<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 000-26537
ALLSCRIPTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3444974
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2401 Commerce Drive
Libertyville, Illinois 60048
(Address of principal executive offices)
______________________
(847) 680-3515
(Registrant's telephone number, including area code)
______________________
Indicate by check ( X ) whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No
------ ------
(2) Yes No X
------ ------
As of August 31, 1999, there were 19,708,431 shares of the Registrant's
$0.01 par value common stock outstanding.
<PAGE>
ALLSCRIPTS, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
At December 31, 1998 and June 30, 1999 (unaudited) 1
Unaudited Condensed Consolidated Statements of Operations
For the three and six months ended June 30, 1998 and 1999 3
Unaudited Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 1998 and 1999 4
Notes to Unaudited Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
ALLSCRIPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1999
(Unaudited)
December 31, ----------------------------------
1998 Actual Pro Forma
---- ------ ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 718,008 $ 4,947,120 $ 4,947,120
Accounts receivable, net of allowances of $4,522,507 in
1998 and $4,499,848 in 1999 9,525,084 3,630,347 3,630,347
Inventories, net 2,905,484 2,924,853 2,924,853
Prepaid and other assets 229,283 149,207 149,207
----------- ----------- -----------
Total current assets 13,377,859 11,651,527 11,651,527
Fixed assets, net 1,783,996 1,908,589 1,908,589
Intangible assets, net 3,701,835 3,366,853 3,366,853
Other assets 56,594 279,691 279,691
----------- ----------- -----------
Total assets $18,920,284 $17,206,660 $17,206,660
============= ============= =============
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
ALLSCRIPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
June 30, 1999
(Unaudited)
December 31, -----------------------------
1999 Actual Pro Forma
----- ------ ---------
LIABILITIES
Current liabilities:
<S> <C> <C> <C>
Notes payable $ 4,000,000 $ 4,550,000 $ 4,550,000
Accounts payable 7,830,158 5,949,378 5,949,378
Accrued expenses 1,276,849 1,508,319 1,508,319
------------ ------------ ------------
Total current liabilities 13,107,007 12,007,697 12,007,697
Long-term debt 58,774 58,774 58,774
------------ ------------ ------------
Total liabilities 13,165,781 12,066,471 12,066,471
------------ ------------ ------------
Redeemable preferred shares:
Series I, cumulative, $1.00 par value, 1,339,241 shares authorized,
issued and outstanding, including $521,053 and $888,856 of
cumulative dividends in 1998 and 1999, respectively; liquidation
value of $8,654,175 8,545,842 8,986,971 8,986,971
Series J, cumulative, $1.00 par value, 1,812,903 shares authorized,
1,803,838 issued and outstanding, including $701,812 and
$1,197,208 of cumulative dividends in 1998 and 1999, respectively;
liquidation value of $11,656,388 12,358,200 12,853,596 12,853,596
Series H, cumulative, $1.00 par value, 1,361,775 shares authorized,
issued and outstanding, including $3,007,430 and $3,359,430 of
cumulative dividends in 1998 and 1999, respectively;
liquidation value of $8,800,000 11,642,880 12,104,580 12,104,580
------------ ------------ ------------
32,546,922 33,945,147 33,945,147
SHAREHOLDERS' DEFICIT
Preferred shares:
Series A, $1.00 par value, 1,050,000 shares authorized, issued and
outstanding, liquidation value of $1,050,000, convertible to common
shares; no shares issued and outstanding, pro forma 1,050,000 1,050,000 -
Series B, $1.00 par value, 533,333 shares authorized, issued and
outstanding, liquidation value of $2,000,000, convertible to common
shares; no shares issued and outstanding, pro forma 533,333 533,333 -
Series C, $1.00 par value, 2,187,501 shares authorized, issued and
outstanding, liquidation value of $7,000,003, convertible to common
shares; no shares issued and outstanding, pro forma 2,187,501 2,187,501 -
Series D, $1.00 par value, 1,833,334 shares authorized, issued and
outstanding, liquidation value of $8,250,003, convertible to common
shares; no shares issued and outstanding, pro forma 1,833,334 1,833,334 -
Series F, $1.00 par value, 2,492,781 shares authorized, issued and
outstanding, liquidation value of $3,115,976, convertible to common
shares; no shares issued and outstanding, pro forma 2,492,781 2,492,781 -
Series G, $1.00 par value, 621,819 shares authorized, issued and
outstanding, liquidation value of $2,798,186, convertible to common
shares; no shares issued and outstanding, pro forma 621,819 621,819 -
------------ ------------ ------------
8,718,768 8,718,768 -
Common shares:
$.01 par value, 125,000,000 shares authorized, 8,358,654 and
8,983,301 shares issued and outstanding, actual in 1998 and
1999, respectively; 75,000,000 authorized, 11,980,742 shares
issued and outstanding, pro forma 83,587 89,833 119,808
Treasury stock at cost; 34,465 common shares actual and pro forma (67,817) (67,817) (67,817)
Unearned compensation (230,417) (1,913,956) (1,913,956)
Additional paid-in-capital 15,467,430 17,419,604 26,427,725
Accumulated deficit (50,763,970) (53,051,390) (53,370,718)
------------ ------------ ------------
Total shareholders' deficit (26,792,419) (28,804,958) (28,804,958)
------------ ------------ ------------
Total liabilities, redeemable preferred shares and
shareholders' deficit $ 18,920,284 $ 17,206,660 $ 17,206,660
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
ALLSCRIPTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue $ 6,055,954 $ 6,392,805 $12,406,753 $12,420,562
Cost of revenue 4,413,024 5,144,096 8,951,219 9,709,152
----------- ----------- ----------- -----------
Gross profit 1,642,930 1,248,709 3,455,534 2,711,410
Selling, general and administrative expenses 3,243,439 4,554,817 6,591,906 8,104,635
Amortization of intangibles 93,442 174,491 186,884 267,933
Other operating expenses - - 111,946 -
----------- ----------- ----------- -----------
Loss from operations (1,693,951) (3,480,599) (3,435,202) (5,661,158)
Interest, net (81,793) (90,834) (477,962) (199,979)
----------- ----------- ----------- -----------
Loss from continuing operations (1,775,744) (3,571,433) (3,913,164) (5,861,137)
Income from discontinued operations 293,760 162 680,731 26,556
Gain from sale of discontinued operations - - - 3,547,161
----------- ----------- ----------- -----------
Net loss before extraordinary item (1,481,984) (3,571,271) (3,232,433) (2,287,420)
Extraordinary loss from early extinguishment of debt (790,431) - (790,431) -
----------- ----------- ----------- -----------
Net loss (2,272,415) (3,571,271) (4,022,864) (2,287,420)
Accretion of mandatory redemption value of
preferred shares and accrued dividends on
preferred shares (858,002) (699,112) (1,088,852) (1,398,225)
----------- ----------- ----------- -----------
Net loss attributable to common shareholders $(3,130,417) $(4,270,383) $(5,111,716) $(3,685,645)
=========== =========== =========== ===========
Per share data-basic and diluted:
Loss from continuing operations $ (0.33) $ (0.48) $ (1.06) $ (0.84)
Discontinued operations 0.04 0.0 0.15 0.00
Gain from sale of discontinued operations - - - 0.41
Extraordinary loss (0.10) - (0.17) -
----------- ----------- ----------- -----------
Net loss $ (0.39) $ (0.48) $ (1.08) $ (0.43)
=========== =========== =========== ===========
Per share data-pro forma basic and diluted:
Loss from continuing operations $ (0.39) $ (0.65)
Discontinued operations 0.0 0.00
Gain from sale of discontinued operations - 0.31
----------- -----------
Net loss $ (0.39) $ (0.34)
=========== ===========
Weighted average shares of common stock outstanding
used in computing basic and diluted loss per share 8,009,939 8,864,422 4,724,545 8,628,829
=========== =========== =========== ===========
Weighted average shares of common stock outstanding
used in computing pro forma basic and diluted
loss per share 11,861,863 11,626,270
=========== ===========
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
3
<PAGE>
ALLSCRIPTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1998 1999
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(4,022,864) $(2,287,420)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 739,877 747,012
Provision for losses on accounts receivable 76,457 182,728
Gain on sale of discontinued operations - (3,547,161)
Extraordinary loss 790,431 -
Compensation expense 135,912 271,450
Exchange of debentures in satisfaction of accrued interest 439,281 -
Changes in assets and liabilities:
Decrease in accounts receivable 694,224 5,851,380
Increase in inventories (723,720) (692,145)
(Increase) decrease in other assets 50,772 (249,104)
(Decrease) increase in accounts payable 768,706 (2,401,679)
Decrease in accrued liabilities (218,344) (482,826)
----------- -----------
Net cash used in operating activities (1,269,268) (2,607,765)
----------- -----------
Cash flows from investing activities:
Capital expenditures (426,096) (693,636)
Proceeds from sale of discontinued operations - 7,472,509
Cash received in acquisition of TeleMed Corp. - 48,853
----------- -----------
Net cash provided by (used in) investing activities (426,096) 6,827,726
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of common share options 40,820 109,151
Proceeds from Series I Unit Offering 8,930,000 -
Borrowings under line of credit - 1,400,000
Payments under line of credit (2,500,000) (1,500,000)
Payments on long-term debt (4,692,932) -
----------- -----------
Net cash provided by financing activities 1,777,888 9,151
----------- -----------
Net increase in cash 82,524 4,229,112
Cash, beginning of period 204,981 718,008
----------- -----------
Cash, end of period $ 287,505 $ 4,947,120
=========== ===========
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
4
<PAGE>
ALLSCRIPTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The quarterly financial information presented herein should be read in
conjunction with Allscripts' audited financial statements and the accompanying
notes included in our Registration Statement on Form S-1 (No. 333-78431)
declared effective July 23, 1999. The unaudited interim financial statements
reflect all adjustments (all of which are of a normal recurring nature) that
are, in the opinion of management, necessary for a fair presentation of the
results for the interim periods. The results for the interim periods are not
necessarily indicative of the results to be expected for the year.
