10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended March 31, 2010
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-12537

QUALITY SYSTEMS, INC.

(Exact name of Registrant as specified in its charter)

California (State or Other Jurisdiction of Incorporation or Organization)	95-2888568 (IRS Employer Identification No.)
18111 Von Karman Avenue, Suite 600, Irvine, California (Address of principal executive offices)	92612 (Zip Code)

Registrant’s telephone number, including area code:

(949) 255-2600

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

Common Stock, $0.01 Par Value	NASDAQ Global Select Market
Title of each class	Name of each exchange on which registered

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 o     No þ

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

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.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of September 30, 2009: $1,168,507,000 (based on the closing sales price of the Registrant’s common stock as reported on the NASDAQ Global Select Market on that date of $61.57 per share).*

The Registrant has no non-voting common equity.

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.

Common Stock, $0.01 Par Value	28,884,481
(Class)	(Outstanding at May 21, 2010)

* For purposes of this Annual Report on Form 10-K, in addition to those shareholders which fall within the definition of “affiliates” under Rule 405 of the Securities Act of 1933, as amended, holders of ten percent or more of the Registrant’s common stock are deemed to be affiliates for purposes of this Report.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents (or parts thereof) are incorporated by reference into the following parts of this Form 10-K:

Proxy Statement for the 2010 Annual Meeting of Shareholders — Part III Items 10, 11, 12, 13 and 14.

QUALITY SYSTEMS, INC.

FORM 10-K
For the Fiscal Year Ended March 31, 2010

INDEX

Item		Page
PART I
Item 1.	Business		4
Item 1A.	Risk Factors		13
Item 1B.	Unresolved Staff Comments		24
Item 2.	Properties		25
Item 3.	Legal Proceedings		25
Item 4.	Reserved		25
PART II
Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities		25
Item 6.	Selected Financial Data		28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		52
Item 8.	Financial Statements and Supplementary Data		53
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		53
Item 9A.	Controls and Procedures		53
Item 9B.	Other Information		54
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		54
Item 11.	Executive Compensation		54
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		54
Item 13.	Certain Relationships and Related Transactions, and Director Independence		54
Item 14.	Principal Accountant Fees and Services		54
PART IV
Item 15.	Exhibits and Financial Statement Schedules		55
	Signatures		59
EX-10.36
EX-10.37
EX-10.38
EX-10.39
EX-10.40
EX-10.41
EX-10.42
EX-10.43
EX-10.44
EX-21
EX-23.1
EX-23.2
EX-31.1
EX-31.2
EX-32.1

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CAUTIONARY STATEMENT

Statements made in this Annual Report on Form 10-K (this “Report”), the Annual Report to Shareholders in which this Report is made a part, other reports and proxy statements filed with the Securities and Exchange Commission (“Commission”), communications to shareholders, press releases and oral statements made by our representatives that are not historical in nature, or that state our or management’s intentions, hopes, beliefs, expectations or predictions of the future, may constitute “forward-looking statements” within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can often be identified by the use of forward-looking terminology, such as “could,” “should,” “will,” “will be,” “will lead,” “will assist,” “intended,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” “plan,” or “estimate” or variations thereof or similar expressions. Forward-looking statements are not guarantees of future performance.

Forward-looking statements involve risks, uncertainties and assumptions. It is important to note that any such performance and actual results, financial condition or business, could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the risk factors discussed in Item 1A of this Report as well as factors discussed elsewhere in this and other reports and documents we file with the Commission. Other unforeseen factors not identified herein could also have such an effect. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial condition or business over time unless required by law. Interested persons are urged to review the risks described under Item 1A. “Risk Factors” and in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in our other public disclosures and filings with the Commission.

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PART I

ITEM 1.   BUSINESS

Company Overview

Quality Systems, Inc., including its wholly-owned subsidiaries, is comprised of the QSI Dental Division, NextGen Healthcare Information Systems, Inc. (“NextGen Division”), including NextGen Sphere, LLC and Opus Healthcare Solutions, Inc., and Lackland Acquisition II, LLC dba Healthcare Strategic Initiatives (“HSI”) and Practice Management Partners, Inc. (“PMP”) (“Practice Solutions Division”) (collectively, the “Company”, “we”, “our”, or “us”). The Company develops and markets healthcare information systems that automate certain aspects of medical and dental practices, networks of practices such as physician hospital organizations (“PHOs”) and management service organizations (“MSOs”), ambulatory care centers, community health centers, and medical and dental schools. The Company also provides revenue cycle management (“RCM”) services through the Practice Solutions Division.

The Company, a California corporation formed in 1974, was founded with an early focus on providing information systems to dental group practices. In the mid-1980’s, we capitalized on the increasing focus on medical cost containment and further expanded our information processing systems to serve the medical market. In the mid-1990’s, we made two acquisitions that accelerated our penetration of the medical market. These two acquisitions formed the basis for the NextGen Division. Today, we serve the medical and dental markets through our NextGen Division and QSI Dental Division.

Business Segments

Historically, the Company has operated principally through two operating divisions: QSI Dental Division and NextGen Division. Through our acquisitions of HSI and PMP in 2008, we continued to strengthen our RCM service offerings. During fiscal year 2010, as a result of certain organizational changes, the composition of the Company’s NextGen Division was revised to exclude the former NextGen Practice Solutions unit and the Company’s RCM entities (HSI and PMP), both of which are now administered and aggregated in the Company’s Practice Solutions Division. Following the reorganization, the Company now operates three reportable operating segments (not including Corporate), comprised of the NextGen Division, the QSI Dental Division and the Practice Solutions Division. As a result, our fiscal year 2010 and 2009 results have been re-casted to reflect this change.

The following table breaks down our reported segment revenue and segment revenue growth by division for the years ended March 31, 2010, 2009 and 2008:

	Segment Revenue Breakdown									Segment Revenue Growth
	for the Year Ended March 31,									for the Year Ended March 31,
	2010			2009			2008			2010			2009			2008
QSI Dental Division		5.9	%		6.5	%		8.6	%		8.1	%		(1.2	)%		(3.3	)%
NextGen Division		79.4	%		83.1	%		91.4	%		13.6	%		19.6	%		21.3	%
Practice Solutions Division		14.7	%		10.4	%		0.0	%		67.5	%		N/A			N/A
Consolidated		100.0	%		100.0	%		100.0	%		18.9	%		31.6	%		18.7	%

QSI Dental Division.  The QSI Dental Division, co-located with our Corporate Headquarters in Irvine, California, currently focuses on developing, marketing and supporting software suites sold to dental and certain niche medical practices. In addition, the Division supports a number of medical clients that utilize its UNIX based medical practice management software product and Software as a Service, or SaaS model, based NextDDS financial and clinical software.

The QSI Dental Division’s practice management software suite utilizes a UNIX operating system. Its Clinical Product Suite (“CPS”) utilizes a Windows NT operating system and can be fully integrated with the practice management software from each Division. CPS incorporates a wide range of clinical tools including, but not limited to, periodontal charting and digital imaging of X-ray and inter-oral camera images as part of the electronic patient record. The Division develops, markets, and manages our Electronic Data Interchange (“EDI”)/connectivity applications. The QSInet Application Service Provider (“ASP/Internet”) offering is also developed and marketed by the Division.

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In July 2009, we licensed source code from PlanetDDS, Inc. that will allow us to deliver hosted, web-based SaaS model practice management and clinical software solutions to the dental industry. The software solution will be marketed primarily to the multi-location dental group practice market in which the Division has historically been a dominant player. This new software solution (NextDDS) brings the QSI Dental Division to the forefront of the emergence of internet based applications and cloud computing and represents a significant growth opportunity for the Division to sell both to its existing customer base as well as new customers.

NextGen Division.  The NextGen Division, with headquarters in Horsham, Pennsylvania, and significant locations in Atlanta, Georgia and Austin, Texas, provides integrated clinical, financial and connectivity solutions for ambulatory, inpatient and dental provider organizations.

On August 12, 2009, we acquired NextGen Sphere, LLC (“Sphere”), a provider of financial information systems to the small hospital inpatient market. This acquisition is also part of our strategy to expand into the small hospital market and to add new customers by taking advantage of cross selling opportunities between the ambulatory and inpatient markets.

On February 10, 2010, we acquired Opus Healthcare Solutions, Inc. (“Opus”), a provider of clinical information systems to the small hospital inpatient market. Founded in 1987 and headquartered in Austin, Texas, Opus delivers web-based clinical solutions to hospital systems and integrated health networks nationwide. This acquisition complements and will be integrated with the assets of Sphere. Both companies are established developers of software and services for the inpatient market and will operate under the Company’s NextGen Division.

The NextGen Division’s major product categories include:

•  NextGen ambulatory product suite that integrates as one system to streamline patient care with standardized, real-time clinical and administrative workflow through the practice, which consists of:

○	NextGen Electronic Health Records (“NextGenehr”) to ensure complete, accurate documentation to manage patient care electronically and to improve clinical processes and patient outcomes with electronic charting at the point of care; and
○	NextGen Enterprise Practice Management (“NextGenepm”) to automate business processes, from front-end scheduling to back-end collections and financial and administrative processes for increased performance and efficiencies.

•  NextGen inpatient products that deliver secure, highly adaptable, and easy to use applications to patient centered hospitals and health systems, which consists of:

○	NextGen Clinicals, which resides on an advanced truly active web 2.0 platform — and is designed to initiate widespread work efficiency and communication, reduce errors and time-to-chart, and improve care; and
○	NextGen Financials, which is a financial and administrative system that helps hospitals significantly improve the smart operations and financial and regulatory management of their facilities.

•  NextGen Community Connectivity, which consists of:

○	NextGen Health Information Exchange (“HIE”), formerly Community Health Solution, to exchange patient data securely with community healthcare organizations;
○	NextGen Patient Portal (“NextMD.com”) to communicate with patients online and import information directly into NextGenehr; and
○	NextGen Health Quality Measures (“HQM”) to allow seamless quality measurement and reporting for practice and physician performance initiatives.

The NextGen Division products utilize Microsoft Windows technology and can operate in a client-server environment as well as via private intranet, the Internet, or in an ASP environment.

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Services provided by the NextGen Division include:

•  EDI services that are intended to automate a number of manual, often paper-based or telephony intensive communications between patients and/or providers and/or payors;

•  Hosting services that allow practices seeking the benefits of IT automation but not the maintenance of in-house hardware and networking;

•  NextGuard — Data Protection services that provide an off-site, data archiving, restoration, and disaster recovery preparedness solution for practices to protect clinical and financial data;

•  Consulting services, such as data conversions or interface development, that allow practices to build custom add-on features; and

•  Physician Resources services that allow practices to consult with the NextGen Division’s physician team.

Practice Solutions Division.  The Practice Solutions Division, with locations in St. Louis, Missouri and Hunt Valley, Maryland, focuses primarily on providing physician practices with RCM services, primarily billing and collection services for medical practices. This Division combines a web-delivered SaaS model and the NextGen^epm software platform to execute its service offerings. We intend to transition our customer base onto the NextGen platform within the next two years. The Practice Solutions Division provides technology solutions and consulting services to cover the full spectrum of providers’ revenue cycle needs from patient access to claims denials.

Practice Solutions Division revenue growth in both fiscal years 2010 and 2009 was impacted by the acquisitions of HSI and PMP in May 2008 and October 2008, respectively.

On May 20, 2008, we acquired St. Louis-based HSI, a full-service healthcare RCM company. HSI operates under the umbrella of the Company’s Practice Solutions Division. Founded in 1996, HSI provides RCM services to providers including health systems, hospitals, and physicians in private practice with an in-house team of more than 200 employees, including specialists in medical billing, coding and compliance, payor credentialing, and information technology. We intend to cross sell both software and RCM services to the acquired customer base of HSI and the NextGen Division.

On October 28, 2008, we acquired Maryland-based PMP, a full-service healthcare RCM company. This acquisition is also part of our growth strategy for our Practice Solutions Division. Similar to HSI, PMP operates under the umbrella of the Company’s Practice Solutions Division. Founded in 2001, PMP provides physician billing and technology management services to healthcare providers, primarily in the Mid-Atlantic region. We intend to cross sell both software and RCM services to the acquired customer base of PMP and the NextGen Division.

The three Divisions operate largely as stand-alone operations, with each Division maintaining its own distinct product lines, product platforms, development, implementation and support teams, sales staffing and branding. The three Divisions share the resources of our “corporate office,” which includes a variety of accounting and other administrative functions. Additionally, there are a small but growing number of clients who are simultaneously utilizing software or services from more than one of our three Divisions.

We continue to pursue product and service enhancement initiatives within each Division. The majority of such expenditures are currently targeted to the NextGen Division product line and client base.

Industry Background

The turbulence in the worldwide economy has impacted almost all industries. While healthcare is not immune to economic cycles, we believe it is more resilient than most segments of the economy. The impact of the current economic conditions on our existing and prospective clients has been mixed. We continue to see organizations that are doing fairly well operationally; however, some organizations with a large dependency on Medicaid populations are being impacted by the challenging financial condition of the many state governments in whose jurisdictions they conduct business. A positive factor for U.S. healthcare is the fact that the Obama Administration is pursuing broad healthcare reform aimed at improving issues surrounding healthcare. The American Recovery and Reinvestment Act (“ARRA”), which became law on February 17, 2009, includes more than $20 billion to help healthcare

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organizations modernize operations through the acquisition of health care information technology. While we are unsure of the immediate impact from the ARRA, the long-term potential could be significant.

Moreover, to compete in the continually changing healthcare environment, providers are increasingly using technology to help maximize the efficiency of their business practices, to assist in enhancing patient care, and to maintain the privacy of patient information.

As the reimbursement environment continues to evolve, more healthcare providers enter into contracts, often with multiple entities, which define the terms under which care is administered and paid. The diversity of payor organizations, as well as additional government regulation and changes in reimbursement models, have greatly increased the complexity of pricing, billing, reimbursement, and records management for medical and dental practices. To operate effectively, healthcare provider organizations must efficiently manage patient care and other information and workflow processes, which increasingly extend across multiple locations and business entities.

In response, healthcare provider organizations have placed increasing demands on their information systems. Initially, these information systems automated financial and administrative functions. As it became necessary to manage patient flow processes, the need arose to integrate “back-office” data with such clinical information as patient test results and office visits. We believe information systems must facilitate management of patient information incorporating administrative, financial and clinical information from multiple entities. In addition, large healthcare organizations increasingly require information systems that can deliver high performance in environments with multiple concurrent computer users.

Many existing healthcare information systems were designed for limited administrative tasks such as billing and scheduling and can neither accommodate multiple computing environments nor operate effectively across multiple locations and entities. We believe that practices that leverage technology to more efficiently handle patient clinical data as well as administrative, financial and other practice management data will be best able to enhance patient flow, pursue cost efficiencies, and improve quality of care. As healthcare organizations transition to new computer platforms and newer technologies, we believe such organizations will be migrating toward the implementation of enterprise-wide, patient-centric computing systems embedded with automated clinical patient records.

Our Strategy

Our strategy is, at present, to focus on providing software and services to medical practices, dental practices, hospitals, health centers, and other healthcare providers. Among the key elements of this strategy are:

•  Continued development and enhancement of select software solutions in target markets;

•  Continued investments in our infrastructure including, but not limited to, product development, sales, marketing, implementation, and support;

•  Continued efforts to make infrastructure investments within an overall context of maintaining reasonable expense discipline;

•  Addition of new customers through maintaining and expanding sales, marketing and product development activities;

•  Expanding our relationship with existing customers through delivery of add-on and complementary products and services; and

•  Continuing our gold standard commitment of service in support of our customers.

While these are the key elements of our current strategy, there can be no guarantee that our strategy will not change, or that we will succeed in achieving these goals individually or collectively.

Products and Services

In response to the growing need for more comprehensive, cost-effective healthcare information solutions for medical practices, dental practices, hospitals, health centers, and other healthcare providers, our systems and services provide our clients with the ability to redesign patient care and other workflow processes while improving

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productivity through facilitation of managed access to patient information. Utilizing our proprietary software in combination with third party hardware and software solutions, our products enable the integration of a variety of administrative and clinical information operations. Leveraging more than 30 years of experience in the healthcare information services industry, we believe we continue to add value by providing our clients with sophisticated, full-featured software systems along with comprehensive systems implementation, maintenance and support services. Any single transaction may or may not include software, hardware or services.

NextGen Ambulatory Practice Management Systems.  Our products consist primarily of proprietary healthcare software applications together with third party hardware and other non-industry specific software. The systems range in capacity from one to thousands of users, allowing us to address the needs of both small and large organizations. The systems are modular in design and may be expanded to accommodate changing client requirements. We offer both standard licenses and SaaS arrangements in our software offerings; although to date, SaaS arrangements have represented less than 5% of our arrangements.

NextGen^epm is the NextGen Division’s practice management offering. NextGen^epm has been developed with a functionally graphical user interface (“GUI”) certified for use with Windows 2000 and Windows XP operating systems. The product leverages a relational database (Microsoft SQL Server) with support on both 32 and 64 bit enterprise servers. NextGen^epm is a scalable, multi-module solution that includes a master patient index, enterprise-wide appointment scheduling with referral tracking, clinical support, and centralized or decentralized patient financial management based on either a managed care or fee-for-service model. The NextGen^epm product is a highly configurable, cost-effective proven solution that enables the effective management of both single and multi-practice settings.

NextGen Ambulatory Clinical Systems.  The NextGen Division provides clinical software applications that are complementary to, and are integrated with, our medical practice management offerings and interface with many of the other leading practice management software systems on the market. The applications incorporated into our practice management solutions and others such as scheduling, eligibility, billing and claims processing are augmented by clinical information captured by NextGen^ehr, including services rendered and diagnoses used for billing purposes. We believe that we currently provide a comprehensive information management solution for the medical marketplace.

NextGen^ehr was developed with client-server architecture and a GUI and utilizes Microsoft Windows 2000, Windows NT or Windows XP on each workstation and either Windows 2000, Windows NT, Windows XP or UNIX on the database server. NextGen^ehr maintains data using industry standard relational database engines such as Microsoft SQL Server or Oracle. The system is scalable from one to thousands of workstations. NextGen^ehr stores and maintains clinical data including:

•  Data captured using user-customizable input “templates”;

•  Scanned or electronically acquired images, including X-rays and photographs;

•  Data electronically acquired through interfaces with clinical instruments or external systems;

•  Other records, documents or notes, including electronically captured handwriting and annotations; and

•  Digital voice recordings.

NextGen^ehr also offers a workflow module, prescription management, automatic document and letter generation, patient education, referral tracking, interfaces to billing and lab systems, physician alerts and reminders, and powerful reporting and data analysis tools. NextGen Express is a version of NextGen^ehr designed for small practices.

QSI Dental Division Practice Management and Clinical Systems.  In fiscal year 2010, we began selling a hosted SaaS practice management and clinical software solutions to the dental industry. The software solution is marketed primarily to the multi-location dental group practice market for which the Division has historically been a dominate player. This new software solution brings the QSI Dental Division to the forefront of the emergence of internet based applications and cloud computing and represents a significant growth opportunity for us to sell both to our existing customer base as well as new customers.

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In addition to the SaaS practice management offering, the QSI Dental Division also sells a character-based practice management system using the IBM RS6000 central processing unit and IBM’S AIX version of the UNIX operating system platform. The hardware components, as well as the requisite operating system licenses, are purchased from manufacturers or distributors of those components. We configure and test the hardware components and incorporate our software and other third party packages into completed systems. We continually evaluate third party hardware components with a view toward utilizing hardware that is functional, reliable and cost-effective.

In addition to the SaaS clinical offering, our dental charting software system, the CPS is a comprehensive solution designed specifically for the dental group practice environment. CPS integrates the dental practice management product with a computer-based clinical information system that incorporates a wide range of clinical tools, including electronic charting of dental procedures, treatment plans and existing conditions, periodontal charting via light-pen, voice-activation, or keyboard entry for full periodontal examinations and PSR scoring, digital imaging of X-ray and intra-oral camera images, computer-based patient education modules, viewable chair-side to enhance case presentation, full access to patient information, treatment plans, and insurance plans via a fully integrated interface with our dental practice management product and document and image scanning for digital storage and linkage to the electronic patient record.

The result is a comprehensive clinical information management system that helps practices save time, reduce costs, improve case presentation, and enhance the delivery of dental services and quality of care. Clinical information is managed and maintained electronically thus forming an electronic patient record that allows for the implementation of the “chartless” office.

CPS incorporates Windows-based client-server technology consisting of one or more file servers together with any combination of one or more desktop, laptop, or pen-based PC workstations. The file server(s) used in connection with CPS utilize(s) Windows 2000 or Windows 2003 operating system and the hardware is typically an Intel-based single or multi-processor platform. Based on the server configuration chosen, CPS is scalable from one to hundreds of workstations. The hardware components, including the requisite operating system licenses, are purchased from third party manufacturers or distributors either directly by the customer or by us for resale to the customer.

NextGen Inpatient Solutions.  NextGen inpatient solutions includes both clinical and financial applications to provide value based solutions for even rural and community hospitals to improve patient safety, automate order entry, and facilitate real-time communication of patient information throughout the hospital. NextGen inpatient solutions are highly scalable, secure and easy to use with a Web 2.0 based clinical component that leverages full “cloud computing” capabilities.

Revenue Cycle Management Services.  Our Practice Solutions Division offers RCM services to physicians. Our RCM service automates and manages billing-related functions for physician practices to help manage reimbursement quickly and efficiently. RCM services generally include:

•  Electronic claims submission service that submits Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) compliant insurance claims electronically to insurance payers;

•  Electronic remittance and payment posting service that uses NextGen Document Management system to link an image of each explanation of benefit (“EOB”) to the corresponding encounter at the time of payment posting to minimizes the need for storage of paper EOBs; and

•  Accounts receivable follow-up methodology that allows practices to establish parameters, adjustment rules and standards for account elevation.

Electronic Data Interchange.  We make available EDI capabilities and connectivity services to our customers. The EDI/connectivity capabilities encompass direct interfaces between our products and external third party systems, as well as transaction-based services. EDI products are intended to automate a number of manual, often paper-based or telephony intensive communications between patients and/or providers and/or payors. Two of the more common EDI services are forwarding insurance claims electronically from providers to payors and assisting practices with issuing statements to patients. Most client practices utilize at least some of these services from us or one of our competitors. Other EDI/connectivity services are used more sporadically by client practices.

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We typically compete to displace incumbent vendors for claims and statements accounts and attempt to increase usage of other elements in our EDI/connectivity product line. In general, EDI services are only sold to those accounts utilizing software from either the QSI Dental or NextGen Divisions. Services include:

•  Electronic claims submission through our relationships with a number of payors and national claims clearinghouses;

•  Electronic patient statement processing, appointment reminder cards and calls, recall cards, patient letters, and other correspondence;

•  Electronic insurance eligibility verification; and

•  Electronic posting of remittances from insurance carriers into the accounts receivable application.

Community Connectivity.  The NextGen Division also markets NextGen HIE to facilitate cross-enterprise data sharing, enabling individual medical practices in a given community to selectively share critical data, such as demographics, referrals, medications lists, allergies, diagnoses, lab results, histories and more. This is accomplished through a secure, community-wide data repository that links health care providers, whether they have the NextGen^ehs system, another compatible electronic medical records system, or no electronic medical records system, together with hospitals, payors, labs and other entities. The product is designed to facilitate a Regional Health Information Organization. The result is that for every health care encounter in the community, a patient-centric and complete record is accessible for the provider. The availability, currency and completeness of information plus the elimination of duplicate data entry can lead to significantly improved patient safety, enhanced decision making capabilities, time efficiencies and cost savings. Our NextGen Division maintains an Internet-based patient health portal, NextMD.com. NextMD.com is a vertical portal for the healthcare industry, linking patients with their physicians, while providing a centralized source of health-oriented information for both consumers and medical professionals. Patients whose physicians are linked to the portal are able to request appointments, send appointment changes or cancellations, receive test results on-line, request prescription refills, view and/or pay their statements, and communicate with their physicians, all in a secure, on-line environment. Our NextGen suite of information systems are or can be linked to NextMD.com, integrating a number of these features with physicians’ existing systems.

Sales and Marketing

We sell and market our products nationwide primarily through a direct sales force. The efforts of the direct sales force are augmented by a small number of reseller relationships established by us. Software license sales to resellers represented less than 10% of total revenue for the years ended March 31, 2010, 2009 and 2008.

Our direct sales force typically makes presentations to potential clients by demonstrating the system and our capabilities on the prospective client’s premises. Sales efforts aimed at smaller practices can be performed on the prospective clients’ premises, or remotely via telephone or Internet-based presentations. Our sales and marketing employees identify prospective clients through a variety of means, including referrals from existing clients, industry consultants, contacts at professional society meetings, trade shows and seminars, trade journal advertising, direct mail advertising, and telemarketing.

Our sales cycle can vary significantly and typically ranges from six to twenty-four months from initial contact to contract execution. Software licenses are normally delivered to a customer almost immediately upon receipt of an order. Implementation and training services are normally rendered based on a mutually agreed upon timetable. As part of the fees paid by our clients, we normally receive up-front licensing fees. Clients have the option to purchase maintenance services which, if purchased, are invoiced on a monthly, quarterly or annual basis.

Several clients have purchased our practice management software and, in turn, are providing either time-share or billing services to single and group practice practitioners. Under the time-share or billing service agreements, the client provides the use of our software for a fee to one or more practitioners. Although we typically do not receive a fee directly from the distributor’s customers, implementation of such arrangements has, from time to time, resulted in the purchase of additional software capacity by the distributor, as well as new software purchases made by the distributor’s customers should such customers decide to perform the practice management functions in-house.

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We continue to concentrate our direct sales and marketing efforts on medical and dental practices, networks of such practices including MSOs and PHOs, professional schools, community health centers and other ambulatory care settings.

MSOs, PHOs and similar networks to which we have sold systems provide use of our software to those group and single physician practices associated with the organization or hospital on either a service basis or by directing us to contract with those practices for the sale of stand-alone systems.

We have also entered into marketing assistance agreements with certain of our clients pursuant to which the clients allow us to demonstrate to potential clients the use of systems on the existing clients’ premises.

From time to time we assist prospective clients in identifying third party sources for financing the purchase of our systems. The financing is typically obtained by the client directly from institutional lenders and typically takes the form of a loan from the institution secured by the system to be purchased or a leasing arrangement. We do not guarantee the financing nor retain any continuing interest in the transaction.

We have numerous clients and do not believe that the loss of any single client would adversely affect us. No client accounted for 10% or more of our net revenue during the fiscal years ended March 31, 2010, 2009 or 2008.

Customer Service and Support

We believe our success is attributable in part to our customer service and support departments. We offer support to our clients seven days a week, 24 hours a day.

Our client support staff is comprised of specialists who are knowledgeable in the areas of software and hardware as well as in the day-to-day operations of a practice. System support activities range from correcting minor procedural problems in the client’s system to performing complex database reconstructions or software updates.

We utilize automated online support systems which assist clients in resolving minor problems and facilitate automated electronic retrieval of problems and symptoms following a client’s call to the automated support system. Additionally, our online support systems maintain call records, available at both the client’s facility and our offices.

We offer our clients support services for most system components, including hardware and software, for a fixed monthly, quarterly or annual fee. Customers also receive access to future unspecified versions of the software, on a when-and-if available basis, as part of support services. We also subcontract, in certain instances, with third party vendors to perform specific hardware maintenance tasks.

Implementation and Training

We offer full service implementation and training services. When a client signs a contract for the purchase of a system that includes implementation and training services, a client manager/implementation specialist trained in medical and/or dental group practice procedures is assigned to assist the client in the installation of the system and the training of appropriate practice staff. Implementation services include loading the software, training customer personnel, data conversion, running test data, and assisting in the development and documentation of procedures. Implementation and training services are provided by our employees as well as certified third parties and certain resellers.

Training may include a combination of computer assisted instruction, or CAI, for certain of our products, remote training techniques and training classes conducted at the client’s or our office(s). CAI consists of workbooks, computer interaction and self-paced instruction. CAI is also offered to clients, for an additional charge, after the initial training program is completed for the purpose of training new and additional employees. Remote training allows a trainer at our offices to train one or more people at a client site via telephone and computer connection, thus allowing an interactive and client-specific mode of training without the expense and time required for travel. In addition, our on-line “help” and other documentation features facilitate client training as well as ongoing support.

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In addition, NextGen “E-learning” is an on-line learning subscription service which allows end users to train on the software on the internet. E-learning allows end users to self manage their own learning with their personal learning path and pace. The service allows users to track the status of courses taken.

At present, our training facilities are located in (i) Horsham, Pennsylvania, (ii) Atlanta, Georgia, (iii) Dallas, Texas, and (iv) Irvine, California.

Competition

The markets for healthcare information systems and services are intensely competitive. The industry is highly fragmented and includes numerous competitors, none of which we believe dominates these markets. Our principal existing competitors in the healthcare information systems and services market include: eClinicalWorks, GE Healthcare (“GE”), Allscripts-Misys Healthcare Solutions, Inc. (“Allscripts”), EPIC and other competitors.

Our recent entry into the small hospital market has introduced new competitors, including Computer Programs and Systems, Inc., Healthland and Healthcare Management Systems, Inc.

The electronic patient records and connectivity markets, in particular, are subject to rapid changes in technology, and we expect that competition in these market segments will increase as new competitors enter the market. We believe our principal competitive advantages are the features and capabilities of our products and services, our high level of customer support, and our extensive experience in the industry.

The revenue cycle management market is also intensely competitive as other healthcare information systems companies, such as GE and Allscripts, are also in the market of selling both practice management and electronic health records software and medical billing and collection services.

Product Enhancement and Development

The healthcare information management and computer software and hardware industries are characterized by rapid technological change requiring us to engage in continuing investments to update, enhance, and improve our systems. During fiscal years 2010, 2009 and 2008, we expended approximately $24.5 million, $19.7 million, and $17.4 million, respectively, on research and development activities, including capitalized software amounts of $7.9 million, $5.9 million, and $6.0 million, respectively. In addition, a portion of our product enhancements have resulted from software development work performed under contracts with our clients.

OTHER INFORMATION

Employees

As of March 31, 2010, we employed approximately 1,502 persons, of which 1,466 were full-time employees. We believe that our future success depends in part upon recruiting and retaining qualified sales, marketing and technical personnel as well as other employees.

Intellectual Property

To protect our intellectual property, we enter into confidentiality agreements and invention assignment agreements with our employees with whom such controls are relevant. Certain qualified employees enter into additional agreements that permit them access under certain circumstances, to software matters that are both confidential and more strictly controlled. In addition, we include intellectual property protective provisions in many of our customer contracts.

Available Information

Our Internet Web site address is www.qsii.com. We make our periodic and current reports, together with amendments to these reports, available on our Internet Web site, free of charge, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Commission. You may access such filings under the “Investor Relations” button on our Web site. Members of the public may also read and copy any materials we file with, or furnish to, the Commission at the Commission’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. To

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obtain information on the operation of the Public Reference Room, please call the SEC at 1-800-SEC-0330. The Commission maintains an Internet site at www.sec.gov that contains the reports, proxy statements and other information that we file electronically with the Commission. The information on our Internet Web site is not incorporated by reference into this Report or any other report or information we file with the Commission.

ITEM 1A.   RISK FACTORS

The more prominent risks and uncertainties inherent in our business are described below. However, additional risks and uncertainties may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations will likely suffer. Any of these or other factors could harm our business and future results of operations and may cause you to lose all or part of your investment.

Risks Related to Our Business

The effects of the recent global economic crisis may impact our business, operating results or financial condition.  The recent global economic crisis has caused a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed income markets. These macroeconomic developments could negatively affect our business, operating results or financial condition in a number of ways. For example, current or potential customers may be unable to fund software purchases, which could cause them to delay, decrease or cancel purchases of our products and services or to not pay us or to delay paying us for previously purchased products and services. Our clients may cease business operations or conduct business on a greatly reduced basis. Finally, our investment portfolio, which includes auction rate securities, is generally subject to general credit, liquidity, counterparty, market and interest rate risks that may be exacerbated by the recent global financial crisis. If the banking system or the fixed income, credit or equity markets continue to deteriorate or remain volatile, our investment portfolio may be impacted and the values and liquidity of our investments could be adversely affected as well.

We face significant, evolving competition which, if we fail to properly address, could adversely affect our business, results of operations, financial condition and price of our stock.  The markets for healthcare information systems are intensely competitive, and we face significant competition from a number of different sources. Several of our competitors have significantly greater name recognition as well as substantially greater financial, technical, product development and marketing resources than we do. There has been significant merger and acquisition activity among a number of our competitors in recent years. Transaction induced pressures, or other related factors may result in price erosion or other negative market dynamics that could adversely affect our business, results of operations, financial condition and price of our stock.

We compete in all of our markets with other major healthcare related companies, information management companies, systems integrators, and other software developers. Competitive pressures and other factors, such as new product introductions by us or our competitors, may result in price or market share erosion that could adversely affect our business, results of operations and financial condition. Also, there can be no assurance that our applications will achieve broad market acceptance or will successfully compete with other available software products.

Our inability to make initial sales of our systems to newly formed groups and/or healthcare providers that are replacing or substantially modifying their healthcare information systems could adversely affect our business, results of operations and financial condition. If new systems sales do not materialize, our near term and longer term revenue will be adversely affected.

Many of our competitors have greater resources than we do. In order to compete successfully, we must keep pace with our competitors in anticipating and responding to the rapid changes involving the industry in which we operate, or our business, results of operations and financial condition may be adversely affected.   The software market generally is characterized by rapid technological change, changing customer needs, frequent new product introductions, and evolving industry standards. The introduction of products incorporating new technologies and the emergence of new industry standards could render our existing products obsolete and unmarketable. There can be no assurance that we will be successful in developing and marketing new products that respond to technological changes or evolving industry standards. New product development depends upon significant research and development expenditures which depend ultimately upon sales growth. Any material shortfall in revenue or research

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funding could impair our ability to respond to technological advances or opportunities in the marketplace and to remain competitive. If we are unable, for technological or other reasons, to develop and introduce new products in a timely manner in response to changing market conditions or customer requirements, our business, results of operations and financial condition may be adversely affected.

In response to increasing market demand, we are currently developing new generations of certain of our software products. There can be no assurance that we will successfully develop these new software products or that these products will operate successfully, or that any such development, even if successful, will be completed concurrently with or prior to introduction of competing products. Any such failure or delay could adversely affect our competitive position or could make our current products obsolete.

We face risk and/or the possibility of claims from activities related to strategic partners, which could be expensive and time-consuming, divert personnel and other resources from our business and result in adverse publicity that could harm our business.  We rely on third parties to provide services that affect our business. For example, we use national clearinghouses in the processing of some insurance claims and we outsource some of our hardware maintenance services and the printing and delivery of patient statements for our customers. These third parties could raise their prices and/or be acquired by competitors of ours, which could potentially create short and long-term disruptions to our business negatively impacting our revenue, profit and/or stock price. We also have relationships with certain third parties where these third parties serve as sales channels through which we generate a portion of our revenue. Due to these third-party relationships, we could be subject to claims as a result of the activities, products, or services of these third-party service providers even though we were not directly involved in the circumstances leading to those claims. Even if these claims do not result in liability to us, defending and investigating these claims could be expensive and time-consuming, divert personnel and other resources from our business and result in adverse publicity that could harm our business.

We may engage in future acquisitions, which may be expensive and time consuming and from which we may not realize anticipated benefits.  We may acquire additional businesses, technologies and products if we determine that these additional businesses, technologies and products are likely to serve our strategic goals. During fiscal year 2009, we acquired HSI and PMP, both of which are full-service healthcare RCM companies servicing physician groups and other healthcare clients. During fiscal year 2010, we acquired Opus and Sphere, both of which are developers of software and services for the inpatient market. The specific risks we may encounter in these types of transactions include but are not limited to the following:

•  potentially dilutive issuances of our securities, the incurrence of debt and contingent liabilities and amortization expenses related to intangible assets, which could adversely affect our results of operations and financial condition;

•  use of cash as acquisition currency may adversely affect interest or investment income, thereby potentially adversely affecting our earnings and /or earnings per share;

•  difficulty in effectively integrating any acquired technologies or software products into our current products and technologies;

•  difficulty in predicting and responding to issues related to product transition such as development, distribution and customer support;

•  the possible adverse effect of such acquisitions on existing relationships with third party partners and suppliers of technologies and services;

•  the possibility that staff or customers of the acquired company might not accept new ownership and may transition to different technologies or attempt to renegotiate contract terms or relationships, including maintenance or support agreements;

•  the possibility that the due diligence process in any such acquisition may not completely identify material issues associated with product quality, product architecture, product development, intellectual property issues, key personnel issues or legal and financial contingencies, including any deficiencies in internal controls and procedures and the costs associated with remedying such deficiencies;

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•  difficulty in integrating acquired operations due to geographical distance, and language and cultural differences; and

•  the possibility that acquired assets become impaired, requiring us to take a charge to earnings which could be significant.

A failure to successfully integrate acquired businesses or technology for any of these reasons could have an adverse effect on our financial condition and results of operations.

Our failure to manage growth could harm our business, results of operations and financial condition.  We have in the past experienced periods of growth which have placed, and may continue to place, a significant strain on our non-cash resources. We also anticipate expanding our overall software development, marketing, sales, client management and training capacity. In the event we are unable to identify, hire, train and retain qualified individuals in such capacities within a reasonable timeframe, such failure could have an adverse effect on us. In addition, our ability to manage future increases, if any, in the scope of our operations or personnel will depend on significant expansion of our research and development, marketing and sales, management, and administrative and financial capabilities. The failure of our management to effectively manage expansion in our business could have an adverse effect on our business, results of operations and financial condition.

Our operations are dependent upon our key personnel. If such personnel were to leave unexpectedly, we may not be able to execute our business plan.  Our future performance depends in significant part upon the continued service of our key technical and senior management personnel, many of whom have been with us for a significant period of time. These personnel have acquired specialized knowledge and skills with respect to our business. We maintain key man life insurance on only one of our employees. Because we have a relatively small number of employees when compared to other leading companies in our industry, our dependence on maintaining our relationships with key employees is particularly significant. We are also dependent on our ability to attract high quality personnel, particularly in the areas of sales and applications development.

The industry in which we operate is characterized by a high level of employee mobility and aggressive recruiting of skilled personnel. There can be no assurance that our current employees will continue to work for us. Loss of services of key employees could have an adverse effect on our business, results of operations and financial condition. Furthermore, we may need to grant additional equity incentives to key employees and provide other forms of incentive compensation to attract and retain such key personnel. Equity incentives may be dilutive to our per share financial performance. Failure to provide such types of incentive compensation could jeopardize our recruitment and retention capabilities.

Continuing worldwide political and economic uncertainties may adversely affect our revenue and profitability.  The last several years have been periodically marked by concerns including but not limited to inflation, decreased consumer confidence, the lingering effects of international conflicts, energy costs and terrorist and military activities. These conditions can make it extremely difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and they could cause constrained spending on our products and services, and/or delay and lengthen sales cycles.

The failure of auction rate securities to sell at their reset dates could impact the liquidity of the investment and could negatively impact the carrying value of the investment.  Our investments include auction rate securities (“ARS”). ARS are securities that are structured with short-term interest rate reset dates of generally less than ninety days but with longer contractual maturities that range, for our holdings, from nine to 28 years. At the end of each reset period, investors can typically sell at auction or continue to hold the securities at par. These securities are subject to fluctuations in interest rate depending on the supply and demand at each auction. As of March 31, 2010, we were holding a total of approximately $7.2 million, net of unrealized loss, in ARS. The Company’s ARS are held by UBS Financial Services Inc. (“UBS”). On November 13, 2008, the Company entered into an Auction Rate Security Rights Agreement (the “Rights Agreement”) with UBS, whereby the Company accepted UBS’s offer to purchase the Company’s ARS investments at any time during the period of June 30, 2010 through July 2, 2012. As a result, the Company had obtained an asset, ARS put option rights, whereby the Company has a right to “put” the ARS back to UBS. The Company expects to exercise its ARS put option rights and put its ARS back to UBS on June 30, 2010, the earliest date allowable under the Rights Agreement. While we believe that UBS has the ability to honor the terms of its

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agreement to purchase the ARS investments from the Company at par, the failure of UBS to purchase these investments would result in the Company being unable to liquidate these securities in the near future. While these debt securities are all highly-rated investments, generally with AAA/Aaa ratings, continued failure to sell at their reset dates could impact the liquidity of the investment which in turn could negatively impact our liquidity position.

Risks Related to Our Products and Service

If our principal products and our new product development fail to meet the needs of our clients, we may fail to realize future growth.  We currently derive substantially all of our net revenue from sales of our healthcare information systems and related services. We believe that a primary factor in the market acceptance of our systems has been our ability to meet the needs of users of healthcare information systems. Our future financial performance will depend in large part on our ability to continue to meet the increasingly sophisticated needs of our clients through the timely development and successful introduction and implementation of new and enhanced versions of our systems and other complementary products. We have historically expended a significant percentage of our net revenue on product development and believe that significant continuing product development efforts will be required to sustain our growth. Continued investment in our sales staff and our client implementation and support staffs will also be required to support future growth.

There can be no assurance that we will be successful in our product development efforts, that the market will continue to accept our existing products, or that new products or product enhancements will be developed and implemented in a timely manner, meet the requirements of healthcare providers, or achieve market acceptance. If new products or product enhancements do not achieve market acceptance, our business, results of operations and financial condition could be adversely affected. At certain times in the past, we have also experienced delays in purchases of our products by clients anticipating our launch, or the launch of our competitors, of new products. There can be no assurance that material order deferrals in anticipation of new product introductions from ourselves or other entities will not occur.

If the emerging technologies and platforms of Microsoft and others upon which we build our products do not gain or continue to maintain broad market acceptance, or if we fail to develop and introduce in a timely manner new products and services compatible with such emerging technologies, we may not be able to compete effectively and our ability to generate revenue will suffer.  Our software products are built and depend upon several underlying and evolving relational database management system platforms such as those developed by Microsoft. To date, the standards and technologies upon which we have chosen to develop our products have proven to have gained industry acceptance. However, the market for our software products is subject to ongoing rapid technological developments, quickly evolving industry standards and rapid changes in customer requirements, and there may be existing or future technologies and platforms that achieve industry standard status, which are not compatible with our products.

We face the possibility of subscription pricing, which may force us to adjust our sales, marketing and pricing strategies.  In April, 2009 we announced a new subscription based, Software as a service delivery model which includes monthly subscription pricing. This model is designed for smaller practices to quickly access the NextGen^ehr or NextGen^epm products at a modest monthly per provider price. We currently derive substantially all of our systems revenue from traditional software license, implementation and training fees, as well as the resale of computer hardware. Today, the majority of our customers pay an initial license fee for the use of our products, in addition to a periodic maintenance fee. While the intent of the new subscription based delivery model is to further penetrate the smaller practice market, there can be no assurance that this delivery model will not become increasingly popular with both small and large customers. If the marketplace increasingly demands subscription pricing, we may be forced to further adjust our sales, marketing and pricing strategies accordingly, by offering a higher percentage of our products and services through these means. Shifting to a significantly greater degree of subscription pricing could adversely affect our financial condition, cash flows and quarterly and annual revenue and results of operations, as our revenue would initially decrease substantially. There can be no assurance that the marketplace will not increasingly embrace subscription pricing.

We face the possibility of claims based upon our Web site content, which may cause us expense and management distraction.  We could be subject to third party claims based on the nature and content of information supplied on our Web site by us or third parties, including content providers or users. We could also be subject to

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liability for content that may be accessible through our Web site or third party Web sites linked from our Web site or through content and information that may be posted by users in chat rooms, bulletin boards or on Web sites created by professionals using our applications. Even if these claims do not result in liability to us, investigating and defending against these claims could be expensive and time consuming and could divert management’s attention away from our operations.

If our security measures are breached or fail, and unauthorized access is obtained to a client’s data, our services may be perceived as not being secure, clients may curtail or stop using our services, and we may incur significant liabilities.  Our services involve the storage and transmission of clients’ proprietary information and protected health information of patients. Because of the sensitivity of this information, security features of our software are very important. If our security measures are breached or fail as a result of third-party action, employee error, malfeasance, insufficiency, defective design, or otherwise, someone may be able to obtain unauthorized access to client or patient data. As a result, our reputation could be damaged, our business may suffer, and we could face damages for contract breach, penalties for violation of applicable laws or regulations, and significant costs for remediation and remediation efforts to prevent future occurrences. We rely upon our clients as users of our system for key activities to promote security of the system and the data within it, such as administration of client-side access credentialing and control of client-side display of data. On occasion, our clients have failed to perform these activities. Failure of clients to perform these activities may result in claims against us that this reliance was misplaced, which could expose us to significant expense and harm to our reputation. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose sales and clients. In addition, our clients may authorize or enable third parties to access their client data or the data of their patients on our systems. Because we do not control such access, we cannot ensure the complete propriety of that access or integrity or security of such data in our systems.

Failure by our clients to obtain proper permissions and waivers may result in claims against us or may limit or prevent our use of data, which could harm our business.  We require our clients to provide necessary notices and to obtain necessary permissions and waivers for use and disclosure of the information that we receive, and we require contractual assurances from them that they have done so and will do so. If they do not obtain necessary permissions and waivers, then our use and disclosure of information that we receive from them or on their behalf may be limited or prohibited by state or federal privacy laws or other laws. This could impair our functions, processes, and databases that reflect, contain, or are based upon such data and may prevent use of such data. In addition, this could interfere with or prevent creation or use of rules, and analyses or limit other data-driven activities that benefit us. Moreover, we may be subject to claims or liability for use or disclosure of information by reason of lack of valid notice, permission, or waiver. These claims or liabilities could subject us to unexpected costs and adversely affect our operating results.

We face the possibility of damages resulting from internal and external security breaches, and viruses.  In the course of our business operations, we compile and transmit confidential information, including patient health information, in our processing centers and other facilities. A breach of security in any of these facilities could damage our reputation and result in damages being assessed against us. In addition, the other systems with which we may interface, such as the Internet and related systems may be vulnerable to security breaches, viruses, programming errors, or similar disruptive problems. The effect of these security breaches and related issues could disrupt our ability to perform certain key business functions and could potentially reduce demand for our services. Accordingly, we have expended significant resources toward establishing and enhancing the security of our related infrastructures, although no assurance can be given that they will be entirely free from potential breach. Maintaining and enhancing our infrastructure security may require us to expend significant capital in the future.

The success of our strategy to offer our EDI services and Internet solutions depends on the confidence of our customers in our ability to securely transmit confidential information. Our EDI services and Internet solutions rely on encryption, authentication and other security technology licensed from third parties to achieve secure transmission of confidential information. We may not be able to stop unauthorized attempts to gain access to or disrupt the transmission of communications by our customers. Anyone who is able to circumvent our security measures could misappropriate confidential user information or interrupt our, or our customers’, operations. In addition, our EDI and Internet solutions may be vulnerable to viruses, physical or electronic break-ins, and similar disruptions.

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Any failure to provide secure infrastructure and/or electronic communication services could result in a lack of trust by our customers causing them to seek out other vendors, and/or, damage our reputation in the market, making it difficult to obtain new customers.

We are subject to the development and maintenance of the Internet infrastructure, which is not within our control, and which may diminish Internet usage and availability as well as access to our Web site.  We deliver Internet-based services and, accordingly, we are dependent on the maintenance of the Internet by third parties. The Internet infrastructure may be unable to support the demands placed on it and our performance may decrease if the Internet continues to experience its historic trend of expanding usage. As a result of damage to portions of its infrastructure, the Internet has experienced a variety of performance problems which may continue into the foreseeable future. Such Internet related problems may diminish Internet usage and availability of the Internet to us for transmittal of our Internet-based services. In addition, difficulties, outages, and delays by Internet service providers, online service providers and other Web site operators may obstruct or diminish access to our Web site by our customers resulting in a loss of potential or existing users of our services.

Our products may be subject to product liability legal claims, which could have an adverse effect on our business, results of operations and financial condition.  Certain of our products provide applications that relate to patient clinical information. Any failure by our products to provide accurate and timely information concerning patients, their medication, treatment, and health status, generally, could result in claims against us which could materially and adversely impact our financial performance, industry reputation and ability to market new system sales. In addition, a court or government agency may take the position that our delivery of health information directly, including through licensed practitioners, or delivery of information by a third party site that a consumer accesses through our Web sites, exposes us to assertions of malpractice, other personal injury liability, or other liability for wrongful delivery/handling of healthcare services or erroneous health information. We maintain insurance to protect against claims associated with the use of our products as well as liability limitation language in our end-user license agreements, but there can be no assurance that our insurance coverage or contractual language would adequately cover any claim asserted against us. A successful claim brought against us in excess of or outside of our insurance coverage could have an adverse effect on our business, results of operations and financial condition. Even unsuccessful claims could result in our expenditure of funds for litigation and management time and resources.

Certain healthcare professionals who use our Internet-based products will directly enter health information about their patients including information that constitutes a record under applicable law that we may store on our computer systems. Numerous federal and state laws and regulations, the common law, and contractual obligations, govern collection, dissemination, use and confidentiality of patient-identifiable health information, including:

•  state and federal privacy and confidentiality laws;

•  our contracts with customers and partners;

•  state laws regulating healthcare professionals;

•  Medicaid laws;

•  the HIPAA and related rules proposed by the Health Care Financing Administration; and

•  Health Care Financing Administration standards for Internet transmission of health data.

HIPAA establishes elements including, but not limited to, federal privacy and security standards for the use and protection of Protected Health Information. Any failure by us or by our personnel or partners to comply with applicable requirements may result in a material liability to us.

Although we have systems and policies in place for safeguarding Protected Health Information from unauthorized disclosure, these systems and policies may not preclude claims against us for alleged violations of applicable requirements. Also, third party sites and/or links that consumers may access through our web sites may not maintain adequate systems to safeguard this information, or may circumvent systems and policies we have put in place. In addition, future laws or changes in current laws may necessitate costly adaptations to our policies, procedures, or systems.

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There can be no assurance that we will not be subject to product liability claims, that such claims will not result in liability in excess of our insurance coverage, that our insurance will cover such claims or that appropriate insurance will continue to be available to us in the future at commercially reasonable rates. Such product liability claims could adversely affect our business, results of operations and financial condition.

We are subject to the effect of payor and provider conduct which we cannot control and accordingly, there is no assurance that revenue for our services will continue at historic levels.  We offer certain electronic claims submission products and services as part of our product line. While we have implemented certain product features designed to maximize the accuracy and completeness of claims submissions, these features may not be sufficient to prevent inaccurate claims data from being submitted to payors. Should inaccurate claims data be submitted to payors, we may be subject to liability claims.

Electronic data transmission services are offered by certain payors to healthcare providers that establish a direct link between the provider and payor. This process reduces revenue to third party EDI service providers such as us. As a result of this, or other market factors, we are unable to ensure that we will continue to generate revenue at or in excess of prior levels for such services.

A significant increase in the utilization of direct links between healthcare providers and payors could adversely affect our transaction volume and financial results. In addition, we cannot provide assurance that we will be able to maintain our existing links to payors or develop new connections on terms that are economically satisfactory to us, if at all.

Risks Related to Regulation

We face increasing involvement of the federal government in our industry, which may give rise to uncertain and unwarranted expectations concerning the benefits we are to receive from government funding and programs.  In February 2009, President Obama signed the American Recovery and Reinvestment Act (“ARRA”), which allocates over $20 billion dollars to healthcare IT over the next several years. The provision of the legislation that addresses health information technology specifically is known as the Health Information Technology for Economic and Clinical Health Act (“HITECH Act”). Under the provisions of HITECH Act, the ARRA includes significant financial incentives to healthcare providers who can demonstrate meaningful use of certified EHR technology beginning in 2011. While the Company expects the ARRA to create significant opportunities for sales of NextGen^ehr over the next several years, we are unsure of the immediate impact from the ARRA and the long-term potential could be significant.

We face the risks and uncertainties that are associated with litigation against us, which may adversely impact our marketing, distract management and have a negative impact upon our business, results of operations and financial condition.  We face the risks associated with litigation concerning the operation of our business. The uncertainty associated with substantial unresolved litigation may have an adverse effect on our business. In particular, such litigation could impair our relationships with existing customers and our ability to obtain new customers. Defending such litigation may result in a diversion of management’s time and attention away from business operations, which could have an adverse effect on our business, results of operations and financial condition. Such litigation may also have the effect of discouraging potential acquirers from bidding for us or reducing the consideration such acquirers would otherwise be willing to pay in connection with an acquisition.

There can be no assurance that such litigation will not result in liability in excess of our insurance coverage, that our insurance will cover such claims or that appropriate insurance will continue to be available to us in the future at commercially reasonable rates.

Because we believe that proprietary rights are material to our success, misappropriation of these rights could adversely affect our financial condition.  We are heavily dependent on the maintenance and protection of our intellectual property and we rely largely on license agreements, confidentiality procedures, and employee nondisclosure agreements to protect our intellectual property. Our software is not patented and existing copyright laws offer only limited practical protection.

There can be no assurance that the legal protections and precautions we take will be adequate to prevent misappropriation of our technology or that competitors will not independently develop technologies equivalent or

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superior to ours. Further, the laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States and are often not enforced as vigorously as those in the United States.

We do not believe that our operations or products infringe on the intellectual property rights of others. However, there can be no assurance that others will not assert infringement or trade secret claims against us with respect to our current or future products or that any such assertion will not require us to enter into a license agreement or royalty arrangement or other financial arrangement with the party asserting the claim. Responding to and defending any such claims may distract the attention of our management and adversely affect our business, results of operations and financial condition. In addition, claims may be brought against third parties from which we purchase software, and such claims could adversely affect our ability to access third party software for our systems.

If we are deemed to infringe on the proprietary rights of third parties, we could incur unanticipated expense and be prevented from providing our products and services.  We are and may continue to be subject to intellectual property infringement claims as the number of our competitors grows and our applications’ functionality is viewed as similar or overlapping with competitive products. We do not believe that we have infringed or are infringing on any proprietary rights of third parties. However, claims are occasionally asserted against us, and we cannot assure you that infringement claims will not be asserted against us in the future. Also, we cannot assure you that any such claims will be unsuccessful. We could incur substantial costs and diversion of management resources defending any infringement claims — even if we are ultimately successful in the defense of such matters. Furthermore, a party making a claim against us could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief that could effectively block our ability to provide products or services. In addition, we cannot assure you that licenses for any intellectual property of third parties that might be required for our products or services will be available on commercially reasonable terms, or at all.

We are dependent on our license rights and other services from third parties, which may cause us to discontinue, delay or reduce product shipments.  We depend upon licenses for some of the technology used in our products as well as other services from third-party vendors. Most of these arrangements can be continued/renewed only by mutual consent and may be terminated for any number of reasons. We may not be able to continue using the products or services made available to us under these arrangements on commercially reasonable terms or at all. As a result, we may have to discontinue, delay or reduce product shipments or services provided until we can obtain equivalent technology or services. Most of our third-party licenses are non-exclusive. Our competitors may obtain the right to use any of the business elements covered by these arrangements and use these elements to compete directly with us. In addition, if our vendors choose to discontinue providing their technology or services in the future or are unsuccessful in their continued research and development efforts, we may not be able to modify or adapt our own products.

There is significant uncertainty in the healthcare industry in which we operate, and we are subject to the possibility of changing government regulation, which may adversely impact our business, financial condition and results of operations.  The healthcare industry is subject to changing political, economic and regulatory influences that may affect the procurement processes and operation of healthcare facilities. During the past several years, the healthcare industry has been subject to an increase in governmental regulation of, among other things, reimbursement rates and certain capital expenditures.

In the past, various legislators have announced that they intend to examine proposals to reform certain aspects of the U.S. healthcare system including proposals which may change governmental involvement in healthcare and reimbursement rates, and otherwise alter the operating environment for us and our clients. Healthcare providers may react to these proposals, and the uncertainty surrounding such proposals, by curtailing or deferring investments, including those for our systems and related services. Cost-containment measures instituted by healthcare providers as a result of regulatory reform or otherwise could result in a reduction in the allocation of capital funds. Such a reduction could have an adverse effect on our ability to sell our systems and related services. On the other hand, changes in the regulatory environment have increased and may continue to increase the needs of healthcare organizations for cost-effective data management and thereby enhance the overall market for healthcare management information systems. We cannot predict what effect, if any, such proposals or healthcare reforms might have on our business, financial condition and results of operations.

As existing regulations mature and become better defined, we anticipate that these regulations will continue to directly affect certain of our products and services, but we cannot fully predict the effect at this time. We have taken

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steps to modify our products, services and internal practices as necessary to facilitate our compliance with the regulations, but there can be no assurance that we will be able to do so in a timely or complete manner. Achieving compliance with these regulations could be costly and distract management’s attention and divert other company resources, and any noncompliance by us could result in civil and criminal penalties.

Developments of additional federal and state regulations and policies have the potential to positively or negatively affect our business.

Our software may potentially be subject to regulation by the U.S. Food and Drug Administration (“FDA”) as a medical device. Such regulation could require the registration of the applicable manufacturing facility and software and hardware products, application of detailed record-keeping and manufacturing standards, and FDA approval or clearance prior to marketing. An approval or clearance requirement could create delays in marketing, and the FDA could require supplemental filings or object to certain of these applications, the result of which could adversely affect our business, financial condition and results of operations.

The United States Congress in 2009 enacted legislation that would cut Medicare reimbursement to physicians by 21% per procedure. Congress has passed several successive acts postponing the cuts and there is discussion to rescind the cut. However, should the cuts be implemented by Medicare, there would be a direct material adverse revenue and earnings impact to our RCM revenue stream. The impact would vary by client depending on the client’s concentration of Medicare patients. Disruption could also affect system sales due to client reexamination of IT spending.

We may be subject to false or fraudulent claim laws.  There are numerous federal and state laws that forbid submission of false information or the failure to disclose information in connection with submission and payment of physician claims for reimbursement. In some cases, these laws also forbid abuse of existing systems for such submission and payment. Any failure of our RCM services to comply with these laws and regulations could result in substantial liability including, but not limited to, criminal liability, could adversely affect demand for our services and could force us to expend significant capital, research and development and other resources to address the failure. Errors by us or our systems with respect to entry, formatting, preparation or transmission of claim information may be determined or alleged to be in violation of these laws and regulations. Determination by a court or regulatory agency that our services violate these laws could subject us to civil or criminal penalties, invalidate all or portions of some of our client contracts, require us to change or terminate some portions of our business, require us to refund portions of our services fees, cause us to be disqualified from serving clients doing business with government payors and have an adverse effect on our business.

In most cases where we are permitted to do so, we calculate charges for our RCM services based on a percentage of the collections that our clients receive as a result of our services. To the extent that violations or liability for violations of these laws and regulations require intent, it may be alleged that this percentage calculation provides us or our employees with incentive to commit or overlook fraud or abuse in connection with submission and payment of reimbursement claims. The U.S. Centers for Medicare and Medicaid Services has stated that it is concerned that percentage-based billing services may encourage billing companies to commit or to overlook fraudulent or abusive practices.

A portion of our business involves billing of Medicare claims on behalf of its clients. In an effort to combat fraudulent Medicare claims, the federal government offers rewards for reporting of Medicare fraud which could encourage others to subject us to a charge of fraudulent claims, including charges that are ultimately proven to be without merit.

If our products fail to comply with evolving government and industry standards and regulations, we may have difficulty selling our products.  We may be subject to additional federal and state statutes and regulations in connection with offering services and products via the Internet. On an increasingly frequent basis, federal and state legislators are proposing laws and regulations that apply to Internet commerce and communications. Areas being affected by these regulations include user privacy, pricing, content, taxation, copyright protection, distribution, and quality of products and services. To the extent that our products and services are subject to these laws and regulations, the sale of our products and services could be harmed.

We are subject to changes in and interpretations of financial accounting matters that govern the measurement of our performance, one or more of which could adversely affect our business, financial condition, cash flows, revenue and results of operations.  Based on our reading and interpretations of relevant guidance, principles or

21

concepts issued by, among other authorities, the American Institute of Certified Public Accountants, the Financial Accounting Standards Board, and the Commission, we believe our current sales and licensing contract terms and business arrangements have been properly reported. However, there continue to be issued interpretations and guidance for applying the relevant standards to a wide range of sales and licensing contract terms and business arrangements that are prevalent in the software industry. Future interpretations or changes by the regulators of existing accounting standards or changes in our business practices could result in changes in our revenue recognition and/or other accounting policies and practices that could adversely affect our business, financial condition, cash flows, revenue and results of operations.

Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have an adverse effect on our business, and our per share price may be adversely affected.  Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) and the rules and regulations promulgated by the SEC to implement Section 404, we are required to include in our Form 10-K a report by our management regarding the effectiveness of our internal control over financial reporting. The report includes, among other things, an assessment of the effectiveness of our internal control over financial reporting. The assessment must include disclosure of any material weakness in our internal control over financial reporting identified by management.

As part of the ongoing evaluation being undertaken by management and our independent registered public accountants pursuant to Section 404, our internal control over financial reporting was effective as of March 31, 2010. However, if we fail to maintain an effective system of disclosure controls or internal controls over financial reporting, we may discover material weaknesses that we would then be required to disclose. Any material weaknesses identified in our internal controls could have an adverse effect on our business. We may not be able to accurately or timely report on our financial results, and we might be subject to investigation by regulatory authorities. This could result in a loss of investor confidence in the accuracy and completeness of our financial reports, which may have an adverse effect on our stock price.

No evaluation process can provide complete assurance that our internal controls will detect and correct all failures within our company to disclose material information otherwise required to be reported. The effectiveness of our controls and procedures could also be limited by simple errors or faulty judgments. In addition, if we continue to expand, through either organic growth or through acquisitions (or both), the challenges involved in implementing appropriate controls will increase and may require that we evolve some or all of our internal control processes.

It is also possible that the overall scope of Section 404 may be revised in the future, thereby causing our auditors and ourselves to review, revise or reevaluate our internal control processes which may result in the expenditure of additional human and financial resources.

Risks Related to Ownership of Our Common Stock

The unpredictability of our quarterly operating results may cause the price of our common stock to fluctuate or decline.  Our revenue may fluctuate in the future from quarter to quarter and period to period, as a result of a number of factors including, without limitation:

•  the size and timing of orders from clients;

•  the specific mix of software, hardware, and services in client orders;

•  the length of sales cycles and installation processes;

•  the ability of our clients to obtain financing for the purchase of our products;

•  changes in pricing policies or price reductions by us or our competitors;

•  the timing of new product announcements and product introductions by us or our competitors;

•  changes in revenue recognition or other accounting guidelines employed by us and/or established by the Financial Accounting Standards Board or other rule-making bodies;

•  accounting policies concerning the timing of the recognition of revenue;

•  the availability and cost of system components;

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•  the financial stability of clients;

•  market acceptance of new products, applications and product enhancements;

•  our ability to develop, introduce and market new products, applications and product enhancements;

•  our success in expanding our sales and marketing programs;

•  deferrals of client orders in anticipation of new products, applications, product enhancements, or public/private sector initiatives;

•  execution of or changes to our strategy;

•  personnel changes; and

•  general market/economic factors.

Our software products are generally shipped as orders are received and accordingly, we have historically operated with a minimal backlog of license fees. As a result, revenue in any quarter is dependent on orders booked and shipped in that quarter and is not predictable with any degree of certainty. Furthermore, our systems can be relatively large and expensive, and individual systems sales can represent a significant portion of our revenue and profits for a quarter such that the loss or deferral of even one such sale can adversely affect our quarterly revenue and profitability.

Clients often defer systems purchases until our quarter end, so quarterly results generally cannot be predicted and frequently are not known until after the quarter has concluded.

Our sales are dependent upon clients’ initial decisions to replace or substantially modify their existing information systems, and subsequently, their decision concerning which products and services to purchase. These are major decisions for healthcare providers and, accordingly, the sales cycle for our systems can vary significantly and typically ranges from six to twenty four months from initial contact to contract execution/shipment.

Because a significant percentage of our expenses are relatively fixed, a variation in the timing of systems sales, implementations, and installations can cause significant variations in operating results from quarter to quarter. As a result, we believe that interim period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indications of future performance. Further, our historical operating results are not necessarily indicative of future performance for any particular period.

We currently recognize revenue pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 985-605, Software, Revenue Recognition, or ASC 985-605. ASC 985-605 summarizes the FASB’s views in applying generally accepted accounting principles to revenue recognition in financial statements.

There can be no assurance that application and subsequent interpretations of these pronouncements will not further modify our revenue recognition policies, or that such modifications would not adversely affect our operating results reported in any particular quarter or year.

Due to all of the foregoing factors, it is possible that our operating results may be below the expectations of public market analysts and investors. In such event, the price of our common stock would likely be adversely affected.

Our common stock price has been volatile, which could result in substantial losses for investors purchasing shares of our common stock and in litigation against us.  Volatility may be caused by a number of factors including but not limited to:

•  actual or anticipated quarterly variations in operating results;

•  rumors about our performance, software solutions, or merger and acquisition activity;

•  changes in expectations of future financial performance or changes in estimates of securities analysts;

•  governmental regulatory action;

•  health care reform measures;

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•  client relationship developments;

•  purchases or sales of company stock;

•  activities by one or more of our major shareholders concerning our policies and operations;

•  changes occurring in the markets in general;

•  macroeconomic conditions, both nationally and internationally; and

•  other factors, many of which are beyond our control.

Furthermore, the stock market in general, and the market for software, healthcare and high technology companies in particular, has experienced extreme volatility that often has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the trading price of our common stock, regardless of actual operating performance.

Moreover, in the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and divert management’s attention and resources.

Two of our directors are significant shareholders, which makes it possible for them to have significant influence over the outcome of all matters submitted to our shareholders for approval and which influence may be alleged to conflict with our interests and the interests of our other shareholders.  Two of our directors and principal shareholders beneficially owned an aggregate of approximately 33.5% of the outstanding shares of our common stock at March 31, 2010. California law and our Bylaws permit our shareholders to cumulate their votes, the effect of which is to provide shareholders with sufficiently large concentrations of our shares the opportunity to assure themselves one or more seats on our Board of Directors. The amounts required to assure a Board position can vary based upon the number of shares outstanding, the number of shares voting, the number of directors to be elected, the number of “broker non-votes,” and the number of shares held by the shareholder exercising cumulative voting rights. In the event that cumulative voting is invoked, it is likely that the two of our directors holding an aggregate of approximately 33.5% of the outstanding shares of our common stock at March 31, 2010 will each have sufficient votes to assure themselves of one or more seats on our Board of Directors. With or without cumulative voting, these shareholders will have significant influence over the outcome of all matters submitted to our shareholders for approval, including the election of our directors and other corporate actions. In fiscal year 2009, one of the principal shareholders, Ahmed Hussein, proposed a different slate of directors than what the Company proposed to shareholders. The Company spent approximately $1.5 million to defend the Company’s slate. In addition, such influence by one or both of these shareholders could have the effect of discouraging others from attempting to purchase us, implement a change over our Board of Directors and management, and/or reducing the market price offered for our common stock in such an event.

Our future policy concerning the payment of dividends is uncertain, which could adversely affect the price of our stock.  We have announced our intention to pay a quarterly dividend commencing with the conclusion of our first fiscal quarter of 2008 (June 30, 2007) and pursuant to this policy our Board of Directors has declared a quarterly cash dividend ranging from $0.25 to its most recent level of $0.30 per share on our outstanding shares of common stock, each quarter thereafter. We anticipate that future quarterly dividends, if and when declared by our Board of Directors pursuant to this policy, would likely be distributable on or about the fifth day of each of the months of October, January, April and July. There can be no guarantees that we will have the financial wherewithal to fund this dividend in perpetuity or to pay it at historic rates. Further, our Board of Directors may decide not to pay the dividend at some future time for financial or non-financial reasons. Unfulfilled expectations regarding future dividends could adversely affect the price of our stock.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

None.

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ITEM 2.   PROPERTIES

Our principal administrative, accounting, QSI Dental Division operations and NextGen Division training operations are located in Irvine, California. Should we continue to grow, we may be required to lease additional space. We believe that suitable additional or substitute space is available, if needed, at market rates.

As of March 31, 2010, we lease an aggregate of approximately 305,500 square feet of space with expiration dates, excluding options, ranging from month-to-month to September 2016, as follows:

	Square Feet
QSI Dental Division
Irvine, California — Corporate Headquarters		24,000
Other U.S. locations		5,000
NextGen Division
Horsham, Pennsylvania		98,000
Austin, Texas		39,000
Atlanta, Georgia		35,000
Laguna Hills, California		4,500
Practice Solutions Division
St. Louis, Missouri		66,500
Hunt Valley, Maryland		33,500
Total leased properties		305,500

ITEM 3.   LEGAL PROCEEDINGS

In the normal course of business, we are involved in various claims and legal proceedings. While the ultimate resolution of these currently pending matters has yet to be determined, we do not presently believe that their outcome will adversely affect our financial position, results of operations or liquidity.

We have experienced legal claims by parties asserting that we have infringed their intellectual property rights. We believe that these claims are without merit and intend to defend them vigorously; however, we could incur substantial costs and diversion of management resources defending any infringement claim — even if we are ultimately successful in the defense of such matter. Litigation is inherently uncertain and always difficult to predict. We refer you to the discussion of infringement and litigation risks in our Risk Factors section of this Report.

ITEM 4.   RESERVED

PART II

ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Price and Holders

Our common stock is traded on the NASDAQ Global Select Market under the symbol “QSII.” The following table sets forth for the quarters indicated the high and low sales prices for each period indicated, as reported on the NASDAQ Global Select Market:

	High		Low
Quarter Ended
June 30, 2008	$	35.97	$	29.00
September 30, 2008	$	47.94	$	27.34
December 31, 2008	$	44.98	$	25.70
March 31, 2009	$	48.46	$	34.26
June 30, 2009	$	62.00	$	43.44
September 30, 2009	$	64.16	$	50.87
December 31, 2009	$	65.98	$	57.63
March 31, 2010	$	68.59	$	51.30

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At May 21, 2010, there were approximately 88 holders of record of our common stock.

Dividends

In January 2007, our Board of Directors adopted a policy whereby we intend to pay a regular quarterly dividend of $0.25 per share on our outstanding common stock, subject to further Board review and approval and establishment of record and distribution dates by our Board of Directors prior to the declaration of each such quarterly dividend. In August 2008, our Board of Directors increased the quarterly dividend to $0.30 per share. We anticipate that future quarterly dividends, if and when declared by our Board of Directors pursuant to this policy, would likely be distributable on or about the fifth day of each of the months of October, January, April and July.

On May 26, 2010, the Board of Directors approved a quarterly cash dividend of $0.30 per share on our outstanding shares of common stock, payable to shareholders of record as of June 17, 2010 with an expected distribution date on or about July 6, 2010.

The following dividends have been declared in the 2010, 2009, and 2008 fiscal years on the dates indicated:

	Record	Payment	Dividend
Board Approval Date	Date	Date	Amount
Fiscal year 2010
January 27, 2010	March 23, 2010	April 5, 2010	$	0.30
October 28, 2009	December 23, 2009	January 5, 2010		0.30
July 23, 2009	September 25, 2009	October 5, 2009		0.30
May 27, 2009	June 12, 2009	July 6, 2009		0.30
Fiscal year 2009
January 28, 2009	March 11, 2009	April 3, 2009	$	0.30
October 30, 2008	December 15, 2008	January 5, 2009		0.30
August 4, 2008	September 15, 2008	October 1, 2008		0.30
May 29, 2008	June 15, 2008	July 2, 2008		0.25
Fiscal year 2008
January 30, 2008	March 14, 2008	April 7, 2008	$	0.25
October 25, 2007	December 14, 2007	January 7, 2008		0.25
July 31, 2007	September 14, 2007	October 5, 2007		0.25
May 31, 2007	June 15, 2007	July 5, 2007		0.25

Payment of future dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including without limitation, our financial condition, operating results, current and anticipated cash needs and plans for expansion.

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Performance Graph

The following graph compares the cumulative total returns of our common stock, the NASDAQ Composite Index, and the NASDAQ Computer & Data Processing Services Stock Index over the five-year period ended March 31, 2010 assuming $100 was invested on March 31, 2005 with all dividends, if any, reinvested. This performance graph shall not be deemed to be “soliciting material” or “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended or the Exchange Act.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Quality Systems, Inc., The NASDAQ Composite Index
And The NASDAQ Computer & Data Processing Index

* $100 invested on 3/31/2005 in stock or index, including reinvestment of dividends. Fiscal year ending March 31.

The last trade price of our common stock on each of March 31, 2006, 2007, 2008, 2009 and 2010 was published by NASDAQ and, accordingly for the periods ended March 31, 2006, 2007, 2008, 2009 and 2010 the reported last trade price was utilized to compute the total cumulative return for our common stock for the respective periods then ended. Shareholder returns over the indicated periods should not be considered indicative of future stock prices or shareholder returns.

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ITEM 6.   SELECTED FINANCIAL DATA

The following selected financial data with respect to our Consolidated Statements of Income data for each of the five years in the period ended March 31, 2010 and the Consolidated Balance Sheets data as of the end of each such fiscal year are derived from our audited Consolidated Financial Statements. The following information should be read in conjunction with our Consolidated Financial Statements and the related notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein.

Consolidated Financial Data

	Year Ended March 31,
	2010		2009			2008		2007		2006
	(In thousands, except per share data)
Statements of Income Data:
Revenue	$	291,811	$	245,515		$	186,500	$	157,165	$	119,287
Cost of revenue		110,807		88,890			62,501		50,784		39,828
Gross profit		181,004		156,625			123,999		106,381		79,459
Selling, general and administrative expenses		86,951		69,410			53,260		45,337		35,554
Research and development costs		16,546		13,777			11,350		10,166		8,087
Amortization of acquired intangible assets		1,783		1,035			—		—		—
Income from operations		75,724		72,403			59,389		50,878		35,818
Interest income		226		1,203			2,661		3,306		2,108
Other income (expense)		268		(279	)		953		—		—
Income before provision for income taxes		76,218		73,327			63,003		54,184		37,926
Provision for income taxes		27,839		27,208			22,925		20,952		14,604
Net income	$	48,379	$	46,119		$	40,078	$	33,232	$	23,322
Basic net income per share	$	1.69	$	1.65		$	1.47	$	1.24	$	0.88
Diluted net income per share	$	1.68	$	1.62		$	1.44	$	1.21	$	0.85
Basic weighted average shares outstanding		28,635		28,031			27,298		26,882		26,413
Diluted weighted average shares outstanding		28,796		28,396			27,770		27,550		27,356
Dividends declared per common share	$	1.20	$	1.15		$	1.00	$	1.00	$	0.875

	March 31,		March 31,		March 31,		March 31,		March 31,
	2010		2009		2008		2007		2006
Balance Sheet Data:
Cash and cash equivalents	$	84,611	$	70,180	$	59,046	$	60,028	$	57,255
Working capital	$	118,935	$	98,980	$	79,932	$	76,616	$	61,724
Total assets	$	310,180	$	242,101	$	187,908	$	150,681	$	122,247
Total liabilities	$	121,891	$	86,534	$	74,203	$	59,435	$	49,838
Total shareholders’ equity	$	188,289	$	155,567	$	113,705	$	91,246	$	72,409

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Except for the historical information contained herein, the matters discussed in this management’s discussion and analysis of financial condition and results of operations, or MD&A, including discussions of our product development plans, business strategies and market factors influencing our results, may include forward-looking statements that involve certain risks and uncertainties. Actual results may differ from those anticipated by us as a result of various factors, both foreseen and unforeseen, including, but not limited to, our ability to continue to develop new products and increase systems sales in markets characterized by rapid technological evolution, consolidation, and competition from larger, better capitalized competitors. Many other economic, competitive, governmental and technological factors could affect our ability to achieve our goals, and interested persons are urged to review the risks described in “Item 1A. Risk Factors” as set forth above, as well as in our other public disclosures and filings with the Commission.

Overview

This MD&A is provided as a supplement to the Consolidated Financial Statements and notes thereto included in this Report, in order to enhance your understanding of our results of operations and financial condition and the following discussion should be read in conjunction with, and is qualified in its entirety by, the Consolidated Financial Statements and related notes thereto included elsewhere in this Report. Historical results of operations, percentage margin fluctuations and any trends that may be inferred from the discussion below are not necessarily indicative of the operating results for any future period.

Our MD&A is organized as follows:

•  Management Overview.  This section provides a general description of our Company and operating segments, a discussion as to how we derive our revenue, background information on certain trends and developments affecting our Company, a summary of our acquisition transactions and a discussion on management’s strategy for driving revenue growth.

•  Critical Accounting Policies and Estimates.  This section discusses those accounting policies that are considered important to the evaluation and reporting of our financial condition and results of operations, and whose application requires us to exercise subjective or complex judgments in making estimates and assumptions. In addition, all of our significant accounting policies, including our critical accounting policies, are summarized in Note 2 to the Consolidated Financial Statements included in this Report.

•  Overview of Results of Operations and Results of Operations by Operating Divisions.  These sections provide our analysis and outlook for the significant line items on our Consolidated Statements of Income, as well as other information that we deem meaningful to understand our results of operations on both a consolidated basis and an operating division basis.

•  Liquidity and Capital Resources.  This section provides an analysis of our liquidity and cash flows and discussions of our contractual obligations and commitments as of March 31, 2010.

•  New Accounting Pronouncements.  This section provides a summary of the most recent authoritative accounting standards and guidance that have either been recently adopted by our Company or may be adopted in the future.

Management Overview

Our Company is comprised of the QSI Dental Division, the NextGen Division, and the Practice Solutions Division. Operationally, HSI and PMP are considered and administered as part of the Practice Solutions Division while Opus and Sphere operate under the NextGen Division. We primarily derive revenue by developing and marketing healthcare information systems that automate certain aspects of medical and dental practices, networks of practices such as PHOs and MSOs, ambulatory care centers, community health centers, and medical and dental schools along with comprehensive systems implementation, maintenance and support and add on complementary services such as RCM and EDI. Our systems and services provide our clients with the ability to redesign patient care

29

and other workflow processes while improving productivity through facilitation of managed access to patient information. Utilizing our proprietary software in combination with third party hardware and software solutions, our products enable the integration of a variety of administrative and clinical information operations.

On May 20, 2008, we acquired HSI, a full-service healthcare RCM company. HSI operates under the umbrella of the Company’s Practice Solutions Division. Founded in 1996, HSI provides RCM services to providers including health systems, hospitals, and physicians in private practice with an in-house team of more than 200 employees, including specialists in medical billing, coding and compliance, payor credentialing, and information technology.

On October 28, 2008, we acquired PMP, a full-service healthcare RCM company. This acquisition is also part of our growth strategy for our Practice Solutions Division. Similar to HSI, PMP operates under the umbrella of the Company’s Practice Solutions Division. Founded in 2001, PMP provides physician billing and technology management services to healthcare providers, primarily in the Mid-Atlantic region.

On August 12, 2009, we acquired Sphere, a provider of financial information systems to the small hospital inpatient market. This acquisition is also part of our strategy to expand into the small hospital market and to add new customers by taking advantage of cross selling opportunities between the ambulatory and inpatient markets.

On February 10, 2010, we acquired Opus, a provider of clinical information systems to the small hospital inpatient market. Founded in 1987 and headquartered in Austin, Texas, Opus delivers web-based clinical solutions to hospital systems and integrated health networks nationwide. This acquisition complements and will be integrated with the assets of Sphere. Both companies are established developers of software and services for the inpatient market and will operate under the Company’s NextGen Division.

Our strategy is, at present, to focus on providing software and services to medical and dental practices. The key elements of this strategy are to continue development and enhancement of select software solutions in target markets, to continue investments in our infrastructure including but not limited to product development, sales, marketing, implementation, and support, to continue efforts to make infrastructure investments within an overall context of maintaining reasonable expense discipline, to add new customers through maintaining and expanding sales, marketing and product development activities, and to expand our relationship with existing customers through delivery of add-on and complementary products and services and to continue our gold standard commitment of service in support of our customers.

Critical Accounting Policies and Estimates

The discussion and analysis of our Consolidated Financial Statements and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate estimates, including but not limited to those related to revenue recognition, valuation of marketable securities, ARS put option rights, uncollectible accounts receivable, software development cost, intangible assets and self-insurance accruals for reasonableness. We base our estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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We believe that significant accounting policies, as described in Note 2 of our Consolidated Financial Statements, “Summary of Significant Accounting Policies” should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations. We believe the following table depicts the most critical accounting policies that affect our Consolidated Financial Statements:

Revenue Recognition	Judgments and Uncertainties
We generate revenue from the sale of licensing rights to use our software products sold directly to end-users and value-added resellers, or VARs. We also generate revenue from sales of hardware and third party software, implementation, training, software customization, EDI, post-contract support (maintenance) and other services, including RCM services, performed for customers who license our products. Revenue from implementation and training services is recognized as the corresponding services are performed. Maintenance revenue is recognized ratably over the contractual maintenance period. RCM revenue is derived from services fees, which include amounts charged for ongoing billing and other related services and are generally billed to the customer as a percentage of total collections. We do not recognize revenue for services fees until these collections are made as the services fees are not fixed or determinable until such time.	A typical system contract contains multiple elements of the above items. FASB ASC Topic 985-605-25, Software, Revenue Recognition, Multiple Elements, or ASC 985-605-25, requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of those elements. The fair value of an element must be based on vendor specific objective evidence (“VSOE”). We limit our assessment of VSOE for each element to either the price charged when the same element is sold separately or the price established by management having the relevant authority to do so, for an element not yet sold separately. VSOE calculations are updated and reviewed at the end of each quarter or annually depending on the nature of the product or service. We have established VSOE for the related undelivered elements based on the bell-shaped curve method. Maintenance VSOE for our largest customers is based on stated renewal rates only if the rate is determine d to be substantive and falls within our customary pricing practices. When evidence of fair value exists for the undelivered elements only, the residual method, provided for under ASC 985-605, is used. Under the residual method, we defer revenue related to the undelivered elements in a system sale based on VSOE of fair value of each of the undelivered elements, and allocate the remainder of the contract price net of all discounts to revenue recognized from the delivered elements. Undelivered elements of a system sale may include implementation and training services, hardware and third party software, maintenance, future purchase discounts, or other services. If VSOE of fair value of any undelivered element does not exist, all revenue is deferred until VSOE of fair value of the undelivered element is established or the element has been delivered. We bill for the entire system sales contract amount upon contract execution, except for maintenance which is billed separately. Amounts billed in excess of the amounts contractually due are recorded in accounts receivable as advance billings. Amounts are contractually due when services are performed or in accordance with contractually specified payment dates. Provided the fees are fixed or determinable and collection is considered probable, revenue from licensing rights and sales of hardware and third party software is generally recognized upon shipment and transfer of title. In certain transactions whose collections risk is high, the cash basis method is used to recognize revenue. If the fee is not fixed or determinable, then the revenue recognized in each period (subject to application of other revenue recognition criteria) will be the lesser of the aggregate of amounts due and payable or the amount of the arrangement fee that would have been recognized if the fees were being recognized using the residual method. Fees which are considered fixed or determinable at the inception of our arrangements must include the following characteristics:
	•   The fee must be negotiated at the outset of an arrangement, and generally be based on the specific volume of products to be delivered without being subject to change based on variable pricing mechanisms such as the number of units copied or distributed or the expected number of users; and
	•   Payment terms must not be considered extended. If a significant portion of the fee is due more than 12 months after delivery or after the expiration of the license, the fee is presumed not fixed or determinable.

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Revenue Recognition (continued)	Effect if Actual Results Differ from Assumptions
	Although we believe that our approach to estimates and judgments as described herein is reasonable, actual results could differ and we may be exposed to increases or decreases in revenue that could be material.
Valuation of Marketable Securities and ARS Put Option Rights Our investments at March 31, 2010 and 2009 are in tax exempt municipal ARS which are classified as either current or non-current marketable securities on our Consolidated Balance Sheets, depending on the liquidity and timing of expected realization of such securities. Our ARS are held by UBS Financial Services Inc.. On November 13, 2008, we entered into an Auction Rate Security Rights Agreement with UBS, whereby the we accepted UBS’s offer to purchase the Company’s ARS investments at any time during the period of June 30, 2010 through July 2, 2012. As a result, we had obtained an asset, ARS put option rights, whereby the we have a right to “put” the ARS back to UBS. We expect to exercise its ARS put option rights and put its ARS back to UBS on June 30, 2010, the earliest date allowable under the Rights Agreement.	Judgments and Uncertainties Marketable securities are recorded at fair value, based on quoted market rates or on valuation analysis when appropriate. The cost of marketable securities sold is based upon the specific identification method. Realized gains or losses and other-than-temporary declines in the fair value of marketable securities are determined on a specific identification basis and reported in interest and other income, net, as incurred. The fair value of our marketable securities has been estimated by management based on certain assumptions of what market participants would use in pricing the asset in a current transaction, or level 3 — unobservable inputs in accordance with FASB ASC Topic 820-10, Fair Value Measurements and Disclosures-Overall, or ASC 820-10. Management used a model to estimate the fair value of these securities that included certain level 2 inputs as well as assumptions, including a liquidity discount, based on management’s judgment, which are highly subjective and therefore considered level 3 inputs in the fair value hierarchy. The estimate of the fair value of the marketable securities could change based on market conditions. Effect if Actual Results Differ from Assumptions Although we believe that our approach to estimates and judgments as described herein is reasonable, actual results could differ and we may be exposed to increases or decreases in gains and losses that could be material.
Allowance for Doubtful Accounts	Judgments and Uncertainties
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We perform credit evaluations of our customers and maintain reserves for estimated credit losses. Reserves for potential credit losses are determined by establishing both specific and general reserves.	Specific reserves are based on management’s estimate of the probability of collection for certain troubled accounts. General reserves are established based on our historical experience of bad debt expense and the aging of our accounts receivable balances net of deferred revenue and specifically reserved accounts. If the financial condition of our customers were to deteriorate resulting in an impairment of their ability to make payments, additional allowances would be required. Effect if Actual Results Differ from Assumptions Although we believe that our approach to estimates and judgments as described herein is reasonable, actual results could differ and we may be exposed to increases or decreases in required reserves that could be material.

