-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SP9LaId9OhhlR+LCQAQSBEtLuZTEzhGjavCK0O60bjIBENcU48pTxKLm6mB3eNK6 E365yoBvio8pnMs5b7q+ng== 0000950131-99-005194.txt : 19990906 0000950131-99-005194.hdr.sgml : 19990906 ACCESSION NUMBER: 0000950131-99-005194 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLSCRIPTS INC /IL CENTRAL INDEX KEY: 0001061377 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 363444974 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26537 FILM NUMBER: 99706454 BUSINESS ADDRESS: STREET 1: 2401 COMMERCE DRIVE STREET 2: 847-680-3515 CITY: LIBERTYVILLE STATE: IL ZIP: 60048 BUSINESS PHONE: 8476803515 MAIL ADDRESS: STREET 1: ALLSCRIPTS INC STREET 2: 2401 COMMERCE DR CITY: LIBERTYVILLE STATE: IL ZIP: 60048 10-Q 1 FORM 10-Q 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. ALLSCRIPTS, INC. FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION PAGE ---- 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
PART I FINANCIAL INFORMATION Item 1. Financial Statements. ALLSCRIPTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1999 (Unaudited) December 31, ---------------------------------- 1998 Actual Pro Forma ---- ------ --------- 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 ============= ============= =============
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 1
ALLSCRIPTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED June 30, 1999 (Unaudited) December 31, ----------------------------- 1999 Actual Pro Forma ----- ------ --------- LIABILITIES Current liabilities: 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 ============ ============ ============
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 2
ALLSCRIPTS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Six Months Ended June 30, June 30, --------------------------- --------------------------- 1998 1999 1998 1999 ----------- ----------- ----------- ----------- 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 =========== ===========
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 3 ALLSCRIPTS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, ---------------------------- 1998 1999 ----------- ------------ 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 =========== ===========
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 4 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
Six Months Ended June 30, -------------------- 1998 1999 ------- ------- 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) ======== ========
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 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:
Six Months Ended June 30, ----------------------------- 1998 1999 ------------ ------------ 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 ============ ============
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 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:
Quarter Ended ---------------------------------------------------------------------- 1998 1999 --------------------------------------------- -------------------- March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 -------- ------- -------- ------- -------- ------- (In thousands) 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 ====== ====== ====== ====== ====== ======
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 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 9 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 10 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 11 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. 12 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; 13 . $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). 14 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. 15 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) 16 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 17 EX-3.1 2 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION 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 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- 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. -3- 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. -4- 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 -5- 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 -6- (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 -7- EX-3.2 3 BY-LAWS OF ALLSCRIPTS 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. 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 2 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. 3 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. 4 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 5 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 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 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 EX-27.1 4 FINANCIAL DATA SCHEDULE
5 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. 1,000 6-MOS DEC-31-1998 JAN-01-1999 JUN-30-1999 4,947 0 8,130 4,500 2,925 11,652 6,728 4,819 17,207 12,008 59 33,945 8,719 90 (37,614) 17,207 12,420 12,420 9,709 9,709 8,372 0 200 (5,861) 0 (5,861) 3,574 0 0 (2,287) (0.43) (0.43)
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