable under any such insurance policies, without any liability to Borrowers whatsoever in respect of such settlements. Any monies received as payment for any loss under any insurance policy mentioned above (other than liability insurance policies) or as payment of any award or compensation for condemnation or taking by eminent domain, shall be paid over to Agent to be applied at the option of the Required Lenders either to the prepayment of the Obligations or to be disbursed to Administrative Borrower under staged payment terms reasonably satisfactory to the Required Lenders for application to the cost of repairs, replacements, or restorations; provided, however, that, with respect to any such monies in an aggregate

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amount during any 12 consecutive month period not in excess of $200,000, so long as (A) no Default or Event of Default shall have occurred and is continuing, (B) Borrowers’ Excess Availability is greater than $5,000,000, (C) Administrative Borrower shall have given Lender prior written notice of the Borrowers intention to apply such monies to the costs of repairs, replacement, or restoration of the property which is the subject of the loss, destruction, or taking by condemnation, (D) the monies are held in a cash collateral account in which Lender has a perfected first-priority security interest, and (E) Borrowers complete such repairs, replacements, or restoration within 180 days after the initial receipt of such monies, Borrowers shall have the option to apply such monies to the costs of repairs, replacement, or restoration of the property which is the subject of the loss, destruction, or taking by condemnation unless and to the extent that such applicable period shall have expired without such repairs, replacements, or restoration being made, in which case, any amounts remaining in the cash collateral account shall be paid to Lender and applied as set forth above.

5.9 Location of Inventory and Equipment. Keep Borrowers’ Inventory and Equipment (other than vehicles and Equipment out for repair) only at the locations identified on Schedule 4.5 and their chief executive offices only at the locations identified on Schedule 4.7(b); provided, however, that Administrative Borrower may amend Schedule 4.5 or Schedule 4.7 so long as such amendment occurs by written notice to Agent not less than 30 days prior to the date on which such Inventory or Equipment is moved to such new location or such chief executive office is relocated, so long as such new location is within the continental United States, and so long as, at the time of such written notification, the applicable Borrower provides Agent a Collateral Access Agreement with respect thereto; provided, further, that Borrowers may maintain, at any time, Inventory and Equipment with an aggregate market value not to exceed $150,000 in locations other than those identified in Schedule 4.5 so long as such locations are within the United States.

5.10 Compliance with Laws. Comply with the requirements of all applicable laws, rules, regulations, and orders of any Governmental Authority, other than laws, rules, regulations, and orders the non-compliance with which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Change.

5.11 Leases. Pay when due all rents and other amounts payable under any material leases to which any Borrower is a party or by which any Borrower’s properties and assets are bound, unless such payments are the subject of a Permitted Protest.

5.12 Existence. At all times preserve and keep in full force and effect each Borrower’s valid existence and good standing and any rights and franchises material to their businesses, unless such Borrower has merged into an Active Borrower pursuant to a Permitted Merger.

5.13 Environmental.

(a) Keep any property owned by any Borrower free of any Environmental Liens or post bonds or other financial assurances sufficient to satisfy the obligations or liability evidenced by such Environmental Liens, (b) use all commercially reasonably efforts to keep any property leased by any Borrower free of any Environmental Liens or post bonds or other financial assurances sufficient to satisfy the obligations or liability evidenced by such Environmental Liens, (c) comply, in all material respects, with Environmental Laws and provide to Agent documentation of such compliance which Agent reasonably requests, (d) promptly notify Agent of any release of a Hazardous Material in any reportable quantity, in violation of applicable Environmental Law, from or onto property owned or operated by any Borrower and take any Remedial Actions required to abate said release or otherwise to come into compliance with applicable Environmental Law, and (d) promptly, but in any event within 5 days of its receipt thereof, provide Agent with written notice of any of the following: (i) notice that an Environmental Lien has been filed against any of the real or personal property of any Borrower, (ii) commencement of any Environmental Action or notice that an Environmental Action will be filed against any Borrower, and (iii) notice of a violation, citation, or other administrative order which reasonably could be expected to result in a Material Adverse Change.

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5.14 Disclosure Updates. Promptly and in no event later than 5 Business Days after obtaining knowledge thereof, notify Agent if any written information, exhibit, or report furnished to the Lender Group contained, at the time it was furnished, any untrue statement of a material fact or omitted to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances in which made. The foregoing to the contrary notwithstanding, any notification pursuant to the foregoing provision will not cure or remedy the effect of the prior untrue statement of a material fact or omission of any material fact nor shall any such notification have the affect of amending or modifying this Agreement or any of the Schedules hereto.

5.15 Control Agreements. Take all reasonable steps in order for Agent to obtain control in accordance with Sections 8-106, 9-104, 9-105, 9-106, and 9-107 of the Code with respect to (subject to the proviso contained in Section 6.12) all of its Securities Accounts, Deposit Accounts, electronic chattel paper, investment property, and letter of credit rights.

5.16 Formation of Subsidiaries. At the time that any Borrower forms any direct or indirect Subsidiary or acquires any direct or indirect Subsidiary after the Closing Date, such Borrower shall (a) cause such new Subsidiary to provide to Agent a joinder to this Agreement and the Security Agreement, together with such other security documents (including Mortgages with respect to any Real Property of such new Subsidiary), as well as appropriate financing statements (and with respect to all property subject to a Mortgage, fixture filings), all in form and substance satisfactory to Agent (including being sufficient to grant Agent a first priority Lien (subject to Permitted Liens) in and to the assets of such newly formed or acquired Subsidiary), (b) provide to Agent a pledge agreement and appropriate certificates and powers or financing statements, hypothecating all of the direct or beneficial ownership interest in such new Subsidiary, in form and substance satisfactory to Agent, and (c) provide to Agent all other documentation, including one or more opinions of counsel satisfactory to Agent, which in its opinion is appropriate with respect to the execution and delivery of the applicable documentation referred to above (including policies of title insurance or other documentation with respect to all property subject to a Mortgage). Any document, agreement, or instrument executed or issued pursuant to this Section 5.16 shall be a Loan Document. Notwithstanding the foregoing: (i) EBITDA of any entity that becomes a Borrower pursuant to this Section 5.16 shall not be included in the calculation of TTM EBITDA for purposes of Section 2.4(c)(i) until the Required Lenders have approved such inclusion in their Permitted Discretion and (ii) the formation or acquisition of foreign subsidiaries shall not be permitted if joining any such foreign subsidiary as a Borrower results in: (1) any Lender being required to qualify to do business, register with any foreign governmental authority or otherwise seek permission or approval from any foreign governmental authority; (2) the violation of any foreign law or regulation by any Lender; or (3) any increased costs to such Lender and such costs are not Lender Group Expenses.

5.17 Intentionally Omitted.

5.18 Post-Closing Covenants. The obligation of the Lender Group (or any member thereof) to make any Advances hereunder at any time after the periods set forth in Schedule 5.18 (or to extend any other credit hereunder) shall be subject to the fulfillment, to the satisfaction of Agent and each Lender (or waiver thereby) in their Permitted Discretion, of each of the post-closing covenants set forth on Schedule 5.18 within the prescribed time periods set forth on such Schedule. The failure by Borrowers to satisfy the post-closing covenants set forth on Schedule 5.18 within the prescribed time periods shall constitute an Event of Default.

5.19 Copyrights. Maintain, at all times, the Required Library in accordance with the Security Agreement.

5.20 Assignability of Contracts. Use commercially reasonable efforts to exclude from all service contracts and all material intellectual property licenses entered into after the Closing Date, and from all other agreements or documents entered into after the Closing Date, any language that would prevent a Borrower from granting a Lien in such agreements or documents to Agent.

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5.21 Billing Procedures. Cause billing and collections with regards to service contracts and all material intellectual property licenses to be substantially on the same basis and in accordance with the usual and customary practices of the Active Borrowers as they exist on the Closing Date.

6. NEGATIVE COVENANTS.

Each Borrower covenants and agrees that, until termination of all of the Commitments and payment in full of the Obligations, Borrowers will not do any of the following:

6.1 Indebtedness. Create, incur, assume, suffer to exist, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except:

(a) Indebtedness evidenced by this Agreement and the other Loan Documents, together with Indebtedness owed to Underlying Issuers with respect to Underlying Letters of Credit,

(b) Indebtedness set forth on Schedule 4.19,

(c) Permitted Purchase Money Indebtedness,

(d) Permitted Capitalized Lease Obligations,

(e) refinancings, renewals, or extensions of Indebtedness permitted under clauses (b), (c), (d) and (h) of this Section 6.1 (and continuance or renewal of any Permitted Liens associated therewith) so long as: (i) the terms and conditions of such refinancings, renewals, or extensions do not, in Agent’s reasonable judgment, materially impair the prospects of repayment of the Obligations by Borrowers or materially impair Borrowers’ creditworthiness, (ii) such refinancings, renewals, or extensions do not result in an increase in the principal amount of, or interest rate with respect to, the Indebtedness so refinanced, renewed, or extended or add one or more Borrowers as liable with respect thereto if such additional Borrowers were not liable with respect to the original Indebtedness, (iii) such refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity of the Indebtedness so refinanced, renewed, or extended, nor are they on terms or conditions, that, taken as a whole, are materially more burdensome or restrictive to the applicable Borrower, (iv) if the Indebtedness that is refinanced, renewed, or extended was subordinated in right of payment to the Obligations, then the terms and conditions of the refinancing, renewal, or extension Indebtedness must include subordination terms and conditions that are at least as favorable to the Lender Group as those that were applicable to the refinanced, renewed, or extended Indebtedness, and (v) the Indebtedness that is refinanced, renewed, or extended is not recourse to any Person that is liable on account of the Obligations other than those Persons which were obligated with respect to the Indebtedness that was refinanced, renewed, or extended,

(f) endorsement of instruments or other payment items for deposit,

(g) Indebtedness composing Permitted Investments

(h) Indebtedness in connection with the issuance by Parent of unsecured convertible notes (the “Convertible Notes”) more specifically described in the Prospectus attached hereto as Exhibit D and made a part hereof by this reference.

(i) Indebtedness under junior subordinated obligations issued by an Active Borrower; but only so long as: (i) a Default or an Event of Default does not exist either before or immediately

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after incurring such obligations, (ii) no more than $5,000,000 of such Indebtedness may exist at any one time, and (iii) the terms of such obligations provide that: (w) the obligations of the applicable Active Borrower under such obligations are junior and subordinate to the obligations of such Active Borrower to the Lender Group pursuant to subordination terms acceptable to Agent in its Permitted Discretion, (x) there shall be no required payment of principal prior to maturity, (y) there may be cash payments of interest only if no Default or Event of Default has occurred and is continuing, and (z) the maturity date shall be no earlier than the date that is 90 days after the Maturity Date;

(j) Intentionally Omitted;

(k) Indebtedness incurred in connection with the financing of insurance premiums on customary terms and in the ordinary course of business; and

(l) to the extent not included in (a) through (l) above, Indebtedness incurred in the ordinary course of business and not exceeding $250,000 in the aggregate outstanding at any one time.

6.2 Liens. Create, incur, assume, or suffer to exist, directly or indirectly, any Lien on or with respect to any of its assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for Permitted Liens (including Liens that are replacements of Permitted Liens to the extent that the original Indebtedness is refinanced, renewed, or extended under Section 6.1(d) and so long as the replacement Liens only encumber those assets that secured the refinanced, renewed, or extended Indebtedness).

6.3 Restrictions on Fundamental Changes.

(a) Other than the QCSI Merger and Permitted Mergers, enter into any merger, consolidation, reorganization, or recapitalization, or reclassify its Stock,

(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation or dissolution),

(c) Except with respect to transactions contemplated in connection with the QCSI Merger and a Permitted Merger, convey, sell, lease, license, assign, transfer, or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of its assets, or

(d) Except in connection with a Permitted Merger, suspend or go out of a substantial portion of its or their business.

6.4 Disposal of Assets. Other than Permitted Dispositions, convey, sell, lease, license, assign, transfer, or otherwise dispose of any of the assets of any Borrower.

6.5 Change Name. Change any Borrower’s name, organizational identification number, state of organization, or organizational identity; provided, however, that a Borrower may change its name upon at least 30 days prior written notice by Administrative Borrower to Agent of such change and so long as, at the time of such written notification, such Borrower provides any financing statements necessary to perfect and continue perfected the Agent’s Liens.

6.6 Nature of Business. Make any change in the principal nature of their business.

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6.7 Prepayments and Amendments. Except in connection with a refinancing permitted by Section 6.1(e),

(a) optionally prepay, redeem, defease, purchase, or otherwise acquire (other than by operation of law as the result of a Permitted Merger or the QCSI Merger) any Indebtedness of any Borrower, other than prepayments, redemptions, or other acquisitions with respect to: (i) the Obligations in accordance with this Agreement, (ii) Indebtedness in the ordinary course of Borrowers’ business but only so long as: (y) no Default or Event of Default exists before and immediately after giving effect to such prepayment and (z) such prepayments do not exceed $200,000 in the aggregate for all Borrowers in any one fiscal year of Parent, and (iii) Indebtedness under the Convertible Notes so long as: (1) no Default or Event of Default exists before and immediately after giving effect to such prepayment and (2) such prepayments are permitted by the terms of the Convertible Notes and the indenture under which the Convertible Notes are issued (the “Indenture”),

(b) make any payment on account of Indebtedness that has been contractually subordinated in right of payment if such payment is not permitted at such time under the subordination terms and conditions, or

(c) directly or indirectly, amend, modify, alter, increase, or change any of the terms or conditions of any agreement, instrument, document, indenture, or other writing evidencing or concerning Indebtedness permitted under Sections 6.1(b), (c), (g), (h), (i), (j), (k), and (l), if such amendment, modification, alteration, increase or change would cause such Indebtedness to not be permitted under such Sections.

6.8 Change of Control. Cause, permit, or suffer, directly or indirectly, any Change of Control.

6.9 Consignments. Consign any of their Inventory or sell any of their Inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale.

6.10 Distributions. Make any distribution or declare or pay any dividends (in cash or other property, other than common Stock) on, or purchase, acquire, redeem, or retire any of any Borrower’s Stock, of any class, whether now or hereafter outstanding; except that: (i) a Borrower may make distributions or declare and pay dividends to another Borrower, (ii) Parent may conduct the Share Repurchases.

6.11 Accounting Methods. Modify or change their fiscal year or their method of accounting (other than as may be required to conform to GAAP) or enter into, modify, or terminate any agreement currently existing, or at any time hereafter entered into with any third party accounting firm or service bureau for the preparation or storage of Borrowers’ accounting records without said accounting firm or service bureau agreeing to provide Agent information regarding Borrowers’ financial condition.

6.12 Investments. Except for the QCSI Merger and Permitted Investments, directly or indirectly, make or acquire any Investment, or incur any liabilities (including contingent obligations) for or in connection with any Investment; provided, however, that Administrative Borrower shall not have Permitted Investments (other than in the Cash Management Accounts) in Deposit Accounts or Securities Accounts in an aggregate amount in excess of $50,000 at any one time unless Administrative Borrower, as applicable, and the applicable securities intermediary or bank have entered into Control Agreements governing such Permitted Investments in order to perfect (and further establish) the Agent’s Liens in such Permitted Investments. Subject to the foregoing proviso, Borrowers shall not establish or maintain any Deposit Account or Securities Account unless Agent shall have received a Control Agreement in respect of such Deposit Account or Securities Account.

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6.13 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any transaction with any Affiliate of any Borrower except for (I) transactions that (a) are in the ordinary course of Borrowers’ business, (b) are upon fair and reasonable terms, (c) if they involve one or more payments or the transfer of assets by any Borrower in excess of $100,000, are fully disclosed to Agent, and (d) are no less favorable to Borrowers than would be obtained in an arm’s length transaction with a non-Affiliate and (II) except for Share Repurchases. Notwithstanding the foregoing, an Active Borrower may not make payments, sell or make any other transfers of assets to an Inactive Borrower.

6.14 Use of Proceeds.

(a) Use the proceeds of the Advances for any purpose other than (i) on the Closing Date, to pay transactional fees, costs, and expenses incurred in connection with this Agreement, the other Loan Documents, and the transactions contemplated hereby and thereby, (ii) to pay the consideration, and transactional fees, costs and expenses incurred in connection with the QCSI Merger, and (iii) thereafter, consistent with the terms and conditions hereof, for its lawful and permitted purposes.

(b) With respect to Active Borrowers, transfer, directly or indirectly any proceeds of the Advances to any Inactive Borrower.

(c) With respect to Inactive Borrowers, request or receive, directly or indirectly any proceeds of the Advances from the Lenders of an Active Borrower, or otherwise.

6.15 Inventory and Equipment with Bailees. Store the Inventory or Equipment of Borrowers at any time now or hereafter with a bailee, warehouseman, or similar party.

6.16 Financial Covenants.

(a) Fail to maintain or achieve:

(i) Minimum TTM EBITDA. TTM EBITDA, measured on the last day of each fiscal quarter, of at least the required amount set forth in the following table for the applicable measurement date set forth opposite thereto:

Applicable Amount	Measurement Date
$42,500,000	June 30, 2006
$47,500,000	September 30, 2006
$57,200,000	December 31, 2006
$57,200,000	March 31, 2007
$57,200,000	June 30, 2007
$57,200,000	September 30, 2007
$70,100,000	December 31, 2007
$70,100,000	March 31, 2008
$70,100,000	June 30, 2008
$70,100,000	September 30, 2008
$83,000,000	December 31, 2008 and the last day of each calendar quarter thereafter

(ii) Minimum Liquidity. Maintain at all times Liquidity of no less than $15,000,000.