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Software Development Costs	Judgments and Uncertainties
Development costs incurred in the research and development of new software products and enhancements to existing software products are expensed as incurred until technological feasibility has been established. After technological feasibility is established with the completion of a working model of the enhancement or product, any additional development costs are capitalized in accordance with FASB ASC Topic 985-20, Software, Costs of Computer Software to be Sold, Leased or Marketed, or ASC 985-20. Such capitalized costs are amortized on a straight line basis over the estimated economic life of the related product, which is generally three years.	We perform an annual review of the recoverability of such capitalized software costs. At the time a determination is made that capitalized amounts are not recoverable based on the estimated cash flows to be generated from the applicable software, any remaining capitalized amounts are written off. Effect if Actual Results Differ from Assumptions Although we believe that our approach to estimates and judgments as described herein is reasonable, actual results could differ and we may be exposed to increases or decreases in revenue that could be material.
Goodwill	Judgments and Uncertainties
Goodwill is related to the NextGen Division and the HSI, PMP, Sphere, and Opus acquisitions, which closed on May 20, 2008, October 28, 2008, August 12, 2009, and February 10, 2010, respectively.	In accordance with FASB ASC Topic 350-20, Intangibles — Goodwill and Other, Goodwill, or ASC 350-20, we test goodwill for impairment annually at the end of our first fiscal quarter, referred to as the annual test date. We will also test for impairment between annual test dates if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is performed at a reporting unit level, which is defined as an operating segment or one level below an operating segment (referred to as a component). A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component. An impairment loss would generally be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit.
	Effect if Actual Results Differ from Assumptions
	We have not made any material changes in the accounting methodology we use to assess impairment loss during the past three fiscal years.
	The carrying values of goodwill at March 31, 2010 were $46.2 million. We have determined that there was no risk of impairment to our goodwill as of March 31, 2010.
	We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to test for impairment losses on goodwill and other intangible assets. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to an impairment charge that could be material.

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Business Combinations — Purchase Price Allocations During the last three fiscal years, we completed three significant acquisitions: In February 2010, we acquired Opus for $20.6 million. In October 2008, we acquired PMP for $19.7 million, including transaction costs. In May 2008, we acquired HSI for $15.6 million, including transaction costs.	Judgments and Uncertainties In accordance with business combination accounting under FASB ASC Topic 805, Business Combinations, or ASC 805, we allocate the purchase price of acquired businesses to the tangible and intangible assets acquired and liabilities assumed based on estimated fair values. Our purchase price allocation methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and liabilities based upon quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analyses. Unanticipated events or circumstances may occur which could affect the accuracy of our fair value estimates, including assumptions regarding industry economic factors and business strategies.
	Effect if Actual Results Differ from Assumptions
	We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to complete the purchase price allocation and estimate the fair value of acquired assets and liabilities. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.
Intangible Assets	Judgments and Uncertainties
Intangible assets consist of capitalized software costs, customer relationships, trade names and certain intellectual property. Intangible assets related to customer relationships and trade names arose in connection with the acquisition of HSI, PMP, Opus, and Sphere.	These intangible assets were recorded at fair value and are stated net of accumulated amortization and impairments. Intangible assets are amortized over their remaining estimated useful lives, ranging from 3 to 9 years. Our amortization policy for intangible assets is based on the principles in FASB ASC Topic 350-30, Intangibles — Goodwill and Other, General Intangibles Other than Goodwill, or ASC 350-30, which requires that the amortization of intangible assets reflect the pattern that the economic benefits of the intangible assets are consumed.
	Effect if Actual Results Differ from Assumptions
	Although we believe that our approach to estimates and judgments as described herein is reasonable, actual results could differ and we may be exposed to decreases in the fair value of our intangible assets, resulting in impairment charges that could be material.
Share-Based Compensation	Judgments and Uncertainties
We have a stock-based compensation plan, which includes stock options and restricted stock units. See Note 2, “Summary of Significant Accounting Policies,” and Note 13, Consolidated Financial Statements of this Report for a complete discussion of our stock-based compensation programs.	We apply the provisions of FASB ASC Topic 718, Compensation — Stock Compensation, or ASC 718, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors based on estimated fair values. ASC 718 requires us to estimate the fair value of “Share-Based Awards,” to the share-based payment awards on the date of grant using an option-pricing model. We estimate the expected term of the option using historical exercise experience. We estimate volatility by using the weighted average historical volatility of our common stock, which we believe approximates expected volatility. The risk free rate is the implied yield available on the U.S Treasury zero-coupon issues with remaining terms equal to the expected term. The expected dividend yield is the average dividend rate during a period equal to the expected term of the option. Those inputs are then entered into the Black Scholes model to determine the estimated fair value. The value of the portion of the award that is expected to vest is recognized as expense over the requisite service period in our Consolidated Statements of Income.

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Share-Based Compensation (continued)	Effect if Actual Results Differ from Assumptions
	We do not believe there is a reasonable likelihood there will be a material change in the future estimates or assumptions we use to determine stock-based compensation expense. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to changes in stock-based compensation expense that could be material.
Self-Insured Liabilities	Judgments and Uncertainties
Effective January 1, 2010, the Company became self-insured with respect to healthcare claims, subject to stop-loss limits. The Company accrues for estimated self-insurance costs and uninsured exposures based on claims filed and an estimate of claims incurred but not reported as of each balance sheet date. However, it is possible that recorded accruals may not be adequate to cover the future payment of claims. Adjustments, if any, to estimated accruals resulting from ultimate claim payments will be reflected in earnings during the periods in which such adjustments are determined.	Our self-insured liabilities contain uncertainties because management is required to make assumptions and to apply judgment to estimate the ultimate cost to settle reported claims and claims incurred but not reported at the balance sheet date. Effect if Actual Results Differ from Assumptions We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate our self-insured liabilities. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.

Overview of Our Results

•  Our total revenue increased 18.9% and income from operations grew 4.6% on a consolidated basis for the year ended March 31, 2010. Revenue was positively impacted by growth in recurring revenue, including maintenance, EDI and RCM revenue, which grew 22.4%, 18.7% and 71.1% respectively, offset by higher corporate expenses.

•  Uncertainty over the final rules regarding incentive payments tied to the ARRA continued to negatively impact system sales revenue in fiscal year 2010. We have made investments in our sales and marketing areas in anticipation of receiving the final rules related to the ARRA.

•  Our year over year growth in revenue and operating income during the year ended March 31, 2010 was partially attributable to the HSI and PMP acquisitions. HSI and PMP combined generated $42.7 million of revenue for fiscal year 2010 as compared to a total of $24.4 million of revenue for the ten and five months of respective results in fiscal year 2009.

•  Operating income was negatively impacted by a shift in revenue mix with an increased share of hardware, EDI, and RCM revenue, resulting in a decline in our gross profit margin. We also experienced higher selling, general and administrative expenses primarily due to higher selling related expenses incurred in preparation for the ARRA, which was enacted in February 2009, as well as higher corporate related expenses.

•  We do not believe the revenue mix changes noted above represent a change in the overall purchasing environment. On top of the potential benefits from the ARRA, we have benefited and hope to continue to benefit from the increased demands on healthcare providers for greater efficiency and lower costs, as well as increased adoption rates for electronic medical records and other technology in the healthcare arena.

•  While we expect to benefit from the increasing demands for greater efficiency as well as government support for increased adoption of electronic health records, the current economic environment, combined with unpredictability of the federal government’s plans to promote increased adoption of electronic medical records, makes the near term achievement of such benefits and, ultimately, their impact on system sales, uncertain.

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NextGen Division

•  NextGen Division revenue increased 13.6% in the year ended March 31, 2010 and divisional operating income (excluding unallocated corporate expenses) increased 8.3% from the year ended March 31, 2009. Organic revenue growth in the NextGen Division was 11.6% and 20.4% for the years ended March 31, 2010 and 2009, respectively.

•  The acquisitions of Opus and Sphere in fiscal year 2010 added approximately $2.9 million in revenue for the year ended March 31, 2010 and $0.7 million in additional operating income in the same period a year ago.

•  Recurring revenue, consisting of maintenance and EDI revenue, represented $111.9 million and accounted for 48.3% of total NextGen Division revenue during fiscal year 2010. In the same period a year ago, recurring revenue represented 44.3% of total NextGen Division revenue, or $90.3 million.

•  During the year ended March 31, 2010, we added staffing resources in anticipation of future growth from the ARRA. We intend to continue doing so in future periods to maximize our opportunities from the ARRA.

•  Our goals include taking maximum advantage of future benefits related to the ARRA and continuing to further enhance and expand the marketing and sales of our existing products, developing new products for targeted markets, continuing to add new customers, selling additional software and services to existing customers, expanding penetration of connectivity and other services to new and existing customers, and capitalizing on growth and cross selling opportunities within the Practice Solutions Division and the recently acquired acute care software product lines.

QSI Dental Division

•  QSI Dental Division revenue increased 8.1% in the year ended March 31, 2010 and divisional operating income (excluding unallocated corporate expenses) increased 2.2% from the year ended March 31, 2009.

•  An increase in system sales revenue offset by an increase in selling, general and administrative expenses were the chief contributors to the operating income results in fiscal year 2010.

•  In July 2009, we licensed source code from PlanetDDS, Inc. that will allow us to deliver hosted, web-based SaaS practice management and clinical software solutions to the dental industry. The software solution will be marketed primarily to the multi-location dental group practice market in which the Division has historically been a dominant player. This new software solution (NextDDS) brings the QSI Dental Division to the forefront of the emergence of internet based applications and cloud computing and represents a significant growth opportunity for us to sell both to our existing customer base as well as new customers.

•  Our goal for the QSI Dental Division is to maximize profit performance given the constraints represented by a relatively weak purchasing environment in the dental group practice market while taking advantage of opportunities with the new NextDDS product. The QSI Dental Division also intends to leverage the NextGen Division’s sales force to sell its dental electronic medical records software to practices that provide both medical and dental services such as Federal Qualified Health Centers, which are receiving grants as part of the ARRA.

Practice Solutions Division

•  Practice Solutions Division revenue increased 67.5% in the year ended March 31, 2010 and divisional operating income (excluding unallocated corporate expenses) decreased 5.7% from the year ended March 31, 2009. A significant driver of the increase in revenue was that fact that fiscal year 2010 included a full year of results for HSI and PMP versus approximately ten and five months of respective results in fiscal year 2009. The Practice Solutions Division also benefited from organic growth achieved through cross selling RCM services to existing NextGen Division customers.

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•  Operating income as a percentage of revenue declined to approximately 5.4% of revenue versus 9.5% of revenue primarily as a result of a smaller amount of software sales to RCM customers compared to the prior year as well as costs related to transitioning to the NextGen platform including training of staff and initial set up and other costs related to achieving higher production volumes.

The following table sets forth for the periods indicated the percentage of net revenue represented by each item in our Consolidated Statements of Income (certain percentages below may not sum due to rounding):

	Year Ended March 31,
	2010			2009			2008
	(Unaudited)
Revenues:
Software, hardware and supplies		30.8	%		34.8	%		40.9	%
Implementation and training services		4.9			5.4			7.2
System sales		35.7			40.2			48.1
Maintenance		30.6			29.7			30.3
Electronic data interchange services		12.0			12.0			12.0
Revenue cycle management and related services		12.6			8.7			0.5
Other services		9.2			9.3			9.1
Maintenance, EDI, RCM and other services		64.3			59.8			51.9
Total revenues		100.0			100.0			100.0
Cost of revenue:
Software, hardware and supplies		4.2			5.4			5.8
Implementation and training services		4.1			4.2			5.5
Total cost of system sales		8.3			9.6			11.4
Maintenance		4.6			4.8			6.7
Electronic data interchange services		8.7			8.7			8.5
Revenue cycle management and related services		9.5			6.0			0.3
Other services		7.0			7.1			6.7
Total cost of maintenance, EDI, RCM and other services		29.7			26.6			22.1
Total cost of revenue		38.0			36.2			33.5
Gross profit		62.0			63.8			66.5
Operating expenses:
Selling, general and administrative		29.8			28.3			28.6
Research and development costs		5.7			5.6			6.1
Amortization of acquired intangible assets		0.6			0.4			0.0
Total operating expenses		36.1			34.3			34.6
Income from operations		25.9			29.5			31.8
Interest income		0.1			0.5			1.4
Other income (expense)		0.1			(0.1	)		0.5
Income before provision for income taxes		26.1			29.9			33.8
Provision for income taxes		9.5			11.1			12.3
Net income		16.6	%		18.8	%		21.5	%

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Comparison of Fiscal Years Ended March 31, 2010 and March 31, 2009

Net Income.  For the year ended March 31, 2010, our net income was $48.4 million or $1.69 per share on a basic and $1.68 per share on a fully diluted basis. In comparison, we earned $46.1 million or $1.65 per share on a basic and $1.62 per share on a fully diluted basis in the year ended March 31, 2009. The increase in net income for the year ended March 31, 2010 was achieved primarily through the following:

•  an 18.9% increase in consolidated revenue, including an increase of $27.7 million in revenue from our NextGen Division and an increase of $17.4 million in revenue from our Practice Solutions Division;

•  a 13.6% increase in NextGen Division revenue, which accounted for 79.4% of consolidated revenue;

•  an increase of recurring revenue, including RCM, maintenance, and EDI revenue, offset by a decline in our gross profit margin due primarily to both a shift in revenue mix with increased RCM revenue and lower gross margins related to RCM revenue;

•  an increase in selling, general and administrative expenses as a percentage of revenue related to higher selling and corporate expenses and

•  a decrease in interest income primarily due significantly lower interest rates, as compared to the prior year, on money market accounts in which we invest a majority of our cash.

Revenue.  Revenue for the year ended March 31, 2010 increased 18.9% to $291.8 million from $245.5 million for the year ended March 31, 2009. NextGen Division revenue increased 13.6% to $231.6 million from $204.0 million in the year ended March 31, 2009 while QSI Dental Division revenue increased 8.1% during that same period to $17.1 million from $15.9 million and Practice Solutions Division revenue increased 67.5% during that same period to $43.1 million from $25.7 million. Practice Solutions Division revenue was impacted positively in fiscal year 2010 as a result of including a full year of results versus approximately ten and five months of results for HSI and PMP, respectively, in fiscal year 2009.

We divide revenue into two categories, “system sales” and “maintenance, EDI, RCM and other services.” Revenue in the system sales category includes software license fees, third party hardware and software, and implementation and training services related to purchase of our software systems. The majority of the revenue in the system sales category is related to the sale of software. Revenue in the maintenance, EDI, RCM and other services category includes maintenance, EDI, RCM, follow-on training services, annual third party license fees, hosting and other services revenue.

System Sales.  Revenue earned from Company-wide sales of systems for the year ended March 31, 2010 increased 5.4% to $104.1 million from $98.8 million in the prior year.

Our increase in revenue from sales of systems was principally the result of a 5.1% increase in category revenue at our NextGen Division whose sales in this category grew from $93.3 million during the year ended March 31, 2009 to $98.1 million during the year ended March 31, 2010. This increase was driven by higher sales of ambulatory practice management and health records software to both new and existing clients, as well as increases in revenue related to implementation and training services.

Systems sales revenue in the QSI Dental Division increased to approximately $3.9 million in the year ended March 31, 2010 from $3.0 million in the year ended March 31, 2009 while systems sales revenue in the Practice Solutions Division decreased to approximately $2.1 million in the year ended March 31, 2010 from $2.4 million in the year ended March 31, 2009. Systems sales in the QSI Dental Division was positively impacted by greater joint sales of dental and medical software to Federally Qualified Health Centers.

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The following table breaks down our reported system sales into software, hardware, third party software, supplies, and implementation and training services components by division:

			Hardware, Third		Implementation
			Party Software		and Training		Total System
	Software		and Supplies		Services		Sales
Year ended March 31, 2010
QSI Dental Division	$	1,699	$	1,409	$	825	$	3,933
NextGen Division		79,832		4,944		13,284		98,060
Practice Solutions Division		1,877		—		267		2,144
Consolidated	$	83,408	$	6,353	$	14,376	$	104,137
Year ended March 31, 2009
QSI Dental Division	$	915	$	1,171	$	938	$	3,024
NextGen Division		74,128		6,775		12,437		93,340
Practice Solutions Division		2,397		—		—		2,397
Consolidated	$	77,440	$	7,946	$	13,375	$	98,761

NextGen Division software license revenue increased 7.7% between the year ended March 31, 2009 and the year ended March 31, 2010. The Division’s software revenue accounted for 81.4% of divisional system sales revenue during the year ended March 31, 2010, compared to 79.4% during the year ended March 31, 2009. Software license revenue growth continues to be an area of primary emphasis for the NextGen Division. The Opus acquisition contributed approximately $0.9 million to the NextGen Division’s software license revenue during the year ended March 31, 2010.

During the year ended March 31, 2010, 5.0% of NextGen Division’s system sales revenue was represented by hardware and third party software compared to 7.3% during the year ended March 31, 2009. The number of customers who purchase hardware and third party software and the dollar amount of hardware and third party software revenue fluctuates each quarter depending on the needs of customers. The inclusion of hardware and third party software in the Division’s sales arrangements is typically at the request of the customer and is not a priority focus for us.

Implementation and training revenue related to system sales at the NextGen Division increased 6.8% in the year ended March 31, 2010 compared to the year ended March 31, 2009. The amount of implementation and training services revenue is dependent on several factors, including timing of customer implementations, the availability of qualified staff, and the mix of services being rendered. The number of implementation and training staff increased during the year ended March 31, 2010 versus 2009 in order to accommodate the increased amount of implementation services sold in conjunction with increased software sales. In order to achieve growth in this area, additional staffing increases and additional training facilities are anticipated, though actual future increases in revenue and staff will depend upon the availability of qualified staff, business mix and conditions, and our ability to retain current staff members.

The NextGen Division’s growth has come in part from investments in sales and marketing activities including a revamped NextGen.com Web site, new NextGen logo, new marketing campaigns, trade show attendance, and other expanded advertising and marketing expenditures. We have also benefited from winning numerous industry awards for the NextGen Division’s flagship NextGen^ehr and NextGen^epm software products and the increasing acceptance of electronic medical records technology in the healthcare industry.

For the QSI Dental Division, total system sales increased 30.1% in the year ended March 31, 2010 compared to the year ended March 31, 2009. Systems sales in the QSI Dental Division were positively impacted by greater joint sales of dental and medical software to Federally Qualified Health Centers. In addition, the Division began selling the SaaS based NextDDS product during the year ended March 31, 2010.

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For the Practice Solutions Division, total system sales decreased by 10.6% in the year ended March 31, 2010 compared to the year ended March 31, 2009. Systems sales revenue within the Practice Solutions Division is composed of sales to existing RCM customers only.

Maintenance, EDI, Revenue Cycle Management and Other Services.  For the year ended March 31, 2010, Company-wide revenue from maintenance, EDI, RCM and other services grew 27.9% to $187.7 million from $146.8 million for the year ended March 31, 2009. The increase in this category resulted from an increase in maintenance, EDI, RCM and other services revenue from the NextGen and Practice Solutions Divisions. Total NextGen Division maintenance revenue for the year ended March 31, 2010 grew 24.9% to $81.9 million from $65.6 million in the prior year. The Opus acquisition contributed $1.2 million to the NextGen Division’s maintenance revenue during the fiscal year ended March 31, 2010. NextGen Division EDI revenue grew 21.2% to $30.0 million compared to $24.8 million in the prior year. RCM revenue grew to $36.7 million from $21.4 million in the prior year primarily as a result of increases in RCM revenue to existing customers as well as including a full year of results for HSI and PMP in fiscal year 2010 versus approximately ten and five months of respective results in fiscal year 2009. Other services revenue for the NextGen Division, which consists primarily of third party annual software license renewals, consulting services and hosting services increased 6.9% to $21.7 million from $20.3 million a year ago. QSI Dental Division maintenance, EDI and other services revenue increased 2.9% to $13.2 million for the year ended March 31, 2010 compared to $12.8 million in the prior year.

The following table details maintenance, EDI, RCM, and other services revenue by category for the years ended March 31, 2010 and 2009:

					Revenue Cycle
	Maintenance		EDI		Management		Other		Total
Year ended March 31, 2010
QSI Dental Division	$	7,217	$	5,038	$	—	$	940	$	13,195
NextGen Division		81,867		29,997		—		21,697		133,561
Practice Solutions Division		108		—		36,665		4,145		40,918
Consolidated	$	89,192	$	35,035	$	36,665	$	26,782	$	187,674
Year ended March 31, 2009
QSI Dental Division	$	7,167	$	4,766	$	—	$	894	$	12,827
NextGen Division		65,559		24,756		—		20,299		110,614
Practice Solutions Division		136		—		21,431		1,746		23,313
Consolidated	$	72,862	$	29,522	$	21,431	$	22,939	$	146,754

The growth in maintenance revenue for the NextGen Division has come from new customers that have been added each quarter, existing customers who have purchased additional licenses, and our relative success in retaining existing maintenance customers. NextGen Division’s EDI revenue growth has come from new customers and from further penetration of the Division’s existing customer base. The growth in RCM is a result of the HSI and PMP acquisitions and future growth is expected from cross selling opportunities between the customer bases. We intend to continue to promote maintenance, EDI and RCM services to both new and existing customers.

Cost of Revenue.  Cost of revenue for the year ended March 31, 2010 increased 24.7% to $110.8 million from $88.9 million for the year ended March 31, 2009 and the cost of revenue as a percentage of revenue increased to 38.0% from 36.2% due to the fact that the rate of growth in cost of revenue grew faster than the aggregate revenue growth rate for the Company.

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The following table details revenue and cost of revenue on a consolidated and divisional basis for the years ended March 31, 2010 and 2009:

	Year Ended March 31,
	2010		%			2009		%
QSI Dental Division
Revenue	$	17,128		100.0	%	$	15,851		100.0	%
Cost of revenue		7,788		45.5	%		7,582		47.8	%
Gross profit	$	9,340		54.5	%	$	8,269		52.2	%
NextGen Division
Revenue	$	231,621		100.0	%	$	203,954		100.0	%
Cost of revenue		73,534		31.7	%		65,311		32.0	%
Gross profit	$	158,087		68.3	%	$	138,643		68.0	%
Practice Solutions Division
Revenue	$	43,062		100.0	%	$	25,710		100.0	%
Cost of revenue		29,485		68.5	%		15,997		62.2	%
Gross profit	$	13,577		31.5	%	$	9,713		37.8	%
Consolidated
Revenue	$	291,811		100.0	%	$	245,515		100.0	%
Cost of revenue		110,807		38.0	%		88,890		36.2	%
Gross profit	$	181,004		62.0	%	$	156,625		63.8	%

Gross profit margins at the NextGen Division for the year ended March 31, 2010 increased slightly to 68.3% from 68.0% from the year ended March 31, 2009 primarily as a result of a lower amount of hardware revenue in fiscal year 2010 versus fiscal year 2009. Gross profit margins at the QSI Dental Division for the year ended March 31, 2010 increased to 54.5% from 52.2% for the year ended March 31, 2009 also as result of lower percentage of payroll and related benefits in system sales in fiscal year 2010 versus fiscal year 2009. Gross margin in the Practice Solutions Division declined as a result of a smaller proportion of software revenue included in revenue versus the prior year as well as costs related to transitioning to the NextGen Division platform and other ramp-up costs.

The following table details the individual components of cost of revenue and gross profit as a percentage of total revenue on a consolidated and divisional basis for the years ended March 31, 2010 and 2009:

	Hardware,			Payroll and
	Third Party			Related									Total Cost of			Gross
	Software			Benefits			EDI			Other			Revenue			Profit
Year ended March 31, 2010
QSI Dental Division		8.5	%		13.8	%		16.0	%		7.2	%		45.5	%		54.5	%
NextGen Division		2.5	%		13.2	%		9.5	%		6.5	%		31.7	%		68.3	%
Practice Solutions Division		0.5	%		43.6	%		1.1	%		23.3	%		68.5	%		31.5	%
Consolidated		2.5	%		17.7	%		8.7	%		9.1	%		38.0	%		62.0	%
Year ended March 31, 2009
QSI Dental Division		7.6	%		19.8	%		17.1	%		3.3	%		47.8	%		52.2	%
NextGen Division		3.9	%		11.0	%		9.1	%		8.0	%		32.0	%		68.0	%
Practice Solutions Division		0.2	%		45.0	%		0.0	%		17.0	%		62.2	%		37.8	%
Consolidated		3.7	%		15.1	%		8.4	%		9.0	%		36.2	%		63.8	%

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The increase in our consolidated cost of revenue as a percentage of revenue between the year ended March 31, 2010 and the year ended March 31, 2009 is primarily attributable to an increase in RCM revenue, which carries higher payroll and related benefits as a percentage of revenue and higher consolidated EDI costs, offset by a decrease in hardware and third party software as a percentage of revenue. Other expense, which consists of outside service costs, amortization of software development costs and other costs, increased slightly to 9.1% of total revenue during the year ended March 31, 2010 from 9.0% of total revenue during the year ended March 31, 2009.

During the year ended March 31, 2010, hardware and third party software constituted a smaller portion of cost of revenue compared to the prior year period in the NextGen Division. The number of customers who purchase hardware and third party software and the dollar amount of hardware and third party software purchased fluctuates each quarter depending on the needs of the customers and is not a priority focus for us.

Our payroll and benefits expense associated with delivering our products and services increased to 17.7% of consolidated revenue in the year ended March 31, 2010 compared to 15.1% during the year ended March 31, 2009 primarily due to inclusion of a full year of HSI and PMP transactions in fiscal year 2010 versus a partial period in fiscal year 2009. RCM is a service business, which inherently has higher percentage of payroll costs as a percentage of revenue.

The absolute level of consolidated payroll and benefit expenses grew from $37.1 million in the year ended March 31, 2009 to $51.8 million in the year ended March 31, 2010, an increase of 39.4% or approximately $14.6 million. Of the $14.6 million increase, approximately $7.2 million of the increase is related to the Practice Solutions Division, which included a full year of HSI and PMP expenses during fiscal year 2010 versus approximately ten and five months of respective expense in fiscal year 2009. For the NextGen Division, an increase of approximately $8.2 million was related to increased headcount and payroll and benefits expense associated with delivering products and services Payroll and benefits expense associated with delivering products and services in the QSI Dental Division decreased $0.7 million from $3.1 million in the year ended March 31, 2009 to $2.4 million in the year ended March 31, 2010. The application of ASC 718 added approximately $0.1 million and $0.2 million in compensation expense to cost of revenue in the years ended March 31, 2010 and 2009, respectively.

As a result of the foregoing events and activities, the gross profit percentage for the Company decreased for the year ended March 31, 2010 versus the prior year.

We anticipate continued additions to headcount in the NextGen Division in areas related to delivering products and services in future periods but due to the uncertainties in the timing of our sales arrangements, our sales mix, the acquisition and training of qualified personnel, and other issues, we cannot accurately predict if related headcount expense as a percentage of revenue will increase or decrease in the future.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses for the year ended March 31, 2010 increased 25.3% to $87.0 million as compared to $69.4 million for the year ended March 31, 2009. The increase in these expenses resulted primarily from a:

•  $9.9 million increase in salaries and related expenses in the NextGen Division primarily as a result of headcount additions;

•  $2.5 million increase in marketing and trade shows in the NextGen Division;

•  $1.5 million increase from the acquisition of Sphere and Opus;

•  $3.3 million increase in corporate related expenses, primarily as a result of headcount additions, and

•  $0.4 million increase in other selling and administrative expenses.

The application of ASC 718 added approximately $1.9 million and $1.5 million in compensation expense to selling, general and administrative expenses for the year ended March 31, 2010 and 2009, respectively, and is included in the aforementioned amounts. Selling, general and administrative expenses as a percentage of revenue increased from 28.3% in the year ended March 31, 2009 to 29.8% in the year ended March 31, 2010.

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We anticipate increased expenditures for trade shows, advertising and the employment of additional sales and administrative staff at the NextGen Division. We also anticipate future increases in corporate expenditures being made in a wide range of areas including professional services. While we expect selling, general and administrative expenses to increase on an absolute basis, we cannot accurately predict the impact these additional expenditures will have on selling, general and administrative expenses as a percentage of revenue.

Research and Development Costs.  Research and development costs for the years ended March 31, 2010 and 2009 were $16.5 million and $13.8 million, respectively. The increases in research and development expenses were due in part to increased investment in the NextGen Division product line. Additionally, the application of ASC 718 added approximately $0.1 million and $0.2 million in the years ended March 31, 2010 and 2009, respectively, in compensation expense to research and development costs, net of amounts capitalized as software development in those fiscal years. Additions to capitalized software costs offset research and development costs. For the year ended March 31, 2010, $7.9 million was added to capitalized software costs while $5.9 million was capitalized during the year ended March 31, 2009. Research and development costs as a percentage of revenue increased to 5.7% in the year ended March 31, 2010 from 5.6% in the year ended March 31, 2009. Research and development expenses are expected to continue at or above current dollar levels.

Amortization of Acquired Intangible Assets.  Amortization expense related to acquired intangible assets for the years ended March 31, 2010 and 2009 were $1.8 million and $1.0 million, respectively. The increase in amortization expense is primarily due to the addition of customer relationships and software technology intangible assets, which were acquired through the acquisitions of Opus and Sphere during fiscal year 2010.

Interest Income.  Interest income for the year ended March 31, 2010 decreased to $0.2 million compared to $1.2 million in the year ended March 31, 2009 primarily due to significantly lower interest rates received on the Company’s cash investments, which are primarily in institutional money market accounts. Short term interest rates were at historic lows for most of the year ended March 31, 2010.

Our investment policy is determined by our Board of Directors. We currently maintain our cash in very liquid short term assets including tax exempt and taxable money market funds. We owned approximately $7.2 million in ARS as of March 31, 2010, which are illiquid due to the auction failures in the ARS market. Our Board of Directors continues to review alternate uses for our cash including, but not limited to, payment of a special dividend, initiation of a stock buyback program, an expansion of our investment policy to include investments with longer maturities of greater than 90 days, or other items. Additionally, it is possible that we will utilize some or all of our cash to fund acquisitions or other similar business activities. Any or all of these programs could significantly impact our investment income in future periods.

Other Income (Expense).  Other income (expense) for the year ended March 31, 2010 consists of gains and losses in fair value recorded on our ARS investments as well as on our ARS put option rights. We recorded an overall gain on our ARS and ARS put option rights of approximately $0.3 million.

Provision for Income Taxes.  The provision for income taxes for the year ended March 31, 2010 was approximately $27.8 million as compared to approximately $27.2 million for the prior year. The effective tax rates for fiscal years 2010 and 2009 were 36.5% and 37.1%, respectively. The provision for income taxes for the years ended March 31, 2010 and 2009 differs from the combined statutory rates primarily due to the impact of varying state income tax rates, research and development tax credits, the qualified production activities deduction, and exclusions for Company-owned life insurance proceeds and tax-exempt interest income. The change in the effective rate for the year ended March 31, 2010 includes an increase in the benefit from the qualified production activities deduction and a decrease in the state income tax expense.

During the year ended March 31, 2010 and 2009, we claimed research and development tax credits of approximately $0.7 million and $1.0 million, respectively. The Company also claimed the qualified production activities deduction under Section 199 of the Internal Revenue Code (“IRC”) of approximately $4.1 million and $2.7 million during the years ended March 31, 2010 and 2009, respectively. Research and development credits and the qualified production activities income deduction taken by us involve certain assumptions and judgments regarding qualification of expenses under the relevant tax code provision.

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Comparison of Fiscal Years Ended March 31, 2009 and March 31, 2008

During fiscal year 2010, as a result of certain organizational changes, the composition of the Company’s NextGen Division was revised to exclude the former NextGen Practice Solutions unit and the Company’s RCM entities (HSI and PMP), both of which are now administered and aggregated in the Company’s Practice Solutions Division. Following the reorganization, the Company now operates three reportable operating segments (not including Corporate), comprised of the NextGen Division, the QSI Dental Division and the Practice Solutions Division. During fiscal year 2009, we strengthened our position in the RCM market with the acquisitions of HSI and PMP, which closed on May 20, 2008 and October 28, 2008, respectively. Prior to fiscal year 2009, the Company had no material operations in the RCM area and as such, fiscal year 2008 result of operations are not re-casted to reflect the change in reportable segments established in fiscal year 2010. Further for purposes of the presentation of the comparison of fiscal years ended March 31, 2009 and March 31, 2008, the tables and discussion therein are not re-casted to reflect the change in reportable segments. See the presentation of the comparison of fiscal years ended March 31, 2010 and March 31, 2009 for re-casted reportable segment results for fiscal year 2009.

Net Income.  For the year ended March 31, 2009, our net income was $46.1 million or $1.65 per share on a basic and $1.62 per share on a fully diluted basis. In comparison, we earned $40.1 million or $1.47 per share on a basic and $1.44 per share on a fully diluted basis in the year ended March 31, 2008. The increase in net income for the year ended March 31, 2009 was achieved primarily through the following:

•  a 31.6% increase in consolidated revenue, including $21.4 million in RCM revenue from our recently acquired entities;

•  a 34.7% increase in NextGen Division revenue which accounted for 93.5% of consolidated revenue;

•  a shift in revenue mix with increased maintenance, EDI and RCM revenue resulting in a decline in our gross profit margin;

•  an increase in selling, general and administrative expenses as a percentage of revenue related to higher than usual legal expenses, primarily as a result of certain legal matters related to intellectual property infringement claims in the NextGen Division and a proxy contest; and

•  a decrease in interest income primarily due a greater proportion of funds invested in short-term U.S Treasuries and tax free money market accounts which returned significantly lower interest rates as compared to the prior year.

Revenue.  Revenue for the year ended March 31, 2009 increased 31.6% to $245.5 million from $186.5 million for the year ended March 31, 2008. NextGen Division revenue increased 34.7% to $229.7 million from $170.5 million in the year ended March 31, 2008, while QSI Dental Division revenue decreased by 1.2% during that same period, to $15.9 million from $16.0 million. NextGen Division revenue is inclusive of approximately $15.6 million in revenue from HSI and $8.6 million in revenue from PMP, our two fiscal year 2009 RCM acquisitions.

We divide revenue into two categories, “system sales” and “maintenance, EDI, RCM and other services.” Revenue in the system sales category includes software license fees, third party hardware and software, and implementation and training services related to purchase of our software systems. The majority of the revenue in the system sales category is related to the sale of software. Revenue in the maintenance, EDI, RCM and other services category includes maintenance, EDI, RCM, follow-on training services, annual third party license fees, hosting and other services revenue.

System Sales.  Revenue earned from Company-wide sales of systems for the year ended March 31, 2009 increased 10.0% to $98.8 million from $89.8 million in the prior year.

Our increase in revenue from sales of systems was principally the result of a 9.9% increase in category revenue at our NextGen Division whose sales in this category grew from $87.1 million during the year ended March 31, 2008 to $95.7 million during the year ended March 31, 2009. This increase was driven by higher sales of NextGen^ehr and NextGen^epm software to both new and existing clients, as well as increases in sales of hardware, third party software and supplies and implementation and training services.

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Systems sales revenue in the QSI Dental Division increased to approximately $3.0 million in the year ended March 31, 2009 from $2.6 million in the year ended March 31, 2008.

The following table breaks down our reported system sales into software, hardware, third party software, supplies, and implementation and training services components by division:

			Hardware, Third		Implementation
			Party Software		and Training		Total System
	Software		and Supplies		Services		Sales
Year ended March 31, 2009
QSI Dental Division	$	915	$	1,171	$	938	$	3,024
NextGen Division		76,525		6,775		12,437		95,737
Consolidated	$	77,440	$	7,946	$	13,375	$	98,761
Year ended March 31, 2008
QSI Dental Division	$	360	$	1,134	$	1,154	$	2,648
NextGen Division		69,276		5,593		12,252		87,121
Consolidated	$	69,636	$	6,727	$	13,406	$	89,769

NextGen Division software license revenue increased 10.5% between the year ended March 31, 2008 and the year ended March 31, 2009. The Division’s software revenue accounted for 79.9% of divisional system sales revenue during the year ended March 31, 2009, compared to 79.5% during the year ended March 31, 2008. Software license revenue growth continues to be an area of primary emphasis for the NextGen Division.

During the year ended March 31, 2009, 7.1% of NextGen Division’s system sales revenue was represented by hardware and third party software compared to 6.4% during the year ended March 31, 2008. The number of customers who purchase hardware and third party software and the dollar amount of hardware and third party software revenue fluctuates each quarter depending on the needs of customers. The inclusion of hardware and third party software in the Division’s sales arrangements is typically at the request of the customer and is not a priority focus for us.

Implementation and training revenue related to system sales at the NextGen Division increased 1.5% in the year ended March 31, 2009 compared to the year ended March 31, 2008. The amount of implementation and training services revenue is dependent on several factors, including timing of customer implementations, the availability of qualified staff, and the mix of services being rendered. The number of implementation and training staff increased during the year ended March 31, 2009 versus 2008 in order to accommodate the increased amount of implementation services sold in conjunction with increased software sales. In order to achieve growth in this area, additional staffing increases and additional training facilities are anticipated, though actual future increases in revenue and staff will depend upon the availability of qualified staff, business mix and conditions, and our ability to retain current staff members.

The NextGen Division’s growth has come in part from investments in sales and marketing activities including a revamped NextGen.com Web site, new NextGen logo, new marketing campaigns, trade show attendance, and other expanded advertising and marketing expenditures. We have also benefited from winning numerous industry awards for the NextGen Division’s flagship NextGen^ehr and NextGen^epm software products and the apparent increasing acceptance of electronic medical records technology in the healthcare industry.

For the QSI Dental Division, total system sales increased 14.2% in the year ended March 31, 2009 compared to the year ended March 31, 2008. We do not presently foresee any material changes in the business environment for the Division with respect to the weak purchasing environment in the dental group practice market that has existed for the past several years.

Maintenance, EDI, Revenue Cycle Management and Other Services.  For the year ended March 31, 2009, Company-wide revenue from maintenance, EDI, RCM and other services grew 51.7% to $146.8 million from $96.7 million for the year ended March 31, 2008. The increase in this category resulted from an increase in maintenance, EDI, RCM and other services revenue from the NextGen Division. Total NextGen Division maintenance revenue for the year ended March 31, 2009 grew 33.3% to $65.7 million from $49.3 million in

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the prior year, while EDI revenue grew 38.4% to $24.8 million compared to $17.9 million in the prior year. RCM grew to $21.4 million primarily as a result of the HSI and PMP acquisitions. Other services revenue for the NextGen Division, which consists primarily of third party annual software license renewals, consulting services and hosting services increased 43.9% to $22.0 million from $15.3 million a year ago. QSI Dental Division maintenance, EDI and other services revenue decreased 4.2% to $12.8 million for the year ended March 31, 2009 compared to $13.4 million in the prior year.

The following table details maintenance, EDI, RCM, and other services revenue by category for the years ended March 31, 2009 and 2008:

					Revenue Cycle
	Maintenance		EDI		Management		Other		Total
Year ended March 31, 2009
QSI Dental Division	$	7,167	$	4,766	$	—	$	894	$	12,827
NextGen Division		65,695		24,756		21,431		22,045		133,927
Consolidated	$	72,862	$	29,522	$	21,431	$	22,939	$	146,754
Year ended March 31, 2008
QSI Dental Division	$	7,186	$	4,564	$	—	$	1,639	$	13,389
NextGen Division		49,269		17,886		871		15,316		83,342
Consolidated	$	56,455	$	22,450	$	871	$	16,955	$	96,731

The growth in maintenance revenue for the NextGen Division has come from new customers that have been added each quarter, existing customers who have purchased additional licenses, and our relative success in retaining existing maintenance customers. NextGen Division’s EDI revenue growth has come from new customers and from further penetration of the Division’s existing customer base. The growth in RCM is a result of the HSI and PMP acquisitions and future growth is expected from cross selling opportunities between the customer bases.

Cost of Revenue.  Cost of revenue for the year ended March 31, 2009 increased 42.2% to $88.9 million from $62.5 million for the year ended March 31, 2008 and the cost of revenue as a percentage of revenue increased to 36.2% from 33.5% due to the fact that the rate of growth in cost of revenue grew faster than the aggregate revenue growth rate for the Company.

The following table details revenue and cost of revenue on a consolidated and divisional basis for the years ended March 31, 2009 and 2008:

	Year Ended March 31,
	2009		%			2008		%
QSI Dental Division
Revenue	$	15,851		100.0	%	$	16,037		100.0	%
Cost of revenue		7,582		47.8	%		7,545		47.0	%
Gross profit	$	8,269		52.2	%	$	8,492		53.0	%
NextGen Division
Revenue	$	229,664		100.0	%	$	170,463		100.0	%
Cost of revenue		81,308		35.4	%		54,956		32.2	%
Gross profit	$	148,356		64.6	%	$	115,507		67.8	%
Consolidated
Revenue	$	245,515		100.0	%	$	186,500		100.0	%
Cost of revenue		88,890		36.2	%		62,501		33.5	%
Gross profit	$	156,625		63.8	%	$	123,999		66.5	%

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Gross profit margins at the NextGen Division for the year ended March 31, 2009 decreased to 64.6% from 67.8% from the year ended March 31, 2008. Gross profit margins at the QSI Dental Division for the year ended March 31, 2009 decreased to 52.2% from 53.0% for the year ended March 31, 2008.

The following table details the individual components of cost of revenue and gross profit as a percentage of total revenue on a consolidated and divisional basis for the years ended March 31, 2009 and 2008:

	Hardware,			Payroll and
	Third Party			Related									Total Cost of			Gross
	Software			Benefits			EDI			Other			Revenue			Profit
Year ended March 31, 2009
QSI Dental Division		7.6	%		19.8	%		17.1	%		3.3	%		47.8	%		52.2	%
NextGen Division		3.5	%		14.8	%		7.8	%		9.3	%		35.4	%		64.6	%
Consolidated		3.7	%		15.1	%		8.4	%		9.0	%		36.2	%		63.8	%
Year ended March 31, 2008
QSI Dental Division		8.0	%		19.1	%		15.7	%		4.2	%		47.0	%		53.0	%
NextGen Division		3.8	%		11.2	%		7.5	%		9.7	%		32.2	%		67.8	%
Consolidated		4.2	%		11.8	%		8.2	%		9.3	%		33.5	%		66.5	%

The increase in our consolidated cost of revenue as a percentage of revenue between the year ended March 31, 2009 and the year ended March 31, 2008 is primarily attributable to an increase in RCM revenue, which carries higher payroll and related benefits as a percentage of revenue and higher EDI costs in both divisions, offset by a decrease in hardware and third party software, and other expense as a percentage of revenue. Other expense, which consists of outside service costs, amortization of software development costs and other costs, decreased to 9.0% of total revenue during the year ended March 31, 2009 from 9.3% of total revenue during the year ended March 31, 2008.

During the year ended March 31, 2009, hardware and third party software constituted a smaller portion of consolidated cost of revenue compared to the prior year period in the NextGen Division. The number of customers who purchase hardware and third party software and the dollar amount of hardware and third party software purchased fluctuates each quarter depending on the needs of the customers and is not a priority focus for us.

Our payroll and benefits expense associated with delivering our products and services increased to 15.1% of consolidated revenue in the year ended March 31, 2009 compared to 11.8% during the year ended March 31, 2008 primarily due to the acquisition of HSI and PMP which as service businesses have an inherently higher percentage of payroll costs as a percentage of revenue.

The absolute level of consolidated payroll and benefit expenses grew from $22.1 million in the year ended March 31, 2008 to $37.1 million in the year ended March 31, 2009, an increase of 67.9% or approximately $15.0 million. Of the $15.0 million increase, approximately $4.8 million was a result of the HSI acquisition and $3.9 million was a result of the PMP acquisition. In addition, related headcount, payroll and benefits expense associated with delivering products and services in the NextGen Division increased by $6.1 million in the year ended March 31, 2009 to $25.1 million from $19.0 million in the year ended March 31, 2008. Payroll and benefits expense associated with delivering products and services in the QSI Dental Division remained consistent at $3.1 million in the year ended March 31, 2009 and 2008, respectively. The application of ASC 718 added approximately $0.2 million and $0.5 million in compensation expense to cost of revenue in the years ended March 31, 2009 and 2008, respectively.

As a result of the foregoing events and activities, the gross profit percentage for the Company and both our Divisions decreased for the year ended March 31, 2009 versus the prior year.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses for the year ended March 31, 2009 increased 32.3% to $70.4 million as compared to $53.3 million for the year ended March 31, 2008. The increase in these expenses resulted from a:

•  $2.7 million increase in legal expenses in the NextGen Division;

•  $1.7 million increase in compensation expense in the NextGen Division;

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•  $1.2 million increase in outside services and consulting services in the NextGen Division;

•  $0.9 million increase in advertising in the NextGen Division;

•  $6.7 million increase in other selling, general and administrative expenses in the NextGen Division; and

•  $3.9 million increase in corporate related expenses.

Approximately $1.5 million of the year over year increase in corporate related expense was related to expenses associated with the proxy contest which occurred in conjunction with the 2008 Annual Shareholders’ Meeting. Amortization of identifiable intangibles related to the HSI and PMP acquisitions of approximately $1.0 million and an increase in corporate salaries and related benefits of $0.7 million also contributed to the year over year corporate increase.

The application of ASC 718 added approximately $1.5 million and $2.5 million in compensation expense to selling, general and administrative expenses for the year ended March 31, 2009 and 2008, respectively, and is included in the aforementioned amounts. Selling, general and administrative expenses as a percentage of revenue increased slightly from 28.6% in the year ended March 31, 2008 to 28.7% in the year ended March 31, 2009.

Research and Development Costs.  Research and development costs for the years ended March 31, 2009 and 2008 were $13.8 million and $11.4 million, respectively. The increases in research and development expenses were due in part to increased investment in the NextGen Division product line. Additionally, the application of ASC 718 added approximately $0.2 million and $0.8 million in the years ended March 31, 2009 and 2008, respectively, in compensation expense to research and development costs, net of amounts capitalized as software development in those fiscal years. Additions to capitalized software costs offset research and development costs. For the year ended March 31, 2009, $5.9 million was added to capitalized software costs while $6.0 million was capitalized during the year ended March 31, 2008. Research and development costs as a percentage of revenue decreased to 5.6% in the year ended March 31, 2009 from 6.1% in the year ended March 31, 2008.

Amortization of Acquired Intangible Assets.  Amortization expense related to acquired intangible assets for the year ended March 31, 2009 was $1.0 million. The amortization expense relates to the addition of customer relationships and trade name intangible assets, which were acquired through the acquisitions of HSI and PMP during fiscal year 2009.

Interest Income.  Interest income for the year ended March 31, 2009 decreased to $1.2 million compared to $2.7 million in the year ended March 31, 2008 primarily due to:

•  a lower amount of investments held in ARS when compared to the prior year;

•  larger amounts invested in money market accounts which earned significantly lower interest rates as compared to the prior year; and

•  overall comparatively lower amounts of funds available for investment during the year due to payments of $8.2 million and $17.0 million, respectively, for the Company’s acquisitions of HSI and PMP and increased quarterly dividend payments.

Other Income (Expense).  Other income (expense) for the year ended March 31, 2009 consists of gains and losses in fair value recorded on our ARS investments as well as on our ARS put option rights. We recognized a pre-tax unrealized loss on our ARS of approximately $0.7 million. At the same time, we estimated the fair value of our ARS put option rights at approximately $0.4 million.

Included in other income for the year ended March 31, 2008 was approximately $1.0 million, resulting from a gain on life insurance proceeds due to the passing of Gregory Flynn, Executive Vice President and General Manager of the QSI Dental Division. Mr. Flynn participated in our deferred compensation plan which is funded through the purchase of life insurance policies with the Company named as beneficiary. There was no gain or loss recorded on investment securities during the year ended March 31, 2008.

Provision for Income Taxes.  The provision for income taxes for the year ended March 31, 2009 was approximately $27.2 million as compared to approximately $22.9 million for the prior year. The effective tax rates for fiscal 2009 and 2008 were 37.1% and 36.4%, respectively. The provision for income taxes for the years ended

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March 31, 2009 and 2008 differs from the combined statutory rates primarily due to the impact of varying state income tax rates, research and development tax credits, the qualified production activities deduction, and exclusions for Company-owned life insurance proceeds and tax-exempt interest income. The change in the effective rate for the year ended March 31, 2009 includes an increase in the benefit from research and development credits, which was mostly offset by a decrease in qualified production activities deduction and an increase in state income tax expense.

During the year ended March 31, 2009 and 2008, we claimed research and development tax credits of approximately $1.0 million and $0.8 million, respectively. The Company also claimed the qualified production activities deduction under Section 199 of the IRC of approximately $2.7 million and $3.1 million during the years ended March 31, 2009 and 2008, respectively. Research and development credits and the qualified production activities income deduction taken by us involve certain assumptions and judgments regarding qualification of expenses under the relevant tax code provision.

Liquidity and Capital Resources

The following table presents selected financial statistics and information for each of the years ended March 31, 2010, 2009 and 2008:

	Year Ended March 31,
	2010		2009		2008
Cash and cash equivalents	$	84,611	$	70,180	$	59,046
Net increase (decrease) in cash and cash equivalents	$	14,431	$	11,134	$	(982	)
Net income	$	48,379	$	46,119	$	40,078
Net cash provided by operating activities	$	55,220	$	48,712	$	43,599
Number of days of sales outstanding		125		125		136

Cash Flow from Operating Activities

Cash provided by operations has historically been our primary source of cash and has primarily been driven by our net income plus adjustments to add back non-cash expenses, including depreciation, amortization of intangibles and capitalized software costs, provisions for bad debts and inventory obsolescence, share-based compensation and deferred taxes.

The following table summarizes our Consolidated Statements of Cash Flows for the years ended March 31, 2010, 2009 and 2008:

	Year Ended March 31,
	2010			2009			2008
Net income	$	48,379		$	46,119		$	40,078
Non-cash expenses		16,152			17,719			11,299
Gain on life insurance proceeds, net		—			—			(755	)
Tax benefit from exercise of stock options, net		—			1			65
Change in deferred revenue		12,528			3,130			5,447
Change in accounts receivable		(18,944	)		(11,369	)		(13,811	)
Change in other assets and liabilities		(2,895	)		(6,888	)		1,276
Net cash provided by operating activities	$	55,220		$	48,712		$	43,599

Net Income.  As referenced in the above table, net income makes up the majority of our cash generated from operations for the years ended March 31, 2010, 2009 and 2008. The NextGen Division’s contribution to net income has increased each year due to that Division’s operating income increasing more quickly than our Company as a whole.

Non-Cash Expenses.  Non-cash expenses include depreciation, amortization of intangibles and capitalized software costs, provisions for bad debts and inventory obsolescence, share-based compensation and deferred taxes. Total non-cash expenses were $16.2 million, $17.7 million and $11.3 million for the years ended March 31, 2010,

49

2009 and 2008, respectively. The change for the year ended March 31, 2010 as compared to the prior year is primarily related to an increase of approximately $0.8 million in depreciation, $0.8 million of amortization of capitalized software costs, $0.7 million of amortization of other intangibles, and $1.4 million in the allowance for bad debt, offset by a decrease of $5.2 million in deferred income tax expense.

Tax Benefits From Stock Options.  Tax benefits from the exercise of stock options were $1.6 million, $3.4 million and $1.4 million for the years ended March 31, 2010, 2009 and 2008, respectively. Our application of ASC 718 required excess tax benefits to be reclassed to financing activities, resulting in a corresponding decrease in our net cash provided by operating activities of $1.6 million, $3.4 million and $1.3 million in the years ended March 31, 2010, 2009 and 2008, respectively.

Deferred Revenue.  Cash from operations benefited significantly from increases in deferred revenue primarily due to an increase in the volume of implementation and maintenance services invoiced by the NextGen Division which had not yet been rendered or recognized as revenue. This benefit is offset by the increase in unpaid deferred revenue. Deferred revenue grew by approximately $12.5 million for the year ended March 31, 2010 versus growth of $3.1 million and $5.4 million for the years ended March 31, 2009 and 2008, resulting in increases to cash provided by operating activities for the respective periods.

Accounts Receivable.  Accounts receivable grew by approximately $18.9 million, $11.4 million and $13.8 million for the years ended March 31, 2010, 2009 and 2008, respectively. The increase in accounts receivable in the periods is due to the following factors:

•  NextGen Division revenue grew 13.6%, 19.6% and 21.3% for the years ended March 31, 2010, 2009 and 2008, respectively;

•  Turnover of accounts receivable is generally slower in the NextGen Division due to the fact that the systems sales related revenue have longer payment terms, generally up to one year, which historically have accounted for a major portion of NextGen Division sales;

•  The Opus acquisition added approximately $2.1 million of accounts receivable as of March 31, 2010; and

•  We experienced an increase in the volume of undelivered services billed in advance by the NextGen Division which were unpaid as of the end of each period and included in accounts receivable. This resulted in an increase in both deferred revenue and accounts receivable of approximately $9.5 million, $1.2 million and $4.9 million for the years ended March 31, 2010, 2009 and 2008, respectively.

The turnover of accounts receivable measured in terms of days sales outstanding (“DSO”) fluctuated during the year, but remained consistent at 125 days during the year ended March 31, 2010 as compared to the prior year.

If amounts included in both accounts receivable and deferred revenue were netted, our turnover of accounts receivable expressed as DSO would be 79 days as of March 31, 2010 and 83 days as of March 31, 2009. Provided turnover of accounts receivable, deferred revenue, and profitability remain consistent with the year ended March 31, 2010, we anticipate being able to continue to generate cash from operations during fiscal 2011 primarily from our net income.

Cash flows from investing activities

Net cash used in investing activities for the years ended March 31, 2010, 2009 and 2008 was $13.9 million, $19.4 million and $30.2 million, respectively. The decrease in cash used in investing activities for the year ended March 31, 2010 is due mainly to the fact that we acquired cash balances of $2.0 million from the acquisition of Opus whereas for the year ended March 31, 2009, we had paid approximately $8.2 million and $17.0 million for the acquisitions of HSI and PMP, respectively, offset by proceeds from the sale of marketable securities of $14.8 million. Other net cash outflows during the year ended March 31, 2010 include payments of $0.3 million for each of our two fiscal year 2010 acquisitions, Opus and Sphere, and payment of contingent consideration related to the PMP acquisition of $3.0 million as well as additions to equipment and improvements and capitalized software costs totaling $12.9 million.

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Cash flows from financing activities

Net cash used in financing activities for the year ended March 31, 2010 was $26.8 million and consisted of dividends paid to shareholders totaling $34.3 million, offset by proceeds of $5.9 million from the exercise of stock options. We recorded a reduction in income tax liability of $1.6 million related to excess tax deductions received from employee stock option exercises. The benefit was recorded as additional paid in capital.

Cash and cash equivalents and marketable securities

At March 31, 2010, we had cash and cash equivalents of $84.6 million and marketable securities of $7.2 million. We intend to expend some of these funds for the development of products complementary to our existing product line as well as new versions of certain of our products. These developments are intended to take advantage of more powerful technologies and to increase the integration of our products. We have no additional significant current capital commitments.

On February 10, 2010, we acquired Opus and on August 12, 2009, we acquired Sphere. The Opus purchase price of $20.6 million consisted of approximately $0.3 million in cash plus up to $11.6 million in contingent consideration tied to future performance. The Sphere purchase price of $1.4 million consisted of approximately $0.3 million in cash plus an estimated $1.1 million (but in no event to exceed $2.5 million) in contingent consideration tied to future performance.

On October 28, 2008, we acquired PMP and on May 20, 2008, we acquired HSI. The PMP purchase price consisted of approximately $17.0 million in cash (including direct transaction costs) plus up to $3.0 million in contingent consideration tied to future performance, which has been paid as of March 31, 2010. The HSI purchase price consisted of approximately $8.2 million in cash (including direct transaction costs) plus up to approximately $1.7 million in contingent consideration tied to future performance.

In January 2007, our Board of Directors adopted a policy whereby we intend to pay a regular quarterly dividend of $0.25 per share on our outstanding common stock, subject to further Board review and approval and establishment of record and distribution dates by our Board of Directors prior to the declaration of each such quarterly dividend. In August 2008, our Board of Directors increased the quarterly dividend to $0.30 per share. We anticipate that future quarterly dividends, if and when declared by our Board of Directors pursuant to this policy, would likely be distributable on or about the fifth day of each of the months of October, January, April and July.

On May 26, 2010, the Board of Directors approved a quarterly cash dividend of $0.30 per share on our outstanding shares of common stock, payable to shareholders of record as of June 17, 2010 with an expected distribution date on or about July 6, 2010.

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The following dividends have been declared in the 2010, 2009, and 2008 fiscal years on the dates indicated:

			Dividend
Board Approval Date	Record Date	Payment Date	Amount
Fiscal year 2010
January 27, 2010	March 23, 2010	April 5, 2010	$	0.30
October 28, 2009	December 23, 2009	January 5, 2010		0.30
July 23, 2009	September 25, 2009	October 5, 2009		0.30
May 27, 2009	June 12, 2009	July 6, 2009		0.30
Fiscal year 2009
January 28, 2009	March 11, 2009	April 3, 2009	$	0.30
October 30, 2008	December 15, 2008	January 5, 2009		0.30
August 4, 2008	September 15, 2008	October 1, 2008		0.30
May 29, 2008	June 15, 2008	July 2, 2008		0.25
Fiscal year 2008
January 30, 2008	March 14, 2008	April 7, 2008	$	0.25
October 25, 2007	December 14, 2007	January 7, 2008		0.25
July 31, 2007	September 14, 2007	October 5, 2007		0.25
May 31, 2007	June 15, 2007	July 5, 2007		0.25

Management believes that its cash and cash equivalents on hand at March 31, 2010, together with its marketable securities and cash flows from operations, if any, will be sufficient to meet its working capital and capital expenditure requirements as well as any dividends to be paid in the ordinary course of business for the remainder of fiscal year 2011.

Contractual Obligations.  The following table summarizes our significant contractual obligations, all of which relate to operating leases, at March 31, 2010 and the effect that such obligations are expected to have on our liquidity and cash in future periods:

Year Ended March 31,
2011	$	4,413
2012		4,565
2013		4,577
2014		3,963
2015 and beyond		7,215
	$	24,733

New Accounting Pronouncements

Refer to Note 2 of our Consolidated Financial Statements, “Summary of Significant Accounting Policies” for a discussion of new accounting standards.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We maintain investments in tax exempt municipal ARS which are classified as current and non-current marketable securities on the Company’s Consolidated Balance Sheets. A small portion of our portfolio is invested in closed-end funds which invest in tax exempt municipal ARS. At March 31, 2010, we had approximately $7.2 million of ARS on our Consolidated Balance Sheets. The ARS are rated by one or more national rating agencies and have contractual terms of up to 30 years but generally have interest rate reset dates that occur every 7, 28 or 35 days.

Despite the underlying long-term maturity of ARS, such securities were priced and subsequently traded as short-term investments because of the interest rate reset feature. If there are insufficient buyers, the auction is said to “fail” and the holders are unable to liquidate the investments through auction. A failed auction does not result in a

52

default of the debt instrument. The securities will continue to accrue interest and be auctioned until the auction succeeds, the issuer calls the securities, or the securities mature. In February 2008, we began to experience failed auctions on our ARS and auction rate preferred securities. To determine their estimated fair values at March 31, 2010, factors including credit quality, the likelihood of redemption, and yields or spreads of fixed rate municipal bonds or other trading instruments issued by the same or comparable issuers, were considered. Based on our ability to access our cash and other short-term investments, our expected operating cash flows, and our other sources of cash, we do not anticipate the current lack of liquidity on these investments to have a material impact on our financial condition or results of operation.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our Consolidated Financial Statements identified in the Index to Financial Statements appearing under “Item 15. Exhibits and Financial Statement Schedules” of this Report are incorporated herein by reference to Item 15.

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 Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of March 31, 2010, that the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended) are effective to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Security Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding whether or not disclosure is required.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, 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.

Our internal control over financial reporting is supported by written policies and procedures, that:

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(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 our company are being made only in accordance with authorizations of our management and directors; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that

53

controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management of the Company has assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2010 in making our assessment of internal control over financial reporting, management used the criteria set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of March 31, 2010.

The effectiveness of the Company’s internal control over financial reporting as of March 31, 2010 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2010, there were no changes in our “internal control over financial reporting” (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.   OTHER INFORMATION

None.

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 is incorporated herein by reference from our definitive proxy statement for our 2010 Annual Shareholders’ Meeting to be filed with the Commission.

ITEM 11.   EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated herein by reference from our definitive proxy statement for our 2010 Annual Shareholders’ Meeting to be filed with the Commission.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

The information required by Item 12 is incorporated herein by reference from our definitive proxy statement for our 2010 Annual Shareholders’ Meeting to be filed with the Commission.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 is incorporated herein by reference from our definitive proxy statement for our 2010 Annual Shareholders’ Meeting to be filed with the Commission.

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 is incorporated herein by reference from our definitive proxy statement for our 2010 Annual Shareholders’ Meeting to be filed with the Commission.

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PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) Index to Financial Statements:

	Page
• Report of Independent Registered Public Accounting Firm		60
• Report of Independent Registered Public Accounting Firm		61
• Consolidated Balance Sheets as of March 31, 2010 and March 31, 2009		62
• Consolidated Statements of Income — Fiscal Years Ended March 31, 2010, March 31, 2009 and March 31, 2008		63
• Consolidated Statements of Shareholders’ Equity — Fiscal Years Ended March 31, 2010, March 31, 2009 and March 31, 2008		64
• Consolidated Statements of Cash Flows — Fiscal Years Ended March 31, 2010, March 31, 2009 and March 31, 2008		65
• Notes to Consolidated Financial Statements		67

(2) The following supplementary financial statement schedule of Quality Systems, Inc., required to be included in Item 15(a)(2) on Form 10-K is filed as part of this Report.

• Schedule II — Valuation and Qualifying Accounts 98

Schedules other than that listed above have been omitted since they are either not required, not applicable, or because the information required is included in the Consolidated Financial Statements or the notes thereto.

(3) The exhibits listed in the Index to Exhibits hereof are attached hereto or incorporated herein by reference and filed as a part of this Report.

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INDEX TO EXHIBITS

Exhibit
Number			Description
	3	.1	Restated Articles of Incorporation of Quality Systems, Inc. filed with the Secretary of State of California on September 8, 1989, are hereby incorporated by reference to Exhibit 3.1 to the registrant’s Registration Statement on Form S-1 (Registration No. 333-00161) filed January 11, 1996.
	3	.2	Certificate of Amendment to Articles of Incorporation of Quality Systems, Inc. filed with the Secretary of State of California effective March 4, 2005, is hereby incorporated by reference to Exhibit 3.1.1 of the registrant’s Annual Report on Form 10-K for the year ended March 31, 2005.
	3	.3	Certificate of Amendment to Articles of Incorporation of Quality Systems, Inc. filed with the Secretary of State of California effective October 6, 2005 is hereby incorporated by reference to Exhibit 3.01 of the registrant’s Current Report on Form 8-K filed October 11, 2005.
	3	.4	Certificate of Amendment to Articles of Incorporation of Quality Systems, Inc. filed with the Secretary of State of California effective March 3, 2006 is hereby incorporated by reference to Exhibit 3.1 of the registrant’s Current Report on Form 8-K filed March 6, 2006.
	3	.5	Amended and Restated Bylaws of Quality Systems, Inc., effective October 30, 2008, are hereby incorporated by reference to Exhibit 3.1 of the registrant’s Current Report on Form 8-K filed October 31, 2008.
	10	.1*	Amended and Restated 1998 Stock Option Plan is hereby incorporated by reference to Exhibit 10.10.1 of the registrant’s Annual Report on Form 10-K for the year ended March 31, 2005.
	10	.2*	Form of Incentive Stock Option Agreement for Amended and Restated 1998 Stock Option Plan is hereby incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.
	10	.3*	Form of Non-Qualified Stock Option Agreement for Amended and Restated 1998 Stock Option Plan is hereby incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q for the quarter ended September 20, 2004.
	10	.4*	2005 Stock Option and Incentive Plan is incorporated by reference to Exhibit 10.01 to the registrant’s Current Report on Form 8-K filed October 5, 2005.
	10	.5*	Form of Nonqualified Stock Option Agreement for 2005 Stock Incentive Plan is incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed June 5, 2007.
	10	.6*	Form of Incentive Stock Option Agreement for 2005 Stock Incentive Plan is incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed June 5, 2007.
	10	.7*	1993 Deferred Compensation Plan is hereby incorporated by reference to Exhibit 10.5 to the registrant’s Annual Report on Form 10-KSB for the year ended March 31, 1994.
	10	.8*	1998 Employee Stock Contribution Plan is hereby incorporated by reference to Exhibit 4.1 to the registrant’s Registration Statement on Form S-8 (Registration No. 333-63131).
	10	.9*	Form of Second Amended and Restated Indemnification Agreement for directors and executive officers is hereby incorporated by reference to Exhibit 10.3 of the registrant’s Current Report on Form 8-K filed on February 2, 2010.
	10	.10	Lease Agreement between Company and Tower Place, L.P. dated November 15, 2000, commencing February 5, 2001 is hereby incorporated by reference to Exhibit 10.14 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2001.
	10	.11	Fourth Amendment to lease agreement between the Company and Tower Place, L.P. dated September 22, 2005 is incorporated by reference to Exhibit 10.24 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2006.
	10	.12	Fifth Amendment to lease agreement between the Company and Tower Place, L.P. dated January 31, 2007 is incorporated by reference to Exhibit 10.13 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2007.
	10	.13	Lease Agreement between the Company and HUB Properties LLC dated May 8, 2002 is hereby incorporated by reference to Exhibit 10.18 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2003.

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Exhibit
Number			Description
	10	.14	Second Amendment to Office Lease agreement between the Company and HUB Properties LLC dated February 14, 2006 is incorporated by reference to Exhibit 10.25 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2006.
	10	.15	Amended and Restated Second Amendment to Office Lease agreement between the Company and HUB Properties LLC dated May 31, 2006 is incorporated by reference to Exhibit 10.17 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2007.
	10	.16	Lease agreement between the Company and Von Karman Michelson Corporation dated September 6, 2005 is incorporated by reference to Exhibit 10.23 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2006.
	10	.17	Office lease between the Company and SLTS Grand Avenue, L.P. dated May 3, 2006 is incorporated by reference to Exhibit 10.20 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2007.
	10	.18*	Board Service Agreement between the Company and Patrick Cline is incorporated by reference to Exhibit 10.2.1 to the registrant’s Current Report on Form 8-K dated May 31, 2005.
	10	.19*	Director Compensation Program is incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed February 2, 2010.
	10	.20	Settlement Agreement dated as of August 8, 2006 between the registrant and Ahmed Hussein is incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed August 9, 2006.
	10	.21*	Description of Compensation Program for Named Executive Officers for Fiscal Year Ended March 31, 2010 is incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed June 1, 2009.
	10	.22	Agreement and Plan of Merger dated May 16, 2008 by and among Quality Systems, Inc., Bud Merger Sub, LLC and Lackland Acquisition II, LLC, is incorporated by reference to Exhibit 10.27 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2008.
	10	.23	Office lease between the Company and Lakeshore Towers Limited Partnership Phase II, a California limited partnership, dated October 18, 2007, is incorporated by reference to Exhibit 10.28 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2008.
	10	.24	Standard Service Center Lease Agreement between the Lincoln National Life Insurance Company and Lackland Acquisition II, LLC, dated November 28, 2001, is incorporated by reference to Exhibit 10.29 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2008.
	10	.25	First Amendment to Standard Service Center Lease Agreement between the Lincoln National Life Insurance Company and Lackland Acquisition II, LLC, dated August 17, 2005, is incorporated by reference to Exhibit 10.30 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2008.
	10	.26	Standard Service Center Lease Agreement between the Lincoln National Life Insurance Company and InfoNow Solutions of St. Louis, LLC, dated November 28, 2001, is incorporated by reference to Exhibit 10.31 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2008.
	10	.27	Second Amendment to Service Center Lease Agreement between the TM Properties, LLC, successor to the Lincoln National Life Insurance Company and Lackland Acquisition II, LLC, dated August 17, 2005, is incorporated by reference to Exhibit 10.32 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2008.
	10	.28	Assignment of Lease between InfoNow Solutions of St. Louis, Lackland Acquisition II, LLC and TM Properties, LLC dated August 17, 2005, is incorporated by reference to Exhibit 10.33 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2008.
	10	.29	Agreement and Plan of Merger dated October 15, 2008 by and among (i) Quality Systems, Inc. (ii) NextGen Healthcare Information Systems, Inc. (iii) Ruth Merger Sub, Inc. (iv) Practice Management Partners, Inc. and (v) certain shareholders set forth therein, is incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.

57

Exhibit
Number			Description
	10	.30	First Amendment to Lease Agreement between Hill Management Services, Inc. and Practice Management Partners, Inc., dated January 15, 2008, is incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
	10	.31	First Amendment to Sublease Agreement between RehabCare Group, Inc. and Practice Management Partners Inc., dated January 15 2008, is incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
	10	.32	Third Amendment to Lease Agreement between Pinecrest LLC and Practice Management Partners, Inc., dated April 30, 2007, is incorporated by reference to Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
	10	.33*	Employment Agreement dated August 11, 2008 between Quality Systems, Inc., and Steven Plochocki, is incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on August 12, 2008.
	10	.34*	Outside Directors Amended and Restated Restricted Stock Agreement is incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed February 9, 2010.
	10	.35*	Employment Offer and Terms of Employment dated September 17, 2009, between Quality Systems, Inc. and Philip N. Kaplan, is incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on September 21, 2009.
	10	.36**	Agreement and Plan of Merger dated February 10, 2010, by and among Quality Systems, Inc., OHS Merger Sub, Inc., Opus Healthcare Solutions, Inc., and the Shareholders of Opus Healthcare Solutions, Inc.
	10	.37**	Sixth Amendment to Lease Agreement between the Company and Tower Place, L.P. dated April 1, 2010.
	10	.38**	Third Amendment to Office Lease agreement between the Company and HUB Properties LLC dated January 1, 2010.
	10	.39**	Fourth Amendment to Office Lease agreement between the Company and HUB Properties LLC dated March 17, 2010.
	10	.40**	Third Amendment to Service Center Lease Agreement between the TM Properties, LLC, successor to the Lincoln National Life Insurance Company and Lackland Acquisition II, LLC, dated March 15, 2010.
	10	.41**	Second Amendment to Lease Agreement between Hill Management Services, Inc. and Practice Management Partners, Inc., dated November 1, 2009.
	10	.42**	Modification of Lease #1 between Olen Commercial Realty Corp. and NXG Acute Care LLC, dated October 13, 2009.
	10	.43**	Lease between Olen Commercial Realty Corp. and NXG Acurate Care LLC, dated October 1, 2009.
	10	.44**	Sublease Agreement between Centex Homes and Opus Healthcare Solutions, Inc., dated February   , 2009.
	21	**	List of subsidiaries.
	23	.1**	Consent of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP.
	23	.2**	Consent of Independent Registered Public Accounting Firm — Grant Thornton LLP.
	31	.1**	Certification of Principal Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2**	Certification of Principal Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1**	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	This exhibit is a management contract or a compensatory plan or arrangement.
**	Filed herewith.

58

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.

By:  /s/  Steven T. Plochocki

Steven T. Plochocki

President and Chief Executive Officer

Date: May 26, 2010

KNOW ALL PERSONS BY THESE PRESENTS, that each of the persons whose signature appears below hereby constitutes and appoints Steven T. Plochocki and Paul A. Holt, each of them acting individually, as his attorney-in-fact, each with the full power of substitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming our signatures as they may be signed by our said attorney-in-fact and any and all amendments to this Annual Report on Form 10-K.

Pursuant to the requirement of the Securities Exchange Act of 1934, this Report has been signed by the following persons on our behalf in the capacities and on the dates indicated.

Signature	Title	Date
/s/  Sheldon Razin Sheldon Razin	Chairman of the Board and Director	May 26, 2010
/s/  Steven T. Plochocki Steven T. Plochocki	Chief Executive Officer (Principal Executive Officer) and Director	May 26, 2010
/s/  Paul A. Holt Paul A. Holt	Chief Financial Officer (Principal Financial Officer) and Secretary	May 26, 2010
/s/  Patrick B. Cline Patrick B. Cline	President and Chief Strategy Officer, and Director	May 26, 2010
/s/  Murray Brennan Murray Brennan	Director	May 26, 2010
/s/  George Bristol George Bristol	Director	May 26, 2010
Ahmed Hussein	Director
Joseph Davis	Director
/s/  Craig Barbarosh Craig Barbarosh	Director	May 26, 2010
/s/  Russell Pflueger Russell Pflueger	Director	May 26, 2010

59

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Quality Systems, Inc.,

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1), present fairly, in all material respects, the financial position of Quality Systems, Inc. and its subsidiaries at March 31, 2010, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2), presents fairly, in all material respects, the information set forth therein for the year ended March 31, 2010 when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audit. 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 and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

We also have audited the adjustments to the financial statements for the years ended March 31, 2009 and 2008 to retrospectively apply the change in reportable segments as described in Note 15. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to financial statements for the years ended March 31, 2009 and 2008 of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the financial statements for the years ended March 31, 2009 and 2008 taken as a whole.

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

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

/s/  PricewaterhouseCoopers LLP

Orange County, California

May 28, 2010

60

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Quality Systems, Inc.

We have audited, before the effects of the adjustments to retrospectively apply the change in operating segment information described in Note 15, the consolidated balance sheet of Quality Systems, Inc. as of March 31, 2009, and the related statements of income, shareholders’ equity, and cash flows for each of the two years in the period ended March 31, 2009 (the 2009 and 2008 consolidated financial statements before the effects of the adjustments discussed in Note 15 are not presented herein). Our audits of the basic financial statements included the financial statement Schedule II listed in the index appearing under Item 15 (a)(2). These 2009 and 2008 consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement 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 consolidated 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 2009 and 2008 consolidated financial statements referred to above, which are before the effects of the adjustments to retrospectively apply the change in operating segment information described in Note 15, present fairly, in all material respects, the financial position of Quality Systems, Inc. as of March 31, 2009 and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2009 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement Schedule II, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in operating segment information described in Note 15 and accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors.

/s/  Grant Thornton LLP

Irvine, California

May 27, 2009

61

QUALITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

	March 31,		March 31,
	2010		2009
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	84,611	$	70,180
Restricted cash		2,339		1,303
Marketable securities		7,158		—
Accounts receivable, net		107,458		90,070
Inventories, net		1,340		1,125
Income taxes receivable		2,953		5,605
Net current deferred tax assets		5,678		3,994
Other current assets		8,684		6,312
Total current assets		220,221		178,589
Marketable securities		—		7,395
Equipment and improvements, net		8,432		6,756
Capitalized software costs, net		11,546		9,552
Intangibles, net		20,145		8,403
Goodwill		46,189		28,731
Other assets		3,647		2,675
Total assets	$	310,180	$	242,101
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,342	$	5,097
Deferred revenue		64,109		47,584
Accrued compensation and related benefits		8,951		9,511
Dividends payable		8,664		8,529
Other current liabilities		16,220		8,888
Total current liabilities		101,286		79,609
Deferred revenue, net of current		474		521
Net deferred tax liabilities		10,859		4,566
Deferred compensation		1,883		1,838
Other noncurrent liabilities		7,389		—
Total liabilities		121,891		86,534
Commitments and contingencies
Shareholders’ equity:
Common Stock
$0.01 par value; authorized 50,000 shares; issued and
outstanding 28,879 and 28,447 shares at March 31, 2010
and March 31, 2009, respectively		289		284
Additional paid-in capital		122,271		103,524
Retained earnings		65,729		51,759
Total shareholders’ equity		188,289		155,567
Total liabilities and shareholders’ equity	$	310,180	$	242,101

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

62

QUALITY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME

	Fiscal Year Ended
	March 31,		March 31,			March 31,
	2010		2009			2008
	(In thousands, except per share data)
Revenues:
Software, hardware and supplies	$	89,761	$	85,386		$	76,363
Implementation and training services		14,376		13,375			13,406
System sales		104,137		98,761			89,769
Maintenance		89,192		72,862			56,455
Electronic data interchange services		35,035		29,522			22,450
Revenue cycle management and related services		36,665		21,431			871
Other services		26,782		22,939			16,955
Maintenance, EDI, RCM and other services		187,674		146,754			96,731
Total revenues		291,811		245,515			186,500
Cost of revenue:
Software, hardware and supplies		12,115		13,184			10,887
Implementation and training services		11,983		10,286			10,341
Total cost of system sales		24,098		23,470			21,228
Maintenance		13,339		11,859			12,446
Electronic data interchange services		25,262		21,374			15,776
Revenue cycle management and related services		27,715		14,674			558
Other services		20,393		17,513			12,493
Total cost of maintenance, EDI, RCM and other services		86,709		65,420			41,273
Total cost of revenue		110,807		88,890			62,501
Gross profit		181,004		156,625			123,999
Operating expenses:
Selling, general and administrative		86,951		69,410			53,260
Research and development costs		16,546		13,777			11,350
Amortization of acquired intangible assets		1,783		1,035			—
Total operating expenses		105,280		84,222			64,610
Income from operations		75,724		72,403			59,389
Interest income		226		1,203			2,661
Other income (expense)		268		(279	)		953
Income before provision for income taxes		76,218		73,327			63,003
Provision for income taxes		27,839		27,208			22,925
Net income	$	48,379	$	46,119		$	40,078
Net income per share:
Basic	$	1.69	$	1.65		$	1.47
Diluted	$	1.68	$	1.62		$	1.44
Weighted average shares outstanding:
Basic		28,635		28,031			27,298
Diluted		28,796		28,396			27,770
Dividends declared per common share	$	1.20	$	1.15		$	1.00

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

63

QUALITY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

										Accumulated
					Additional					Other			Total
	Common Stock				Paid-in		Retained			Comprehensive			Shareholders’
	Shares		Amount		Capital		Earnings			Loss			Equity
	(In thousands)
Balance, March 31, 2007		27,123	$	271	$	65,666	$	25,309		$	—		$	91,246
Exercise of stock options		325		3		4,757		—			—			4,760
Tax benefit resulting from exercise of stock options		—		—		1,376		—			—			1,376
Stock-based compensation		—		—		3,757		—			—			3,757
Dividends declared		—		—		—		(27,316	)		—			(27,316	)
Net income		—		—		—		40,078			—			40,078
Unrealized loss on marketable securities, net of tax		—		—		—		—			(196	)		(196	)
Balance, March 31, 2008		27,448		274		75,556		38,071			(196	)		113,705
Exercise of stock options		697		7		12,512		—			—			12,519
Tax benefit resulting from exercise of stock options		—		—		3,382		—			—			3,382
Stock-based compensation		—		—		1,977		—			—			1,977
Common stock issued for acquisitions		302		3		10,097		—			—			10,100
Dividends declared		—		—		—		(32,431	)		—			(32,431	)
Net income		—		—		—		46,119			—			46,119
Reclassification of unrealized loss on marketable securities, net of tax		—		—		—		—			196			196
Balance, March 31, 2009		28,447		284		103,524		51,759			—			155,567
Exercise of stock options		238		3		5,852		—			—			5,855
Tax benefit resulting from exercise of stock options		—		—		1,576		—			—			1,576
Stock-based compensation		—		—		2,073		—			—			2,073
Stock-based compensation related to acquisitions		—		—		433		—			—			433
Common stock issued for acquisitions		194		2		8,813		—			—			8,815
Dividends declared		—		—		—		(34,409	)		—			(34,409	)
Net income		—		—		—		48,379			—			48,379
Balance, March 31, 2010		28,879	$	289	$	122,271	$	65,729		$	—		$	188,289

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

64

QUALITY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Fiscal Year Ended
	March 31,			March 31,			March 31,
	2010			2009			2008
	(In thousands)
Cash flows from operating activities:
Net income	$	48,379		$	46,119		$	40,078
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		3,663			2,911			2,369
Amortization of capitalized software costs		5,927			5,163			4,149
Amortization of other intangibles		1,783			1,034			—
Gain on life insurance proceeds, net		—			—			(755	)
Provision for bad debts		3,465			2,089			1,171
Provision (recovery) for inventory obsolescence		27			(13	)		52
Share-based compensation		2,073			1,977			3,757
Deferred income tax (benefit) expense		(786	)		4,462			(199	)
Tax benefit from exercise of stock options		1,576			3,382			1,376
Excess tax benefit from share-based compensation		(1,576	)		(3,381	)		(1,311	)
Loss on disposal of equipment and improvements		—			96			—
Changes in assets and liabilities, net of amounts acquired:
Accounts receivable		(18,944	)		(11,369	)		(13,811	)
Inventories		(238	)		(88	)		99
Income taxes receivable		3,875			(5,433	)		—
Other current assets		(2,310	)		(1,202	)		(89	)
Other assets		(894	)		(448	)		381
Accounts payable		(1,810	)		(299	)		(561	)
Deferred revenue		12,528			3,130			5,447
Accrued compensation and related benefits		(1,006	)		136			1,825
Income taxes payable		(1,404	)		(1,541	)		1,226
Other current liabilities		846			2,055			(1,232	)
Deferred compensation		46			(68	)		(373	)
Net cash provided by operating activities		55,220			48,712			43,599
Cash flows from investing activities:
Additions to capitalized software costs		(7,921	)		(5,863	)		(6,019	)
Additions to equipment and improvements		(4,935	)		(3,218	)		(2,113	)
Proceeds from sale of marketable securities		425			14,825			91,825
Purchases of marketable securities		—			—			(114,645	)
Proceeds from life insurance policy, net		—			—			755
Cash acquired from purchase of Opus		2,036			—			—
Purchase of Opus		(250	)		—			—
Purchase of Sphere		(300	)		—			—
Purchase of PMP, including direct transaction costs		—			(16,950	)		—
Purchase of HSI, including direct transaction costs		—			(8,241	)		—
Payment of contingent consideration related to purchase of PMP		(3,000	)		—			—
Net cash used in investing activities		(13,945	)		(19,447	)		(30,197	)

65

QUALITY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

	Fiscal Year Ended
	March 31,			March 31,			March 31,
	2010			2009			2008
	(In thousands)
Cash flows from financing activities:
Excess tax benefit from share-based compensation		1,576			3,381			1,311
Proceeds from exercise of stock options		5,855			12,519			4,760
Dividends paid		(34,275	)		(30,763	)		(20,455	)
Loan repayment		—			(3,268	)		—
Net cash used in financing activities		(26,844	)		(18,131	)		(14,384	)
Net increase (decrease) in cash and cash equivalents		14,431			11,134			(982	)
Cash and cash equivalents at beginning of year		70,180			59,046			60,028
Cash and cash equivalents at end of year	$	84,611		$	70,180		$	59,046
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes, net of refunds	$	24,506		$	26,455		$	20,546
Non-cash investing and financing activities:
Unrealized gain (loss) on marketable securities, net of tax	$	—		$	196		$	(196	)
Issuance of stock options with fair value of $433 in connection with the purchase of PMP	$	433		$	—		$	—
Effective February 10, 2010, the Company acquired Opus in a transaction summarized as follows:
Fair value of net assets acquired	$	32,209		$	—		$	—
Cash paid		(250	)		—			—
Common stock issued for Opus stock		(8,815	)		—			—
Fair value of contingent consideration		(11,516	)		—			—
Liabilities assumed	$	11,628		$	—		$	—
Effective August 12, 2009, the Company acquired Sphere in a transaction summarized as follows:
Fair value of net assets acquired	$	1,453		$	—		$	—
Cash paid		(300	)		—			—
Fair value of contingent consideration		(1,074	)		—			—
Liabilities assumed	$	79		$	—		$	—
Effective October 28, 2008, the Company acquired PMP in a transaction summarized as follows:
Fair value of net assets acquired	$	—		$	23,875		$	—
Cash paid		—			(16,950	)		—
Common stock issued for PMP stock		—			(2,750	)		—
Liabilities assumed	$	—		$	4,175		$	—
Effective May 20, 2008, the Company acquired HSI in a transaction summarized as follows:
Fair value of net assets acquired	$	—		$	20,609		$	—
Cash paid		—			(8,241	)		—
Common stock issued for HSI stock		—			(7,350	)		—
Liabilities assumed	$	—		$	5,018		$	—

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

66

QUALITY SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2010 and 2009
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)

1.   Organization of Business

Description of Business

Quality Systems, Inc. is comprised of the QSI Dental Division and wholly-owned subsidiaries, NextGen Healthcare Information Systems, Inc. (“NextGen Division”), Lackland Acquisition II, LLC dba Healthcare Strategic Initiatives (“HSI”) and Practice Management Partners, Inc. (“PMP”) and most recently NextGen Sphere, LLC and Opus Healthcare Solutions, Inc. (collectively, the Company). The Company develops and markets healthcare information systems that automate certain aspects of medical and dental practices, networks of practices such as physician hospital organizations (“PHOs”) and management service organizations (“MSOs”), ambulatory care centers, community health centers, and medical and dental schools. The Company also provides revenue cycle management (“RCM”) services through the Practice Solutions Division.

