UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-35547
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
36-4392754
(I.R.S. Employer
Identification No.)
222 Merchandise Mart Plaza, Suite 2024, Chicago, IL 60654
(Address of principal executive offices and zip code)
(800) 334-8534
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class:
Common Stock, par value $0.01 per share
Trading Symbol
MDRX
Name of Each Exchange on which Registered
The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
Emerging growth company
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant based upon the closing sale price of the common stock on
June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, was $1,078,860,200. Solely for purposes of this disclosure, shares of common
stock held by executive officers and directors of the registrant as of such date have been excluded because such persons may be deemed to be affiliates. This determination of
executive officers and directors as affiliates is not necessarily a conclusive determination for any other purposes.
As of February 22, 2021, there were 140,032,248 shares of the registrant’s common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement related to its 2021 annual meeting of stockholders (the “2021 Proxy Statement”) are incorporated by reference into Part
III of this Annual Report on Form 10-K where indicated. The 2021 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of
the fiscal year to which this report relates.
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
TABLE OF CONTENTS TO
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020
PART I
PART II
Item
1.
Business
1A. Risk Factors
1B.
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
2.
3.
4.
5.
6.
7.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
7A. Quantitative and Qualitative Disclosures About Market Risk
8.
9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
9A. Controls and Procedures
PART III
10.
Directors, Executive Officers and Corporate Governance
11.
Executive Compensation
12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
13.
Certain Relationships and Related Transactions and Director Independence
14.
Principal Accountant Fees and Services
15.
Exhibits and Financial Statement Schedules
16.
Form 10-K Summary
PART IV
2
Page
3
13
27
28
28
28
29
32
34
54
55
111
111
112
112
112
112
112
113
118
Each of the terms “we,” “us,” “our” or “company” as used herein refers collectively to Allscripts Healthcare Solutions, Inc. (“Allscripts”) and/or
its wholly-owned subsidiaries and controlled affiliates, unless otherwise stated.
The “Business” section, the “Risk Factors” section, the “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” section and other sections of this Annual Report on Form 10-K (this “Form 10-K”) contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the current beliefs and expectations of our
management with respect to future events and are subject to significant risks and uncertainties. Such statements can be identified by the use of words such
as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “continue,” “can,” “may”
and similar terms. Actual results could differ from those set forth in the forward-looking statements, and reported results should not be considered an
indication of future performance. Certain factors that could cause our actual results to differ materially from those described in the forward-looking
statements include, but are not limited to, those discussed in Part I, Item 1A, “Risk Factors” of this Form 10-K, which are incorporated herein by
reference. We do not undertake to update any forward-looking statements to reflect the impact of circumstances or events that may arise after the date of
the forward-looking statements for any reason, except as required by law.
Item 1. Business
PART I
We deliver information technology (“IT”) solutions and services to help healthcare organizations around the world achieve optimal clinical,
financial and operational results. Our solutions and services are sold to:
• Physician practices and specialty groups
• Hospitals
• Governments and militaries
• Health systems
• Health plans
• Life-sciences companies
• Retail clinics
• Surgery centers
• Retail pharmacies
• Pharmacy benefit managers
• Insurance companies
• Employer wellness clinics
• Post-acute organizations
• Consumers
• Lab companies
• Urgent care facilities
Our portfolio, which we believe offers some of the most comprehensive solutions in our industry today, helps clients advance the quality and
efficiency of healthcare by providing electronic health records (“EHR”), financial management, population health management, precision medicine and
consumer solutions. Built on an open integrated platform, our solutions enable users to streamline workflows, leverage functionality from other software
vendors and exchange data. The Allscripts Developer Program focuses on nurturing partnerships with other developers to help clients optimize the value of
their Allscripts investment.
Recent Business Developments
On October 13, 2020, Allscripts announced a definitive agreement to sell its CarePort Health business (“CarePort”) to WellSky Corp., in exchange
for $1.35 billion. CarePort solutions assist hundreds of hospitals and thousands of post-acute care providers to efficiently coordinate and transition patients
through different settings of care. The transaction closed on December 31, 2020. Prior to the sale, CarePort was part of the Data, Analytics and Care
Coordination reportable segment.
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On July 30, 2020, we announced a definitive agreement to sell the EPSiTM business (“EPSi”), a leading provider of financial decision support and
planning tools for hospitals and health systems, to Strata Decision Technology, in exchange for $365 million. The transaction closed on October 15, 2020.
Prior to the sale, EPSi was part of the Unallocated category as it did not meet the requirements to be a reportable segment nor the criteria to be aggregated
into our two reportable segments. As a result of each sale, and since both businesses were part of the same strategic initiative, were sold within the same
period and the combined sale of EPSi and CarePort represents a strategic shift that had a major effect on our operations and financial results, these
businesses are now reported together as discontinued operations for the years ended December 31, 2020, 2019 and 2018.
On July 13, 2020, Allscripts and Microsoft jointly announced the extension of their long-standing strategic alliance to enable the expanded
development and delivery of cloud-based health IT solutions. The five-year extension will support Allscripts’ cloud-based SunriseTM electronic health
record, making Microsoft the cloud provider for the solution and opening up co-innovation opportunities to help transform healthcare with smarter, more
scalable technology.
On January 13, 2020, we announced that we extended our engagement with our largest customer, Northwell Health, which is New York’s largest
health system. Our managed service business supports the organization’s infrastructure as well as our solutions and third-party applications. We also
provide comprehensive service desk support and application management services, as well as project delivery, strategic and leadership-planning activities.
Corporate Information
Founded in 1986, Allscripts is incorporated in Delaware with principal executive offices located at 222 Merchandise Mart Plaza, Suite 2024,
Chicago, Illinois 60654. Our principal website is www.allscripts.com. The contents of this website are not incorporated into this filing. Furthermore, our
references to the URLs for this website are intended to be inactive textual references only.
Solutions
Our portfolio addresses a range of healthcare industry needs, with the goal of enabling smarter care delivered with greater precision, for healthier
communities. Across care settings, our solutions enable clinical, financial and operational efficiencies while helping patients deepen their engagement in
their own care. Our principal solutions consist of the following:
Electronic Health Records
Allscripts offers a suite of EHRs for hospitals and health systems, as well as community and physician practices. Built on an open platform with
advanced clinical decision support, our EHRs provide analysis and insights. Our EHR solutions deliver a single patient record, workflows and consolidated
analytics. Our innovative solutions help deliver improved patient care and outcomes. Our EHR solutions consist of the following:
Sunrise™ is a comprehensive platform of health for hospitals and health systems. SunriseTM supports hospitals and health systems by delivering a
single patient record that supports inpatient and outpatient care and provides advanced decision guidance and supportive workflows for clinicians. Sunrise
provides mobile support for clinicians, delivering the power of innovative healthcare IT where they are.
The SunriseTM platform of health includes:
• Acute care
• Ambulatory care
• Emergency care
• Mobility solutions
• Pharmacy
• Radiology and enterprise wide viewer
• Surgical care
• Tissue management
• Anesthesia information management
• Laboratory information management
• Blood bank solutions
• Wound care
• Oncology care
• Rehabilitation care
• Financial management solutions
• Enterprise-wide registration and scheduling solutions
• Health information management and abstracting solutions
• Allscripts Go (integrated patient ride-share, transportation solution)
• Charge Logic (charge optimization for outpatient facilities)
• Supply chain and point-of-use supply solutions
• Clinical performance management analytics
• Surgical analytics, surgeon access and OR optimization solutions
• Patient Flow (patient throughput solution and census logic analytics)
• Infusion analytics
Paragon® is an integrated clinical, financial and administrative EHR solution tailored for community hospitals and health systems. The solution
supports the full scope of care delivery and business processes, from patient access management and accounting through clinical assessment,
documentation and treatment.
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Allscripts TouchWorks® EHR is an EHR solution for larger single and multispecialty practices and is built on an open platform that brings data
sources together. This open platform feature, along with the ability to customize workflows, enables clinical staff to effectively coordinate and deliver both
primary and specialized care. Functionality is also offered on mobile devices.
