ALLSCRIPTS INC /IL, S-1/A, 2000-02-18

ALLSCRIPTS INC /IL
S-1/A, 2000-02-18
DRUGS, PROPRIETARIES & DRUGGISTS' SUNDRIES

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As Filed With the Securities and Exchange Commission on February 18, 2000.

Registration No. 333-95521
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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AMENDMENT NO. 1

to
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933

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Allscripts, Inc.

(Exact name of registrant as specified in its charter)

Delaware 36-3444974
(State or other 5122
jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or Industrial Classification Identification No.)
organization) Code Number)

2401 Commerce Drive
Libertyville, Illinois 60048
(847) 680-3515
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)

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Glen E. Tullman
Chairman and Chief Executive Officer
2401 Commerce Drive
Libertyville, Illinois 60048
(847) 680-3515
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:
Joseph H. Greenberg Mitchell L. Hollins
Gardner, Carton & Douglas Sonnenschein Nath & Rosenthal
321 North Clark Street, Suite 2900 8000 Sears Tower
Chicago, Illinois 60610 Chicago, Illinois 60606
(312) 644-3000 (312) 876-8000

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

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell nor does it seek an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Subject to Completion. Dated February 18, 2000.

2,000,000 Shares

Allscripts, Inc.

[LOGO FOR ALLSCRIPTS]
Common Stock

----------

Allscripts, Inc. is offering 692,000 of the shares to be sold in the
offering. The selling stockholders identified in this prospectus are offering
an additional 1,308,000 shares. Allscripts will not receive any of the proceeds
from the sale of the shares being sold by the selling stockholders.

The common stock is quoted on the Nasdaq National Market under the symbol
"MDRX". The last reported sale price of the common stock on February 17, 2000
was $49.9375 per share.

See "Risk Factors" beginning on page 6 to read about factors you should
consider before buying shares of the common stock.

----------

Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.

----------

<TABLE>
<CAPTION>
Per Share Total
--------- ------------
<S> <C> <C>
Initial price to public............................. $ $
Underwriting discount............................... $ $
Proceeds, before expenses, to Allscripts............ $ $
Proceeds, before expenses, to the selling
stockholders....................................... $ $
</TABLE>

To the extent that the underwriters sell more than 2,000,000 shares of common
stock, the underwriters have the option to purchase up to an additional 300,000
shares from Allscripts at the initial price to public less the underwriting
discount.

----------

The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.

Goldman, Sachs & Co.

Bear, Stearns & Co. Inc.

CIBC World Markets

Wit SoundView

Adams, Harkness & Hill, Inc.

-----------

Prospectus dated , 2000.
<PAGE>

ALLSCRIPTS(TM)

MEDICATION MANAGEMENT SOLUTIONS

Connectivity
@
The Point of Care

Pharmacy Managed Care

[Photo of patient consulting with pharmacist]

[Photo of patient consulting with
physician]

Pharmacy Benefits Managed Care Benefits

.Valuable Electronic Information .Control Medication Costs

.e-Refill .Increased Formulary Compliance

.e-Messaging .Drug Utilization Review

.Decreased Costs . Managing Care

.Reduced Prescription Errors .Treatment Protocols

.Increased Patient Compliance

Physician

[Photo of physician using TouchScript]

Physician Benefits

.3Touch(TM) Speed & Simplicity

.Increased Revenue

.Increased Patient Satisfaction

.Time Savings

.Medication Information

.Better Management of Financial Risk

.Fewer Phone Calls & Disruptions

Patient Benefits Pharmaceutical Manufacturer Benefits

.Convenience
.Internet Gateway to Physicians
.Confidentiality
.Improved Marketing
.Compliance Programs
.Physician Profiling
.Fewer Medication Errors
.e-Detailing

.Link Clinical and Rx Information

Patient Pharmaceutical

[Photo of patient receiving prepackaged medication]

[Photo of machine repackaging
medications]

Manufacturer

<PAGE>

PROSPECTUS SUMMARY

This is a summary and does not contain all the information that may be
important to you. You should read the more detailed information included in
this prospectus. All information in this prospectus gives effect to a one-for-
six reverse split of our common stock effected on June 28, 1999. Except as
otherwise noted, the information contained in this prospectus assumes that the
underwriters will not exercise the over-allotment option, and no other person
will exercise any other outstanding option or warrant.

Allscripts, Inc.

We believe physicians find our solutions attractive because incorporating
these solutions into their office work flow can increase efficiency and
profitability, reduce medication errors and improve the quality of patient
care. We also believe that, in addition to medication management, there are
other aspects of the physician's daily work flow that can be effectively
addressed through technology-focused solutions. We intend to enhance our
current offerings by integrating new products and services that address these
needs.

The traditional process for prescribing and delivering medications is
inefficient, unnecessarily costly and error-prone. Our Internet and in-office
comprehensive solutions are designed to improve and streamline every step of
the pharmaceutical healthcare process in a way that can benefit each
participant. Our medication management solutions enable physicians to improve
their prescribing at the point of care by providing them with information about
potential adverse drug interactions, patient drug history and managed care
guidelines. This ready access to information during the prescribing process
reduces the time physicians spend clarifying and changing prescriptions,
enables them to better manage financial risk and can reduce medication errors.
Our products also enable physicians to increase practice revenue by dispensing
their most commonly prescribed medications to their patients at the point of
care. In addition, our solutions make it possible for patients to have their
prescriptions electronically routed to the pharmacy of their choice or to
benefit from the convenience, immediacy and confidentiality of receiving their
medications in the physician's office. Our solutions also benefit managed care
organizations by promoting higher physician compliance with their pharmacy
guidelines, while pharmacies benefit from improved communication with
physicians, which enhances efficiency and reduces the likelihood of errors. We
also believe that our medication management solutions as well as the new
products and services that we intend to offer in the future will benefit
additional participants in the healthcare delivery process.

We currently offer products in four categories: point-of-care medication
management, Internet products and services, including e-detailing, information
products and prepackaged medications. Our TouchScript software enables
electronic prescribing, routing of prescription information and capturing of
prescription data at the point of care. Our other e-commerce products and
services offer physicians and their patients medication-related education and
information services. We also sell prepackaged medications to physicians for
dispensing to their patients.

We believe that our experience in the pharmaceutical healthcare delivery
process gives us a competitive advantage. Through our business relationships
with thousands of physicians, we have developed an understanding of their
office work flow and business practices. Versions of TouchScript are currently
installed and used in over 400 physician practice sites, and we have
facilitated relationships

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between many of the country's largest managed care payers and our physician
customers under which our customers can obtain reimbursement for prescription
medications dispensed in their offices. In addition, our experience in
providing medication management solutions has given us a thorough understanding
of the complex and dynamic healthcare regulatory environment. Finally, we
believe that our management team, which is experienced in managing rapidly
growing public companies that use technology to change business processes,
further enhances our competitive advantage.

Corporate Information

Allscripts was incorporated in Illinois in 1986 and was reincorporated in
Delaware in 1999. Our executive offices are at 2401 Commerce Drive,
Libertyville, Illinois 60048. Our telephone number is (847) 680-3515; our
Internet e-mail address is [email protected]; and our Web site is
www.Allscripts.com. Information contained on our Web site is not part of this
prospectus.

TouchScript(R) and MedSmart(R) are registered trademarks of Allscripts, Inc.
Allscripts(TM), 3Touch Prescribing(TM), Physician's Interactive(TM),
ScriptGuard(TM), Personal Prescriber(TM), e-detailing(TM) and Intelligent
Reminder(TM) are trademarks of Allscripts, Inc. All other trademarks, brand
marks, trade names and registered marks used in this prospectus are trademarks,
brand marks, trade names or registered marks of their respective owners.

The Offering

<TABLE>
<S> <C>
Shares offered by
Allscripts............. 692,000
Shares offered by the
selling stockholders... 1,308,000
Shares to be outstanding
after the offering
(1).................... 25,437,345
Nasdaq National Market
symbol................. MDRX
Use of proceeds......... Working capital and other general corporate purposes. See
"Use of Proceeds."
</TABLE>
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(1) Based on shares outstanding as of February 18, 2000. It excludes shares
that may be issued pursuant to a contingent obligation to a strategic
partner and also excludes an aggregate as of February 18, 2000 of up to
2,971,636 shares comprised of:

. 57,133 shares issuable upon the exercise of outstanding warrants at a
weighted average exercise price of $1.76 per share;

. 2,241,460 shares issuable upon the exercise of outstanding stock options
with a weighted average exercise price of $4.51 per share; and

. 673,043 shares available for future grant under our Amended and Restated
1993 Stock Incentive Plan.

See "Shares Eligible for Future Sale" and "Business--Strategic
Relationships--IMS Health Strategic Alliance."

4
<PAGE>

Summary Consolidated Financial Data
(In thousands, except per share data)

The following table summarizes our financial data and should be read
together with our consolidated financial statements, including the related
notes, and the other financial information in this prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenue.......................... $33,310 $33,462 $30,593 $23,682 $ 27,586
Gross profit..................... 9,168 10,072 9,476 6,362 5,677
Loss from continuing operations.. (5,752) (4,430) (8,991) (7,694) (15,433)
Gain from sale of discontinued
operations...................... -- -- -- -- 3,547
Net loss......................... (4,363) (2,941) (10,799) (7,514) (11,244)
Net loss attributable to common
stockholders.................... (5,286) (3,864) (11,722) (9,929) (13,442)
Basic and diluted net loss from
continuing operations per
share........................... $ (3.84) $ (1.87) $ (3.35) $ (1.66) $ (1.20)
Weighted average shares used in
computing per share
calculation..................... 1,737 2,854 2,956 6,076 14,718
Pro forma basic and diluted net
loss from continuing operations
per share (1)................... $ (0.88) $ (0.94)
Shares used in computing pro
forma basic and diluted net loss
from continuing operations per
share (1)....................... 9,073 16,426
Other Operating Data:
Traditional revenue (2).......... $33,310 $33,462 $30,593 $22,338 $ 17,892
E-commerce revenue (3)........... -- -- -- 1,344 9,694
------- ------- ------- ------- --------
Revenue.......................... $33,310 $33,462 $30,593 $23,682 $ 27,586
======= ======= ======= ======= ========
</TABLE>

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(1) Pro forma basic and diluted net loss from continuing operations per share
information reflects the impact of the conversion of all shares of
convertible preferred stock into common stock upon the closing of our
initial public offering as well as the issuance of 19,958 shares of common
stock upon the closing of our initial public offering pursuant to a
contingent payment obligation on basic and diluted net loss per share as of
the beginning of the year, or date of issuance, if later, using the if-
converted method. In addition, the unaudited pro forma net loss per share
information excludes accretion and accrued dividends on redeemable
preferred shares as redemption of these shares, which occurred upon the
closing of our initial public offering, is assumed to have occurred as of
the beginning of the year or, if later, the date of issuance.

(2) Traditional revenue includes all non-e-commerce revenue and is derived from
the sale through non-Internet channels of prescription medications and
other medical products to physicians who do not use our software.

(3) E-commerce revenue is derived primarily from the sale of prescription
medications over the Internet to physicians who use our software or who
order products from us primarily over the Internet. E-commerce revenue also
includes revenue from software license fees, computer hardware sales and
leases, and related services.

<TABLE>
<CAPTION>
December 31, 1999
-------------------------------
Pro Pro Forma
Actual Forma(1) As Adjusted(2)
------- -------- --------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and marketable
securities................................... $55,610 $65,610 $ 97,928
Working capital............................... 58,856 68,856 101,174
Total assets.................................. 74,014 84,014 116,332
Long-term debt................................ 59 59 59
Total stockholders' equity.................... 67,364 77,364 109,681
</TABLE>
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(1) The consolidated pro forma balance sheet data at December 31, 1999 shows
our balance sheet data as if we had completed our sale to a strategic
partner of 214,794 shares of common stock for $10,000,000 on December 31,
1999.

(2) The consolidated pro forma as adjusted balance sheet data at December 31,
1999 shows our pro forma balance sheet, giving effect to the sale of
692,000 shares at an assumed initial price to the public of $49.9375 per
share, after deducting the underwriting discount and estimated offering
expenses payable by us.

5
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RISK FACTORS

You should carefully consider the risks and uncertainties described below
and other information in this prospectus before deciding to invest in our
common stock. These are not the only risks and uncertainties that we face.
Additional risks and uncertainties that we do not currently know about or that
we currently believe are immaterial may also harm our business operations. If
any of these risks or uncertainties occurs, it could have a material adverse
effect on our business, the trading price of our common stock could decline and
you could lose all or part of your investment.

Risks Related to Our Company

If physicians do not accept our products and services, our growth will be
impaired.

Our business model depends on our ability to sell our TouchScript system to
physicians and other healthcare providers and to generate usage by a large
number of physicians. We have not achieved this goal with previous or currently
available versions of our software. Physician acceptance of our products and
services will require physicians to adopt different behavior patterns and new
methods of conducting business and exchanging information. We cannot assure you
that physicians will integrate our products and services into their office work
flow or that participants in the pharmaceutical healthcare market will accept
our products and services as a replacement for traditional methods of
conducting pharmaceutical healthcare transactions. Achieving market acceptance
for our products and services will require substantial marketing efforts and
the expenditure of significant financial and other resources to create
awareness and demand by participants in the pharmaceutical healthcare industry.
If we fail to achieve broad acceptance of our products and services by
physicians and other healthcare participants or to position our services as a
preferred method for pharmaceutical healthcare delivery, our prospects for
growth will be diminished.

Because our business model is new and unproven, our operating history is not
indicative of our future performance and our business is difficult to evaluate.

Because we have not yet successfully implemented our business model, we do
not have an operating history upon which you can evaluate our prospects, and
you should not rely upon our past performance to predict our future
performance. We sold our pharmacy benefit management business in March 1999.
Revenue from this discontinued operation was $44,719,000 in 1997, $52,866,000
in 1998 and $14,292,000 in 1999. In each of 1997 and 1998, revenue from this
discontinued operation exceeded revenue from continuing operations. For the
year ended December 31, 1998, we generated 93.4% of our revenue from the sale
of prepackaged medications to doctors for dispensing at the point of care,
without the use of our TouchScript system. For the year ended December 31,
1999, we generated 80.4% of our revenue from these non-TouchScript medication
sales. Accordingly, our operating history is not indicative of our future
performance under our new business model. In attempting to implement our
business model, we are significantly changing our business operations, sales
and implementation practices, customer service and support operations and
management focus. We are also facing new risks and challenges, including a lack
of meaningful historical financial data upon which to plan future budgets, the
need to develop strategic relationships and other risks described below.

We have a substantial accumulated deficit because of our operating losses and
may never be profitable.

At December 31, 1999, we had an accumulated deficit of $62,008,000, and we
expect to continue to incur significant operating losses. We also expect that
our operating losses will continue to increase as we invest in the growth of
our business and the implementation of our business strategy. We cannot be
certain that we will ever become profitable. If we do achieve profitability, we
cannot be certain that we can sustain or increase profitability on a quarterly
or annual basis in the future.

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If we are unable to maintain existing relationships and create new
relationships with managed care payers, our prospects for growth will suffer.

We rely on managed care organizations to reimburse our physician customers
for prescription medications dispensed in their offices. While many of the
leading managed care payers and pharmacy benefit managers currently reimburse
our physicians for in-office dispensing, none of these payers is under a long-
term obligation to do so. If we are unable to increase the number of managed
care payers that reimburse for in-office dispensing, or if some or all of the
payers who currently reimburse physicians decline to do so in the future,
utilization of our products and, therefore, our growth will be impaired.

If we are unable to successfully introduce new products, our business prospects
will be impaired.

The successful implementation of our business model depends on our ability
to introduce new products and to introduce these new products on schedule. See
"Business--Products and Services" and "--Product Development and Technology."
We cannot assure you that we will be able to introduce new products or our
products currently under development on schedule, or at all. In addition, early
releases of software often contain errors or defects. We cannot assure you
that, despite our extensive testing, errors will not be found in our new
product releases and services before or after commercial release, which would
result in product redevelopment costs and loss of, or delay in, market
acceptance. A failure by us to introduce planned products or other new products
or to introduce these products on schedule could have a material adverse effect
on our business prospects.

Our business will not be successful unless we establish and maintain strategic
relationships.

To be successful, we must establish and maintain strategic relationships
with leaders in a number of healthcare and Internet industry segments. This is
critical to our success because we believe that these relationships will enable
us to:

. extend the reach of our products and services to a larger number of
physicians and to other participants in the healthcare industry;

. develop and deploy new products;

. further enhance the Allscripts brand; and

. generate additional revenue.

Entering into strategic relationships is complicated because some of our
current and future strategic partners may decide to compete with us in some or
all of our markets. In addition, we may not be able to establish relationships
with key participants in the healthcare industry if we have relationships with
their competitors. Moreover, many potential strategic partners have resisted,
and may continue to resist, working with us until our products and services
have achieved widespread market acceptance.

Once we have established strategic relationships, we will depend on our
partners' ability to generate increased acceptance and use of our products and
services. To date, we have established only a limited number of strategic
relationships, and these relationships, including our recently formed alliance
with IMS Health Incorporated, are in the early stages of development and may
not achieve the objectives that we seek. We have limited experience in
establishing and maintaining strategic relationships with healthcare and
Internet industry participants. If we lose any of these strategic relationships
or fail to establish additional relationships, or if our strategic
relationships fail to benefit us as expected, we may not be able to execute our
business plan, and our business will suffer.

If potential customers take a long time to evaluate the purchase of our
products and services, we could incur additional selling expenses and require
additional working capital.

The length of the sales cycle for our current TouchScript product depends
on a number of factors, including the nature and size of the potential customer
and the extent of the commitment being made by

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the potential customer, and is difficult to predict. Our marketing efforts with
respect to large healthcare organizations generally involve a lengthy sales
cycle due to these organizations' complex decision-making processes. If
potential customers take longer than we expect to decide whether to purchase
our solutions, our selling expenses could increase, and we may need to raise
additional capital sooner than we would otherwise need to.

If we cannot keep pace with advances in technology, our business could be
harmed.

If we cannot adapt to changing technologies, our products and services may
become obsolete, and our business could suffer. Because the Internet and
healthcare information markets are characterized by rapid technological change,
we may be unable to anticipate changes in our current and potential customers'
requirements that could make our existing technology obsolete. Our success will
depend, in part, on our ability to continue to enhance our existing products
and services, develop new technology that addresses the increasingly
sophisticated and varied needs of our prospective customers, license leading
technologies and respond to technological advances and emerging industry
standards and practices on a timely and cost-effective basis. The development
of our proprietary technology entails significant technical and business risks.
We may not be successful in using new technologies effectively or adapting our
proprietary technology to evolving customer requirements or emerging industry
standards.

Our future success depends upon our ability to grow, and if we are unable to
manage our growth effectively, we may incur unexpected expenses and be unable
to meet our customers' requirements.

We will need to expand our operations if we successfully achieve market
acceptance for our products and services. We cannot be certain that our
systems, procedures, controls and existing space will be adequate to support
expansion of our operations. Our future operating results will depend on the
ability of our officers and key employees to manage changing business
conditions and to implement and improve our technical, administrative,
financial control and reporting systems. An unexpectedly large increase in the
volume or pace of traffic on our Web site or the number of orders placed by
customers may require us to expand and further upgrade our technology. We may
not be able to project the rate or timing of increases in the use of our Web
site accurately or to expand and upgrade our systems and infrastructure to
accommodate such increases. Difficulties in managing any future growth could
have a significant negative impact on our business because we may incur
unexpected expenses and be unable to meet our customers' requirements.

If we lose the services of our key personnel, we may be unable to replace them,
and our business could be negatively affected.

Our success depends in large part on the continued service of our
management and other key personnel and our ability to continue to attract,
motivate and retain highly qualified employees. In particular, the services of
Glen E. Tullman, our Chairman and Chief Executive Officer, and David B. Mullen,
our President and Chief Financial Officer, are integral to the execution of our
business strategy. If one or more of our key employees leaves Allscripts, we
will have to find a replacement with the combination of skills and attributes
necessary to execute our strategy. Because competition for skilled employees is
intense, and the process of finding qualified individuals can be lengthy and
expensive, we believe that the loss of the services of key personnel could
negatively affect our business, financial condition and results of operations.

If we are unable to implement our acquisition strategy successfully, our
ability to expand our product and service offerings and our customer base may
be limited.

We regularly evaluate acquisition opportunities. Acquisitions involve
numerous risks, including difficulties in the assimilation of the operations,
services, products and personnel of the acquired company,

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<PAGE>

the diversion of management's attention from other business concerns, entry
into markets in which we have little or no direct prior experience, the
potential loss of key employees of the acquired company and our inability to
maintain the goodwill of the acquired businesses. In order to expand our
product and service offerings and grow our business by reaching new customers,
we may continue to acquire businesses that we believe are complementary. The
successful implementation of this strategy depends on our ability to identify
suitable acquisition candidates, acquire companies on acceptable terms,
integrate their operations and technology successfully with our own and
maintain the goodwill of the acquired business. We are unable to predict
whether or when any prospective acquisition candidate will become available or
the likelihood that any acquisition will be completed. Moreover, in pursuing
acquisition opportunities, we may compete for acquisition targets with other
companies with similar growth strategies. Some of these competitors may be
larger and have greater financial and other resources than we have. Competition
for these acquisition targets could also result in increased prices of
acquisition targets.

Future acquisitions may result in potentially dilutive issuances of equity
securities, the incurrence of additional debt, the assumption of known and
unknown liabilities, the writeoff of software development costs and the
amortization of expenses related to goodwill and other intangible assets, all
of which could have a material adverse effect on our business, financial
condition, operating results and prospects. We have taken, and in the future
may take, charges against earnings in connection with acquisitions. The costs
and expenses incurred may exceed the estimates upon which we based these
charges.

Our business depends on our intellectual property rights, and if we are unable
to protect them, our competitive position will suffer.

Our business plan is predicated on our proprietary systems and technology,
including TouchScript. We protect our proprietary rights through a combination
of trademark, trade secret and copyright law, confidentiality agreements and
technical measures. We generally enter into non-disclosure agreements with our
employees and consultants and limit access to our trade secrets and technology.
We cannot assure you that the steps we have taken will prevent misappropriation
of technology. Misappropriation of our intellectual property would have a
material adverse effect on our competitive position. In addition, we may have
to engage in litigation in the future to enforce or protect our intellectual
property rights or to defend against claims of invalidity, and we may incur
substantial costs as a result.

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 could be subject to intellectual property infringement claims as the
number of our competitors grows and the functionality of our applications
overlaps with competitive products. While we do not believe that we have
infringed or are infringing on any valid proprietary rights of third parties,
we cannot assure you that infringement claims will not be asserted against us
or that those claims will be unsuccessful. We could incur substantial costs and
diversion of management resources defending any infringement claims.
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.

Factors beyond our control could cause interruptions in our operations, which
would adversely affect our reputation in the marketplace and our results of
operations.

To succeed, we must be able to operate our systems without interruption.
Certain of our communications and information services are provided through our
service providers. Our operations are

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<PAGE>

vulnerable to interruption by damage from a variety of sources, many of which
are not within our control, including:

.power loss and telecommunications failures;

.software and hardware errors, failures or crashes;

.computer viruses and similar disruptive problems; and

.fire, flood and other natural disasters.

We have no comprehensive plans for these contingencies. Any significant
interruptions in our services would damage our reputation in the marketplace
and have a negative impact on our results of operations.

We may be liable for use of data we provide.

We provide data for use by healthcare providers in treating patients.
Third-party contractors provide us with most of this data. Although no claims
have been brought against us alleging injuries related to the use of our data,
claims may be made in the future. While we maintain product liability insurance
coverage in an amount that we believe is sufficient for our business, we cannot
assure you that this coverage will prove to be adequate or will continue to be
available on acceptable terms, if at all. A claim brought against us that is
uninsured or under-insured could materially harm our financial condition.

If our security is breached, we could be subject to liability, and people could
be deterred from using our services.

The difficulty of securely transmitting confidential information over the
Internet has been a significant barrier to conducting e-commerce and engaging
in sensitive communications over the Internet. Our strategy relies on the use
of the Internet to transmit confidential information. We believe that any well-
publicized compromise of Internet security may deter people from using the
Internet for these purposes, and from using our system to conduct transactions
that involve transmitting confidential healthcare information.

It is also possible that third parties could penetrate our network security
or otherwise misappropriate patient information and other data. If this
happens, our operations could be interrupted, and we could be subject to
liability. We may have to devote significant financial and other resources to
protect against security breaches or to alleviate problems caused by breaches.
We could face financial loss, litigation and other liabilities to the extent
that our activities or the activities of third-party contractors involve the
storage and transmission of confidential information like patient records or
credit information. In addition, we could incur additional expenses if new
regulations regarding the use of personal information are introduced.

If we are unable to obtain additional financing for our future needs, our
growth prospects and our ability to respond to competitive pressures will be
impaired.

We expect the net proceeds to us of this offering, together with our
existing cash, cash equivalents, marketable securities and borrowings under our
line of credit, to be sufficient to meet the anticipated cash needs of our
current business during the year ending December 31, 2000. We may need to raise
additional funds sooner, however, in order to fund more rapid expansion, to
develop new or enhance existing services or products, to respond to competitive
pressures or to acquire complementary products, businesses or technologies. We
cannot be certain that additional financing will be available on favorable
terms, or at all. If adequate financing is not available or is not available on
acceptable terms, our ability to fund our expansion, take advantage of
potential acquisition opportunities, develop or enhance services or products,
or respond to competitive pressures would be significantly limited.

10
<PAGE>

If our content and service providers fail to perform adequately, our reputation
in the marketplace and results of operations could be adversely affected.

We depend on independent content and service providers for many of the
benefits we provide through our TouchScript system, including the maintenance
of managed care pharmacy guidelines, drug interaction reviews and the routing
of transaction data to third-party payers. Any problems with our providers that
result in interruptions of our services or a failure of our services to
function as desired could damage our reputation in the marketplace and have a
material adverse effect on our results of operations. We may have no means of
replacing content or services on a timely basis or at all if they are
inadequate or in the event of a service interruption or failure.

We also expect to rely on independent content providers for the majority of
the clinical, educational and other healthcare information that we plan to
provide on our Web site. In addition, we will depend on our content providers
to deliver high quality content from reliable sources and to continually
upgrade their content in response to demand and evolving healthcare industry
trends. Any failure by these parties to develop and maintain high quality,
attractive content could impair the value of the Allscripts brand and our
results of operations.

If third-party payers force us to reduce our prices, our results of operations
could suffer.

We expect to derive a majority of our revenue from the sale, including over
the Internet, of prepackaged medications to physicians. We may be subject to
pricing pressures with respect to our future sales of prepackaged medications
arising from various sources, including practices of managed care organizations
and any governmental action requiring or allowing pharmaceutical reimbursement
under Medicare. If our pricing of prepackaged medications experiences
significant downward pressure, our business will be less profitable. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

If we incur costs exceeding our insurance coverage in lawsuits pending against
us or that are brought against us in the future, it could materially adversely
affect our financial condition.

We are a defendant in numerous multi-defendant lawsuits involving the
manufacture and sale of dexfenfluramine, fenfluramine and phentermine. The
plaintiffs in these cases claim injury as a result of ingesting a combination
of these weight-loss drugs. While we do not believe we have any significant
liability in these lawsuits, in the event we were found liable in these
lawsuits or in any other lawsuits filed against us in the future in connection
with these weight-loss drugs or otherwise, and if our insurance coverage were
inadequate to satisfy these liabilities, it could have a material adverse
effect on our financial condition. See "Business--Legal Proceedings."

If our principal supplier fails or is unable to perform its contract with us,
we may be unable to meet our commitments to our customers.

We currently purchase a majority of the medications that we repackage from
McKesson HBOC, Inc. We have an agreement with this supplier that expires in
September 2001. If we do not meet certain minimum purchasing requirements,
McKesson may increase the prices that we pay under this agreement, in which
case we would have the option to terminate the agreement. Although we believe
that there are a number of other sources of supply of medications, if McKesson
fails or is unable to perform under our agreement, particularly at certain
critical times during the year, we may be unable to meet our commitments to our
customers, and our relationships with our customers could suffer.

Year 2000 problems may adversely affect us.

We have not experienced any Year 2000-related problems with our medication
management products or with third-party software, hardware or services on which
we rely. It is possible, however, that

11
<PAGE>

Year 2000 compliance problems exist that we cannot yet identify. If problems
arise and we fail to address them on a timely basis, it could result in lost
revenue, increased operating costs, the loss of customers and other business
interruptions. As of December 31, 1999, we had incurred costs that we believe
are allocable to Year 2000 compliance of approximately $175,000. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000."

Because of anti-takeover provisions under Delaware law and in our Certificate
of Incorporation and By-laws, takeovers may be more difficult, possibly
preventing you from obtaining optimal share price.

Certain provisions of Delaware law and our Certificate of Incorporation and
By-Laws could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, control
of Allscripts. For example, our Certificate of Incorporation and By-Laws
provide for a classified Board of Directors and allow us to issue preferred
stock with rights senior to those of the common stock without any further vote
or action by the stockholders. In addition, we are subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law, which could
have the effect of delaying or preventing a change in control of Allscripts.
See "Description of Capital Stock--Preferred Stock" and "--Certain Limited
Liability, Indemnification and Anti-takeover Provisions."

Risks Related to Our Industry

If the healthcare environment becomes more restrictive, or we do not comply
with healthcare regulations, our existing and future operations may be
curtailed, and we could be subject to liability.

As a participant in the healthcare industry, our operations and
relationships are regulated by a number of federal, state and local
governmental entities. Because our business relationships with physicians are
unique, and the healthcare electronic commerce industry as a whole is
relatively young, the application of many state and federal regulations to our
business operations is uncertain. It is possible that a review of our business
practices or those of our customers by courts or regulatory authorities could
result in a determination that could adversely affect us. In addition, the
healthcare regulatory environment may change in a way that restricts our
existing operations or our growth. See "Business--Governmental Regulation."

. Electronic Prescribing. The use of our TouchScript software by physicians
to perform electronic prescribing, electronic routing of prescriptions to
pharmacies and dispensing is governed by state and federal law. The
application of these laws to our business is uncertain because many
existing laws and regulations, when enacted, did not anticipate methods
of e-commerce now being developed. The laws of many jurisdictions neither
specifically permit nor specifically prohibit electronic transmission of
prescription orders. Future regulation of these areas may adversely
affect us.

. Licensure. As a repackager and distributor of drugs, we are subject to
regulation by and licensure with the United States Food and Drug
Administration, the United States Drug Enforcement Administration and
various state agencies that regulate wholesalers or distributors. Among
the regulations applicable to our repackaging operation are the FDA's
"good manufacturing practice" regulations. Because the FDA's good
manufacturing practice regulations were designed to govern the
manufacture, rather than the repackaging, of drugs, we face legal
uncertainty concerning the application of some aspects of these
regulations and of the standards that the FDA will enforce. Both the FDA
and the DEA have the right, at any time, to inspect our facilities and
operations to determine if we are operating in compliance with the
requirements for licensure and all applicable laws and regulations. Along
with many other drug repackagers, we have received an FDA warning letter
alleging violations of FDA regulations, including the good manufacturing
practice regulations.

12
<PAGE>

We have implemented procedures intended to address many of the concerns
raised by the FDA in that letter and believe that our compliance with FDA
regulations meets or exceeds the standard in the drug repackaging
industry. We also believe that we possess all licenses required to operate
our business. If, however, we do not maintain all necessary licenses, or
the FDA decides to substantially modify the manner in which it has
historically enforced its good manufacturing practice regulations against
drug repackagers or the FDA or DEA finds any violations during one of
their periodic inspections, we could be subject to liability, and our
operations could be shut down.

. Physician Dispensing. Physician dispensing of medications for profit is
allowed in all states except Utah and is prohibited, subject to extremely
limited exceptions, in Massachusetts, Montana and Texas. In addition, New
Jersey and New York allow physician dispensing of medications for profit,
but limit the number of days' supply of all medications, subject to
limited exceptions, that a physician may dispense, and several other
states limit the number of days' supply of controlled substances that a
physician may dispense. Other states may enact legislation or regulations
prohibiting or restricting physician dispensing.

The American Medical Association, through certain of its constituent
bodies, has historically taken inconsistent positions on physician
dispensing, alternately discouraging and supporting it. While the AMA's
Council on Ethical and Judicial Affairs in 1986 discouraged physicians
from regularly dispensing prescription pharmaceuticals, in 1987 the AMA's
House of Delegates adopted the following resolution: "Resolved, that the
American Medical Association support the physician's right to dispense
drugs and devices when it is in the best interest of the patient and
consistent with the AMA's ethical guidelines." This position was
reaffirmed by the AMA House of Delegates in January 1997. The AMA's
ethical guidelines provide in relevant part that "[p]hysicians may
dispense drugs within their office practices provided there is no
resulting exploitation of patients." While two recent Reports of the
Council on Ethical and Judicial Affairs oppose the in-office sale of
health-related products by physicians, these reports specifically exclude
the sale of prescription items from their scope, although they do refer to
the Council's 1986 Report.

. Stark II. Congress enacted significant prohibitions against physician
self-referrals in the Omnibus Budget Reconciliation Act of 1993. This
law, commonly referred to as "Stark II," applies to physician dispensing
of outpatient prescription drugs that are reimbursable by Medicare or
Medicaid. We believe that the physicians who use our TouchScript system
or dispense drugs distributed by us are doing so in material compliance
with Stark II, either pursuant to an in-office ancillary services
exception or another applicable exception. While our physician customers
currently do not, to any significant degree, dispense drugs that are
reimbursable by Medicare or Medicaid, if they were to and if it were
determined that the physicians who use our system or dispense
pharmaceuticals purchased from us were not in compliance with Stark II,
it could have a material adverse effect on our business, results of
operations and prospects.

. Drug Distribution. As a distributor of prescription drugs to physicians,
we and our customers are also subject to the federal anti-kickback
statute, which applies to Medicare, Medicaid and other state and federal
programs. The statute prohibits the solicitation, offer, payment or
receipt of remuneration in return for referrals or the purchase of goods,
including drugs, covered by the programs. The anti-kickback law provides
a number of exceptions or "safe harbors" for particular types of
transactions. We believe that our arrangements with our customers are in
material compliance with the anti-kickback statute and relevant safe
harbors. Many states have similar fraud and abuse laws, and we believe
that we are in material compliance with those laws. If, however, it were
determined that we were not in compliance with those laws, we could be
subject to liability, and our operations could be curtailed.

. Claims Transmission. As part of our services provided to physicians, our
system will electronically transmit claims for prescription medications
dispensed by a physician to many patients' managed care organizations and
payers for immediate approval and reimbursement.

13
<PAGE>

Federal law provides that it is both a civil and a criminal violation for
any person to submit a claim to any payer, including, for example,
Medicare, Medicaid and all private health plans or managed care plans
seeking payment for any services or products that have not been provided
to the patient or overbilling for services or products provided. We have
in place policies and procedures that we believe assure that all claims
that are transmitted by our system are accurate and complete, provided
that the information given to us by our customer is also accurate and
complete. If, however, we do not follow those procedures and policies, or
they are not sufficient to prevent inaccurate claims from being submitted,
we could be subject to liability.

. Patient Information. Existing federal and state laws and regulations
regulate the disclosure of confidential medical information, including
information regarding conditions like AIDS, substance abuse and mental
illness. In addition, the U.S. Department of Health and Human Services
recently published a proposed rule regarding the disclosure of
confidential medical information, which is expected to become final in
May 2000. As part of the operation of our business, our customers may
provide to us patient-specific information related to the prescription
drugs that our customers prescribe to their patients. We have policies
and procedures that we believe assure compliance with all federal and
state confidentiality requirements for handling of confidential medical
information we receive. If, however, we do not follow those procedures
and policies, or they are not sufficient to prevent the unauthorized
disclosure of confidential medical information, we could be subject to
liability, fines and lawsuits, or our operations could be shut down.

In June 1999, President Clinton announced that he intended to propose broad
Medicare reform legislation that would make available to Medicare recipients a
subsidized prescription drug benefit. While no federal price controls are
included in the current version of the proposed legislation, any legislation
that reduces physician incentives to dispense medications in their offices
could adversely affect physician acceptance of our products. We cannot predict
whether or when future health care reform initiatives at the federal or state
level or other initiatives affecting our business will be proposed, enacted or
implemented or what impact such initiatives may have on our business,
financial condition or results of operations.

If the new and rapidly evolving Internet and electronic healthcare information
markets fail to develop as quickly as expected, our business prospects will be
impaired.

The Internet and electronic healthcare information markets are in the early
stages of development and are rapidly evolving. A number of market entrants
have introduced or developed products and services that are competitive with
one or more components of the solutions we offer. In addition, several
companies have recently introduced or announced their intention to introduce
electronic prescribing products. We expect that additional companies will
continue to enter these markets. In new and rapidly evolving industries, there
is significant uncertainty and risk as to the demand for, and market
acceptance of, recently introduced products and services. Because the markets
for our products and services are new and evolving, we are not able to predict
the size and growth rate of the markets with any certainty. We cannot assure
you that markets for our products and services will develop or that, if they
do, they will be strong and continue to grow at a sufficient pace. If markets
fail to develop, develop more slowly than expected or become saturated with
competitors, our business prospects will be impaired.

Consolidation in the healthcare industry could adversely affect our business.

Many healthcare industry participants are consolidating to create
integrated healthcare delivery systems with greater market power. As provider
networks and managed care organizations consolidate, competition to provide
products and services like ours will become more intense, and the importance
of establishing relationships with key industry participants will become
greater. These industry participants may try to use their market power to
negotiate price reductions for our products and services. If we were forced to
reduce our prices, our business would become less profitable unless we were
able to achieve corresponding reductions in our expenses.

14
<PAGE>

If the Internet infrastructure does not continue to improve, our ability to use
the Internet on a large scale could be compromised.

If the Internet continues to experience significant growth in the number of
users and the level of use, then the Internet infrastructure may not be able to
continue to support the demands placed on it. The Internet may not prove to be
a viable commercial medium because of inadequate development of the necessary
infrastructure, lack of timely development of complementary products like high
speed modems, delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet activity or increased
government regulation. Because our business plan relies heavily on the
viability of the Internet, our business will suffer if growth of the Internet
does not meet our expectations.

Risks Related to This Offering and Our Stock

The public market for our common stock may be volatile.

The market price of our common stock is highly volatile and could fluctuate
significantly in response to various factors, including:

.actual or anticipated variations in our quarterly operating results;

.announcements of technological innovations or new services or products by
us or our competitors;

.timeliness of our introductions of new products;

.changes in financial estimates by securities analysts;

. conditions and trends in the electronic healthcare information, Internet,
e-commerce and pharmaceutical markets; and

.general market conditions and other factors.

In addition, the stock markets, especially the Nasdaq National Market, have
experienced extreme price and volume fluctuations that have affected the market
prices of equity securities of many technology companies, and Internet-related
companies in particular. These fluctuations have often been unrelated or
disproportionate to operating performance. The trading prices of many
technology companies' stocks are at or near historical highs. We cannot assure
you that these high trading prices will be sustained. These broad market
factors may materially affect the trading price of our common stock. General
economic, political and market conditions like recessions and interest rate
fluctuations may also have an adverse effect on the market price of our common
stock. In the past, following periods of volatility in the market price for a
company's securities, stockholders have often initiated securities class action
litigation. Any securities class action litigation could result in substantial
costs and the diversion of management's attention and resources.

Our quarterly operating results may vary.

Our quarterly operating results have varied in the past, and we expect that
they will continue to vary in future periods depending on a number of factors,
including seasonal variances in demand for our products and services, the
sales, installation and implementation cycles for our TouchScript system and
other factors described in this "Risk Factors" section of the prospectus. For
example, all other factors aside, our sales of prepackaged medications have
historically been highest in the fall and winter months. We expect to increase
activities and spending in substantially all of our operational areas. We base
our expense levels in part upon our expectations concerning future revenue, and
these expense levels are relatively fixed in the short term. If we have lower
revenue, we may not be able to reduce our spending in the short term in
response. Any shortfall in revenue would have a direct impact on our results of
operations. For these and other reasons, we may not meet the earnings estimates
of securities analysts or investors, and our stock price could suffer.

15
<PAGE>

We may have substantial sales of our common stock after the offering that could
cause our stock price to fall.

Our common stock began trading on the Nasdaq National Market on July 23,
1999; however, to date there have been a limited number of shares trading in
the public market. This offering will result in additional shares of our common
stock being available on the open market. In addition, a substantial number of
shares will become eligible for public sale at various times thereafter. Sales
of a substantial number of shares of our common stock in this offering and
thereafter could cause our stock price to fall. See "Underwriting" and "Shares
Eligible for Future Sale."

Because our executive officers and directors have substantial control of our
voting stock, takeovers not supported by them will be more difficult, possibly
preventing you from obtaining optimal share price.

The control of a significant amount of our stock by insiders could
adversely affect the market price of our common stock. After this offering, our
executive officers and directors will beneficially own or control 10,401,662
shares or 40.0% of the outstanding common stock. If our executive officers and
directors choose to act or vote together, they will have the power to influence
significantly all matters requiring the approval of our stockholders, including
the election of directors and the approval of significant corporate
transactions. Without the consent of these stockholders, we could be prevented
from entering into transactions that could be beneficial to us. For more
information, see "Management," "Principal and Selling Stockholders" and
"Description of Capital Stock."

Investors will suffer immediate and substantial dilution.

The initial price to public in this offering will be substantially higher
than the net tangible book value per share of common stock. If we sell 692,000
shares in the offering at an assumed initial price to public of $49.9375 per
share, our net tangible book value per share will be $4.23, which is $45.71
below the per share initial price to public. If we issue additional common
stock in the future or outstanding options or warrants to purchase our common
stock are exercised, there will be further dilution. For more information, see
"Dilution."

16
<PAGE>

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and
uncertainties, including those discussed above and elsewhere in this
prospectus. We develop forward-looking statements by combining currently
available information with our beliefs and assumptions. These statements often
contain words like believe, expect, anticipate, intend, contemplate, seek,
plan, estimate or similar expressions. Forward-looking statements do not
guarantee future performance. Recognize these statements for what they are and
do not rely on them as facts.

USE OF PROCEEDS

Our net proceeds from the sale of the 692,000 shares offered by us are
estimated by us to be approximately $32,318,000, assuming an initial price to
public of $49.9375 per share, after deducting the underwriting discount and
estimated offering expenses payable by us, or $46,512,000 if the underwriters
exercise the over-allotment option in full. We will not receive any of the
proceeds from the sale of shares by the selling stockholders. See "Principal
and Selling Stockholders."

We will use the net proceeds for general corporate purposes and working
capital. We may use a portion of the net proceeds to acquire complementary
technologies or businesses; however, we currently have no commitments or
agreements and are not involved in any negotiations with respect to any
acquisitions. Pending use of the net proceeds of this offering, we intend to
invest the net proceeds in interest-bearing, investment-grade securities.

PRICE RANGE OF COMMON STOCK

Our common stock has been quoted on the Nasdaq National Market under the
symbol "MDRX" since July 23, 1999. Prior to that time, there was no public
market for the common stock. The following table sets forth, for the periods
indicated, the high and low closing prices per share of the common stock as
reported on the Nasdaq National Market.

<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
Year Ended December 31, 1999
Third Quarter (since July 23, 1999)............................ $19.75 $12.38
Fourth Quarter................................................. 49.50 10.88
Year Ended December 31, 2000
First Quarter (through February 17, 2000)...................... 57.56 44.63
</TABLE>

On February 17, 2000, the last reported sale price of the common stock on
the Nasdaq National Market was $49.9375 and there were approximately 230
stockholders of record.

DIVIDEND POLICY

We have never declared or paid cash dividends on our common stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business and do not anticipate paying any
cash dividends in the foreseeable future. In addition, under the terms of our
current bank line of credit, we are prohibited from paying dividends, other
than dividends payable in capital stock, on any of our shares.

17
<PAGE>

CAPITALIZATION

The following table shows our capitalization as of December 31, 1999 on an
actual, pro forma and pro forma as adjusted basis. The "actual" column reflects
our capitalization as of December 31, 1999 on an historical basis, without any
adjustments to reflect subsequent or anticipated events. The "pro forma" column
reflects our capitalization as of December 31, 1999 with adjustments for the
issuance in February 2000 to a strategic partner of 214,794 shares of common
stock for $10,000,000. The "pro forma as adjusted" column reflects our pro
forma capitalization as of December 31, 1999 with adjustments for the receipt
of the estimated net proceeds from our sale of the 692,000 shares offered by us
at an assumed initial price to public of $49.9375 per share, after deducting
the underwriting discount and estimated offering expenses.

None of the columns shown below reflects the following:

.the 63,799 shares of common stock issuable upon exercise of outstanding
warrants as of December 31, 1999 with a weighted average exercise price
of $1.58 per share, 55,466 of which were exercisable as of that date. See
"Description of Capital Stock--Warrants" and "Shares Eligible for Future
Sale;"

.the 3,251,316 shares reserved for issuance under our stock option plan, of
which 2,587,478 shares were subject to outstanding options as of December
31, 1999 with a weighted average exercise price of $4.10 per share. Of
those 2,587,478 shares, 984,426 were exercisable as of that date. See
"Management--Employee Benefit Plans--Amended and Restated 1993 Stock
Incentive Plan;" and

.shares that may be issued pursuant to a contingent obligation to a
strategic partner. See "Business--Strategic Relationships--IMS Health
Strategic Alliance."

The table below should be read in conjunction with our balance sheet as of
December 31, 1999 and the related notes, which are included elsewhere in this
prospectus:

<TABLE>
<CAPTION>
December 31, 1999
-------------------------------
Pro Pro Forma
Actual Forma As Adjusted
-------- -------- -----------
(In thousands)
<S> <C> <C> <C>
Long-term debt................................. $ 59 $ 59 $ 59
-------- -------- --------
Stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000
shares authorized, no shares issued and
outstanding................................. -- -- --
Common stock, $0.01 par value, 75,000,000
shares authorized, 24,221,537, 24,436,331
and 25,128,331 shares issued and
outstanding, actual, pro forma and pro forma
as adjusted, respectively................... 242 244 251
Treasury stock at cost; 34,465 shares of
common stock................................ (68) (68) (68)
Unearned compensation........................ (1,632) (1,632) (1,632)
Additional paid-in capital................... 130,830 140,828 173,138
Accumulated deficit.......................... (62,008) (62,008) (62,008)
-------- -------- --------
Total stockholders' equity ................ 67,364 77,364 109,681
-------- -------- --------
Total capitalization..................... $ 67,423 $ 77,423 $109,740
======== ======== ========
</TABLE>

18
<PAGE>

DILUTION

Our pro forma net tangible book value as of December 31, 1999 was
approximately $73.8 million or $3.02 per share of common stock. Pro forma net
tangible book value per share represents the amount of our total tangible
assets reduced by the amount of our total liabilities, after giving effect to
our issuance in February 2000 to a strategic partner of 214,794 shares of
common stock for $10,000,000. Dilution in net tangible book value per share
represents the difference between the amount per share paid by purchasers of
shares of common stock in this offering and the pro forma net tangible book
value per share of common stock immediately after the closing of this offering.
After giving effect to the sale of the 692,000 shares of common stock offered
by us at an assumed initial price to public of $49.9375 per share, and after
deducting the underwriting discount and estimated offering expenses payable by
us, our pro forma net tangible book value at December 31, 1999 would have been
approximately $106.1 million or $4.23 per share of common stock. This
represents an immediate increase in pro forma net tangible book value of $1.21
per share to existing shareholders and an immediate dilution of $45.71 per
share to new investors in the common stock. The following table illustrates
this dilution on a per share basis:

<TABLE>
<S> <C> <C>
Assumed initial price to public per share....................... $49.9375
Pro forma net tangible book value per share before this
offering..................................................... $3.02
Increase per share attributable to new investors.............. 1.21
-----
Pro forma net tangible book value per share after this offering
(as adjusted).................................................. 4.23
--------
Dilution per share to new investors............................. $ 45.71
========
</TABLE>

The above information assumes no exercise of outstanding options and no
exercise of any options that we may grant in the future under our Amended and
Restated 1993 Stock Incentive Plan. As of December 31, 1999, there were
outstanding options to purchase 2,587,478 shares of common stock at a weighted
average exercise price of $4.10 per share. On that date, options to purchase
984,426 shares were exercisable. The above information also assumes no exercise
of outstanding warrants. As of December 31, 1999, there were outstanding
warrants to purchase 63,799 shares of common stock at a weighted average
exercise price of $1.58 per share, 55,466 of which were exercisable. Based on
the pro forma net tangible book value of $4.23 per share after this offering
and the assumed initial price to public of $49.9375 per share, dilution to new
investors would be $45.73 per share if all of the outstanding stock options and
warrants were exercised. See "Management--Employee Benefit Plans--Amended and
Restated 1993 Stock Incentive Plan," "Description of Capital Stock" and Note 12
of Notes to Consolidated Financial Statements.

19
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

You should read the selected consolidated financial data shown below in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our financial statements and related notes
included elsewhere in this prospectus. The consolidated statements of
operations data for the years ended December 31, 1997, 1998 and 1999 and the
consolidated balance sheet data at December 31, 1998 and 1999 are derived from
the consolidated financial statements audited by PricewaterhouseCoopers LLP
that are included in this prospectus. The consolidated statements of operations
data for the years ended December 31, 1995 and 1996 and the balance sheet data
at December 31, 1995, 1996 and 1997 are derived from audited financial
statements that are not included in this prospectus. The historical results are
not necessarily indicative of results to be expected for any future period. The
statements of operations data below reflect the pharmacy benefit management
business that we sold in March 1999 as a discontinued operation. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1995 1996 1997 1998 1999
------- ------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Revenue................. $33,310 $33,462 $ 30,593 $ 23,682 $ 27,586
Cost of revenue......... 24,142 23,390 21,117 17,320 21,909
------- ------- -------- -------- --------
Gross profit............ 9,168 10,072 9,476 6,362 5,677
Operating expenses:
Selling, general and
administrative
expenses.............. 12,427 11,599 13,869 12,658 20,656
Amortization of
intangibles........... 495 529 409 372 1,351
Other operating
expenses.............. 1,318 1,034 2,568 430 319
------- ------- -------- -------- --------
Loss from operations.... (5,072) (3,090) (7,370) (7,098) (16,649)
Interest income
(expense), net......... (1,005) (1,301) (1,621) (596) 1,216
Other expense........... 325 (39) -- -- --
------- ------- -------- -------- --------
Loss from continuing
operations............. (5,752) (4,430) (8,991) (7,694) (15,433)
Income (loss) from
discontinued
operations............. 1,389 1,489 (1,808) 970 642
Gain from sale of
discontinued
operations............. -- -- -- -- 3,547
------- ------- -------- -------- --------
Loss before
extraordinary items.... (4,363) (2,941) (10,799) (6,724) (11,244)
Extraordinary loss from
early extinguishment of
debt................... -- -- -- (790) --
------- ------- -------- -------- --------
Net loss................ (4,363) (2,941) (10,799) (7,514) (11,244)
Accretion on mandatory
redeemable preferred
shares and accrued
dividends on preferred
shares................. (923) (923) (923) (2,415) (2,198)
------- ------- -------- -------- --------
Net loss attributable to
common stockholders.... $(5,286) $(3,864) $(11,722) $ (9,929) $(13,442)
======= ======= ======== ======== ========
Basic and diluted net
loss from continuing
operations per share... $ (3.84) $ (1.87) $ (3.35) $ (1.66) $ (1.20)
======= ======= ======== ======== ========
Weighted average shares
used in computing per
share calculation ..... 1,737 2,854 2,956 6,076 14,718
======= ======= ======== ======== ========
Pro forma basic and
diluted net loss from
continuing operations
per share (1).......... $ (0.88) $ (0.94)
======== ========
Shares used in computing
pro forma basic and
diluted net loss from
continuing operations
per share (1).......... 9,073 16,426
======== ========
Other Operating Data:
Traditional revenue
(2).................... $33,310 $33,462 $ 30,593 $ 22,338 $ 17,892
E-commerce revenue (3).. -- -- -- 1,344 9,694
------- ------- -------- -------- --------
Revenue................. $33,310 $33,462 $ 30,593 $ 23,682 $ 27,586
======= ======= ======== ======== ========
Balance Sheet Data (at
period end):
Cash, cash equivalents
and marketable
securities............. $ 673 $ 665 $ 205 $ 718 $ 55,610
Working capital......... (2,730) 5,443 (3,023) 271 58,856
Total assets............ 23,701 26,713 19,387 18,920 74,014
Long-term debt.......... 4,814 15,093 11,276 59 59
Redeemable preferred
shares................. 8,873 9,796 10,719 32,547 --
Total stockholders'
equity (deficit)....... (2,859) (6,700) (18,356) (26,792) 67,364
</TABLE>

20
<PAGE>

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

You should read the following discussion and analysis together with
"Selected Consolidated Financial Data" and our consolidated financial
statements and related notes included in this prospectus. This discussion
contains certain forward-looking statements that involve risks, uncertainties
and assumptions. You should read the cautionary statements made in this
prospectus as applying to related forward-looking statements wherever they
appear in this prospectus. Our actual results may be materially different from
the results we discuss in the forward-looking statements due to certain
factors, including those discussed in "Risk Factors" and other sections of this
prospectus.

Overview

We provide physicians with Internet and client/server medication management
solutions designed to improve the quality and cost effectiveness of
pharmaceutical healthcare.

From our inception in 1986 through 1996, we focused almost exclusively on
the sale of prepackaged medications to physicians, in particular those with a
high percentage of fee-for-service patients. The advent of managed prescription
benefit programs required providers to obtain reimbursement for medications
dispensed from managed care organizations rather than directly from their
patients. This new reimbursement methodology made it more difficult for our
physician customers to dispense medications to their patient base.

In 1997, under the direction of our new executive management team, we
focused our efforts on the information aspects of medication management,
including the development of technology tools necessary for electronic
prescribing, routing of prescription information and submission of medication
claims for managed care reimbursement. In January 1998, we introduced the first
version of TouchScript that fully incorporated these features. At the same
time, we redirected our sales and marketing efforts away from our traditional
fee-for-service customer base to physicians who have a large percentage of
managed care patients. We recognized that there is a larger market opportunity
among physicians whose patients are covered by managed care plans because the
portion of prescriptions covered by managed care plans is increasing relative
to the portion of fee-for-service prescriptions. Further, we believe that our
technology can give us a competitive advantage where more patients'
prescriptions are covered by managed care plans because our products streamline
the process by which physicians, managed care organizations and patients
interact. In addition, we believe that the managed care market provides us with
the opportunity to realize higher margins on our software products. To maintain
our position in a rapidly changing and increasingly competitive marketplace, we
expect to continue to increase the number of our sales, sales support, product
development and customer service personnel significantly, and, accordingly, we
expect our operating expenses to continue to increase at an accelerated pace.