The Company, a California corporation formed in 1974, was founded with an early focus on providing information systems to dental group practices. In the mid-1980’s, the Company capitalized on the increasing focus on medical cost containment and further expanded its information processing systems to serve the medical market. In the mid-1990’s, the Company made two acquisitions that accelerated its penetration of the medical market. These two acquisitions formed the basis for the NextGen Division. Today, the Company serves the medical and dental markets through its NextGen Division and QSI Dental Division.

During fiscal year 2010, as a result of certain organizational changes, the composition of the Company’s NextGen Division was revised to exclude the former NextGen Practice Solutions unit and the Company’s RCM entities (HSI and PMP), both of which are now administered and aggregated in the Company’s Practice Solutions Division. Following the reorganization, the Company now operates three reportable operating segments (not including Corporate), comprised of the NextGen Division, the QSI Dental Division and the Practice Solutions Division.

The QSI Dental Division, co-located with the Corporate Headquarters in Irvine, California, currently focuses on developing, marketing and supporting software suites sold to dental and certain niche medical practices. In addition, the Division supports a number of medical clients that utilize its UNIX based medical practice management software product and Software as a Service, or SaaS model, based NextDDS financial and clinical software.

The NextGen Division, with headquarters in Horsham, Pennsylvania, and significant locations in Atlanta, Georgia and Austin, Texas, provides integrated clinical, financial and connectivity solutions for ambulatory, inpatient and dental provider organizations.

The Practice Solutions Division, with locations in St. Louis, Missouri and Hunt Valley, Maryland, focuses primarily on providing physician practices with RCM services, primarily billing and collection services for medical practices. This Division combines a web-delivered SaaS model and the NextGen^epm software platform to execute its service offerings.

The three Divisions operate largely as stand-alone operations, with each Division maintaining its own distinct product lines, product platforms, development, implementation and support teams, sales staffing and branding. The three Divisions share the resources of the Company’s “corporate office,” which includes a variety of accounting and other administrative functions. Additionally, there are a small but growing number of clients who are simultaneously utilizing software or services from more than one of the three Divisions.

Acquisitions

On May 20, 2008, the Company acquired St. Louis-based HSI, a full-service healthcare RCM company. HSI operates under the umbrella of the Company’s Practice Solutions Division. Founded in 1996, HSI provides RCM

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services to providers including health systems, hospitals, and physicians in private practice with an in-house team of more than 200 employees, including specialists in medical billing, coding and compliance, payor credentialing, and information technology. The Company intends to cross sell both software and RCM services to the acquired customer base of HSI and the NextGen Division.

On October 28, 2008, the Company acquired Maryland-based PMP, a full-service healthcare RCM company. This acquisition is also part of the Company’s growth strategy for the Practice Solutions Division. Similar to HSI, PMP operates under the umbrella of the Company’s Practice Solutions Division. Founded in 2001, PMP provides physician billing and technology management services to healthcare providers, primarily in the Mid-Atlantic region. The Company intends to cross sell both software and RCM services to the acquired customer base of PMP and the NextGen Division.

On August 12, 2009, the Company acquired NextGen Sphere, LLC (“Sphere”), a provider of financial information systems to the small hospital inpatient market. This acquisition is also part of the Company’s strategy to expand into the small hospital market and to add new customers by taking advantage of cross selling opportunities between the ambulatory and inpatient markets.

On February 10, 2010, the Company acquired Opus Healthcare Solutions, Inc. (“Opus”), a provider of clinical information systems to the small hospital inpatient market. Founded in 1987 and headquartered in Austin, Texas, Opus delivers web-based clinical solutions to hospital systems and integrated health networks nationwide. This acquisition complements and will be integrated with the assets of Sphere. Both companies are established developers of software and services for the inpatient market and will operate under the Company’s NextGen Division.

2.   Summary of Significant Accounting Policies

Principles of Consolidation.  The Consolidated Financial Statements include the accounts of Quality Systems, Inc. and its wholly-owned subsidiaries, which consists of NextGen Healthcare Information Systems, Lackland Acquisition II, LLC dba Healthcare Strategic Initiatives, Practice Management Partners, Inc., NextGen Sphere, LLC, and Opus Healthcare Solutions, Inc. All significant intercompany accounts and transactions have been eliminated.

Business Segments.  The Company has prepared operating segment information in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, or ASC 280, which requires that companies disclose “operating segments” based on the manner in which management disaggregates the Company’s operations for making internal operating decisions. See Note 15.

Basis of Presentation.  The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Certain prior year amounts have been reclassified to conform with fiscal year 2010 presentation.

References to dollar amounts in the Consolidated Financial Statement sections are in thousands, except for shares and per share data, unless otherwise specified.

Revenue Recognition.  The Company recognizes system sales revenue pursuant to FASB ASC Topic 985-605, Software, Revenue Recognition, or ASC 985-605. The Company generates revenue from the sale of licensing rights to its software products directly to end-users and value-added resellers, or VARs. The Company also generates revenue from sales of hardware and third party software, implementation, training, Electronic Data Interchange (“EDI”), post-contract support (maintenance), and other services, including RCM, performed for customers who license its products.

A typical system contract contains multiple elements of the above items. FASB ASC Topic 985-605-25, Software, Revenue Recognition, Multiple Elements, or ASC 985-605-25, requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of those

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elements. The fair value of an element must be based on vendor specific objective evidence (“VSOE”). The Company limits its assessment of VSOE for each element to either the price charged when the same element is sold separately or the price established by management having the relevant authority to do so, for an element not yet sold separately. VSOE calculations are updated and reviewed quarterly or annually depending on the nature of the product or service. The Company has established VSOE for the related undelivered elements based on the bell-shaped curve method. Maintenance VSOE for the Company’s largest customers is based on stated renewal rates only if the rate is determined to be substantive and falls within the Company’s customary pricing practices.

When evidence of fair value exists for the delivered and undelivered elements of a transaction, then discounts for individual elements are aggregated and the total discount is allocated to the individual elements in proportion to the elements’ fair value relative to the total contract fair value.

When evidence of fair value exists for the undelivered elements only, the residual method, provided for under ASC 985-605, is used. Under the residual method, the Company defers revenue related to the undelivered elements in a system sale based on VSOE of fair value of each of the undelivered elements, and allocates the remainder of the contract price net of all discounts to revenue recognized from the delivered elements. If VSOE of fair value of any undelivered element does not exist, all revenue is deferred until VSOE of fair value of the undelivered element is established or the element has been delivered.

The Company bills for the entire system sales contract amount upon contract execution except for maintenance which is billed separately. Amounts billed in excess of the amounts contractually due are recorded in accounts receivable as advance billings. Amounts are contractually due when services are performed or in accordance with contractually specified payment dates. Provided the fees are fixed or determinable and collection is considered probable, revenue from licensing rights and sales of hardware and third party software is generally recognized upon physical or electronic shipment and transfer of title. In certain transactions where collections risk is high, the cash basis method is used to recognize revenue. If the fee is not fixed or determinable, then the revenue recognized in each period (subject to application of other revenue recognition criteria) will be the lesser of the aggregate of amounts due and payable or the amount of the arrangement fee that would have been recognized if the fees were being recognized using the residual method. Fees which are considered fixed or determinable at the inception of the Company’s arrangements must include the following characteristics:

•  The fee must be negotiated at the outset of an arrangement, and generally be based on the specific volume of products to be delivered without being subject to change based on variable pricing mechanisms such as the number of units copied or distributed or the expected number of users.

•  Payment terms must not be considered extended. If a significant portion of the fee is due more than 12 months after delivery or after the expiration of the license, the fee is presumed not fixed or determinable.

Revenue from implementation and training services is recognized as the corresponding services are performed. Maintenance revenue is recognized ratably over the contractual maintenance period.

Contract accounting is applied where services include significant software modification, development or customization. In such instances, the arrangement fee is accounted for in accordance with FASB ASC Topic 605-35, Revenue Recognition, Construction-Type and Production-Type Contracts, or ASC 605-35. Pursuant to ASC 605-35, the Company uses the percentage of completion method provided all of the following conditions exist:

•  the contract includes provisions that clearly specify the enforceable rights regarding goods or services to be provided and received by the parties, the consideration to be exchanged, and the manner and terms of settlement;

•  the customer can be expected to satisfy its obligations under the contract;

•  the Company can be expected to perform its contractual obligations; and

•  reliable estimates of progress towards completion can be made.

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The Company measures completion using labor input hours. Costs of providing services, including services accounted for in accordance with ASC 605-35, are expensed as incurred.

If a situation occurs in which a contract is so short term that the financial statements would not vary materially from using the percentage-of-completion method or in which the Company is unable to make reliable estimates of progress of completion of the contract, the completed contract method is utilized.

Product returns are estimated in accordance with FASB ASC Topic 605-15, Revenue Recognition, Products, or ASC 605-15. The Company also ensures that the other criteria in ASC 605-15 have been met prior to recognition of revenue:

•  the price is fixed or determinable;

•  the customer is obligated to pay and there are no contingencies surrounding the obligation or the payment;

•  the customer’s obligation would not change in the event of theft or damage to the product;

•  the customer has economic substance;

•  the amount of returns can be reasonably estimated; and

•  the Company does not have significant obligations for future performance in order to bring about resale of the product by the customer.

The Company has historically offered short-term rights of return in certain sales arrangements. If the Company is able to estimate returns for these types of arrangements, revenue is recognized and these arrangements are recorded in the Consolidated Financial Statements. If the Company is unable to estimate returns for these types of arrangements, revenue is not recognized in the Consolidated Financial Statements until the rights of return expire.

Revenue related to sales arrangements that include the right to use software stored on the Company’s hardware is accounted for under FASB ASC Topic 985-605-05, Software, Revenue Recognition, Hosting Arrangements, or ASC 985-605-05, which requires that for software licenses and related implementation services to continue to fall under ASC 985-605-05, the customer must have the contractual right to take possession of the software without incurring a significant penalty and it must be feasible for the customer to either host the software themselves or through another third party. If an arrangement is not deemed to be accounted for under ASC 985-605-05, the entire arrangement is accounted for as a service contract in accordance with ASC 985-605-25. In that instance, the entire arrangement would be recognized as the hosting services are being performed.

From time to time, the Company offers future purchase discounts on its products and services as part of its sales arrangements. Pursuant to FASB ASC Topic 985-605-55, Software, Revenue Recognition, Flowchart of Revenue Recognition on Software Arrangements, or ASC 985-605-55, such discounts that are incremental to the range of discounts reflected in the pricing of the other elements of the arrangement, that are incremental to the range of discounts typically given in comparable transactions, and that are significant, are treated as an additional element of the contract to be deferred. Amounts deferred related to future purchase options are not recognized until either the customer exercises the discount offer or the offer expires.

RCM service revenue is derived from services fees, which include amounts charged for ongoing billing and other related services, and are generally billed to the customer as a percentage of total collections. The Company does not recognize revenue for services fees until these collections are made, as the services fees are not fixed or determinable until such time.

Revenue is divided into two categories, “system sales” and “maintenance, EDI, RCM and other services”. Revenue in the system sales category includes software license fees, third party hardware and software, and implementation and training services related to purchase of the Company’s software systems. Revenue in the maintenance, EDI, RCM and other services category includes maintenance, EDI, RCM services, follow on training and implementation services, annual third party license fees, hosting services and other services revenue.

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Cash and Cash Equivalents.  Cash and cash equivalents generally consist of cash, money market funds and short-term U.S. Treasury securities with original maturities of less than 90 days. The Company had cash deposits at U.S. banks and financial institutions at March 31, 2010 of which $82,223 was in excess of the Federal Deposit Insurance Corporation insurance limit of $250 per owner. The Company is exposed to credit loss for amounts in excess of insured limits in the event of non-performance by the institutions; however, the Company does not anticipate non-performance by these institutions. The money market fund in which the Company holds a portion of its cash invests in only investment grade money market instruments from a variety of industries, and therefore bears relatively low market risk. The average maturity of the investments owned by the money market fund is approximately two months.

Restricted Cash.  Restricted cash consists of cash which is being held by HSI acting as agent for the disbursement of certain state social services programs. The Company records an offsetting “Care Services liability” (see also Note 9) when it initially receives such cash from the government social service programs and relieves both restricted cash and the Care Services liability when amounts are disbursed. HSI earns an administrative fee which is based on a percentage of funds disbursed on behalf of certain government social service programs.

Marketable Securities and ARS Put Option Rights.  Marketable securities are recorded at fair value, based on quoted market rates or valuation analysis when appropriate.

The Company’s investments at March 31, 2010 and 2009 are in tax exempt municipal Auction Rate Securities (“ARS”) which are classified as either current or non-current marketable securities on the Company’s Consolidated Balance Sheets, depending on the liquidity and timing of expected realization of such securities. The ARS are rated by one or more national rating agencies and have contractual terms of up to 30 years, but generally have interest rate reset dates that occur every 7, 28 or 35 days. Despite the underlying long-term maturity of ARS, such securities were priced and subsequently traded as short-term investments because of the interest rate reset feature. If there are insufficient buyers, the auction is said to “fail” and the holders are unable to liquidate the investments through auction. A failed auction does not result in a default of the debt instrument. Under their respective terms, the securities will continue to accrue interest and be auctioned until the auction succeeds, the issuer calls the securities or the securities mature. In February 2008, the Company began to experience failed auctions on its ARS.

The Company’s ARS are held by UBS Financial Services Inc. (“UBS”). On November 13, 2008, the Company entered into an Auction Rate Security Rights Agreement (the “Rights Agreement”) with UBS, whereby the Company accepted UBS’s offer to purchase the Company’s ARS investments at any time during the period of June 30, 2010 through July 2, 2012. As a result, the Company had obtained an asset, ARS put option rights, whereby the Company has a right to “put” the ARS back to UBS. The Company expects to exercise its ARS put option rights and put its ARS back to UBS on June 30, 2010, the earliest date allowable under the Rights Agreement.

Prior to signing the Rights Agreement the Company had asserted that it had the intent and ability to hold these securities until anticipated recovery and classified its ARS as held for sale securities on its Consolidated Balance Sheets. By accepting the Rights Agreement, the Company could no longer assert that it has the intent to hold the auction rate securities until anticipated recovery and consequently elected to reclassify its investments in ARS as trading securities, as defined by FASB ASC Topic 320, Investments — Debt and Equity Securities, or ASC 320, on the date of Company’s acceptance of the Rights Agreement. As trading securities, the ARS are carried at fair value with changes recorded through earnings.

To determine the estimated fair values of the ARS at March 31, 2010 and 2009, factors including credit quality, assumptions about the likelihood of redemption, observable market data such as yields or spreads of fixed rate municipal bonds and other trading instruments issued by the same or comparable issuers, were considered. The Company has valued the ARS as the approximate midpoint between various fair values, measured as the difference between the par value of the ARS and the fair value of the securities, discounted by the credit risk of the broker and other factors such as the Company’s historical experience to sell ARS at par. Based on this analysis, the Company recognized a gain of approximately $188 through its earnings for the year ended March 31, 2010. The estimated fair

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value of the ARS as of March 31, 2010 was determined to be $7,158 and is included on the accompanying Consolidated Balance Sheets.

As the Company will be permitted to put the ARS back to UBS at par value, the Company accounted for the ARS put option right as a separate asset that was measured at its fair value with changes recorded through earnings. The Company has valued the ARS put option right as the approximate midpoint between various fair values, measured as the difference between the par value of the ARS and the fair value of the securities, discounted by the credit risk of the broker and other factors such as the Company’s historical experience to sell ARS at par. Based on this analysis, the Company recognized a gain of approximately $80 through its earnings for the year ended March 31, 2010. The estimated fair value of the ARS put option rights as of March 31, 2010 was determined to be $548 and is included on the accompanying Consolidated Balance Sheets in other current assets.

The Company is required to assess the fair value of these two individual assets and to record corresponding changes in fair value in each reporting period through the Consolidated Statements of Income until the ARS put option rights are exercised and the ARS are redeemed or sold. The Company expects that the fair value movements in the ARS will be largely offset by the future changes in the fair value of the ARS put option rights. Since the ARS put option rights represent the right to sell the securities back to UBS at par, the Company will be required to periodically assess the economic ability of UBS to meet that obligation in assessing the fair value of the ARS put option rights.

Allowance for Doubtful Accounts.  The Company provides credit terms typically ranging from thirty days to less than twelve months for most system and maintenance contract sales and generally does not require collateral. The Company performs credit evaluations of its customers and maintains reserves for estimated credit losses. Reserves for potential credit losses are determined by establishing both specific and general reserves. Specific reserves are based on management’s estimate of the probability of collection for certain troubled accounts. General reserves are established based on the Company’s historical experience of bad debt expense and the aging of the Company’s accounts receivable balances net of deferred revenue and specifically reserved accounts. Accounts are written off as uncollectible only after the Company has expended extensive collection efforts.

Included in accounts receivable are amounts related to maintenance and services which were billed, but which had not yet been rendered as of the end of the period. Undelivered maintenance and services are included on the accompanying Consolidated Balance Sheets in deferred revenue (see also Note 9).

Inventories.  Inventories consist of hardware for specific customer orders and spare parts, and are valued at lower of cost (first-in, first-out) or market. Management provides a reserve to reduce inventory to its net realizable value.

Equipment and Improvements.  Equipment and improvements are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of equipment and improvements are provided over the estimated useful lives of the assets, or the related lease terms if shorter, by the straight-line method. Useful lives range as follows:

•	Computers and electronic test equipment	3-5 years
•	Furniture and fixtures	5-7 years
•	Leasehold improvements	lesser of lease term or estimated useful life of asset

Software Development Costs.  Development costs incurred in the research and development of new software products and enhancements to existing software products are expensed as incurred until technological feasibility has been established. After technological feasibility is established, any additional development costs are capitalized in accordance with FASB ASC Topic 985-20, Software, Costs of Computer Software to be Sold, Leased or Marketed, or ASC 985-20. Such capitalized costs are amortized on a straight-line basis over the estimated economic life of the related product, which is typically three years. The Company provides support services on the current and prior two versions of its software. Management performs an annual review of the estimated economic life and the

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recoverability of such capitalized software costs. If a determination is made that capitalized amounts are not recoverable based on the estimated cash flows to be generated from the applicable software, any remaining capitalized amounts are written off.

Goodwill.  Goodwill is related to the NextGen Division and the HSI, PMP, Sphere, and Opus acquisitions, which closed on May 20, 2008, October 28, 2008, August 12, 2009, and February 10, 2010, respectively (see Notes 5, 6 and 7). In accordance with FASB ASC Topic 350-20, Intangibles — Goodwill and Other, Goodwill, or ASC 350-20, the Company tests goodwill for impairment annually at the end of its first fiscal quarter, referred to as the annual test date. The Company will also test for impairment between annual test dates if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is performed at a reporting-unit level. An impairment loss would generally be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit. The Company has determined that there was no indication of impairment to its goodwill as of March 31, 2010. See also Note 6.

Intangible Assets.  Intangible assets consist of capitalized software costs, customer relationships, trade names and certain intellectual property. Intangible assets related to customer relationships and trade names arose in connection with the acquisition of HSI, PMP, Sphere, and Opus. These intangible assets were recorded at fair value and are stated net of accumulated amortization and impairments. Intangible assets are amortized over their remaining estimated useful lives, ranging from 3 to 9 years. The Company’s amortization policy for intangible assets is based on the principles in FASB ASC Topic 350-30, Intangibles — Goodwill and Other, General Intangibles Other than Goodwill, or ASC 350-30, which requires that the amortization of intangible assets reflect the pattern that the economic benefits of the intangible assets are consumed.

Long-Lived Assets.  The Company assesses the recoverability of long-lived assets at least annually or whenever adverse events or changes in circumstances indicate that impairment may have occurred in accordance with FASB ASC Topic 360-10, Property, Plant, and Equipment, Impairment or Disposal of Long-Lived Assets, or ASC 360-10. If the future undiscounted cash flows expected to result from the use of the related assets are less than the carrying value of such assets, an impairment has been incurred and a loss is recognized to reduce the carrying value of the long-lived assets to fair value, which is determined by discounting estimated future cash flows.

Management periodically reviews the carrying value of long-lived assets to determine whether or not impairment to such value has occurred and has determined that there was no impairment to its long-lived assets as of March 31, 2010. In addition to the recoverability assessment, the Company routinely reviews the remaining estimated lives of its long-lived assets.

Income Taxes.  The Company accounts for income taxes in accordance with FASB ASC Topic 740, Income Taxes, or ASC 740.  Income taxes are provided based on current taxable income and the future tax consequences of temporary differences between the basis of assets and liabilities for financial and tax reporting. The deferred income tax assets and liabilities represent the future state and federal tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred income taxes are also recognized for operating losses that are available to offset future taxable income and tax credits that are available to offset future income taxes. At each reporting period, management assesses the realizable value of deferred tax assets based on, among other things, estimates of future taxable income, and adjusts the related valuation allowance as necessary. Management makes a number of assumptions and estimates in determining the appropriate amount of expense to record for income taxes. These assumptions and estimates consider the taxing jurisdiction in which the Company operates as well as current tax regulations. Accruals are established for estimates of tax effects for certain transactions and future projected profitability of the Company’s businesses based on management’s interpretation of existing facts and circumstances.

On April 1, 2007, the Company adopted the provisions of ASC 740 related to the accounting for uncertain tax provisions. The adoption of the provisions of ASC 740 did not have a material effect on the Consolidated Financial Statements. As a result, there was no cumulative effect related to adopting ASC 740. However, certain amounts have

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been reclassified in the Company’s Consolidated Balance Sheets in order to comply with the requirements of the statement. See Note 11.

Self-Insurance Liabilities.  Effective January 1, 2010, the Company became self-insured with respect to healthcare claims, subject to stop-loss limits. The Company accrues for estimated self-insurance costs and uninsured exposures based on claims filed and an estimate of claims incurred but not reported as of each balance sheet date. However, it is possible that recorded accruals may not be adequate to cover the future payment of claims. Adjustments, if any, to estimated accruals resulting from ultimate claim payments will be reflected in earnings during the periods in which such adjustments are determined. Periodically, the Company reevaluates the adequacy of the accruals by comparing amounts accrued on the balance sheet for anticipated losses to an updated actuarial loss forecasts and third party claim administrator loss estimates and makes adjustments to the accruals as needed.

As of March 31, 2010, the self-insurance accrual was approximately $516, which is included in other current liabilities on the accompanying Consolidated Balance Sheet. If any of the factors that contribute to the overall cost of insurance claims were to change, the actual amount incurred for the self-insurance liabilities would be directly affected.

Advertising Costs.  Advertising costs are charged to operations as incurred. The Company does not have any direct-response advertising. Advertising costs, which includes trade shows and conventions, were approximately $6,198, $3,459 and $2,580 for the years ended March 31, 2010, 2009 and 2008, respectively, and were included in selling, general and administrative expenses in the Consolidated Statements of Income.

Marketing Assistance Agreements.  The Company has entered into marketing assistance agreements with certain existing users of the Company’s products, which provide the opportunity for those users to earn commissions if they host specific site visits upon the Company’s request for prospective customers that directly result in a purchase of the Company’s software by the visiting prospects. Amounts earned by existing users under this program are treated as a selling expense in the period when earned.

Other Comprehensive Income.  Comprehensive income includes all changes in Shareholders’ Equity during a period except those resulting from investments by owners and distributions to owners. The components of accumulated other comprehensive income (loss), net of income tax, consist of unrealized losses on marketable securities of $(196) as of March 31, 2008. There were no other comprehensive income items for the years ended March 31, 2010 or 2009.

	Year Ended March 31,
	2010		2009		2008
Net income	$	48,379	$	46,119	$	40,078
Other comprehensive income:
Unrealized loss on marketable securities, net of tax		—		—		(196	)
Comprehensive income	$	48,379	$	46,119	$	39,882

Earnings per Share.  Pursuant to FASB ASC Topic 260, Earnings Per Share, or ASC 260, the Company provides dual presentation of “basic” and “diluted” earnings per share (“EPS”).

Basic EPS excludes dilution from common stock equivalents and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution from common stock equivalents.

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The following table reconciles the weighted average shares outstanding for basic and diluted net income per share for the periods presented:

	Year Ended March 31,
	2010		2009		2008
Net income	$	48,379	$	46,119	$	40,078
Basic net income per share:
Weighted average shares outstanding — Basic		28,635		28,031		27,298
Basic net income per common share	$	1.69	$	1.65	$	1.47
Net income	$	48,379	$	46,119	$	40,078
Diluted net income per share:
Weighted average shares outstanding — Basic		28,635		28,031		27,298
Effect of potentially dilutive securities		161		365		472
Weighted average shares outstanding — Diluted		28,796		28,396		27,770
Diluted net income per common share	$	1.68	$	1.62	$	1.44

The computation of diluted net income per share does not include 74,962, 440,338 and 279,752 options for the years ended March 31, 2010, 2009 and 2008, respectively, because their inclusion would have an anti-dilutive effect on earnings per share.

Share-Based Compensation.  FASB ASC Topic 718 Compensation — Stock Compensation, or ASC 718, requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. Expected term is estimated using historical exercise experience. Volatility is estimated by using the weighted average historical volatility of the Company’s common stock, which approximates expected volatility. The risk free rate is the implied yield available on the U.S Treasury zero-coupon issues with remaining terms equal to the expected term. The expected dividend yield is the average dividend rate during a period equal to the expected term of the option. Those inputs are then entered into the Black Scholes model to determine the estimated fair value. The value of the portion of the award that is ultimately expected to vest is recognized ratably as expense over the requisite service period in the Company’s Consolidated Statements of Income.

The following table shows total stock-based compensation expense included in the Consolidated Statements of Income for years ended March 31, 2010, 2009 and 2008, respectively:

	Year Ended March 31,
	2010			2009			2008
Costs and expenses:
Cost of revenue	$	85		$	195		$	496
Research and development		108			242			800
Selling, general and administrative		1,880			1,540			2,461
Total share-based compensation		2,073			1,977			3,757
Amounts capitalized in software development costs		(27	)		(21	)		(39	)
Amounts charged against earnings, before income tax benefit	$	2,046		$	1,956		$	3,718
Related income tax benefit		(608	)		(549	)		(969	)
Decrease in net income	$	1,438		$	1,407		$	2,749

Sales Taxes.  In accordance with the guidance of FASB ASC Topic 605-45, Revenue Recognition, Principal Agent Considerations, or ASC 605-45, the Company accounts for sales taxes imposed on its goods and services on a net basis in the Consolidated Statements of Income.

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Use of Estimates.  The preparation of Consolidated Financial Statements in conformity with GAAP 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 the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to uncollectible receivables, vendor specific objective evidence, valuation of marketable securities and ARS put option rights, self-insurance accruals, and income taxes and related credits and deductions. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Newly Adopted Accounting Standards.  In September 2009, the FASB issued an accounting standards update to ASC 740. This update addresses the need for additional implementation guidance on accounting for uncertainties in income taxes, specifically, whether income tax paid by an entity is attributable to the entity or its owners; what constitutes a tax position for a pass-through entity or a tax-exempt entity; and how to apply the uncertainty in income taxes when a group of related entities comprise both taxable and nontaxable entities. This update also eliminates certain disclosures for nonpublic entities. Since the Company currently applies the standards for accounting for uncertainty in income taxes, this update was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of this update did not have a material impact on the Company’s Consolidated Financial Statements.

In August 2009, the FASB issued an accounting standards update to ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. This update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or the quoted prices for similar liabilities when traded as assets and (ii) another valuation technique that is consistent with the principles of ASC 820. This update also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. Additionally, this update clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. This update was effective for the first reporting period beginning after issuance (the Company’s interim period ended September 30, 2009). The adoption of this update did not have a material impact on the Company’s Consolidated Financial Statements.

In April 2009, the FASB issued three related accounting provisions intended to provide additional application guidance and enhanced disclosures regarding fair value measurements and other-than-temporary impairments of securities: (i) FASB ASC Topic 820-10-65, Fair Value Measurements and Disclosures — Transition and Open Effective Date Information, or ASC 820-10-65; (ii) FASB ASC Topic 320-10-65, Investments — Debt and Equity Securities — Transition and Open Effective Date Information, or ASC 320-10-65; and (iii) FASB ASC Topic 825-10-65, Financial Instruments — Transition and Open Effective Date Information, or ASC 825-10-65. ASC 820-10-65 provides guidelines for making fair value measurements more consistent with the principles presented in ASC 820-10. ASC 820-10-65 must be applied prospectively and retrospective application is not permitted. ASC 820-10-65 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity early adopting ASC 820-10-65 must also early adopt ASC 320-10-65. ASC 320-10-65 provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on debt securities. ASC 320-10-65 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity may early adopt these provisions only if it also elects to early adopt ASC 820-10-65. ASC 825-10-65 enhances consistency in financial reporting by increasing the frequency of fair value disclosures. ASC 825-10-65 is effective for interim periods ending after June 15, 2009, with early adoption permitted for periods

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ending after March 15, 2009. However, an entity may early adopt these interim fair value disclosure requirements only if it also elects to early adopt ASC 820-10-65 and ASC 320-10-65. The adoption of these provisions did not have a material impact on the Company’s Consolidated Financial Statements.

In April 2009, the FASB issued ASC Topic 805-20, Business Combinations, Identifiable Assets and Liabilities, and Any Noncontrolling Interest, or ASC 805-20. ASC 805-20 amends the guidance in ASC 805 to: (i) require that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated (if fair value of such an asset or liability cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with FASB ASC Topic 450, Contingencies, or ASC 450), (ii) eliminate the requirement to disclose an estimate of the range of outcomes of recognized contingencies at the acquisition date (for unrecognized contingencies, the FASB decided to require that entities include only the disclosures required by ASC 450 and that those disclosures be included in the business combination footnote); and (iii) require that contingent consideration arrangements of an acquiree assumed by the acquirer in a business combination be treated as contingent consideration of the acquirer and should be initially and subsequently measured at fair value in accordance with ASC 805. ASC 805-20 is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.

In December 2007, the FASB issued ASC Topic 805-10-65-1, Business Combinations — Overall — Transition Related to SFAS No. 141 (revised 2007), Business Combinations (SFAS 141(R)) and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Review Bulletin No. 51, or ASC 805-10-65-1, the provisions of which have been incorporated in ASC Topic 805-10, Business Combinations — Overall, or ASC 805-10, and ASC 805-20. ASC 805-10-65-1 retains the fundamental requirements of the original pronouncement requiring that the purchase method be used for all business combinations. ASC 805-10-65-1 defines the acquirer as the entity that obtains control of one or more businesses in the business combination, establishes the acquisition date as the date that the acquirer achieves control and requires the acquirer to recognize the assets acquired, liabilities assumed and any noncontrolling interest (including goodwill) at their fair values as of the acquisition date. In addition, ASC 805-10-65-1 requires expensing of acquisition-related and restructure-related costs, remeasurement of earn out provisions at fair value, measurement of equity securities issued for purchase at the date of close of the transaction and non-expensing of in-process research and development related intangibles. ASC 805-10-65-1 applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The Company adopted ASC 805-10 and ASC 805-20 and applied the provisions of the pronouncement to the business combinations completed during fiscal year 2010.

In November 2008, the FASB ratified ASC Topic 350-30-55, Intangibles — Goodwill and Other, Defensive Intangible Asset, or ASC 350-30-55. ASC 350-30-55 clarifies the accounting for certain separately identifiable intangible assets that an acquirer does not intend to actively use but instead intends to hold to prevent its competitors from obtaining access to them. ASC 350-30-55 requires an acquirer in a business combination to account for a defensive intangible asset as a separate unit of accounting, which should be amortized to expense over the period the asset diminishes in value. ASC 350-30-55 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The adoption of ASC 350-30-55 did not have a material impact on the Company’s Consolidated Financial Statements.

In June 2008, the FASB issued ASC Topic 260-10-45, Earnings Per Share, Required EPS Presentation on the Face of the Income Statement, or ASC 260-10-45. ASC 260-10-45 concluded that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of basic earnings per share (“EPS”) pursuant to the two-class method. ASC 260-10-45 became effective on April 1, 2009. Early adoption was not permitted; however, it does apply retrospectively to EPS data for all periods presented in the financial statements or in financial data. The Company does not currently have any share-based awards with nonforfeitable rights to dividends or dividend

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equivalents and therefore ASC 260-10-45 did not have an impact on the Company’s EPS data in fiscal year 2010 or on EPS for any prior periods presented in the Company’s Consolidated Financial Statements or financial data.

In April 2008, the FASB finalized ASC Topic 350-30-65, Intangibles — Goodwill and Other, General Intangibles Other than Goodwill — Transition and Open Effective Date Information, or ASC 350-30-65. ASC 350-30-65 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB ASC Topic 350-20, Intangibles — Goodwill and Other, Goodwill. ASC 350-30-65 applies to intangible assets that are acquired individually or with a group of other assets and both intangible assets acquired in business combinations and asset acquisitions. ASC 350-30-65 is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The adoption of ASC 350-30-65 did not have a material impact on the Company’s Consolidated Financial Statements.

Recently Issued Accounting Standards.  In January 2010, the FASB issued guidance that requires reporting entities to make new disclosures about recurring or nonrecurring fair value measurements, including significant transfers into and out of Level 1 and Level 2 fair value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures that are effective for annual periods beginning after December 15, 2010. The Company does not expect the disclosure provisions for Level 3 reconciliation to have a significant impact on its Consolidated Financial Statements.

In September 2009, the FASB reached a consensus on Accounting Standards Update, or ASU, 2009-13, Revenue Recognition (Topic 605) — Multiple-Deliverable Revenue Arrangements, or ASU 2009-13, and ASU 2009-14, Software (Topic 985) — Certain Revenue Arrangements That Include Software Elements, or ASU 2009-14. ASU 2009-13 modifies the requirements that must be met for an entity to recognize revenue from the sale of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. ASU 2009-13 eliminates the requirement that all undelivered elements must have either: (i) VSOE or (ii) third-party evidence, or TPE, before an entity can recognize the portion of an overall arrangement consideration that is attributable to items that already have been delivered. In the absence of VSOE or TPE of the standalone selling price for one or more delivered or undelivered elements in a multiple-element arrangement, entities will be required to estimate the selling prices of those elements. Overall arrangement consideration will be allocated to each element (both delivered and undelivered items) based on their relative selling prices, regardless of whether those selling prices are evidenced by VSOE or TPE or are based on the entity’s estimated selling price. The residual method of allocating arrangement consideration has been eliminated. ASU 2009-14 modifies the software revenue recognition guidance to exclude from its scope tangible products that contain both software and non-software components that function together to deliver a product’s essential functionality. These new updates are effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of these ASUs will have on its Consolidated Financial Statements.

3.   Cash and Cash Equivalents

At March 31, 2010 and 2009, the Company had cash and cash equivalents of $84,611 and $70,180, respectively. Cash and cash equivalents consist of cash, money market funds and short-term U.S. Treasury securities with original maturities of less than 90 days. The money market fund in which the Company holds a portion of its cash invests in only investment grade money market instruments from a variety of industries, and therefore bears relatively low market risk. The average maturity of the investments owned by the money market fund is approximately two months.

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4.   Fair Value Measurements

The Company applies ASC 820 with respect to fair value measurements of (a) nonfinancial assets and liabilities that are recognized or disclosed at fair value in the Company’s Consolidated Financial Statements on a recurring basis (at least annually) and (b) all financial assets and liabilities. The Company adopted the aspects of ASC 820 relative to nonfinancial assets and liabilities that are measured at fair value, but are recognized and disclosed at fair value on a nonrecurring basis, prospectively effective April 1, 2009. ASC 820 prioritizes the inputs used in measuring fair value into the following hierarchy:

Level 1 Quoted market prices in active markets for identical assets or liabilities;

Level 2 Observable inputs other than those included in Level 1 (for example, quoted prices for similar assets in active markets or quoted prices for identical assets in inactive markets); and

Level 3 Unobservable inputs reflecting management’s own assumptions about the inputs used in estimating the value of the asset.

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis in accordance with ASC 820 as of March 31, 2010 and March 31, 2009:

			Quoted Prices		Significant
			in Active		Other
	Balance at		Markets for		Observable		Unobservable
	March 31,		Identical Assets		Inputs		Inputs
	2010		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	84,611	$	84,611	$	—	$	—
Restricted cash		2,339		2,339		—		—
Marketable securities(1)		7,158		—		—		7,158
ARS put option rights(2)		548		—		—		548
	$	94,656	$	86,950	$	—	$	7,706

			Quoted Prices		Significant
			in Active		Other
	Balance at		Markets for		Observable		Unobservable
	March 31,		Identical Assets		Inputs		Inputs
	2009		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	70,180	$	70,180	$	—	$	—
Restricted cash		1,303		1,303		—		—
Marketable securities(1)		7,395		—		—		7,395
ARS put option rights(3)		468		—		—		468
	$	79,346	$	71,483	$	—	$	7,863

(1)	Marketable securities consist of ARS
(2)	ARS put option rights are included on the accompanying Consolidated Balance Sheets in other current assets as of March 31, 2010.
(3)	ARS put option rights are included on the accompanying Consolidated Balance Sheets in other assets as of March 31, 2009.
	The fair value of the Company’s ARS, including the Company’s ARS put option rights, has been estimated by management based on its assumptions of what market participants would use in pricing the asset in a current transaction, or Level 3 — unobservable inputs, in accordance with ASC 820, and represents $7,706 and $7,863 or

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8.1% and 9.9%, of total financial assets measured at fair value in accordance with ASC 820 at March 31, 2010 and 2009, respectively. Management used a model to estimate the fair value of these securities that included certain Level 2 inputs as well as assumptions, such as a liquidity discount and credit rating of the issuers, based on management’s judgment, which are highly subjective and therefore considered Level 3 inputs in the fair value hierarchy. The estimate of the fair value of the ARS could change based on market conditions. For additional information on cash and cash equivalents, restricted cash or marketable securities, see Note 2.

The following table presents activity in the Company’s assets measured at fair value using significant unobservable inputs (Level 3), as defined by ASC 820, as of and for the year ended March 31, 2010:

Balance at March 31, 2009	$	7,863
Transfer in/(out) of Level 3		—
Proceeds from sale (at par)		(425	)
Recognized gain		268
Balance at March 31, 2010	$	7,706

To determine the estimated fair values of the ARS at March 31, 2010 and 2009, factors including credit quality, assumptions about the likelihood of redemption, observable market data such as yields or spreads of fixed rate municipal bonds and other trading instruments issued by the same or comparable issuers, were considered. The Company has valued the ARS as the approximate midpoint between various fair values, measured as the difference between the par value of the ARS and the fair value of the securities, discounted by the credit risk of the broker and other factors such as the Company’s historical experience to sell ARS at par.

Interest income related to cash and cash equivalents and marketable securities for each of the three years ended March 31, 2010 is as follows:

	Year Ended March 31,
	2010		2009		2008
Interest Income	$	226	$	1,203	$	2,661

5.   Business Combinations

On May 20, 2008, the Company acquired HSI, a full-service healthcare RCM company, and on October 28, 2008, the Company acquired PMP, a full-service healthcare RCM company. The Company accounted for these acquisitions as a business combination using the purchase method of accounting. The purchase price was allocated to HSI and PMP’s tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the respective acquisitions dates. The fair value of the assets acquired and liabilities assumed represent management’s estimate of fair value.

During fiscal year 2010, the Company paid $3,000 in cash and issued stock options with a fair value of $433 as part of a contingent earn-out agreement relating to the acquisition of PMP. The additional consideration was recorded as an increase to goodwill. See Note 6.

Acquisition of Sphere

On August 12, 2009, the Company acquired certain assets of Sphere. The Company accounted for this acquisition as a purchase business combination as defined in ASC 805. Under the acquisition method of accounting, the purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair value of the assets acquired and liabilities assumed represent management’s estimate of fair value.

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The purchase price totaled $1,374, including contingent consideration payable over a five year period, consisting of maintenance revenue and license fee payments, estimated at approximately $1,074 based on the probability of achieving certain business milestones, but which in no event shall exceed $2,500. The total purchase price for Sphere is as follows:

Cash paid	$	300
Contingent consideration		1,074
Total purchase price	$	1,374

In connection with the acquisition, the Company recorded $275 of intangible assets related to customer relationships and software technology and $1,020 of goodwill. The Company is amortizing the customer relationships intangible asset over 4 years and the software technology over 3 years.

The following table summarizes the final allocation of the purchase price:

	August 12,
	2009
Fair value of the net tangible assets acquired and liabilities assumed:
Current assets (consisting of accounts receivable only)	$	158
Current liabilities, including long-term debt due within one year		(79	)
Total tangible assets acquired and liabilities assumed		79
Fair value of identifiable intangible assets acquired:
Customer relationships		156
Software technology		119
Goodwill (including assembled workforce of $84)		1,020
Total identifiable intangible assets acquired		1,295
Total purchase price	$	1,374

The pro forma effects of this acquisition would not have been material to the Company’s results of operations for the year ended March 31, 2010 and is therefore not presented.

Acquisition of Opus

On February 10, 2010, the Company acquired Opus. The Company accounted for this acquisition as a purchase business combination as defined in ASC 805. Under the acquisition method of accounting, the purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair value of the assets acquired and liabilities assumed represent management’s estimate of fair value.

The estimated fair value of the acquired tangible and intangible assets and liabilities assumed were determined using multiple valuation approaches depending on the type of tangible or intangible asset acquired, including but not limited to the income approach, the excess earnings method as well as the relief from royalty method approach.

Key assumptions used to determine the fair value of tangible and intangible assets acquired were (a) expected cash flow period of 5 to 10 years; (b) a weighted average cost of capital discount rate ranging from 24% to 26%, calculated using the capital asset pricing model, the build-up and IRR methodologies; and (c) a risk free rate of 4.5%, which is based on the rates of long-term treasury securities.

The Company recognized approximately $200 of acquisition and integration related costs that were expensed in the year ended March 31, 2010.

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The purchase price totaled $20,581, including approximately $11,516 in contingent consideration based primarily on Opus achieving certain EBITDA and strategic goal targets. The total purchase price for Opus is as follows:

Cash paid	$	250
Common stock issued at fair value		8,815
Contingent consideration		11,516
Total purchase price	$	20,581

In connection with the acquisition, the Company recorded $13,250 of intangible assets related to customer relationships and software technology and $13,005 of goodwill. The Company is amortizing the customer relationships intangible asset over 4 years and the software technology over 8 years.

The following table summarizes the final allocation of the purchase price:

	February 10,
	2010
Fair value of the net tangible assets acquired and liabilities assumed:
Cash and cash equivalents	$	2,036
Current assets (including accounts receivable of $1,753)		3,435
Equipment and improvements and other long-term assets		483
Accounts payable and accrued liabilities		(7,678	)
Deferred revenues		(3,950	)
Total tangible assets acquired and liabilities assumed		(5,674	)
Fair value of identifiable intangible assets acquired:
Customer relationships		1,250
Software technology		12,000
Goodwill (including assembled workforce of $1,000)		13,005
Total identifiable intangible assets acquired		26,255
Total purchase price	$	20,581

The pro forma effects of this acquisition would not have been material to the Company’s results of operations for the year ended March 31, 2010 and is therefore not presented.

6.   Goodwill

In accordance with ASC 350-20, the Company does not amortize goodwill as the goodwill has been determined to have an indefinite useful life.

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Goodwill consists of the following:

	Balance at				Balance at
	March 31,		Additions to		March 31,
	2009		Goodwill		2010
NextGen Division
Opus Healthcare Solutions, Inc.	$	—	$	13,005	$	13,005
NextGen Sphere, LLC		—		1,020		1,020
NextGen Healthcare Information Systems, Inc.		1,840		—		1,840
Total NextGen Division goodwill		1,840		14,025		15,865
Practice Solutions Division
Practice Management Partners, Inc.		16,052		3,433		19,485
Healthcare Strategic Initiatives		10,839		—		10,839
Total Practice Solutions Division goodwill		26,891		3,433		30,324
Total goodwill	$	28,731	$	17,458	$	46,189

7.   Intangible Assets

The Company had the following intangible assets, other than capitalized software development costs, with determinable lives as of March 31, 2010:

	Customer			Trade			Software
	Relationships			Name			Technology			Total
Gross carrying amount	$	10,206		$	637		$	12,119		$	22,962
Accumulated amortization		(2,357	)		(269	)		(191	)		(2,817	)
Net intangible assets	$	7,849		$	368		$	11,928		$	20,145
Aggregate amortization expense during the year	$	1,434		$	158		$	191		$	1,783

Activity related to the intangible assets for the year ended March 31, 2010 is as follows:

	Customer			Trade			Software
	Relationships			Name			Technology			Total
Balance as of April 1, 2009	$	7,877		$	526		$	—		$	8,403
Acquisition		1,406			—			12,119			13,525
Amortization		(1,434	)		(158	)		(191	)		(1,783	)
Balance as of March 31, 2010	$	7,849		$	368		$	11,928		$	20,145

The following table represents the remaining estimated amortization of intangible assets with determinable lives as of March 31, 2010:

For the year ended March 31,
2011	$	3,255
2012		3,320
2013		3,184
2014		3,055
2015 and beyond		7,331
Total	$	20,145

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8.   Capitalized Software Costs

As of March 31, 2010 and 2009, the Company had the following amounts related to capitalized software costs:

	March 31,			March 31,
	2010			2009
Gross carrying amount	$	41,429		$	33,508
Accumulated amortization		(29,883	)		(23,956	)
Net capitalized software costs	$	11,546		$	9,552
Aggregate amortization expense during the year	$	5,927		$	5,163

Activity related to net capitalized software costs for the years ended March 31, 2010 and 2009 is as follows:

	Year Ended March 31,
	2010			2009
Beginning of the year	$	9,552		$	8,852
Capitalization		7,921			5,863
Amortization		(5,927	)		(5,163	)
End of the year	$	11,546		$	9,552

The following table represents the remaining estimated amortization of capitalized software costs as of March 31, 2010:

For the year ended March 31,
2011	$	5,729
2012		3,783
2013		1,768
2014		266
2015 and beyond		—
Total	$	11,546

9.   Composition of Certain Financial Statement Captions

Accounts receivable include amounts related to maintenance and services that were billed but not yet rendered as of the end of the fiscal year. Undelivered maintenance and services are included on the accompanying Consolidated Balance Sheets as part of the deferred revenue balance.

	March 31,			March 31,
	2010			2009
Accounts receivable, excluding undelivered software, maintenance and services	$	72,500		$	64,003
Undeliverable software, maintenance and implementation services billed in advance, included in deferred revenue		39,447			29,944
Accounts receivable, gross		111,947			93,947
Allowance for doubtful accounts		(4,489	)		(3,877	)
Accounts receivable, net	$	107,458		$	90,070

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Inventories are summarized as follows:

	March 31,		March 31,
	2010		2009
Computer systems and components, net of reserve for obsolescence of $237 and $210, respectively	$	1,322	$	1,105
Miscellaneous parts and supplies		18		20
Inventories, net	$	1,340	$	1,125

Equipment and improvements are summarized as follows:

	March 31,			March 31,
	2010			2009
Computer and electronic test equipment	$	18,599		$	15,384
Furniture and fixtures		5,136			3,520
Leasehold improvements		1,969			1,595
		25,704			20,499
Accumulated depreciation and amortization		(17,272	)		(13,743	)
Equipment and improvements, net	$	8,432		$	6,756

Accrued compensation and related benefits are summarized as follows:

	March 31,		March 31,
	2010		2009
Payroll, bonus and commission	$	4,185	$	5,768
Vacation		4,766		3,743
Accrued compensation and related benefits	$	8,951	$	9,511

Short and long-term deferred revenue are summarized as follows:

	March 31,		March 31,
	2010		2009
Maintenance	$	13,242	$	8,776
Implementation services		38,137		28,631
Annual license services		8,214		7,988
Undelivered software and other		4,516		2,189
Deferred revenue	$	64,109	$	47,584
Deferred revenue, net of current	$	474	$	521

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Other current liabilities are summarized as follows:

	March 31,		March 31,
	2010		2009
Contingent consideration related to acquisition	$	5,275	$	—
Care services liabilities		2,336		1,303
Accrued EDI expense		2,000		1,258
Customer deposits		1,036		674
Accrued royalties		926		933
Deferred rent		641		782
Self insurance reserve		516		—
Sales tax payable		506		602
Commission payable		468		385
Professional services		391		409
Other accrued expenses		2,125		2,542
Other accrued liabilities	$	16,220	$	8,888

10.   Other Income (Expense)

Other income (expense) of $268 for the year ended March 31, 2010 consists predominantly of gains and losses in fair value recorded on the Company’s ARS investments as well as on its ARS put option rights. For the year ended March 31, 2010, the Company recognized a gain on the ARS of approximately $188 and a gain on the ARS put option rights of approximately $80. See Note 2.

11.   Income Taxes

During the years ended March 31, 2010, 2009 and 2008, the Company claimed federal research and development tax credits of $605, $859 and $779, respectively, and state research and development tax credits of approximately $129, $166 and $113, respectively. Due to the expiration of the Internal Revenue Service (“IRS”) statute related to research and development credits on December 31, 2009, the Company’s research and development credits for the year ended March 31, 2010 represent credits for the nine-month period from April 1, 2009 through December 31, 2009. The Company also claimed the qualified production activities deduction under Section 199 of the Internal Revenue Code (“IRC”) for $4,133, $2,747 and $3,069 during the years ended March 31, 2010, 2009 and 2008, respectively. The research and development credits and the qualified production activities income deduction taken by the Company involve certain assumptions and judgments regarding qualification of expenses under the relevant tax code provisions.

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The provision (benefit) for income taxes consists of the following components:

	Year Ended March 31,
	2010			2009		2008
Current:
Federal taxes	$	23,750		$	18,818	$	18,120
State taxes		5,043			4,992		4,348
		28,793			23,810		22,468
Deferred:
Federal taxes		(768	)		2,802		333
State taxes		(186	)		596		124
		(954	)		3,398		457
Total	$	27,839		$	27,208	$	22,925

The provision for income taxes differs from the amount computed at the federal statutory rate as follows:

	Year Ended March 31,
	2010			2009			2008
Current:
Federal income tax statutory rate		35.0	%		35.0	%		35.0	%
Increase (decrease) resulting from:
State income taxes, net of Federal benefit		4.3			5.2			4.8
Research and development tax credits		(0.9	)		(1.3	)		(1.3	)
Qualified production activities income deduction		(2.0	)		(1.4	)		(1.8	)
Other		0.1			(0.4	)		(0.3	)
Effective income tax rate		36.5	%		37.1	%		36.4	%

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The net deferred tax assets (liabilities) in the accompanying Consolidated Balance Sheets consist of the following:

	March 31,			March 31,
	2010			2009
Deferred tax assets:
Deferred revenue and allowance for doubtful accounts	$	5,577		$	3,271
Inventory valuation		115			100
Purchased in-process research and development		601			912
Accrued compensation and benefits		2,325			1,955
Deferred compensation		783			789
State income taxes		640			185
Compensatory stock option expense		252			125
Other		125			779
Total deferred tax assets		10,418			8,116
Deferred tax liabilities:
Accelerated depreciation		(1,529	)		(1,114	)
Capitalized software		(4,806	)		(4,126	)
Intangibles assets		(6,938	)		(1,412	)
Prepaid expense		(2,326	)		(2,036	)
Total deferred tax liabilities		(15,599	)		(8,688	)
Deferred tax assets (liabilities), net	$	(5,181	)	$	(572	)

The deferred tax assets and liabilities have been shown net in the accompanying Consolidated Balance Sheets based on the long-term or short-term nature of the items that give rise to the deferred amount. No valuation allowance has been made against the deferred tax assets as management expects to receive the full benefit of the assets recorded.

Uncertain tax positions

A reconciliation of the beginning and ending amount of unrecognized tax benefits, which is recorded in income taxes payable in the Company’s Consolidated Balance Sheet, is as follows:

Balance at March 31, 2008	$	613
Additions for prior year tax positions		15
Reductions for prior year tax positions		(561	)
Balance at March 31, 2009	$	67
Additions for prior year tax positions		598
Reductions for prior year tax positions		(9	)
Balance at March 31, 2010	$	656

The total amount of unrecognized tax benefit that, if recognized, would decrease the income tax provision is $656.

The Company’s continuing practice is to recognize estimated interest and/or penalties related to income tax matters in general and administrative expenses. The Company had approximately $59 and $12 of accrued interest related to income tax matters at March 31, 2010 and 2009, respectively. No penalties were accrued.

The Company’s income tax returns filed for tax years 2006 through 2008 and 2005 through 2008 are subject to examination by the federal and state taxing authorities, respectively. The Company is currently not under examination by the IRS or any state income tax authority. The Company does not anticipate that total unrecognized

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tax benefits will significantly change due to the settlement of audits or the expiration of statute of limitations within the next twelve months.

12.   Employee Benefit Plans

The Company has a 401(k) plan available to substantially all of its employees. Participating employees may defer up to the IRS limit based on the IRC per year. The annual contribution is determined by a formula set by the Company’s Board of Directors and may include matching and/or discretionary contributions. The amount of the Company match is discretionary and subject to change. The retirement plans may be amended or discontinued at the discretion of the Board of Directors. Contributions of $371, $357 and $317 were made by the Company to the 401(k) plan for the fiscal years ended March 31, 2010, 2009 and 2008, respectively.

The Company has a deferred compensation plan (the “Deferral Plan”) for the benefit of those employees who qualify for inclusion. Participating employees may defer up to 75% of their salary and 100% of their annual bonus for a Deferral Plan year. In addition, the Company may, but is not required to, make contributions into the Deferral Plan on behalf of participating employees, and the amount of the Company match is discretionary and subject to change. Each employee’s deferrals together with earnings thereon are accrued as part of the long-term liabilities of the Company. Investment decisions are made by each participating employee from a family of mutual funds. Deferred compensation liability was $1,883 and $1,838 at March 31, 2010 and 2009, respectively. To offset this liability, the Company has purchased life insurance policies on some of the participants. The Company is the owner and beneficiary of the policies and the cash values are intended to produce cash needed to help make the benefit payments to employees when they retire or otherwise leave the Company. The Company intends to hold the life insurance policy until the death of the plan participant. The net cash surrender value of the life insurance policies for deferred compensation was $2,670 and $1,715 at March 31, 2010 and 2009, respectively. The values of the life insurance policies and the related Company obligation are included on the accompanying Consolidated Balance Sheets in long-term other assets and long-term deferred compensation, respectively. The Company made contributions of $48, $29 and $29 to the Deferral Plan for the fiscal years ended March 31, 2010, 2009 and 2008, respectively.

The Company has a voluntary employee stock contribution plan for the benefit of full-time employees. The plan is designed to allow qualified employees to acquire shares of the Company’s common stock through automatic payroll deduction. Each eligible employee may authorize the withholding of up to 10% of his or her gross payroll each pay period to be used to purchase shares on the open market by a broker designated by the Company. In addition, the Company will match 5% of each employee’s contribution and will pay all brokerage commissions and fees in connection with each purchase. The amount of the Company match is discretionary and subject to change. The plan is not intended to be an employee benefit plan under the Employee Retirement Income Security Act of 1974, and is therefore not required to comply with that Act. Contributions of approximately $35, $14 and $28 were made by the Company for the fiscal years ended March 31, 2010, 2009 and 2008, respectively.

13.   Share-Based Awards

Employee Stock Option Plans

In September 1998, the Company’s shareholders approved a stock option plan (the “1998 Plan”) under which 4,000,000 shares of Common Stock were reserved for the issuance of options. The 1998 Plan provides that employees, directors and consultants of the Company may, at the discretion of the Board of Directors or a duly designated compensation committee, be granted options to purchase shares of Common Stock. The exercise price of each option granted was determined by the Board of Directors at the date of grant, and options under the 1998 Plan expire no later than ten years from the grant date. Options granted will generally become exercisable in accordance with the terms of the agreement pursuant to which they were granted. Certain option grants to directors became exercisable three months from the date of grant. Upon an acquisition of the Company by merger or asset sale, each

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outstanding option may be subject to accelerated vesting under certain circumstances. The 1998 Plan terminated on December 31, 2007. As of March 31, 2010, there were 301,462 outstanding options related to this Plan.

In October 2005, the Company’s shareholders approved a stock option and incentive plan (the “2005 Plan”) under which 2,400,000 shares of Common Stock were reserved for the issuance of awards, including stock options, incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units, performance shares, performance units (including performance options) and other share-based awards. The 2005 Plan provides that employees, directors and consultants of the Company may, at the discretion of the Board of Directors or a duly designated compensation committee, be granted awards to acquire shares of Common Stock. The exercise price of each option award shall be determined by the Board of Directors at the date of grant in accordance with the terms of the 2005 Plan, and under the 2005 Plan awards expire no later than ten years from the grant date. Options granted will generally become exercisable in accordance with the terms of the agreement pursuant to which they were granted. Upon an acquisition of the Company by merger or asset sale, each outstanding option may be subject to accelerated vesting under certain circumstances. The 2005 Plan terminates on May 25, 2015, unless terminated earlier by the Board of Directors. At March 31, 2010, 1,771,185 shares were available for future grant under the 2005 Plan. As of March 31, 2010, there were 570,501 outstanding options related to this Plan.

A summary of stock option transactions during the years ended March 31, 2010, 2009 and 2008 is as follows:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
				Exercise		Contractual		Value
	Number of Shares			Price		Life		(In thousands)
Outstanding, March 31, 2007		1,461,950		$	18.46
Granted		225,500		$	38.78
Exercised		(325,266	)	$	14.64			$	4,955
Forfeited/Canceled		(58,450	)	$	21.12
Outstanding, March 31, 2008		1,303,734		$	22.81
Granted		298,331		$	38.71
Exercised		(697,083	)	$	17.96			$	17,182
Forfeited/Canceled		(84,900	)	$	25.93
Outstanding, March 31, 2009		820,082		$	32.39		3.63
Granted		289,484		$	58.44		7.75
Exercised		(237,603	)	$	24.64		2.49	$	8,254
Forfeited/Canceled		—
Outstanding, March 31, 2010		871,963		$	43.15		4.51	$	15,945
Vested and expected to vest, March 31, 2010		861,701		$	43.10		4.50	$	15,806
Exercisable, March 31, 2010		261,127		$	31.92		2.49	$	7,708

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The Company continues to utilize the Black-Scholes valuation model for estimating the fair value of share-based compensation after the adoption of ASC 718 with the following assumptions:

	Year Ended March 31,
	2010	2009	2008
Expected life	4.42 - 4.75 years	4.01 years	3.75 - 4.01 years
Expected volatility	45.49% - 47.65%	42.00% - 46.70%	42.37% - 44.81%
Expected dividends	1.90% - 2.20%	2.90% - 3.50%	2.67% - 3.38%
Risk-free rate	0.82% - 2.41%	1.07% - 3.40%	2.46% - 5.09%

During the years ended March 31, 2010 and 2009, 289,484 and 298,331 options were granted, respectively, under the 2005 Plan. The Company issues new shares to satisfy option exercises. Based on historical experience of option cancellations, the Company has estimated an annualized forfeiture rate of 1.7% for employee options and 0.0% for director options. Forfeiture rates will be adjusted over the requisite service period when actual forfeitures differ, or are expected to differ, from the estimate. The weighted average grant date fair value of stock options granted during the years ended March 31, 2010, 2009 and 2008 was $19.30, $11.22 and $12.41 per share, respectively. The expected dividend yield is the average dividend rate during a period equal to the expected life of the option.

On February 16, 2010, the Board of Directors granted a total of 121,059 options under the Company’s 2005 Plan to selected employees at an exercise price equal to the market price of the Company’s common stock on the date of grant ($56.95 per share). Of the total options, 118,059 options vest in five equal annual installments beginning February 16, 2011 and expire on February 16, 2018 and 3,000 options vest in two equal annual installments beginning February 16, 2011 and expire on February 16, 2013.

On December 7, 2009, the Board of Directors granted a total of 63,425 options under the Company’s 2005 Plan to selected employees at an exercise price equal to the market price of the Company’s common stock on the date of grant ($60.29 per share). The options vest in five equal annual installments beginning December 7, 2010 and expire on December 7, 2017.

On November 30, 2009, the Board of Directors granted a total of 75,000 options under the Company’s 2005 Plan, of which 53,000 were granted to selected employees and 22,000 options were granted as part of an earn-out provision relating to the acquisition of PMP (see Note 6), at an exercise price equal to the market price of the Company’s common stock on the date of grant ($59.49 per share). The options vest in five equal annual installments beginning November 30, 2010 and expire on November 30, 2017.

On September 17, 2009, the Board of Directors granted a total of 30,000 options under the Company’s 2005 Plan to an employee at an exercise price equal to the market price of the Company’s common stock on the date of grant ($58.03 per share). The options vest in five equal annual installments beginning September 17, 2010 and expire on September 17, 2017.

On November 5, 2008, the Board of Directors granted a total of 80,141 options under the Company’s 2005 Plan to selected employees at an exercise price equal to the market price of the Company’s common stock on the date of grant ($42.20 per share). The options vest in four equal annual installments beginning November 5, 2009 and expire on November 5, 2013.

On September 9, 2008, the Board of Directors granted a total of 35,000 options under the Company’s 2005 Plan to non-management directors pursuant to the Company’s previously announced compensation plan for non-management directors, at an exercise price equal to the market price of the Company’s common stock on the date of grant ($45.61 per share). The options vest in four equal annual installments beginning September 9, 2009 and expire on September 9, 2015.

On August 18, 2008, the Board of Directors granted a total of 50,000 options under the Company’s 2005 Plan to an employee at an exercise price equal to the market price of the Company’s common stock on the date of grant ($40.08 per share). The options vest in four equal annual installments beginning August 18, 2009 and expire on August 18, 2013.

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On August 11, 2008, the Board of Directors granted a total of 25,000 options under the Company’s 2005 Plan to selected employees at an exercise price equal to the market price of the Company’s common stock on the date of grant ($40.71 per share). The options vest in four equal annual installments beginning August 11, 2009 and expire on August 11, 2013.

On June 13, 2008, the Board of Directors granted a total of 108,190 options under the Company’s 2005 Plan to selected employees at an exercise price equal to the market price of the Company’s common stock on the date of grant ($32.79 per share). The options vest in four equal annual installments beginning June 13, 2009 and expire on June 13, 2013.

Performance-Based Awards

On May 27, 2009, the Board of Directors approved its fiscal 2010 equity incentive program for employees to be awarded options to purchase the Company’s common stock. The maximum number of options available under the equity incentive program plan is 320,000, of which 105,000 are reserved for the Company’s Named Executive Officers and 215,000 for non-executive employees of the Company. Under the program, executives are eligible to receive options based on meeting certain target increases in earnings per share performance and revenue growth during fiscal year 2010 and for one executive, a portion of the options is based on retention of employment status through the end of fiscal 2010. Under the program, the non-executive employees are eligible to receive options based on recommendation of senior management. The options shall be issued pursuant to one of the Company’s shareholder approved option plans, have an exercise price equal to the closing price of the Company’s shares on the date of grant, a term of eight years, vesting in five equal annual installments commencing one year following the date of grant. Compensation expense for the non-executive options will commence when granted. Compensation expense associated with the executive performance based awards are initially based on the number of options expected to vest after assessing the probability that certain performance criteria will be met. Cumulative adjustments are recorded quarterly to reflect subsequent changes in the estimated outcome of performance-related conditions. The Company utilized the Black-Scholes option valuation model and the recorded stock compensation expense related to the executive performance awards was approximately $35 during the year ended March 31, 2010.

The following assumptions were utilized for performance based awards under the Company’s 2010 incentive plan during the year ended March 31, 2010:

	Year Ended
	March 31, 2010
Expected life	4.42 years
Expected volatility	45.49%
Expected dividends	2.20%
Risk-free rate	2.32%

Non-vested stock option award activity, including employee stock options and performance-based awards, for the year ended March 31, 2010, is summarized as follows:

				Weighted
	Non-Vested			Average
	Number of			Fair Value
	Shares			Price
Outstanding, April 1, 2009		465,345		$	11.74
Granted		289,484		$	19.30
Vested		(143,993	)	$	12.03
Forfeited/Canceled		—
Outstanding, March 31, 2010		610,836		$	15.26

As of March 31, 2010, $7,995 of total unrecognized compensation costs related to stock options is expected to be recognized over a weighted average period of 5.38 years. This amount does not include the cost of new options

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that may be granted in future periods or any changes in the Company’s forfeiture percentage. The total fair value of options vested during years ended March 31, 2010, 2009 and 2008 was $1,732, $3,236 and $1,345, respectively.

Restricted Stock Units

On May 27, 2009, the Board of Directors approved its Outside Director Compensation Plan, whereby each non-employee Director is to be awarded shares of restricted stock units upon election or re-election to the Board. The restricted stock units are awarded under the 2005 Plan. Such restricted units vest in two equal, annual installments on the first and second anniversaries of the grant date and are nontransferable for one year following vesting. Upon each vesting of the award, two shares of common stock shall be issued for each restricted stock unit. The Company estimated the fair value of the restricted stock units using the market price of its common stock on the date of the grant ($53.86 per share on August 13, 2009, the grant date). The fair value of these restricted units is amortized on a straight-line basis over the vesting period. As of March 31, 2010, 8,000 restricted units were issued and approximately $136 of compensation expense was recorded under this Plan during the year ended March 31, 2010.

As of March 31, 2010, $295 of total unrecognized compensation costs related to restricted stock units is expected to be recognized over a weighted average period of 1.37 years. This amount does not include the cost of new restricted stock units that may be granted in future periods or any changes in the Company’s forfeiture percentage. During the year ended March 31, 2010, no restricted stock units became vested.

14.   Commitments, Guarantees and Contingencies

Rental Commitments

The Company leases facilities and offices under irrevocable operating lease agreements expiring at various dates through May 2017 with rent escalation clauses. Rent expense related to these leases is recognized on a straight-line basis over the lease terms. Rent expense for the years ended March 31, 2010, 2009 and 2008 was $4,264, $3,560 and $2,737, respectively. Rental commitments under these agreements are as follows:

Year Ended March 31,
2011	$	4,413
2012		4,565
2013		4,577
2014		3,963
2015 and beyond		7,215
	$	24,733

Commitments and Guarantees

Software license agreements in both the QSI and NextGen Divisions include a performance guarantee that the Company’s software products will substantially operate as described in the applicable program documentation for a period of 365 days after delivery. To date, the Company has not incurred any significant costs associated with its performance guarantee or other related warranties and does not expect to incur significant warranty costs in the future. Therefore, no accrual has been made for potential costs associated with these warranties. Certain arrangements also include performance guarantees related to response time, availability for operational use, and other performance-related guarantees. Certain arrangements also include penalties in the form of maintenance credits should the performance of the software fail to meet the performance guarantees. To date, the Company has not incurred any significant costs associated with these warranties and does not expect to incur significant warranty costs in the future. Therefore, no accrual has been made for potential costs associated with these warranties.

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The Company has historically offered short-term rights of return in certain sales arrangements. If the Company is able to estimate returns for these types of arrangements and all other criteria for revenue recognition have been met, revenue is recognized and these arrangements are recorded in the Consolidated Financial Statements. If the Company is unable to estimate returns for these types of arrangements, revenue is not recognized in the Consolidated Financial Statements until the rights of return expire, provided also, that all other criteria of revenue recognition have been met.

The Company’s standard sales agreements in the NextGen Division contain an indemnification provision pursuant to which it shall indemnify, hold harmless, and reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with any United States patent, any copyright or other intellectual property infringement claim by any third party with respect to its software. The QSI Dental Division arrangements occasionally utilize this type of language as well. As the Company has not incurred any significant costs to defend lawsuits or settle claims related to these indemnification agreements, the Company believes that its estimated exposure on these agreements is currently minimal. Accordingly, the Company has no liabilities recorded for these indemnification obligations.

The Company has entered into marketing assistance agreements with existing users of the Company’s products which provide the opportunity for those users to earn commissions if they host specific site visits upon the Company’s request for prospective customers that directly result in a purchase of the Company’s software by the visiting prospects. Amounts earned by existing users under this program are treated as a selling expense in the period when earned.

Litigation

The Company has experienced certain legal claims by parties asserting that it has infringed certain intellectual property rights. The Company believes that these claims are without merit and the Company has defended them vigorously. However, in order to avoid the further legal costs and diversion of management resources it is reasonably possible that a settlement may be reached which could result in a liability to the Company. However, at this time it is not possible to estimate with reasonable certainty what amount, if any, may be incurred as a result of a settlement. Litigation is inherently uncertain and always difficult to predict.

15.   Operating Segment Information

The Company has prepared operating segment information in accordance with ASC 280 to report components that are evaluated regularly by its chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.

As a result of certain organizational changes, the composition of the Company’s NextGen Division was revised to exclude the former NextGen Practice Solutions unit and the Company’s RCM entities (HSI and PMP), both of which are now administered and aggregated in the Company’s Practice Solutions Division. Following the reorganization, the Company now operates three reportable operating segments (not including Corporate), comprised of the NextGen Division, the QSI Dental Division and the Practice Solutions Division.

Prior period segment results were revised to reflect this reorganization for the Company’s NextGen Division and Practice Solution Division. The results of operations related to the HSI and PMP acquisitions are included in the Practice Solutions Division. The results of operations related to the Opus and Sphere acquisitions are included in the NextGen Division.

The QSI Dental Division, co-located with the Company’s Corporate Headquarters in Irvine, California, currently focuses on developing, marketing and supporting software suites sold to dental and certain niche medical practices. In addition, the Division supports a number of medical clients that utilize the Division’s UNIX based medical practice management software product.

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The NextGen Division, with headquarters in Horsham, Pennsylvania, and significant locations in Atlanta, Georgia and Austin, Texas, focuses principally on developing and marketing products and services for medical practices.

The Practice Solutions Division, with locations in St. Louis, Missouri and Hunt Valley, Maryland, focuses primarily on providing physician practices with RCM services, primarily billing and collection services for medical practices. This Division combines a web-delivered SaaS model and the NextGen^epm software platform to execute its service offerings.

The three Divisions operate largely as stand-alone operations, with each Division maintaining its own distinct product lines, product platforms, development, implementation and support teams, sales staffing and branding. The three Divisions share the resources of the Company’s “corporate office” which includes a variety of accounting and other administrative functions. Additionally, there are a small but growing number of clients who are simultaneously utilizing software or services from more than one of its three Divisions.

The accounting policies of the Company’s operating segments are the same as those described in Note 2 of the Consolidated Financial Statements, “Summary of Significant Accounting Policies,” except that the disaggregated financial results of the segments reflect allocation of certain functional expense categories consistent with the basis and manner in which Company management internally disaggregates financial information for the purpose of assisting in making internal operating decisions. Certain corporate overhead costs, such as executive and accounting department personnel-related expenses, are not allocated to the individual segments by management. Management evaluates performance based on stand-alone segment operating income. Because the Company does not evaluate performance based on return on assets at the operating segment level, assets are not tracked internally by segment. Therefore, segment asset information is not presented.

Operating segment data is as follows:

	March 31,			March 31,			March 31,
	2010			2009			2008
Revenue:
QSI Dental Division	$	17,128		$	15,851		$	16,037
NextGen Division		231,621			203,954			170,463
Practice Solutions Division		43,062			25,710			—
Consolidated revenue	$	291,811		$	245,515		$	186,500
Operating income:
QSI Dental Division	$	3,460		$	3,385		$	3,662
NextGen Division		88,108			81,323			66,558
Practice Solutions Division		2,314			2,455			—
Unallocated corporate expense		(18,158	)		(14,760	)		(10,831	)
Consolidated operating income	$	75,724		$	72,403		$	59,389

All of the recorded goodwill at March 31, 2010 relates to the Company’s NextGen Division and Practice Solutions Division. As a result of the reorganization discussed above, the goodwill relating to the fiscal year 2009 acquisitions of HSI and PMP is now recorded in the Practice Solutions Division. The goodwill relating to the acquisitions of Opus and Sphere is recorded in the NextGen Division.

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16.   Subsequent Events

On May 26, 2010, the Board of Directors approved a quarterly cash dividend of $0.30 per share on the Company’s outstanding shares of common stock, payable to shareholders of record as of June 17, 2010 with an expected distribution date on or about July 6, 2010.

17.   Selected Quarterly Operating Results (unaudited)

The following table presents quarterly unaudited consolidated financial information for the eight quarters in the period ended March 31, 2010. Such information is presented on the same basis as the annual information presented in the accompanying Consolidated Financial Statements. In management’s opinion, this information reflects all adjustments that are necessary for a fair presentation of the results for these periods.

	Quarter Ended
	06/30/08		09/30/08		12/31/08		03/31/09		06/30/09		09/30/09		12/31/09		03/31/10
	(Unaudited)
Revenues:
Software, hardware and supplies	$	21,369	$	21,297	$	22,336	$	20,384	$	17,776	$	22,856	$	24,346	$	24,783
Implementation and training services		3,585		3,486		2,675		3,629		3,457		3,380		3,313		4,226
System sales		24,954		24,783		25,011		24,013		21,233		26,236		27,659		29,009
Maintenance		17,136		17,234		19,152		19,340		21,640		21,475		22,139		23,938
Electronic data interchange services		6,670		6,985		8,008		7,859		8,161		8,796		8,897		9,181
Revenue cycle management and related services		1,957		4,527		6,835		8,112		8,992		8,888		9,602		9,183
Other services		4,507		5,452		6,473		6,507		6,612		6,303		6,665		7,202
Maintenance, EDI, RCM and other services		30,270		34,198		40,468		41,818		45,405		45,462		47,303		49,504
Total revenues		55,224		58,981		65,479		65,831		66,638		71,698		74,962		78,513
Cost of revenue:
Software, hardware and supplies		3,486		3,395		3,030		3,273		2,704		3,737		2,810		2,864
Implementation and training services		3,015		2,626		2,143		2,502		2,881		3,296		2,898		2,908
Total cost of system sales		6,501		6,021		5,173		5,775		5,585		7,033		5,708		5,772
Maintenance		3,082		2,947		2,826		3,004		3,025		3,255		3,392		3,667
Electronic data interchange services		4,891		5,256		5,541		5,686		5,890		6,164		6,525		6,683
Revenue cycle management and related services		1,305		3,132		4,475		5,762		6,522		6,856		7,124		7,213
Other services		3,448		3,866		5,085		5,114		4,867		5,003		5,560		4,963
Total cost of maintenance, EDI, RCM and other services		12,726		15,201		17,927		19,566		20,304		21,278		22,601		22,526
Total cost of revenue		19,227		21,222		23,100		25,341		25,889		28,311		28,309		28,298
Gross profit		35,997		37,759		42,379		40,490		40,749		43,387		46,653		50,215

96

QUALITY SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Quarter Ended
	06/30/08		09/30/08		12/31/08		03/31/09			06/30/09		09/30/09		12/31/09		03/31/10
	(Unaudited)
Operating expenses:
Selling, general and administrative		15,182		18,000		18,276		17,952			20,093		20,061		21,574		25,223
Research and development costs		3,119		3,342		3,624		3,692			3,977		4,346		3,954		4,269
Amortization of acquired intangible assets		70		283		325		357			357		367		377		682
Total operating expenses		18,371		21,625		22,225		22,001			24,427		24,774		25,905		30,174
Income from operations		17,626		16,134		20,154		18,489			16,322		18,613		20,748		20,041
Interest income		374		340		328		161			78		59		43		46
Other income		—		—		—		(279	)		58		—		136		74
Income before provision for income taxes		18,000		16,474		20,482		18,371			16,458		18,672		20,927		20,161
Provision for income taxes		6,886		5,975		7,332		7,015			6,112		6,852		7,775		7,100
Net income	$	11,114	$	10,499	$	13,150	$	11,356		$	10,346	$	11,820	$	13,152	$	13,061
Net income per share:
Basic*	$	0.40	$	0.38	$	0.46	$	0.40		$	0.36	$	0.41	$	0.46	$	0.45
Diluted*	$	0.40	$	0.37	$	0.46	$	0.40		$	0.36	$	0.41	$	0.46	$	0.45
Weighted average shares outstanding:
Basic		27,465		27,930		28,340		28,393			28,492		28,597		28,667		28,784
Diluted		27,771		28,211		28,473		28,526			28,635		28,742		28,833		28,929
Dividends declared per common share	$	0.25	$	0.30	$	0.30	$	0.30		$	0.30	$	0.30	$	0.30	$	0.30

* Quarterly EPS will not sum to annual EPS due to rounding

97

Schedule II — Valuation and Qualifying Accounts

ALLOWANCE FOR DOUBTFUL ACCOUNTS

	Balance at		Additions					Balance at
	Beginning of		Charged to Costs					End of
	Year		and Expenses		Deductions			Year
	(In thousands)
For the Year Ended
March 31, 2010	$	3,877	$	3,465	$	(2,853	)	$	4,489
March 31, 2009	$	2,528	$	2,089	$	(740	)	$	3,877
March 31, 2008	$	2,438	$	1,171	$	(1,081	)	$	2,528

ALLOWANCE FOR INVENTORY OBSOLESCENCE

	Balance at		Additions					Balance at
	Beginning of		Charged to Costs					End of
	Year		and Expenses		Deductions			Year
	(In thousands)
For the Year Ended
March 31, 2010	$	210	$	27	$	—		$	237
March 31, 2009	$	223	$	—	$	(13	)	$	210
March 31, 2008	$	324	$	52	$	(153	)	$	223

98

INDEX TO EXHIBITS ATTACHED TO THIS REPORT

Exhibit
Number			Description
	10	.36	Agreement and Plan of Merger dated February 10, 2010, by and among Quality Systems, Inc., OHS Merger Sub, Inc., Opus Healthcare Solutions, Inc., and the Shareholders of Opus Healthcare Solutions, Inc.
	10	.37	Sixth Amendment to Lease Agreement between the Company and Tower Place, L.P. dated April 1, 2010.
	10	.38	Third Amendment to Office Lease agreement between the Company and HUB Properties LLC dated January 1, 2010.
	10	.39	Fourth Amendment to Office Lease agreement between the Company and HUB Properties LLC dated March 17, 2010.
	10	.40	Third Amendment to Service Center Lease Agreement between the TM Properties, LLC, successor to the Lincoln National Life Insurance Company and Lackland Acquisition II, LLC, dated March 15, 2010.
	10	.41	Second Amendment to Lease Agreement between Hill Management Services, Inc. and Practice Management Partners, Inc., dated November 1, 2009.
	10	.42	Modification of Lease #1 between Olen Commercial Realty Corp. and NXG Acute Care LLC, dated October 13, 2009.
	10	.43	Lease between Olen Commercial Realty Corp. and NXG Acurate Care LLC, dated October 1, 2009.
	10	.44	Sublease Agreement between Centex Homes and Opus Healthcare Solutions, Inc., dated February   , 2009.
	21		List of subsidiaries.
	23	.1	Consent of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP.
	23	.2	Consent of Independent Registered Public Accounting Firm — Grant Thornton LLP.
	31	.1	Certification of Principal Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification of Principal Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99

EX-10.36

Exhibit 10.36

AGREEMENT AND PLAN OF MERGER

     THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is entered into as of February 10, 2010 by and among Quality Systems, Inc., a California corporation (“Parent”), OHS Merger Sub, Inc., a Texas corporation and wholly-owned subsidiary of Parent (“Merger Sub”), Opus Healthcare Solutions, Inc., a Texas corporation (the “Company”), and the shareholders (each a “Shareholder” and collectively, the “Shareholders”) of the Company. Capitalized terms shall have the meanings ascribed to them in Article IX.

RECITALS

     A. This Agreement contemplates a merger of Merger Sub with and into the Company with the Company as the surviving entity. In such merger, the Shareholders will receive shares of Parent’s common stock in exchange for their capital stock of the Company.

     B. The Parties intend for the Merger to qualify as a tax-free reorganization under Section 368(a) of the Code.

AGREEMENT

     Now, therefore, in consideration of the representations, warranties and covenants herein contained, the Parties agree as follows.

ARTICLE I
THE MERGER; CLOSING

     1.1 The Merger. Upon and subject to the terms and conditions of this Agreement, Merger Sub shall merge with and into the Company at the Effective Time. From and after the Effective Time, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the Surviving Corporation. The Merger shall have the effects set forth in Section 10.008 of the Texas Business Organizations Code (the “TBOC”).

     1.2 The Closing. The Closing shall take place remotely by the exchange of counterpart signature pages and documents, simultaneously with the execution and delivery hereof by all parties hereto.

     1.3 Actions at the Closing.

          (a) At the Closing:

               (i) the Company shall deliver to Parent the various certificates, instruments and documents referred to in Section 6.1;

               (ii) Parent shall deliver to the Company the various certificates, instruments and documents referred to in Section 6.2;

               (iii) the Surviving Corporation and Merger Sub shall file with the Texas Secretary of State the Certificate of Merger; and

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               (iv) Parent, the Shareholder Representative and the Escrow Agent shall execute and deliver the Escrow Agreement.

          (b) Upon confirmation from the Texas Secretary of State that the Certificate of Merger has been filed and accepted:

               (i) each Shareholder shall deliver to Parent for cancellation the certificate(s) representing his Company Shares together with an appropriate letter of transmittal (each, a “Shareholder Transmittal Letter”) substantially in the form attached hereto as Exhibit A;

               (ii) Parent shall submit to its transfer agent an order for the issuance of the Parent Shares to which the Shareholders are entitled pursuant to Section 1.5(a)(i); and

               (iii) Parent shall submit to its transfer agent an order for the issuance to the Shareholders of the Initial Escrowed Shares, which shall be deposited with the Escrow Agent in accordance with Section 1.9 and the Escrow Agreement.

     1.4 Additional Action. The Surviving Corporation may, at any time after the Effective Time, take any action, including executing and delivering any document, in the name and on behalf of the Company or Merger Sub, in order to consummate the series of transactions contemplated by this Agreement.

     1.5 Conversion of Shares. At the Effective Time, by virtue of the Merger without any further action on the part of any Party or the holder of any of the Company Shares:

          (a) Each Company Share shall be converted into the right to receive the following:

               (i) from Parent at Closing, a number of Parent Shares equal in value to the Closing Consideration Per Share (valuing the Parent Shares, for purposes of this Section 1.5(a)(i), using the Share Valuation Method);

               (ii) from Parent at the time set forth in Section 1.6, cash equal to the quotient of (A) the Closing Amount Adjustment payable to the Shareholders pursuant to Section 1.6, if any, divided by (B) the total number of Common Shares issued and outstanding immediately prior to the Effective Time;

               (iii) from the Escrow Agent at the time set forth in the Escrow Agreement, the Escrowed Shares, if any, to which the holder of such Company Share is entitled pursuant to the Escrow Agreement; and

               (iv) from Parent at the times set forth in Section 1.8, the Earnout Payments, if any, due to the holders of Company Shares pursuant to Section 1.8.

          (b) Each share of common stock, $0.01 par value per share, of the Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and thereafter evidence one share of common stock, $0.01 par value per share, of the Surviving Corporation.

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          (c) No certificates or scrip representing fractional shares of Parent Shares shall be issued as part of any amount of the Aggregate Transaction Consideration that a Shareholder has a right to receive. Notwithstanding any other provision of this Agreement, in the event a Shareholder would otherwise have been entitled to receive a fraction of a share of Parent Shares such fraction shall be rounded up or down to the nearest whole share.

     1.6 Closing Amount Adjustment.

          (a) Target Working Capital. The Closing Amount will be adjusted by the difference between the Closing Date Working Capital and Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000) (the “Target Working Capital”).

          (b) Closing Amount Adjustment. If the Closing Date Working Capital set forth in the Final Balance Sheet is greater than the Target Working Capital, the Closing Amount will be increased by such excess and if the Closing Date Working Capital set forth in the Final Balance Sheet is less than the Target Working Capital, the Closing Amount will be decreased by such shortfall (the amount of any such adjustment, the “Closing Amount Adjustment”). If the Closing Amount is increased pursuant to this Section 1.6, then Parent will pay to each of the Shareholders by wire transfer in immediately available funds, within fifteen (15) days following finalization of the Final Balance Sheet pursuant to subsection (c) below, an amount equal to the product of (i) the Closing Amount Adjustment, multiplied by (ii) such Shareholder’s Ownership Percentage. If the Closing Amount is decreased pursuant to this Section 1.6, then each Shareholder will pay to Parent by wire transfer in immediately available funds, within fifteen (15) days following finalization of the Final Balance Sheet pursuant to subsection (c) below, an amount equal to the product of (i) the Closing Amount Adjustment, multiplied by (ii) such Shareholder’s Ownership Percentage; provided, however, that if any Shareholder does not pay such amount within such 15-day period, Parent shall have the right to setoff such amount against any amounts of the Aggregate Transaction Consideration payable to the Shareholders hereunder.