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(iii) Minimum TTM Recurring Revenues. TTM Recurring Revenues, measured on the last day of each fiscal quarter, of at least the required amount set forth in the following table for the applicable measurement date set forth opposite thereto:

Applicable Amount	Measurement Date
$137,000,000	June 30, 2006
$152,000,000	September 30, 2006
$162,000,000	December 31, 2006
$169,000,000	March 31, 2007
$177,000,000	June 30, 2007
$183,000,000	September 30, 2007
$186,000,000	December 31, 2007

(b) Make:

(i) Capital Expenditures. Capital Expenditures in any fiscal year in excess of the amount set forth in the following table for the applicable period:

Fiscal Year 2006	Fiscal Year 2007	Fiscal Year 2008
$28,000,000	$35,000,000	$38,000,000

The covenants contained in Sections 6.16(a)(iii) and (b) shall be established by Agent for each fiscal quarter ending after December 31, 2007 (or each fiscal year after fiscal year 2008 with respect to Section 6.16 (b)) based upon Borrowers’ Projections for the applicable fiscal year, which projections must be delivered to Agent in accordance with Schedule 5.3. The Projections must credibly reflect expected performance by Borrowers in each period of each such fiscal year that is equal to or better than the actual performance for the same periods in the fiscal year ending 2007, as reflected in the financial statements delivered to Agent for such fiscal year, and all such projections shall otherwise be satisfactory to Agent in its reasonable credit judgment. Agent shall set the future periods’ financial covenants based on 85% (120% with respect to Section 6.16 (b)) of the applicable statistics and ratios as provided for in the Projections approved by Agent.

7. EVENTS OF DEFAULT.

Any one or more of the following events shall constitute an event of default (each, an “Event of Default”) under this Agreement:

7.1 If Borrowers fail to pay when due and payable, or when declared due and payable, (a) all or any portion of the Obligations consisting of interest, fees, or charges due the Lender Group, reimbursement of Lender Group Expenses, or other amounts (other than any portion thereof constituting principal) constituting Obligations (including any portion thereof that accrues after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), and such failure continues for a period of 3 Business Days, or (b) all or any portion of the principal of the Obligations);

7.2 If Borrowers:

(a) fail to perform or observe any covenant or other agreement contained in any of Sections 2.7, 5.2, 5.3, 5.5, 5.8, 5.12, 5.14, 5.16, 5.18, and 6.1 through 6.16 of this Agreement;

(b) fail to perform or observe any covenant or other agreement contained in any of Sections 5.6, 5.7, 5.9, 5.10, 5.11, and 5.15 of this Agreement and such failure continues for a period of 10 days after the earlier of (i) the date on which such failure shall first become known to any officer of any Borrower or (ii) written notice thereof is given to Administrative Borrower by Lender; or

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(c) fail to perform or observe any covenant or other agreement contained in this Agreement, or in any of the other Loan Documents; in each case, other than any such covenant or agreement that is the subject of another provision of this Section 7 (in which event such other provision of this Section 7 shall govern), and such failure continues for a period of 20 days after the earlier of (i) the date on which such failure shall first become known to any officer of any Borrower or (ii) written notice thereof is given to Administrative Borrower by Lender;

7.3 If any material portion of any Borrower’s assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any third Person and the same is not discharged before the earlier of 30 days after the date it first arises or 5 days prior to the date on which such property or asset is subject to forfeiture by such Borrower;

7.4 If an Insolvency Proceeding is commenced by any Borrower;

7.5 If an Insolvency Proceeding is commenced against any Borrower, and any of the following events occur: (a) the applicable Borrower consents to the institution of such Insolvency Proceeding against it, (b) the petition commencing the Insolvency Proceeding is not timely controverted, (c) the petition commencing the Insolvency Proceeding is not dismissed within 60 calendar days of the date of the filing thereof; (d) an interim trustee is appointed to take possession of all or any substantial portion of the properties or assets of, or to operate all or any substantial portion of the business of, any Borrower, or (e) an order for relief shall have been issued or entered therein;

7.6 If any Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs;

7.7 If one or more judgments or other claims involving an aggregate amount of $200,000, or more (except to the extent fully covered by insurance pursuant to which the insurer has accepted liability therefor in writing) shall be entered or filed against any Borrower or with respect to any of their respective assets, and the same is not released, discharged, bonded against, or stayed pending appeal before the earlier of 30 days after the date it first arises or 5 days prior to the date on which such asset is subject to being forfeited by the applicable Borrower;

7.8 If there is a default in one or more agreements to which any Borrower is a party with one or more third Persons relative to Indebtedness of any Borrower involving an aggregate amount of $100,000 or more, and such default (i) occurs at the final maturity of the obligations thereunder, or (ii) results in a right by such third Person(s), irrespective of whether exercised, to accelerate the maturity of the applicable Borrower’s obligations thereunder;

7.9 If any material misstatement or misrepresentation in any warranty, representation, statement, or Record made to the Lender Group by any Borrower, or any officer, employee, agent, or director of any Borrower exists when made or furnished or deemed made to the Lender Group and such material misstatement or misrepresentation has an adverse impact on the Collateral or the interests of the Lender Group;

7.10 Intentionally Omitted.

7.11 If the Security Agreement or any other Loan Document that purports to create a Lien, shall, for any reason, fail or cease to create a valid and perfected and, except to the extent permitted by the terms hereof or thereof, first priority Lien on or security interest in the Collateral covered hereby or thereby, except as a result of a disposition of the applicable Collateral in a transaction permitted under this Agreement; or

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7.12 Any provision of any Loan Document shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by any Borrower or a proceeding shall be commenced by any Borrower, or by any Governmental Authority having jurisdiction over any Borrower, seeking to establish the invalidity or unenforceability thereof, or any Borrower shall deny that it has any liability or obligation purported to be created under any Loan Document.

8. THE LENDER GROUP’S RIGHTS AND REMEDIES.

8.1 Rights and Remedies. Upon the occurrence, and during the continuation, of an Event of Default, the Required Lenders (at their election but without notice of their election and without demand) may authorize and instruct Agent to do any one or more of the following on behalf of the Lender Group (and Agent, acting upon the instructions of the Required Lenders, shall do the same on behalf of the Lender Group), all of which are authorized by Borrowers:

(a) Declare all or any portion of the Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable;

(b) Cease advancing money or extending credit to or for the benefit of Borrowers under this Agreement, under any of the Loan Documents, or under any other agreement between Borrowers and the Lender Group;

(c) Terminate this Agreement and any of the other Loan Documents as to any future liability or obligation of the Lender Group, but without affecting any of the Agent’s Liens in the Collateral and without affecting the Obligations; and

(d) The Lender Group shall have all other rights and remedies available at law or in equity or pursuant to any other Loan Document.

The foregoing to the contrary notwithstanding, upon the occurrence of any Event of Default described in Section 7.4 or Section 7.5, in addition to the remedies set forth above, without any notice to Borrowers or any other Person or any act by the Lender Group, the Commitments shall automatically terminate and the Obligations then outstanding, together with all accrued and unpaid interest thereon and all fees and all other amounts due under this Agreement and the other Loan Documents, shall automatically and immediately become due and payable, without presentment, demand, protest, or notice of any kind, all of which are expressly waived by Borrowers.

8.2 Remedies Cumulative. The rights and remedies of the Lender Group under this Agreement, the other Loan Documents, and all other agreements shall be cumulative. The Lender Group shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by the Lender Group of one right or remedy shall be deemed an election, and no waiver by the Lender Group of any Event of Default shall be deemed a continuing waiver. No delay by the Lender Group shall constitute a waiver, election, or acquiescence by it.

9. TAXES AND EXPENSES.

If any Borrower fails to pay any monies (whether taxes, assessments, insurance premiums, or, in the case of leased properties or assets, rents or other amounts payable under such leases) due to third Persons, or fails to make any deposits or furnish any required proof of payment or deposit, all as required under the terms of this Agreement, then, Agent, in its sole discretion and without prior notice to any Borrower,

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may do any or all of the following: (a) make payment of the same or any part thereof (except to the extent that the validity of such assessment or tax is subject to a Permitted Protest), (b) set up such reserves against the Maximum Revolver Amount as Agent deems necessary to protect the Lender Group from the exposure created by such failure, or (c) in the case of the failure to comply with Section 5.8 hereof, obtain and maintain insurance policies of the type described in Section 5.8 and take any action with respect to such policies as Agent deems prudent in its Permitted Discretion. Any such amounts paid by Agent shall constitute Lender Group Expenses and any such payments shall not constitute an agreement by the Lender Group to make similar payments in the future or a waiver by the Lender Group of any Event of Default under this Agreement. Agent need not inquire as to, or contest the validity of, any such expense, tax, or Lien and the receipt of the usual official notice for the payment thereof shall be conclusive evidence that the same was validly due and owing.

10. WAIVERS; INDEMNIFICATION.

10.1 Demand; Protest; etc. Each Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, nonpayment at maturity, release, compromise, settlement, extension, or renewal of documents, instruments, chattel paper, and guarantees at any time held by the Lender Group on which any such Borrower may in any way be liable.

10.2 The Lender Group’s Liability for Borrower Collateral. Each Borrower hereby agrees that: (a) so long as Agent complies with its obligations, if any, under the Code, the Lender Group shall not in any way or manner be liable or responsible for: (i) the safekeeping of the Borrower Collateral, (ii) any loss or damage thereto occurring or arising in any manner or fashion from any cause, (iii) any diminution in the value thereof, or (iv) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of loss, damage, or destruction of the Borrower Collateral shall be borne by Borrowers.

10.3 Indemnification. Each Borrower shall pay, indemnify, defend, and hold the Agent-Related Persons, the Lender-Related Persons, and each Participant (each, an “Indemnified Person”) harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, and damages, and all reasonable attorneys fees and disbursements and other costs and expenses actually incurred in connection therewith or in connection with the enforcement of this indemnification (as and when they are incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them (a) in connection with or as a result of or related to the execution, delivery, enforcement, performance, or administration (including any restructuring or workout with respect hereto) of this Agreement, any of the other Loan Documents, or the transactions contemplated hereby or thereby or the monitoring of Borrowers’ compliance with the terms of the Loan Documents, and (b) with respect to any investigation, litigation, or proceeding related to this Agreement, any other Loan Document, or the use of the proceeds of the credit provided hereunder (irrespective of whether any Indemnified Person is a party thereto), or any act, omission, event, or circumstance in any manner related thereto (all the foregoing, collectively, the “Indemnified Liabilities”). The foregoing to the contrary notwithstanding, Borrowers shall have no obligation to any Indemnified Person under this Section 10.3 with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Person. This provision shall survive the termination of this Agreement and the repayment of the Obligations. If any Indemnified Person makes any payment to any other Indemnified Person with respect to an Indemnified Liability as to which Borrowers were required to indemnify the Indemnified Person receiving such payment, the Indemnified Person making such payment is entitled to be indemnified and reimbursed by Borrowers with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

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11. NOTICES.

Unless otherwise provided in this Agreement, all notices or demands by Borrowers or Agent to the other relating to this Agreement or any other Loan Document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as Administrative Borrower or Agent, as applicable, may designate to each other in accordance herewith), or telefacsimile to Borrowers in care of Administrative Borrower or to Agent, as the case may be, at its address set forth below:

If to Administrative Borrower:	THE TRIZETTO GROUP, INC.
	567 San Nicolas Drive
	Suite 360
	Newport Beach, California 92660
	Attn: James C. Malone
	Fax No.: 949.219.2198
with copies to:	STRADLING YOCCA CARLSON & RAUTH
	660 Newport Center Drive
	Suite 1600
	Newport Beach, California 92660
	Attn: K.C. Schaaf, Esq.
	Fax No.: 949.725.4100
If to Agent:	WELLS FARGO FOOTHILL, INC.
	2450 Colorado Avenue
	Suite 300 West
	Santa Monica, California 90404
	Attn: Business Finance Division Manager
	Fax No.: 310.453.7413
with copies to:	BUCHALTER NEMER
	1000 Wilshire Boulevard
	Suite 1500
	Los Angeles, California 90017.
	Attention: Robert J. Davidson, Esq.
	Fax: 213-896-0400

Agent and Borrowers may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other party. All notices or demands sent in accordance with this Section 11, other than notices by Agent in connection with enforcement rights against the Borrower Collateral under the provisions of the Code, shall be deemed received on the earlier of the date of actual receipt or 3 Business Days after the deposit thereof in the mail. Each Borrower acknowledges and agrees that notices sent by the Lender Group in connection with the exercise of enforcement rights against Borrower Collateral under the provisions of the Code shall be deemed sent when deposited in the mail or personally delivered, or, where permitted by law, transmitted by telefacsimile or any other method set forth above.

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12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 12(b).

(c) BORROWERS AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWERS AND EACH MEMBER OF THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

(b) REFERENCE PROVISION.

(i) EACH OF BORROWERS, AGENT AND EACH MEMBER OF THE LENDER GROUP PREFER THAT ANY DISPUTE BETWEEN THEM BE RESOLVED IN LITIGATION SUBJECT TO A JURY TRIAL WAIVER AS SET FORTH IN THE LOAN DOCUMENTS, BUT THE CALIFORNIA SUPREME COURT HAS HELD THAT PRE-DISPUTE JURY TRIAL WAIVERS ARE UNENFORCEABLE. THIS REFERENCE PROVISION WILL BE APPLICABLE UNTIL: (I) THE CALIFORNIA SUPREME COURT HOLDS THAT A PRE-DISPUTE JURY TRIAL WAIVER PROVISION SIMILAR TO THAT CONTAINED IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS IS VALID OR ENFORCEABLE; OR (II) THE CALIFORNIA LEGISLATURE PASSES LEGISLATION AND THE GOVERNOR OF THE STATE OF CALIFORNIA SIGNS INTO LAW A STATUTE AUTHORIZING PRE-DISPUTE JURY TRIAL WAIVERS AND AS A RESULT SUCH WAIVERS BECOME ENFORCEABLE. IN ADDITION, THIS REFERENCE PROVISION, IF NOT ALREADY APPLICABLE AS OTHERWISE PROVIDED HEREIN, WILL BECOME APPLICABLE, IF A COURT, CONTRARY TO A CHOICE OF LAW PROVISION CONTAINED IN THE LOAN DOCUMENTS, HOLDS THAT THE LAWS OF THE STATE OF CALIFORNIA APPLY TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

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(ii) OTHER THAN (I) NONJUDICIAL FORECLOSURE OF SECURITY INTERESTS IN REAL OR PERSONAL PROPERTY, (II) THE APPOINTMENT OF A RECEIVER OR (III) THE EXERCISE OF OTHER PROVISIONAL REMEDIES (ANY OF WHICH MAY BE INITIATED PURSUANT TO APPLICABLE LAW), ANY CONTROVERSY, DISPUTE OR CLAIM (EACH, A “CLAIM”) BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, WILL BE RESOLVED BY A REFERENCE PROCEEDING IN CALIFORNIA IN ACCORDANCE WITH THE PROVISIONS OF SECTION 638 ET SEQ. OF THE CALIFORNIA CODE OF CIVIL PROCEDURE (“CCP”), OR THEIR SUCCESSOR SECTIONS, WHICH SHALL CONSTITUTE THE EXCLUSIVE REMEDY FOR THE RESOLUTION OF ANY CLAIM, INCLUDING WHETHER THE CLAIM IS SUBJECT TO THE REFERENCE PROCEEDING. EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, VENUE FOR THE REFERENCE PROCEEDING WILL BE IN THE SUPERIOR COURT OR FEDERAL DISTRICT COURT LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA (THE “COURT”).

(iii) THE REFEREE SHALL BE A RETIRED JUDGE OR JUSTICE SELECTED BY MUTUAL WRITTEN AGREEMENT OF THE PARTIES. IF THE PARTIES DO NOT AGREE, THE REFEREE SHALL BE SELECTED BY THE PRESIDING JUDGE OF THE COURT (OR HIS OR HER REPRESENTATIVE). A REQUEST FOR APPOINTMENT OF A REFEREE MAY BE HEARD ON AN EX PARTE OR EXPEDITED BASIS, AND EACH OF PARENT, BORROWERS, AGENT AND EACH MEMBER OF THE LENDER GROUP AGREE THAT IRREPARABLE HARM WOULD RESULT IF EX PARTE RELIEF IS NOT GRANTED. THE REFEREE SHALL BE APPOINTED TO SIT WITH ALL THE POWERS PROVIDED BY LAW. PENDING APPOINTMENT OF THE REFEREE, THE COURT HAS POWER TO ISSUE TEMPORARY OR PROVISIONAL REMEDIES.

(iv) EACH OF BORROWERS, AGENT AND EACH MEMBER OF THE LENDER GROUP AGREE THAT TIME IS OF THE ESSENCE IN CONDUCTING THE REFERENCE PROCEEDINGS. ACCORDINGLY, THE REFEREE SHALL BE REQUESTED, SUBJECT TO CHANGE IN THE TIME PERIODS SPECIFIED HEREIN FOR GOOD CAUSE SHOWN, TO (A) SET THE MATTER FOR A STATUS AND TRIAL-SETTING CONFERENCE WITHIN FIFTEEN (15) DAYS AFTER THE DATE OF SELECTION OF THE REFEREE, (B) IF PRACTICABLE, TRY ALL ISSUES OF LAW OR FACT WITHIN NINETY (90) DAYS AFTER THE DATE OF THE CONFERENCE AND (C) REPORT A STATEMENT OF DECISION WITHIN TWENTY (20) DAYS AFTER THE MATTER HAS BEEN SUBMITTED FOR DECISION.

(v) THE REFEREE WILL HAVE POWER TO EXPAND OR LIMIT THE AMOUNT AND DURATION OF DISCOVERY. THE REFEREE MAY SET OR EXTEND DISCOVERY DEADLINES OR CUTOFFS FOR GOOD CAUSE, INCLUDING A PARTY’S FAILURE TO PROVIDE REQUESTED DISCOVERY FOR ANY REASON WHATSOEVER. UNLESS OTHERWISE ORDERED BASED UPON GOOD CAUSE SHOWN, NO PARTY TO SUCH ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION, SHALL BE ENTITLED TO “PRIORITY” IN CONDUCTING DISCOVERY, DEPOSITIONS MAY BE TAKEN BY ANY PARTY TO SUCH ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION UPON SEVEN (7) DAYS WRITTEN NOTICE, AND ALL OTHER DISCOVERY SHALL BE RESPONDED TO WITHIN FIFTEEN (15) DAYS AFTER SERVICE. ALL DISPUTES RELATING TO DISCOVERY WHICH CANNOT BE RESOLVED BY THE PARTIES SHALL BE SUBMITTED TO THE REFEREE WHOSE DECISION SHALL BE FINAL AND BINDING.