As our strategic focus has shifted to medication management products and
solutions, the human resources needed to manage, implement and support our
strategy have been changing as well. Consequently, we have continually assessed
the skills and experience of our workforce to ensure an appropriate match with
our business objectives. This led to a significant turnover in staff during
1997 and 1998 through reductions in force, employee terminations and employee
attrition. The costs associated with this reorganization consisted primarily of
severance costs related to the reductions in force and employee terminations
and have been recorded as other operating expenses. This reorganization has
helped align our staffing with our strategic focus and has reduced associated
administrative expenses.

We currently derive our revenue from the sale of prepackaged medications,
software licenses, computer hardware and related services. In the years ended
December 31, 1998 and 1999, sales of prepackaged medications represented 97.8%
and 94.8%, respectively, of total revenue.

21
<PAGE>

Our shift in focus to physicians who require technology-based services to
operate successfully in a managed care environment and away from physicians
with a high percentage of fee-for-service patients is reflected in the
composition of our revenue, as depicted in the following table:

<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------
1998 1999
--------------------------------- --------------------------------
Dec.
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 31
-------- ------- -------- ------- -------- ------- -------- ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Traditional revenue..... $6,101 $5,807 $5,394 $5,036 $5,235 $4,537 $4,035 $4,085
E-commerce revenue...... 250 249 366 479 793 1,855 2,940 4,106
------ ------ ------ ------ ------ ------ ------ ------
Total revenue......... $6,351 $6,056 $5,760 $5,515 $6,028 $6,392 $6,975 $8,191
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

Traditional revenue includes all non-e-commerce revenue and is derived from
the sale through non-Internet channels of prescription medications and other
medical products to physicians who do not use our software. We expect
traditional revenue to represent a decreasing percentage of total revenue in
the future. E-commerce revenue is derived primarily from the sale of
prescription medications over the Internet to physicians who use our software
or who order products from us primarily over the Internet. E-commerce revenue
also includes revenue for software subscriptions, computer hardware sales and
leases, and related services. For the year ended December 31, 1999, sales of
prepackaged medications represented 86.2% of e-commerce revenue. In 1999,
approximately 43% of e-commerce revenue represented a shift of traditional
medication sales to Internet or TouchScript ordering. While we expect a portion
of futuree-commerce revenue to continue to represent a shifting of traditional
revenue, we anticipate that most of the future growth in e-commerce revenue
will be generated by physician practice groups that are not currently our
customers. Factors that we expect will attract future customers include an
interest in physician dispensing, a desire to minimize financial risk imposed
by managed care payers with respect to medications that they prescribe, and
concern about the potential liability associated with medication errors.

As of December 31, 1999, we operated in one segment--the sale of medication
management products, which currently consist principally of TouchScript and
prepackaged medications. Our two other product categories, Internet products
and services and information products, currently generate an immaterial amount
of revenue. Nevertheless, these product categories are central to our operating
strategy. We anticipate that if these product categories grow, the way our
business is organized will change to reflect the increasing importance of each
of these product categories. If this occurs, we may determine that we operate
in multiple segments and be required to make additional disclosure about each.

We believe that managed care prescription programs will continue to cover
an increasing percentage of patients in the foreseeable future. This trend will
have the effect of reducing the dispensing opportunities of our traditional
dispensing customers because of their inability to submit claims electronically
for reimbursement by managed care payers. This reduction in dispensing
opportunities will reduce the revenue that we have historically recognized from
these customers. Additionally, managed care programs impose reduced
reimbursement rates for the medications dispensed to their plan participants,
thus providing us with a dollar margin per prescription dispensed that is lower
than we have historically experienced. Because TouchScript enables physicians
to submit claims electronically for reimbursement by managed care payers, a
large portion of the medications dispensed by our TouchScript customers is
dispensed to managed care patients. Accordingly, we expect that the fastest
growing portion of our business will provide margins with respect to the sale
of prepackaged medications that are lower than we have historically
experienced.

The length of the sales cycle for our current TouchScript product has
shortened in recent months and generally ranges from one to six months. Our
sales cycle length depends on a number of factors, including the nature and
size of the potential customer and the extent of the commitment being made by
the potential customer. Our typical sales cycle for large healthcare
organizations, such as physician practice management organizations, hospital-
owned physician groups and independent practice organizations, has generally
been longer than for smaller physician groups due to the more complex

22
<PAGE>

decision-making processes of larger organizations. Our customers currently
consist of physician practices that range in size from a single physician in
one location to as many as 140 physicians practicing in multiple locations.
Typical TouchScript license agreements have a term of three years and provide
for up-front fees for installation services and monthly subscription fees,
which entitle the customer, at no additional charge, to software upgrades,
periodic on-site maintenance and telephone support to the extent that these are
made generally available. Some contracts include a 90-day evaluation period.

Medications sold to physicians are billed upon shipment, generally with 30-
day payment terms. We collect, on behalf of TouchScript customers, amounts due
to them from managed care organizations for medications provided to patients in
the office. These payments are generally collected within 15 days after the
medications are dispensed and are offset against amounts owed to us by
physicians. We do not believe that this arrangement has a material impact on
our overall collection cycle or liquidity.

We recognize revenue from the sale of medications upon shipment of the
pharmaceutical products. We recognize revenue from software subscriptions and
related leased hardware, if applicable, ratably over the term of the
subscription, typically 36 months, beginning after the software and hardware
have been delivered and installed and customer training has been completed.
Revenue from the sale of hardware is recognized upon shipment of the product;
however, no revenue is recognized for subscriptions or the lease or sale of
hardware where payment of the related fee is refundable or subject to the
performance of future obligations. We recognize revenue from services as they
are performed.

We do not believe that inflation has had a material effect on our results
of operations.

In the years ended December 31, 1998 and 1999, we recorded total unearned
stock compensation of approximately $407,000 and $1,850,000, respectively, in
connection with stock options granted during the period. These amounts
represent the difference between the exercise price of stock option grants and
the deemed fair market value of our common stock at the time of the grants.
These amounts are being amortized to expense over the vesting periods of the
applicable options, resulting in approximately $176,000 and $449,000 of expense
for the years ended December 31, 1998 and 1999, respectively, which amounts are
included in selling, general and administrative expenses. Amortization of
unearned compensation expense for each of the next four fiscal years is
expected to be as follows:

<TABLE>
<CAPTION>
Amount
Year Ended (In thousands)
---------- --------------
<S> <C>
December 31, 2000.......................................... $538
December 31, 2001.......................................... 493
December 31, 2002.......................................... 485
December 31, 2003.......................................... 116
</TABLE>

In March 1999, in order to focus all of management's attention and
resources on the physician medication management business and due to the
significant resources necessary to remain competitive and sustain profitability
in the pharmacy benefit management business, we sold substantially all of the
assets, excluding cash and accounts receivable, of the pharmacy benefit
management business. The total consideration was approximately $7,500,000 in
cash at closing and a contingent payment of up to $8,400,000 based upon
achieving certain milestones for the one-year period following the closing. We
expect to receive less than the maximum contingent payment. This business had
net sales of $44,719,000, $52,866,000 and $14,292,000 in 1997, 1998 and 1999,
respectively, while recording an operating loss of $1,808,000 for 1997, an
operating profit of $970,000 for 1998 and an operating profit of $642,000 for
1999. The operating loss of $1,808,000 for 1997 included a writedown of
acquisition intangibles in the amount of $3,300,000. The writedown was the
result of the loss of customers acquired in the acquisition of our mail order
pharmacy business, reduced margin contributions from other acquired customers
and higher projected levels of customer attrition. Our financial statements and
the discussion in

23
<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations reflect the pharmacy benefit management business as a discontinued
operation. In the year ended December 31, 1999, we recognized a gain on the
sale of this business of $3,547,000, based upon the consideration received at
closing. If we receive any additional contingent payments, the gain, net of tax
effects, will be increased accordingly. See Note 16 of Notes to Consolidated
Financial Statements.

In May 1999, we acquired all of the outstanding stock of TeleMed Corp.,
which operates as MedSmart, in exchange for 117,500 shares of our common stock
at closing and an additional 87,271 shares in September 1999. MedSmart sells e-
detailing products, which are Internet-based physician drug education programs
and medical books, online and by telephone. These products are intended to
complement our existing line of medication management products. MedSmart
generated revenue of approximately $1,600,000 with a net loss of approximately
$330,000 for the year ended December 31, 1998. The MedSmart acquisition will
have the near-term effect of increasing cash used in operating activities.

In June 1999, we acquired substantially all of the assets of Shopping@Home,
Inc., a development-stage Internet retailer, in exchange for a promissory note
in the principal amount of $650,000, bearing interest at 6.0% per year, which
was repaid in August 1999. We expect the Internet software capabilities of
Shopping@Home to enhance the development of our Internet-based products.
Shopping@Home generated no revenue and had operating losses of approximately
$325,000 for the year ended December 31, 1998. The Shopping@Home acquisition
will have the near-term effect of increasing cash used in operating activities.
See "Certain Relationships and Related Party Transactions--Shopping@Home
Acquisition."

Based on preliminary and incomplete financial information, we believe that
from December 31, 1999 to the date of this prospectus, our stockholders'
deficit continued to increase, and our consolidated net current assets
decreased. Additionally, we believe that as compared to the corresponding
period in 1999, loss from continuing operations and net loss increased.

Results of Operations

The following table shows, for the periods indicated, our results of
operations expressed as a percentage of our revenue:

<TABLE>
<CAPTION>
Year Ended
December 31,
---------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Revenue................................................. 100.0% 100.0% 100.0%
Cost of revenue......................................... 69.0 73.1 79.4
----- ----- -----
Gross profit............................................ 31.0 26.9 20.6
Operating expenses:
Selling, general and administrative expenses.......... 45.4 53.5 74.9
Amortization of intangibles........................... 1.3 1.6 4.9
Other operating expenses.............................. 8.4 1.8 1.2
----- ----- -----
Loss from operations.................................... (24.1) (30.0) (60.4)
Interest income (expense), net.......................... (5.3) (2.5) 4.4
Other expense........................................... -- -- --
----- ----- -----
Loss from continuing operations......................... (29.4) (32.5) (56.0)
Income (loss) from discontinued operations.............. (5.9) 4.1 2.3
Gain from sale of discontinued operations............... -- -- 12.9
----- ----- -----
Loss before extraordinary items......................... (35.3) (28.4) (40.8)
Extraordinary loss from early extinguishment of debt.... -- (3.3) --
----- ----- -----
Net loss................................................ (35.3)% (31.7)% (40.8)%
===== ===== =====
</TABLE>

24
<PAGE>

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Total revenue increased by 17% or $3,904,000 from $23,682,000 in 1998 to
$27,586,000 in 1999.E-commerce revenue increased by 621% or $8,350,000 from
$1,344,000 in 1998 to $9,694,000 in 1999. Traditional revenue decreased by 20%
or $4,446,000 from $22,338,000 in 1998 to $17,892,000 in 1999.

The increase in e-commerce revenue reflects a shifting of traditional
revenue as a result of traditional customers ordering products over the
Internet, as well as additional installations and increased use of TouchScript.
The decrease in traditional revenue reflects a shifting of traditional revenue
to e-commerce as outlined above and the attrition of traditional customers, as
well as reduced levels of prepackaged medication dispensing by our traditional
customers due to the increased penetration of managed care prescription
programs. This decrease was partially offset by general price inflation of
brand medications, an increase in the dispensing percentage of brand drugs,
which have a considerably higher average selling price than their generic
counterparts, and revenue generated by MedSmart.

Cost of revenue increased by 27% or $4,589,000 from $17,320,000 in 1998 to
$21,909,000 in 1999 due to a greater percentage of revenue coming from sales of
higher cost brand products, increased revenue, increased operating costs at
sites where we manage the dispensary on behalf of the physician and increased
costs of technical support. Cost of revenue as a percentage of total revenue
increased from 73.1% in 1998 to 79.4% in 1999 principally due to a greater
percentage of revenue coming from lower margin brand products and increased
operating costs at sites where we manage the dispensary on behalf of the
physician. This percentage increase was partially offset by higher relative
percentage margin contributions from software and MedSmart revenues.

Selling, general and administrative expenses increased by 63% or $7,998,000
from $12,658,000 in 1998 to $20,656,000 in 1999 due primarily to additional
spending for sales and sales support personnel as well as related expenses
needed to sell, implement and support TouchScript installations, additional
spending for TouchScript and Internet product development personnel and related
support expenses, expenses related to MedSmart operations, increased recruiting
expenses, increased legal costs and additional deferred stock compensation
expense. In 1999, we recorded unearned stock compensation of approximately
$1,850,000, representing the difference between the exercise price of stock
option grants and the deemed fair market value of our common stock at the time
of the grants. This amount will be amortized to expense over the vesting
periods of the applicable grants and is expected to be fully amortized by 2003.
We also incurred non-cash compensation expense of $293,000 related to stock
options issued to consultants of Allscripts. As a result, selling, general and
administrative expenses as a percentage of total revenue increased from 53.4%
in 1998 to 74.9% in 1999.

Amortization of intangibles increased by 263% or $979,000 from $372,000 in
1998 to $1,351,000 in 1999. The increase in amortization relates to the
amortization of the goodwill recorded in the MedSmart acquisition, which was
completed in May 1999, and the Shopping@Home acquisition, which was completed
in June 1999.

Other operating expenses decreased by 26% or $111,000 from $430,000 in 1998
to $319,000 in 1999. Other operating expenses in 1999 of $319,000 reflect a
non-cash, non-recurring charge related to the issuance of common stock upon the
closing of our initial public offering in accordance with a contingent payment
obligation related to an acquisition we made in 1995. The 1998 expense
consisted entirely of severance costs related to the refocusing of our sales
efforts.

Net interest income for 1999 was $1,216,000 as compared to net interest
expense of $596,000 for 1998. This increase relates to interest earned on the
investment of net proceeds from our initial public offering, the exchange of
subordinated convertible debentures for redeemable preferred stock in April

25
<PAGE>

1998, the repayment of the term loan we had with our commercial bank in April
1998 and the repayment of borrowings on our revolving credit facility with our
commercial bank in July 1999.

We have recorded no provision or benefit for income taxes during 1999
because we currently anticipate that the annual effective income tax rate will
be minimal or zero and we have fully reserved all of our deferred tax assets.

The operating results of our pharmacy benefit management business, which we
sold in March 1999, have been segregated from continuing operations and
reported as a separate line item on the Consolidated Statements of Operations
under the caption "Income (loss) from discontinued operations." Additionally,
the gain we recognized from the sale of this business has been reported as a
separate line item under the caption "Gain from sale of discontinued
operations."

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

Total revenue decreased by 23% or $6,911,000 from $30,593,000 in 1997 to
$23,682,000 in 1998. Traditional revenue decreased by 27% or $8,255,000 from
$30,593,000 in 1997 to $22,338,000 in 1998. The overall decrease consists
primarily of approximately $6,600,000 due to attrition of customers and reduced
levels of medication dispensing by our traditional customers, principally as a
result of the increased market penetration of managed care prescription
programs. This decrease also reflects approximately $3,300,000 due to the
manufacturer withdrawal of two weight-loss products in October 1997 and
approximately $700,000 as a result of price reductions in response to
competitive pressures. This decrease was partially offset by increases in the
average selling price of brand products sold, which increased traditional
revenues by approximately $2,500,000 from 1997 to 1998. In the first quarter of
1998, we began to generate e-commerce revenue. We recognized $1,344,000 of e-
commerce revenue in 1998.

Cost of revenue decreased by 18% or $3,797,000 from $21,117,000 in 1997 to
$17,320,000 in 1998 due to the decrease in traditional revenue outlined above.
As a percentage of total revenue, cost of revenue increased from 69.0% in 1997
to 73.1% in 1998. This percentage increase was principally due to price
reductions in response to competitive pressures, which increased the cost of
revenue as a percentage of revenue by approximately 5%, and increased costs of
production, warehousing and distribution, which increased cost of revenue as a
percentage of revenue by approximately 1%. These increases were partially
offset by a shift in product mix to higher percentage margin products, which
reduced cost of revenue as a percentage of revenue by approximately 2%.

Selling, general and administrative expenses decreased by 9% or $1,211,000
from $13,869,000 in 1997 to $12,658,000 in 1998 but increased as a percentage
of total revenue from 45.4% in 1997 to 53.5% in 1998. The decrease consists
primarily of $1,614,000 attributable to a reduction in sales personnel and
related expenses as a result of the reorganization of the sales and marketing
efforts, and $446,000 related to decreased expenses associated with general and
administrative functions. These decreases were partially offset by increased
spending of $492,000 for personnel needed to develop, sell, implement and
support the TouchScript product, an increase in bad debt expense of $263,000
and unearned compensation expense of $176,000.

Amortization of intangibles decreased by 9% or $37,000 from $409,000 in
1997 to $372,000 in 1998. The decrease in the amortization is the result of a
writedown in 1997 of acquisition intangibles to net realizable value.

26
<PAGE>

Other operating expenses decreased by 83% or $2,138,000 from $2,568,000 in
1997 to $430,000 in 1998. The 1997 expense relates to a writedown of
acquisition intangibles in the amount of $2,328,000 and a severance charge of
$240,000 for a reduction in force of three sales and seven general and
administrative staff personnel. The expense in 1998 related to a reduction in
force of nine sales and ten general and administrative staff personnel.

Interest expense decreased by 63% or $1,025,000 from $1,621,000 in 1997 to
$596,000 in 1998 due to the exchange of subordinated convertible debentures for
redeemable preferred stock and the repayment of the term loan in April 1998. In
addition, in 1998 we recognized an extraordinary loss of $790,000 from the
early extinguishment of debt relating to the exchange of the debentures for
redeemable preferred stock.

Selected Quarterly Operating Results

Our quarterly results of operations have generally been seasonal, with a
greater proportion of our revenue typically occurring in the first and fourth
quarters. This seasonality is primarily attributable to the fact that more
prescriptions are written in the winter months.

The following table shows our quarterly unaudited consolidated financial
information for the eight quarters ended December 31, 1999 and each item as a
percentage of total revenue. We have prepared this information on the same
basis as the annual information presented in other sections of this prospectus.
In management's opinion, this information reflects all adjustments, all of
which are of a normal recurring nature, that are necessary for a fair
presentation of the results for these periods. You should not rely on the
operating results for any quarter to predict the results for any subsequent
period or for the entire fiscal year. You should be aware of possible variances
in our future quarterly results. See "Risk Factors--Risks Related to This
Offering and Our Stock--Our quarterly operating results may vary."

<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------------------
1998 1999
------------------------------------ -----------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- ------- -------- ------- -------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenue................. $ 6,351 $ 6,056 $ 5,760 $ 5,515 $6,028 $ 6,392 $ 6,975 $ 8,191
Cost of revenue......... 4,538 4,413 4,280 4,089 4,565 5,143 5,686 6,515
------- ------- ------- ------- ------ ------- ------- -------
Gross profit............ 1,813 1,643 1,480 1,426 1,463 1,249 1,289 1,676
Operating expenses:
Selling, general and
administrative
expenses.............. 3,349 3,242 3,116 2,951 3,550 4,554 5,698 6,854
Amortization of
intangibles........... 93 93 93 93 93 175 477 606
Other operating
expenses.............. 112 -- -- 318 -- -- 319 --
------- ------- ------- ------- ------ ------- ------- -------
Loss from operations.... (1,741) (1,692) (1,729) (1,936) (2,180) (3,480) (5,205) (5,784)
Interest income
(expense), net......... (396) (81) (45) (74) (109) (91) 603 813
------- ------- ------- ------- ------ ------- ------- -------
Loss from continuing
operations............. (2,137) (1,773) (1,774) (2,010) (2,289) (3,571) (4,602) (4,971)
Income from discontinued
operations............. 387 294 201 88 26 -- 616 --
Gain from sale of
discontinued
operations............. -- -- -- -- 3,547 -- -- --
------- ------- ------- ------- ------ ------- ------- -------
Income (loss) before
extraordinary items.... (1,750) (1,479) (1,573) (1,922) 1,284 (3,571) (3,986) (4,971)
Extraordinary loss from
early extinguishment of
debt................... -- (790) -- -- -- -- -- --
------- ------- ------- ------- ------ ------- ------- -------
Net (loss) income....... $(1,750) $(2,269) $(1,573) $(1,922) $1,284 $(3,571) $(3,986) $(4,971)
======= ======= ======= ======= ====== ======= ======= =======

</TABLE>

27
<PAGE>

<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------------------
1998 1999
------------------------------------ -----------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
As a Percentage of Revenue:
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 71.5 72.9 74.3 74.1 75.7 80.5 81.5 79.5
----- ----- ----- ----- ----- ----- ----- -----
Gross profit............ 28.5 27.1 25.7 25.9 24.3 19.5 18.5 20.5
Operating expenses:
Selling, general and
administrative
expenses.............. 52.7 53.5 54.1 53.6 58.9 71.3 81.6 83.7
Amortization of
intangibles........... 1.5 1.5 1.6 1.7 1.5 2.7 6.8 7.4
Other operating
expenses.............. 1.8 -- -- 5.8 -- -- 4.6 --
----- ----- ----- ----- ----- ----- ----- -----
Loss from operations.... (27.5) (27.9) (30.0) (35.2) (36.1) (54.5) (74.5) (70.6)
Interest income
(expense), net......... (6.2) (1.3) (0.8) (1.3) (1.8) (1.4) 8.6 9.9
----- ----- ----- ----- ----- ----- ----- -----
Loss from continuing
operations............. (33.7) (29.2) (30.8) (36.5) (37.9) (55.9) (65.9) (60.7)
Income from discontinued
operations............. 6.1 4.8 3.5 1.6 0.4 -- 8.8 --
Gain from sale of
discontinued
operations............. -- -- -- -- 58.8 -- -- --
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before
extraordinary items.... (27.6) (24.4) (27.3) (34.9) 21.3 (55.9) (57.1) (60.7)
Extraordinary loss from
early extinguishment of
debt................... -- (13.1) -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- -----
Net (loss) income....... (27.6)% (37.5)% (27.3)% (34.9)% 21.3% (55.9)% (57.1)% (60.7)%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>

Discontinued Operations

The operating results of the pharmacy benefit management segment have been
segregated from continuing operations and reported as a separate line item on
the Consolidated Statements of Operations under the caption "Income (loss) from
discontinued operations." Additionally, we have restated our prior financial
statements to present the operating results of the pharmacy benefit management
business as a discontinued operation.

Operating results from discontinued operations were as follows:

<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Revenue......................................... $44,719 $52,866 $14,292
Cost of revenue................................. 41,413 49,313 13,378
------- ------- -------
Gross profit................................ 3,306 3,553 914
Selling, general and administrative expenses.... 5,114 2,583 272
------- ------- -------
Operating income (loss)......................... (1,808) 970 642
------- ------- -------
Income (loss) from discontinued operations...... $(1,808) $ 970 $ 642
======= ======= =======
</TABLE>

Revenue from discontinued operations increased by 18.2% or $8,147,000 from
$44,719,000 in 1997 to $52,866,000 in 1998. The increase in revenue reflects
our focus on and success within the specialty medication market business,
primarily HIV medications. The increases were partially offset by the loss of
customers and the repricing of certain accounts as part of the competitive
renewal bid process. Revenue from discontinued operations decreased by 73.0% or
$38,574,000 from $52,866,000 in 1998 to $14,292,000 in 1999 due to the sale of
the pharmacy benefit management business in March of 1999.

While specialty medication customers generated significant revenue, their
gross profit margin percentage was lower than our historical customer base. As
a result, cost of revenue in 1998 increased by 19.1% or $7,900,000 from
$41,413,000 in 1997 to $49,313,000 in 1998 and increased as a percentage of
revenue from 92.6% to 93.3%. Cost of revenue decreased by 72.9% or $35,935,000
from $49,313,000 in 1998 to $13,378,000 in 1999 due to the sale of the pharmacy
benefit management business in 1999 as noted above. Cost of revenue as a
percentage of revenue increased from 93.3% in 1998 to 93.6% in 1999.

28
<PAGE>

Selling, general and administrative expenses of discontinued operations
increased by $763,000 or 41.9% from $1,820,000 in 1997, excluding a $3,294,000
writedown of acquisition intangibles in 1997, to $2,583,000 in 1998. This
increase relates to a $800,000 charge for uncollectible receivables, costs
associated with a major computer system conversion and increased administrative
and support costs to support higher revenue levels. Selling, general and
administrative expenses decreased by $2,311,000 or 89.5% from $2,583,000 in
1998 to $272,000 in 1999, primarily due to the sale of the pharmacy benefit
management business in March of 1999, as noted above.

Liquidity and Capital Resources

At December 31, 1999, our principal sources of liquidity consisted of
$40,561,000 of cash and cash equivalents and $15,049,000 of marketable
securities. Historically, our principal sources of funds were bank borrowings,
the sale of subordinated debt, redeemable preferred stock and equity
securities, and operating cash flow generated by our pharmacy benefit
management business, which we sold in March 1999. We issued securities for net
cash proceeds totaling $8,930,000 in 1998 and $102,709,000 in 1999. We have
used these capital resources to fund operating losses, working capital, capital
expenditures, acquisitions and retirement of debt. At December 31, 1999, we had
an accumulated deficit of $62,008,000.

Net cash used in operating activities increased by $8,528,000 from
$4,165,000 for 1998 to $12,693,000 for 1999, due to an increase in operating
losses. In addition, accounts payable decreased, primarily due to the payment
of outstanding payables related to our pharmacy benefit management business,
which we sold in March 1999. Inventories also increased from December 31, 1998
to December 31, 1999 as our inventories of computer equipment increased in
anticipation of increased sales and installations of our TouchScript software.
This was partially offset by decreases in accounts receivable, primarily due to
the collection of outstanding receivables related to our pharmacy benefit
management business. Further offsets were recognized from increases in
depreciation and amortization.

Net cash used in investing activities increased from $884,000 in 1998 to
$11,959,000 in 1999, primarily as a result of the purchase of marketable
securities of $15,049,000 offset by cash received from the sale of the pharmacy
benefit management business of $7,472,000 in March 1999. Capital expenditures
increased from $884,000 in 1998 to $4,428,000 in 1999. The increased level of
expenditures in 1999 relates to computer systems placed at sites where we
manage the dispensary on behalf of the physician and increases in capital
outlays to accommodate new employees. Currently, we have no material
commitments for capital expenditures, although we anticipate ongoing capital
expenditures in the ordinary course of business.

Net cash provided by financing activities increased from $5,562,000 for
1998 to $64,495,000 for 1999 primarily due to the receipt of net proceeds of
$102,709,000 from the initial public offering of our common stock and
$1,400,000 in additional borrowings under our revolving credit line, offset by
preferred stock redemptions of $34,745,000 and repayment of revolving credit
line borrowings of $5,400,000.

We have spent $518,000, $771,000 and $1,417,000 on software development
costs in 1997, 1998 and 1999, respectively. Upon the establishment of
technological feasibility for previous versions of TouchScript, we began
capitalizing related software development costs. However, these costs were
written off because their recoverability was uncertain since market acceptance
of TouchScript had not been achieved. Development costs incurred subsequent to
the establishment of technological feasibility but prior to general release of
the current version of TouchScript were not significant.

On July 28, 1999, we completed an initial public offering of our common
stock. We issued 7,000,000 shares of common stock at an initial public offering
price of $16.00 per share. The initial public offering resulted in gross
proceeds of $112,000,000, $7,840,000 of which was applied to the underwriting
discount and approximately $1,451,000 of which was applied to related offering
expenses. In addition, we used $34,745,000 of the proceeds to redeem all
outstanding shares of our Series H, I and J Redeemable

29
<PAGE>

Preferred Stock, plus accrued dividends thereon; $3,900,000 to repay advances
under our revolving line of credit with our commercial bank; and $653,000 to
repay a promissory note, including accrued interest, issued as consideration
for our acquisition of Shopping@Home, Inc. The remaining net proceeds of
approximately $63,400,000 were invested in short-term, interest-bearing,
investment grade securities pending their use for general corporate purposes
and working capital.

At December 31, 1999, we had operating loss carryforwards available for
federal income tax reporting purposes of approximately $41,500,000 and have
continued to generate taxable losses in 2000. The operating loss carryforwards
expire in 2002 through 2019. Our ability to use these operating loss
carryforwards to offset future taxable income depends on a variety of factors,
including possible limitations on usage under Internal Revenue Code Section
382. Section 382 imposes an annual limitation on the future utilization of
operating loss carryforwards due to changes in ownership resulting from the
issuance of common shares, stock options, warrants and preferred shares.

We believe that the net proceeds to us of this offering, together with our
existing cash, including the $10,000,000 of proceeds we received from the sale
of common stock to a strategic partner in February 2000, cash equivalents,
marketable securities and borrowings under our line of credit, will be
sufficient to meet the anticipated cash needs of our current business during
the year ending December 31, 2000. However, any projections of future cash
needs and cash flows are subject to substantial uncertainty. We will, from time
to time, consider the acquisition of, or investment in, complementary
businesses, products, services and technologies, which might affect our
liquidity requirements or cause us to issue additional equity or debt
securities. There can be no assurance that financing will be available in the
amounts or on terms acceptable to us, if at all. See "Risk Factors--Risks
Related to Our Company--If we are unable to obtain financing for our future
needs, our growth prospects and our ability to respond to competitive pressures
will be impaired."

Year 2000

We have not experienced any Year 2000-related problems with our medication
management products or with third-party software, hardware or services on which
we rely. It is possible, however, that Year 2000 compliance problems exist that
we cannot yet identify. If problems arise and we fail to address them on a
timely basis, it could result in lost revenue, increased operating costs, the
loss of customers and other business interruptions. As of December 31, 1999, we
had incurred costs that we believe are allocable to Year 2000 compliance of
approximately $175,000.

Recently Issued Accounting Pronouncements

In the first quarter of 1999, Allscripts adopted Statement of Position 98-
1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 requires entities to capitalize certain internal-use
software costs once certain criteria are met. Prior to 1999, Allscripts'
practice was to expense the costs of obtaining or developing internal-use
software as incurred. Costs that are capitalizable under this pronouncement
include external direct costs of materials and services consumed in developing
or obtaining internal-use computer software, payroll and payroll-related costs
for employees who are directly associated with and who devote time to the
internal-use computer software project and interest costs incurred when
developing computer software for internal use. Costs incurred relating to
development of internal-use software have not been material.

30
<PAGE>

BUSINESS

General

We provide physicians with Internet and client/server medication management
solutions designed to improve the quality and cost effectiveness of
pharmaceutical healthcare. Our technology-based approach focuses on the point
of care, where prescriptions and many other healthcare transactions originate,
and creates an electronic dialogue between physicians and other participants in
the healthcare delivery process, including patients, pharmacies, managed care
organizations and pharmaceutical manufacturers. We believe physicians find our
solutions attractive because incorporating these solutions into their office
work flow can increase efficiency and profitability, reduce medication errors
and improve the quality of patient care.

Our products are designed to improve every step of the pharmaceutical
healthcare process. We currently offer products in four categories: point-of-
care medication management, Internet products and services, information
products and prepackaged medications. Our TouchScript software enables
electronic prescribing, routing of prescription information and capturing of
prescription data at the point of care. This software is currently available on
multiple platforms, including the Personal Prescriber, a wireless hand-held
device. Our other e-commerce products and services offer physicians and their
patients medication-related education and information services. We also sell
our prepackaged medications to physicians so they can offer their patients the
convenience of receiving prescription medications in the physician's office.

Recent Developments

Since the initial public offering of our common stock in July 1999, we have
advanced our strategy across several fronts.

.Our e-commerce revenue as a percentage of our total revenue has increased
from 29% in the second quarter of 1999 to 50% in the fourth quarter of
1999.

.The length of the average sales cycle for TouchScript has decreased from a
range of three to nine months to one to six months.

.The number of physician practice sites using our TouchScript system has
increased from approximately 150 to over 400, and the number of payers
reimbursing our physician customers for prescriptions they dispense
increased from approximately 60 to approximately 100.

.We introduced the Personal Prescriber, a wireless hand-held prescribing
device, in September 1999 and have shipped over 400 to customers since
then.

.We have entered into a number of strategic alliances, including an
alliance with IMS Health Incorporated, a leading provider of information
solutions to the pharmaceutical and healthcare industries.

Background

According to the Health Care Financing Administration, healthcare
expenditures in the United States totaled approximately $1.0 trillion in 1996,
or 14% of the country's gross domestic product, making it the largest single
sector of the economy. One of the fastest growing components of healthcare
expenditures is pharmaceutical costs, which totaled approximately $100 billion
in 1998, according to IMS Health Incorporated, a leading provider of
pharmaceutical information. According to the Health Care Financing
Administration, pharmaceutical costs are expected to increase at an annual rate
of approximately 10% through 2007, driven by an aging population, the
accelerating introduction of new drugs, direct-to-consumer advertising by
pharmaceutical manufacturers and cost advantages over alternate forms of care,
most notably inpatient hospital care. This in turn has created pressure on
managed care organizations to control pharmacy costs and improve the process of
managing medication treatments.

31
<PAGE>

Physicians have also been affected as healthcare has shifted from a fee-
for-service model to managed care forms of reimbursement, which in many cases
transfer financial risk for pharmaceutical costs from traditional third-party
payers to physicians. This transfer of risk has often had an adverse financial
impact on physicians. Moreover, as healthcare becomes increasingly consumer
driven, patients are seeking more information, control and convenience, placing
additional time and financial pressures on physicians. These changes have led
many physicians in the United States to search for tools and solutions to
improve practice efficiency, increase revenue, comply with managed care
guidelines and address patient needs.

Rapid Growth of the Internet and Business-to-Business E-commerce

The Internet is becoming an increasingly important medium in healthcare,
providing the opportunity for unprecedented communication and access to
information for all participants in the healthcare delivery process. We believe
that an increasing number of physicians regularly access the Internet,
indicating their willingness to adopt technology. Moreover, according to
Forrester Research, business-to-business e-commerce is expected to grow from
$109 billion in 1999 to $1.3 trillion in 2003, accounting for more than 90% of
the dollar value of e-commerce in the United States by 2003. We believe that
electronic prescribing as well as other business-to-business e-commerce
transactions are rapidly gaining acceptance in the healthcare community.

The Opportunity

The traditional process for prescribing and delivering medications is
inefficient, unnecessarily costly and error-prone. The Institute of Medicine
has estimated that between 44,000 and 98,000 people die each year because of
medical mistakes. This has prompted President Clinton to sign an executive
memorandum creating a task force to focus on increasing the use of electronic
prescribing tools as one step to reducing medication errors. Physicians write
virtually all of the approximately three billion annual prescriptions by hand,
resulting in errors and necessitating millions of telephone inquiries from
pharmacies for clarification and correction. When physicians write
prescriptions, they often do not have ready access to information that would
help ensure that the prescription is clinically sound, cost effective and
compliant with managed care organizations' pharmacy guidelines. The pharmacist
or managed care organization checks this information only after the physician
writes the prescription. The inability of managed care organizations to
communicate with physicians at the time of prescribing has made it difficult to
manage pharmaceutical costs. The existing process further inconveniences the
patient, who must travel from the physician's office to a pharmacy and must
often wait for the prescription to be filled. In addition, despite the fact
that pharmaceutical manufacturers spend billions of dollars promoting the use
of their drugs, physicians have a difficult time staying current on the rapidly
expanding body of pharmaceutical products and knowledge.

The Allscripts Solution

We have developed Internet and in-office comprehensive electronic solutions
that significantly streamline the process of prescribing and delivering
medications. Our TouchScript software enables physicians to improve their
prescribing at the point of care by providing ready access to information about
potential adverse drug interactions, patient drug history and managed care
preferences, including pharmacy guidelines and generic substitutes. Both before
and as the prescription is written, TouchScript reduces the possibility of
medication errors and the need for expensive and time-consuming retrospective
intervention by pharmacists and pharmacy benefit managers.

We offer or intend to offer other e-commerce products that address various
aspects of the medication management process. We currently have products that
enable physicians to purchase medications and supplies via the Internet and
make it possible for patients to have their prescriptions electronically routed

32
<PAGE>

to the pharmacies of their choice or to receive their medications in their
physicians' offices. We offer physicians Internet-based information services
that permit them to better care for their patients. We intend to offer patients
ancillary information and electronic services focused on improving care,
including education and compliance programs. We believe that, in addition to
medication management, there are other aspects of the physician's daily work
flow that can be effectively addressed through technology-focused solutions. We
intend to enhance our current offerings by integrating new products and
services that address these needs.

Our solution redesigns the pharmaceutical healthcare delivery process to
benefit each participant. By providing ready access to information during the
prescribing process, our system benefits physicians by reducing the amount of
time spent clarifying and changing prescriptions. In addition, our system
enables physicians to better manage financial risk and to increase practice
revenue through dispensing their most commonly prescribed medications to their
patients at the point of care and can also reduce medication errors. Patients
benefit from the convenience, immediacy and confidentiality of receiving
prescription medications in the physician's office. Patients also gain access
to valuable information that enables them to play a more active role in
managing their healthcare. Managed care organizations benefit from higher
physician compliance with their pharmacy guidelines, resulting in lower overall
costs. Pharmacies benefit from improved communication with physicians, which
enhances efficiency and reduces the likelihood of errors. We also believe that
the new products and services that we intend to offer in the future will
benefit additional participants in the healthcare delivery process.

We believe that the best way to improve the medication management process
is by focusing where the prescription originates--with the physician--and
motivating physicians to write prescriptions electronically. By combining
electronic prescribing and dispensing, innovative product design, state-of-the-
art software and hardware, and the Internet, we believe we offer an attractive
opportunity for physicians. Key advantages of our solution include:

. Ease of Use. TouchScript is easy to use, enabling a physician to complete
a prescription in as little as 20 seconds.

. Accessibility. TouchScript enables physicians to prescribe electronically
from a variety of locations on several different platforms, including
wireless hand-held devices, the Internet and touch screen-enabled
personal computers.

. Information. TouchScript provides valuable, objective information prior
to and during the prescribing process, enabling physicians to improve the
quality of their prescriptions.

. Financial Opportunity. TouchScript offers physicians a significant
financial opportunity through better management of pharmacy risk and
additional practice revenue from dispensing medications.

Competitive Advantage

We believe that we have several advantages over our current and potential
competitors:

. Installed Base. Versions of TouchScript are currently installed and used
in over 400 physician practice sites.

. Physician Relationships. Our experience with thousands of physicians at
more than 2,500 sites across the United States enables us to understand
their office work flow and the way they conduct their business.

. Managed Care Experience. Approximately 100 managed care payers and
pharmacy benefit managers, including many of the country's largest,
currently reimburse our physician customers for prescription medications
dispensed in their offices.

. Regulatory Experience. We have a thorough understanding of, and operating
experience in, the dynamic and complex federal and state healthcare
regulatory environment.

33
<PAGE>

. Management. Our management team has substantial experience in managing
rapidly growing public companies that use technology to change business
processes.

The Allscripts Strategy

Our objective is to become the leading provider of medication management
solutions and point of care tools designed to automate the physician's work
flow. Our strategy to achieve this objective includes the following:

. Accelerating sales of our medication management solutions through
expansion of marketing efforts, conversion of traditional dispensing-only
customers to TouchScript and development of strategic alliances with
physician practice management system vendors, physician-oriented Internet
portals and managed care organizations.

. Increasing customer utilization of our medication management products to
enhance the financial opportunity for physicians through a combination of
quality customer service and expansion of the number of managed care
organizations that reimburse physicians for prescription medications
dispensed in their offices.

. Enhancing our medication management product line by developing additional
Internet-based products for physicians and their patients.

. Providing additional physician work flow automation tools to our
installed base.

. Developing and marketing information products that use the data collected
during the electronic prescribing process.

Products and Services

Our product strategy is built around the physician prescribing
electronically at the point of care, where virtually all prescriptions are
initiated. Our e-commerce business is currently comprised of three major
product categories:

. point-of-care medication management,

. Internet products and services and

. information products.

Our traditional business consists of sales of prepackaged medications through
channels other than the Internet.

34
<PAGE>

Current and Future E-Commerce Products and Services

<TABLE>
<S> <C>
Internet Products and Services
Point-of-Care Medication Management

Online Ordering (www.Allscripts.com)
.Medications for in-office dispensing
.Medical education materials
TouchScript Version 7
.Drug Utilization Review
.Formulary checking (800 plans)
.Generic substitution
.Automated Internet ordering
. SCRIPT standard prescription routing
. Online submission of pharmacy claims
.Inventory management
.ScriptGuard barcode scanning
.Touch screen-enabled
.3Touch Prescribing
.Hand-held enabled
Physician's Interactive/e-detailing
.Internet and Interactive Voice
Response drug education
and detailing

TouchScript.net
.Internet-enabled electronic
prescribing

TouchScript Outsourcing
.On-site dispensary management Intelligent Reminder+

Patient Education+
.Health state information
.Managed care information
.Drug information

Information Products

Data Mining Products
.Prescribing data linked to diagnosis
</TABLE>
- --------

+Release date to be determined.

Point-of-Care Medication Management

TouchScript is an Internet and client/server software application that
physicians use to electronically prescribe, route prescriptions and dispense
medications. TouchScript provides the physician with ready access to
information during the prescribing process to facilitate writing a high-quality
prescription. This information includes patient drug history, potential adverse
drug interactions, generic drug alternatives and the relative costs of
medications and drug preferences of managed care plans offered by over 800
payers. The resulting prescription is legible, accurate and more likely to be
clinically safe and follow managed care guidelines, reducing the need for
subsequent communication between the physician and a pharmacist to correct or
clarify the prescription.

Once the prescribing process is completed, TouchScript offers a variety of
fulfillment options for the patient: electronic routing to a retail, Internet
or mail order pharmacy, printing a legible hard copy or receiving the
medication in the physician's office. If the patient chooses to receive the
medication in the physician's office and is carrying a pharmacy benefit card,
the system can submit the pharmacy claim electronically for immediate approval
and reimbursement by the managed care organization.

Drug inventory management is fully automated, and all medication orders and
receipts are handled via the Internet using a proprietary program. TouchScript
employs an industry standard electronic data interchange format for sending and
receiving prescription information called SCRIPT standard, which was developed
by the National Council for Prescription Drug Programs. This enables two-way
communication between physicians and pharmacists in a more efficient way than
can be accomplished over the telephone. In addition, TouchScript's underlying
relational database enables users to generate a variety of clinical, financial
and operational reports.

35
<PAGE>

We designed TouchScript to be faster and easier for a physician to use than
a prescription pad. We currently offer TouchScript featuring 3Touch
Prescribing on a variety of platforms, including wireless hand-held devices,
the Internet and touch screen-enabled personal computers. TouchScript learns
the physician's preferences dynamically, tailoring information on patients,
diagnoses, medications and instructions more precisely as usage increases.

For large physician practices, we offer an outsourcing option, under which
we provide employees to staff the practice's on-site dispensary.

Internet Products and Services

As an extension of our TouchScript medication management solutions, we
offer transaction-based
e-commerce services that enhance our business relationships with physicians.
We are also developing a number of informational and educational services for
physicians and patients to be offered through our Web site.

Online Ordering. Through our Web site, www.Allscripts.com, we currently
sell pharmaceuticals to physicians, enabling them to provide patients with
medications in the office, and we plan to facilitate the delivery of
pharmaceutical products directly to patients in the future. We also enable
healthcare professionals to purchase medical-related texts, journals and
products online.

Physician's Interactive/e-detailing. This product enables pharmaceutical
manufacturers and managed care organizations to deliver drug education and
detailing to physicians more efficiently and cost-effectively via the
Internet, without the face-to-face interaction currently required. The product
is also available through Interactive Voice Response.

TouchScript.net. This Internet version of TouchScript offers all of the
electronic prescribing and routing capabilities of Version 7.

Intelligent Reminder. We intend to offer a service to track patient
compliance with prescribed treatment and to send reminders to patients,
physicians and managed care organizations. By increasing compliance, we expect
to improve patient care and reduce unnecessary office visits, benefiting
patients, physicians and managed care organizations.

Patient Education. We intend to create a Web site that will provide
information to patients, enabling them to take a more active role in managing
and improving the quality and cost of their healthcare. Specific information
regarding health state, managed care and medications will be made available on
the Web site and via e-mail.

Information Products

Data Mining Products. As a by-product of electronic prescribing, we
accumulate data that correlates the medications prescribed with the related
diagnosis. This type of correlated data is not readily available on a broad
scale, and we believe that we can market it to pharmaceutical manufacturers
and managed care organizations.

Prepackaged Medications

We fulfill orders for prepackaged medications for our traditional and e-
commerce customers from our FDA-licensed repackaging facility in Libertyville,
Illinois. Enabling physicians to sell repackaged pharmaceuticals is an
important component of the financial opportunity we provide to physicians.

36
<PAGE>

Sales and Marketing

We sell our products through an internal direct sales force and intend to
pursue strategic relationships with key suppliers of physician practice
management systems, physician-focused Internet portals and managed care
organizations to complement our internal efforts.

As of January 31, 2000, we employed 66 sales professionals who market
directly to large physician practices, clinics, integrated healthcare networks,
physician practice management organizations and pharmaceutical manufacturers.
We target sites with a large number of high-volume prescribing physicians in
states where in-office dispensing is well-established or where many physicians
bear financial risk for pharmaceutical costs.

We use a variety of tools to attract prospective customers, including
editorials, articles and advertisements in trade journals, as well as executive
seminars, exhibits at selected trade shows and other direct marketing
techniques.

IMS Health Strategic Alliance

On February 16, 2000 we entered into a Strategic Alliance Agreement with
IMS Health Incorporated, a leading provider of information solutions to the
pharmaceutical and healthcare industries. In addition, IMS agreed to purchase
214,794 shares of our common stock for an aggregate purchase price of
$10,000,000 or $46.56 per share, which represents the average per share closing
price of our stock for the ten trading days prior to February 16. If the
initial price to public in this offering is less than $46.56, we will issue
additional shares to IMS equal to $10,000,000 divided by the initial price to
public, less the 214,794 shares already issued. The Strategic Alliance
Agreement provides for the creation of a joint venture to develop and market
new Internet-based information solutions for the pharmaceutical industry.

The goals of the joint venture include:

. accelerating TouchScript's market penetration rate;

. expanding TouchScript as a technology that can enable research, promotion
and interactive communication with physicians;

. facilitating the commercialization of the information assets generated by
TouchScript; and

. developing next generation products using the TouchScript platform for
use by pharmaceutical companies, insurance companies and other payers,
and healthcare providers, including physicians.

Because the joint venture has only recently been formed, we cannot predict
whether, or the extent to which, any of these goals will be achieved.

Merck-Medco Strategic Relationship

Merck-Medco Managed Care is the country's largest pharmacy benefits
manager, covering over 60 million people. We have a non-exclusive pilot
agreement with Merck-Medco to evaluate the effectiveness of our TouchScript
medication management solutions in affecting prescribing behavior and
accelerating patient participation in Merck-Medco's mail order prescription
services. Merck-Medco works closely with us to target high-volume prescribers
and encourage them to adopt the TouchScript system.

Customer Service and Support

Our customer service strategies are important to our ability to maximize
physician utilization of our medication management solutions. We provide our
customers with a range of services that begins before product implementation
and continues throughout our relationship. As of January 31, 2000, our
TouchScript customer service and support team consisted of 128 Account
Executives, Regional Managers and Customer Support Representatives. We expect
our team to continue to grow substantially in 2000.

37
<PAGE>

Implementation Services

Implementation involves site evaluation, work flow preparation, hardware
and software installation and training of physicians and their staff. Site
evaluation helps us understand how best to implement our solution within the
physician's office work flow. Physician training on the system can typically be
completed in 30 minutes or less. The physician's office staff is usually
trained in administrative and fulfillment functions in two to three hours. The
objective of the implementation process is to maximize the value added to the
physician's practice through electronic prescribing, routing to the appropriate
dispensing location and utilizing information.

Account Management and Customer Support

Once TouchScript is operational, our staff works to help the customer
realize the benefits of the system. Account Managers contact customers on a
regular basis, either in person, by telephone or online, monitor weekly
activity and help increase customer satisfaction. We provide toll-free
telephone and online support to our TouchScript customers 24 hours a day, seven
days a week. In addition, a separate group of Account Managers services more
than 2,500 physician practice locations across the country that purchase our
prepackaged medications.

Managed Care

Our Managed Care team is responsible for facilitating access to managed
care networks, acquiring and maintaining pharmacy guideline information for
over 800 payers and supporting ongoing relationships with payers and pharmacy
benefit managers.

Competition

Our industry is intensely competitive, rapidly evolving and subject to
rapid technological change. Many companies that offer products or services that
compete with one or more of our products or services have greater financial,
technical, product development, marketing and other resources than we have.
These organizations may be better known and may have more customers than we
have. We may be unable to compete successfully against these organizations. We
believe that we must gain significant market share with our products and
services before our competitors introduce alternative products and services
with features similar to ours.

We believe that there are no competitors in medication management that
offer a comprehensive solution with ease of use, accessibility, information
content and financial opportunity for physicians comparable to ours. However,
several organizations offer components that overlap with certain components of
our solutions and may become increasingly competitive with us in the future. In
addition, several companies have recently introduced or announced their
intention to introduce electronic prescribing products.

We face competition from several types of organizations, including the
following:

. electronic prescribing product providers;

. physician practice management systems suppliers;

. electronic medical records providers;

. healthcare electronic data interchange providers;

. point-of-care dispensing providers; and

. Internet information providers.

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<PAGE>

While many of these types of organizations are potential competitors, we
believe that there are opportunities to establish strategic relationships,
alliances or distribution agreements with some of them and we intend to pursue
these opportunities selectively. In addition, we expect that major software
information systems companies and others specializing in the healthcare
industry may offer products or services that are competitive with components of
our solutions.

Product Development and Technology

As of January 31, 2000, our software development department consisted of 24
technology professionals. These individuals, with expertise in application
development, documentation and quality assurance, are divided into cross-
functional teams responsible for our point-of-care and Internet solutions.

TouchScript operates on Microsoft's NT and Windows operating systems. All
software products are developed using com-objects, Active Server Pages and C++
programming language. Our Internet applications are browser-independent and are
protected by a state-of-the-art firewall, which is a network interconnection
element that polices traffic flowing between the Allscripts internal network
and the Internet, and proxy servers that provide layered security defenses
against unauthorized access. We employ industry standard 128-bit encryption,
known as secure socket layers, to provide secure transfer of information over
the Internet.

Governmental Regulation

As a participant in the healthcare industry, our operations and
relationships are regulated by a number of federal, state and local
governmental entities.

The use of our TouchScript software by physicians to perform electronic
prescribing, electronic routing of prescriptions to pharmacies and dispensing
is governed by state and federal law. States have differing prescription format
requirements, which we have programmed into TouchScript. Many existing laws and
regulations, when enacted, did not anticipate methods of e-commerce now being
developed. Federal law and the laws of several states neither specifically
permit nor specifically prohibit electronic transmission of prescription
orders. Given the rapid growth of e-commerce in healthcare, and particularly
the growth of the Internet, we expect many states, as well as the federal
government, to directly address these areas with regulation in the near future.

Physician dispensing of medications for profit is allowed in all states
except Utah and is prohibited, subject to extremely limited exceptions, in
Massachusetts, Montana and Texas. In addition, New York and New Jersey, allow
physician dispensing of medications for profit, but limit the number of days'
supply of all medications, subject to limited exceptions, that a physician can
dispense, and several other states limit the number of days' supply of
controlled substances that a physician may dispense. Many of the states
allowing physician dispensing for profit have regulations relating to
licensure, storage, labeling, record keeping and the degree of supervision
required by the physician over support personnel who assist in the non-
judgmental tasks associated with physician dispensing, like retrieving
medication bottles and affixing labels. We regularly monitor these laws and
regulations, in consultation with the governing agencies, to assist our
customers in understanding them so that they can materially comply.

Congress enacted significant prohibitions against physician self-referrals
in the Omnibus Budget Reconciliation Act of 1993. This law, commonly referred
to as "Stark II," applies to physician dispensing of outpatient prescription
drugs that are reimbursable by Medicare or Medicaid. Stark II, however,
includes an exception for the provision of in-office ancillary services,
including a physician's dispensing of outpatient prescription drugs, provided
that the physician meets the requirements of the exception. We believe that the
physicians who use our TouchScript system or dispense drugs distributed by us
are doing so in material compliance with Stark II, either pursuant to the in-
office ancillary services exception or another applicable exception.

39
<PAGE>

As a repackager and distributor of drugs, we are subject to regulation by
and licensure with the FDA, the DEA and various state agencies that regulate
wholesalers or distributors. Among the regulations applicable to our
repackaging operation are the FDA's "good manufacturing practices." We are
subject to periodic inspections by regulatory authorities of our facilities,
policies and procedures for compliance with applicable legal requirements.
Because the FDA's good manufacturing practices were designed to govern the
manufacture, rather than the repackaging, of drugs, we face legal uncertainty
concerning the application of some aspects of these regulations and of the
standards that the FDA will enforce. See "Risk Factors--Risks Related to Our
Industry--If the healthcare environment becomes more restrictive, or we do not
comply with healthcare regulations, our existing and future operations may be
curtailed, and we could be subject to liability."

As a distributor of prescription drugs to physicians, we and our customers
are also subject to the federal anti-kickback statute, which applies to
Medicare, Medicaid and other state and federal programs. The statute prohibits
the solicitation, offer, payment or receipt of remuneration in return for
referrals or the purchase of goods, including drugs, covered by the programs.
The anti-kickback law provides a number of exceptions or "safe harbors" for
particular types of transactions. We believe that our arrangements with our
customers are in material compliance with the anti-kickback statute and
relevant safe harbors. Many states have similar fraud and abuse laws, and we
believe that we are in material compliance with those laws.