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. Allscripts' practice has been to
expense the costs of obtaining or developing internal-use software as incurred.
According to Allscripts' policy, 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.
2. Business Combinations
On May 10, 1999, Allscripts acquired TeleMed Corp. (which operates as
MedSmart), a privately held company that sells Internet-based physician drug
education programs and medical books online and by telephone. Allscripts
exchanged 117,500 shares of its common stock, and is obligated to issue up to an
additional 117,500 shares under certain circumstances, for all of the
outstanding common shares of MedSmart. Allscripts assigned a value of $11.00 per
share to the shares issued in the combination, the estimated fair market value
at the time of the transaction. 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 $1,900,000,
which represents the excess of the purchase price over the fair value of the
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 will be included in the
consolidated financial statements subsequent to the date of acquisition. The
acquisition resulted in goodwill of approximately $640,000, which represents the
excess of the purchase price over the fair value of the assets and which will be
amortized on a straight-line basis over two years.
The following unaudited pro forma consolidated results of operations for
the six months ended June 30, 1998 and 1999 assume the MedSmart and
Shopping@Home, Inc. acquisitions occurred as of January 1 of each year. The 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.
5
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
1998 1999
------- -------
<S> <C> <C>
Revenue $13,098 $12,880
======= =======
Loss from continuing operations $(4,148) $(6,314)
Income from discontinued operations 679 26
Gain from sale of discontinued operations - 3,547
Extraordinary loss from early extinguishment of debt (790) -
-------- -------
Net loss $(4,259) $(2,741)
======== ========
Per share data - basic and diluted:
Loss from continuing operations $ (1.08) $ (0.89)
Income from discontinued operations 0.14 0.00
Gain from sale of discontinued operations - 0.41
Extraordinary loss from early extinguishment of debt (0.16) -
-------- --------
Net loss $ (1.10) $ (0.48)
======== ========
</TABLE>
3. Net Loss Per Share
Basic and diluted net loss per common share are presented in conformity
with Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
for all periods presented.
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 all outstanding convertible preferred
stock, which is convertible into 2,977,483 shares of common stock, all
outstanding warrants to purchase 4,903,763 shares of common stock and all
outstanding options to purchase 2,363,885 shares of common stock from the
calculation of diluted loss per share because all such securities are
antidilutive for all periods presented.
4. Contingencies
The pharmaceutical repackaging industry is subject to stringent federal and
state regulations. Allscripts' repackaging operations are regulated by the FDA
as if Allscripts were a manufacturer. Allscripts is also subject to regulation
by the DEA in connection with the packaging and distribution of controlled
substances.
Allscripts is a defendant in over 2,000 multi-defendant lawsuits involving
the manufacture and sale of dexfenfluramine, fenfluramine and phentermine.
Approximately 115 of these suits were filed between February 1998 and June 1999
and the remaining suits were filed in state courts in Texas 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 only conducted a preliminary review of the recently-filed 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.
6
<PAGE>
5. Discontinued Operations
In March 1999, Allscripts sold substantially all of the assets, excluding
cash and accounts receivable, of its pharmacy benefit management business. The
operating results of the pharmacy benefit management segment have been
segregated from continuing operations and reported as a separate line item on
the Unaudited Condensed Consolidated Statements of Operations under the caption
"Income from discontinued operations."
Operating results from discontinued operations were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------
1998 1999
------------ ------------
<S> <C> <C>
Revenue....................................... $24,790,701 $14,291,828
Cost of revenue............................... 23,032,391 13,377,729
------------ ------------
Gross profit............................. 1,758,310 914,099
Selling, general and administrative expenses... 827,935 762,172
Amortization of intangibles.................... 251,069 125,533
------------ ------------
Operating income............................... 679,306 26,394
Interest income................................ 1,425 162
------------ ------------
Income from discontinued operations............ $ 680,731 $ 26,556
============ ============
</TABLE>
In addition, in the first quarter of 1999, Allscripts recognized a gain on
the sale of this business of $3,547,161, which has also been reported as a
separate line item under the caption "Gain on sale of discontinued operations."
This gain does not reflect contingent payments from the buyer of up to
$8,400,000, which will be recognized if and when they are realized.
Included in revenue is $2,103,538 in the first six months of 1998 and
$374,876 in the first six months of 1999 from Anthem, Inc., a related party.
6. Income Taxes
Allscripts has made no provision (benefit) for income taxes, as it
anticipates at this time that the annual effective income tax rate will be
minimal or zero.
7. Pro Forma Information
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 common
stock. Additionally, 19,958 shares of common stock were issued upon the closing
of the offering, pursuant to a contingent share payment obligation. Allscripts
has presented a pro forma balance sheet as if this conversion and contingent
stock issuance occurred on June 30, 1999 and pro forma net loss per share
information as if these transactions occurred on January 1, 1999.
Upon the closing of the offering, 1,000,000 shares of undesignated
preferred stock, par value $0.01 per share, and 75,000,000 shares of common
stock, par value $0.01 per share, were authorized. See Note 8.
8. Subsequent Events - 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. 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 $1,100,000 of which was applied to
related offering expenses. In addition, Allscripts used $34,745,088 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 $653,033 to
repay a promissory note, including accrued interest, issued as consideration for
Allscripts' acquisition of Shopping@Home, Inc. The remaining net proceeds of
approximately $64,000,000 were invested in short-term, interest-bearing,
investment grade securities.
9. Supplemental Cash Flow Information
Noncash investing and financing activities:
In connection with the acquisition of TeleMed, Inc., Allscripts issued
117,500 common shares valued at $11.00 per share
In connection with the acquisition of Shopping@Home, Inc., Allscripts
issued a note in the face amount of $650,000, bearing interest at 6% per
annum
In connection with the Series H and I warrants, Allscripts has reclassified
from Additional paid-in-capital to Series H and I Redeemable Preferred
shares, accretion and accrued dividends totaling in the aggregate
$1,088,852 and $1,398,225 at June 30, 1998 and 1999, respectively
In connection with the issuance of common share options, Allscripts
recorded $322,741 and $1,844,753 of unearned compensation in the first six
months of 1998 and 1999, respectively
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
We provide physicians with Internet and client/server medication management
solutions designed to improve the quality and cost effectiveness of
pharmaceutical healthcare. We currently derive our revenue from the sale of
prepackaged medications, software licenses of our TouchScript medication
management software, computer hardware and related services.