          (c) Adjustment Procedures. The adjustments described in Section 1.6(b) will be determined as follows:

               (i) Within sixty (60) days after the Closing Date, Parent shall prepare and deliver to the Shareholder Representative a balance sheet of the Company as of the Closing Date which shall set forth the Closing Date Working Capital (the “Final Balance Sheet”). The parties acknowledge and agree that for purposes of determining the Closing Amount Adjustment pursuant to this Section 1.6(c)(i) the Final Balance Sheet shall be prepared on a basis consistent with and utilizing the same principles, practices and policies of the Company as those used in preparing the Most Recent Balance Sheet.

               (ii) The Shareholder Representative and any professionals chosen by the Shareholder Representative shall have the right to review the Surviving Corporation’s books and records relating to, and the work papers of Parent and its advisors utilized in preparing, the Final Balance Sheet. The Final Balance Sheet shall be binding for purposes of the Closing Amount Adjustment unless the Shareholder Representative presents to Parent within thirty (30) days after receipt of the Final Balance Sheet from Parent written notice of disagreement specifying in reasonable detail the nature and extent of the disagreement.

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               (iii) If the Shareholder Representative delivers a timely notice of disagreement, Parent and the Shareholder Representative shall attempt in good faith during the thirty (30) days immediately following Parent’s receipt of timely notice of disagreement to resolve any disagreement with respect to the Final Balance Sheet. If, at the conclusion of such 30-day period, Parent and the Shareholder Representative have not resolved their disagreements regarding the Final Balance Sheet, Parent and the Shareholder Representative shall refer the items of disagreement for final determination to the Austin, Texas office of a national or regional accounting firm which is mutually acceptable to Parent and the Shareholder Representative (the “Accountants”). However, if Parent and the Shareholder Representative are unable to agree on such a firm which is willing to so serve, Parent shall deliver to the Shareholder Representative a list of the Austin, Texas offices of two independent national or regional accounting firms that are not auditors, tax advisors or other consultants to Parent, the Surviving Corporation or the Shareholder Representative (or any of their respective Affiliates), and the Shareholder Representative shall select one of such two firms to be the Accountants within five (5) Business Days. The Accountants, Parent and the Shareholder Representative will enter into such engagement letters as required by the Accountants to perform under this Section 1.6(c)(iii). The Parties will be reasonably available for the Accountants, and shall instruct the Accountants to render a final determination within the twenty (20) days immediately following the referral to the Accountants. The Final Balance Sheet shall be deemed to be conclusive and binding on Parent and the Shareholders upon (A) the failure of the Shareholder Representative to deliver to Parent a notice of disagreement thirty (30) days after receipt of the Final Balance Sheet prepared by Parent, (B) resolution of any disagreement by mutual agreement of Parent and the Shareholder Representative after a timely notice of disagreement has been delivered to Parent, or (C) notification by the Accountants of their final determination of the items of disagreement submitted to them.

               (iv) The fees and disbursements of the Accountants under this Section 1.6(c) shall be borne exclusively by the Shareholders, unless the adjustments to the Final Balance Sheet resulting from the Shareholder Representative’s notice of disagreement caused change in the Closing Amount Adjustment in excess of Fifty Thousand Dollars ($50,000) in favor of the Shareholders, in which case such fees and disbursements shall be borne exclusively by Parent. In the event the Shareholders are obligated to pay the fees and disbursements of the Accountants hereunder, such amounts shall be disbursed from the Escrow Fund, and then from any other amounts of the Aggregate Transaction Consideration payable to the Shareholders hereunder, whether by right of setoff or otherwise, or if amounts payable hereunder are not sufficient, upon demand by Parent, from the Shareholders.

     1.7 Reserved.

     1.8 Earnout.

          (a) EBITDA Portion (First Earnout Period). Subject to the terms and conditions of this Section 1.8, if for the twelve (12) month period ending on the first anniversary of the Closing Date (the “First Earnout Period”):

               (i) EBITDA is less than $3,000,000, then Parent shall not be required to pay any amount pursuant to this Section 1.8(a); and

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               (ii) EBITDA equals or exceeds $3,000,000, then Parent shall pay as additional Aggregate Transaction Consideration pursuant to Section 1.8(f), and subject to the Earnout cap set forth in Section 1.8(e), an amount equal to seventy percent (70%) of the amount of all such EBITDA (including the first $3,000,000 thereof) (the “First EBITDA Payment”); provided, however, that the maximum First EBITDA Payment shall be $4,500,000.

          (b) EBITDA Portion (Second Earnout Period). Subject to the terms and conditions of this Section 1.8, if for the twelve (12) month period ending on the second anniversary of the Closing Date (the “Second Earnout Period” and together with the First Earnout Period, the “Earnout Periods”):

               (i) EBITDA is less than $4,500,000, then Parent shall not be required to pay any amount pursuant to this Section 1.8(b); and

               (ii) EBITDA equals or exceeds $4,500,000, then Parent shall pay as additional Aggregate Transaction Consideration pursuant to Section 1.8(f), and subject to the Earnout cap set forth in Section 1.8(e), an amount equal to eighty percent (80%) of the amount of all such EBITDA (including the first $4,500,000 thereof) (the “Second EBITDA Payment” and collectively with the First EBITDA Payment, the “EBITDA Payments”); provided, however, that the maximum Second EBITDA Payment shall be the sum of $4,500,000 plus the amount, if any, by which the First EBITDA Payment is less than $4,500,000; provided, further, that if EBITDA for the First Earnout Period is less than $3,000,000, the maximum Second EBITDA Payment shall be $4,500,000.

          (c) ^***

          (d) Revenue Target Portion. Subject to the terms and conditions of this Section 1.8, if Revenues for the Second Earnout Period equals or exceeds $17,500,000, then Parent shall pay $1,000,000 as additional Aggregate Transaction Consideration pursuant to Section 1.8(f).

          (e) Earnout Caps. For the avoidance of doubt, in no event shall Parent be required to pay more than: (i) $4,500,000 pursuant to Section 1.8(a)(ii); (ii) $9,000,000 in the aggregate for all payments pursuant to Sections 1.8(a)(ii) and 1.8(b)(ii); (iii) $4,000,000 in the aggregate for all payments pursuant to Section 1.8(c) (collectively, the “Strategic Objectives Payments”); and (iv) $1,000,000 pursuant to Section 1.8(d) (the “Revenues Payment” and collectively with the EBITDA Payments and the Strategic Objectives Payments, the “Earnout Payments”).

          (f) Allocation and Payment of Earnout Payments. If an Earnout Payment is due, then Parent shall pay such Earnout Payment to the Shareholders and to the holders of the Options terminated prior to the Closing set forth on Part II of Exhibit B (the “Option Holders”) as follows.

^*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission

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               (i) Until Total Consideration equals or exceeds the Option Holder Threshold, each Earnout Payment (or group of Earnout Payments being paid contemporaneously) shall be payable to the Shareholders in accordance with the percentages set forth in Part I of Exhibit B and the Option Holders shall not be entitled to any portion of such Earnout Payments; provided, that each Shareholder shall first receive a portion of the Earnout Payment(s) equal to any Indemnification Payments made by such Shareholder (to the extent a payment has not already been made to such Shareholder in respect of such Indemnification Payments).

               (ii) When Total Consideration is greater than the Option Holder Threshold, to the extent any Earnout Payment (or group of Earnout Payments being paid contemporaneously) causes Total Consideration to be greater than the Option Holder Threshold, the amount of Earnout Payments in excess of the Option Holder Threshold shall be payable to the Shareholders and Option Holders in accordance with the percentages set forth in Part II of Exhibit B; provided, that each Shareholder shall first receive a portion of the Earnout Payment(s) equal to any Indemnification Payments made by such Shareholder (to the extent a payment has not already been made to such Shareholder in respect of such Indemnification Payments).

               (iii) All payments due to the Shareholders pursuant to Sections 1.8(f)(i) and (ii) shall be made by the issuance to each Shareholder of a number of Parent Shares equal in value to the amount due to such Shareholder (valuing the Parent Shares, for purposes of this Section 1.8(f)(i), using the Share Valuation Method). For the avoidance of doubt, the Share Valuation Method will be applied as of the date on which EBITDA for the applicable period is finally determined pursuant to Section 1.8(g). Parent shall pay any amount due to the Option Holders under Section 1.8(f)(ii) by delivery of cash or check for good funds, subject to any applicable withholding.

               (iv) Healthcare Growth Partners, LLC shall be entitled to receive from each Earnout Payment an amount equal to two percent (2%) of such Earnout Payment. Parent shall pay the amount due to Healthcare Growth Partners, LLC by wire transfer of immediately available funds to an account designated by Healthcare Growth Partners, LLC.

               (v) Parent shall pay the First EBITDA Payment, if any, and any Strategic Objectives Payments achieved prior to the end of the First Earnout Period within five (5) Business Days (in the case of the Shareholders and Healthcare Growth Partners, LLC) or within thirty (30) days (in the case of the Option Holders) following the date on which EBITDA for the First Earnout Period is finally determined pursuant to Section 1.8(g). If the strategic objective set forth in Section 1.8(c)(i) is achieved after the end of the First Earnout Period and prior to March 31, 2011, Parent shall pay such Strategic Objective Payment within five (5) Business Days (in the case of the Shareholders and Healthcare Growth Partners, LLC) or within thirty (30) days (in the case of the Option Holders) of the achievement of such strategic objective. Parent shall pay the Second EBITDA Payment, if any, the Revenues Payment, if any, and any Strategic Objectives Payments achieved prior to the end of the Second Earnout Period within five (5) Business Days (in the case of the Shareholders and Healthcare Growth Partners, LLC) or within thirty (30) days (in the case of the Option Holders) following the date on which EBITDA for the Second Earnout Period is finally determined pursuant to Section 1.8(g). If the strategic objective set forth in Section 1.8(c)(ii) is achieved after the end of the Second Earnout

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Period and prior to May 10, 2012, Parent shall pay such Strategic Objective Payment within five (5) Business Days (in the case of the Shareholders and Healthcare Growth Partners, LLC) or within thirty (30) days (in the case of the Option Holders) of the achievement of such strategic objective.

          (g) Earnout Procedures.

               (i) Within forty-five (45) days after the end of each Earnout Period, Parent shall deliver to the Shareholder Representative a certificate (the “Earnout Certificate”) which shall set forth EBITDA, Revenues, if applicable, and achievement of the strategic objectives set forth in Section 1.8(c), if applicable, for the Earnout Period and the Earnout Payment due for such Earnout Period, if any. A sample Earnout Payment calculation is attached hereto as Exhibit I.

               (ii) The Shareholder Representative and any professionals chosen by the Shareholder Representative shall have the right to review the Surviving Corporation’s books and records relating to, and the work papers of Parent and its advisors utilized in preparing the Earnout Certificate. The amount of the Earnout Payment set forth in the Earnout Certificate shall be binding on the Shareholders unless the Shareholder Representative presents to Parent within thirty (30) days after receipt of the Earnout Certificate written notice of disagreement specifying in reasonable detail the nature and extent of the disagreement. Parent and the Shareholder Representative shall attempt in good faith during the thirty (30) days immediately following Parent’s receipt of the Shareholder Representative’s timely notice of disagreement to resolve any disagreement with respect to such Earnout Payment.

               (iii) If, at the end of the 30-day period referenced in subsection (ii) above, Parent and the Shareholder Representative have not resolved all disagreements with respect to whether the calculation of the Earnout Payment is in accordance with the terms of Section 1.8, Parent and the Shareholder Representative will refer the items of disagreement to the Accountants (to the extent the items of disagreement relate to the calculation of EBITDA or Revenues), which shall be selected in accordance with the provisions of Section 1.6(c)(iii), or to the Software Consultants (to the extent the items of disagreement relate to the achievement of the strategic objectives set forth in Section 1.8(c)). The parties will be reasonably available and work diligently to facilitate the mediation of all disputes between the parties within the 30-day period immediately following the referral to the Accountants and/or the Software Consultants, as applicable. Parent and the Shareholder Representative will enter into such engagement letters as required by the Accountants or Software Consultants to perform under this Section 1.8(g)(iii). The Earnout Certificate shall be deemed to be conclusive and binding on Parent and the Shareholders upon (A) the failure of the Shareholder Representative to deliver to Parent a notice of disagreement within thirty (30) days of receipt of the Earnout Certificate prepared by Parent, (B) resolution of any disagreement by mutual agreement of Parent and the Shareholder Representative (and any resulting modification of the Earnout Certificate) after a timely notice of disagreement has been delivered to Parent, or (C) notification by the Accountants or Software Consultants, as applicable, of their final determination of the items of disagreement submitted to them (and any resulting modification of the Earnout Certificate); provided that nothing herein shall prohibit Shareholders from challenging the Earnout Certificate in any court of competent jurisdiction based on any item that is not an accounting dispute or the achievement of a specific

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strategic objective (including Parent’s failure to comply with its obligations under Section 1.8(h) or (i)).

               (iv) The fees and disbursements of the Accountants under this Section 1.8(g) shall be deducted from the Earnout Payment (and borne by the Shareholders if there is no Earnout Payment), unless it is determined that (A) the Earnout Certificate understated the Earnout Payment by at least One Hundred Forty Thousand Dollars ($140,000) or (B) Parent acted in bad faith with respect to such understatement, in either which case such fees and disbursements will be borne exclusively by Parent. The fees and disbursements of the Software Consultants under this Section 1.8(g) shall be divided equally between Parent, on the one hand, and the Shareholders, on the other hand, with the Shareholders’ portion being deducted from the Earnout Payment (and borne by the Shareholders if there is no Earnout Payment), unless it is determined that (A) the Earnout Certificate understated the Earnout Payment by at least One Hundred Forty Thousand Dollars ($140,000) or (B) Parent acted in bad faith with respect to such understatement, in either which case such fees and disbursements will be borne exclusively by Parent.

          (h) Acceleration Events.

               (i) If a Change of Control with respect to the Business occurs at any time prior to the expiration of the Second Earnout Period, then Parent shall pay the maximum Earnout Payments for any Earnout Period not yet completed on the date of such Change of Control, even if Parent would not otherwise be required to make such Earnout Payments based on the EBITDA, Revenues and strategic objectives actually achieved during such period(s). Parent shall pay such amount no later than ten (10) Business Days after such Change of Control. For purposes of this Agreement, “Change of Control” shall mean (a) any acquisition of the Surviving Corporation, Parent, or any Affiliate of the Parent in control of the Business (a “Successor Entity”) by means of merger or other form of corporate reorganization in which the outstanding securities of the Surviving Corporation, Parent or such Successor Entity are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring entity or its Affiliate (other than a mere reincorporation transaction), unless Parent continues to hold, directly or indirectly, more than 50% of the voting power of the surviving or acquiring entity after the transaction; (b) a sale or transfer of a majority or more of the outstanding securities of the Surviving Corporation, Parent or a Successor Entity, in one or more transactions, to any Person; (c) a sale or transfer of all or substantially all of the assets constituting the Business to any Person other than Affiliate of Parent; or (d) a spin-out of the Surviving Corporation or a Successor Entity to the stockholders of Parent.

               (ii) If the employment of Fred Beck or Tim Rhoads is terminated by the Surviving Corporation without “cause” (as defined in Section 7(c) of their respective employment agreements) or Fred Beck or Tim Rhoads terminates his employment with “Good Reason” (as defined in Section 7(e) of their respective employment agreements) at any time prior to the expiration of the Second Earnout Period, then Parent shall pay one-third of the maximum Earnout Payments eligible to be earned for any Earnout Period not yet completed on the date of such termination of employment, even if Parent would not otherwise be required to make such Earnout Payments based on the EBITDA, Revenues and strategic objectives actually achieved during such period(s). Parent shall pay such amount no later than ten (10) Business Days after

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such termination of employment. All payments pursuant to this Section 1.8(h)(ii) shall be deducted from any future Earnout Payments (during the applicable Earnout Period to which such payment is attributable). For the avoidance of doubt, the provisions of this Section 1.8(h)(ii) apply upon each termination of employment (i.e. Parent must pay two-thirds of the maximum Earnout Payments if both Fred Beck and Tim Rhoads are terminated).

          (i) Conduct of Business.

               (i) The Shareholders understand, acknowledge and agree (as evidenced by the adoption of this Agreement) that Parent is entitled to manage and operate the Surviving Corporation and its business in its sole and absolute discretion; provided, however, that prior to the expiration of the Second Earnout Period (A) Parent shall at all times act in good faith with respect to the Opus Business and shall not, directly or indirectly, take any action, or fail to take any action, with the intent of reducing or eliminating Parent’s obligation to make an Earnout Payment hereunder, (B) Parent will not acquire or develop a competing inpatient clinical solution unless it will be deemed by Parent to be an Opus Product, (C) so long as Fred E. Beck and Tim Rhoads remain employed by the Surviving Corporation or any Affiliate thereof, they will continue to exercise overall management authority for the Opus Business, subject only to the supervision and direction of Pat Cline, Scott Decker, Phil Kaplan, Steve Puckett or another executive designated by Parent, (D) Purchaser shall not take any action intended solely to decrease EBITDA or Revenues of the Opus Business, (E) Parent shall cause to be devoted to the Opus Business development resources and personnel that are at least substantially the same as those devoted to the Opus Business immediately prior to the Closing (unless the Opus Business’ sales decline to an extent that such resources and personnel are not warranted, as determined in Parent’s sole and absolute discretion), and (F) Parent shall cause to be devoted to the Opus Business sales resources and personnel that are at least substantially the same as those devoted to the Opus Business immediately prior to the Closing.

               (ii) The Parties acknowledge and agree that, unless otherwise agreed to in writing by Parent and the Shareholder Representative, during the Earnout Periods, Parent will not cause to be operated through the Surviving Corporation any business other than the Business and such other activities, if any, conducted by the Surviving Corporation as of the Closing Date; provided, however, that, Parent may, in its sole and absolute discretion, merge or otherwise combine the operations of the Surviving Corporation with NextGen Sphere, LLC, a California limited liability company; provided, further, that if such operations are combined, the operations of NextGen Sphere, LLC (including the Surviving Corporation’s cost of integrating such operations with those of the Surviving Corporation but excluding the Surviving Corporation’s cost to integrate with the Sphere software) will not be included in calculating EBITDA and Revenues; provided, further, that Parent may in its sole and absolute discretion include the operations of Sphere (both costs and revenues) only to the extent such operations have a net positive effect on EBITDA. The Parties acknowledge and agree that the current Sphere product is a credible HIS solution, and Parent shall act in good faith with the resources necessary to cause such product to continue to be credible in order to satisfy market demand, investing as needed in implementation, support, development, quality assurance, management and release management resources to keep pace with the market demand.

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               (iii) Parent will maintain or cause to be maintained separate or otherwise identifiable (e.g., in the case of a shared general ledger) books and records for the Surviving Corporation at all times during the Earnout Periods in a manner reasonably necessary for the determination of EBITDA and Revenues.

               (iv) Notwithstanding the foregoing, the Shareholders understand, acknowledge and agree (as evidenced by the adoption of this Agreement) that Parent intends to integrate certain operations of the Company with the operations of NextGen and that NextGen may seek to realize certain financial synergies by eliminating redundant positions, functions and/or resources after consummation of the Merger.

     1.9 Escrow.

          (a) Escrow Fund to Secure Obligations. On the Closing Date, Parent shall deposit with the Escrow Agent a number of Parent Shares equal in value to $2,500,000 (valuing such Parent Shares, for purposes of this Section 1.9(a), using the Share Valuation Method) (the “Initial Escrowed Shares”). On the date of each payment of an Earnout Payment prior to the Escrow Termination Date, a number of Parent Shares to be issued to the Shareholders equal in value to twenty percent (20%) of the amount of such Earnout Payment (valuing such Parent Shares, for purposes of this Section 1.9(a), using the Share Valuation Method) shall be deposited with the Escrow Agent (collectively with the Initial Escrowed Shares, the “Escrowed Shares”). The Escrowed Shares shall represent a source of value to secure the Shareholders’ obligations hereunder to the extent the Escrowed Shares have not been surrendered by operation of Article VII, Article VIII or in accordance with the Escrow Agreement. The Escrowed Shares shall be held by the Escrow Agent under the Escrow Agreement pursuant to the terms thereof. The Escrowed Shares shall be held until the Escrow Termination Date as a trust fund and shall not be subject to any lien, attachment trustee process or any other judicial process of any creditor of any party, and shall be held and disbursed solely for the purposes and in accordance with the terms of the Escrow Agreement.

          (b) Release of Escrow Fund. The remaining balance of the Escrowed Shares will be released upon the second anniversary of the Closing (the “Escrow Termination Date”); provided, however, that if any indemnity claims by Parent pursuant to Article VII or VIII are unsatisfied, an amount equal to the amount of the aggregate of such unsatisfied claims shall be retained by the Escrow Agent.

          (c) Approval of Escrow Agreement. The adoption of this Agreement shall constitute approval of the Escrow Agreement and of all of the arrangements relating thereto, including the placement of the Escrowed Shares in escrow and the appointment of the Shareholder Representative to act on behalf of the Shareholders.

          (d) Payment Information Certificate. Whenever any portion of the Escrowed Shares are to be released to one or more Shareholders, the Shareholder Representative shall provide to Parent, certified in writing by the Shareholder Representative (“Payment Information Certificate”), a schedule specifying the name, address and taxpayer identification number for each such Shareholder and the exact number of Escrowed Shares to be disbursed to each such Shareholder (“Payment Information”). The preparation of the Payment Information

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Certificate and the accuracy of the Payment Information set forth thereon shall be the sole and exclusive responsibility of the Shareholder Representative; provided, however, that Parent shall have the right to review and approve such Payment Information Certificate and Payment Information, which approval shall not be unreasonably withheld or delayed.

     1.10 Certificate of Formation and Bylaws.

          (a) The certificate of formation of the Surviving Corporation immediately following the Effective Time shall be the same as the certificate of formation of the Company immediately prior to the Effective Time.

          (b) The bylaws of the Surviving Corporation immediately following the Effective Time shall be the same as the bylaws of the Company immediately prior to the Effective Time.

     1.11 No Further Rights. From and after the Effective Time, no Company Shares shall be deemed to be outstanding, and holders of certificates formerly representing Company Shares shall cease to have any rights with respect thereto except as provided herein or by law.

     1.12 Shareholder Releases.

          (a) Effective as of the Closing, each Shareholder agrees not to sue and fully releases and discharges the Company and its shareholders, directors, officers, assigns and successors, past and present (collectively, “Releasees”), with respect to and from any and all claims, issuances of the Company’s stock, notes or other securities, any demands, rights, liens, contracts, covenants, proceedings, causes of action, obligations, debts, and losses of whatever kind or nature in law, equity or otherwise, whether now known or unknown, and whether or not concealed or hidden, all of which each Shareholder now owns or holds or has at any time owned or held against Releasees connected with or relating to any matter occurring on or prior to the Effective Time; provided, however, that nothing in this Section 1.12 will be deemed to constitute a release by any Shareholder of (i) any right of such Shareholder under this Agreement, the Escrow Agreement or any Employment Agreement entered into pursuant hereto, (ii) any right to receive compensation or benefits under employee benefit plans (including, without limitation, salary) attributable to the periods prior to the Closing Date or (iii) any right to indemnification under the certificate of formation or bylaws of the Company or under applicable law with respect to acts or omissions prior to the Closing Date.

          (b) It is the intention of each Shareholder that such release be effective as a bar to each and every claim, demand and cause of action specified in subsection (a) above.

     1.13 Appointment of Shareholder Representative.

          (a) The Shareholders irrevocably make, constitute and appoint Fred E. Beck to act as the Shareholders’ representative and agent for all purposes under this Agreement (the “Shareholder Representative”).

          (b) Should the Shareholder Representative resign or be unable to serve, the Shareholders having received a majority of the Aggregate Transaction Consideration shall

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appoint a single substitute agent to take on the responsibilities of the Shareholder Representative, whose appointment shall be effective on the date of the prior Shareholder Representative’s resignation or incapacity.

          (c) By way of illustration only, and without limitation, the Shareholder Representative shall have the authority to (i) execute on behalf of each Shareholder, as fully as if the Shareholders were acting on their own behalf, any and all documents and agreements referred to herein, including executing the Escrow Agreement as the Shareholders’ representative, (ii) give and receive notice or instructions permitted or required under this Agreement or the Escrow Agreement, (iii) authorize the release of the Escrowed Shares to pay any Claimed Amount or any other amounts payable out of the Escrowed Shares in accordance with this Agreement, or (iv) undertake any actions with respect to the resolution of a dispute or any disagreement with respect to the amount of the Earnout Payments.

          (d) Any notice, direction or communication received by Parent, Merger Sub or the Surviving Corporation from the Shareholder Representative, or delivered to the Shareholder Representative by Parent, Merger Sub or the Surviving Corporation, shall be binding upon the Shareholders. The Shareholder Representative shall act in all matters on behalf of the Shareholders, and Parent, Merger Sub and, after the Closing, the Surviving Corporation shall be entitled to rely on the actions of the Shareholder Representative as the actions of the Shareholders. Parent, Merger Sub and the Surviving Corporation may deliver notices and communications to the Shareholders hereunder through the Shareholder Representative at the address set forth in this Agreement for notices, and such delivery shall be deemed to have been made to any or all of the Shareholders. None of Parent, Merger Sub nor the Surviving Corporation shall pay any costs or expenses incurred by the Shareholder Representative in carrying out his or her obligations hereunder. Each of Parent, Merger Sub and the Surviving Corporation consents to the appointment of the Shareholder Representative to act as described hereunder.

          (e) The Shareholder Representative will have no liability to the Shareholders with respect to actions taken or omitted to be taken in his capacity as the Shareholder Representative, except with respect to any liability resulting directly from the Shareholder Representative’s gross negligence or willful misconduct. Each Shareholder hereby agrees to severally, in accordance with his Ownership Percentage, and not jointly, indemnify and hold harmless the Shareholder Representative from and against any and all (i) reasonable legal fees incurred by the Shareholder Representative in connection with the performance or administration of the Shareholder Representative’s duties hereunder and (ii) Damages asserted against, resulting to, or imposed upon, or incurred or suffered by, the Shareholder Representative (except to the extent resulting from the gross negligence or willful misconduct on the part of the Shareholder Representative) arising out of or in connection with the acceptance, performance or administration of the Shareholder Representative’s duties hereunder.

     1.14 Withholding. Parent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to the Shareholders and the Option Holders such amounts as it is required to deduct and withhold with respect to such payment under the Code, or any provision of state, local or foreign Tax law. To the extent that amounts

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are so withheld by Parent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Shareholders or the Option Holders, as applicable.

     1.15 Closing Statement. The Parties shall prepare and execute a statement at the Closing setting forth the amounts to be paid, and the Parent Shares to be issued, at the Closing.

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE INDEMNIFYING SHAREHOLDERS

     The Company and the Indemnifying Shareholders jointly and severally represent and warrant to Parent and Merger Sub that, except as set forth in the Disclosure Schedule, the statements contained in this Article II are true and correct as of the date of this Agreement and will be true and correct as of the Closing, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties will be true and correct as of such date). The Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Article II. The disclosures in any section or subsection of the Disclosure Schedule shall qualify any other sections and subsections in this Article II only to the extent either (i) there is an express cross-reference or (ii) it is clear from a reading of the disclosure that such disclosure is applicable to such other sections and subsections.

     2.1 Organization, Qualification and Corporate Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas. The Company is duly qualified to conduct business and is in good standing under the laws of each jurisdiction listed in Section 2.1 of the Disclosure Schedule, which jurisdictions constitute the only jurisdictions in which the nature of the Company’s business or the ownership or leasing of its properties requires such qualification, except where the failure to be so authorized, qualified or licensed would not result in a Company Material Adverse Effect. The Company has all requisite corporate power and authority to carry on the business in which it is engaged and to own and use the properties owned and used by it. The Company has made available in the electronic data room or delivered to Parent true, complete and correct copies of its charter and bylaws. The Company is not in default under or in violation of any provision of its charter or bylaws.

     2.2 Capitalization.

          (a) The authorized capital stock of the Company consists of Ten Million (10,000,000) shares of common stock, $0.01 par value per share, of which, as of the date of this Agreement, One Million (1,000,000) shares have been issued and are outstanding, all of which are owned by the Shareholders.

          (b) Section 2.2(b) of the Disclosure Schedule sets forth a complete and accurate list, as of the date of this Agreement, showing the number of shares of capital stock, and the class or series of such shares, held by each Shareholder. None of the outstanding Company Shares constitute restricted stock or are otherwise subject to a repurchase or redemption right. All of the issued and outstanding Company Shares have been duly authorized and validly issued

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and are fully paid and nonassessable. All of the issued and outstanding Equity Interests of the Company have been offered, issued and sold by the Company in compliance with all applicable federal and state securities laws.

          (c) Except as set forth in Section 2.2(c) of the Disclosure Schedule, as of the Effective Time, (i) no subscription, Warrant, Option, convertible security or other right (contingent or otherwise) to purchase or acquire any shares of capital stock of the Company shall be authorized or outstanding, (ii) the Company shall have no obligation (contingent or otherwise) to issue any subscription, Warrant, Option, convertible security or other such right, or to issue or distribute to holders of any shares of its capital stock any evidences of indebtedness or assets of the Company, and (iii) the Company shall have no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or to make any other distribution in respect thereof. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company.

          (d) Except as set forth in Section 2.2(d) of the Disclosure Schedule and except for the Option Plan, there is no outstanding agreement, written or oral, between the Company and any holder of its securities, or, to the Knowledge of the Company, among any holders of its securities, relating to the sale or transfer (including agreements relating to rights of first refusal, co-sale rights or “drag-along” rights), registration under the Securities Act, or voting, of the capital stock of the Company.

     2.3 Authorization of Transaction. The Company has all requisite power, capacity and authority to execute and deliver this Agreement and to perform its obligations hereunder. Except as set forth in Section 2.3 of the Disclosure Schedule, the execution and delivery by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company, including the Requisite Shareholder Approval. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent such enforceability is subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or other law affecting or relating to creditors rights generally and general principles of equity (regardless of whether such enforceability is considered in proceeding in equity or law).

     2.4 Noncontravention. Subject to the filing of the Certificate of Merger as required by the TBOC, neither the execution and delivery by the Company of this Agreement, nor the consummation by the Company of the transactions contemplated hereby, will (a) conflict with or violate any provision of the charter or bylaws of the Company, (b) require on the part of the Company any notice to or filing with, or any permit, authorization, consent or approval of, any Governmental Entity, (c) except as set forth in Section 2.4(c) of the Disclosure Schedule, conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party the right to terminate, modify or cancel, or require any notice, consent or waiver under, any Material Contract, (d) result in the imposition of any Security Interest upon any assets of the Company, or (e) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its properties or assets.

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     2.5 Subsidiaries. Except as set forth in Section 2.5 of the Disclosure Schedule, the Company does not control directly or indirectly or have any direct or indirect equity participation or similar interest in any corporation, partnership, limited liability company, joint venture, trust or other business association or entity.

     2.6 Financial Statements. The Company has made available in the electronic data room or delivered to Parent the Financial Statements, copies of which are attached to Section 2.6 of the Disclosure Schedule. Except as set forth in Section 2.6 of the Disclosure Schedule, the Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, fairly present the financial condition, results of operations and cash flows of the Company as of the respective dates thereof and for the periods referred to therein and are consistent with the books and records of the Company; provided, however, that the Financial Statements referred to in clause (b) of the definition of such term are subject to normal recurring year-end adjustments (which will not be material) and do not include footnotes. Except as set forth in Section 2.6 of the Disclosure Schedule, there are no material differences from the information included in the footnotes to the audited Financial Statements that would be disclosed in footnotes to the unaudited Financial Statements if such footnotes had been prepared.

     2.7 Absence of Certain Changes. Since the Most Recent Balance Sheet Date, the Company has operated its business only in the Ordinary Course of Business, and, except as set forth on Section 2.7 of the Disclosure Schedule:

          (a) the Company has not incurred any Debt;

          (b) the Company has not made any acquisition (by merger, consolidation, or acquisition of stock or assets or otherwise) of any other Person;

          (c) the Company has not created any Security Interest on any of its assets, tangible or intangible;

          (d) except for sales to customers of the Company’s products and services in the Ordinary Course of Business, the Company has not sold, assigned or transferred any of its tangible assets;

          (e) the Company has not entered into or amended (i) any customer agreement with a Person that is or would be a Significant Person or (ii) any agreement, other than a customer agreement, that is a Material Contract;

          (f) the Company has not (i) entered into or amended any employment or severance or similar agreement with any employee or any collective bargaining agreement, (ii) adopted or amended, or increased the payments to or benefits under, any profit sharing, bonus, thrift, stock option, deferred compensation, savings, insurance, restricted stock, pension, retirement, or other employee benefit plan for or with any of its directors, officers or employees or (iii) granted any increase in compensation payable or to become payable or the benefits provided to its directors, officers or employees, other than in the Ordinary Course of Business;

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          (g) the Company has not (i) made or changed any Tax election or (ii) made any material change in any method of accounting or accounting practice used by it, other than any such changes required by GAAP;

          (h) the Company has conducted and reflected in its books and records each transaction referenced in Section 2.26 of the Disclosure Schedule on an arm’s-length basis;

          (i) there has been no change, event or development that has had, individually or in the aggregate, a Company Material Adverse Effect;

          (j) there has not been any material casualty, loss, damage or destruction (whether or not covered by insurance) to any asset of the Company;

          (k) the Company has not made any single expenditure or commitment to purchase personal property or for additions to property, plant and equipment in excess of $25,000;

          (l) the Company has not issued, sold or otherwise disposed of any debenture, note, stock, or equity interest or modified or amended any right of any holder thereof;

          (m) the Company has not amended, terminated, waived, disposed of, or permitted to lapse, any material Permit;

          (n) there has not been any amendment to the charter or bylaws of the Company; and

          (o) the Company has not materially altered the nature of its business or business plan.

     2.8 Undisclosed Liabilities. Except as provided in Section 2.8 of the Disclosure Schedule, the Company has no liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities shown on the Most Recent Balance Sheet and (b) liabilities which have arisen since the Most Recent Balance Sheet Date in the Ordinary Course of Business and (c) contractual and other liabilities incurred in the Ordinary Course of Business which are not required by GAAP to be reflected on a balance sheet or that would not otherwise be required to be disclosed in the footnotes of the Company’s financial statements if such footnotes had been prepared.

     2.9 Taxes.

          (a) The Company has properly filed on a timely basis all Tax Returns that it is and was required to file, and all such Tax Returns were true, correct and complete in all material respects. The Company has properly paid on a timely basis all Taxes, whether or not shown on any of its Tax Returns, that were due and payable. All Taxes that the Company is or was required by law to withhold or collect have been withheld or collected and, to the extent required, have been properly paid on a timely basis to the appropriate Governmental Entity. The Company has complied with all information reporting and back-up withholding requirements

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including maintenance of the required records with respect thereto, in connection with amounts paid to any employee, independent contractor, creditor or other third party.

          (b) The unpaid Taxes of the Company for periods through the date of the Most Recent Balance Sheet Date do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Most Recent Balance Sheet.

          (c) The Company is not and has never been a member of any group of corporations with which it has filed (or been required to file) consolidated, combined, or unitary Tax Returns. The Company has no actual or potential liability under Treasury Regulation Section 1.1502-6 (or any comparable or similar provision of federal, state, local, or foreign law), or as a transferee or successor, by contract, or otherwise for any Taxes of any Person (including without limitation any affiliated, combined, or unitary group of corporations or other entities that included the Company during a prior Taxable period). The Company is not a party to, bound by, or obligated under any Tax allocation, Tax sharing, Tax indemnity or similar agreement.

          (d) The Company has made available in the electronic data room or delivered to Parent (i) complete and correct copies of all income Tax Returns of the Company relating to Taxes for all Taxable periods ending on or after January 1, 2006, and (ii) complete and correct copies of all private letter rulings, revenue agent reports, information document requests, notices of proposed deficiencies, deficiency notices, protests, petitions, closing agreements, settlement agreements, pending ruling requests and any similar documents submitted by, received by or agreed to by or on behalf of the Company relating to Taxes for all Taxable periods ending on or after January 1, 2006. No income Tax Returns of the Company have been audited by the Internal Revenue Service or other applicable Governmental Entity for any Taxable period ending on or after January 1, 2006, or, to the Knowledge of the Company, for any Taxable period ending before January 1, 2006. The Company has delivered or made available to Parent complete and correct copies of all other Tax Returns of the Company relating to Taxes for all Taxable periods ending on or after January 1, 2006. No examination or audit of any Tax Return of the Company by any Governmental Entity is currently in progress or threatened or contemplated, and the Company does not know of any basis upon which a Tax deficiency or assessment would reasonably be expected to be asserted against the Company. The Company has not been informed by any jurisdiction that the jurisdiction believes that the Company was required to file any Tax Return that was not filed.

          (e) The Company has not (i) waived any statute of limitations with respect to Taxes or agreed to extend the period for assessment or collection of any Taxes, (ii) requested any extension of time within which to file any Tax Return, which Tax Return has not yet been filed, or (iii) executed or filed any power of attorney relating to Taxes with any Governmental Entity.

          (f) The Company is not a party to any Tax litigation. The Company is not nor has it ever been a party to any transaction or agreement that is in conflict with the Tax rules on transfer pricing in any relevant jurisdiction. The Company has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code.

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          (g) Except as set forth on Section 2.9(g) of the Disclosure Schedule, there are no Security Interests or other encumbrances with respect to Taxes upon any of the assets or properties of the Company, other than with respect to Taxes not yet due and payable.

          (h) The Company has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code.

          (i) Except as set forth on Section 2.9(i) of the Disclosure Schedule, the Company has not made any payments, nor is it obligated to make any payments, nor is it a party to any agreement, contract, arrangement, or plan that could obligate it to make any payments, that are or could be, separately or in the aggregate, “excess parachute payments” within the meaning of Section 280G of the Code (without regard to Sections 280G(b)(4) and 280G(b)(5) thereof). No excise Tax will be imposed upon the Company as a result of the acceleration of Options.

          (j) No Shareholder holds Company Shares that are non-transferable and subject to a substantial risk of forfeiture within the meaning of Section 83 of the Code with respect to which a valid election under Section 83(b) of the Code has not been made, and no payment to any Shareholder of any portion of the consideration payable pursuant to this Agreement will result in compensation or other income to such Shareholder with respect to which Parent or the Company would be required to deduct or withhold any Taxes.

          (k) None of the assets of the Company (i) is property that is required to be treated as being owned by any other person pursuant to the provisions of former Section 168(f)(8) of the Internal Revenue Code of 1954, (ii) is “tax-exempt use property” within the meaning of Section 168(h) of the Code, (iii) directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code, or (iv) is subject to a lease under Section 7701(h) of the Code or under any predecessor section.

          (l) The Company will not be required to include any item of income in, or exclude any item of deduction from, Taxable income for any Taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a Taxable period ending on or prior to the Closing Date (or as a result of the transactions contemplated by this Agreement) under Section 481 of the Code (or any corresponding or similar provision of federal, state, local or foreign Tax law); (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Tax law) executed on or prior to the Closing Date; (iii) deferred intercompany gain or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign Tax law); (iv) installment sale or open transaction disposition made on or prior to the Closing Date; or (v) prepaid amount received on or prior to the Closing Date. The Company currently utilizes, the accrual method of accounting for income Tax purposes and such method of accounting has not changed in the past five (5) years.

          (m) The Company has not participated in or cooperated with an international boycott within the meaning of Section 999 of the Code.

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          (n) There is no limitation on the utilization by the Company of its net operating losses, built-in losses, Tax credits, or similar items under Sections 382, 383, or 384 of the Code or comparable provisions of foreign, state or local law (other than any such limitation arising as a result of the consummation of the transactions contemplated by this Agreement).

          (o) The Company has not distributed to the Shareholders or security holders stock or securities of a controlled corporation, nor have stock or securities of the Company been distributed, in a transaction to which Section 355 or Section 361 of the Code applies.

          (p) The Company is not nor has it ever been required to make a basis reduction pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).

          (q) Section 2.9(q) of the Disclosure Schedule sets forth each jurisdiction (other than United States federal) in which the Company files, or, is required to file or has been required to file a Tax Return or is or has been liable for Taxes on a “nexus” basis and each jurisdiction that has sent notices or communications of any kind requesting information relating to the Company’s nexus with such jurisdiction.

          (r) The Company is not a “consenting corporation” within the meaning of Section 341(f) of the Code, and none of the assets of the Company are subject to an election under Section 341(f) of the Code.

          (s) There is no basis for the assertion of any claim relating or attributable to Taxes, which, if adversely determined, would result in any Security Interest on the assets of the Company, or would reasonably be expected to have a material adverse effect on the Company.

     2.10 Assets.

          (a) Except as set forth in Section 2.10(a) of the Disclosure Schedule, the Company is the true and lawful owner, and has good title to, all of the assets (tangible or intangible) purported to be owned by the Company, free and clear of all Security Interests. The Company owns or leases all tangible assets sufficient for the conduct of its business as presently conducted. Each such tangible asset is free from material defects, has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear) and is suitable for the purposes for which it presently is used.

          (b) Section 2.10(b) of the Disclosure Schedule lists (i) all fixed assets (within the meaning of GAAP) of the Company having a book value greater than $5,000, indicating the cost, accumulated book depreciation (if any) and the net book value of each such fixed asset as of the Most Recent Balance Sheet Date, and (ii) all other assets of a tangible nature (other than inventories) of the Company whose book value exceeds $5,000.

          (c) Each item of equipment, motor vehicle and other asset that the Company has possession of pursuant to a lease agreement or other contractual arrangement is in such condition that, upon its return to its lessor or owner under the applicable lease or contract, the obligations of the Company to such lessor or owner to maintain such item will have been discharged in full and no additional amounts will be due and owing thereunder.

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     2.11 Owned Real Property. The Company does not own, and has never owned, any real property.

     2.12 Real Property Leases. Section 2.12 of the Disclosure Schedule lists all Leases and lists the term of such Lease, any extension and expansion options, and the rent payable thereunder. The Company has made available in the electronic data room or delivered to Parent complete and accurate copies of the Leases. With respect to each Lease:

          (a) such Lease is legal, valid, binding, and enforceable against the Company and, to the Knowledge of the Company, is in full force and effect;

          (b) except as disclosed on Section 2.12 of the Disclosure Schedule, such Lease will continue to be legal, valid, binding, and enforceable against the Company and, to the Knowledge of the Company, in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing;

          (c) the Company is not in breach or violation of, or default under, any such Lease, and no event has occurred, is pending or, to the Knowledge of the Company, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a breach or default by the Company or, to the Knowledge of the Company, any other party under such Lease and to the Knowledge of the Company, each parcel of Leased Real Property is in compliance in all material respects with all applicable Laws and Governmental Orders;

          (d) there are no material disputes, oral agreements or forbearance programs in effect as to such Lease;

          (e) the Company has not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold;

          (f) based on the Company’s experience up to the Closing Date, all facilities leased or subleased thereunder are supplied with utilities and other services adequate for the operation of said facilities;

          (g) except as set forth in Section 2.12(g) of the Disclosure Schedule, to the Company’s Knowledge, there is not any Security Interest, easement, covenant or other restriction applicable to the real property subject to such lease which would reasonably be expected to materially impair the current uses or the occupancy by the Company of the property subject thereto; and

          (h) other than the rental payment amounts set forth in Section 2.12 of the Disclosure Schedule and any other amounts payable by the Company pursuant to the terms of the applicable Lease, no other amounts are owed by the Company with respect to the rental of any parcel of Leased Real Property.

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     2.13 Intellectual Property.

          (a) Section 2.13(a) of the Disclosure Schedule lists each patent, patent application, copyright registration or application therefor, and trademark, service mark and domain name registration or application therefor of the Company.

          (b) The Company owns or has the right under all Company Intellectual Property reasonably necessary (i) to use, sell, market and distribute the Customer Deliverables and (ii) to operate the Business as presently conducted. Each item of Company Intellectual Property will be owned or available for use by the Company immediately following the Closing on substantially identical terms and conditions as it was owned or available for use by the Company immediately prior to the Closing, except as described in Section 2.13(b) of the Disclosure Schedule. No current or former employee of the Company has any claim or right in or to the Company Intellectual Property. The Company has taken commercially reasonable measures to protect the proprietary nature of each item of Company Intellectual Property the exclusive use of which is material to the Business, and to maintain in confidence all trade secrets and confidential information, that it owns or uses. No other Person has any rights to any of the Company Intellectual Property owned by the Company (except pursuant to agreements or licenses specified in Section 2.13(d) of the Disclosure Schedule), and, to the Knowledge of the Company and the Shareholders, no other Person is infringing, violating or misappropriating any of the Company Intellectual Property, except as described in Section 2.13(b) of the Disclosure Schedule.

          (c) None of the Company Intellectual Property, Customer Deliverables, or the sale, marketing, distribution, provision or use thereof (as each is conducted immediately prior to Closing), infringes or violates, or constitutes a misappropriation of, any Intellectual Property rights of any Person. Section 2.13(c) of the Disclosure Schedule lists any complaint, claim or notice, or threat thereof, received by the Company alleging any infringement, violation or misappropriation of Intellectual Property of any third party within the immediately preceding four (4) years; and the Company has made available to Parent complete access to all written documentation in the possession of the Company relating to any such complaint, claim, notice or threat. The Company has made available to Parent complete access to all written documentation in the Company’s possession relating to claims or disputes known to the Company concerning any Company Intellectual Property.

          (d) Section 2.13(d) of the Disclosure Schedule identifies each license or other agreement that is currently in effect pursuant to which the Company has licensed, distributed or otherwise granted any rights to any third party with respect to, any Company Intellectual Property or any Intellectual Property owned by a party other than the Company. Except as described in Section 2.13(d) of the Disclosure Schedule, the Company has not agreed to indemnify any Person against any infringement, violation or misappropriation of any Intellectual Property rights with respect to any Customer Deliverables. Except as set forth in Section 2.13(d) of the Disclosure Schedule, the Company is not, nor will it or any party hereto be as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement, in breach of any license, sublicense or other agreement relating to the Company Intellectual Property.

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          (e) Section 2.13(e) of the Disclosure Schedule identifies each item of Intellectual Property used by the Company that is owned by a party other than the Company, and the license or agreement pursuant to which the Company uses it (excluding “off-the-shelf” software programs licensed by or to the Company pursuant to nonnegotiable standard form, mass market or “shrink wrap” licenses).

          (f) Except as set forth in Section 2.13(f) of the Disclosure Schedule, all of the copyrightable materials (but excluding materials created, developed or otherwise provided by a third party) embedded in, incorporated into or delivered bundled with the Customer Deliverables have been created by employees of the Company within the scope of their employment by the Company, or by independent contractors of the Company who have executed agreements expressly assigning all right, title and interest in such copyrightable materials to the Company. Except as set forth in Section 2.13(f) of the Disclosure Schedule, no portion of such copyrightable materials was jointly developed with any third party.

          (g) Except as set forth in Section 2.13(g) of the Disclosure Schedule, the Customer Deliverables, the Internal Systems, and the Company Intellectual Property are free from significant defects or significant programming errors, do not contain any “Easter egg,” “back door,” time bomb,” “Trojan Horse,” “worm,” “drop dead device,” “virus” (as these terms are commonly used in the computer software field) or other software routines designed to permit unauthorized access, to disable or erase software, hardware, or data without the knowledge or intent of the operator or to perform any other similar type of function and conform in all material respects to the written documentation and specifications therefore.

          (h) The Internal Systems, Customer Deliverables, and the Company Intellectual Property currently used by the Company to provide products and services to their customers (i) are reasonably adequate for the business of the Company as of the date of this Agreement and (ii) meet or are capable of being scaled to meet, all of the requirements under the customer contracts of the Company.

          (i) The Company has maintained detailed logs and records reasonably sufficient to explain the functioning of the Internal Systems, Customer Deliverables, and the Company Intellectual Property (including, but not limited to, source code) and to allow a reasonably skilled programmer or other Parent personnel to fully and satisfactorily use it in substantially the manner intended without reliance on the knowledge or memory of any Person. Except as set forth in Section 2.13(i) of the Disclosure Schedule, the Company does not use, rely on or contract with any Person to provide service bureau, outsourcing or other computer processing services.

          (j) Section 2.13(j) of the Disclosure Schedule lists all Public Software that has been incorporated in the Internal Systems, Customer Deliverables, and the Company Intellectual Property, their corresponding licenses, and how the Public Software is used, including whether the Public Software is linked to the Company Intellectual Property (including by dynamic linking). In addition, the Internal Systems, Customer Deliverables, and the Company Intellectual Property do not contain or link with any Public Software code that requires the disclosure or distribution of all or a portion of the non-Public-Software source code for any Internal Systems, Customer Deliverables or Company Intellectual Property or requires the

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distribution of any Internal Systems, Customer Deliverables, or Company Intellectual Property without charge to third parties, except for publishing minor modifications to the Public Software itself that do not contain Company Intellectual Property.

          (k) The Data Rights and information used by the Company in providing Customer Deliverables, in keeping track of the financial and business relationships between the Company and customers and in managing the Business (collectively, the “Data”) (i) does not violate the privacy rights of any Person under applicable Law, (ii) does not infringe upon, misappropriate or violate the Intellectual Property rights of any Person, (iii) was collected and acquired in accordance with all applicable laws and agreements, and (iv) when used by the Company, in the manner in which the Data was used immediately prior to the date hereof, does not violate any applicable Law or agreement. The Company has taken commercially reasonable steps to maintain the confidentiality and proprietary nature of the Data to the extent the confidentiality of the Data is material to the Business.

     2.14 Contracts.

          (a) Section 2.14 of the Disclosure Schedule lists the following agreements (written or oral) to which the Company is a party as of the date of this Agreement (each, a “Material Contract”):

               (i) any agreement (or group of related agreements) for the lease of personal property from or to third parties providing for lease payments in excess of $10,000 per annum or having a remaining term longer than six months;

               (ii) any agreement (or group of related agreements) with software vendors, distributors or sales agents allowing for the resale, marketing or distribution of the Company’s services of products;

               (iii) any agreement containing covenants restraining or limiting the freedom of the Company to engage in any line of business or compete with any Person including, without limitation, by restraining or limiting the right to solicit customers or that could reasonably be expected, following the Closing, to restrain or limit the freedom of Parent or any Affiliate thereof to engage in any line of business or compete with any Person;

               (iv) any agreement containing a right of first refusal;

               (v) any agreement (or group of related agreements) that is terminable upon or prohibits a change in ownership or control of the Company, or that requires consent in connection with a change in ownership or control of the Company;

               (vi) any agreement (or group of related agreements) that provides for the Company to be the exclusive or a preferred provider of any product or service to any Person or the exclusive or a preferred recipient of any product or service of any Person during any period of time or that otherwise involves the granting by any Person to the Company of exclusive or preferred rights of any kind;

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               (vii) any agreement (or group of related agreements) that provides for any Person to be the exclusive or a preferred provider of any product or service to the Company, or the exclusive or a preferred recipient of any product or service of the Company during any period of time or that otherwise involves the granting by the Company to any Person of exclusive or preferred rights of any kind;

               (viii) any agreement (or group of related agreements) in which a party has agreed to purchase all of its requirements for specified goods or services from a particular provider;

               (ix) any agreement (or group of related agreements) in which the Company has granted manufacturing rights, “most favored nation” or similar pricing provisions or marketing or distribution rights relating to any products or territory;

               (x) any agreement (or group of related agreements) under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) Debt or under which it has imposed (or may impose) a Security Interest on any of its assets, tangible or intangible;

               (xi) any agreement for the disposition of any significant portion of the assets or business of the Company (other than sales of products in the Ordinary Course of Business) or any agreement for the acquisition of the assets or business of any other entity (other than purchases of inventory or components in the Ordinary Course of Business);

               (xii) any employment or consulting agreement;

               (xiii) any agreement involving any current or former officer, director or shareholder of the Company or an Affiliate thereof;

               (xiv) any agreements that, by their terms bind Affiliates of the Company or will bind Affiliates of the Company after the Closing;

               (xv) any agreement not otherwise listed in Section 2.14 of the Disclosure Schedule under which the consequences of a default or termination would reasonably be expected to have a Company Material Adverse Effect;

               (xvi) any agreement for the license of Intellectual Property, excluding “off-the-shelf” software programs licensed by or to the Company pursuant to nonnegotiable standard form, mass market or “shrink wrap” licenses; and

               (xvii) any other agreement (or group of related agreements) involving more than $50,000 in annual payments or that is otherwise material to the Company.

          (b) The Company has made available in the electronic data room or delivered to Parent a complete and accurate copy of each agreement listed in Section 2.13 or Section 2.14 of the Disclosure Schedule, or with respect to each such unwritten agreement, the Company has provided a detailed description of the terms of such unwritten agreement. With respect to each agreement so listed: (i) the agreement is legal, valid, binding and enforceable against the

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Company and, to the Knowledge of the Company, is in full force and effect; (ii) the agreement will continue to be legal, valid, binding and enforceable against the Company and, to the Knowledge of the Company, in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing; and (iii) except as set forth on Section 2.14(b)(iii) of the Disclosure Schedule, neither the Company nor, to the Knowledge of the Company, any other party, is in breach or violation of, or default under, any material provision of such agreement, and no event has occurred, is pending or, to the Knowledge of the Company, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a breach or default of any material provision of such agreement by the Company or, to the Knowledge of the Company, of any other party under such agreement.

     2.15 Accounts Receivable. Except as set forth in Section 2.15 of the Disclosure Schedule, all Accounts Receivable of the Company reflected on the Most Recent Balance Sheet (other than those paid since such date) are valid receivables enforceable and fully collectible within one hundred eighty (180) days of the Closing Date, free and clear of any claim, right of setoff or other dispute, demand or future obligation of any nature whatsoever. The Company has not received any written notice from an account debtor stating that any Account Receivable is subject to any contest, claim or setoff by such account debtor.

     2.16 Powers of Attorney. Except as set forth in Section 2.16 of the Disclosure Schedule, there are no outstanding powers of attorney executed on behalf of the Company.

     2.17 Insurance. Section 2.17 of the Disclosure Schedule lists each insurance policy (including fire, theft/crime, casualty, comprehensive general liability, workers compensation, business interruption, environmental, errors and omissions, directors and officers fiduciary liability, employment practices liability, product liability and automobile insurance policies and bond and surety arrangements) to which the Company is a party, all of which are in full force and effect including the name of the insurer, policy numbers and whether such policy is a claims-made or occurrence policy. Except as set forth in Section 2.17 of the Disclosure Schedule, there is no claim pending or, to the Knowledge of the Company, any existing facts which are reasonably likely to result in a claim, and no claim has been denied or disputed by the underwriter of any policy within the last four (4) years. All premiums due and payable under all such policies have been paid. The Company has not been denied insurance coverage at any time during the past five years and no policies have been cancelled or have been refused to be renewed by the insurer in the past five years except as set forth in Section 2.17 of the Disclosure Schedule. The Company has no Knowledge of any threatened termination of, or premium increase with respect to, any such policy except as set forth in Section 2.17 of the Disclosure Schedule. Each such policy will continue to be enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing. The Company has not failed to timely give any notice required or failed to satisfy any subjectivities under such insurance policies or binders of insurance.

     2.18 Litigation. Except as set forth in Section 2.18 of the Disclosure Schedule, there is no Legal Proceeding which is pending or, to the Knowledge of the Company, has been threatened against the Company, and, to the Knowledge of the Company, no event has occurred or circumstance exists that would reasonably be expected to give rise to or serve as the basis for

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any Legal Proceeding. There are no judgments, orders or decrees outstanding against the Company.

     2.19 Warranties. Except as set forth in Section 2.19 of the Disclosure Schedule, no Customer Deliverable is subject to any guaranty, warranty, right of credit or other indemnity. Section 2.19 of the Disclosure Schedule sets forth the aggregate expenses incurred by the Company in fulfilling its obligations under its guaranty, warranty, right of credit and other indemnity provisions during each of the fiscal years and the interim period covered by the Financial Statements. The Company has no liability (and there is no known basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand giving rise to any liability) arising out of any injury to individuals or property as a result of the ownership, possession or use of any product manufactured, sold, leased or delivered by the Company.

     2.20 Employees.

          (a) Section 2.20 of the Disclosure Schedule contains a list of all employees of the Company, along with the position and the annual rate (or hourly rate, where applicable) of compensation of each such person.

          (b) The Company is not a party to or bound by any collective bargaining agreement, and has not experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes. The Company has never committed any unfair labor practice. The Company has no Knowledge of any organizational effort made or threatened, either currently or within the past two years, by or on behalf of any labor union with respect to employees of the Company.

          (c) All employee expenses and benefits shall have been accrued on the Final Balance Sheet for all periods prior to and up through the Closing Date.

          (d) To the Knowledge of the Company, no officer, Key Employee or group of employees has any plans to terminate employment with the Company at any time within twelve (12) months after the date hereof.

     2.21 Employee Benefits.

          (a) Section 2.21(a) of the Disclosure Schedule contains a complete and accurate list of all Company Plans. Complete and accurate copies of documents embodying each of the Company Plans and related plan documents including (without limitation) plan documents, trust documents, group annuity contracts, plan amendments, insurance policies or contracts, participant agreements, employee booklets, administrative service agreements, summary plan descriptions, plan summaries or descriptions, minutes, resolutions, compliance and nondiscrimination tests for the last three plan years, standard COBRA forms and related notices, registration statements and prospectuses, and, to the extent still in its possession, any material employee communications relating thereto, have been made available in the electronic data room or delivered to Parent. With respect to each Company Plan which is subject to ERISA reporting requirements, the Company has made available in the electronic data room or delivered copies of the Form 5500 reports and any applicable financial statements, including schedules and

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reports filed for the last three years. The Company has made available in the electronic data room or delivered to Parent the most recent Internal Revenue Service determination or opinion letter issued, if any, with respect to each such Company Plan which is intended to be a qualified plan as described in Code Section 401(a), and nothing has occurred since the issuance of each such letter which could reasonably be expected to cause the loss of tax-qualified status of any such Company Plan.

          (b) Each Company Plan has been administered substantially in accordance with its terms and in compliance with the requirements prescribed by any and all statutes, rules and regulations (including ERISA and the Code), except as would not have, in the aggregate, a Company Material Adverse Effect. The Company and the ERISA Affiliates have performed all material obligations required to be performed by them under, and are not in material default or violation by any other party to, any Company Plan. All contributions required to be made by the Company or any ERISA Affiliate to any Company Plan have been made or accrued on the Most Recent Balance Sheet. All governmental filings and reports as to each Company Plan subject to ERISA have been prepared in good faith and timely filed and were true and correct as of the date filed. The Company has distributed or posted all notices and reports to employees or participants in the Company Plans required to be distributed or posted. There has been no “prohibited transaction,” as such term is defined in Section 406 of ERISA or Section 4975 of the Code, with respect to any Company Plan for which there is not a statutory exemption. Neither the Company nor any ERISA Affiliate is subject to any liability or penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any prohibited transaction with any Company Plan. With respect to each Company Plan no “reportable event” within the meaning of Section 4043 of ERISA (excluding any such event for which the thirty (30) day notice requirement has been waived under the regulations to Section 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 of ERISA has occurred. No Company Plan has assets that include securities issued by the Company or any ERISA Affiliate and no Company Plan constitutes a security which is required to be registered under applicable state or federal securities laws. There has been no amendment to, written interpretation or announcement by the Company or any ERISA Affiliate of any increase in the benefits provided under any Company Plan above the level of benefits which resulted in the expense incurred with respect to that Plan for the most recent fiscal year included in the Company’s financial statements.

          (c) No suit, investigation, audit, administrative proceeding, action, or other litigation (except claims for benefits payable in the normal operation of the Company Plans and proceedings with respect to qualified domestic relations orders) has been brought, or to the Knowledge of the Company is threatened, against or with respect to any Company Plan or asserting any rights or claims to benefits under any Company Plan, including audit or inquiry by the IRS or United States Department of Labor.

          (d) With respect to each Company Plan that is intended to be qualified under Section 401(a) of the Code, the Company has either obtained or is entitled to rely on a determination and/or notification letter from the Internal Revenue Service to the effect that such Company Plan is qualified under Sections 401(a) and 501(a) of the Code; that such determination and/or notification letter covers all amendments to the Code which are currently effective, and the plans and the trusts related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code or, if not, the Company still has time

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remaining to apply under applicable Treasury Regulations or Internal Revenue Service pronouncements to either make any amendments in such Company Plan as may be necessary to result in such Company Plan being qualified under all such amendments and, if desired, to apply to the Internal Revenue Service for a favorable determination letter on such qualification; and no act or omission has occurred that could reasonably be expected to adversely affect the qualification of such Company Plan or materially increase the Company’s expense associated with such Company Plan. Each Company Plan that is required to satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been tested for compliance with, and satisfies the requirements of Section 401(k)(3) and Section 401(m)(2) of the Code for each plan year ending prior to the Closing Date, or is a “safe harbor” plan that avoids the need for any such testing.

          (e) The Company has not nor has any ERISA Affiliate ever maintained, established, sponsored, participated in, contributed to, or is obligated to contribute to, or otherwise incurred any obligation or liability (including, without limitation, any contingent liability) under any “multiemployer plan” as defined in Section 3(37) of ERISA or to any “employee pension benefit plan” (as defined in Section 3(2) of ERISA) that is subject to Section 412 of the Code or Title IV of ERISA. Neither the Company nor any ERISA Affiliate has any actual or potential withdrawal liability (including, without limitation, any contingent liability) from any complete or partial withdrawal (as defined in Sections 4203 and 4205 of ERISA) from any multiemployer plan.

          (f) With respect to each Company Plan, the Company and each of its ERISA Affiliates have substantially complied with (i) the applicable healthcare continuation and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and the regulations thereunder and any similar state law governing the extension or continuation of health care coverage following the termination of employment of the employees of the Company; (ii) the applicable requirements of the Family Medical Leave Act of 1993 and the regulations thereunder; (iii) the applicable requirements of HIPAA; (iv) the applicable requirements of the Cancer Rights Act of 1998; and (v) and the applicable requirements of the Newborn and Mother’s Health Protection Act of 1996. The Company is in material compliance with its obligations to any current and/or former employees and/or qualified beneficiaries pursuant to COBRA, HIPAA, or any state law governing the extension or continuation of health care coverage following the termination of employment of the employees of the Company.

          (g) There are no unfunded obligations under any Company Plan providing benefits after termination of employment to any employee of the Company (or to any beneficiary of any such employee), including but not limited to retiree health coverage or other retiree welfare benefits and deferred compensation, but excluding continuation of health coverage required to be continued under Section 4980B of the Code or other applicable law and insurance conversion privileges under state law in addition to any such obligations which are reflected on the Company’s financial statements. The assets of each Company Plan that is funded are reported at their fair market value on the books and records of such Company Plan.

          (h) No act or omission has occurred and no condition exists with respect to any Company Plan that would reasonably be expected to subject the Company or any ERISA Affiliate to (i) any material fine, penalty, tax or liability of any kind imposed under ERISA or the

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Code or (ii) any contractual indemnification or contribution obligation protecting any fiduciary, insurer or service provider with respect to any Company Plan.

          (i) No Company Plan is funded by, associated with or related to a “voluntary employee’s beneficiary association” within the meaning of Section 501(c)(9) of the Code.

          (j) Each Company Plan may be amended, terminated or otherwise discontinued unilaterally by the Company at any time without liability or expense to the, Company (or after the Closing Date, Parent) or such Company Plan as a result thereof (other than for benefits accrued through the date of termination or amendment and reasonable administrative expenses related thereto) and no Company Plan, plan document or agreement, summary plan description or other written communication distributed generally to employees by its terms prohibits the Company from amending, terminating or otherwise discontinuing any such Company Plan.

          (k) Section 2.21(k) of the Disclosure Schedule discloses each: (i) agreement with any shareholder, director, executive officer or other key employee of the Company (A) the benefits of which are contingent, or the terms of which are altered, upon the occurrence of a transaction involving the Company of the nature of any of the transactions contemplated by this Agreement, (B) providing any term of employment or compensation guarantee or (C) providing severance benefits or other benefits after the termination of employment of such director, executive officer or key employee; (ii) agreement, plan or arrangement under which any person may receive payments from the Company that may be subject to the tax imposed by Section 4999 of the Code or included in the determination of such person’s “parachute payment” under Section 280G of the Code (without regard to Sections 280G(b)(4) and 280G(b)(5) thereof); and (iii) agreement or plan binding the Company, including any stock option plan, stock appreciation right plan, restricted stock plan, stock purchase plan, severance benefit plan or Company Plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Any Company Plan which is a nonqualified deferred compensation plan as defined in Code Section 409A is either exempt from Code Section 409A or is in material compliance with Code Section 409A.

          (l) Section 2.21(l) of the Disclosure Schedule sets forth the policy of the Company with respect to accrued vacation, accrued sick time and earned time off and the amount of such liabilities as of the date of this Agreement. On the Closing Date, no employees will have accrued vacation in excess of 240 hours.

          (m) The Company has classified all individuals who perform services for the Company correctly under the Company Plans, ERISA and the Code as common law employees, independent contractors, leased employees, and exempt or non-exempt employees.

          (n) The Company has not engaged in any transaction with respect to any Company Plan that is the same as or substantially similar to any transaction that the Internal Revenue Service has determined to be a tax avoidance transaction and has identified as a listed transaction in published guidance under 26 CFR Section 1.6011-4(b)(2).

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     2.22 Environmental Matters.

          (a) The Company has complied in all material respects with all applicable Environmental Laws and Environmental Permits. There is no pending or, to the Knowledge of the Company, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law and Environmental Permits involving the Company or any properties owned or leased by it.

          (b) The Company is not subject to any environmental liability of any solid or hazardous waste transporter or treatment, storage or disposal facility that has been used by the Company.

          (c) The Company has not Released any Hazardous Material on any of the Leased Real Property or on any property formerly owned, leased, used or occupied by the Company.

          (d) There are no Environmental Claims pending or, to the Knowledge of the Company, threatened against the Company on any of the Leased Real Property and, to the Knowledge of the Company, there are no circumstances that would reasonably be expected to form the basis of any such Environmental Claim.

          (e) The Company is not aware of any actual or alleged liability, whether fixed or contingent, under any Environmental Law.

     2.23 Legal Compliance.

          (a) The Company is currently conducting, and has at all times conducted, its business in material compliance with each applicable law (including rules and regulations thereunder) of any federal, state, local or foreign government, or any Governmental Entity. The Company (including any Affiliates) has not received any notice or communication from any Governmental Entity alleging noncompliance with any applicable law, rule or regulation.

          (b) Subject to paragraph (c) below, the Company complies with and has implemented all such measures required for it to comply with its obligations as a Covered Entity for its “Health Plan” and as a “Business Associate” of its “Covered Entity” (as such capitalized terms are defined in HIPAA and the regulations promulgated thereunder), including without limitation, the privacy and security regulations (45 C.F.R. 160 and 164) and the transaction and code set regulations (45 C.F.R. 162) promulgated under HIPAA. With respect to any HIPAA regulatory requirements, including any contractual privacy and security commitments for “Protected Health Information” (as that term is defined in the HIPAA privacy and security regulations), for which the Company’s (including any Affiliates) compliance with HIPAA is required (collectively, the “HIPAA Commitments”),

               (i) the Company is in material compliance with the HIPAA Commitments;

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               (ii) the transactions contemplated by this Agreement will not violate any of the HIPAA Commitments;

               (iii) the Company has not received written inquiries from the U.S. Department of Health and Human Services or any other Governmental Entity regarding the Company’s compliance with the HIPAA Commitments; and

               (iv) the HIPAA Commitments have not been rejected by any applicable certification organization which has reviewed such HIPAA Commitments or to which any such HIPAA Commitment has been submitted.

          (c) The Company has either entered into or made reasonable and good faith efforts to enter into valid, written Business Associate agreements with all customers that are Covered Entities and with all contractors, agents, vendors, suppliers, and service providers that are Business Associates of the Company.

     2.24 Customers and Suppliers. Section 2.24 of the Disclosure Schedule sets forth a list of (a) each customer of the Company under contract as of January 31, 2010 and (b) each supplier that is the sole supplier of any significant product or service to the Company (each such customer or supplier, a “Significant Person”).

     2.25 Permits. Section 2.25 of the Disclosure Schedule sets forth a list of all Permits issued to or held by the Company. Such listed Permits are the only Permits that are required for the Company to conduct its business as presently conducted. Each such Permit is in full force and effect; the Company is in material compliance with the terms of each such Permit; and, to the Knowledge of the Company, no suspension or cancellation of such Permit is threatened. There is no basis for believing that such Permit will not be renewable upon expiration. Each such Permit will continue in full force and effect immediately following the Closing.

     2.26 Certain Business Relationships With Affiliates. Except as set forth in Section 2.26 of the Disclosure Schedule, no Affiliate of the Company (a) owns any property or right, tangible or intangible, which is used in the business of the Company, (b) has any claim or cause of action against the Company, or (c) owes any money to, or is owed any money by, the Company. Section 2.26 of the Disclosure Schedule describes any transactions or relationships between the Company and any Affiliate thereof which occurred or have existed since the beginning of the time period covered by the Financial Statements.

     2.27 Brokers’ Fees. Except as set forth in Section 2.27 of the Disclosure Schedule, neither the Company, nor any Shareholder nor any other party with whom or for whom the Company or the Shareholders may have contracted has any liability or obligation to pay any fees, commissions or any other amounts of any kind whatsoever to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

     2.28 Books and Records. The minute books and other similar records of the Company contain complete and accurate records of all actions taken at any meetings of the Company’s shareholders, Board of Directors or any committee thereof and of all written consents executed in lieu of the holding of any such meeting. The books and records of the Company accurately reflect in all material respects the assets, liabilities, business, financial

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condition and results of operations of the Company and have been maintained in accordance with good business and bookkeeping practices. Section 2.28 of the Disclosure Schedule contains a list of all accounts and safe deposit boxes of the Company (including the name of each bank, trust company, savings institution, brokerage firm, mutual fund or other financial institution with which the Company has an account or safe deposit box) and the names of persons having signature authority with respect thereto or access thereto.

     2.29 Compliance with Healthcare Laws and Regulations.

          (a) Without limiting the generality of Section 2.23 or any other representation or warranty made by the Company herein, the Company is conducting and has conducted its business and operations in compliance in all material respects with, and neither the Company nor any of its officers, directors or employees has engaged in any activities prohibited under, all applicable civil or criminal statutes, laws, ordinances, rules and regulations of any federal, state, local or foreign Governmental Entity with respect to regulatory matters relating to the provision, administration, and/or payment for healthcare products or services (collectively, “Healthcare Laws”), including, without limitation, (i) rules and regulations governing the operation and administration of Medicare, Medicaid, or other federal health care programs; (ii) 42 U.S.C. § 1320a-7(b), commonly referred to as the “Federal Anti-Kickback Statute,” (iii) 42 U.S.C. § 1395nn, commonly referred to as the “Stark Law,” (iv) 31 U.S.C. §§ 3729-33, commonly referred to as the “False Claims Act” and (v) rules and regulations of the U.S. Food and Drug Administration.

          (b) The Company has not received any notice or communication from any Governmental Entity alleging noncompliance with any Healthcare Laws. There is no civil, criminal or administrative action, suit, demand, claim, complaint, hearing, investigation, notice, demand letter, warning letter, proceeding or request for information pending against the Company and the Company has no liability (whether actual or contingent) for failure to comply with any Healthcare Laws. To the Knowledge of the Company, there is no act, omission, event or circumstance that would reasonably be expected to give rise to any such action, suit, demand, claim, complaint, hearing, investigation, notice, demand letter, warning letter, proceeding or request for information or any such liability. There has not been any violation of any Healthcare Laws by the Company in its submissions or reports to any Governmental Entity that would reasonably be expected to require investigation, corrective action or enforcement action. There is no civil or criminal proceeding, or, to the Knowledge of the Company, threatened, relating to the Company or any Company director, officer or employee that involves a matter within or related to Healthcare Laws.

          (c) Any remuneration (including, without limitation, a “discount or reduction in price,” as referenced in 42 U.S.C. § 1320a-7b(b)(3)(A)) exchanged between the Company and its customers, contractors, or other entities with which it has a business relationship (together, “Trading Partners”) has at all times been commercially reasonable and represents the fair market value for rendered services or purchased items. No remuneration exchanged between the Company and its Trading Partners has taken into account, either directly or indirectly, the volume or value of any referrals or any other federal health care program business generated between the Company and such Trading Partners.

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          (d) Neither the Company nor any of its directors, officers or employees has been debarred or subject to mandatory or permissive exclusion from participation in Medicare, Medicaid, or any other federal or state healthcare program.

          (e) The Company has maintained all records required to be maintained by it under any Healthcare Laws.

     2.30 Disclosure. No representation or warranty by the Company contained in this Agreement, and no statement contained in the Disclosure Schedule or any other document, certificate or other instrument delivered or to be delivered by or on behalf of the Company pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein not misleading.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS

     Each Shareholder, severally with respect to himself and not jointly, represents and warrants to Parent as follows (collectively as set forth in this Article III, the “Shareholder Fundamental Representations”):

     3.1 Title to Shares. Such Shareholder owns beneficially and of record all of the Company Shares set forth next to such Shareholder’s name in Section 2.2(b) of the Disclosure Schedule, and such Shareholder has the full and unrestricted power to sell, assign, transfer and deliver such Company Shares in accordance with the terms of this Agreement, free and clear of all Security Interests and there are no claims or actions pending with respect to the title of such Company Shares, except for those arising under this Agreement and applicable securities law restrictions. Such Shareholder is not a party to any voting trust, proxy or other agreement or understanding with respect to the voting of any Company Shares.

     3.2 No Conflict. The execution, delivery and performance by such Shareholder of this Agreement and all related documents to which such Shareholder is a party and the consummation of the transactions contemplated by this Agreement and such documents do not and will not to such Shareholder’s Knowledge violate any statute, rule, regulation, order or decree of any Governmental Entity by which such Shareholder or such Shareholder’s properties or assets is bound. There is no decree, judgment, order investigation or litigation at law or in equity, no arbitration proceeding, and no proceeding before or by any Governmental Entity, pending or to such Shareholder’s Knowledge, threatened, to which such Shareholder is a party relating to the transactions contemplated by this Agreement.

     3.3 Enforceability. This Agreement has been duly executed and delivered by such Shareholder. This Agreement constitutes the valid and binding obligation of such Shareholder enforceable against such Shareholder in accordance with its terms, except to the extent that enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws relating to or affecting the rights and remedies of creditors generally and (ii) general principles of equity.

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

     Parent and Merger Sub, jointly and severally, represent and warrant to the Shareholders that the statements contained in this Article IV are true and correct as of the date of this Agreement and will be true and correct as of the Closing Date as though made as of the Closing Date, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties will be true and correct as of such date).

     4.1 Organization and Corporate Power. Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of formation. Each of Parent and Merger Sub has all requisite corporate power and authority to carry on the business in which it is engaged and to own and use the properties owned and used by it.

     4.2 Authorization of Transaction. Each of Parent and Merger Sub has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Parent and Merger Sub of this Agreement and the consummation by Parent and Merger Sub of the series of transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Parent and Merger Sub. This Agreement has been duly and validly executed and delivered by each of Parent and Merger Sub and constitutes a valid and binding obligation of each of Parent and Merger Sub, enforceable against it in accordance with its terms and conditions, except to the extent that enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws relating to or affecting the rights and remedies of creditors generally and (ii) general principles of equity.

     4.3 Noncontravention. Except for the filing of the Certificate of Merger as required by the TBOC, neither the execution and delivery by Parent and Merger Sub of this Agreement, nor the consummation by Parent and Merger Sub of the transactions contemplated hereby, will (a) conflict with or violate any provision of the charter or bylaws of Parent and Merger Sub, (b) require on the part of Parent or Merger Sub any filing with, or permit, authorization, consent or approval of, any Governmental Entity, (c) conflict with, result in breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party any right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract or instrument to which Parent or Merger Sub is a party or by which it is bound or to which any of its assets are subject, except for (i) any conflict, breach, default, acceleration, termination, modification or cancellation which would not adversely affect the consummation of the series of transactions contemplated hereby, or (ii) any notice, consent or waiver the absence of which would not adversely affect the consummation of the series of transactions contemplated hereby, or (d) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent or Merger Sub or any of its properties or assets.

     4.4 Litigation. As of the date of this Agreement, there is no action, suit, investigation or proceeding pending against or, to Parent’s Knowledge, threatened against or affecting Parent or Merger Sub or any of their respective officers or directors in their capacity as officers or

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directors of Parent or Merger Sub before any court or arbitrator or any governmental body, agency or official, which in any manner challenges or seeks to prevent, enjoin, alter or materially delay any of the series of transactions contemplated hereby.

     4.5 Disclosure. No representation or warranty by Parent or Merger Sub contained in this Agreement, and no statement contained in any schedule hereto or any other document, certificate or other instrument delivered or to be delivered by or on behalf of Parent or Merger Sub pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein not misleading.

     4.6 Valid Issuance of Shares. The Parent Shares issued as part of the Aggregate Transaction Consideration will, when issued and delivered to the Shareholders in accordance with the terms hereof, be duly authorized, validly issued, fully paid and non-assessable.

     4.7 Material Adverse Change. Except as has been publicly disclosed or is publicly disclosed prior to the date of this Agreement, since September 30, 2009, there have been no transactions, conditions or events which, individually, or in the aggregate constitute or has had a Parent Material Adverse Effect. Since January 1, 1998, Parent has not received written notice from the SEC that it will require Parent to restate any of the financial statements of Parent included in the Parent SEC Filings or that the SEC is making an investigation of the Parent’s financial statements or accounting practices.

     4.8 Brokers’ Fees. Neither Parent nor Merger Sub nor any other party with whom or for whom Parent or Merger Sub may have contracted has any liability or obligation to pay any fees, commissions or any other amounts of any kind whatsoever to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

     4.9 Tax-Free Reorganization. Merger Sub is a wholly-owned, direct subsidiary of Parent, and it is the present intention of Parent to continue at least one significant historic business line of the Company, or to use at least a significant portion of the Company’s historic business assets in a business, each within the meaning of Treasury Regulations § 1.368-1(d).

     4.10 SEC and Exchange Compliance.

          (a) Since January 1, 2006 and through the date of this Agreement, Parent has timely filed all required reports and forms and other documents (including exhibits and all other information incorporated therein) with the SEC (the “Parent SEC Filings”). As of their respective dates (and without giving effect to any amendments or modifications filed after the Closing Date), the Parent SEC Filings complied as to form with requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Parent SEC Filings. As of their respective filing dates, each Parent SEC Filing filed prior to the date of this Agreement pursuant to the Securities Act or the Exchange Act did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading.

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          (b) Each of Parent’s consolidated statements of financial condition or balance sheets included in or incorporated by referenced into the Parent SEC Filings, including related notes and schedules, fairly presented in all material respects the consolidated financial position of Parent and its subsidiaries as of the date of such balance sheet and each of the Parent’s consolidated statements of income, cash flows and changes in stockholders’ equity included in or incorporated by reference into Parent SEC Filings, including any related notes and schedules, fairly presented in all material respects the consolidated results of operations, cash flows and changes in stockholders’ equity, as the case may be, of Parent and its subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to normal year-end audit adjustments), in each case in accordance with GAAP consistently applied during the periods involved (except as may be noted therein and except, in the case of unaudited statements, for the absence of notes).

          (c) Parent is in compliance in all material respects with the rules, regulations and policies of the NASDAQ Global Select Market applicable to Parent, including, without limitation, its corporate governance standards.

ARTICLE V
CERTAIN COVENANTS

     5.1 Expenses. Except as expressly set forth in this Agreement, each of the Parties shall bear its own costs and expenses (including legal, investment banking and accounting fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. Parent shall pay on behalf of the Company and the Shareholders at Closing Company Transaction Expenses in those amounts and to those persons directed by the Shareholder Representative; provided, however, that the total amount so paid by Parent on behalf of the Company and the Shareholders shall be deducted from the Closing Amount in determining the Net Closing Amount payable to the Shareholders at Closing; provided, further, that the total amount so paid by Parent shall not exceed $250,000. For the avoidance of doubt, the Shareholders shall have sole liability for any Company Transaction Expenses not paid at or before Closing, and the Surviving Corporation shall not have any liability for Company Transaction Expenses.

     5.2 Proprietary Information. From and after the Closing, no Shareholder shall disclose or make use of, and each Shareholder shall cause all of his Affiliates not to disclose or make use of, any knowledge, information or documents of a confidential nature or not generally known to the public with respect to the Company or Parent and their respective businesses (including the financial information, technical information or data relating to the Company’s services and names of customers of the Company), except to the extent that (i) such knowledge, information or documents shall have become public knowledge other than through improper disclosure by any Shareholder or an Affiliate, (ii) such Shareholder is required to disclose such information by law or legal process or (iii) it is necessary and appropriate for such Shareholder to disclose and/or make use of such information in his capacity as an employee of the Surviving Corporation after Closing.

     5.3 Confidentiality. Each of the parties hereto agrees that the information obtained in any investigation pursuant to the negotiation and execution of this Agreement or the

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effectuation of the transaction contemplated hereby, shall be governed by the terms of that certain confidentiality letter agreement, as amended, by and between the Company and NextGen Healthcare Information Systems, Inc., a wholly-owned subsidiary of Parent (“NextGen”), dated August ___, 2009; provided, however, that Parent and NextGen may make such disclosures as may be required under applicable law.

     5.4 Transition. Unless otherwise directed or consented to by Parent in writing, the Shareholders will not take any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier, or other business associate of the Company from maintaining the same business relationships with the Company after the Closing as it maintained with the Company prior to the Closing.

     5.5 Solicitation of Employees. Each of the Shareholders covenants and agrees that beginning on the Closing Date and continuing for a period of eighteen (18) months thereafter, neither such Shareholder nor any Affiliates of such Shareholder will anywhere in the world where the Business was conducted or proposed to be conducted prior to Closing (the “Non-Solicitation Area”) (i) solicit or hire any of the employees of the Surviving Corporation who are employed by the Surviving Corporation or were employed by the Company within the twelve (12) month period prior to the Closing, or (ii) interfere with the relationship of the Surviving Corporation with any such employees. The Shareholders agree that the restrictions contained in this Section 5.5 are reasonable as to time and geographic scope because of the nature of the business of the Company and the Shareholders agree, in particular, that the geographic scope of this restriction is reasonable because companies engaged in the business of the Surviving Corporation compete throughout the Non-Solicitation Area. The Shareholders acknowledge that the Surviving Corporation is in direct competition with all other companies engaged in the business of the Surviving Corporation throughout the Non-Solicitation Area, and because of the nature of such business, the Shareholders agree that the covenants contained in this Section 5.5 cannot reasonably be limited to any smaller geographic area.

     5.6 Issuance of Parent Shares. Parent shall use its best efforts to ensure that the stock certificates representing the Parent Shares portion of the Closing Amount be issued to the Shareholders entitled thereto within three (3) Business Days after the Closing pursuant to the issuance order referenced in Section 1.3(b)(ii).

     5.7 Rule 144; Listing of Parent Shares. Parent shall use its Reasonable Best Efforts to ensure that the Shareholders may sell the Parent Shares issued as part of the Aggregate Transaction Consideration under Rule 144 promulgated under the Securities Act (“Rule 144”). Without limiting the generality of the foregoing, Parent shall respond in a timely manner, and will cause its officers, legal counsel, transfer agent and other representatives to respond in a timely manner, to requests by the Shareholders or their brokers to sell Parent Shares under Rule 144 following the Closing Date, including requests to have the restrictive legends removed from the stock certificates representing the Parent Shares. Parent will ensure that all Parent Shares issued as part of the Aggregate Transaction Consideration will, prior to issuance, be authorized for listing on the NASDAQ Global Select Market to the extent that Parent otherwise qualifies.

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     5.8 Credit for Employment. Parent hereby agrees that Parent shall grant or cause the Surviving Corporation to grant all employees of the Company credit for any service with the Company earned prior to the Closing Date for: (i) purposes of vacation accrual under any employee vacation plan or policy established or maintained by Parent, Surviving Corporation or any of their Affiliates on or after the Closing Date, (ii) eligibility and vesting under Parent’s, Surviving Corporation’s or any of their Affiliate’s 401(k) plan existing as of the Closing Date, and (iii) fulfillment of any eligibility waiting periods requirements under any of Parent’s, Surviving Corporation’s or any of their Affiliate’s health insurance plan existing as of the Closing Date.

     5.9 Revision of Revenue Recognition Policies. Parent and the Shareholder Representative shall use their respective best efforts and negotiate in good faith to agree upon reasonable revenue recognition accounting policies to replace items 4 and 5 in the “Revenue Recognition” section of Exhibit D no later than forty-five (45) days after the Closing Date; provided; however, that if Parent and the Shareholder Representative are unable to agree upon such replacement policies, items 4 and 5 in the “Revenue Recognition” section of Exhibit D shall apply.