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(vi) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE REFEREE SHALL DETERMINE THE MANNER IN WHICH THE REFERENCE PROCEEDING IS CONDUCTED INCLUDING THE TIME AND PLACE OF HEARINGS, THE ORDER OF PRESENTATION OF EVIDENCE, AND ALL OTHER QUESTIONS THAT ARISE WITH RESPECT TO THE COURSE OF THE REFERENCE PROCEEDING. ALL PROCEEDINGS AND HEARINGS CONDUCTED BEFORE THE REFEREE, EXCEPT FOR TRIAL, SHALL BE CONDUCTED WITHOUT A COURT REPORTER, EXCEPT THAT WHEN A PARTY TO SUCH ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION SO REQUESTS, A COURT REPORTER WILL BE USED AT ANY HEARING CONDUCTED BEFORE THE REFEREE, AND THE REFEREE WILL BE PROVIDED A COURTESY COPY OF THE TRANSCRIPT. THE PARTY MAKING SUCH A REQUEST SHALL HAVE THE OBLIGATION TO ARRANGE FOR AND PAY THE COURT REPORTER. SUBJECT TO THE REFEREE’S POWER TO AWARD COSTS TO THE PREVAILING PARTY, THE PARTIES TO ANY SUCH ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION WILL EQUALLY SHARE THE COST OF THE REFEREE AND THE COURT REPORTER AT TRIAL.

(vii) THE REFEREE SHALL BE REQUIRED TO DETERMINE ALL ISSUES IN ACCORDANCE WITH EXISTING CASE LAW AND THE STATUTORY LAWS OF THE STATE OF CALIFORNIA. THE RULES OF EVIDENCE APPLICABLE TO PROCEEDINGS AT LAW IN THE STATE OF CALIFORNIA WILL BE APPLICABLE TO THE REFERENCE PROCEEDING. THE REFEREE SHALL BE EMPOWERED TO ENTER EQUITABLE AS WELL AS LEGAL RELIEF, PROVIDE ALL TEMPORARY OR PROVISIONAL REMEDIES, ENTER EQUITABLE ORDERS THAT WILL BE BINDING ON THE PARTIES TO SUCH ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION AND RULE ON ANY MOTION WHICH WOULD BE AUTHORIZED IN A TRIAL, INCLUDING WITHOUT LIMITATION MOTIONS FOR SUMMARY JUDGMENT OR SUMMARY ADJUDICATION. THE REFEREE SHALL ISSUE A DECISION AND PURSUANT TO CCP §644 THE REFEREE’S DECISION SHALL BE ENTERED BY THE COURT AS A JUDGMENT OR AN ORDER IN THE SAME MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT. THE FINAL JUDGMENT OR ORDER OR FROM ANY APPEALABLE DECISION OR ORDER ENTERED BY THE REFEREE SHALL BE FULLY APPEALABLE AS PROVIDED BY LAW. THE PARTIES TO SUCH ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION RESERVE THE RIGHT TO FINDINGS OF FACT, CONCLUSIONS OF LAWS, A WRITTEN STATEMENT OF DECISION, AND THE RIGHT TO MOVE FOR A NEW TRIAL OR A DIFFERENT JUDGMENT, WHICH NEW TRIAL, IF GRANTED, IS ALSO TO BE A REFERENCE PROCEEDING UNDER THIS PROVISION.

(viii) IF THE ENABLING LEGISLATION WHICH PROVIDES FOR APPOINTMENT OF A REFEREE IS REPEALED (AND NO SUCCESSOR STATUTE IS ENACTED), ANY DISPUTE BETWEEN THE PARTIES THAT WOULD OTHERWISE BE DETERMINED BY REFERENCE PROCEDURE WILL BE RESOLVED AND DETERMINED BY ARBITRATION. THE ARBITRATION WILL BE CONDUCTED BY A RETIRED JUDGE OR JUSTICE, IN ACCORDANCE WITH THE CALIFORNIA ARBITRATION ACT §1280 THROUGH §1294.2 OF THE CCP AS AMENDED FROM TIME TO TIME. THE LIMITATIONS WITH RESPECT TO DISCOVERY SET FORTH ABOVE SHALL APPLY TO ANY SUCH ARBITRATION PROCEEDING.

(ix) EACH OF BORROWERS, AGENT AND EACH MEMBER OF THE LENDER GROUP RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY. AFTER CONSULTING WITH COUNSEL OF THEIR OWN CHOICE, EACH OF PARENT, BORROWERS, AGENT AND EACH MEMBER OF THE LENDER GROUP KNOWINGLY AND

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VOLUNTARILY AND FOR THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR IS RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS.

13. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.

13.1 Assignments and Participations.

(a) Any Lender may assign and delegate to one or more assignees (each an “Assignee”) that are Eligible Transferees all, or any ratable part of all, of the Obligations, the Commitments and the other rights and obligations of such Lender hereunder and under the other Loan Documents, in a minimum amount of $5,000,000; provided, however, that Borrowers and Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses, and related information with respect to the Assignee, have been given to Administrative Borrower and Agent by such Lender and the Assignee, (ii) such Lender and its Assignee have delivered to Administrative Borrower and Agent an Assignment and Acceptance, and (iii) the assigning Lender or Assignee has paid to Agent for Agent’s separate account a processing fee in the amount of $3,500, provided, however that the payment of such processing fee shall not be required with respect to any Assignment where the Assignee is an Affiliate of the assigning Lender. Anything contained herein to the contrary notwithstanding, the payment of any fees shall not be required and the Assignee need not be an Eligible Transferee if such assignment is in connection with any merger, consolidation, sale, transfer, or other disposition of all or any substantial portion of the business or loan portfolio of the assigning Lender.

(b) From and after the date that Agent notifies the assigning Lender (with a copy to Administrative Borrower) that it has received an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assigning Lender shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except with respect to Section 10.3 hereof) and be released from any future obligations under this Agreement (and in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement and the other Loan Documents, such Lender shall cease to be a party hereto and thereto), and such assignment shall effect a novation between Borrowers and the Assignee; provided, however, that nothing contained herein shall release any assigning Lender from obligations that survive the termination of this Agreement, including such assigning Lender’s obligations under Article 15 and Section 16.7 of this Agreement.

(c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (1) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document furnished pursuant hereto, (2) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrowers or the performance or observance by Borrowers of any of their obligations under this Agreement or any other Loan Document furnished pursuant hereto, (3) such Assignee confirms that it has received a copy of this Agreement, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (4) such Assignee will, independently and without reliance upon Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this

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Agreement, (5) such Assignee appoints and authorizes Agent to take such actions and to exercise such powers under this Agreement as are delegated to Agent, by the terms hereof, together with such powers as are reasonably incidental thereto, and (6) such Assignee agrees that it will perform all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

(d) Immediately upon Agent’s receipt of the required processing fee payment and the fully executed Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Lender pro tanto.

(e) Any Lender may at any time sell to one or more commercial banks, financial institutions, or other Persons (a “Participant”) participating interests in its Obligations, the Commitment, and the other rights and interests of that Lender (the “Originating Lender”) hereunder and under the other Loan Documents; provided, however, that (i) the Originating Lender shall remain a “Lender” for all purposes of this Agreement and the other Loan Documents and the Participant receiving the participating interest in the Obligations, the Commitments, and the other rights and interests of the Originating Lender hereunder shall not constitute a “Lender” hereunder or under the other Loan Documents and the Originating Lender’s obligations under this Agreement shall remain unchanged, (ii) the Originating Lender shall remain solely responsible for the performance of such obligations, (iii) Borrowers, Agent, and the Lenders shall continue to deal solely and directly with the Originating Lender in connection with the Originating Lender’s rights and obligations under this Agreement and the other Loan Documents, (iv) no Lender shall transfer or grant any participating interest under which the Participant has the right to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment to, or consent or waiver with respect to this Agreement or of any other Loan Document would (A) extend the final maturity date of the Obligations hereunder in which such Participant is participating, (B) reduce the interest rate applicable to the Obligations hereunder in which such Participant is participating, (C) release all or substantially all of the Collateral or guaranties (except to the extent expressly provided herein or in any of the Loan Documents) supporting the Obligations hereunder in which such Participant is participating, (D) postpone the payment of, or reduce the amount of, the interest or fees payable to such Participant through such Lender, or (E) change the amount or due dates of scheduled principal repayments or prepayments or premiums, and (v) all amounts payable by Borrowers hereunder shall be determined as if such Lender had not sold such participation, except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement. The rights of any Participant only shall be derivative through the Originating Lender with whom such Participant participates and no Participant shall have any rights under this Agreement or the other Loan Documents or any direct rights as to the other Lenders, Agent, Borrowers, the Collections of Borrowers, the Collateral, or otherwise in respect of the Obligations. No Participant shall have the right to participate directly in the making of decisions by the Lenders among themselves.

(f) In connection with any such assignment or participation or proposed assignment or participation, a Lender may, subject to the provisions of Section 16.7, disclose all documents and information which it now or hereafter may have relating to Borrowers and their respective businesses.

(g) Any other provision in this Agreement notwithstanding, any Lender may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury Regulation 31 CFR § 203.24, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law.

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13.2 Successors. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, however, that Borrowers may not assign this Agreement or any rights or duties hereunder without the Lenders’ prior written consent and any prohibited assignment shall be absolutely void ab initio. No consent to assignment by the Lenders shall release any Borrower from its Obligations. A Lender may assign this Agreement and the other Loan Documents and its rights and duties hereunder and thereunder pursuant to Section 13.1 and, except as expressly required pursuant to Section 13.1 hereof, no consent or approval by any Borrower is required in connection with any such assignment.

14. AMENDMENTS; WAIVERS.

14.1 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Loan Document (other than Bank Product Agreements), and no consent with respect to any departure by Borrowers therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by Agent at the written request of the Required Lenders) and Administrative Borrower (on behalf of all Borrowers) and then any such waiver or consent shall be effective, but only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all of the Lenders affected thereby and Administrative Borrower (on behalf of all Borrowers), do any of the following:

(a) increase or extend any Commitment of any Lender,

(b) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees, or other amounts due hereunder or under any other Loan Document,

(c) reduce the principal of, or the rate of interest on, any loan or other extension of credit hereunder, or reduce any fees or other amounts payable hereunder or under any other Loan Document,

(d) change the Pro Rata Share that is required to take any action hereunder,

(e) amend or modify this Section or any provision of this Agreement providing for consent or other action by all Lenders,

(f) other than as permitted by Section 15.12, release Agent’s Lien in and to any of the Collateral,

(g) change any of the following definitions: (i) Required Lenders, (ii) Pro Rata Share, (iii) EBITDA Revolver Limiter, EBITDA Term Loan Limiter, and (iv) Applicable EBITDA Multiplier.

(h) contractually subordinate any of the Agent’s Liens,

(i) release any Borrower from any obligation for the payment of money,

(j) change the definition of Maximum Credit Amount, or Maximum Revolver Amount, Term Loan Amount, or change Sections 2.1 (a), (b), (c), 2.4(b), or 2.3(d) or

(k) amend any of the provisions of Section 15.

and, provided further, however, that no amendment, waiver or consent shall, unless in writing and signed by Agent, Issuing Lender, or Swing Lender, as applicable, affect the rights or duties of Agent, Issuing Lender, or

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Swing Lender, as applicable, under this Agreement or any other Loan Document. The foregoing notwithstanding, any amendment, modification, waiver, consent, termination, or release of, or with respect to, any provision of this Agreement or any other Loan Document that relates only to the relationship of the Lender Group among themselves, and that does not affect the rights or obligations of Borrowers, shall not require consent by or the agreement of Borrowers.

14.2 Replacement of Holdout Lender.

(a) If any action to be taken by the Lender Group or Agent hereunder requires the unanimous consent, authorization, or agreement of all Lenders, and a Lender (“Holdout Lender”) fails to give its consent, authorization, or agreement, then Agent, upon at least 5 Business Days prior irrevocable notice to the Holdout Lender, may permanently replace the Holdout Lender with one or more substitute Lenders (each, a “Replacement Lender”), and the Holdout Lender shall have no right to refuse to be replaced hereunder. Such notice to replace the Holdout Lender shall specify an effective date for such replacement, which date shall not be later than 15 Business Days after the date such notice is given.

(b) Prior to the effective date of such replacement, the Holdout Lender and each Replacement Lender shall execute and deliver an Assignment and Acceptance, subject only to the Holdout Lender being repaid its share of the outstanding Obligations (including an assumption of its Pro Rata Share of the Risk Participation Liability) without any premium or penalty of any kind whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver any such Assignment and Acceptance prior to the effective date of such replacement, the Holdout Lender shall be deemed to have executed and delivered such Assignment and Acceptance. The replacement of any Holdout Lender shall be made in accordance with the terms of Section 13.1. Until such time as the Replacement Lenders shall have acquired all of the Obligations, the Commitments, and the other rights and obligations of the Holdout Lender hereunder and under the other Loan Documents, the Holdout Lender shall remain obligated to make the Holdout Lender’s Pro Rata Share of Advances and to purchase a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk Participation Liability of such Letter of Credit.

14.3 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to exercise any right, remedy, or option under this Agreement or any other Loan Document, or delay by Agent or any Lender in exercising the same, will operate as a waiver thereof. No waiver by Agent or any Lender will be effective unless it is in writing, and then only to the extent specifically stated. No waiver by Agent or any Lender on any occasion shall affect or diminish Agent’s and each Lender’s rights thereafter to require strict performance by Borrowers of any provision of this Agreement. Agent’s and each Lender’s rights under this Agreement and the other Loan Documents will be cumulative and not exclusive of any other right or remedy that Agent or any Lender may have.

15. AGENT; THE LENDER GROUP.

15.1 Appointment and Authorization of Agent. Each Lender hereby designates and appoints WFF as its representative under this Agreement and the other Loan Documents and each Lender hereby irrevocably authorizes Agent to execute and deliver each of the other Loan Documents on its behalf and to take such other action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to Agent by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Agent agrees to act as such on the express conditions contained in this Section 15. The provisions of this Section 15 (other than the proviso to Section 15.11(a) and Sections 15.11(b), (c), and (d)) are solely for the benefit of Agent, and the Lenders, and Borrowers shall have no rights as a third party beneficiary of any of the provisions contained herein. Any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall Agent have or be deemed to have any fiduciary relationship with any

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Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against Agent; it being expressly understood and agreed that the use of the word “Agent” is for convenience only, that WFF is merely the representative of the Lenders, and only has the contractual duties set forth herein. Except as expressly otherwise provided in this Agreement, Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions that Agent expressly is entitled to take or assert under or pursuant to this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, or of any other provision of the Loan Documents that provides rights or powers to Agent, Lenders agree that Agent shall have the right to exercise the following powers as long as this Agreement remains in effect: (a) maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Obligations, the Collateral, the Collections of Borrowers, and related matters, (b) execute or file any and all financing or similar statements or notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and other written agreements with respect to the Loan Documents, (c) make Advances, for itself or on behalf of Lenders as provided in the Loan Documents, (d) exclusively receive, apply, and distribute the Collections of Borrowers as provided in the Loan Documents, (e) open and maintain such bank accounts and cash management arrangements as Agent deems necessary and appropriate in accordance with the Loan Documents for the foregoing purposes with respect to the Collateral and the Collections of Borrowers, (f) perform, exercise, and enforce any and all other rights and remedies of the Lender Group with respect to Borrowers, the Obligations, the Collateral, the Collections of Borrowers, or otherwise related to any of same as provided in the Loan Documents, and (g) incur and pay such Lender Group Expenses as Agent may deem necessary or appropriate for the performance and fulfillment of its functions and powers pursuant to the Loan Documents.

15.2 Delegation of Duties. Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys in fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Agent shall not be responsible for the negligence or misconduct of any agent or attorney in fact that it selects as long as such selection was made without gross negligence or willful misconduct.

15.3 Liability of Agent. None of the Agent Related Persons shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (b) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by any Borrower or Affiliate of any Borrower, or any officer or director thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the books and records or properties of Borrowers or the books or records or properties of any of Borrowers’ Affiliates.

15.4 Reliance by Agent. Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, telefacsimile or other electronic method of transmission, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent, or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Borrowers or counsel to any Lender), independent accountants and other experts selected by Agent. Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless Agent shall first receive such advice or concurrence of the Lenders as it deems appropriate and until such instructions are

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received, Agent shall act, or refrain from acting, as it deems advisable. If Agent so requests, it shall first be indemnified to its reasonable satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the requisite Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders.

15.5 Notice of Default or Event of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest, fees, and expenses required to be paid to Agent for the account of the Lenders and, except with respect to Events of Default of which Agent has actual knowledge, unless Agent shall have received written notice from a Lender or Administrative Borrower referring to this Agreement, describing such Default or Event of Default, and stating that such notice is a “notice of default.” Agent promptly will notify the Lenders of its receipt of any such notice or of any Event of Default of which Agent has actual knowledge. If any Lender obtains actual knowledge of any Event of Default, such Lender promptly shall notify the other Lenders and Agent of such Event of Default. Each Lender shall be solely responsible for giving any notices to its Participants, if any. Subject to Section 15.4, Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Section 8; provided, however, that unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable.

15.6 Credit Decision. Each Lender acknowledges that none of the Agent Related Persons has made any representation or warranty to it, and that no act by Agent hereinafter taken, including any review of the affairs of Borrowers and their Affiliates, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of Borrowers and any other Person party to a Loan Document, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Borrowers. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Borrowers and any other Person party to a Loan Document. Except for notices, reports, and other documents expressly herein required to be furnished to the Lenders by Agent, Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of Borrowers and any other Person party to a Loan Document that may come into the possession of any of the Agent Related Persons.