Our shift in focus away from physicians with a high percentage of fee-for-
service patients to those who require technology-based services to operate
successfully in a managed care environment is reflected in the composition of
our revenue, as depicted in the following table:
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------------
1998 1999
--------------------------------------------- --------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30
-------- ------- -------- ------- -------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Traditional revenue...................... $6,101 $5,807 $5,394 $5,036 $5,235 $4,537
E-commerce revenue....................... 250 249 366 479 793 1,855
------ ------ ------ ------ ------ ------
Total revenue......................... $6,351 $6,056 $5,760 $5,515 $6,028 $6,392
====== ====== ====== ====== ====== ======
</TABLE>
Traditional revenue is derived from the sale of prescription medications
and other medical products to physicians through non-Internet channels. We
expect traditional revenue to represent a decreasing percentage of total revenue
in the future. E-commerce revenue includes the sale of prescription medications
over the Internet as well as technology-related revenue for software license
fees, computer hardware sales and leases and related services. For the three
months ended June 30, 1999, sales of prepackaged medications represented 95% of
e-commerce revenue. For the three months ended June 30, 1999, approximately 56%
of our e-commerce revenue represented a shifting of traditional customers to
TouchScript or Internet ordering. While we expect a portion of future e-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 but
either have an interest in physician dispensing, or do not intend to dispense
but are subject to financial risk imposed by managed care payers with respect to
medications that they prescribe, or both.
We believe that managed care prescription programs will continue to cover
an increasing percentage of patients for the foreseeable future. This trend will
have the effect of reducing the dispensing opportunities for 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 are 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.
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
Total revenue for the three months ended June 30, 1999 increased by 6% or
$336,000 from $6,056,000 in 1998 to $6,392,000 in 1999. Traditional revenue for
the three months ended March 31, 1999 decreased by 22% or $1,270,000 from
$5,807,000 in 1998 to $4,537,000 in 1999. E-commerce revenue increased by 645%
or $1,606,000 from $249,000 in the second quarter of 1998 to $1,855,000 in the
second quarter of 1999. The decrease in traditional revenue reflects reduced
levels of prepackaged medication dispensing by our traditional customers as a
result of the
8
<PAGE>
increased penetration of managed care prescription programs, as well as the
attrition of customers. This decrease also reflects a shifting of traditional
revenue to e-commerce by virtue of traditional customers ordering products over
the Internet. This decrease was partially offset by the introduction of new,
more expensive brand medications and by revenue generated by MedSmart, which was
acquired in May 1999. The increase in e-commerce revenue reflects additional
installations and increased use of TouchScript, and a shifting of traditional
revenue as outlined above.
Cost of revenue for the three months ended June 30, 1999 increased by 17%
or $731,000 from $4,413,000 in 1998 to $5,144,000 in 1999 due to the increased
revenue, a greater percentage of revenue coming from higher cost brand products
and increased costs of production and order fulfillment. As a percentage of
total revenue, cost of revenue for the three months ended June 30, 1999
increased to 80.5% from 72.9% in the prior year period principally due to a
greater percentage of revenue coming from lower dollar margin and lower
percentage margin prescriptions filled on behalf of patients covered by managed
prescription benefit programs, a greater percentage of revenue coming from
higher cost brand products and increased costs of production and order
fulfillment.
Selling, general and administrative expenses for the three months ended
June 30, 1999 increased by 40% or $1,311,000 over the prior year period due
primarily to additional spending of $718,000 for sales support personnel needed
to sell, implement and support TouchScript installations, additional spending of
$219,000 for TouchScript and Internet product development personnel, $158,000 in
costs associated with legislative and lobbying efforts, $109,000 related to
MedSmart operations and additional spending of $63,000 on information systems
personnel. As a result, selling, general and administrative expenses as a
percentage of total revenue increased to 71.3% for the three months ended June
30, 1999 from 53.6% of total revenue in the prior year period. To implement our
strategy fully, we expect 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
substantially.
Amortization of intangibles for the three months ended June 30, 1999
increased by 87% or $81,000 from the prior year period. The increase in
amortization relates to the amortization of the goodwill recorded in the
MedSmart acquisition, which was completed in May 1999.
Interest expense for the three months ended June 30, 1999 increased by 11%
or $9,000 over the prior year period due to increased borrowings under a
revolving credit facility with our commercial bank. These increases were
partially offset by interest we paid in the 1998 period on the subordinated
convertible debentures, which were exchanged for Series J redeemable preferred
stock in April 1998, and interest we paid in the 1998 period on the term loan we
had with our commercial bank, which was repaid in April 1998.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Total revenue for the six months ended June 30, 1999 increased by $13,000
from $12,407,000 in 1998 to $12,420,000 in 1999. Traditional revenue for the six
months ended June 30, 1999 decreased by 18% or $2,136,000 from $11,908,000 in
1998 to $9,772,000 in 1999. E-commerce revenue increased by 431% or $2,149,000
from $499,000 for the six months ended June 30, 1998 to $2,648,000 for the same
period in 1999. The decrease in traditional revenue reflects reduced levels of
prepackaged medication dispensing by our traditional customers as a result of
the increased penetration of managed care prescription programs, as well as the
attrition of customers. This decrease also reflects a shifting of traditional
revenue to e-commerce by virtue of traditional customers ordering products over
the Internet. This decrease was partially offset by the introduction of new,
more expensive brand medications and by revenue generated by MedSmart. The
increase in e-commerce revenue reflects additional installations and increased
use of TouchScript, and a shifting of traditional revenue as outlined above.
Cost of revenue for the six months ended June 30, 1999 increased by 8% or
$758,000 from $8,951,000 in 1998 to $9,709,000 in 1999 due to a shift to higher
cost brand products and increased costs of production and order fulfillment. As
a percentage of total revenue, cost of revenue for the six months ended June 30,
1999 increased to 78.2% from 72.1% in the prior year period principally due to a
greater percentage of revenue coming from lower dollar
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margin and lower percentage margin prescriptions filled on behalf of patients
covered by managed prescription benefit programs, and increased costs of
production and order fulfillment.
Selling, general and administrative expenses for the six months ended June
30, 1999 increased by 23% or $1,513,000 over the prior year period due primarily
to additional spending of $1,280,000 for sales support personnel needed to sell,
implement and support TouchScript installations, additional spending of $334,000
for TouchScript and Internet product development personnel, $109,000 related to
MedSmart operations and additional spending of $135,000 for deferred
compensation expense. In 1998 and the first quarter of 1999 we recorded unearned
stock compensation of approximately $2,250,000, 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 options and is
expected to be fully amortized by 2003. These costs were partially offset by a
reduction in sales personnel and related expenses as a result of a refocusing of
our sales effort. As a result, selling, general and administrative expenses as a
percentage of total revenue increased to 65.3% for the six months ended June 30,
1999 from 53.1% of total revenue in the prior year period.
Amortization of intangibles for the six months ended June 30, 1999
increased by 43% or $81,000 in 1999 from the prior year period. The increase in
amortization relates to the amortization of the goodwill recorded in the
MedSmart acquisition.
Other operating expenses decreased in 1999 by 100% or $112,000 over the
prior year period. The 1998 expenses consisted entirely of severance costs
related to the refocusing of our sales efforts.
Interest expense for the six months ended June 30, 1999 decreased by 58% or
$278,000 over the prior year period due to the exchange in 1998 of subordinated
convertible debentures for redeemable preferred stock and the repayment in 1998
of the term loan we had with our commercial bank. These amounts were partially
offset by increased borrowings in 1999 under our revolving credit facility with
our commercial bank.
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 Unaudited Condensed Consolidated
Statements of Operations under the caption "Income 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."
Liquidity and Capital Resources
At June 30, 1999, our principal sources of liquidity consisted of
$4,947,000 of cash.
Net cash used in operating activities increased by $1,339,000 to
$2,608,000 for the six months ended June 30, 1999, compared to $1,269,000 for
the six months ended June 30, 1998, due to an increase in operating losses.
Accounts receivable, net of allowances, decreased from $9,525,000 at December
31, 1998 to $3,630,000 at June 30, 1999 and accounts payable decreased over the
same period from $7,830,000 to $5,949,000. These decreases resulted primarily
from the collection of outstanding receivables and the payment of outstanding
payables relating to our pharmacy benefit management business,
which we sold in March 1999. In addition, net inventories did not materially
change from December 31, 1998 to June 30, 1999 as the decrease in inventories
resulting from the sale of our pharmacy benefit management business was offset
by an increase in our inventories of computer equipment in anticipation of
increased sales and installations of our TouchScript software.
Net cash provided by investing activities increased by $7,254,000 to
$6,828,000 in the first six months of 1999 from a net use of $426,000 in the
first six months of 1998, primarily as a result of the sale of the pharmacy
benefit management business in March 1999. Capital expenditures were $694,000
for the first six months of 1999 and $426,000 for the first six months of 1998.