ARTICLE VI
CONDITIONS TO CONSUMMATION OF MERGER

     6.1 Conditions to Obligations of Parent and Merger Sub. The obligation of Parent and Merger Sub to consummate the Merger is subject to the satisfaction (or waiver by Parent) of the following additional conditions at or before Closing:

          (a) there shall not be any Dissenting Shares;

          (b) the Company shall have obtained at its own expense all of the waivers, permits, consents, approvals, novations or other authorizations whatsoever, and effected all of the registrations, filings and notices which are required on the part of the Company to consummate the transactions contemplated by this Agreement, including, but not limited to, the consents set forth in Section 2.4(c) of the Disclosure Schedule, and to otherwise comply with all applicable laws and regulations in connection with the consummation of the series of transactions contemplated by this Agreement;

          (c) the representations and warranties of the Company and the Shareholders set forth in this Agreement shall be true and correct in all material respects as of the Closing except to the extent they pertain to a different date;

          (d) the Company and each of the Shareholders shall each have performed or complied with in all material respects its or his agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Closing;

          (e) no Legal Proceeding shall be pending or threatened wherein an unfavorable judgment, order, decree, stipulation or injunction would (i) prevent consummation of the series of transactions contemplated by this Agreement or any one of them, (ii) cause the series of transactions contemplated by this Agreement or any one of them to be rescinded

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following consummation or (iii) have, individually or in the aggregate, a Company Material Adverse Effect, and no such judgment, order, decree, stipulation or injunction shall be in effect;

          (f) the Company shall have delivered to the Parent the Company Certificate;

          (g) Parent shall have received the resignations, effective as of the Closing, of each director and officer of the Company specified by Parent;

          (h) Parent shall have received such other certificates and instruments (including certificates of good standing of the Company in its jurisdiction of organization, certified charter documents, certificates as to the incumbency of officers and the adoption of authorizing resolutions) as Parent shall reasonably request in connection with the Closing;

          (i) Parent shall have received a fully executed employment agreement (including noncompete, invention assignment and non-solicitation provisions) by and between the Surviving Corporation and each of Fred Beck, Tim Rhoads and Nathan Read in a form reasonably satisfactory to Parent;

          (j) Parent shall have received for each employee an executed acknowledgement of receipt of the employee handbook of the Company;

          (k) Parent shall have received the Escrow Agreement, executed by the Shareholder Representative and the Escrow Agent;

          (l) all outstanding Options shall have been terminated;

          (m) Parent shall have received an executed Confidential Investor Questionnaire from each Shareholder in the form attached hereto as Exhibit C;

          (n) the Company shall have obtained the Requisite Shareholder Approval of the Shareholders;

          (o) Parent shall have received the legal opinion of the Company’s counsel in a form reasonably satisfactory to Parent, dated as of the date of this Agreement;

          (p) the Company shall have no Debt;

          (q) Parent shall have received evidence (in form and substance reasonably satisfactory to Parent) that the Company’s investment bankers, attorneys and/or other advisors and any other similar agents and representatives have been or will be paid in full at or prior to the Closing (except for the Incremental Transaction Expenses payable to Healthcare Growth Partners, LLC pursuant to Section 1.8(f)(iv)), and that the Surviving Corporation will have no liability to any such parties for any costs related to the transactions contemplated by this Agreement;

          (r) the Company shall have purchased tail coverage on the D&O, employment practices and E&O insurance covering any claims made within six (6) years after the Closing Date that are based upon or relate to acts, events or omissions that occurred any time

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prior to Closing. Such tail insurance shall have deductibles and coverage amounts that are no less favorable to the Company and the Surviving Corporation as the insurance the Company had in place during the six (6) months immediately prior to Closing. In the event the coverage that would be afforded to the Surviving Corporation through the purchase of the aforementioned tail coverage E&O insurance is already covered by Parent’s insurance policies as in place at Closing and without any additional cost to Parent, the accrual for the cost of purchasing tail coverage E&O insurance shall be reversed for purposes of calculating the Final Balance Sheet;

          (s) Parent shall have received evidence (in form and substance reasonably satisfactory to Parent) that the Company has paid a bonus to Nathan Read in the amount of $22,000; and

          (t) Parent shall have received evidence (in form and substance reasonably satisfactory to Parent) that the Company has paid all accrued vacation in excess of 240 hours per employee.

     6.2 Conditions to Obligations of the Company. The obligation of the Company to consummate the Merger is subject to the satisfaction (or waiver by the Company) of the following additional conditions:

          (a) Parent shall have obtained at its own expense all of the waivers, permits, consents, approvals or other authorizations, and effected all of the registrations, filings and notices which are required on the part of Parent or Merger Sub to consummate the series of transactions contemplated by this Agreement and to otherwise comply with all applicable laws and regulations in connection with the consummation of the series of transactions contemplated by this Agreement;

          (b) the representations and warranties of Parent and Merger Sub set forth in this Agreement shall be true and correct in all material respects as of the Closing except to the extent they pertain to a different date;

          (c) each of Parent and Merger Sub shall have performed or complied with in all material respects its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Closing;

          (d) no Legal Proceeding shall be pending or threatened wherein an unfavorable judgment, order, decree, stipulation or injunction would (i) prevent consummation of the transactions contemplated by this Agreement or (ii) cause the transactions contemplated by this Agreement to be rescinded following consummation, and no such judgment, order, decree, stipulation or injunction shall be in effect;

          (e) Parent shall have delivered to the Company the Parent Certificate; and

          (f) the Company shall have received such other certificates and instruments (including certificates of good standing of Parent and Merger Sub in their respective jurisdiction of organization, certified charter documents, certificates as to the incumbency of officers and the adoption of authorizing resolutions) as it shall reasonably request in connection with the Closing.

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ARTICLE VII
INDEMNIFICATION

     7.1 Indemnification by the Shareholders with respect to the Company. Except as otherwise set forth in this Article VII, each of the Shareholders shall, jointly and severally, indemnify Parent and Merger Sub in respect of, and hold them harmless against and any and all Damages incurred or suffered by the Surviving Corporation, Parent, Merger Sub or any Affiliate thereof resulting from, relating to or constituting the matters set forth in the subsections of this Section 7.1. In addition to the foregoing, and not by way of limitation, Merger Sub’s and Parent’s right to indemnification hereunder shall not be affected by any investigation conducted by Merger Sub, Parent or any of their Affiliates.

          (a) Any breach of any representation or warranty of the Company and the Indemnifying Shareholders contained in this Agreement (other than any breach or alleged breach of Section 2.9 which shall be resolved pursuant to Article VIII), the Escrow Agreement or the Company Certificate;

          (b) Any claim by a former shareholder of the Company, or any other Person (other than a Shareholder), seeking to assert, or based upon any of the following with respect to any periods or occurrences prior to the Effective Time: (i) ownership or rights to ownership of any shares of capital stock of the Company which differ from those set forth in the Disclosure Schedule; (ii) any rights of a shareholder (other than the right to receive the Aggregate Transaction Consideration pursuant to this Agreement), including any option, preemptive rights or rights to notice or to vote; (iii) any rights under the charter or bylaws of the Company (other than indemnification); (iv) any claim that his, her or its shares were wrongfully repurchased by the Company; or (v) any inaccuracy or misstatement in a Payment Information Certificate, with respect or related to any Payment Information.

          (c) Any Third Party Actions concerning matters related to the Company which matter giving rise to the Third Party Action occurred prior to the Closing Date, regardless of when such Third Party Action is filed or otherwise instituted.

          (d) The matters set forth in Item 1 of Section 2.9(s) and Item 1 of Section 2.18 of the Disclosure Schedule.

          (e) To the extent any Damages to which NextGen, Merger Sub or Parent is entitled to indemnification pursuant to this Article VII consist of (i) fees, costs and expenses of NextGen’s, Merger Sub’s, Parent’s, the Company’s or their Affiliate’s outside legal counsel and professional advisors or (ii) amounts paid to a third-party as part of a judgment, settlement or other resolution of a Third Party Action, then in such event NextGen, Merger Sub or Parent shall be entitled to indemnification at the rate of 110% of any such Damages actually incurred by NextGen, Parent, the Company or their Affiliates. To the extent any director or employee of NextGen, Merger Sub, Parent, the Company or their Affiliates (including, but not limited to, individuals that may be Shareholders) spends time managing, negotiating, overseeing, preparing for, defending or otherwise focusing their time on claims or other matters to which NextGen, Merger Sub or Parent is entitled to indemnification pursuant to this Article VII, NextGen, Merger Sub or Parent shall be entitled (in addition to any other indemnification to which it is

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entitled hereunder) to indemnification for each hour (or six minute intervals of a partial hour) spent by any such director or employee at the rate of 150% of such director’s or employee’s Per Hour Rate.

     7.2 Indemnification by the Shareholders with respect to the Shareholders. Except as otherwise set forth in this Article VII, each of the Shareholders (with respect to himself only) shall indemnify Parent and Merger Sub in respect of, and hold them harmless against any and all Damages incurred or suffered by the Surviving Corporation, Parent, Merger Sub or any Affiliate thereof resulting from, relating to or constituting the matters set forth in the subsections of this Section 7.2. In addition to the foregoing, and not by way of limitation, Merger Sub’s and Parent’s right to indemnification hereunder shall not be affected by any investigation conducted by Merger Sub, Parent or any of their Affiliates.

          (a) Any failure by such Shareholder to perform any covenant or agreement of such Shareholder contained in this Agreement or the Escrow Agreement.

          (b) Any claim by such Shareholder seeking to assert, or based upon any of the following with respect to any periods or occurrences prior to the Effective Time: (i) ownership or rights to ownership of any shares of capital stock of the Company which differ from those set forth in the Disclosure Schedule; (ii) any rights of a shareholder (other than the rights of the Shareholders pursuant to this Agreement), including any option, preemptive rights or rights to notice or to vote; (iii) any rights under the charter or bylaws of the Company (other than indemnification); or (iv) any claim that his shares were wrongfully repurchased by the Company.

     7.3 Indemnification by Merger Sub and Parent. Merger Sub and Parent shall, jointly and severally, indemnify the Shareholders in respect of, and hold them harmless against, any and all Damages incurred or suffered by the Shareholders resulting from, relating to or constituting:

          (a) any breach of any representation or warranty of Merger Sub or Parent contained in this Agreement, the Escrow Agreement or the Parent Certificate; or

          (b) any failure to perform any covenant or agreement of Merger Sub or Parent contained in this Agreement or the Escrow Agreement.

     7.4 Indemnification Claims.

          (a) Notice of Third Party Actions. An Indemnified Party shall give written notification to the Indemnifying Party of the commencement of any Third Party Action. Such notification shall be given within twenty (20) days after receipt by the Indemnified Party of notice of such Third Party Action, and shall describe in reasonable detail (to the extent known by the Indemnified Party) the facts constituting the basis for such Third Party Action and the amount of the claimed Damages; provided, however, that no delay or failure on the part of the Indemnified Party in so notifying the Indemnifying Party shall relieve the Indemnifying Party of any liability or obligation hereunder except to the extent of any damage or liability caused by or arising out of such failure.

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          (b) Indemnification by the Shareholders of Third Party Actions. The obligations and liabilities of the Shareholders with respect to a Third Party Action for which Merger Sub or Parent is entitled to indemnification pursuant to this Article VII will be subject to the following terms and conditions. Merger Sub or Parent will have the right (including the selection of counsel reasonably acceptable to the Shareholder Representative) to defend against, direct the defense of, or settle any such Third Party Action and any related Legal Proceeding, but the Shareholders must reasonably cooperate in the defense thereof. In connection therewith, each of Merger Sub and Parent agrees (i) to keep the Shareholder Representative reasonably informed of its defense and resolution of the Third Party Action, (ii) to report to the Shareholder Representative in writing, at least quarterly, as to the amount of Damages (including attorneys’ fees and expenses) incurred as of the date of such report, and (iii) that it will make reasonable judgments with respect to incurring costs and expenses (including the selection of outside counsel) in a similar manner and based on similar factors as it does for similar third party claims for which it has no claim against the Shareholders for indemnification. No compromise, discharge or settlement of, or admission of liability in connection with, such claims may be effected by Merger Sub or Parent without the written consent of the Shareholder Representative (which consent will not be unreasonably withheld or delayed), unless Parent has waived any right to indemnification therefor by the Shareholders. So long as Merger Sub or Parent is conducting the defense of the Third Party Action, the Shareholder Representative may retain separate co-counsel at the Shareholders’ sole cost and expense and participate in the defense of the Third Party Action.

          (c) Indemnification by Parent and Merger Sub of Third Party Actions. The obligations and liabilities of Merger Sub and Parent hereunder with respect to a Third Party Action for which the Shareholders are entitled to indemnification pursuant to this Article VII will be subject to the following terms and conditions.

               (i) Merger Sub or Parent will have the right, but not the obligation, to defend against and to direct the defense of any such Third Party Action and any related Legal Proceeding at Merger Sub’s or Parent’s sole cost and expense and with counsel of Merger Sub’s or Parent’s choosing (subject to the approval of the Shareholder Representative, which will not be unreasonably withheld or delayed) and the Shareholder Representative will reasonably cooperate in the defense thereof; provided, however, that the assumption by Parent or Merger Sub of the defense of any such Third Party Action shall constitute an acknowledgement, without reservation, of Parent’s and Merger Sub’s obligation to indemnify and defend the Shareholders with respect to such Third Party Action. The Shareholder Representative may participate in such defense with counsel of their own choosing, provided that Merger Sub or Parent will not, following written notice of its election to defend against and direct the defense of any such Third Party Action and so long as Parent or Merger Sub is defending against such Third Party Action in good faith, be liable to the Shareholders under this Article VII for any fees of other counsel or any other expenses with respect to the defense of such Legal Proceeding incurred by the Shareholders in connection with the defense of such Legal Proceeding unless Parent, Merger Sub or any of their Affiliates are also a party to such Third Party Action and the Shareholder Representative determines in good faith that Shareholders have available to them one or more defenses or counterclaims that are inconsistent with those of Merger Sub or Parent. If Merger Sub or Parent assumes the defense of a Third Party Action, no compromise, discharge or settlement of, or admission of liability in connection with, such claims may be effected by

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Merger Sub or Parent without the written consent of the Shareholder Representative (which consent will not be unreasonably withheld or delayed) unless (x) there is no finding or admission of any violation of law or any violation of the rights of any Person and no effect on any other claims that may be made against the Shareholders, and (y) the sole relief provided is monetary damages that are paid in full by Merger Sub or Parent. If Parent or Merger Sub has assumed the defense of a Third Party Claim and is defending it in good faith, neither Merger Sub nor Parent will have any liability with respect to any compromise or settlement of such claims effected without its written consent (which consent will not be unreasonably withheld or delayed).

               (ii) Notwithstanding the provisions of Section 7.3(c)(i), if Merger Sub and Parent fail or refuse to undertake the defense of such Third Party Action within fourteen (14) days after delivery of written notification to Parent of the commencement of such Third Party Action or if Merger Sub or Parent later withdraws from such defense, the Shareholder Representative will have the right to undertake the defense of such claim with counsel of its own choosing, with Parent and Merger Sub responsible for the costs and expenses of such defense and bound by any determination made in such Third Party Action or any compromise or settlement effected by the Shareholders.

          (d) In order to seek indemnification under this Article VII, an Indemnified Party shall deliver a Claim Notice to the Indemnifying Party. If the Indemnified Party is Parent and is seeking to enforce such claim pursuant to the Escrow Agreement, the Indemnifying Party shall deliver a copy of the Claim Notice to the Escrow Agent.

          (e) Within twenty (20) days after delivery of a Claim Notice, the Indemnifying Party shall deliver to the Indemnified Party a Response, in which the Indemnifying Party shall: (i) agree that the Indemnified Party is entitled to receive all of the Claimed Amount (in which case the Response shall be accompanied by a payment by the Indemnifying Party to the Indemnified Party of the Claimed Amount, by check or by wire transfer, provided that if the Indemnified Party is Parent, Merger Sub or any of their Affiliates, the Indemnifying Party and the Indemnified Party shall deliver to the Escrow Agent, within three (3) days following the delivery of the Response, a written notice executed by both parties instructing the Escrow Agent to release to Parent for cancellation a number of Escrowed Shares equal in value to the Claimed Amount (valuing the Escrowed Shares for such purpose in the manner set forth in the Escrow Agreement) or, if less, the number of Escrowed Shares remaining in the Escrow Fund); (ii) agree that the Indemnified Party is entitled to receive the Agreed Amount (in which case the Response shall be accompanied by a payment by the Indemnifying Party to the Indemnified Party of the Agreed Amount, by check or by wire transfer, provided that if the Indemnified Party is Parent, Merger Sub or any of their Affiliates, the Indemnifying Party and the Indemnified Party shall deliver to the Escrow Agent, within three (3) days following the delivery of the Response, a written notice executed by both parties instructing the Escrow Agent to release to Parent for cancellation a number of Escrowed Shares equal in value to the Agreed Amount (valuing the Escrowed Shares for such purpose in the manner set forth in the Escrow Agreement) or, if less, the number of Escrowed Shares remaining in the Escrow Fund); or (iii) dispute that the Indemnified Party is entitled to receive any of the Claimed Amount.

          (f) During the 30-day period following the delivery of a Response that reflects a Dispute, the Indemnifying Party and the Indemnified Party shall use good faith efforts

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to resolve the Dispute. If the Dispute is not resolved within such 30-day period, such Dispute shall be resolved in a court of competent jurisdiction. If the Indemnified Party is Parent, Merger Sub or any of the Affiliates, the Indemnifying Party shall deliver to the Escrow Agent, promptly following resolution of the Dispute (whether by mutual agreement, judicial decision or otherwise), a written notice executed by both parties instructing the Escrow Agent as to what (if any) portion of the Escrowed Shares shall be released to Parent and/or the Shareholders (which notice shall be consistent with the terms of the resolution of the Dispute).

     7.5 Survival of Representations and Warranties. All representations and warranties that are covered by the indemnification agreements in Section 7.1(a) and Section 7.3(a) shall (a) survive the Closing and (b) shall expire on the date which is twenty-four (24) months following the Closing Date except for those representations and warranties concerning Capitalization (Section 2.2), Taxes (Section 2.9), Employee Benefits (Section 2.21) and Environmental (Section 2.22), the Shareholder Fundamental Representations, Organization and Corporate Power (Section 4.1), Valid Issuance of Shares (Section 4.6), Tax-Free Reorganization (Section 4.9), and SEC and Exchange Compliance (Section 4.10), which shall be for their respective statutes of limitations. If an Indemnified Party delivers to an Indemnifying Party, before expiration of a representation or warranty, either a Claim Notice based upon a breach of such representation or warranty, or an Expected Claim Notice based upon a breach of such representation or warranty, then the applicable representation or warranty shall survive until, but only to the extent of, and for purposes of the resolution of, the specific matter covered by such notice. If the Legal Proceeding or written claim with respect to which an Expected Claim Notice has been given is definitively withdrawn or resolved, the Indemnified Party shall promptly so notify the Indemnifying Party and if the Indemnified Party has delivered a copy of the Expected Claim Notice to the Escrow Agent with respect to such Expected Claim Notice, the Indemnifying Party and the Indemnified Party shall promptly deliver to the Escrow Agent a written notice executed by both parties instructing the Escrow Agent to release such retained Escrowed Shares in accordance with the resolution of such matter pursuant to the terms of the Escrow Agreement.

     7.6 Treatment of Indemnity Payments. Any payments made to an Indemnified Party pursuant to this Article VII shall be treated as an adjustment to the Aggregate Transaction Consideration for Tax purposes.

     7.7 Limitations.

          (a) Anything herein to the contrary notwithstanding, the indemnification rights set forth in this Article VII and Article VIII shall be Parent’s, Merger Sub’s and their respective Affiliates’ sole and exclusive remedy against the Shareholders for any claim, demand, cause of action or Damages arising out of or related to this Agreement or the transactions contemplated hereby; provided that nothing contained in this Agreement shall limit or impair any right that any Party may have to sue and obtain equitable relief, including specific performance and other injunctive relief, for the breach of Sections 5.2, 5.3, 5.4 or 5.5 or any right or remedy that any Party may have on account of fraud.

          (b) Parent, Merger Sub and their respective Affiliates cannot make any claim for indemnity under this Article VII unless the aggregate of all claims for Damages exceeds one

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hundred thousand dollars ($100,000), at which time claims may be made only for the amount of such Damages in excess of $100,000; provided, however, that such limitation shall not apply to the Shareholder Fundamental Representations or the Fundamental Representations.

          (c) Notwithstanding any other provision herein, to the extent that any indemnifiable Damages are satisfied pursuant to Section 1.6, Article VII or Article VIII, the amount of such satisfied Damages shall not be deducted from the EBITDA of the Surviving Corporation for purposes of determining the Earnout Payments.

          (d) In determining the amount of any indemnification obligations under this Article VII, the amount of any obligation for which indemnification may be claimed by any Indemnified Party shall be reduced by any insurance proceeds received by the Indemnified Party (or by any Affiliate of the Indemnified Party) with respect to the matter that is the subject of the indemnified claim. Each Indemnified Party (on behalf of itself and its Affiliates) agrees to make good faith, commercially reasonably efforts to obtain all such insurance proceeds available to it; provided, however, that no claim for indemnification shall be conditioned upon the final resolution of such insurance claim — the proceeds of such claim to be paid back to the Indemnifying Party if collected after the payment by the Indemnifying Party to the Indemnified Party concerning such claim.

          (e) Notwithstanding anything to the contrary contained in this Agreement, no claim for indemnity under this Agreement may be made to the extent such claim relates to amounts that are accrued for as current liabilities on the Final Balance Sheet as determined by the parties pursuant to Section 1.6.

          (f) Anything herein to the contrary notwithstanding, (i) the aggregate, maximum liability of the Shareholders for all Damages based on this Agreement or the transactions contemplated hereby (excluding those based on the Fundamental Representations, the Shareholder Fundamental Representations or fraud) shall be forty percent (40%) of the Aggregate Transaction Consideration received by the Shareholders and (ii) the aggregate, maximum liability of any one Shareholder for all Damages based on this Agreement or the transactions contemplated hereby (excluding fraud) shall be limited to the actual Aggregate Transaction Consideration received by such Shareholder.

          (g) Anything herein to the contrary notwithstanding, Parent, Merger Sub and their respective Affiliates shall not be entitled to recover any funds or property from any Shareholder in respect of the Shareholders’ obligations under this Article VII or Article VIII, unless and until all of the Escrowed Shares have been forfeited to Parent pursuant to the terms of the Escrow Agreement.

     7.8 Right of Setoff. Upon notice to Shareholder Representative specifying in reasonable detail the basis therefor, if all of the Escrowed Shares have been disbursed to Parent pursuant to the terms of the Escrow Agreement, Parent may set off any amount to which it determines in good faith it is entitled under this Article VII or Article VIII against any amounts owed to the Shareholders pursuant to this Agreement (including the Earnout Payments, if and when due). The exercise of such right of setoff by Parent in good faith, whether or not ultimately determined to be justified, will not constitute a breach of this Agreement. Neither the exercise of

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nor the failure to exercise such right of setoff will constitute an election of remedies or limit Parent in any manner in the enforcement of any other remedies that may be available to it.

ARTICLE VIII
TAX MATTERS

     8.1 Tax Indemnification. Shareholders, jointly and severally, shall indemnify and hold harmless Parent, Merger Sub and the Company, and any successors thereto or Affiliates thereof in respect of and against Damages resulting from, relating to, or constituting (x) a breach of any representation contained in Section 2.9, (y) the failure to perform any covenant or agreement set forth in this Article VIII, and (z) without duplication, the following Taxes (except to the extent they are accrued for on the Final Balance Sheet):

          (a) Any Taxes for any Taxable period ending on or before the Closing Date due and payable by the Company;

          (b) Any Taxes for any Taxable period ending on or before the Closing Date for which the Company has any liability as a transferee or successor, or pursuant to any contractual obligation or otherwise; and

          (c) Any transfer, sales, use, stamp, conveyance, value added, recording, registration, documentary, filing and other non-income Taxes and administrative fees (including, without limitation, notary fees) arising in connection with the consummation of the series of transactions contemplated by this Agreement whether levied on Parent, Merger Sub, the Company or any of the Shareholders.

     8.2 Preparation and Filing of Tax Returns; Payment of Taxes.

          (a) Parent shall prepare and timely file or shall cause to be prepared and timely filed all Tax Returns for the Company that are required to be filed (taking into account extensions) after the Closing Date; provided, that Parent shall provide any such Tax Return that applies to a Taxable period that began prior to the Closing Date to the Shareholder Representative for his review and comment prior to filing. Parent shall make or cause to be made all payments required with respect to any such Tax Returns.

          (b) Any Tax Return to be prepared and filed for Taxable periods beginning before the Closing Date shall be prepared on a basis consistent with the last previous similar Tax Return to the extent permitted under applicable law.

          (c) The Shareholders shall be entitled to any Tax refund not reflected on the Final Balance Sheet that is attributable to any Taxable period ending on or prior to the Closing Date.

     8.3 Audits, Assessments, Etc. Whenever any taxing authority sends a notice of an audit, initiates an examination of the Company, or otherwise asserts a claim, makes an assessment, or disputes the amount of Taxes for which the Shareholders are or may be liable under this Agreement, Parent shall promptly inform the Shareholder Representative. The failure of Parent to notify the Shareholder Representative promptly shall not relieve the Shareholders of

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any obligations under this Agreement except to the extent such failure materially prejudices the Shareholders. Parent shall have the exclusive right to control any resulting proceedings. The Shareholder Representative shall have the right to participate at the Shareholders’ expense, in such proceeding, or portion thereof, only to the extent such proceeding, or portion thereof, or determination, or portion thereof, affects the amount of Taxes for which the Shareholders are liable under this Agreement, and Parent may settle any such proceeding or determination, or portion thereof, to the extent such proceeding or determination affects the amount of Taxes for which the Shareholders are liable under this Agreement only with the prior written consent of the Shareholder Representative, which consent shall not be unreasonably withheld.

     8.4 Termination of Tax Sharing Agreements. All Tax sharing, Tax indemnity or Tax distribution agreements or similar arrangements with respect to or involving the Company shall be terminated prior to the Closing Date and, after the Closing Date, Parent, the Surviving Corporation their Affiliates shall not be bound thereby or have any liability thereunder for amounts due in respect of periods ending on or before the Closing Date.

     8.5 Indemnification Claims.

          (a) Scope of Article VIII. Any claim by any Party relating to a breach by another Party of its obligations under this Article VIII shall be pursued in accordance with the procedures for indemnification claims set forth in this Article VIII, and shall not otherwise be subject to the terms and conditions set forth in Article VII. To the extent there is any inconsistency between the terms of Article VII and this Article VIII with respect to the allocation of responsibility between the Company, the Shareholders and Parent for Taxes relating to the business of the Company, the provisions of this Article VIII shall govern.

          (b) Claim Procedure. For purposes of clarification, (i) claims for a breach of an obligation under this Article VIII may be made by a Party at any time prior to the thirtieth (30^th) day after the expiration of the statute of limitations applicable to the Tax matter to which the claim relates, (ii) in order to seek indemnification under this Article VIII, Parent shall deliver a Claim Notice to the Shareholder Representative and the Escrow Agent in the form prescribed by the Escrow Agreement, (iii) upon delivery of any Claim Notice hereunder, the applicable representation or warranty shall survive until, but only to the extent of, and for purposes of the resolution of, the specific matter covered by such notice, and (iv) within twenty (20) days after delivery of a Claim Notice, the Shareholder Representative shall deliver to Parent a Response in which the Shareholder Representative shall: (1) agree that Parent is entitled to receive all of the Claimed Amount (in which case the Shareholder Representative and Parent shall deliver to the Escrow Agent, within three days following the delivery of the Response, a written notice executed by the Shareholder Representative and Parent instructing the Escrow Agent to release to Parent for cancellation a number of Escrowed Shares equal in value to the Claimed Amount (valuing the Escrowed Shares for such purpose in the manner set forth in the Escrow Agreement) or, if less, the number of Escrowed Shares remaining in the Escrow Fund; (2) agree that Parent is entitled to receive the Agreed Amount (in which case the Shareholder Representative and Parent shall deliver to the Escrow Agent, within three (3) days following the delivery of the Response, a written notice executed by the Shareholder Representative and Parent instructing the Escrow Agent to release to Parent for cancellation a number of Escrowed Shares equal in value to the Agreed Amount (valuing the Escrowed Shares for such purpose in the manner set forth in the

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Escrow Agreement) or, if less, the number of Escrowed Shares remaining in the Escrow Fund; or (3) dispute that Parent is entitled to receive any of the Claimed Amount.

     8.6 Dispute Resolution. During the thirty (30) day period following the delivery of a Response that reflects a Dispute, Parent and the Shareholder Representative shall attempt in good faith to resolve the Dispute. If, at the end of the thirty (30) day period, Parent and the Shareholder Representative have not resolved such Dispute, Parent and the Shareholder Representative shall refer the Dispute for determination to the Accountants who shall act as experts, not as arbitrators, and the parties will be reasonably available and work diligently to facilitate the Accountants to render a determination within a twenty (20) day period immediately following the referral to them. A determination by the Accountants with respect to any item of Dispute submitted to them will be binding on Parent and the Shareholders. The fees and expenses of the Accountants shall be borne equally by the Shareholders on the one hand and Parent on the other hand.

     8.7 Limitations. The Shareholders shall have no right of contribution against the Company with respect to any breach by the Company of any of its representations, warranties, covenants or agreements. Any payments made to Parent pursuant to this Article VIII shall be treated as an adjustment to the Aggregate Transaction Consideration for Tax purposes.

ARTICLE IX
DEFINITIONS

     For purposes of this Agreement, each of the following terms shall have the meaning set forth below.

     “Accountants” shall have the meaning set forth in Section 1.6(c)(iii) of this Agreement.

     “Accounting Policies” shall mean the cost accounting policies set forth in Exhibit D attached hereto.

     “Accounts Receivable” shall mean each and all accounts receivable of the Company reflected on the Most Recent Balance Sheet (other than those paid since such date).

     “Affiliate” shall mean any affiliate, as defined in Rule 12b-2 under the Exchange Act.

     “Aggregate Transaction Consideration” shall mean the sum of (a) the Closing Amount, (b) if the Closing Amount Adjustment is payable to the Shareholders in accordance with Section 1.6, plus such amount, or, if the Closing Amount Adjustment is payable to Parent in accordance with Section 1.6, minus such amount, plus (c) the Earnout Payments, if any.

     “Agreed Amount” shall mean part, but not all, of the Claimed Amount.

     “Agreement” shall have the meaning set forth in the first paragraph of this Agreement.

     “ARRA” shall mean the American Recovery and Reinvestment Act of 2009, as it may be amended from time to time, and any rules or regulations promulgated pursuant thereto.

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     “Business” shall mean the provision of web-based applications to hospital systems, physician group practices and reference laboratories, consisting of clinical documentation, order management, clinical data repository, physician web access, and laboratory data management.

     “Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in the City of Austin, Texas are required or authorized by law to be closed.

     “Cash Advance” shall mean the $498,566.96 payment made by the Company to the Option Holders in connection with the termination of their Options (not taking into account any required withholding).

     “CCHIT” means the Certification Commission for Health Information Technology.

     “Certificate of Merger” shall mean the certificate of merger or other appropriate documents prepared and executed in accordance with Section 10.151 of the TBOC in form and substance reasonably satisfactory to the Parties.

     ***

     “CERCLA” shall mean the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.

     “Change of Control” shall have the meaning set forth in Section 1.8(h).

     “Claim Notice” shall mean written notification which contains (i) a description of the Damages incurred or reasonably expected to be incurred by the Indemnified Party and the Claimed Amount of such Damages, to the extent then known, (ii) a statement that the Indemnified Party is entitled to indemnification under Article VII or Article VIII for such Damages and a reasonable explanation of the basis therefor, and (iii) a demand for payment in the amount of such Damages.

     “Claimed Amount” shall mean the amount of any Damages incurred or reasonably expected to be incurred by the Indemnified Party.

     “Closing” shall mean the closing of the series of transactions contemplated by this Agreement.

     “Closing Amount” shall mean Twelve Million Dollars ($12,000,000), as adjusted pursuant to Section 1.6.

     “Closing Amount Adjustment” shall have the meaning set forth in Section 1.6(b).

     “Closing Consideration Per Share” shall be equal to the Net Closing Amount divided by the total number of Company Shares issued and outstanding immediately prior to the Effective Time.

^*** Portions of this page have been omitted pursuant to a request for confidential treament and filed separately with the Securities and Exchange Commission

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     “Closing Date” shall mean the date on which the Closing occurs.

     “Closing Date Working Capital” shall mean, as of the Closing Date and giving effect to consummation of the Merger, the sum of the Company’s total current assets minus total current liabilities (other than deferred revenue and vacation time accruals), determined in accordance with GAAP consistently applied. For the avoidance of doubt, unbilled accounts receivable, deferred revenue, vacation time accruals, deferred taxes and similar non-cash balance sheet items will not be included in determining Closing Date Working Capital. By way of example only, attached as Exhibit E is a sample calculation of Closing Date Working Capital as if the Closing had occurred on January 31, 2010.

     “COBRA” shall have the meaning set forth in Section 2.21(f).

     “Code” shall mean the Internal Revenue Code of 1986, as amended.

     “Company” shall have the meaning set forth in the first paragraph of this Agreement.

     “Company Certificate” shall mean a certificate to the effect that each of the conditions specified in subsections (a), (b), (c) and (d) of Section 6.1 of this Agreement is satisfied in all respects.

     “Company Intellectual Property” shall mean the Intellectual Property owned by the Company and used in connection with the Business.

     “Company Material Adverse Effect” shall mean any material adverse change, event, circumstance or development with respect to, or material adverse effect on, (i) the business, assets, liabilities, capitalization, prospects, condition (financial or other), or results of operations of the Company, or (ii) the ability of Parent to operate the business of the Company in the manner in which it is conducted at the time of the Closing. For the avoidance of doubt, the parties agree that the terms “material,” “materially” or “materiality” as used in this Agreement with an initial lower case “m” shall have their respective customary and ordinary meanings, without regard to the meaning ascribed to Company Material Adverse Effect.

     “Company Plan” shall mean any Employee Benefit Plan maintained, or contributed to, by the Company or any ERISA Affiliate.

     “Company Shares” shall mean the shares of common stock, $0.01 par value per share, of the Company.

     “Company Transaction Expenses” shall mean all costs and expenses (including legal, investment banking and accounting fees and expenses) incurred by the Company or the Shareholders in connection with the preparation and negotiation of this Agreement and the transactions contemplated hereby.

     “Customer Deliverables” shall mean the services that the Company (i) currently provides, or (ii) has provided within the previous five years.

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     “Damages” shall mean any and all debts, obligations and other liabilities (whether absolute, accrued, contingent, fixed or otherwise, or whether known or unknown, or due or to become due or otherwise), diminution in value, monetary damages, fines, fees, penalties, interest obligations, deficiencies, losses and expenses (including amounts paid in settlement, interest, court costs, costs of investigators, fees and expenses of attorneys, accountants, financial advisors and other experts, and other expenses of litigation).

     “Data” shall have the meaning set forth in Section 2.13(k).

     “Data Rights” means all data, compilations of data and databases (in all forms and in all media), and all database rights therein.

     “Debt” shall mean the sum of (a) all obligations of the Company for borrowed money, or with respect to deposits or advances of any kind to the Company, (b) all obligations of the Company evidenced by bonds, debentures, notes, or similar instruments, (c) all obligations of the Company upon which interest charges are customarily paid, other than credit card obligations reflected in accounts payable, (d) all obligations of the Company under conditional sale or other title retention agreements relating to property purchased by the Company, (e) all obligations of the Company issued or assumed as the deferred purchase price of property or services (excluding obligations of the Company or creditors for raw materials, inventory, services and supplies incurred in the Ordinary Course of Business), (f) all obligations of others secured by any lien on property or assets owned or acquired by the Company other than true leases or capitalized leases, whether or not the obligations secured thereby have been assumed, (g) all obligations of the Company under interest rate or currency hedging transactions (valued at the termination value thereof), and (h) all letters of credit issued for the account of the Company. For the purposes of clarification, Debt does not include accounts payable or other liabilities to the extent taken into account in calculating Closing Date Working Capital as contemplated under Section 1.6 of this Agreement.

     “Disclosure Schedule” shall mean the disclosure schedule provided by the Company to Parent on the date hereof.

     “Dispute” shall mean the dispute resulting if the Indemnifying Party in a Response disputes its liability for all or part of the Claimed Amount.

     “Dissenting Shares” shall mean Company Shares held as of the Effective Time by a Shareholder who has not voted such Company Shares in favor of the adoption of this Agreement and with respect to which such Shareholder shall be entitled to dissent and appraisal in accordance with Section 10.356 of the TBOC following the Effective Time.

     “Earnout Certificate” shall have the meaning set forth in Section 1.8(g).

     “Earnout Payment” shall have the meaning set forth in Section 1.8(e).

     “Earnout Period” shall have the meaning set forth in Section 1.8(b).

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     “EBITDA” means earnings of the Surviving Corporation from operations before interest, taxes, depreciation and amortization, determined in accordance with the Accounting Policies and, to the extent not inconsistent therewith, GAAP.

     “EBITDA Payments” shall have the meaning set forth in Section 1.8(b)(ii).

     “Effective Time” shall mean the time at which the Surviving Corporation files the Certificate of Merger with the Texas Secretary of State.

     “Employee Benefit Plan” shall mean any “employee pension benefit plan” (as defined in Section 3(3) of ERISA), any “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), and any other written or oral plan, agreement or arrangement involving direct or indirect compensation, including insurance coverage, severance benefits, disability benefits, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation.

     “Environmental Claim” means a claim or demand by, or notice from, a third party, including any Governmental Entity, seeking a remedy or alleging liability or responsibility for or with respect to any Materials of Environmental Concern or violation of or liability under Environmental Law or Environmental Permits, whether due to negligence, strict liability or otherwise. The term includes administrative investigations, hearings and proceedings, court actions, orders, notices of violation, notice of potential responsibility, claims, actions, demands and notices by third parties for or with respect to bodily injury, environmental property damage, cleanup, cleanup costs and violations of Environmental Laws.

     “Environmental Law” shall mean any federal, state or local law, statute, rule, order, directive, judgment, Permit or regulation or the common law relating to the environment, occupational health and safety, or exposure of persons or property to Materials of Environmental Concern, including any statute, regulation, administrative decision or order pertaining to: (i) the presence of or the treatment, storage, disposal, generation, transportation, handling, distribution, manufacture, processing, use, import, export, labeling, recycling, registration, investigation or remediation of Materials of Environmental Concern or documentation related to the foregoing; (ii) air, water and noise pollution; (iii) groundwater and soil contamination; (iv) the release, threatened release, or accidental release into the environment, the workplace or other areas of Materials of Environmental Concern, including emissions, discharges, injections, spills, escapes or dumping of Materials of Environmental Concern; (v) transfer of interests in or control of real property which may be contaminated; (vi) community or worker right-to-know disclosures with respect to Materials of Environmental Concern; (vii) the protection of wild life, marine life and wetlands, and endangered and threatened species; (viii) storage tanks, vessels, containers, abandoned or discarded barrels and other closed receptacles; and (ix) health and safety of employees and other persons. As used above, the term “release” shall have the meaning set forth in CERCLA.

     “Environmental Permits” shall mean all permits, approvals, identification numbers, licenses and other authorizations required under or issued pursuant to any applicable Environmental Law.

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     “Equity Interest” means (i) with respect to a corporation, any and all shares of capital stock and any option, warrant, convertible security, subscription right, conversion right, exchange right or other agreement that could require a Person to issue any of its capital stock or sell any capital stock (“Commitments”) with respect thereto, (ii) with respect to a partnership, limited liability company, trust or similar Person, any and all units, interests or other partnership/limited liability company interests, and any Commitments with respect thereto, and (iii) any other equity ownership, participation or security in a Person.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

     “ERISA Affiliate” shall mean any entity which is, or at any applicable time was, a member of (1) a controlled group of corporations (as defined in Section 414(b) of the Code), (2) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (3) an affiliated service group (as defined under Section 414(m) of the Code or the regulations under Section 414(o) of the Code), any of which includes or included the Company.

     “Escrow Agreement” shall mean an escrow agreement a form mutually acceptable to Parent and the Company.

     “Escrow Agent” shall mean the escrow agent under the Escrow Agreement, which shall initially be US Bank, Los Angeles, California.

     “Escrow Fund” shall mean the fund of Escrowed Shares established pursuant to the Escrow Agreement.

     “Escrow Termination Date” shall have the meaning set forth in Section 1.9(b).

     “Escrowed Shares” shall have the meaning set forth in Section 1.9(a).

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

     “Expected Claim Notice” shall mean a notice that, as a result of a Legal Proceeding instituted by or written claim made by a third party, an Indemnified Party reasonably expects to incur Damages for which it is entitled to indemnification under Article VII.

     “Final Balance Sheet” shall have the meaning set forth in Section 1.6(c)(i).

     “Financial Statements” shall mean:

          (a) the balance sheet and statement of income, change in shareholders’ equity and cash flows of the Company as of December 31, 2008, and for the fiscal year then ended, which shall be audited by Lockart, Atchley & Associates, L.L.C., as the Company’s independent auditing firm; and

          (b) the unaudited balance sheets and unaudited statements of income, changes in shareholders’ equity and cash flows of the Company for the twelve (12) months ended as of December 31, 2009; and

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          (c) the unaudited balance sheet of the Company as of the Most Recent Balance Sheet Date.

     “Final Closing Consideration” shall mean (a) the Net Closing Amount plus (b) the $2,500,000 of Initial Escrowed Shares (c)(1) plus the Closing Amount Adjustment (if the Closing Amount Adjustment increases the Closing Amount) or (2) minus the Closing Amount Adjustment (if the Closing Amount Adjustment decreases the Closing Amount).

     “First Earnout Period” shall have the meaning set forth in Section 1.8(a).

     “First EBITDA Payment” shall have the meaning set forth in Section 1.8(a)(ii).

     “Fundamental Representations” shall mean Capitalization (Section 2.2), Authorization (Section 2.3), Taxes (Section 2.9), Intellectual Property (Section 2.13), Litigation (Section 2.18), Employee Benefits (Section 2.21), and Environmental (Section 2.22).

     “GAAP” shall mean generally accepted accounting principles in the United States of America applied on a consistent basis.

     “Governmental Entity” shall mean any government or any agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign.

     “Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Entity.

     “Hazardous Materials” shall mean (a) petroleum and petroleum products, radioactive materials, asbestos-containing materials, mold, urea formaldehyde foam insulation, transformers or other equipment that contain polychlorinated biphenyls and radon gas, (b) any other chemicals, materials or substances defined as or included in the definition of “hazardous substances”, “hazardous wastes”, “hazardous materials”, “extremely hazardous wastes”, “restricted hazardous wastes”, “toxic substances”, “toxic pollutants”, “contaminants” or “pollutants”, or words of similar import, under any applicable Environmental Law, and (c) any other chemical, material or substance which is regulated by any Environmental Law.

     “Healthcare Laws” shall have the meaning set forth in Section 2.29(a).

     “HIPAA” shall mean the Health Insurance Portability and Accountability Act of 1996, as it may be amended from time to time, and any rules or regulations promulgated pursuant thereto.

     “HIPAA Commitments” shall have the meaning set forth in Section 2.23(b).

     ***

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     “Incremental Transaction Expenses” shall mean all amounts already paid or due to paid to Healthcare Growth Partners, LLC pursuant to Section 1.8(f)(iv).

     “Indemnification Payment” shall mean amounts paid by the Shareholders to Parent, Merger Sub or any of their Affiliates pursuant to Section 7.1 or Article VIII (including any Escrowed Shares surrendered by the Shareholders, valuing such Escrowed Shares for this purpose in the manner set forth in the Escrow Agreement).

     “Indemnified Party” shall mean a party entitled, or seeking to assert rights, to indemnification under Article VII or Article VIII.

     “Indemnifying Party” shall mean the party from whom indemnification is sought by the Indemnified Party.

     “Indemnifying Shareholders” shall mean Fred E. Beck and Tim Rhoads.

     “Initial Escrowed Shares” shall have the meaning set forth in Section 1.9(a).

     ***

     “Intellectual Property” shall mean all:

          (a) patents, patent applications, patent disclosures and all related continuation, continuation-in-part, divisional, reissue, reexamination, utility model, certificate of invention and design patents, patent applications, registrations and applications for registrations;

          (b) trademarks, service marks, trade dress, Internet domain names, logos, trade names and corporate names and registrations and applications for registration thereof;

          (c) copyrightable works, copyrights and registrations and applications for registration thereof;

          (d) copyright, confidential information and trade secrets embodied in computer software and documentation;

          (e) inventions, trade secrets and confidential business information, whether patentable or nonpatentable and whether or not reduced to practice, know-how, manufacturing and product processes and techniques, research and development information, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information;

          (f) all data, compilations of data and databases (in all forms and in all media), and all database rights therein; and

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          (g) other proprietary rights relating to any of the foregoing (including remedies against infringements thereof and rights of protection of interest therein under the laws of all jurisdictions).

     “Internal Systems” shall mean the internal computer systems of the Company that are used in its and in connection with business or operations, including computer hardware systems, software applications and embedded systems.

     “Key Employees” shall mean Fred E. Beck, Nathan Read, Tim Rhoads, Adrienne Beveridge, Tanya Thompson, Brian Carlson and Tony Forma.

     “Knowledge” of the Company shall mean the knowledge of Fred Beck, Tim Rhoads and/or Nathan Read. “Knowledge” of Parent shall mean the knowledge of the officers of Parent. An individual will be deemed to have “knowledge” of a particular fact or other matter if (a) such individual is actually aware of such fact or other matter; or (b) such individual reasonably would be expected to discover or otherwise become aware of such fact or other matter if such individual had undertaken a reasonable review of the Company’s or Parent’s (as applicable) books and records or made inquiry of the Company’s or Parent’s (as applicable) employees or agents that would reasonably be expected to have knowledge of such matter.

     “Law” means any federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).

     “Lease” shall mean any lease or sublease pursuant to which the Company leases or subleases from another party any real property.

     “Leased Real Property” means the real property leased by the Company as tenant, together with, to the extent leased by the Company, all buildings and other structures, facilities or improvements currently located thereon, all fixtures, systems, equipment and items of personal property of the Company attached or appurtenant thereto and all easements, licenses, rights and appurtenances relating to the foregoing.

     “Legal Proceeding” shall mean any action, suit, proceeding, claim, arbitration or investigation before any Governmental Entity or before any arbitrator or mediator.

     “Material Contract” shall have the meaning set forth in Section 2.14(a).

     “Materials of Environmental Concern” shall mean any: pollutants, contaminants or hazardous substances (as such terms are defined under CERCLA), pesticides (as such term is defined under the Federal Insecticide, Fungicide and Rodenticide Act), solid wastes and hazardous wastes (as such terms are defined under the Resource Conservation and Recovery Act), chemicals, other hazardous, radioactive or toxic materials, oil, petroleum and petroleum products (and fractions thereof), or any other material (or article containing such material) listed or subject to regulation under any law, statute, rule, regulation, order, Permit, or directive due to its potential, directly or indirectly, to harm the environment or the health of humans or other living beings.

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     “Merger” shall mean the merger of Merger Sub with and into the Company in accordance with the terms of this Agreement.

     “Merger Sub” shall have the meaning set forth in the first paragraph of this Agreement.

     “Most Recent Balance Sheet” shall mean the unaudited balance sheet of the Company as of the Most Recent Balance Sheet Date.

     “Most Recent Balance Sheet Date” shall mean December 31, 2009.

     “NASDAQ” shall mean the National Association of Securities and Dealers Automated Quotation Stock Market.

     “Net Closing Amount” shall mean the Closing Amount, less the $2,500,000 of Initial Escrowed Shares, and less the amount of Company Transaction Expenses paid by Parent on behalf of the Company and the Shareholders at Closing.

     “NextGen” shall have the meaning set forth in Section 5.3.

     “Non-Solicitation Area” shall have the meaning set forth in Section 5.5.

     “Option” shall mean each option to purchase or acquire Company Shares under the Option Plan.

     “Option Holder” shall have the meaning set forth in Section 1.8(f).

     “Option Holder Threshold” shall mean $17,458,234.65.

     “Option Plan” shall mean the Opus Healthcare Solutions, Inc. 2009 Stock Incentive Plan.

     “Opus Business” shall mean the Business, as it is conducted by the Surviving Corporation or any successor thereto after Closing.

     “Opus Products” means the products and services for which the Business receives full revenue credit under this Agreement, including all products and services offered or under development by the Company immediately prior to Closing, all successors to such products, and all clinical products and services developed by the Surviving Corporation, Parent, NextGen or any their Affiliates after Closing for inpatient hospitals and reference laboratories; provided, however, that “Opus Products” shall not include NextGen’s HIE product (NextGen CHS), existing NextGen interfaces to hospital systems and reference laboratories, or services performed by NextGen related to these existing products.

     “Ordinary Course of Business” shall mean the ordinary course of business consistent with recent past custom and practice (within the past 24 months) (including with respect to frequency and amount).

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     “Ownership Percentage” shall mean for each Shareholder: the number of Company Shares owned by such Shareholder divided by the total number of issued and outstanding Company Shares immediately prior to the Effective Time.

     “Parent” shall have the meaning set forth in the first paragraph of this Agreement.

     “Parent SEC Filings” shall have the meaning set forth in Section 4.10(a).

     “Parent Certificate” shall mean a certificate to the effect that each of the conditions specified in subsections (a), (b) and (c) of Section 6.2 is satisfied in all respects.

     “Parent Material Adverse Effect” shall mean any material adverse change, event, circumstance or development with respect to, or material adverse effect on, the business, assets, liabilities, capitalization, condition (financial or other), or results of operations of Parent. For the avoidance of doubt, the Parties agree that the terms “material,” “materially” or “materiality” as used in this Agreement with an initial lower case “m” shall have their respective customary and ordinary meanings, without regard to the meaning ascribed to Parent Material Adverse Effect.

     “Parent Shares” shall mean shares of common stock, par value $0.01 per share, of Parent that are restricted within the meaning of the Securities Act. The Parent Shares issued at Closing and the Parent Shares issued as Earnout Payments for the First Earnout Period shall also include a restriction providing that such shares cannot be sold prior to December 15, 2010 (in the case of the Parent Shares issued at Closing) or prior to December 15, 2011 (in the case of the Parent Shares issued as Earnout Payments for the First Earnout Period). All of such Parent Shares shall contain a legend reflecting such restriction on sale. Any Parent Shares issued as Earnout Payments for the second Earnout Period shall not be subject to any restriction on sale (other than those imposed by securities or other Laws, including but not limited to Rule 144).

     “Parties” or “Party” shall mean individually and collectively (as the case may be) Parent, Merger Sub, the Company, and the Shareholders.

     “Payment Information” shall have the meaning set forth in Section 1.9(d).

     “Payment Information Certificate” shall have the meaning set forth in Section 1.9(d).

     “Per Hour Rate” shall mean a director’s or employee’s (as applicable) annual total compensation (including salary and bonus) divided by 2,000 hours.

     “Permits” shall mean all permits, licenses, registrations, certificates, orders, approvals, franchises, variances and similar rights issued by or obtained from any Governmental Entity (including those issued or required under Environmental Laws and those relating to the occupancy or use of owned or leased real property).

     “Person” shall mean any natural person, corporation, limited liability company, general or limited partnership, proprietorship, other business, non-profit or charitable organization, trust, union, association (whether or not incorporated in any jurisdiction), or any court, arbitration tribunal, administrative agency or commission or other governmental or regulatory authority or agency.

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     ***

     “Public Software” means any software that contains, or is derived in any manner (in whole or in part) from, any software that is distributed as open source software or similar licensing or distribution models, including without limitation software licensed or distributed under any of the following licenses or distribution models, or licenses or distribution models similar to any of the following: (i) GNU’s General Public License (GPL) or Lesser/Library GPL (LGPL), (ii) the Artistic License (e.g., PERL), (iii) the Mozilla Public License, (iv) the Netscape Public License, (v) the Sun Community Source License (SCSL), (vi) the Sun Industry Standards License (SISL), (vii) the BSD License, and (viii) the Apache License.

     “Quarterly Customer Survey Results” shall mean the results of customer satisfaction surveys conducted by the Opus Business of all customers other than Universal Health Systems, Inc. each calendar quarter. The survey questions will solicit numerical responses based on a five-point scale (5=Very Satisfied, 4=Satisfied, 3=Neutral, 2=Dissatisfied, 1=Very Dissatisfied). The responses to each question in a particular customer survey will be averaged to arrive at an overall score for that customer, and the overall scores for all customers will be averaged to arrive at the results for the calendar quarter. An example of the survey is set forth in Exhibit F. It is expected that qualitative improvements may be made to this survey to improve customer feedback on products and services.

     “Reasonable Best Efforts” shall mean best efforts, to the extent commercially reasonable.

     “Release” means disposing, discharging, injecting, spilling, leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing, appearing and the like into or upon any land, building, surface, subsurface or water or air or otherwise entering into the environment.

     “Releasees” shall have the meaning set forth in Section 1.12(a) of this Agreement.

     “Requisite Shareholder Approval” shall mean the adoption of this Agreement and the approval of the Merger by a two-thirds vote of all the holders of Company Shares entitled to vote on this Agreement and the Merger as set forth in Section 21.452 of the TBOC.

     “Response” shall mean a written response containing the information provided for in Section 7.4(e).

     “Revenues” means gross revenues of the Opus Business, determined in accordance with the Accounting Policies and, to the extent not inconsistent therewith, GAAP.

     “Revenues Payment” shall have the meaning set forth in Section 1.8(e).

     “Rule 144” shall have the meaning set forth in Section 5.7.

     “Second Earnout Period” shall have the meaning set forth in Section 1.8(b).

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     “Second EBITDA Payment” shall have the meaning set forth in Section 1.8(b)(ii).

     “SEC” shall mean the Securities and Exchange Commission.

     “Securities Act” shall mean the Securities Act of 1933, as amended.

     “Security Interest” shall mean any mortgage, pledge, security interest, encumbrance, charge or other lien (whether arising by contract or by operation of law), other than (i) mechanic’s, materialmen’s, and similar liens, (ii) liens arising under worker’s compensation, unemployment insurance, social security, retirement, and similar legislation, (iii) liens for taxes not yet due and payable, and (iv) liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the Ordinary Course of Business of the Company and not material to the Company.

     “Share Valuation Method” shall mean the valuation of the Parent Shares based upon the average closing price of Parent’s common stock as reported by the NASDAQ Global Select Market (or, if no longer traded on such market, such other market or exchange as Parent’s common stock may then be traded) over the forty-five (45) trading days ending on the close of the trading day immediately prior to the date upon which the Share Valuation Method is conducted; provided, however, that for purposes of valuing Parent Shares to be issued to the Shareholders as Earnout Payments, the value of each Parent Share shall be limited to a maximum of 115% and a minimum of 85% of the value of the average closing price of Parent’s common stock as reported by the NASDAQ Global Select Market over the forty-five (45) trading days ending on the close of the trading day immediately prior to the Closing Date (adjusted as appropriate to take into account the effect of any stock splits, reverse stock splits, stock dividends or other divisions or combinations of Parent Shares after the Closing Date). By way of example only, Exhibit H sets forth possible applications of the limitations contained in the foregoing proviso.

     “Shareholder Fundamental Representations” shall have the meaning set forth in Article III.

     “Shareholder Representative” shall have the meaning set forth in Section 1.13(a).

     “Shareholder Transmittal Letter” shall have the meaning set forth in Section 1.3(b)(i).

     “Shareholders” shall have the meaning set forth in the first paragraph of this Agreement.

     “Significant Person” shall mean a Person listed in Section 2.24 of the Disclosure Schedule.

     “Software Consultants” shall mean one of the following firms selected by the Shareholders Representative by written notice to Parent not more than thirty (30) days after Closing: JHD Group, Hayes Management Consulting, Inc., Deloitte, ECG Management Consultants, Inc., Gartner, Inc. or Coker Group.

     “Strategic Objectives Payments” shall have the meaning set forth in Section 1.8(e).

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     “Successor Entity” shall have the meaning set forth in Section 1.8(h).

     “Surviving Corporation” shall mean the Company following the Closing, as the surviving corporation in the Merger.

     “Target Working Capital” shall have the meaning set forth in Section 1.6(a).

     “Taxes” (including with correlative meaning “Tax” and “Taxable”) shall mean (a) any and all taxes, and any and all other charges, fees, levies, duties, deficiencies, customs or other similar assessments or liabilities in the nature of a tax, including without limitation any income, gross receipts, ad valorem, net worth, premium, value-added, alternative or add-on minimum, excise, severance, stamp, occupation, windfall profits, real property, personal property, assets, sales, use, capital stock, capital gains, documentary, recapture, transfer, transfer gains, estimated, withholding, employment, unemployment insurance, unemployment compensation, social security, business license, business organization, environmental, workers compensation, payroll, profits, license, lease, service, service use, gains, franchise and other taxes imposed by any federal, state, local, or foreign Governmental Entity, (b) any interest, fines, penalties, assessments, or additions resulting from, attributable to, or incurred in connection with any items described in this paragraph or any contest or dispute thereof, and (c) any items described in this paragraph that are attributable to another person but that the Company is liable to pay by law, by contract, or otherwise.

     “Tax Returns” shall mean any and all reports, returns, declarations, statements, forms, or other information required to be supplied to a Governmental Entity or to any individual or entity in connection with Taxes and any associated schedules, attachments, work papers or other information provided in connection with such items, including any amendments, thereof.

     “TBOC” shall have the meaning set forth in Section 1.1.

     “Third Party Action” shall mean any Legal Proceeding or contractual indemnification claim by a person or entity other than a Party (or an Affiliate of a Party) for which indemnification may be sought by a Party under Article VII.

     “Total Consideration” shall mean the sum of (i) the Earnout Payment(s) due to be paid under Section 1.8, (ii) if one or more Earnout Payments has already been made, the amount of such Earnout Payment(s) already paid, and (iii) the Final Closing Consideration received by the Shareholders, minus all Incremental Transaction Expenses paid or to be paid pursuant to Section 1.8(f)(iv), minus all Indemnification Payments made by the Shareholders.

     “Trading Partners” shall have the meaning set forth in Section 2.29(c).

     “Warrant” shall mean each warrant or other contractual right to purchase or acquire Company Shares, provided that Options shall not be considered Warrants.

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ARTICLE X
MISCELLANEOUS

     10.1 Press Releases and Announcements. Parent and the Shareholders have agreed upon the form of press release to be issued promptly after the execution hereof. Neither Party shall issue any other press release or make any other public announcement or other disclosure relating to the existence or subject matter of this Agreement without the prior written consent of the other Party; provided, however, that Parent may make any disclosure or filing required (in the opinion of its counsel) by applicable Law, any listing or trading agreement, or the rules and regulations of NASDAQ, including but not limited to the filing of a Current Report on Form 8-K to report execution of this Agreement; provided, further, that if Parent determines with the advice of counsel that it is required to make this Agreement and the terms of the transaction public or otherwise make any disclosure or filing with respect thereto other than the agreed upon press release, it shall, at a reasonable time before making any public disclosure or filing, consult with the Shareholder Representative regarding such disclosure, seek confidential treatment for such terms or portions of this Agreement or the transaction as may be reasonably requested by the Shareholder Representative and disclose only such information as is legally compelled to be disclosed. This provision will not apply to communications by any party to its counsel, accountants and other professional advisors.

     10.2 No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns.

     10.3 Entire Agreement. This Agreement (including the Disclosure Schedule, the Exhibits and the other documents referred to herein), constitutes the entire agreement among the Parties with respect to the subject matter hereof, and supersedes any prior or contemporaneous understandings, agreements or representations by or among the Parties, written or oral, express or implied, which may have related to the subject matter hereof in any way. Without limiting the generality of the foregoing, neither Parent nor Merger Sub is entitled to rely on any representation or warranty that is not set forth in this Agreement.

     10.4 Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other Parties. Parent may assign its rights hereunder to any subsidiary of Parent, including, without limitation, NextGen; provided that Parent shall not be relieved of any liability hereunder by any such assignment.

     10.5 Counterparts and Facsimile Signature. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed to be an original copy of this Agreement and all of which together shall be deemed to constitute one and the same agreement. The exchange of copies of this Agreement and of signature pages by facsimile or .PDF transmission shall constitute effective execution and delivery of this Agreement as to the Parties and may be used in lieu of the original Agreement and signature pages thereof for all purposes.

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     10.6 Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

     10.7 Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next business day delivery via a reputable nationwide overnight courier service, in each case to the intended recipient as set forth below:

If to the Shareholders:	Copy to (which shall not constitute notice):
Fred E. Beck	Bradley Arant Boult Cummings LLP
2222 Upper Branch Cove	1819 Fifth Avenue North
Dripping Springs, TX 78620	Birmingham, AL 35203
Fax: (521) 506-2352	Attn: James V. Stewart
Telephone: (521) 894-0175	Fax: (205) 488-6087
	Telephone: (205) 521-8087
If to Parent:	Copy to (which shall not constitute notice):
Quality Systems, Inc.	Rutan & Tucker, LLP
18111 Von Karman Avenue,	611 Anton Boulevard, 14th Floor
Suite 600	Costa Mesa, California 92626
Irvine, California 92612	Attn: Thomas J. Crane
Attn: Chief Operating Officer	Fax: (714) 546-9035
Fax: (949) 255-2610	Telephone: (714) 641-5100
Telephone: (949) 255-2600

     Any Party may give any notice, request, demand, claim or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy or ordinary mail) other than electronic mail, but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.

     10.8 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the State of California.

     10.9 Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the Parties. No waiver of

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any right or remedy hereunder shall be valid unless the same shall be in writing and signed by the Party giving such waiver. No waiver by any Party with respect to any default, misrepresentation or breach of warranty or covenant hereunder shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

     10.10 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified.

     10.11 Construction.

          (a) The language used throughout this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.

          (b) All terms and words used in this Agreement, regardless of whether singular or plural, or the gender in which they are used, shall be deemed to include any other number and any other gender as the context may require.

          (c) Any reference to any federal, state, local or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.

          (d) Any reference herein to “including” shall be interpreted as “including without limitation.”

          (e) Any reference to any Article, Section or paragraph shall be deemed to refer to an Article, Section or paragraph of this Agreement, unless the context clearly indicates otherwise.

     10.12 Attorneys Fees. In the event of any litigation or arbitration proceeding arising out of any disputes under this Agreement, the prevailing party shall be entitled to recover their costs and expenses including, without limitation, reasonable attorneys fees. For the avoidance of doubt, this Section 10.12 shall not apply to disputes pursuant to Sections 1.6(c) and 1.8(g).

[Signature page follows]

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     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.

PARENT:	QUALITY SYSTEMS, INC.
	By:	/s/ PATRICK B. CLINE
		Patrick B. Cline,
		President and Chief Strategy Officer
MERGER SUB:	OHS MERGER SUB, INC.
	By:	/s/ PATRICK B. CLINE
		Patrick B. Cline,
		President
THE COMPANY:	OPUS HEALTHCARE SOLUTIONS, INC.
	By:	/s/ FRED BECK
		Fred Beck,
		President
THE SHAREHOLDERS:	/s/ FRED BECK
	FRED BECK
	/s/ TIM R. RHOADS
	TIM R. RHOADS
	/s/ PETER R. ACKERMANN
	PETER R. ACKERMANN
	/s/ DIETER SCHULTZE-ZEU
	DIETER SCHULTZE-ZEU

SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER

EXHIBIT A

SHAREHOLDER TRANSMITTAL LETTER

Common Stock Transmittal Letter
To Accompany Certificates
Representing Shares of Common Stock

of

OPUS HEALTHCARE SOLUTIONS, INC.

Ladies and Gentlemen:

     This Common Stock Transmittal Letter (the “Transmittal Letter”) is being delivered in connection with the merger (the “Merger”) of Opus Healthcare Solutions, Inc., a Texas corporation (the “Company”), with OHS Merger Sub, Inc., a Texas corporation (“Merger Sub”) and a wholly-owned subsidiary of Quality Systems, Inc., a California corporation (“Parent”), pursuant to the Agreement and Plan of Merger by and among Parent, Merger Sub, the Company, and the shareholders of the Company (the “Shareholders”), dated February 10, 2010 (the “Merger Agreement”).

     Capitalized terms not defined herein shall have the meanings ascribed to them in the Merger Agreement.

By executing and delivering this Transmittal Letter, the undersigned acknowledges and confirms the following:

     1. The undersigned has full authority to surrender without restriction his Company stock certificate(s) (the “Certificate(s)”).

     2. The undersigned has received and carefully reviewed a copy of the Merger Agreement.

     3. The undersigned understands that a portion of the Aggregate Transaction Consideration otherwise payable to the undersigned at the Effective Time will be held back by Parent as the Escrow Shares to provide for indemnification costs, as described in the Merger Agreement, pursuant to the terms and conditions of the Merger Agreement. The undersigned understands that the Escrow Shares and, consequently, the Aggregate Transaction Consideration may be reduced or eliminated for indemnification costs in accordance with the terms of the Merger Agreement. The distribution of the undersigned’s interest in the Escrow Shares, including the interest thereon, is subject to the terms and conditions of the Merger Agreement and the undersigned acknowledges and agrees to be bound by the terms and conditions of such agreement.

     4. The undersigned understands that, pursuant to the Merger Agreement, portions of the Aggregate Transaction Consideration comprising the Earnout Payments that may otherwise become payable to the undersigned may be reduced or eliminated, including by being paid for indemnification costs.

     5. The undersigned, by executing below, hereby agrees that Fred E. Beck shall be the “Shareholder Representative” who shall act as the agent for the undersigned, as described in the Merger Agreement. Without limiting the foregoing:

     (a) Any notice, direction or communication received by Parent from the Shareholder Representative, or delivered to the Shareholder Representative by Parent, shall be binding upon the undersigned;

     (b) The Shareholder Representative is authorized to execute on behalf of the undersigned any and all documents and agreements referred to in the Merger Agreement on behalf of the undersigned upon the Closing and following the Effective Time. Any notice, communication, direction or document referred to in the Merger Agreement which is received by Parent and signed by the Shareholder Representative on behalf of the undersigned shall be deemed signed by the undersigned;

     (c) The Shareholders (including the undersigned) shall pay all costs and expenses incurred by the Shareholder Representative in carrying out the obligations of the Shareholder Representative under the Merger Agreement, and shall defend (at the Shareholder Representative’s option), indemnify and hold the Shareholder Representative harmless from and against any and all claims, liabilities, expenses (including reasonable attorneys’ fees and expenses), costs or losses, of any nature, arising from, in connection with or otherwise related to the Shareholder Representative’s performance of his duties as Shareholder Representative; and

     (d) The undersigned acknowledges and agrees that the Merger Agreement provides that, should the Shareholder Representative resign or be unable to serve, the Shareholders having received a majority of the Aggregate Transaction Consideration shall appoint a single substitute agent to take on the responsibilities of the Shareholder Representative.

[Signature page follows]

     The undersigned hereby represents and warrants that the undersigned has full power and authority to complete and deliver this Transmittal Letter and to deliver for surrender and cancellation the Certificate(s) delivered herewith and that the rights represented by the Certificate(s) are free and clear of all liens, restrictions, charges and encumbrances and are not subject to any adverse claim. The undersigned will, upon request, execute any additional documents necessary or desirable to complete the surrender of the Certificate(s) surrendered herewith. All authority conferred shall survive the death or incapacity of the undersigned, and all obligations of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.

     The registered holder must sign EXACTLY as his name appears on the Certificate(s).

By:

Registered Holder
(please print):

Date: Phone:

Certificate Number(s) Number of Common Shares

Address:

EXHIBIT B

ALLOCATION OF EARNOUT PAYMENTS

Part I: Allocation of Earnout Payments until Total Consideration is equal to the Option Holder Threshold:

Shareholder	Shares		%
Fred E. Beck		333,330		33.3330	%
Tim R. Rhoads		333,330		33.3330	%
Dieter Schultze Zeu		166,670		16.6670	%
Peter R. Ackermann		166,670		16.6670	%
TOTAL		1,000,0000		100.0000	%

Part II: Allocation of Earnout Payments when Total Consideration is greater than the Option Holder Threshold:

Shareholder / Option Holder	Shares		%
Fred E. Beck		333,330		29.1451	%
Tim R. Rhoads		333,330		29.1451	%
Dieter Schultze Zeu		166,670		14.5730	%
Peter R. Ackermann		166,670		14.5730	%
Babyak		280		0.0245	%
Barsun		286		0.0250	%
Bechtold		2,794		0.2443	%
Beveridge		11,501		1.0056	%
Botello		324		0.0283	%
Bowers		2,810		0.2457	%
Carlson		15,122		1.3222	%
Colunga		60		0.0052	%
Connaway		1,145		0.1001	%
Costello		324		0.0283	%
Cuellar		556		0.0486	%
Densmore		213		0.0186	%
Duncan		280		0.0245	%
Earls		108		0.0094	%
Feltner		7,023		0.6141	%
Forma		10,795		0.9439	%
Gonzalez		723		0.0632	%
Gregory		445		0.0389	%
Guthrie		3,000		0.2623	%
Hanson		111		0.0097	%

Shareholder / Option Holder	Shares		%
Henry, Grant		890		0.0778	%
Henry, Michael		110		0.0096	%
Hicks		350		0.0306	%
Hoffman		418		0.0365	%
Kean		216		0.0189	%
Kramer		61		0.0053	%
Labardini		3,340		0.2920	%
Leyendecker		437		0.0382	%
Lindsey		477		0.0417	%
Liu		350		0.0306	%
McKeeman		3,094		0.2705	%
Millard		612		0.0535	%
Moore		61		0.0053	%
Mountzouris		12,798		1.1190	%
Nash		413		0.0361	%
Nordlund		598		0.0523	%
Patel		3,183		0.2783	%
Pavelka		223		0.0195	%
Prather		509		0.0445	%
Rathbun		413		0.0361	%
Read		15,694		1.3722	%
Richardson		91		0.0080	%
Robbins, Teri		717		0.0627	%
Roberts		598		0.0523	%
Sagen		573		0.0501	%
Smith, Brian		143		0.0125	%
Smith, Stephen		413		0.0361	%
Swansiger		1,073		0.0938	%
Thompson		12,251		1.0712	%
Thomson		4,288		0.3749	%
Tomsho		3,535		0.3091	%
Tran		420		0.0367	%
Trimmier		139		0.0122	%
Walter		3,335		0.2916	%
Watters		2,907		0.2542	%
Weiss		390		0.0341	%
Wester		3,434		0.3003	%
Wheeler		431		0.0377	%
Wilson, Ken		172		0.0150	%
Wilson, Les		3,401		0.2974	%
Wise		3,092		0.2704	%
Zepeda		143		0.0125	%
TOTAL		1,143,693		100.0000	%

EXHIBIT C

CONFIDENTIAL INVESTOR QUESTIONNAIRE

Confidential Investor Questionnaire

     The information contained in this Confidential Investor Questionnaire (the “Questionnaire”) is being furnished to representatives of Quality Systems, Inc., a California corporation (the “Company”) to enable it to determine whether the acquisition by the undersigned of certain shares (“Shares”) of the Company in connection with the proposed merger between an affiliate of the Company and Opus Healthcare Solutions, Inc., a Texas corporation (“Opus”), may be made to the undersigned, a shareholder of Opus, pursuant to (i) Regulation D of the Securities Act of 1933, as amended (the “Act”), (ii) any other exemption from the registration provisions of the Act, and (iii) exemptions from applicable registration provisions of state securities laws, since the Shares will not be registered under the Act or such laws. The undersigned understands that the Company will rely upon the information contained herein for purposes of such determination.

     The undersigned represents to the Company that (i) as of the date hereof the information contained herein is complete and accurate and may be relied upon by the Company and its counsel and (ii) the undersigned will notify the Company immediately of any material change in any of such information occurring prior to the acquisition of any Shares by the undersigned.

     The undersigned further represents to the Company that: (a) the undersigned understands that the Shares have not been registered under the Act or applicable state securities laws and are being offered in reliance upon the exemptions from the registration requirements of the Act and such state securities laws; (b) the undersigned is acquiring the Shares for the undersigned’s own account and not for the account of any other person, and such acquisition will not be made with the view to the further resale or distribution thereof; and (c) the undersigned understands that the completion of this Questionnaire does not constitute an offer of any Shares to the undersigned.

     The undersigned understands that if the undersigned is not capable of understanding the financial risks and merits of an investment in the Shares an Investor Representative (as defined in Regulation D, promulgated under the Act) acceptable to the Company shall be appointed.

     All information contained herein is for use by the Company and its counsel and will at all times be kept strictly confidential; however, the undersigned agrees that the Company may present this Questionnaire to such parties as it may be deem appropriate if called upon to establish the availability of the exemptions under the Act and applicable state securities laws.

INSTRUCTIONS FOR COMPLETING QUESTIONNAIRE:

     Completion of this Questionnaire is required before any offer or issuance of Shares may be made to the undersigned.

PLEASE TYPE OR PRINT (EXCEPT FOR SIGNATURE)
DO NOT LEAVE BLANK SPACES — IF A QUESTION IS “NOT APPLICABLE”
OR THE ANSWER IS “NONE,” SO STATE.
(Attach additional pages if necessary)

1.	Name of Investor:
	(a) Individual:

Last Name First Name Middle Name

(b) Jointly:

Last Name First Name Middle Name

Street Address:

City:                                                             State:

Telephone:                                                 Zip Code:

Date of Birth or Organization:

U.S. Citizen:            Yes:                                         No:

College:                                                             Degree:                                         Year:

Graduate School:                                                  Degree:                                         Year:

Other Education:

Social Security or Taxpayer I.D. No:

Name of individual and address to which all correspondence should be sent:

2.	State of Residence:
3.	[Complete this # 3 only if employer not Opus] Name of Employer:
	Street Address:
	City:                                                                                 State:
	Telephone:                                                                      Zip Code:

	Nature of Employer’s Business:
	Position and Duties:
4.	Your position(s) of employment or occupation(s) during the past five years (and the inclusive dates of each) are as follows:

Employer and	Nature of
Position or Occupation	Duties	From	To

5.	The undersigned possesses a general understanding of the nature and risks of investments.
	Yes:                      No:

6.	The undersigned considers himself/herself/itself to be an experienced, sophisticated investor.
	Yes:                      No:                     (*if “No”, an Investor Representative may be required.)

7.	The undersigned is capable of evaluating the risks and merits of an investment in Shares and believes the undersigned can withstand the complete loss of such amount as may be invested in any Shares (or in any of the Shares).
	Yes:                      No:

8.	The undersigned is able to bear the complete economic risk of an investment in the Shares (or in any of the Shares) for an indefinite period of time.
	Yes:                      No:

9. The following information is required to ascertain whether a prospective investor would be deemed an “accredited investor” as defined in Rule 501 of Regulation D under the Act. The undersigned is one of the following:

(a) Any bank as defined in Section 3(a)(2) of the Act or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; any insurance company as defined in Section 2(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of such act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;

Yes:                       No:                             

(b) A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;

Yes:                       No:                             

(c) An organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring any Shares, with total assets in excess of $5,000,000;

Yes:                       No:                             

(d) Any director or executive officer of the Company;

Yes:                       No:                             

(e) A natural person whose individual net worth, or joint net worth with such person’s spouse, at the time of acquisition exceeds $1,000,000;

Yes:                       No:                             

(f) A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with such person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching individual income in excess of $200,000 or joint income with such person’s spouse in excess of $300,000 in the current year;

Yes:                       No:                             

(g) A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring any Shares, whose acquisition is directed by a sophisticated person^*; or

Yes:                       No:                             

(h) Any entity in which all of the equity owners are accredited investors.

Yes:                       No:                             

^* A person will be deemed to be a sophisticated person for these purposes if such person has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of a prospective in the Shares and the Company.

INDIVIDUALS:

Dated:

(Signature of Individual)

(Print Name of Individual)

(Print Name of Spouse or Joint Tenant, If Any)

Note: If two investors are signing, please check the manner in which the ownership is to be legally held (the indicated manner shall be construed as if written out in full accordance with applicable laws or regulations):

                  JT TEN: As joint tenants with right of survivorship and not as tenants in common.

                  TEN COM:           As tenants in common.

                  TEN ENT:             As tenants by the entireties.

EXHIBIT D

^***

^*** This page has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission

EXHIBIT E

SAMPLE WORKING CAPITAL CALCULATION

Sample Working Capital Calculation
As of January 31, 2010

Current Assets
Cash	4,227,108
Billed Accounts Receivable	1,216,965
Prepaid Income Taxes	1,228,049
Prepaid Expenses	69,348
Deposits	27,982
Total Current Assets	6,769,452
Current Liabilities
Accounts Payable	279,400
Income Taxes Payable	1,182,618
Accrued Expenses	2,683
Total Current Liabilities	1,464,701
Net Working Capital	5,304,751
Less: Target	3,750,000
Amount Retained by Opus Shareholders	1,554,751

EXHIBIT F

^***

^*** This page has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission

EXHIBIT G

^***

^*** This page has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission

EXHIBIT H

EXAMPLES OF LIMITATIONS ON PARENT SHARE VALUATION

The following assumptions and examples are offered solely for purposes of illustrating the operation of the limitations set forth in the proviso in the definition of Share Valuation Method (the “Collar”).

Assumptions for purposes of example:

• Value of a Parent Share as of the Closing Date (using the Share Valuation Method) = $60.00

• Aggregate Earnout Payment due to Shareholders = $5,000,000

Example No. 1:

If, at the time EBITDA is finalized for the period with respect to which the Earnout Payment is due, the value of a Parent Share using the Share Valuation Method (prior to the application of the Collar) is $45.00, then the Collar would act to limit the value of a Parent Share to $51.00 (85% of $60.00). Accordingly, the Shareholders would receive an aggregate of 98,039 Parent Shares ($5,000,000/$51.00) rather than 111,111 Parent Shares ($5,000,000/$45.00).

Example No. 2:

If, at the time EBITDA is finalized for the period with respect to which the Earnout Payment is due, the value of a Parent Share using the Share Valuation Method (prior to the application of the Collar) is $75.00, then the Collar would act to limit the value of a Parent Share to $69.00 (115% of $60.00). Accordingly, the Shareholders would receive an aggregate of 72,463 Parent Shares ($5,000,000/$69.00) rather than 66,666 Parent Shares ($5,000,000/$75.00).

EXHIBIT I

SAMPLE EARNOUT PAYMENT CALCULATION

Earnout Calculation Example

			Year 1						Year 2
($ in 000s)	Scenario 1		Scenario 2		Scenario 3		Scenario 1		Scenario 2		Scenario 3
Revenue		11,445		14,646		17,750		12,028		17,680		22,000
EBITDA		1,451		3,891		6,450		1,302		5,632		9,450
Minimum Revenue								17,500		17,500		17,500
Minimum EBITDA		2,000		2,000		2,000		3,500		3,500		3,500
Strategic targets hit (y or n)		y		y		y		y		y		y
Payment — based on revenue		—		—		—		—		1,000		1,000
Payment — based on EBITDA		—		2,724		4,500		—		4,505		4,500
Payment — based on strategic goals		—		2,000		2,000		—		2,000		2,000
Total earnout payments		—		4,724		6,500		—		7,505		7,500
Total purchase price including earnout								12,000		24,229		26,000

Revenue Recognition Example

Capital Lease Structure (example)
Monthly Fee for Core Offering*	$	10,000
Total Contract Term, in months		60
Total Contract Value	$	600,000
Conversion of Contract Value for Earnout, over term
License Revenue	$	247,500
Implementation and Integration, based on 750 hours @ $150/hr	$	112,500
Software Support & Maintenance fee (includes hosting) @ $4K/mo, start month 5 (go-live)	$	240,000
	$	600,000

	Earnout		GAAP		Difference
Month 1, contract signed, software revenue recognized	$	247,500	$	10,000	$	237,500
Month 2-4, services renderred and revenue recognized as performed	$	112,500	$	30,000	$	82,500
Month 5-12, after go-live, Maintenance revenue recognized	$	32,000	$	80,000	$	(48,000	)
Total Year 1 recognition^	$	392,000	$	120,000	$	272,000
Maintenance revenue to be recognized monthly over remaining term
Year 2 Recognition	$	48,000	$	120,000	$	(72,000	)
Susequent to Year 2 Recognition	$	160,000	$	360,000	$	(200,000	)
Remaining life of contract	$	208,000	$	480,000	$	(272,000	)
Total Revenue Recognized	$	600,000	$	600,000	$	—

*	Excludes 3rd party offerings, includes Software, Maintenance, Hosting, and Services
^	Earnout calculation will use VSOE principles as the overriding method in calculating all deal type recognition, as approved by QSII Accounting

EX-10.37

Exhibit 10.37

SIXTH AMENDMENT TO LEASE

     THIS SIXTH AMENDMENT TO LEASE (this “Amendment”) is made as of the Amendment Date (as hereinafter defined) by and between TOWER PLACE, L.P., a Georgia limited partnership (“Landlord”) and QUALITY SYSTEMS, INC., a California corporation (“Tenant”).

RECITALS

     Landlord and Tenant have previously entered into that certain Tower Place Office Lease dated November 15, 2000, as amended by that certain First Amendment of Lease dated August 12, 2003, as further amended by that certain Second Amendment of Lease dated October 1, 2003, as further amended by that certain Third Amendment of Lease dated June 9, 2004, as further amended by that certain Fourth Amendment of Lease dated September 22, 2005, and as further amended by that certain Fifth Amendment to Lease dated February 5, 2007 (collectively, the “Lease”) for the lease of approximately 34,783 rentable square feet of space, more commonly known as Suites 2000 and 2700, 3340 Peachtree Road, NE (the “Premises”) located within Tower Place, Atlanta, Fulton County, Georgia, 30326.

     Landlord and Tenant desire to amend the Lease as more particularly set forth below.

     NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration in hand paid by each party hereto to the other, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

1. Definitions. All capitalized terms used herein but undefined shall have the meaning as defined in the Lease.

2. Term. The Lease Term is hereby extended so that the Expiration Date shall become December 31, 2015.

3. Rent. Notwithstanding any provision of the Lease to the contrary, as of May 1, 2010 (the “Effective Date”) and continuing throughout the Lease Term as extended hereby, the Base Rental for the Premises shall be payable pursuant to the terms of the Lease in accordance with the following schedule:

			Rentable		Annual Base				Monthly
Period			Square		Rental Per		Annual Base		Installment
From	Through		Footage		Square Foot		Rental		of Base Rental
5/1/2010		4/30/2011		34,783	$	11.63	$	404,352.36	$	33,696.03
5/1/2011		9/30/2011		34,783	$	11.97	$	416,482.92 (annualized)	$	34,706.91
10/1/2011		4/30/2012		34,783	$	23.95	$	832,965.84 (annualized)	$	69,413.82
5/1/2012		4/30/2013		34,783	$	24.67	$	857,954.88	$	71,496.24
5/1/2013		4/30/2014		34,783	$	25.41	$	883,693.56	$	73,641.13
5/1/2014		4/30/2015		34,783	$	26.17	$	910,204.32	$	75,850.36
5/1/2015		12/31/2015		34,783	$	26.95	$	937,510.44 (annualized)	$	78,125.87

4. Base Year. Commencing on the Effective Date, the Base Year (as defined in Section 1.1(i) of the Lease) shall be calendar year 2010.

5. Refurbishment Allowance. Commencing on the Amendment Date, Landlord shall provide a refurbishment allowance (the “Refurbishment Allowance”) to Tenant in the amount of One Hundred Thirty-Nine Thousand One Hundred Thirty-Two and No/100 Dollars ($139,132.00) to reimburse Tenant for the costs incurred by Tenant in connection with the refurbishment of the Premises (the “Refurbishment”). Tenant shall be responsible for the performance of the Refurbishment. Tenant will prepare any necessary

plans and specifications for each phase of the Refurbishment (the “Refurbishment Plans”) and submit the same to Landlord for review and approval, such approval not to be unreasonably withheld, conditioned, or delayed. Within five (5) business days following Landlord’s receipt of the Refurbishment Plans, Landlord will provide Tenant its approval or disapproval. Landlord and Tenant will exchange the Refurbishment Plans pursuant to the aforementioned time-table and process until the Refurbishment Plans are agreed upon by Landlord and Tenant. Thereafter, Tenant shall use reasonable speed and diligence to substantially complete the applicable phase of the Refurbishment in accordance with the Refurbishment Plans, the terms of the Lease and all applicable laws and regulations. The Refurbishment Allowance shall be payable to Tenant by Landlord only after the completion of the applicable phase of the Refurbishment in accordance with the Refurbishment Plans and upon the submission by Tenant to Landlord on or before December 31, 2011 of third party invoices paid by Tenant in connection with the applicable phase of the Refurbishment; provided, however, that no portion of the Refurbishment Allowance shall be used to reimburse Tenant for the costs of fixtures, furniture or other personal property. The cost of the Refurbishment shall include, without limitation, all reasonable and customary costs and expenses incurred by Landlord pertaining to each phase of the Refurbishment and a construction management fee to Landlord of 4.4% of the total cost of each phase of the Refurbishment. Tenant hereby expressly agrees that Tenant shall be responsible for any and all Refurbishment costs in excess of the Refurbishment Allowance. In the event that the full amount of the Refurbishment Allowance is not utilized on or before December 31, 2011, the difference between the amount of the Refurbishment Allowance actually utilized prior to such date and the full amount of the Refurbishment Allowance shall be forfeited by Tenant.