As part of our services provided to physicians, our system will
electronically transmit claims for prescription medications dispensed by a
physician to many patients' payers for immediate approval and reimbursement.
Federal law provides that it is both a civil and a criminal violation for any
person to submit a claim to any payer, including, for example, Medicare,
Medicaid and all private health plans and managed care plans, seeking payment
for any services or products that overbills or bills for items that have not
been provided to the patient. We believe that we have in place policies and
procedures to assure that all claims that are transmitted by our system are
accurate and complete, provided that the information given to us by our
customers is also accurate and complete.

Existing federal and state laws and regulations regulate the disclosure of
confidential medical information, including information regarding conditions
like AIDS, substance abuse and mental illness. In addition, the U.S. Department
of Health and Human Services recently published a proposed rule regarding the
disclosure of confidential medical information, which is expected to become
final in May 2000. As part of the operation of our business, our customers may
provide to us patient-specific information related to the prescription drugs
that our customers prescribe to their patients. We believe that we have
policies and procedures to assure that any confidential medical information we
receive is handled in a manner that complies with all federal and state
confidentiality requirements.

History

Allscripts was initially organized to repackage and sell pharmaceuticals to
physicians for dispensing to their patients. When the current management team
arrived at Allscripts in late 1997, it recognized the need for a new set of
medication management solutions. The communication capabilities offered by the
Internet, paired with our existing relationships with managed care
organizations and with physicians, enabled us to create a new set of tools for
the physician with a first-to-market advantage. Management immediately
refocused Allscripts on information technology products rather than solely
dispensing repackaged pharmaceuticals. In recent years, we have invested
heavily in Internet and client/server software development to capture and
leverage the value of electronic information to all parties in the healthcare
equation: patients, physicians, managed care organizations, pharmacies and
pharmaceutical manufacturers.

40
<PAGE>

Employees

As of January 31, 2000, we employed 303 persons on a full-time basis,
including 128 in customer service and support, 56 in general and
administrative, 66 in sales and marketing, 29 in production and warehousing and
24 in product development. None of our employees is a member of a labor union
or is covered by a collective bargaining agreement. We believe we have
excellent relations with our employees.

Facilities

Our executive offices and state-of-the-art repackaging facilities are
located in Libertyville, Illinois in approximately 80,000 square feet of leased
space under a lease that expires in June 2004. We also lease space for a
separate, smaller repackaging facility in Grayslake, Illinois under a lease
that expires in June 2002. We believe that our facilities are adequate for our
current operations.

Insurance

Since June 1998, we have maintained occurrence-based product liability
insurance in the amount of $31,000,000 per occurrence and $32,000,000 per year
in the aggregate. Prior to that, we were covered by occurrence-based product
liability insurance in the amount of $16,000,000 per occurrence and $17,000,000
per year in the aggregate. While we believe our insurance is adequate for our
needs, we cannot assure you that we will be able to maintain this insurance in
the future or that this insurance will be sufficient to cover all possible
liabilities.

Legal Proceedings

We are involved in litigation incidental to our business from time to time.
We are not currently involved in any litigation in which we believe an adverse
outcome would have a material adverse effect on our business, financial
condition, results of operations or prospects. However, we have been involved
in litigation and are subject to certain claims as described below.

Allscripts is a defendant in over 2,000 multi-defendant lawsuits brought by
over 3,000 claimants involving the manufacture and sale of dexfenfluramine,
fenfluramine and phentermine. The majority of these suits were filed in state
courts in Texas beginning in August 1999. The plaintiffs in these cases claim
injury as a result of ingesting a combination of these weight-loss drugs. In
each of these suits Allscripts is one of many defendants, including
manufacturers and other distributors of these drugs. Allscripts does not
believe it has any significant liability incident to the distribution or
repackaging of these drugs, and it has tendered defense of these lawsuits to
its insurance carrier for handling. In addition, while Allscripts has not yet
conducted a review of all of the Texas suits, since physician dispensing is
generally prohibited in Texas and Allscripts has never distributed these drugs
in Texas, Allscripts believes that it is unlikely that it is responsible for
the distribution of the drugs at issue in many of these cases. The lawsuits are
in various stages of litigation, and it is too early to determine what, if any,
liability Allscripts will have with respect to the claims made in these
lawsuits. If Allscripts' insurance coverage in the amount of $16,000,000 per
occurrence and $17,000,000 per year in the aggregate is inadequate to satisfy
any resulting liability, Allscripts will have to defend these lawsuits and be
responsible for the damages, if any, that Allscripts suffers as a result of
these lawsuits. Allscripts does not believe that the outcome of these lawsuits
will have a material adverse effect on its financial condition, results of
operations or cash flows.

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<PAGE>

MANAGEMENT

Directors, Executive Officers and Key Employees

The following table sets forth the directors, executive officers and
certain key employees of Allscripts, their ages and the positions they held
with Allscripts as of February 15, 2000:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Directors and Executive
Officers:
Glen E. Tullman....... 40 Chairman of the Board and Chief Executive Officer
David B. Mullen....... 49 President, Chief Financial Officer and Director
Joseph E. Carey....... 42 Chief Operating Officer
Steven M. Katz........ 50 Executive Vice President, Sales and Marketing
John G. Cull.......... 38 Senior Vice President, Finance, Treasurer and Secretary
Philip D. Green(1).... 49 Director
M. Fazle Husain(2).... 35 Director
Michael J. Kluger(2).. 43 Director
L. Ben Lytle(1)(2).... 53 Director
Gary M. Stein(1)...... 32 Director
Edward M. Philip...... 34 Director

Other Key Employees:
Donald J. Abramo...... 47 Vice President, Managed Care
Clifford E. Berman.... 40 General Counsel and Senior Vice President, Regulatory
and Legislative Affairs
Stanley A. Crane...... 50 Chief Technology Officer
Karl L. Greiter II.... 38 Vice President, Account Management
James R. Hewitt....... 33 Chief Information Officer
Philip J. Langley..... 33 Senior Vice President
Steven Lefar.......... 33 Senior Vice President, Corporate Development
Donald Q. Paullin..... 56 Vice President, Physician's Interactive Operations
</TABLE>
- --------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.

Glen E. Tullman has been the Chairman of the Board since May 1999 and our
Chief Executive Officer since August 1997. From October 1994 to July 1997, Mr.
Tullman was Chief Executive Officer of Enterprise Systems, Inc., a publicly
traded healthcare information services company providing resource management
solutions to large integrated healthcare networks. From 1983 to 1994, Mr.
Tullman was employed by CCC Information Services Group, Inc., a computer
software company servicing the insurance industry, most recently as President
and Chief Operating Officer.

David B. Mullen has been our President and Chief Financial Officer and a
director since August 1997. From January 1995 to June 1997, Mr. Mullen served
as Chief Financial Officer of Enterprise Systems, Inc. From 1983 to 1995, Mr.
Mullen was employed in various positions by CCC Information Services Group,
Inc., including Vice Chairman, President and Chief Financial Officer. Prior to
that, he was employed by Ernst & Young LLP.

Joseph E. Carey has been our Chief Operating Officer since April 1999. From
September 1998 to April 1999, he served as President and Chief Operating
Officer of Shopping@Home, Inc. Prior to that time, he was Senior Vice President
and General Manager of the Resource Management Group of HBO & Company, a
healthcare software firm. Mr. Carey joined HBO in 1997 with HBO's acquisition
of Enterprise Systems, Inc., where he held the role of President from 1993
until the acquisition.

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<PAGE>

Steven M. Katz has been our Executive Vice President, Sales and Marketing
since September 1997. From December 1994 to July 1997, Mr. Katz served as Chief
Operating Officer of Enterprise Systems, Inc. From December 1993 to November
1994, Mr. Katz was employed by CCC Information Services Group, Inc. as
President of the Insurance Division.

John G. Cull has been our Senior Vice President, Finance, Secretary and
Treasurer since 1995. From 1991 to 1993, Mr. Cull was our assistant controller,
and from 1993 to 1995 he was our controller. From 1986 to 1991, Mr. Cull was
controller of Federated Foods, Inc., a food brokerage company. Prior to joining
Federated Foods, Mr. Cull was employed by Arthur Andersen & Co.

Philip D. Green has been one of our directors since 1992. Mr. Green is a
founding partner of the Washington, D.C. based law firm of Green, Stewart,
Farber & Anderson, P.C., which was formed in 1989. From 1978 through 1989, Mr.
Green was a partner in the Washington, D.C. based law firm of Schwalb,
Donnenfeld, Bray & Silbert, P.C. Mr. Green practices healthcare law and
represents several major teaching hospitals.

M. Fazle Husain has been one of our directors since April 1998. Mr. Husain
is a Principal of Morgan Stanley Dean Witter & Co., an investment banking firm,
where he has been employed since 1991, and is a Managing Member of Morgan
Stanley Venture Partners III, L.L.C., the General Partner of Morgan Stanley
Venture Partners III, L.P., Morgan Stanley Venture Investors III, L.P. and The
Morgan Stanley Venture Partners Entrepreneur Fund, L.P. Mr. Husain was also
employed at Morgan Stanley Dean Witter from 1987 until 1989. Mr. Husain focuses
primarily on investments in the healthcare industry, including healthcare
services, medical devices and healthcare information technology. He serves on
the Boards of Directors of IntegraMed America, Inc. and Cardiac Pathways
Corporation.

Michael J. Kluger has been one of our directors since 1994. He is a
founding partner of Liberty Partners, L.P., whose general partner is Liberty
Capital Partners, Inc., a New York investment management firm, where he has
served as a Managing Director since 1992. For five years prior thereto, Mr.
Kluger was a Director and Senior Vice President of Merrill Lynch Interfunding
Inc., a subsidiary of Merrill Lynch & Co., an investment banking and brokerage
firm. Mr. Kluger is also a managing director of Liberty Capital Partners, Inc.
Mr. Kluger serves on the Board of Directors of Monaco Coach Corporation.

L. Ben Lytle has been one of our directors since March 1999. He is Chairman
of the Board and CEO of Anthem, Inc., one of the largest healthcare management
companies in the United States. Before joining Anthem's predecessor company in
1976, he held positions with LTV Aerospace, Associates Corp. of North America
and American Fletcher National Bank. Mr. Lytle serves on the boards of IPALCO
Enterprises, Inc., an energy company; Central Newspapers, Inc., a media
company; CID Equity Partners, a venture capital firm; and Duke Realty
Investments, Inc., a real estate investment firm.

Gary M. Stein has been one of our directors since April 1998. Mr. Stein is
a Vice President of Morgan Stanley Dean Witter & Co., an investment banking
firm, where he has been employed since 1997 and a Vice President of Morgan
Stanley Venture Partners III, L.L.C. Prior to joining Morgan Stanley Dean
Witter in 1997, Mr. Stein was an Associate at Patricof & Co. Ventures, Inc.,
where he focused on private equity investments in the healthcare industry from
1992 to 1997. Prior to that time, Mr. Stein was a Financial Analyst at Morgan
Stanley & Co., Inc. and Morgan Stanley Australia, Ltd.

Edward M. Philip has been one of our directors since July 1999. Mr. Philip
is Chief Operating Officer of Lycos, Inc., which he has been since December
1996. He has been Chief Financial Officer and Secretary of Lycos, Inc. since
December 1995. From July 1991 to December 1995, Mr. Philip was employed by The
Walt Disney Company, where he served in various finance positions, most
recently as Vice President and Assistant Treasurer. Prior to joining The Walt
Disney Company, Mr. Philip was an investment banker at Salomon Brothers Inc.

43
<PAGE>

Donald J. Abramo has been our Vice President, Managed Care since February
1999. From January 1998 to January 1999, Mr. Abramo served as Regional Vice
President of Managed Care for Caremark International Inc., which has been a
wholly owned subsidiary of MedPartners Inc. since September 1996. From January
1997 to December 1997, Mr. Abramo served as Area Vice President for Caremark
International Inc., and from January 1994 to December 1996, he served as
Caremark's Director of Managed Care Sales. Prior to 1994, he was employed with
Baxter International and Blue Cross/Blue Shield.

Clifford E. Berman has been our General Counsel and Senior Vice President,
Regulatory and Legislative Affairs since July 1998. From September 1996 to July
1998, he served as Vice President of Legal Services for MedPartners, Inc. Prior
to that time, he held various positions at Caremark, Inc. Mr. Berman served on
the Illinois State Board of Pharmacy and was Chairman of its Legislative and
Regulatory Committee from 1994 to 1999. Mr. Berman is the past president of the
Pharmaceutical Care Management Association and currently serves on its Board of
Directors.

Stanley A. Crane has been our Chief Technology Officer since January 2000
and was our Vice President, Internet Services from April 1999 until that time.
From September 1998 to April 1999, he was Chief Technology Officer for
Shopping@Home, Inc. From January 1998 to September 1998, he was Chief
Technology Officer for MaxMiles, Inc., an Internet travel services company.
From August 1995 to January 1998, Mr. Crane was Chief Technology Officer for
Enterprise Systems, Inc., where he led a development team through its
successful migration from DOS-based applications to a system of Windows,
object-oriented, client/server applications. Prior to this, Mr. Crane held a
variety of roles with Lotus, Ashton-Tate and WordStar.

Karl L. Greiter has been our Vice President, Account Management since
September 1998. From November 1995 to August 1998, Mr. Greiter was our
controller. Before joining Allscripts, Mr. Greiter was employed by William G.
Ceas & Co., an investment banking firm.

James Hewitt has been our Chief Information Officer since January 2000.
From August 1995 to January 2000, he was Managing Director of Information
Technology for The Options Clearing Corporation. Prior to 1995 Mr. Hewitt held
the position of Vice President Software Development for Enterprise Systems,
Inc.

Phillip J. Langley has been our Senior Vice President since August 1998.
From 1989 to 1998, Mr. Langley served in a variety of positions for CCC
Information Services Group, Inc., most recently as Group Vice President--North
America Sales and Service.

Steven Lefar has been our Senior Vice President, Corporate Development
since April 1999. From 1996 to 1999, Mr. Lefar served as a Senior Manager in
the healthcare practice of Andersen Consulting, where he helped develop and
implement Covation, a joint venture that delivers outsourcing and e-commerce
services to healthcare providers. Prior to that, he was employed with Caremark
and APM, a healthcare consulting firm.

Donald Q. Paullin has been our Vice President, Physician's Interactive
Operations since July 1999, when Allscripts acquired MedSmart, which Mr.
Paullin founded in 1995. Prior to founding MedSmart, Mr. Paullin was the
President of Medicode Marketing Corporation, a medical publishing company.

Election of Directors

Eight directors serve on our Board of Directors. The directors are divided
into three classes, with each class as nearly equal in number as possible. Upon
the expiration of the term of each class of directors, directors comprising
that class will be elected for a three-year term at the annual meeting of
stockholders in the year in which their term expires. Messrs. Green, Lytle and
Philip will serve in the class

44
<PAGE>

with a term that expires on the date of the annual meeting of stockholders to
be held in 2000. Messrs. Kluger, Mullen and Stein will serve in the class with
a term that expires on the date of the annual meeting of stockholders to be
held in 2001. Messrs. Husain and Tullman will serve in the class with a term
that expires on the date of the annual meeting of stockholders to be held in
2002. All officers serve at the pleasure of the Board of Directors. There are
no family relationships among any of our directors or executive officers.

Committees of the Board of Directors

The Board of Directors has established two standing committees: the Audit
Committee and the Compensation Committee. The Audit Committee recommends the
appointment of auditors and oversees our accounting and audit functions. The
Compensation Committee determines executive officers' salaries, bonuses and
other compensation and administers the Amended and Restated 1993 Stock
Incentive Plan.

Director Compensation

Our independent directors receive a fee of $1,000 for each meeting of the
Board of Directors that they attend. We also reimburse them for their travel
expenses. Under our Amended and Restated 1993 Stock Incentive Plan, these
directors are eligible to receive stock option grants at the discretion of the
Board of Directors or the Compensation Committee. In 1999, Mr. Philip received
an option to purchase 40,000 shares of our common stock at a per share exercise
price of $12.6875. The option vests one-third per year and becomes fully vested
in 2002.

Pharmacy Advisory Board

Because of the important role pharmacy plays in medication management, we
have assembled a Pharmacy Advisory Board to consult on a variety of topics. The
Advisory Board will provide guidance to Allscripts in a number of key areas,
including the design and development of products and services, trends in
pharmacy and pharmaceutical care, and the planning and conducting of
pharmacoeconomic and medical research on issues such as electronic prescribing,
compliance programs and drug education.

J. Lyle Bootman, Ph.D., is Dean and Professor of the University of Arizona
College of Pharmacy and is Founding and Executive Director of the University of
Arizona Center for Health Outcomes and PharmacoEconomic (HOPE) Research. Dr.
Bootman has authored over 200 research articles and has been an invited speaker
at more than 300 healthcare meetings. He has published several books, including
"Principles of Pharmacoeconomics." Dr. Bootman was recently named to the
Institute of Medicine and serves as the current President of the American
Pharmaceutical Association.

James T. Doluisio, Ph.D., is the Hoeschst Roussel Professor of Pharmacy at
the University of Texas at Austin, where he also served as the Dean of the
College of Pharmacy from 1973 through 1998. Dr. Doluisio has written more than
90 papers on bioequivalency, biopharmaceutics, pharmacokinetics and on various
other pharmacy topics for national and international journals and textbooks.
Dr. Doluisio also served as President of the American Pharmaceutical
Association in 1982 and President of the American Association of Pharmaceutical
Scientists in 1988. From 1990 to 1995, he chaired the Board of the United
States Pharmacopeial Convention and recently served as the Inaugural Chairman
of Pharmaceutical Care Management Association's Deans Advisory Council. He has
served as a consultant to the FDA, as a member of the U.S. Office of Technology
Assessment Drug Bioequivalence Study Panel and as a consultant in Pharmacy to
the Surgeon General of the U.S. Air Force.

Robert C. Johnson, Ph.D., is President of R.C. Johnson Associates, a
healthcare and association management consulting firm in Arizona, and he is
Professor of Pharmacy Administration and Executive Director of the Center for
the Advancement of Pharmacy Practice at Midwestern University's College of
Pharmacy. Mr. Johnson is a past Chairman and Chief Executive Officer of PCS
Health Systems, the

45
<PAGE>

nation's largest pharmacy benefit managers, and also served as Corporate Vice
President for Government Affairs for the McKesson Foundation. He served as
Chief Executive Officer of the California Pharmacists Association for 20 years,
and he is a past president of the American Pharmaceutical Association.

Ronald P. Jordan, R.Ph., is a registered pharmacist, President of HCaliber
Consulting of East Greenwich, Rhode Island, an international healthcare
informatics firm, and Senior Vice President of Informatics at Hospice Pharmacia
L.L.C. of Philadelphia, Pennsylvania. Mr. Jordan is immediate past president of
the American Pharmaceutical Association and served as a member of its board of
trustees from 1994 through 1997. He served as a Trustee of the National Council
for Prescription Drug Programs, where he co-chaired the Standardization
Committee for over five years. Most recently, Mr. Jordan was appointed as one
of eleven members of the Health Care Financing Administration Medicare Coverage
Advisory Commission, and he was appointed to serve on the Rhode Island
Governor's Advisory Council on Health.

Delbert D. Konnor, PharmMS, is President and Chief Executive Officer of the
Pharmaceutical Care Management Association, a trade association representing
the major companies in the managed care pharmacy industry. In addition, he is
Adjunct Professor of Pharmaceutical Administration at Duquesne University and
Ohio Northern University. Mr. Konnor previously served as Vice President of
Professional Services for AARP Pharmacy Service. His key government pharmacy
positions have included Manager of the Voluntary Compliance Program for the
Drug Enforcement Administration and the Director of the first White House
Conference on Prescription Drug Misuse, Abuse and Diversion.

Debi Reissman, Pharm.D. is President of Rxperts Managed Care Consulting, a
consulting firm in Santa Ana, California that specializes in pharmacy benefit
consulting to physicians and the managed care industry. She is also an
Assistant Clinical Professor at the University of Southern California School of
Pharmacy. Dr. Reissman consults in the area of pharmacy benefit design and
prescription utilization management and has more than 19 years of experience in
the managed healthcare industry. She has held a variety of pharmacy management
positions, including Chief Executive Officer of Prescription Solutions, the
pharmacy benefit subsidiary of PacifiCare Health Systems. In addition to her
work experience, Dr. Reissman has been actively involved in national pharmacy
organizations, including the Academy of Managed Care Pharmacy where she chaired
the finance committee and served as treasurer for four years.

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<PAGE>

Executive Compensation

This table summarizes the before-tax compensation for our named executive
officers for the fiscal years ended December 31, 1999 and 1998. Named executive
officers include the Chief Executive Officer and the other four executive
officers of Allscripts whose salary and bonus earned during 1999 exceeded
$100,000. Amounts disclosed as "all other compensation" consist of our matching
contributions under our 401(k) plan.

<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
------------------ ------------
Securities
Name and Principal Salary Underlying All Other
Position Year ($) Bonus ($) Options (#) Compensation ($)
------------------ ---- -------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Glen E. Tullman......... 1999 $225,000 $12,500 -- $ 996
1998 225,000 548,083 498
Chairman and Chief --
Executive Officer
David B. Mullen......... 1999 225,000 12,500 -- 1,000
1998 225,000 548,083 1,000
President and Chief --
Financial Officer
Steven M. Katz ......... 1999 215,000 12,500 -- --
1998 215,000 382,841 --
Executive Vice --
President, Sales and
Marketing
John G. Cull ........... 1999 141,000 35,000 4,166 1,000
1998 140,000 19,164 1,000
Senior Vice President,
Finance, Treasurer --
and Secretary
Joseph E. Carey......... 1999 134,583 37,500(1) 69,166 --
1998 -- -- --
Chief Operating Officer --
</TABLE>
Summary Compensation Table

- --------

(1) Includes a signing bonus of $25,000 awarded in April 1999 pursuant to the
terms of Mr. Carey's employment agreement.

Option Grants in Last Fiscal Year

This table gives information relating to option grants to the named
executive officers during the year ended December 31, 1999. The options were
granted under our Amended and Restated 1993 Stock Incentive Plan. The potential
realizable value is calculated based on the term of the option at its time of
grant, 10 years. The calculation assumes that the fair market value on the date
of grant appreciates at the indicated rate compounded annually for the entire
term of the option and that the option is exercised at the exercise price and
sold on the last day of its term at the appreciated price. Stock price
appreciation of 0%, 5% and 10% is assumed pursuant to the rules of the
Securities and Exchange Commission. Based on the closing price of the common
stock on February 17, 2000 of $49.9375 per share, the actual price appreciation
may be substantially greater than that assumed under these rules. We cannot
assure you that the actual stock price will appreciate over the 10-year option
term at the assumed levels or at any other defined level.

<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term
--------------------------------------------------------- ----------------------------
Percent
of Total
Number of Options
Securities Granted
Underlying in Exercise Fair Market
Options Fiscal Price Value at Grant Expiration
Name Granted (#) 1999 (%) ($/Share) Date ($/Share) Date 0% 5% 10%
---- ----------- -------- --------- -------------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Glen E. Tullman......... -- -- $-- $-- -- $ -- $ -- $ --
David B. Mullen......... -- -- -- -- -- -- -- --
Steven M. Katz.......... -- -- -- -- -- -- -- --
John G. Cull............ 4,166(1) 0.4% 3.00 9.00 3/31/09 24,996 51,321 93,682
Joseph E. Carey......... 69,166(2) 6.7 3.00 9.00 3/31/09 414,996 852,035 1,555,287
</TABLE>
- --------

(1) The option vests 25% on each of March 31, 2000, 2001, 2002 and 2003.

(2) The option vested 25% on October 11, 1999 and vests 25% on each of March
31, 2000, 2001 and 2002.

47
<PAGE>

Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

This table provides information regarding the exercise of options during
fiscal 1999 by the named executive officers. The value of unexercised in-the-
money options at fiscal year end is calculated using the difference between the
option exercise price and $44.00 (the last reported market price of Allscripts
common stock on December 31, 1999) multiplied by the number of shares
underlying the option. An option is in-the-money if the fair market value of
the common stock subject to the option is greater than the exercise price.

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Shares Options at Fiscal the-Money Options at
Acquired on Value Year End (#) Fiscal Year End ($)
Exercise Realized ------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Glen E. Tullman......... -- $ -- 130,148 146,454 $5,718,703 $6,435,189
David B. Mullen......... 262,683 2,348,386(1) 137,703 142,129 6,050,670 6,245,148
Steven M. Katz.......... 185,053 1,654,374(1) 94,160 100,794 4,137,390 4,428,888
John G. Cull............ 12,498 173,465 84,214 22,448 3,576,374 794,403
Joseph E. Carey......... -- -- 17,292 51,874 708,972 2,126,834
</TABLE>
- --------
(1) Based on the fair market value on the date of exercise, which has been
deemed to be $9.00 per share.

Employment and Other Agreements

Employment Agreements

We have entered into employment agreements with each of David B. Mullen and
Glen E. Tullman effective August 1, 1997, with Steven M. Katz effective
September 2, 1997 and with Joseph E. Carey effective August 2, 1999. Each
agreement has an initial term ending December 31, 2000 and renews for
consecutive one-year terms unless either party gives 30 days' notice prior to
the expiration of any term. Messrs. Mullen and Tullman are each paid an annual
salary of $225,000 and are each entitled to an annual bonus as determined by
the Board of Directors or the Compensation Committee. Mr. Katz is paid an
annual salary of $215,000, and Mr. Carey is paid an annual salary of $190,000
and was paid a signing bonus of $25,000. Messrs. Katz and Carey are each
entitled to an annual bonus, contingent upon the attainment of certain
objectives, as determined by the Chief Executive Officer in consultation with
the Board of Directors or the Compensation Committee. The agreements also
provide that each of Messrs. Mullen, Tullman, Katz and Carey will not compete
with us during the term of his employment and for one year thereafter. If we
terminate any of Messrs. Mullen, Tullman, Katz or Carey without Cause or if any
of them terminates his employment For Good Reason, as each of those terms is
defined in the agreements, he will be entitled to 12 months' salary as
severance, as well as any salary that was accrued but not yet paid as of the
termination date, the unpaid performance bonus, if any, for the calendar year
preceding the termination date and any performance bonus for the calendar year
in which the termination date occurs that would have been payable had there
been no termination. The amount of these performance bonuses is to be
determined in the manner in which it would have been determined had there been
no termination.

Termination of Employment and Change in Control Arrangements

We have entered into stock option agreements with each of Messrs. Tullman,
Mullen and Katz pursuant to their employment agreements granting them options
to purchase shares of our common stock

48
<PAGE>

as follows: Mr. Tullman, 548,083 shares; Mr. Mullen, 548,083 shares; and Mr.
Katz, 382,841 shares. Under the option agreements, in the event of a Change of
Control, as defined in the stock option agreements, vesting of the options will
accelerate so that the unvested portion of the options will vest immediately.
The option agreements also provide for accelerated vesting of a portion of the
options in the event of termination of employment without Cause, For Good
Reason or because of death or disability, as each of those terms is defined in
the employment agreements. In addition, we have entered into a stock option
agreement with Mr. Carey granting him options to purchase 69,166 shares of
common stock. Under this option agreement, in the event of a Change in Control,
as defined in the stock option agreement, vesting of the options will
accelerate so that the unvested portion of the options will vest immediately.

Under an agreement entered into between us and John G. Cull, if Mr. Cull is
discharged for any reason other than for Cause, as defined in the agreement,
Mr. Cull will be entitled to monthly payments equal to his then in-effect
monthly salary together with a pro rata bonus amount and a continuation of
health insurance benefits, for a period of 12 months. If, within six months of
a Change in Control of Allscripts, as defined in the agreement, Mr. Cull is
discharged by Allscripts other than for Cause or voluntarily terminates his
employment following a change in his position that materially reduces his level
of responsibilities or a material reduction in his overall level of
compensation, Mr. Cull will be entitled to monthly payments equal to his then
in-effect monthly salary for a period of 12 months together with a pro rata
bonus amount and a continuation of health insurance benefits. In addition, the
agreement provides that all existing stock options owned by Mr. Cull will
immediately vest upon the occurrence of the same events that require us to make
severance payments to him following a Change in Control. In addition, Mr. Cull
has agreed not to compete with us for a period of 12 months following the
termination of his employment.

Employee Benefit Plans

Amended and Restated 1993 Stock Incentive Plan

In May and June 1999, our Board of Directors and shareholders adopted and
approved our Amended and Restated 1993 Stock Incentive Plan, which, among other
things, increased the shares authorized for issuance under the plan by
1,300,000. The plan authorizes the grant of options to purchase up to an
aggregate of 4,393,489 shares. The plan provides that the number of shares of
common stock underlying stock incentives granted under the plan to any
individual in any twelve-month period may not exceed 3,000,000. The plan is
designed to grant stock incentives, including qualified and nonqualified
options to purchase common stock and stock appreciation rights, to key
individuals who perform services for us or on our behalf, such as employees,
officers, eligible directors, as defined in the plan, consultants and agents of
Allscripts. The purpose of the plan is to enable us to attract, retain and
motivate key individuals by providing them the opportunity to obtain an equity
interest in Allscripts. The Compensation Committee of our Board of Directors
administers the plan and determines the per share exercise price at the time
each stock incentive is granted; provided that in the case of qualified
incentive stock options, the exercise price is not less than fair market value
on the date of grant. The plan provides that if there is a change in our common
stock through a merger, consolidation, reorganization, recapitalization or
otherwise, or if there is a dividend on the common stock, payable in common
stock, or if there is a stock split, combination or other change in our issued
common stock, the common stock available under the plan and the common stock
subject to then-existing stock incentives shall be increased or decreased
proportionately. In 1998, we recorded unearned compensation of approximately
$407,000 in connection with grants under the plan, and in 1999, we recorded
approximately $1,850,000 of additional unearned compensation.

As of February 17, 2000, there were options outstanding under the plan to
purchase an aggregate of 2,241,460 shares of common stock, 646,049 of which
were currently exercisable. The weighted average per share exercise price for
all of these options is $4.51.

49
<PAGE>

401(k) Plan

We have adopted a 401(k) retirement savings plan. This plan is available to
all employees who are at least 21 years old and who have been employed by us
for at least one year. An employee may contribute, on a pretax basis, up to the
maximum percent of the employee's total annual income from us permitted under
the Internal Revenue Code. Under the terms of the 401(k) plan, we match
employee contributions at 25% of the first 10% of eligible compensation
contributed by the employee to the plan. For "highly compensated employees" as
defined under the Internal Revenue Code, our matching percentage is 10% of the
first 10% of eligible compensation contributed by the employee. Contributions
are allocated to each employee's individual account and are, at the employee's
election, invested in one, all, or some combination of four investment funds.
Employee contributions are fully vested and non-forfeitable. Employees become
100% vested in our contributions after a period of three years.

Compensation Committee Interlocks and Insider Participation

The members of the Compensation Committee of our Board of Directors are
Messrs. Husain, Kluger and Lytle. None of these persons has ever been an
officer or employee of Allscripts or any of its subsidiaries. See "Certain
Relationships and Related Party Transactions--Series I and J Redeemable
Preferred Stock Private Placement," "--Redeemable Preferred Stock Redemptions,"
"--Certain Business Relationships" and "Description of Capital Stock--
Registration Rights."

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Our policy is that all transactions between us and our executive officers,
directors and principal stockholders be on terms no less favorable to us than
we could obtain from unaffiliated third parties or else be approved by our
disinterested directors.

Shopping@Home Acquisition

In June 1999, we acquired substantially all of the assets of Shopping@Home,
Inc. in exchange for a promissory note in the principal amount of $650,000.
This note was repaid in August 1999. Messrs. Tullman and Carey are principal
shareholders of Shopping@Home.

Series I and J Redeemable Preferred Stock Private Placement

In April 1998, we sold 1,199,770 shares of Series I redeemable preferred
stock and 4,118,324 shares of common stock for an aggregate purchase price of
$8,000,000 to Morgan Stanley Venture Partners III, L.P., Morgan Stanley Venture
Investors III, L.P. and The Morgan Stanley Venture Partners Entrepreneur Fund,
L.P. Messrs. Husain and Stein, two of our directors, are affiliates of each of
these Morgan Stanley funds. We also sold 37,493 shares of Series I preferred
stock and 128,697 shares of common stock to Mr. Tullman for a purchase price of
$250,000, 14,997 shares of Series I preferred stock and 51,479 shares of common
stock to Mr. Mullen for a purchase price of $100,000, 3,749 shares of Series I
preferred stock and 12,869 shares of common stock to Mr. Carey for a purchase
price of $25,000, 4,499 shares of Series I preferred stock and 15,443 shares of
common stock to James A. Rosenblum, a former executive officer of Allscripts,
for a purchase price of $30,000, and 13,497 shares of Series I preferred stock
and 46,331 shares of common stock to Michael E. Cahr, a former director of
Allscripts, for a purchase price of $90,000.

In connection with our sale of Series I preferred stock, we also issued
543,870 shares of Series J redeemable preferred stock and warrants to acquire
an aggregate of 696,833 shares of common stock at a per share exercise price of
$0.06 to Allstate Insurance Company. John M. Goense, a former director of
Allscripts, was, at the time, a Managing Director of Allstate Private Equity, a
division of the Investment

50
<PAGE>

Department of Allstate Insurance Company. We issued the shares and warrants in
exchange for debentures of Allscripts held by Allstate in the principal amount
of $3,382,704 plus accrued interest of $131,785, which Allstate purchased from
us in April 1996 for $3,000,000, and Allstate's agreement to modify the
redemption and dividend provisions of the 440,968 shares of Series H preferred
stock held by Allstate. In the same transaction, we issued 273,748 shares of
Series J preferred stock and warrants to purchase an aggregate of 659,669
shares of common stock at a per share exercise price of $0.06 to Liberty
Partners Holdings 6, L.L.C. and Liberty Investment Partnership #6, of each of
which Mr. Kluger, one of our directors, is a managing director, and to the
State Board of Administration of Florida, which has entered into an investment
management contract with Liberty Capital Partners Inc., of which Mr. Kluger is
a managing director. We issued the shares and warrants in exchange for
debentures of Allscripts held by the State Board of Administration of Florida
in the principal amount of $1,691,352 plus accrued interest of $65,892, which
the State Board of Administration of Florida purchased from us in April 1996
for $1,500,000, and debentures held by Liberty Investment Partnership #6 in the
principal amount of $11,276 plus accrued interest of $439, as well as Liberty
Partners Holdings 6, L.L.C.'s agreement to modify the redemption and dividend
provisions of the 680,892 shares of Series H preferred stock held by it. In
connection with this financing, we also entered into a Right of First Offer and
Co-Sale Agreement with Allstate, the Liberty funds, the Morgan Stanley funds
and Messrs. Tullman, Mullen and Cahr.

Redeemable Preferred Stock Redemptions

We used a portion of the net proceeds of our initial public offering to
redeem shares of preferred stock held by some of our affiliates according to
their redemption terms as follows, including accrued dividends:

. $10,468,581 to redeem 815,594 shares of Series H preferred stock and
439,883 shares of Series J preferred stock held by Liberty Partners
Holdings 6, L.L.C.;

. $12,473,513 to redeem 217,459 shares of Series H preferred stock,
1,199,770 shares of Series I preferred stock and 268,204 shares of Series
J preferred stock held collectively by the Morgan Stanley Venture
Partners III, L.P., Morgan Stanley Venture Investors III, L.P. and The
Morgan Stanley Venture Partners Entrepreneur Fund, L.P.;

. $605,892 to redeem 18,929 shares of Series H preferred stock, 37,493
shares of Series I preferred stock and 23,345 shares of Series J
preferred stock held by Mr. Tullman;

. $245,780 to redeem 7,764 shares of Series H preferred stock, 14,997
shares of Series I preferred stock and 9,575 shares of Series J preferred
stock held by Mr. Mullen;

. $14,179 to redeem 796 shares of Series H preferred stock and 982 shares
of Series J preferred stock held by Mr. Cull;

. $189,992 to redeem 9,159 shares of Series H preferred stock, 3,749 shares
of Series I preferred stock and 11,295 shares of Series J preferred stock
held by Mr. Carey;

. $46,430 to redeem 796 shares of Series H preferred stock, 4,499 shares of
Series I preferred stock and 982 shares of Series J preferred stock held
by Mr. Rosenblum, a former executive officer of Allscripts; and

. $49,642 to redeem 2,787 shares of Series H preferred stock and 3,438
shares of Series J preferred stock held by Mr. Green.

Certain Business Relationships

In each of the last three fiscal years, we retained the law firm of Green,
Stewart, Farber & Anderson, P.C., of which Mr. Green, one of our directors, is
a partner. We paid fees to Mr. Green's law firm of approximately $55,000 in
1997, $36,000 in 1998 and $130,000 in 1999.

51
<PAGE>

From June 1997 through March 1999, we provided pharmacy benefit management
services for Anthem, Inc. Mr. Lytle, one of our directors, is Chairman of the
Board, President and Chief Executive Officer of Anthem. Revenue from Anthem was
approximately $1,580,000 in 1997, approximately $2,982,000 in 1998 and
approximately $375,000 in 1999 for these services.

Registration Rights Agreement

See "Description of Capital Stock--Registration Rights."

PRINCIPAL AND SELLING STOCKHOLDERS

The following table provides information known to us with respect to the
beneficial ownership of our common stock as of January 31, 2000 and as adjusted
to reflect the sale of the shares offered by this prospectus by:

. each stockholder known by us to own beneficially more than 5% of the
common stock;

. each director;

. our Chief Executive Officer and our other named executive officers; and

. all directors and executive officers as a group.

Beneficial ownership is a technical term broadly defined by the SEC to mean
more than ownership in the usual sense. In general, beneficial ownership
includes any shares that the holder can vote or transfer and stock options and
warrants that are exercisable currently or become exercisable within 60 days.
These shares are considered to be outstanding for the purpose of calculating
the percentage of outstanding Allscripts common stock owned by a particular
stockholder, but are not considered to be outstanding for the purpose of
calculating the percentage ownership of any other person. Percentage of
ownership is based on 24,528,632 shares outstanding as of January 31, 2000 and
25,437,345 shares outstanding after this offering. Except as otherwise noted,
to our knowledge, the stockholders named in this table have sole voting and
investment power for all shares shown as beneficially owned by them.

<TABLE>
<CAPTION>
Shares
Shares Beneficially Owned
Beneficially Owned Number of After the Sale of
Prior to this Shares Shares Covered by
Offering Covered by this Prospectus
------------------ this ------------------
Number Percent Prospectus Number Percent
---------- ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
Glen E. Tullman (1).......... 730,980 3.0% -- 730,980 2.9%
David B. Mullen (2).......... 531,425 2.2 -- 531,425 2.1
Steven M. Katz (3)........... 279,213 1.1 -- 279,213 1.1
John G. Cull (4)............. 105,939 * -- 105,939 *
Joseph E. Carey (5).......... 132,646 * -- 132,646 *
Philip D. Green (6).......... 110,893 * -- 110,893 *
M. Fazle Husain (7).......... 6,062,063 24.7 808,000 5,254,063 20.7
Michael J. Kluger (8)........ 3,748,170 15.3 500,000 3,248,170 12.8
L. Ben Lytle (9)............. 8,333 * -- 8,333 *
Edward M. Philip............. -- -- -- -- --
Gary M. Stein (7)............ 6,062,063 24.7 808,000 5,254,063 20.7
Morgan Stanley Venture
Partners III, L.P.(7)....... 5,320,682 21.7 709,183 4,611,499 18.1
Morgan Stanley Venture
Investors III, L.P.(7)...... 511,028 2.1 68,114 442,914 1.7
The Morgan Stanley Venture
Partners Entrepreneur Fund,
L.P.(1) (7)................. 230,353 * 30,703 199,650 *
Liberty Partners Holdings 6,
L.L.C. (8).................. 3,748,170 15.3 500,000 3,248,170 12.8
All directors and executive
officers as a group
(11 persons) (10)........... 11,709,662 46.7 1,308,000 10,401,662 40.0
</TABLE>
- --------
*Less than 1%.

52
<PAGE>

(1) Includes 130,148 shares issuable upon exercise of options that will be
exercisable within 60 days. Mr. Tullman is a limited partner in The Morgan
Stanley Venture Partners Entrepreneur Fund, L.P. and has an approximately
2.5% interest therein. Such interest does not constitute beneficial
ownership of any of the shares owned by this entity.
(2) Includes 137,703 shares issuable upon exercise of options that will be
exercisable within 60 days, and 4,915 shares issuable upon exercise of
warrants that are currently exercisable.
(3) Includes 94,160 shares issuable upon exercise of options that will be
exercisable within 60 days.

(4) Includes 86,036 shares issuable upon exercise of options that will be
exercisable within 60 days.

(5) Includes 34,584 shares issuable upon exercise of options that will be
exercisable within 60 days.
(6) Includes 68,304 shares issuable upon exercise of options that will be
exercisable within 60 days, and 6,168 shares issuable upon exercise of
warrants that are currently exercisable.

(7) Mr. Husain is a Managing Member of Morgan Stanley Venture Partners III,
L.L.C., which is the General Partner of each of Morgan Stanley Venture
Partners III, L.P., Morgan Stanley Venture Investors III, L.P. and The
Morgan Stanley Venture Partners Entrepreneur Fund, L.P. Mr. Stein is a Vice
President of Morgan Stanley Venture Partners III, L.L.C. Each of Messrs.
Husain and Stein disclaim beneficial ownership of the shares held by these
entities, except to the extent of his proportionate interest therein. The
address for Messrs. Husain and Stein and these entities is c/o Morgan
Stanley Dean Witter Venture Partners, 1221 Avenue of the Americas, New
York, New York 10020.
(8) Mr. Kluger disclaims beneficial ownership of the shares held by Liberty
Partners Holdings 6, L.L.C., except to the extent of his proportionate
interest therein. The address for Mr. Kluger and Liberty Partners Holdings
6, L.L.C. is c/o Liberty Partners, L.P., 1177 Avenue of the Americas, New
York, New York 10036.
(9) Consists of 8,333 shares issuable upon exercise of options that will be
exercisable within 60 days.
(10) Includes the shares described in Notes 1 through 9.

53
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Our Certificate of Incorporation provides that our authorized capital stock
consists of 75,000,000 shares of common stock, $0.01 par value, and 1,000,000
shares of preferred stock, $0.01 par value. As of February 18, 2000, there were
24,745,345 shares of common stock outstanding and no shares of preferred stock
outstanding. As of that date, there were 230 holders of record of common stock.
All shares of common stock are, and the common stock being sold in this
offering will be, when issued, fully paid and non-assessable.

Common Stock

Holders of common stock are entitled to one vote for each share held on all
matters subject to a vote of stockholders, subject to the rights of holders of
any outstanding preferred stock, and do not have cumulative voting rights.
Accordingly, holders of a majority of the shares of common stock entitled to
vote in any election of directors may elect all of the directors standing for
election, subject to the rights of holders of any outstanding preferred stock.
Holders of common stock are entitled to receive ratably any dividends that the
Board of Directors may declare out of funds legally available therefor, subject
to any preferential dividend rights of outstanding preferred stock. Upon the
liquidation, dissolution or winding up of Allscripts, the holders of common
stock would be entitled to receive ratably the net assets of Allscripts
available after the payment of all debts and other liabilities and subject to
the prior rights of holders of any outstanding preferred stock. Holders of
common stock have no preemptive, subscription, redemption or conversion rights.

Preferred Stock

Under our Certificate of Incorporation, we are authorized to issue
1,000,000 shares of preferred stock, which may be issued from time to time in
one or more series upon authorization by the Board of Directors. The Board of
Directors, without further approval of the stockholders, is authorized to fix
the number of shares constituting any series, as well as the dividend rights
and terms, conversion rights and terms, voting rights and terms, redemption
rights and terms, liquidation preferences and any other rights, preferences,
privileges and restrictions applicable to each series of preferred stock. The
issuance of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could also adversely affect
the voting power of the holders of common stock. The issuance of preferred
stock could also, under some circumstances, have the effect of making it more
difficult for a third party to acquire, or discouraging a third party from
acquiring, a majority of our outstanding voting stock or otherwise adversely
affect the market price of our common stock. We are not aware of any plans by a
third party to seek control of Allscripts, and we have no current plans to
issue any preferred stock.

Warrants

As of February 17, 2000, we had warrants outstanding to purchase an
aggregate of 57,133 shares of common stock at an average weighted exercise
price of $1.76 per share.

Registration Rights

Liberty Partners Holdings 6, L.L.C., Morgan Stanley Venture Investors III,
L.P., Morgan Stanley Venture Partners III, L.P. and The Morgan Stanley Venture
Partners Entrepreneur Fund, L.P., which will collectively hold 8,502,233 shares
of common stock after this offering, are entitled to registration rights with
respect to these shares. Under our Registration Agreement, Morgan Stanley
Venture Partners III, L.P., Morgan Stanley Venture Investors III, L.P. and The
Morgan Stanley Venture Partners Entrepreneur Fund, L.P., collectively, on the
one hand, and Liberty Partners Holdings 6, L.L.C., on the other hand, is each
entitled to require us to register their shares of common stock three times,
but not more than once in any

54
<PAGE>

six-month period. In addition, if we propose or are required to register any of
our common stock, either for our own account or for the account of other of our
stockholders, we are required to notify the holders described above, and
subject to certain limitations, to include in such registration all of the
common stock requested to be included by those holders. We are obligated to
bear the expenses, other than underwriting commissions, of the first
registration required by Liberty or the Morgan Stanley parties, and of all
incidental registrations. Any exercise of these registration rights may hinder
our efforts to arrange future financings and have an adverse effect on the
market price of our common stock.

Certain Limited Liability, Indemnification and Anti-takeover Provisions

Indemnification and Limitation of Liability

Our Certificate of Incorporation and By-laws provide that we shall, with
some limitations, indemnify our directors and officers against expenses,
including attorneys' fees, judgments, fines and certain settlements, actually
and reasonably incurred by them in connection with any suit or proceeding to
which they are a party so long as they acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of
Allscripts. This indemnification also applies to a criminal action or
proceeding, so long as the director or officer had no reasonable cause to
believe their conduct to have been unlawful.

Section 102 of the Delaware General Corporation Law permits a Delaware
corporation to include in its certificate of incorporation a provision
eliminating or limiting a director's liability to a corporation or its
stockholders for monetary damages for breaches of fiduciary duty. Delaware
General Corporation Law Section 102 provides, however, that liability for
breaches of the duty of loyalty, acts or omissions not in good faith or
involving intentional misconduct, or knowing violation of the law, and the
unlawful purchase or redemption of stock or payment of unlawful dividends or
the receipt of improper personal benefits cannot be eliminated or limited in
this manner. Our Certificate of Incorporation includes a provision that
eliminates, to the fullest extent permitted, director liability for monetary
damages for breaches of fiduciary duty.

Section 203 of Delaware General Corporation Law

Section 203 of the Delaware General Corporation Law prohibits certain
transactions between a Delaware corporation and an "interested stockholder,"
which is defined as a person who, together with any affiliates or associates,
beneficially owns, directly or indirectly, 15% or more of the outstanding
voting shares of a Delaware corporation. This provision prohibits certain
business combinations between an interested stockholder and a corporation for a
period of three years after the date the interested stockholder becomes an
interested stockholder, unless:

. the business combination is approved by the corporation's board of
directors prior to the date the interested stockholder becomes an
interested stockholder;

. the interested stockholder acquired at least 85% of the voting stock of
the corporation (other than stock held by directors who are also officers
or by certain employee stock plans) in the transaction in which it
becomes an interested stockholder; or

. the business combination is approved by a majority of the board of
directors and by the affirmative vote of 66 2/3% of the outstanding
voting stock that is not owned by the interested stockholder.

For this purpose, business combinations include mergers, consolidations,
sales or other dispositions of assets having an aggregate value in excess of
10% of the consolidated assets of the corporation, and certain transactions
that would increase the interested stockholder's proportionate share ownership
in the corporation.

55
<PAGE>

Special Meetings of Stockholders; No Stockholder Action By Written Consent

Our Certificate of Incorporation provides that special meetings of our
stockholders may be called only by a majority of the Board of Directors, the
Chairman or the President. In addition, the Certificate of Incorporation
provides that our stockholders may only take actions at a duly called annual or
special meeting of stockholders and may not take action by written consent.

Advance Notice Requirements for Stockholder Proposals and Nomination of
Directors

Our By-laws provide that stockholders seeking to bring business before, or
nominate directors at, any annual meeting of stockholders, must provide timely
notice in writing. To be timely, a stockholder's notice must be given in
writing to the Secretary of Allscripts not less than 120 days prior to the
meeting. The By-laws also specify requirements for a stockholder's notice to be
in proper written form.

Classified Board of Directors

The Certificate of Incorporation and By-Laws provide that the Board of
Directors is divided into three classes of directors serving staggered three-
year terms. As a result, one-third of our Board of Directors will be elected
each year. See "Management--Election of Directors."

Number of Directors; Removal; Vacancies

The By-Laws provide that we have at least three directors, with the exact
number fixed by the Board of Directors. Vacancies on the Board of Directors may
be filled only by the affirmative vote of the remaining directors then in
office. The Certificate of Incorporation provides that directors may be removed
only for cause and only by the holders of at least 80% of the outstanding
shares of stock entitled to vote generally in the election of directors, voting
together as a single class.

Consideration of Constituencies with Respect to Acquisitions

The Certificate of Incorporation provides that in determining whether an
acquisition proposal is in the best interests of Allscripts and its
stockholders, our Board of Directors may, to the extent permitted by law,
consider all factors it deems relevant, including the effects of the
acquisition upon employees, suppliers, customers and the communities in which
we are located.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is LaSalle Bank N.A.

56
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

We will have 25,437,345 shares of common stock outstanding after this
offering, 25,737,345 shares if the underwriters' over-allotment option is
exercised in full, assuming no exercise of options or warrants after February
17, 2000. All of the 2,000,000 shares sold in this offering, as well as the
7,000,000 shares sold in our initial public offering and 11,552,872 shares
released from lock-up agreements that were entered into in connection with our
initial public offering, on or about January 20, 2000, will be freely tradeable
without restriction under the Securities Act by persons other than our
"affiliates" as that term is defined in Rule 144 under the Securities Act
(whose sales would be subject to certain limitations and restrictions described
below). The following table summarizes the shares of our common stock eligible
for future sale over various time periods:

<TABLE>
<CAPTION>
Shares
Relevant Dates Eligible for Sale Comment
-------------- ----------------- -------
<S> <C> <C>
July 23, 1999........... 8,365,329 Initial public offering.

October 21, 1999........ 667,467 Shares salable under Rule 144 or Rule 701
that were not subject to initial public
offering lock-up.

January 20, 2000........ 11,552,872 Initial public offering lock up released.

Upon effectiveness...... 2,000,000 Shares sold in this offering.

90 days after effective 9,171,401
date................... Lock up released.
</TABLE>

All of our executive officers, directors, key employees, the selling
stockholders and one other stockholder have agreed to a "lock up" at the
request of the underwriters. In the aggregate, this group holds 9,569,085
shares of our common stock, after giving effect to this offering, including
594,776 shares issuable upon exercise of outstanding vested options and
warrants. Under the lock up, they cannot sell or otherwise dispose of any of
our common stock in the public market for a period of 90 days after the date of
this prospectus without the written consent of Goldman, Sachs & Co. When the
90-day lock-up period expires, approximately 8,547,148 additional shares that
are restricted securities will be eligible for sale under Rule 144 or Rule 701.
Shares acquired in transactions exempt from registration under the Securities
Act are "restricted securities" as that term is defined in Rule 144. Restricted
shares may only be resold if they are registered under the Securities Act or
are sold under an exemption from registration, like the exemption contained in
Rule 144.

Currently under Rule 144, a person who has beneficially owned restricted
securities for at least one year may, subject to certain conditions, sell his
restricted securities. Generally, these persons may sell within any three-month
period a number of restricted shares that does not exceed the greater of (1) 1%
of our then outstanding common stock (254,373 shares immediately after the
offering) or (2) the average weekly trading volume of our common stock during
the four calendar weeks preceding the sale, subject to the filing of a Form 144
with respect to the sale. Sales under Rule 144 are also subject to requirements
concerning manner of sale, notice and availability of public information about
us. A person who is not deemed to have been our affiliate at any time during
the three months preceding the sale and who has beneficially owned his shares
for at least two years may sell restricted shares in the public market under
Rule 144(k) without regard to the requirements mentioned above, other than the
manner-of-sale requirement. Persons deemed to be affiliates must always sell
pursuant to Rule 144, even after expiration of the applicable holding periods.

We have filed a registration statement on Form S-8 under the Securities Act
to register for offer and sale the common stock subject to outstanding stock
options or reserved for issuance under our Amended and Restated 1993 Stock
Incentive Plan. See "Management--Employee Benefit Plans." Shares issued after
the effective date of the registration statement on Form S-8 upon the exercise
of stock options registered on the registration statement generally will be
eligible for sale in the public market, subject to

57
<PAGE>

the lock-up agreements discussed above and volume and other restrictions. When
the 90-day lockup period expires, approximately 624,253 additional shares
issuable upon the exercise of options that will be vested at that time will be
eligible for sale in the public market subject, in the case of affiliates, to
volume and other restrictions.

Shares that we issued prior to our initial public offering or that we may
issue upon the exercise of options that we granted to consultants and employees
prior to our initial public offering also may be eligible for sale in the
public market. Rule 701 under the Securities Act permits resales of shares
issued pursuant to certain compensatory benefit plans and contracts in reliance
upon certain provisions of Rule 144. Non-affiliates may sell without complying
with the public information, holding period, volume limitations or notice
provisions of Rule 144. Affiliates may sell without complying with the holding
period provisions of Rule 144.

In addition, certain stockholders will have registration rights with
respect to 8,502,233 shares of our common stock after this offering.
Registration of these securities subject to registration rights under the
Securities Act would result in the shares becoming freely tradeable without
restriction under the Securities Act. See "Description of Capital Stock--
Registration Rights" and "Risk Factors--Risks Related to This Offering and Our
Stock--We may have substantial sales of our common stock after the offering."

LEGAL MATTERS

Gardner, Carton & Douglas, Chicago, Illinois, will pass upon the validity
of the common shares offered by this prospectus. Sonnenschein Nath & Rosenthal,
Chicago, Illinois, has acted as counsel to the underwriters in connection with
certain legal matters relating to the common shares offered by this prospectus.