The increased level of expenditures in 1999 relates to computer systems
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placed at sites where we manage the dispensary or pharmacy 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 decreased by $1,769,000 to $9,000 for the
first six months of 1999 compared to $1,778,000 for the six months ended June
30, 1998, primarily because of the issuance in 1998 of $8,600,000 in redeemable
preferred stock offset in part by the repayment in 1998 of $4,700,000 in term
debt and $2,500,000 outstanding under our revolving line of credit.
We have spent $771,000 and $586,000 on software development costs in 1998
and in the six months ended June 30, 1999, respectively. While technological
feasibility for the current version of TouchScript has been achieved, and,
therefore, we have capitalized the related software development costs, these
costs have been written off because their recoverability is uncertain since
market acceptance of the current version of TouchScript has not been achieved.
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 offering price of $16.00
per share. The offering resulted in gross proceeds of $112,000,000, $7,840,000
of which were applied to the underwriting discount and approximately $1,100,000
of which were applied to related offering expenses. In addition, we used
$34,745,088 of the proceeds to redeem all outstanding shares of our Series H, I
and J Redeemable Preferred Stock, plus accrued dividends thereon, $3,900,000 to
repay all advances under our revolving line of credit with our commercial bank
and $653,033 to repay a promissory note, including accrued interest, issued as
consideration for our acquisition of Shopping@Home, Inc. The remaining net
proceeds of approximately $64,000,000 were invested in short-term, interest-
bearing, investment grade securities.
We believe that current cash and marketable securities balances will be
sufficient to meet our anticipated cash needs for at least the next 12 months.
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 impact 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.
Year 2000
Many existing computer programs use only two digits to identify a year.
These programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the Year
2000. We use software, computer technology and other services internally
developed and provided by third-party vendors that may fail due to the Year 2000
phenomenon. For example, we are dependent on third-party vendors to host our
Internet servers, perform certain information processing functions and provide
other services critical to our business.
We have reviewed the Year 2000 compliance of our medication management
products and have tested these products to determine how they will function at
and beyond the Year 2000. Based upon our assessment to date, we believe that all
of the medication management products that we currently sell are Year 2000
compliant. We have contacted the small number of customers using certain older
versions of our products that are not Year 2000 compliant. We have offered these
customers upgrades to Year 2000 compliant versions of these products at no cost.
We have assessed the Year 2000 readiness of all mission-critical hardware,
operating systems and third-party and proprietary software, which include
software for use in our accounting, order entry, database, security and other
operating systems. The failure of our software or systems to be Year 2000
compliant could have a material adverse effect on our corporate accounting
functions, our ability to fulfill orders and the operation of TouchScript and
our Web site. As part of the assessment of the Year 2000 compliance of these
systems, we have received assurances from our vendors that their software,
computer technology and other services are Year 2000 compliant. We have expensed
amounts incurred in connection with Year 2000 assessment through December 31,
1998. Such amounts have not been material. As of August 1, 1999 we had completed
our assessment process, replaced all mission-critical, non-compliant hardware
with hardware that is Year 2000 compliant, upgraded all mission-critical third-
party software, including
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operating systems, to Year 2000 compliant versions, upgraded proprietary
software so that it is Year 2000 compliant, and upgraded the interfaces among
our internal systems and between those systems and external systems. We will
begin system-wide testing in September, 1999, which we expect to be completed by
October 31, 1999. At this time, we cannot determine the expenses associated with
this testing and any potential remediation plan that may be incurred in the
future. The failure of our software and computer systems and of our third-party
suppliers to be Year 2000 compliant could have a material adverse effect on us.
As of June 30, 1999, we had incurred costs that we believe are allocable to the
Year 2000 problem of approximately $125,000.
The Year 2000 readiness of the general infrastructure necessary to support
our operations is difficult to assess. For instance, we depend on the integrity
and stability of the Internet to provide our services. The infrastructure
necessary to support our operations consists of a network of computers and
telecommunications systems located throughout the world and operated by numerous
unrelated entities and individuals, none of which has the ability to control or
manage the potential Year 2000 issues that may impact the entire infrastructure.
Our ability to assess the reliability of this infrastructure is limited and
relies solely on generally available news reports, surveys and comparable
industry data. Based on these sources, we believe most entities and individuals
who rely significantly on the Internet are carefully reviewing and attempting to
remediate issues relating to Year 2000 compliance, but it is not possible to
predict whether these efforts will be successful in reducing or eliminating the
potential negative impact of Year 2000 issues. A significant disruption in the
ability to reliably access the Internet or portions of it wold have an adverse
effect on demand for our products and services and would have a material adverse
effect on us.
We have not developed a contingency plan to address situations that may
result if we or our vendors are unable to achieve Year 2000 compliance. If
circumstances require, we will develop a contingency plan. The cost of
developing and implementing such a plan, if necessary, could be material. Any
failure of our material systems, our vendors' material systems or the Internet
to be Year 2000 compliant could have material adverse consequences for us.
These consequences could include difficulties in operating our Web site
effectively, taking product orders, making product deliveries, transmitting data
or conducting other fundamental parts of our business.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
This report and statements we or our representatives make contain forward-
looking statements that involve risks and uncertainties. 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 upon them as facts.
Forward-looking statements involve risks, uncertainties and assumptions,
including, but not limited to, those discussed in this report. We make these
statements under the protection afforded them by Section 21E of the Securities
Exchange Act of 1934. Because we cannot predict all of the risks and
uncertainties that may affect us, or control the ones we do predict, our actual
results may be materially different from the results we express in our forward-
looking statements.
For a more complete discussion of the risks, uncertainties and assumptions
that may affect us, see Allscripts' Registration Statement on Form S-1 (No. 333-
78431) declared effective July 23, 1999.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
See Note 4, Contingencies in Part I, Item 1, Financial Statements.
Item 2. Changes in Securities and Use of Proceeds.
On July 28, 1999, Allscripts completed the initial public offering of its
common stock. The managing underwriters were Goldman Sachs & Co., Bear Stearns
& Co. Inc., CIBC World Markets Corp. and Wit Capital Corporation. The shares of
common stock sold in the offering were registered under the Securities Act of
1933 on a Registration Statement on Form S-1 (No. 333-78431). The effective
date of the Registration Statement was July 23, 1999.
The offering was completed on July 28, after we had sold 7,000,000 shares
of common stock registered under the Registration Statement at an initial public
offering price of $16.00 per share. The remaining 1,050,000 shares of common
stock registered under the Registration Statement were subject to the
underwriters' over-allotment option, which was not exercised. 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 $1,100,000 of which
was applied to related expenses. In addition, we used $34,745,088 of the
proceeds to redeem all outstanding shares of our Series H, I and J Redeemable
Preferred Stock, including accrued dividends thereon, $3,900,000 to repay
advances under our revolving line of credit with our commercial bank and
$653,033 to repay a promissory note, including accrued interest, issued as
consideration for our acquisition of Shopping@Home, Inc., principal shareholders
of which are Glen E. Tullman, our Chairman and Chief Executive Officer, and
Joseph E. Carey, our Chief Operating Officer. The remaining net proceeds of the
offering to Allscripts of approximately $64,000,000 were invested in short-term,
interest-bearing, investment grade securities.
Except as set forth below and in connection with the repayment of the
Shopping@Home promissory note as described above, none of the net proceeds of
the offering were paid by Allscripts, directly or indirectly, to any director,
officer or general partner of Allscripts or their associates, persons owning ten
percent or more of any class of Allscripts' equity securities, or affiliates of
Allscripts:
Net proceeds of the offering were used to redeem shares of redeemable
preferred stock held by some of our affiliates according to their redemption
terms as follows:
. $10,468,581 to redeem 815,594 shares of Series H Preferred Stock and
439,883 shares of Series J Preferred Stock plus accrued but unpaid
dividends thereon 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 plus accrued but unpaid dividends thereon
held collectively by 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 plus accrued but unpaid dividends thereon held by Glen
E. Tullman, our Chairman and Chief Executive Officer;
. $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 plus accrued but unpaid dividends thereon held by
David B. Mullen, our President and Chief Financial Officer;
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. $14,179 to redeem 796 shares of Series H Preferred Stock and 982
shares of Series J Preferred Stock plus accrued but unpaid dividends
thereon held by John G. Cull, our Senior Vice President, Finance,
Treasurer and Secretary;
. $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 plus accrued but unpaid dividends thereon held by
Joseph E. Carey, our Chief Operating Officer;
. $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
plus accrued but unpaid dividends thereon held by James A. Rosenblum,
our Chief Technology Officer; and
. $49,642 to redeem 2,787 shares of Series H Preferred Stock and 3,438
shares of Series J Preferred Stock plus accrued but unpaid dividends
thereon held by Philip D. Green, a member of our Board of Directors.