6. Renewal Option. Tenant shall, provided the Lease is in full force and effect and Tenant is not in default under any of the other terms and conditions of the Lease at the time of notification or commencement, have one (1) option to renew the Lease for a term of five (5) years, for the portion of the Premises being leased by Tenant as of the date the renewal term is to commence, on the same terms and conditions set forth in the Lease, except as modified by the terms, covenants and conditions as set forth below:

     (a) If Tenant elects to exercise said option, then Tenant shall provide Landlord with written notice no earlier than the date which is two hundred ten (210) days prior to the expiration of the then current term of the Lease but no later than the date which is one hundred eighty (180) days prior to the expiration of the then current term of this Lease. If Tenant fails to provide such notice, Tenant shall have no further or additional right to extend or renew the term of the Lease.

     (b) The Annual Rent and Monthly Installment in effect at the expiration of the then current term of the Lease shall be increased to reflect the current fair market rental for comparable space in the Building and in other similar buildings in the same rental market as of the date the renewal term is to commence, taking into account the specific provisions of the Lease which will remain constant. Landlord shall advise Tenant of the new Annual Rent and Monthly Installment for the Premises no later than sixty (60) days after receipt of Tenant’s written request therefor. Said request shall be made no earlier than thirty (30) days prior to the first date on which Tenant may exercise its option under this Paragraph. Said notification of the new Annual Rent may include a provision for its escalation to provide for a change in fair market rental between the time of notification and the commencement of the renewal term. In no event shall the Annual Rent and Monthly Installment for any option period be less than the Annual Rent and Monthly Installment in the preceding period.

     (c) This option is not transferable; the parties hereto acknowledge and agree that they intend that the aforesaid option to renew the Lease shall be “personal” to Tenant as set forth above and that in no event will any assignee or sublessee have any rights to exercise the aforesaid option to renew.

7. Right of First Refusal. Notwithstanding anything in Section 10 of the Fifth Amendment to Lease to the contrary, in the event Tenant exercises its option to lease the Refusal Space pursuant to the terms of said Section 10 on or before April 30, 2013, the Refusal Space shall be leased on an “as is” basis and Landlord shall have no obligation to

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improve the Refusal Space; provided, however, Landlord shall provide Tenant with a tenant improvement allowance of $25.00 per rentable square foot of the Refusal Space, prorated on a monthly basis to reflect the remaining Lease Term for the Refusal Space.

8. Notices. Notwithstanding anything to the contrary contained in the Lease, all notices required or desired to be given with respect to the Lease may also be delivered by a nationally recognized overnight delivery service providing proof of delivery, with proper postage prepaid and properly addressed to the party. Any such notice or demand shall be effective and deemed delivered on the date of deposit with the overnight delivery service; provided that the period of time in which a response to a notice delivered via overnight delivery must be given or taken shall run from the date of receipt as indicated on the receipt or other proof of delivery.

9. Landlord’s Notice Address. Notwithstanding anything to the contrary contained in the Lease, pursuant to Section 8.1 of the Lease, Landlord’s address for notices shall be:

     (i) To Landlord:

Tower Place, L.P.
c/o RREEF
3314 Peachtree Road, NE
Suite 950
Atlanta, Georgia 30326
Attn: Scott Bodin

and

Tower Place, L.P.
c/o Regent Partners, LLC.
3344 Peachtree Road, NE
Suite 1800
Atlanta, Georgia 30326
Attn: President
With copy to: David R. Tennery
Mark exterior of envelope clearly: OFFICIAL NOTICE/TIME SENSITIVE

(With a copy of any notice sent to Landlord sent also to Manager at Manager’s address set forth as provided herein); and

     (ii) To Manager:

Regent Partners, LLC
3340 Peachtree Road, NE
Suite 2140
Atlanta, Georgia 30326
Attn: Property Manager — Debra Cobbs

10. Parking. Section 8.27 of the Lease is hereby deleted in its entirely and the following is hereby substituted therefor;

     8.27 PARKING: Tenant shall have the right on the Commencement Date to lease parking spaces in the parking facilities of the Tower Place Complex owned or controlled by Landlord available to tenants therein (as same may be modified from time to time) up to the maximum number of parking spaces stipulated in Section 1.1(r) as modified by Lease Amendments #1 - #5. All of such spaces shall be unassigned and shall be leased at the posted monthly rental rates in effect therefor from time to time. Landlord and Tenant agree and Tenant acknowledges that rates for spaces in the parking facilities of the Tower Place Complex may vary according to the location of spaces in the facilities and according to whether or not spaces are reserved or unreserved. Tenant further acknowledges and agrees feat Landlord may designate certain spaces within the parking

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facilities of the Tower Place Complex as reserved or assigned spaces for the benefit of Landlord, visitors to the project or tenants therein, other tenants, couriers and delivery services and other persons. Tenant shall comply and cause its employees to complete and sign the Tower Place Parking Application. Tenant must comply with all rules and regulations established by Landlord and/or the operator of the parking facilities as provided in the Tower Place Parking Rules and Regulations, including, without limitation, any card, sticker, window transmitter or other identification system, whether now or hereafter in effect, and agrees to pay to Landlord a non-refundable fee at the rate then in effect for each parking card, sticker, window transmitter or other identifier issued, including, without limitation, replacements. All parking privileges granted pursuant to this Section 8.27 are non-assignable and nontransferable by Tenant; provided however, that parking privileges may be assigned or transferred by Tenant in conjunction with a transfer, assignment or subletting allowed by Article V of this Lease.

11. Limitation of Liability. REDRESS FOR ANY CLAIM AGAINST LANDLORD UNDER THIS AMENDMENT AND THE LEASE SHALL BE LIMITED TO AND ENFORCEABLE ONLY AGAINST AND TO THE EXTENT OF LANDLORD’S INTEREST IN THE BUILDING. THE OBLIGATIONS OF LANDLORD UNDER THIS AMENDMENT AND THE LEASE ARE NOT INTENDED TO BE AND SHALL NOT BE PERSONALLY BINDING ON, NOR SHALL ANY RESORT BE HAD TO THE PRIVATE PROPERTIES OF, ANY OF ITS OR ITS INVESTMENT MANAGER’S TRUSTEES, DIRECTORS, OFFICERS, PARTNERS, BENEFICIARIES, MEMBERS, STOCKHOLDERS, EMPLOYEES, OR AGENTS, AND IN NO CASE SHALL LANDLORD BE LIABLE TO TENANT HEREUNDER FOR ANY LOST PROFITS, DAMAGE TO BUSINESS, OR ANY FORM OF SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES.

12. Tenant’s Authority.

     (a) If Tenant signs as a corporation, partnership, trust or other legal entity each of the persons executing this Amendment on behalf of Tenant represents and warrants that Tenant has been and is qualified to do business in the state in which the Building is located, that the entity has full right and authority to enter into this Amendment, and that all persons signing on behalf of the entity were authorized to do so by appropriate actions. Tenant agrees to deliver to Landlord, simultaneously with the delivery of this Amendment, a corporate resolution, proof of due authorization by partners, opinion of counsel or other appropriate documentation reasonably acceptable to Landlord evidencing the due authorization of Tenant to enter into this Amendment.

     (b) Tenant hereby represents and warrants that neither Tenant, nor any persons or entities holding any legal or beneficial interest whatsoever in Tenant, are (i) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets Control, U.S. Department of the Treasury (“OFAC”); (ii) designated by the President or OFAC pursuant to the Trading with the Enemy Act, 50 U.S.C. App. § 5, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive Order of the President issued pursuant to such statutes; or (iii) named on the following list that is published by OFAC: “List of Specially Designated Nationals and Blocked Persons.” If the foregoing representation is untrue at any time during the Term, an Event of Default will be deemed to have occurred, without the necessity of notice to Tenant

13. Indemnification. None of the Landlord Entities shall be liable and Tenant hereby waives all claims against them for any damage to any property or any injury to any person in or about the Premises or the Building by or from any cause whatsoever (including without limiting the foregoing, rain or water leakage of any character from the roof, windows, walls, basement, pipes, plumbing works or appliances, the Building not being in good condition or repair, gas, fire, oil, electricity or theft), except to the extent caused by or arising from the gross negligence or willful misconduct of Landlord or its agents, employees or contractors. Tenant shall protect, indemnify and hold the Landlord Entities harmless from and against any and all loss, claims, liability or costs (including court costs and attorney’s fees) incurred by reason of (a) any damage to any property

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(including but not limited to property of any Landlord Entity) or any injury (including but not limited to death) to any person occurring in, on or about the Premises or the Building to the extent that such injury or damage shall be caused by or arise from any actual or alleged act, neglect, fault, or omission by or of Tenant or any Tenant entity to meet any standards imposed by any duty with respect to the injury or damage; (b) the conduct or management of any work or thing whatsoever done by the Tenant in or about the Premises or from transactions of the Tenant concerning the Premises; (c) Tenant’s failure to comply with any and all governmental laws, ordinances and regulations applicable to the condition or use of the Premises or its occupancy; or (d) any breach or default on the part of Tenant in the performance of any covenant or agreement on the part of the Tenant to be performed pursuant to this Lease. The provisions of this Section shall survive the termination of this Lease with respect to any claims or liability accruing prior to such termination.

14. Covenant of Confidentiality. Tenant covenants and agrees to keep in strict confidence and not divulge the existence, contents or provisions of this Amendment to anyone without the written consent of Landlord, except in Tenant’s dealings with its financial or professional advisors or with any litigation or arbitration proceedings, in response to any governmental request or as otherwise required by law. A breach of this covenant of confidentiality shall be a material breach of the Lease and an immediate Event of Default pursuant to Article VI of the Lease, without notice or opportunity to cure, subjecting Tenant to any and all of Landlord’s rights and remedies available in the event of non-payment of rent, whether under the Lease, this Amendment, and/or at law or in equity. This covenant of confidentiality shall survive the expiration or earlier termination of the Lease or Tenant’s right to possession of the Premises.

15. Miscellaneous.

     (a) Except as expressly provided herein, no free rent, moving allowances, tenant improvement allowances or other such financial concessions contained in the Lease shall apply to the Term as extended hereby. Tenant accepts the Premises in their “as-is” condition.

     (b) Tenant represents to Landlord that, as of the date hereof, Landlord is not in default of the Lease.

     (c) For purposes of this Amendment, the term “Amendment Date” shall mean the date upon which this Amendment is signed by Landlord or Tenant, whichever is later.

     (d) Except as amended hereby, the Lease shall be and remain in full force and effect and unchanged. As amended hereby, the Lease is hereby ratified and confirmed by Landlord and Tenant. To the extent the terms hereof are inconsistent with the terms of the Lease, the terms hereof shall control.

     (e) Landlord and Tenant acknowledge that Grubb & Ellis has acted as agent for Landlord in the negotiation and procurement of this Amendment. Tenant represents and warrants that it has been represented by Kern Olsen in connection with the negotiation and procurement of this Amendment and agrees to indemnify Landlord against any third party other than Kern Olsen claiming a fee or commission by or through Tenant.

     (f) The submission of this Amendment to Tenant for examination or consideration does not constitute an offer to amend the Lease, and this Amendment shall become effective only upon the execution and delivery thereof by Landlord and Tenant

[signatures on next page]

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and sealed as of the Amendment Date.

Date: 04/06/10	LANDLOARD: TOWER PLACE, L.P., a Georgia limited partnership
	By:	RREEF America REIT III Corp. O, a
		Maryland corporation, its manager
	By:	RREEF America, LLC, a Delaware limited liability company
	By:	/s/ B S Bodin
		Name:	B S Bodin
		Title:	Regional Director
Date: 3/15/10	TENANT: QUALITY SYSTEMS, INC., a California corporation
	By:	/s/ P. Kaplan
		Name:	P. Kaplan
		Title:	COO
	Attest:	/s/ A. Weiss
		Name:	A. Weiss
		Title:	VP, Procurement [CORPORATE SEAL]

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EX-10.38

Exhibit 10.38

AMENDED AND RESTATED THIRD AMENDMENT TO OFFICE LEASE

          This Amended and Restated Third Amendment to Office Lease (this “Amendment”) is executed as of January 11, 2010, between HUB PROPERTIES LLC, a Massachusetts limited liability company having an address c/o Reit Management & Research LLC, 400 Centre Street, Newton, Massachusetts 02458 (“Landlord”), and QUALITY SYSTEMS, INC., a California corporation having an address at 18191 Von Karman Avenue, #420, Irvine, California 92612, Attention: Chief Financial Office (“Tenant”).

RECITALS

          Landlord and Tenant entered into that certain Office Lease dated May 8, 2002, as amended by that certain Expansion and Extension Amendment to Office Lease dated October 8, 2004, that certain Amended and Restated Second Amendment to Office Lease dated May 31, 2006, and that certain Third Amendment to Office Lease dated November 9, 2009 (the “Third Amendment”), and as may be further amended from time to time (collectively, the “Lease”) pursuant to which Tenant is currently leasing 77,832 Rentable Square Feet of space in the Building (as more particularly described in the Lease, the “Premises”).

          Tenant desires to lease additional space in the Building and Landlord has agreed to lease additional space in the Building to Tenant on the terms and conditions contained herein.

          Capitalized terms used herein but not defined shall be given the meanings assigned to them in the Lease.

AGREEMENTS

          For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant, intending to be legally bound, agree as follows:

          1. Recitals; Amendment and Restatement. The foregoing recitals are hereby incorporated into the body of this Amendment as if they were set forth in full herein. This Amendment shall amend, restate and replace the Third Amendment in its entirety.

          2. Second Additional Expansion Premises; Use; Tenant’s Tax Share and Tenant’s Expense Share. For the period from March 1, 2010 through September 30, 2011, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, 20,190 Rentable Square Feet of Space (the “Second Additional Expansion Premises”) located on the 1^st floor of the Building, shown on the floor plan attached hereto as Exhibit A, on the terms and conditions of the Lease, as amended hereby, which Second Additional Expansion Premises, or any part thereof, Tenant shall not use or occupy, or permit or suffer to be used or occupied, other than for the Permitted Use. From March 1, 2010 through September 30, 2011, the term “Premises” shall refer collectively to the Original Premises, the Expansion Premises, the Additional Expansion Premises, the Conference Center and the Second Additional Expansion Premises, and both Tenant’s Tax Share and Tenant’s Expense Share shall be increased to 89.1109%, which is the ratio of the Rentable Area of the Original Premises, the Expansion Premises, the Additional Expansion Premises, the Conference Center and the Second Additional Expansion Premises

(98,022 Rentable Square Feet) to the total Rentable Area of the Building (110,000 Rentable Square Feet).

          3. Second Additional Expansion Premises.

               (a) Condition of Second Additional Expansion Premises. Tenant acknowledges and agrees that Tenant is leasing the Second Additional Expansion Premises in its “AS-IS” condition and that Landlord is not responsible to make or pay for any improvements to the Second Additional Expansion Premises.

               (b) Early Access. Tenant shall have access to the Second Additional Expansion Premises upon full execution of this Amendment for the sole purpose of fitting out the Second Additional Expansion Premises, provided that (i) such access does not interfere with the Landlord, (ii) prior to any such access, Tenant delivers to Landlord a copy of its certificate of insurance for the Second Additional Expansion Premises (complying with the terms of the Lease) naming Landlord as an additional insured. Prior to March 1, 2010, Tenant shall not use the Second Additional Expansion Premises to conduct any business whatsoever. Such early access shall be subject to all of the provisions of the Lease, including the payment of Additional Rent, provided that prior to March 1, 2010 no Minimum Rent for the Second Additional Expansion Premises shall accrue.

               (c) Tenant’s Contractors. In making any alterations and improvements or performing any other work of any kind within the Second Additional Expansion Premises through the services of any contractor or contractors, the following conditions shall be fulfilled, and Tenant, by undertaking to have such work performed by its contractor or contractors, shall be deemed to have agreed to cause such conditions to be fulfilled:

                    (i) Prior to commencing any such work, Tenant shall (A) furnish Landlord with a written description of the proposed work and reasonably detailed plans and specifications therefor and (B) obtain the approval of Landlord, in writing, for the specific work it proposes to perform and all such plans and specifications. Landlord shall respond with its approval or disapproval within five (5) business days of receipt of Tenant’s request; provided, however, that should Landlord’s review require review of the plans and specifications by a third party professional, Landlord shall have up to thirty (30) days to respond. Should Landlord disapprove Tenant’s submitted plans and specifications, Landlord will reasonably specify the reasons for disapproval in its response to Tenant.

                    (ii) The work shall be performed at Tenant’s expense by responsible contractors and subcontractors approved in advance by Landlord, who shall not in Landlord’s sole opinion, and who in fact do not, prejudice Landlord’s relationship with Landlord’s contractors or subcontractors or the relationship between such contractors and their subcontractors or employees, or disturb harmonious labor relations. Landlord hereby approves the following contractors: Tamora Construction, Patriot Construction and Commercial Construction. Tenant’s contractors and subcontractors shall comply with all insurance requirements and undertakings set forth in Exhibit D attached to the Lease, as the same may be changed by written notice from Landlord to Tenant from time to time during the Term.

                    (iii) Each of such contractors being paid $5,000.00 or more shall, prior to the commencement of their work and not later than ten (10) days after the

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execution of their respective contracts, file waivers of mechanic’s liens in the appropriate public office, which waivers shall be effective to preclude the filing of any mechanic’s liens on account of the work to be performed by any of Tenant’s contractors, subcontractors or materialmen.

                    (iv) No such work shall be performed in such manner or at such times as to interfere with any work being done by any of Landlord’s contractors or subcontractors in or about the Property generally. Tenant’s contractors and subcontractors shall be subject to the decisions of Landlord’s contractor as to such matters and as to avoidance of interference with other tenants of the Building or the work of other tenants’ contractors and subcontractors, but Landlord’s contractor shall not be responsible for any aspect of the work performed by Tenant’s contractors or subcontractors or for the coordination of the work of Landlord’s contractors or others with Tenant’s contractors.

                    (v) Except as otherwise set forth in this Section 3(c), all such work shall be subject to the requirements and provisions of Section 10.6, 10.7 and 25 of the Lease.

                    (vi) Tenant and its contractors and subcontractors shall be solely responsible for the transportation, safekeeping and storage of materials and equipment used in the performance of their work, for the removal of waste and debris resulting therefrom, and for any damage caused by them to any installations or work performed by Landlord’s, or any other tenant’s, contractors and subcontractors.

          4. Minimum Rent. For the period from March 1, 2010 through September 30, 2011, Tenant shall pay, as additional Minimum Rent for the Second Additional Expansion Premises, the amount of $543,447.50 ($28,602.50 per month). Such payment shall be in addition to all other Minimum Rent Tenant is required to pay under Section 4.1 of the Lease.

          5. Ratification of Confession of Judgment.

               SECTION 17.2 OF THE LEASE PROVIDES FOR THE CONFESSION OF JUDGMENT AGAINST TENANT FOR MONEY AND FOR EJECTMENT. IN CONNECTION THEREWITH, TENANT, KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND UPON ADVICE OF SEPARATE COUNSEL, UNCONDITIONALLY WAIVED ANY AND ALL RIGHTS IT MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. TENANT HEREBY RATIFIES AND CONFIRMS SECTION 17.2 OF THE LEASE AND CONFIRMS THAT SUCH SECTION APPLIES TO THE RENT DUE WITH RESPECT TO THE SECOND ADDITIONAL EXPANSION PREMISES AND LANDLORD’S POSSESSION OF THE SECOND ADDITIONAL EXPANSION PREMISES. SPECIFICALLY, TENANT ACKNOWLEDGES THAT THE LEASE, AS AMENDED HEREBY, PROVIDES FOR THE CONFESSION OF JUDGMENT AGAINST TENANT FOR MONEY DUE UNDER THE LEASE, AS AMENDED HEREBY, AND FOR EJECTMENT WITH RESPECT TO THE ENTIRE PREMISES. TENANT (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF LANDLORD REPRESENTED, EXPRESSLY OR

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OTHERWISE, THAT LANDLORD WILL NOT SEEK TO EXERCISE OR ENFORCE ITS RIGHTS TO CONFESS JUDGMENT UNDER THE LEASE, AS AMENDED HEREBY, AND (II) ACKNOWLEDGES THAT THE EXECUTION OF THE LEASE AND THIS AMENDMENT BY LANDLORD HAS BEEN MATERIALLY INDUCED BY, AMONG OTHER THINGS, THE INCLUSION IN THE LEASE AND IN THE AMENDMENT OF SAID RIGHTS TO CONFESS JUDGMENT AGAINST TENANT. TENANT FURTHER ACKNOWLEDGES THAT IT HAD THE OPPORTUNITY TO DISCUSS SAID PROVISIONS WITH TENANT’S INDEPENDENT LEGAL COUNSEL AND THAT THE MEANING AND EFFECT OF SUCH PROVISIONS HAS BEEN FULLY EXPLAINED TO TENANT BY SUCH COUNSEL, AND AS EVIDENCE OF SUCH FACT AN AUTHORIZED OFFICER OF TENANT SIGNS HIS OR HER INITIALS IN THE SPACE PROVIDED BELOW.

/s/ Bob Ellis  

(Tenant’s Initials) 

          6. Limitation of Liability. In addition to any other limitations of Landlord’s liability as contained in the Lease, as amended hereby, the liability of Landlord (and its partners, shareholders or members) to Tenant (or any person or entity claiming by, through or under Tenant) for any default by Landlord under the terms of the Lease, as amended hereby, or any matter relating to or arising out of the occupancy or use of the Premises and/or other areas of the Building shall be limited to Tenant’s actual direct, but not consequential, damages therefor and shall be recoverable only from the interest of Landlord in the Building, and Landlord (and its partners, shareholders or members) shall not be personally liable for any deficiency.

          7. Brokerage. Landlord and Tenant each warrant to the other that it has not dealt with any broker or agent in connection with the negotiation or execution of this Amendment other than The Flynn Company and Kern Olsen Real Estate Services, whose commissions shall be paid by Landlord pursuant to a separate written agreement. Tenant and Landlord shall each indemnify the other against all costs, expenses, attorneys’ fees, and other liability for commissions or other compensation claimed by any other broker or agent claiming the same by, through, or under the indemnifying party.

          8. Ratification. Tenant hereby ratifies and confirms its obligations under the Lease, as amended hereby, and represents and warrants to Landlord that Tenant has no defenses thereto. Additionally, Tenant further confirms and ratifies that, as of the date hereof, (a) the Lease is and remains in good standing and in full force and effect, and (b) Tenant has no claims, counterclaims, set-offs or defenses against Landlord arising out of the Lease or in any way relating thereto or arising out of any other transaction between Landlord and Tenant.

          9. Binding Effect; Inconsistency; Governing Law. Except as amended hereby, the Lease shall remain in full effect and this Amendment shall be binding upon Landlord and Tenant and their respective successors and assigns. If any inconsistency exists or arises between the terms of the Lease and the terms of this Amendment, the terms of this Amendment shall prevail. This Amendment shall be governed by the laws of the Commonwealth of Pennsylvania.

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          10. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall constitute an original but all of which together shall constitute one and the same Amendment.

               Executed as of the date first written above.

LANDLORD:
HUB PROPERTIES LLC,
a Massachusetts limited liability company
By:	MA PO, LLC,
	a Delaware limited liability company,
	its Managing Member

By:	/s/ David M. Lepore
	Name:	David M. Lepore
	Title:	Senior Vice President
TENANT: QUALITY SYSTEMS, INC., a California corporation
By:	/s/ Bob Ellis
	Name:	Bob Ellis
	Title:	Evp

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EXHIBIT A

PLAN OF SECOND ADDITIONAL EXPANSION PREMISES

A-1

THIRD AMENDMENT TO OFFICE LEASE

          This Third Amendment to Office Lease (this “Amendment”) is executed as of November 9, 2009, between HUB PROPERTIES LLC, a Massachusetts limited liability company having an address c/o Reit Management & Research LLC, 400 Centre Street, Newton, Massachusetts 02458 (“Landlord”), and QUALITY SYSTEMS, INC., a California corporation having an address at 18191 Von Karman Avenue, #420, Irvine, California 92612, Attention: Chief Financial Office (“Tenant”).

RECITALS

          Landlord and Tenant entered into that certain Office Lease dated May 8, 2002, as amended by that certain Expansion and Extension Amendment to Office Lease dated October 8, 2004 and that certain Amended and Restated Second Amendment to Office Lease dated May 31, 2006 and as may be further amended from time to time (collectively, the “Lease”) pursuant to which Tenant is currently leasing 77,832 Rentable Square Feet of space in the Building (as more particularly described in the Lease, the “Premises”).

          Tenant desires to lease additional space in the Building and Landlord has agreed to lease additional space in the Building to Tenant on the terms and conditions contained herein.

          Capitalized terms used herein but not defined shall be given the meanings assigned to them in the Lease.

AGREEMENTS

          For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant, intending to be legally bound, agree as follows:

          1. Recitals. The foregoing recitals are hereby incorporated into the body of this Amendment as if they were set forth in full herein.

          2. Second Additional Expansion Premises; Use; Tenant’s Tax Share and Tenant’s Expense Share. For the period from January 1, 2010 through December 31, 2010, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, 10,167 Rentable Square Feet of Space (the “Second Additional Expansion Premises”) located on the 1^st floor of the Building, shown on the floor plan attached hereto as Exhibit A, on the terms and conditions of the Lease, as amended hereby, which Second Additional Expansion Premises, or any part thereof, Tenant shall not use or occupy, or permit or suffer to be used or occupied, other than for the Permitted Use. From January 1, 2010 through December 31, 2010, the term “Premises” shall refer collectively to the Original Premises, the Expansion Premises, the Additional Expansion Premises, the Conference Center and the Second Additional Expansion Premises, and both Tenant’s Tax Share and Tenant’s Expense Share shall be increased to 79.9991%, which is the ratio of the Rentable Area of the Original Premises, the Expansion Premises, the Additional Expansion Premises, the Conference Center and the Second Additional Expansion Premises (87,999 Rentable Square Feet) to the total Rentable Area of the Building (110,000 Rentable Square Feet). Landlord and Tenant agree that the aggregate Rentable Square Feet in the Premises for the period from January 1, 2010 through December 31, 2010 (unless Tenant

exercises its Termination Option (as hereinafter defined)) is 87,999 Rentable Square Feet, and thereafter (unless Tenant exercises its Option to Extend (as hereinafter defined)) the aggregate Rentable Square Feet in the Premises shall return to 77,832 Rentable Square Feet and Tenant’s Tax Share and Tenant’s Expense Share shall return to 70.7564%.

          3. Second Additional Expansion Premises.

               (a) Condition of Second Additional Expansion Premises. Tenant acknowledges and agrees that Tenant is leasing the Second Additional Expansion Premises in its “AS-IS” condition and that Landlord is not responsible to make or pay for any improvements to the Second Additional Expansion Premises.

               (b) Early Access. Tenant shall have access to the Second Additional Expansion Premises upon full execution of this Amendment for the sole purpose of fitting out the Second Additional Expansion Premises, provided that (i) such access does not interfere with the Landlord, (ii) prior to any such access, Tenant delivers to Landlord a copy of its certificate of insurance for the Second Additional Expansion Premises (complying with the terms of the Lease) naming Landlord as an additional insured. Prior to January 1, 2010, Tenant shall not use the Second Additional Expansion Premises to conduct any business whatsoever. Such early access shall be subject to all of the provisions of the Lease, including the payment of Additional Rent, provided that prior to January 1, 2010 no Minimum Rent for the Second Additional Expansion Premises shall accrue.

               (c) Tenant’s Contractors. In making any alterations and improvements or performing any other work of any kind within the Second Additional Expansion Premises through the services of any contractor or contractors, the following conditions shall be fulfilled, and Tenant, by undertaking to have such work performed by its contractor or contractors, shall be deemed to have agreed to cause such conditions to be fulfilled:

                    (i) Prior to commencing any such work, Tenant shall (A) furnish Landlord with a written description of the proposed work and reasonably detailed plans and specifications therefor and (B) obtain the approval of Landlord, in writing, for the specific work it proposes to perform and all such plans and specifications. Landlord shall respond with its approval or disapproval within five (5) business days of receipt of Tenant’s request; provided, however, that should Landlord’s review require review of the plans and specifications by a third party professional, Landlord shall have up to thirty (30) days to respond. Should Landlord disapprove Tenant’s submitted plans and specifications, Landlord will reasonably specify the reasons for disapproval in its response to Tenant.

                    (ii) The work shall be performed at Tenant’s expense by responsible contractors and subcontractors approved in advance by Landlord, who shall not in Landlord’s sole opinion, and who in fact do not, prejudice Landlord’s relationship with Landlord’s contractors or subcontractors or the relationship between such contractors and their subcontractors or employees, or disturb harmonious labor relations. Landlord hereby approves the following contractors: Tamora Construction, Patriot Construction and Commercial Construction. Tenant’s contractors and subcontractors shall comply with all insurance requirements and undertakings set forth in Exhibit D attached to the Lease, as the same may be changed by written notice from Landlord to Tenant from time to time during the Term.

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                    (iii) Each of such contractors being paid $5,000.00 or more shall, prior to the commencement of their work and not later than ten (10) days after the execution of their respective contracts, file waivers of mechanic’s liens in the appropriate public office, which waivers shall be effective to preclude the filing of any mechanic’s liens on account of the work to be performed by any of Tenant’s contractors, subcontractors or materialmen.

                    (iv) No such work shall be performed in such manner or at such times as to interfere with any work being done by any of Landlord’s contractors or subcontractors in or about the Property generally. Tenant’s contractors and subcontractors shall be subject to the decisions of Landlord’s contractor as to such matters and as to avoidance of interference with other tenants of the Building or the work of other tenants’ contractors and subcontractors, but Landlord’s contractor shall not be responsible for any aspect of the work performed by Tenant’s contractors or subcontractors or for the coordination of the work of Landlord’s contractors or others with Tenant’s contractors.

                    (v) Except as otherwise set forth in this Section 3(c), all such work shall be subject to the requirements and provisions of Section 10.6, 10.7 and 25 of the Lease.

                    (vi) Tenant and its contractors and subcontractors shall be solely responsible for the transportation, safekeeping and storage of materials and equipment used in the performance of their work, for the removal of waste and debris resulting therefrom, and for any damage caused by them to any installations or work performed by Landlord’s, or any other tenant’s, contractors and subcontractors.

          4. Minimum Rent. For the period from January 1, 2010 through December 31, 2010, Tenant shall pay, as additional Minimum Rent for the Second Additional Expansion Premises, the amount of $172,839.00 ($14,403.25 per month). Such payment shall be in addition to all other Minimum Rent Tenant is required to pay under Section 4.1 of the Lease.

          5. Termination Option. Tenant shall have the one-time option to terminate the lease of the Second Additional Expansion Space (the “Termination Option”) effective as of June 30, 2010 (the “Termination Date”), by delivery on or before May 31, 2010 of (a) written notice of termination to Landlord and (b) Tenant’s good bank check in the amount of $6,756.00. Notwithstanding anything to the contrary contained herein, at Landlord’s option, Tenant’s termination of the lease with respect to the Second Additional Expansion Premises pursuant to this Section 5 shall be ineffective if an Event of Default exists either at the time of Tenant’s exercise of its Termination Option or at the Termination Date. Failure of Tenant to timely exercise the Termination Option (“exercise” meaning both the giving of the requisite notice and the payment of the requisite fee) shall constitute Tenant’s irrevocable waiver of the Termination Option.

          6. Option to Extend. Tenant is hereby granted the option to extend its lease of the Second Additional Expansion Premises (the “Option to Extend”) for one (1) additional period of nine (9) months, i.e. January 1, 2011 through September 30, 2011 (the “Extended Term”), upon the following terms and conditions:

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               (a) No Event of Default shall be then existing either at the time of Tenant’s giving of its extension notice to Landlord or at or prior to January 1, 2011;

               (b) Landlord shall have made a good faith determination that Tenant remains creditworthy;

               (c) Other than to an Affiliate of the Tenant, Tenant shall not have previously assigned the Lease or sublet all or part of the Premises;

               (d) Tenant shall have delivered to Landlord written notice of Tenant’s election to exercise the Option to Extend on or before August 31, 2010; and

               (e) All Lease terms for the Extended Term shall be the same as specified for the initial Term of the Lease, except that (i) there shall be no further option to renew or extend the lease of the Second Additional Expansion Premises beyond the Extended Term, and (ii) Minimum Rent for the Second Additional Expansion Premises payable during the Extended Term shall be equal to $133,441.92 ($14,826.88 per month).

          7. Ratification of Confession of Judgment.

               SECTION 17.2 OF THE LEASE PROVIDES FOR THE CONFESSION OF JUDGMENT AGAINST TENANT FOR MONEY AND FOR EJECTMENT. IN CONNECTION THEREWITH, TENANT, KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND UPON ADVICE OF SEPARATE COUNSEL, UNCONDITIONALLY WAIVED ANY AND ALL RIGHTS IT MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. TENANT HEREBY RATIFIES AND CONFIRMS SECTION 17.2 OF THE LEASE AND CONFIRMS THAT SUCH SECTION APPLIES TO THE RENT DUE WITH RESPECT TO THE SECOND ADDITIONAL EXPANSION PREMISES AND LANDLORD’S POSSESSION OF THE SECOND ADDITIONAL EXPANSION PREMISES. SPECIFICALLY, TENANT ACKNOWLEDGES THAT THE LEASE, AS AMENDED HEREBY, PROVIDES FOR THE CONFESSION OF JUDGMENT AGAINST TENANT FOR MONEY DUE UNDER THE LEASE, AS AMENDED HEREBY, AND FOR EJECTMENT WITH RESPECT TO THE ENTIRE PREMISES. TENANT (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF LANDLORD REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LANDLORD WILL NOT SEEK TO EXERCISE OR ENFORCE ITS RIGHTS TO CONFESS JUDGMENT UNDER THE LEASE, AS AMENDED HEREBY, AND (II) ACKNOWLEDGES THAT THE EXECUTION OF THE LEASE AND THIS AMENDMENT BY LANDLORD HAS BEEN MATERIALLY INDUCED BY, AMONG OTHER THINGS, THE INCLUSION IN THE LEASE AND IN THE AMENDMENT OF SAID RIGHTS TO CONFESS JUDGMENT AGAINST TENANT. TENANT FURTHER ACKNOWLEDGES THAT IT HAD THE OPPORTUNITY TO DISCUSS SAID PROVISIONS WITH TENANT’S INDEPENDENT LEGAL COUNSEL AND THAT THE MEANING AND EFFECT OF SUCH PROVISIONS HAS BEEN FULLY EXPLAINED TO TENANT BY SUCH COUNSEL, AND AS EVIDENCE OF

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SUCH FACT AN AUTHORIZED OFFICER OF TENANT SIGNS HIS OR HER INITIALS IN THE SPACE PROVIDED BELOW.

/s/ Bob Ellis  

(Tenant’s Initials) 

          8. Limitation of Liability. In addition to any other limitations of Landlord’s liability as contained in the Lease, as amended hereby, the liability of Landlord (and its partners, shareholders or members) to Tenant (or any person or entity claiming by, through or under Tenant) for any default by Landlord under the terms of the Lease, as amended hereby, or any matter relating to or arising out of the occupancy or use of the Premises and/or other areas of the Building shall be limited to Tenant’s actual direct, but not consequential, damages therefor and shall be recoverable only from the interest of Landlord in the Building, and Landlord (and its partners, shareholders or members) shall not be personally liable for any deficiency.

          9. Brokerage. Landlord and Tenant each warrant to the other that it has not dealt with any broker or agent in connection with the negotiation or execution of this Amendment other than The Flynn Company and Kern Olsen Real Estate Services, whose commissions shall be paid by Landlord pursuant to a separate written agreement. Tenant and Landlord shall each indemnify the other against all costs, expenses, attorneys’ fees, and other liability for commissions or other compensation claimed by any other broker or agent claiming the same by, through, or under the indemnifying party.

          10. Ratification. Tenant hereby ratifies and confirms its obligations under the Lease, as amended hereby, and represents and warrants to Landlord that Tenant has no defenses thereto. Additionally, Tenant further confirms and ratifies that, as of the date hereof, (a) the Lease is and remains in good standing and in full force and effect, and (b) Tenant has no claims, counterclaims, set-offs or defenses against Landlord arising out of the Lease or in any way relating thereto or arising out of any other transaction between Landlord and Tenant.

          11. Binding Effect; Inconsistency; Governing Law. Except as amended hereby, the Lease shall remain in full effect and this Amendment shall be binding upon Landlord and Tenant and their respective successors and assigns. If any inconsistency exists or arises between the terms of the Lease and the terms of this Amendment, the terms of this Amendment shall prevail. This Amendment shall be governed by the laws of the Commonwealth of Pennsylvania.

          12. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall constitute an original but all of which together shall constitute one and the same Amendment.

[execution on following page]

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Executed as of the date first written above.

LANDLORD: HUB PROPERTIES LLC, a Massachusetts limited liability company
By:	MA PO, LLC,
	a Delaware limited liability company,
	its Managing Member

By:	/s/ David M. Lepore
	Name:	David M. Lepore
	Title:	Vice President

TENANT: QUALITY SYSTEMS, INC., a California corporation
By:	/s/ Bob Ellis
	Name:	Bob Ellis
	Title:	Executive VP & General Counsel

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EXHIBIT A

PLAN OF SECOND ADDITIONAL EXPANSION PREMISES

A-1

EX-10.39

Exhibit 10.39

FOURTH AMENDMENT TO OFFICE LEASE

          This Fourth Amendment to Office Lease (this “Amendment”) is executed as of March 17, 2010, but is effective as of March 1, 2010 (the “Effective Date”), between HUB PROPERTIES LLC, a Massachusetts limited liability company having an address c/o Reit Management & Research LLC, 400 Centre Street, Newton, Massachusetts 02458 (“Landlord”), and QUALITY SYSTEMS, INC., a California corporation having an address at 18111 Von Karman Avenue, #600, Irvine, California 92612, Attention: VP Procurement (“Tenant”).

RECITALS

          Landlord and Tenant entered into that certain Office Lease dated May 8, 2002, as amended by that certain Expansion and Extension Amendment to Office Lease dated October 8, 2004, that certain Amended and Restated Second Amendment to Office Lease dated May 31, 2006 (the “Second Amendment”), and that certain Amended and Restated Third Amendment to Office Lease dated January 11, 2010 (the “Third Amendment”), and as may be further amended from time to time (collectively, the “Lease”) pursuant to which Tenant is leasing 98,022 Rentable Square Feet of space in the Building (as more particularly described in the Lease, the “Premises”).

          Tenant desires to extend the Term of the Lease and to increase the area of the Second Additional Expansion Premises (as defined in the Third Amendment), and Landlord has agreed to such extension and such increase on the terms and conditions contained herein.

          Capitalized terms used herein but not defined shall be given the meanings assigned to them in the Lease.

AGREEMENTS

          For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant, intending to be legally bound, agree as follows:

          1. Recitals; Amendment and Restatement. The foregoing recitals are hereby incorporated into the body of this Amendment as if they were set forth in full herein.

          2. Extension of Term.

               (a) As of the Effective Date, the third sentence of Section 3.1 of the Lease is deleted in its entirety and replaced with the following:

“The Term shall continue until September 30, 2016 (the “Termination Date”), unless sooner terminated.”

               (b) As of the Effective Date, Section 3.7 of the Lease is deleted in its entirety.

          3. Second Additional Expansion Premises; Use; Tenant’s Tax Share and Tenant’s Expense Share.

                (a) Section 2 of the Third Amendment is amended and restated in its entirety as follows:

“Commencing on April 1, 2010 through the end of the Term, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, 20,450 Rentable Square Feet of Space (the “Second Additional Expansion Premises”) located on the 1^st floor of the Building, shown on the floor plan attached hereto as Exhibit A, on the terms and conditions of the Lease, as amended hereby, which Second Additional Expansion Premises, or any part thereof, Tenant shall not use or occupy, or permit or suffer to be used or occupied, other than for the Permitted Use. From April 1, 2010 through the end of the Term, the term “Premises” shall refer collectively to the Original Premises, the Expansion Premises, the Additional Expansion Premises, the Conference Center and the Second Additional Expansion Premises, and both Tenant’s Tax Share and Tenant’s Expense Share shall be increased to 89.3473%, which is the ratio of the Rentable Area of the Original Premises, the Expansion Premises, the Additional Expansion Premises, the Conference Center and the Second Additional Expansion Premises (98,282 Rentable Square Feet) to the total Rentable Area of the Building (110,000 Rentable Square Feet).”

               (b) Exhibit A attached to the Third Amendment is hereby replaced with Exhibit A attached to this Amendment.

          4. Tenant Improvements. Section 3 of the Third Amendment is amended and restated in its entirety as follows:

               “3. Tenant Improvements.

     (a) Condition of Premises. Tenant acknowledges and agrees that Tenant is currently in occupancy of the Premises (except for the Second Additional Expansion Premises) and Tenant is leasing the Premises, including the Second Additional Expansion Premises, in its “AS-IS” condition. Except as hereinafter set forth, Landlord is not responsible to make or pay for any improvements to any portion of the Premises.

     (b) Early Access to the Second Additional Expansion Premises.Tenant shall have access to the Second Additional Expansion Premises upon full execution of this Amendment for the sole purpose of fitting out the Second Additional Expansion Premises, provided that (i) such access does not interfere with the Landlord, (ii) prior to any such access, Tenant delivers to Landlord a copy of its certificate of insurance for the Second Additional Expansion Premises (complying with the terms of the Lease)

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naming Landlord as an additional insured. Prior to April 1, 2010, Tenant shall not use the Second Additional Expansion Premises to conduct any business whatsoever. Such early access shall be subject to all of the provisions of the Lease, including the payment of Additional Rent, provided that prior to April 1, 2010 no Minimum Rent for the Second Additional Expansion Premises shall accrue.

     (c) Improvements.

          (i) Construction of Improvements. Tenant shall construct improvements within the Premises strictly in accordance with the terms of this Section 3.

          (ii) Tenant’s Construction Representative. Prior to the commencement of any design documentation, the Tenant, by notice to Landlord in writing, shall designate a single individual as the “Tenant’s Construction Representative,” who Tenant agrees shall be available to meet and consult with Landlord on a continuing basis at the Premises as Tenant’s representative concerning the matters which are the subject of this Section 3 and who, as between Landlord and Tenant, shall have the power legally to bind Tenant in giving direction to Landlord respecting the Construction Documents and the Tenant Work, in giving approvals of design documents and work, and in making requests and approval for changes.

          (iii) Preparation, Review and Approval of Tenant’s Construction Documents. Tenant shall, at its expense, consult with its architect, engineer, designer and such other consultants as it shall deem necessary for development and timely completion of certain documents as described in this Subsection (iii). Promptly following execution of this Amendment, and prior to commencement of preparation of the plans and documents which Tenant is obligated to produce hereunder, Tenant will cause its architect or engineer to conduct a field survey of the Premises to verify critical dimensions.

                    (A) Construction Documents. Tenant, at its expense, shall cause to be prepared and delivered to Landlord one (1) complete reproducible set and six (6) blue-line print sets of complete and final “Construction Documents” consisting of (a) working drawings; (b) six (6) copies of specifications, as approved by Landlord for the Tenant Work (as hereinafter defined); and (c) a permit set. The Construction Documents shall be signed and sealed by a reputable architect or professional engineer (where applicable) licensed and registered in the Commonwealth of Pennsylvania. The Construction Documents shall conform to all applicable laws, ordinances, building codes and requirements of public authorities and insurance underwriters. The Construction Documents shall contain, at a minimum, floor plans,

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reflected ceiling plans, power and telephone plans, mechanical plans, electrical plans, fire protection plans and all other details and schedules which designate the locations and specifications for all mechanical, electrical, fire protection and life safety equipment to be installed in the Premises, and all partitions, doors, lighting fixtures, electric receptacles and switches, telephone outlets, special air conditioning, and other improvements to be installed within the Premises.

                    (B) Landlord Approval. Tenant shall submit the Construction Documents for Landlord’s approval in accordance with guidelines and time frames established by Landlord from time-to-time. The approval by Landlord of Tenant’s Construction Documents shall be subject to the following procedural requirements:

                         (I) Landlord shall review the applicable documents or any additional requested information, and either approve the same or return the same to Tenant with requested modifications.

                         (II) If Landlord shall return the modified documents to Tenant with requested modifications, Landlord shall specify a reasonable period of time, not to exceed five (5) business days, within which such modifications shall be made and within which such modified plans shall be re-submitted to Landlord by Tenant, until the modified documents are finally approved by Landlord.

                         (III) To the extent the Tenant’s Construction Documents, as the case may be, in Landlord’s sole judgment, involve any modification of, or impact upon, the Property’s structural, mechanical, electrical or plumbing systems or components, then such approval may be withheld by Landlord in its absolute and sole discretion.

                         (IV) Tenant’s Construction Documents, as approved by Landlord and as modified by Tenant to take account of any changes reasonably requested by Landlord, are hereinafter considered to be “Issued for Construction.”

                         (V) Without limiting the generality of the foregoing, Tenant acknowledges that Landlord may disapprove documents submitted by Tenant under this Section 3(c)(iii) because the work detailed therein: (a) is likely to adversely affect Building systems, the structure of the Building or the safety of the Building and/or its occupants; (b) might impair Landlord’s ability to furnish services to Tenant or other tenants in the Building; (c) would increase the cost of operating the Building; (d) would violate any governmental laws, rules or ordinances (or interpretations thereof); (e) contains or uses hazardous or toxic materials or substances; (f) would adversely affect the appearance of the Building; (g) might adversely affect another tenant’s premises; (h) is prohibited by

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any ground lease affecting the Building or any mortgage, trust deed or other instrument encumbering the Building; or (i) is likely to be substantially delayed because of unavailability or shortage of labor or materials necessary to perform such work or the difficulties or unusual nature of such work. The foregoing reasons, however, shall not be the only reasons for which Landlord may withhold its approval, whether or not such other reasons are similar or dissimilar to the foregoing. Neither the approval by Landlord of the Tenant Work or any plans, drawings, specifications or other items associated with the Tenant Work, nor Landlord’s performance, supervision or monitoring of the Tenant Work, shall constitute any warranty by Landlord to Tenant of the adequacy of the design for Tenant’s intended use of the Premises.

                    (C) Costs of Tenant’s Documents. Upon Landlord’s receipt from Tenant of an invoice evidencing the actual cost of Tenant’s preparation of its Construction Documents, Landlord shall pay to Tenant’s architect, engineer or other professional the amount of such cost in accordance with and subject to the procedures set forth in Section 3(d) for the Tenant Work; provided that the aggregate amount to be reimbursed by Landlord to Tenant for Tenant’s cost to prepare such documents and for other costs of the Tenant Work shall not exceed the Construction Allowance, and the Construction Allowance shall be reduced by every such reimbursement to Tenant.

               (iv) Tenant Work Defined. Tenant shall, in a good and workmanlike manner, cause the Premises to be improved and completed at Tenant’s expense (subject to the Construction Allowance as hereinafter provided) and in accordance with Tenant’s Construction Documents, which work (including materials, supplies, components, labor and services therefor) is herein referred to as the “Tenant Work”.

               (v) Tenant’s Contractor.

                    (A) The work shall be performed at Tenant’s expense by responsible contractors and subcontractors approved in advance by Landlord, who shall not in Landlord’s sole opinion, and who in fact do not, prejudice Landlord’s relationship with Landlord’s contractors or subcontractors or the relationship between such contractors and their subcontractors or employees, or disturb harmonious labor relations. Landlord hereby approves the following contractors: Tamora Construction, Patriot Construction and Commercial Construction. Tenant’s contractors and subcontractors shall comply with all insurance requirements and undertakings set forth in Exhibit D attached to the Lease, as the same may be changed by written notice from Landlord to Tenant from time to time during the Term.

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                    (B) Upon Landlord’s approval of the Tenant’s contractor, Tenant shall enter into a construction contract or construction management agreement for the Tenant Work (the “Tenant Work Contract”). The Tenant Work Contract shall require that both Landlord and Tenant must approve the selection of each subcontractor and supplier over Fifty Thousand Dollars ($50,000.00), such approval not to be unreasonably withheld or delayed.

                    (C) Prior to commencement of the Tenant Work,Tenant will provide Landlord with a copy of the building permit respecting the Tenant Work. Additionally, upon completion of the Tenant Work and prior to occupancy of the Premises by Tenant, Tenant will deliver to Landlord a copy of the permanent Certificate of Occupancy respecting the Premises.

               (d) Payment of Construction Allowance.

          (i) The term “Construction Allowance” shall mean up to the maximum aggregate sum of $982,820.00, to be applied as set forth in this Section 3(d). Tenant may draw upon the Construction Allowance for (A) payment of or reimbursement of costs paid for labor and materials provided for the Tenant Work and incorporated into the Premises, (B) payment of or reimbursement of Tenant’s architect’s and engineer’s and other professional fees paid by Tenant in connection with the design and construction of the Tenant Work as provided in Section 3(c)(iii)(C), and (C) payment of or reimbursement of costs for furniture, fixtures and equipment to be used in the Premises up to $294,846.00 of the Construction Allowance (herein all called “Tenant’s Costs”) in accordance with the terms of this Section 3(d). At the time Tenant’s Construction Documents are finalized, Tenant will deliver to Landlord an estimated budget reasonably detailing the anticipated Tenant’s Costs. Tenant shall submit to Landlord on or before the twentieth (20th) day of each month, a voucher for Tenant’s Costs (in the standard American Institute of Architects form) executed by Tenant’s Construction Representative and by a partner or officer of Tenant, setting forth in reasonable detail the amount of such Tenant’s Costs and identifying the material, labor, fees, and costs to which they relate, accompanied by (A) in the case of a request for reimbursement of costs paid by Tenant, (I) canceled checks, paid invoices or other evidence reasonably satisfactory to Landlord that Tenant has paid the sums sought to be reimbursed, and (II) a lien release executed by each of Tenant’s contractors which received payments for which Tenant is seeking reimbursement, and (B) in the case of a request for payment directly to a contractor or contractors, design professional or furniture vendor, copies of invoices for the work or items sought to be paid and a certification from Tenant’s Construction Representative that the work and items represented by such invoices have been accepted by Tenant. Landlord shall pay to Tenant and/or the Tenant’s contractor(s), design

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professional(s) and/or furniture vendor(s), as the case may be, the amount of each Tenant voucher, or applicable portion thereof, within thirty (30) days after Landlord’s receipt and approval of a given Tenant’s voucher and the certificate described in Subsection (d)(ii) below, until the Construction Allowance is exhausted; provided, that in no event shall Landlord be liable for any late fees, late charges, interest or any penalty incurred by Tenant under its contract(s) with its contractor(s), design professional(s) and/or furniture vendor(s) as a result of the receipt by any such contractor(s), design professional(s) and/or furniture vendor(s) of payment after the date it is due. Notwithstanding the foregoing, any amounts held back as retainage under contracts for the Tenant Work shall not constitute a part of Tenant’s Costs unless and until paid to the contractor under the terms of the subject contract. If Landlord supervises the construction of the Tenant Work, Tenant shall compensate Landlord in an amount equal to five percent (5%) of the aggregate of the Tenant’s Costs as compensation to Landlord for administration and supervision of the Tenant Work (“Landlord’s Cost”). Landlord’s Cost shall be paid by Tenant to Landlord in installments due within thirty (30) days after billing, in an amount equal to 5% of Tenant’s Costs incurred to date, and may be drawn by Landlord from the Construction Allowance.

          (ii) Each voucher submitted to Landlord by Tenant (as set forth in Subsection (d)(i) above) shall be accompanied by a certificate duly executed and sworn to by Tenant’s Construction Representative stating that: (A) Tenant has incurred and, if applicable, paid, all costs and expenses sought to be paid or reimbursed, (B) based on site inspections and the data comprising the invoice submitted for payment by Landlord, the Tenant Work has progressed to the point indicated and the quality and condition of the Tenant Work theretofore completed or in the process of completion as of the date of such certificate is in accordance with the Construction Documents and with all construction and other contracts pertaining thereto, and (C) that Tenant’s contractor is or was, as the case may be, entitled to the amount so certified. All vouchers requesting disbursement of sums from the Construction Allowance must be submitted to Landlord on or before September 15, 2011.

     (e) Contractor Requirements. In making any alterations and improvements or performing any other work of any kind within the Premises through the services of any contractor or contractors, the following conditions shall be fulfilled, and Tenant, by undertaking to have such work performed by its contractor or contractors, shall be deemed to have agreed to cause such conditions to be fulfilled:

          (i) Prior to commencing any such work, Tenant shall (A) furnish Landlord with a written description of the proposed work and reasonably detailed plans and specifications therefor and (B) obtain the approval of Landlord, in writing, for the specific work it proposes to

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perform and all such plans and specifications. Landlord shall respond with its approval or disapproval within five (5) business days of receipt of Tenant’s request; provided, however, that should Landlord’s review require review of the plans and specifications by a third party professional, Landlord shall have up to thirty (30) days to respond. Should Landlord disapprove Tenant’s submitted plans and specifications, Landlord will reasonably specify the reasons for disapproval in its response to Tenant.

          (ii) The work shall be performed at Tenant’s expense by responsible contractors and subcontractors approved in advance by Landlord, who shall not in Landlord’s sole opinion, and who in fact do not, prejudice Landlord’s relationship with Landlord’s contractors or subcontractors or the relationship between such contractors and their subcontractors or employees, or disturb harmonious labor relations. Landlord hereby approves the following contractors: Tamora Construction, Patriot Construction and Commercial Construction. Tenant’s contractors and subcontractors shall comply with all insurance requirements and undertakings set forth in Exhibit D attached to the Lease, as the same may be changed by written notice from Landlord to Tenant from time to time during the Term.

          (iii) Each of such contractors being paid $5,000.00 or more shall, prior to the commencement of their work and not later than ten (10) days after the execution of their respective contracts, file waivers of mechanic’s liens in the appropriate public office, which waivers shall be effective to preclude the filing of any mechanic’s liens on account of the work to be performed by any of Tenant’s contractors, subcontractors or materialmen.

          (iv) No such work shall be performed in such manner or at such times as to interfere with any work being done by any of Landlord’s contractors or subcontractors in or about the Property generally. Tenant’s contractors and subcontractors shall be subject to the decisions of Landlord’s contractor as to such matters and as to avoidance of interference with other tenants of the Building or the work of other tenants’ contractors and subcontractors, but Landlord’s contractor shall not be responsible for any aspect of the work performed by Tenant’s contractors or subcontractors or for the coordination of the work of Landlord’s contractors or others with Tenant’s contractors.

          (v) Except as otherwise set forth in this Section 3(e), all such work shall be subject to the requirements and provisions of Section 10.6, 10.7 and 25 of the Lease.

          (vi) Tenant and its contractors and subcontractors shall be solely responsible for the transportation, safekeeping and storage of materials and equipment used in the performance of their work, for the

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removal of waste and debris resulting therefrom, and for any damage caused by them to any installations or work performed by Landlord’s, or any other tenant’s, contractors and subcontractors.”

          5. Minimum Rent.

               (a) Section 4 of the Third Amendment is amended and restated in its entirety as follows:

“For the period from April 1, 2010 through September 30, 2010, Tenant shall pay, as additional Minimum Rent for the Second Additional Expansion Premises, the amount of $173,824.98 ($28,970.83 per month). Such payment shall be in addition to all other Minimum Rent Tenant is required to pay under Section 4.1 of the Lease.”

               (b) As of October 1, 2010, Section 4.1 of the Lease is deleted in its entirety and replaced with the following:

          “4.1 Minimum Rent. Annual Minimum Rent for the Premises (“Minimum Rent”) shall be as follows:

October 1, 2010 through	$1,474,230.00	$122,852.50
September 30, 2011	per annum	per month
October 1, 2011 through	$1,523,371.00	$126,947.58
September 30, 2012	per annum	per month
October 1, 2012 through	$1,572,512.00	$131,042.66
September 30, 2013	per annum	per month
October 1, 2013 through	$1,621,653.00	$135,137.75
September 30, 2014	per annum	per month
October 1, 2014 through	$1,670,794.00	$139,232.83
September 30, 2015	per annum	per month
October 1, 2015 through	$1,719,935.00	$143,327.91
September 30, 2016	per annum	per month

All Minimum Rent shall be payable in equal monthly installments due on the first day of each month without demand, deduction or set-off, at the following address (or at such other address of which Landlord shall hereafter give Tenant written notice):

Hub Properties LLC
P. O. Box 845559
Boston, MA 02284-5559”

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          6. Base Year. As of October 1, 2010, the definition of “Base Year” set forth in Section 1 of the Lease is deleted in its entirety and replaced with the following:

               “Base Year. The term “Base Year” shall mean calendar year 2010.”

          7. Termination Option. As of the Effective date, Section 7 of the Second Amendment is deleted in its entirety and replaced with the following:

          “(a) Tenant shall have the one-time option to terminate the Lease effective as of October 31, 2014 (the “End Date”), by delivery of written notice of termination to Landlord at least twelve (12) months prior to the End Date; provided, however, that Tenant may only exercise such termination option if, prior to Tenant’s giving notice of such exercise, (i) Tenant has sold all or substantially all of the assets of its subsidiary, NextGen Healthcare Information Systems, a California corporation (“Next Gen”), in an arm’s length sale to a person or entity that is not an affiliate of either Tenant or Next Gen, or (ii) Tenant has requested and Landlord has advised Tenant in writing within twenty days from the date of Landlord’s receipt of Tenant’s request that Landlord is unable to provide expansion space for Tenant in the Building. Tenant’s notice exercising such termination option shall be irrevocable. As material consideration for the option to terminate herein set forth, Tenant shall deliver to Landlord at least ninety (90) days prior to the End Date Tenant’s good bank check for the “Termination Fee” (as defined below). In calculating the Termination Fee, it will be assumed the “Lease Costs” (as defined below) were financed at a fixed interest rate of ten percent (10) per annum with a seventy-two (72) month self-amortizing loan paid in seventy-two (72) equal monthly installments due on the first day of each calendar month, commencing on October 1, 2010 and the “Termination Fee” will be the principal balance that would remain outstanding under such loan following payment of the monthly installment owing for the calendar month in which the End Date occurs. The term “Lease Costs” means the sum of the following: (i) the Construction Allowance plus (ii) Landlord’s professional, designer, architectural and engineering fees and costs, including, without limitation, the cost of review to drawing and other plans relating to the Tenant’s Work, plus (iii) all leasing commission paid by Landlord in connection with this Fourth Amendment, plus (iv) Landlord’s reasonable legal costs incurred and paid in negotiation and preparing this Fourth Amendment. Notwithstanding anything to the contrary contained herein, at Landlord’s option, Tenant’s termination of the Lease pursuant to this Section 7 shall be ineffective if an Event of Default exists either at the time of Tenant’s exercise of its termination option or at the End Date. Failure of Tenant to timely exercise the option herein granted (“exercise” meaning both the giving of the requisite notice and the payment of the Termination Fee) shall constitute Tenant’s irrevocable waiver of such option.

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          (b) Section 3.6 of the Lease is deleted in its entirety.”

          8. Right of First Refusal. As of the Effective Date, Section 14 of the Second Amendment is hereby deleted in its entirety and replaced with the following:

          “(a) From October 1, 2010 through September 30, 2012, provided no uncured Event of Default then exists hereunder, and further provided that Landlord shall have received a bona fide request for proposal with respect to all or any portion of the vacant space in the Building (the “Available Space”), Landlord shall first offer the Available Space to Tenant on the same terms and conditions (including, without limitation, length of Term and rate of Minimum Rent) as Landlord is leasing the Premises to Tenant. From October 1, 2012 through the end of the Term, provided no uncured Event of Default then exists hereunder, and further provided that Landlord shall have received a bona fide request for proposal with respect to all or any portion of the Available Space, Landlord shall first offer the Available Space to Tenant for the remainder of the Term, at a minimum rate of rent equal to the average minimum rate of rent that Landlord would propose to the unrelated third party who has requested a proposal, and otherwise on the same terms and conditions as Landlord would propose to the unrelated third party who has requested a proposal, reformulated for the remaining Term; for example, if Landlord would propose $10.00 per Rentable Square Foot for tenant improvements over a five (5) year term to the unrelated third party, but the remaining Term is only two (2) years, then Tenant would receive $4.00 per Rentable Square Foot for tenant improvements.

          (b) Landlord’s offer shall take the form of a written notice to Tenant setting forth the Rentable Area of the Available Space proposed to be leased, the date it is expected to be available, the proposed terms and conditions of lease (which, during the period from October 1, 2010 through September 30, 2012, shall be the same as the Lease) and a floor plan of the space in question. Tenant shall have ten (10) days after the date Tenant receives Landlord’s offer (“Landlord’s Offer”) to accept or decline the same without modification. In the event that Tenant does not accept Landlord’s offer in writing (and without modification) within ten (10) days after the date on which Tenant receives Landlord’s Offer, then Landlord shall be free to lease the Available Space to the party issuing the bona fide request for a proposal. In the event that Tenant accepts Landlord’s Offer in writing (without modification) within such time period, Landlord and Tenant shall have thirty (30) days from the date of Tenant’s acceptance in which to enter into a lease agreement for the Available Space or Landlord shall be free to lease the Available Space to any prospective tenant. Landlord and Tenant acknowledge and agree that if the Available Space subsequently becomes available again, Tenant shall have the same right of first refusal contained herein.”

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          9. Ratification of Confession of Judgment.

               SECTION 17.2 OF THE LEASE PROVIDES FOR THE CONFESSION OF JUDGMENT AGAINST TENANT FOR MONEY AND FOR EJECTMENT. IN CONNECTION THEREWITH, TENANT, KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND UPON ADVICE OF SEPARATE COUNSEL, UNCONDITIONALLY WAIVED ANY AND ALL RIGHTS IT MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. TENANT HEREBY RATIFIES AND CONFIRMS SECTION 17.2 OF THE LEASE AND CONFIRMS THAT SUCH SECTION APPLIES TO THE RENT DUE WITH RESPECT TO THE SECOND ADDITIONAL EXPANSION PREMISES AND LANDLORD’S POSSESSION OF THE SECOND ADDITIONAL EXPANSION PREMISES. SPECIFICALLY, TENANT ACKNOWLEDGES THAT THE LEASE, AS AMENDED HEREBY, PROVIDES FOR THE CONFESSION OF JUDGMENT AGAINST TENANT FOR MONEY DUE UNDER THE LEASE, AS AMENDED HEREBY, AND FOR EJECTMENT WITH RESPECT TO THE ENTIRE PREMISES. TENANT (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF LANDLORD REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LANDLORD WILL NOT SEEK TO EXERCISE OR ENFORCE ITS RIGHTS TO CONFESS JUDGMENT UNDER THE LEASE, AS AMENDED HEREBY, AND (II) ACKNOWLEDGES THAT THE EXECUTION OF THE LEASE AND THIS AMENDMENT BY LANDLORD HAS BEEN MATERIALLY INDUCED BY, AMONG OTHER THINGS, THE INCLUSION IN THE LEASE AND IN THE AMENDMENT OF SAID RIGHTS TO CONFESS JUDGMENT AGAINST TENANT. TENANT FURTHER ACKNOWLEDGES THAT IT HAD THE OPPORTUNITY TO DISCUSS SAID PROVISIONS WITH TENANT’S INDEPENDENT LEGAL COUNSEL AND THAT THE MEANING AND EFFECT OF SUCH PROVISIONS HAS BEEN FULLY EXPLAINED TO TENANT BY SUCH COUNSEL, AND AS EVIDENCE OF SUCH FACT AN AUTHORIZED OFFICER OF TENANT SIGNS HIS OR HER INITIALS IN THE SPACE PROVIDED BELOW.

(Tenant’s Initials)

          10. Limitation of Liability. In addition to any other limitations of Landlord’s liability as contained in the Lease, as amended hereby, the liability of Landlord (and its partners, shareholders or members) to Tenant (or any person or entity claiming by, through or under Tenant) for any default by Landlord under the terms of the Lease, as amended hereby, or any matter relating to or arising out of the occupancy or use of the Premises and/or other areas of the Building shall be limited to Tenant’s actual direct, but not consequential, damages therefor and shall be recoverable only from the interest of Landlord in the Building, and Landlord (and its partners, shareholders or members) shall not be personally liable for any deficiency.

          11. Brokerage. Landlord and Tenant each warrant to the other that it has not dealt with any broker or agent in connection with the negotiation or execution of this Amendment other than The Flynn Company and Kern Olsen Real Estate Services, whose commissions shall be paid by Landlord pursuant to a separate written agreement. Tenant and Landlord shall each indemnify the other against all costs, expenses, attorneys’ fees, and other

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liability for commissions or other compensation claimed by any other broker or agent claiming the same by, through, or under the indemnifying party.

          12. Ratification. Tenant hereby ratifies and confirms its obligations under the Lease, as amended hereby, and represents and warrants to Landlord that Tenant has no defenses thereto. Additionally, Tenant further confirms and ratifies that, as of the date hereof, (a) the Lease is and remains in good standing and in full force and effect, and (b) Tenant has no claims, counterclaims, set-offs or defenses against Landlord arising out of the Lease or in any way relating thereto or arising out of any other transaction between Landlord and Tenant.

          13. Binding Effect; Inconsistency; Governing Law. Except as amended hereby, the Lease shall remain in full effect and this Amendment shall be binding upon Landlord and Tenant and their respective successors and assigns. If any inconsistency exists or arises between the terms of the Lease and the terms of this Amendment, the terms of this Amendment shall prevail. This Amendment shall be governed by the laws of the Commonwealth of Pennsylvania.

          14. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall constitute an original but all of which together shall constitute one and the same Amendment.

          Executed as of the date first written above.

LANDLORD: HUB PROPERTIES LLC, a Massachusetts limited liability company
By:	MA PO, LLC,
	a Delaware limited liability company,
	its Managing Member
By:	/s/ David M. Lepore
	Name:	David M. Lepore
	Title:	Vice President
TENANT: QUALITY SYSTEMS, INC., a California corporation
By:	/s/ P. Kaplan
	Name:	P. Kaplan
	Title:	COO

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EXHIBIT A

PLAN OF SECOND ADDITIONAL EXPANSION PREMISES

A-1

EX-10.40

Exhibit 10.40

THIRD AMENDMENT TO SERVICE CENTER LEASE

     This Third Amendment to Service Center Lease (“Amendment”) is made and entered into this ___ day of March, 2010, by and between TM Properties, L.L.C., a Missouri limited liability company, successor to The Lincoln National Life Insurance Company (“Landlord”), and Quality Systems, Inc., a California corporation, successor Lackland Acquisition II, LLC as (“Tenant”).

     WHEREAS, Landlord and Tenant entered into that certain Standard Service Center Lease Agreement dated November 28, 2001, as amended by that certain First Amendment to Service Center Lease dated August 17, 2005 and that certain Second Amendment to Service Center Lease dated August 17, 2005 (as amended, “Lease”), whereby Tenant leased those certain premises containing approximately 30,705 square feet in Suites 1828, 1836A, 1836B and 1842 at the building known as Meadows Corporate Center II and approximately 9,361 square feet in Suite 1884-7 at the building known as Meadows Corporate Center IV, which is situated at Lackland Hill Parkway, St. Louis, Missouri, 63146, upon the terms and conditions contained in the Lease; and

     WHEREAS, Landlord and Tenant agree that the Lease is currently scheduled to expire on November 30, 2010; and

     WHEREAS, Landlord and Tenant desire to renew and extend the term for an additional five (5) years pursuant to the terms of this Amendment; and

     WHEREAS, Landlord and Tenant desire to modify and amend certain terms and conditions of the Lease as hereinafter provided.

     NOW, THEREFORE, in consideration of the agreements and promises contained herein and in the Lease, and other valuable consideration, the adequacy and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.	Recitals. The Recitals contained herein are true and correct and incorporated herein by this reference. Capitalized terms not otherwise defined herein, in the Recitals, or the preamble, shall have the meanings ascribed to them under the Lease, as amended hereby.
2.	Renewal Term. Tenant and Landlord hereby extend and renew the Lease for an additional five (5) year period, commencing on December 1, 2010 and terminating on November 30, 2015 (“Renewal Term”).
3.	Leased Premises. Section 1.1 of the Lease is hereby deleted in its entirety and replaced with the following:

“1.1 Demise of Leased Premises. Landlord, in consideration of the rents and of the terms and conditions hereinafter contained, does hereby lease to Tenant, and Tenant does hereby rent from Landlord the space containing approximately 57,997 rentable square feet in the aggregate (“Leased Premises”). The Leased Premises is located in seven (7) suites as follows:

(i)	Suite 1836A containing 8,139 rentable square feet in Meadows Corporate Center II;
(ii)	Suite 1836B containing approximately 4,430 rentable square feet in Meadows Corporate Center II;
(iii)	Suite 1828 containing approximately 9,500 rentable square feet in Meadows Corporate Center II;
(iv)	Suite 1842 containing approximately 8,636 rentable square feet in Meadows Corporate Center II;
(v)	Suite 1844-46 containing approximately 11,636 rentable square feet in Meadows Corporate Center II (“Expansion Space”);
(vi)	Suite 1884-7 containing approximately 9,361 rentable square feet in Meadows Corporate Center IV (“Suite 1884-7”); and
(vii)	Suite 1884-4 containing approximately 6, 295 square feet in Meadows Corporate Center IV (“Suite 1884-4”, and collectively with Suite 1884-7, the “Transition Space”).

Effective as of December 1, 2010, the Leased Premises shall also include Suite 1848 containing approximately 8,575 rentable square feet in Meadows Corporate Center III (“Suite 1848”), for an aggregate total of 66,572 square feet. Meadows Corporate Center II, Meadows Corporate Center III, and Meadows Corporate Center IV are located at Lackland Hills Parkway, St. Louis, Missouri 63146 (each a “Building, and collectively “Buildings”). The Buildings are part of a three (3) building service center complex commonly known as The Meadows Corporate Center (collectively the “Project”). The “Property” is the land upon which the Project is located and is described on Exhibit “A” and the floor plans of the Leased Premises are attached as Exhibit “B” and incorporated by reference.”

4. Base Rent. Notwithstanding anything to the contrary contained in the Lease, commencing December 1, 2010, Tenant shall pay Base Rent to Landlord in the amount as follows:

Period	Base Rent per SF		Monthly Base Rent		Annual Base Rent
12/1/2010-11/30/2012	$	10.50	$	58,250.50	$	699,006
12/1/2012-11/30/2014	$	11.00	$	61,024.33	$	732,292
12/1/201-11/30/2015	$	11.50	$	63,798.17	$	765,578

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     Effective December 1, 2010, the Base Rent is computed based upon 66,572 square feet of the Leased Premises. With respect to the Expansion Space, Base Rent shall abate until December 1, 2010. Base Rent and all other sums, whether designated additional rent or otherwise, payable to Landlord under this Lease shall be paid to Landlord at the following address, or at such other address as Landlord may direct in writing:

TM Properties, L.L.C.
4678 World Parkway Circle
St. Louis, Missouri 63134

5. Proportionate Share. Section 3.4 of the Lease is hereby deleted in its entirety and replaced with the following:

“3.4 Proportionate Share. Tenant’s “Proportionate Share” as used in this Lease shall be obtained by multiplying the expense in question by a fraction, the numerator of which shall be the rentable square footage area of the Leased Premises, and the denominator of which shall be the rentable square feet of the Project, which for purposes of this Lease shall be stipulated to be 132,994 rentable square feet. For purposes of this Lease, Tenant’s Proportionate Share is 43.6% (57,997 rentable square feet divided by 132,994 rentable square feet). Effective as of December 1, 2010, Tenant’s Proportionate Share is 50.05% (66,572 rentable square feet divided by 132,994 rentable square feet).”

6.	Project. The terms “Property” and “Building” found in Sections 3.5(b), 3.6, and 4.4 of the Lease are hereby deleted and replaced with the term “Project”.
7.	Real Property Taxes and Insurance. Commencing on December 1, 2010, Section 3.5(a) of the Lease is hereby deleted in its entirety and replaced with the following:

“3.5 Real Property Taxes and Insurance. (a) Beginning December 1, 2010, Tenant shall pay as Additional Rent, Tenant’s Proportionate Share of the amount by which Real Property Taxes (as defined in Section 3.5(b)) and Insurance (as defined in Section 3.6) payable during each calendar year falling entirely or partly within the Lease Term exceed the Expense Stop Amount as defined in Section 3.9. Tenant shall make estimated monthly payments to Landlord on account of the amount by which Real Property Taxes and Insurance that are expected to be paid during each calendar year would exceed the Expense Stop Amount. Beginning December 1, 2010 and at the beginning of each calendar year thereafter, Landlord may submit a statement setting forth Landlord’s reasonable estimate of such excess and Tenant’s Proportionate Share thereof. Tenant shall pay to Landlord on the

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first day of each month following receipt of such statement, until Tenant’s receipt of the succeeding annual statement, an amount equal to one-twelfth (1/12^th) of such share.”

8. Expense Stop Amount. Section 3.9 of the Lease is hereby deleted in its entirety and replaced with the following:

“3.9 Expense Stop Amount. For purposes of this Lease, “Expense Stop Amount” shall be defined as Tenant’s Proportionate Share of the actual expense incurred for Real Property Taxes and Insurance in the calendar year 2010.”

9.	Common Expenses. The following shall be added to the end of Section 4.4 of the Lease: “; and management fees paid by Landlord.”
10.	Option to Extend Term. Section 2.4 of the Lease is hereby deleted in its entirety and replaced with the following:

“2.4 Option to Extend Term. Provided Tenant is not in default in any of the terms, conditions or covenants of this Lease either on the date Tenant gives Landlord the renewal notice required herein or at the end of the Renewal Term, Landlord hereby grants to Tenant an option to renew (“Option to Renew”) this Lease for one (1) additional period of five (5) years upon the same terms and conditions contained in the Lease, except that Base Rent and any tenant improvement allowance shall be negotiated in good faith by both Landlord and Tenant upon market terms changed by similar properties in the Westport submarket at the time the Option to Renew is exercised. The Option to Renew must be exercised by Tenant giving written notice to Landlord during the period between November 30, 2014 and February 28, 2015. All other terms of this Lease shall remain the same. As used throughout this Lease, any reference to the “lease term”, “term”, or “term of this Lease” shall also include any and all renewal terms and the Renewal Term.”

11. Right of First Opportunity.

(a)	The first sentence of Section 2.5 is hereby deleted in its entirety and replaced with the following:
	“2.5 Right of First Opportunity. Subject to all other options held by existing tenants of the Buildings and provided that Tenant is not in default hereunder at the time of Tenant’s exercise of this option, Tenant shall have a one-time right of first opportunity (the “Right of First Opportunity”) to lease any contiguous space to the Leased Premises located in Meadows Corporate Center III (the

4

	“ROFO Space”), if and when such space becomes available during the Term of this Lease, on the following terms and conditions:”
(b)	Section 2.5(i) of the Lease is hereby deleted in its entirety and replaced with the following:
	“(i) Landlord shall notify Tenant of the available ROFO Space prior to offering such ROFO Space to any other party and set forth the terms and conditions upon which Landlord is willing to lease the ROFO Space to Tenant (“Landlord’s Notice”). Tenant shall have five (5) days from the receipt of Landlord’s Notice to exercise the Right of First Opportunity by sending written notice to Landlord of its intent to lease the ROFO Space upon the terms and conditions in Landlord’s Notice (the “Leased Expansion Space”). Tenant shall be deemed to have declined a lease for the ROFO Space if its acceptance is delayed or if the acceptance changes any material term or condition of the Landlord’s Notice.”

12. Tenant Improvements. A new Section 27 is hereby added to the Lease:

“27 Tenant Improvements.

(a) Preliminary Space Plan. Tenant shall prepare and provide a preliminary space plan to Landlord to be mutually approved by Landlord and Tenant showing the size, nature and location of the improvements to be constructed in Leased Premises (the “Tenant Improvements”). Promptly following execution of this Lease, Tenant shall meet with an architect approved by Landlord and shall provide such information and make such selections as may be necessary for the expeditious completion of the planning process.

(b) Working Drawings. Based upon the preliminary space plan and the information provided and selections made by Tenant, Landlord shall cause working drawings and specifications (collectively, the “Plans”) to be prepared for the Tenant Improvements. The Plans shall be consistent with the Building design standards as established by Landlord (unless a departure therefrom is approved by both parties). Tenant shall contract directly with the architect to prepare the Plans. The cost for the Plans shall be paid out of the tenant improvement allowance of $250,000 (“Tenant Improvement Allowance”). The Plans shall be subject to the reasonable approval of both parties. Except as specifically noted on the approved Plans, all materials and finishes shall be those established as the building standard by Landlord.

(c) Cooperation. During the entire course of the process described above, both Landlord and Tenant shall review and respond to

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submissions by the other party with reasonable dispatch. Tenant shall respond with its approval or comments within five days after receipt of initial drawings, specifications, or other materials requiring Tenant’s review and within three days after receipt of revised versions of such documents or materials. From time to time at the request of either party, Landlord and Tenant shall devise, and revise as necessary, working schedules for the preparation of the Plans and the construction of the Improvements. Tenant shall not permit any supplier, installer, contractor, or other person employed by Tenant to materially interfere with the progress of the work and any access shall be subject to scheduling with Landlord and in compliance with all of Landlord’s requirements.

(d) Construction. Landlord shall solicit at least three (3) competitive bids for a general contractor and shall consult with Tenant as to the most qualified, competitive bidder to be selected. Landlord shall cause the general contractor to construct the Tenant Improvements within the Leased Premises set forth in the approved Plans in a good, workmanlike manner and in substantial accordance with the Plans.

(e) Change Order. If Tenant requests any changes to the Tenant Improvements, Landlord shall advise Tenant prior to making such changes as to the estimated cost to perform such change and the estimated delay, if any, in the date for Substantial Completion estimated to be caused by such change. If the change order requires any additional payment by Tenant, Tenant shall pay the same to Landlord within ten (10) days after receipt of the change order.

(f) Cost. Prior to commencement of construction of the Tenant Improvements, Tenant shall pay to Landlord the amount, if any, by which the estimated Costs of Construction exceed the Tenant Improvement Allowance. Any difference between actual and estimated Costs of Construction shall be paid or refunded, as the case may be, within ten days after receipt of Landlord’s statement calculating the amount due. Any unused portion of the Tenant Improvement Allowance shall not be used as a rent credit or otherwise and will no longer be available to Tenant if not used by December 31, 2010. “Costs of Construction” of the Tenant Improvements means all costs and expenses incurred by Landlord to design and build the Tenant Improvements, including, without limitation, permit and inspection fees, management and supervision fees equal to five percent (5%) of all expenses for which the Tenant Improvement Allowance was utilized, taxes, amounts paid to contractors, subcontractors, and suppliers,

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architects’ fees, engineering costs, premiums for bonds and insurance, utilities, equipment rental, demolition, labor, materials, and supplies. Tenant may use a portion of the Tenant Improvement Allowance in an amount not to exceed $51,000 towards the purchase of cubicles, furniture, equipment and move-related expenses for the Premises. The Tenant Improvement Allowance may not be used towards the payment of Rent.

(g) “Substantial Completion” (or similar derivations) of the Tenant Improvements shall mean that stage of the Tenant Improvements when the Tenant Improvements are sufficiently complete in accordance with the approved Plans so that Tenant can occupy and utilize the Leased Premises for its intended purpose, with only a limited number of minor punchlist items remaining to be completed or corrected and which do not unreasonably interfere with Tenant’s use of the Leased Premises.”

13. Transition Space: A new Section 28 is hereby added to the Lease:

“28. Transition Space. Effective as of December 1, 2010, the Transition Space shall be leased on a month-to-month basis upon the same terms and conditions of this Lease, including Base Rent. Either party may terminate all or a portion of the Transition Space upon thirty (30) days prior written notice to the other party (“Termination Notice”). Tenant shall execute and deliver to Landlord within thirty (30) days of the Termination Notice an amendment to the Lease prepared by Landlord which (a) removes the Transition Space from the Leased Premises, (b) decreases the rentable area of the Leased Premises by the rentable area of the Transition Space and decreases Tenant’s Proportionate Share accordingly, and (c) makes such other modifications of affected portions of this Lease consistent with the foregoing.”

14. Expansion Space and Suite 1848: A new Section 29 is hereby added to the Lease:

“29. Expansion Space and Suite 1848. Notwithstanding anything to the contrary contained in the Lease, Landlord shall at its expense make any improvements or alterations to the Expansion Space and Suite 1848 that are specifically required by governmental officials to conform with applicable laws, ordinances, regulations, and the ADA in connection with Tenant’s initial occupancy of the Expansion Space and Suite 1848 only.”

15. Interior Construction. Section 26.5 of the Lease and Exhibit “F” of the Lease are hereby deleted in their entirety.

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16. Notices: Landlord’s and Tenant’s notice addresses as provided in Article XVII of the Lease are hereby deleted and replaced with the following:

“If to Landlord:

Thomas R. Martin
Duke Realty Corporation
520 Maryville Centre Drive
Suite 200
St. Louis, MO 63141

With a copy to:

Cassidy Turley
1884 Lackland Hill Parkway, Suite 2
St. Louis, MO 63146

If to Tenant:

Mr. Allen Weiss
VP, Procurement
Office of the COO
Quality Systems, Inc.
1811 Von Karman Avenue, Suite 600
Irvine, CA 92612”

17.	Exhibits. Exhibit “A” to the Lease, which is the definition of Property, and Exhibit “B” to the Lease, which is the Floor Plan, are hereby replaced by Exhibit “A” and Exhibit “B” attached hereto and incorporated herein by this reference.
18.	Ratification. Except as expressly set forth herein, all the terms, covenants and conditions, representations and warranties set froth in the Lease shall continue in full force and effect and are hereby ratified and affirmed.
19.	Authorization. Each of the parties represents and warrants to the other that it is authorized to enter into this Amendment and has taken all necessary action to approve the execution of this Amendment.
20.	Counterparts. This Amendment may be executed in counterparts, each of which shall constitute an original.

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

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     IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of the day and year first above written.

LANDLORD:			TENANT:
TM Properties, L.L.C.			Quality Systems, Inc.
By:	/s/ Thomas K. Martin		By:	/s/ Phillip N. Kaplan
	Name:	Thomas K. Martin		Name:	Phillip N. Kaplan
	Title:	Manager		Title:	COO

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EXHIBIT A

Legal Description of Property

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EXHIBIT B

Floor Plan

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EX-10.41

Exhibit 10.41

SECOND AMENDMENT TO LEASE

     THIS SECOND AMENDMENT TO LEASE (this “Amendment”) is made as of this 1^st day of November, 2009, by and between HILL MANAGEMENT SERVICES, INC., a Maryland corporation, agent for the owner (“Landlord”), and PRACTICE MANAGEMENT PARTNERS, INC., a Maryland corporation (“Tenant”).

Recitals

     A. Landlord and Tenant entered into a Lease dated April 12, 2007 and a First Amendment To Lease dated January 15, 2008, collectively (the “Lease”), for Suites LL4, 500, 600 and 702 deemed to consist of 33,482 square feet (the “Leased Premises”), which has an address of 11350 McCormick Road, Hunt Valley, Maryland 21031 in Executive Plaza IV in Baltimore County, Maryland (the “Property”).

     B. Landlord and Tenant now desire to amend certain provisions of the Lease to provide Tenant with an extension of its Initial Lease Term.

Agreements

     NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:

     Section 1. Amendment of Lease. The provisions of the Lease are amended as follows:

1.1. Term. Commencing June 1, 2010, the term of the Lease shall be extended for two (2) years and the Expiration Date as set forth in Section 1.A. of the Lease, shall be amended to delete June 30, 2012 and substitute, in lieu thereof, June 30, 2014.

1.2. Rent. Commencing on June 1, 2010 and continuing through June 30, 2014, Tenant shall pay to Landlord annual basic rent of Six Hundred Two Thousand Six Hundred Seventy-Six and 00/100 Dollars ($602,676.00), payable in equal monthly installments of Fifty Thousand Two Hundred Twenty-Three and 00/100 Dollars ($50,223.00).

1.3. Expansion Rent. In the event Tenant expands, during the Initial Lease Term, into additional office space within Executive Plaza I, II, III or IV (the “Additional Leased Premises”) the annual basic rent for the Additional Leased Premises shall be as per the following schedule and shall remain at the corresponding rental rate through June 30, 2014.

Year Of Tenant’s Office Expansion	Additional Leased Premises Rental Rate
6/1/2010 - 5/31/2011	$18.00 per square foot
6/1/2011 - 5/31/2012	$18.54 per square foot
6/1/2012 - 5/31/2013	$19.10 per square foot
6/1/2013 - 5/31/2014	$19.67 per square foot

Landlord and Tenant agree that the above rental rate schedule is based upon Tenant receiving possession of the Additional Leased Premises in as-is condition.

1.4. Electric Submeter. Commencing June 1, 2010 and continuing through the Lease Term, provided Tenant is not in default of the Lease, Landlord agrees to reduce Tenant’s electric cost for Suite LL4 of the Leased Premises in an amount equal to Four Thousand Five Hundred and 00/100 Dollars ($4,500.00) per month or Thirteen Thousand Five Hundred and 00/100 Dollars ($13,500.00) per quarter. For example, in the event the electric costs

1

for Suite LL4 are less than $4,500 per month, Tenant shall have no responsibility for said costs associated with Suite LL4. In the event the electric costs for Suite LL4 exceed $4,500 per month, Tenant shall be responsible for the balance of said costs.

     Section 2. Titles of Sections. The section titles used in this Amendment are for convenience of reference only, and shall not constitute a part of this Amendment nor shall they affect the meaning, construction or effect of this Amendment or the Lease.