EXPERTS

The financial statements of Allscripts, Inc. as of December 31, 1998 and
1999 and for each of the three years in the period ended December 31, 1999,
included in this Prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

58
<PAGE>

UNDERWRITING

Allscripts, the selling stockholders and the underwriters for the offering
(the "Underwriters") named below have entered into an underwriting agreement
with respect to the shares being offered. Subject to certain conditions, each
Underwriter has severally agreed to purchase the number of shares indicated in
the following table. Goldman, Sachs & Co., Bear, Stearns & Co. Inc., CIBC World
Markets Corp., SoundView Technology Group, Inc., and Adams, Harkness & Hill,
Inc. are the representatives of the Underwriters.

<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Goldman, Sachs & Co. ...........................................
Bear, Stearns & Co. Inc. .......................................
CIBC World Markets Corp. .......................................
SoundView Technology Group, Inc. ...............................
Adams, Harkness & Hill, Inc. ...................................
---------
Total....................................................... 2,000,000
=========
</TABLE>

If the Underwriters sell more shares than the total number set forth in the
table above, the Underwriters have an option to buy up to an additional 300,000
shares from Allscripts to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this option, the Underwriters
will severally purchase shares in approximately the same proportion as set
forth in the table above.

The following table shows the per share and total underwriting discounts
and commissions to be paid to the Underwriters by Allscripts. Such amounts are
shown assuming both no exercise and full exercise of the Underwriters' option
to purchase 300,000 additional shares.

<TABLE>
<CAPTION>
Paid by Allscripts No Exercise Full Exercise
------------------ ----------- -------------
<S> <C> <C>
Per Share....................................... $ $
Total........................................... $ $
</TABLE>

Shares sold by the Underwriters to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial price to public. Any such
securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $ per share from
the initial price to public. If all the shares are not sold at the initial
price to public, the representatives may change the offering price and the
other selling terms.

All of Allscripts' executive officers, directors, key employees, the
selling stockholders and one other stockholder have agreed with the
Underwriters not to dispose of or hedge any of their shares of common stock or
securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date 90 days
after the date of this prospectus, except with the prior written consent of the
representatives. This agreement does not apply to any existing employee benefit
plans. See "Shares Eligible for Future Sale" for a discussion of certain
transfer restrictions.

A prospectus in electronic format is being made available on an Internet
web site maintained by Wit SoundView's affiliate, Wit Capital Corporation.
Other than the prospectus in electronic format, the information on Wit
SoundView's affiliate's web site and any information contained on any other web
site

59
<PAGE>

maintained by Wit Capital is not part of the prospectus or the registration
statement of which this prospectus forms a part, has not been approved and/or
endorsed by Allscripts or any underwriter in its capacity as underwriter and
should not be relied upon by investors.

In connection with the offering, the Underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offering is in progress.

The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such Underwriter in stabilizing or short covering
transactions.

These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.

As permitted by Rule 103 under the Exchange Act, certain Underwriters and
selling group members that are market makers ("passive market makers") in the
common stock may make bids for or purchases of common stock in the Nasdaq
National Market until a stabilizing bid has been made. Rule 103 generally
provides that:

. a passive market maker's net daily purchases of the common stock may not
exceed 30% of its average daily trading volume in such securities for the
two full consecutive calendar months, or any 60 consecutive days ending
within the 10 days, immediately preceding the filing date of the
registration statement of which this prospectus forms a part,

. a passive market maker may not effect transactions or display bids for
common stock at a price that exceeds the highest independent bid for the
common stock by persons who are not passive market makers, and

.bids made by passive market makers must be identified as such.

Allscripts estimates that the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $425,000,
substantially all of which will be paid by Allscripts.

Allscripts and the selling stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.

60
<PAGE>

WHERE TO FIND MORE INFORMATION

We have filed with the SEC a registration statement under the Securities
Act with respect to the common stock offered by this prospectus. This
prospectus does not contain all of the information that is in the registration
statement. For further information with respect to us and the common stock, you
should refer to the registration statement, including the related exhibits and
schedules. The statements contained in this prospectus as to the contents of
any document filed as an exhibit are of necessity brief descriptions and are
not necessarily complete; each of these statements is qualified in its entirety
by reference to the document.

You may read and copy this registration statement, including the exhibits,
without charge and obtain copies at prescribed rates at the Public Reference
Room of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the SEC located at Seven World Trade Center, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. You can obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. In addition, you can
obtain documents that we file electronically, including registration
statements, quarterly and annual reports and proxy statements and other
information, from the SEC's Web site at: http://www.sec.gov.

61
<PAGE>

ALLSCRIPTS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheets at December 31, 1998 and 1999................ F-3
Consolidated Statements of Operations for the years ended December 31,
1997, 1998 and 1999..................................................... F-5
Consolidated Statements of Shareholders' Equity (Deficit) for the years
ended December 31, 1997, 1998 and 1999.................................. F-6
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999..................................................... F-7
Notes to Consolidated Financial Statements............................... F-8

</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and

Shareholders of Allscripts, Inc.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of shareholders' equity
(deficit) and of cash flows present fairly, in all material respects, the
financial position of Allscripts, Inc. and its subsidiaries at December 31,
1998 and 1999, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1999 in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of Allscripts' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 17, 2000

F-2
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

<TABLE>
<CAPTION>
December 31,
1998 1999
------- -------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 718 $40,561
Marketable securities.................................... -- 15,049
Accounts receivable, net of allowances of $4,523 in 1998
and $3,743 in 1999...................................... 9,525 5,466
Inventories.............................................. 2,905 3,585
Prepaid and other current assets......................... 229 786
------- ------- ---
Total current assets................................... 13,377 65,447
Fixed assets, net.......................................... 1,784 4,940
Intangible assets, net..................................... 3,702 3,575
Debt issuance costs........................................ 57 52
------- ------- ---
Total assets........................................... $18,920 $74,014
======= ======= ===
</TABLE>

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

F-3
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS, CONTINUED

(In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
December 31,
1998 1999
-------- --------
<S> <C> <C> <C>
LIABILITIES
Current liabilities:
Note payable......................................... $ 4,000 $ --
Accounts payable..................................... 7,829 4,352
Accrued expenses..................................... 1,277 1,664
Deferred revenue..................................... -- 575
-------- -------- ---
Total current liabilities........................... 13,106 6,591
Long-term debt......................................... 59 59
-------- -------- ---
Total liabilities................................... 13,165 6,650
-------- -------- ---
REDEEMABLE PREFERRED SHARES
Series I, cumulative, $1.00 par value, 1,339,241
shares authorized, issued and outstanding in 1998,
including $521 of cumulative dividends, liquidation
value of $8,654; no shares authorized, issued and
outstanding in 1999................................. 8,546 --
Series J, cumulative, $1.00 par value, 1,812,903
shares authorized, 1,803,838 issued and outstanding
in 1998, including $702 of cumulative dividends,
liquidation value of $11,656; no shares authorized,
issued and outstanding in 1999...................... 12,358 --
Series H, cumulative, $1.00 par value, 1,361,775
shares authorized, issued and outstanding in 1998,
including $3,007 of cumulative dividends,
liquidation value of $8,800; no shares authorized,
issued and outstanding in 1999...................... 11,643 --
-------- -------- ---
32,547 --
-------- --------
COMMITMENTS AND CONTINGENCIES (NOTES 8 AND 13)......... -- --
-------- --------
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred shares:
Undesignated, $0.01 par value, 1,000,000 shares
authorized, no shares issued and outstanding in
1999................................................ -- --
Series A, $1.00 par value, 1,050,000 shares
authorized, issued and outstanding in 1998,
liquidation value of $1,050, convertible to common
shares; no shares authorized, issued and outstanding
in 1999............................................. 1,050 --
Series B, $1.00 par value, 533,333 shares authorized,
issued and outstanding in 1998, liquidation value of
$2,000, convertible to common shares; no shares
authorized, issued and outstanding in 1999.......... 533 --
Series C, $1.00 par value, 2,187,501 shares
authorized, issued and outstanding in 1998,
liquidation value of $7,000, convertible to common
shares; no shares authorized, issued and outstanding
in 1999 ............................................ 2,188 --
Series D, $1.00 par value, 1,833,334 shares
authorized, issued and outstanding in 1998,
liquidation value of $8,250, convertible to common
shares; no shares authorized, issued and outstanding
in 1999............................................. 1,833 --
Series F, $1.00 par value, 2,492,781 shares
authorized, issued and outstanding in 1998,
liquidation value $3,116, convertible to common
shares; no shares authorized, issued and outstanding
in 1999............................................. 2,493 --
Series G, $1.00 par value, 621,819 shares authorized,
issued and outstanding in 1998, liquidation value
$2,798, convertible to common shares; no shares
authorized, issued and outstanding in 1999.......... 622 --
-------- -------- ---
8,719 --
Common shares $0.01 par value, 125,000,000 and
75,000,000 shares authorized, 8,358,654 and 24,221,537
shares issued and outstanding in 1998 and 1999,
respectively.......................................... 84 242
Additional paid-in capital............................. 15,468 130,830
Unearned compensation.................................. (231) (1,632)
Treasury stock at cost: 34,465 common shares........... (68) (68)
Accumulated deficit.................................... (50,764) (62,008)
-------- -------- ---
Total shareholders' equity (deficit)................ (26,792) 67,364
-------- -------- ---
Total liabilities, redeemable preferred shares and
shareholders' equity (deficit)..................... $ 18,920 $ 74,014
======== ======== ===
</TABLE>

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

F-4
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

<TABLE>
<CAPTION>
Year ended December 31,
1997 1998 1999
-------- ------- --------
<S> <C> <C> <C>
Revenue.......................................... $ 30,593 $23,682 $ 27,586
Cost of revenue.................................. 21,117 17,320 21,909
-------- ------- --------
Gross profit................................. 9,476 6,362 5,677
Selling, general and administrative expenses..... 13,869 12,658 20,656
Amortization of intangibles...................... 409 372 1,351
Other operating expenses......................... 2,568 430 319
-------- ------- --------
Loss from operations......................... (7,370) (7,098) (16,649)
Interest income (expense), net................... (1,621) (596) 1,216
-------- ------- --------
Loss from continuing operations.................. (8,991) (7,694) (15,433)
Income (loss) from discontinued operations....... (1,808) 970 642
Gain from sale of discontinued operations........ -- -- 3,547
-------- ------- --------
Loss before extraordinary item................... (10,799) (6,724) (11,244)
Extraordinary loss from early extinguishment of
debt............................................ -- (790) --
-------- ------- --------
Net loss......................................... (10,799) (7,514) (11,244)
Accretion of mandatory redemption value of
preferred shares and accrued dividends on
preferred shares................................ (923) (2,415) (2,198)
-------- ------- --------
Net loss attributable to common shareholders..... $(11,722) $(9,929) $(13,442)
======== ======= ========
Per share data--basic and diluted:
Loss from continuing operations (including
accretion and accrued dividends on preferred
shares)........................................ $ (3.35) $ (1.66) $ (1.20)
Income (loss) from discontinued operations...... (0.61) 0.16 0.04
Gain from sale of discontinued operations....... -- -- 0.25
Extraordinary loss.............................. -- (0.13) --
-------- ------- --------
Net loss attributable to common shareholders.... $ (3.96) $ (1.63) $ (0.91)
======== ======= ========
Per share data--pro forma basic and diluted
(unaudited):
Loss from continuing operations (excluding
accretion and accrued dividends on preferred
shares)........................................ $ (0.88) $ (0.94)
Income (loss) from discontinued operations...... 0.11 0.04
Gain from sale of discontinued operations....... -- 0.22
Extraordinary loss.............................. (0.09) --
------- --------
Net loss attributable to common shareholders.... $ (0.86) $ (0.68)
======= ========
Weighted average shares of common stock
outstanding used in computing basic and diluted
net loss per share.............................. 2,956 6,076 14,718
======== ======= ========
Weighted average shares of common stock
outstanding used in computing pro forma basic
and diluted net loss per share (unaudited)...... 9,073 16,426
======= ========
</TABLE>

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

F-5
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

(In thousands, except share amounts)

<TABLE>
<CAPTION>
Additional Unearned Accumu-
Preferred Common Paid-In Compen- Treasury lated
Shares Shares Capital sation Stock Deficit
------------------ ----------------- ---------- -------- --------------- --------
Shares Amount Shares Amount Shares Amount
---------- ------ ---------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996.................... 8,718,768 $8,719 2,867,715 $ 29 $ 17,049 $ -- (20,179) $(46) $(32,451)
Issuance of 37,807
common shares under
option agreements...... 37,807 1 56 (14,286) (22)
Issuance of 519,530
common shares to HBO &
Co. for TouchScript
software............... 519,530 5 26
Cumulative dividends in
arrears on Series H
redeemable preferred
shares................. (704)
Accretion of mandatory
redemption value of
preferred shares....... (219)
Net loss for the year
ended December 31,
1997................... (10,799)
---------- ------ ---------- ---- -------- ------- ------- ---- --------
Balance at December 31,
1997.................... 8,718,768 8,719 3,425,052 35 16,208 -- (34,465) (68) (43,250)
Issuance of 4,597,070
common shares in Series
I Unit Offering........ 4,597,070 46 963
Issuance of 336,532
common shares under
option agreements...... 336,532 3 54
Issuance of 1,326,652
warrants in connection
with exchange of
subordinated
convertible debentures
for Series J redeemable
preferred shares....... 239
Unearned compensation
expense................ 407 (407)
Compensation expense... 176
Cumulative dividends in
arrears on Series H
redeemable preferred
shares................. (704)
Cumulative dividends in
arrears on Series I
redeemable preferred
shares................. (521)
Cumulative dividends in
arrears on Series J
redeemable preferred
shares................. (702)
Accretion of mandatory
redemption value of
preferred shares....... (323)
Issuance costs of
Series I Unit
Offering............... (153)
Net loss for the year
ended December 31,
1998................... (7,514)
---------- ------ ---------- ---- -------- ------- ------- ---- --------
Balance at December 31,
1998.................... 8,718,768 8,719 8,358,654 84 15,468 (231) (34,465) (68) (50,764)
Issuance of 204,771
shares of common stock
in connection with
MedSmart acquisition... 204,771 2 2,570
Issuance of 961,541
shares of common stock
under option
agreements............. 961,541 9 797
Expense related to
warrants granted to
nonemployee............ 30
Issuance of 7,000,000
shares of common stock
in initial public
offering, net of
offering expenses...... 7,000,000 70 102,639
Payment of fractional
shares in connection
with reverse stock
split.................. (6)
Issuance of 4,699,130
shares of common stock
under warrant
agreements............. 4,699,130 47 367
Issuance of 19,958
shares of common stock
under a contingent
payment obligation..... 19,958 0 319
Conversion of
convertible preferred
shares to common shares
at initial public
offering............... (8,718,768) (8,719) 2,977,483 30 8,689
Other capital
contribution........... 12
Unearned compensation
expense................ 1,850 (1,850)
Compensation expense... 449
Expense related to
options granted to
nonemployees........... 293
Cumulative dividends in
arrears on Series H
redeemable preferred
shares................. (407)
Cumulative dividends in
arrears on Series I
redeemable preferred
shares................. (425)
Cumulative dividends in
arrears on Series J
redeemable preferred
shares................. (572)
Accretion of mandatory
redemption value of
preferred shares....... (794)
Net loss for the year
ended December 31,
1999................... (11,244)
---------- ------ ---------- ---- -------- ------- ------- ---- --------
Balance at December 31,
1999.................... -- $ -- 24,221,537 $242 $130,830 $(1,632) (34,465) $(68) $(62,008)
========== ====== ========== ==== ======== ======= ======= ==== ========
</TABLE>

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

F-6
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

<TABLE>
<CAPTION>
Year ended December 31,
1997 1998 1999
-------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................ $(10,799) $(7,514) $(11,244)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................. 1,695 1,531 2,517
Gain on sale of discontinued operations....... -- -- (3,547)
Expense from issuance of equity instruments to
nonemployees................................. -- -- 323
Write-off of intangible assets................ 5,622 -- --
Extraordinary loss............................ -- 791 --
Compensation expense.......................... -- 176 449
Exchange of debentures in satisfaction of
accrued interest............................. 876 439 --
Other operating expense....................... -- -- 319
Changes in assets and liabilities:
Decrease in accounts receivable, net........ 559 55 4,195
(Increase) decrease in inventories.......... 247 (348) (1,353)
(Increase) decrease in prepaids and other
current assets............................. (23) 154 (604)
(Decrease) increase in accounts payable..... 266 1,131 (3,999)
(Decrease) increase in accrued expenses and
deferred revenue........................... (114) (580) 251
-------- ------- --------
Net cash used in operating activities..... (1,671) (4,165) (12,693)
-------- ------- --------
Cash flows from investing activities:
Capital expenditures............................ (1,192) (884) (4,428)
Purchase of marketable securities............... -- -- (15,049)
Disposal of property, plant, and equipment...... 40 -- --
Proceeds from sale of discontinued operations... -- -- 7,472
Acquisition of TouchScript software............. (50) -- --
Cash received in acquisitions................... -- -- 46
-------- ------- --------
Net cash used in investing activities..... (1,202) (884) (11,959)
-------- ------- --------
Cash flows from financing activities:
Proceeds from initial public offering........... -- -- 102,709
Borrowings under line of credit................. 2,500 4,000 1,400
Payments under line of credit................... -- (2,500) (5,400)
Proceeds from Series I Unit Offering............ -- 8,930 --
Payments under long-term obligations............ (101) -- --
Payments for preferred stock redemptions........ -- -- (34,745)
Payment of note payable in connection with
acquisition.................................... -- -- (650)
Proceeds from exercise of common stock
warrants....................................... -- -- 414
Repayment of term loan.......................... -- (4,693) --
Payments on capital lease....................... (20) -- --
Proceeds from exercise of common stock options.. 57 57 806
Treasury stock purchases........................ (22) -- --
Share and debt issue costs...................... -- (232) (45)
Other capital contribution...................... -- -- 12
Payment of fractional shares.................... -- -- (6)
-------- ------- --------
Net cash provided by financing
activities............................... 2,414 5,562 64,495
-------- ------- --------
Net increase (decrease) in cash and cash
equivalents...................................... (459) 513 39,843
Cash and cash equivalents, beginning of year...... 664 205 718
-------- ------- --------
Cash and cash equivalents, end of year............ $ 205 $ 718 $ 40,561
======== ======= ========
</TABLE>

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

F-7
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business

Allscripts, Inc. and its wholly owned subsidiaries, Allscripts Pharmacy
Centers, Inc., Prescription Management Company, Inc., Physician Dispensing
Systems, Inc. and TeleMed Corp. (altogether referred to as "Allscripts"),
provide physicians with Internet and client/server medication management
solutions designed to improve the quality and cost effectiveness of
pharmaceutical healthcare. Allscripts grants uncollateralized credit to its
customers. Allscripts operates in one industry segment. As its product
offerings evolve, the manner in which its activities are internally reported
and its decisions are made could change. Allscripts will continually evaluate
its determination of operating segments. The company changed its name to
Allscripts, Inc. on October 20, 1997 and merged into a subsidiary incorporated
in Delaware upon the closing of its initial public offering in July 1999 (Note
12).

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Allscripts,
Inc. and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated.

Revenue Recognition

Allscripts' revenue is primarily derived from the sale of medications for
dispensing at the point of care. Revenue is also generated from sales of
software subscriptions and services as well as the sale and leasing of hardware
to customers. Allscripts defers the recognition of all revenue until
collectibility is probable, persuasive evidence of an arrangement exists and
the price of the products or services being sold is fixed and determinable.
Revenue from the sale of medications is recognized upon shipment of the
pharmaceutical products. Revenue from software subscriptions and related leased
hardware, if applicable is recognized ratably over the term of the subscription
beginning after the software and hardware have been delivered and installed and
customer training has been completed. Revenue from the sale of hardware is
recognized upon shipment of the product; however, no revenue is recognized for
software subscriptions or the lease or sale of hardware where payment of the
related fee is refundable or subject to the performance of future obligations.
Revenue from services is recognized as they are performed.

Manufacturer Rebates

Rebates from suppliers are recorded as a reduction of cost of revenue and
are recognized on an estimated basis upon shipment of the product to customers.
The difference between the amount estimated and the amount actually received is
reflected prospectively as a change of estimate. These revisions have not been
material.

Inventories

Inventories, which consist primarily of finished goods, are carried at the
lower of cost or market with cost being determined using the specific
identification method.

Fixed Assets

Fixed assets are stated at cost. Depreciation is computed on the straight-
line method over the estimated useful lives of the related assets. Upon asset
retirement or other disposition, cost and the related allowance for
depreciation are removed from the accounts, and gain or loss is included in the

F-8
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

consolidated statements of operations. Amounts expended for repairs and
maintenance are charged to operations as incurred.

Intangible Assets

Intangible assets, which are stated at cost, consist of software rights,
non-compete agreements, customer lists and goodwill. Allscripts' policy is to
amortize intangible assets using the straight-line method over the remaining
estimated economic life of those assets including the period being reported on.
Upon the occurrence of an event or change in circumstances indicating that the
carrying amount of its intangible assets may not be recoverable, Allscripts
analyzes their value to determine whether the recorded amounts are reasonable
and are not impaired. The analysis includes a review of undiscounted future
cash flows for each group of acquired customers based on environmental factors,
customer retention and other factors Allscripts believes are relevant to
determine if any impairment of the asset has occurred. If impairment is noted,
the amount of impairment is then measured and a writedown is recorded. If
necessary, the remaining amortization period is adjusted accordingly.

Debt Issuance Costs

Costs attributable to the issuance of significant debt are deferred and
amortized on a straight-line basis over the term of the related debt.

Use of Estimates

Generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at year end
and the reported amounts of revenue and expenses during the year. Actual
results could differ from these estimates.

Concentration of Credit Risk

Financial instruments that potentially subject Allscripts to a
concentration of credit risk consist of cash and cash equivalents, marketable
securities and trade receivables. Allscripts maintains its cash balances with
one major commercial bank and its cash equivalents and marketable securities in
interest-bearing, investment-grade securities.

Allscripts sells its products and services to healthcare providers and
employer funded benefit plans. Credit risk with respect to trade receivables is
generally diversified due to the large number of customers and their dispersion
across the United States. Trade receivables with employer funded benefit plans
are further diversified across many different industries. To reduce credit
risk, Allscripts performs ongoing credit evaluations of its customers and their
payment histories. In general, Allscripts does not require collateral from its
customers, but it does enter into advance deposit, security or guarantee
agreements if appropriate.

The provision for doubtful accounts aggregated $667,000 and $1,241,000 in
1997 and 1998, respectively. Allscripts recorded a net credit to income
aggregating $633,000 in 1999 due to the collection of receivables which had
been reserved as being uncollectable in previous periods.

Income Taxes

Deferred tax assets or liabilities are established for temporary
differences between financial and tax reporting bases and for tax carryforward
items and are subsequently adjusted to reflect changes in tax

F-9
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

rates expected to be in effect when the temporary differences reverse. A
valuation allowance is established for any deferred tax asset for which
realization is not likely.

Stock Based Compensation

Allscripts follows Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" (FAS 123). As allowed by FAS 123,
Allscripts has elected to continue to account for its stock based compensation
programs according to the provisions of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees." Accordingly, compensation
expense has been recognized to the extent of employee or director services
rendered based on the intrinsic value of compensatory options or shares granted
under the plans. Allscripts has adopted the disclosure provisions required by
FAS 123.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheets for cash and cash
equivalents, marketable securities, accounts receivable and accounts payable
approximate their fair values due to the short-term nature of these financial
instruments. The fair value of the long-term debt is estimated based on current
interest rates available to Allscripts for debt instruments with similar terms,
degrees of risk and remaining maturities. The carrying value of the long-term
debt approximates its fair value.

Advertising Costs

Allscripts recognizes substantially all advertising costs as incurred.
Advertising expense was $17,000, $0 and $118,000 in 1997, 1998 and 1999,
respectively.

Comprehensive Income

During 1998, Allscripts adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (FAS 130). FAS 130 establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. To date,
Allscripts has not had any transactions that are required to be reported as
other comprehensive income.

Net Loss Per Share

Allscripts accounts for net loss per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (FAS 128). FAS 128
requires the presentation of "basic" earnings per share and "diluted" earnings
per share. Basic earnings per share is computed by dividing the net loss
attributable to common shareholders by the weighted average shares of
outstanding common stock. For purposes of calculating diluted earnings per
share, the denominator includes both the weighted average shares of common
stock outstanding and dilutive potential common stock.

In accordance with FAS 128, basic and diluted net loss per share has been
computed using the weighted average number of shares of common stock
outstanding during the period. Allscripts has excluded the impact of all
outstanding warrants and options to purchase shares of common stock, all
outstanding convertible preferred shares on an if-converted basis and
contingent share payment obligations from the calculation of diluted loss per
share because all such securities are antidilutive for all periods presented.

F-10
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

On July 28, 1999, Allscripts consummated an initial public offering of its
common stock. Upon the closing of the offering, all of the outstanding shares
of Allscripts' convertible preferred stock were automatically converted into
2,977,483 shares of common stock. Additionally, 19,958 shares of common stock
were issued upon the closing of the offering, pursuant to a contingent share
payment obligation (see Note 3). The unaudited pro forma diluted net loss per
share information included in the accompanying consolidated statements of
operations for the years ended December 31, 1998 and 1999 reflects the impact
of such conversion and such issuance on basic and diluted net loss per share as
of the beginning of the year, or date of issuance, if later, using the if-
converted method. In addition, the unaudited pro forma net loss per share
information excludes accretion and accrued dividends on redeemable preferred
shares as redemption of said shares is assumed to have occurred as of the
beginning of the year or, if later, date of issuance.

Below is a summary of the shares used in calculating diluted net loss per
share and unaudited pro forma diluted net loss per share for the periods
indicated.

<TABLE>
<CAPTION>
Year Ended
December 31,
1997 1998 1999
----- ----- ------
(In thousands)
<S> <C> <C> <C>
Diluted weighted average shares outstanding:
Attributable to common stock outstanding.............. 2,956 6,076 14,718
Attributable to common stock options and warrants..... -- -- --
Attributable to convertible preferred stock........... -- -- --
Attributable to contingent share payment obligation... -- -- --
----- ----- ------
2,956 6,076 14,718
===== ===== ======
Unaudited pro forma diluted weighted average shares
outstanding:
Attributable to common stock outstanding.................... 6,076 14,718
Attributable to common stock options and warrants........... -- --
Attributable to convertible preferred stock................. 2,977 1,696
Attributable to contingent share payment obligation......... 20 12
----- ------
9,073 16,426
===== ======
</TABLE>

Software Development Costs

Allscripts capitalizes purchased software that is ready for service and
software development costs incurred from the time technological feasibility of
the software is established until the software is ready for use. Research and
development costs and other computer software maintenance costs related to
software development are expensed as incurred. Upon the establishment of
technological feasibility for previous versions of TouchScript, related
software development costs were capitalized. However, these costs were written
off because the recoverability was uncertain since market acceptance of
TouchScript had not been achieved. Development costs incurred subsequent to the
establishment of technological feasibility but prior to general release of the
current version of TouchScript were not significant. Software development costs
of $518,000, $771,000 and $1,417,000 have been expensed in 1997, 1998 and 1999,
respectively. The costs of purchased software are amortized using the straight-
line method over three years.

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents balances at December 31, 1999 consist of cash and
highly liquid corporate debt securities with maturities at the time of purchase
of less than 90 days. The cash and cash equivalents balance at December 31,
1998 consisted exclusively of cash.

F-11
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

At December 31, 1999, cash equivalents were comprised of overnight
repurchase agreements, money market funds and corporate debt securities
totaling $290,000, $16,578,000 and $22,066,000, respectively.

Marketable securities at December 31, 1999 were comprised of corporate debt
securities with a weighted average time to maturity of 3.6 months. These
securities were available for sale and their amortized cost approximated fair
market value at December 31, 1999.

3. Other Operating Expenses

Other operating expenses consist of the following for the years ended
December 31:

<TABLE>
<CAPTION>
1997 1998 1999
------ ---- ----
(In thousands)
<S> <C> <C> <C>
Management reorganization and shutdown costs............ $ 240 $430 $--
Settlement of contingent payment obligation............. -- -- 319
Writedown of acquisition intangibles.................... 2,328 -- --
------ ---- ----
$2,568 $430 $319
====== ==== ====
</TABLE>

The management reorganization and shutdown costs relate to severance costs
associated with reductions in force and other severance arrangements. The
portion of the charges outlined above that relates to management
reorganization equals $240,000 in 1997 and $430,000 in 1998. The number and
nature of employees affected in each year is as follows: 1997, seven
administrative and three sales and 1998, ten administrative and nine sales. As
of December 31, 1999, all payments provided for had been made.

A summary of management reorganization and shutdown costs and related
payments is as follows:

<TABLE>
<CAPTION>
1997 1998 1999
----- ----- -----
(In thousands)
<S> <C> <C> <C>
Beginning balance.................................... $ 286 $ 181 $ 273
Expense.............................................. 240 430 --
Payments............................................. (345) (338) (273)
----- ----- -----
Ending balance..................................... $ 181 $ 273 $ --
===== ===== =====
</TABLE>

The settlement of contingent payment obligation reflects a non-cash, non-
recurring charge related to the issuance of 19,958 shares of common stock upon
the closing of the initial public offering in settlement of a contingent
payment obligation related to an acquisition Allscripts made in 1995.

Allscripts determined that an impairment of customer lists and goodwill
acquired in certain point-of-care-dispensing acquisitions occurred in 1997.
The impairment was triggered by the loss of customers and the reduced level of
operating profit being generated by the acquired customers. The impairment
analysis included a review of undiscounted future cash flows for each group of
acquired customers to determine if any impairment of the asset had occurred.
As a result, Allscripts has made a provision in 1997 of $2,328,000,
representing the estimated excess of the carrying value of the intangible
assets over the discounted future cash flows. In addition, Allscripts reduced
the remaining amortization period to six and three years for goodwill and
customer lists, respectively, related to its mail order pharmacy business and
five and two years for goodwill and customer lists, respectively, related to
its point-of-care site dispensing business. The previous amortization periods
had been 20 and 10 years, respectively, for intangibles arising from those
acquisitions. In testing for impairment, Allscripts used the held-for-use
model under FAS 121.

F-12
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

4. Acquisitions

On May 10, 1999, Allscripts acquired TeleMed Corp., which operated as
MedSmart, a privately held company that sells Internet-based physician drug
education programs and medical books online and by telephone. In exchange for
all of the outstanding common shares of MedSmart, Allscripts issued 117,500
shares of its common stock at closing and an additional 87,271 shares in
September 1999 pursuant to a contingent payment obligation. Allscripts assigned
a value of $11.00 per share to the shares issued at closing and $14.65 per
share to the shares issued in September. The business combination was accounted
for using the purchase method of accounting, and MedSmart's results of
operations have been included in the consolidated financial statements
subsequent to the date of acquisition. The acquisition resulted in goodwill of
approximately $3,200,000, which represents the excess of the purchase price
over the fair value of the acquired net assets and which is being amortized on
a straight-line basis over two years.

On June 30, 1999, Allscripts acquired substantially all of the assets of
Shopping@Home, Inc., a development-stage Internet retailer, in exchange for a
promissory note in the principal amount of $650,000, bearing interest at 6% per
year and payable upon the consummation of an initial public offering. The
business combination was accounted for using the purchase method of accounting,
and the results of operations of Shopping@Home have been included in the
consolidated financial statements subsequent to the date of acquisition. The
acquisition resulted in goodwill of approximately $630,000, which represents
the excess of the purchase price over the fair value of the acquired net
liabilities and which is being amortized on a straight-line basis over two
years. The promissory note, including accrued interest of $3,000, was repaid in
August 1999.

The following unaudited pro forma consolidated results of operations for
the years ended December 31, 1998 and 1999 assume the MedSmart and
Shopping@Home, Inc. acquisitions occurred as of January 1 of each year. As a
result, weighted average shares include 205,000 shares issued as consideration
for the MedSmart acquisition as if they had been issued as of January 1 of each
period presented. The unaudited pro forma results are not indicative of the
actual results that would have occurred had the acquisitions been completed as
of the beginning of each of the periods presented, nor are they necessarily
indicative of future consolidated results.

<TABLE>
<CAPTION>
Year Ended
December 31,
------------------
1998 1999
-------- --------
(In thousands,
except per share
data)
<S> <C> <C>
Revenue................................................. $ 25,293 $ 28,045
Loss from continuing operations......................... (10,388) (16,937)
Income from discontinued operations..................... 970 642
Gain from sale of discontinued operations............... -- 3,547
Extraordinary loss from early extinguishment of debt.... (790) --
Net loss................................................ (10,208) (12,748)
Net loss attributable to common shareholders............ (12,623) (14,946)
Per share data--basic and diluted:
Loss from continuing operations (including accretion
and accrued dividends on preferred shares)........... $ (2.04) $ (1.29)
Income from discontinued operations................... 0.16 0.04
Gain from sale of discontinued operations............. -- 0.24
Extraordinary loss from early extinguishment of debt.. (0.13) --
-------- --------
Net loss attributable to common shareholders........ $ (2.01) $ (1.01)
======== ========
Weighted average shares of common stock outstanding used
in computing unaudited pro forma basic and diluted net
loss per share......................................... 6,281 14,825
======== ========
</TABLE>

F-13
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

5. Fixed Assets

Fixed assets as of December 31 consist of the following:

<TABLE>
<CAPTION>
Estimated
Useful Life 1998 1999
----------- ------ ------
(In
thousands)
<S> <C> <C> <C>
Office furniture and equipment................. 2-7 years $3,845 $4,466
Service assets................................. 2 years 1,064 3,844
Production and warehouse equipment............. 7 years 1,106 1,088
Leasehold improvements......................... 4 years 584 952
Construction in progress....................... -- 40 57
------ ------
6,639 10,407
Less accumulated depreciation.................. 4,855 5,467
------ ------
$1,784 $4,940
====== ======
</TABLE>

Depreciation expense from continuing operations was approximately $522,000,
$563,000 and $980,000 in 1997, 1998 and 1999, respectively.

Service assets includes equipment leased to customers and equipment placed
with customers for their use in running Allscripts' software. At December 31,
1999, service assets included $1,296,000 of assets at physician sites in
various stages of installation for which depreciation had not begun.

6. Intangible Assets

Intangible assets as of December 31 consist of the following:

<TABLE>
<CAPTION>
Estimated
Useful LIfe 1998 1999
----------- -------- -------
(In thousands)
<S> <C> <C> <C>
Capitalized software........................ 3 years $ 81 $ 81
Non-compete agreements...................... 5 years 515 --
Customer lists.............................. 4-5 years 4,264 3,563
Goodwill.................................... 2-8 years 15,984 12,044
-------- -------
20,844 15,688
Less accumulated amortization............... 17,142 12,113
-------- -------
$ 3,702 $ 3,575
======== =======
</TABLE>

Accumulated amortization includes writedowns in excess of normal
amortization.

F-14
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

7. Accrued Expenses

Accrued expenses as of December 31 consist of the following:

<TABLE>
<CAPTION>
1998 1999
------ ------
(In
thousands)
<S> <C> <C>
Accrued employee compensation benefits and payroll
taxes................................................... $ 201 $ 172
Accrued vacation pay..................................... 550 654
Accrued management bonus................................. -- 326
Accrued severance........................................ 273 139
Accrued travel........................................... -- 115
Accrued commissions...................................... 42 36
Accrued interest......................................... 3 8
Accrued other............................................ 208 214
------ ------
$1,277 $1,664
====== ======
</TABLE>

8. Lease Commitments

Allscripts conducts its operations from leased premises and with equipment
acquired under several operating leases. Total rent expense from continuing
operations was approximately $491,000, $599,000 and $579,000 in 1997, 1998 and
1999, respectively.

Future minimum rental payments for the next five years are as follows (in
thousands):

<TABLE>
<CAPTION>
Year Ending
December
31,
-----------
<S> <C>
2000.............................................................. $ 737
2001.............................................................. 809
2002.............................................................. 804
2003.............................................................. 805
2004.............................................................. 411
------
Total minimum lease payments...................................... $3,566
======
</TABLE>

9. Notes Payable

Notes payable as of December 31 consist of the following:

<TABLE>
<CAPTION>
1998 1999
------- -------
(In thousands)
<S> <C> <C>
Borrowings under revolving credit facility with
commercial bank........................................ $ 4,000 $ --
======= ======
</TABLE>

Through April 16, 1998, Allscripts maintained a credit arrangement with a
commercial bank consisting of two components, a revolving credit facility and a
term loan. The revolving credit facility permitted borrowings up to
$10,000,000, limited by certain eligible working capital requirements.
Borrowings under the revolving credit facility were collateralized by accounts
receivable, inventory, equipment and other assets. Allscripts was required to
maintain a compensating balance of $350,000 under the revolving credit
facility.

F-15
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

The term loan, which was guaranteed by a certain preferred shareholder and
which was part of the credit arrangement with a commercial bank that expired on
April 30, 1998, was paid off in April 1998 from the proceeds of the Series I
Unit Offering.

On April 16, 1998, Allscripts signed a new revolving credit agreement with
its commercial bank. As amended, the revolving credit facility permits
borrowings up to $10,000,000, limited by certain eligible working capital
requirements. Interest is at prime plus 0.5% (9.0% at December 31, 1999).
Borrowings under the revolving credit facility are collateralized by accounts
receivable, inventory, equipment and other assets. The revolving credit
facility expires on April 16, 2000.

Under the revolving credit agreement, Allscripts is required to maintain
certain financial ratios, including minimum net working capital, minimum EBITDA
and minimum capital funds. The agreement also prohibits the payment of
dividends. No outstanding borrowings existed under the line at December 31,
1999, and no amounts were available for borrowing at that date due to certain
covenant violations.

10. Long-Term Obligations

On April 30, 1996, Allscripts completed a $10,000,000 financing in the form
of 8.0% convertible subordinated debentures due April 30, 2001. Interest on the
debentures was payable semiannually. The debentures could be converted into
2,683,152 common shares of Allscripts at a conversion price equal to $4.2024.
The debentures were convertible at the option of the holder. Under the terms of
the debenture agreements, Allscripts' ability to pay dividends was restricted
under certain circumstances.

In conjunction with the issuance of the Series I Preferred and common stock
(see Note 12), the majority of the outstanding subordinated convertible
debentures were exchanged for 1,803,838 shares of Series J Preferred (see Note
12). In connection with this exchange, Allscripts also issued to the Series J
Preferred shareholders 1,326,652 detachable warrants to purchase shares of
common stock of Allscripts for $0.06 per share. The warrants will expire five
years from the date of closing of the sale of Series I Preferred (see Note 12).

An extraordinary loss of $790,000 was recorded in the consolidated
statement of operations for the year ended December 31, 1998, consisting of the
writeoff of deferred financing costs related to Allscripts' convertible
subordinated debentures in connection with their exchange for shares of Series
J Preferred and warrants.

Long-term obligations as of December 31 consist of the following:

<TABLE>
<CAPTION>
1998 1999
-------- --------
(In thousands,
except share and
per share
amounts)
<S> <C> <C>
Convertible subordinated debentures issued April 30, 1996;
due April 30, 2001; interest at 8.0% payable semiannually on
April 30 and October 31, potentially increasing 0.5% on each
such interest record date to a maximum of 1.5%; convertible
into 13,985 common shares at December 31, 1998 and 1999 at
$4.2024..................................................... $ 59 $ 59
-------- --------
Less current portion......................................... -- --
-------- --------
$ 59 $ 59
======== ========
</TABLE>

F-16
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

11. Income Taxes

Under the provisions of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," Allscripts recognizes a current tax asset
or liability for current taxes refundable or payable, respectively and a
deferred tax asset or liability for the estimated future tax effects of
temporary differences between the carrying value of assets and liabilities for
financial reporting and their tax basis, excluding goodwill, and carryforwards
to the extent that these items are realizable. The consolidated income tax
provision is comprised as follows:

<TABLE>
<CAPTION>
December 31, 1998 December 31, 1999
-------------------------- --------------------------
Current Noncurrent Total Current Noncurrent Total
------- ---------- ------- ------- ---------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Deferred income tax..... $ 438 $ 1,258 $ 1,696 $(249) $ 4,603 $ 4,354
Valuation allowance..... (438) (1,258) (1,696) 249 (4,603) (4,354)
----- ------- ------- ----- ------- -------
$ -- $ -- $ -- $ -- $ -- $ --
===== ======= ======= ===== ======= =======
</TABLE>

Realization of deferred tax assets is contingent upon the generation of
future taxable income. Due to the uncertainty of realization of these future
tax benefits, Allscripts has provided a valuation allowance for the full amount
of its deferred tax assets.

<TABLE>
<CAPTION>
December 31, 1998 December 31, 1999
------------------- -------------------
Temporary Tax Temporary Tax
Difference Effect Difference Effect
---------- -------- ---------- --------
(In thousands)
<S> <C> <C> <C> <C>
Allowance for doubtful accounts..... $ 4,523 $ 1,877 $ 3,743 $ 1,553
Acquisition costs................... 873 362 873 362
Accrued vacation.................... 550 228 654 271
Accrued bonus....................... 30 12 -- --
Accrued severance................... -- -- 139 58
Inventory reserve................... 154 64 -- --
Contributions carryover............. -- -- 36 15
Inventory capitalization............ 56 23 83 34
Gain on sale of discontinued
operation.......................... -- -- 30 13
Property, plant and equipment....... 111 46 265 110
Net operating loss carryforwards.... 30,534 12,672 41,500 17,222
-------- -------- -------- --------
Subtotal........................ 36,831 15,284 47,323 19,638
Less: valuation allowance........... (36,831) (15,284) (47,323) (19,638)
-------- -------- -------- --------
Total........................... $ -- $ -- $ -- $ --
======== ======== ======== ========
</TABLE>

The U.S. federal statutory tax rate differs from Allscripts' effective tax
rate due to the following:

<TABLE>
<CAPTION>
Year Ended
December 31,
--------------
1998 1999
------ ------
(In
thousands)
<S> <C> <C>
U.S. federal statutory tax rate................................. 34.0% 34.0%
State taxes, net of federal benefit............................. 5.0 5.0
Amortization of nondeductible goodwill.......................... 1.3 3.4
Other, net...................................................... 1.2 (0.9)
Change in valuation allowance................................... (41.5) (41.5)
------ ------
-- % -- %
====== ======
</TABLE>

F-17
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

At December 31, 1999, Allscripts has operating loss carryforwards available
for federal income tax reporting purposes of approximately $41,500,000. The
operating loss carryforwards expire between 2002 and 2019. Allscripts' ability
to utilize these operating loss carryforwards to offset future taxable income
is dependent on a variety of factors, including possible limitations on usage
pursuant to Internal Revenue Code Section (IRC) 382. IRC 382 imposes an annual
limitation on the future utilization of operating loss carryforwards due to
changes in ownership resulting from the issuance of common shares, stock
options, warrants and convertible preferred shares.

12. Redeemable Preferred Shares and Shareholders' Equity

Common Stock Split

During 1999, Allscripts' Board of Directors authorized and its shareholders
approved a one-for-six reverse common stock split. Consequently, all common
share and per share information in the accompanying financial statements has
been adjusted to reflect the reverse stock split.

Initial Public Offering

On July 28, 1999, Allscripts completed the initial public offering of its
common stock. Allscripts issued 7,000,000 shares of common stock at an initial
public offering price of $16.00 per share and all outstanding shares of
convertible preferred stock automatically converted into 2,977,483 shares of
common stock. The initial public offering resulted in gross proceeds of
$112,000,000, $7,840,000 of which was applied to the underwriting discount and
approximately $1,451,000 of which was applied to related offering expenses. In
addition, Allscripts used approximately $34,745,000 of the proceeds to redeem
all outstanding shares of its Series H, I and J Redeemable Preferred Stock,
plus accrued dividends thereon, $3,900,000 to repay advances under its
revolving line of credit with its commercial bank and approximately $653,000 to
repay a promissory note, including accrued interest, issued as consideration
for Allscripts' acquisition of Shopping@Home, Inc. (see Note 4).

Redeemable Preferred Shares

The Series H Preferred shares were voting, nonparticipating and had a
liquidation preference upon dissolution of Allscripts of $6.462 per share plus
an amount equal to all unpaid dividends accrued thereon. The Series H Preferred
shares were senior to Series A, Series B, Series C, Series D, Series F and
Series G Preferred shares with respect to the liquidation preference.

The shares were entitled to cumulative, quarterly dividends of 8.0%
accruing from the date of issuance and payable beginning September 15, 1998 and
then payable quarterly thereafter. Mandatory redemption of shares (at $6.462
per share) in the proportion of 10%, 10%, 10%, and 70% of the total number of
shares originally issued was initially scheduled to begin on September 15, 1998
and occur annually thereafter through 2001, respectively.

In connection with the 8% convertible subordinated debenture offering
described in Note 10, the terms of the Series H Preferred were amended.
Pursuant to such amendment, on September 15, 1998, Allscripts was required to
begin paying dividends quarterly. Allscripts was required to redeem shares of
Series H Preferred with a redemption value of $6.16 million and all accrued
dividends thereon on September 15, 2001.

In conjunction with the issuance of $8,930,000 of Series I Preferred on
April 16, 1998, the terms of the Series H Preferred were amended to extend the
maturity date five years from the closing of the sale of the Series I
Preferred. Allscripts was required to redeem shares of Series H Preferred equal
to $8,800,000

F-18
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

plus all accrued dividends ($3,007,000 at December 31, 1998 or $2.21 per share)
five years from the closing of the sale of Series I Preferred. In consideration
of the change in terms therein, Allscripts issued 916,651 warrants to purchase
shares of common stock of Allscripts for $0.06 per share to the holders of
Series H Preferred. The warrants will expire five years from the date of the
closing of the sale of Series I Preferred.

On April 16, 1998, Allscripts effected the private placement of Series I
Preferred and common stock of Allscripts for $8,930,000. The common stock
component, 4,597,070 shares, represented 24.4% of Allscripts' common stock at
April 16, 1998, assuming exercise of all options and warrants and the
conversion of all convertible preferred stock into common stock. Based upon an
independent appraisal, $1,009,000 was allocated to the value of the common
stock issued in the Series I Unit Offering. The difference, $733,000, between
the amount initially recorded for the redeemable preferred stock and its
redemption value was accreted over the life of the Series I Preferred shares
such that the Series I Preferred shares were reflected at redemption value at
the date of redemption on July 28, 1999. The Series I Preferred shares were
voting and had a liquidation preference upon dissolution of Allscripts of
$6.462 per share plus an amount equal to all unpaid dividends accrued thereon.
The Series I Preferred shares were in parity with the Series J Preferred shares
and senior to Series A, Series B, Series C, Series D, Series F, Series G and
Series H Preferred shares with respect to liquidation preference.

A cumulative dividend on the Series I Preferred accrued at a rate of 8.5%
per annum. The Series I Preferred shares were redeemed at $8,654,000 plus
accrued unpaid dividends, upon completion of the initial public offering of
Allscripts common stock on July 28, 1999.

In conjunction with the issuance of the Series I Preferred and common
stock, substantially all of the outstanding subordinated convertible debentures
were exchanged for 1,803,838 shares of Series J Preferred. The Series J
Preferred shares were voting and had a liquidation preference upon dissolution
of Allscripts of $6.462 per share plus an amount equal to all unpaid dividends
accrued thereon.

A cumulative dividend on the Series J Preferred accrued at a rate of 8.5%
per annum. The Series J Preferred shares were redeemed at $11,656,000 plus
accrued unpaid dividends on July 28, 1999.

Preferred Shares

The Series A, Series B, Series C, Series D, Series F and Series G Preferred
shares were voting, nonparticipating, convertible, and had a liquidation
preference upon dissolution of Allscripts equal to $1.00, $3.75, $3.20, $4.50,
$1.25 and $4.50 per share, respectively. The Series G Preferred shares were
senior to the Series A, Series B, Series C, Series D and Series F Preferred
shares in respect to the liquidation preference. The Series C, Series D and
Series F Preferred shares were senior to the Series A and Series B Preferred
shares in respect to the liquidation preference. These preferred shareholders
had the option to convert their shares into common shares at prescribed rates.
Automatic conversion of all convertible preferred shares into 2,977,483 shares
of common stock occurred upon the closing of the initial public offering of
Allscripts common stock on July 28, 1999.

Warrants

In conjunction with the 1996 convertible subordinated debenture offering,
the term loan guaranteed by a shareholder was amended to extend the maturity
date to April 30, 1998. In exchange for extending its guaranty of such term
debt, Allscripts issued warrants to purchase an aggregate of 279,175 common
shares with a strike price of $4.2024. The warrants expire April 30, 2001.
Because the exercise price of

F-19
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

the warrants exceeded the per share value implied by the convertible
subordinated debenture offering, no value was ascribed to the warrants. At
December 31, 1999, 15,124 warrants were outstanding, all of which were fully
vested and exercisable.

As a condition to the Series I Unit Offering, Allscripts amended the
maturity date of the Series H Preferred shares and exchanged the subordinated
convertible debentures for shares of Series J Preferred. In exchange for these
concessions, Allscripts issued detachable warrants to the holders of Series H
Preferred shares and holders of Series J Preferred shares in the aggregate
amounts of 916,651 and 1,326,652 shares of common stock, respectively. Based
upon an independent appraisal, $165,000 was allocated to the warrants issued to
the Series H Preferred shareholders, and the net loss attributable to the
common shareholders in 1998 was increased by this amount. Based upon an
independent appraisal, $239,000 was assigned to the value of the warrants
issued to the Series J Preferred shareholders. The warrants carry a strike
price of $0.06 and expire in April 2003. At December 31, 1999, 4,690 Series H
warrants and 32,319 Series J warrants were outstanding, all of which were fully
vested and exercisable.

During 1999, Allscripts issued a fully vested warrant to purchase 3,333
shares of common stock at $3.00 per share to a nonemployee. Allscripts assigned
a value of $9.00 to the warrant and accordingly recorded expense in the amount
of $30,000 in 1999. In addition, during 1999, Allscripts issued a performance-
based warrant to another nonemployee to purchase 8,333 shares of common stock
at $3.00 per share. This warrant was not vested at December 31, 1999.

All of the above warrants may be exercised with payment of cash or the
surrender of additional warrants, such warrants to be valued by the excess of
fair market value of a common share on the day of exercise over the warrant
purchase price. For the year ended December 31, 1999, 4,165,057 shares of
common stock were issued through the cashless exercise of warrants. Warrants to
purchase 140,834 shares of common stock were surrendered to exercise these
warrants, such warrants being valued at the excess of fair market value of a
common share on the day of exercise over the warrant exercise price. The net
value surrended was approximately $1,399,000. The value of the net shares
issued has been recorded to the par value of common stock and additional paid-
in capital in the December 1999 balance sheet.

At December 31, 1999, Allscripts has reserved 63,799 shares of common stock
for issuance upon the exercise of warrants.

Stock Option Plans

At December 31, 1999, options to purchase 4,393,489 shares of common stock
were authorized under Allscripts' Amended and Restated 1993 Stock Incentive
Plan. The exercise price for shares under this plan is determined by
Allscripts' Board of Directors at the date of grant. All options must be
exercised within ten years of the date of grant. The plan provides for exercise
of options by payment of cash or surrender of common stock. Options vest on
various schedules, primarily over three and four year periods from the date of
grant, and in certain circumstances upon a change in control.

In May 1998, in conjunction with the closing of the Series I Unit Offering,
the Board of Directors approved the cancellation and reissuance of options to
purchase 1,481,916 shares of Allscripts' common stock. The options covered by
the grant all have an exercise price of $0.06 per share.

At December 31, 1999, Allscripts has reserved 2,587,478 and 663,838 shares
of common stock for issuance upon exercise of outstanding and authorized but
ungranted options, respectively.

F-20
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Had Allscripts elected to apply the provisions of FAS 123 regarding
recognition of compensation expense to the extent of the calculated fair value
of stock options granted in 1997, 1998 and 1999, reported net loss and net loss
attributable to common shareholders per share would have been increased as
follows:

<TABLE>
<CAPTION>
1997 1998 1999
-------- ------- --------
(In thousands,
except per share data)
<S> <C> <C> <C>
Net loss, as reported...................... $(10,799) $(7,514) $(11,244)
Pro forma net loss......................... (10,895) (7,649) (11,375)
Net loss per share attributable to common
shareholders--basic and diluted, as
reported.................................. $ (3.96) $ (1.63) $ (0.91)
Pro forma net loss per share attributable
to common shareholders--basic and
diluted................................... (4.00) (1.66) (0.92)
</TABLE>

Under FAS 123, compensation expense representing fair value of the option
grant is recognized over the vesting period. The initial impact on pro forma
net loss may not be representative of compensation expense in future years,
when the effect of volatility would be reflected in pro forma earnings relating
to options granted subsequent to Allscripts' initial public offering.

For purposes of the FAS 123 pro forma net loss and net loss per share
calculation, the fair value of each option grant is estimated as of the date of
grant using the Black-Scholes option pricing model. The weighted average
assumptions used in determining fair value as disclosed for FAS 123 are shown
in the following table:

<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate................................. 5.99% 5.15% 5.82%
Option life (years)..................................... 4 4 4
Dividend rate........................................... --% --% --%
</TABLE>

No expected volatility factor has been used in determining the fair value
of options granted prior to Allscripts' initial public offering, while a
volatility factor of 87% has been used in valuing options granted subsequent to
the initial public offering and prior to December 31, 1999.

Option activity for the years ended December 31, 1997, 1998 and 1999 is as
follows:

<TABLE>
<CAPTION>
Options Weighted Average Options
Outstanding Exercise Price Exercisable
----------- ---------------- -----------
<S> <C> <C> <C>
Balance at December 31, 1996.......... 1,378,012 $ 1.50 802,049
Options granted..................... 1,655,218 2.34
Options exercised................... (37,807) 1.50
Options forfeited................... (265,066) 1.56
----------
Balance at December 31, 1997.......... 2,730,357 2.04 1,100,948
Options granted..................... 1,985,165 0.06
Options exercised................... (336,522) 0.18
Options forfeited................... (198,301) 1.62
Options canceled.................... (1,483,576) 1.34
----------
Balance at December 31, 1998.......... 2,697,123 0.68 1,434,122
Options granted..................... 1,025,440 9.56
Options exercised................... (961,541) 0.84
Options forfeited................... (173,544) 1.19
----------
Balance at December 31, 1999.......... 2,587,478 4.10 984,426
==========
</TABLE>

F-21
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

For the years ended December 31, 1997, 1998 and 1999 the weighted average
fair value of options granted was $0.49, $0.19 and $7.97, respectively.