15.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender Group Expenses to the extent Agent reasonably deems necessary or appropriate for the performance and fulfillment of its functions, powers, and obligations pursuant to the Loan Documents, including court costs, attorneys fees and expenses, fees and expenses of financial accountants, advisors, consultants, and appraisers, costs of collection by outside collection agencies, auctioneer fees and expenses, and costs of security guards or insurance premiums paid to maintain the Collateral, whether or not Borrowers are obligated to reimburse Agent or Lenders for such expenses pursuant to this Agreement or otherwise. Agent is authorized and directed to deduct and retain sufficient amounts from the Collections of Borrowers received by Agent to reimburse Agent for such out-of-pocket costs and expenses prior to the distribution of any amounts to Lenders. In the event Agent is not reimbursed for such costs and expenses from the Collections of Borrowers received by

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Agent, each Lender hereby agrees that it is and shall be obligated to pay to or reimburse Agent for the amount of such Lender’s Pro Rata Share thereof. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent Related Persons (to the extent not reimbursed by or on behalf of Borrowers and without limiting the obligation of Borrowers to do so), according to their Pro Rata Shares, from and against any and all Indemnified Liabilities; provided, however, that no Lender shall be liable for the payment to any Agent Related Person of any portion of such Indemnified Liabilities resulting solely from such Person’s gross negligence or willful misconduct nor shall any Lender be liable for the obligations of any Defaulting Lender in failing to make an Advance or other extension of credit hereunder. Without limitation of the foregoing, each Lender shall reimburse Agent upon demand for such Lender’s Pro Rata Share of any costs or out of pocket expenses (including attorneys, accountants, advisors, and consultants fees and expenses) incurred by Agent in connection with the preparation, execution, delivery, administration, modification, amendment, or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that Agent is not reimbursed for such expenses by or on behalf of Borrowers. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of Agent.

15.8 Agent in Individual Capacity. WFF and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in, and generally engage in any kind of banking, trust, financial advisory, underwriting, or other business with Borrowers and Affiliates and any other Person party to any Loan Documents as though WFF were not Agent hereunder, and, in each case, without notice to or consent of the other members of the Lender Group. The other members of the Lender Group acknowledge that, pursuant to such activities, WFF or its Affiliates may receive information regarding Borrowers or their Affiliates and any other Person party to any Loan Documents that is subject to confidentiality obligations in favor of Borrowers or such other Person and that prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver Agent will use its reasonable best efforts to obtain), Agent shall not be under any obligation to provide such information to them. The terms “Lender” and “Lenders” include WFF in its individual capacity.

15.9 Successor Agent. Agent may resign as Agent upon 45 days notice to the Lenders. If Agent resigns under this Agreement, the Required Lenders shall appoint a successor Agent for the Lenders. If no successor Agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with the Lenders, a successor Agent. If Agent has materially breached or failed to perform any material provision of this Agreement or of applicable law, the Required Lenders may agree in writing to remove and replace Agent with a successor Agent from among the Lenders. In any such event, upon the acceptance of its appointment as successor Agent hereunder, such successor Agent shall succeed to all the rights, powers, and duties of the retiring Agent and the term “Agent” shall mean such successor Agent and the retiring Agent’s appointment, powers, and duties as Agent shall be terminated. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Section 16 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor Agent has accepted appointment as Agent by the date which is 45 days following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Lenders appoint a successor Agent as provided for above.

15.10 Lender in Individual Capacity. Any Lender and its respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with Borrowers and Affiliates and any other Person party to any Loan Documents as though such Lender were not a Lender hereunder without notice to or consent of the other members of the Lender Group. The other members of the Lender Group acknowledge that, pursuant to such activities, such Lender and its respective Affiliates may

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receive information regarding Borrowers or their Affiliates and any other Person party to any Loan Documents that is subject to confidentiality obligations in favor of Borrowers or such other Person and that prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver such Lender will use its reasonable best efforts to obtain), such Lender shall not be under any obligation to provide such information to them. With respect to the Swing Loans and Protective Advances, Swing Lender shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the sub-agent of Agent.

15.11 Withholding Taxes.

(a) All payments made by any Borrower hereunder or under any note or other Loan Document will be made without setoff, counterclaim, or other defense. In addition, all such payments will be made free and clear of, and without deduction or withholding for, any present or future Taxes, and in the event any deduction or withholding of Taxes is required, each Borrower shall comply with the penultimate sentence of this Section 15.11(a). “Taxes” shall mean, any taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding any tax imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein measured by or based on the net income or net profits of Lender) and all interest, penalties or similar liabilities with respect thereto. If any Taxes are so levied or imposed, each Borrower agrees to pay the full amount of such Taxes and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement, any note, or Loan Document, including any amount paid pursuant to this Section 15.11(a) after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein; provided, however, that Borrowers shall not be required to increase any such amounts if, and shall be reimbursed for any such amounts previously paid to the extent that, the increase in such amount payable results from Agent’s or such Lender’s own willful misconduct or gross negligence (as finally determined by a court of competent jurisdiction). Each Borrower will furnish to Lender as promptly as possible after the date the payment of any Tax is due pursuant to applicable law certified copies of tax receipts evidencing such payment by any Borrower.

(b) If a Lender claims an exemption from United States withholding tax, Lender agrees with and in favor of Agent and any Borrower, to deliver to Agent:

(i) if such Lender claims an exemption from United States withholding tax pursuant to its portfolio interest exception, (A) a statement of the Lender, signed under penalty of perjury, that it is not a (I) a “bank” as described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder of any Borrower (within the meaning of Section 871(h)(3)(B) of the IRC), or (III) a controlled foreign corporation related to any Borrower within the meaning of Section 864(d)(4) of the IRC, and (B) a properly completed and executed IRS Form W-8BEN, before receiving its first payment under this Agreement and at any other time reasonably requested by Agent or any Borrower;

(ii) if such Lender claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed and executed IRS Form W-8BEN before receiving its first payment under this Agreement and at any other time reasonably requested by Agent or any Borrower;

(iii) if such Lender claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, two properly completed and executed copies of IRS Form W-8ECI before receiving its first payment under this Agreement and at any other time reasonably requested by Agent or any Borrower; or

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(iv) such other form or forms, including IRS Form W-9, as may be required under the IRC or other laws of the United States as a condition to exemption from, or reduction of, United States withholding or backup withholding tax before receiving its first payment under this Agreement and at any other time reasonably requested by Agent or any Borrower.

Lender agrees promptly to notify Agent and Administrative Borrower of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

(c) If a Lender claims an exemption from withholding tax in a jurisdiction other than the United States, Lender agrees with and in favor of Agent and Borrowers, to deliver to Agent any such form or forms, as may be required under the laws of such jurisdiction as a condition to exemption from, or reduction of, foreign withholding or backup withholding tax before receiving its first payment under this Agreement and at any other time reasonably requested by Agent or Administrative Borrower.

Lender agrees promptly to notify Agent and Administrative Borrower of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

(d) If any Lender claims exemption from, or reduction of, withholding tax and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of Borrowers to such Lender, such Lender agrees to notify Agent and Administrative Borrower of the percentage amount in which it is no longer the beneficial owner of Obligations of Borrowers to such Lender. To the extent of such percentage amount, Agent and Borrowers will treat such Lender’s documentation provided pursuant to Sections 15.11(b) or 15.11(c) as no longer valid. With respect to such percentage amount, Lender may provide new documentation, pursuant to Sections 15.11(b) or 15.11(c), if applicable.

(e) If any Lender is entitled to a reduction in the applicable withholding tax, Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by subsection (b) or (c) of this Section 15.11 are not delivered to Agent, then Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax.

(f) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that Agent did not properly withhold tax from amounts paid to or for the account of any Lender due to a failure on the part of the Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify and hold Agent harmless for all amounts paid, directly or indirectly, by Agent, as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to Agent under this Section 15.11, together with all costs and expenses (including attorneys fees and expenses). The obligation of the Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of Agent.

15.12 Collateral Matters.

(a) The Lenders hereby irrevocably authorize Agent, at its option and in its sole discretion, to release any Lien on any Collateral (i) upon the termination of the Commitments and payment and satisfaction in full by Borrowers of all Obligations, (ii) constituting property being sold or disposed of if a release is required or desirable in connection therewith and if Administrative Borrower certifies to Agent that the sale or disposition is permitted under Section 6.4 of this Agreement or the other Loan Documents (and Agent may rely conclusively on any such certificate, without further inquiry), (iii) constituting property in which no Borrower owned any interest at the time the Agent’s Lien was granted nor at any time thereafter, or

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(iv) constituting property leased to a Borrower under a lease that has expired or is terminated in a transaction permitted under this Agreement. Except as provided above, Agent will not execute and deliver a release of any Lien on any Collateral without the prior written authorization of (y) if the release is of all or substantially all of the Collateral, all of the Lenders, or (z) otherwise, the Required Lenders. Upon request by Agent or Administrative Borrower at any time, the Lenders will confirm in writing Agent’s authority to release any such Liens on particular types or items of Collateral pursuant to this Section 15.12; provided, however, that (1) Agent shall not be required to execute any document necessary to evidence such release on terms that, in Agent’s opinion, would expose Agent to liability or create any obligation or entail any consequence other than the release of such Lien without recourse, representation, or warranty, and (2) such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of Borrowers in respect of) all interests retained by Borrowers, including, the proceeds of any sale, all of which shall continue to constitute part of the Collateral.

(b) Agent shall have no obligation whatsoever to any of the Lenders to assure that the Collateral exists or is owned by Borrowers or is cared for, protected, or insured or has been encumbered, or that the Agent’s Liens have been properly or sufficiently or lawfully created, perfected, protected, or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent pursuant to any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, subject to the terms and conditions contained herein, Agent may act in any manner it may deem appropriate, in its sole discretion given Agent’s own interest in the Collateral in its capacity as one of the Lenders and that Agent shall have no other duty or liability whatsoever to any Lender as to any of the foregoing, except as otherwise provided herein.

15.13 Restrictions on Actions by Lenders; Sharing of Payments.

(a) Each of the Lenders agrees that it shall not, without the express written consent of Agent, and that it shall, to the extent it is lawfully entitled to do so, upon the written request of Agent, set off against the Obligations, any amounts owing by such Lender to Borrowers or any deposit accounts of Borrowers now or hereafter maintained with such Lender. Each of the Lenders further agrees that it shall not, unless specifically requested to do so in writing by Agent, take or cause to be taken any action, including, the commencement of any legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce any security interest in, any of the Collateral.

(b) If, at any time or times any Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments with respect to the Obligations, except for any such proceeds or payments received by such Lender from Agent pursuant to the terms of this Agreement, or (ii) payments from Agent in excess of such Lender’s Pro Rata of all such distributions by Agent, such Lender promptly shall (1) turn the same over to Agent, in kind, and with such endorsements as may be required to negotiate the same to Agent, or in immediately available funds, as applicable, for the account of all of the Lenders and for application to the Obligations in accordance with the applicable provisions of this Agreement, or (2) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the other Lenders so that such excess payment received shall be applied ratably as among the Lenders in accordance with their Pro Rata Shares; provided, however, that to the extent that such excess payment received by the purchasing party is thereafter recovered from it, those purchases of participations shall be rescinded in whole or in part, as applicable, and the applicable portion of the purchase price paid therefor shall be returned to such purchasing party, but without interest except to the extent that such purchasing party is required to pay interest in connection with the recovery of the excess payment.

15.14 Agency for Perfection. Agent hereby appoints each other Lender as its agent (and each Lender hereby accepts such appointment) for the purpose of perfecting the Agent’s Liens in assets which, in accordance with Article 8 or Article 9, as applicable, of the Code can be perfected only by possession or

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control. Should any Lender obtain possession or control of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver possession or control of such Collateral to Agent or in accordance with Agent’s instructions.

15.15 Payments by Agent to the Lenders. All payments to be made by Agent to the Lenders shall be made by bank wire transfer of immediately available funds pursuant to such wire transfer instructions as each party may designate for itself by written notice to Agent. Concurrently with each such payment, Agent shall identify whether such payment (or any portion thereof) represents principal, premium, fees, or interest of the Obligations.

15.16 Concerning the Collateral and Related Loan Documents. Each member of the Lender Group authorizes and directs Agent to enter into this Agreement and the other Loan Documents. Each member of the Lender Group agrees that any action taken by Agent in accordance with the terms of this Agreement or the other Loan Documents relating to the Collateral and the exercise by Agent of its powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders.

15.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information. By becoming a party to this Agreement, each Lender:

(a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report (each a “Report” and collectively, “Reports”) prepared by or at the request of Agent, and Agent shall so furnish each Lender with such Reports,

(b) expressly agrees and acknowledges that Agent does not (i) make any representation or warranty as to the accuracy of any Report, and (ii) shall not be liable for any information contained in any Report,

(c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or other party performing any audit or examination will inspect only specific information regarding Borrowers and will rely significantly upon the books and records of Borrowers, as well as on representations of Borrowers’ personnel,

(d) agrees to keep all Reports and other material, non-public information regarding Borrowers and their operations, assets, and existing and contemplated business plans in a confidential manner in accordance with Section 16.7, and

(e) without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold Agent and any such other Lender preparing a Report harmless from any action the indemnifying Lender may take or fail to take or any conclusion the indemnifying Lender may reach or draw from any Report in connection with any loans or other credit accommodations that the indemnifying Lender has made or may make to Borrowers, or the indemnifying Lender’s participation in, or the indemnifying Lender’s purchase of, a loan or loans of Borrowers; and (ii) to pay and protect, and indemnify, defend and hold Agent, and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including, attorneys fees and costs) incurred by Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.

In addition to the foregoing: (x) any Lender may from time to time request of Agent in writing that Agent provide to such Lender a copy of any report or document provided by Borrowers to Agent that has not been contemporaneously provided by Borrowers to such Lender, and, upon receipt of such request, Agent promptly shall provide a copy of same to such Lender, (y) to the extent that Agent is entitled, under any provision of the

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Loan Documents, to request additional reports or information from Borrowers, any Lender may, from time to time, reasonably request Agent to exercise such right as specified in such Lender’s notice to Agent, whereupon Agent promptly shall request of Administrative Borrower the additional reports or information reasonably specified by such Lender, and, upon receipt thereof from Administrative Borrower, Agent promptly shall provide a copy of same to such Lender, and (z) any time that Agent renders to Administrative Borrower a statement regarding the Loan Account, Agent shall send a copy of such statement to each Lender.

15.18 Several Obligations; No Liability. Notwithstanding that certain of the Loan Documents now or hereafter may have been or will be executed only by or in favor of Agent in its capacity as such, and not by or in favor of the Lenders, any and all obligations on the part of Agent (if any) to make any credit available hereunder shall constitute the several (and not joint) obligations of the respective Lenders on a ratable basis, according to their respective Commitments, to make an amount of such credit not to exceed, in principal amount, at any one time outstanding, the amount of their respective Commitments. Nothing contained herein shall confer upon any Lender any interest in, or subject any Lender to any liability for, or in respect of, the business, assets, profits, losses, or liabilities of any other Lender. Each Lender shall be solely responsible for notifying its Participants of any matters relating to the Loan Documents to the extent any such notice may be required, and no Lender shall have any obligation, duty, or liability to any Participant of any other Lender. Except as provided in Section 16.7, no member of the Lender Group shall have any liability for the acts of any other member of the Lender Group. No Lender shall be responsible to any Borrower or any other Person for any failure by any other Lender to fulfill its obligations to make credit available hereunder, nor to advance for it or on its behalf in connection with its Commitment, nor to take any other action on its behalf hereunder or in connection with the financing contemplated herein.

15.19 Bank Product Providers. Each Bank Product Provider shall be deemed a party hereto for purposes of any reference in a Loan Document to the parties for whom Agent is acting; it being understood and agreed that the rights and benefits of such Bank Product Provider under the Loan Documents consist exclusively of such Bank Product Provider’s right to share in payments and collections out of the Collateral as more fully set forth herein. In connection with any such distribution of payments and collections, Agent shall be entitled to assume no amounts are due to any Bank Product Provider unless such Bank Product Provider has notified Agent in writing of the amount of any such liability owed to it prior to such distribution.

16. GENERAL PROVISIONS.

16.1 Effectiveness. This Agreement shall be binding and deemed effective when executed by Borrowers, Agent, and each Lender whose signature is provided for on the signature pages hereof.

16.2 Section Headings. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement.

16.3 Interpretation. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed against the Lender Group or Borrowers, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to accomplish fairly the purposes and intentions of all parties hereto.

16.4 Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

16.5 Counterparts; Electronic Execution. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and

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delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement. The foregoing shall apply to each other Loan Document mutatis mutandis.

16.6 Revival and Reinstatement of Obligations. If the incurrence or payment of the Obligations by any Borrower or the transfer to the Lender Group of any property should for any reason subsequently be declared to be void or voidable under any state or federal law relating to creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, or other voidable or recoverable payments of money or transfers of property (collectively, a “Voidable Transfer”), and if the Lender Group is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that the Lender Group is required or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys fees of the Lender Group related thereto, the liability of Borrowers automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made.

16.7 Confidentiality.

(a) Agent and Lenders each individually (and not jointly or jointly and severally) agree that material, non-public information regarding Borrowers, their operations, assets, and existing and contemplated business plans shall be treated by Agent and the Lenders in a confidential manner, and shall not be disclosed by Agent and the Lenders to Persons who are not parties to this Agreement, except: (a) to attorneys for and other advisors, accountants, auditors, and consultants to any member of the Lender Group, (b) to Subsidiaries and Affiliates of any member of the Lender Group (including the Bank Product Providers), provided that any such Subsidiary or Affiliate shall have agreed to receive such information hereunder subject to the terms of this Section 16.7, (c) as may be required by statute, decision, or judicial or administrative order, rule, or regulation, (d) as may be agreed to in advance by Administrative Borrower or its Subsidiaries or as requested or required by any Governmental Authority pursuant to any subpoena or other legal process, (e) as to any such information that is or becomes generally available to the public (other than as a result of prohibited disclosure by Agent or the Lenders), (f) in connection with any assignment, prospective assignment, sale, prospective sale, participation or prospective participations, or pledge or prospective pledge of any Lender’s interest under this Agreement, provided that any such assignee, prospective assignee, purchaser, prospective purchaser, participant, prospective participant, pledgee, or prospective pledgee shall have agreed in writing to receive such information hereunder subject to the terms of this Section, and (g) in connection with any litigation or other adversary proceeding involving parties hereto which such litigation or adversary proceeding involves claims related to the rights or duties of such parties under this Agreement or the other Loan Documents. The provisions of this Section 16.7 shall survive for 2 years after the payment in full of the Obligations.