     Section 3. Definitions. Unless otherwise set forth in this Amendment, all capitalized terms shall have the same meaning ascribed to them in the Lease.

     Section 4. Interpretation. All other terms, covenants and conditions of the Lease shall remain unchanged and continue in full force and effect except as such terms, covenants and conditions have been amended or modified by this Amendment, and this Amendment shall, by this reference, constitute a part of the Lease.

     Section 5. Representations. Tenant hereby represents and warrants to Landlord that, as of the date hereof, it (i) is the sole legal and beneficial owner of all of the right, title and interest granted to it by the provisions of the Lease, (ii) has not sold, transferred or encumbered any or all of such right, title or interest, and (iii) has the full and sufficient right at law and in equity to execute and deliver this Amendment as the owner of such right, title, and interest, without the necessity of having any other person’s consent thereto or joinder therein.

     Section 6. Successors and Assigns. This Amendment and the terms, covenants and conditions herein contained shall inure to the benefit of and be binding upon Landlord and its successors and assigns, and Tenant and its permitted successors and assigns.

     IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be duly executed under seal on their behalf by their duly authorized representative, as of the date first above written.

WITNESS/ATTEST:	Landlord:
	HILL MANAGEMENT SERVICES, INC. agent for the owner
	By:	/s/ Anthony E. Giulio	(SEAL)
		Anthony E. Giulio, President
	Date: 11/30/09
WITNESS/ATTEST:	Tenant:
	PRACTICE MANAGEMENT PARTNERS, INC.
	By:	/s/ Donald S. Good Jr.	(SEAL)
		Printed Name: Donald S. Good Jr.
		Title: President
	Date: 11-25-09

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EX-10.42

Exhibit 10.42

MODIFICATION OF LEASE # 1

This Modification of Lease #1 dated for reference purposes only, October 13, 2009 is pursuant to that certain Lease by and between OLEN COMMERCIAL REALTY CORP., A NEVADA CORPORATION, as “Lessor”, and NXG ACUTE CARE LLC, A CALIFORNIA LIMITED LIABILITY COMPANY AND WHOLLY-OWNED SUBSIDIARY OF NEXTGEN HEALTHCARE INFORMATION SYSTEMS, INC., A CALIFORNIA CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF QUALITY SYSTEMS INC., A CALIFORNIA CORPORATION, as “Lessee”, dated October 1, 2009 for property located at: 22912 Mill Creek Drive, Suite A, Laguna Hills, CA 92653. The undersigned Parties hereby understand and agree that the above mentioned Lease shall be amended and modified as follows:

Article 1.4. Early Possession: Shall be modified in part to read: “October 14, 2009....”

Article 3.2. Early Possession: Shall be modified in part to read: “Lessor agrees to grant Lessee early occupancy of said Premises, the date to be October 14, 2009. Lease payments shall not commence until November 1, 2009. Lessee agrees to hold Lessor harmless from any liability or responsibility for damages to any of Lessee’s personal property, or for any loss suffered by Lessee through vandalism, theft, or destruction of said personal property by fire or other causes. It is agreed by Lessee and Lessor that all the terms and conditions of the tease are to be in full force and effect, except as to rent, as of the date of Lessee’s possession of subject Premises.”

Addendum A. Item G. Suite Refurbishment/Tenant Improvements: Shall include the following: “Lessee agrees to hold Lessor harmless from any interruption of business suffered by Lessee or any liability whatsoever resulting from any Tenant Improvements as set forth in the Lease for subject Premises. Lessor will make every reasonable effort to complete said work as soon as possible, but can make no guaranty as to a specific date of completion, and same shall not affect the payment of rent due from Lessee. Lessee shall be responsible for moving all wall hangings and furniture and Lessor shall not be responsible for same. Lessee acknowledges that Lessor has forewarned Lessee of the inconvenience Lessee may experience by occupying said Premises during Tenant Improvement work including, but not limited to, interruption of utilities, odors, noise, dust and debris, and that Lessor is accommodating Lessee’s request to complete Tenant Improvements in subject Premises during Lessee’s occupancy. Lessee further agrees not to interfere with in any way, nor instruct Lessor’s construction crew.”

Except as amended and modified herein, all other terms and conditions of said Lease by and between the Parties described above, shall continue in full force and effect. This Modification of Lease #1 shall become effective upon the date of execution hereof.

AGREED AND ACCEPTED:		AGREED AND ACCEPTED:
LESSOR:		LESSEE:
OLEN COMMERCIAL REALTY CORP. A NEVADA CORPORATION		NXG Acute Care LLC, a California Limited Liability Company and wholly-owned subsidiary of NextGen Healthcare Information Systems, Inc., a California Corporation and wholly-owned subsidiary of Quality Systems Inc., a California Corporation
By:		By:	/s/ Stephen K. Puckett
	Jayne Taylor Vice President/CFO		Stephen K. Puckett Vice President
Date:		Date:	October 13, 2009

ADDENDUM “A”

TO LEASE DATED:	October 1, 2009
BY AND BETWEEN:	OLEN COMMERCIAL REALTY CORP., A NEVADA CORPORATION
AS LESSOR; AND:	NXG Acute Care LLC, a California Limited Liability Company and wholly-owned subsidiary of NextGen Healthcare Information Systems, Inc., a California Corporation and wholly-owned subsidiary of Quality Systems Inc., a California Corporation
AS LESSEE

A.	SIGN CRITERIA
	These regulations are established in order to ensure that all signs comply with County of Orange sign ordinances, and in order to maintain a continuity in appearance throughout the Lake Forest Corporate Park. Conformance with the following sign regulations will be strictly enforced:

1. GENERAL REQUIREMENTS

(a)	Each tenant shall be allowed one Identity sign.
(b)	The sign shall be constructed and installed at Lessee’s expense.
(c)	No electrical or audible signs shall be permitted.
(d)	Except as provided herein, no advertising piacards, banners, pennants, names, insignias, trademarks, or other descriptive material shall be affixed or maintained upon the glass panes or exterior walls of the building.
(e)	Placement of the sign shall be in the specific location and installation shall be by the method designated by Lessor.
(f)	Lessee shall submit a sketch of Lessee’s proposed sign (including color selection and proposed location) to Lessor for approval prior to construction and installation. Lessee shall be responsible for obtaining all necessary sign permits and approvals from the County of Orange. Lessee acknowledges Lessee’s sign is also subject to the review and approval of the Lake Forest Corporate Park Management Association Architectural Review Committee.

2. TENANT IDENTIFICATION SIGNS: SINGLE-TENANT BUILDINGS

(a) Each unit shall be entitled to one identification sign on the building.

(b)	The dimensions of the sign shall not exceed 1’ in height, or 3’ in length, including logo.
(c)	Individual letters shall not exceed 4” in height. Letter style shall be white upper case Optima Regular. Lessee may include a logo as part of the three (3) square foot sign area, but the logo shall not exceed one square foot.
(e)	Lessee shall obtain Lessor’s approval of the exact placement of the sign on the building prior to installation.

3. TENANT IDENTIFICATION SIGNS: MULTI-TENANT BUILDINGS

(a)	Each suite shall be entitled to one Identification sign.
(b)	Signs shall be vinyl press-on letters.
(c)	The dimensions of the sign area, including logo, shall not exceed 1’ x 2’. Individual letters shall not exceed 4” in height.

Lessor’s Initials	Lessee’s Initials

ADDENDUM “A”
PAGE 2

(e)	Letter color shall be white. Lettering style, logo and logo colors shall be at Lessee’s option.
(f)	Placement of the sign shall be on the glass front door, or on the glass pane immediately to the left of the front door.

B	EXTERIOR STORAGE
	Tenant shall neither store, nor permit to be stored any goods, machinery, merchandise, equipment, or any other items whatsoever in the parking lot or any other common area adjacent to or in the Building. Tenant may only place or store items wholly within its leased Premises.
C.	DECLARATION OF COVENANTS, CONDITIONS, AND RESTRICTIONS
	Lessee acknowledges that his leasehold estate is part of a Planned Development subject to a Declaration of Covenants, Conditions, and Restrictions. Lessee agrees to accept its leasehold estate subject to the aforementioned Declaration and to make adequate provisions to permit entry and other actions by Lessor for the purpose of performing and complying with these restrictions.
D.	MANAGEMENT
	Subject to Paragraph 7.1 of this Lease, Lessee agrees to pay Common Area Operating Expenses as set forth hereinbelow, and as adjusted pursuant to Paragraph 4.2 herein. In no event shall Lessor be required to insure plate glass or insure against malicious mischief or vandalism.
	The Common Area Operating Expense Budget is as follows:

TOTAL COMMON AREA OPERATING EXPENSE MONTHLY BUDGET FOR:
LAKE FOREST CORPORATE PARK

Total Project Square Footage:		58,010
Tenant’s Square Footage:		2,526
Tenant’s Percentage:		4.35	%
Total Common Area	$	9,862.00
Property Taxes	$	6,913.00
Insurance	$	773.00
TOTAL EXPENSES PER MONTH	$	17,548.00
Lessee’s monthly prorata share is 4.35% of the above expenses as follows:
Common Area	$	429.00
Property Taxes	$	300.72
Insurance	$	33.63
TOTAL MONTHLY COMMON AREA OPERATING EXPENSE BUDGET	$	763.35

Lessor will provide Lessee an estimate of the Common Area Operating Expenses each year which will be added to the monthly lease payment. The estimate for the first year is based on the Common Area Operating Expense Budget above. Lessor agrees to provide Lessee with an accounting of the actual expenses as of December 31st of each year. Should the cost of providing these services exceed the estimate, then upon receipt of a statement from Lessor, Lessee shall pay a lump sum equal to Lessee’s prorata share of Common Area Operating Expenses for the previous calendar year, less the total of the monthly installments of the estimated Common Area Operating Expenses paid in the previous calendar year. The estimated monthly installments to be paid for the next calendar year shall be adjusted to reflect such Increase.

Lessor’s Initials	Lessee’s Initials

EX-10.43

Exhibit 10.43

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE — NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

1. Basic Provisions (“Basic Provisions”).

     1.1 Parties: This Lease (“Lease”), dated for reference purposes only, October 1, 2009, is made by and between OLEN COMMERCIAL REALTY CORP., A NEVADA CORPORATION (“Lessor”) and NXG ACUTE CARE LLC, A CALIFORNIA LIMITED LIABILITY COMPANY AND WHOLLY-OWNED SUBSIDIARY OF NEXTGEN HEALTHCARE INFORMATION SYSTEMS, INC., A CALIFORNIA CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF QUALITY SYSTEMS INC., A CALIFORNIA CORPORATION (“Lessee”), (collectively the “Parties”, or individually a “Party”).

     1.2(a) Premises: That certain portion of the Project (as defined below), including all Improvements therein or to be provided by Lessor under the terms of this Lease, commonly known by the street address of 22912 Mill Creek Drive, Suite A, located in the City of Laguna Hills, County of Orange, State of California, with zip code 92653, as outlined on Exhibit A and Exhibit A-1 attached hereto (“Premises”) and generally described as (describe briefly the nature of the premises): a portion of a multi-tenant Building within the Project known as Lake Forest Corporate Park. In addition to Lessee’s rights to use and occupy the Premises as hereinafter specified, Lessee shall have non-exclusive rights to the Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any rights to the roof, exterior walls or utility raceways of the building containing the Premises (“Building”) or to any other buildings in the Project. The Premises, the Building, the Common Areas, the land upon which they are located, along with all other buildings and improvements thereon, are herein collectively referred to as the “Project” (See also Paragraph 2).

     1.2(b) Parking: Lessee’s prorata share of (4:1,000) of unreserved vehicle parking spaces (“Unreserved Parking Spaces”); and -0- reserved vehicle parking spaces (“Reserved Parking Spaces”). (Also see Paragraph 2.6.)

     1.3 Term: Approximately two (2) years and five (5) months (“Original Term”) commencing November 1, 2009 (“Commencement Date”) and ending March 20, 2012 (“Expiration Date”). (Also see Paragraph 3.)

     1.4 Early Possession: Upon Lessor’s notice to Lessee that Tenant Improvements are Substantially Complete (“Early Possession Date”). (Also see Paragraphs 3.2 and 3.3.)

     1.5 Bass Rent: $2,778.60 per month (“Base Rent”) (See Addendum C for Rent Adjustments) plus $763.35 Common Area Operating Expenses and $454.68 Electricity Charges (see Addendum A, Items D & H) for a total Monthly Remittance of $3,996.63 payable on the first day of each month commencing November 1, 2009 (Also see Paragraph 4.)

a.	Landlord’s Mailing Address: 7 Corporate Plaza, Newport Beach, CA 92660
b.	Tenant’s Mailing Address: 22912 Mill Creek Drive, Suite A, Laguna Hills, CA 92653
c.	RENT CHECKS ARE DUE ON THE FIRST OF EACH MONTH. Please remit Rent Payments to: Olen Commercial Realty Corp., Unit Q, P. O. Box 51915, Los Angeles, CA 90051-8215 LESSOR DOES NOT INVOICE ON A MONTHLY BASIS.

Lessor’s Initials	Lessee’s Initials

1

     1.6 Lessee’s Share of Common Area Operating Expanses: 4.35 percent (4.35%) (Lessee’s Share”).

     1.7. Base Rent and Other Monies Paid Upon Execution:

(a)	Base Rent: $2,778.60 for the period November 1-30, 2009
(b)	Common Area Operating Expenses: $763.35 for the period November 1-30, 2009
(c)	Security Deposit: $4,165.85 (Security Deposit”). (See also Paragraph 5)
(d)	Other: $454.68 Electricity Charges for November 1-30, 2009
(e)	Total Due Upon Execution of this Lease: $8,162.48

     1.8 Agreed Use: General office as approved by the City of Laguna Hills (See also Paragraph 6)

     1.9 Insuring Party. Lessor is the “Insuring Party”. (Also see Paragraph 8.)

     1.10 Real Estate Brokers: (See also Paragraph 15)

          (a) Representation: The following real estate brokers (the “Brokers”) and brokerage relationships exist in this transaction (check applicable boxes):

N/A represents Lessor exclusively (“Lessor’s Broker”);
N/A represents Lessee exclusively (“Lessee’s Broker”); or
N/A represents both Lessor and Lessee (“Dual Agency”). (Also see Paragraph 15.)

          (b) Payment to Brokers. Upon the execution of this Lease by both Parties and occupancy of the Premises by Lessee, Lessor shall pay to the Brokers the brokerage fee agreed to in a separate written agreement.

     1.11 Guarantor. The obligations of the Lessee under this Lease are to be guaranteed by N/A (“Guarantor”). (Also see Paragraph 37.)

     1.12 Addenda and Exhibits. Attached hereto are Addenda A, B, C and Exhibits A, A-1, all of which constitute a part of this Lease.

2. Premises, Parking and Common Areas.

     2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of square footage set forth in this Lease, or that may have been used in calculating Rent, is an approximation which the Parties agree is reasonable and any payments based thereon are not subject to revision whether or not the actual size is more or less.

     2.2 Condition. Lessor shall deliver that portion of the Premises contained within the Building (“Unit”) to Lessee broom clean and free of debris on the Commencement Date or the Early Possession Date, whichever first occurs (“Start Date”), and so long as the required service contracts described in Paragraph 7.1(b) below are obtained by Lessee and in effect within 30 days following the Start Date, warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems (“HVAC”), loading doors, if any, and all such other elements in the Unit, other than those constructed by Lessee, shall be in good operating condition on said date and that the structural elements of the roof, bearing walls and foundation of the Unit shall be free of material defects. If a non-compliance with such warranty exists as of the Start Date, or if one of such systems or elements should malfunction or fall within the appropriate warranty period, Lessor shall, as Lessor’s sole obligation with respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee selling forth with specificity the nature and extent of such non-compliance, malfunction or failure, rectify same at Lessor’s expense. The warranty period shall be as follows: 30 days as to all Building systems and other elements of the Unit, except for latent or structural defects. If Lessee does not

Lessor’s Initials	Lessee’s Initials

2

give Lessor the required notice within the appropriate warranty period, correction of any such non-compliance, malfunction or failure shall be the obligation of Lessee at Lessee’s sole cost and expense (except for the repairs to the fire sprinkler systems, roof, foundations, and/or bearing walls (see Paragraph 7)).

     2.3 Compliance. Lessor warrants that the Improvements on the Premises and the Common Areas comply with the building codes that were in effect at the time that each such improvement, or portion thereof, was constructed, and also with all applicable laws, covenants or restrictions of record, regulations, and ordinances in effect on the Start Date (“Applicable Requirements”). Said warranty does not apply to the use to which Lessee will put the Premises or to any Alterations or Utility installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the Applicable Requirements, and especially the zoning, are appropriate for Lessee’s Intended use, and acknowledges that past uses of the Premises may no longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee selling forth with specificity the nature and extent of such non-compliance, rectify the same at Lessor’s expense. If Lessee does not give Lessor written notice of a non-compliance with this warranty within 6 months following the Start Date, correction of that non-compliance shall be the obligation of Lessee at Lessee’s sole cost and expense. If the Applicable Requirements are hereafter changed so as to require during the term of this Lease the construction of an addition to or an alteration of the Unit, Premises and/or Building, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the Unit, Premises and/or Building (“Capital Expenditure”), Lessor and Lessee shall allocate the cost of such work as follows:

          (a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required as a result of the specific and unique use of the Premises by Lessee as compared with uses by tenants in general, Lessee shall be fully responsible for the cost thereof, provided, however, that if such Capital Expenditure is required during the last 2 years of this Lease and the cost thereof exceeds 6 months’ Base Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, in writing, within 10 days after receipt of Lessee’s termination notice that Lessor has elected to pay the difference between the actual cost thereof and the amount equal to 6 months’ Base Rent. If Lessee elects termination, Lessee shall immediately cease the use of the Premises which requires such Capital Expenditure and deliver to Lessor written notice specifying a termination date at least 90 days thereafter. Such termination date shall, however, in no event be earlier than the last day that Lessee could legally utilize the Premises without commencing such Capital Expenditure.

          (b) If such Capital Expenditure is not the result of the specific and unique use of the Premises by Lessee (such as, governmentally mandated seismic modifications), then Lessor and Lessee shall allocate the obligation to pay for the portion of such costs reasonably attributable to the Premises pursuant to the formula set out in Paragraph 7.1(d); provided, however, that If such Capital Expenditure is required during the last 2 years of this Lease or if Lessor reasonably determines that it is not economically feasible to pay its share thereof, Lessor shall have the option to terminate this Lease upon 90 days prior written notice to Lessee unless Lessee notifies Lessor, in writing, within 10 days after receipt of Lessor’s termination notice that Lessee will pay for such Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any such Capital Expenditure, Lessee may advance such funds and deduct same, with Interest, from Rent until Lessor’s share of such costs have been fully paid.

          (c) Notwithstanding the above, the provisions concerning Capital Expenditure are intended to apply only to non-voluntary, unexpected, and new Applicable Requirements. If the Capital Expenditures are instead triggered by Lessee as a result of an actual or proposed change in use, change in intensity of use, or modification to the Premises then, and in that event, Lessee shall be fully responsible for the cost thereof, and Lessee shall not have any right to terminate this Lease.

     2.4 Acknowledgements. Lessee hereby acknowledges: (a) that it has been advised by Lessor and/or Broker(s) to satisfy itself with respect to the condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with Applicable Requirements and the Americans with Disabilities Act), and their suitability for Lessee’s Intended use, (b) Lessee has made such Investigation as it deems necessary with reference to such matters, is satisfied with reference thereto, and assumes all responsibility therefore as the same relate to Lessee’s occupancy of the Premises and/or the terms of this Lease; and (c) that neither Lessor, Lessor’s agents, nor Brokers have made any oral or written representations or warranties with respect to said matters other than as set forth in this Lease. In addition, Lessor acknowledges that: (i) Brokers have made no representations, promises or warranties concerning Lessee’s ability to honor the Lease or suitability to occupy the Premises, and (ii) it is Lessor’s sole responsibility to investigate the financial capability and/or suitability of all proposed tenants.

Lessor’s Initials	Lessee’s Initials

3

     2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in this Paragraph 2 shall be of no force or effect if immediately prior to the Start Date Lessee was the owner or occupant of the Premises. In such event, Lessee shall be responsible for any necessary corrective work.

     2.6 Vehicle Parking. Lessee shall be entitled to use the number of Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph 1.2(b) on those portions of the Common Areas designated from time to time by Lessor for parking. Lessee shall not use more parking spaces than said number. Said parking spaces shall be used for parking by vehicles no larger than full-size passenger automobiles or pick-up trucks, herein called “Permitted Size Vehicles”. Lessor may regulate the loading and unloading of vehicles by adopting Rules and Regulations as provided in Paragraph 2.9. No vehicles other than Permitted Size Vehicles may be parked in the Common Area without the prior written permission of Lessor.

          (a) Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee’s employees, suppliers, shippers, customers, contractors or invitees to be loaded, unloaded, or parked in areas other than those designated by Lessor for such activities.

          (b) Lessee shall not service or store any vehicles in the Common Areas. NO OVERNIGHT PARKING SHALL BE ALLOWED; AT LESSOR’S DISCRETION, VIOLATORS MAY BE TOWED AT VEHICLE OWNER’S EXPENSE.

          (c) If Lessee permits or allows any of the prohibited activities described in this Paragraph 2.6, then Lessor shall have the right, without notice, In addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Lessee, which cost shall be Immediately payable upon demand by Lessor.

     2.7 Common Areas — Definition. The term “Common Areas” is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Project and interior utility raceways and installations within the Unit that are provided and designated by the Lessor from time to time for the general non-exclusive use of Lessor, Lessee and other tenants of the Project and their respective employees, suppliers, shippers, customers, contractors and invitees, including parking areas, loading and unloading areas, trash areas, roadways, walkways, driveways and landscaped areas.

     2.8 Common Areas — Lessee’s Rights. Lessor grants to Lessee, for the benefit of Lessee and its employees, suppliers, shippers, contractors, customers and invitees, during the term of this Lease, the non-exclusive right to use, in common with others entitled to such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions governing the use of the Project. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property, temporarily or permanently, In the Common Areas. Any such storage shall be permitted only by the prior written consent of Lessor or Lessor’s designated agent, which consent may be revoked at any time. In the event that any unauthorized storage shall occur then Lessor shall have the right, without notice. In addition to such other rights and remedies that it may have, to remove the property and charge the cost to Lessee, which cost shall be Immediately payable upon demand by Lessor.

     2.9 Common Areas — Rules and Regulations. Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to establish, modify, amend and enforce reasonable Rules and Regulations (“Rules and Regulations”) for the management, safety, care, and cleanliness of the grounds, the parking and unloading of vehicles and the preservation of good order, as well as for the convenience of other occupants or tenants of the Building and the Project and their invitees, Lessee agrees to abide by and conform to all such Rules and Regulations, and to cause its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform. Lessor shall not be responsible to Lessee for the non-compliance with said rules and regulations by other tenants of the Project.

     2.10 Common Areas — Changes. Lessor shall have the right, in Lessor’s sole discretion, from time to time:

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          (a) To make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas, walkways and utility raceways;

          (b) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available;

          (c) To designate other land outside the boundaries of the Project to be a part of the Common Areas;

          (d) To add additional buildings and improvements to the Common Areas;

          (e) To use the Common Areas while engaged in making additional improvements, repairs or alterations to the Project, or any portion thereof; and

          (f) To do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Project as Lessor may, in the exercise of sound business Judgment, deem to be appropriate.

3. Term.

     3.1 Term. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3.

     3.2 Early Possession. If Lessee totally or partially occupies the Premises prior to the Commencement Date, the obligation to pay Base Rent and Common Area Operating Expenses shall be abated for the period of such early possession. All other terms of this Lease, (Real Properly Taxes and Insurance premiums and to maintain the Premises) shall, however, be in effect during such period. Any such early possession shall not affect the Expiration Date.

Lessor agrees to grant Lessee rent-free Early Possession of said Premises, the date to be upon Lessor’s notice to Lessee that Tenant Improvements are Substantially Complete. Lease payments shall not commence until November 1, 2009. Lessee agrees to hold Lessor harmless from any liability or responsibility for damages to any of Lessee’s personal property, or for any loss suffered by Lessee through vandalism, theft, or destruction of said personal property by fire or other causes. It is agreed by Lessee and Lessor that all the terms and conditions of the Lease are to be in full force and effect, except as to rent, as of the date of Lessee’s possession of subject Premises.

     3.3 Delay in Possession. Lessor agrees to use its best commercially reasonable efforts to deliver possession of the Premises to Lessee by the Commencement Date. If, despite said efforts, Lessor is unable to deliver possession as agreed, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease. Lessee shall not, however, be obligated to pay Rent or perform its other obligations until it receives possession of the Premises. If possession is not delivered within 60 days after the Commencement Date, Lessee may, at it’s option, by notice in writing within 10 days after the end of such 60 day period, cancel this Lease, in which event the Parties shall be discharged from all obligations hereunder. If such written notice is not received by Lessor within said 10 day period, Lessee’s right to cancel shall terminate. Except as otherwise provided, If possession is not tendered to Lessee by the Start Date and Lessee does not terminate this Lease, as aforesaid, any period of rent abatement that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to what Lessee would otherwise have enjoyed under the terms hereof, but minus any days of delay caused by the acts or omissions of Lessee. If possession of the Premises is not delivered within 4 months after the Commencement Date, this Lease shall terminate unless other agreements are reached between Lessor and Lessee, in writing.

4. Rent.

     4.1 Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent (“Rent”).

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     4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the term hereof, in addition to the Base Rent, Lessee’s Share (as specified in Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined, during each calendar year of the term of this Lease, in accordance with the following provisions:

          (a) “Common Area Operating Expenses” are defined, for purposes of this Lease, as all costs Incurred by Lessor relating to the ownership and operation of the Project, Including, but not limited to, the following:

(i) The operation, repair and maintenance, in neat, clean, good order and condition, of the following:

(aa)	The Common Areas and Common Area improvements, Including parking areas, loading and unloading areas, trash areas, roadways, walkways, parkways, driveways, landscaped areas, bumpers, Irrigation systems, Common Area lighting facilities, fences and gates, elevators, roof and roof drainage systems.
(bb)	Exterior signs and any tenant directories.
(cc)	Fire detection and sprinkler systems.

(ii)	The cost of water, gas, electricity and telephone to service the Common Areas and any utilities not separately metered.
(iii)	Trash disposal, pest control services, property management and security services and the costs of any environmental Inspections.
(iv)	Reserves set aside for maintenance and repair of Common Areas.
(v)	Real Property Taxes (as defined in Paragraph 10.2)
(vi)	The cost of the premiums for the insurance policies maintained by Lessor under Paragraph 8 hereof.
(vii)	Any deductible portion of an insured loss concerning the Building or the Common Areas.
(viii)	The cost of any Capital Expenditure to the Building or the Project not covered under the provisions of Paragraph 2.3 provided; however, that Lessor shall allocate the cost of any such Capital Expenditure over a reasonable period and Lessee shall not be required to pay more than Lessee’s Share of the cost of such Capital Expenditure In any given month.
(ix)	Any other services to be provided by Lessor that are stated elsewhere in this Lease to be a Common Area Operating Expense.

          (b) Any Common Area Operating Expenses and Real Property Taxes that are specifically attributable to the Unit, Building or to any other building in the Project or to the operation, repair and maintenance thereof, shall be allocated entirely to such Unit, Building or other building. However, any Common Area Operating Expenses and Real Property Taxes that are not specifically attributable to the Building or to any other building or to the operation, repair and maintenance thereof, shall be equitably allocated by Lessor to all buildings in the Project.

          (c) The Inclusion of the improvements, facilities and services set forth In Subparagraph 4.2(a) shall not be deemed to Impose an obligation upon Lessor to either have said Improvements or facilities or to provide those services unless the Project already has the same, Lessor already provides the services, or Lessor has agreed elsewhere in this Lease to provide the same or some of them.

          (d) Lessee’s Share of Common Area Operating Expenses shall be payable by Lessee within 10 days after a reasonably detailed statement of actual expenses is presented to Lessee. At Lessor’s option, however, an amount may be estimated by Lessor from time to time of Lessee’s Share of annual Common Area Operating Expenses and the same shall be payable monthly or quarterly, as Lessor shall designate, during each 12-month period of the Lease term, on the same day as the Base Rent is due hereunder. Lessor will attempt to deliver to Lessee within 60 days after the expiration of each calendar year a reasonably detailed statement showing Lessee’s Share of the actual Common Area Operating Expenses Incurred during the preceding year. If Lessee’s payments under this Paragraph 4.2(d) during said preceding year exceed Lessee’s Share as Indicated on said statement, Lessee shall be credited the amount of such overpayment against Lessee’s Share of Common Area Operating Expenses next becoming due. If Lessee’s payments under this Paragraph 4.2(d) during the preceding year were less than Lessee’s Share as Indicated on such statement, Lessee shall pay to Lessor the amount of the deficiency within 10 days after delivery by Lessor to Lessee of the statement.

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     4.3 Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it is due. Rent for any period during the term hereof which is for less than one full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a waiver of Lessor’s rights to the balance of such Rent, regardless of Lessor’s endorsement of any check so stating. In the event that any check, draft, or other instrument of payment given by Lessee to Lessor is dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in addition to any late charges which may be due.

5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the Security Deposit as Security for Lessee’s faithful performance of its obligations under this Lease. If Lessee falls to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, cost, expense, loss or damage (including, but not limited to, past or future rent) which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of the Security Deposit, Lessee shall within 10 days after written request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. If the Base Rent increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional monies with Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial Security Deposit bore to the initial Base Rent. Should the Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to increase the Security Deposit to the extent necessary, in Lessor’s reasonable judgment, to account for any increased wear and tear that the Premises may suffer as a result thereof. If a change in control of Lessee occurs during this Lease and following such change the financial condition of Lessee is, in Lessor’s reasonable Judgment, significantly reduced, Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on such change in financial condition. Lessor shall not be required to keep the Security Deposit separate from its general accounts. Within 14 days after the expiration or termination of this Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent, and otherwise within 30 days after the Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit not used or applied by Lessor. No part of the Security Deposit shall be considered to be held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease. Lessee hereby expressly waives any and all rights it may have with respect to a security deposit under California Civil Code Section 1950.7(c), or any similar, related or successor provision of law.

NOTE: Security Deposit shall not be applied toward the last month’s rent. In no event shall the Security Deposit on hand be less than an amount equal to the last month’s remittance.

6. Use.

     6.1 Use. Lessee shall use and occupy the Premises only for the Agreed Use, or any other legal use which is reasonably comparable thereto, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of or causes damage to neighboring premises or properties. Lessor shall not unreasonably withhold or delay its consent to any written request for a modification of the Agreed Use, so long as the same will not impair the structural integrity of the improvements on the Premises or the mechanical or electrical systems therein, and/or is not significantly more burdensome to the Premises, If Lessor elects to withhold consent, Lessor shall within 7 days after such request give written notification of same, which notice shall include an explanation of Lessor’s objections to the change in the Agreed Use.

     6.2 Hazardous Substances.

          (a) Reportable Uses Require Consent. The term “Hazardous Substance” as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, release either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment, or the Premises; (ii) regulated or monitored by any governmental authority; or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substance shall include, but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any products, by-products or fractions thereof. Lessee shall not engage in any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of

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Lessor and timely compliance (at Lessee’s expense) with all Applicable Requirements. “Reportable Use” shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements requires that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably required to be used in the normal course of the Agreed Use, so long as such use is in compliance with the Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasements) and/or increasing the Security Deposit.

          (b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, other than as previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance.

          (c) Lessee Remediation. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under or about the Premises (including through the plumbing or sanitary sewer system), and shall promptly, at Lessee’s expense, take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for Lessee, or any third party.

          (d) Lessee indemnification. Lessee shall indemnify, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless from and against any and all loss of rents and/or damages, liabilities, judgments, costs, claims, liens, expenses, penalties, and attorneys and consultants’ fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party (provided, however, that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises from areas outside the Project). Lessee’s obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation, removal, remediation, restoration and/or abatement and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement.

          (e) Lessor Indemnification. Lessor and its successors and assigns shall indemnify, defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all environmental damages, including the cost of remediation, which existed as a result of Hazardous Substances on the Premises prior to the Start Date or which are caused by the gross negligence or willful misconduct of Lessor, its agents or employees. Lessor’s obligations, as and when required by the Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease.

          (f) Investigations and Remediations. Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entitles having Jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to the Start Date, unless such remediation measure is required as a result of Lessee’s use (including “Alterations”, as defined in paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and Lessor’s agents to have reasonable access to the Premises at reasonable times in order to carry out Lessor’s investigative and remedial responsibilities.

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          (g) Lessor’s Termination Option. If a Hazardous Substance Condition (see Paragraph 9.1(e) occurs during the term of this Lease, unless Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by the Applicable Requirements and this Lease shall continue in full force and effect, but subject to Lessor’s rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor’s option, either (i) investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor’s expense, in which event this Lease shall continue in full force and effect, or (ii) if the estimated cost to remediate such condition exceeds 12 times the then monthly Base Rent or $100,000, whichever is greater, give written notice to Lessee, within 30 days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of Lessor’s desire to terminate this Lease as of the date 60 days following the date of such notice. In the event Lessor elects to give a termination notice, Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee’s commitment to pay the amount by which the cost of remediation of such Hazardous Substance Condition exceeds an amount equal to 12 times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days following such commitment. In such event, this Lease shall continue in full force and affect, and Lessor shall proceed to make such remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time provided, this Lease shall terminate as of the date specified in Lessor’s notice of termination.

     6.3 Lessee’s Compliance with Applicable Requirements. Except as otherwise provided in this Lease, Lessee, shall, at Lessee’s sole expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the requirements of any applicable fire insurance underwriter or rating bureau, and the recommendations of Lessor’s engineers and/or consultants which relate in any manner to the Premises, without regard to whether said Requirements are now in effect or become effective after the Start Date. Lessee shall, within 10 days after receipt of Lessor’s written request, provide Lessor with copies of all permits and other documents, and other information evidencing Lessee’s compliance with any Applicable Requirements specified by Lessor, and shall Immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements.

     6.4 Inspection; Compliance. Lessor and Lessor’s “Lender” (as defined in Paragraph 30) and consultants shall have the right to enter into Premises at any time, in the case of an emergency, and otherwise at reasonable times, after reasonable notice, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirements, or a contamination is found to exist or be imminent, or the inspection is requested or ordered by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspection, so long as such inspection is reasonably related to the violation or contamination.

7. Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations.

     7.1 Lessee’s Obligations.

          (a) In General. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee’s Compliance with Applicable Requirements), 7.2 (Lessor’s obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee’s sole expense, keep the Premises, Utility Installations (intended for Lessee’s exclusive use, no matter where located), and Alterations in good order, condition and repair (whether or not the portion of the Premises requiring repairs, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee’s use, any prior use, the elements or the age of such portion of the Premises), including, but not limited to, all equipment or facilities, such as plumbing, HVAC equipment, electrical, lighting facilities, boilers, pressure vessels, fixtures, interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass and skylights but excluding any items which are the responsibility of Lessor pursuant to Paragraph 7.2. Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the service contracts required by Paragraph 7.1(b) below. Lessee’s obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair.

          (b) Service Contracts. Lessee shall, at Lessee’s sole expense, procure and maintain quarterly contracts, with copies to Lessor, in customary form and substance for, and with contractors specializing and experienced

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in the maintenance of the following equipment and improvements, if any, if and when installed on the Premises: (i) HVAC equipment. However, Lessor reserves the right, upon notice to Lessee, to procure and maintain any or all of such service contracts, and if Lessor so elects, Lessee shall reimburse Lessor, upon demand, for the cost thereof.

          (c) Failure to Perform. If Lessee fails to perform Lessee’s obligations under this Paragraph 7.1, Lessor may enter upon the Premises after 10 days’ prior written notice to Lessee (except in the case of an emergency, in which case no notice shall be required), perform such obligations on Lessee’s behalf, and put the Premises in good order, condition and repair, and Lessee shall promptly reimburse Lessor for the cost thereof.

          (d) Replacement. Subject to Lessee’s indemnification of Lessor as set forth in Paragraph 8.7 below, and without relieving Lessee of liability resulting from Lessee’s failure to exercise and perform good maintenance practices, if the HVAC unit(s) cannot be repaired other than at a cost which is in excess of 50% of the cost of replacing such item, then such item shall be replaced by Lessor, and the cost thereof shall be prorated between the Parties and Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying the cost of such replacement by a fraction, the numerator of which is one, and the denominator of which is 144 (i.e. 1/144^th of the cost per month). Lessee shall pay interest on the unamortized balance at a rate that is commercially reasonable in the Judgment of Lessor’s accountants. Lessee may, however, prepay its obligation at any time.

     7.2 Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler system, Common Area fire alarm and/or smoke detection systems, fire hydrants, parking lots, walkways, parkways, driveways, landscaping, fences, signs and utility systems serving the Common Areas and all parts thereof, as well as providing the services for which there is a Common Area Operating Expense pursuant to Paragraph 4.2, Lessor shall not be obligated to paint the exterior or interior surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or replace windows, doors or plate glass of the Premises. Lessee expressly waives the benefit of any statute now or hereafter in effect to the extent it is inconsistent with the terms of this Lease.

     7.3 Utility Installations; Trade Fixtures; Alterations.

          (a) Definitions. The term “Utility Installations” refers to all floor and window coverings, air lines, power panels, electrical distribution, security and fire protection systems, communications systems, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. The term “Trade Fixtures” shall mean Lessee’s machinery and equipment which can be removed without doing material damage to the Premises. The term “Alterations” shall mean any modification of the improvements, other than Utility Installations or Trade Fixtures, whether by addition or deletion. “Lessee-Owned Alterations and/or Utility Installations” are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).

          (b) Consent. Lessee shall not make any Alterations or Utility Installations to the Premises without Lessor’s prior written consent. Lessee may, however, make non-structural Utility Installations to the interior of the Premises (excluding the roof) without such consent but upon notice to Lessor, as long as they are not visible from the outside, do not involve puncturing, relocating or removing the roof or any existing walls, and the cumulative cost thereof during this Lease as extended does not exceed a sum equal to 3 months’ Base Rent in the aggregate or a sum equal to one month’s Base Rent in any one year. Notwithstanding the foregoing, Lessee shall not make or permit any roof penetrations and/or install anything on the roof without the prior written approval of Lessor. Lessor may, as a precondition to granting such approval, require Lessee to utilize a contractor chosen and/or approved by Lessor. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee’s: (i) acquiring all applicable governmental permits; (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work; and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility Installations shall be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications. For work which costs an amount in excess of one month’s Base Rent, Lessor may

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condition its consent upon Lessee providing a lien and completion bond in an amount equal to 150% of the estimated cost of such Alteration or Utility Installation and/or upon Lessee’s posting an additional Security Deposit with Lessor.

          (c) Indemnification. Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic’s or materialmen’s lien against the Premises or any interest therein. Lessee shall give Lessor not less than 10 days’ notice prior to the commencement of any work in, on, or about the Premises, and Lessor shall have the right to post notices of non-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense, defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equal to 150% of the amount of such contested lien, claim or demand, indemnifying Lessor against liability for the same. If Lessor elects to participate in any such action, Lessee shall pay Lessor’s attorneys’ fees and costs.

     7.4 Ownership; Removal; Surrender; and Restoration.

          (a) Ownership. Subject to Lessor’s right to require removal or elect ownership as hereinafter provided, all Alterations and Utility Installations made by Lessee shall be the property of Lessee, but considered a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration or termination of this Lease, become the properly of Lessor and be surrendered by Lessee with the Premises.

          (b) Removal. By delivery to Lessee of written notice from Lessor not earlier than 90 and not later than 30 days prior to the end of the term of this Lease, Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or termination of this Lease. Lessor may require the removal at any time of all or any part of any Lessee Owned Alterations or Utility Installations made without the required consent.

          (c) Surrender; Restoration. Lessee shall surrender the Premises and tender keys to Lessor by the Expiration Date or any earlier termination date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. Any personal property of Lessee not removed on or before the expiration or any earlier termination date shall be deemed abandoned by Lessee and shall be disposed of or retained by Lessor as Lessor may desire. “Ordinary wear and tear” shall not include any damage or deterioration that would have been prevented by good maintenance practice. Notwithstanding the foregoing, if this Lease is for 12 months or less, then Lessee shall surrender the Premises in the same condition as delivered to Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair any damage occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee Owned Alterations and/or Utility Installations, furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee. Lessee shall also completely remove from the Premises any and all Hazardous Substances brought onto the Premises by or for Lessee, or any third party (except Hazardous Substances which were deposited via underground migration from areas outside of the Project) even if such removal would require Lessee to perform or pay for work that exceeds statutory requirements. Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate the Premises and tender keys to Lessor by the Expiration Date or earlier termination date pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 26 below.

8. Insurance; Indemnity.

     8.1 Payment of Premiums. The cost of the premiums for the insurance policies required to be carried by Lessor, pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b), shall be Common Area Operating Expense. Premiums for policy periods commencing prior to, or extending beyond, the term of this Lease shall be prorated to coincide with the corresponding Start Date or Expiration Date.

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     8.2 Liability Insurance.

          (a) Carried by Lessee. Lessee shall obtain and keep in force a Commercial General Liability policy of insurance protecting Lessee and Lessor as an additional insured against claims for bodily injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an occurrence basis providing single limit coverage in an amount not less than $1,000,000 per occurrence with an annual aggregate of not less than $2,000,000, an “Additional Insured-Managers or Lessors of Premises Endorsement” and contain the “Amendment of the Pollution Exclusion Endorsement” for damage caused by heal, smoke or fumes from a hostile fire. The policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an “Insured contract” for the performance of Lessee’s indemnity obligations under this Lease. The limits of said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. All insurance carried by Lessee shall be primary to and not contributory with any similar insurance carried by Lessor, whose insurance shall be considered excess insurance only.

          (b) Carried by Lessor. Lessor shall maintain liability insurance described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional insured therein.

     8.3 Property Insurance — Building. Improvements and Rental Value.

          (a) Building and Improvements. Lessor shall obtain and keep in force a policy or policies of insurance in the name of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender insuring loss or damage to the Premises. The amount of such insurance shall be equal to the full replacement cost of the Premises, as the same shall exist from time to time, or the amount required by any Lender, but in no event more than the commercially reasonable and available insurable value thereof. Lessee-Owned Alterations and Utility Installations, Trade Fixtures, and Lessee’s personal property shall be insured by Lessee under Paragraph 8.4. If the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood and/or earthquake unless required by a Lender), including coverage for debris removal and the enforcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any co-insurance clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located.

          (b) Rental Value. Lessor shall also obtain and keep in force a policy or policies in the name of Lessor, with loss payable to Lessor and any Lender, insuring the loss of the full Rent for one year with an extended period of indemnity for an additional 180 days (“Rental Value Insurance”). Said insurance shall contain an agreed valuation provision in lieu of any co-insurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent otherwise payable by Lessee, for the next 12 month period.

          (c) Adjacent Premises. Lessee shall pay for any increase in the premiums for the property insurance of the Building and for the Common Areas or other buildings in the Project if said increase is caused by Lessee’s acts, omissions, use or occupancy of the Premises.

          (d) Lessee’s Improvements. Since Lessor is the Insuring Party, Lessor shall not be required to insure Lessee Owned Alterations and Utility Installations unless the item in question has become the property of Lessor under the terms of this Lease.

     8.4 Lessee’s Property; Business Interruption Insurance.

          (a) Property Damage. Lessee shall obtain and maintain insurance coverage on all of Lessee’s personal property, Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $1,000 per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall provide Lessor with written evidence that such insurance is in force.

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          (b) Business Interruption. Lessee shall obtain and maintain loss of Income and extra expense Insurance in amounts as will reimburse Lessee for direct or Indirect loss of earnings attributable to all perils commonly insured against by prudent lessees in the business of Lessee or attributable to prevention of access to the Premises as a result of such perils.

          (c) No Representation of Adequate Coverage. Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee’s property, business operations or obligations under this Lease.

     8.5 Insurance Policies. Insurance required herein shall be by companies duly licensed or admitted to transact business in the state where the Premises are located, and maintaining during the policy term a “General Policyholders Rating” of at least B+, V, as set forth in the most current issue of “Best’s Insurance Guide”, or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certified copies of policies of such insurance or certificates evidencing the existence and amounts of the required insurance. No such policy shall be cancelable or subject to modification except after 30 days’ prior written notice to Lessor. Lessee shall, at least 30 days prior to the expiration of such policies, furnish Lessor with evidence of renewals or “insurance binders” evidencing renewal thereof, or Lessor may order such Insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fall to procure and maintain the insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same.

     8.6 Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages against the other, for loss of or damage to its property arising out of or incident to the perils required to be insured against herein. The effect of such releases and waivers is not limited by the amount of insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby.

     8.7 Indemnity. Except for Lessor’s gross negligence or willful misconduct, Lessee shall Indemnify, protect, defend and hold harmless the Premises, Lessor and its agents, Lessor’s master or ground lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, liens, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or liabilities arising out of, involving, or in connection with, the use and/or occupancy of the Premises by Lessee. If any action or proceeding is brought against Lessor by reason of any of the foregoing matters, Lessee shall upon notice defend the same at Lessee’s expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or indemnified.

     8.8 Exemption of Lessor from Liability. Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee’s employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Building, or from other sources or places. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of Lessor nor from the failure of Lessor to enforce the provisions of any other lease in the Project. Notwithstanding Lessor’s negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee’s business or for any loss of Income or profit therefrom.

9. Damage or Destruction.

     9.1 Definitions.

          (a) “Premises Partial Damage” shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations, which can reasonably be repaired in 3 months or less from the date of the damage or destruction, and the cost thereof does not exceed a sum equal to 6 months Base

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Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total.

          (b) “Premises Total Destruction” shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot reasonably be repaired in 3 months or less from the date of the damage or destruction and/or the cost thereof exceeds a sum equal to six months Base Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total.

          (c) “Insured Loss” shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits involved.

          (d) “Replacement Cost” shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation.

          (e) “Hazardous Substance Condition” shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the Premises.

     9.2 Partial Damage — Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor’s election, make the repair of any damage or destruction the total cost to repair of which is $5,000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute the shortage in proceeds as and when required to complete said repairs. In the event, however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within 10 days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said 10 day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10 days thereafter to; (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and effect, or (ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party.

     9.3 Partial Damage — Uninsured Loss. If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee’s expense), Lessor may either: (i) repair such damage as soon as reasonably possible at Lessor’s expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this Lease by giving written notice to Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective 60 days following the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within 10 days after the receipt of the termination notice to give written notice to Lessor of Lessee’s commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days after making such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not make the required commitment, this Lease shall terminate as of the date specified in the termination notice.

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     9.4 Total Destruction. Notwithstanding any other provisions hereof, if a Premises Total Destruction occurs, this Lease shall terminate 60 days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right to recover Lessor’s damages from Lessee, except as provided in Paragraph 8.6.

     9.5 Damage Near End of Term. If at any time during the last 6 months of this Lease there is damage for which the cost to repair exceeds one month’s Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective 60 days following the date of occurrence of such damage by giving a written termination notice to Lessee within 30 days after the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor with any shortage in insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the date which is 10 days after Lessee’s receipt of Lessor’s written notice purporting to terminate this Lease, or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in Insurance proceeds, Lessor shall, at Lessor’s commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee falls to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the termination notice and Lessee’s option shall be extinguished.

     9.6 Abatement of Rent; Lessee’s Remedies.

          (a) Abatement. In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required for the repair, remediation or restoration of such damage shall be abated in proportion to the degree to which Lessee’s use of the Premises is impaired, but not to exceed the proceeds received from the Rental Value insurance. All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or other restoration except as provided herein.

          (b) Remedies. If Lessor shall be obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within 90 days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee’s election to terminate this Lease on a date not less than 60 days following the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within 30 days thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or restoration is commenced within such 30 days, this Lease shall continue in full force and effect. “Commence” shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs.

     9.7 Termination; Advance Payments. Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee’s Security Deposit as has not been, or is not then required to be, used by Lessor.

     9.8 Waive Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage to or destruction of the Premises with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent inconsistent herewith.

10. Real Property Taxes.

     10.1 Definition. As used herein, the term “Real Property Taxes” shall include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal income or estate taxes); Improvement bond; and/or license fee imposed upon or levied against any legal or equitable interest of Lessor in the Project, Lessor’s right to other income therefrom, and/or Lessor’s business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to the Project address and where the proceeds so generated are to be applied by the city, county or other local taxing authority of a Jurisdiction within which the Project is located. The term “Real Properly Taxes” shall also include any tax, fee, levy, assessment or charge, or any

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increase therein, imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership of the Project or any portion thereof or a change in the improvements thereon. In calculating Real Property Taxes for any calendar year, the Real Property Taxes for any real estate tax year shall be included in the calculation of Real Property Taxes for such calendar year based upon the number of days which such calendar year and tax year have in common.

     10.2. Payment of Taxes. Lessor shall pay the Real Property Taxes applicable to the Project, and except as otherwise provided in Paragraph 10.3, any such amounts shall be included in the calculation of Common Area Operating Expenses in accordance with the provisions of Paragraph 4.2.

     10.3 Additional Improvements. Common Area Operating Expenses shall not include Real Property Taxes specified in the tax assessor’s records and work sheets as being caused by additional improvements placed upon the Project by other lessees or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at the time Common Area Operating Expenses are payable under Paragraph 4.2, the entirety of any increase in Real Property Taxes If assessed solely by reason of Alterations, Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee’s request.

     10.4 Joint Assessment. If the Building is not separately assessed, Real Property Taxes allocated to the Building shall be an equitable proportion of the Real Property Taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor’s work sheets or such other information as may be reasonably available. Lessor’s reasonable determination thereof, in good faith, shall be conclusive.

     10.5 Personal Property Taxes. Lessee shall pay prior to delinquency all taxes assessed against and levied upon Lessee Owned Alterations and Utility installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee contained in the Premises. When possible, Lessee shall cause its Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee’s said property shall be assessed with Lessor’s real property, Lessee shall pay Lessor the taxes attributable to Lessee’s property within 10 days after receipt of a written statement setting forth the taxes applicable to Lessee’s property.

11. Utilities. Lessee shall pay for all water, gas, heal, light, power, telephone, trash disposal and other utilities and services supplied to the Premises, together with any taxes thereon. Notwithstanding the provisions of Paragraph 4.2, if at any time in Lessor’s sole judgment, Lessor determines that Lessee is using a disproportionate amount of water, electricity or other commonly metered utilities, or that Lessee is generating such a large volume of trash as to require an increase in the size of the dumpster and/or an increase in the number of times per month that the dumpster is emptied, then Lessor may increase Lessee’s Base Rent by an amount equal to such increased costs.

12. Assignment and Subletting.

     12.1 Lessor’s Consent Required.

          (a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, “assign or assignment”) or sublet all or any part of Lessee’s interest in this Lease or in the Premises without Lessor’s prior written consent.

          (b) A change in the control of Lessee shall constitute an assignment requiring consent. The transfer, on a cumulative basis, of 25% or more of the voting control of Lessee shall constitute a change in control for this purpose.

          (c) The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee’s assets occurs, which results or will result in a reduction of the Net Worth of Lessee, by an amount greater than 25% of such Net Worth as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or Is greater, shall be considered an

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assignment of this Lease to which Lessor may withhold its consent. “Net Worth of Lessee” shall mean the net worth of Lessee (excluding any guarantors) established under generally accepted accounting principles.

          (d) An assignment or subletting without consent shall, at Lessor’s option, be a Default curable after notice per Paragraph 13.1(c), or a non-curable Breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a non-curable Breach, Lessor may either; (i) terminate this Lease, or (ii) upon 30 days written notice, increase the monthly Base Rent to 110% of the Base Rent then in effect. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to 110% of the price previously in effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the remainder of the Lease term shall be increased to 110% of the scheduled adjusted rent.

          (e) Lessee’s remedy for any breach of this Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief.

     12.2 Terms and Conditions Applicable to Assignment and Subletting.

          (a) Regardless of Lessor’s consent, no assignment or subletting shall: (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be performed by Lessee.

          (b) Lessor may accept any Rent or performance of Lessee’s obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of any Rent or performance shall constitute a waiver or estoppel of Lessor’s right to exercise its remedies for Lessee’s Default or Breach.

          (c) Lessor’s consent to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting.

          (d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee’s obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor’s remedies against any other person or entity responsible therefor to Lessor, or any security held by Lessor.

          (e) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor’s determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any, together with a fee of $1,000 or 10% of the current monthly Base Rent applicable to the portion of the Premises which is the subject of the proposed assignment or sublease whichever is greater, as consideration for Lessor’s considering and processing said request. Lessee agrees to provide Lessor with such other or additional Information and/or documentation as may be reasonably requested.

          (f) Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment or entering into such sublease, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented in writing.

          (g) Lessor’s consent to any assignment or subletting shall not transfer to the assignee or sublessee any Option granted to the original Lessee by this Lease unless such transfer is specifically consented to by Lessor in writing. (See Paragraph 39.2)

     12.3 Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein:

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          (a) Lessee hereby assigns and transfers to Lessor all of Lessee’s interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee’s obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee’s obligations, Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee’s obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee’s obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary.

          (b) In the event of a Breach by Lessee, Lessor may, at its option, require sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior Defaults or Breaches of such sublessor.

          (c) Any matter requiring the consent of the sublessor under a sublease shall also require the consent of Lessor.

          (d) No sublessee shall further assign or sublet all or any part of the Premises without Lessor’s prior written consent.

          (e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any, specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee.

13. Default; Breach; Remedies.

     13.1 Default; Breach. A “Default” is defined as a failure by the Lessee to comply with or perform any of the terms, covenants, conditions or Rules and Regulations under this Lease. A “Breach” is defined as the occurrence of one or more of the following Defaults, and the failure of Lessee to cure such Default within any applicable grace period:

          (a) The abandonment of the Premises; or the vacating of the Premises without providing a commercially reasonable level of security accompanied by the non-payment of Rent, or where the coverage of the property insurance described in Paragraph 8.3 is jeopardized as a result thereof, or without providing reasonable assurances to minimize potential vandalism.

          (b) The failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder, whether to Lessor or to a third party, when due, to provide reasonable evidence of insurance or surety bond, or to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of 3 business days following written notice to Lessee.

          (c) The failure by Lessee to provide (i) reasonable written evidence of compliance with Applicable Requirements, (ii) the service contracts, (iii) the rescission of an unauthorized assignment or subletting, (iv) an Estoppel Certificate, (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any document requested under Paragraph 41 (easements), or (viii) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of 10 days following written notice to Lessee.

          (d) A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof, other than those described in subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of 30 days after written notice; provided, however, that if the nature of Lessee’s Default is such that more than 30 days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said 30 day period and thereafter diligently prosecutes such cure to completion.

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          (e) The occurrence of any of the following events: (i) the making of any general arrangement or assignment for the benefit of creditors; (ii) becoming a “debtor” as defined in 11 U.S.C.§ 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where such seizure is not discharged within 30 days; provided, however, in the event that any provision of this Subparagraph (e) is contrary to any applicable law, such provision shall be of no force or effect, and not effect the validity of the remaining provisions.

          (f) The discovery that any financial statement of Lessee or of any Guarantor given to Lessor was materially false.

          (g) If the performance of Lessee’s obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor’s liability with respect to this Lease other than in accordance with the terms of such guaranty, (iii) a Guarantor’s becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’s refusal to honor the guaranty, or (v) a Guarantor’s breach of its guaranty obligation on an anticipatory basis, and Lessee’s failure, within 60 days following written notice of any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease.

          13.2 Remedies. If Lessee fails to perform any affirmative duties or obligations, within 10 days after written notice (or in case of an emergency, without notice), Lessor may, at its option, perform such duly or obligation on Lessee’s behalf, Including but not limited to the obtaining of reasonably required bonds, Insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be due and payable by Lessee upon receipt of invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its own option, may require all future payments to be made by Lessee to be by cashier’s check. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach:

          (a) Terminate Lessee’s right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, Including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys’ fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent, Efforts by Lessor to mitigate damages caused by Lessee’s Breach of this Lease shall not waive Lessor’s right to recover damages under this Paragraph 12. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful detainer statute shall also constitute the notice required by Paragraph 13.1. In such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute.

          (b) Continue the Lease and Lessee’s right to possession and recover the Rent as it becomes due, in which event Lessee may sublet or assign, subject only to reasonable limitations. Acts of maintenance, efforts to relet,

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and/or the appointment of a receiver to protect the Lessor’s interest, shall not constitute a termination of the Lessee’s right to possession.

          (c) Pursue any other remedy now or hereafter available under the laws or judicial decisions of the state wherein the Premises are located. The expiration or termination of this Lease and/or the termination of Lessee’s right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee’s occupancy of the Premises.

     13.3 Inducement Recapture. Any agreement for free or abated rent or other charges, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration for Lessee’s entering into this Lease, all of which concessions are hereinafter referred to as “Inducement Provisions”, shall be deemed conditioned upon Lessee’s full and faithful performance of all of the terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any Rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor under such an inducement Provision shall be immediately due and payable by Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this Paragraph shall not be deemed a waiver by Lessor of the provisions of this paragraph unless specifically so stated in writing by Lessor at the time of such acceptance.

     13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent shall not be received by Lessor within 5 days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to 10% of each such overdue amount or $100, whichever is greater. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of such late payment. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee’s Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for 3 consecutive installments of Base Rent, then notwithstanding any other provision of this Lease to the contrary, Base Rent shall, at Lessor’s option, become due and payable quarterly in advance.

     13.5 Interest. Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor, when due as to scheduled payments (such as Base Rent) or within 30 days following the date on which it was due for non-scheduled payment, shall bear interest from the date when due, as to scheduled payments, or the 31^st day after it was due as to non-scheduled payments. The interest (“Interest”) charged shall be equal to the prime rate reported in the Wall Street Journal as published closest prior to the date when due plus 4%, but shall not exceed the maximum rate allowed by law. Interest is payable in addition to the potential late charge provided for in Paragraph 13.4.

     13.6 Breach by Lessor.

          (a) Notice of Breach. Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than 30 days after receipt by Lessor, and any Lender whose name and address shall have been furnished Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor’s obligation is such that more than 30 days are reasonably required for its performance, then Lessor shall not be in breach if performance is commenced within such 30 day period and thereafter diligently pursued to completion.

          (b) Performance by Lessee on Behalf of Lessor. In the event that neither Lessor nor Lender cures said breach within 30 days after receipt of said notice, or if having commenced said cure they do not diligently pursue it to completion, then Lessee may elect to cure said breach at Lessee’s expense and offset from Rent an amount equal to the greater of one month’s Base Rent or the Security Deposit, and to pay an excess of such expense under protest, reserving Lessee’s right to reimbursement from Lessor. Lessee shall document the cost of said cure and supply said documentation to Lessor.

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14. Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively “Condemnation”), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the floor area of the Unit, or more than 25% of Lessee’s Reserved Parking Spaces, is taken by Condemnation, Lessee may, at Lessee’s option, to be exercised in writing within 10 days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within 10 days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Condemnation awards and/or payments shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be entitled to any compensation for Lessee’s relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations and Utility installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the properly of the Lessee and Lessee shall be entitled to any and all compensation which is payable therefor. In the event that this Lease is not terminated by reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such Condemnation.

15. Brokerage Fees.

     15.1 Additional Commission. In addition to the payments owed pursuant to Paragraph 1.10(b) above, Lessor shall pay Brokers (as set forth in 1.10(a)) Additional Commission only in accordance with Lessor’s commission schedule in effect at the time of the execution of this Lease.

     15.2 Assumption of Obligations. Any buyer or transferee of Lessor’s interest in this Lease shall be deemed to have assumed Lessor’s obligation hereunder. Brokers shall be third party beneficiaries of the provisions of Paragraphs 1.9, 15, 22 and 31. If Lessor fails to pay to Brokers any amounts due as and for brokerage fees pertaining to this Lease when due, then such amounts shall accrue interest, In addition, if Lessor fails to pay any amounts to Lessee’s Broker when due, Lessee’s Broker may send written notice to Lessor and Lessee of such failure and if Lessor fails to pay such amounts within ten (10) days after said notice, Lessee shall pay said monies to its Broker and offset such amounts against Rent. In addition, Lessee’s Broker shall be deemed to be a third party beneficiary of any commission agreement entered into by and/or between Lessor and Lessor’s Broker for the limited purpose of collecting any brokerage fee owed.

     15.3 Representations and indemnities of Broker Relationships. Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder (other than the Brokers, if any) in connection with this Lease, and that no one other than said named Brokers is entitled to any commission or finder’s fee in connection herewith. Lessee and Lessor do each hereby agree to Indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, attorneys’ fees reasonably incurred with respect thereto.

16. Estoppel Certificates.

          (a) Each Party (as “Responding Party”) shall within 10 days after written notice from the other Party (the “Requesting Party”) execute, acknowledge and deliver to the Requesting Party a statement in writing in form similar to the then most current “Estoppel Certificate” form published by the American Industrial Real Estate Association, plus such additional information, confirmation and/or statements as may be reasonably requested by the Requesting Party.

          (b) If the Responding Party shall fail to execute or deliver the Estoppel Certificate within such 10 day period, the Requesting Party may execute an Estoppel Certificate stating that: (i) the Lease is in full force and effect without modification except as may be represented by the Requesting Party, (ii) there are no uncured defaults in the Requesting Party’s performance, and (iii) if Lessor is the Requesting Party, not more than one month’s rent has been paid in advance. Prospective purchasers and encumbrances may rely upon the Requesting Party’s Estoppel Certificate, and the Responding Party shall be estopped from denying the truth of the facts contained in said Certificate.

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          (c) If Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee and all Guarantors shall deliver to any potential lender or purchaser designated by Lessor such financial statements as may be reasonably required by such lender or purchaser, including but not limited to Lessee’s financial statements for the past 3 years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth.

17. Definition of Lessor. The term “Lessor” as used herein shall mean the owner or owners at the time in question of the fee title to the Premises, or, if this is a sublease, of the Lessee’s Interest in the prior lease. in the event of a transfer of Lessor’s title or interest in the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor, Except as provided in Paragraph 15, upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. Notwithstanding the above, and subject to the provisions of Paragraph 20 below, the original Lessor under this Lease, and all subsequent holders of the Lessor’s interest in this Lease shall remain liable and responsible with regard to the potential duties and liabilities of Lessor pertaining to Hazardous Substances as outlined in Paragraph 6.2 above.

18. Severability. The invalidity of any provision of this Lease, as determined by a court of competent Jurisdiction, shall in no way affect the validity of any other provision hereof.

19. Days. Unless otherwise specifically Indicated to the contrary, the word “days” as used in this Lease shall mean and refer to calendar days.

20. Limitation on Liability. Subject to the provisions of Paragraph 17 above, the obligations of Lessor under this Lease shall not constitute personal obligations of Lessor, the individual partners of Lessor or its or their individual partners, directors, officers or shareholders, and Lessee shall look to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against the individual partners of Lessor, or its or their individual partners, directors, officers or shareholders, or any of their personal assets for such satisfaction.

21. Time of Essence. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease.

22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the use, nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or beach hereof by either Party. The liability (including court costs and attorneys’ fees), of any Broker with respect to negotiation, execution, delivery or performance by either Lessor or Lessee under this Lease or any amendment or modification hereto shall be limited to an amount up to the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker’s liability shall not be applicable to any gross negligence or willful misconduct of such Broker.

23. Notices.

     23.1 Notice Requirements. All notices required or permitted by this Lease or applicable law shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party’s signature on this Lease shall be that Party’s address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee’s taking possession of the Premises, the Premises shall constitute Lessee’s address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate in writing.

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     23.2 Date of Notice. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given 48 hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantee next day delivery shall be deemed given 24 hours after delivery of the same to the Postal Service or courier. Notices transmitted by facsimile transmission or similar means shall be deemed delivered upon telephone confirmation of receipt (confirmation report from fax machine is sufficient), provided a copy is also delivered via delivery or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.

24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same of any other term, covenant or condition hereof. Lessor’s consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor’s consent to, or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce the provision or provisions of this Lease requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment.

25. Disclosures Regarding The Nature of a Real Estate Agency Relationship.

          (a) When entering into a discussion with a real estate agent regarding a real estate transaction, a Lessor or Lessee should from the outset understand what type of agency relationship or representation it has with the agent or agents in the transaction. Lessor and Lessee acknowledge being advised by the Brokers in this transaction, as follows:

               (i) Lessor’s Agent. A Lessor’s agent under a listing agreement with the Lessor acts as the agent for the Lessor only. A Lessor’s agent or subagent has the following affirmative obligations: To the Lessor: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessor. To the Lessee and the Lessor: (a) Diligent exercise of reasonable skills and care in performance of the agent’s duties, (b) A duty of honest and fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above.

               (ii) Lessee’s Agent. An agent can agree to act as agent for the Lessee only. In these situations, the agent is not the Lessor’s agent even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Lessor. An agent acting only for a Lessee has the following affirmative obligations. To the Lessee: A fiduciary duty of utmost care, Integrity, honesty, and loyalty in dealings with the Lessee. To the Lessee and the Lessor: (a) Diligent exercise of reasonable skills and care in performance of the agent’s duties, (b) A duty of honest and fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above.

               (iii) Agent Representing Both Lessor and Lessee. A real estate agent, either acting directly or through one or more associate licenses, can legally be the agent of both the Lessor and the Lessee in a transaction, but only with the knowledge and consent of both the Lessor and the Lessee. In a dual agency situation, the agent has the following affirmative obligations to both the Lessor and the Lessee: (a) A fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with either Lessor or the Lessee. (b) Other duties to the Lessor and the Lessee as stated above in subparagraphs (i) or (ii). In representing both Lessor and Lessee, the agent may not without the express permission of the respective Party, disclose to the other Party that the Lessor will accept rent in an amount less than that indicated in the listing or that the Lessee is willing to pay a higher rent than that offered. The above duties of the agent in a real estate transaction do not relieve a Lessor or Lessee from the responsibility to protect their own interests. Lessor and Lessee should carefully read all agreements to assure that they adequately express their understanding of the

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transaction. A real estate agent is a person qualified to advise about real estate. If legal or tax advice is desired, consult a competent professional.

          (b) Brokers have no responsibility with respect to any default or breach hereof by either Party. The liability (including court costs and attorneys’ fees), of any Broker with respect to any breach of duty, error or omission relating to this Lease shall not exceed the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker’s liability shall not be applicable to any gross negligence or willful misconduct of such Broker.

          (c) Buyer and Seller agree to identify to Brokers as “Confidential” any communication or information given Brokers that is considered by such Party to be confidential.

26. No Right To Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or termination of this Lease. In the event that Lessee holds over, then the Base Rent shall be increased to 150% of the Base Rent applicable immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee.

27. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.

28. Covenants and Conditions; Construction of Agreement. All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions. In construing this Lease, all headings and titles are for the convenience of the Parties only and shall not be considered a part of this Lease. Whenever required by the context, the singular shall include the plural and vice versa. This Lease shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared It.

29. Binding Effect; Choice of Law. This Lease shall be binding upon the Parties, their personal representatives, successors and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located.

30. Subordination; Attornment; Non-Disturbance.

     30.1 Subordination. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, “Security Device”), now or hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such Security Devices (In this Lease together referred to as “Lender”) shall have no liability or obligation to perform any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee, whereupon this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof.

     30.2 Attornment. In the event that Lessor transfers title to the Premises, or the Premises are acquired by another upon the foreclosure or termination of a Security Device to which this Lease is subordinated (i) Lessee shall, subject to the non-disturbance provisions of Paragraph 30.3, attorn to such new owner, and upon request, enter into a new lease, containing all of the terms and provisions of this Lease, with such new owner for the remainder of the term hereof, or, at the election of such new owner, this Lease shall automatically become a new Lease between Lessee and such new owner, upon all of the terms and conditions hereof, for the remainder of the term hereof, and (ii) Lessor shall thereafter be relieved of any further obligations hereunder and such new owner shall assume all of Lessor’s obligations hereunder, except that such new owner shall not: (a) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership; (b) be subject to any offsets or defenses which Lessee might have against any prior lessor, (c) be bound by prepayment of more than one month’s rent, or (d) be liable for the return of any security deposit paid to any prior lessor.

     30.3 Non-Disturbance. With respect to Security Devices entered into by Lessor after the execution of this Lease, Lessee’s subordination of this Lease shall be subject to receiving a commercially reasonable non-disturbance agreement (a “Non-Disturbance Agreement”) from the Lender which Non-Disturbance Agreement provides that

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Lessee’s possession of the Premises, and this Lease, including any options to extend the term hereof, will not be disturbed so long as Lessee is not in Breach hereof and attorns to the record owner of the Premises. Further, within 60 days after the execution of this Lease, Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance Agreement from the holder of any pre-existing Security Device which is secured by the Premises. In the event that Lessor is unable to provide the Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee’s option, directly contact Lender and attempt to negotiate for the execution and delivery of a Non-Disturbance Agreement.

     30.4 Self-Executing. The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any subordination, attornment and/or Non-Disturbance Agreement provided for herein.

31. Attorneys’ Fees. If any Party or Broker brings an action or proceeding Involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys’ fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term, “Prevailing Party” shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, Judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys’ fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys’ fees reasonably incurred. In addition, Lessor shall be entitled to attorneys’ fees, costs and expenses incurred in the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a reasonable minimum per occurrence for such services and consultation).

32. Lessor’s Access; Showing Premises; Repairs. Lessor and Lessor’s agents shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times for the purpose of showing the same to prospective purchasers, lenders, or tenants, and making such alterations, repairs, improvements or additions to the Premises as Lessor may deem necessary. All such activities shall be without abatement of rent or liability to Lessee. Lessor may at any time place on the Premises any ordinary “For Sale” signs and Lessor may at any time during the last 6 months of the term hereof place on the Premises any ordinary “For Lease” signs. Lessee may at any time place on the Premises any ordinary “For Sublease” sign.

33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without Lessor’s prior written consent. Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction.

34. Signs. Except for ordinary “For Sublease” signs which may be placed only on the Premises, Lessee shall not place any sign upon Project without Lessor’s prior written consent. All signs must comply with all Applicable Requirements.

35. Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, that Lessor may elect to continue any one or all existing subtenancies. Lessor’s failure within 10 days following any such event to elect to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor’s election to have such event constitute the termination of such Interest.

36. Consents. (a) Except as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed. Lessor’s actual reasonable costs and expenses (including but not limited to architects’, attorneys’, engineers’ and other consultants’ fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents to an assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefor. Lessor’s consent to act, assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessor’s consent shall not

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preclude the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. In the event that either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such determination, the determining party shall furnish its reasons in writing and in reasonable detail within 10 business days following such request.

37. Guarantor.

     37.1 Execution. The Guarantors, If any, shall each execute a guaranty in the form most recently published by the American Industrial Real Estate Association, and each such Guarantor shall have the same obligations as Lessee under this Lease.

     37.2 Default. It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon request to provide: (a) evidence of the execution of the guaranty, including the authority of the party signing on Guarantor’s behalf to obligate Guarantor, and in the case of a corporate Guarantor, a certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect.

38. Quiet Possession. Subject to payment by Lessee of the Rent and the performance of all of the covenants, conditions and provisions on Lessee’s part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises for the entire term hereof.

39. Options. If Lessee is granted an option, as defined below, then the following provisions shall apply,

     39.1 Definition. “Option” shall mean: (a) the right to extend the term of or renew this Lease or to extend or renew any lease that Lessee has on other property of Lessor; (b) the right of first refusal or first offer to lease either the Premises or other property of Lessor; (c) the right to purchase or the right of first refusal to purchase the Premises or other property of Lessor.

     39.2 Options Personal To Original Lessee. Any Option granted to Lessee in this Lease is personal to the original Lessee, and cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession of the Premises and, If requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning or subletting.

     39.3 Multiple Options. In the event that Lessee has any multiple Options to extend or renew this Lease, a later Option cannot be exercised unless the prior Options have been validly exercised.

     39.4 Effect of Default on Options.

          (a) Lessee shall have no right to exercise an Option: (i) during the period commencing with the giving of any notice of Default and continuing until said Default is cured, (ii) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv) In the event that Lessee has been given 3 or more notices of separate Default, whether or not the Defaults are cured, during the 12 month period immediately preceding the exercise of the Option.

          (b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee’s inability to exercise an Option because of the provisions of Paragraph 39.4(a).

          (c) An Option shall terminate and be of no further force or effect, notwithstanding Lessee’s due and timely exercise of the Option, if, after such exercise and prior to the commencement of the extended term, (i) Lessee fails to pay Rent for a period of 30 days after such Rent becomes due (without any necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee 3 or more notices of separate Default during any 12 month period, whether or not the Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.

40. Security Measures. Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide

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same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties.

41. Reservations. Lessor reserves the right: (i) to grant, without the consent or joinder of Lessee, such easements rights and dedications that Lessor deems necessary, (ii) to cause the recordation of parcel maps and restrictions, and (iii) to create and/or install new utility raceways, so long as such easements, rights, dedications, maps, restrictions, and utility raceways do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate such rights.

42. Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment “under protest” and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to Institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay.

43. Authority. If either Party hereto is a corporation, trust, limited liability company, partnership, or similar entity, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each party shall, within thirty (30) days after request, deliver to the other party satisfactory evidence of such authority.

44. Counterparts. This Lease may be executed in multiple counterparts, all of which shall constitute one and the same Lease.

45. Conflict. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions.

46. Offer. Preparation of this Lease by either party or their agent and submission of same to the other Party shall not be deemed an offer to lease to the other Party, This Lease is not intended to be binding until executed and delivered by all Parties hereto.

47. Amendments. This Lease may be modified only in writing, signed by the parties in interest at the time of the modification. As long as they do not materially change Lessee’s obligations hereunder, Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises.

48. Multiple Parties. If more than one person or entity is named herein as either Lessor or Lessee, such multiple Parties shall have joint and several responsibility to comply with the terms of this Lease.

49. Waiver of Jury Trial. The Parties hereby waive their respective rights to trial by jury in any action or proceeding involving the Property or arising out of this Agreement.

50. Terminology. For purposes of this Lease the term “Landlord” shall be interchangeable with “Lessor” and the term “Tenant” shall be interchangeable with “Lessee”.

51. Prior Agreements; Amendments. This Lease contains all of the agreements of the parties with respect to any matter covered or mentioned in this Lease, and no prior agreement or understanding pertaining to any such matter shall be effective for any purpose. No provisions of this Lease may be amended or added to except by an agreement in writing signed by the parties or their respective successors in interest.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO, THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.

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IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY’S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.

The Parties hereto have executed this Lease at the place and on the dates specified above their respective signatures.

Executed at Newport Beach, California			Executed at: Orlando, FL
Date: 10/13/09			Date: 10/1/2009
By LESSOR:			By LESSEE:
OLEN COMMERCIAL REALTY CORP. A NEVADA CORPORATION			NXG ACUTE CARE LLC, A CALIFORNIA LIMITED LIABILITY COMPANY AND WHOLLY-OWNED SUBSIDIARY OF NEXTGEN HEALTHCARE INFORMATION SYSTEMS, INC., A CALIFORNIA CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF QUALITY SYSTEMS INC., A CALIFORNIA CORPORATION
By:	/s/ Jayne Taylor		By:	/s/ Stephen K. Puckett
	Name Printed:	Jayne Taylor		Name Printed:	Stephen K. Puckett
	Title:	Vice President/CFO		Title:	Vice President

Landlord’s Mailing Address:	7 Corporate Plaza	Tenant’s Mailing Address:	22912 Mill Creek Dr., Suite A
	Newport Beach, CA 92660		Laguna Hills, CA 92653
Rent Payment Address:	Olen Commercial Realty Corp.
	Unit Q
	P.O. Box 51915
	Los Angeles, CA 90051-6215
Telephone/Facsimile: 949.644.6536 / 949.719.7200		Telephone/Facsimile: 800.888.7955
Federal ID No. 88-0309052		Federal ID No. 27-0650707

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ADDENDUM “A”

TO LEASE DATED:	October 1, 2009
BY AND BETWEEN:	OLEN COMMERCIAL REALTY CORP., A NEVADA CORPORATION
AS LESSOR; AND:	NXG Acute Care LLC, a California Limited Liability Company and wholly-owned subsidiary of NextGen Healthcare Information Systems, Inc., a California Corporation and wholly-owned subsidiary of Quality Systems Inc., a California Corporation
AS LESSEE

A.	SIGN CRITERIA
	These regulations are established in order to ensure that all signs comply with County of Orange sign ordinances, and in order to maintain a continuity in appearance throughout the Lake Forest Corporate Park. Conformance with the following sign regulations will be strictly enforced:

1. GENERAL REQUIREMENTS

(a)	Each tenant shall be allowed one Identity sign.
(b)	The sign shall be constructed and installed at Lessee’s expense.
(c)	No electrical or audible signs shall be permitted.
(d)	Except as provided herein, no advertising placards, banners, pennants, names, Insignias, trademarks, or other descriptive material shall be affixed or maintained upon the glass panes or exterior walls of the building.
(e)	Placement of the sign shall be in the specific location and installation shall be by the method designated by Lessor.
(f)	Lessee shall submit a sketch of Lessee’s proposed sign (Including color selection and proposed location) to Lessor for approval prior to construction and Installation. Lessee shall be responsible for obtaining all necessary sign permits and approvals from the County of Orange. Lessee acknowledges Lessee’s sign is also subject to the review and approval of the Lake Forest Corporate Park Management Association Architectural Review Committee.

2. TENANT IDENTIFICATION SIGNS: SINGLE-TENANT BUILDINGS

(a)	Each unit shall be entitled to one identification sign on the building.
(b)	The dimensions of the sign shall not exceed 1’ in height, or 3’ in length, including logo.
(c)	Individual letters shall not exceed 4” in height. Letter style shall be white upper case Optima Regular. Lessee may include a logo as part of the three (3) square foot sign area, but the logo shall not exceed one square foot.
(e)	Lessee shall obtain Lessor’s approval of the exact placement of the sign on the building prior to Installation.

3. TENANT IDENTIFICATION SIGNS: MULTI-TENANT BUILDINGS

(a)	Each suite shall be entitled to one identification sign.
(b)	Signs shall be vinyl press-on letters.
(c)	The dimensions of the sign area, including logo, shall not exceed 1’x 2’. Individual letters shall not exceed 4” in height.

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ADDENDUM “A”
PAGE 2

(e)	Letter color shall be white. Lettering style, logo and logo colors shall be at Lessee’s option.
(f)	Placement of the sign shall be on the glass front door, or on the glass pane immediately to the left of the front door.

B	EXTERIOR STORAGE
	Tenant shall neither store, nor permit to be stored any goods, machinery, merchandise, equipment, or any other items whatsoever in the parking lot or any other common area adjacent to or in the Building. Tenant may only place or store items wholly within its leased Premises.
C.	DECLARATION OF COVENANTS, CONDITIONS, AND RESTRICTIONS
	Lessee acknowledges that his leasehold estate is part of a Planned Development subject to a Declaration of Covenants, Conditions, and Restrictions. Lessee agrees to accept its leasehold estate subject to the aforementioned Declaration and to make adequate provisions to permit entry and other actions by Lessor for the purpose of performing and complying with these restrictions.
D.	MANAGEMENT
	Subject to Paragraph 7.1 of this Lease, Lessee agrees to pay Common Area Operating Expenses as set forth hereinbelow, and as adjusted pursuant to Paragraph 4.2 herein. In no event shall Lessor be required to insure plate glass or insure against malicious mischief or vandalism.
	The Common Area Operating Expense Budget is as follows:

TOTAL COMMON AREA OPERATING EXPENSE MONTHLY BUDGET FOR:
LAKE FOREST CORPORATE PARK

Total Project Square Footage:		58,010
Tenant’s Square Footage:		2,526
Tenant’s Percentage:		4.35	%
Total Common Area	$	9,862.00
Property Taxes	$	6,913.00
Insurance	$	773.00
TOTAL EXPENSES PER MONTH	$	17,548.00
Lessee’s monthly prorate share is 4.35% of the above expenses as follows:
Common Area	$	429.00
Property Taxes	$	300.72
Insurance	$	33.63
TOTAL MONTHLY COMMON AREA OPERATING EXPENSE BUDGET	$	763.35

Lessor will provide Lessee an estimate of the Common Area Operating Expenses each year which will be added to the monthly lease payment. The estimate for the first year is based on the Common Area Operating Expense Budget above. Lessor agrees to provide Lessee with an accounting of the actual expenses as of December 31st of each year. Should the cost of providing these services exceed the estimate, then upon receipt of a statement from Lessor, Lessee shall pay a lump sum equal to Lessee’s prorata share of Common Area Operating Expenses for the previous calendar year, less the total of the monthly installments of the estimated Common Area Operating Expenses paid in the previous calendar year. The estimated monthly installments to be paid for the next calendar year shall be adjusted to reflect such increase.

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ADDENDUM “A”
PAGE 3

If in any calendar year Lessee’s share of Common Area Operating Expenses shall be less than the preceding year, then upon receipt of Lessor’s statement, any over payment made by Lessee on the monthly installment basis provided above shall be credited toward the next monthly rent falling due and the estimated monthly installment of Common Area Operating Expenses to be paid shall be adjusted to reflect such lower Common Area Operating Expenses for the most recent year.

E.	NO TELEMARKETING
	Lessee warrants to Lessor that its “use” of the subject Premises shall NOT be for the operation of a telemarketing business, although some business-to-business targeted marketing involving the use of telephone research, surveying and prospecting techniques may be employed. Lessee acknowledges that Lessor does not allow “boiler-room” telemarketing businesses as an acceptable “Use” for this or any other location in Lessor’s properties and Lessee therefore understands and agrees its total number of employees shall not adversely impact the Project parking, or usage of the common areas, or exceed that which would be reasonably expected for normal general office use in a facility of this size, and that non-compliance of these issues shall constitute a material breach of this Lease.
F.	RESTROOM MAINTENANCE
	Lessee shall be responsible for maintaining its prorata share of the restroom together with the other tenant(s) in the adjacent space. In the event the adjacent space is vacant, Lessee shall maintain 100% of the restrooms.
G.	SUITE REFURBISHMENT/TENANT IMPROVEMENTS
	Lessor has completed its standard refurbishment of Premises, which included patching and repainting, cleaning of all floors and floor coverings, replacement of all damaged ceiling tiles and cleaning of entire suite to “move-in” condition.
	Additionally, Lessor shall complete the following Tenant Improvements at Lessor’s sole cost substantially in accordance with the attached Exhibit “A-1” using Lessor’s building-standard materials and finishes as follows;

1.	Demolish and remove approximately 3’ linear feet of existing demising wall to create opening between Suites A and B/C where shown on attached Exhibit A-1 and patch carpet as needed;
2.	Replace buzzing ballasts and bulbs as needed in Suites A, B, C & Common Area restrooms;
3.	Have licensed plumber Inspect urinal In men’s restroom (flushing mechanism sticks and causes overflow) and repair or replace urinal as needed;
4.	Inspect light fixtures in both restrooms (bulbs are constantly needing replacement despite turning off lights when not in use; make sure ballasts and bulbs are properly suited to each other;
5.	Roto-root plumbing lines in both restrooms to remove roots and debris;
6.	Install weather stripping on front door of Suite A;
7.	Install one (1) 2’ X 4’ fluorescent light fixture in common area restroom hallway;
8.	Replace stained ceiling tiles in Suites B/C and any broken/stained ceiling tiles in Suite A;
9.	Repair door in Suite C that is out of alignment and consequently difficult to lock;
10.	Secure all existing outlets in Suite A to the wall;
11.	Patch holes and touch-up paint in office in Suite C where phone patch panel was removed;
12.	Replace fan in Men’s restroom.

Lessor shall make every reasonable effort to complete the above Tenant Improvements as soon as reasonably possible after receipt of signed leases and move-in monies, and estimates said work to take approximately 1-2 weeks to complete from date of Lessor’s receipt of signed leases, but Lessor can make no guaranty of an exact date of completion.

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ADDENDUM “A”
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“Substantially Completed” and/or “Substantial Completion” of Tenant Improvements shall be defined as when the Tenant Improvements as set forth herein are completed and the suite Is cleaned to the point that any reasonable person walking the Premises would deem it ready to occupy, minor punch-list Items excepted.

ADDITIONAL TENANT IMPROVEMENTS

In the event Lessee requests Additional Tenant Improvements prior to its initial occupancy of the Premises, such Improvements shall be subject to Lessor’s prior approval, with the understanding that the total cost of said Additional Tenant Improvements shall be the sole responsibility of Lessee. If Lessor and Lessee are unable to agree upon the plans for, or the cost of any such proposed Additional Tenant Improvements, Lessor shall not be obligated to construct such Additional Tenant Improvements. In the event Additional Tenant Improvements are approved by Lessor, then Lessor shall prepare an Additional Work Authorization (“AWA”) outlining the specific additional work to be completed and shall deliver same to Lessee. Lessee shall execute said AWA and return it to Lessor, together with a check for the total cost of such Additional Tenant Improvements. Lessor shall not be obligated to commence construction of any approved Additional Tenant Improvements until Lessor has received such signed AWA and the check, Further, should the Additional Tenant Improvements requested by Lessee result in a delay in the completion of the work as set forth in Item G hereinabove beyond the date that work would have been completed had such Additional Tenant Improvements not been requested, then Lessee agrees the Commencement Date for this lease will be effective upon the date those Tenant Improvements would have originally been completed, regardless of whether Lessor has actually completed the Tenant Improvements as set forth herein on that date, or whether Lessee can occupy the Premises on or before that date.

