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INTERMEDIX HOLDINGS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2010 (1) Acquisition of Intermedix Corporation by Intermedix Holdings Inc. On July 19, 2010, Intermedix Holdings Inc. (the Company, or Successor), a Delaware corporation, entered into an Agreement and Plan of Merger (the Merger Agreement) with Intermedix Corporation (IMX or the Predecessor), and Intermedix Merger Sub Inc. (Merger Sub), a Delaware corporation and a wholly owned subsidiary of the Company established as an acquisition vehicle for the purpose of acquiring IMX. The acquisition and financing transactions described below are collectively referred to as (the Merger). In accordance with the terms of the Merger Agreement, on August 23, 2010 (the Merger Date), the Company completed the acquisition of 100% of the issued and outstanding capital stock of the Predecessor Company consummated by (i) $361.6 million paid to tender all outstanding shares of common stock at $256.16 per share, (ii) $10.0 million net cash paid with respect to stock options exercised (net of strike prices and rights to cash exchanged for equity in the Successor), (iii) $14.4 million in Company stock issued in lieu of cash in exchange for $12.4 million in outstanding stock and $2.0 million in options of the Predecessor held by management and employees, (iv) $167.6 million paid to retire the Predecessor's senior and subordinated debt, and (v) $8.9 million of transaction costs paid or accrued on behalf of the Predecessor. In addition, $0.3 million in capital lease debt was assumed and the Company acquired cash totaling $18.8 million. Transaction costs incurred by the Company in connection with the Merger amounted to $15.8 million and are included in "Selling, general and administrative expense" in the accompanying consolidated statement of operations of the Company. The Merger, including the payment of transaction costs, was funded with $285.2 million in cash and $290.0 million in debt (see note 10 for terms). The Company incurred financing fees of $8.2 million in connection with financing arrangements made to fund the Merger, which have been capitalized and are reflected in "Other assets" in the Company's consolidated balance sheet as of December 31, 2010. Following the consummation of the Merger, Merger Sub was merged with and into the Predecessor with it surviving as a wholly owned subsidiary of the Company. The Merger has been accounted for as a business combination using the acquisition method of accounting in accordance with Financial Accounting Standard Board (FASB) Accounting Standard Codification (ASC) Topic 805, Business Combinations (ASC Topic 805). The allocation of the purchase price of IMX to the assets acquired and liabilities assumed is reflected in the table below under "Purchase Price Allocation of Merger." The fair value of the equity consideration was determined based on the enterprise value of the Company as of the Merger Date. Assets acquired and liabilities assumed reflect fair value estimates and analyses, including work performed by third -party valuation specialists. The fair value of receivables acquired includes management's estimate of the cash flows not expected to be collected. The Merger resulted in goodwill of $322.8 million. Such goodwill reflects the substantial value of the Company's expectations for continued future growth in the business, the unique synergies between Revenue Cycle Management (RCM) services and technology product offerings and the experienced management team skilled at integrating acquisitions. 6 (Continued)