Information regarding options outstanding at December 31, 1999 is as
follows:

<TABLE>
<CAPTION>
Weighted
Average
Remaining
Number of Contractual Number of
Exercise Options Life Options
Prices Outstanding (in years) Exercisable
-------- ----------- ----------- -----------
<S> <C> <C> <C>
$0.06 1,071,394 8.48 454,412
1.50 438,212 5.24 438,019
2.16 4,800 6.67 3,900
2.34 53,400 7.05 40,179
3.00 308,723 9.25 47,916
11.25 386,450 9.80 --
12.69 184,000 9.61 --
14.69 40,000 9.75 --
15.38 63,000 9.69 --
16.00 37,499 9.56 --
--------- -------
2,587,478 984,426
========= =======
</TABLE>

In August 1999, Allscripts granted options to purchase an aggregate of
30,000 shares of common stock to nonemployees in exchange for future services.
These options have an exercise price of $12.69 per share and vest over a period
of two years from the date of grant. Selling, general and administrative
expenses for the year ended December 31, 1999 include $293,000 in expense
relating to these options.

13. Contingencies

The pharmaceutical repackaging industry is subject to stringent federal and
state regulations. Allscripts' repackaging operations are regulated by the Food
and Drug Administration as if Allscripts were a manufacturer. Allscripts is
also subject to regulation by the Drug Enforcement Administration in connection
with the packaging and distribution of controlled substances.

Allscripts is a defendant in numerous multi-defendant lawsuits involving
the manufacture and sale of dexfenfluramine, fenfluramine and phentermine. The
plaintiffs in these cases claim injury as a result of ingesting a combination
of these weight-loss drugs. These suits have been filed in various
jurisdictions throughout the United States, and in each of these suits
Allscripts is one of many defendants, including manufacturers and other
distributors of these drugs. Allscripts does not believe it has any significant
liability incident to the distribution or repackaging of these drugs and it has
tendered defense of these lawsuits to its insurance carrier for handling. The
lawsuits are in various stages of litigation and it is too early to determine
what, if any, liability Allscripts will have with respect to the claims made in
these lawsuits. If Allscripts' insurance coverage is inadequate to satisfy any
resulting liability, Allscripts will have to defend these lawsuits and be
responsible for the damages, if any, that Allscripts suffers as a result of
these lawsuits. Allscripts does not believe that the outcome of these lawsuits
will have a material adverse effect on its financial condition, results of
operations or cash flows.

In addition to the matter noted above, Allscripts is from time to time
subject to legal proceedings and claims which arise in the normal course of its
business. In the opinion of management, the amount of ultimate liability with
respect to these actions will not have a material adverse effect on Allscripts'
consolidated financial condition, results of operations or cash flows.

F-22
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

14. Savings Plan

Effective January 1, 1993, employees of Allscripts who meet certain
eligibility requirements can participate in Allscripts' 401(k) Savings and
Investment Plan. Under the plan, Allscripts may, at its discretion, match the
employee contributions. Allscripts recorded expenses from continuing operations
related to its matching contributions in 1997, 1998 and 1999 of $45,000,
$37,000 and $60,000, respectively.

15. Enterprise Systems, Inc. Agreement

During 1996 and 1997, Allscripts established a relationship with Enterprise
Systems, Inc. to further develop Allscripts' automated dispensing product and
introduce touch technology to its product. Enterprise developed a product
called TouchScript. On March 13, 1997, Enterprise Systems, Inc. entered into a
Merger Agreement with HBO & Company and subsequently on June 26, 1997 completed
said merger. On July 17, 1997, Allscripts entered into an agreement with HBO &
Company whereby HBO & Company assigned and transferred to Allscripts all of its
rights, title and interest in the TouchScript system and all corresponding
documentation therefor, including all copyrights, copyright registrations,
trademark applications and trademark registrations. In exchange, Allscripts
issued 519,530 shares of common stock.

The shares were recorded at fair market value determined by Allscripts of
$0.06 per share, thus assigning a value of $31,000 to the TouchScript software.
The software is being amortized on a straight-line basis over a three-year
period.

16. Discontinued Operations

On March 18, 1999, Allscripts signed a definitive agreement to sell certain
assets of its pharmacy benefit management operation to Pharmacare Management
Services, Inc., Pharmacare Direct, Inc., and Procare Pharmacy, Inc. The sale
closed on March 31, 1999. The aggregate purchase price is $15,400,000, payable
in the form of an up-front payment at closing of $7,000,000 and a contingent
payment of up to $8,400,000 payable within 10 business days after the first
anniversary of the closing date. Additionally, the buyers purchased the
inventory at Allscripts' net cost, approximately $500,000, while Allscripts
retained the remaining working capital. The contingent payment is based upon
the number of prescription fillings (including original fillings and subsequent
refills) for the one-year period following the closing. Allscripts will receive
$23.12 for each traditional mail order prescription filling up to a maximum of
$5,000,000, $11.67 for each specialty mail order prescription filling up to a
maximum of $700,000 and $4.48 for each retail pharmacy prescription filling up
to a maximum of $2,700,000, in each case for fillings only from customers that
have been retained as of the anniversary date. Under certain circumstances, a
portion of the contingent payment can be paid prior to the anniversary date.
Allscripts has not received any contingent payments through December 31, 1999
and expects to receive less than the maximum contingent payment during 2000.

The operating results of the pharmacy benefit management segment have been
segregated from continuing operations and reported as a separate line item on
the Consolidated Statements of Operations under the caption "Income (loss) from
discontinued operations." Additionally, Allscripts has restated its prior
financial statements to present the operating results of the pharmacy benefit
management operations as a discontinued operation.

F-23
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Operating results from discontinued operations were as follows:

Included in revenue is $1,580,000, $2,982,000 and $375,000 in 1997, 1998
and 1999 from Anthem, Inc., a related party (see Note 19). Included in selling,
general and administrative expenses in 1997 is approximately $3,300,000
pertaining to the writedown of intangible assets.

The components of assets and liabilities of discontinued operations
included in Allscripts' consolidated balance sheets at December 31 are as
follows:

<TABLE>
<CAPTION>
1998 1999
------- -------
(In thousands)
<S> <C> <C>
Assets:
Accounts receivable...................................... $ 7,015 $ 95
Inventory................................................ 521 --
Other.................................................... 2,936 145
------- -------
Total assets.............................................. 10,472 240
Liabilities............................................... 6,192 226
------- -------
Net................................................... $ 4,280 $ 14
======= =======
</TABLE>

17. Supplemental Cash Flow Information

<TABLE>
<CAPTION>
1997 1998 1999
---- ------- -----
(In thousands,
except share and
per share amounts)
<S> <C> <C> <C>
Interest paid............................................... $509 $ 294 $ 231
Noncash investing and financing activity:
In connection with the agreement with HBO & Company,
issuance of 519,530 common shares valued at $0.06 per
share, in exchange for software valued at $31,000........ 31 -- --
Accretion of mandatory redemption value of preferred
shares................................................... 219 323 794
In connection with the $10,000,000, 8.0% convertible
subordinated debentures issued April 30, 1996, issuance
of $875,680 of additional debentures in satisfaction of
accrued interest thereon for the year ended December 31,
1997..................................................... 876 -- --
In connection with the Series I Unit Offering, issuance of
1,803,838 shares of Series J Redeemable Preferred shares
and 1,326,661 warrants in exchange for Allscripts'
outstanding convertible subordinated debentures (in the
aggregate principal amount of $11,219,000) plus accrued
interest thereon through April 15, 1998 ($437,000 in
aggregate)............................................... -- 11,656 --
In connection with the acquisition of TeleMed Corp.,
issuance of 117,500 and 87,271 shares of common stock
valued at $11.00 and $14.65 per share, respectively, in
exchange for net tangible liabilities of $655,000........ -- -- 2,571
In connection with the acquisition of Shopping@Home,
issuance of a 6% promissory note in the principal amount
of $650,000 in exchange for net tangible assets of
$18,000.................................................. -- -- 650
In connection with Allscripts' initial public offering,
conversion of 8,718,768 shares of preferred stock into
2,977,483 shares of common stock......................... -- -- 8,719
Cumulative dividends in arrears on redeemable preferred
shares................................................... 704 1,927 1,404
</TABLE>

F-24
<PAGE>

ALLSCRIPTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

18. Recently Issued Accounting Pronouncements

19. Related Party Transactions

From June 1997 through March 1999, Allscripts provided pharmacy benefit
management services for Anthem, Inc. One of Allscripts' directors is Chairman
of the Board and Chief Executive Officer of Anthem (see Note 16).

One of Allscripts' directors is a partner in the law firm of Green,
Stewart, Farber & Anderson, which Allscripts has retained to provide legal
services. Expense related to services provided by this law firm was $60,000,
$44,000 and $33,000 in 1997, 1998 and 1999, respectively.

20. Subsequent Event

On February 16, 2000, Allscripts entered into a subscription agreement
under which Allscripts agreed to sell 214,794 shares of common stock for a cash
purchase price of $10,000,000. The shares to be issued may be increased in the
event that the original per share price paid is greater than the initial price
to the public in the offering contemplated by this prospectus.

F-25
<PAGE>

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

No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Forward-Looking Statements............................................... 17
Use of Proceeds.......................................................... 17
Price Range of Common Stock.............................................. 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Consolidated Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 31
Management............................................................... 42
Certain Relationships and Related Party Transactions..................... 50
Principal and Selling Stockholders....................................... 52
Description of Capital Stock............................................. 54
Shares Eligible for Future Sale.......................................... 57
Legal Matters............................................................ 58
Experts.................................................................. 58
Underwriting............................................................. 59
Where to Find More Information........................................... 61
Index to Consolidated Financial Statements............................... F-1
</TABLE>

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

2,000,000 Shares

Allscripts, Inc.

Common Stock

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

Goldman, Sachs & Co.

Bear, Stearns & Co. Inc.

CIBC World Markets

Wit SoundView

Adams, Harkness & Hill, Inc.

Representatives of the Underwriters

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

Information Not Required In Prospectus

Item 13. Other Expenses of Issuance and Distribution

We will bear the expenses relating to the registration of common stock.
Except for the Securities and Exchange Commission registration fee, the
National Association of Securities Dealers, Inc. filing fee and the Nasdaq
National Market listing fee, the following expenses are estimates:

<TABLE>
<S> <C> <C>
Securities and Exchange Commission registration fee........ $ 31,575
National Association of Securities Dealers, Inc. filing
fee....................................................... 30,500
Nasdaq National Market listing fee......................... 9,920
Legal fees and expenses.................................... 125,000
Accountants' fees.......................................... 75,000
Printing fees.............................................. 125,000
Transfer agent fees........................................ 5,000
Miscellaneous.............................................. 23,005
--------
Total.................................................. $425,000
========
</TABLE>

Item 14. Indemnification of Directors and Officers

Our Certificate of Incorporation and By-laws provide that we shall, subject
to certain limitations, indemnify our directors and officers against expenses
(including attorneys' fees, judgments, fines and certain settlements) actually
and reasonably incurred by them in connection with any suit or proceeding to
which they are a party so long as they acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to a criminal action or proceeding, so long as
they had no reasonable cause to believe their conduct to have been unlawful.

Section 102 of the Delaware General Corporation Law permits a Delaware
corporation to include in its certificate of incorporation a provision
eliminating or limiting a director's liability to a corporation or its
stockholders for monetary damages for breaches of fiduciary duty. The enabling
statute provides, however, that liability for breaches of the duty of loyalty,
acts or omissions not in good faith or involving intentional misconduct, or
knowing violation of the law, and the unlawful purchase or redemption of stock
or payment of unlawful dividends or the receipt of improper personal benefits
cannot be eliminated or limited in this manner. Our Certificate of
Incorporation includes a provision that eliminates, to the fullest extent
permitted, director liability for monetary damages for breaches of fiduciary
duty.

Pursuant to the Underwriting Agreement as set forth in Exhibit 1.1, our
directors and officers are indemnified against certain civil liabilities that
they may incur under the Securities Act in connection with this registration
statement and the related prospectus.

We have purchased directors and officers liability insurance, which
provides coverage against certain liabilities.

In addition, some of our directors are indemnified against liabilities that
they may incur in their capacities as directors by third parties with which
they are affiliated.

Item 15. Recent Sales of Unregistered Securities

In the three years preceding the filing of this registration statement, we
sold the following securities (adjusted to give effect to a one-for-six reverse
stock split) that were not registered under the Securities Act:

II-1
<PAGE>

On July 17, 1997, we issued 519,530 common shares to HBO & Company in
exchange for all of HBO & Company's right, title and interest in and to the
TouchScript system. Exemption from registration is claimed pursuant to Section
4(2) of the Securities Act, no public sale having been involved.

On April 16, 1998, we issued warrants to purchase 916,651 common shares
with a per share exercise price of $0.06 and shares of Series H redeemable
preferred stock with modified redemption terms to the holders of Series H
preferred stock in exchange for their shares of Series H preferred stock.
Exemption from registration is claimed pursuant to Sections 3(a)(9) and 4(2) of
the Securities Act.

On April 16, 1998, we issued 1,339,241 shares of Series I redeemable
preferred stock and 4,597,070 common shares to a group of accredited investors
including members of management for an aggregate consideration of $8,930,000.
Exemption from registration is claimed pursuant to Section 4(2) of the
Securities Act, no public sale having been involved.

On April 16, 1998, we issued 1,803,838 shares of Series J redeemable
preferred stock and warrants to purchase 1,326,652 common shares with a per
share exercise price of $0.06 to the holders of the Debentures in exchange for
the Debentures and accrued interest thereon. Exemption from registration is
claimed pursuant to Sections 3(a)(9) and 4(2) of the Securities Act.

On March 31, 1999, we issued warrants to purchase 11,666 common shares with
a per share exercise price of $3.00 to certain nonemployees. Exemption from
registration is claimed pursuant to Section 4(2) of the Securities Act, no
public sale having been involved.

In May and September 1999 we issued an aggregate 204,771 common shares to
the stockholders of TeleMed Corp. in exchange for all of the outstanding
capital stock of TeleMed Corp. Exemption from registration is claimed pursuant
to Section 4(2) of the Securities Act, no public sale having been involved.

On June 30, 1999, we issued a promissory note in the principal amount of
$650,000 to Shopping@Home, Inc. in exchange for substantially all of the assets
of Shopping@Home. Exemption from registration is claimed pursuant to Section
4(2) of the Securities Act, no public sale having been involved.

On July 28, 1999, upon the closing of our initial public offering,
Allscripts, Inc., an Illinois corporation, merged with and into its wholly
owned subsidiary, Allscripts, Inc., a Delaware corporation. In connection with
the merger, Allscripts, Inc.--Delaware issued shares of common stock to the
holders of common stock of Allscripts, in exchange for such holders' shares of
common stock of Allscripts. Exemption from registration is claimed pursuant to
Section 3(a)(9) of the Securities Act.

On February 18, 2000, we issued 214,794 shares of common stock to a
strategic partner for a purchase price of $10,000,000. Exemption from
registration is claimed pursuant to Section 4(2) of the Securities Act, no
public sale having been involved.

In the three years preceding the filing of this registration statement, we
have issued an aggregate of 1,670,180 unregistered common shares to current and
former employees upon exercise of options for an aggregate exercise price of
$1,351,656. Exemption from registration is claimed pursuant to Rule 701 under
the Securities Act.

In the three years preceding the filing of this registration statement, we
have issued an aggregate of 4,705,796 shares of unregistered common stock upon
exercise of warrants for an aggregate exercise price of $417,113 and 140,834
shares of common stock surrendered pursuant to cashless exercises. Exemption
from registration is claimed pursuant to sections 3(a)(9) and 4(2) of the
Securities Act.

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits--See Index to Exhibits.

(b) Financial Statement Schedule
Report of Independent Accountants
Schedule II--Valuation and Qualifying Accounts

II-2
<PAGE>

Item 17. Undertakings

The undersigned hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Libertyville and State of Illinois on the 18th day of February, 2000.

Allscripts, Inc.

/s/ John G. Cull
________________________________________

John G. Cull

Senior Vice President, Finance,
Treasurer and Secretary

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 18th day of February, 2000.

<TABLE>
<CAPTION>
Signature Title
--------- -----

<C> <S>
* Chairman and Chief Executive Officer
___________________________________________ (Principal Executive Officer)
Glen E. Tullman

* President, Chief Financial Officer and
___________________________________________ Director (Principal Financial Officer)
David B. Mullen

/s/ John G. Cull Senior Vice President, Finance, Treasurer
___________________________________________ and Secretary (Principal Accounting
John G. Cull Officer)

* Director
___________________________________________
Philip D. Green

* Director
___________________________________________
M. Fazle Husain

* Director
___________________________________________
Michael J. Kluger

* Director
___________________________________________
L. Ben Lytle

* Director
___________________________________________
Edward M. Philip

* Director
___________________________________________
</TABLE> Gary M. Stein

/s/ John G. Cull

* _____________________________

John G. Cull, as attorney-in-
fact,

pursuant to a power of attorney

granted in Registration
Statement

No. 333-95521 filed on January
27, 2000

S-1
<PAGE>

Report of Independent Accountants
on Financial Statement Schedule

To the Board of Directors of
Allscripts, Inc.

Our audits of the consolidated financial statements referred to in our
report dated February 17, 2000, appearing in this Registration Statement also
included an audit of the financial statement schedule listed in Item 16(b) of
this Registration Statement. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 17, 2000

FS-1
<PAGE>

Allscripts, Inc. and Subsidiaries
Valuation and Qualifying Accounts

Schedule II

<TABLE>
<CAPTION>
Beginning Charged to Deductions Ending
Balance Expense (Writeoffs) Balance
--------- ---------- ----------- -------
(In thousands)
<S> <C> <C> <C> <C>
Allowance for accounts receivable
Year ended December 31, 1997....... $ 3,141 $ 667 $(376) $ 3,432
Year ended December 31, 1998....... 3,432 1,241 (150) 4,523
Year ended December 31, 1999....... 4,523 (633) (147) 3,743

Valuation allowance for deferred tax
assets
Year ended December 31, 1997....... 11,043 2,545 -- 13,588
Year ended December 31, 1998....... 13,588 1,696 -- 15,284
Year ended December 31, 1999....... 15,284 4,354 -- 19,638
</TABLE>

FS-2
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number Description Reference
- ------- ----------- ---------
<S> <C> <C>
1.1 Form of Underwriting Agreement Incorporated herein by reference from the
Registrant's Registration Statement on
Form S-1 filed on January 27, 2000 (SEC
file no. 333-95521)

2.1 Form of Plan of Merger between the Incorporated herein by reference from the
Registrant and Allscripts, Inc., an Registrant's Registration Statement on
Illinois corporation Form
S-1 as part of Amendment No. 4 filed on
July 20, 1999 (SEC file no. 333-78431)

3.1 Amended and Restated Certificate of Incorporated herein by reference from the
Incorporation Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999

5.1 Opinion of Gardner, Carton & Douglas

3.2 By-laws Incorporated herein by reference from the
Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999

10.1+ Amended and Restated 1993 Stock Incentive Incorporated herein by reference from the
Plan Registrant's Registration Statement on
Form
S-1 as part of Amendment No. 2 filed on
June 29, 1999 (SEC file no. 333-78431)

10.2 Asset Purchase Agreement, dated as of Incorporated herein by reference from the
March 19, 1999, by and among the Registrant's Registration Statement on
Registrant, PharmaCare Management Services, Form
Inc., PharmaCare Direct, Inc. and ProCare S-1 as part of Amendment No. 1 filed on
Pharmacy, Inc. June 7, 1999 (SEC file no. 333-78431)

10.3 Twelfth Restated Registration Agreement Incorporated herein by reference from the
dated as of June 18, 1999, by and among the Registrant's Registration Statement on
Registrant, those Holders of the Form
Registrant's Series A Preferred, Series B S-1 as part of Amendment No. 2 filed on
Preferred, Series C Preferred, Series D June 29, 1999 (SEC file no. 333-78431)
Preferred, Series F Preferred and Series G
Preferred listed in Schedule I attached
thereto, the Holders of the Extension
Guaranty Warrants listed in Schedule II
thereto, the Holders of the 1996 Extension
Guaranty Warrants listed in Schedule II
thereto, those Holders of Common listed in
Schedule III thereto, the Holders of Series
H Warrants and H Unit Common listed in
Schedule IV thereto, the Holders of
Extension Series H Warrants listed in
Schedule IV thereto, the Holders of I Unit
Common listed in Schedule V thereto and the
Holders of Debenture Warrants listed in
Schedule VI thereto.

10.4 Industrial Building Lease dated April 30, Incorporated herein by reference from the
1997 between G2 Limited Partnership and the Registrant's Registration Statement on
Registrant Form
S-1 filed on May 14, 1999 (SEC file no.
333-78431)

</TABLE>

E-1
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description Reference
- ------- ----------- ---------
<S> <C> <C>
10.5 Lease Agreement between American National
Bank and Trust Company of Chicago, as
Trustee, and the Registrant dated September
1996, as amended December 31, 1999

10.6+ Employment Agreement effective August 1, Incorporated herein by reference from the
1997 between the Registrant and Glen E. Registrant's Registration Statement on
Tullman Form S-1 filed on May 14, 1999 (SEC file
no. 333-78431)

10.7+ Employment Agreement effective August 1, Incorporated herein by reference from the
1997 between the Registrant and David B. Registrant's Registration Statement on
Mullen Form S-1 filed on May 14, 1999 (SEC file
no. 333-78431)

10.8+ Employment Agreement effective September 2, Incorporated herein by reference from the
1997 between the Registrant and Steven M. Registrant's Registration Statement on
Katz Form S-1 filed on May 14, 1999 (SEC file
no. 333-78431)

10.9+ Agreement dated May 1, 1995 between the Incorporated herein by reference from the
Registrant and John G. Cull Registrant's Registration Statement on
Form S-1 filed on May 14, 1999 (SEC file
no. 333-78431)

10.10 Form of TouchScript Master License Incorporated herein by reference from the
Agreement Registrant's Registration Statement on
Form S-1 filed on May 14, 1999 (SEC file
no. 333-78431)

10.11 Revolving Credit Agreement dated as of Incorporated herein by reference from the
April 16, 1998 and amended as of May 6, Registrant's Registration Statement on
1998 by and between the Registrant and Form S-1 as part of Amendment No. 2 filed
LaSalle National Bank on June 29, 1999 (SEC file no. 333-78431)

10.12 Supply Agreement dated August 27, 1998 Incorporated herein by reference from the
between McKesson U.S. Health Care and the Registrant's Registration Statement on
Registrant Form S-1 as part of Amendment No. 1 filed
on June 7, 1999 (SEC file no. 333-78431)

10.13 Form of Series H Warrant Incorporated herein by reference from the
Registrant's Registration Statement on
Form S-1 filed on May 14, 1999 (SEC file
no. 333-78431)

10.14 Form of Extension Guaranty Warrant Incorporated herein by reference from the
Registrant's Registration Statement on
Form S-1 filed on May 14, 1999 (SEC file
no. 333-78431)

10.15 Form of 1996 Extension Guaranty Warrant Incorporated herein by reference from the
Registrant's Registration Statement on
Form S-1 filed on May 14, 1999 (SEC file
no. 333-78431)

</TABLE>

E-2
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description Reference
- ------- ----------- ---------
<S> <C> <C>
10.16 Form of Debenture Warrant Incorporated herein by reference from the
Registrant's Registration Statement on
Form
S-1 filed on May 14, 1999 (SEC file no.
333-78431)

10.17 Form of Series H Extension Warrant Incorporated herein by reference from the
Registrant's Registration Statement on
Form
S-1 filed on May 14, 1999 (SEC file no.
333-78431)

10.18 Asset Purchase Agreement dated June 30, Incorporated herein by reference from the
1999 by and among the Registrant and Registrant's Registration Statement on
Shopping@Home, Inc., Glen Tullman, Lee Form
Shapiro, Stanley Crane and Joseph E. Carey S-1 as part of Amendment No. 4 filed on
July 20, 1999 (SEC file no. 333-78431)

10.19+ Employment Agreement, effective August 2, Incorporated herein by reference from the
1999, between the Registrant and Joseph E. Registrant's Quarterly Report on Form 10-Q
Carey for the quarter ended September 30, 1999
(filed as Exhibit 10.1 thereto)

23.1 Consent of PricewaterhouseCoopers LLP

23.2 Consent of Gardner, Carton & Douglas
(included in Exhibit 5.1)

24.1 Powers of Attorney (included on signature Incorporated herein by reference from the
page) Registrant's Registration Statement on
Form
S-1 filed on January 27, 2000 (SEC file
no. 333-95521)

27.1 Financial Data Schedule

</TABLE>
- --------
+Indicates compensatory plan.

E-3

<PAGE>

Exhibit 5.1

GARDNER CARTON & DOUGLAS
321 North Clark Street
Suite 2900
Chicago, Illinois 60610

February 18, 2000

Allscripts, Inc.
2401 Commerce Drive
Libertyville, Illinois 60048

Re: Registration Statement on Form S-1 (No. 333-95521)
--------------------------------------------------

Gentlemen:

As counsel to Allscripts, Inc., a Delaware corporation (the "Company"), we
have participated in the legal proceedings and matters relating to the proposed
sale of up to 992,000 shares of Common Stock, $.01 par value per share, of the
Company (the "Offered Stock") referred to in the Registration Statement filed
with the Securities and Exchange Commission on Form S-1 (Registration No. 333-
95521) with respect to the Offered Stock (such Registration Statement as amended
or supplemented and together with any registration statement referred to in the
next succeeding sentence, is hereinafter referred to as the "Registration
Statement"). This opinion also relates to any registration statement in
connection with this offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and the term "Offered
Stock" as used herein includes any additional shares of the Company's Common
Stock registered pursuant to such subsequently filed registration statement.

In our opinion, the shares of Offered Stock have been duly authorized and,
when issued, delivered and paid for, will be validly issued, fully paid and non-
assessable.

We consent to the use of our name in the Registration Statement and to the
filing of this opinion as an Exhibit to such Registration Statement.

Very truly yours,

/s/ Gardner, Carton & Douglas

<PAGE>

Exhibit 10.5

CONCEPTS II BUILDING
--------------------

FIRST AMENDMENT
---------------

TO
--

LEASE AGREEMENT
---------------

between
-------

AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
---------------------------------------------------
as Trustee under Trust Agreement dated May 15, 1994,
----------------------------------------------------
and known as Trust Number MP-012430
-----------------------------------

LANDLORD
--------

and
---

ALLSCRIPTS, INC.
----------------

TENANT
------
<PAGE>

AMENDED LEASE SUMMARY SHEET
---------------------------

DATE OF FIRST AMENDMENT
TO LEASE: December 31st, 1999

DATE OF LEASE: October 15, 1996

TENANT: Allscripts, Inc.

BUILDING: Concepts II
2441 Commerce Drive
Libertyville, Illinois 60048

LEASED PREMISES ("Original"): Rentable Square Feet - 61,266 square feet

ADDITIONAL LEASED PREMISES: Rentable Square Feet - 18,449 square feet

LEASED PREMISES ("with Additional
Leased Premises") Rentable Square Feet - 79,715 square feet

COMMENCEMENT DATE: April 1, 1997

COMMENCEMENT DATE FOR ADDITIONAL
LEASED PREMISES: February 1, 2000

TERMINATION DATE FOR LEASED
PREMISES AND ADDITIONAL
PREMISES: June 30, 2004

FIXED RENT FOR LEASED PREMISES
("Original") For Entire Term: $3,628,587.18
87 Monthly Payments As Follows:

4/1/97 to 3/31/98 $38,546.53
4/1/98 to 3/31/99 $39,510.20
4/1/99 to 3/31/00 $40,497.96
4/1/00 to 3/31/01 $41,510.41
4/1/01 to 3/31/02 $42,548.17
4/1/02 to 3/31/03 $43,611.88
4/1/03 to 3/31/04 $44,702.18
4/1/04 to 6/30/04 $45,819.74

FIXED RENT FOR ADDITIONAL
LEASED PREMISES: For Entire Term: $1,117,278.58
51 Monthly Payments As Follows:
2/1/00 to 3/31/00 None
4/1/00 to 1/31/01 $20,755.13
2/1/01 to 1/31/02 $21,377.78
2/1/02 to 1/31/03 $22,019.11
2/1/03 to 1/31/04 $22,679.69
2/1/04 to 6/30/04 $23,360.08

<PAGE>

AMENDED LEASE SUMMARY SHEET
---------------------------
Page 2

COMBINED FIXED RENT FOR
LEASED PREMISES AND ADDITIONAL
LEASED PREMISES: For Entire Term: $4,745,857.76
87 Monthly Payments As Follows:
4/1/97 to 3/31/98 $38,546.53
4/1/98 to 3/31/99 $39,510.20
4/1/99 to 3/31/00 $40,497.96
4/1/00 to 1/31/01 $62,265.54
2/1/01 to 3/31/01 $62,888.19
4/1/01 to 1/31/02 $63,925.95
2/1/02 to 3/31/02 $64,567.28
4/1/02 to 1/31/03 $65,630.99
2/1/03 to 3/31/03 $66,291.56
4/1/03 to 1/31/04 $67,381.87
2/1/04 to 3/31/04 $68,062.26
4/1/04 to 6/30/04 $69,179.82

TAXES & OPERATING EXPENSES: Tenant shall pay on a prorata share
- 76.85% until March 31, 2000,
thereafter 100%

ELECTRICITY AND GAS FOR
HVAC: Separately Metered to Tenant

ELECTRICITY FOR LIGHTING AND
OUTLETS: Separately Metered to Tenant

PERMITTED USES: Warehousing, Industrial and Office Uses

SECURITY DEPOSIT: None

TENANT IMPROVEMENTS FOR
LEASED PREMISES: Landlord has provided an allowance of
$650,000

TENANT IMPROVEMENTS FOR ADDITIONAL
LEASED PREMISES: Landlord has provided an allowance of
$100,000

THE AMENDED LEASE SUMMARY IS FOR INFORMATIONAL PURPOSES ONLY. IN THE EVENT ANY
INFORMATION ON THE LEASE SUMMARY IS IN CONFLICT WITH ANY PROVISION IN THE LEASE
AGREEMENT, THE LEASE AGREEMENT SHALL PREVAIL.
<PAGE>

TABLE OF ARTICLES
-----------------

<TABLE>
<CAPTION>
ARTICLE PAGE NUMBER
- ------- -----------
<S> <C> <C>
I Defined Terms 1

II Leasing Covenant - Additional Leased Premises 1

III Restated Fixed Rent 1

IV Acceptance of Additional Leased Premises 3

V Tenant's Prorata Share of Additional Rent 4

VI Amendment to Notice Article 4

VII Option to Renew 5

VIII Remaining Provisions of Lease 5

IX Trustee's Authority and Exculpatory 5

EXHIBITS
- --------

A. Site Plan

B. Restated Estoppel Certificate
</TABLE>
<PAGE>

Exhibit 10.5

FIRST AMENDMENT TO LEASE AGREEMENT
----------------------------------

THIS FIRST AMENDMENT TO LEASE AGREEMENT (the "Amendment"), is made and
entered into this 31st day of December 1999, by and between AMERICAN NATIONAL
BANK AND TRUST COMPANY OF CHICAGO, as Trustee under Trust Agreement dated May
15, 1994, and known as Trust Number MP-012430 ("Landlord"), and ALLSCRIPTS,
INC., a Delaware corporation (formally ALLSCRIPTS PHARMACEUTICALS, INC., an
Illinois Corporation) ("Tenant"), and hereby amends a Lease Agreement entered
into between the parties on October 15, 1996 ("Lease").

WHEREAS, Landlord is the owner of a single story industrial building
totaling approximately 79,715 square feet (the "Building") as outlined in the
Site Plan attached hereto and identified as Exhibit A which is made a part
hereof. The Building is commonly known as Concepts II, and has a common address
of 2401 Commerce Drive, Libertyville, Illinois 60048, and is located in the
industrial park known as Lincoln Commerce Center;

WHEREAS, the Tenant has leased from the Landlord 61,266 Rentable Square
Feet of the Building (the Leased Premises) pursuant to the Lease; and

WHEREAS, the Tenant desires to lease the balance of the Building from the
Landlord, an additional 18,449 Rentable Square Feet (the "Additional Leased
Premises"), which is highlighted on Exhibit A.

NOW THEREFORE it is agreed to amend the Lease as follows:

ARTICLE I
DEFINED TERMS
-------------

The Lease provides for various special references and/or definitions of
certain terms or words. All such references and/or definitions are incorporated
in this Amendment, however with the exception that hereinafter the words "Leased
Premises" shall mean collectively the Leased Premises, as defined in the Lease,
and the Additional Leased Premises, as defined herein.

ARTICLE II
LEASING COVENANT - ADDITIONAL LEASED PREMISES
---------------------------------------------

Landlord does hereby lease and demise to the Tenant, and Tenant accepts
from Landlord, the certain premises referred to as Additional Leased Premises,
as highlighted on the Site Plan attached hereto as Exhibit A, containing 18,449
square feet, for the term of years and months commencing on February 1, 2000 and
terminating on the Termination Date (June 30, 2004).

ARTICLE III
RESTATED FIXED RENT
-------------------

Article II, FIXED RENT, of the Lease is hereby voided and held for naught
effective as of February 1, 2000, and the following Article III, RESTATED FIXED
RENT, substituted therefor:

"Subject to the terms and conditions of the Lease and in consideration
hereof, Tenant agrees to pay the Landlord a fixed rent of Four Million, Seven
Hundred Forty Five Thousand, Eight Hundred Fifty Seven and 76/100 Dollars
($4,745,857.76) ("Restated Fixed Rent"), in eighty seven (87) monthly
installments payable in advance on the first day of each month as follows:

1
<PAGE>

A. For the Twelve (12) month period from April 1, 1997 to March 31, 1998
inclusive - Twelve (12) monthly installments of Thirty Eight, Thousand Five
Hundred and Forty Six and 53/100 Dollars ($38,546.53) (payment of these
installments by the Tenant to the Landlord is hereby acknowledged);

B. For the Twelve (12) month period from April 1, 1998 to March 31, 1999
inclusive - Twelve (12) monthly installments of Thirty Nine Thousand, Five
Hundred and Ten and 20/100 Dollars ($39,510.20) (payment of these
installments by the Tenant to the Landlord is hereby acknowledged);

C. For the Twelve (12) month period from April 1, 1999 to March 31, 2000
inclusive - Twelve (12) monthly installments of Forty Thousand, Four
Hundred and Ninety-Seven and 96/100 Dollars ($40,497.96) (payment of the
installments from April 1, 1999 to December 31, 1999 by the Tenant to the
Landlord is hereby acknowledged);

D. For the Ten (10) month period from April 1, 2000 to January 31, 2001
inclusive - Ten (10) monthly installments of Sixty Two Thousand, Two
Hundred and Sixty Five and 54/100 Dollars ($62,265.54);

E. For the Two (2) month period from February 1, 2001 to March 31, 2001
inclusive - Two (2) monthly installments of Sixty Two Thousand, Eight
Hundred and Eighty Eight and 19/100 Dollars ($62,888.19);

F. For the Ten (10) month period from April 1, 2001 to January 31, 2002
inclusive - Ten (10) monthly installments of Sixty Three Thousand, Nine
Hundred and Twenty Five and 95/100 Dollars ($63,925.95);

G. For the Two (2) month period from February 1, 2002 to March 31, 2002
inclusive - Two (2) monthly installments of Sixty Four Thousand, Five
Hundred and Sixty Seven and 28/100 Dollars ($64,567.28);

H. For the Ten (10) month period from April 1, 2002 to January 31, 2003
inclusive - Ten (10) monthly installments of Sixty Five Thousand, Six
Hundred and Thirty and 99/100 Dollars ($65,630.99);

I. For the Two (2) month period from February 1, 2003 to March 31, 2003
inclusive - Two (2) monthly installments of Sixty Six Thousand, Two Hundred
and Ninety One and 56/100 Dollars ($66,291.56);

J. For the Ten (10) month period from April 1, 2003 to January 31, 2004
inclusive - Ten (10) monthly installments of Sixty Seven Thousand, three
Hundred and Eighty One and 87/100 Dollars ($67,381.87);

K. For the Two (2) month period from February 1, 2004 to March 31, 2004
inclusive - Two (2) monthly installments of Sixty Eight Thousand, Sixty Two
and 26/100 Dollars ($68,062.26); and

L. For the Three (3) month period from April 1, 2004 to June 30, 2004
inclusive - Three (3) monthly installments of Sixty Nine Thousand, One
Hundred and Seventy Nine and 82/100 Dollars ($69,179.82).

2
<PAGE>

Restated Fixed Rent and Additional Rent and/or other payments reserved and
required under the Lease and the Amendment are collectively referred to as the
"Rental". Unless as otherwise specifically provided or hereafter otherwise
designated, all monthly installments of Rental shall be paid in advance on the
first day of each and every calendar month of the Term to Landlord's agent,
Lincoln Atrium Management Company, 59 West Seegers Road, Arlington Heights,
Illinois 60005, or to such other agent or at such other place as Landlord may
from time to time hereafter designate in writing. All Rental shall be paid by
Tenant to Landlord without notice or demand, and without abatement, deduction,
counterclaim or set off of any kind."

ARTICLE IV
ACCEPTANCE OF ADDITIONAL LEASED PREMISES
----------------------------------------

A. The Tenant accepts the Additional Leased Premises in its "as is"
"where is" condition with no agreement on the part of the Landlord to make any
Tenant Improvements or changes thereto. However the Landlord warrants that the
roof, the structure, and the parking lot of the Building, and the plumbing and
HVAC servicing the Additional Leased Premises are all in good working order as
of the date of the execution of this Amendment. The Tenant shall be entitled to
receive the benefit of existing manufacturers' and contractors' warranties, if
any, regarding the Additional Leased Premises.

B. Subject to Article IV, Section C below, the Tenant shall be
responsible and shall pay for the cost of any and all improvements installed to
the Additional Leased Premises it determines necessary (the "Tenant Work"). The
Tenant shall obtain and pay for the cost of all permits required from the
Village for the construction of the Tenant Work performed by the Tenant or the
Tenant's contractors. The Tenant shall be responsible for the performance of all
Tenant Work in accordance with and pursuant to the following:

(a) Prior to the commencement of the construction of the Tenant Work, the
Tenant shall submit to the Landlord the following: (i) the architectural
plans and specifications (the "Tenant Plans"); (ii) a sworn contractor's
statement listing all the contractors and/or subcontractors who will
perform the Tenant Work, their addresses, telephone numbers, and the amount
of their contracts; and (iii) copies of contracts with all contractors
and/or subcontractors; (iv) copies of all permits from the Village. The
Tenant Plans shall be subject to the prior written approval of the
Landlord, which approval or disapproval shall be given by the Landlord
within five (5) business days after receipt by the Landlord of the Tenant
Plans. If approval or disapproval is not given by the Landlord within the
said five (5) day period, it shall be conclusively presumed that the Tenant
Plans have been approved by the Landlord. The Tenant may not commence the
Tenant Work until this approval has been obtained from the Landlord.

(b) All Tenant Work shall be constructed and/or installed in a good and
workmanlike manner and in accordance with all applicable federal, state,
municipal and local laws and building codes, fire regulations and
requirements of the Fire Insurance Rating Bureau.

(c) Tenant agrees at its expense, to obtain and maintain fire and extended
coverage insurance, public liability insurance and Workman's Compensation
insurance from insurance companies reasonably acceptable to Landlord
adequate to fully protect Landlord from and against all liability for death
or injury to person or damage to property caused in or about the Building
by reason of the construction of the Tenant Work. The required public
liability insurance shall insure Landlord and Tenant from all claims,
demands or actions for injury to or death arising out of any one accident
to the limit of Five Million Dollars ($5,000,000), and for damage to
property in an amount of not less than One Million Dollars ($1,000,000).
The Landlord shall be named as an additional insured on said policies.

3
<PAGE>

(d) All roof penetrations required by the Tenant, if any, shall be by the
Landlord's roofing contractor at the Tenant's expense; provided however the
Tenant shall have the right to review and approve all of the Landlord's
contractor's charges, which charges shall be competitive in the
marketplace. No attachment to or drilling or welding to or of the
Building's structural systems or exterior walls is allowed without the
express written permission of the Landlord, which shall not be unreasonably
withheld or delayed.

(e) Any equipment and/or fixtures to be hung from the ceiling shall be
attached to the structural members only, and not from any duct work,
conduit, decking, ceiling grid and/or acoustical tiles.

(f) Tenant shall cause, at its expense, the daily removal of all trash,
rubbish and surplus material from the Building and the Additional Leased
Premises.

(g) Upon approval of the Tenant Plans by the Landlord, the Tenant shall
cause the construction of the Tenant Work to promptly commence and will use
every reasonable effort to cause the Tenant Work to be completed as soon as
possible.

C. As an inducement to enter into this Amendment, the Landlord agrees to
pay to the Tenant the sum of One Hundred Thousand Dollars ($100,000) (the
"Tenant Inducement"), payable as follows:

(a) Within fifteen (15) days of the receipt by the Landlord of invoices
and acceptable lien waivers from the Tenant's contractor(s) for the Tenant
Work, the Landlord shall pay to the Tenant the amount of said invoices, not
to exceed the amount of the Tenant Inducement, provided the Tenant has not
committed an uncured Event of Default at the time of the payment; and

(b) The unpaid balance of the Tenant Inducement, if any, shall be paid to
the Tenant within fifteen (15) days of the receipt by the Landlord of
acceptable final lien waivers from all Tenant contractor(s) provided the
Tenant has not committed an uncured Event of Default at the time of the
payment. Tenant shall provide a copy of the occupancy permit upon receipt
from Village.

The Landlord does not require the Tenant to expend the entire amount of the
Tenant Inducement on the cost of the Tenant Work, and should the cost of the
Tenant Work be less than the Tenant Inducement, the unexpended portion of the
Tenant Inducement will be paid to the Tenant upon compliance of its obligations
under Subsection C (b) above.

ARTICLE V
TENANT'S PRORATA SHARE OF ADDITIONAL RENT
-----------------------------------------

Effective as of April 1, 2000, the Tenant's Prorata Share of Additional
Rent (as defined in Article III of the Lease) is increased to One Hundred
Percent (100%).

ARTICLE VI
AMENDMENT TO NOTICE ARTICLE
---------------------------

The address for Notices to the Landlord as provided in Article XVII of the
Lease is changed to:

4
<PAGE>

Lincoln Atrium Management Company
59 West Seegers Road
Arlington Heights, IL 60005
Fax Number - 847-364-7772

ARTICLE VII
OPTION TO RENEW
---------------

Section A of Article XXII - OPTION TO RENEW of the Lease is hereby voided
and held for naught and the following substituted therefor:

"A. The monthly Fixed Rent to be paid by the Tenant during the first year
of the Extended Term shall be the greater of the following:

(a) Seventy Thousand Nine Hundred and Nine and 32/100 Dollars
($70,909.32); or

(b) The sum of the following two calculations:

(i) Thirty-Eight Thousand Five Hundred and Forty Six and 53/100
Dollars ($38,546.53), plus that sum determined by multiplying the
percentage increase of the PRICE INDEX between the month of April
1997 and June 2004 times Thirty-Eight Thousand Five Hundred and
Forty Six and 53/100 Dollars ($38,546.53); and

(ii) Twenty Thousand, Seven Hundred and Fifty Five and 13/100
Dollars ($20,755.13), plus that sum determined by multiplying the
percentage increase of the PRICE INDEX between the months of
February 2000 and June 2004 times Twenty Thousand, Seven Hundred
and Fifty Five and 13/100 Dollars ($20,755.13)."

ARTICLE VIII
REMAINING PROVISIONS OF LEASE
-----------------------------

The Estoppel Certificate (Exhibit F of the Lease) is hereby restated as set
forth in Exhibit B. All other provisions, terms and conditions of the Lease, not
in conflict with the provisions, terms and conditions of this Amendment, shall
remain in full force and effect.

ARTICLE IX
TRUSTEE'S AUTHORITY AND EXCULPATORY
-----------------------------------

AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO hereby represents and
warrants that it is fully empowered and authorized to execute this Amendment
pursuant to the terms and conditions contained herein pursuant to the Trust
Agreement dated May 15, 1994, and known as Trust Number MP - 012430, and that
such terms and conditions do not violate the provisions of such Trust. It is
expressly understood and agreed by and between the parties hereto, anything
herein to the contrary notwithstanding, that each and all of the
representations, covenants, undertakings and agreements herein made on the part
of the Landlord while in form purporting (except as herein otherwise expressed)
to be the representations, covenants, undertakings and agreements of the
Landlord are nevertheless each and every one of them, made and intended not as
personal representations, covenants, undertakings and agreements by the Landlord
or for the purpose or with the intention of binding the Landlord personally, but
are made and/or intended for the purpose of binding only that portion of the
trust

5
<PAGE>

property specifically leased hereunder; that this Amendment is executed and
delivered by said Landlord not in its own right, but solely in the exercise of
the powers conferred upon it as such trustee; that no duty shall rest upon
Landlord to sequester the trust estate or the rents, issues and profits arising
therefrom, or the proceeds arising from any sale or other disposition thereof;
and that no personal liability or personal responsibility is assumed by nor
shall at any time be asserted or enforceable against AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO, or any of the beneficiaries under said Trust
Agreement, on account of this Amendment and/or the Lease on account of any
representations, covenants, undertakings or agreements of the Landlord in this
Amendment and/or the Lease contained either expressed or implied; all such
personal liability, if any, being expressly waived and released by the Tenant
herein and by all persons claiming by, through or under said Tenant.

IN WITNESS WHEREOF, we have set our hands and seal to this First Amendment
to Lease, of six (6) pages, this page included, the day and year first above
written.

LANDLORD:
AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO as trustee as aforesaid

/s/ Dennis John Carrara
--------------------------------------------------

Assistant Vice President

TENANT:
ALLSCRIPTS, INC., a Delaware Corporation

/s/ John Cull /s/ David B. Mullen
- ------------------ --------------------------------------------------
Secretary President

6
<PAGE>

LANDLORD'S ACKNOWLEDGMENT
-------------------------

STATE OF ILLINOIS
COUNTY OF COOK

I, Maureen Paige, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY THAT Dennis John Carrara personally known to me to
be the Assistant Vice President of AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO and personally known to me to be the same person whose name is
subscribed to the foregoing instrument, appeared before me this day in person
and acknowledged that he signed and delivered the said instrument as said
President of said corporation, and caused the corporate seal of said corporation
to be affixed thereto, pursuant to authority given by the Trust Agreement, dated
May 15, 1994, and known as Trust No. MP-012430, and by the direction of the
beneficiaries thereof, for the uses and purposes therein set forth.

Given under my hand and notarial seal this 25th day of January,
2000.

[SEAL]

/s/ Maureen Paige
--------------------------------
Notary Public

My commission expires 10/28/02.

TENANT'S ACKNOWLEDGMENT
-----------------------

STATE OF ILLINOIS
COUNTY OF COOK

I, Connie S. Scharfhausen, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY THAT David B. Mullen personally known to
me to be the President of ALLSCRIPTS, INC., a Delaware Corporation, and John
Cull, personally known to me to be the Secretary of said corporation and
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument, appeared before me this day in person and severally
acknowledged that they signed and delivered the said instrument as President and
Secretary of said corporation, and caused the corporate seal to be affixed
thereto, pursuant to authority given by the Board of Directors of said
corporation, as their free and voluntary act and as the free and voluntary act
and deed of said corporation, for the uses and purposes therein set forth.

Given under my hand and notarial seal this 31st day of December 1999.

/s/ Connie S. Scharfhausen
------------------------------------------------
Notary Public

My Commission expires: May 29, 2002.

[SEAL]
<PAGE>

[LINCOLN COMMERCE CENTER -
CONCEPTS II SITE PLAN]

EXHIBIT A

<PAGE>

RESTATED ESTOPPEL CERTIFICATE

The undersigned, ALLSCRIPTS, INC., a Delaware Corporation, hereby
certifies that it is the Tenant under a certain Lease Agreement dated October
15, 1996, and amended December 31st, 1999, (collectively the "Lease") with
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Trustee under Trust
Agreement dated May 15, 1994, and known as Trust Number MP-012430, as the
Landlord, which Lease leases to Tenant, 79,715 square feet of office/warehouse
space ("Leased Premises") at the Concepts II Building, Libertyville, Illinois
("Building").

The Tenant hereby further certifies as to the following:

1. That the Lease is in full force and effect and has not been
modified, altered, or amended;

2. That possession of the Leased Premises ("Original Leased
Premises"- 61,266 square feet) had been accepted by the Tenant on April 1, 1997,
and the Additional Leased Premises ("Additional Leased Premises" - 18,449 square
feet) on February 1, 2000;

3. That the Term of the Lease commenced on April 1, 1997, and ends
on June 30, 2004;

4. That the Rentable Square Feet of the Leased Premises are 79,715;

5. That the Fixed Rent payable by Tenant for the entire Term is
$4,745,857.76, payable in 87 Monthly Payments As Follows:

4/1/97 to 3/31/98 $38,546.53
4/1/98 to 3/31/99 $39,510.20
4/1/99 to 3/31/00 $40,497.96
4/1/00 to 1/31/01 $62,265.54
2/1/01 to 3/31/01 $62,888.19
4/1/01 to 1/31/02 $63,925.95
2/1/02 to 3/31/02 $64,567.28
4/1/02 to 1/31/03 $65,630.99
2/1/03 to 3/31/03 $66,291.56
4/1/03 to 1/31/04 $67,381.87
2/1/04 to 3/31/04 $68,062.26
4/1/04 to 6/30/04 $69,179.82

6. That the Tenant is obligated to pay 100.00% of the Taxes and
Operating Expenses of the Building, as Additional Rent;

7. That the Tenant has accepted, and is in possession of, the Leased
Premises; that any Tenant Improvements to the Leased Premises, required by the
terms of the Lease to be made by the Landlord, have been completed to the
satisfaction of the Tenant;

8. That there are no payments, credits, or concessions required to
be made or granted by Landlord to Tenant in connection with the Lease which have
not been paid or fulfilled, so that the Landlord has no obligations or
liabilities with respect thereto;

9. That no Rental or any other charges due under the Lease have been
paid more than thirty (30) days in advance of the date hereof;

1
<PAGE>

10. That the Lease, the Leased Premises or any portion thereof, have
not been assigned or sublet, by operation of law or otherwise;

11. That there has been no Event of Default or breach under the
Lease, by either the Tenant or the Landlord, and that no event has occurred
which, with the giving of Notices, or the passage of time, or both, could result
in an Event of Default or breach under the Lease;

12. That the Tenant, as of the date hereof, does not have any right,
charge, claim, lien, or right of set-off, under the Lease and/or against the
Landlord, other than as stated in the Lease;

13. That the Lease, dated October 15, 1996, consists of 31 Pages and
the following Exhibits:

Exhibit A - Legal Description
Exhibit B - Site Plan
Exhibit C - Tenant Plans
Exhibit D - Contract Prices and Estimates
Exhibit E - Protective Covenants
Exhibit F - Estoppel Certificate

and the First Amendment to Lease, dated December ____, 1999, consists of 6 pages
and the following Exhibits:

Exhibit A - Site Plan
Exhibit B - Restated Estoppel Certificate;

14. That there are no agreements between the Landlord and the Tenant
other than as stated and provided in the above described Lease, Lease Amendment
and their respective Exhibits;

15. That exceptions to the above statements 1 to 14 are set forth
hereinafter (if none, state none):

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

- --------------------------------------------------------------------------------
and;

16. That this certificate is being made to:
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
and said party may rely on the truthfulness of the statements set forth herein.

This Estoppel Certificate is dated this 31st day of December, 1999.

TENANT:
ALLSCRIPTS, INC., a Delaware Corporation

/s/ John Cull /s/ David B. Mullen
- -------------------- -----------------------------------------------
Secretary President

EXHIBIT B

2
<PAGE>

CONCEPTS II BUILDING

LEASE AGREEMENT

between

AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
as Trustee under Trust Agreement dated May 15, 1994,
and known as Trust Number MP-012430

LANDLORD

and

ALLSCRIPS PHARMACEUTICALS, INC.

TENANT
<PAGE>

LEASE SUMMARY SHEET

DATE OF LEASE: October 15, 1996

TENANT: Allscrips Pharmaceuticals, Inc.

LEASED PREMISES: Concepts II
2441 Commerce Drive
Libertyville, Illinois 60061
Rentable Square Feet - 61,266
square feet

COMMENCEMENT DATE: April 1, 1997

TERMINATION DATE: June 30, 2004

FIXED RENT: For Entire Term: $3,628,587.18
87 Monthly Payments As Follows:
4/1/97 to 3/31/98 $38,546.53
4/1/98 to 3/31/99 $39,510.20
4/1/99 to 3/31/00 $40,497.96
4/1/00 to 3/31/01 $41,510.41
4/1/01 to 3/31/02 $42,548.17
4/1/02 to 3/31/03 $43,611.88
4/1/03 to 3/31/04 $44,702.18
4/1/04 to 6/30/04 $45,819.74

TAXES & OPERATING EXPENSES: Tenant shall pay on a prorata share -
76.85%

ELECTRICITY AND GAS FOR
HVAC: Separately Metered to Tenant

ELECTRICITY FOR LIGHTING AND
OUTLETS: Separately Metered to Tenant

PERMITTED USES: Warehousing, Industrial and Office Uses

SECURITY DEPOSIT: Letter of Credit in the amount of $500,000,
reducing $100,000 per year, or
eliminated under certain
circumstances.