Allscripts Professional EHR™ is an EHR solution for small- to mid-size physician practices. Allscripts Professional EHRTM works in accountable
care organizations (“ACOs”), patient-centered medical homes and Federally Qualified Health Centers. The solution’s mobile offering, Allscripts
Professional EHRTM Mobile, provides on-the-go access to Allscripts Professional EHRTM, driving greater efficiency and improved patient care.
Practice Fusion is a cloud-based EHR and is an intuitive and easy-to-use solution for clinicians in small and independent practices. The solution
helps drive operational efficiencies with smart charting that adapts to each practice’s specific needs and enables patients to receive medications more
quickly. Practice Fusion also reduces administrative burdens by helping staff simplify front-office tasks and improve billing efficiency.
BOSSnet is an electronic document management solution that digitizes paper for our EHR customers and serves as a digital health record solution
for emerging markets with low digital maturity. The solution currently has a large customer base in Australia and is now expanding across other
geographies.
Payer and Life Sciences
Veradigm™ is the Allscripts payer and life science business unit which is an integrated data systems and services business that combines data-
driven clinical insights with actionable tools that reside in clinical workflow. VeradigmTM provides solutions to their client base which help key healthcare
stakeholders improve the quality, efficiency and value of healthcare delivery - including biopharma, health plans, healthcare providers, health technology
partners, and most importantly, the patients they serve.
Consumer Solutions
FollowMyHealth® is a comprehensive patient engagement platform with options for telehealth and remote patient monitoring. This patient
engagement platform serves as the foundation for emerging consumer health initiatives, including automated secure messaging.
Financial Management
Allscripts financial solutions support revenue cycle, claims management, budgeting and analytic functions for healthcare organizations. These tools
can help change clinician behavior to improve patient flow, increase quality, advance outcomes, optimize referral networks, decrease leakage and reduce
costs. Plus, our solutions allow our clients to extract the data needed to support new reimbursement models. Offerings include:
• Sunrise™ Financial Manager
• Sunrise™ Abstracting
• STAR
• Allscripts Revenue Cycle Management Services
Population Health Management
Allscripts provides robust, community-connected population health solutions that enable and deliver care coordination, connectivity, data
aggregation and analytics.
• Allscripts care coordination solutions include Allscripts® Care Director, dbMotion™ and chronic care management services.
• Our connectivity and data aggregation solutions include the dbMotion™ Solution and dbMotion™ Community powered by OnePartner.
• Allscripts Clinical Performance Management enables healthcare organizations to measure performance and outcomes, analyze utilization, manage
risk, reduce cost and improve quality across the continuum of care.
Services
In addition to our solutions, Allscripts offers customizable professional and managed service offerings. From hosting, consulting, optimization and
managed IT services to revenue cycle services for practices, Allscripts partners with clients to meet their goals.
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Our Strategy
Our strategy is built upon our vision of enabling smarter care at virtually every point of the healthcare continuum. Given the breadth of our
portfolio and global client base, we are well positioned to connect providers to patients and payers across all healthcare settings. Smarter care is a strategic
imperative for healthcare organizations globally and requires a balance between managing cost while maintaining the highest quality of care. Our solutions
are positioned to facilitate the transformation in healthcare delivery by connecting communities, driving interoperability, providing data analytics,
delivering consumer engagement features and assisting clients manage the evolution toward value-based care. These key strategic areas all help healthcare
providers better manage populations of patients, especially those with costly chronic conditions, such as diabetes, asthma and heart disease, to help bring
down the cost of care and improve patient outcomes.
•
•
•
•
•
Connecting communities – Our care coordination solutions improve safety and quality as a patient transitions from one care setting to
another. To do so, care coordination solutions help build assessments, monitor results, track outcomes and make modifications in a patient’s
care plan. Healthcare is a group effort and having full visibility into a patient’s care plan is critical. Access to comprehensive patient
information is key, and our community solutions help create an organized, longitudinal patient record spanning all points of care.
Interoperability – We provide clients a wide array of interoperability tools to support their need and desire to connect to numerous
stakeholders in the industry, including other healthcare providers, labs, imaging facilities, public health entities and patients, as well as other
third-party technology providers. Allscripts open platform is proven, scalable and user-friendly, and connects both clinical and financial data
across every setting. We also offer Application Programming Interfaces (“APIs”) based on the Fast Healthcare Interoperability Resources.
With this platform, clients can connect to any certified application or device, which saves time and money and gives clients full access to a
variety of innovative solutions.
Data analytics – Allscripts understands that healthcare organizations need to analyze dependencies, trends and patterns so that they can
develop business and clinical intelligence. Our analytics offerings help organizations better manage their patient populations by using clean
data for better decisions at the point of care. Insights and analytics serve as the foundation for informed analysis and effective planning.
Consumer engagement – Our patient engagement software helps healthcare organizations achieve better outcomes, reduce emergency room
visits and decrease hospitalizations. Our solutions also integrate with health IT offerings across an organization, regardless of a provider’s
chosen vendor. With a patient engagement platform, individuals and their families have the opportunity to become active members of their
care team, which improves results.
Payer and life sciences – Through Veradigm™, we are positioned to help clients manage the evolution toward value-based care, facilitate
patient medication access and affordability and provide new, efficient operating models for generating the real-world evidence necessary to
accelerate the development of new therapies and to enhance the value of existing ones.
Material Government Regulations
Our business operations are worldwide and are subject to various federal, state, local, and foreign laws, and our products and services are governed
by a number of rules and regulations. Although there is no assurance that existing or future government laws, rules and other regulations applicable to our
operations, products or services will not have a material adverse effect on our capital expenditures, results of operations and competitive position, we do
not currently anticipate materially increased expenditures in response to government regulations or future material impacts to our results or
competitiveness. Nonetheless, as discussed below, healthcare laws and global trade regulations have materially impacted and could continue to materially
impact our business and operations. For a discussion of the risks associated with government regulations that may materially impact us, please see the
section entitled "Risk Factors" in Item 1A.
Healthcare IT Industry
The healthcare IT industry in which we operate is highly regulated, and the services we provide are subject to a complex set of healthcare laws and
regulations, including, among others, the 21st Century Cures Act (the “Cures Act”), the Medicare Access and CHIP Reauthorization Act (“MACRA”), the
Health Information Technology for Economic and Clinical Health Act (“HITECH”), the Health Insurance Portability and Accountability Act of 1996
(“HIPAA”), regulations issued by the Centers for Medicare and Medicaid Services (“CMS”) and the Department of Health and Human Services (“HHS”), a
number of fraud and abuse laws, including the federal Anti-Kickback Statute and the False Claims Act, and the Patient Protection and Affordable Care Act
(as amended, the “PPACA”), as discussed below. In addition, the healthcare IT industry is subject to changing political, legislative, regulatory and other
industry standards, which create both significant opportunities as well as certain challenges. These include:
•
HITECH: In 2009, the United States federal government enacted HITECH, which authorized the Office of the National Coordinator for
Health Information Technology (“ONC”) to establish the functionality that EHR products must meet in order for our technologies to be
considered certified and for our customers to qualify for participation in various government incentive programs.
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•
•
•
•
Provider Reimbursement: In recent years, there have been significant changes to provider payment models by the United States federal
government, moving toward a value-based care model similar to those being adopted by commercial payers and state governments. This leads
to increasing pressure on healthcare organizations to reduce costs and increase demonstration of quality care, replacing fee-for-service models
in part by expanding advanced payment models. Such changes to provider payment models could further encourage the adoption of healthcare
IT as a means of improving quality of patient care through increased efficiency, care coordination, and improved access to complete medical
documentation.
o
The passage of MACRA in 2015 codified the creation of new payment models, such as Accountable Care Organizations and the
Quality Payment Program, that have significantly expanded and will continue to significantly expand the number of ambulatory
healthcare professionals delivering care under payment programs that are driven by quality measurement. In 2016, CMS issued
preliminary regulations for the Quality Payment Program (“QPP”), and many of our clients are also involved with the
Comprehensive Primary Care Plus program, which is working toward similar goals by emphasizing the role of the primary care
provider. Other important drivers of healthcare IT adoption in the primary care space are the Patient Centered Medical Home
program, a voluntary program in which many of our clients participate that has a strong emphasis on quality measurement and
patient engagement. Even where some of these programs will likely be adjusted in part by HHS under the new Biden
Administration, significant levels of reimbursements will still require providers to capture, communicate, measure and share
outcomes through technology solutions such as ours, given that those requirements are bound in federal statute.