(b) Anything in this Agreement to the contrary notwithstanding, Agent may provide information concerning the terms and conditions of this Agreement and the other Loan Documents to loan syndication and pricing reporting services.

16.8 Lender Group Expenses. Borrowers agree to pay any and all Lender Group Expenses promptly after demand therefor by Agent and agrees that their obligations contained in this Section 16.8 shall survive payment or satisfaction in full of all other Obligations.

16.9 USA PATRIOT Act. Each Lender that is subject to the requirements of the USA Patriot Act (Title 111 of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby notifies

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Borrowers that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies Borrowers, which information includes the name and address of Borrowers and other information that will allow such Lender to identify Parent and Borrowers in accordance with the Act.

16.10 Integration. This Agreement, together with the other Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof.

16.11 Parent as Agent for Borrowers. Each Borrower hereby irrevocably appoints Parent as the borrowing agent and attorney-in-fact for all Borrowers (the “Administrative Borrower”) which appointment shall remain in full force and effect unless and until Agent shall have received prior written notice signed by each Borrower that such appointment has been revoked and that another Borrower has been appointed Administrative Borrower. Each Borrower hereby irrevocably appoints and authorizes the Administrative Borrower (i) to provide Agent with all notices with respect to Advances and Letters of Credit obtained for the benefit of any Borrower and all other notices and instructions under this Agreement and (ii) to take such action as the Administrative Borrower deems appropriate on its behalf to obtain Advances and Letters of Credit and to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement. It is understood that the handling of the Loan Account and Collateral of Borrowers in a combined fashion, as more fully set forth herein, is done solely as an accommodation to Borrowers in order to utilize the collective borrowing powers of Borrowers in the most efficient and economical manner and at their request, and that Lender Group shall not incur liability to any Borrower as a result hereof. Each Borrower expects to derive benefit, directly or indirectly, from the handling of the Loan Account and the Collateral in a combined fashion since the successful operation of each Borrower is dependent on the continued successful performance of the integrated group. To induce the Lender Group to do so, and in consideration thereof, each Borrower hereby jointly and severally agrees to indemnify each member of the Lender Group and hold each member of the Lender Group harmless against any and all liability, expense, loss or claim of damage or injury, made against the Lender Group by any Borrower or by any third party whosoever, arising from or incurred by reason of (a) the handling of the Loan Account and Collateral of Borrowers as herein provided, (b) the Lender Group’s relying on any instructions of the Administrative Borrower, or (c) any other action taken by the Lender Group hereunder or under the other Loan Documents, except that Borrowers will have no liability to the relevant Agent-Related Person or Lender-Related Person under this Section 16.9 with respect to any liability that has been finally determined by a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of such Agent-Related Person or Lender-Related Person, as the case may be.

16.12 Changes in Accounting Policies. In the event the Financial Accounting Standards Board (or any successor organization) adopts changes to GAAP after the Closing Date and as a result solely of such changes there is an adverse effect on Borrowers’ ability to comply with the financial covenants hereunder or there occurs a reduction of Maximum Revolver Amount, Agent and Lenders agree to review the effect of such changes and to make such adjustments as Agent and Lenders deem necessary in their Permitted Discretion.

16.13 Amendment and Restatement of Original Loan Agreement. This Agreement constitutes an amendment and restatement of the Original Credit Agreement effective from and after the Closing Date. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby are not intended by the parties to be, and shall not constitute, a novation or an accord and satisfaction of the Obligations or any other obligations owing to Agent or the Lenders under the Original Credit Agreement or any other existing Original Loan Document. On the Closing Date, the credit facilities and the terms and conditions thereof described in the Original Credit Agreement shall be amended and replaced in their entirety by the credit facilities and the terms and conditions described herein, and all Advances and other Obligations of Borrowers outstanding as of such date under the Original Credit Agreement shall be deemed to be Advances and Obligations outstanding under the corresponding facilities described herein (such that all

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Obligations which are outstanding on the Closing Date under the Original Credit Agreement shall become Obligations under this Agreement), without further action by any Person. Each of the parties hereto hereby acknowledges and agrees that the grant of the security interests in the Collateral pursuant to the Security Agreement and in any other Loan Document (unless explicitly agreed to by Agent in writing) is not intended to, nor shall it be construed, as constituting a release of any prior security interests granted by any Borrower in favor of Agent for the benefit of itself, the Lenders, and the Bank Product Providers in or to any Collateral or any other Property of such Borrower, but is intended to constitute a restatement and reconfirmation of the prior security interests granted by the Borrowers in favor of Agent for the benefit of itself, the Lenders, and the Bank Product Providers in and to the Collateral and a grant of a new security interest in any Collateral that is not included in the prior security grants by the Borrowers and in favor of Agent for the benefit of itself, the Lenders, and the Bank Product Providers to the extent such grant was not included in the prior security grants.

[Signature page(s) to follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written.

THE TRIZETTO GROUP, INC.,
a Delaware corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
DIOGENES, INC.,
a Delaware corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
INFOTRUST COMPANY,
an Illinois corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
NOVALIS CORPORATION,
a Delaware corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
NOVALIS DEVELOPMENT & LICENSING CORPORATION,
an Indiana corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer

S-1

Amended and Restated Credit Agreement

NOVALIS DEVELOPMENT CORPORATION, a Delaware corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
NOVALIS SERVICES CORPORATION, a Delaware corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
OPTION SERVICES GROUP, INC., an Illinois corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
DIGITAL INSURANCE SYSTEMS CORPORATION, an Ohio corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
FINSERV HEALTH CARE SYSTEMS, INC., a New York corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
CREATIVE BUSINESS SOLUTIONS, INC., a Texas corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer

S-2

Amended and Restated Credit Agreement

HEALTHCARE MEDIA ENTERPRISES, INC., a Delaware corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
HEALTH NETWORKS OF AMERICA, INC., a Maryland corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
HEALTHWEB, INC., a Delaware corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
MARGOLIS HEALTH ENTERPRISES, INC., a California corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
TRIZETTO APPLICATION SERVICES, INC., a Colorado corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
WINTHROP FINANCIAL GROUP, INC., an Illinois corporation.
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer

S-3

Amended and Restated Credit Agreement

CAREKEY, INC., a Delaware corporation.
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
PLAN DATA MANAGEMENT, INC., a Delaware corporation.
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
QUARTZ ACQUISITION CORP., a Delaware corporation.
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
QUALITY CARE SOLUTIONS, INC., a Nevada corporation (the successor by merger to Quartz Acquisition Corp.)
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer
QCSI PUERTO RICO, INC., a Delaware corporation
By:	/s/ James C. Malone
Name:	James C. Malone
Title:	Executive Vice President, Chief Financial Officer

S-4

Amended and Restated Credit Agreement

WELLS FARGO FOOTHILL, INC., a California corporation, as Agent and as a Lender
By:	/s/ Terri Le
Name:	Terri Le
Title:	Vice President

S-5

Amended and Restated Credit Agreement

Schedule 1.1

As used in the Agreement, the following terms shall have the following definitions:

“Account” means an account (as that term is defined in the Code).

“Account Debtor” means any Person who is obligated on an Account, chattel paper, or a general intangible.

“ACH Transactions” means any cash management or related services (including the Automated Clearing House processing of electronic fund transfers through the direct Federal Reserve Fedline system) provided by a Bank Product Provider for the account of Administrative Borrower or its Subsidiaries.

“Acquisition” means any Asset Acquisition or any Stock Acquisition.

“Active Borrower” means each Borrower that is not an Inactive Borrower.

“Administrative Borrower” has the meaning specified therefor in Section 16.11.

“Advances” has the meaning specified therefor in Section 2.1(a).

“Affiliate” means, as applied to any Person, any other Person who controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” means the possession, directly or indirectly through one or more intermediaries, of the power to direct the management and policies of a Person, whether through the ownership of Stock, by contract, or otherwise; provided, however, that, for purposes of Section 6.13: (a) any Person which owns directly or indirectly 10% or more of the Stock having ordinary voting power for the election of directors or other members of the governing body of a Person or 10% or more of the partnership or other ownership interests of a Person (other than as a limited partner of such Person) shall be deemed an Affiliate of such Person, (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person, and (c) each partnership (formed under the laws of any jurisdiction) or joint venture in which a Person is a partner or joint venturer shall be deemed an Affiliate of such Person.

“Agent” has the meaning specified therefor in the preamble to the Agreement.

“Agent-Related Persons” means Agent, together with its Affiliates, officers, directors, employees, attorneys, and agents.

“Agent’s Account” means the Deposit Account of Agent identified on Schedule A-1.

“Agent’s Liens” means the Liens granted by Borrowers or their Subsidiaries to Agent under the Loan Documents.

“Agreement” means the Credit Agreement to which this Schedule 1.1 is attached.

“Applicable Margin” means, with respect to Base Rate Loans and LIBOR Rate Loans, as the case may be, as of any date of determination, the following margins based upon the most recent Senior Leverage Ratio calculation; provided, however, that at any time that an Event of Default exists hereunder, the applicable Base Rate Margin shall be at Level VI:

Level	Senior Leverage Ratio	Margin above Base Rate	Margin above LIBOR Rate
I	Less than 1.75:1.00	.0%	1.75%
II	At least 1.75:1.00 but less than 2.25:1.00	.0%	2.0%
III	At least 2.25:1.00 but less than 2.50:1.00	.5%	2.25%
IV	At least 2.50:1.00 but less than 3.00:1.00	1.00%	2.50%
V	At least 3.00:1.00 but less than 3.50:1.00	1.50%	3.00%
VI	At least 3.50:1.00	2.00%	3.50%

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The Applicable Margins shall be based upon the most recent Senior Leverage Ratio calculation and shall be redetermined each fiscal quarter of Borrowers as of the first day of the month following the date Agent receives the certified calculation of the Senior Leverage Ratio in a Compliance Certificate; provided, however, that if Borrowers fail to provide the Compliance Certificate when due, the Applicable Margin shall be the margin in the row styled “Level VI” as of the first day of the month following the date on which the Compliance Certificate was required to be delivered until the first day of the month following the date on which it is delivered (but not retroactively), without constituting a waiver of any Default or Event of Default caused by the failure to timely deliver the Compliance Certificate, at which time the Applicable Margin shall be set at a margin based upon the Senior Leverage Ratio calculation set forth therein. In the event that the information contained in any Compliance Certificate delivered pursuant to Schedule 5.3 is shown to be inaccurate, and such inaccuracy, if corrected, would have led to a different determination of the Applicable Margin at the time such Compliance Certificate was delivered, the Borrowers shall immediately (i) re-deliver a correct Compliance Certificate for the applicable period to the Agent and the Applicable Margin shall be redetermined in accordance with the definition thereof and (ii) deliver to the Agent full payment in respect of the accrued additional interest on the Obligations from the date of delivery of the inaccurate Compliance Certificate, which payment shall be promptly applied by the Agent in accordance with Section 2.4 (it being understood that nothing in this definition shall limit the rights of the Lenders under Section 7). For purposes of this definition, “Senior Leverage Ratio” means the ratio of (a) the Senior Debt as of such date, to (b) TTM EBITDA as of such date.

“Applicable EBITDA Multiplier” means, as of any date of determination, the multiplier set forth in the following table that corresponds to such date:

Applicable EBITDA Multiplier	Date of Determination
3.50	June 30, 2006 through and including December 31, 2006
3.25	January 1, 2007 through and including June 30, 2007
2.75	July 1, 2007 through and including December 31, 2007
2.50	January 1, 2008 and thereafter

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“Asset Acquisition” means the purchase or other acquisition by any Active Borrower of all or substantially all of the assets of any other Person.

“Assignee” has the meaning specified therefor in Section 13.1(a).

“Assignment and Acceptance” means an Assignment and Acceptance Agreement substantially in the form of Exhibit A-1.

“Authorized Person” means any officer or employee of Administrative Borrower.

“Availability” means, as of any date of determination, the amount that Borrowers are entitled to borrow as Advances hereunder (after giving effect to all then outstanding Obligations (other than Bank Product Obligations) and all sublimits and reserves then applicable hereunder).

“Bank Product” means any financial accommodation extended to Administrative Borrower or its Subsidiaries by a Bank Product Provider (other than pursuant to the Agreement) including: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash management, including controlled disbursement, accounts or services, or (g) transactions under Hedge Agreements.

“Bank Product Agreements” means those agreements entered into from time to time by Administrative Borrower or its Subsidiaries with a Bank Product Provider in connection with the obtaining of any of the Bank Products.

“Bank Product Obligations” means all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by Administrative Borrower or its Subsidiaries to any Bank Product Provider pursuant to or evidenced by the Bank Product Agreements and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all such amounts that Administrative Borrower or its Subsidiaries are obligated to reimburse to Agent or any member of the Lender Group as a result of Agent or such member of the Lender Group purchasing participations from, or executing indemnities or reimbursement obligations to, a Bank Product Provider with respect to the Bank Products provided by such Bank Product Provider to Administrative Borrower or its Subsidiaries.

“Bank Product Provider” means Wells Fargo or any of its Affiliates.

“Bank Product Reserve” means, as of any date of determination, the lesser of: (i) $3,000,000 and (ii) the amount of reserves that Agent has established (based upon the Bank Product Providers’ reasonable determination of the credit exposure of Administrative Borrower and its Subsidiaries in respect of Bank Products) in respect of Bank Products then provided or outstanding.

3

“Bankruptcy Code” means title 11 of the United States Code, as in effect from time to time.

“Base LIBOR Rate” means the rate per annum, determined by Agent in accordance with its customary procedures, and utilizing such electronic or other quotation sources as it considers appropriate (rounded upwards, if necessary, to the next 1/100%), to be the rate at which Dollar deposits (for delivery on the first day of the requested Interest Period) are offered to major banks in the London interbank market 2 Business Days prior to the commencement of the requested Interest Period, for a term and in an amount comparable to the Interest Period and the amount of the LIBOR Rate Loan requested (whether as an initial LIBOR Rate Loan or as a continuation of a LIBOR Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by Administrative Borrower in accordance with the Agreement, which determination shall be conclusive in the absence of manifest error.

“Base Rate” means, the rate of interest announced, from time to time, within Wells Fargo at its principal office in San Francisco as its “prime rate”, with the understanding that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publications as Wells Fargo may designate.

“Base Rate Loan” means the portion of the Advances or the Term Loan that bears interest at a rate determined by reference to the Base Rate.

“Bear Stearns Collateral Account” means that certain brokerage account #049-41366 maintained by Parent at Bear Stearns & Co.

“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA Affiliate of any Borrower has been an “employer” (as defined in Section 3(5) of ERISA) within the past six years, but excluding a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as set forth in ERISA Section 303(a)(3).

“Board of Directors” means the board of directors (or comparable managers) of Parent or any committee thereof duly authorized to act on behalf of the board of directors (or comparable managers).

“Borrower” and “Borrowers” have the respective meanings specified therefor in the preamble to the Agreement.

“Borrowing” means a borrowing hereunder consisting, as the context requires, of: (i) Advances made on the same day by the Lenders (or Agent on behalf thereof), (ii) Advances made by Swing Lender in the case of a Swing Loan, (iv) Advances made by Agent in the case of a Protective Advance, or (iv) Term Loan Draws funded by the Lenders, in each case, to Administrative Borrower.

“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks are authorized or required to close in the State of California, except that, if a determination of a Business Day shall relate to a LIBOR Rate Loan, the term “Business Day” also shall exclude any day on which banks are closed for dealings in Dollar deposits in the London interbank market.

“Capital Expenditures” means, with respect to any Person for any period, the aggregate of all expenditures by such Person and its Subsidiaries during such period that are capital expenditures as determined in accordance with GAAP, whether such expenditures are paid in cash or financed and including capitalized software expenditures.

4

“Capitalized Lease Obligation” means that portion of the obligations under a Capital Lease that is required to be capitalized in accordance with GAAP.

“Capital Lease” means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

“Cash Equivalents” means (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within 1 year from the date of acquisition thereof, (b) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within 1 year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor’s Rating Group (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”), (c) commercial paper maturing no more than 270 days from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody’s, (d) certificates of deposit or bankers’ acceptances maturing within 1 year from the date of acquisition thereof issued by any bank organized under the laws of the United States or any state thereof having at the date of acquisition thereof combined capital and surplus of not less than $250,000,000, (e) Deposit Accounts maintained with (i) any bank that satisfies the criteria described in clause (d) above, or (ii) any other bank organized under the laws of the United States or any state thereof so long as the amount maintained with any such other bank is less than or equal to $100,000 and is insured by the Federal Deposit Insurance Corporation, and (f) Investments in money market funds substantially all of whose assets are invested in the types of assets described in clauses (a) through (e) above.

“Cash Management Account” has the meaning specified therefor in Section 2.7(a).

“Cash Management Agreements” means those certain cash management agreements, in form and substance satisfactory to Agent, each of which is among Administrative Borrower or one of its Subsidiaries, Agent, and one of the Cash Management Banks.

“Cash Management Bank” has the meaning specified therefor in Section 2.7(a).

“Change of Control” means that (a) any “person” or “group” (within the meaning of Sections 13(d) and 14(d) of the Exchange Act) becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 30%, or more, of the Stock of Parent having the right to vote for the election of members of the Board of Directors, or (b) a majority of the members of the Board of Directors do not constitute Continuing Directors.