TENANT IMPROVEMENTS: Landlord will provide an allowance of
$650,000

THE LEASE SUMMARY IS FOR INFORMATIONAL PURPOSES ONLY. IN THE EVENT ANY
INFORMATION ON THE LEASE SUMMARY IS IN CONFLICT WITH ANY PROVISION IN THE LEASE
AGREEMENT, THE LEASE AGREEMENT SHALL PREVAIL.
<PAGE>

TABLE OF ARTICLES
-----------------

ARTICLE PAGE NUMBER
------- -----------

I Leasing Covenant and Term 1

II Fixed Rent 1

III Additional Rent 2

IV Construction and Acceptance of
Leased Premises 5

V Use of Leased Premises 9

VI Services 10

VII Signs 11

VIII Tenant Covenants 12

IX Landlord Indemnification 16

X Landlord's Mortgage 16

XI Rights Reserved to Landlord 17

XII Damage by Fire or Other Casualty 18

XIII Eminent Domain 19

XIV Assignment and Subletting 19

XV Remedies 20

XVI Surrender of Possession 23

XVII Notices 23

XVIII Americans with Disabilities Act 24

XIX General 25

XX Dispute Resolution 26

XXI Right of First Refusal 27

XXII Option to Renew 28

XXIII Security Letter of Credit 29

XXIV Trustee's Authority and Exculpatory 30
<PAGE>

TABLE OF ATTACHED EXHIBITS
--------------------------

Exhibit A - Legal Description

Exhibit B - Site Plan

Exhibit C - Tenant Plans

Exhibit D - Contract Prices and Estimates

Exhibit E - Protective Covenants

Exhibit F - Estoppel Certificate
<PAGE>

LEASE AGREEMENT
---------------

THIS LEASE AGREEMENT, referred to hereinafter as LEASE, is made and entered into
this 15th day of October 1996, by and between AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, as Trustee under Trust Agreement dated May 15, 1994, and
known as Trust Number MP-012430, hereinafter called LANDLORD, and ALLSCRIPS
PHARMACEUTICALS, INC., an Illinois Corporation, hereinafter called TENANT.

WHEREAS, Landlord is the owner of a certain tract of land, hereinafter referred
to as the SITE, and legally described in Exhibit A which is made a part hereof.
The Site is currently improved with a single story industrial building totaling
approximately 79,715 square feet (referred to hereinafter as the BUILDING) as
outlined in the Site Plan attached hereto and identified as Exhibit B which is
made a part hereof. The Building is commonly known as Concepts II, and has a
common address of 2401 Commerce Drive, Libertyville, Illinois 60061, and is
located in the industrial park known as Lincoln Commerce Center.

ARTICLE I
LEASING COVENANT AND TERM
-------------------------

Landlord does hereby lease and demise to Tenant, and Tenant accepts from
Landlord, the premises, hereinafter referred to as LEASED PREMISES, as
highlighted on the Site Plan (Exhibit B), in the Building, said Leased Premises
containing 61,266 square feet, hereinafter referred to as RENTABLE SQUARE FEET,
for a term of eighty-seven (87) months commencing on April 1, 1997, hereinafter
referred to as the COMMENCEMENT DATE, and unless sooner terminated as
hereinafter provided, shall end on June 30, 2004, hereinafter referred to as the
TERMINATION DATE. The eighty seven (87) month period of occupancy of the Leased
Premises by the Tenant is hereinafter referred to as the TERM.

ARTICLE II
FIXED RENT
----------

Subject to the terms and conditions of the Lease and in consideration hereof,
Tenant agrees to pay the Landlord a fixed rent of Three Million, Six Hundred
Twenty Eight Thousand, Five Hundred Eighty Seven and 18/100 Dollars
($3,628,587.18), hereinafter referred to as FIXED RENT, in eighty seven (87)
monthly installments payable in advance on the first day of each month as
follows:

A. For the Twelve (12) month period from April 1, 1997 to March 31,
1998 inclusive - Twelve (12) monthly installments of Thirty-Eight
Thousand Five Hundred and Forty Six and 53/100 Dollars ($38,546.53)
($7.55 per square foot);

B. For the Twelve (12) month period from April 1, 1998 to March 31,
1999 inclusive - Twelve (12) monthly installments of Thirty-Nine
Thousand Five Hundred and Ten and 20/100 Dollars ($39,510.20) ($7.739
per square foot);

C. For the Twelve (12) month period from April 1, 1999 to March 31,
2000 inclusive - Twelve (12) monthly installments of Forty Thousand
Four Hundred and Ninety-Seven and 96/100 Dollars ($40,497.96) ($7.932
per square foot);

D. For the Twelve (12) month period from April 1, 2000 to March 31,
2001 inclusive - Twelve (12) monthly installments of Forty One Thousand
Five Hundred and Ten and 41/100 Dollars ($41,510.41) ($8.13 per square
foot);

1
<PAGE>

E. For the Twelve (12) month period from April 1, 2001 to March 31,
2002 inclusive - Twelve (12) monthly installments of Forty-Two Thousand
Five Hundred and Forty-Eight and 17/100 Dollars ($42,548.17) ($8.334
per square foot);

F. For the Twelve (12) month period from April 1, 2002 to March 31,
2003 inclusive - Twelve (12) monthly installments of Forty-Three
Thousand Six Hundred and Eleven and 88/100 Dollars ($43,611.88) ($8.542
per square foot);

G. For the Twelve (12) month period from April 1, 2003 to March 31,
2004 inclusive - Twelve (12) monthly installments of Forty-Four
Thousand Seven Hundred and Two and 18/100 Dollars ($44,702.18) ($8.756
per square foot); and

H. For the Three (3) month period from April 1, 2004 to June 30, 2004
inclusive - Three (3) monthly installments of Forty-Five Thousand
Eight Hundred and Nineteen and 74/100 Dollars ($45,819.74) ($8.975 per
square foot).

Fixed Rent and Additional Rent (as hereinafter defined) and/or other payments
reserved and required under the Lease are collectively referred to as the
RENTAL. Unless as otherwise specifically provided or hereafter otherwise
designated, all monthly installments of Rental shall be paid in advance on the
first day of each and every calendar month of the Term to Landlord's agent,
Lincoln Atrium Management Company, 135 E. Algonquin Road, Arlington Heights,
Illinois 60005 (hereinafter referred to as LAMCO), or to such other agent or at
such other place as Landlord may from time to time hereafter designate in
writing. All Rental shall be paid by Tenant to Landlord without notice or
demand, and without abatement, deduction, counterclaim or set off of any kind.

ARTICLE III
ADDITIONAL RENT
---------------

It is mutually understood that the Fixed Rent does not include therein a
provision for the payment of taxes (as hereinafter defined and referred to as
TAXES) on the Building, nor does it include therein a provision for the payment
of materials, costs, expenses, and services incurred in the operation and
maintenance of the Building (as hereinafter defined and referred to as OPERATING
EXPENSES). Starting on the Commencement Date, Tenant agrees to pay to Landlord
seventy-six point eighty-five percent (76.85%), (which percentage is hereinafter
referred to as the TENANT'S PRORATA SHARE and is calculated by dividing the
Rentable Square Feet by 79,715, the total square feet of the Building) of the
total Taxes and Operating Expenses (hereinafter collectively referred to as
ADDITIONAL RENT) of the Building in addition to the Fixed Rent, as more fully
provided for hereinafter:

A. Taxes are defined as those taxes levied or assessed against the
Building by any lawful authority for each calendar year of the Term,
regardless of whether or not the amount assessed or levied is payable
in that year or in a subsequent year. Specifically, Taxes shall mean
all taxes and assessments, of every kind and nature, special or
otherwise, including without limitation, general real property taxes,
personal property taxes imposed upon fixtures, machinery, apparatus
systems and appurtenances in, upon, or used in connection with the
Building or the operation thereof, sewer rents, water rents, special
assessments, transit taxes, any tax or excise on Rental, or any other
tax (however described) on account of Rental received for use and
occupancy of any or all of the Building, whether such Taxes are imposed
by the United States, the State of Illinois, the County of Lake, the
Village of Libertyville (hereinafter referred to as the VILLAGE), or
any other governmental authority or agency or political subdivision.
There shall also be included in Taxes

2
<PAGE>

all fees and costs including, without limitation, attorney's fees paid
or incurred by Landlord in seeking to obtain a reduction of or a limit
on an increase in Taxes, and objecting to or defending against the levy
of same. If at any time during the Term the method of taxation then
prevailing shall be altered so that any tax, assessment, levy,
imposition, or charge or any part thereof, shall be imposed upon
Landlord (or upon the beneficiaries of Landlord) in place, or partly in
place, of any such Taxes or increase therein heretofore described in
this subparagraph and/or the same shall be measured by or be based in
whole or in part upon the Building or the Rental or other income
therefrom, then all such taxes, assessments, impositions, levies, or
charges or part thereof shall be included in Taxes, to the extent that
such items would be payable if the building were the only property
and/or income of Landlord (or the only property and/or income of the
beneficiaries of Landlord) subject thereto. Taxes shall not include any
Federal, State or local municipal income taxes, capital stock taxes, or
estate or inheritance taxes, other than as specifically provided for
above, or penalties or interest on the late payment of installments of
Taxes. From time to time, the Landlord, in its reasonable discretion,
shall take all reasonable and proper steps and procedures to minimize
Taxes, including, but not limited to, the contesting of or objecting to
increases of the determination of the fair market value of the Building
by the Lake County Assessor for real estate tax purposes and the
objecting to the tax rate imposed by the taxing authorities. The
Landlord does not warrant that any such steps or procedures will result
in the reduction or minimization of Taxes.

B. Operating Expenses are defined as all expenses and costs incurred by
or paid on behalf of the Landlord and which, in accordance with
generally accepted accounting practice as applied to the operation,
repair, management, and maintenance of an office/industrial/warehouse
building in the Lake County, Illinois area, are properly charged,
expensed or amortized to such ownership, operation, management, and
maintenance of the Building, including without limitation, the cost of
window washing, repairs and maintenance, parking lot and common area
cleaning, insurance, landscaping, snow removal, janitorial services,
common area lighting, parking lot lighting, heating and air
conditioning of common areas, security services, pest control,
management fees, office expenses, service and/or lease contracts on
equipment used in common in the Building, and professional fees.
Operating Expenses shall not include: (a) interest and principal
payments on mortgages and other debt service and ground lease payments;
(b) franchise or income taxes imposed upon Landlord or Taxes charged to
the Building as provided in subparagraph A above; (c) the cost or fees
for any lease, work, or service performed in any instance for an
individual tenant and not for all tenants in common; (d) capital
improvements and replacements; (e) leasing commissions and costs
incident thereto; (f) attorneys fees and costs connected with ownership
and organization of the Landlord and not strictly related to the
operation of the Building; (g) costs for services sold to tenants and
for which Landlord is entitled or would ordinarily be entitled to be
reimbursed directly by tenants and not chargeable to all tenants as
Operating Expenses; (h) depreciation and amortization, except as
allowed pursuant to above or on equipment and installations charged to
tenants as Operating Expenses; (i) fees or other compensation paid to
affiliates of Landlord for services to the Building, to the extent that
the costs of such services exceed competitive costs of services of
equal quality and quantity were they not so rendered by an affiliate;
(j) advertising and promotion expenses; (k) wages, salaries, or other
compensation paid to any executive employees above the grade of
Building Manager; (l) expenses directly caused by the intentional
violation by Landlord of any lease pertaining to the Building; (m)
legal fees in enforcing leases of other tenants; and (n) costs
occasioned by fire, windstorm, or other casualty or for any other
reason, which costs are reimbursed to

3
<PAGE>

Landlord by insurers, other parties, or by governmental authorities in
eminent domain.

C. Operating Expenses and Taxes, provided for herein, shall be payable
by Tenant to Landlord in monthly installments of 1/12th of the total
amount due or estimated to be due from the Tenant in any one calendar
year. Starting on the Commencement Date, the Landlord estimates the
Tenant's obligation for Operating Costs and Taxes will be Seven
Thousand Six Hundred and Eighty-Five and 08/100 Dollars ($7685.08) per
month.

D. On the commencement of each subsequent calendar year of the Term,
the Tenant shall continue to pay the monthly installment of Taxes and
Operating Costs paid in the previous year, until the Landlord delivers
to the Tenant a written statement, certified to be true and correct by
the Landlord, hereinafter referred to as the ANNUAL STATEMENT,
indicating, among other items, in reasonable detail the previous
calendar year's total Taxes and Operating Costs. The Landlord will
endeavor to supply the Annual Statement to the Tenant by July 1st of
each calendar year. Based upon the Annual Statement, the Tenant may be
required to pay an additional sum, if the total of the monthly deposits
for Taxes and Operating Costs received from the Tenant by the Landlord
in the previous calendar year was less than the actual Taxes and
Operating Costs attributable to the Tenant as set forth in the Annual
Statement. Said additional sum (considered within the definition of
Additional Rent) shall be due from the Tenant within thirty (30) days
after the mailing of the Annual Statement to the Tenant. In the event
the monthly deposits paid by the Tenant in the previous calendar year
for Taxes and Operating Costs were more than Tenant's actual
obligation, as set forth in the Annual Statement, Tenant shall be
entitled to a refund, which shall be applied to the succeeding month's
Rental to the extent of said overpayment, or if the Lease has expired,
then the amount of said refund shall be paid by the Landlord to the
Tenant within ten (10) days of the mailing of the Annual Statement,
assuming there are no sums due from the Tenant to the Landlord, or if
there are any sums due from the Tenant to the Landlord, then such
amount shall be applied to the payment of such sums.

E. The Annual Statement may further provide for an increase or decrease
of the amount of the monthly installment due from the Tenant to the
Landlord for Taxes and Operating Costs, should the Taxes and Operating
Costs of the previous calendar year have either increased or decreased.
In the event the Landlord increases the monthly installment, the Tenant
shall further pay to the Landlord, within thirty (30) days of the
mailing of the Annual Statement, a lump sum equal to the amount of the
monthly increase multiplied by the number of months then elapsed
between January 1 of the then current calendar year and the month in
which the Annual Statement is delivered to the Tenant. In the event the
Landlord decreases the monthly installment of Taxes and Operating
Costs, the Tenant shall be entitled to a refund equal to the amount of
the monthly decreased multiplied by the number of months then elapsed
between January 1 of the then current calendar year and the month in
which the Annual Statement is delivered to the Tenant, which sum shall
be applied to the succeeding month's Rental, or if the Lease has
expired, then such amount shall be paid by the Landlord to the Tenant
within ten (10) days of the mailing of the Annual Statement, assuming
there are no sums due from the Tenant to the Landlord, or if there are
any sums due from the Tenant to the Landlord, then such amount shall be
applied to the payment of such sums.

F. The Tenant, or its representative, shall have the right to examine
and audit the Landlord's books and records with respect only to the
items relating to Additional Rent in the Annual Statement, after
providing the Landlord with a prior written

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<PAGE>

Notice (as Notice is defined hereinafter) requesting such examination
(hereinafter referred to as FIRST EXCEPTION NOTICE), within thirty (30)
days following the date of the mailing of the Annual Statement to the
Tenant. Such examination or audit shall be made at the Landlord's place
of business during normal business hours. Within thirty (30) days after
the completion of the audit, which must take place within ninety (90)
days of the First Exception Notice, the Tenant must deliver to the
Landlord a written exception of any items or calculations specified in
the Annual Statement, stating in particularity the grounds for said
exception (hereinafter referred to as SECOND EXCEPTION NOTICE). Failure
on the part of the Tenant to serve on the Landlord the First Exception
Notice and/or the Second Exception Notice, as provided for
hereinabove, all within the time periods specified, shall result in the
binding and conclusive presumption of the approval by the Tenant of the
computations and charges set forth in the Annual Statement and such
Additional Rent charges shall be considered as final and accepted and
binding upon and by the Tenant and may not be contested at any time
thereafter; the Tenant thereafter forever waiving its right to contest
such Additional Rent charges set forth in the particular Annual
Statement. In the event the Tenant properly serves a Second Exception
Notice upon the Landlord and the Landlord and Tenant cannot resolve the
controversy within sixty (60) days after the date of the Second
Exception Notice, then the Tenant shall have the right, within said
sixty (60) day period, to submit to the Landlord a Notice electing to
resolve the dispute in accordance with the procedure set forth in
Article XX herein. If submitted to arbitration in accordance with
Article XX, and the decision of the arbitrators is in favor of the
Landlord, or if an overstatement of an amount chargeable to the Tenant
as provided in the Annual Statement, as determined by the arbitration,
is less than 5% of the total amount due from the Tenant for Additional
Rent for the year in question, the cost of the arbitration, including,
but not limited to, the reasonable attorneys' and accounts' fees
incurred by the Landlord, shall be paid by the Tenant; otherwise the
reasonable cost thereof, including, but not limited to, the reasonable
attorneys' and accountants' fees incurred by the Tenant, will be paid
by the Landlord. Any overstatement shall be applied to the succeeding
month's Rental, or if the Lease has expired, then such amount shall be
paid by the Landlord to the Tenant within ten (10) days of the
arbitrators' written decision, assuming there are no sums due from the
Tenant to the Landlord, or if there are any sums due from the Tenant to
the Landlord, then such amount shall be applied to the payment of such
sums. Failure on the part of the Tenant to submit the controversy to
dispute resolution in accordance with Article XX within the time
periods specified herein shall result in a conclusive and final waiver
of the Tenant's right to contest the charges set forth in the Annual
Statement or in the Second Exception Notice, and such Additional Rent
charges shall be considered as final and accepted and binding upon and
by the Tenant. Regardless of the provisions set forth in this
subparagraph and whether or not the tenant properly contests any
Additional Rent charges in any Annual Statement, the Tenant must pay,
when due, all contested Additional Rent charges, subject to its right
to secure a refund or credit therefor should the Tenant prevail
successfully in any of the procedures set forth herein.

G. The provisions of this Article III shall survive the termination of
this Lease.

ARTICLE IV
CONSTRUCTION AND ACCEPTANCE OF LEASED PREMISES
----------------------------------------------

A. Pursuant to the direction of the Tenant, an architectural firm
affiliated with one of the beneficiaries of the Landlord, Tsolinas/Moreno &
Associates, Inc. 135 East Algonquin Road, Arlington Heights, Illinois 60005,
hereinafter referred to as the

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<PAGE>

ARCHITECT, will prepare complete, finished, detailed architectural, engineering,
fire protection, electrical, and mechanical working drawing plans or contract
documents, for all the improvements to the Leased Premises and the Building
requested by the Tenant, including but not limited to all special improvements
or additions required by the Tenant and particular to the Tenant's business, all
such plans hereinafter collectively referred to as the TENANT PLANS, for all
work to be performed in constructing the improvements to the Leased Premises,
said improvements hereinafter referred to as TENANT IMPROVEMENTS. The Tenant
Plans shall be of a form and content as required by the Village for building
permit purposes, and also in a form and content sufficient for construction and
bidding purposes. Provided the Tenant reasonably cooperates with the Landlord
and the Architect to expedite the preparation of the Tenant Plans, the Landlord
agrees to direct the Architect to use its best efforts to complete the Tenant
Plans within forty-five (45) days after the execution of this Lease. The Tenant
agrees to approve or disapprove the Tenant Plans within seven (7) business days
after receipt thereof. Should the Tenant disapprove the Tenant Plans, or any
part thereof, said disapproval shall be in writing and state with specificity
the reasons therefor and include, if practical, suggestions to remedy the
disapprovals. When the Tenant Plans have been fully approved by the Tenant, they
will be attached to this Lease, labeled Exhibit C, and made a part hereof as if
they were part of this Lease at the time of the execution hereof.

B. The Landlord agrees to cause the construction of the Tenant
Improvements and any Additional Tenant Improvements (as defined hereinafter), in
accordance with the Tenant Plans, provided the cost and expense of constructing
same does not exceed the sum of Six Hundred Fifty Thousand and 00/100 Dollars
($650,000.00), hereinafter referred to as the LANDLORD'S CONTRIBUTION. The
Tenant shall not be obligated to repay to the Landlord any portion of the
Landlord's Contribution, provided it does not commit an Event of Default (as
defined hereinafter) during the Term of this Lease. However if the Tenant
commits an Event of Default and the cure period (if any) expires without
appropriate remedial actions by the Tenant, and as a result thereof, the
Landlord elected to either terminate the Lease or terminate the Tenant's right
to possession of the Leased Premises without terminating the Lease (pursuant to
Article XV B), then the Tenant shall be obligated to repay to the Landlord the
following portions of the Landlord's Contribution, hereinafter referred to as
REPAYMENTS:

(a) If the Event of Default occurred in the period from April 1, 1997
to March 31, 1998, the sum of Five Hundred Thousand Dollars ($500,000);

(b) If the Event of Default occurred in the period from April 1, 1998
to March 31, 1999, the sum of Four Hundred Thousand Dollars ($400,000);

(c) If the Event of Default occurred in the period from April 1, 1999
to March 31, 2000, the sum of Three Hundred Thousand Dollars
($300,000);

(d) If the Event of Default occurred in the period from April 1, 2000
to March 31, 2001, the sum of Two Hundred Thousand Dollars ($200,000);
and

(e) If the Event of Default occurred in the period from April 1, 2001
to March 31, 2002, the sum of One Hundred Thousand Dollars ($100,000).

The Repayments shall be considered as Additional Rent. If the Event of Default
occurs subsequent to March 31, 2002, the Tenant shall not be obligated to repay
to the Landlord any portion of the Landlord's Contribution.

C. The fees and charges of the Architect shall be considered as part of
the cost of

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<PAGE>

the Tenant Improvements. The fees of the Architect shall be limited to Five
Percent (5%) of the total cost of the Tenant Improvements and Additional Tenant
Improvements.

D. A general contracting firm affiliated with one of the beneficiaries
of the Landlord, CFM Construction Company, 135 East Algonquin Road, Arlington
Heights, Illinois 60005, hereinafter referred to as the GENERAL CONTRACTOR, will
be the general contractor selected to construct the Tenant Improvements. The
fees, overhead and profit, of the General Contractor shall be limited to Eight
Percent (8%) of the total aggregate cost of constructing the Tenant Improvements
and any Additional Tenant Improvements, excluding the Architect fees. The
category of general conditions or administration, an element of the total
aggregate costs of the Tenant Improvements or Additional Tenant Improvements,
shall be limited to Four Percent (4%) of the total aggregate cost of
constructing the Tenant Improvements and any Additional Improvements, excluding
the Architect fees and the General Contractor's fees.

E. The General Contractor shall use its best efforts to solicit at
least three (3) competitive bids for each of the major trades or subcontractors
required to construct the Tenant Improvements. The Tenant may submit a list of
subcontractors, who shall be added to those subcontractors from whom the General
Contractor will request bids. The General Contractor shall have the right to bid
on any or all of the work. The Landlord and the Tenant shall jointly decide on
which bids and/or which subcontractors to accept, which may not necessarily be
the lowest bidders. When the Landlord and Tenant have agreed to accept all the
bids from the trades, a schedule of the contract prices and estimates shall be
attached to this Lease, labeled as Exhibit D, and made a part hereof as if it
was a part of this Lease at the time of the execution hereof.

F. Any additional work or changes requested by the Tenant and not a
part of the originally approved Tenant Plans, shall be set forth in written
orders, herein referred to as CHANGE ORDERS, detailing the additional work or
changes and the cost and expense (and/or credits, if any) thereof. All approved
additional work and changes shall be referred to herein as ADDITIONAL TENANT
IMPROVEMENTS. All Change Orders must be signed and approved by both the Tenant
and Landlord. Architect and general contractor's fees, in the amounts set forth
above, shall be added to the costs of Additional Tenant Improvements.

G. In the event the total aggregate amount of the costs of the Tenant
Improvements and any Additional Tenant Improvements (including the fees and
charges of the Architect and the General Contractor) are in excess of the
Landlord's Contribution, said excess shall hereinafter be referred to as
TENANT'S CONTRIBUTION, and shall be paid to the Landlord by the Tenant on or
before the Commencement Date.

H. In the event the cost of the Tenant Improvements and any Additional
Tenant Improvements does not exceed the Landlord's Contribution, the savings
(hereinafter referred to as REMAINING LANDLORD'S CONTRIBUTION) will be applied
to the payment of Tenant's Rental, as it becomes due.

I. The Landlord agrees to Substantially Complete (as hereinafter
defined) the construction of the Tenant Improvements and Additional Tenant
Improvements on or before April 1, 1997, excluding the installation or
construction of certain portions or parts of the Tenant Improvements or
Additional Tenant Improvements, if any, which Landlord and Tenant have agreed,
in writing, when they agreed to approve the Tenant Plans, or executed a Change
Order, would not be completed on or before April 1, 1997, those certain portions
or parts of the Tenant Improvements hereinafter referred to as LONG LEAD ITEMS.
SUBSTANTIALLY COMPLETE is generally defined as the Leased Premises being in a
condition

7
<PAGE>

whereby the Tenant can occupy same and reasonably being able to conduct its
business therein; and more specifically means that the following have been
substantially completed, installed and in working order:

(a) Interior partitions, walls and doors;

(b) Ceiling and light fixtures;

(d) Floor coverings;

(e) Electrical outlets, wiring and switches;

(f) Painting; and

(g) Common areas, plumbing and bathrooms.

The Leased Premises shall be considered Substantially Complete
regardless of the following:

(a) Long Lead Items agreed to in writing by the Landlord and
Tenant;

(b) Furniture and fixtures purchased and installed by Tenant;

(d) Equipment and machinery purchased and installed by Tenant; and

(e) Punch List items as defined hereinafter.

However, in no event shall the Leased Premises be considered as Substantially
Complete unless the Village issues an Occupancy Permit allowing the occupancy of
the Leased Premises by the Tenant.

J. In the event there is a disagreement as to whether or not the Leased
Premises is Substantially Complete, either the Landlord or the Tenant shall have
the right to submit the dispute to resolution in accordance with the provisions
of Article XX. Unless the Leased Premises is totally unusable for the Tenant's
intended use in which event all Rental shall abate until it is usable, the
Tenant shall accept possession of the Leased Premises and pay all Rental due,
subject to the dispute resolution process.

K. The Landlord shall not be responsible for delays in Substantially
Completing the Leased Premises, and any costs occasioned thereof, resulting from
the following:

(a) If the Tenant unreasonably delays the approval of the Tenant Plans;

(b) Change Orders requested by the Tenant after the Tenant Plans are
approved by the Tenant; or

The above events are hereinafter referred to as TENANT DELAYS.

8
<PAGE>

L. When the Tenant Improvements and/or Additional Tenant Improvements
are Substantially Complete, the Landlord shall so notify the Tenant in writing.
Not later than five (5) business days thereafter, the Tenant agrees to inspect
the Leased Premises with the Landlord. Should the inspection reveal that certain
items of Tenant Improvements or Additional Tenant Improvements have not been
completed or are not in compliance with the Tenant Plans or Change Orders, a
written statement will jointly be prepared, and agreed to by both Landlord and
Tenant, setting forth such items, which statement is hereinafter referred to as
the PUNCH LIST. If the parties disagree as to the items to be included in the
Punch List, the disagreement shall be resolved by the dispute resolution
procedure set forth in Article XX. The Landlord agrees to promptly complete and
remedy the Punch List items. By occupying the Leased Premises, the Tenant
formally accepts and acknowledges that the Leased Premises are in a condition
complying with all of Landlord's covenants hereunder, with the exception of
those items, if any, on the Punch List and any latent defects.

M. Landlord shall permit the Tenant and the Tenant's employees and
agents to enter the Leased Premises prior to the Commencement Date so that
Tenant may do such other work as may be required to make the Leased Premises
ready for the Tenant's use and occupancy. The Landlord permission for such entry
is upon the condition that Tenant's employees, agents and contractors will work
in harmony with Landlord, and its employees, agents and contractors will not
interfere with the performance of the construction of the Tenant Improvements,
any work being performed for any other tenants, and/or in the operation of the
Building. If at any time such entry and work by the Tenant and/or its employees,
agents and contractors causes or threatens to cause such disharmony or
interference, Landlord shall have the right to withdraw such permission upon
twenty four (24) hours written Notice to Tenant. Tenant agrees that any such
entry and activity in the Leased Premises will be governed by all the applicable
provisions of this Lease. The Landlord shall not be liable in any way for
injury, loss or damage which may occur to any of installations and improvements
in and to the Leased Premises, or to any personal property belonging to the
Tenant or its employees, agents or contractors and placed in the Leased
Premises, unless such injury, loss or damage was caused by the Landlord's
negligence.

N. The Landlord warrants that its contractors have not nor will it use
asbestos or Hazardous Materials (as defined hereinafter) in the construction of
the Building or the Tenant Improvements.

O. The Landlord warrants that the Tenant Improvements constructed and
installed by it will be in good working order for a one year period from the
Commencement Date.

ARTICLE V
USE OF LEASED PREMISES
----------------------

A. The Leased Premises may be used and occupied only for office,
warehouse and pharmaceutical processing purposes and for no other purpose or
purposes without the written consent of Landlord, which consent shall not be
unreasonably withheld. Tenant agrees to conduct its business at all times in
good faith, in a high-grade and reputable manner. During the entire Term, the
Tenant shall promptly comply with the pertaining provisions of the Declaration
of Protective Covenants For Lincoln Commerce Center (attached hereto as Exhibit
E and hereinafter referred to as PROTECTIVE COVENANTS) and all laws, ordinances,
and regulations affecting the Building and the Leased Premises and promulgated
by duly constituted governmental authorities.

B. The Leased Premises shall be used only for business, commercial, or

9
<PAGE>

manufacturing purposes. Tenant shall not display, sell, or offer for sale any
alcoholic liquors in the Leased Premises. In addition, the Tenant or its
employees, agents, contractors, or servants shall not:

(a) Use the Leased Premises for any purpose which increases the rate of
premium cost or invalidates any policy of insurance covering or carried
on the Building in which the Leased Premises are located or the
operation thereof or any part or appurtenances thereof;

(b) Obstruct the sidewalks or parking lots or use the same for business
or display purposes;

(d) Use plumbing for any purpose other than that for which constructed;

(e) Make or permit excessive noise or noxious odors, objectionable to
the public, to other occupants of the Building, or to Landlord;

(f) Create, maintain, or permit a nuisance in the Leased Premises;

(g) Place or permit any radio, television or data antenna, loud speaker
or sound amplifier, satellite dish, or other devices similar to any of
the foregoing on the roof or outside of the Building, or at any place
where the same may be seen or heard outside of the Building; and/or

(h) Solicit business in the parking lot or other common areas,
distribute any handbills or other advertising matter on automobiles
parked in the parking lot or in other common areas.

C. Tenant will keep the Leased Premises clean and free from rubbish and
dirt at all times, and shall store trash and garbage within the Leased Premises
and will make the same available for regular pick-up and cartage of such trash
at the Tenant's expense.

ARTICLE VI
SERVICES
--------

A. Landlord shall provide the following services to the Tenant, which
shall be considered as Operating Expenses:

(a) A total of two hundred sixty-three (263) parking spaces will be
provided for the use of all the tenants of the Building. All spaces,
excluding those reserved for other tenants, shall be available on a
first-come, first-serve basis;

(b) Landscaping of the exterior plantings and grass areas;

(d) Repair, replacement and maintenance of those portions of the
Building and equipment therein, excluding the Leased Premises, which
are under the exclusive control of the Landlord;

10
<PAGE>

(e) Snow removal of snow accumulation in excess of two (2") inches in
the parking lot and walkways; and

(f) Cleaning, maintenance, repair and replacement of the parking lot
and walkways as reasonably required.

B. Tenant agrees that Landlord shall not be liable in damages by
abatement or set-off of Rental, or otherwise, for the failure or delay in
furnishing any service pursuant to this Article, when such failure or delay is
occasioned, in whole or in part, by repairs or improvements (provided the
repairs or replacements are diligently and promptly performed by the Landlord),
or by any strike, lockout, or other labor trouble, or by the inability to secure
electricity, gas, fuel, or water to and at the Building, or by accident or
casualty whatsoever unless resulting from the Landlord's negligence, or by any
law, order, ordinance, or regulation of any governmental authority, or by any
other cause beyond the reasonable control of the Landlord, nor shall any such
discontinuance or such failure or delay be deemed to give rise to an eviction,
constructive or actual, of Tenant, or give rise to any right on the part of the
Tenant to terminate this Lease, or give the Tenant any right to stop the payment
of Rental provided for herein.

C. The Tenant shall be responsible for and shall pay the following:

(a) All utility costs, including, but not limited to, gas, electric,
and other charges incurred in connection with heating, air
conditioning, ventilating, lighting, telephone and data, machinery and
equipment, office machines and equipment, and all other devices used by
Tenant in the operation of the Leased Premises and the business of the
Tenant;

(b) Repair and replacement of all glass windows and doors;

(c) Maintaining and repairing and keeping in good order all the Tenant
Improvements installed in the Leased Premises, including but not
limited to, the plumbing fixtures and systems, the interior walls, the
heating and air conditioning equipment, the electrical and lighting
fixtures, the electrical wiring, outlets and switches, the floors, the
carpeting, the ceiling, and the windows and doors to any glass therein,
and/or replacement of burnt out fluorescent and incandescent lighting
tubes and bulbs;

(d) Providing of security services to the Leased Premises; and

(e) The Tenant shall pay for and maintain in force an agreement with an
air conditioning and heating contractor (to be selected by the Tenant,
subject to the Landlord's reasonable approval) to periodically inspect,
repair, and maintain the air conditioning and heating equipment.

D. In the event the Tenant fails to provide for the services as
specified in Article VI C, and pay for the charges and costs resulting
therefrom, the Landlord may, at its option, contract for same, after giving the
Tenant fifteen (15) days written Notice, and the actual cost thereof, plus ten
percent (10%) thereof, shall be charged to the Tenant as Additional Rent.

ARTICLE VII
SIGNS
-----

The Tenant shall be allowed to place a sign on the south side of the
Building at the

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<PAGE>

primary entrance into the Leased Premises facing Winchester Drive which shall
contain the Tenant's logo. The Tenant shall also have the right to construct a
free standing monument sign at the entrance into the parking lot for the Leased
Premises facing Commerce Drive, which sign shall contain the Tenant's logo and
the address of the Leased Premises. All such signage, including any interior
signage which is visible to the outside of any portion of the Leases Premises,
shall be in accordance with standards determined by the Landlord in its sole,
but reasonable, discretion; and further subject to the applicable provisions of
the Protective Covenants and ordinances of the Village.

ARTICLE VIII
TENANT COVENANTS
----------------

A. Other than specifically provided for hereinabove, Tenant shall not
erect or install any other exterior signs or interior window or door signs,
advertising media, or window or door lettering or placards without Landlord's
prior written consent. Tenant shall not install any exterior lighting, shades,
or awnings or make any exterior decoration or painting, without Landlord's prior
written consent, which shall not be unreasonably withheld or delayed. Use of
roof is reserved to Landlord.

B. Tenant will not commit any act which will cause a mechanic's lien to
be filed against the Leased Premises or against the Building. After the initial
construction of the Tenant's Improvements, the Tenant shall not make any
repairs, remodeling, decorating, alterations or additions to the Leased Premises
(hereinafter referred to as TENANT ALTERATIONS) without first procuring
Landlord's written consent (which shall not be unreasonably withheld or
delayed). The Tenant shall deliver to Landlord plans and specifications of the
Tenant Alterations and copies of the proposed contracts and necessary permits
before the Landlord will consider approval or disapproval. In the event the
Landlord approves the proposed Tenant Improvements, the Tenant shall then
furnish indemnification against liens, costs, damages, and expenses as may be
reasonably required by Landlord. At the termination of this Lease, all Tenant
Alterations, which in any manner are attached to the floors, walls, or ceilings,
shall remain upon and be surrendered with the Leased Premises as part thereof,
furthermore any floor covering which may be cemented or otherwise affixed to the
floor shall likewise become the property of Landlord, all without compensation
or credit to Tenant. Provided the Tenant notifies the Landlord, in writing, at
the time of the installation or construction of the Tenant Alterations, that it
intends to remove same at the end of the Term, it may do so provided it restores
the Leased Premises to its condition as existed prior to the installation or
construction of the Tenant Alterations, and further, such removal shall not
cause material damage to the Leased Premises.

C. Tenant agrees to indemnify and save Landlord harmless against any
and all claims, demands, damages, costs, and expenses, arising from the conduct
or management of the business conducted by Tenant in the Leased Premises, or
from the construction of Tenant Alterations to the Leased Premises, or from any
breach or default on the part of Tenant in the performance of any covenant or
agreement on the part of Tenant to be performed pursuant to the terms of this
Lease, or from any act or negligence of Tenant, its agents, contractors,
servants, employees, subleasees, concessionaires, or licensees, in or about the
Leased Premises and the Building. In case of any action or proceeding brought
against Landlord by reason of any such claim, upon Notice from Landlord, Tenant
covenants to defend such action and the Landlord's interest by competent counsel
(competent in the Landlord's reasonable judgement only). To the extent not
expressly prohibited by law. Tenant releases Landlord, its agents, servants, and
employees from, and waives all claims to damages to person or property,
sustained by the Tenant or by any

12
<PAGE>

other occupant of the Leased Premises, the Building, or by any other person,
resulting directly or indirectly from fire or other casualty, because of
existing or future conditions, defects, matters, or things in the Leased
Premises or any part thereof; or from any equipment or appurtenances therein or
from any accident in or about the Building, EXCEPT in the event the damages are
caused by the negligence or wrongful intentional acts of the Landlord or its
employees, agents, or servants. All personal property belonging to the Tenant or
any occupant of the Leased Premises shall be there at the risk of the Tenant or
other person only, and the Landlord shall not be liable for damages thereto or
theft or misappropriation thereof.

D. Tenant shall not carry any stock of goods or do anything in or about
the Leased Premises which will in any way tend to increase insurance rates on
said Leased Premises or the Building in which the same are located. If Landlord
shall consent to such use, Tenant agrees to pay any reasonable increase in
premiums for insurance against loss by fire or extended coverage risks resulting
from the business carried on in the Leased Premises by Tenant. After the Tenant
Improvements have been constructed and completed and the Tenant thereafter
installs any additional electrical equipment that overloads the power lines to
the Building. Tenant shall at its own expense make whatever changes are
necessary to comply with the requirements of insurance underwriters and
insurance rating bureaus and governmental authorities having jurisdiction.

E. Tenant agrees to procure and maintain a policy or policies of
insurance at its own cost and expense, insuring Landlord and Tenant from all
claims, demands, or actions for injury to or death arising out of any one
accident to the limit of $5,000,000, and for damage to property in an amount of
not less than $1,000,000, made by or on behalf of any person or persons, firm or
corporation arising from, related to, or connected with the conduct and
operation of the Leased Premises in the Building. All said policies shall name
the Landlord as an additional insured party. Said insurance shall not be subject
to cancellation except after at least ten (10) days prior written Notice to
Landlord. A duly executed certificate for the same shall be deposited with
Landlord on or before the Commencement Date and within thirty (30) days after
the expiration of the term of such coverage upon renewal of same. If tenant
fails to comply with such requirement, Landlord may obtain such insurance and
keep same in effect, and Tenant shall pay the Landlord the premium cost thereof,
plus ten percent (10%), within thirty (30) days after billing of same by the
Landlord, said sum to be considered as Additional Rent; and/or Landlord may
elect to regard such non compliance as an Event of Default (as defined
hereinafter).

F. Tenant represents, warrants, and covenants to Landlord that Tenant
shall at no time (a) use or permit the use of the Leased Premises, the Building
and/or the Site for the generation, manufacture, production, storage, release,
discharge, or disposal of Hazardous Materials (as hereinafter defined) except in
accordance with Environmental Regulations (as hereinafter defined); or (b) to
transport Hazardous Materials to or from the Leased Premises, except in
accordance with Environmental Regulations; or (c) perform any act or action
whatsoever which violates any Environmental Regulations; and/or (d) allow or
permit any other person or entity to do any of the above:

(a) The term HAZARDOUS MATERIALS is defined as and includes, without
limitation, any flammable explosives, radioactive materials, asbestos
and asbestos containing materials, hazardous wastes, hazardous or toxic
substances, or related materials defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), the
Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C.
Sections 6901, et seq.),

13
<PAGE>

and in the regulations adopted and publications promulgated pursuant
thereto, or any other federal, state, or local environmental laws,
ordinances, rules, or regulations dealing with hazardous materials.

(b) The term ENVIRONMENTAL REGULATIONS is defined as all federal,
state, and local laws, including all zoning laws or ordinances, and all
regulations, codes, requirements, public and private land use
restrictions, rules and orders which relate to or govern Hazardous
Materials, and/or the environmental conditions in, on, under, or about
the Leased Premises, the Building or the Site, in force at the time of
the execution of the Lease and at any time during the Term.

(c) Tenant shall assume sole and full responsibility for, and shall
remedy at its sole cost and expense, all such violations of any
Environmental Regulations caused by it or by introducing Hazardous
Materials into the Leased Premises or the Building or Site, or on any
adjacent property. Tenant shall at no time use, generate, release,
store, treat, dispose of, or otherwise deposit in or about the Leased
Premises any Hazardous Materials except in accordance with
Environmental Regulations; or permit or allow any third party to do so,
without Landlord's express, prior, written consent. Tenant's compliance
with the terms of the Article and with all Environmental Regulations
shall be at Tenant's sole cost and expense.

(d) Tenant shall provide Landlord with written notification,
immediately upon the discovery or notice or upon having reasonable
grounds to suspect, by Tenant, its successors, assigns, licensees,
invitees, employees, and/or agents, that any provision of this Article
has not been strictly complied with; and including, but not by
exclusion of other circumstances requiring notice, Tenant shall give
prompt written Notice to Landlord of (a) any proceeding or inquiry by
any governmental authority with respect to the Leased Premises, the
Building or the Site of any Hazardous Substance on the Leased Premises,
the Building or the Site or the migration thereof from or to other
property; (b) all claims made or threatened by any third party against
Tenant, Landlord, or the Leased Premises relating to any loss or injury
resulting from any Hazardous Substance; and (c) Tenant's discovery of
any occurrence or condition on any property adjoining or in the
vicinity of the Leased Premises, the Building or the Site that
threatens to cause the Leased Premises, the Building or the Site or any
part thereof to be subject to or in violation of any Environmental
Regulations.

(e) It shall be an Event of Default (as defined herein) under this
Lease, entitling Landlord to exercise any of its rights and remedies
under this Lease, if any provision of this Article is not strictly
complied with at all times. Landlord's election to conduct inspections
of the Leased Premises shall not be construed as approval of Tenant's
use of the Leased Premises or any activities conducted thereon, and
shall in no way constitute an assumption by Landlord of any
responsibility whatsoever regarding Tenant's use of any Hazardous
Materials.

(f) In the event the Tenant violates its representations, covenants,
warranties, and obligations set forth in this Article, the Tenant shall
defend, indemnify, and hold harmless Landlord, the Landlord's
mortgagee(s), and the Landlord's Beneficiaries, employees, and agents
from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs or expenses of whatever kind or nature,
known or unknown, contingent or otherwise, arising out of or in any way
related to the acts and omissions of Tenant, Tenant's officers,
directors, employees, agents, contractors, subcontractors, subtenants
and invitees with respect to (a) the generation, manufacture,
operations involving, transport, treatment, storage,

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<PAGE>

handling, production, processing, disposal, release or threatened
release of any Hazardous Materials in violation of Environmental
Regulations, which are on, from, or affecting the Leased Premises, the
Building or the Site, (b) any personal injury (including wrongful
death) or property damage (real or personal) arising out of or related
to such Hazardous Materials; (c) any lawsuit brought or threatened,
settlement reached, or governmental order relating to such Hazardous
Materials or violation of Environmental Regulations; and (d) any
violations of laws, orders, regulations, requirements, or demands of
government authorities, or any reasonable policies or requirements of
Landlord, which are based upon or in any way related to such Hazardous
Materials or violations of Environmental Regulations, including,
without limitation, reasonable attorneys and consultant fees,
investigation and laboratory fees, court costs, and litigation
expenses. This indemnification shall survive the termination,
cancellation, and surrender of this Lease however effectuated.

(g) In the event this Lease is terminated, cancelled, or surrendered
for any reason whatsoever, Tenant shall deliver the Leased Premises to
Landlord free of any and all Hazardous Materials so that the condition
of the Leased Premises shall conform with all Environmental Regulations
affecting the Leased Premises, subject to any conditions existing prior
to the Commencement Date.

(h) In the event that as a result of the Tenant use of the Leased
Premises, any investigation, site monitoring, containment, cleanup,
removal, restoration, or other remedial work of any kind or nature,
hereinafter referred to as the REMEDIAL WORK, is required under
Environmental Regulations and/or any applicable local, state or federal
law or regulation, or any judicial order, or by any governmental entity
because of, or in connection with, the current or future presence,
release of a Hazardous Substance in or into the air, soil, ground
water, surface water, or soil vapor at, on, about, under, or within the
Leased Premises (or any portion thereof), the Building and/or the Site,
Tenant shall within thirty (30) days after written demand for
performance thereof by Landlord (or such shorter period of time as may
be required under any Environmental Regulations or any applicable law,
regulation, order or agreement), commence and thereafter diligently
prosecute to completion, all such Remedial Work. All Remedial Work
shall be performed by qualified contractors. All costs and expenses of
such Remedial Work shall be paid by Tenant, including, without
limitation, Landlord's reasonable attorneys' fees and costs incurred in
connection with monitoring or review of such Remedial Work. In the
event Tenant shall fail to timely prosecute to completion such Remedial
Work, Landlord may, but shall not be required to, cause such Remedial
Work to be performed and all costs and expenses thereof, or incurred in
connection therewith, shall become due from the Tenant within ten (10)
days after Notice thereof, and shall be considered as Additional Rent.

G. The Tenant agrees it will not make any structural changes to the
Leased Premises without the written approval of the Landlord, which shall not be
unreasonably withheld or delayed.

H. The Tenant agrees it will not place fixtures, equipment, or material
of any kind in the Leased Premises, the weight of which may exceed the floor
load capacity as specified in the Tenant Plans.

I. Tenant shall at no time permit any asbestos containing material to
be used on, under, or about the Leased Premises.

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<PAGE>

ARTICLE IX
LANDLORD INDEMNIFICATION
------------------------

A. Except as otherwise provided for herein, Landlord agrees to
indemnify and save harmless Tenant, Tenant's successors and assigns, and
Tenant's present and future officers, directors, employees, and agents
(collectively TENANT INDEMNITEES) against any and all claims, demands, damages,
costs, and expenses, arising from the operations of the Landlord in the
Building, or from the construction of improvements to any other portion of the
Building, or from any breach or default on the part of Landlord in the
performance of any covenant or agreement on the part of Landlord to be performed
pursuant to the terms of this Lease, or from any act of negligence of Landlord,
its agents, contractors, servants, and employees in or about the Leased Premises
and the Building. In case of any action or proceeding brought against Tenant
Indemnities by reason of any such claim, upon Notice from Tenant, Landlord
covenants to defend such action or proceeding by counsel, competent in the
Tenant's reasonable judgement. To the extent not expressly prohibited by law,
Landlord releases Tenant Indemnitees, from, and waives all claims to damages to
person or property, sustained by the Landlord and/or the Building resulting
directly or indirectly from fire or other casualty, because of existing or
future conditions, defects, matters or things in the Leased Premises or any part
thereof; or from any equipment or appurtenances therein or from any accident in
or about the Leased Premises or from any act by any of Tenant's employees,
agents or servants, EXCEPT in the event the damages are caused by the negligence
or wrongful intentional acts of the Tenant Indemnitees.

B. Landlord agrees to indemnify and save harmless Tenant Indemnitees
from and against any and all liabilities, penalties, fines, forfeitures,
demands, damages, losses, claims, causes of action, suits, judgements, and costs
and expenses incidental thereto (including cost of defense, settlement,
reasonable attorneys' fees, reasonable consultant fees, and reasonable expert
fees), which Tenant Indemnities may hereafter suffer or incur, be responsible
for or disburse as a result of any liabilities directly or indirectly caused by
or arising out of any Hazardous Materials existing on or about the Leased
Premises, the Building and/or the Site, but only to the extent that any such
existence is caused by Landlord's activities on the Leased Premises, the
Building and/or the Site. This provision shall survive termination of the Lease.

ARTICLE X
LANDLORD'S MORTGAGE
-------------------

From time to time before or after the execution of this Lease, and before the
termination of the Term thereof, the Landlord may execute a mortgage or trust
deed in the nature of a mortgage of Landlord's interest in the Building. In such
event:

A. This Lease and all rights of Tenant are subject and subordinate to
any mortgage or mortgages, blanket or otherwise, which do now or may
hereafter affect the Building, and to any and all renewals,
modifications, consolidations, replacements, and extensions thereto. It
is the intention of the parties that this provision be self-operative
and that no further instrument shall be required to effect such
subordination of this Lease. Tenant shall, however, upon demand at any
time or times, execute, acknowledge, and deliver to Landlord, within
ten (10) days after written request by Landlord, without expense to
Landlord, any and all instruments that may be necessary or proper to
subordinate this Lease, and all rights of Tenant hereunder to any such
mortgage or to confirm or evidence such subordination; provided,
however, the mortgagee shall agree to enter into a non-disturbance
agreement with the Tenant, which agreement shall state that provided
the Tenant is in

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<PAGE>

full compliance with the terms and provisions of this Lease and has not
committed an Event of Default (as defined hereinafter), the Lease shall
remain in full force and effect and the possession of the Leased
Premises by the Tenant shall not be disturbed.

B. Landlord agrees promptly to notify Tenant of the placing of any
mortgage or trust deed against the Site or the Building, and Tenant
agrees in the event of any act or omission by Landlord which would give
Tenant the right to terminate this Lease, or to claim a partial or
total eviction, Tenant shall not exercise any such right until it has
notified in writing the holder of any mortgage which at the time shall
be a lien on the Building, of such act or omission, and such holder is
provided with a reasonable time not exceeding thirty (30) days to cure
any such default.

C. Tenant covenants and agrees, in the event any proceedings are
brought for the foreclosure of any such mortgage, to attorn to the
purchaser upon any such foreclosure sale, if so requested to do so by
such purchaser, and to recognize such purchaser as the Landlord under
this Lease, provided Tenant is furnished with a non disturbance
agreement, within thirty (30) days of the said purchase. Tenant agrees
to execute and deliver, at any time and from time to time, upon the
request of Landlord or any holder of such mortgage or such purchaser,
any instrument which, in the reasonable judgment of such requesting
party, may be necessary or appropriate in any such foreclosure
proceeding or otherwise to evidence such attornment. In the event of
such foreclosure, the Tenant's right to possession and quiet enjoyment
shall not be disturbed provided it is in full compliance with all the
material terms and conditions of this Lease.

D. Any reference herein to the words "foreclosure, foreclosure sale,
and/or foreclosure proceeding" shall be interpreted to include a
conveyance by deed in lieu of foreclosure.

ARTICLE XI
RIGHTS RESERVED TO LANDLORD
---------------------------

Landlord shall have the following rights exercisable after Notice to Tenant
(except in the event of an emergency, when prior Notice will not be required)
and without liability to Tenant for damage or injury to the property, person, or
business (all claims for damage being hereby released) and without effecting an
eviction (constructive or otherwise) or disturbance of Tenant's use or
possession or giving rise to any claim for set-offs or abatement of Rental:

A. To change the name of the Building upon three (3) month's prior
written Notice;

B. To install and maintain signs on the exterior and interior of the
Building;

C. To have passkeys to the Leased Premises;

D. To enter the Leased Premises at reasonable business hours, after
reasonable Notice, to make inspections, to exhibit the Leased Premises
to purchasers, mortgagees or others, or for other reasonable purposes,
and in the last six (6) months of the Term, to exhibit the Leased
Premises to prospective tenants;

E. At any reasonable time or times and during business hours, to
decorate and to make, at its own expense, repairs, alterations,
additions, and improvements, structural or otherwise, in and to the
Building, and to perform any acts related to

17
<PAGE>

The safety, protection, or preservation thereof, and during such
operations to take into and through the Leased Premises, or any part of
the Building, all materials and equipment required and to close or
temporarily suspend operation of entrances, doors, corridors, or other
facilities, provided such work does not substantially interfere with
the Tenant's ability to conduct its business, or make the Leased
Premises any less desirable; and

F. To enter upon the Leased Premises at reasonable times, after
reasonable Notice, for any reasonable purposes contemplated herein.

ARTICLE XII
DAMAGE BY FIRE OR OTHER CASUALTY
--------------------------------

A. If the Leased Premises or the Building shall be damaged by fire or
other cause and if it appears in the reasonable opinion of the Landlord's
architect that the Leased Premises and/or the Building may be repaired or
restored within one hundred fifty (150) days after such damage, and should the
mortgagee of the Building elect to make sufficient insurance proceeds available
for the costs of the repair and restoration, then Landlord shall commence to
restore the Leased Premises and the Building as soon as reasonably possible and
complete such repair or restoration with reasonable promptness. Based upon the
architect's opinion and the mortgagee's decision to make the insurance proceeds
available, Landlord shall make an election to restore or not to restore within
forty five (45) days after the date of the casualty, and shall so notify the
Tenant in writing. If the Landlord elects not to restore, this Lease shall
forthwith terminate upon the date of said damage. Should no Notice be received
from the Landlord within the forty five (45) day period, it shall conclusively
be presumed that the Landlord has elected to restore the Leased Premises and the
Building.

B. Notwithstanding anything to the contrary herein contained, Landlord
shall have no duty pursuant to this Article XII to repair or restore any Tenant
Alterations to the Leased Premises made after the Commencement Date; unless the
Tenant has notified the Landlord in writing, prior to the fire or other
casualty, that it desires the Landlord to add certain specified Tenant
Alterations to the fire and extended coverage insurance policies of the Landlord
and the Tenant has paid to the Landlord the actual cost of any additional
insurance premiums resulting therefrom. If, at the time of the casualty, Tenant
wants any other or additional repairs, restorations, additions, or alterations,
and if Landlord consents thereto, which consent shall not be unreasonably
withheld, the same shall be done by Landlord at the Tenant's expense.

C. Rental shall abate beginning with the date of the damage causing the
Leased Premises to be untenantable and ending with the date when the Leased
Premises are again rendered tenantable, however, such abatement shall be limited
to the ratio the untenantable portion of the Leased Premises bears to the entire
Leased Premises, should only a portion of the Leased Premises be untenantable;
provided, however, if the damage had been caused by the intentional act or
neglect of the Tenant which results in one or more of the insurance companies
providing the fire and extended coverage on the claim asserting a defense to the
payment of all or a material part of the claim resulting from the casualty,
then, in such event, Rental shall not abate and the Tenant shall be obligated to
continue the payment of Rental during the period the Leased Premises or any part
thereof is untenantable.

D. Notwithstanding any provisions herein to the contrary, in the event
the Leased Premises or the Building are not restored or rendered tenantable
within one hundred fifty (150) days after the casualty, the Tenant shall have
the right to cancel and terminate this Lease upon a prior thirty (30) day
written Notice of the Landlord.

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<PAGE>

ARTICLE XIII
EMINENT DOMAIN
--------------

A. If the entire Building shall be taken by any public authority under
the power of eminent domain, then the Term of this Lease shall cease as of the
day possession shall be taken by such public authority, and the Rental shall be
paid up to that date with a proportionate refund by Landlord of such Rental as
shall have been paid in advance. The Landlord shall provide the Tenant with
Notice of a taking within thirty (30) days after it receives formal notice from
the said public authority.