PPACA: PPACA, which was signed into law in 2010, has impacted us and our clients. While at this time repeal of the law is unlikely,
particularly under the new Biden Administration, legal challenges continue to advance through the justice system, including an impending
ruling from the Supreme Court. Many components of the law, including those which have had a positive effect on our business by requiring
the expanded use of health IT products, are expected to remain in effect, as they are not subject to repeal or modification under any currently
pending legislation. Certain provisions of PPACA, such as those mandating reductions in reimbursement for certain types of providers or
decreasing the number of covered lives in the United States or the depth of insurance coverage available to patients, may have a negative effect
on our sales by reducing the resources available to our current and prospective clients to purchase our products.
Cures Act: In late 2016, Congress passed the Cures Act, a sweeping piece of legislation attempting to modernize many areas of the healthcare
industry. Sections of the law addressing interoperability also codified the concept of information blocking, requiring a new regulatory
structure to respond to concerns that actors in the healthcare industry intentionally block the exchange of information between various
stakeholders. The Cures Act authorized penalties for any such action for health IT developers and health information exchange entities, as
well as virtually every type of provider organization that Allscripts serves. We will respond to the requirements of the final associated
regulation on Interoperability, Information Exchange and Certification released by ONC in March 2020 as thoroughly as possible. The ONC
regulation, which involves complex and specific requirements, requires that we evaluate changes to business processes related to requests for
the access, exchange or use of Electronic Health Information. Our Company has been and remains committed to open and efficient
information exchange and we will continue to support clients in their efforts to exchange health data and meet all new associated certification
requirements.
Privacy and Health Data: Allscripts is subject to numerous privacy and security laws and regulations, including HIPAA and the FTC Act.
HIPAA: HIPAA and its implementing regulations contain substantial restrictions and requirements with respect to the use and
disclosure of individuals’ protected health information. As part of the operation of our business, Allscripts, and our subcontractors
may have access to, or our clients may provide to us, individually identifiable health information related to the treatment, payment
and operations of providers’ practices. In the United States, government and industry legislation and rulemaking, especially
HIPAA, HITECH and standards and requirements published by industry groups such as the Joint Commission, require the use of
standard transactions, standard identifiers, security and other standards and requirements for the transmission of certain electronic
health information. HIPAA applies to “Covered Entities,” such as certain healthcare providers, health plans, and “healthcare
clearinghouses,” as well as business associates that performed functions on behalf of or provided services to Covered Entities. We
consider ourselves a Covered Entity due to our acting as a healthcare clearinghouse through our provision of Allscripts Payerpath
due to its filing of electronic healthcare claims on behalf of healthcare providers that are subject to HIPAA and HITECH. In
addition, as a result of our dealings with certain clients and others in the healthcare industry that may be considered Covered
Entities under or otherwise subject to the requirements of HIPAA, we are, in some circumstances, considered a business associate
under HIPAA. As a business associate, we are subject to the HIPAA requirements relating to the privacy and security of protected
health information. Among other things, HIPAA requires business associates to (i) maintain physical, technical and administrative
safeguards to prevent protected health information from misuse, (ii) report
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security incidents and other inappropriate uses or disclosures of the information, including to individuals and governmental
authorities, and (iii) assist Covered Entities from which we obtain health information with certain of their duties under HIPAA. We
have policies and procedures that we believe comply with federal and state confidentiality requirements for the handling of
protected health information (“PHI”) that we receive and with our obligations under Business Associate Agreements.
The principal effects of HIPAA are, first, to require that our systems be capable of being operated by us and our clients in a manner
that is compliant with the Transaction, Security and Privacy Standards mandated by HIPAA, and second, to comply with HIPAA
when it directly applies to us. We have policies and safeguards in place intended to protect health information as required by
HIPAA and have processes in place to assist us in complying with applicable laws and regulations regarding the protection of this
data and responding to any security incidents. The Office of Civil Rights has proposed updates and changes to HIPAA-related
regulations, and Allscripts plans to adjust our processes and procedures as necessary, as new rules are finalized.
FTC Act: Section 5 of the Federal Trade Commission Act (the “FTC Act”) prohibits unfair methods of competition and unfair or
deceptive acts or practices in or affecting commerce. The FTC Act, and the rules promulgated thereunder, may be applicable to
health information that is held in a capacity that does not implicate HIPAA. Therefore, for certain activities and applications, we
employ processes designed to comply with the FTC Act.
42 CFR Part 2: The Substance Abuse and Mental Health Services Administration is also expected to promulgate regulations
amending requirements and restrictions related specifically to the storage and exchange of behavioral health- and substance use
disorder-related patient data, working to ease integration between such sensitive health data and the patient’s larger health
record. Similarly, we will adjust policies and procedures as required by any final regulation as released.
o
o
•
Fraud and Abuse Laws: The healthcare industry is subject to laws and regulations on fraud and abuse that, among other things, prohibit the
direct or indirect payment or receipt of any remuneration for patient referrals, or for the purchase or order, or arranging for or recommending
referrals or purchases, of any item or service paid for in whole or in part by these federal or state healthcare programs. Federal enforcement
personnel have substantial funding, powers and remedies to pursue suspected or perceived fraud and abuse. Moreover, both federal and state
laws forbid bribery and similar behavior.
Federal Anti-Kickback Statute: The federal Anti-Kickback Statute prohibits any person or entity from offering, paying,
soliciting or receiving anything of value, directly or indirectly, for the referral of patients covered by Medicare, Medicaid and other
federal healthcare programs or the leasing, purchasing, ordering or arranging for or recommending the lease, purchase or order of
any item, good, facility or services covered by these programs. Courts have interpreted the law to provide that a financial
arrangement may violate this law if any one of the purposes of an arrangement is to encourage patient referrals or other federal
healthcare program business, regardless of whether there are other legitimate purposes for the arrangement. There are several
limited exclusions known as safe harbors that may protect some arrangements from enforcement penalties. Penalties for federal
Anti-Kickback Statute violations can be severe, and include imprisonment, criminal fines, civil money penalties with triple
damages (when the False Claims Act is implicated) and exclusion from participation in federal healthcare programs. Many states
have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items
or services reimbursed by any source, not only the Medicare and Medicaid programs. HHS finalized changes to the latest
regulations stemming from the federal Anti-Kickback Statute and Stark Law in late 2020, continuing to make further allowances
for exclusions associated with the purchase of health information technology.
o
False Claims Act: The federal False Claims Act prohibits anyone from, among other things, knowingly presenting, or causing to
be presented, for payment to federal programs (including Medicare and Medicaid) claims for items or services that are false or
fraudulent. Although we do not submit claims directly to payors, Allscripts could be held liable under the False Claims Act if we
are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding
information to customers through our revenue cycle/claims management services, or if our EHR products are found to have caused
providers to have inaccurately attested to incentive or reimbursement program criteria.
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We believe that these and other changes in laws and regulations, along with increasing pressure from private payers to move providers to quality-
based payment programs and market opportunities to maximize the data that is increasingly being created and captured through the care process, will
continue to drive adoption of healthcare IT products and services such as ours. With the incoming Biden Administration, we anticipate continued pressure
through a variety of administrative and regulatory levers to increase interoperability in the industry across a variety of stakeholders, including
implementing regulations that require robust, sophisticated health technology. For example, although many large physician groups have already purchased
EHR technology, we expect those groups may choose to replace their older EHR technology to comply with future Quality Payment Program and
Accountable Care Organization requirements and to add new features and functionality. Further, opportunities for healthcare provider organizations to
expand their care coordination efforts in order to successfully comply with new payment programs or to add software specific to the precision medicine
expansion, as outlined in the Cures Act, could lead to additional demand for our solutions.