“Closing Date” means the date of the initial Term Loan Draw hereunder.

“Closing Date Projections” means the Projections delivered to Agent on or about the Closing Date.

“Code” means the California Uniform Commercial Code, as in effect from time to time.

“Collateral” means all assets and interests in assets and proceeds thereof now owned or hereafter acquired by Administrative Borrower or its Subsidiaries in or upon which a Lien is granted under any of the Loan Documents.

“Collateral Access Agreement” means a landlord waiver, bailee letter, or acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in Administrative Borrower’s or its Subsidiaries’ books and records, Equipment or Inventory, in each case, in form and substance satisfactory to Agent.

5

“Collections” means all cash, checks, notes, instruments, and other items of payment (including insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds).

“Commitment” means, with respect to each Lender, its Revolver Commitment, its Term Loan Commitment, or its Total Commitment, as the context requires, and, with respect to all Lenders, their Revolver Commitments, their Term Loan Commitments, or their Total Commitments, as the context requires, in each case as such Dollar amounts are set forth beside such Lender’s name under the applicable heading on Schedule C-1 or in the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder, as such amounts may be reduced or increased from time to time pursuant to assignments made in accordance with the provisions of Section 13.1.

“Compliance Certificate” means a certificate substantially in the form of Exhibit C-1 delivered by the chief financial officer of Parent to Agent.

“Continuing Director” means (a) any member of the Board of Directors who was a director (or comparable manager) of Parent on the Closing Date, except for David Thomas and (b) any individual who becomes a member of the Board of Directors after the Closing Date if such individual was appointed or nominated for election to the Board of Directors by a majority of the Continuing Directors, but excluding any such individual originally proposed for election in opposition to the Board of Directors in office at the Closing Date in an actual or threatened election contest relating to the election of the directors (or comparable managers) of Parent and whose initial assumption of office resulted from such contest or the settlement thereof.

“Control Agreement” means a control agreement, in form and substance satisfactory to Agent, executed and delivered by Borrowers, Agent, and the applicable securities intermediary (with respect to a Securities Account) or bank (with respect to a Deposit Account).

“Copyright Security Agreement” has the meaning specified therefor in the Security Agreement.

“Daily Balance” means, as of any date of determination and with respect to any Obligation, the amount of such Obligation owed at the end of such day.

“Default” means an event, condition, or default that, with the giving of notice, the passage of time, or both, would be an Event of Default.

“Defaulting Lender” means any Lender that fails to make any Advance, fund any Term Loan Draw, or make any other extension of credit that it is required to make hereunder on the date that it is required to do so hereunder.

“Defaulting Lender Rate” means (a) for the first 3 days from and after the date the relevant payment is due, the Base Rate, and (b) thereafter, the interest rate then applicable to Advances (inclusive of the Base Rate Margin applicable thereto).

“Deposit Account” means any deposit account (as that term is defined in the Code).

“Designated Account” means the Deposit Account of Administrative Borrower identified on Schedule D-1.

“Designated Account Bank” has the meaning specified therefor in Schedule D-1.

“Dollars” or “$” means United States dollars.

6

“EBITDA” means, with respect to any fiscal period, Parent’s and its Subsidiaries’ consolidated net earnings (or loss), minus extraordinary gains and interest income, plus (i) interest expense, plus (ii) income taxes, plus (iii) non-cash employee compensation consisting of Stock of any Borrower (to the extent any Borrower is required to recognize such Stock based compensation as an expense), plus (iv) depreciation and amortization for such period, plus (v) extraordinary non-cash losses in an amount not to exceed $2,000,000 in any one fiscal year, plus (vi) the amount actually paid by Borrowers in the 2006 calendar year with respect to the settlement of the McKesson Lawsuit in the total aggregate amount not to exceed $15,000,000, in each case, as determined in accordance with GAAP. Notwithstanding the foregoing, the EBITDA calculation shall not include any pre-QCSI Merger contributions to EBITDA from QCSI.

“EBITDA Revolver Limiter” means, as of any date of determination, the difference of: (A) product of: (i) the Applicable EBITDA Multiplier multiplied by (ii) TTM EBITDA calculated as of the most recent month for which financial statements have been delivered pursuant to Section 5.3, minus (B) the outstanding balance of the Term Loan.

“EBITDA Term Loan Limiter” means, as of any date of determination, the difference of: (A) product of: (i) the Applicable EBITDA Multiplier multiplied by (ii) TTM EBITDA calculated as of the most recent month for which financial statements have been delivered pursuant to Section 5.3, minus (B) the Revolver Usage.

“Eligible Transferee” means (a) a commercial bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $250,000,000, (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development or a political subdivision of any such country and which has total assets in excess of $250,000,000, provided that such bank is acting through a branch or agency located in the United States, (c) a finance company, insurance company, or other financial institution or fund that is engaged in making, purchasing, or otherwise investing in commercial loans in the ordinary course of its business and having (together with its Affiliates) total assets in excess of $250,000,000, (d) any Affiliate (other than individuals) of a Lender, (e) so long as no Event of Default has occurred and is continuing, any other Person approved by Agent and Administrative Borrower (which approval of Administrative Borrower shall not be unreasonably withheld, delayed, or conditioned), and (f) during the continuation of an Event of Default, any other Person approved by Agent. Notwithstanding the foregoing, so long as no Default or Event of Default exists as of any date of determination, “Eligible Transferee” shall not include any Person Agent knows is an operating company and a direct competitor of Borrowers, taken as a whole.

“Environmental Actions” means any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter, or other communication from any Governmental Authority, or any third party involving violations of Environmental Laws or releases of Hazardous Materials from (a) any assets, properties, or businesses of any Borrower, any Subsidiary of a Borrower, or any of their predecessors in interest, (b) from adjoining properties or businesses, or (c) from or onto any facilities which received Hazardous Materials generated by any Borrower, any Subsidiary of a Borrower, or any of their predecessors in interest.

“Environmental Law” means any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy or rule of common law now or hereafter in effect and in each case as amended, or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, in each case, to the extent binding on any Borrower, relating to the environment, the effect of the environment on employee health, or Hazardous Materials, in each case as amended from time to time.

“Environmental Liabilities” means all liabilities, monetary obligations, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all reasonable fees,

7

disbursements and expenses of counsel, experts, or consultants, and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand, or Remedial Action required, by any Governmental Authority or any third party, and which relate to any Environmental Action.

“Environmental Lien” means any Lien in favor of any Governmental Authority for Environmental Liabilities.

“Equipment” means equipment (as that term is defined in the Code.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto.

“ERISA Affiliate” means (a) any Person subject to ERISA whose employees are treated as employed by the same employer as the employees of a Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by the same employer as the employees of a Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA that is a member of an affiliated service group of which a Borrower is a member under IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA that is a party to an arrangement with a Borrower and whose employees are aggregated with the employees of a Borrower under IRC Section 414(o).

“Event of Default” has the meaning specified therefor in Section 7.

“Excess Availability” means, as of any date of determination, the amount equal to Availability minus the aggregate amount, if any, of all trade payables of Borrowers and their Subsidiaries more than 60 days past due date and all book overdrafts of Borrowers and their Subsidiaries in excess of their historical practices with respect thereto, in each case as determined by Agent in its Permitted Discretion.

“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time to time.

“Extraordinary Receipts” means any cash received by Parent or any of its Subsidiaries not in the ordinary course of business, including (a) foreign, United States, state or local tax refunds, (b) pension plan reversions, (c) proceeds of insurance (including key man life insurance and business interruption insurance, but excluding any casualty insurance) except to the extent actually used by such Person in accordance with Section 5.8(b), (d) judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action, (e) indemnity payments, and (f) any purchase price adjustment received in connection with any purchase agreement, but only to the extent that the amount of all such receipts in (a) through (f) either (1) exceed $1,000,000 in the aggregate in any fiscal year of Parent or (2) is received while an Event of Default has occurred and its continuing.

“Fee Letter” means that certain amended and restated fee letter between Borrowers and Agent, in form and substance satisfactory to Agent.

“Funding Date” means the date on which a Borrowing occurs.

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

“Governing Documents” means, with respect to any Person, the certificate or articles of incorporation, by-laws, or other organizational documents of such Person.

8

“Governmental Authority” means any federal, state, local, or other governmental or administrative body, instrumentality, board, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body.

“Hazardous Materials” means (a) substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as “hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources, (c) any flammable substances or explosives or any radioactive materials, and (d) asbestos in any form or electrical equipment that contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of 50 parts per million.

“Hedge Agreement” means any and all agreements, or documents now existing or hereafter entered into by Administrative Borrower or any of its Subsidiaries that provide for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging Administrative Borrower’s or any of its Subsidiaries’ exposure to fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations or commodity prices.

“Holdout Lender” has the meaning specified therefor in Section 14.2(a).

“Inactive Borrowers” means Digital Insurance Systems Corporation, an Ohio corporation, Finserv Health Care Systems, Inc., a New York corporation, Creative Business Solutions, Inc., a Texas corporation, Healthcare Media Enterprises, Inc., a Delaware corporation, Health Networks of America, Inc., a Maryland corporation, HealthWeb, Inc., a Delaware corporation, Margolis Health Enterprises, Inc., a California corporation, TriZetto Application Services, Inc., a Colorado corporation, QCSI Puerto Rico, and Winthrop Financial Group, Inc., an Illinois corporation.

“Indebtedness” means (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, interest rate swaps, or other financial products, (c) Capitalized Lease Obligations, (d) all obligations or liabilities of others secured by a Lien on any asset of a Person or its Subsidiaries, irrespective of whether such obligation or liability is assumed, (e) all obligations to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices), (f) all obligations owing under Hedge Agreements, and (g) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (f) above.

“Indemnified Liabilities” has the meaning specified therefor in Section 10.3.

“Indemnified Person” has the meaning specified therefor in Section 10.3.

“Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

“Intercompany Subordination Agreement” means a subordination agreement executed and delivered by Borrowers and Agent, the form and substance of which is satisfactory to Agent.

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“Interest Expense” means, for any period, the aggregate of the interest expense of Parent and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.

“Interest Period” means, with respect to each LIBOR Rate Loan, a period commencing on the date of the making of such LIBOR Rate Loan (or the continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan to a LIBOR Rate Loan) and ending 1 month, 2 months, or 3 months thereafter; provided, however, that (a) if any Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended (subject to clauses (c)-(e) below) to the next succeeding Business Day, (b) interest shall accrue at the applicable rate based upon the LIBOR Rate from and including the first day of each Interest Period to, but excluding, the day on which any Interest Period expires, (c) any Interest Period that would end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, (d) with respect to an Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period), the Interest Period shall end on the last Business Day of the applicable calendar month that is 1 month, 2 months, or 3 months after the date on which the Interest Period began, as applicable, and (e) Borrowers (or Administrative Borrower on behalf thereof) may not elect an Interest Period which will end after the Maturity Date.

“Inventory” means inventory (as that term is defined in the Code).

“Investment” means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of loans, guarantees, advances, or capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business, and (b) bona fide Accounts arising in the ordinary course of business consistent with past practice), purchases or other acquisitions of Indebtedness, Stock, or all or substantially all of the assets of such other Person (or of any division or business line of such other Person), and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP.

“IRC” means the Internal Revenue Code of 1986, as in effect from time to time.

“Issuing Lender” means WFF.

“L/C” has the meaning specified therefor in Section 2.12(a).

“L/C Disbursement” means a payment made by the Issuing Lender pursuant to a Letter of Credit.

“L/C Undertaking” has the meaning specified therefor in Section 2.12(a).

“Lender” and “Lenders” have the respective meanings set forth in the preamble to the Agreement, and shall include any other Person made a party to the Agreement in accordance with the provisions of Section 13.1.

“Lender Group” means, individually and collectively, each of the Lenders (including the Issuing Lender) and Agent.

“Lender Group Expenses” means all (a) costs or expenses (including taxes, and insurance premiums) required to be paid by a Borrower under any of the Loan Documents that are paid, advanced, or incurred by the Lender Group, (b) fees or charges paid or incurred by Agent in connection with the Lender Group’s transactions with Borrowers, including, fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record searches (including tax lien, litigation, and UCC searches and including searches with the patent and trademark office, the copyright office, or the department of motor

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vehicles), filing, recording, publication, appraisal (including periodic collateral appraisals or business valuations to the extent of the fees and charges (and up to the amount of any limitation) contained in the Agreement, real estate surveys, real estate title policies and endorsements, and environmental audits, (c) costs and expenses incurred by Agent in the disbursement of funds to Borrowers or other members of the Lender Group (by wire transfer or otherwise), (d) charges paid or incurred by Agent resulting from the dishonor of checks, (e) reasonable costs and expenses paid or incurred by the Lender Group to correct any default or enforce any provision of the Loan Documents, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated, (f) audit fees and expenses of Agent related to any inspections or audits to the extent of the fees and charges (and up to the amount of any limitation) contained in the Agreement, (g) reasonable costs and expenses of third party claims or any other suit paid or incurred by the Lender Group in enforcing or defending the Loan Documents or in connection with the transactions contemplated by the Loan Documents or the Lender Group’s relationship with any Borrower, (h) Agent’s and each Lender’s reasonable costs and expenses (including attorneys fees) incurred in advising, structuring, drafting, reviewing, administering, syndicating (including rating the Term Loan), or amending the Loan Documents, and (i) Agent’s and each Lender’s reasonable costs and expenses (including attorneys, accountants, consultants, and other advisors fees and expenses) incurred in terminating, enforcing (including attorneys, accountants, consultants, and other advisors fees and expenses incurred in connection with a “workout,” a “restructuring,” or an Insolvency Proceeding concerning any Borrower in exercising rights or remedies under the Loan Documents), or defending the Loan Documents, irrespective of whether suit is brought, or in taking any Remedial Action concerning the Collateral.

“Lender-Related Person” means, with respect to any Lender, such Lender, together with such Lender’s Affiliates, officers, directors, employees, attorneys, and agents.

“Letter of Credit” means an L/C or an L/C Undertaking, as the context requires.

“Letter of Credit Usage” means, as of any date of determination, the aggregate undrawn amount of all outstanding Letters of Credit.

“LIBOR Deadline” has the meaning specified therefor in Section 2.13(b)(i).

“LIBOR Notice” means a written notice in the form of Exhibit L-1.

“LIBOR Option” has the meaning specified therefor in Section 2.13(a).

“LIBOR Rate” means, for each Interest Period for each LIBOR Rate Loan, the rate per annum determined by Agent (rounded upwards, if necessary, to the next 1/100%) by dividing (a) the Base LIBOR Rate for such Interest Period, by (b) 100% minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage.

“LIBOR Rate Loan” means each portion of an Advance or the Term Loan that bears interest at a rate determined by reference to the LIBOR Rate.

“Lien” means any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, irrespective of whether (a) such interest is based on the common law, statute, or contract, (b) such interest is recorded or perfected, and (c) such interest is contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances. Without limiting the generality of the foregoing, the term “Lien” includes the lien or security interest arising from a mortgage, deed of trust, encumbrance, notice of Lien, levy or assessment, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes and also includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting Real Property.

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“Liquidity” means, as of any date of determination, the sum of: (i) Qualified Cash plus (ii) Excess Availability.

“Loan Account” has any meaning specified therefor in Section 2.10.

“Loan Documents” means the Agreement, the Bank Product Agreements, the Cash Management Agreements, the Control Agreements, the Fee Letter, the Intercompany Subordination Agreement, the Security Agreement, the Patent Security Agreement, Trademark Security Agreement, Copyright Security Agreement, any note or notes executed by a Borrower in connection with the Agreement and payable to a member of the Lender Group, and any other agreement entered into, now or in the future, by any Borrower and the Lender Group in connection with the Agreement.

“Loan Limit” has the meaning specified therefor in Section 2.4(c)(i)

“Limiter Excess” has the meaning specified therefor in Section 2.4(c)(i).

“Material Adverse Change” means (a) a material adverse change in the business, prospects, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Borrowers and their Subsidiaries, taken as a whole, (b) a material impairment of a Borrower’s or any of its Subsidiaries’ ability to perform its obligations under the Loan Documents to which it is a party or of the Lender Group’s ability to enforce the Obligations or realize upon the Collateral, or (c) a material impairment of the enforceability or priority of the Agent’s Liens with respect to the Collateral as a result of an action or failure to act on the part of Borrower.

“Maturity Date” has the meaning specified therefor in Section 3.3.

“Maximum Credit Amount” means $250,000,000.

“Maximum Revolver Amount” means $100,000,000.

“McKesson Lawsuit” means, that certain Civil Action No. 04-1258-SLR, relating to the complaint filed against Parent, on September 13, 2004, in the District Court for the District of Delaware, captioned McKesson Information Solutions LLC v. The TriZetto Group, Inc, wherein McKesson alleged that certain of Parent’s products infringed on one of McKesson’s patents.

“Merger Agreement” has the meaning specified therefor in the recitals to the Agreement.

“Merger Documents” has the meaning specified therefor in Section 4.22.

“Mortgages” means, individually and collectively, one or more mortgages, deeds of trust, or deeds to secure debt, executed and delivered by a Borrower in favor of Agent, in form and substance satisfactory to Agent, that encumber the Real Property Collateral.

“Net Cash Proceeds” means:

(a) with respect to any sale or disposition by a Borrower of property or assets, the amount of cash proceeds received (directly or indirectly) from time to time (whether as initial consideration or through the payment of deferred consideration) by or on behalf of a Borrower, in connection therewith after deducting therefrom only (i) the amount of any indebtedness secured by any Permitted Lien on any asset (other

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than (A) Indebtedness owing to Agent or any Lender under the Agreement or the other Loan Documents and (B) Indebtedness assumed by the purchaser or such asset) which is required to be, and is, repaid in connection with such sale or disposition, (ii) reasonable fees, commissions, and expenses related thereto and required to be paid by a Borrower in connection with such sale or disposition and (iii) taxes paid or payable to any taxing authorities by a Borrower in connection with such sale or disposition, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an Affiliate of a Borrower, and area properly attributable to such transaction; and

(b) with respect to the issuance or incurrence of any Indebtedness by a Borrower, or the issuance by a Borrower of any shares of its Stock, the aggregate amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment or disposition of deferred consideration) by or on behalf of a Borrower in connection with such issuance or incurrence, after deducting therefrom only (i) reasonable fees, commissions, and expenses related thereto and required to be paid by a Borrower in connection with such issuance or incurrence, (ii) taxes paid or payable to any taxing authorities by a Borrower in connection with such issuance or incurrence, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an Affiliate of a Borrower, and are properly attributable to such transaction.