Upon the closing of the initial public offering of Allscripts' common
stock, all outstanding shares of Allscripts' Series A, B, C, D, F and G
Convertible Preferred Stock converted into a total of 2,977,483 shares of common
stock in accordance with the terms of each series of preferred stock. Also upon
the closing of the offering, all outstanding shares of Allscripts' Series H, I
and J Redeemable Preferred Stock were redeemed by Allscripts.
On May 12, 1999, Allscripts issued an aggregate of 117,500 shares of
common stock 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, Allscripts issued a promissory note in the
principal amount of $650,000, bearing interest at an annual rate of 6%, 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. Upon the closing of
the 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' Inc. (Illinois), in exchange
for such holders' shares of common stock of Allscripts, Inc. (Illinois).
Exemption from registration is claimed pursuant to Section 3(a)(9) of the
Securities Act.
Item 4. Submission of Matters to a Vote of Security Holders.
Pursuant to a written consent of the stockholders of Allscripts dated
June 18, 1999, the stockholders of Allscripts approved the following matters,
all of which were reflected in Allscripts' Registration Statement on Form S-1 or
filed as exhibits thereto:
(a) The amendment of the Amended and Restated Articles of Incorporation of
Allscripts, Inc., an Illinois corporation, to (i) effect a one-for-six
reverse split of Allscripts, Inc. (Illinois) common stock and (ii)
provide Allscripts, Inc. (Illinois) with the option to redeem all or
part of its outstanding Series H Superior Senior Redeemable Preferred
Stock, $1.00 par value, and Series J Super Superior Senior Redeemable
Preferred Stock, $1.00 par value, upon the consummation of the initial
public offering.
(b) The amendment and restatement of the Amended and Restated 1993 Stock
Incentive Plan to, among other things, increase the number of shares
of common stock authorized for issuance under the Plan by 1,300,000 to
4,393,489 shares (giving effect to the reverse stock split described
above).
(c) The reincorporation of Allscripts, Inc. (Illinois), in the State of
Delaware through the merger of Allscripts, Inc. (Illinois) into
Allscripts, Inc., a Delaware corporation and a wholly owned subsidiary
of Allscripts, Inc. (Illinois).
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - See Index to Exhibits.
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed during the quarter ended June 30,
1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: September 3, 1999 ALLSCRIPTS, INC.
-------------------------- (Registrant)
By: /s/ David B. Mullen
-------------------------------------
David B. Mullen
President and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
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INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
3.1 Amended and Restated Certificate of Incorporation of Allscripts
3.2 By-Laws of Allscripts
27.1 Financial Data Schedule
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EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ALLSCRIPTS, INC.
(Incorporated in Delaware on July 13, 1999)
ALLSCRIPTS, INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: Pursuant to Section 245(b) and 242 of the General Corporation Law
of the State of Delaware (the "Delaware Law"), the Certificate of Incorporation,
as amended, of ALLSCRIPTS, INC., a Delaware corporation (the "Corporation") is
hereby amended and restated to read in its entirety as follows:
"AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
FIRST: The name of the corporation is Allscripts, Inc.
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of the Corporation's registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business and the objects and purposes to be
conducted or promoted by the Corporation are to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH:
1. Authorized Shares. The total number of shares of stock of all classes
which the Corporation shall have authority to issue is seventy-six million
(76,000,000), of which one million (1,000,000) shall be shares of Preferred
Stock with a par value of $0.01 per share ("Preferred Stock"), and seventy-five
million (75,000,000) shall be shares of Common Stock with a par value of $0.01
per share ("Common Stock").
2. Preferred Stock.
(a) The Preferred Stock shall be issuable in series, and in connection with
the issuance of any series of Preferred Stock and to the extent now or hereafter
permitted by the laws of the State of Delaware, the Board of Directors is
authorized to fix by resolution the designation of each series, the stated value
of the shares of each series, the dividend rate or rates of each series (which
rate or rates may be expressed in terms of a formula or other method by which
such rate or rates shall be calculated from time to time) and the date or dates
and other provisions respecting the payment of dividends, the provisions, if
any, for a sinking fund for the shares of each series, the preferences of the
shares of each series in the event of the liquidation or dissolution of the
Corporation, the provisions, if any, respecting the redemption of the shares of
each series and, subject to requirements of the laws of the State of Delaware,
the voting rights (except that such shares shall not have more than one vote per
share), the terms, if any, upon which the shares of each series shall be
convertible into or exchangeable for any other
<PAGE>
shares of stock of the Corporation and any other relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, of the shares of each series.
(b) Preferred Stock of any series redeemed, converted, exchanged,
purchased, or otherwise acquired by the Corporation shall constitute authorized
but unissued Preferred Stock.
(c) All shares of any series of Preferred Stock, as between themselves,
shall rank equally and be identical (except that such shares may have different
dividend provisions); and all series of Preferred Stock, as between themselves,
shall rank equally and be identical except as set forth in resolutions of the
Board of Directors authorizing the issuance of such series.
3. Common Stock.
(a) After dividends to which the holders of Preferred Stock may then be
entitled under the resolutions creating any series thereof have been declared
and after the Corporation shall have set apart the amounts required pursuant to
such resolutions for the purchase or redemption of any series of Preferred
Stock, the holders of Common Stock shall be entitled to have dividends declared
in cash, property, or other securities of the Corporation out of any net profits
or net assets of the Corporation legally available therefor, if, as and when
such dividends are declared by the Corporation's Board of Directors.
(b) In the event of the liquidation or dissolution of the Corporation's
business and after the holders of Preferred Stock shall have received amounts to
which they are entitled under the resolutions creating such series, the holders
of Common Stock shall be entitled to receive ratably the balance of the
Corporation's net assets available for distribution.
(c) Each share of Common Stock shall be entitled to one vote upon all
matters upon which stockholders have the right to vote, but shall not be
entitled to vote for the election of any directors who may be elected by vote of
the Preferred Stock voting as a class if so provided in the resolution creating
such Preferred Stock pursuant to Section 2(a) of this Article FOURTH.
4. Preemptive Rights. No holder of any shares of the Corporation shall
have any preemptive right to subscribe for or to acquire any additional shares
of the Corporation of the same or of any other class whether now or hereafter
authorized or any options or warrants giving the right to purchase any such
shares, or any bonds, notes, debentures or other obligations convertible into
any such shares.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The private property of the stockholders shall not be subject to
the payment of corporate debts to any extent whatever.
SEVENTH: Except as may otherwise be fixed by resolution of the Board of
Directors pursuant to the provisions of Article FOURTH hereof relating to the
rights of the holders of Preferred Stock to elect directors as a class, the
number of directors of the Corporation shall be fixed from time to time by or
pursuant to the By-Laws of the Corporation. The directors, other than those who
may be elected by the holders of Preferred Stock, shall be classified, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as possible. The first class shall be initially elected
for a term expiring at the next ensuing annual meeting, the second class shall
be initially elected for a term expiring one year thereafter, and the third
class shall be elected for a term expiring two
-2-
<PAGE>
years thereafter, with each member of each class to hold office until his
successor is elected and qualified. At each annual meeting of the stockholders
of the Corporation held after the initial classification and election of
directors, the successors of the class of directors whose term expires at that
meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election.
Advance notice of stockholder nominations for the election of directors
shall be given in the manner provided in the By-Laws of the Corporation.
Except as may otherwise be fixed by resolution of the Board of Directors
pursuant to the provisions of Article FOURTH hereof relating to the rights of
the holders of Preferred Stock to elect directors as a class, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or any other cause shall be filled by the affirmative
vote of a majority of the remaining directors then in office, even though less
than a quorum of the Board of Directors. Any director elected in accordance
with the preceding sentence shall hold office for the remainder of the full term
of the class of directors in which the new directorship was created (subject to
the requirements of this Article SEVENTH that all classes be as nearly equal in
number as possible) or in which the vacancy occurred and until such director's
successor shall have been elected and qualified. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of an
incumbent director.
Subject to any rights of the holders of Preferred Stock to elect directors
as a class, a director may be removed only for cause and only by the affirmative
vote of the holders of 80% of the combined voting power of the then outstanding
shares of stock entitled to vote generally in the election of directors, voting
together as a single class.