Global Trade
As a global company, the import and export of our products and services are subject to laws and regulations including international treaties, U.S.
export controls and sanctions laws, customs regulations, and local trade rules around the world. Such laws, rules and regulations may delay the introduction
of some of our products or impact our competitiveness through restricting our ability to do business in certain places or with certain entities and
individuals, or requiring compliance with disparate local laws concerning transfer and disclosure of health data and laws concerning controlled technology
or source code. The consequences of any failure to comply with domestic and foreign trade regulations could limit our ability to conduct business globally.
Business Organization
We derive our revenues primarily from sales of our proprietary software (either as a direct license sale or under a subscription delivery model),
which also serves as the basis for our recurring service contracts for software support and maintenance and certain transaction-related services. In addition,
we provide various other client services, including installation, and managed services such as outsourcing, private cloud hosting and revenue cycle
management.
During 2020, we realigned our reporting structure to organize the Company around strategic business units to maximize delivery of client
commitments, operational effectiveness and competitiveness. Refer to Note 19, “Business Segments,” to our consolidated financial statements included in
Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K for detailed discussion about these changes. Our two reportable
segments are as follows:
•
•
The Core Clinical and Financial Solutions reportable segment derives its revenue from the sale of software applications for patient
engagement, integrated clinical and financial management solutions, which primarily include EHR-related software, financial and practice
management software, related installation, support and maintenance, outsourcing, private cloud hosting and revenue cycle management.
The Data, Analytics and Care Coordination reportable segment derives its revenue from the sale of practice reimbursement and payer and life
sciences solutions, which are mainly targeted at physician practices, payers, life sciences companies and other key healthcare stakeholders.
These solutions enable clients to transition, analyze and coordinate care and improve the quality, efficiency and value of healthcare delivery
across the entire care community.
The results of operations related to CarePort, which was sold on December 31, 2020, is presented throughout our financial statements as
discontinued operations. Prior to the sale, CarePort was included in the Data, Analytics and Care Coordination reportable segment. Refer to Note 18,
“Discontinued Operations” to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this
Form 10-K.
Clients
Our clients in the Core Clinical and Financial Solutions segment include physician practices and hospitals, which include some of the most
prestigious medical groups and hospitals in the United States and internationally and often serve as reference sources for prospective clients that are
interested in purchasing our solutions. Our clients in the Data, Analytics and Care Coordination segment include coordinated community care
organizations, health plans and payors, life science companies and physician practices. For the year ended December 31, 2020, we had one client that
accounted for 12% of our revenue. No other single client accounted for more than 10% of our revenue in the years ended December 31, 2020, 2019 and
2018.
Research and Development
Rapid innovation characterizes the healthcare IT industry. We believe our ability to compete successfully depends heavily on our ability to ensure a
continual and timely flow of competitive products, services and technologies to the markets in which we operate.
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Because of this, we continue to invest into our research and development efforts with a focus on growth opportunities. These efforts include
developing new solutions as well as new features and enhancements to our existing solutions, which we believe will ensure that our solutions comply with
continually evolving regulatory requirements and create additional opportunities to connect our systems to the healthcare community.
Competition
The markets for our solutions and services are highly competitive and are characterized by rapidly evolving technology and solution standards and
user needs, as well as frequent introduction of new solutions and services. Some of our competitors may be more established, benefit from greater name
recognition, and have substantially greater financial, technical, and marketing resources than we do.
We compete primarily with numerous types of organizations, including developers of revenue cycle and practice management software and
services, large system integrators, IT service providers, ambulatory and acute care EHR solutions, population health management and value-based care
technologies, analytics systems, care management solutions and post-acute solutions. We generally compete on the basis of several factors, including
breadth and depth of services (including our open architecture and the level of solution integration across care settings), integrated platform, regulatory
compliance, reputation, reliability, accuracy, security, client service, total cost of ownership, innovation and industry acceptance, expertise and experience.
We believe we compete favorably on these metrics and are one of the leading companies offering a suite of healthcare IT solutions.
Moreover, we expect that competition will continue to increase as a result of consolidation in both the IT and healthcare industries. If one or more
of our competitors or potential competitors were to merge or partner with another of our competitors, the change in the competitive landscape could
adversely affect our ability to compete effectively.
Our principal existing competitors in these markets include, but are not limited to (in alphabetical order) AdvancedMD, athenahealth Inc., Availity,
Cerner Corporation, Change Healthcare, CPSI (Computer Programs and Systems Inc.), CureMD Healthcare, eClinicalWorks, Enli Health Intelligence, Epic
Systems Corporation, Evolent Health, Greenway Medical Technologies, Harris Healthcare, Healthagen, Health Catalyst, IBM Watson Health, Inovalon,
IQVIA, Kareo, The Lash Group, Inc., MEDHOST, Inc., Meditech (Medical Information Technology, Inc.), Nextgen, nThrive, Optum, Philips Healthcare,
Premier Inc., Science 37, T-System, The TriZetto Group, Inc. (a division of Cognizant Technology Solutions, Inc.), Waystar and Wellsoft Corporation.
Backlog
We had a contract backlog of $4.1 billion as of both December 31, 2020 and 2019, respectively. Contract backlog represents the value of bookings
and support and maintenance contracts that have not yet been recognized as revenue. Bookings reflect the value of executed contracts for software,
hardware, other client services, private-cloud hosting, outsourcing and subscription-based services. Total contract backlog can fluctuate between periods
based on the level of revenue and bookings as well as the timing and mix of renewal activity and periodic revalidations. We estimate that approximately
35% of our aggregate contract backlog as of December 31, 2020 will be recognized as revenue during 2021.
Intellectual Property
We rely on a combination of trademark, copyright, trade secret and patent laws in the United States and other jurisdictions, as well as
confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. We also enter into confidentiality and proprietary
rights agreements with our employees, consultants and other third parties and control access to software, documentation and other proprietary information.
Many of our products include intellectual property obtained from third parties. For example:
• Many of our products are built on technology provided by Microsoft Corporation, such as the Microsoft SQL Server information platform, the
Microsoft .NET Framework and the Microsoft Azure cloud platform.
• We license content from companies such as OptumInsight, 3M Health Information Systems, Wolters Kluwer Health, Elsevier, IMO and
Clinical Architecture, which we incorporate or use in certain solutions.
It may be necessary in the future to seek or renew licenses relating to various aspects of our products and services. While we have generally been
able to obtain licenses on commercially reasonable terms in the past, there is no guarantee that we can obtain such licenses in the future on reasonable
terms or at all. Because of continuous healthcare IT innovation, current extensive patent coverage and the rapid rate of issuance of new patents, it is
possible that certain components of our solutions may unknowingly infringe upon an existing patent or other intellectual property rights of others.
Occasionally, we have been notified that we may be infringing certain patent or other intellectual property rights of third parties. While the outcome of any
litigation or dispute is uncertain, we do not believe that the resolution any of these infringement notices will have a material adverse impact on our
business.
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Geographic Information
Historically, the majority of our clients and revenue have been associated with North America, where we have clients in the United States and
Canada. While we remain focused on the North American market, which we expect will continue to drive our revenue in the future, we believe that there
are opportunities for us globally as other countries face similar challenges of controlling healthcare costs while improving the quality and efficiency of
healthcare delivery. As a result, we have increased our efforts to selectively expand the sales of many of our solutions outside of North America, primarily
in the United Kingdom, the Middle East, Asia and Australia.
Human Capital
We track and report internally on key talent metrics including workforce demographics, talent pipeline, diversity data and engagement of our
employees. As of December 31, 2020, we had approximately 8,400 employees, including approximately 58.9% in the United States, 36.4% in India, 1.4%
in Canada, 1.3% in Israel, and 2.0% in other international countries. We also engage contractors and consultants. None of our employees are covered by a
collective bargaining agreement or are represented by a labor union.
Our employees are a significant asset and we recognize that attracting, motivating and retaining talent at all levels is vital to continuing our success.