“Obligations” means (a) all loans (including the Term Loan), Advances, debts, principal, interest (including any interest that accrues after the commencement of an Insolvency Proceeding regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), contingent reimbursement obligations with respect to outstanding Letters of Credit, premiums, liabilities (including all amounts charged to Borrowers’ Loan Account pursuant hereto), obligations (including indemnification obligations), fees (including the fees provided for in the Fee Letter), charges, costs, Lender Group Expenses (including any fees or expenses that accrue after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), lease payments, guaranties, covenants, and duties of any kind and description owing by Borrowers to the Lender Group pursuant to or evidenced by the Loan Documents and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all interest not paid when due and all Lender Group Expenses that Borrowers are required to pay or reimburse by the Loan Documents, by law, or otherwise, and (b) all Bank Product Obligations. Any reference in the Agreement or in the Loan Documents to the Obligations shall include all or any portion thereof and any extensions, modifications, renewals, or alterations thereof, both prior and subsequent to any Insolvency Proceeding.

“Original Credit Agreement” has the meaning specified therefor in the recitals to the Agreement.

“Original Loan Documents” means the Loan Documents as that term was defined in the Original Credit Agreement.

“Originating Lender” has the meaning specified therefor in Section 13.1(e).

“Overadvance” has the meaning specified therefor in Section 2.5.

“Parent” has the meaning specified therefor in the preamble to the Agreement.

“Participant” has the meaning specified therefor in Section 13.1(e).

“Patent Security Agreement” has the meaning specified therefor in the Security Agreement.

“PDM” means Plan Data Management, Inc., a Delaware corporation.

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“Permitted Acquisition” means a Permitted Cash Acquisition or a Permitted Non-Cash Acquisition, as the context requires.

“Permitted Capitalized Lease Obligations” means, as of any date of determination, Capitalized Lease Obligations incurred after the Closing Date not to exceed $7,250,000 in the aggregate incurred in any one fiscal year.

“Permitted Cash Acquisition” means any Acquisition made by an Active Borrower as to which each of the following is applicable (a) such Acquisition does not qualify as a Permitted Non-Cash Acquisition solely because the consideration payable in respect of the proposed Acquisition includes some form of consideration other than solely the common Stock of Parent; (b) no Indebtedness that is not permitted under Section 6.1 will be incurred as a result of such Acquisition; (c) both before and after giving effect to payment of any consideration (other than Stock of Parent) paid in connection with such Acquisition, Borrowers would have Liquidity in excess of $20,000,000; and (d) the total consideration (other than Stock of Parent) paid, or obligations assumed, in connection with all Permitted Cash Acquisitions consummated since the Closing Date does not exceed $20,000,000 in the aggregate.

“Permitted Discretion” means a determination made in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.

“Permitted Dispositions” means (a) sales and other dispositions of Equipment that is substantially worn, damaged, or obsolete in the ordinary course of business, (b) sales of Inventory to buyers in the ordinary course of business, (c) the use or transfer of money or Cash Equivalents in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents, (d) the licensing, on a non-exclusive basis, of Intellectual Property rights in the ordinary course of business, (e) the transfer of assets by a Borrower to an Active Borrower, (f) so long as no Default or Event of Default has occurred and is continuing or would result therefrom, dispositions of assets (other than Accounts, Intellectual Property, Inventory, or contracts for maintenance services that are revenue generating) not otherwise permitted in clauses (a) through (e) so long as made at fair market value and the aggregate amount of all such dispositions during any fiscal year would not exceed $2,000,000.

“Permitted Investments” means (a) Investments in cash and Cash Equivalents (other than those maintained in the Bear Stearns Collateral Account), (b) Investments in negotiable instruments for collection, (c) advances made in connection with purchases of goods or services in the ordinary course of business, (d) Investments received in settlement of amounts due to a Borrower effected in the ordinary course of business or owing to a Borrower as a result of Insolvency Proceedings involving an Account Debtor or upon the foreclosure or enforcement of any Lien in favor of a Borrower, (e) Permitted Acquisitions, (f) Investments relating to payments made to customers of a Borrower in connection with a bona fide customer agreement (the “Customer Rebates”) and provided: (x) no Default or Event of Default has occurred and is continuing or would result from the Customer Rebates; (y) both before and after giving effect to any Customer Rebate, Borrowers would have Liquidity in excess of $30,000,000, and (z) Customer Rebates do not exceed $10,000,000 in the aggregate; and (g) Investments in the Bear Stearns Collateral Account, but only so long as the aggregate value of the Investments in the Bear Stearns Collateral Account does not at any time exceed $1,000,000 and such account is closed on or before February 12, 2007 (after such date the Investments in the Bear Stearns Collateral Account shall cease to be a Permitted Investment).

“Permitted Liens” means (a) Liens held by Agent to secure the Obligations, (b) Liens for unpaid taxes, assessments, or other governmental charges or levies that either (i) are not yet delinquent, or (ii) do not have priority over the Agent’s Liens and the underlying taxes, assessments, or charges or levies are the subject of Permitted Protests, (c) judgment Liens that do not constitute an Event of Default under Section 7.7 of the Agreement, (d) Liens set forth on Schedule P-1, (e) the interests of lessors under operating leases, (f) purchase money Liens or the interests of lessors under Capital Leases to the extent that such Liens or interests secure

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Permitted Purchase Money Indebtedness or Permitted Capitalized Lease Obligations, as applicable, and so long as such Lien attaches only to the asset purchased or acquired and the proceeds thereof, (g) Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of Borrowers’ business and not in connection with the borrowing of money, and which Liens either (i) are for sums not yet delinquent, or (ii) are the subject of Permitted Protests, (h) Liens on amounts deposited in connection with obtaining worker’s compensation or other unemployment insurance, (i) Liens on amounts deposited in connection with the making or entering into of bids, tenders, statutory obligations, government contracts, or leases in the ordinary course of business and not in connection with the borrowing of money, (j) Liens on amounts deposited as security for surety or appeal bonds in connection with obtaining such bonds in the ordinary course of business, (k) with respect to any Real Property, easements, rights of way, and zoning restrictions that do not materially interfere with or impair the use or operation thereof and (l) the Lien held by JPMorgan Chase Bank, N.A. on assets deposited in the Bear Stearns collateral account brokerage account #049-41366 maintained at Bear Stearns & Co., but only so long as the aggregate value of the Investments in the Bear Stearns Collateral Account does not at any time exceed $1,000,000 and such account is closed on or before February 12, 2007 (after such date the Lien referenced in this clause (l) shall cease to be a Permitted Lien).

“Permitted Merger” means the merger of (i) an Active Borrower into an Active Borrower (ii) an Inactive Borrower into an Active Borrower, so long as (A) no other provision of this Agreement would be violated thereby, (B) Administrative Borrower gives the Agent at least 15 days’ prior written notice of such merger, (C) no Default or Event of Default shall have occurred and be continuing either before or after giving effect to such merger, (D) the Agent’s rights in any Collateral, including, without limitation, the existence, perfection and priority of any Lien thereon, are not adversely affected by such merger, and (E) the surviving entity of any such merger shall be an Active Borrower.

“Permitted Non-Cash Acquisition” means any Acquisition made by an Active Borrower so long as:

(a) no Default or Event of Default shall have occurred and be continuing or would result from the consummation of the proposed Acquisition,

(b) the assets being acquired, or the Person whose Stock is being acquired, are useful in or engaged in, as applicable, the business of the Active Borrowers or a business reasonably related thereto,

(c) the consideration payable in respect of the proposed Acquisition shall be comprised solely of common Stock of Parent,

(d) Borrowers have provided Agent with written confirmation, supported by reasonably detailed calculations, that on a pro forma basis, created by adding the historical combined financial statements of Parent (including the combined financial statements of any other Person or assets that were the subject of a prior Permitted Acquisition during the relevant period) and the Projections delivered to Agent pursuant to Schedule 5.3 to the historical consolidated financial statements of the Person to be acquired (or the historical financial statements related to the assets to be acquired) and the financial projections of the Person being acquired pursuant to the proposed Acquisition (adjusted to eliminate expense items that would not have been or would not be incurred and to include income items that would have been or would be recognized, Borrowers would have been and will continue to be in compliance with the financial covenants in Section 6.16 for the 12 months ending as of the first fiscal quarter ended immediately prior to the proposed date of consummation of such proposed Acquisition and for the period ending on the first fiscal quarter that is at least 12 months after the proposed date of consummation of such proposed Acquisition, together with copies of all such historical financial statements and financial projections of the Person or assets being acquired and a compliance certificate executed by Parent reflecting the relevant calculations,

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(e) Borrowers have provided Agent with written notice of the proposed Acquisition not less than 10 Business Days prior to the anticipated closing date of the subject Acquisition together with such documentation that Agent may require demonstrating that after giving effect to the subject Acquisition, Parent and its Subsidiaries (taken as a whole) could not reasonably be expected to suffer a Material Adverse Change as a result of such proposed Acquisition,

(f) in the case of an Asset Acquisition, the subject assets are being acquired directly by an Active Borrower,

(g) in the case of a Stock Acquisition, the subject Stock is being acquired directly by an Active Borrower,

(h) in the case of an Asset Acquisition, the relevant Active Borrower shall have executed and delivered or authorized, as applicable, any and all security agreements, financing statements, fixture filings, and other documentation reasonably requested by Agent in order to include the newly acquired assets within the collateral hypothecated under the Loan Documents,

(i) in the case of a Stock Acquisition, the relevant Active Borrower shall have complied with each of the provisions of Section 5.16 with respect to the Subsidiary being acquired

(j) the total consideration (to be paid solely in Stock of Parent) paid, or obligations assumed, in connection with all Permitted Non-Cash Acquisitions consummated since the Closing Date shall not exceed $50,000,000 in the aggregate.

“Permitted Protest” means the right of Administrative Borrower or any Active Borrower to protest any Lien (other than any Lien that secures the Obligations), taxes (other than payroll taxes or taxes that are the subject of a United States federal tax lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on a Borrower’s or any of its Subsidiaries’ books and records in such amount as is required under GAAP, (b) any such protest is instituted promptly and prosecuted diligently by Administrative Borrower or any of its Subsidiaries, as applicable, in good faith, and (c) Agent is satisfied that, while any such protest is pending, there will be no impairment of the enforceability, validity, or priority of any of the Agent’s Liens.

“Permitted Purchase Money Indebtedness” means, as of any date of determination, Purchase Money Indebtedness incurred after the Closing Date in an aggregate principal amount outstanding at any one time not in excess of $5,000,000.

“Person” means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.

“Projections” means Parent’s forecasted (a) balance sheets, (b) profit and loss statements, and (c) cash flow statements, all prepared on a basis consistent with Parent’s historical financial statements, together with appropriate supporting details and a statement of underlying assumptions.

“Pro Rata Share” means, as of any date of determination:

(a) with respect to a Lender’s obligation to make Advances and right to receive payments of principal, interest, fees, costs, and expenses with respect thereto, (i) prior to the Revolver Commitments being terminated or reduced to zero, the percentage obtained by dividing (y) such Lender’s Revolver Commitment, by (z) the aggregate Revolver Commitments of all Lenders, and (ii) from and after the

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time that the Revolver Commitments have been terminated or reduced to zero, the percentage obtained by dividing (y) the aggregate outstanding principal amount of such Lender’s Advances by (z) the aggregate outstanding principal amount of all Advances,

(b) with respect to a Lender’s obligation to participate in Letters of Credit, to reimburse the Issuing Lender, and right to receive payments of fees with respect thereto, (i) prior to the Revolver Commitments being terminated or reduced to zero, the percentage obtained by dividing (y) such Lender’s Revolver Commitment, by (z) the aggregate Revolver Commitments of all Lenders, and (ii) from and after the time that the Revolver Commitments have been terminated or reduced to zero, the percentage obtained by dividing (y) the aggregate outstanding principal amount of such Lender’s Advances by (z) the aggregate outstanding principal amount of all Advances,

(c) with respect to a Lender’s obligation to make the Term Loan and right to receive payments of interest, fees, and principal with respect thereto, (i) prior to the making of first Term Loan Draw, the percentage obtained by dividing (y) such Lender’s Term Loan Commitment, by (z) the aggregate amount of all Lenders’ Term Loan Commitments, and (ii) from and after the making of the first Term Loan Draw, the percentage obtained by dividing (y) the principal amount of such Lender’s portion of the Term Loan by (z) the outstanding principal amount of the Term Loan, and

(d) with respect to all other matters as to a particular Lender (including the indemnification obligations arising under Section 15.7), the percentage obtained by dividing (i) such Lender’s Revolver Commitment plus the outstanding principal amount of such Lender’s portion of the Term Loan, by (ii) the aggregate amount of Revolver Commitments of all Lenders plus the outstanding principal amount of the Term Loan; provided, however, that in the event the Revolver Commitments have been terminated or reduced to zero, Pro Rata Share under this clause shall be the percentage obtained by dividing (A) the outstanding principal amount of such Lender’s Advances plus such Lender’s ratable portion of the Risk Participation Liability with respect to outstanding Letters of Credit plus the outstanding principal amount of such Lender’s portion of the Term Loan, by (B) the outstanding principal amount of all Advances plus the aggregate amount of the Risk Participation Liability with respect to outstanding Letters of Credit plus the outstanding principal amount of the Term Loan.

“Protective Advances” has the meaning specified therefor in Section 2.3(d)(i).

“Purchase Money Indebtedness” means Indebtedness (other than the Obligations, but excluding Capitalized Lease Obligations), incurred at the time of, or within 20 days after, the acquisition of any fixed assets for the purpose of financing all or any part of the acquisition cost thereof.

“QCSI” means Quality Care Solutions, Inc., a Nevada corporation.

“QCSI Puerto Rico” means, QCSI Puerto Rico, Inc., a Delaware corporation.

“Qualified Cash” means, as of any date of determination, the amount of unrestricted cash and Cash Equivalents of the Active Borrowers that is in Deposit Accounts or in Securities Accounts, or any combination thereof, and which such Deposit Account or Securities Account is maintained by a branch office of the bank or securities intermediary located within the United States and is the subject of a Control Agreement.

“Real Property” means any estates or interests in real property now owned or hereafter acquired by any Borrower and the improvements thereto.

“Real Property Collateral” means the Real Property identified on Schedule R-1 and any Real Property hereafter acquired by a Borrower.

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“Record” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.

“Recurring Maintenance Revenues” means, with respect to any period, the revenue of Active Borrowers for such period that is derived from providing software maintenance services to their customers pursuant to written software maintenance contracts (acceptable to Agent), all as reflected on a report prepared in accordance with Active Borrowers’ historic practices and which report is to be otherwise satisfactory to Agent.

“Recurring Revenues” means, with respect to any period, the revenue of Active Borrowers for such period that is derived from providing software hosting, business process outsourcing, IT outsourcing, and software maintenance services to their customers pursuant to written contracts (acceptable to Agent), all as reflected on a report prepared in accordance with Active Borrowers’ historic practices and which report is to be otherwise satisfactory to Agent.

“Recurring Revenues Certificate” means, the recurring revenues certificate delivered to Agent pursuant to the terms of Schedule 5.2.

“Remedial Action” means all actions taken to (a) clean up, remove, remediate, contain, treat, monitor, assess, evaluate, or in any way address Hazardous Materials in the indoor or outdoor environment, (b) prevent or minimize a release or threatened release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c) restore or reclaim natural resources or the environment, (d) perform any pre-remedial studies, investigations, or post-remedial operation and maintenance activities, or (e) conduct any other actions with respect to Hazardous Materials authorized by Environmental Laws.

“Replacement Lender” has the meaning specified therefor in Section 14.2(a).

“Report” has the meaning specified therefor in Section 15.17.

“Required Availability” means that the sum of (a) Excess Availability, plus (b) Qualified Cash exceeds $30,000,000.

“Required Lenders” means, at any time, Lenders whose aggregate Pro Rata Shares (calculated under clause (b) of the definition of Pro Rata Shares) equal or exceed 50.1%

“Reserve Percentage” means, on any day, for any Lender, the maximum percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor Governmental Authority) for determining the reserve requirements (including any basic, supplemental, marginal, or emergency reserves) that are in effect on such date with respect to eurocurrency funding (currently referred to as “eurocurrency liabilities”) of that Lender, but so long as such Lender is not required or directed under applicable regulations to maintain such reserves, the Reserve Percentage shall be zero.

“Revolver Commitment” means, with respect to each Lender, its Revolver Commitment, and, with respect to all Lenders, their Revolver Commitments, in each case as such Dollar amounts are set forth beside such Lender’s name under the applicable heading on Schedule C-1 or in the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder, as such amounts may be reduced or increased from time to time pursuant to assignments made in accordance with the provisions of Section 13.1.

“Revolver Usage” means, as of any date of determination, the sum of (a) the amount of outstanding Advances, plus (b) the amount of the Letter of Credit Usage.

18

“Risk Participation Liability” means, as to each Letter of Credit, all reimbursement obligations of Borrowers to the Issuing Lender with respect to an L/C Undertaking, consisting of (a) the amount available to be drawn or which may become available to be drawn, (b) all amounts that have been paid by the Issuing Lender to the Underlying Issuer to the extent not reimbursed by Borrowers, whether by the making of an Advance or otherwise, and (c) all accrued and unpaid interest, fees, and expenses payable with respect thereto.

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

“Securities Account” means a “securities account” (as that term is defined in the Code).

“Security Agreement” means the amended and restated security agreement, in form and substance satisfactory to Agent, executed and delivered by Borrower to Agent.