In the event Lessee requires Additional Tenant Improvements in subject Premises after lease execution, such improvements shall be subject to Lessor’s prior approval, with the understanding that the total cost of the Additional Tenant Improvements shall be the sole responsibility of Lessee. If Lessor and Lessee are unable to agree upon the plans for, or the cost of, any such proposed Additional Tenant Improvements, Lessor shall not be obligated to construct such Additional Tenant Improvements. In the event Additional Tenant Improvements are approved by Lessor, then Lessor shall prepare an Additional Work Authorization (“AWA”) outlining the specific additional work to be completed and shall deliver same to Lessee. Lessee shall execute said AWA and return it to Lessor, together with a check for the total cost of such Additional Tenant Improvements. Lessor shall not be obligated to commence construction of any approved Additional Tenant Improvements until Lessor has received such signed AWA and the check. Any construction delay arising out of Lessee’s request for any Additional Tenant Improvements shall not affect the payment of Rent as set forth herein. All Rent payments shall be due on the first of each month of the Lease Term regardless of whether or not the Additional Tenant Improvements have been completed or delayed.

H.

ELECTRICITY

The monthly remittance amount in Article 1.5 of this Lease includes an eighteen cent (18 cent) per square foot charge for electricity ($454.68) which Lessee agrees to pay to Lessor as reimbursement for electrical usage. Lessor reserves the right to reassess said usage at any time, and if it finds Lessee’s actual usage to be in excess of $454.68 per month, may adjust this electrical assessment in accordance with Lessee’s actual usage.

Lessor’s Initials	Lessee’s Initials

ADDENDUM “B”

BY AND BETWEEN:	OLEN COMMERCIAL REALTY CORP., A NEVADA CORPORATION
AS LESSOR; AND:	NXG Acute Care LLC, a California Limited Liability Company and wholly-owned subsidiary of NextGen Healthcare Information Systems, Inc., a California Corporation and wholly-owned subsidiary of Quality Systems Inc., a California Corporation
AS LESSEE
TO LEASE DATED:	October 1, 2009

1. No sign, placard, picture, advertisement, name or notice shall be inscribed, displayed or printed or affixed on or to any part of the outside or inside of the Building without the written consent of Lessor, and Lessor shall have the right to remove and destroy any such sign, placard, picture, advertisement, name or notice without notice to and at the expense of Lessee.

All approved signs or lettering on doors shall be printed, painted, affixed or inscribed at the expense of Lessee by a person approved by the Lessor.

Leases shall not place anything or allow anything to be placed near the glass of any window, door, partition or wall which may appear unsightly from outside the Premises; provided, however, that the Lessor may furnish and install a Building standard window covering at all exterior windows. Lessee shall not without prior written consent of Lessor cause or otherwise install sunscreen on any window.

2.	The sidewalks, halls, passages, exits, entrances, elevators and stairways, driveways, and parking areas shall not be obstructed by lessees or used by them for any purpose other than for ingress and egress from their respective premises.
3.	Lessee shall not alter any lock or install any new or additional locks or bolts on any doors or windows of the Premises, without prior written consent of Lessor and subsequent delivery of a duplicate key to Lessor.
4.	The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein and the expanse of any breakage, stoppage, or damage resulting from the violation of this rule shall be borne by the lessee who, or whose employees or invitees shall have caused it.
5.	Lessee shall not overload the floor of the Premises or in any way deface the Premises or any part thereof.
6.	Lessee shall not use, keep of permit to be used or kept any foul or noxious gas or substances in the Premises, or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to the Lessor or other occupants of the Building by reason of noise, odors and/or vibrations, or interfere in any way with other lessees or those having business therein, nor shall any animals or birds be brought in or kept in or about the Premises or the Building.
7.	No cooking except for normal employee meal preparation shall be done or permitted by any Lessee on the Premises, nor shall the Premises be used for washing clothes, for lodging, or for any improper, objectionable or immoral purpose.
8.	Lessee shall not keep in the Premises or the Building any kerosene, gasoline or inflammable or combustible fluid or material, or use any method of healing or air conditioning other than that supplied or approved in writing by the Lessor.
9.	Lessor will direct electricians as to where and how telephone and telegraph wires are to be Introduced. No boring or cutting for wires will be allowed without the consent of the Lessor. The locations of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Lessor.
10.	Lessor reserves the right to exclude or expel from the Building any person who, in the judgment of Lessor, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Building.
11.	Lessee shall not disturb, solicit, or canvass any occupant of the Building and shall cooperate to prevent same.
12.	Without the written consent of Lessor, Lessee shall not use the name of the building in connection with or in promoting or advertising the business of Lessee except as Lessee’s address.
13.	Lessor shall have the right to control and operate the public portions of the Building, and the public facilities, and healing and air conditioning, as well as facilities furnished for the common use of the lessees. In such manner as it deems best for the benefit of the Lessees generally.
14.	All garbage and refuse shall be placed by Lessee in the containers at the location prepared by Lessor for refuse collection, in the manner and at the times and places specified by Lessor. Lessee shall not burn any trash or garbage of any kind in or about the Leased Premises or the Business Park. All cardboard boxes must be “broken down” prior to being placed in the trash container. All styrofoam chips must be bagged or otherwise contained prior to placement in the trash container, so as not to constitute a nuisance. Pallets may not be disposed of in the trash bins or enclosures. It is the Lessee’s responsibility to dispose of pallets by alternative means.

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ADDENDUM “B”
PAGE 2

	Should any garbage or refuse not be deposited in the manner specified by Lessor, Lessor may after three (3) hours verbal notice to Lessee, take whatever action necessary to correct the Infraction at Lessee’s expense.
15.	No aerial antenna shall be erected on the roof or exterior walls of the Leased Premises, or on the grounds, without in each instance, the written consent of Lessor first being obtained. Any aerial or antennae so installed without such written consent shall be subject to removal by Lessor at any time without notice.
16.	No loud speakers, televisions, phonographs, radios, cell phones or other devices shall be used in a manner so as to be heard or seen outside of the Leased Premises or in neighboring space without the prior written consent of Lessor.
17.	The outside areas immediately adjoining the Leased Premises shall be kept clean and free from dirt and rubbish by the Lessee, to the satisfaction of the Lessor, and Lessee shall not place or permit any obstruction or materials in such areas. No exterior storage shall be allowed.
18.	Lessee shall use at Lessee’s cost such pest extermination contractors as Lessor may direct and at such intervals as Lessor may require.
19.	These common types of damages will be charged back to the Lessee if they are not corrected prior to vacating the Premises:

• Keys not returned to Lessor for ALL locks, requiring the service of a locksmith and rekeying.

• Removal of all decorator painting, wallpapering and paneling, or Lessor’s prior consent to remain.

• Electrical conduit and receptacles on the surface of walls.

• Phone outlets, wiring, or phone equipment added on wall surfaces.

• Security tape/magnetic tape switches for burglar alarm systems added to windows and door surfaces.

• Penetration of roof membrane in any manner.

• Holes in walls, doors, and ceiling surfaces.

• Addition or change of standard door hardware.

• Painting or gluing of carpet or tile on warehouse floors.

• Glass damage.

• Damage to warehouse ceiling Insulation.

• Stains or damage to carpeting beyond normal wear-and-tear.

• Damaged, Inoperative, or missing electrical, plumbing, or HVAC equipment.

• Debris and furniture requiring disposal.

• Damaged or missing mini-blinds, draperles, and baseboards.

• Installation of additional improvements without Lessor’s prior written approval or obtainment of required City building permits.

Lessee agrees to comply with all such rules and regulations upon notice from Lessor. Should Lessee not abide by these Rules and Regulations, Lessor may serve a three (3) day notice to correct deficiencies. If Lessee has not corrected deficiencies by the end of the notice period, Lessee will be in default of lease.

Lessor reserves the right to amend or supplement the foregoing rules and regulations and to adopt and promulgate additional rules and regulations applicable to the leased premises. Notice of such rules and regulations and amendments and supplements thereto, if any, shall be given to the Lessee.

Lessor’s Initials	Lessee’s Initials

ADDENDUM “C”

TO LEASE DATED:	October 1, 2009
BY AND BETWEEN:	OLEN COMMERCIAL REALTY CORP., A NEVADA CORPORATION
AS LESSOR; AND:	NXG Acute Care LLC, a California Limited Liability Company and wholly-owned subsidiary of NextGen Healthcare Information Systems, Inc., a California Corporation and wholly-owned subsidiary of Quality Systems Inc., a California Corporation
AS LESSEE

ANNUAL RENT ADJUSTMENT

The minimum Base Monthly Rent set forth in Article 1.5 of this Lease shall be adjusted as follows:

Beginning on November 1, 2010 through October 31, 2011 the minimum Base Monthly Rent shall be $2,861.96*.

Beginning on November 1, 2011 through March 20, 2012 the minimum Base Monthly Rent shall be $2,947.82*.

*Note: The Base Monthly Rent set forth above does not include monthly Common Area Operating Expenses of $763.35, and Electricity Charges of $454.68 which amounts are subject to adjustment pursuant to Addendum A, Items D and H of this Lease. The Security Deposit shall be subject to adjustment pursuant to Article 5 of the Lease.

Lessor’s Initials	Lessee’s Initials

EXHIBIT “A”

Lessor’s Initials	Lessee’s Initials

EX-10.44

Exhibit 10.44

SUBLEASE AGREEMENT

     This Sublease Agreement (this “Sublease”) is made as of the ___ day of February, 2009 (the “Effective Date”) by and between CENTEX HOMES a Nevada general partnership, having an address at 2728 N. Harwood, Dallas TX 75201 (“Sublandlord”) and Opus Healthcare Solutions, Inc., a Texas corporation having an address at 12301 Research Blvd., Building IV, Suite 200, Austin, TX 78759 (“Subtenant”).

     Pursuant to a lease agreement dated May 23, 2005 and the first amendment thereto dated April 17, 2006 (the “Master Lease”), copies of which are annexed to this Sublease as Exhibit A, between Carr Texas OP, LP, a Delaware limited partnership, as landlord (“Landlord”) and Sublandlord, as tenant, Sublandlord leased from Landlord a total of approximately thirty-nine thousand two hundred twenty-six (39,226) rentable square feet in the building known as Riata Corporate Park 2 (the “Building”) and having an address at 12301-B Riata Trace Parkway, Austin, Texas (the “Premises”). The term “Master Lease” includes any amendments or modifications thereto and any other agreements concerning the Premises. Sublandlord now desires to sublease to Subtenant and Subtenant desires to sublease from Sublandlord a portion of the Premises described as approximately twenty-one thousand one hundred forty-eight (21,148) rentable square feet on the second floor of the Building (the “Subleased Premises”), as determined in accordance with The Standard Method for Measuring Floor Area in Office Buildings (ANSI/BOMA 265.1-1996, published by the Building Owners and Managers Association).

     For good and valuable consideration, the receipt whereof is acknowledged by the parties, Sublandlord and Subtenant agree as follows:

1. Sublease of Premises — AS-IS Condition. Sublandlord hereby subleases to Subtenant and Subtenant hereby subleases from Sublandlord the Subleased Premises in accordance with the terms and conditions of this Sublease. Subtenant has inspected the Subleased Premises, is satisfied with its condition and hereby accepts the Subleased Premises in its “AS IS” condition. ADDITIONALLY, SUBLANDLORD SHALL MAKE NO WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASEHOLD IMPROVEMENTS IN THE SUBLEASED PREMISES. ALL IMPLIED WARRANTIES WITH RESPECT THERETO, INCLUDING, BUT NOT LIMITED TO, THOSE OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY NEGATED AND WAIVED.

2. Sublease Term and Access to the Subleased Premises.

     a. Term. The term (the “Term”) of this Sublease shall commence on April 1, 2009 (the “Commencement Date”), unless extended pursuant to Paragraph 23 below, and shall expire on October 31, 2010 (the “Expiration Date”), unless sooner terminated or extended, as provided herein. Sublandlord retains all rights to terminate the Master Lease as provided therein and this Sublease is subject to such rights. If the Master Lease expires or is terminated for any reason whatsoever, including any termination by Sublandlord, this Sublease shall terminate automatically, and the parties hereto shall be relieved of all liabilities and obligations hereunder, except for those which accrued prior to the date of such termination. During the Term, Sublandlord shall pay all Rent as it becomes due under the Master Lease and shall not otherwise intentionally cause a termination of the Master Lease.

     b. Prior Access. Notwithstanding the foregoing, provided Landlord has given its written consent to this Sublease in accordance with the provisions of Paragraph 23 below, as of February 15, 2009 and prior to the Commencement Date (the “Move-In Period”), Subtenant shall have a license to enter into the Subleased Premises for the sole purpose of preparing the Subleased Premises for Subtenant’s future use thereof, including the installation of a server room, telephone equipment, computer, cabling and office furnishings (the “Move-In Work”), which such Move-In Work shall be subject to Sublandlord and Landlord’s prior written consent. Subtenant hereby acknowledges and agrees that, during the Move-In Period, (i) Subtenant shall not have exclusive access to the Subleased Premises, (ii) Sublandlord may continue to store furniture, equipment and other items in the Subleased Premises

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and (iii) the Subleased Premises are not required to be in a “broom clean” condition. Subtenant shall have no obligation to pay Base Rent during the Move-In Period, but all other terms and provisions of this Sublease shall apply to Subtenant’s use of the Subleased Premises during the Move-In Period, including, without limitation, Subtenant’s obligation to obtain and maintain insurance in accordance with the provisions of Paragraph 16 below. Notwithstanding the foregoing, in no event shall the Move-In Work extend or delay the Commencement Date. Sublandlord hereby agrees to surrender and deliver possession of the Subleased Premises in a “broom clean” condition on or before February 27, 2009.

3. Rent and Other Charges.

     a. Rent. Beginning on the Commencement Date, Subtenant shall pay total base rent (“Base Rent”) for the Premises in the amount of $26,435.00 per month, payable on or before the first day of each consecutive calendar month. Subtenant is not obligated to pay any Operating Cost Share Rent or Operating Costs (as defined in the Master Lease), but Subtenant is obligated to pay Additional Rent required to be paid under the Master Lease for such items as excessive use of services, the performance of special services by Landlord that are not charged as part of Excess Operating Costs, and indemnification payments.

     b. Utilities. In the event Landlord requests that either Sublandlord or Subtenant separately meter the Subleased Premises for utilities including, but not limited to electric or gas services, (i) Subtenant shall arrange with the utility company and/or Landlord to have the meter billed directly to Subtenant, (ii) Subtenant shall pay for all utility services consumed in the Subleased Premises and (iii) Subtenant shall reimburse Sublandlord for any and all utility charges actually incurred by Sublandlord arising from and after the Commencement Date until such use is separately billed to Subtenant.

     c. Payment. All Rent shall be paid by Subtenant to Sublandlord by check made payable to Centex Homes and shall be sent to:

Centex Service Co.
P.O. Box 841593
Lock Box #841593
Dallas, TX 75284-1593

     d. Late Payments. In addition to all other remedies which Sublandlord may have at law, in the event that Subtenant fails to make any payment for which it is obligated under this Sublease within five (5) business days of its due date, the amount of such payment shall bear interest at the greater of (i) the rate of interest applicable to late payments under the Master Lease, and (ii) rate of one and one-half percent (1¹/2%) per month for each month or fraction of a month such payment is late. In the event that the legal limit of the interest rate chargeable for late payments is less than 1¹/2% per month, then the late payments shall bear interest at the highest permissible legal rate of interest.

     e. Rent All sums due to Sublandlord from Subtenant shall constitute Rent under this Sublease and will be subject to all the terms and conditions for payment as set forth in this Sublease.

4. Security Deposit: First Month’s Rent.

     a. Security Deposit. Upon the Effective Date, Subtenant shall deposit with Sublandlord, as security for Subtenant’s faithful performance of all terms, covenants and conditions of this Sublease, the sum of $26,435.00. This deposit is to be retained by Sublandlord until the expiration or sooner termination of this Sublease and shall be returned to Subtenant within ten (10) business days thereafter provided that (i) the Subleased Premises have been vacated; (ii) Sublandlord shall have inspected the Subleased Premises after such vacation and found the Subleased Premises to be in the condition required pursuant to the Master Lease; and (iii) Subtenant shall have complied with all of the terms, covenants, and conditions of this Sublease. Otherwise, the deposit paid pursuant to this Paragraph 4(a) may be retained by Sublandlord, at its option, as liquidated damages, or may be applied by Sublandlord at any time during the Term of this Sublease against any actual loss, damage or injury chargeable to

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Subtenant. If any portion of the deposit is so used or applied, Subtenant shall, within five (5) business days after written demand from Sublandlord, deposit with Sublandlord an amount sufficient to replace the amount of the deposit so used or applied. Subtenant shall not be entitled to apply the deposit to the last payment of Rent or any other payment due under this Sublease.

     b. First Month’s Rent. Upon the Effective Date, Subtenant shall pay to Sublandlord the first month’s Rent in the amount of $26,435.00.

5. Use. Subtenant shall use the Subleased Premises only for general office purposes and for no other purpose.

6. Quiet Possession. Sublandlord has the right to sublease the Subleased Premises for the Term of this Sublease, subject to the provisions of Paragraph 23 following, and agrees that Subtenant, upon paying the Rent and performing and observing the covenants and conditions to be performed and kept by it as provided in this Sublease, shall have the peaceable and quiet possession of the Subleased Premises during the Term of this Sublease.

7. Services. Sublandlord shall have no liability or responsibility for the provision of any services to the Subleased Premises. Rather, Landlord will provide such services in accordance with the terms of the Master Lease. No failure of Landlord to provide services, and no interruption in the provision of such services, shall cause Sublandlord to be in default under this Sublease nor shall Subtenant be entitled to an abatement of Rent or to terminate this Sublease.

8. Alterations. Subtenant shall make no alterations to the Subleased Premises without both Sublandlord’s and Landlord’s prior written consent. Notwithstanding the foregoing, in the event Sublandlord and Landlord grant such consent, Subtenant may make alterations to the Subleased Premises provided that (i) any such alterations shall be made in accordance with the provisions of Section 5 of the Master Lease, (ii) any such alterations shall be made at Subtenant’s sole cost and expense and (ii) at the expiration of the Term, Subtenant shall be responsible for the sole cost and expense of restoring the Subleased Premises to the condition so requested by Landlord.

9. Repairs and Maintenance. To the extent of Sublandlord’s obligations as the tenant under the Master Lease, Subtenant shall maintain the Subleased Premises in good, safe, sanitary condition and repair, subject to ordinary wear and tear, and promptly repair any damage caused by Subtenant, its employees, agents, contractors, customers, clients, or other parties lawfully at the Subleased Premises. Subtenant shall obtain and maintain in full force and effect throughout the Term of this Sublease a contract with a reputable service company for the upkeep and maintenance of the heating, ventilating, and air conditioning system servicing the Subleased Premises to the extent required under the Master Lease, and shall provide a copy of such contract and all renewals to Sublandlord. Sublandlord shall have no liability or responsibility for maintenance, repairs, rebuilding or restoration of the Subleased Premises. No failure of Landlord to provide such maintenance, repairs, rebuilding or restoration shall cause Sublandlord to be in default under this Sublease nor shall Subtenant be entitled to an abatement of rent or to terminate this Sublease.

10. Entry by Landlord and Sublandlord. Subtenant shall permit Landlord and Sublandlord and their agents and representatives to enter upon the Subleased Premises for the purposes and under the conditions set forth in the Master Lease.

11. Environmental Conditions. Subtenant shall not bring or cause to be brought to the Premises, or produce on the Subleased Premises, any hazardous substances (“Hazardous Substances”) which are regulated by any Federal, State or local statutes or ordinances. Hazardous Substances shall include any substances declared to be hazardous or toxic under any law or regulation now or hereafter enacted or promulgated by any governmental or quasi-governmental authority having jurisdiction. Subtenant shall not cause or permit its employees, agents, licensees, contractors, customers, or any other parties coming onto or into the Subleased Premises for any reason, to cause the use, generation, release, manufacture, production, processing, storage, or disposal of any Hazardous Substances on or from the Subleased

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Premises. Further, Subtenant shall not cause any hazardous condition to occur on the Subleased Premises or conduct any business or operations on the Subleased Premises which are reasonably deemed by Sublandlord’s or Landlord’s insurance carriers to constitute a material increase in the risks initially insured as they pertain to hazardous materials or hazardous activities, or which would increase Landlord’s or Sublandlord’s property or liability insurance premiums. In the event Subtenant breaches the provisions of this Paragraph 11, Subtenant shall, in accordance with applicable laws, promptly remove the Hazardous Substances and cease the business or operations which are hazardous. In the event Subtenant shall fail to comply with the provisions of this Paragraph 11, Sublandlord, in addition to all other rights and remedies provided to it in this Sublease, shall have the right to immediately terminate this Sublease and to take all actions legally permissible to remove Subtenant and its property from the Premises. The obligations of this Paragraph 11 are in addition to any provision in the Master Lease concerning environmental conditions or issues. It is expressly agreed by Subtenant that its indemnification obligations under this Sublease, and all the terms and conditions thereof pursuant to Paragraph 19, apply to this Paragraph 11.

12. Surrender of Premises. Subtenant shall immediately vacate and surrender the Subleased Premises on the expiration or any earlier termination date of this Sublease, and shall simultaneously remove all of Subtenant’s furnishings, equipment, and all other personal property from the Subleased Premises. Subtenant also shall comply with all provisions of the Master Lease with respect to the surrender of the Subleased Premises upon expiration of the Master Lease. If Subtenant fails to remove any of its property within five (5) days thereafter, Sublandlord shall have the right, in Sublandlord’s sole discretion, to deem all or any part of such property abandoned and to remove, store, or dispose of Subtenant’s property in any manner it elects without any obligation to account for the value of such property or to make any payment therefor to Subtenant. If Subtenant shall fail to vacate the Subleased Premises or remove any of its property as described above, then Sublandlord, in addition to any other rights and remedies it may have pursuant to the Master Lease, this Sublease, or at law or in equity, shall have the right to receive and Subtenant shall pay as penalty and not as Rent, an amount equal to 200% of the Base Rent due for each day after the expiration or termination date that Subtenant and/or its property remains in the Subleased Premises.

13. Incorporation of Master Lease.

     a. This Sublease is subject and subordinate to the Master Lease. Except as may be inconsistent with the terms and provisions hereof, the terms and provisions of the Master Lease shall be applicable to this Sublease and shall be incorporated into this Sublease as if Sublandlord was the lessor under the Master Lease and Subtenant was the lessee under the Master Lease. Where reasonably necessary, the terms of the Master Lease as incorporated into this Sublease shall be construed in light of the fact that Sublandlord (unlike Landlord) does not own a fee interest in the Subleased Premises but only a leasehold interest under the Master Lease.

     b. Landlord’s performance in accordance with the Master Lease shall fulfill the equivalent obligation of Sublandlord hereunder. As between the parties hereto, if the terms of this Sublease conflict with the terms of the Master Lease, then the terms of this Sublease shall control. Subtenant shall perform and observe all the obligations, covenants, indemnities, and conditions contained in the Master Lease on Sublandlord’s part that are incorporated herein above by reference. Subtenant will not cause or allow to be caused any default under the Master Lease. Subtenant hereby indemnifies and holds Sublandlord harmless from and against any claim, loss, damage, expense (including without limitation reasonable attorneys’ fees and costs) or liability arising under the Master Lease, from or related to Subtenant’s failure to perform Subtenant’s obligations under this Sublease, or arising from a default under the Master Lease caused by Subtenant, including without limitation those obligations of Sublandlord pursuant to the Master Lease which are incorporated herein by reference. Subtenant acknowledges that it has received and reviewed the Master Lease, in the form attached hereto as Exhibit A. Subtenant is not relying on, and Sublandlord has made no representations regarding, the interpretation of the terms of the Master Lease.

     c. Sublandlord shall be entitled to the same rights, privileges, options, and remedies available to Landlord under the Master Lease and such rights, privileges, options and remedies are

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hereby incorporated in this Sublease. Subtenant acknowledges that it is bound by the same responsibilities, limitations, and duties of the tenant under the Master Lease and that such responsibilities, limitations, and duties are hereby incorporated in this Sublease.

14. Option to Renew or Extend Master Lease. Sublandlord shall retain all right, and Subtenant shall have no right, to exercise any renewal, expansion, refusal, contraction, termination, preferential or other rights contained in the Master Lease to increase or decrease the size of the Premises or the Subleased Premises, extend or shorten the term of the Master Lease, or terminate the Master Lease.

15. Partial Lease Provisions.

     a. Allocation of Rent. To the extent any charges payable under the Master Lease, and payable under this Sublease, are payable on a per square foot basis, such as Additional Rent, then such charges shall also be allocated to the Subleased Premises on a per square foot basis.

     b. Parking. Subtenant shall be entitled to use eighty-five (85) of the parking spaces to which Sublandlord is entitled under the Master Lease, at no additional cost.

     c. Signs. Sublandlord shall retain all signage and building naming rights contained in the Master Lease. Subtenant shall have no right to install any signs on the exterior of the Subleased Premises, the Premises, or the building in which the Premises is located. Notwithstanding the foregoing, and subject to the prior written approval of both Landlord and Sublandlord, in their respective sole and absolute discretion, Subtenant may install, at Subtenant’s sole cost and expense, standard directory and suite signage.

     d. Elevator Lobby. Subject to the prior written approval of both Landlord and Sublandlord, in their respective sole and absolute discretion, Subtenant may utilize the elevator lobby of the Building on floor 2 as its reception area; provided, however, that such use shall not interfere with or otherwise disturb the access of other tenants in the Building to their respective leased premises or interrupt the business operations of other tenants in the Building.

16. Insurance.

     a. As of the Effective Date, Subtenant shall provide and keep in force during the Term commercial general liability insurance with a combined single limit of $1,000,000 per occurrence covering the Subleased Premises, Fire Legal Liability limits of $300,000; Property insurance covering subtenants betterments and improvements and personal property; along with any other insurance required to be maintained by the tenant under the Master Lease. The policies shall name Landlord and Sublandlord as additional insureds and shall provide for at least thirty (30) days written notice before cancellation or material change in the policy. Subtenants policies shall waive all rights of subrogation against Landlord and Sublandlord and shall be primary insurance and not excess over any liability insurance provided by Landlord or Sublandlord. Subtenant shall provide to Sublandlord a certificate of insurance as evidence of coverage prior to Subtenant’s occupancy of the Premises and shall promptly furnish Sublandlord with a renewal certificate on or before the date of the expiration of the policy then in effect.

     b. Anything in this Sublease to the contrary notwithstanding, Sublandlord and Subtenant each hereby waives any and all rights of recovery, claim, action or cause-of-action, against each other, and the Landlord, and their agents (including partners, both general and limited), officers, directors, shareholders, customers, invitees, or employees, for any loss or damage that may occur to the Subleased Premises, the Premises, and the building in which they are located, or any improvements thereto, or any improvements thereon, or any personal property of such party therein, by reason of fire, the elements or any other cause which is actually insured against by Landlord, Sublandlord or Subtenant, as the case may be, regardless of cause or origin, including negligence of the other party hereto, its agents, partners, shareholders, officers, directors, customers, invitees or employees, and covenants that no insurer shall hold any right of subrogation against such other party.

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17. Subtenant Renewal, Provided that (i) the Master Lease has not been terminated, (ii) this Sublease has not been terminated, (iii) an event of default has not occurred and (iv) Sublandlord has granted its consent thereto, which consent may be withheld in Sublandlord’s sole and absolute discretion, Subtenant is hereby granted the right (“Subtenant’s Renewal Right”) to extend the Term of this lease until April 30, 2013, which is the termination date as set forth in the Master Lease (the “Termination Date”) (such that Subtenant’s sublease of the Subleased Premises will be coterminous with Sublandlord’s lease of the Premises). In the event Subtenant desires to exercise the Subtenant Renewal Right, Subtenant shall deliver to Sublandlord one hundred eighty (180) days prior written notice of its intent to renew. If Subtenant timely delivers the such notice to Sublandlord, Sublandlord shall deliver to Subtenant no later than one hundred twenty (120) days prior written notice of whether Sublandlord will consent to the exercise of Subtenant’s Renewal Right. The “Renewal Term” shall commence on the day after the Expiration Date and shall expire on the Termination Date, subject to Paragraph 2 above. Subtenant shall pay Base Rent during such Renewal Term in accordance with the following schedule:

	Base Rent		Payment per month for
Period	rate		applicable period
November 1, 2010 - February 28, 2011	$	20.90	$	36,833.00
March 1, 2011- February 29, 2012	$	21.375	$	37,670.00
March 1, 2012 - April 30, 2013	$	21.85	$	38,507.00

     Notwithstanding the foregoing, nothing contained herein shall be deemed to obligate Sublandlord to consent to any such renewal. In the event Sublandlord does not consent to Subtenant’s exercise to Subtenant Renewal Right, the Term shall expire on the Expiration Date in accordance with Paragraph 2 above and Subtenant shall vacate the premises in accordance with Paragraph 12 above.

18. Furniture and Equipment.

     a. Sublandlord hereby grants to Subtenant, and Subtenant hereby accepts from Sublandlord, a license to use all those items of furniture (the “Furniture”) belonging to Sublandlord listed on Exhibit B attached hereto and made a part hereof until the earlier to occur of (i) the termination of this Sublease or (ii) the expiration of the Term or the Renewal Term, if applicable. In the event this Sublease is not otherwise terminated, and so long as an event of default has not occurred, upon the expiration of the Term or the Renewal Term, as applicable, Subtenant shall have the right to purchase those items of furniture listed on Exhibit C attached hereto and made a part hereof from Sublandlord for a purchase price of One and No/100 Dollar ($1.00).

     b. FOR SEVEN THOUSAND FIVE HUNDRED AND NO/100 DOLLARS ($7,500.00) AND OTHER GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged and confessed, Sublandlord does hereby bargain, assign, and sell to Subtenant all Sublandlord’s right, title and interest in and to the IT equipment (the “Equipment”) listed on Exhibit D attached hereto and made a part hereof. Subtenant shall pay any federal, state or local sales, use, or value added tax which may be due as a result of this transfer.

     c. SUBTENANT UNDERSTANDS AND AGREES THAT THE FURNITURE AND THE EQUIPMENT ARE BEING SOLD AND CONVEYED “AS IS”, “WHERE IS”, “WITH ALL FAULTS” THAT MAY EXIST AS OF THE EFFECTIVE DATE, AND WITH ANY AND ALL LATENT AND PATENT DEFECTS. SUBLANDLORD SPECIFICALLY DISCLAIMS ANY AND ALL WARRANTIES, WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE FURNITURE AND THE EQUIPMENT, AND SUBTENANT HEREBY EXPRESSLY WAIVES ANY IMPLIED COVENANTS. SUBLANDLORD HAS NOT MADE AND DOES NOT HEREBY MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR CHARACTER WHATSOEVER WITH RESPECT TO THE FURNITURE AND THE EQUIPMENT, THEIR CONDITION, THEIR COMPLIANCE WITH LAWS, INCOME TO BE DERIVED THEREFROM, OR EXPENSES TO BE INCURRED WITH RESPECT THERETO, THE OBLIGATIONS, RESPONSIBILITIES OR LIABILITIES RELATING TO THE

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FURNITURE AND THE EQUIPMENT, OR ANY OTHER MATTER OR THING RELATING TO OR AFFECTING THE FURNITURE AND THE EQUIPMENT.

19. Indemnification. Subtenant shall indemnify and hold harmless Landlord, Sublandlord, their affiliates and subsidiaries, and their employees, agents, successors, assigns, officers and directors from and against any and all claims, demands, causes of action, damages or penalties arising in connection with (i) Subtenant’s use or occupancy of the Subleased Premises, (ii) the conduct of Subtenant’s business or from any activity, work or things done, permitted or suffered by Subtenant in or upon the Subleased Premises, (iii) the Furniture and the Equipment or (iv) any breach by Subtenant of any terms and conditions of this Sublease or Master Agreement. Subtenant shall not be liable for any damage or injury caused solely by the negligence or intentional acts of Landlord, Sublandlord, or their respective employees, agents, or contractors occurring at the Subleased Premises. The provisions of this Paragraph 19 shall survive the expiration or sooner termination of this Sublease.

20. Default. Should Subtenant fail to pay any Rent due or any other sum required to be paid by Subtenant to Sublandlord hereunder, or should Subtenant default in the performance of any other covenant or condition on Subtenant’s part to be performed and such default, if with respect to Rent, is not cured within the shorter of (a) five (5) business days after Subtenant’s receipt of written notice from Sublandlord or within thirty (30) days after receipt of written notice with respect to other defaults in performance, specifying the nature of such alleged default, or (b) the period required under the Master Lease, Sublandlord shall have the right to terminate this Sublease and shall have all such other rights and remedies as are afforded at law or in equity to a landlord upon default by a tenant, and Subtenant shall indemnify and hold harmless Sublandlord from all damages resulting from such default; provided, however, if the nature of the default (other than failure to pay Rent) is such that it cannot be cured within such period, then Subtenant shall not be deemed to be in default if Subtenant shall have commenced the cure of such default within such period and thereafter diligently prosecutes such cure to completion except to the extent such failure constitutes a default under the Master Lease. The indemnification obligation pursuant to this Paragraph 20 shall survive the expiration or sooner termination of this Sublease.

21. Brokers. Except for Commercial Real Estate Solutions (“Subtenant’s Broker”), Subtenant hereby represents that it has not employed any broker or finder in connection with this Sublease Agreement. Subtenant has agreed to pay Subtenant’s Broker pursuant to the terms of a separate agreement. Except for The Staubach Company (“Sublandlord’s Broker”), Sublandlord hereby represents that it has not employed any broker or finder in connection with this Sublease Agreement. Sublandlord has agreed to pay Sublandlord’s Broker pursuant to the terms of a separate agreement. Subtenant agrees to indemnify and hold harmless Sublandlord from and with respect to any claims for a brokerage commission, finder’s fee or similar payment with respect to this Sublease that is made by any party claiming by, through or under Subtenant. Similarly, Sublandlord agrees to indemnify and hold harmless Subtenant from and with respect to any claims for a brokerage fee, finder’s fee or similar payment with respect to this Sublease that is made by a party claiming by, through or under Sublandlord.

22. Miscellaneous Provisions.

     a. Notices. All notices, requests, consents and other communications required or permitted under this Sublease shall be in writing (including electronic transmission) and shall be (as elected by the person giving such notice) hand delivered by messenger, sent by a reputable overnight courier service, electronically transmitted, or mailed (airmail if international) by registered or certified mail (postage prepaid), return receipt requested, addressed to:

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If to Subtenant:	Opus Healthcare Solutions 12 301-B Riata Trace Pk cuq. Austin, TX 78727 Attn: Fred Beck Phone: 512-336-7200 Fax: 512-336-4479
If to Sublandlord:	Centex Homes c/o SRS Real Estate Partners Lease Administration, File ID # __________ 15660 N. Dallas Parkway, Suite 1200 Dallas, TX 75248
	With copy to:
	Centex Homes 2728 N. Harwood Dallas, TX 75201 Attention: Director of Facilities

or to such other address as any party may designate by notice complying with the terms of this Section. Each such notice shall be deemed delivered (a) on the date delivered if by personal delivery or reputable overnight carrier service; (b) on the date of transmission with confirmed answer back if by electronic transmission; and (c) on the date upon which the return receipt is signed or delivery is refused or the notice is designated by the postal authorities as not deliverable, as the case may be, if mailed.

     b. Assignment and Subletting. Subject to the limitations in the Master Lease and below, Subtenant shall have the right to assign, in whole or in part, all its rights and obligations hereunder upon the written consent of Sublandlord; provided, however, such assignment shall in any event be subject to the approval of Landlord. No transfer or assignment by Subtenant shall release Subtenant of Subtenant’s obligations hereunder or affect the primary liability of Subtenant to perform all obligations to be performed by Subtenant hereunder. Sublandlord shall have the right, in its sole discretion, to withhold consent to any request from Subtenant with respect to any proposed assignment or subletting. Sublandlord shall have the right to transfer and assign, in whole or in part, all its rights and obligations hereunder. Upon request by Sublandlord, Subtenant agrees to execute a certificate certifying such facts (if true) as Sublandlord may reasonably require in connection with any such assignment by Sublandlord.

     c. Governing Law. This Sublease shall be governed by the laws of the state in which the Premises are located.

     d. Severability. If any provision of this Sublease is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Sublease shall not be affected thereby, and this Sublease shall be valid and enforceable to the fullest extent permitted by law.

23. Landlord’s Consent. This Sublease shall not become effective and shall not bind the parties until Landlord has given its consent to this Sublease. Subtenant may not occupy the Subleased Premises prior to receiving Landlord’s consent to this Sublease. If Landlord does not give its consent within thirty (30) days after the date first written above, either party may terminate this Sublease upon five (5) business days notice. In the event of such termination, Sublandlord shall promptly refund any monies paid to it by Subtenant. Notwithstanding the foregoing, in the event (i) Landlord fails to give its consent prior to April 1, 2009 and (ii) neither Sublandlord nor Subtenant have terminated this Sublease in accordance with the provisions of this Paragraph 23, the Commencement Date shall be extended until such date that Landlord gives its consent to this Sublease.

[SIGNATURE PAGE FOLLOWS.]

8

     Sublandlord and Subtenant have executed this Sublease as of the Effective Date.

Sublandlord:		Subtenant:
CENTEX HOMES,		OPUS HEALTHCARE
a Nevada general partnership		a ________________________
By:	Centex Real Estate Corporation A Nevada corporation, managing general partner
By:	/s/ Chris Werth	By:	/s/ Fred Beck
	Print Name: Chris Werth		Print Name: Fred Beck
	Title:             Division President		Title:             President

By execution of this Sublease, Landlord consents to the sublease of the Premises to Subtenant on the terms and conditions set forth in this Sublease.

Landlord: CARR TEXAS OP, LP, a Delaware limited partnership
By:	Carr Texas OP GP, LLC
	a Delaware limited liability company
	its general partner
By:	Carr Office Park, LLC
	a Delaware limited liability company
	its sole member
By:	CarrAmerica Realty Operating Partnership, LP,
	a Delaware limited partnership
	its managing member
By:	CarrAmerica Realty Corporation,
	a Maryland corporation
	its general partner
By:
	Print Name:
	Title:
	Date:

9

EXHIBIT A

MASTER LEASE AND FIRST AMENDMENT

[see attached]

EXHIBIT B

INVENTORY OF FURNITURE SUBJECT TO LICENSE TO USE BY SUBTENANT

Description	Total
chair, black leather		2
chair, stationary		68
chair, wheels		100
corner desk		2
cubes		46
desk		24
desk, metal- small		1
desk, metal- wheels		1
hutch for desk		2
hutch for two drawer cabinet		2
large conference table		2
metal cart, wheels		1
modular desk		25
short tables, square		2
small chair, stationary		8
table, folding		1
table, medium		1
table, round		6
table, semicircle		1
table, square		5
table, square, wheels		1
tables, square		2
tall tables, square		2

Other file cabinets, storage items, book shelves, and other miscellaneous items to be determined after Sublandlord vacates the 2nd floor.

EXHIBIT C

INVENTORY OF FURNITURE SUBJECT TO PURCHASE BY SUBTENANT

Description	QTY
chair, stationary		34
chair, wheels		50
corner desk		1
cubes		46
desk		12
desk, metal- small
desk, metal- wheels		1
hutch for desk		1
hutch for two drawer cabinet		1
large conference table		1
metal cart, wheels		1
modular desk		12
short tables, square		1
small chair, stationary		8
table, folding		1
table, medium		1
table, round		3
table, semicircle		1
table, square		2
table, square, wheels		1
tables, square		1

Other file cabinets, storage items, book shelves, and other miscellaneous items to be determined after Sublandlord vacates the 2nd floor.

EXHIBIT D

IT EQUIPMENT PURCHASED BY SUBTENANT

Description	Serial Number	QTY
Cisco Systems Catalyst 2950 Series	FHK0934Y06D		1
Cisco Systems Catalyst 2950 Series	FHK0934Z06V		1
Cisco Systems Catalyst 2950 Series	FHK0936W01U		1
Cisco Systems Catalyst 2950 Series	FHK0936W02L		1
Cisco Systems Catalyst 2950 Series	FHK0936X03N		1
Cisco Systems Catalyst 2950 Series	FOC0848Z0UE		1

TENANT: CENTEX HOMES, a Nevada general partnership
By:	Centex Real Estate Corporation, a Nevada corporation, its managing partner
By:	/s/ Bryan Swindell
	Name:	Bryan Swindell
	Title:	Division President

Address:
Date signed:	5/25/05

30

APPENDIX A

LEGAL DESCRIPTION OF LAND AND PLAN OF THE PREMISES

Lot 2, Block A, Riata Corporate Park Sec 1, according to the map or plat thereof in the Official Public Records of Travis County Texas.

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APPENDIX B

RULES AND REGULATIONS

     1. Tenant shall not place anything, or allow anything to be placed near the glass of any window, door, partition or wall which may, in Landlord’s judgment, appear unsightly from outside of the Building.

     2. The Building directory shall be available to Tenant solely to display names and their location in the Building, which display shall be as directed by Landlord.

     3. The sidewalks, halls, passages, exits, entrances, elevators and stairways shall not be obstructed by Tenant or used by Tenant for any purposes other than for ingress to and egress from the Premises. Tenant shall lend its full cooperation to keep such areas free from all obstruction and in a clean and sightly condition and shall move all supplies, furniture and equipment as soon as received directly to the Premises and move all such items and waste being taken from the Premises (other than waste customarily removed by employees of the Building) directly to the shipping platform at or about the time arranged for removal therefrom. The halls, passages, exits, entrances, elevators, stairways, balconies and roof are not for the use of the general public and Landlord shall, in all cases, retain the right to control and prevent access thereto by all persons whose presence in the judgment of Landlord, reasonably exercised, shall be prejudicial to the safety, character, reputation and interests of the Building. Neither Tenant nor any employee or invitee of Tenant shall go upon the roof of the Building.

     4. The toilet rooms, urinals, wash bowls and other apparatuses shall not be used for any purposes other than that for which they were constructed, and no foreign substance of any kind whatsoever shall be thrown therein, and to the extent caused by Tenant or its employees or invitees, the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by Tenant.

     5. Tenant shall not cause any unnecessary janitorial labor or services by reason of Tenant’s carelessness or indifference in the preservation of good order and cleanliness.

     6. Tenant shall not install or operate any refrigerating, heating or air conditioning apparatus (other than a household-type refrigerator), or carry on any mechanical business without the prior written consent of Landlord; use the Premises for housing, lodging or sleeping purposes; or permit preparation or warming of food in the Premises (warming of coffee and individual meals with employees and guests excepted). Tenant shall not occupy or use the Premises or permit the Premises to be occupied or used for any purpose, act or thing which is in violation of any Governmental Requirement or which may be dangerous to persons or property.

     7. Tenant shall not bring upon, use or keep in the Premises or the Building any kerosene, gasoline orinflammable or combustible fluid or material, or any other articles deemed hazardous to persons or property, or use any method of heating or air conditioning other than that supplied by Landlord.

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     8. Landlord shall have sole power to direct electricians as to where and how telephone and other wires are to be introduced. No boring or cutting for wires is to be allowed without the consent of Landlord. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Landlord.

     9. No additional locks shall be placed upon any doors, windows or transoms in or to the Premises. Tenant shall not change existing locks or the mechanism thereof. Upon termination of the lease, Tenant shall deliver to Landlord all keys and passes for offices, rooms, parking lot and toilet rooms which shall have been furnished Tenant.

          In the event of the loss of keys so furnished, Tenant shall pay Landlord therefor. Tenant shall not make, or cause to be made, any such keys and shall order all such keys solely from Landlord and shall pay Landlord for any keys in addition to the two sets of keys originally furnished by Landlord for each lock.

     10. Tenant shall not install linoleum, tile, carpet or other floor covering so that the same shall be affixed to the floor of the Premises in any manner except as approved by Landlord.

     11. No furniture, packages, supplies, equipment or merchandise will be received in the Project or carried up or down in any elevator, except between such hours and in such elevator as shall be designated by Landlord, and with such padding or other precautions as may be required by Landlord. Tenant shall not take or permit to be taken in or out of other entrances of the Building any item normally taken in or out through any trucking concourse or service doors.

     12. Tenant shall cause all doors to the Premises to be closed and securely locked and shall turn off all utilities, lights and machines before leaving the Building at the end of the day.

     13. Without the prior written consent of Landlord, Tenant shall not use the name of the Building or the Project or any picture of the Building or the Project in connection with, or in promoting or advertising the business of, Tenant, except Tenant may use the address of the Building as the address of its business.

     14. Tenant shall cooperate fully with Landlord to assure the most effective operation of the Premises’ or the Building’s heating and air conditioning, and shall refrain from attempting to adjust any controls, other than room thermostats installed for Tenant’s use. Tenant shall keep corridor doors closed.

     15. Tenant assumes full responsibility for protecting the Premises from theft, robbery and pilferage, which may arise from a cause other than Landlord’s negligence, which includes keeping doors locked and other means of entry to the Premises closed and secured.

     16. Peddlers, solicitors and beggars shall be reported to the office of the Project or as Landlord otherwise requests.

     17. Tenant shall not advertise the business, profession or activities of Tenant conducted in the Project in any manner which violates the letter or spirit of any code of ethics adopted by any recognized association or organization pertaining to such business, profession or activities.

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     18. No bicycle or other vehicle and no animals or pets shall be allowed in the Premises, halls, freight docks, or any other parts of the Building except that blind persons may be accompanied by “seeing eye” dogs. Tenant shall not make or permit any noise, vibration or odor to emanate from the Premises, or do anything therein tending to create, or maintain, a nuisance, or do any act tending to injure the reputation of the Building or the Project.

     19. Tenant acknowledges that Building or Project security problems may occur which may require the employment of extreme security measures in the day-to-day operation of the Building or the Project.

     Accordingly:

          (a) Landlord may, at any time, or from time to time, or for regularly scheduled time periods, as deemed advisable by Landlord and/or its agents, in their sole discretion, require that persons entering or leaving the Building or the Project identify themselves to watchmen or other employees designated by Landlord, by registration, identification or otherwise.

          (b) Tenant agrees that it and its employees will cooperate fully with Building and Project employees in the implementation of any and all security procedures.

          (c) Such security measures shall be the sole responsibility of Landlord, and Tenant shall have no liability for any action taken by Landlord in connection therewith, it being understood that Landlord is not required to provide any security procedures and shall have no liability for such security procedures or the lack thereof.

     20. Tenant shall not do or permit the manufacture, sale, purchase, use or gift of any fermented, intoxicating or alcoholic beverages without obtaining written consent of Landlord.

     21. Tenant shall not disturb the quiet enjoyment of any other tenant.

     22. Tenant shall not provide any janitorial services or cleaning without Landlord’s written consent and then only subject to supervision of Landlord and at Tenant’s sole responsibility and by janitor or cleaning contractor or employees at all times satisfactory to Landlord.

     23. Subject to the limitations set forth in the Lease, Landlord may retain a pass key to the Premises and be allowed admittance thereto at all times to enable its representatives to examine the Premises from time to time and to exhibit the same; and Landlord may place and keep on the windows and doors of the Premises, during the last six (6) months of the Term, signs advertising the Premises for Rent.

     24. No equipment, mechanical ventilators, awnings, special shades or other forms of window covering shall be permitted either inside or outside the windows of the Premises without the prior written consent of Landlord, and then only at the expense and risk of Tenant, and they shall be of such shape, color, material, quality, design and make as may be approved by Landlord.

     25. Tenant shall not during the term of this Lease canvas or solicit other tenants of the Building for any purpose, except in the ordinary course of Tenant’s business.

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     26. Tenant shall not install or operate any phonograph, musical or sound- producing instrument or device, radio receiver or transmitter, TV receiver or transmitter, or similar device in the Building, nor install or operate any antenna, aerial, wires or other equipment inside or outside the Building, nor operate any electrical device from which may emanate electrical waves which may interfere with or impair radio or television broadcasting or reception from or in the Building or elsewhere, without in each instance the prior written approval of Landlord. The use thereof, if permitted, shall be subject to control by Landlord to the end that others shall not be disturbed.

     27. Tenant shall promptly remove all rubbish and waste from the Premises.

     28. Tenant shall not exhibit, sell or offer for sale, rent or exchange in the Premises or at the Project any article, thing or service, except those ordinarily embraced within the use of the Premises specified in Section 6 of this Lease, without the prior written consent of Landlord.

     29. Tenant may list all furniture, equipment and similar articles Tenant desires to remove from the Premises or the Building and deliver a copy of such list to Landlord and procure a removal permit from the Office of the Building authorizing Building employees to permit such articles to be removed. If Tenant fails to provide such list to Landlord or otherwise procure a removal permit, Landlord shall be entitled (but not obligated) to halt such removal until such time as Tenant acknowledges such employee’s authority to remove such items.

     30. Tenant shall not overload any floors in the Premises or any public corridors or elevators in the Building.

     31. Tenant shall not do any painting in the Premises, or mark, paint, cut or drill into, drive nails or screws into, or in any way deface any part of the Premises or the Building, outside or inside, without the prior written consent of Landlord, except as reasonably necessary in the ordinary course of business or as commonly done in decorating or equipping office space, subject to Section 5A of the Lease.

     32. Whenever Landlord’s consent, approval or satisfaction is required under these Rules, then unless otherwise stated, any such consent, approval or satisfaction must be obtained in advance, such consent or approval may be granted or withheld in Landlord’s sole discretion, and Landlord’s satisfaction shall be determined in its sole judgment.

     33. Tenant and its employees shall cooperate in all fire drills conducted by Landlord in the Building.

B-4

APPENDIX C

TENANT IMPROVEMENT AGREEMENT

     1. INITIAL IMPROVEMENTS. Landlord shall cause to be constructed, in a good workmanlike manner, the improvements (the “Initial Improvements”) in the Premises in accordance with plans and specifications approved by Tenant and Landlord (the “Plans”), which approvals shall not be unreasonably withheld. The Initial Improvements shall be performed at the Landlord’s cost.

     Landlord shall cause the Plans to be prepared by a professional architect, and mechanical and electrical engineer(s) and based upon the space plans as shown on Appendix C-1 attached hereto using building standard finishes. Within ten (10) business days after the later to occur of (i) the mutual execution of the Lease or (ii) Tenant’s providing to Landlord the preliminary space plans for the Premises and such other information reasonably required by Landlord to commence preparation of the Plans, Landlord shall furnish the initial draft of the Plans to Tenant for Tenant’s review and approval. Tenant shall, within ten (10) days after receipt, either provide comments to such Plans or approve the same. Tenant shall be deemed to have approved such Plans if it does not timely provide comments on such Plans. If Tenant provides Landlord with comments to the initial draft of the Plans, Landlord shall provide revised Plans to Tenant incorporating Tenant’s comments within one (1) week after receipt of Tenant’s comments. Tenant shall, within five (5) business days after receipt, then either provide comments to such revised Plans or approve such Plans. Tenant shall be deemed to have approved such revised Plans if Tenant does not timely provide comments on such Plans. The process described above shall be repeated, if necessary, until the Plans have been finally approved by Tenant and Landlord; provided, however, if Landlord and Tenant cannot, despite using good faith efforts, reach agreement with respect to the Plans by June 15, 2005, then either Landlord or Tenant may terminate this Lease upon delivery of written notice to the other, whereupon (i) Landlord shall return to Tenant any prepaid Rent and (ii) the parties shall have no further rights or obligations under this Lease. Landlord hereby agrees that the Plans for the Initial Improvements shall comply with all applicable Governmental Requirements.

     Once the Plans have been finally approved, Landlord will promptly prepare all necessary construction drawings for the construction of the Initial Improvements. Upon the completion of such construction drawings, Landlord shall submit the same to Tenant for its approval. Tenant shall, within five (5) days after receipt, then either provide comments to such drawings or approve the same. Tenant shall be deemed to have approved such drawings if Tenant does not timely provide comments thereto. If Tenant timely provides any comments to such drawings, Landlord shall revise such drawings and resubmit the same to Tenant for its review and approval. Until such time as Landlord and Tenant mutually approve such construction drawings, the process described above shall be repeated as reasonably necessary, and both Landlord and Tenant agree to act in good faith in order to derive mutually acceptable construction drawings for the construction of the Initial Improvements.

     Once the Plans and all construction drawings relative thereto have been finalized and approved by Tenant and Landlord, Landlord shall promptly (i) submit the same to the appropriate governmental authorities for the issuance of all necessary building permits, and (ii) select a contractor to perform the construction of the Initial Improvements. Landlord shall use commercially reasonable efforts to cause the Initial Improvements to be substantially completed, except for

C-1

mechanical adjustments or minor details of construction (“Punch List Items”), on or before July 1, 2005 (the “Intended Completion Date”), subject to Tenant Delay (as defined in Section 4 hereof) and Force Majeure.

     2. CHANGE ORDERS. If, prior to the Commencement Date, Tenant shall require improvements or changes (individually or collectively, “Change Orders”) to the Premises in addition to, revision of, or substitution for the Initial Improvements, Tenant shall deliver to Landlord for its approval plans and specifications for such Change Orders. If Landlord does not approve of the plans for Change Orders, Landlord shall advise Tenant of the revisions required. Tenant shall revise and redeliver the plans and specifications to Landlord within five (5) business days of Landlord’s advice or Tenant shall be deemed to have abandoned its request for such Change Orders. Tenant shall pay for all preparations and revisions of plans and specifications, and the construction of all Change Orders.

     3. TURN KEY. Landlord shall complete the Initial Improvements on a “turn key” basis; provided, however, Landlord has no obligation to pay for costs of (i) Change Orders or (ii) costs associated with cabling, telecommunications equipment, furniture, appliances and Tenant’s move into the Premises. Notwithstanding the foregoing, Landlord shall provide Tenant with a moving allowance of up to $355,000.00 for Tenant’s moving expenses, which allowance shall be provided to Tenant within ten (10) days after Tenant’s occupancy of the Premises.

     4. COMMENCEMENT DATE DELAY. The parties acknowledge and agree that the Commencement Date of the Lease shall not occur prior to the date that the Initial Improvements have been substantially completed (the “Completion Date”); provided, however, the Commencement Date shall not be deferred to or beyond the Completion Date to the extent that any one or more of the following (a “Tenant Delay”), has caused the Completion Date to occur after the Intended Completion Date:

          (a) Tenant’s request for Change Orders to the extent such Change Orders actually cause a delay; or

          (b) Contractor’s performance of any Change Orders, to the extent a delay results therefrom; or

          (c) Tenant’s request for materials, finishes or installations requiring unusually long lead times; or

          (d) Tenant’s delay in reviewing, revising or approving plans and specifications beyond the periods set forth herein; or

          (e) Tenant’s delay in providing information critical to the normal progression of the project. Tenant shall provide such information as soon as reasonably possible, but in no event longer than one week after receipt of such request for information from the Landlord; or

          (f) Tenant’s delay in making payments to Landlord for costs of the Change Orders; or

C-2

          (g) Any other act or omission by Tenant, its agents, contractors or persons employed by any of such persons, to the extent a delay results therefrom.

          Landlord agrees to use reasonable efforts to notify Tenant of any circumstances or acts or omissions of Tenant that constitute a Tenant Delay hereunder. If the Completion Date occurs after the Intended Completion Date, and such delay has resulted from a Tenant Delay, then, for purposes of this Lease, the Completion Date shall be deemed to be the date, determined in Landlord’s sole discretion, on which the Initial Improvements would have been substantially completed but for any Tenant Delay. For purposes hereof, the Initial Improvements shall be deemed to be “substantially completed” at such time as Landlord has certified to Tenant that (i) Landlord has completed the Initial Improvements in substantial conformance with the Plans, subject only to Punch List Items, (ii) Landlord has tendered possession of the Premises to Tenant, and (iii) Landlord has obtained any required certificates of occupancy necessary to permit Tenant to occupy the Premises.

          Landlord shall complete Punch List Items within thirty (30) days after the Commencement Date, and, for a period of one (1) year after the Commencement Date, Landlord shall promptly repair or correct any latent defects in the Initial Improvements, provided that Tenant gives Landlord written notice thereof within said one-year period.

     5. ACCESS BY TENANT PRIOR TO COMMENCEMENT OF TERM. Landlord at its discretion may permit Tenant and its agents to enter the Premises prior to the Completion Date to prepare the Premises for Tenant’s use and occupancy. Any such permission shall constitute a license only, conditioned upon Tenant’s:

          (a) working in harmony with Landlord and Landlord’s agents, contractors, workmen, mechanics and suppliers and with other tenants and occupants of the Building;

          (b) obtaining in advance Landlord’s approval of the contractors proposed to be used by Tenant and depositing with Landlord in advance of any work the contractor’s statement of the scope of work to be performed (or a copy of its construction contract with Tenant) and the form of lien waivers intended to be utilized by the contractor and all subcontractors and suppliers of material; and

          (c) furnishing Landlord with such insurance as Landlord may require against liabilities which may arise out of such entry.

          Landlord shall have the right to withdraw such license for any reason upon twenty-four (24) hours’ written notice to Tenant. Landlord shall not be liable in any way for any injury, loss or damage which may occur to any of Tenant’s property or installations in the Premises prior to the Commencement Date. 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 Premises or the Building. Any entry and occupation permitted under this Section shall be governed by Section 5 and all other terms of the Lease.

     6. MISCELLANEOUS. Terms used in this Appendix C shall have the meanings assigned to them in the Lease. The terms of this Appendix C are subject to the terms of the Lease.

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APPENDIX C-1

SPACE PLANS

C-4

APPENDIX D

MORTGAGES CURRENTLY AFFECTING THE PROJECT

Northwestern Mutual Life Insurance Co.
720 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Real Estate Investment Department
Reference Loan No. 332559

D-1

APPENDIX E

COMMENCEMENT DATE CONFIRMATION

Landlord: Carr Texas OP, LP, a Delaware limited partnership

Tenant: Centex Homes, a Nevada general partnership

     This Commencement Date Confirmation is made by Landlord and Tenant pursuant to that certain Lease dated as of May 23, 2005 (the “Lease”) for certain premises known as Suites 100 and 200 in the building commonly known as Riata Corporate Park Building 2 (the “Premises”). This Confirmation is made pursuant to Item 9 of the Schedule to the Lease.

     1. Lease Commencement Date, Termination Date. Landlord and Tenant hereby agree that the Commencement Date of the Lease is                     , 2005, and the Termination Date of the Lease is                     , 200   .

     2. Acceptance of Premises. Tenant has inspected the Premises and affirms that the Premises is acceptable in all respects in its current “as is” condition, subject only to latent defects and Punch List Items, the correction of which Landlord shall complete in accordance with the terms of the Lease.

     3. Incorporation. This Confirmation is incorporated into the Lease, and forms an integral part thereof. This Confirmation shall be construed and interpreted in accordance with the terms of the Lease for all purposes.

TENANT: CENTEX HOMES, a Nevada general partnership
By:	Centex Real Estate Corporation, a Nevada corporation, its managing partner
By:	[Do Not Execute when Signing Lease]
	Name:
	Title:

E-2

LANDLORD: CARR TEXAS OP, LP, a Delaware limited partnership
By:	Carr Texas OP GP, LLC, a Delaware limited liability company, its general partner
By:	Carr Office Park, LLC, a Delaware limited liability company, its sole member
By:	CarrAmerica Realty Operating Partnership, LP, a Delaware limited partnership, its managing member
By:	CarrAmerica Realty
	Corporation, a Maryland corporation, its general partner
By:
	Name:
	Title:

E-3

APPENDIX F

SPECIAL PROVISIONS

1. EXTENSION OPTION. Subject to Subsection B below, Tenant may at its option extend the Term of this Lease for two (2) periods of five (5) years each (each, a “Renewal Term”). Each Renewal Term shall be upon the same terms contained in this Lease excluding Appendix C of this Lease and except for the payment of Base Rent during the Renewal Term; and any reference in the Lease to the “Term” of the Lease shall be deemed to include each Renewal Term and apply thereto, unless it is expressly provided otherwise. Tenant shall have no additional extension options.

     A. The Base Rent during each Renewal Term shall be the Market Rate (defined hereinafter) for such space for a term commencing on the first day of the Renewal Term. “Market Rate” shall mean the then prevailing market rate for a comparable term commencing on the first day of the Renewal Term for tenants of comparable size for comparable space (giving due consideration to existing tenant improvements) in the Building and other first class office buildings in the vicinity of the Building, as reasonably determined by Landlord.

     B. To exercise any option, Tenant must deliver a binding notice to Landlord not less than nine (9) months prior to the expiration of the initial Term of this Lease. Thereafter, the Market Rate for the Renewal Term shall be calculated pursuant to Subsection C below and Landlord shall inform Tenant of the Market Rate. Such calculations shall be final and shall not be recalculated at the actual commencement of the Renewal Term. If Tenant fails to timely give its notice of exercise, Tenant will be deemed to have waived its option to extend.

     C. Market Rate shall be determined as follows:

     (i) If Tenant provides Landlord with its binding notice of exercise pursuant to Subsection B above, within thirty (30) days of receipt of such notice, Landlord shall calculate and inform Tenant of the Market Rate. If Tenant rejects the Market Rate as calculated by Landlord, Tenant shall inform Landlord of its rejection within ten (10) days after Tenant’s receipt of Landlord’s calculation, and Landlord and Tenant shall commence negotiations to agree upon the Market Rate. If Tenant fails to timely reject Landlord’s calculation of the Market Rate it will be deemed to have accepted such calculation. If Landlord and Tenant are unable to reach agreement within fifteen (15) days after Landlord’s receipt of Tenant’s notice of rejection, then the Market Rate shall be determined in accordance with (ii) below.

     (ii) If Landlord and Tenant are unable to reach agreement on the Market Rate within said fifteen (15) day period, then within five (5) days thereafter, Landlord and Tenant shall each simultaneously submit to the other in a sealed envelope its good faith estimate of the Market Rate. If the higher of such estimates is not more than one hundred five percent (105%) of the lower, then the Market Rate shall be the average of the two. Otherwise, the dispute shall be resolved by arbitration in accordance with (iii) and (iv) below.

F-1

     (iii) Within seven (7) days after the exchange of estimates, the parties shall select as an arbitrator an independent MAI appraiser with at least ten (10) years of experience in appraising office space in the metropolitan area in which the Project is located (a “Qualified Appraiser”). If the parties cannot agree on a Qualified Appraiser, then within a second period of seven (7) days, each shall select a Qualified Appraiser and within ten (10) days thereafter the two appointed Qualified Appraisers shall select a third Qualified Appraiser and the third Qualified Appraiser shall be the sole arbitrator. If one party shall fail to select a Qualified Appraiser within the second seven (7) day period, then the Qualified Appraiser chosen by the other party shall be the sole arbitrator.

     (iv) Within twenty-one (21) days after submission of the matter to the arbitrator, the arbitrator shall determine the Market Rate by choosing whichever of the estimates submitted by Landlord and Tenant the arbitrator judges to be more accurate. The arbitrator shall notify Landlord and Tenant of its decision, which shall be final and binding. If the arbitrator believes that expert advice would materially assist him, the arbitrator may retain one or more qualified persons to provide expert advice. The fees of the arbitrator and the expenses of the arbitration proceeding, including the fees of any expert witnesses retained by the arbitrator, shall be paid by the party whose estimate is not selected. Each party shall pay the fees of its respective counsel and the fees of any witness called by that party.

          D. Tenant’s option to extend this Lease is subject to the conditions that: (i) on the date that Tenant delivers its binding notice exercising an option to extend, Tenant is not in default under this Lease after the expiration of any applicable notice and cure periods, and (ii) except to a Permitted Transferee, Tenant shall not have assigned the Lease, or sublet any portion of the Premises under a sublease which is effective at any time during the final twelve (12) months of the initial Term.

2. RIGHT OF FIRST REFUSAL. Subject to Subsection B below, and subject to any renewal options of any current tenant in the Building (a “Prior Tenant”), Landlord hereby grants to Tenant for the Term of the Lease a recurring right of first refusal to lease the portion of the first (1st) floor of the Building immediately contiguous to the portion of the original Premises on the first (1st) floor (collectively, the “RFR Space”), to be exercised in accordance with Subsection A below.

     A. In the event Landlord receives a bona fide offer or proposal from a third party to lease all or a portion of the RFR Space acceptable to Landlord, which may be evidenced by a written proposal from a prospective tenant detailing all substantive lease terms, Landlord shall so notify Tenant (“Landlord’s RFR Notice”), identifying the available RFR Space and setting forth the business terms of such offer or proposal. Tenant shall notify Landlord within five (5) business days of receipt of Landlord’s RFR Notice whether it desires to lease such RFR Space on the terms set forth in Landlord’s RFR Notice. If Tenant does not notify Landlord within said 5-day period that it will lease such RFR Space, Tenant shall have no further right of first refusal for such RFR Space unless Landlord fails to enter into a lease for such RFR Space substantially on such terms within six (6) months following Landlord’s RFR Notice, in which case the RFR Space shall again be subject to Tenant’s right of first refusal as set forth herein after such 6-month period. Furthermore, if at any time during the Lease Term the RFR Space or any portion of it subsequently becomes available for rent, Tenant’s recurring right of first refusal shall again become applicable with respect to such space. If Tenant exercises its right of first refusal with respect to the RFR Space, such space shall be

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added to the Premises for all purposes of this Lease on (a) the terms specified in Landlord’s RFR Notice (except that the lease term for such RFR Space shall be coterminous with the Term of the Lease), and (b) the terms of this Lease to the extent that they do not conflict with the terms specified in Landlord’s RFR Notice.

     B. Tenant’s right of first refusal is subject to the conditions that: (i) on the date that Tenant delivers its notice exercising its right of first refusal, Tenant is not in default under this Lease after the expiration of any applicable notice and cure periods, and (ii) except to a Permitted Transferee, Tenant shall not have assigned the Lease, or sublet any portion of the Premises under a sublease which is in effect at any time during the period commencing with Tenant’s delivery of its notice and ending on the date the RFR Space is added to the Premises.

     C. Promptly after Tenant’s exercise of its right of first refusal, Landlord shall execute and deliver to Tenant an amendment to the Lease to reflect changes in the Premises, Base Rent, Tenant’s Proportionate Share and any other appropriate terms changed by the addition of the RFR Space. Within fifteen (15) business days thereafter, Tenant shall execute and return the amendment, or be deemed not to have elected to exercise its right of first refusal as to the RFR Space, and Landlord shall thereafter be free to lease the RFR Space to such third party offeror.

3. SIGNAGE.

     A. Subject to provisions of this Section 3, Landlord grants Tenant the nonexclusive right to place a building sign identifying the tenancy of Tenant on the Building (the “Sign”). For purposes of this Section and Tenant’s right to the Sign, “Tenant” shall mean only the original party who signed this Lease on the execution date as the tenant.

     B. Tenant hereby covenants and agrees that:

     (i) The size, dimensions, material, content, design, construction, location and method of installation of the Sign shall be as depicted on Schedule F-1 (location) and Schedule F-2 (plans and specifications) attached hereto. Any changes or additions to such exhibit shall require Landlord’s prior written consent;

     (ii) Tenant shall be responsible for ensuring that the Sign is in compliance with all applicable codes, ordinances, statutes, rules and regulations, including any action or rule of any landmark and/or historical commission having jurisdiction;

     (iii) Tenant, at its sole cost and expense, shall obtain and comply with all consents, approvals and permits necessary from all governmental and quasi-governmental authorities and landmark and/or historical commissions having jurisdiction;

     (iv) Tenant, at its sole cost and expense, shall insure the Sign as part of its property and shall also carry liability and property damage insurance with respect to the Sign in amounts equal to full replacement and reinstallation costs of the Sign; and

     (v) Tenant, at its sole cost and expense, shall clean and maintain the Sign on a regular basis so as to ensure that the Sign retains an attractive appearance at all times.

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     C. In addition to the foregoing, Tenant shall:

     (i) Pay all costs associated with creating, designing, manufacturing, installing, cleaning, maintaining, repairing and replacing (if necessary) the Sign; and

     (ii) Be permitted to illuminate the Sign; provided, however, that Tenant pays all costs of such illumination, which costs shall include, without limitation, the installation, operation, maintenance, repair and replacement of bulbs and ballasts (“Lighting Costs”). If any of the Lighting Costs are invoiced to Landlord, such costs shall become immediately due upon invoice to Tenant therefor from Landlord.

     D. In the event that Tenant:

     (i) Assigns the Lease (except as may be permitted under Paragraph 17G of the Lease); or

     (ii) Is in default of the Lease beyond any applicable notice and cure periods;

Then, upon not less than thirty (30) days’ prior written notice, Landlord may, but is not required to, terminate Tenant’s rights and privileges pursuant to this Section II and remove the Sign from the Building.

     E. Upon the expiration or earlier termination of this Lease or of Tenant’s right to possession of the Premises, or upon termination of Tenant’s rights and privileges in accordance with paragraph D of this Section 2:

     (i) If Landlord desires that the Sign be removed, Tenant shall, at Tenant’s sole cost and expense, remove the Sign and restore and repair all parts of the Building affected by the installation or removal of the Sign to the condition existing prior to its installation or to a condition otherwise reasonably acceptable to Landlord; or

     (ii) If Landlord does not then desire that the Sign be removed, such Sign shall remain until such time as Landlord shall desire that it be removed, in which event Landlord shall remove the Sign and repair and restore all damage caused by such removal, and such removal, repair and restoration costs shall be deemed Additional Rent, due and payable by Tenant upon invoice therefor from Landlord.

     F. Tenant’s rights hereunder shall be subject to the existing signage rights of other tenants or occupants of the Building, and Landlord shall be permitted to grant to other tenants of the Building the right to install signage on or in the Building.

4. TERMINATION RIGHT. To be effective on the last day of the sixtieth (60^th) Lease Month (“Termination Date”), so long as Tenant is not in default under this Lease, Tenant shall have a one-time right (“Termination Right”) to terminate this Lease in its entirety by timely providing Landlord written notice of Tenant’s exercise of such Termination Right (the “Termination Notice”), and paying to Landlord the Termination Payment (defined below). The Termination Notice must be

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given to Landlord on or before the day which is six (6) months prior to the Termination Date. Once exercised by Tenant, the Termination Right may not be revoked by Tenant without Landlord’s consent. The Termination Payment must be paid by Tenant to Landlord within thirty (30) days following Tenant’s receipt from Landlord of its calculation of the amount of the Termination Payment in order for the Termination Notice to be effective. The failure of Tenant to timely give the Termination Notice and/or pay the Termination Payment shall be deemed a waiver by Tenant of the Termination Right.

     As used herein, “Termination Payment” shall mean a cash amount equal to the sum of the (a) six (6) month’s Rent at the rate charged immediately prior to the Termination Date, plus (b) the aggregate of the unamortized portions (as of the Termination Date) of (i) costs incurred by Landlord in the construction and installation of the Tenant Improvements, (ii) leasing commissions paid by Landlord in connection with this Lease, and (iii) moving costs provided by Landlord to Tenant, such amortization being calculated by using a straight line method over the Term of the Lease and a eight percent (8%) per annum interest factor. Notwithstanding the foregoing, in the event that Tenant has exercised its right to lease any RFR Space in accordance with the terms hereof, the Termination Payment shall also include such amounts relative to the RFR Space.

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APPENDIX G

CURRENT JANITORIAL SERVICES

A. Building Entrance/Main Lobby Area:

1. Daily/As Necessary

a.	Thoroughly clean the entire glass entrance doors, including handles.
b.	Thoroughly dust all lobby furniture and fixtures.
c.	Remove all fingerprints, smudges, and dirt from all vertical surfaces within 72” from floor.
d.	Thoroughly clean Directory Board.
e.	All carpeted areas shall be thoroughly vacuumed. Spot cleaned as necessary. This shall include walk-off mats if present.
f.	Hard surface floor areas shall be maintained in a manner which consistently presents the appearance desired without visible evidence of traffic patterns. Particular attention shall be paid to edges to ensure a proper, dust free, consistent appearance. Any damage to the stone surface, resulting from improper care, shall be the full responsibility of the Contractor.
g.	All metal surfaces shall be maintained in a manner consistent with the original intent of the manufacturer and the desires of Landlord or its property manager.
h.	Thoroughly clean entire lobby area to include, but not limited to, dust/wipe down work area, empty trash receptacles, replace trash liner, clean telephone equipment, and dust chairs. This area shall be maintained in a manner, which presents only the highest quality impression possible.

2. Periodic

a.	Strip, refinish, or otherwise maintain hard surface floor finishes to ensure an appearance consistent with that desired by the architects of the facility as requested by Landlord or its property manager.
b.	Thoroughly clean, monthly, in a manner specified by management, all carpeted floor surfaces, including area carpets.
c.	Dust and damp wipe, to remove all residues on a quarterly basis, all vertical surfaces above 72” in height. If special lift equipment is necessary this item shall be considered a special request, outside the terms of this Agreement.
d.	On a quarterly basis all air diffuses and light fixtures will be thoroughly washed and wiped clean. If special lift equipment is necessary this item shall be considered a special request outside the terms of this Agreement.

B. Elevators:

1. Daily

a.	Damp wipe, dust, and/or thoroughly clean, using the appropriate chemicals and polishes, all exterior and interior doors, cab walls, door frames, and indicator panels.
b.	Vacuum all carpeted floor surfaces to remove soil, loose debris, and dust. Particular attention to be paid to edges. Spot clean as necessary.
c.	Maintain hard surface floors in a manner consistent with process utilized in main lobby area. Appearance shall be consistent and free of traffic/wear patterns.
d.	Clean and polish tracks, plates, and grooves.

2. Periodic

a. Dust inside of telephone cabinets weekly clean thoroughly weekly.

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b.	Thoroughly dust ceilings, light fixtures and ceiling finishes weekly.
c.	Shampoo carpets monthly or more often if necessary.

C. Tenant Occupied Areas:

1. Daily

a.	Empty all waste baskets and reline with approved liner as necessary.
b.	Remove all waste to designated area.
c.	Dust all horizontal surfaces. Paper shall not be disturbed on desks.
d.	Clean all glass furniture tops.
e.	Vacuum all carpets.
f.	Sweep and damp mop all non-carpeted areas to produce a thoroughly clean appearance.
g.	Damp wipe and clean all counters and tops of appliances in kitchen areas, so long as those surfaces do not have any items on them. Dust thoroughly.
h.	Thoroughly clean and polish all water coolers and fountains.
i.	Windows shall remain closed and locked.
j.	Venetian blinds shall remain in the position found or adjusted as requested.
k.	Spot clean carpeting in conjunction with Tenant’s carpet cleaning program.

2. Weekly

a.	Detail vacuum all carpets, including under moveable furniture, with particular attention to edges.
b.	Clean all window frames, sills, chair rails, convector tops, picture frames, or frames of wall hangings within 72” of floor surface.
c.	High dust within 72” of floor.
d.	Clean all baseboards.

3. As Necessary

a.	Clean doors, doorframes, walls, millwork, file cabinets, nameplates, and switch plates to remove fingerprints, spills, and other markings.
b.	Clean all metal trim work.
c.	Maintain all composition hard surface floors to ensure a scuff-free high gloss, clean appearance.

4. Periodic

a.	Dust all window blinds monthly.
b.	Clean all lighting and ventilation fixtures monthly.

5. Other

a.	Remove all recyclable materials to designated areas as specified by Landlord or its property manager.
b.	Lights shall be turned off and doors locked unless specifically designated otherwise.
c.	Wash waste receptacles as designated by Landlord or its property manager.

D. Common Area Corridors and Elevator Lobbies:

1. Daily

a.	All carpeted floor surfaces are to be vacuumed including edges and under furniture.
b.	Baseboards shall be wiped with a treated dust cloth.
c.	Spot-clean carpet and baseboards as necessary.
d.	All hard surface floors shall be dust mopped, wet mopped, spray buffed, and refinished as

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	necessary to preserve and present a uniform appearance free of wear patterns, stains, and scuffs.
e.	Washable wall surfaces shall be spot cleaned to remove all smudges, stains, and handprints.
f.	Doors and doorframes shall be spot cleaned to remove hand-marks and stains. Dust as necessary.
g.	Glass entrances and doors shall be spot cleaned to remove any fingerprints, smudges, or stains.
h.	All metalwork, such as mail chutes, door hardware, metal lettering, etc. shall be wiped clean and polished as directed by management.
i.	Elevator doors and tracks shall be wiped down, and polished if necessary, to remove all dust, marks, and stains.
j.	Remove all debris from cigarette urns or ash receptacles, replacing materials as necessary.
k.	Dust furniture, accessories, ledges, and all other horizontal surfaces using a treated cloth. Vacuum upholstery as necessary.

2. Weekly

a. Thoroughly clean glass entrances and doors.

3. Monthly

a.	Dust all areas not accomplished during daily maintenance schedule. This shall include, but not be limited to, ledges, air diffuses, vents, lights, etc.
b.	Thoroughly dust interior of fire extinguisher cabinet including unit. Clean glass door if applicable.
c.	Dust Venetian blinds if applicable.

4. Quarterly

a.	Dust and damp wipe, where necessary, all light lenses and fixtures including exit lights. This does not include parabolic lenses.
b.	Wash and dry all air diffuses.

E. Restroom Facilities (Including tenant facilities):

1. Daily

a.	Damp wipe with a mild, non-abrasive, approved germicidal detergent all counter tops, doors, walls, door frames, kick plates, thresholds, and partitions.
b.	Clean and polish towel and tissue dispensers, flushometers, shelves, fixtures, and all other metal surfaces to remove all soil.
c.	Thoroughly clean all mirrored surfaces to a clean, streak-free, appearance.
d.	Empty and damp wipe all waste paper containers. Replace liner daily.
e.	Thoroughly clean sinks and polish fixtures.
f.	Toilets, toilet seats, and urinals shall be thoroughly cleaned using an approved germicidal cleaner. All stains, streaks, and deposits shall be removed. Clean, and polish all bright work.
g.	Empty and thoroughly clean feminine product disposal receptacles and replace liner.
h.	Sweep and wet mop floor using a germicidal detergent approved by Management. Particular attention shall be paid to corners and edges to prevent splashing and build-up.
i.	Refill all toilet tissue, paper towel, sanitary napkins, soap, and toilet seat cover dispensers using Owner-approved products.
j.	Thoroughly clean all countertops to eliminate the buildup of soap residue and calcium deposits.

2. Weekly

a.	Thoroughly wash partitions and walls. Remove graffiti immediately where possible. If not possible report to Landlord or its property manager.
b.	Thoroughly clean base of walls and edges.

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c.	Dust ventilating diffuses and light lenses.
d.	Pour water, and appropriate chemical, down floor drains to reduce odors.

3. Monthly

a. Machine scrub floors with particular attention paid to grout, corners, and edges.

4. Quarterly

a.	Thoroughly wash walls, floors to ceiling, with approved germicidal detergent. Wash doors and door frames.
b.	Polish countertops.

5. As Necessary, if Specified.

a. Apply approved seal and floor finish and maintain in a manner to ensure a clean, scruff free, appearance.

F. Trash Removal and Loading Dock Responsibilities

1. Daily

a.	All trash collected throughout facility shall be transported to, and deposited in, receptacle designated by Landlord or its property manager.
b.	Recyclable products shall be collected by Contractor and deposited in receptacles designated by Landlord or its property manager in accordance with recycling program of facility. No mixing of recycling products shall occur.
c.	Clean all debris from around trash receptacle area in loading dock area.
d.	Hose down, and police, around trash dumpster to remove spillage resulting from trash removal.

G. Stairways

1.	Interior tenant stairways shall be maintained in the same manner as tenant occupied space including, but not limited to, the following on a daily basis; thorough vacuuming, dusting of all surfaces, spot clean all glass surfaces, clean and polish metal work, and spot clean carpets.
2.	Building exit stairways shall be policed daily to remove all debris, damp mop as necessary to remove spills. Weekly dust mop and damp mop landings and stairs, spray buff and refinish as necessary to ensure a high gloss appearance. Spot clean and dust walls, handrails, and fixtures as necessary. Dust lights, pipes, and signage monthly.

H. Special Projects/Periodics/Other

1.	Schedule, through appropriate tenant representative, the thorough dusting of desks, furniture; and other horizontal surfaces, otherwise inaccessible to nightly maintenance as necessary.
2.	Maintain all tenant area hard surface floor areas as necessary to ensure a high gloss, scuff free appearance.
3.	Dust and damp wipe all tenant area kitchens, copy rooms, and lounge counter tops and appliances daily.
4.	Vacuum all walk-off mats thoroughly while in place. Spot clean as necessary. Shampoo monthly or more often if necessary.
5.	Dust all exit lights monthly.

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6.	Contractor shall protect all carpeted areas, baseboards, walls, doors, and elevator doors and frames while performing hard surface floor care.
7.	Respond fully to all requests of Landlord or its property manager and key tenant representatives to any areas not otherwise covered under these specifications.

I. Metal Care (Optional, may be performed by another contractor)

1. Bronze/Brass Finishes

a.	Wash all metal to remove dust, hand prints, or smudges daily with clean water and using a soft towel or diaper-like cloth. Surface should always be wiped with the grain of the metal.
b.	Handrails, control panels, call buttons, and other high wear areas are to be waxed on a weekly basis with a pre-softened auto was and buffed with a soft, diaper-like cloth. Do not allow wax to accumulate around, and in, buttons on seams in the metal. All wiping of the surface should be with the grain of the metal.
c.	All remaining metal surfaces shall be waxed, as in Item B above, semi-annually.
d.	To remove any stain which cannot be removed through washing with clear water utilize only naphtha solvent. If stain is unable to be removed in this manner, report it to Landlord or its property manager.

2. Stainless Steel Finishes

a.	Wash all metal to remove dust, hand prints, or smudges daily with clean water and using a soft towel or diaper-like cloth. Surface should always be wiped with, the grain of the metal.
b.	Handrails, control panels, call buttons, and other high wear areas are to be waxed on a weekly basis with a pre-softened auto was and buffed with a soft, diaper-like cloth. Do not allow wax to accumulate around, and in, buttons on seams in the metal. All wiping of the surface should be with the grain of the metal.
c.	All remaining metal surfaces shall be waxed, as in Item B. above, semi-annually,
d.	To remove any stain which cannot be removed through washing with clear water utilizing a neutral detergent. If stain is unable to be removed in this manner, report it to Landlord or its property manager.

J. Qualifications

     Landlord shall maintain the Building in a manner consistent with comparable Class A buildings; however, Landlord reserves the right, at Landlord’s sole discretion, to amend these specifications from time to time without notice.

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EX-21

EXHIBIT 21

QUALITY SYSTEMS, INC.

LIST OF SUBSIDIARIES

1	.	NextGen Healthcare Information Systems, Inc.
2	.	Lackland Acquisition II, LLC dba Healthcare Strategic Initiatives
3	.	Practice Management Partners, Inc.
4	.	NextGen Sphere, LLC
5	.	Opus Healthcare Solutions, Inc.

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 33-31949, No. 33-63131, No. 333-67115 and No. 333-129752) and Form S-3 (No. 333-155489) of Quality Systems, Inc. of our report dated May 28, 2010 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/   PricewaterhouseCoopers LLP

Orange County, California

May 28, 2010

EX-23.2

EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated May 27, 2009, with respect to the fiscal year 2009 and 2008 consolidated financial statements and schedule included in the Annual Report of Quality Systems, Inc. on Form 10-K for the year ended March 31, 2010. We hereby consent to the incorporation by reference of said report in the Registration Statements of Quality Systems, Inc. on (i) Forms S-8 (File No. 33-31949, effective November 6, 1989, File No. 33-63131, effective September 10, 1989, File No. 333-67115, effective November 12, 1998 and File No. 333-129752, effective November 16, 2005) and (ii) Form S-3 (File No. 333-155489, effective December 4, 2008).

/s/  Grant Thornton LLP

Irvine, California

May 28, 2010

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER REQUIRED BY
RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven T. Plochocki, certify that:

1. I have reviewed this Form 10-K of Quality Systems, Inc.;

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.

By:  /s/  Steven T. Plochocki

Steven T. Plochocki

Chief Executive Officer

(Principal Executive Officer)

Date: May 28, 2010

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER REQUIRED BY
RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul A. Holt, certify that:

1. I have reviewed this Form 10-K of Quality Systems, Inc.;

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:

(c) 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;

(d) 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;

(e) 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

(f) 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.

By:  /s/  Paul A. Holt

Paul A. Holt

Chief Financial Officer

(Principal Accounting Officer)

Date: May 28, 2010

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 10-K of Quality Systems, Inc. (the “Company”) for the year ended March 31, 2010 (the “Report”), the undersigned hereby certify in their capacities as Chief Executive Officer and Chief Financial Officer of the Company, respectively, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:  /s/  Steven T. Plochocki

Steven T. Plochocki

Chief Executive Officer (Principal Executive Officer)

Dated: May 28, 2010

By:  /s/  Paul A. Holt

Paul A. Holt

Chief Financial Officer (Principal Accounting Officer)

Dated: May 28, 2010