We aim to create an inclusive, respectful and open work environment and culture comprising talented employees of diverse backgrounds, in which our
employees can grow and advance their careers, with the overall goal of developing, expanding and retaining our workforce to support our business. We
strive to sustain a work environment in which each employee’s perspective, background, skills and abilities are valued in support of our mission to create
solutions that enable smarter care for healthier patients, populations and communities. We invest in our employees through high-quality benefits and
various health and wellness initiatives, and offer competitive compensation packages.
The health and safety of our employees is key to our success. For Allscripts, many of our employees are client facing and participate in the day to
day operations of hospitals and medical centers. In response to the novel coronavirus (“COVID-19”) pandemic, we moved quickly to make informed
decisions to support the health and safety of our employees. We responded with the following actions: (i) immediately transitioning employees in all of our
global offices to a remote work environment, with essential (IT/Systems) employees working staggered shifts to maintain social distance; (ii) implementing
a COVID-19 self-reporting process that allowed us to quickly provide assistance to COVID-19-impacted employees and their families; (iii) updating our
corporate intranet to prominently inform employees of COVID-19 protocol and remind them to incorporate new hygiene habits into their days; (iv)
partnering with our Managed Services sites to ensure our front-line employees were part of their vaccination programs; (v) providing letters to our
employees that regularly visit clients and interact with site staff and patients to support their ability to obtain timely vaccinations; and (vi) reminding
employees of the CMD (Clean, Mask, Distance) protocols in every communication from our Chief Executive Officer.
Fostering inclusivity and equity in our workforce is also vital to our success. Allscripts’ Cabinet, comprised of our Chief Executive Officer’s direct
staff, is made up of five men and five women. Globally, our population of employees at the level of Director and above is 66% male and 34% female. We
have established Allscripts Women Engagement, which assists women in managing their careers and driving professional development, all while creating
professional development opportunities for women to excel in their careers and in our Company. We have a nine block leadership development process in
place that helps us to identify our high potential talent each year. This gives us a view to succession planning for promotions in the organization. Our
strategy incorporates thoughtful review around ensuring we have a lens of diversity on identifying high potential talent in the organization. With a focus on
development, we were able to fill 59% of our management openings through internal promotion during 2020, with a fill rate of 71% during the last half of
the year. Also during 2020, we launched a Champions Network of employees at all levels across our global team that will be working together to enhance
our diversity and inclusion initiatives and to ensure that our goals, vision and mission result in a workplace that celebrates each unique individual. We
regularly solicit feedback through surveys and other mechanisms to gain insights into workplace engagement, what motivates employees to do their best
work and overall employee satisfaction. Employees are provided opportunities to raise suggestions and collaborate with leadership to implement actions for
ongoing improvements. We use the results of the surveys to influence our people strategy and policies.
In 2020, our employee experience framework utilized several listening opportunities to hear and learn from employees. The three primary tools
used are: a bi-annual company-wide Engagement survey, Lifecycle surveys (new hire and exit surveys) and Learning & Development surveys. Our
Engagement Survey puts emphasis on measuring confidence in leadership, perceived care for employees, consistency in how policies are applied, and
effectiveness of communication efforts.
Our Chief Executive Officer reviews overall Company results with employees and leaders at all levels and engages in actions that are aimed at
removing barriers to engagement. Based on employee feedback and continued action around our 2019 Employee Survey, selected activities were added for
2020, including: our Chief Executive Officer communicating on a weekly basis to all employees, creating new Resource Groups with employee
engagement, and quarterly All Hands meetings to review the current state of the business and answer employee questions.
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Information about our Executive Officers
The following sets forth certain information regarding our executive officers as of February 26, 2021, based on information furnished by each of
them:
Name
Paul Black
Richard Poulton
Lisa Khorey
Tejal Vakharia
Age
62
55
54
48
Position
Chief Executive Officer
President and Chief Financial Officer
Executive Vice President, Chief Client Delivery Officer
Senior Vice President and General Counsel
Paul Black has served as our Chief Executive Officer since December 2012 and is also a member of our Board of Directors (our “Board”). Mr.
Black also served as our President from December 2012 to September 2015. Prior to joining Allscripts, Mr. Black served as Operating Executive of
Genstar Capital, LLC, a private equity firm, and Senior Advisor at New Mountain Finance Corporation, an investment management company. From 1994
to 2007, Mr. Black served in various executive positions (including Chief Operating Officer from 2005 to 2007) at Cerner Corporation, a healthcare IT
company. Mr. Black has also served as a director and Chairman (2010-2012) of Truman Medical Centers from 2001-2017. He serves on the board of the
Harry S. Truman Presidential Library and the University of Kansas Health System Advancement Board.
Richard Poulton has served concurrently as both our President and Chief Financial Officer since March 2020. Mr. Poulton has served as our
President since October 2015. Furthermore, Mr. Poulton served as our Chief Financial Officer from October 2012 to March 2016 and as an Executive Vice
President from October 2012 to September 2015. From 2006 to 2012, Mr. Poulton served in various positions at AAR Corp., a provider of products and
services to commercial aviation and the government and defense industries. His most recent role at AAR Corp. was Chief Financial Officer and Treasurer.
Mr. Poulton also spent more than ten years at UAL Corporation in a variety of financial and business development roles, including Senior Vice President of
Business Development as well as President and Chief Financial Officer of its client-focused Loyalty Services subsidiary.
Lisa Khorey has served as our Executive Vice President, Chief Client Delivery Officer since November 2016. Prior to joining Allscripts, Ms.
Khorey was the executive director of Ernst & Young’s National Provider Practice, specializing in analytics. Previously, Ms. Khorey held a variety of
technical and executive leadership roles at University of Pittsburgh Medical Center.
Tejal Vakharia has served as our Senior Vice President and General Counsel since June 2020. Prior to that, Ms. Vakharia was the Senior Vice
President and Chief Compliance Counsel for Allscripts. Prior to joining Allscripts in 2011, she held business, compliance and legal leadership positions at
General Electric and Abbott Laboratories, and was an attorney at the multinational law firms of Foley & Lardner and Dentons.
Available Information
Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed
pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the U.S. Securities and
Exchange Commission (the “SEC”). We are subject to the informational requirements of the Exchange Act and we file or furnish reports, proxy statements
and other information with the SEC. Such reports and information are available free of charge at our website at investor.allscripts.com as soon as
reasonably practicable following our filing of any of these reports with, or furnishing any of these reports to, the SEC. The SEC maintains an Internet site
that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (http://www.sec.gov).
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Item 1A. Risk Factors
Our business, financial condition, operating results and stock price can be materially and adversely affected by a number of factors, whether
currently known or unknown, including, but not limited to, those described below. Any one or more of such factors, some of which are outside of our
control, could directly or indirectly cause our actual financial condition and operating results to vary materially from our past or anticipated future
financial condition or operating results.
Because of the following factors, as well as other factors affecting our financial condition and operating results, past financial performance should
not be considered a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
These risk factors may be important to understanding any statement made by us in this Form 10-K or elsewhere. The following information should
be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the
consolidated financial statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.
Risks Related to COVID-19
The novel coronavirus (“COVID-19”) pandemic has adversely impacted and could continue to adversely impact the business, results of
operations, financial condition, liquidity and cash flows of us and our clients.
The COVID-19 pandemic and efforts to control its spread have had a significant, ongoing impact on our operations and the operations of our
healthcare clients. The magnitude and duration of the disruption and resulting decline in business activity will largely depend on future developments
which are highly uncertain and cannot be predicted. Because our hospital and other health care provider clients have understandably prioritized their
resources toward the COVID-19 outbreak, we expect that our business will continue to be adversely affected, including by negatively impacting the
demand and timing for implementing our solutions and the timing of payment for our solutions. For example, the COVID-19 pandemic negatively
impacted revenue for the year ended December 31, 2020, as we saw delays in deals with upfront software revenue and professional services
implementations across our inpatient and outpatient base. We also experienced lower revenue from our clients as patient volumes were lower for most of
our clients. We are unable to predict the continuing magnitude of any such effect.