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized:
1. To adopt, amend and repeal the By-Laws of the Corporation. Any By-Laws
adopted by the directors under the powers conferred hereby may be amended
or repealed by the directors or by the stockholders. Notwithstanding the
foregoing or any other provision in this Certificate of Incorporation or
the By-Laws of the Corporation to the contrary, Article II, Sections 3 and
7 and Article III, Sections 1, 2 and 3 of the By-Laws shall not be amended
or repealed and no provision inconsistent therewith shall be adopted
without the affirmative vote of the holders of at least 80% of the voting
power of all the shares of the Corporation entitled to vote generally in
the election of directors, voting together as a single class.
2. To fix and determine, and to vary the amount of, the working capital of
the Corporation, and to determine the use or investment of any assets of
the Corporation, to set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose and to
abolish any such reserve or reserves.
3. To authorize the purchase or other acquisition of shares of stock of
the Corporation or any of its bonds, debentures, notes, scrip, warrants or
other securities or evidence of indebtedness.
4. Except as otherwise provided by law, to determine the places within or
without the State of Delaware, where any or all of the books of the
Corporation shall be kept.
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5. To authorize the sale, lease or other disposition of any part or parts
of the properties of the Corporation and to cease to conduct the business
connected therewith or again to resume the same, as it may deem best.
6. To authorize the borrowing of money, the issuance of bonds, debentures
and other obligations or evidences of indebtedness of the Corporation,
secured or unsecured, and the inclusion of provisions as to redeemability
and convertibility into shares of stock of the Corporation or otherwise;
and the mortgaging or pledging, as security for money borrowed or bonds,
notes, debentures or other obligations issued by the Corporation, of any
property of the Corporation, real or personal, then owned or thereafter
acquired by the Corporation.
7. To authorize the negotiation and execution on behalf of the Corporation
of agreements with officers and other employees of the corporation relating
to the payment of severance compensation to such officers or employees.
In addition to the powers and authorities herein or by statute expressly
conferred upon it, the Board of Directors may exercise all such powers and do
all such acts and things as may be exercised or done by the Corporation,
subject, nevertheless, to the provisions of the laws of the State of Delaware,
of this Certificate of Incorporation and of the By-Laws of the Corporation.
Subject to any limitation in the By-Laws, the members of the Board of
Directors shall be entitled to reasonable fees, salaries, or other compensation
for their services, as determined from time to time by the Board of Directors,
and to reimbursement for their expenses as such members. Nothing herein
contained shall preclude any director from serving the Corporation or its
subsidiaries or affiliates in any other capacity and receiving compensation
therefor.
Notwithstanding anything contained in this Amended and Restated Certificate
of Incorporation to the contrary, the affirmative vote of the holders of at
least 80% of the voting power of all shares of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to alter, amend, adopt any provision inconsistent with or repeal
this Article SEVENTH.
EIGHTH: Both stockholders and directors shall have power, if the By-Laws
so provide, to hold their meetings and to have one or more offices within or
without the State of Delaware.
Except as may otherwise be fixed by resolution of the Board of Directors
pursuant to the provisions of Article FOURTH hereof relating to the rights of
the holders of Preferred Stock, any action required or permitted to be taken by
the stockholders of the Corporation may be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in
writing by such holders. Except as otherwise required by law and subject to the
rights of the holders of Preferred Stock, special meetings of stockholders may
be called only by the Chairman, if any, on his own initiative, the President on
his own initiative or by the Board of Directors pursuant to a resolution
approved by a majority of the entire Board of Directors. Notwithstanding
anything contained in this Amended and Restated Certificate of Incorporation to
the contrary, the affirmative vote of the holders of at least 80% of the voting
power of all shares of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
alter, amend, adopt any provision inconsistent with or repeal this Article
EIGHTH.
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NINTH: Except as otherwise provided in this Amended and Restated
Certificate of Incorporation, the Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Amended and Restated
Certificate of Incorporation in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.
TENTH:
(a) A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. If the General Corporation Law of the State of
Delaware, or any other applicable law, is amended to authorize corporation
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the General Corporation Law of the State of
Delaware, or any other applicable law, as so amended. Any repeal or
modification of this Section (a) by the stockholders of the Corporation shall
not adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
(b) (1) Each person who has or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she or a person of whom he or she is the legal
representative is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer or employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is an alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the General Corporation Law
of the State of Delaware, or any other applicable law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that except
as provided in paragraph (2) of this Section (b) with respect to proceedings
seeking to enforce rights to indemnification, the Corporation shall indemnify
any such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section (b) shall be a contract right and
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that if the General Corporation Law of the State of Delaware, or any
other applicable law, requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding shall be made
only upon delivery to the Corporation of an undertaking by or on behalf of such
director or officer to repay all
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amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section (b) or otherwise.
(2) If a claim under paragraph (1) of this Section (b) is not paid in full
by the Corporation within thirty days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standard of conduct which make it permissible under the General
Corporation Law of the State of Delaware, or any other applicable law, for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, stockholders or independent legal
counsel) to have made a determination prior to the commencement of such action
that indemnification of the claimant is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in the General
Corporation Law of the State of Delaware, or any other applicable law, nor an
actual determination by the Corporation (including its Board of Directors,
stockholders or independent legal counsel) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
(3) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Section (b) shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, provision of this Certificate of
Incorporation, By-Law, agreement, vote of stockholders or disinterested
directors or otherwise.
(4) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware, or any other
applicable law.
(5) The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification, and rights to be paid by
the Corporation the expenses incurred in defending any proceeding in advance of
its final disposition, to any employee or agent of the Corporation to the
fullest extent of the provisions of this Section (b) with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
(6) Any repeal or modification of this Section (b) by the stockholders of
the Corporation shall not adversely affect any right or protection of a
director, officer, employee or agent of the Corporation existing at the time of
such repeal or modification.
ELEVENTH: In determining whether an "Acquisition Proposal" is in the best
interests of the Corporation and its stockholders, the Board of Directors may,
to the extent permitted by law, consider all factors it deems relevant
including, without limitation, the following:
(a) The consideration being offered in the Acquisition Proposal, not only
in relation to the then current market price, but also in relation to the then
current value of the Corporation in a freely negotiated transaction and in
relation to the Board of Directors' estimate of the future value of the
Corporation as an independent entity; and
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(b) Such other factors the Board of Directors determines to be relevant,
including among others the social, legal and economic effects upon employees,
suppliers, customers and the communities in which the Corporation is located, as
well as on the long term business prospects of the Corporation.
"Acquisition Proposal" means any proposal of any person (i) for a tender
offer, exchange offer or any other method of acquiring any equity securities of
the Corporation with a view to acquiring control of the Corporation, (ii) to
merge or consolidate the Corporation with another corporation, or (iii) to
purchase or otherwise acquire all or substantially all of the properties and
assets of the Corporation.
This Article ELEVENTH shall not be interpreted to create any rights on
behalf of third persons, such as employees, suppliers, or customers.
TWELFTH: The Corporation has elected to be governed by Section 203 of the
General Corporation Law of Delaware."
SECOND: The Board of Directors of the Corporation, by unanimous written
consent, duly adopted resolutions proposing and approving the Amended and
Restated Certificate of Incorporation of the Corporation and directing that such
Amended and Restated Certificate of Incorporation be submitted to the
stockholder of the Corporation to consider and adopt the same.
THIRD: Pursuant to Section 211 of the Delaware Law, the adoption of the
Amended and Restated Certificate of Incorporation was consented to at a meeting
by the holder of the voting power of all shares of capital stock of the
Corporation entitled to vote thereon.
FOURTH: The Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, ALLSCRIPTS, INC. has caused this Certificate to be
signed by its Secretary and Treasurer this 21st day of July, 1999.
ALLSCRIPTS, INC.
By: /s/ John G. Cull
____________________________
John G. Cull,
Secretary and Treasurer
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EXHIBIT 3.2
BY-LAWS
OF
ALLSCRIPTS, INC.
(A Delaware Corporation)
ARTICLE I.
Offices
Section 1. The registered office of Allscripts, Inc. (the "Corporation")
shall be in Wilmington, New Castle County, Delaware.
Section 2. The Corporation shall have its principal office at 2401
Commerce Drive, Libertyville, Illinois, and it may also have offices at such
other places as the board of directors may from time to time determine.