B. If a material portion of the floor area of the Leased Premises shall
be taken under the power of eminent domain, Landlord and the Tenant shall each
have the right to terminate this Lease, by Notice in writing to the other on or
before the day of surrendering possession to the public authority, and Rental
shall be paid or refunded as of the date of termination. In the event this Lease
remains in effect, all of the terms herein provided shall continue in effect
except that the Rental shall be equitably abated, and Landlord shall make all
necessary repairs or alterations to the Leased Premises and the Building so as
to constitute the remaining premises a complete architectural unit.

C. All damages awarded for such taking under the power of eminent
domain, whether for the whole or a part of the Leased Premises, shall be the
property of Landlord, whether such damages shall be awarded as compensation for
diminution in value of the leasehold or to the fee of the Building. However, the
Tenant shall be entitled to seek separate damages for any such taking so long as
the same does not diminish or reduce the Landlord's award.

ARTICLE XIV
ASSIGNMENT AND SUBLETTING
-------------------------

A. Tenant shall not assign nor in any other way transfer this Lease or
any interest therein, nor sublet the Leased Premises or any part or parts
thereof, nor permit occupancy by anyone with, through, or under it, without the
previous written consent of the Landlord, which consent shall not be
unreasonably withheld or delayed. Consent by the Landlord to one or more
assignments or subletting of this Lease or the Leased Premises shall not operate
as a waiver of Tenant's rights as to any subsequent assignments or subletting.
The Tenant specifically understands and agrees that any assignment or sublease
shall in no way release (unless by written agreement) the Tenant of any of its
obligations and covenants under this Lease, nor should said assignment or
sublease be construed or taken as a waiver of any of the Landlord's rights or
remedies hereunder against or as relating to the Tenant. It is the specific
understanding and intention of the parties that in the event the Tenant's
interest herein is assigned or sublet either through the provisions of this
Article, by operation of law or otherwise, the Tenant shall not monetarily
benefit from an increase in the Rental or other considerations paid by the
assignee or subtenant over and above the Rental provided for in this Lease. In
the event the terms of the assignment or sublease provide for an increase in
Rental over and above the rental provided for herein, or in the event the Tenant
receives, or is entitled to receive, a bonus or consideration from the assignee
or subtenant in consideration of said assignment or sublease, such increased
Rental, bonus, or consideration shall be paid directly to the Landlord by either
the Tenant and/or the assignee or sublessee, as the case may be; however, Tenant
shall have the right, prior to the payment to the Landlord of the increased
Rental, bonus, or consideration to deduct therefrom any and all costs incurred
by Tenant in acquiring such assignee or sublessee, including but not limited to
leasing commissions, advertising costs, and changes or

19
<PAGE>

Improvements to the Leased Premises.

B. Notwithstanding the above, the Tenant has the right to assign or
sublease to a corporation which is the parent or subsidiary of or is controlled
by Tenant, or to a corporation resulting from any reorganization or merger to
which Tenant or its parent or any of its subsidiaries or any corporation
controlled by it is a party; provided further, however, in the event of any
assignment or sublease by Tenant, Tenant shall remain primarily liable and
responsible for the faithful performance of this Lease, the use of the Leased
Premises shall be substantially the same, and the Tenant gives the Landlord
written Notice of all particulars of the assignment or sublease.

ARTICLE XV
REMEDIES
--------

A. Any one (1) or more of the following events shall be considered an
event of default, hereinafter referred to as EVENT OF DEFAULT:

(a) Tenant shall be adjudged an involuntary bankrupt, or a decree or
order approving, as properly filed, a petition or answer filed against
Tenant asking reorganization of Tenant under the Federal bankruptcy
laws as now or hereafter amended, or under the laws of any State, shall
be entered, and any such decree or judgment or order shall not have
been vacated or stayed or set aside within sixty (60) days from the
date of the entry or granting thereof; or

(b) Tenant shall file or admit the jurisdiction of the court and the
material allegations contained in any petition in bankruptcy laws as
now or hereafter amended, or Tenant shall institute any proceedings or
shall give its consent to the institution of any proceedings for any
relief of Tenant under any bankruptcy or insolvency laws or any laws
relating to the relief of debtors, readjustment of indebtedness,
reorganization, arrangements, composition or extension; or

(c) Tenant shall make any assignment for the benefit of creditors or
shall apply for or consent to the appointment of a receiver for Tenant
or any of the property of Tenant; or

(d) The Leased Premises are levied upon by any revenue officer or
similar officer, and such levy shall not have been vacated or stayed or
set aside within twenty (20) days from the date of the entry or
granting thereof; or

(e) A decree or order appointing a receiver of the property of Tenant
shall be made and such decree or order shall not have been vacated,
stayed, or set aside within thirty (30) days from the date of entry or
granting thereof; or

(f) Tenant shall fail to pay any installment of Rental, Additional Rent
or other sums required to be paid by Tenant hereunder when due as
herein provided, and such default shall continue for five (5) days
after Notice thereof in writing to Tenant; or

(g) Tenant shall fail to contest the validity of any lien filed or
claimed against the Building or the Leased Premises related to Tenant
Alterations or any other improvement to the Leased Premises or Building
performed or made by the Tenant or on behalf of the Tenant, and/or
further, the Tenant shall fail to give to the Landlord security or
indemnity, adequate in Landlord's reasonable discretion, to Landlord to
ensure payment of release thereof, all within fifteen (15) days after
the date of the

20
<PAGE>

filing or notice of lien to Landlord; and if the Tenant has commenced
to contest the same after having given such security or indemnity,
shall fail to prosecute such contest with diligence, or shall fail to
have the same released and satisfy any judgment rendered thereon, and
such failure continues for ten (10) days after Notice thereof in
writing to Tenant; or

(h) Tenant shall fail to keep, observe, or perform any of the other
covenants and agreements herein contained to be kept, observed, and
performed by Tenant, and such failure shall continue for thirty (30)
days after Notice thereof in writing to Tenant, provided, however,
should remedial activity on the part of the Tenant reasonably require a
period in excess of the said thirty (30) days, the Tenant shall not be
considered to have committed an Event of Default provided it diligently
pursues said remedial activity for a reasonable period of time as may
be required, but in no event more than sixty (60) days.

B. Upon the occurrence of any one (1) or more of the above Events of
Default or any other Event of Default specified elsewhere in this Lease, and
after the expiration of the cure period provided, if any, then upon written
Notice from Landlord to Tenant, the Landlord may elect to either (a) terminate
the Lease, or (b) terminate the rights of the Tenant to possession of the Leased
Premises only without terminating the Lease. Upon termination of the Lease, or
upon any termination of the Tenant's right to possession without termination of
the Lease, Tenant shall surrender possession and vacate the Leased Premises
immediately, and deliver possession thereof to Landlord, and Tenant hereby
grants to Landlord the full and free right, without further demand or Notice of
any kind to Tenant (except as herein expressly provided), to enter into and upon
the Leased Premises in such event, with due process of law, and to repossess the
Leased Premises as Landlord's former estate and to expel or remove Tenant and
any others who may be occupying or within the Leased Premises, and remove
Tenant's personal property, signs, and other evidences of tenancy, without being
deemed in any manner guilty of trespass, eviction, or forcible entry or
detainer, without incurring any liability for any damage resulting therefrom,
and without relinquishing Landlord's rights to Rental for the entire balance of
the Term, or from any other obligations under this Lease, or any other right
given to Landlord by operation of law.

C. Upon termination of the Lease, Landlord shall be entitled to receive
as damages all Rental (including Repayments) and other sums due and payable by
Tenant on the date of the termination, plus (a) the present value of the Rental
and other sums provided herein to be paid by Tenant for the rest of the Term
less the fair rental value of the Leased Premises, each based upon a discount
rate of nine percent (9%), plus (b) the cost of performing any other covenants
to be performed by Tenant, and (c) the cost of attorneys' fees and court costs
incurred by the Landlord, if any, in enforcing the rights of the Landlord, less
any Repayments received by Landlord.

D. If Landlord elects to terminate the Tenant's right to possession
only without terminating the Lease, Landlord shall be entitled to receive as
damages (a) all Rental and other sums due and payable by Tenant on the date of
the termination (including Repayments), plus (b) all Rental and other sums as
such become due and payable thereafter for the rest of the Term, plus (c) the
cost of performing any other covenants to be performed by Tenant under the terms
and provisions of this Lease, plus (d) the cost of reasonable attorneys' fees
and court costs incurred by the Landlord, if any, in enforcing the rights of the
Landlord, less any Repayments received by Landlord.

E. Upon termination of the Lease, or if in the event the Landlord
elects to terminate the Tenant's right to possession and not terminate the
Lease, the Landlord

21
<PAGE>

shall have the obligation to use reasonable efforts to relet the Leased
Premises, however, Landlord shall not be deemed to have failed to use such
reasonable efforts by reason of the fact that Landlord has leased or sought to
lease other vacant premises owned by Landlord (or Landlord's Beneficiaries), in
preference to reletting the Leased Premises. Landlord may relet all or any part
of the Leased Premises for such reasonable rental and upon such terms as shall
be reasonably satisfactory to Landlord (including the right to relet the Leased
Premises for a term greater or lesser than that remaining on the Term of this
Lease, and the right to relet the Leased Premises as a part of a larger area or
a smaller area, and the right to change the character or use made of the Leased
Premises). For the purpose of such reletting, Landlord may decorate or make any
repairs, changes, cleaning, painting, alterations, or additions in or to the
Leased Premises, and may further pay for customary leasing brokers' commissions,
reasonable market rent concessions to a new tenant or tenants, and reasonable
attorneys' fees that may be necessary to induce or procure the replacement
tenant. If the Leased Premises are relet and a sufficient sum shall not be
realized from the collection of the rental of such reletting, after paying all
the expenses of such reletting as referred to hereinabove, to satisfy the
remaining Rental and other charges due from the Tenant for the remainder of the
Term, Tenant shall pay to the Landlord on demand any such deficiency, within
twenty (20) days after demand.

F. In the event of any uncured Event of Default hereunder by Tenant,
including but not limited to, Tenant's failure to obtain insurance, make
repairs, or satisfy lien claims, Landlord may, but is not obligated to, with
Notice to the Tenant, cure the Event of Default for the account of and at the
expense of Tenant. Any such sum of money paid by Landlord, plus ten percent
(10%), shall be due and payable by the Tenant to the Landlord, as Additional
Rent, and shall be assessed annual interest thereon at the rate of three percent
(3%) in excess of the then current prime rate of interest from time to time
charged by the First National Bank of Chicago, or twelve percent (12%) per
annum, whichever is greater, from the date of payment by the Landlord.

G. If the Landlord or the Tenant are compelled to incur any expense in
instituting or prosecuting any action or proceeding in law or in equity to
enforce any of the rights and obligations hereunder or to defend any action
brought by the Tenant or the Landlord, the losing party in such actions shall
pay to the prevailing party, the expenses incurred, including but not limited to
reasonable attorneys' fees and court costs, with interest thereon at the rate of
three percent (3%) in excess of the then current prime rate of interest from
time to time charged by the First National Bank of Chicago per annum, or twelve
(12%) per annum, whichever is greater, commencing on the date of decision by the
trial court. Any sums hereunder due from the Tenant to the Landlord shall be
considered as Additional Rent. In the event of any such actions or proceedings
arising out of this Lease, both parties agreed to waive right of trial by jury.

H. No remedy herein or otherwise conferred upon or reserved to Landlord
shall be considered to exclude or suspend any other remedy, but the same shall
be cumulative and shall be in addition to every other remedy given hereunder now
or hereafter existing at law or in equity or by statute, and every power and
remedy given by this Lease to Landlord may be exercised from time to time and as
often as occasion may arise or as may be deemed expedient. No delay or omission
of Landlord to exercise any right or power arising from any breach of the Lease
by the other shall impair any such right or power or shall be construed to be a
waiver of any such breach or any acquiescence therein.

I. The monthly installments of Rental are due on the 1st day of each
month. Any other charges are due within thirty (30) days of written Notice
thereof. All Rental and/or other sums due from Tenant to Landlord which are then
unpaid when due, shall be

22
<PAGE>

assessed interest thereon at the rate of three percent (3%) in excess of the
then current prime rate of interest from time to time charged by the First
National Bank of Chicago per annum, or twelve percent (12%) per annum, whichever
is greater, and said sum shall be payable by Tenant as Additional Rent.

J. The provisions of this Article shall survive the termination of this
Lease.

ARTICLE XVI
SURRENDER OF POSSESSION
-----------------------

A. At the expiration of the Term, whether by lapse of time or
otherwise, Tenant shall surrender the Leased Premises in good condition and
repair, reasonable wear and tear and loss by fire or other unavoidable casualty
excepted.

B. In the event Tenant remains in possession of the Leased Premises
after the expiration of the Term, without the execution of a new lease or the
exercise of the provisions of Article XXII, it shall be deemed to be occupying
the Leased Premises as a tenant at sufferance from month to month, at Two
Hundred Percent (200%) of the Rental and other charges due from Tenant paid or
payable during the last month of the Term, subject to all the other conditions,
provisions, and obligations of this Lease insofar as the same are applicable to
a month to month tenancy unless otherwise agreed to in writing by the parties.
Tenant shall also pay to the Landlord all consequential damages sustained by
Landlord on account of such holdover including, but not limited to, loss of
rental from prospective tenants for the Leased Premises. The provisions of this
Article XVI B shall not operate as a waiver by Landlord of any right of
re-entry, or other remedies available to Landlord hereinabove provided or by
operation of law.

C. Upon the expiration of the Term, whether by the lapse of time or
otherwise, if Landlord so requests in writing, Tenant shall promptly remove all
personal property and those Tenant Alterations not affixed to the realty, and
repair any damage occasioned by such removals at Tenant's expense; and if in
default thereof, Landlord may effect such removals and repairs, and Tenant shall
pay Landlord the cost of such removals and repairs, plus ten percent (10%), with
interest at the rate of three percent (3%) in excess of the then current prime
rate of interest from time to time charged by the First National Bank of Chicago
per annum, or twelve percent (12%) per annum, whichever is greater, commencing
on the date of payment thereof, and same shall be due and payable by the Tenant
within ten (10) days after Notice.

ARTICLE XVII
NOTICES
-------

A. Whenever under this Lease a provision is made for notice of any kind
(hereinafter referred to as NOTICE), the Notice shall be in writing, and signed
by or on behalf of the party giving or making the Notice, and shall be given to
the Party at its address and/or fax number set forth below or such other address
and/or fax number as the party may later specify for that purpose by Notice to
the other party. Each Notice shall, for all purposes, be deemed given and
received:

(a) If given by fax, when the fax is transmitted to the party's fax
number specified below and confirmation of complete receipt is received
by that transmitting party during normal business hours or on the next
business day if not confirmed during normal business hours;

(b) If hand delivered to a party, when the copy of the Notice is
receipted;

23
<PAGE>

(c) If given by a nationally recognized and reputable overnight
delivery service, the day on which the Notice is actually received by
the party;

(d) If given by certified mail, return receipt requested, postage
prepaid, two (2) business days after it is posted with the United
States Postal Service, to the address of the party specified below.

B. If any Notice is sent by fax, the transmitting party shall send a
duplicate copy of the Notice to the other party by regular mail. In all events,
however, any Notice sent by fax transmission shall govern all matters dealing
with delivery of the Notice, including the date on which the Notice is deemed to
have been received by the other party.

C. The provisions above governing the date on which a Notice is deemed
to have been received by a party to this Lease shall mean and refer to the date
on which a party to this Lease, and not its counsel or other recipient to which
a copy of the Notice may be sent, is deemed to have received the Notice.

D. If Notice is tendered under the provisions of this Lease and is
refused by the intended recipient of the Notice, the Notice shall nonetheless be
considered to have been given and shall be effective as of the date of the
refusal. The contrary notwithstanding, any Notice given to a party in a manner
other than that provided in this Lease, that is actually received by that party,
shall be effective with respect to said party on receipt of the Notice.

E. Notices shall be sent to the following addresses and/or fax numbers:

To the Landlord:
Lincoln Atrium Management Company
135 East Algonquin Road
Arlington Heights, Illinois 60005
Fax Number: 847-364-7772

To the Tenant:
Allscrips Pharmaceuticals, Inc.
2401 Commerce Drive
Libertyville, Illinois 60061
Telecopy Number: 800-548-5160

F. Prior to the Commencement Date the address of the Tenant shall be:

Allscrips Pharmaceuticals, Inc.
1033 Butterfield Road
Vernon Hills, Illinois 60061-1360
Telecopy Number: 800-548-5160

ARTICLE XVIII
AMERICANS WITH DISABILITIES ACT
-------------------------------

Notwithstanding anything to the contrary contained in this Lease,
Landlord is and shall be solely responsible for ensuring that at the time of the
Commencement Date, the Leased Premises and the Building are in full compliance
with Title III of the Americans With Disabilities Act (42 U.S.C. SS. 12101 et
seq. - hereinafter referred to as ADA), and

24
<PAGE>

all regulations pursuant thereto (the REGULATIONS). Landlord hereby indemnifies,
saves, and holds harmless Tenant from and against any and all claims, demands,
causes of action, suits, losses, costs, and expenses (including, without
limitation, attorneys' fees and litigation costs), damages, penalties and fines
asserted against, suffered or incurred by, Tenant in any way relating to or
arising from, in whole or in part, an actual or asserted claim that the Leased
Premises or the Building (or any portion thereof), were in violation of the ADA
or the Regulations as of the Commencement Date. In the event ADA and/or the
regulations are amended in the future which may result in the Leased Premises
and/or the Building becoming out of compliance, the Landlord shall be solely
responsible for the cost of any major structure changes which may be required to
place the Building in full compliance with said amended ADA or Regulations;
however, the Tenant shall be solely responsible for the cost of any other
required modifications or changes to the Leased Premises.

ARTICLE XIX
GENERAL
-------

A. Nothing contained herein shall be deemed or construed by the parties
hereto, nor by any third party, as creating the relationship of principal and
agent or of partnership or of joint venture between the parties hereto, it being
understood and agreed that neither the method of computation of Rental nor any
other provision contained herein, nor any acts of the parties hereto shall be
deemed to create any relationship between the parties hereto other than the
relationship of the landlord and tenant. Whenever herein the singular number is
used, the same shall include the plural, and the masculine gender shall include
the feminine and neuter genders.

B. The various rights and remedies herein contained and reserved to
each of the parties shall not be considered as exclusive of any other right or
remedy of such party, but shall be construed as cumulative and shall be in
addition to every other remedy now or hereafter existing at law, in equity, or
by statute. No delay or omission of the right to exercise any power by either
party shall impair any such right or power, or shall be construed as a waiver of
any Event of Default or as acquiescence therein. One or more waivers of any
covenant, term, or condition of this Lease by either party shall not be
construed by the other party as a waiver of a subsequent breach of the same
covenant, term, or condition. The consent or approval by either party to or of
any act by the other party of a nature requiring consent or approval shall not
be deemed to waive or render unnecessary consent to or approval of any
subsequent similar act, and specifically the acceptance of a late payment of
Rental by the Landlord, shall not constitute a waiver of the obligation of the
Tenant to make all future payments in a timely manner as provided for herein.

C. The laws of the State of Illinois shall govern the validity,
performance, and enforcement of this Lease. The invalidity or unenforceability
of any provision of this Lease shall not affect or impair any other provisions.

D. The headings of the several articles contained herein are for
convenience only and do not define, limit, or construe the contents of such
articles.

E. The covenants, agreements, and obligations herein contained shall
extend to, bind and inure to the benefit not only of the parties hereto but
their successors and assigns, with the exceptions as stated herein.

F. Whenever a period of time is herein provided for Landlord or Tenant
to do or perform any act or thing, neither shall be liable or responsible for
any delays due to

25
<PAGE>

strikes, riots, acts of God, shortages of labor or materials, national
emergency, acts of a public enemy, governmental restrictions, laws or
regulations, or any other cause or causes whether similar or dissimilar to those
enumerated, beyond its reasonable control.

G. No payment by Tenant or receipt by Landlord of a lesser amount than
the Rental herein stipulated or other charges shall be deemed to be other than
on account of the earliest stipulated amount, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as Rental
be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
Rental or other charges or pursue any other remedy in this Lease provided.

H. This Lease and the Exhibits, attached hereto and forming a part
hereof, set forth all the covenants, promises, agreements, conditions, and
understandings between Landlord and Tenant concerning the Leased Premises, and
there are no covenants, promises, agreements, conditions, or understandings,
either oral or written, between them other than as are herein set forth. Except
as herein otherwise provided, no subsequent alteration, amendment, change, or
addition to this Lease shall be binding upon Landlord or Tenant unless reduced
to writing and signed by them. This Lease consists of the following:

Lease of 31 Pages
Exhibit A - Legal Description
Exhibit B - Site Plan
Exhibit C - Tenant Plans
Exhibit D - Contract Prices and Estimates
Exhibit E - Protective Covenants
Exhibit F - Estoppel Certificate

I. Each of the parties represents and warrants that there are no claims
for brokerage commissions or finder's fees in connection with the execution of
this Lease, except for CB Commercial and Stein & Company, which Landlord agrees
to pay; and each of the parties agree to indemnify and hold harmless the other
against all liabilities arising from any such claim other than from CB
Commercial and Stein & Company, including, without limitation, the cost of
counsel fees and costs in connection therewith.

J. So long as the Tenant shall observe and perform the covenants and
agreements binding on it hereunder, Tenant shall at all times during the Term
hereof, peacefully and quietly have and enjoy the possession of the Leased
Premises, and the Landlord shall and will warrant and defend the Leased Premises
on behalf of the Tenant against any and every person claiming the whole or part
thereof.

K. Tenant shall from time to time, within ten (10) days after written
request by Landlord, execute, acknowledge, and deliver to Landlord an Estoppel
Certificate in the form and content set forth in Exhibit F, attached hereto and
made a part hereof.

L. Whenever or wherever the consent of the Landlord or Tenant shall be
required hereunder, the same shall not be unreasonably withheld or delayed.

ARTICLE XX
DISPUTE RESOLUTION
------------------

A. The parties shall attempt in good faith to resolve all disputes
promptly by negotiation. Any party may give the other party written Notice of
any dispute not

26
<PAGE>

resolved in the normal course of business. Senior executives of both parties
shall meet at a mutually acceptable time and place within ten (10) days after
delivery of such Notice, and thereafter as often as they reasonably deem
necessary, to exchange relevant information and to attempt to resolve the
dispute. If the matter has not been resolved within thirty (30) days from the
referral of the dispute to senior executives, or if no meting of senior
executives has taken place within fifteen (15) days after such referral, either
party may initiate mediation as provided hereinafter. All negotiations pursuant
to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and State
rules of evidence.

B. In the event that any dispute arising out of or relating to this
Lease is not resolved in accordance with the procedures provided in Section A
above, the dispute shall be submitted to mediation with American Arbitration
Association (AAA), in Chicago, Illinois. If the mediation process has not
resolved the dispute within thirty (30) days of the submission of the matter to
mediation, or such longer period as the parties may agree, then the dispute
shall be decided by arbitration as set forth below.

C. All claims, disputes, and other matters in question not resolved by
mediation, including whether either of the parties are responsible for the
payment of fees, costs and attorneys fees (hereinafter collectively referred to
as the CONTROVERSY) shall be decided by binding arbitration by the AAA in
accordance with the Arbitration Rules of the AAA then in effect. This agreement
to submit to binding arbitrate shall be specifically enforceable under the
prevailing arbitration law of any court of competent jurisdiction. Notice of
demand for arbitration must be filed in writing with the other party to this
Lease and with the AAA. The demand must be made within a reasonable time after
the Controversy has arisen. In no event may a demand for arbitration be made if
the Controversy would be barred by the applicable statute of limitations.

ARTICLE XXI
RIGHT OF FIRST REFUSAL
----------------------

A. Providing the Tenant has not committed an uncured Event of Default,
the Landlord hereby grants to the Tenant a right of first refusal to lease any
remaining space in the Building. When the Landlord has received a bona fide
written proposal signed by a third party to lease any space in the Building
acceptable to the Landlord, the Landlord shall first send a Notice to the Tenant
including a copy of the proposal, which shall include but not limited to, the
location in the Building of the offered space (herein FIRST REFUSAL PREMISES),
its rentable square feet, the rental, the term, tenant improvement allowances
and rent allowances if any, the commencement and termination dates, rights to
expansion space, renewal options, and any other special terms or conditions the
Landlord deems pertinent. This Notice and copy of the proposal shall hereinafter
be referred to as FIRST REFUSAL NOTICE. The Tenant shall have fifteen (15) days
thereafter to elect, in writing, to agree to lease the First Refusal Premises
upon the provisions set forth in the First Refusal Notice. In the event the
Tenant fails to exercise its rights hereunder by notifying the Landlord in
writing within the fifteen (15) day period the Landlord shall have the right to
enter into a lease with the said thirty party described in the First Refusal
Notice but only upon substantially the same economic terms set forth therein. If
the Landlord substantially and materially changes or alters the economic terms
of the lease to the third party, the Landlord shall give the Tenant a new First
Refusal Notice, and the Tenant shall again have the same rights as provided for
above.

B. In the event the Tenant exercises its right of the first refusal
provided in this Article XXI, the Landlord shall thereupon prepare a lease
amendment to this Lease based upon the terms of said First Refusal Notice. If
the Landlord and the Tenant, both

27
<PAGE>

acting reasonably and fairly, cannot agree upon the terminology of the said
amendment within thirty (30) days after the delivery to the Tenant of the
initial draft of the amendment, then the Landlord may elect, upon written Notice
to the Tenant, to terminate this right of first refusal as to that particular
First Refusal Premises and lease the First Refusal Premises to the third party
upon the same economic terms and provisions as in the First Refusal Notice.

C. The Tenant's refusal or failure to exercise its rights under this
Article XXI as to a particular set of terms for a particular First Refusal
Premises, or the inability of the Tenant to agree on the terminology of a lease
agreement, shall not terminate this right of first refusal as to any other
spaces or the same space being offered for lease thereafter.

D. After the exercise of the rights provided in this Article XXI, and
the entry by both parties into a lease agreement for the lease of the First
Refusal Premises, the term Leased Premises, as applied in this Lease, shall also
apply to the First Refusal Premises.

E. This Right of First Refusal shall not apply to any space in the
Building being leased by Motorola, Inc. and/or any of its subsidiaries or
affiliates.

ARTICLE XXII
OPTION TO REVIEW
----------------

Provided the Tenant has not committed an uncured Event of Default, the
Tenant shall have the right to renew this Lease and lease the Leased Premises
for one (1) five (5) year period, hereinafter referred to as the EXTENDED TERM,
upon the same terms and conditions set forth herein with the following
exceptions:

A. The monthly Fixed Rent to be paid by the Tenant during the first
year of the Extended Term shall be the greater of the following:

(a) Forty Six Thousand Nine Hundred and Sixty Five and 23/100
Dollars ($46,965.23); or

(b) Thirty-Eight Thousand Five Hundred and Forty Six and
53/100 Dollars ($38,546.53), plus that sum determined by
multiplying the percentage increase of the PRICE INDEX between
the month of April 1997 and April 2004 times Thirty-Eight
Thousand Five Hundred and Forty Six and 53/100 Dollars
($38,546.53).

B. The Fixed Rent during the second (2nd) year of the Extended Term,
and in each year thereafter, shall be increased by two and one-half
Percent (2.5%) of the preceding year's Fixed Rent.

C. The word "year" as used in this Article shall mean the period from
July 1 to June 30.

D. The Price index means the consumer price index published by the
Bureau of Labor Statistics of the United States Department of Labor,
U.S. City Average, All Items and Major Group Figures for Urban Wage
Earners and Clerical Workers (1982-84=100). If a substantial change is
made in the manner of computing the Price Index, then the Price Index
will be adjusted to the figures that would have been used had the
manner of computing the Price Index be the same as that in effect as of
the Commencement Date.

28
<PAGE>

If the Price Index is not available, a reliable governmental or other
nonpartisan publication evaluating the information used in determining
the consumer price index shall be applied for the purposes of this
Article XXII.

E. To exercise this renewal option, the Tenant must give the Landlord
written Notice, on or before July 1, 2003.

F. Upon the exercise of this renewal option, the word Term as defined
in this Lease shall also apply to the Extended Term, and the term
Termination Date shall be defined as the last date of the Extended
Term.

G. All other terms and conditions of this Lease shall be in full force
and effect during the Extended Term, including the obligation to pay
Additional Rent.

H. This renewal option shall be exercised only as to all the Leased
Premises leased by the Tenant at the time of the Notice.

ARTICLE XXIII
SECURITY LETTER OF CREDIT
-------------------------

A. Tenant, contemporaneously with the exception of this Lease, shall
deposit with Landlord, an unconditional and irrevocable letter of credit in
favor of the Landlord in the amount of Five Hundred Thousand Dollars ($500,000),
hereinafter referred to as the L/C DEPOSIT. The L/C Deposit shall be held by
Landlord as security for the faithful performance by Tenant of all of the terms,
covenants, and conditions of this Lease by said Tenant to be kept and performed.

B. The form, provisions and terms of the L/C Deposit shall be as
follows:

(a) The L/C Deposit shall be drawn on a bank approved by the Landlord
(hereinafter referred to as the L/C BANK), which approval will not be
unreasonably withheld or delayed.

(b) The expiration date of the L/C Deposit shall be April 1, 2002. If
the expiration date of the L/C Deposit is prior to April 1, 2002, the
Tenant must supply a new L/C Deposit, extending the expiration date for
a period of at least one (1) year, thirty (30) days prior to the
expiration date. Failure on the part of the Tenant to supply such new
L/C Deposit on a timely basis, shall be considered as an Event of
Default of this Lease.

(c) The amount of the L/C Letter shall decrease One Hundred Thousand
Dollars ($100,000) annually on the anniversary date of the Commencement
Date, as follows:

(1) April 1, 1998 - $400,000
(2) April 1, 1999 - $300,000
(3) April 1, 2000 - $200,000
(4) April 1, 2001 - $100,000
(5) April 1, 2002 - 00

(d) The Landlord shall have the right to draw on the L/C Letter if the
Tenant has committed an Event of Default, and the cure period (if any)
expired without appropriate remedial actions by the Tenant, and as a
result thereof, the Landlord elected to either terminate the Lease or
terminate the Tenant's right to possession of the Leased Premises
without terminating the Lease (pursuant to Article XV B). The

29
<PAGE>

L/C Bank shall pay to the Landlord the amount of the L/C Letter when it
is personally served with a letter from LAMCO, or from such other agent
as Landlord may from time to time hereafter designate in writing to the
L/C Bank, which shall contain the following wording:

"Allscrips Pharmaceuticals, Inc. ("Allscrips") has committed
an Event of Default, pursuant to the provisions of a Lease
agreement dated October __, 1996, and any cure period as
provided in the Lease Agreement has expired without Allscrips
remedying the Default, and the Landlord has terminated the
Lease Agreement or terminated Allscrips' right to possession
of the Leased Premises."

(e) The form and the remainder of the working of the L/C Letter shall
be subject to the approval of the Landlord, which approval will not be
unreasonably withheld or delayed.

C. At any time during the Term, should either one of the two events
occur, the Landlord shall return the L/C Letter to the Tenant and no further
security shall be required of the Tenant:

(a) An initial public offering of the stock of the Tenant which results
in net proceeds, after commissions and expenses, of Twenty Five Million
Dollars ($25,000,000) or more being added to the working capital of the
Tenant; or

(b) The merger of the Tenant into a company which, prior to the merger,
has a net worth of Twenty Million Dollars ($20,000,000) or more.

ARTICLE XXIV
TRUSTEE'S AUTHORITY AND EXCULPATORY
-----------------------------------

AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO hereby represents and
warrants that it is fully empowered and authorized to execute this Lease on the
terms and conditions contained herein pursuant to the Trust Agreement dated May
15, 1994, and known as Trust Number MP - 012430, and that such terms and
conditions do not violate the provisions of such Trust. It is expressly
understood and agreed by and between the parties hereto, anything herein to the
contrary notwithstanding, that each and all of the representations, covenants,
undertakings, and agreements herein made on the part of the Landlord while in
form purporting (except as herein otherwise expressed) to be the
representations, covenants, undertakings, and agreements of the Landlord are
nevertheless each and every one of them, made and intended not as personal
representations, covenants, undertakings, and agreements by the Landlord or for
the purpose or with the intention of binding the Landlord personally, but are
made and/or intended for the purpose of binding the Site and the Building; that
this Lease is executed and delivered by said Landlord not in its own right, but
solely in the exercise of the powers conferred upon it as such trustee; that no
duty shall rest upon Landlord to sequester the trust estate or the rents,
issues, and profits arising therefrom, or the proceeds arising from any sale or
other disposition thereof; and that no personal liability or personal
responsibility is assumed by nor shall at any time be asserted or enforceable
against AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, or any of the
beneficiaries under said Trust Agreement, on account of this Lease or on account
of any representations, covenants, undertakings, or agreements of the Landlord
in this Lease contained herein either expressed or implied; all such personal
liability, if any, being expressly waived and released by the Tenant herein and
by all persons claiming by, through, or under said Tenant.

30
<PAGE>

IN WITNESS WHEREOF, we have set our hands and seal to this Lease the
day and year first above written.

LANDLORD:
AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO, as trustee as aforesaid
Attestation not required by
American National Bank and
Trust Company of Chicago
By-Laws
/s/ Dennis John Carrara
- ---------------------------- -------------------------------------------
Secretary _____ President SECOND VICE PRESIDENT

TENANT:
ALLSCRIPS PHARMACEUTICALS, INC., an Illinois
Corporation

/s/ John Cull /s/ Michael E. Cahr
- ---------------------------- --------------------------------------------
Secretary President

31
<PAGE>

LANDLORD'S ACKNOWLEDGMENT
-------------------------
STATE OF ILLINOIS
COUNTY OF COOK

I, Margaret O'Donnell, a Notary Public in and for said County, in the
State aforesaid, DO HEREBY CERTIFY THAT Dennis John Carrara, SECOND VICE
PRESIDENT personally known to me to be the _____ President and
_________________________ personally known to me to be the _____ Secretary of
the AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO and personally known to
me to be the same persons whose names are subscribed to the foregoing
instrument, appeared before me this day in person and severally acknowledged
that they signed and delivered the said instrument as said President and said
Secretary of said corporation, and caused the corporate seal of said corporation
to be affixed thereto, pursuant to authority given by the Trust Agreement, dated
May 15, 1994, and known as Trust No. MP-012430, and by the direction of the
beneficiaries thereof, for the uses and purposes therein set forth.

Given under my hand and notarial seal this 24 day of October, 1996.

/s/ Margaret O'Donnell
------------------------
Notary Public

My commission expires 5-10-97.
--------

[SEAL]

TENANT'S ACKNOWLEDGMENT
-----------------------
STATE OF ILLINOIS
COUNTY OF COOK

I, Sheryl Kemble, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY THAT Michael E. Cahr personally known to me to be
the President of ALLSCRIPS PHARMACEUTICALS, INC., an Illinois Corporation, duly
licensed to transact business in the State of Illinois, and John G. Cull,
personally known to me to be the _____ Secretary of said corporation and
personally known to me to be the same persons who names are subscribed to the
foregoing instrument, appeared before me this day in person and severally
acknowledged that they signed and delivered the said instrument as President and
Secretary of said corporation, and caused the corporate seal to be affixed
thereto, pursuant to authority given by the Board of Directors of said
corporation, as their free and voluntary act and as the free and voluntary act
and deed of said corporation, for the uses and purposes therein set forth.

Given under my hand and notarial seal this 15 day of October, 1996.

/s/ Sheryl Kemble
--------------------
Notary Public

My Commission expires: 1-24-98.
--------

[SEAL]

<PAGE>

CONCEPTS II BUILDING
--------------------

Legal Description
-----------------

Lots 8 & 9 of Block 2 of Lincoln Commerce Center, a subdivision of parts of the
Southwest 1/4 and the Southeast 1/4 of Section 12, and the Northeast 1/4 of
Section 13, all in Township 44 North, Range 10, East of the Third Principal
Meridian, in Lake County, Illinois.

EXHIBIT A
<PAGE>

[Floorplan appears here]

EXHIBIT B
<PAGE>

TENANT PLANS

TO BE ATTACHED

EXHIBIT C
<PAGE>

CONTRACT PRICES AND ESTIMATES

TO BE ATTACHED

EXHIBIT D
<PAGE>

DECLARATION OF PROTECTIVE COVENANTS
FOR LINCOLN COMMERCE CENTER
LIBERTYVILLE, ILLINOIS

This Declaration of Protective Covenants (hereinafter "Declaration") is
made effective the 8th day of September 1989, by LaSalle National Bank, not
personally but as Trustee under Trust No. 113790 dated November 1, 1988, and by
LaSalle National Bank, not personally but as Trustee under Trust No. 113097
dated March 15, 1988, (hereinafter collectively referred to as the
"Declarants"), as the owners of real property located in the Village of
Libertyville, which properties are commonly known as "Lincoln Commerce Center"
and which properties are legally described in Exhibit "A" of this Declaration,
which Exhibit is attached hereto and incorporated herein as if fully stated, and
which properties are hereinafter referred to as the "Property".

WITNESSETH:
-----------

WHEREAS, the Lincoln Commerce Center is being developed as an office
and industrial complex by the Declarants, and Declarants desire to provide for
the preservation of the values and amenities thereof for the benefit of the
Property, to create certain easements appurtenant to all or a part of the
Property, and to provide for the use, maintenance, and repair thereof for any
and all subsequent Owners (as defined hereinafter), all of which shall inure to
the benefit of and pass with the Property and shall apply to and bind successors
in interest and any subsequent owners thereof.

NOW, THEREFORE, the Declarants hereby declare that any interest in the
Property is and shall be held, conveyed, and occupied subject to the covenants,
easements, charges, liens, and restrictions hereinafter set forth (hereinafter
the "Protective Covenants").

I. THE PROPERTY.

The Property affected hereby and subject to this Declaration is
commonly known as Lincoln Commerce Center, a planned development located within
the Village of Libertyville, Lake County, State of Illinois.

II. DEFINITIONS.

The following words, when used in this Declaration or any Supplemental
or Amended Declaration (unless the context shall specifically provide
otherwise), shall have the following meanings, interpretations and effects:

A. "Association" - A to be formed not-for-profit Illinois corporation
to be known as "Lincoln Commerce Center Association" (or by such other name as
may be available at the time of its incorporation) for the purpose of owning
and/or maintaining the Common Areas (as hereinafter defined) and for such other
purposes as may hereinafter be set forth to effectuate the intent of this
Declaration. For the purposes of this

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Exhibit E (30 pages)
<PAGE>

Declaration, references to the Association or its Board shall mean the
Declarants until such time as the Association is formed. Similarly, references
to the Declarants shall mean the Association from and after the referenced
rights or duties are assigned to or devolves to the Association in accordance
with the terms hereof.

B. "Building Site" - Any lot within the Property upon which a building
or buildings and appurtenant structures may be erected, including, without
limitation, any lot appearing on any recorded subdivision plat or plan
pertaining to the Property.

C. "Common Area" - Those areas designated "Common Area", "Private Water
Detention Easement", "Wetlands and Stormwater Management Facilities", or "Out
Lots" on the Plat of Subdivision of the Lincoln Commerce Center, recorded in the
Office of the Recorder of Deeds of Lake County on November 13, 1989, as Document
No. 2850008 (the "Plat of Subdivision") and/or on any amendments or corrections
thereto, any facilities appurtenant thereto, berms, entryway signs or monuments
and landscaping located in the rights-of-way adjacent to or on the Property, any
reservoir or pumping station located on the Property and serving the Property
(unless conveyed to the County of Lake or to the Village) and any other areas,
improvements or facilities within the Property intended for the common use or
benefit of the Owners and which areas, improvements or facilities have not been
dedicated to and accepted by the Village or other governmental bodies, which are
so designated in this Declaration or by Declarants in a duly recorded
instrument.

D. "Default Interest Rate" - A per annum interest rate equal to four
percent (4%) above the rate then being charged from time to time by the First
National Bank of Chicago to its largest customers of the highest credit standing
for short term unsecured loans

E. "Improvements" - All structures or other changes to the Property,
Building Site, or a parcel or lot of any kind, whether above or below grade,
including, but not limited to, buildings, fences, equipment, utility
installations, sending or receiving antennae, storage, loading, and parking
facilities, walkways, driveways, landscaping, signs, site lighting, site
grading, earth movement and any exterior additions, changes, or alterations
thereto.

F. "Owner" - The Party holding legal or equitable title to a Building
Site and the Improvements thereon, excluding the Declarants.

G. "Owners" - Collectively the parties holding legal or equitable title
to all Building Sites and the Improvements thereon, excluding the Declarants.

H. "Party" - An individual, corporation, partnership, or legal entity,
public or private.

I. "Storm Water Facilities" - The storm water system serving the
Property, in whole or in part, including areas designated Private Water
Dentention Easement or Wetlands and Stormwater Management Facilities on the Plat
of Subdivision, conduits, inlet and outlet storm sewers and structures, wells
(including electrical service and discharge pipes)

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<PAGE>

designed to replenish retention ponds, catch basins, inlets, inlet leads, catch
basin leads, wet lands, detention basins, retention ponds, the immediate
adjacent table land to such basins and ponds, and irrigation systems servicing
the Property or the Common Area. There shall be excluded from Storm Water
Facilities (1) storm water collecting facilities dedicated to and accepted by or
owned by governmental bodies or which governmental bodies have agreed to
maintain and (2) storm water collecting sewers and facilities within a Building
Site, the principal purpose of which is to serve such Building Site.

J. "Village" - The Village of Libertyville, an Illinois municipal
corporation, and its successors.

III. PURPOSE.

The purpose of this Declaration is to seek to ensure the proper
development and use of each Building Site; to protect the Owners, tenants or
occupants, present or future, of all Building Sites against the improper
development and use of each Building Site, against the improper development and
use of other Building Sites as will depreciate the value of his Building Site;
to prevent the erection in the Lincoln Commerce Center of Improvements of
unsuitable design, or those built using improper or unsuitable materials, or
which otherwise violate the terms of this Declaration; to prevent haphazard and
inharmonious Improvements; to secure and maintain sufficient setbacks from
streets and adequate free spaces between structures; and, in general, to
establish and maintain the values and amenities of an attractive setting for
business and industry with ample open area and high quality structures and
landscaping. This Declaration is further intended to complement applicable
governmental and municipal regulations, and where conflicts occur, the most
restrictive requirements shall be applied.

IV. IMPROVEMENT COVENANTS.

No Improvements may be constructed by Owners on any portion of the
Property unless they comply with the provisions of this Section IV.

A. ZONING. The zoning of Lincoln Commerce Center is M-3 Planned
Industrial District, in accordance with Chapter 33.16.4 of the Libertyville
Municipal Code, hereinafter referred to as "Zoning Code." All Improvements shall
conform to the Zoning Code. Any application to change the zoning of any Building
Site requires the prior written approval of the Declarants, or of the
Association in the event the rights of Declarants have been transferred or
assigned to the Association. Notwithstanding anything herein to the contrary,
Declarants reserve the right to change the use and zoning of any Building Site
Declarants own, subject only to approval by the Village.

B. CONSTRUCTION.

1. MATERIALS. All Improvements shall be constructed with high
quality permanent materials and shall be designed to be durable and easily
maintained. All Improvements and other structures within the Lincoln

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<PAGE>

Commerce Center shall have exterior walls constructed of attractive materials
which have been approved by Declarants. Subject to the Declarants' review and
approval of color, design and application, all exterior materials shall be face
brick, stone, glass, exposed aggregate panels, textured concrete, steel,
aluminum or wood. Equivalent or better materials and any combination of the
above materials may be used in well conceived and creative applications as
approved by Declarants. Common brick, concrete block, cinder block, and split
face block are specifically prohibited on any exterior wall. Accessory buildings
and enclosures and any structures that are appurtenant to any building shall be
approved by Declarants and shall be of similar or compatible materials, design
and construction.

2. EXTERIOR EQUIPMENT. Exterior mechanical and electrical
equipment, including without limitation air conditioning and heating equipment,
air handling equipment, transformers, transclosures, pump houses, communication
towers, microwave or communications satellite dishes, vents and fans, whether
mounted on the roof or walls of any building or on the ground, shall be placed
or screened so that the predominant design lines of the building or structure
continue without visual distraction or interruption. If any such equipment is
not screened from the view of anyone within any street right-of-way by the
building exterior walls, such equipment shall be separately screened either by
approved building materials or otherwise. The height of any such screening shall
be at least equal to the height of the equipment to be screened.

3. UTILITIES. All plans and specifications shall provide for
the underground installation of all utilities from Building Site lot lines to
Improvements and shall provide for appropriate safety measures or other
controls, whether of a temporary or permanent nature, as may be prudent under
the circumstances and as set forth by local, state, or federal governmental
agencies. Any connection of underground utility involving crossing a public
roadway shall be accomplished only by auguring and casing the carrier pipe.
Wherever feasible, utility connections made above ground level shall be located
within buildings. If utility connections are above ground and not within a
building, such as exposed utility boxes, where feasible they shall be screened
using landscaping or other suitable designs and materials.

C. OBJECTIONABLE USES. Any use which is deemed by the Declarants to be
incompatible or objectionable, including without limitation any use which, in
the Declarants' opinion, might product offensive or unusual odors, fumes, dust,
smoke, noise or pollution, or which might produce an unusual danger of fire,
explosion or other casualty, shall not be permitted in Lincoln Commerce Center.
All business, production, servicing and processing shall take place within
completely enclosed structures unless expressly approved by the Declarants.

D. PARKING.

1. PARKING AREAS. Each Building Site shall contain all
required parking facilities entirely within the site. Parking on street
rights-of-way is expressly prohibited. No parking areas or driveways, except
access driveways, shall be constructed within the required front

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<PAGE>

setbacks of any Building Site.

2. TRAILER PARKING. No storage or overnight parking of trucks
or truck trailers shall be permitted except in off-street loading areas or as
expressly approved by the Declarants.

3. REQUIRED SPACES. The number and location of the required
parking spaces shall be subject to the then applicable zoning and building code
ordinances and regulations of the Village. Prior to an Owner applying to the
village for a variance or change of the applicable zoning and building parking
standards, the written approval of the Declarants must be obtained.

E. OFF-STREET LOADING AREAS. Provisions for handling all truck service
shall be totally within each Building Site. No off-street loading areas or
loading docks shall be located within forty feet (40') of the closest point of
intersection of two (2) or more public or private rights-of-way. Loading space
adjacent to any street must be totally enclosed within a building. Open
off-street loading spaces, not adjacent to streets, shall be adequately screened
from adjacent streets and abutting Building Sites by a fence, wall, door,
landscaping or combination thereof.

F. OUTSIDE STORAGE AND DISPLAYS. The outside display of materials or
merchandise for advertising or merchandising purposes is prohibited. Outdoor
storage of any kind shall be permitted only upon prior approval of the
Declarants, and then generally only behind a principal building or within the
rear half of the Building Site, if screened from the view of anyone within any
street right-of-way and abutting Building Sites by screening walls, earth berms
or plant material at least equal in height to the material being stored. All
equipment and facilities for the bulk storage of liquids, petroleum products,
fuels, refuse, water and similar materials shall be deemed to be outside
storage. Any trash in garbage, storage, pickup areas, receptacles or dumpsters
shall be located within an enclosed building or an area (open to the sky)
enclosed by screening walls, earth berms or plant materials at least equal in
height to the material being stored. Such storage areas or structures shall not
be located within required front, side or rear yard areas.

G. LANDSCAPING.

1. GENERALLY. All open areas on each Building Site not
occupied by buildings, structures, outside storage areas, parking areas, street
right-of-way paved areas, driveways, walkways and off-street loading areas shall
be suitably graded and drained and shall be landscaped with lawns, trees, and
shrubs. Lawns shall be seeded or sodded with bluegrass predominant mixtures. A
landscape plan must be submitted to Declarants in accordance with Section V for
review and approval. All completed landscaping may not be subsequently altered
without the approval of Declarants.

2. PRESERVATION OF TREES. All reasonable efforts shall be made
to preserve the existing trees on each Building Site. Removal of any existing
trees shall be subject to the approval of the Declarants.

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<PAGE>

3. PARKING AREAS. Parking areas adjacent to a street shall be
screened from the street(s) by landscaped berms, hedges, or plantings. There
shall be landscaped buffer strip between every parking area and adjacent
Building Sites at least eight feet (8') wide as measured from the Building Site
lot line. Said buffer strip shall contain at least one shade tree, at least
three inches (3") in diameter, for every forty (40) lineal feet of parking area.

4. MINIMUM PLANTING REQUIRED. Each Building Site shall be
planted with the trees, bushes and other plantings as may be from time to time
required by the Village. It is recommended that trees be grouped in clusters and
oriented to harmonize with adjacent landscaping in place or proposed
landscaping.

5. LANDSCAPE MAINTENANCE. All landscaping on each Building
Site and on the landscaped portions and curbs of any abutting street
right-of-way shall be properly maintained by the Owner or tenant of the Building
Site, which maintenance shall include removal of all trash and debris and all
necessary cutting, watering, fertilizing, aerating, spraying, pruning and
required replacements.

6. TIME. All landscaping on each Building Site shall be
completed within sixty (60) days after occupancy of, or completion of the major
or primary building thereon, whichever event first occurs. The time for
completion may be extended by Declarants if there are delays caused by adverse
weather conditions or by other causes beyond reasonable control. If any Owner
fails to undertake and complete its landscaping within the time limit set forth
above, Declarants may, at their option, after giving such Owner ten (10) days'
prior written notice (unless within said ten (10) day period the Owner of said
Building Site shall proceed and thereafter pursue with diligence the completion
of such landscaping), undertake and complete the landscaping of such Building
Site in accordance with the approved landscaping plan therefor. If Declarants
undertakes and completes such landscaping because of the failure of Owner to
complete the same, the costs of such landscaping together with interest thereon
at the Default Interest Rate shall be assessed against the Owner and if said
assessment and interest is not paid within thirty (30) days after written notice
of such assessment from Declarants, said assessment and interest will constitute
a lien against the Building Site and may be enforced as set forth in Section
VIII.A.7. hereof.

7. LETTER OF CREDIT. In addition to the foregoing, each Owner
shall deliver to Declarants no later than ten (10) days subsequent to approval
of the landscaping plans by Declarants, an irrevocable unconditional letter of
credit in form satisfactory to Declarants, issued by a commercial bank or
savings and loan association approved by Declarants, in the amount of the
estimated cost of the landscaping for its Building Site. Said letter of credit
may be drawn upon by Declarants to pay the costs of completion of the
landscaping in the event that the landscaping is not completed within the time
set forth in this Section IV.G. hereof and Declarants elects to undertake and
complete the same. Upon completion of the landscaping by Owner in accordance
with the approved plans, the letter of credit shall be promptly returned by
Declarants to Owner. Notwithstanding the foregoing, an Owner may furnish other
security satisfactory to Declarants to ensure completion of the

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<PAGE>

landscaping in accordance with the plans approved therefor.

H. FENCING. Fencing shall be permitted only to secure outside storage
or in connection with design screening. All fencing must be approved by
Declarants and be constructed with materials compatible with those used in the
major building in the Building Site. All metal fencing shall be screened by
landscaping.

I. EXTERIOR LIGHTING.

1. PLAN. Each Building Site shall have adequate exterior
lighting for its intended use minimizing glare and without creating lighting
which would be annoying to other Building Sites. An exterior lighting plan must
be submitted to Declarants in accordance with Section V for review and approval.

2. COLOR, TYPE. All exterior lighting shall be of the high
pressure sodium vapor type and/or color. No neon lights and no traveling,
flashing or intermittent lighting of any kind shall be permitted.

3. POLE HEIGHT. All pole mounted exterior lighting fixtures
shall be on poles no higher than twenty feet (20').

4. HOURS OF OPERATION. All exterior lighting shall be
continuously operated each night from dusk until midnight unless the operations
of the Building Site require twenty four (24) hour lighting, in which case the
exterior lighting shall be operated all during the nighttime hours.

5. UNDERGROUND WIRING. All wiring for exterior lighting shall
be installed underground.

J. SIGNS AND GRAPHICS. All signs, visible from the exterior of any
building, must be submitted to the Declarants in accordance with Section V for
review and approval prior to their installation, and shall be maintained in a
safe and presentable condition at all times, including replacement of defective
parts, painting, repainting, cleaning and any other necessary maintenance acts.
The Declarants shall maintain and replace as necessary any signs identifying
"Lincoln Commerce Center," the location and design of which shall be determined
by Declarants as approved by the Village. All signs must conform with the
standards set forth hereinafter, which standards may be subject to change and
amendment by the Declarants from time to time:

1. One (1) free-standing ground sign shall be allowed per
Building Site.

2. Signs may be illuminated (internally or by direct ground
mounted illumination) or non-illuminated.

3. The size, shape and color of the sign shall be in aesthetic
balance with itself, the size of the Building Site, the amount of street
frontage, the size and nature of the Improvements, and the surrounding
properties, as may be determined solely by the Declarants in a uniform and
consistent manner.

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<PAGE>

4. The height of the sign should be predetermined so that the
center line of the main panel is always at the optimum viewing height for a
person seated in an automobile. In no event should the height of a free-standing
sign exceed ten (10) feet measured from curb elevation.

5. A sign cannot be located in street right-of-ways, but can
be located in any front or side yard area that does not obstruct the sight lines
at a street or driveway intersection, as determined by the Village. Sign
location should also not block or detract from adjacent property.

6. The base of the sign must be landscaped.

7. Only a corporate name, type of business, street address,
logo, or corporate graphics may appear on the sign.

8. Flashing, animated, moving, inappropriately colored, roof,
canopy or marquee signs are prohibited.

9. No off-premises signs are permitted.

10. Signs shall comply with all standards established by the
Village.

11. Messages or symbols to inform, direct or control shall
appear on informational/directional signs, which shall be uniform as to
material, color and shape and harmonious with surroundings. Advertising shall be
prohibited on these signs. All lettering should be Helvetica Medium upper case
or lower case. These signs shall be low to the ground, small in size and of a
number which are reasonably necessary for the purpose intended (as the
Declarants may be determine).