As a result of the COVID-19 pandemic, certain industry events that we sponsor or at which we present and certain client events have been
canceled, postponed or moved to virtual-only experiences, and we have instituted a work-from-home policy for most of our employees and have
significantly restricted employee travel, which has restricted our sales, marketing and other important business activities. In addition, concerns over the
economic impact of the COVID-19 pandemic have caused extreme volatility in financial and other capital markets which has adversely impacted and may
continue to adversely impact our stock price and our ability to access capital markets. The extent to which the COVID-19 pandemic will continue to impact
our results of operations and financial condition will depend on future developments that are highly uncertain and cannot be predicted, including the
duration and severity of the pandemic, resurgences or additional “waves” of outbreaks of the virus in various jurisdictions (including new strains or
mutations of the virus), the impact of the pandemic on economic activity, the actions taken by health authorities and policy makers to contain its impacts on
public health and the global economy, and the availability and effectiveness of vaccines. The COVID-19 pandemic may also have the effect of heightening
many of the other risks described below, such as those relating to our products and services, sales cycles and implementation schedules, the retention of key
employees, financial performance and debt obligations.
Risks Related to Our Industry
Markets for our products and services are highly competitive and subject to rapid technological change, and we may be unable to compete
effectively in these markets.
The markets for our products and services are intensely competitive and are characterized by rapidly evolving technology, solution standards and
user needs and the frequent introduction of new products and services. Some of our competitors may be more established, benefit from greater name
recognition and have substantially greater financial, technical and marketing resources than us. Moreover, we expect that competition will continue to
increase as a result of potential incentives provided by government programs and as a result of consolidation in both the IT and healthcare industries.
We compete on the basis of a number of factors, including:
•
•
•
•
•
•
breadth and depth of services, including our open architecture and the level of product integration across care settings;
integrated platform;
regulatory compliance;
reputation;
reliability, accuracy and security;
client service;
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•
•
•
total cost of ownership;
innovation; and
industry acceptance, expertise and experience.
There can be no assurance that we will be able to compete successfully against current and future competitors or that the competitive pressures that
we face will not materially and adversely impact our business, financial condition and operating results.
Consolidation in the healthcare industry could adversely impact our business, financial condition and operating results.
Many healthcare provider organizations are consolidating to create integrated healthcare delivery systems with greater market power. As provider
networks and managed care organizations consolidate, thus decreasing the number of market participants, competition to provide products and services like
ours will become more intense, and the importance of establishing and maintaining relationships with key industry participants will increase. These
industry participants may try to use their market power to negotiate price reductions for our products and services. Further, consolidation of management
and billing services through integrated delivery systems may decrease demand for our products. Such consolidation may also lead integrated delivery
systems to require newly acquired physician practices to replace their current Allscripts EHR product with that already in use in the larger enterprise. Any
of these factors could materially and adversely impact our business, financial condition and operating results.
We are subject to a number of existing laws, regulations and industry initiatives, and we are susceptible to a changing regulatory environment.
As a participant in the healthcare industry, our operations and relationships, and those of our clients, are regulated by a number of foreign, federal,
state and local governmental entities. The impact of this regulation on us is direct, to the extent we are ourselves subject to these laws and regulations, and
is also indirect, both in terms of the level of government reimbursement available to our clients and in that, in a number of situations, even if we are not
directly regulated by specific healthcare laws and regulations, our products must be capable of being used by our clients in a manner that complies with
those laws and regulations. The ability of our clients to comply with laws and regulations while using our solutions could affect the marketability of our
products or our compliance with our client contracts, or even expose us to direct liability under the theory that we had assisted our clients in a violation of
healthcare laws or regulations. Because our business relationships with physicians, hospitals and other provider clients are unique and the healthcare IT
industry as a whole is relatively young, the application of many state and federal regulations to our business operations and to our clients is uncertain. It is
possible that a review of our business practices or those of our clients by courts or regulatory authorities could result in a determination that could adversely
affect us. See the risk factor entitled “The failure by Practice Fusion to comply with the terms of its settlement agreements with the U.S. Department of
Justice (the “DOJ”) could have a material and adverse impact on our business, results of operations and financial condition, and, even if Practice Fusion
complies with those settlement agreements, the costs and burdens of compliance could be significant, and we may face additional investigations and
proceedings from other governmental entities or third parties related to the same or similar conduct underlying the agreements with the DOJ.” Furthermore,
as we expand our business globally, we become subject to comparable laws and regulations in each non-United States jurisdiction in which we operate,
which creates additional risks. See the risk factor entitled “Our business is subject to the risks of global operations” below for more information.
Specific risks include, but are not limited to:
Healthcare Fraud. Federal and state governments continue to enhance regulation of and increase their scrutiny over practices involving healthcare
fraud perpetrated by healthcare providers and professionals whose services are reimbursed by Medicare, Medicaid and other government healthcare
programs. Any determination by a regulatory, prosecutorial or judicial authority that any of our activities involving our clients, vendors or channel partners
violate any of these laws could subject us to civil or criminal penalties, require us to change or terminate some portions of our business, require us to refund
a portion of our license or service fees or disqualify us from providing services to clients doing business with government programs, any of which could
have a material adverse effect on our business, financial condition and operating results. Even an unsuccessful challenge by regulatory or prosecutorial
authorities of our activities could result in adverse publicity, require a costly response from us and have a material adverse effect on our business, financial
condition and operating results.
Patient Information. Our business is subject to rules, particularly HIPAA and HITECH, and contractual obligations relating to the privacy and
security of protected health information (“PHI”) that we and our subcontractors may have access to as part of the operation of our business. These rules and
obligations have increased the cost of compliance and could subject us to additional enforcement actions and contractual liability, which could further
increase our costs and adversely affect the way in which we do business.
The penalties for a violation of HIPAA or HITECH are significant and could have an adverse impact upon our business, financial condition and
operating results, if such penalties ever were imposed. If we or our subcontractors do not follow procedures and policies for the handling of PHI, or if
those procedures and policies are not sufficient to prevent the unauthorized disclosure of PHI, we could be subject to civil and/or criminal liability, fines
and lawsuits, termination of our client contracts or our operations could be shut down. Moreover, because all HIPAA standards and HITECH implementing
regulations and guidance are subject to
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change or interpretation, we cannot predict the full future impact of HIPAA, HITECH or their implementing regulations on our business and operations.
Additionally, certain state privacy laws are not preempted by HIPAA and HITECH and may impose independent obligations upon our clients or us.
Additional legislation governing the acquisition, storage and transmission or other dissemination of health record information and other personal
information, including social security numbers and other identifiers, continues to be proposed and come into force at the state level. There can be no
assurance that changes to state or federal laws will not materially restrict the ability of providers to submit information from patient records using our
products and services.
Electronic Prescribing. The use of our software by physicians to perform a variety of functions, including electronic prescribing, which refers to
the electronic routing of prescriptions to pharmacies and the ensuing dispensation, is governed by state and federal law, including fraud and abuse laws.
States have differing prescription format requirements, which we have programmed into our software. There is significant variation in the laws and
regulations governing prescription activity, as federal law and the laws of many states permit the electronic transmission of certain controlled prescription
orders, while the laws of several states neither specifically permit nor specifically prohibit the practice. Restrictions exist at the federal level on the use of
electronic prescribing for controlled substances and certain other drugs. However, some states (most notably New York) have passed complementary laws
governing the use of electronic prescribing tools in the use of prescribing opioids and other controlled substances, and we expect this to continue to be
addressed with regulations in other states.
In general, regulations in this area impose certain requirements which can be burdensome and evolve regularly and may adversely affect our
business model. Aspects of our clinical products are affected by such regulation because of our need to include features or functions in our products to meet
certain regulatory requirements, as well as the need of our clients to comply, and we expect this will continue for the foreseeable future.
Electronic Health Records. A number of important federal and state laws governing the use and content of EHRs may affect the design of such
technology. As a company that provides EHRs to a variety of providers of healthcare, our systems and services must be designed in a manner that
facilitates our clients’ compliance with these laws. We cannot predict the content or effect of possible changes to these laws or new federal and state laws
that might govern these systems and services. We may also be subject to future legislation and regulations concerning the development and marketing of
healthcare software systems or requirements related to product functionality. These could increase the cost and time necessary to market new services and
could affect us in other respects not presently foreseeable. Furthermore, several of our products are certified by an Office of the National Coordinator for
Health Information Technology-approved certifying body as meeting the standards for functionality, interoperability and security under HITECH. Our
failure to maintain this certification or otherwise meet industry standards could adversely impact our business.