“Senior Debt” means the total amount of Obligations outstanding as of the date of measurement.

“Settlement” has the meaning specified therefor in Section 2.3(e)(i).

“Settlement Date” has the meaning specified therefor in Section 2.3(e)(i).

“Share Repurchases” means a transaction or series of transactions whereby Parent repurchases Stock of Parent, (i) pursuant to Parent’s Stock repurchase plan approved by the Board of Directors (the “Plan Share Repurchases”), as long as: (x) no Default or Event of Default shall have occurred and be continuing either before or immediately after giving effect to a Plan Share Repurchase, (y) both before and immediately after giving effect to any Plan Share Repurchase, Borrowers would have Liquidity in excess of $30,000,000 and (z) the aggregate amount of consideration paid for such Plan Share Repurchases shall not exceed $5,000,000; (ii) pursuant to repurchase rights exercisable in connection with the termination of service of any service provider to any Borrower (the “Other Share Repurchases”), provided: (y) no Default or Event of Default shall have occurred and be continuing or would result from any Other Share Repurchase and (z) the aggregate amount of consideration paid for such Other Share Repurchase shall not exceed $500,000 in any one fiscal year; and (iii) pursuant to Plan Share Repurchases (in addition to those permitted under clause (i) above and referred to herein as the “Additional Plan Share Repurchases”) as long as: (w) no Default or Event of Default shall have occurred and be continuing either before or immediately after giving effect to an Additional Plan Share Repurchase, (x) both before and immediately after giving effect to any Additional Plan Share Repurchase, Borrowers would have Liquidity in excess of $40,000,000, (y) the aggregate amount of consideration paid for such Additional Plan Share Repurchases shall not exceed $50,000,000, and (z) all such Additional Plan Share Repurchases described in this clause (iii) shall be consummated on or before June 30, 2007.

“Solvent” means, with respect to any Person on a particular date, that, at fair valuations, the sum of such Person’s assets is greater than all of such Person’s debts.

“Stock” means all shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).

“Stock Acquisition” means the purchase or other acquisition by Parent of all of the Stock of any other Person.

“Subsidiary” of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the shares of Stock having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) of such corporation, partnership, limited liability company, or other entity.

19

“Swing Lender” means WFF or any other Lender that, at the request of Administrative Borrower and with the consent of Agent agrees, in such Lender’s sole discretion, to become the Swing Lender under Section 2.3(d).

“Swing Loan” has the meaning specified therefor in Section 2.3(d)(i).

“Taxes” has the meaning specified therefor in Section 15.11.

“Term Loan” has the meaning specified therefor in Section 2.2.

“Term Loan Amount” means $150,000,000.

“Term Loan Availability” means, as of any date of determination, the difference of (A) the lesser of: (i) the EBITDA Term Loan Limit or the (ii) Term Loan Amount, minus (B) the outstanding amount of the Term Loan.

“Term Loan Commitment” means, with respect to each Lender, its Term Loan Commitment, and, with respect to all Lenders, their Term Loan Commitments, in each case as such Dollar amounts are set forth beside such Lender’s name under the applicable heading on Schedule C-1 or in the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder, as such amounts may be reduced or increased from time to time pursuant to assignments made in accordance with the provisions of Section 13.1.

“Term Loan Draw” has the meaning specified therefor in Section 2.2.

“Termination Date” means, the date on which all of the Obligations are paid in full in accordance with the terms of the Agreement and the Commitments of the Lenders are terminated.

“Total Commitment” means, with respect to each Lender, its Total Commitment, and, with respect to all Lenders, their Total Commitments, in each case as such Dollar amounts are set forth beside such Lender’s name under the applicable heading on Schedule C-1 attached hereto or on the signature page of the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder, as such amounts may be reduced or increased from time to time pursuant to assignments made in accordance with the provisions of Section 13.1.

“Trademark Security Agreement” has the meaning specified therefor in the Security Agreement.

“TTM EBITDA” means, as of any date of determination, EBITDA for the most recently completed 12 month period (which period may include the date of measurement).

“TTM Recurring Revenues” means, as of any date of determination, the actual Recurring Revenues for the most recently completed 12 month period (which period may include the date of measurement), as set forth in the relevant Recurring Revenues Certificates for such period.

“Underlying Issuer” means a third Person which is the beneficiary of an L/C Undertaking and which has issued a letter of credit at the request of the Issuing Lender for the benefit of Borrowers.

“Underlying Letter of Credit” means a letter of credit that has been issued by an Underlying Issuer.

“United States” means the United States of America.

“Voidable Transfer” has the meaning specified therefor in Section 16.6.

20

“Wells Fargo” means Wells Fargo Bank, National Association, a national banking association.

“WFF” means Wells Fargo Foothill, Inc., a California corporation.

21

EX-10.41

EXHIBIT 10.41

THE TRIZETTO GROUP, INC.

1998 LONG-TERM INCENTIVE PLAN

Restricted Stock Award Agreement

Performance Compensation Award

You are hereby awarded Restricted Stock subject to the terms and conditions set forth in this Restricted Stock Award Agreement (the “Award”) and in The TriZetto Group, Inc. 1998 Long-Term Incentive Plan, as amended (the “Plan”), which is attached hereto as Exhibit A. All terms in this Award that begin with a capital letter are defined in the Plan or in this Award.

By executing this Award, you agree to be bound by all of the Plan’s terms and conditions as if they had been set out verbatim in this Award. In addition, you recognize and agree that all determinations, interpretations, or other actions respecting the Plan and this Award will be made by the Committee, and shall be final, conclusive and binding on all parties, including you and your successors in interest.

Specific Terms. Your Performance Compensation Award has the following terms:

Name of Participant	[                                                         ]
Shares Subject to this Award	shares of Common Stock of The TriZetto Group, Inc.
Purchase Price per Share	$0.00
Award Date	January 30, 2007
Vesting	This Award is a Performance Compensation Award, as defined in Section 10(b) of the Plan. The Shares subject to this Award will cliff vest on March 15, 2010 only if, and to the extent that, the Company achieves the financial performance specified in at least one of the “Performance Formulae” specified below: If the Company attains 24% compounded annual growth in the Performance Measure during the Performance Period, 100% of the Shares subject to this Award shall vest on March 15, 2010. If the Company attains 19.2% compounded annual growth in the Performance Measure during the Performance Period, 50% of the Shares subject to this Award shall vest on March 15, 2010. If the Company attains between 19.2% and 24% compounded annual growth in the Performance Measure during the Performance Period, a proportional number of Shares subject to this Award shall vest on March 15, 2010. For purposes of this Award, the following definitions shall apply: •     The Performance Measure shall mean the Company’s earnings before

	interest, taxes and other adjustments per share, and •     The Performance Period shall mean the three (3) year period commencing Jan. 1, 2007 and ending Dec. 31, 2009. The Company’s fiscal year ending December 31, 2006 (excluding any impact of the legal settlement with McKesson Information Solutions LLC) shall serve as the base year for purposes of computing compounded annual growth in the Performance Measure during the Performance Period. Subject to the limits set forth in Section 10(b) of the Plan, for each fiscal year of the Company that ends with or within the Performance Period, the Compensation Committee may, in its sole discretion, adjust the Performance Formulae.
Accelerated Vesting	Your vesting under this Award will accelerate only under the circumstances expressly set forth in the Plan. See Section 13(b) of the Plan.
Deferral Election pursuant to Section 9 of the Plan	¨   You are eligible to make this election if you desire to do so. x  You are not eligible to make this election.

1. Dividends. Upon lapse of the vesting restrictions on this Award, you will receive an amount equal to any cash dividends (plus simple interest at [            ] percent ([            ]%) per year), plus a number of Shares equal to any stock dividends, which were declared and paid to the Company’s shareholders between the Award Date and the date such unrestricted Shares are issued to you.

2. Investment Purposes. You acknowledge that you are acquiring your Restricted Stock for investment purposes only and without any present intention of selling or distributing them.

3. Legend. Until all vesting restrictions lapse and new certificates are issued pursuant to the next section, certificates representing shares of Restricted Stock issued pursuant to this Award shall bear the following legend:

The shares represented by this certificate are subject to reacquisition under, and such shares may not be sold or otherwise transferred except pursuant to, the provisions of the Restricted Stock Award Agreement (Performance Compensation Award), dated [February 9, 2007], by and between The TriZetto Group, Inc. and the registered owner of such shares.

4. Vesting Dates. As you satisfy vesting conditions of this Award, the Company shall cause new certificates to be issued and delivered to you, free from the legend in the preceding section, but with any other legends the Company determines to be appropriate. New certificates shall not be delivered to you unless you have made arrangements satisfactory to the Committee to satisfy tax-withholding obligations. If you do not satisfy the vesting requirements as of any vesting date, you will irrevocably forfeit any rights to those Shares subject to the vesting requirement on that date.

5. Section 83(b) Election Notice. If you elect under Code Section 83(b) to be taxed immediately on your Restricted Stock when it was granted to you, you promise to notify the Company of the election within 10 days of filing that election with the Internal Revenue Service. Exhibit B is a suggested form of Section 83(b) election.

6. Deferral Election. If allowed under the Specific Terms, at any time during the calendar year in which you receive this Award, you may irrevocably elect to defer the receipt of all or a percentage of the Shares that

2

would otherwise be issued to you on the lapsing of vesting restrictions of this Award in a future calendar year (or for the remainder of any calendar year in which you make the election, provided the election occurs within the thirty (30)-day period after you first became an Eligible Person.) A copy of the form which you may use to make a deferral election is attached hereto as Exhibit C. Notwithstanding the foregoing, Restricted Stock which has been subject to a Section 83(b) election is not eligible for deferral.

7. Not a Contract of Employment. By executing this Award, you acknowledge and agree that (1) any person who is terminated before full vesting of an award, such as the one granted to you by this Award, could claim that he or she was terminated to preclude vesting; (2) you promise never to make such a claim; (3) nothing in this Award or the Plan confers on you any right to continued Company employment or restricts the Company’s right to terminate your employment at any time for any or no reason; and (4) the Company would not have granted this Award to you but for these acknowledgements and agreements.

8. Severability. Subject to one exception, every provision of this Award and the Plan is intended to be severable, and any illegal or invalid term shall not affect the validity or legality of the remaining terms. The only exception is that this Award shall be unenforceable if any provision of the preceding section is illegal, invalid, or unenforceable.

9. Notices. Any notice, payment or communication required or permitted to be given by any provision of this Award shall be in writing and shall be delivered personally or sent by certified mail, return receipt requested, addressed as follows: (i) if to the Company, at the address set forth on the signature page, to the attention of: General Counsel; (ii) if to you, at the address set forth below your signature on the signature page. Each party may, from time to time, by notice to the other party hereto, specify a new address for delivery of notices relating to this Award. Any such notice shall be deemed to be given as of the date such notice is personally delivered or properly mailed.

10. Binding Effect. Every provision of this Award shall be binding on and inure to the benefit of the parties’ respective heirs, legatees, legal representatives, successors, transferees, and assigns.

11. Headings. Headings shall be ignored in interpreting this Award.

12. Counterparts. This Award may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute the same instrument.

3

BY YOUR SIGNATURE BELOW, along with the signature of the Company’s representative, you and the Company agree that the Award is granted under and governed by the terms and conditions of this Award Agreement and the Plan.

THE TRIZETTO GROUP, INC.
By:
Name:	Jeffrey H. Margolis
Title:	Chief Executive Officer
Address:	c/o The TriZetto Group, Inc.
	567 San Nicolas Drive, Suite 360
	Newport Beach, California 92660

The undersigned Participant hereby accepts the terms of this Award Agreement and the Plan.

By:

Name:

Address:

4

Exhibit A

THE TRIZETTO GROUP, INC.

1998 LONG-TERM INCENTIVE PLAN, AS AMENDED

Exhibit B

THE TRIZETTO GROUP, INC.

1998 LONG-TERM INCENTIVE PLAN

Section 83(b) Election Form

Attached is an Internal Revenue Code Section 83(b) Election Form. If you wish to make a Section 83(b) election, you must do so within 30 days of the date the restricted stock was transferred to you. In order to make the election, you must completely fill out the attached form and file one copy with the Internal Revenue Service office where you file your tax return. In addition, one copy of the statement also must be submitted with your income tax return for the taxable year in which you make this election. Finally, you also must submit a copy of the election form to the Company. A Section 83(b) election normally cannot be revoked.

THE TRIZETTO GROUP, INC.

Election to Include Value of Restricted Stock in Gross Income

in Year of Transfer under Internal Revenue Code Section 83(b)

Pursuant to Section 83(b) of the Internal Revenue Code, I hereby elect within 30 days of receiving the property described herein to be taxed immediately on its value specified in item 5 below.

1. My General Information:

Name:

Address:

SSN/TIN:

2. Description of the property with respect to which I am making this election:

                     shares of                      stock of The TriZetto Group, Inc. (“Restricted Stock”).

3. The Restricted Stock was transferred to me on                  , 20__. This election relates to the 20     calendar taxable year.

4. The Restricted Stock is subject to the following restrictions:

The Restricted Stock is forfeitable until it is earned in accordance with The TriZetto Group, Inc. 1998 Long-term Incentive Plan (the “Plan”), Restricted Stock Award Agreement (the “Award”) or other Award or Plan provisions. The Restricted Stock generally is not transferable until my interest becomes vested and non-forfeitable, pursuant to the Award and the Plan.

5. Fair market value:

The fair market value at the time of transfer (determined without regard to any restrictions other then restrictions which by their terms never will lapse) of the Restricted Stock with respect to which I am making this election is $             per share.

6. Amount paid for Restricted Stock:

The amount I paid for the Restricted Stock is $             per share.

7. Furnishing statement to employer:

A copy of this statement has been furnished to my employer,                                         . If the transferor of the Restricted Stock is not my employer, that entity also has been furnished with a copy of this statement.

8. Award or Plan not affected:

Nothing contained herein shall be held to change any of the terms or conditions of the Award or the Plan.

Dated:                          , 20    .

Taxpayer

Exhibit C

THE TRIZETTO GROUP, INC.

1998 LONG-TERM INCENTIVE PLAN

Deferral Election Form

Attached is the form you may use if you wish to defer the receipt of all or a percentage of the Shares that would otherwise be issued to you upon the lapse of the vesting restrictions on your Award. You must submit a copy of the Deferral Election Form executed by you to the Company as provided for in the form. An election to defer receipt of your Shares may not be revoked.

You are advised to consult with your individual tax advisor with respect to the tax consequences related to your Award and any elections you may make to defer the receipt of shares.

THE TRIZETTO GROUP, INC.

1998 LONG-TERM INCENTIVE PLAN

Deferral Election Form

Pursuant to Section 6 of the Restricted Share Award granted to me on             , 20     (the “Award Date”), I hereby irrevocably elect to defer the receipt of         % of the shares of common stock of the Company that would otherwise be issued to me in a future calendar year upon the lapsing of transfer restrictions of the Award granted to me under the Plan on the Award Date. All terms that begin with a capital letter are defined in the Plan or in the Award.

I understand and acknowledge that this election is irrevocable.

I understand and acknowledge that this election will be ineffective if it is made in a calendar year other than the one in which the Award Date occurred, unless I have just become an Eligible Person. If I have just become an Eligible Person, I understand that this election will be ineffective with respect to the remainder of this calendar year if my election is made after the thirtieth day on which I first became an Eligible Person.

Witnessed by: PARTICIPANT

EX-21.1

EXHIBIT 21.1

CURRENT SUBSIDIARIES OF TRIZETTO

ENTITY NAME	JURISDICTION
Carekey, Inc.	Delaware
Creative Business Solutions, Inc.	Texas
Diogenes, Inc.	Delaware
Finserv Health Care Systems, Inc.	New York
Healthcare Media Enterprises, Inc.	Delaware
HealthWeb, Inc.	Delaware
Infotrust Company	Illinois
Margolis Health Enterprises, Inc.	California
Novalis Corporation	Delaware
Digital Insurance Systems Corporation	Ohio
Health Networks of America, Inc.	Maryland
Novalis Development Corporation	Delaware
Novalis Development & Licensing Corporation	Indiana
Novalis Services Corporation	Delaware
Options Services Group, Inc.	Illinois
Plan Data Management, Inc.	Delaware
Quality Care Solutions, Inc.	Nevada
QCSI Puerto Rico, Inc.	Delaware
TriZetto Application Services, Inc.	Colorado
Winthrop Financial Group, Inc.	Illinois

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements on Forms S-3 (Nos. 333-140134, 333-131826,
333-130585, 333-62968, 333-58982, 333-52490 and 333-47764) and S-8 (Nos. 333-136302, 333-127705, 333-106673, 333-118084,
333-63902, 333-52488, 333-43220, 333-94817, and 333-92729) of The TriZetto Group, Inc., of our reports dated February 16, 2007, with respect to the consolidated financial statements and schedule of The TriZetto Group, Inc., management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of The TriZetto Group, Inc., included in this Annual Report on Form 10-K for the year ended December 31, 2006.

/s/ ERNST & YOUNG LLP

Orange County, California

March 12, 2007

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Jeffrey H. Margolis, certify that:

1. I have reviewed this report on Form 10-K for the year ended December 31, 2006 of The TriZetto Group, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2007	/s/ Jeffrey H. Margolis
	Name:	Jeffrey H. Margolis
	Title:	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, James C. Malone, certify that:

1. I have reviewed this report on Form 10-K for the year ended December 31, 2006 of The TriZetto Group, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2007	/s/ James C. Malone
	Name:	James C. Malone
	Title:	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification of CEO and CFO Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned, the Chief Executive Officer and the Chief Financial Officer of The TriZetto Group, Inc. (the “Company”), each hereby certifies that to his knowledge on the date hereof:

(a) The Form 10-K of the Company for the year ended December 31, 2006, filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 16, 2007	/s/ Jeffrey H. Margolis
	Jeffrey H. Margolis
	Chief Executive Officer

Date: March 16, 2007	/s/ James C. Malone
	James C. Malone
	Chief Financial Officer