12. Multi-tenant buildings occupied by two or more tenants
shall meet the same standards for corporate identification signage and
informational/directional signage as outlined hereinabove and below, with the
following exceptions:

a) An owner of a multi-tenant building may establish, subject
to the approval of the Declarants, a Uniform Signage
Package which would be compatible and harmonious with the
architectural scheme of the Property and the Building Site,
and also be in general compliance with the intent of these
signage guidelines, but would also allow some minor
variances to meet the unique needs of a multi-tenant
facility.

b) All signage in a multi-tenant property should be uniform as
to color of sign frame system, if any, shape, size and
placement. The main panel of the property identity sign may
be of uniform color and have standardized lettering, or may
allow for individualized colors and corporate logos and
graphics.

13. A simple, single line sign with uniform lettering not to
exceed 5" in height may be affixed or placed on the exterior of a loading

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<PAGE>

dock door or service area designating the name of the Party being serviced.

14. All construction signs used for information purposes,
signs for sale, lease and development, and subdivision signs shall be submitted
for approval to the Declarants. All signs indicating the name of the general
contractor, subcontractors, architects, engineers, financiers, or other
individuals or corporations involved in the construction on a Building Site
shall be prohibited unless such signage is on or attached to the construction
trailer located on the site during the period of construction. For the purpose
of identifying a specific construction site or project within Lincoln Commerce
Center, the developer, owner, or occupant may erect one (1) 4' x 8' single face,
non-illuminated sign setting forth only the following: "Future facility for
(name of Company)", and the Lincoln Commerce Center address. The Lincoln
Commerce Center logo, if any, may also be incorporated in this sign.
Construction signage shall be removed immediately following building completion.
Lease and development signage shall be removed once all building(s) have been
completed and are 90% occupied as determined by square footage.

15. All signs shall be maintained by the Owner or the tenant
in a safe and presentable condition at all times, including replacement of
defective parts, painting, repainting, cleaning and any other necessary
maintenance acts.

16. The Declarants shall have the right to enter onto any
Building Site to remove any sign erected without prior written approval, and the
Owner and/or tenant shall assume all costs and damages occasioned by such
removal.

K. VILLAGE APPROVALS.

The compliance by an Owner with any or all of the provisions of this
Section IV herein, or of any other Section of this Declaration, shall not excuse
the Owner from complying with all the ordinances, zoning, statutes, rules,
regulations and requirements of the Village, County of Lake, State of Illinois,
United States, or any other governmental bodies having jurisdiction over the
Property.

L. COMMONWEALTH EDISON NORTHERN DIVISON HEADQUARTERS.

Prior to the execution and recording of this Declaration, construction
had commended on a portion of the Property for the Northern Division
Headquarters buildings of Commonwealth Edison Company. The building plans, site
and layout of buildings, landscaping plans, fencing, parking lots, outdoor
storage, off-street loading areas, engineering and all other aspects of the
construction thereof is considered approved by the Declarants. In the event such
approved plans are at variance with the construction standards and requirements
or other procedures set forth herein, such variances are acknowledged and
approved by the Declarants, and such approval shall be binding upon the
Association and other successors in interest to the Declarant.

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<PAGE>

V. SUBMITTAL PROCEDURES.

A. REQUIRED PROCEDURES. Prior to application to the Village to obtain
the various approvals as may be required from time to time, Owners or their
designated representative must present their development proposals to
Declarants. Only after approval by the Declarants as provided for herein, may an
Owner commence the approval and permit process with the Village.

B. SUBMISSION DOCUMENTS. Owners or their designated representatives
shall submit detailed information in writing regarding the proposed use of the
Building Site, copies of all permits and any accompanying correspondence,
erosion and sedimentation control plans and other plans submitted for
governmental approval, and three (3) full sets of construction plans, drawings,
and specifications showing or stating all aspects of the exterior of the
Improvement, site layout, landscaping and engineering of the proposed
Improvement, including without limitation, the following, all hereinafter
referred to as "Plans and Specifications":

1. Location of all structures, easements, street
rights-of-way, and setback lines;

2. Location of all walks, driveways and curb lines;

3. Layout and location of all parking areas, including
location and dimensions of all spaces, circulation aisles, islands, curbs and
bumpers;

4. Layout and location of all off-street loading areas;

5. Layout and location of all outside storage areas, including
identification and size of the material to be stored and location and dimensions
of all fencing and screening;

6. All landscaping, including location, heights, spread, type
and number of trees and shrubs and location and type of all ground cover and
lawn material;

7. Location, height, intensity and fixture type of all
exterior lighting;

8. Location, size and type of all pipes, lines, conduits and
appurtenant equipment and facilities for the transmission of sanitary sewage,
storm water, water, electricity, gas, telephone, steam and other utility
services;

9. Location, size and type of all fencing;

10. Architectural floor plans showing building elevations (all
faces of the Improvements), and all other exterior details of each building;

11. Building exterior material and color information,
including samples;

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<PAGE>

12. Temporary construction sign design;

13. Permanent sign and informational/directional signs designs
(showing location, size, type and material and color information);

14. Site coverage data and calculations, including finished
contour lines and spot elevations;

15. Parking data and calculations, including base data for
projected needs;

16. Site drainage data and calculations, including finished
contour lines and spot elevations; and

17. Description of proposed use.

C. SCALE AND DETAIL. All architectural plans and construction drawings
submitted shall be to a scale of not less than one inch (1") equal to sixteen
feet (16'). All site plans submitted shall be to a scale of not less than one
inch (1") equal to fifty feet (50').

D. NO USE PRIOR TO APPROVAL. No Improvement, building, structure, sign
or improvement of any kind shall be commenced, installed, erected, placed,
assembled, altered, moved onto or permitted to remain on any Building Site, nor
shall any use be commenced of any Building Site, unless and until the Plans and
Specifications have been submitted to, reviewed and approved in writing by
Declarants in accordance with this Section V. No Building Site Owner shall apply
to any public authority for any construction or building permits for any project
before written approval of the Plans and Specifications have been given by the
Declarants.

E. CHANGES. No construction or use that is inconsistent with, in
addition to or materially different from any previously approved Plans and
Specifications shall be commenced or permitted until final construction drawings
and specifications reflecting such change or addition has been approved in
accordance with this Section V.

F. APPROVAL AND DISAPPROVAL.

1. STANDARDS. Declarants shall have the right to disapprove
any Plans and Specifications because they are not in accordance with the
purposes set forth in Section III and the requirements of Section IV hereof, or
because they fail to comply with any requirement of this Declaration or the
Lincoln Commerce Center signage standards or because they fail to include any
information which is required by this Declaration or which reasonably may have
been requested by Declarants. The approval or disapproval of Declarants pursuant
to the general provisions of this Declaration shall not be deemed to be limited
by reason of any specific illustrations or requirements set forth herein.

2. TIME FOR APPROVAL. Declarants shall approve, disapprove, or
request any additions or supplemental information relating to any Plans and
Specifications within fifteen (15) days after all Plans and Specifications (in
the form and substance acceptable to Declarants and in accordance with this
Declaration) are submitted, unless during said

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<PAGE>

fifteen (15) day period, Declarants determines that, as a result of the nature
of the submittal or the issues raised thereby, an additional period of time is
necessary, in which case Declarants shall notify Owner than an additional thirty
(30) day period is required.

G. DECLARANTS' FEES.

Declarants shall be entitled to a reasonable fee not to exceed Five
Hundred Dollars ($500.00) per acre, in connection with the approvals required
under Article IV hereof, which fee shall be payable at the time of submission of
the Plans and Specifications for approval to Declarants. The per acre fee shall
be subject to review and change by the Declarants from time to time. Declarants
shall not be required to approve any Plans and Specifications until they receive
the appropriate fee under this Section. Any fees that remain unpaid shall be
collectible hereunder in the same manner as a lien for charges under this
Declaration. Neither Declarants, nor their agents, employees, successors or
assigns shall be liable in damages to any Owner or to any other Party submitting
Plans and Specifications to any one or more of them for approval by reason of a
mistake in judgment, negligence or nonfeasance arising out of or in connection
with the approval or disapproval or failure to approve any Plans and
Specifications. Every Party who submits Plans and Specifications to Declarants,
for approval as herein provided, agrees by submission of such Plans and
Specifications, and every Owner or Party claiming by or through an Owner agrees
by acquiring title to any part of the Property of any interest in the Property,
that it will not bring any action or suit against Declarants or its agents,
employees, successors or assigns to recover any such damages.

H. GRADING AND ENGINEERING PLANS.

It is understood and agreed that all grading and engineering plans
submitted to the Declarants for approval shall be prepared by a licensed
engineer approved by Declarants (which approval shall not be unreasonably
withheld) in order that said grading and engineering plans will conform with the
overall grading and engineering plans for the Lincoln Commerce Center.

I. TRANSFER OF REVIEW RIGHTS TO ASSOCIATION. Declarants' right to
approve or disapprove Plans and Specifications may, at Declarants' election, be
transferred to the Association in accordance with the provisions of Sections
VIII and/or XIII, or delegated to an agent in accordance with Section XVII.

J. DECLARANTS' WAIVER DISCRETION. The Declarants may, in their sole
discretion, waive any of the provisions of Section IV or V as it may pertain to
a particular Owner or Building Site, and each Owner of occupant of any portion
of the Property hereby waives any claim or right for damages or liabilities from
the Declarants or the Association which may result from such determination or
waiver.

VI. OWNER'S MAINTENANCE OBLIGATIONS.

A. OWNER'S MAINTENANCE. Each Owner shall at all times maintain,

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<PAGE>

repair, replace and renew or cause to be maintained, repaired, replaced or
renewed all Improvements on its Building Site, so as to keep same in a clean,
sightly, safe and first-class condition consistent with its original intended
appearance ("Owner's Maintenance"). Owner's Maintenance shall include, but not
be limited to: the maintenance of all visible exterior surfaces of all buildings
and other improvements; the prompt removal of all paper, debris and refuse from
all areas of its Building Site and all snow and ice from paved areas; the
operation, maintenance, repair, replacement and removal of all storm water
drainage facilities located on its Building Site; the repair, replacement,
cleaning and revamping of all signs and lighting fixtures; and the mowing,
watering, fertilizing, weeding, replanting and replacing of all landscaping. All
construction of Improvements shall be promptly commenced and diligently pursed.
The Owner of any Building Site under construction shall, at all times, keep
public and private streets used by such Owner or its contractors, agents or
employees in connection with construction, and the Building Site, free from any
dirt, mud, garbage, trash or other debris which might be occasioned by such
construction.

B. DAMAGE TO IMPROVEMENTS. If any Improvement is damaged or destroyed,
the Owner shall promptly (but in no event more than Twelve (12) months after the
date of the casualty) restore such Improvement to the condition existing prior
to such damage or destruction or, in the alternative, raze and remove such
Improvement and landscape the Building Site pursuant to a landscaping plan
approved as provided in Section V hereof.

C. LANDSCAPE VACANT BUILDING SITE. If the Owner does not commence
construction of Improvements upon the Building Site within six (6) months of the
date of recording a Deed to an Owner, the Owner shall landscape the Building
Site with no less than an appropriate ground cover, such as field grass or sod,
and thereafter maintain such ground cover in a clean, neat and safe condition,
keeping it mowed at a height not to exceed four (4) inches until the
commencement of construction of Improvements. The aforesaid six (6) month period
may be extended with the written approval of Declarants.

D. RIGHT TO PERFORM OWNER'S MAINTENANCE. If an Owner shall fail to
perform Owner's Maintenance as aforesaid or the landscaping work in accordance
with the provisions hereof, Declarants may give written notice to the Owner
specifying the manner in which the Owner has failed to so perform. If such
failure has not been corrected within ten (10) days after such notice, or if
such work, if it cannot be completed within such ten (10) day period, has not
been commenced within such period and thereafter diligently completed,
Declarants may enter upon the Building Site and perform such work. Declarants by
reason of their performing such work shall not be liable or responsible to the
Owner for any losses or damage thereby sustained by the Owner or anyone claiming
by or under the Owner except for gross negligence or wanton or willful acts. The
Owner shall be liable for the cost of such work and shall promptly reimburse
Declarants for such cost, together with interest calculated from the date of
expenditure until repayment, at the Default Interest Rate. If the Owner shall
fail to reimburse Declarants within thirty (30) days after receipt of a
statement for such work from Declarants then said indebtedness shall be a debt
of the Owner, and shall constitute a lien

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against that Building Site on which said work was performed. Such lien shall
have the same attributes as the lien for changes set forth in Section VIII.A.7.
hereof, and Declarants shall have identical powers and rights in all respects,
including but not limited to, the right of foreclosure.

E. MAINTENANCE EASEMENT. Declarants hereby reserves, for themselves and
for their designees or employees, and for the Association, the free and
unrestricted right, license and privilege to have free and unrestricted access
upon and across Lincoln Commerce Center and each Building Site, and, upon
reasonable notice, any Improvements thereon, for the purpose of performing any
work the Declarants shall have the right to perform pursuant to the provisions
of this Declaration, including but not limited to the performance of Owner's
Maintenance which an Owner fails to perform. Each Owner, mortgagee, tenant or
occupant of any Building Site, by accepting title thereto or an estate therein,
shall be deemed to have consented to the foregoing reservations and to have
granted the foregoing rights. The Declarants and the Association shall use all
reasonable efforts to avoid interfering with the normal business operations of
anyone occupying such Building Sites.

VII. STORM WATER FACILITIES.

A. EASEMENTS. Easements for the retention and/or detention of water for
the benefit of the Lincoln Commerce Center and the individual Building Sites are
hereby declared upon those portions of the Property which are designated herein
for such purpose or on the Plat of Subdivision as Private Water Detention
Easements and/or Wetlands and Stormwater Management Facilities. It is understood
that any such retention and/or detention areas may, in the future, be reshaped,
altered, or relocated within the aforementioned easements to meet required
governmental standards or engineering requirements, but no such reshaping,
alteration, or relocation shall be made without the prior written approval of
the Village.

B. MAINTENANCE. It is recognized and understood that the Private Water
Detention Easements and the Wetlands and Stormwater Management Facilities (the
Storm Water Facilities) serve both important functional and aesthetic purposes
and that their repair and maintenance are of vital concern to all parties having
an interest in Lincoln Commerce Center. In order to ensure that these areas are
in full and good working order, are sightly and well kept, and comply with
applicable governmental regulations, they are to be considered Common Area and
the responsibility for their maintenance and repair, including the cost thereof,
shall be that of the Declarants. The Storm Water Facilities on any Building Site
shall include any area designated Private Water Detention Easement on the Plat
of Subdivision. Where necessary or advisable, said delineation may be adjusted
in order to accommodate specific topographical conditions and/or the location of
Improvements and, where feasible and practical, a physical demarcation should be
utilized in order to facilitate recognition of the respective maintenance areas.
Notwithstanding anything herein to the contrary: (i) the Owners of each Building
Site shall be responsible for the maintenance, including the cost thereof, of
plantings located adjacent to any pond on the Owner's Building Site; and (ii)
areas

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<PAGE>

designated Wetlands and Stormwater Management Facilities and Private Water
Drainage Easements on the Lincoln Commerce Center Plat of Subdivision and
located on a Building Site shall be maintained by the Owner thereof (said
maintenance shall include, but not be limited to, keeping Storm Water Facilities
clear of debris and other accumulations, insuring that the flow of storm water
is not blocked or hindered, and maintaining the Storm Water Facilities in
accordance with the landscaped plan for the Building Site).

C. IMPAIRMENT. It is understood that no Owner, by either act or
omission, shall do or refrain from doing any act the effect of which will impair
the function and/or aesthetics of the Storm Water Facilities or any
appurtenances utilized in connection therewith. Where as a result of the act or
omission of an Owner, its agents, invitees, contractors, subcontractors,
employees, etc., an extraordinary expense is incurred by the Association with
regard to the repair or maintenance of the Storm Water Facilities, such expense
shall be due and payable by the party so charged upon demand therefor, the
unpaid portion of which shall accrue interest at the Default Interest Rate, and
shall be a lien in the same manner as provided hereinafter in Section VIII.A.7.

VIII. ADMINISTRATION.

A. AUTHORITY.

1. INITIAL CONTROL. The Association's rights, duties and
obligations under this Declaration shall be administered by Declarants so long
as Fifty Percent (50%) or more of the Lincoln Commerce Center is owned by
Declarants. At such time as Declarants no longer owns Fifty Percent (50%) or
more of the Lincoln Commerce Center, or sooner if Declarants so elects,
Declarants shall cause to be established in accordance with the provisions of
this Section VIII the Association with a five (5) member Board of Directors. At
the time of the establishment of the Association, the Association shall take
over the control of and assume all the duties and the obligations of the
Declarants, all as provided for herein.

2. ESTABLISHMENT. At such time as the Association is
established, Declarants shall designate the initial five (5) directors. Three
(3) of the initial directors shall serve for a two (2) year period and two (2)
remaining initial directors shall serve for a three (3) year period. At the end
of the term of the initial directors, all directors shall thereafter serve for
two (2) year terms and they shall be elected by a majority vote of the Owners
(as provided in subsection 6 below).

3. ASSOCIATION AS OWNER OF LAND. The Association shall have
the right to accept and convey title in fee simple to the Common Areas or other
real property located within the Lincoln Commerce Center or contiguous,
adjoining or adjacent to the Lincoln Commerce Center.

4. OBLIGATIONS AND POWERS. The Declarants and/or the
Association shall (a) provide for the enforcement of this Declaration; (b)
establish policies and procedures for the review and approval of plans and
specifications as required by this Declaration; (c) have the right to provide
for any improvements or for the maintenance of any improvements

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<PAGE>

which it reasonably deems necessary or desirable in accordance with this
Declaration; (d) have the right to make whatever arrangements which it
reasonably deems necessary or desirable for the security of the people and
businesses in Lincoln Commerce Center; (e) otherwise establish such policies and
procedures which it reasonably deems necessary or desirable in accordance with
this Declaration; (f) pay for and carry liability insurance and other forms of
insurance on the Common Areas, and (g) have the power (provided said power is
exercised in a reasonable manner) to own personal property, formulate additional
regulations and to make or grant such variances and exceptions from the
provisions of this Declaration which it deems consistent with the basic
objectives of the Lincoln Commerce Center. The Association will hold title to,
pay real estate taxes and other taxes on the Common Areas, and maintain those
areas of the Lincoln Commerce Center which are established for the common
benefit of all Owners of land within the Lincoln Commerce Center, including,
without limitation, all Common Areas, all entrances to the Lincoln Commerce
Center and other landscape features not maintained by the Village or the Owners,
all of which are hereby specifically authorized. In addition to the foregoing,
the Association and/or the Declarants shall, prior to the acceptance of
dedication from time to time by the appropriate governmental body or public
authority or utility of all or any part or parts of the public street
rights-of-way within the Lincoln Commerce Center, street lighting, water and
sanitary sewer lines, and other utility facilities in the Lincoln Commerce
Center, be responsible for the maintenance and repair of said improvements,
including the maintenance of all landscaping and the removal of snow, from the
improved nondedicated public street rights-of-way within the Lincoln Commerce
Center. The Declarants and/or the Association shall also have the express power
to dedicate the aforesaid improvements and facilities to any governmental
authority.

5. MEMBERSHIP. Upon formation of the Association, each Owner
of a Building Site shall be a member of the Association and each purchaser of a
Building Site by acceptance of conveyance thereof, covenants and agrees to
become a member of the Association. Membership in the Association shall
automatically terminate upon the sale, transfer, or other disposition of a
member's title ownership in a Building Site, at which time the new Owner of such
title interest shall automatically become a member of the Association. No member
shall have any right or power to disclaim, terminate, or withdraw from his
membership in the Association or from any of its obligations as a member by
non-use of the Common Areas or otherwise.

6. VOTING RIGHTS. The Association shall have two (2) classes
of voting membership:

a) CLASS A. Class A members shall be all those who own
Building sites within Lincoln Commerce Center except
the Declarants. Each Class A member shall be
entitled to one (1) vote for each forty thousand
(40,000) square feet of the Property (land area) that
said member owns within Lincoln Commerce Center.
Fractional votes shall be determined by rounding the
remainders to the nearest ten thousand (10,000)
square feet and dividing the rounded number by forty
thousand (40,000) (thus, votes shall be cast only in
fractions divisible by .25). Where more than one
party

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<PAGE>

holds the particular interest or interests, the vote
for such square footage shall be exercised as said
Owners determine among themselves, but in no event
shall more than one (1) vote be cast with respect to
any forty thousand (40,000) square feet or part
thereof as aforesaid.

b) CLASS B. The Class B voting members shall be the
Declarants. The Class B voting members shall be
entitled to three (3) votes for each forty thousand
(40,000) square feet of Property (Land Area) that
the Declarants own within Lincoln Commerce Center.
Fractional votes for the Class B voting member shall
be computed in the same manner as provided
hereinabove for the Class A members.

Notwithstanding anything to the contrary in this Declaration, amendments to this
Section VIII A. 6. Shall only be effective upon the unanimous written consent of
all Class A voting members and all Class B voting members.

7. LEVYING OF ASSESSMENTS.

a) AUTHORITY. The Declarants and/or the Association shall have
the power to levy general and special assessments and charges
upon and against the Owners of the Building Sites, the
Property or any portion thereof in Lincoln Commerce Center for
the purpose of carrying out the obligations, duties and powers
herein set forth, including any legal and other costs incurred
in enforcing this Declaration in accordance with the terms
hereof. Specifically, such funds received from such
assessments or charges shall be expended by the Declarants or
the Association for (i) the providing for, the maintaining and
operating the Common Areas, including, without limitation:
entrances, street rights-of-way, pathways, recreational
facilities, directional and informational signs, signs
identifying Lincoln Commerce Center, public area lighting,
park area, wet lands, storm sewers, detention and retention
areas, street medians, drainage, and any other improvements
relating to the enhancement of the overall quality of Lincoln
Commerce Center; (ii) the payment of real estate taxes on the
Common Areas; (iii) providing for the administration and
enforcement of this Declaration, including reasonable
administrative staff requirements and expenses; and (iv) to
fulfill any of the obligations of the Association and
Declarants hereunder. Each Owner of a Building Site by the
acceptance of the Deed for said Building Site, whether or not
such obligation be so expressed in any such deed or other
conveyance, for each Building Site owned by each Owner,
together with Declarants, hereby covenants and agrees and
shall be deemed to have covenanted and agreed to pay to the
Association and/or the Declarants, as the case may be, all
assessments and charges as are levied pursuant to the
provisions of this Declaration. All assessments and charges,
together with interest thereon at the Default Interest Rate if
not paid when due, and the costs of collection, if any,
including attorneys' fees, as herein provided, shall be
charged as a continuing lien upon the Building Site against
which each such charge is made. Each such assessment or charge
as aforesaid, together with interest and

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<PAGE>

costs thereon, shall, in addition, be the personal obligation
of the Owner of such Building Site at the time the assessment
or charge was levied by the Declarants or the Association.
Declarants, to the extent that they own any part of the
Property, shall be deemed subject to the provisions of this
Section.

b) PROCEDURES. Commencing with the first fiscal year and for
each year thereafter, the Association or the Declarants shall
estimate in writing its costs of operation for the coming year
and same shall be assessed and paid no more frequently than
quarterly in advance by each Owner or as Declarants or the
Association shall otherwise direct. Such assessment shall take
into consideration the cost of or reserves for any
contemplated repair, replacement, or renewal of a specified
improvement upon the Common Areas or the personal property and
facilities maintained by the Declarants or the Associations.
If the assessment proves inadequate for any reason (including
non-payment of any Owner's assessment) or proves to exceed
funds reasonably needed, then the Declarants or the
Association may increase or decrease the assessments payable
hereunder by giving written notice thereof (together with a
revised estimate) to each Owner not less than ten (10) days
prior to the effective due date for the payment of the revised
assessment. At least once each year, the Declarants or the
Association shall deliver to each Owner a statement of actual
costs for the prior year along with a reconciliation of
estimated assessments with actual costs and reserves. The
Association shall have the power to levy additional
assessments as provided in the By-Laws of the Association.
Each Owner shall be assessed for a prorata share of all
assessments, such share to be determined by a fraction, the
numerator of which is the number of square fee of the Property
owned by the Owner, and the denominator of which is the number
of total square feet of land contained in the entire Property
less any portion of the Property which is dedicated to a
governmental body (included but not limited to the Village),
public or private streets owned by the Declarants or the
Association and/or any Common Areas. Any Owner shall have the
right to examine the Declarants' or the Association's records
relative to any assessment, provided that reasonable notice is
first given and provided that said Owner bears all costs of
said examination. All assessments shall be prorated as of the
date title transfers to a new Owner.

c) NOTICE OF ASSESSMENT. Notice of each assessment shall be
given by sending a written notice by postage prepaid United
States mail addressed to the last known or usual post office
address of the Owner of any Building Site or by posting a
brief notice of the assessment upon the Building Site itself.

d) NONPAYMENT OF ASSESSMENT. Any assessments or charges which
are not paid within thirty (30) days after due date shall be
delinquent. All delinquent assessments shall bear interest at
the Default Interest Rate.

e) LIEN. To evidence a lien on a Building Site which is

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<PAGE>

delinquent in the payment of an assessment or a charge,
Declarants shall prepare a written notice of assessment lien
setting forth the amount of the unpaid indebtedness, the name
of the Owner of such Building Site subject to such lien and a
legal description of such Building Site ("Notice"). The Notice
shall be signed by one of the officers of the Declarants or
the Association and shall be recorded in the Office of the
Recorder of Deeds of Lake County, Illinois. Such lien for
payment of charges shall attach to the affect Building Site
after recording the Notice and may be enforced by all
available legal methods of collection including, but not
limited to, the foreclosure of such lien by Declarants in like
manner as a mortgage on real property, or Declarants or the
Association may institute suit against the Owner obligated to
pay the assessment and/or for the foreclosure of the aforesaid
lien judicially. In any foreclosure proceeding, whether
judicial or not judicial, the Owner shall be required to pay
the costs, expenses and reasonable attorneys' fees incurred in
connection therewith. Declarants or the Association shall have
the power to bid on such Building Site at foreclosure or other
legal sale and to acquire, hold, lease, mortgage, convey or
otherwise deal with the same. Upon the written request of any
mortgagee holding a prior lien on any part of the Building
Site, Declarants or the Association shall report to said
mortgagee any unpaid charges or assessments remaining unpaid
for longer than sixty (60) days after the same are due.

f) SUBORDINATION OF LIEN TO PRIOR ENCUMBRANCES. The recorded
Notice evidencing the lien for any charge or assessment
provided in this Declaration shall be superior to all other
liens, encumbrances and charges against the Building Site,
except only as against previously recorded, or for liens
securing payment of taxes, special assessments and special
taxes heretofore or hereafter levied by any political
subdivision or municipal corporation or any state or federal
taxes which by law are a lien against the interest of any such
Owner prior to pre-existing recorded encumbrances; and
provided further, that said recorded Notice evidencing such
assessment lien shall be subordinate to the lien of a prior
recorded bona fide security device, including a mortgage,
trust deed or sale and leaseback encumbering said Building
Site, except for such amounts which become due and payable
from and after the date on which the holder of such security
device either (i) takes possession of said Building Site, or
(ii) accepts a conveyance of any interest therein other than
as security, or (iii) files suit to foreclose its security
device. Declarants or the Association shall have the power to
subordinate the aforesaid lien to any other lien. Such power
shall be entirely discretionary with Declarants or the
Association. A transfer of title shall not relieve the
Building Site from the lien for any charges thereafter
becoming due nor from the lien of any subsequent charges.

h) EXEMPT PROPERTY. All parts of the Lincoln Commerce Center
dedicated to and accepted by the Village or any other public
authority, or owned by the Association as Common Areas, shall
be exempt from assessments, charges, and liens created under
this Declaration.

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<PAGE>

i) BY-LAWS. Upon incorporation of the Association, the
Directors shall establish appropriate By-Laws for the
Association through which the Association can carry out the
purposes of this Declaration.

B. ENFORCEMENT. This Declaration shall operate as a covenant running
with the land, and all provisions hereof shall be enforceable by Declarants, the
Association, Village, and every Owner by proper proceedings, either in equity or
at law. Further, Declarants, and the Association shall have the right to sue for
and obtain an injunction, prohibitive or mandatory, to prevent the breach of or
to enforce the observance of the covenants, conditions, restrictions,
reservations and easements herein set forth, but the failure of the Declarants
or the Association to enforce any of the covenants, conditions, restrictions,
reservations or easements herein set forth, at the time of any violation, shall
not be deemed to be a waiver of the rights of the Declarants or the Association
to do so as to any subsequent violation. This Declaration may also be enforced
by (i) suit to recover damages, (ii) suit to enforce a lien against the Owner's
Building Site, or (iii) any other available remedy at law or equity. Further,
Declarants and the Association are each empowered to take all immediate action
it deems necessary, at the cost and expense of any Building Site Owner, to
correct any violation of this Declaration relating to such Building Site,
including without limitation the power to exercise the right, license, and
permission to enter upon any Building Site with men, equipment, materials and
other necessary articles, all without being guilty of trespass and without being
subject to any liability or damages, to complete any work necessary to correct
any violation of this Declaration. Reasonable care will be used in the
performance of such work. In the event that Declarants or the Association deem
it necessary to secure the service of an attorney to enforce any provision of
this Declaration, the fee of such attorney and all other costs connected with
the contemplated or actual legal proceedings shall be paid by the Owner of the
Building Site which is the subject of the proceedings. Written notice of such
costs shall be given to the Building Site Owner and such costs shall be
reimbursed by the Building Site Owner within ten (10) days after the date of
such notice. If such costs remain unpaid, they shall be considered delinquent
and shall constitute a lien upon the Building Site.

IX. COMMON AREAS AND DRAINAGE FACILITIES.

Upon the establishment of the Association, the Declarants shall convey
to the Association all of its right, title and interest to the Common Areas and
assign to the Association any or all of its obligations for the performance of
maintenance of the Common Areas and drainage facilities.

X. RIGHT TO RE-SUBDIVIDE.

Once a Building Site has been purchased from Declarants, its successors
or assigns, such Building Site shall be considered as a single unit and further
subdivision of a portion of the Building Site is prohibited unless written
approval is given by Declarants or the

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<PAGE>

Association, which approval shall not be unreasonably withheld.

XI. ADDITIONAL LAND.

Declarants, from time to time and at any time before and after it has
conveyed all of the Lincoln Commerce Center, shall have the right to render
other land that is adjoining to the Lincoln Commerce Center or to any other
property then subject and subservient to this Declaration in all respects by
executing and recording a supplement to this Declaration containing: A legal
description of the land to be added; a statement that Declarants is the record
owner in fee simple of such land, or in lieu thereof; a statement that all other
persons, firms or corporations having an interest in such land have joined in
such supplement; a statement of the additional restrictions or burdens to which
such land shall be subjected, if any; and a statement of the restrictions,
burdens or provisions of this Declaration which shall be applicable to such land
in modified form, if any. Following the execution, delivery and recording of
such supplement, but subject to its terms, such land and the then and future
owners, tenants, mortgagees and other occupants of all or any part thereof shall
in all respects be fully subject to this Declaration and all rights, privileges,
obligations, duties, liabilities, responsibilities, burdens and restrictions
contained herein, including but not limited to, the obligation for payment of
assessments, as though such land had originally been included in and subject to
this Declaration.

XII. DURATION OF RESTRICTIONS.

Each of the conditions, covenants, restrictions, reservations and
easements herein contained shall continue and be binding upon Declarants and
upon its successors and assigns and upon each of them, and all parties and
persons claiming under Declarations for a term of fifty (50) years from the date
this Declaration is recorded, after which time it shall automatically extend for
successive periods of five (5) years unless an instrument has been recorded
signed by all the then Owners of all of the Building Sites, agreeing to
terminate this Declaration.

XIII. APPOINTMENT OF SUCCESSOR TO DECLARANTS.

If Declarants transfers or leases all or substantially all of their
then interest in and to the Property in a single transaction (which transfer
shall be deemed to include a transfer resulting from foreclosure or deed in lieu
of foreclosure), all of Declarants' rights under this Declaration may be
assigned to and assumed by such transferee or lessee. The Declarants may, at any
time, transfer all of their rights, duties and obligations under this
Declaration to the Association. Such transfer shall be effective and binding
upon the Association as of the day it is notified of such transfer. The
foregoing transfers and assignments shall be evidenced by signed and
acknowledged written declarations recorded in the Office of the Recorder of
Deeds for Lake County, Illinois. In the event Declarants or their duly
designated successors shall no longer possess a fee simple interest in the
Property, the rights and obligations

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<PAGE>

of Declarants shall devolve to the Association.

XIV. RESERVATION OF EASEMENTS FOR UTILITIES.

Non-exclusive Easements for the benefit of Declarants are hereby
declared in the designated set back areas between the building lines (designated
on the Flat of Subdivision or in Village ordinances) and the boundaries of
individual Building Sites as may be necessary or convenient for the purpose of
erecting, constructing, maintaining, and operating utility services over,
across, under and through the Property (including but not limited to public
service wiring, conduits or lighting, power and telephone lines, gas lines,
sanitary sewer, storm sewer and water). Said easement, at Declarants' election,
may be assigned to the Village, the Association and/or appropriate public
agencies and utilities. No Buildings may be located upon said easement but,
subject to the limitations of Village ordinances and this Declaration,
landscaping, parking and access drives may be located thereon.

XV. CERTIFICATE OF COMPLIANCE.

Upon payment of a reasonable fee and upon written request of any Owner,
mortgagee, tenant or occupant, either current or prospective, of a Building
Site, Declarants shall issue an acknowledged certificate in recordable form
setting forth the amount of any unpaid charges, if any, and setting forth
generally whether or not said Owner is, to the best knowledge of Declarants, in
violation of any of the terms and conditions of this Declaration. Such statement
shall be furnished by Declarants within a reasonable time, but not to exceed
twenty (20) days from the receipt of a written request for such written
statement. If Declarants fails to furnish such statement within said twenty (20)
days, it shall be conclusively presumed that there are no unpaid charges
relating to the Building Site as to which the request was made, and that said
Building Site is in conformance with all of the terms and conditions of this
Declaration.

XVI. RULE AGAINST PERPETUITIES.

If and to the extent that any of the covenants herein would otherwise
be unlawful or void for violation of (a) the rule against perpetuities, (b) the
rule restricting restraints on alienation, or (c) any other applicable statute
or common law rule analogous thereto or otherwise imposing limitations upon the
time for which such covenants may be valid, then the provision concerned shall
continue and endure only until the expiration of a period of twenty-one (21)
years after the death of the last to survive of the class of persons consisting
of all of the lawful descendants of President George Bush, living at the date of
this Declaration.

XVII. DECLARANTS' AGENT.

The Declarants may appoint an agent to act in their stead for any or

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<PAGE>

all purposes provided for herein, including but not limited to the granting of
all approvals and consents of the Declarants as required herein, the assessing,
billing and collection of all charges and assessments including the imposition
of liens, and the acceptance of service and notices provided for herein. The
Declarants' appointment of said agent or any change, modification, limitation or
termination thereof shall be made by a written notice to all the Owners, sent by
U.S. Mails, by certified mail, return receipt requested.

XVIII. MISCELLANEOUS.

A. PARTIAL INVALIDITY. Invalidation of any portion of this Declaration
by judgment or court order shall in no way affect any of the other portions, all
of which shall remain in full force and effect.

B. INTERPRETATION. This Declaration shall be interpreted for the mutual
benefit and protection of the Owners and tenants of the Lincoln Commerce Center
and in furtherance of the basic goals of this Declaration. Any discrepancy,
conflict or ambiguity which may be found herein shall be resolved and determined
by Declarants and, in the absence of an adjudication by a court of competent
jurisdiction to the contrary, such resolution and determination shall be final.

C. CAPTIONS. The captions and organizational numbers and letters
appearing in this Declaration are inserted only as a matter of convenience and
neither in any way define, limit, construe or describe the scope or intent of
this Declaration nor in any way modify or affect this Declaration.

D. GOVERNING LAW. This Declaration and the rights of the Owners of the
Lincoln Commerce Center hereunder shall be governed by the laws of the State of
Illinois.

E. LIMITATION OF LIABILITY. Neither Declarants nor their agents or
employees nor any disclosed or undisclosed principals of Declarants shall have
any liability hereunder after they cease to hold title to all or substantially
all of the Property, except for obligations as the owner of one or more Building
Sites. Neither Declarants or the Association nor their agents or employees nor
any disclosed or undisclosed principals of Declarants shall have any personal
liability with respect to any of the provisions of this Declaration or the
Property, or shall they be liable in damages or otherwise to anyone submitting
Plans and Specifications for approval or making any other request of Declarants,
or to any Owner, tenant or subtenant of Property in the Lincoln Commerce Center,
by reason of any mistake in judgment, or any negligence or nonfeasance arising
out of or in connection with (i) the approval or disapproval, or failure to
approve or disapprove, any Plans and Specifications or other request; (ii) the
enforcement or failure to enforce the terms of this Declaration; and (iii) the
administration of this Declaration; and anyone who submits Plans and
Specifications or any request to Declarants for approval, by the submission of
such Plans and Specifications or request, and the Owner, tenant, mortgagee or
subtenant, by acquiring title to or an interest in any Building Site or interest
whatsoever in the Property or any part thereof, agrees, to the extent permitted
by law, not to bring any action

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<PAGE>

or suit to recover from any such damages against Declarants. Further, if
Declarants is in breach or default with respect to Declarants' obligations under
this Declaration or otherwise, any interested party shall look solely to the
equity of Declarants in the Property for the satisfaction of any obligation of
liability.

F. AMENDMENTS. The Declarants and/or the Association shall have and
they are hereby granted the power to amend, modify, or otherwise alter this
Declaration and each and all of the terms and provisions hereof and each and all
of the rules, covenants, easements, agreements, and restrictions herein
contained, at any time and from time to time; provided however if the
Association has been established, then such action must be recommended by the
Board of Directors and approved by the affirmative vote of 75% of the votes of
the Owners (as provided by Section VIII A. 6.), subject to the limitation that
such action shall not cause the Common Areas, or any part thereof, to be in
noncompliance with any zoning ordinance or other applicable law or governmental
regulation. The Declarants and/or the Association hereby reserves the right to
amend this Declaration at any time for the purpose of correcting clerical errors
or clarification of the terms of the Declaration without the consent or approval
of the Board of Directors, the Owners or any other party, provided said
amendments do not constitute a material and substantial change to the
Declaration. Anything herein to the contrary notwithstanding, no changes or
amendments to this Declaration which would affect the rights reserved herein to
the Village shall be effective without the prior written approval of the
Corporate authorities.

G. RECAPTURE AND VILLAGE CHARGES. Nothing contained in this Declaration
shall in any manner limit the right of the Declarants to enter into and enforce
Recapture Agreements with the Village or any other governmental authorities
having jurisdiction over the subject matter of such Agreements.

H. NOTICES. Any notice required or desired to be given under this
Declaration shall be in writing and shall be deemed to have been properly served
when delivered in person and receipted for or after deposit in the United States
Mail, certified mail, return receipt requested, postage prepaid, addressed to an
Owner, at its last known address as shown on the records of the Declarants or
the Association, at the address to which assessments are mailed. All notices to
the Declarants shall be sent in the manner as aforesaid to:

TMA Group Development Corporation
145 E. Algonquin Road
Arlington Height, Illinois 60005

or at such other place or party as the Declarants may indicate by an amendment
to this Declaration properly recorded with the Recorder of Deed of Lake County.

I. DELAY IN PERFORMANCE - FORCE MAJEURE. If the performance of any act
or obligation under this Declaration is prevented or delayed by an act of God,
fire, earthquake, flood, explosion, action of the elements, war, invasion,
insurrection, mob violence, sabotage, malicious mischief, inability to procure
or general shortage of labor, equipment or

24
<PAGE>

facilities, materials or supplies in the open market, failure of transportation,
strike, lockout, action or labor union, condemnation, threatened condemnation,
requisitions, laws, orders of government or civil or military or naval
authorities or any other cause whether similar or dissimilar to the foregoing
not within the reasonable control of the person required to perform such act or
obligation, then such person shall be excused from the performance of such act
or obligation for so long as such person is so prevented or delayed by reason
thereof. This force majeure provision shall apply to Declarants, the Association
and each Owner's obligations hereunder except those that require the payment of
money.

J. BINDING EFFECT OF DECLARATION. All the rights, covenants,
agreements, reservations, restrictions and conditions herein contained shall run
with the land and shall inure to the benefit of and be binding upon Declarants
and each subsequent holder of any interest in any portion of the Property and
their grantees, heirs, successors, personal representatives and assigns with the
same full force and effect for all purposes as though set forth at length in
each and every conveyance of the Property or any part thereof. Reference in the
respective deeds of conveyance, or in any mortgage or trust deed or other
evidence of obligation, to the easements and covenants herein described shall be
sufficient to create and reserve such easements and covenants to the respective
grantees, mortgagees or trustees of such parcels as fully and completely as
though said easements and covenants were fully recited and set forth in their
entirety in such documents.

K. CONFLICTS. If Declarants obtain a zoning variance with regard to any
portion of the Property in which Declarants hold record title and such zoning
variance provides for less restrictive standards than the standards set forth in
this Declaration, then the provisions of such zoning variance shall apply to
that portion of the Property so affected and the provisions of this Declaration
as to such standards shall be unenforceable by any other Owner with regard to
such portion of the Property.

L. RIGHTS OF THE VILLAGE. In addition to any rights, powers or
easements granted to the Village elsewhere in this Declaration, the Village
shall have the rights, powers and easements set forth in this Section.

1. ENTRY UNTO THE PROPERTY. The Village has the right to enter
upon, on, and over areas utilized for Storm Water Facilities, Wetlands and
Stormwater Management Facilities, Private Water Detention Easements, Common
Areas, driveways, entrances and other property used for ingress and egress to
the Property and/or to a Building Site to determine whether any of the said
areas are in violation or not in conformity with applicable restrictions,
regulations and covenants of this Declaration.

2. NOTICE BY VILLAGE. If the Village reasonably determine that
any of the above areas are in violation or not in conformity with this
Declaration, the Village may give the Association, the Declarants and/or an
Owner written notice of such determination. The notice which the Village shall
give shall be in writing and shall permit the Association, the Declarants, or
the Owner, as the case may be, not less than thirty (30) days to cure the
violation. Provided, however that if an

25
<PAGE>

emergency exists requiring immediate intervention by the Village, the Village
shall have the right to make emergency repairs or take emergency action without
providing written notice, but may, if time permits, give oral notice.

3. FAILURE TO CORRECT. If the Association, the Declarant, or
an Owner fails to perform any required act or to desist from taking a prohibited
act within the time permitted under this Declaration, or in the absence of such
specific time, within thirty (30) days after receiving above described notice of
the determination, the Village shall have the right to perform or cause to be
performed such maintenance or other action or operations necessary to correct
the violation, to abate the prohibited act, to fulfill the conditions of this
Declaration or to bring the Property into compliance with such restrictions,
regulations and covenants as are being ignored or violated.

4. RIGHT OF REIMBURSEMENT. If the Village performs such
services or has such services performed, it shall be entitled to complete
reimbursement by the Association, the Declarants, or an Owner, as the case may
be, and, if not paid within thirty (30) days after an invoice therefor is given,
may place a lien upon the Property or the Building Site affected, in an amount
equal to the sum owed. Further, the Village shall have the right to enforce
compliance with the provisions of this Section by injunction or other legal
proceedings and to recover damages and costs of reasonable attorneys' fees which
may arise thereby.

5. GENERAL. The rights of the Village to enforce the
provisions of this Declaration, as set forth in this Section, may not be amended
by the Declarants, Association or the Owners without the written permission of
the Village. The Village shall not be obligated to enforce the provisions of
this Declaration, but may do so at its sole discretion.

XIX. TRUSTEE'S EXCULPATION.

A. Trust No. 113790. Anything herein to the contrary notwithstanding,
each and all of the representations, covenants, undertakings and agreements
herein made on the part of Declarant Trust No. 113790, while in form purporting
to be the representations, covenants, undertakings and agreements of said
Declarant, are nevertheless each and every one of them made and intended not as
personal representations, covenants, undertakings and agreements by Declarant or
for any other purpose or intention other than the limited purpose of binding
only that portion of the trust property specifically described herein, and this
instrument is executed and delivered by LaSalle National Bank, not in its own
right, but solely in the exercise of the powers conferred upon it as Trustee of
Trust No. 113790, and that no personal liability or personal responsibility is
assumed by nor shall at any time be asserted or enforceable against Declarant or
LaSalle National Bank on account of this instrument or on the account of any
representation, covenant, undertaking, or agreement of said Declarant in this
instrument contained, either expressed or implied, all such personal liability,
if any, being expressly waived and released.

26
<PAGE>

B. Trust No. 113097. Anything herein to the contrary notwithstanding,
each and all of the representations, covenants, undertakings and agreements
herein made on the part of Declarant Trust No.113097, while in form purporting
to be the representations, covenants, undertakings and agreements of said
Declarant, are nevertheless each and every one of them made and intended not as
personal representations, covenants, undertakings and agreements by Declarant or
for any other purpose or intention other than the limited purpose of binding
only that portion of the trust property specifically described herein, and this
instrument is executed and delivered by LaSalle National Bank, not in its own
right, but solely in the exercise of the powers conferred upon it as Trustee of
Trust No. 113097, and that no personal liability or personal responsibility is
assumed by nor shall at any time be asserted or enforceable against Declarant or
LaSalle National Bank on account of this instrument or on the account of any
representation, covenant, undertaking, or agreement of said Declarant in this
instrument contained, either expressed or implied, all such personal liability,
if any, being expressly waived and released.

IN WITNESS WHEREOF, the undersigned have caused these presents
to be duly executed under seal this 8th day of September 1989.

DECLARANTS:

LA SALLE NATIONAL BANK, not
personally but as Trustee
under Trust Agreement dated
November 1, 1988 and known
as Trust No. 113790
ATTEST:

/s/ Rosemary Collins By /s/ Corrine Bek
- ------------------------------- --------------------------------
Assistant Secretary Its Assistant Vice President
----------------------------
[SEAL]

LA SALLE NATIONAL BANK, not
personally but as Trustee
under Trust Agreement dated
March 15, 1988 and known as
ATTEST: No. 113097

/s/ Rosemary Collins By /s/ Corrine Bek
- ------------------------------- --------------------------------
Assistant Secretary Its Assistant Vice President
----------------------------

[SEAL]

27
<PAGE>

STATE OF ILLINOIS )
)SS
COUNTY OF COOK )

I, the undersigned, a Notary Public, in and for the County and State
aforesaid, do hereby certify that Corinne Bek, Assistant Vice President of
LaSalle National Bank, a national banking association, and Rosemary Collins,
Assistant Secretary of said national banking association, personally known to me
to be the same persons whose names are subscribed to the foregoing instrument as
such Asst Vice President and Asst Secretary, respectively, appeared before me
this day in person and acknowledged that they signed and delivered the said
instrument as their own free and voluntary acts, and as the free and voluntary
act of said national banking association, as the Trustee for Trust #113790, for
the uses and purposes therein set forth; and the said Asst Secretary did also
then and there acknowledge that she, as custodian of the corporate seal of said
national banking association, did affix the said corporate seal of said national
banking association to said instrument as her own free and voluntary act, and as
the free and voluntary act of said national banking association, as Trustee, for
the uses and purposes therein set forth, pursuant to the authority granted them
under the said Trust Agreement.

Given under my hand and official seal this 8th day of September 1989.

/s/ Harriet Deniszwicz
--------------------------------------
Notary Public

My commission expires:
----------------------------------------
[SEAL]

The Common Address of this Property is:

Peterson Road on the North, the Wisconsin Central Railroad Right of Way
on the East, Winchester Road on the South and proposed Harris Road on the West.

28
<PAGE>

STATE OF ILLINOIS )
)SS
COUNTY OF COOK )

I, the undersigned, a Notary Public, in and for the County and State
aforesaid, do hereby certify that Corinne Bek, Assistant Vice President of
LaSalle National Bank, a national banking association, and Rosemary Collins,
Asst Secretary of said national banking association, personally known to me
to be the same persons whose names are subscribed to the foregoing instrument as
such Asst Vice President and Asst Secretary, respectively, appeared before me
this day in person and acknowledged that they signed and delivered the said
instrument as their own free and voluntary acts, and as the free and voluntary
act of said national banking association, as the Trustee for Trust #113097, for
the uses and purposes therein set forth; and the said Asst Secretary did also
then and there acknowledge that she, as custodian of the corporate seal of said
national banking association, did affix the said corporate seal of said national
banking association to said instrument as her own free and voluntary act, and as
the free and voluntary act of said national banking association, as Trustee, for
the uses and purposes therein set forth, pursuant to the authority granted them
under the said Trust Agreement.

Given under my hand and official seal this 8th day of September, 1989.

/s/ Harriet Deniszwicz
--------------------------------------
Notary Public

My commission expires:
----------------------------------------
[SEAL]

This Document has been prepared by:
Harvey X. Koloms
Attorney at Law
145 East Algonquin Road
Arlington Heights, Illinois 60005

The Permanent Real Estate Tax Index Numbers affecting this Property are as
follows:

10-12-400-003-0021
10-12-400-011-0021
10-13-200-040-0010
10-13-200-040-0011
10-12-400-012-0021
10-12-400-006-0021
10-12-300-004-0021
10-13-200-039-0021

29
<PAGE>

Exhibit A
---------

Legal Description

Owned by La Salle National Bank, as Trustee under Trust Agreement dated March
15, 1988 and known as Trust No. 113097:

Lot 1 of Block 1 of Lincoln Commerce Center, being a subdivision of
parts of the Southwest 1/4 and the Southeast 1/4 of Section 12, and of
the Northeast 1/4 of Section 13, all in Township 44 North, Range 10,
East of the Third Principal Meridian, in Lake County, Illinois.

Owned by La Salle National Bank, as Trustee under Trust Agreement dated November
1, 1988 and known as Trust No. 113790:

Lot 2 and 3 of Block 1, Block 2 and Outlot A and B of Lincoln Commerce
Center, being a subdivision of parts of the Southwest 1/4 and the
Southeast 1/4 of Section 12, and of the Northeast 1/4 of Section 13,
all in Township 44 North, Range 10, East of the Third Principal
Meridian, in Lake County, Illinois.
<PAGE>

ESTOPPEL CERTIFICATE

The undersigned, ALLSCRIPS PHARMACEUTICALS, INC., an Illinois
Corporation, hereby certifies that it is the Tenant under a certain Lease
Agreement dated the _________ day of October 1996 with AMERICAN NATIONAL BANK
AND TRUST COMPANY OF CHICAGO, as Trustee under Trust Agreement dated May 15,
1994, and known as Trust Number MP-012430, as the Landlord, which Lease
Agreement leases to Tenant, 61,266 square feet of office/warehouse space
(hereinafter referred to as Leased Premises) at Concepts II Building,
Libertyville, Illinois (hereinafter referred to as Building).

The Tenant hereby further certifies as to the following:

1. That the Lease is in full force and effect and has not been
modified, altered, or amended;

2. That possession of the Leased Premises has been accepted by
the Tenant on April 1, 1997;

3. That the Term of the Lease commenced on April 1, 1997, and
ends on June 30, 2004;

4. That the Rentable Square Feet of the Leased Premises are
61,266;

5. That the Fixed Rent payable by Tenant for the entire Term is
$3,628,587.18 payable in 87 Monthly Payments As Follows:

6. That the Tenant is obligated to pay 76.85% of the Taxes and
Operating Expenses of the Building, as Additional Rent;

7. That the Tenant has accepted, and is in possession of, the
Leased Premises; that any Tenant Improvements to the Leased Premises, required
by the terms of the Lease to be made by the Landlord, have been completed to the
satisfaction of the Tenant;

8. That there are no payments, credits, or concessions required
to be made or granted by Landlord to Tenant in connection with the Lease which
have not been paid or fulfilled, so that the Landlord has no obligations or
liabilities with respect thereto;

9. That no Rental or any other charges due under the Lease have
been paid more than thirty (30) days in advance of the date hereof, other than a
security deposit in the amount of $500,000, in the form of a letter of credit,
reducing or eliminated under certain circumstances;

10. That the Lease, the Leased Premises or any portion thereof,
have not been assigned or sublet, by operation of law or otherwise;

-1-
<PAGE>

12. That the Tenant, as of the date hereof, does not have any
right, charge, claim, lien, or right of set-off, under the Lease and/or against
the Landlord, other than as stated in the Lease;

13. That this Lease consists of 31 Pages and the following
Exhibits:

Exhibit A - Legal Description
Exhibit B - Site Plan
Exhibit C - Tenant Plans
Exhibit D - Contract Prices and Estimates
Exhibit E - Protective Covenants
Exhibit F - Estoppel Certificate;

14. That there are no agreements between the Landlord and the
Tenant other than as stated and provided in the Lease and its Exhibits;

15. That exceptions to the above statements 1 to 14 are set forth
hereinafter (if none, state none):

16. That this certificate is being made to:

This Estoppel Certificate is dated this _____ day of ___________ ____.

TENANT:
ALLSCRIPS PHARMACEUTICALS, INC., an
Illinois Corporation

- ------------------------- -----------------------------------------
Secretary President

-2-

EXHIBIT F

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form S-1 of our
reports dated February 17, 2000, relating to the financial statements and
financial statement schedule of Allscripts, Inc., which appear in such
Registration Statement. We also consent to the references to us under the
headings "Experts" and "Selected Consolidated Financial Data" in such
Registration Statement.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois
February 18, 2000

<PAGE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Allscripts, Inc. as of and for the year
ended December 31, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 40,561
<SECURITIES> 15,049
<RECEIVABLES> 9,209
<ALLOWANCES> 3,743
<INVENTORY> 3,585
<CURRENT-ASSETS> 65,447
<PP&E> 10,407
<DEPRECIATION> 5,467
<TOTAL-ASSETS> 74,014
<CURRENT-LIABILITIES> 6,591
<BONDS> 59
0
0
<COMMON> 242
<OTHER-SE> 67,122
<TOTAL-LIABILITY-AND-EQUITY> 74,014
<SALES> 27,586
<TOTAL-REVENUES> 27,586
<CGS> 21,909
<TOTAL-COSTS> 21,909
<OTHER-EXPENSES> 22,326
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,216)
<INCOME-PRETAX> (15,433)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,433)
<DISCONTINUED> 642
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,244)
<EPS-BASIC> (0.91)
<EPS-DILUTED> (0.91)

</TABLE>