HITECH identified the “meaningful use” of interoperable electronic health records throughout the United States health care delivery system as a
critical national goal. By using certified EHR technology and submitting information on the quality of care and other measures to the Secretary of Health &
Human Services, eligible healthcare professionals and hospitals have been able to qualify for an additional Medicare and Medicaid payment for the
Meaningful Use of certified EHR technology that meets specified objectives under the EHR Incentive program. If our clients do not receive or lose
expected incentive payments, this could harm their willingness to purchase future products or upgrades, and therefore could have an adverse effect on our
future revenues.
Claims Transmission. Our system electronically transmits medical claims by physicians to patients’ payers for approval and reimbursement. In
addition, we offer revenue cycle management services that include the manual and electronic processing and submission of medical claims by physicians to
patients’ payers for approval and reimbursement. Federal law provides that it is both a civil and a criminal violation for any person to submit, or cause to be
submitted, a claim to any payer, including, without limitation, Medicare, Medicaid and all private health plans and managed care plans, seeking payment
for any services or products that overbills or bills for items that have not been provided to the patient. We have in place policies and procedures that we
believe assure that all claims that are transmitted by our system and through our services are accurate and complete, provided that the information given to
us by our clients is also accurate and complete. If, however, we or our subcontractors do not follow those procedures and policies, or they are not sufficient
to prevent inaccurate claims from being submitted, we could be subject to liability.
Furthermore, to the extent that there is an information security breach, it could have a material adverse effect on our business. See “If our security is
breached, we could be subject to liability, and clients could be deterred from using our products and services.”
Medical Devices. Certain computer software products are regulated as medical devices under the Federal Food, Drug and Cosmetic Act. The Cures
Act, passed in December 2016, clarified the definition of a medical device to exclude health information technology such as EHRs; however, the legislation
did leave the opportunity for that designation to be revisited if determined to be necessary by changing industry and technological dynamics. Accordingly,
the Food and Drug Administration (the “FDA”) may become increasingly active in regulating computer software intended for use in healthcare settings.
Depending on the product, we could be required to notify the FDA and demonstrate substantial equivalence to other products on the market before
marketing such products or obtain FDA approval by demonstrating safety and effectiveness before marketing a product. Depending on the intended use of
a device, the FDA could require us to obtain extensive data from clinical studies to demonstrate safety or effectiveness or substantial equivalence. If the
FDA requires this data, we could be required to obtain approval of an investigational device exemption
15
before undertaking clinical trials. Clinical trials can take extended periods of time to complete. We cannot provide assurances that the FDA would approve
or clear a device after the completion of such trials. In addition, these products would be subject to the Federal Food, Drug and Cosmetic Act’s general
controls. The FDA can impose extensive requirements governing pre- and post-market conditions such as approval, labeling and manufacturing, as well as
governing product design controls and quality assurance processes. Failure to comply with FDA requirements can result in criminal and civil fines and
penalties, product seizure, injunction and civil monetary policies—each of which could have an adverse effect on our business.
Increased government involvement in healthcare could materially and adversely impact our business.
United States healthcare system reform at both the federal and state level could increase government involvement in healthcare, reconfigure
reimbursement rates and otherwise change the business environment of our clients and the other entities with which we have a business relationship. We
cannot predict whether or when future healthcare reform initiatives at the federal or state level or other initiatives affecting our business will be proposed,
enacted or implemented or what impact those initiatives may have on our business, financial condition or operating results. Our clients and the other
entities with which we have a business relationship could react to these initiatives and the uncertainty surrounding these proposals by curtailing or deferring
investments, including those for our products and services.
Additionally, government regulation could alter the clinical workflow of physicians, hospitals and other healthcare participants, thereby limiting the
utility of our products and services to existing and potential clients and curtailing broad acceptance of our products and services. Further examples of
government involvement could include requiring the standardization of technology relating to EHRs, providing clients with incentives to adopt EHR
solutions or developing a low-cost government-sponsored EHR solution, or increased enforcement activity targeting healthcare fraud and abuse.
Changes in interoperability and other regulatory standards applicable to our software could require us to incur substantial additional
development costs.
Our clients and the industry leaders enacting regulatory requirements are concerned with, and often require, that our software solutions be
interoperable with other third-party health IT suppliers. Market forces or governmental authorities have created and could continue to create software
interoperability standards that could apply to our solutions, and if our applicable products or services are not consistent with those standards, we could be
forced to incur substantial additional development costs and delays may result in connection therewith. If our applicable products or services are not
consistent with these varying and evolving standards or do not support our clients in their efforts to meet new certification requirements, our market
position and sales could be adversely affected, and we may have to invest significantly in changes to our software solutions, which could materially and
adversely impact our financial condition and operating results.
Risks Related to Our Company
We could fail to maintain and expand our business with our existing clients or effectively transition our clients to newer products.
For the year ended December 31, 2020, we had one client that accounted for 12% of our revenue. Our business model depends on our success with
maintaining our existing clients, particularly our significant clients, and selling new and incremental products and services to these existing clients. In
addition, our success with certain clients requires our achieving interoperability between our new products and our legacy products to provide a single
solution that connects healthcare providers across care settings. Certain of our clinical solutions clients initially purchase one or a limited number of our
products and services. These clients may choose not to expand their use of, or purchase, additional modules. Also, as we deploy new applications and
features for our existing solutions or introduce new solutions and services, our current clients could choose not to purchase these new offerings. If we fail to
generate additional business from our current clients, our revenue could grow at a slower rate or even decrease.
In addition, the transition of our existing clients to current versions of our products presents certain risks, including the risk of data loss or
corruption or delays in completion. If such events occur, our client relationships and reputation could be damaged. Any of the foregoing could materially
and adversely impact our business, financial condition and operating results.
Our products or services could fail to perform properly due to errors or similar problems.
Complex technology, such as ours, often contains defects or errors, some of which may remain undetected for a period of time. It is possible that such
errors may be found after the introduction of new products or services or enhancements to existing products or services. We continually introduce new
solutions and enhancements to our solutions and, despite testing by us, it is possible that errors may occur in our software or offerings. If we detect any errors
before we introduce a solution, we may have to delay deployment for an extended period of time while we address the problem. If we do not discover errors
that affect our new or current solutions or enhancements until after they are deployed, we would need to provide enhancements to correct such errors. Errors in
our products or services could result in:
•
•
product-related liabilities, fraud and abuse or patient safety issues;
unexpected expenses and liability and diversion of resources to remedy errors;
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•
•
•
•
•
•
harm to our reputation;
lost sales;
delays in commercial releases;
delays in or loss of market acceptance of our solutions;
license termination or renegotiations; and
privacy and/or security vulnerabilities.
Furthermore, our clients may use our products or services together with products or services from other companies or those that they have
developed internally. As a result, when problems occur, it may be difficult to identify the source of the problem. Even when our products or services do not
cause these problems, the existence of these errors may cause us to incur significant costs, divert the attention of our technical personnel from our other
solution development efforts, impact our reputation and cause significant issues with our client relationships.
We could be subject to liability as a result of information security breaches, and clients could be deterred from using our products and services.
Our business relies on the secure electronic transmission, storage and hosting of sensitive information, including PHI, financial information and
other sensitive information relating to our clients, company and workforce. As a result, we face risk of deliberate or unintentional incidents involving
unauthorized access to our computer systems or data that could result in the misappropriation or loss of assets or the disclosure of sensitive information, the
corruption of data, or other disruption of our business operations. We believe that companies in our industry may continue to be targeted by such events
with increasing frequency due to the value of healthcare-related data. Any future denial-of-service, ransomware or other Internet-based attacks may range
from mere vandalism of our electronic systems to systematic theft of sensitive information and intellectual property. For example, in 2018 we were subject
to a ransomware attack that impacted two of our data centers, resulting in outages that left certain of our solutions offline for our clients. In addition, we
recently became aware that a third party obtained unauthorized access to personally identifiable information stored in our computer systems. The means of
such access has been removed and we are otherwise responding to the incident. While we are still evaluating any potential impact and have no indication
the information was distributed or used, we cannot be certain that this or any future breach or incident will not materially and adversely impact our
business, financial condition, or operating results.