ARTICLE II
Stockholders
Section 1. Annual Meeting. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on such date as the board of
directors shall fix each year. At an annual meeting of stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be (a)
specified in the notice of meeting, or any supplement thereto, given by or at
the direction of the board of directors, (b) otherwise properly brought before
the meeting by or at the direction of the board of directors, or (c) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the secretary of the Corporation
not less than one hundred and twenty (120) days prior to the meeting nor more
than one hundred and fifty (150) days prior to the meeting. A stockholder's
notice to the secretary of the Corporation shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting, (b) the name
and address, as they appear on the Corporation's stockholder records, of the
stockholder proposing such business, (c) the class and number of shares of the
Corporation which are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. Irrespective of anything
in these by-laws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this Section 1.
The presiding officer of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 1, and if
it is so determined, shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
Section 2. Special Meetings. Special meetings of the stockholders may be
called only by the chairman, the president or the board of directors pursuant to
a resolution approved by a majority of the entire board of directors.
<PAGE>
Section 3. Stockholder Action; How Taken. Any action required or
permitted to be taken by the stockholders of the Corporation must be effected at
a duly called annual or special meeting of such holders and may not be effected
by any consent in writing by such holders.
Section 4. Place of Meeting. The board of directors may designate any
place, either within or without Delaware, as the place of meeting for any annual
or special meeting. In the absence of any such designation, the place of
meeting shall be the principal office of the Corporation designated in Section 2
of Article I of these by-laws.
Section 5. Notice of Meetings. Written or printed notice stating the
place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten nor more than sixty days before the date of the meeting, or in the case
of a merger or consolidation, not less than twenty nor more than fifty days
before the date of the meeting, either personally or by mail, by or at the
direction of the chairman or the president, or the secretary, or the officer or
persons calling the meeting, to each stockholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mails in a sealed envelope addressed to the
stockholder at his address as it appears on the records of the Corporation with
postage thereon prepaid.
Section 6. Record Date. For the purpose of determining (a) stockholders
entitled to notice of or to vote at any meeting of stockholders, or (b)
stockholders entitled to receive payment of any dividend, or (c) stockholders
for any other purpose, the board of directors may fix in advance a date as the
record date for any such determination of stockholders, such date in any case to
be not more than sixty days and not less than ten days, or in the case of a
merger or consolidation not less than twenty days, prior to the date on which
the particular action requiring such determination of stockholders is to be
taken.
Section 7. Quorum. The holders of not less than one-third of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute, by the certificate of incorporation or by these by-laws.
If, however, such quorum shall not be present or represented at any meeting of
the stockholders, the chairman of the meeting shall have the power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes or of the certificate of
incorporation or of these by-laws, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 8. Qualification of Voters. The board of directors may fix a day
and hour not more than sixty nor less than ten days prior to the day of holding
any meeting of stockholders as the time as of which the stockholders entitled to
notice of and to vote at such a meeting shall be determined. Only those persons
who were holders of record of voting stock at such time shall be entitled to
notice of and to vote at such meeting.
Section 9. Procedure. The order of business and all other matters of
procedure at every meeting of stockholders shall be determined by the chairman
of the meeting. The board of directors shall
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appoint two or more inspectors of election to serve at every meeting of
stockholders at which directors are to be elected.
ARTICLE III.
Directors
Section 1. Number, Election and Terms. Except as otherwise fixed pursuant
to the provisions of Article Fourth of the certificate of incorporation relating
to the rights of the holders of any class or series of stock having a preference
over the common stock as to dividends or upon liquidation to elect additional
directors under specified circumstances, the number of directors shall be a
minimum of three and fixed from time to time by the board of directors. The
directors, other than those who may be elected by the holders of any class or
series of stock having a preference over the common stock as to dividends or
upon liquidation, shall be classified, with respect to the time for which they
severally hold office, into three classes, as near equal in number as possible,
as determined by the board of directors, one class to hold office initially for
a term expiring at the annual meeting of stockholders to be held in 2000,
another class to hold office initially for a term expiring at the annual meeting
of stockholders to be held in 2001 and another class to hold office initially
for a term expiring at the annual meeting of stockholders to be held in 2002,
with the members of each class to hold office until their successors are elected
and qualified. At each annual meeting of stockholders, the successors of the
class of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election.
The term the "entire board" as used in these by-laws means the total number
of directors which the Corporation would have if there were no vacancies.
Subject to the rights of holders of any class or series of stock having a
preference over the common stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the board of directors
or a committee appointed by the board of directors or by any stockholder
entitled to vote in the election of directors generally. However, any
stockholder entitled to vote in the election of directors generally may nominate
one or more persons for election as directors at a meeting only if written
notice of such stockholder's intent to make such nomination or nominations has
been given, either by personal delivery or by United States mail, postage
prepaid, to the secretary of the Corporation not later than (a) with respect to
an election to be held at an annual meeting of stockholders, one hundred twenty
(120) days nor earlier than one hundred fifty (150) days prior to the
anniversary date of the immediately preceding annual meeting, and (b) with
respect to an election to be held at a special meeting of stockholders for the
election of directors, the close of business on the tenth day following the date
on which notice of such meeting is first given to stockholders. Each such
notice shall set forth: (a) the name and address of the stockholder who intends
to make the nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons, naming such person
or persons, pursuant to which the nomination or nominations are to be made by
the stockholder; (d) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission; and (e)
the consent of each nominee to serve as a director of the Corporation if so
elected. The chairman of the meeting may refuse to acknowledge the nomination
of any person not made in compliance with the foregoing procedure.
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Section 2. Newly Created Directorships and Vacancies. Except as otherwise
fixed pursuant to the provisions of Article Fourth of the certificate of
incorporation relating to the rights of the holders of any class or series of
stock having a preference over the common stock as to dividends or upon
liquidation to elect directors under specified circumstances, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the board of directors resulting from death, resignation,
disqualification, removal or other cause shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the board of directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors to which such director's predecessor
shall have been elected and qualified. No decrease in the number of directors
constituting the board of directors shall shorten the term of any incumbent
director.
Section 3. Removal. Subject to the rights of any class or series of stock
having a preference over the common stock as to dividends or upon liquidation to
elect directors under specified circumstances, any director may be removed from
office only for cause and only by the affirmative vote of the holders of 80% of
the combined voting power of the then outstanding shares of stock entitled to
vote generally in the election of directors, voting together as a single class.
Section 4. Regular Meetings. Regular meetings of the board of directors
shall be held at such times and place as the board of directors may from time to
time determine.
Section 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the chairman or the president or by an
officer of the Corporation upon the request of a majority of the entire board.
The person or persons authorized to call special meetings of the board of
directors may fix any place, either within or without Delaware, as the place for
holding any special meeting of the board of directors called by them.
Section 6. Notice. Notice of regular meetings of the board of directors
need not be given. Notice of every special meeting of the board of directors
shall be given to each director at his usual place of business, or at such other
address as shall have been furnished by him for the purpose. Such notice shall
be given at least twenty-four hours before the meeting by telephone, by personal
delivery, by commercial courier, by mail or by facsimile transmission. Such
notice need not include a statement of the business to be transacted at, or the
purpose of, any such meeting.
Section 7. Quorum. A majority of the entire Board shall constitute a
quorum for the transaction of business at any meeting of the board of directors,
provided, that if less than a majority of the entire board is present at said
meeting, a majority of the directors present may adjourn the meeting from time
to time until a quorum is obtained without further notice. The act of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the board of directors unless the act of a greater number is
required by the certificate of incorporation or the by-laws of the Corporation.
Section 8. Compensation. Directors who are also full time employees of
the Corporation shall not receive any compensation for their services as
directors but they may be reimbursed for reasonable expenses of attendance. By
resolution of the board of directors, all other directors may receive either an
annual fee or a fee for each meeting attended, or both, and expenses of
attendance, if any, at each regular or special meeting of the board of directors
or of a committee of the board of directors; provided, that nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
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Section 9. Committees. The board of directors may, by resolution passed
by a majority of the entire board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation, which,
to the extent provided in the resolution, shall have and may exercise the powers
of the board of directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
board of directors. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
Section 10. Director Emeritus. The Board of Directors may by resolution
appoint any former director who has retired from the Board of Directors as a
Director Emeritus. Directors Emeritus may, but are not required to, attend all
meetings (regular and special) of the Board of Directors and will receive notice
of such meetings; however, they shall not have the right to vote and they shall
be excluded from the number of directors for quorum and other purposes.
Directors Emeritus shall be appointed for one year terms and may be reappointed
for up to two additional one year terms.
ARTICLE IV.
Officers
Section 1. Number. The officers of the Corporation shall be a chairman, a
vice-chairman (if elected by the board of directors), a president, an executive
vice president (if elected by the board of directors), one or more vice
presidents (the number thereof to be determined by the board of directors), a
treasurer, a secretary and such other officers as may be elected in accordance
with the provisions of this Article.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the board of directors at the first meeting of the
board of directors held after each annual meeting of stockholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as convenient. Vacancies may be filled or new offices
created and filled at any meeting of the board of directors. Each officer shall
hold office until his successor shall have been duly elected and shall have
qualified or until his death or until he shall resign or shall have been removed
in the manner hereinafter provided.
Section 3. Removal. Any officer or agent elected or appointed by the
board of directors may be removed by the board of directors whenever in its
judgment the best interests of the Corporation would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
Section 5. Chairman. The chairman shall preside at all meetings of the
stockholders and the board of directors. If so appointed by the board of
directors he shall be the chief executive officer of the Corporation and shall
have those duties and responsibilities described in Section 8 of this Article.
He shall perform such other duties as may be prescribed by the board of
directors.
Section 6. Vice-Chairman. The vice-chairman (if elected by the board of
directors) shall, in the absence of the chairman, preside at all meetings of the
stockholders and the board of directors. If so appointed by the board of
directors he shall be the chief executive officer and shall have those duties
and
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responsibilities described in Section 8 of this Article. He shall perform such
other duties as may be prescribed by the board of directors and by the chief
executive officer if he does not have that position.
Section 7. President. The president shall in general be in charge of all
operations of the Corporation and shall direct and administer the activities of
the Corporation in accordance with the policies, goals and objectives
established by the chief executive officer and the board of directors. In the
absence of the chief executive officer, the president shall assume his duties
and responsibilities. In the absence of the chairman and vice-chairman he shall
preside at all meetings of the stockholders and board of directors. He shall
perform such other duties as may be prescribed by the board of directors and
chief executive officer if he does not have that position.
Section 8. Chief Executive Officer. The chief executive officer of the
Corporation shall be either the chairman, the vice-chairman or the president as
determined by the board of directors. The chief executive officer shall provide
overall direction and administration of the business of the Corporation, he
shall interpret and apply the policies of the board of directors, establish
basic policies within which the various corporate activities are carried out,
guide and develop long range planning and evaluate activities in terms of
objectives. He may sign (with the secretary or any other proper officer of the
Corporation thereunto authorized by the board of directors, if such additional
signature is necessary under the terms of the instrument document being executed
or under applicable law, stock certificates of the Corporation, any deeds,
mortgages, bonds, contracts, or other instruments except in cases where the
signing and execution thereof shall be required by law to be otherwise signed or
executed, and he may execute proxies on behalf of the Corporation with respect
to the voting of any shares of stock owned by the Corporation. He shall have
the power to (1) designate management committees of employees deemed essential
in the operations of the Corporation, its divisions or subsidiaries, and appoint
members thereof, subject to the approval of the board of directors; (2) appoint
certain employees of the Corporation as vice presidents of one or several
divisions or operations of the Corporation, subject to the approval of the board
of directors, provided however, that any vice president so appointed shall not
be an officer of the Corporation for any other purpose; and (3) appoint such
other agents and employees as in his judgment may be necessary or proper for the
transaction of the business of the Corporation and in general shall perform all
duties incident to the office of chief executive.
Section 9. Executive Vice President. The executive vice president (if
elected by the board of directors) shall report to either the chief executive
officer or the president as determined in the corporate organization plan
established by the board of directors. He shall direct and coordinate such
major activities as shall be delegated to him by his superior officer in
accordance with policies established and instructions issued by his superior
officer, the chief executive officer, or the board of directors.
Section 10. Vice President. The board of directors may elect one or
several vice presidents. Each vice president shall report to either the chief
executive officer, the chief operating officer or the executive vice president
as determined in the corporate organization plan established by the board of
directors. Each vice president shall perform such duties as may be delegated to
him by his superior officers and in accordance with the policies established and
instructions issued by his superior officer, the chief executive officer or the
board of directors. The board of directors may designate any vice president as
a senior vice president and a senior vice president shall be senior to all other
vice presidents and junior to the executive vice president. In the event there
is more than one senior vice president, then seniority shall be determined by
and be the same as the annual order in which their names are presented to and
acted on by the board of directors.
Section 11. The Treasurer. The treasurer shall (a) have charge and
custody of and be responsible for all funds and securities of the Corporation;
receive and give receipts for moneys due and payable to the Corporation from any
source whatsoever, and deposit all such moneys in the name of the
6
<PAGE>
Corporation in such banks, trust companies or other depositories as shall be
selected by the Corporation; (b) in general perform all the duties incident to
the office of treasurer and such other duties as from time to time may be
assigned to him by the chief executive officer, chief operating officer or by
the board of directors. If required by the board of directors, the treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the board of directors shall determine.
Section 12. The Assistant Treasurer. The assistant treasurer (or, if more
than one, the assistant treasurers) shall, in the absence or disability of the
treasurer, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
Section 13. The Secretary. The secretary shall: (a) keep the minutes of
the stockholders' and the board of directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these by-laws or as required by law; (c) be custodian of
the corporate records and of the seal of the Corporation and see that the seal
of the corporation is affixed to all stock certificates prior to the issue
thereof and to all documents, the execution of which on behalf of the
Corporation under its seal is duly authorized in accordance with the provisions
of these by-laws or as required by law; (d) be custodian of the corporate
records and of the seal of the Corporation and see that the seal of the
Corporation is affixed to all stock certificates prior to the issue thereof and
to all documents, the execution of which on behalf of the Corporation under its
seal is duly authorized in accordance with the provisions of these by-laws; (e)
keep a register of the post office address of each stockholder which shall be
furnished to the secretary by such stockholder; (f) sign with the chairman,
president, or a vice president, stock certificates of the Corporation, the issue
of which shall have been authorized by resolution of the board of directors; (g)
have general charge of the stock transfer books of the Corporation; (h) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the chief executive
officer, chief operating officer or by the board of directors.
Section 14. The Assistant Secretary. The assistant secretary (or, if more
than one, the assistant secretaries) shall in the absence or disability of the
secretary, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
ARTICLE V.
Fiscal Year
The fiscal year of the Corporation shall begin on the first day of January
in each year and end on the thirty-first day of December in each year.
ARTICLE VI.
Seal
The board of directors shall provide a corporate seal which shall be in the
form of a circle and shall have inscribed thereon the name of the Corporation
and the words "Corporate Seal, Delaware".
7
<PAGE>
ARTICLE VII.
Waiver of Notice
Whenever any notice whatsoever is required to be given under the provisions
of these by-laws or under the provisions of the certificate of incorporation or
under the provisions of the laws of the state of Delaware, waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
ARTICLE VIII.
Amendments
Subject to the provisions of the certificate of incorporation, these by-
laws may be altered, amended or repealed at any regular meeting of the
stockholders, or at any special meeting of stockholders duly called for that
purpose, by a majority vote of the shares represented and entitled to vote at
such meeting; provided that in the notice of such special meeting notice of such
purpose shall be given. Subject to the laws of the State of Delaware, the
certificate of incorporation and these by-laws, the board of directors may by a
majority vote of those present at any meeting at which a quorum is present amend
these by-laws, or enact such other by-laws as in their judgment may be advisable
for the regulation of the conduct of the affairs of the Corporation.
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
condensed consolidated financial statements of Allscripts, Inc. as of and for
the six months ended June 30, 1999 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,947
<SECURITIES> 0
<RECEIVABLES> 8,130
<ALLOWANCES> 4,500
<INVENTORY> 2,925
<CURRENT-ASSETS> 11,652
<PP&E> 6,728
<DEPRECIATION> 4,819
<TOTAL-ASSETS> 17,207
<CURRENT-LIABILITIES> 12,008
<BONDS> 59
33,945
8,719
<COMMON> 90
<OTHER-SE> (37,614)
<TOTAL-LIABILITY-AND-EQUITY> 17,207
<SALES> 12,420
<TOTAL-REVENUES> 12,420
<CGS> 9,709
<TOTAL-COSTS> 9,709
<OTHER-EXPENSES> 8,372
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 200
<INCOME-PRETAX> (5,861)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,861)
<DISCONTINUED> 3,574
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,287)
<EPS-BASIC> (0.43)
<EPS-DILUTED> (0.43)
</TABLE>