We have devoted and continue to devote significant resources to protecting and maintaining the confidentiality of this information, including
designing and implementing security and privacy programs and controls, training our workforce and implementing new technology. We have no guarantee
that these programs and controls will be adequate to prevent all possible security threats. Any compromise of our electronic systems, including the
unauthorized access, use or disclosure of sensitive information or a significant disruption of our computing assets and networks, could adversely affect our
reputation or our ability to fulfill contractual obligations, could require us to devote significant financial and other resources to mitigate such problems, and
could increase our future cyber security costs, including through organizational changes, deploying additional personnel and protection technologies,
further training of employees, and engaging third party experts and consultants. Moreover, unauthorized access, use or disclosure of such sensitive
information, including any resulting from the incidents described above, could result in civil or criminal liability or regulatory action, including potential
fines and penalties. In addition, any real or perceived compromise of our security or disclosure of sensitive information may deter clients from using or
purchasing our products and services in the future, which could materially and adversely impact our financial condition and operating results.
We use third-party contractors to store, transmit and host sensitive information for our clients. While we have contractual or other mechanisms in
place with these third-party contractors that require them to have appropriate security programs and controls in place and, frequently, to indemnify us for
security-related breaches, any compromise or failure of these contractors’ privacy and security practices could adversely affect our reputation, require us to
devote financial and other resources to mitigate these breaches, or subject us to litigation from our clients or shareholders, as well as actions by regulatory
agencies.
Companies, including Allscripts, and governmental agencies have experienced high profile incidents involving data security breaches by entities that
transmit and store sensitive information. Lawsuits resulting from these and other similar security breaches have sought very significant monetary damages.
While we maintain insurance coverage that, subject to policy terms and conditions and subject to a significant self-insured retention, is designed to address
certain aspects of security-related risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise in our business,
and we cannot provide assurance that this coverage will prove to be adequate or will continue to be available on acceptable terms.
The failure by Practice Fusion to comply with the terms of its settlement agreements with the U.S. Department of Justice (the “DOJ”) could have a
material and adverse impact on our business, results of operations and financial condition, and, even if Practice Fusion complies with those
settlement agreements, the costs and burdens of compliance could be significant, and we may face additional investigations and proceedings from
other governmental entities or third parties related to the same or similar conduct underlying the agreements with the DOJ.
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On January 27, 2020, we announced that our subsidiary Practice Fusion entered into a series of agreements to resolve an investigation conducted by
the DOJ and the U.S. Attorney for the District of Vermont. See the risk factor entitled “We have acquired and expect to acquire new companies,
investments or technologies, which are subject to significant risks.” Practice Fusion has entered a three-year deferred prosecution agreement with the U.S.
Attorney for the District of Vermont (“Deferred Prosecution Agreement”) and a civil settlement agreement with the DOJ (“Civil Settlement Agreement”),
and has entered into separate civil settlement agreements with the Medicaid programs for each U.S. state, the District of Columbia and Puerto Rico (“State
Settlement Agreements” and, together with the Deferred Prosecution Agreement and the Civil Settlement Agreement, the “Settlement Agreements”).
Under the Deferred Prosecution Agreement, Practice Fusion consented to the filing of a two count criminal information: one felony count of
violating the Anti-Kickback Statute and one felony count of conspiracy to violate the Anti-Kickback Statute. The Deferred Prosecution Agreement required
Practice Fusion to pay a criminal fine of $25.3 million and a forfeiture payment of $959,700, both of which have been paid in full, and for the Company
and Practice Fusion to regularly review and certify compliance with the Deferred Prosecution Agreement. Practice Fusion also agreed to implement
Additional Civil Compliance Terms, which include the appointment of an Oversight Organization and the implementation of compliance measures set forth
in a Compliance Addendum, each as described further in the Deferred Prosecution Agreement. The Oversight Organization Mandate requires Practice
Fusion to retain an Oversight Organization selected by the U.S. Attorney’s Office for the District of Vermont for three years. The Oversight Organization is
required to take steps to provide reasonable assurance that Practice Fusion establishes and maintains compliance systems, controls and processes
reasonably designed, implemented and operated to ensure Practice Fusion’s compliance with the terms of the Deferred Prosecution Agreement, including
the Compliance Addendum, as well as reducing the risk of any recurrence of misconduct as described in the information and statement of facts. The
Compliance Addendum also required Practice Fusion to, within 90 days of the execution of the Deferred Prosecution Agreement, implement and maintain
a Sponsored Clinical Decision Support (“CDS”) Compliance Program that sets procedures and systems to review all current or future Sponsored CDSs on
the Practice Fusion electronic health records system. Practice Fusion is subject to the Compliance Addendum for a three-year period from the effective date
of the Deferred Prosecution Agreement.
Practice Fusion also entered into the Civil Settlement Agreement to resolve allegations by the DOJ that false claims were submitted to
governmental healthcare programs. The Civil Settlement Agreement required Practice Fusion to pay a civil settlement of $118.6 million, which included
$5.2 million designated for the state Medicaid program expenditures and has been paid in full. In addition, Practice Fusion entered into the State Settlement
Agreements to resolve Medicaid claims under state law analogues to the federal False Claims Act. The financial terms of the State Settlement Agreements
are substantially similar to those set forth in the Civil Settlement Agreement.
See Note 22, “Contingencies,” to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data”
of this Form 10-K for additional information.
Compliance with the terms of the Settlement Agreements has imposed and could continue to impose significant costs and burdens on us. If we fail
to comply with any such Settlement Agreement, the DOJ may impose substantial monetary penalties, exclude Practice Fusion from Medicare, Medicaid
and other federal healthcare programs, and/or criminally prosecute Practice Fusion, which could have a material adverse effect on our business, financial
condition and results of operations.
Other government investigations or legal or regulatory proceedings, including investigations or proceedings brought by private litigants or shareholders,
federal agencies, private insurers and states’ attorneys general, may follow as a consequence of our entry into the Settlement Agreement or the existing
government investigation of our EIS Business, which could result in criminal liability, the imposition of damages or non-monetary relief, significant
compliance, litigation or settlement costs, other losses, or a diversion of management’s attention from other business concerns and have a material adverse
effect on our business, results of operations and financial condition. We may also be subject to negative publicity related to these matters that could harm
our reputation, reduce demand for our solutions and services, result in employee attrition and negatively impact our stock price.
We have acquired and expect to acquire new companies, investments or technologies, which are subject to significant risks.
We have recently made investments in, or acquisitions of, businesses, joint ventures, new services and technologies, and other intellectual property
rights. We expect that we will continue to make such investments and acquisitions in the future.
Our investments and acquisitions involve numerous risks, including:
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the potential failure to achieve the expected benefits of the investment or acquisition, including the inability to generate sufficient revenue to
offset acquisition or investment costs, or the inability to achieve expected synergies or cost savings;
unanticipated expenses related to acquired businesses or technologies;
the diversion of financial, managerial and other resources from existing operations;
the risks of entering into new markets in which we have little or no experience or where competitors may have stronger positions;
unanticipated regulatory and other compliance risks related to acquired companies or technologies;
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potential write-offs or amortization of acquired assets or investments;
the potential loss of key employees, clients or partners of an acquired business;
delays in client purchases due to uncertainty related to any acquisition;
potential unknown liabilities associated with an investment or acquisition; and
the tax effects of any such acquisitions.
In addition, prior to their acquisition by us, the Enterprise Information Solutions business acquired from McKesson Corporation (the “EIS
Business”) received a request for documents and information from the U.S. Attorney’s Office pursuant to a civil investigative demand (a “CID”). The CID
relates to the certification of the respective business’s software under the U.S. Office of the National Coordinator for Health Information Technology’s
electronic health record certification program and related business practices. In August 2018, an additional CID sought similar information related to a
separate EIS Business solution. If either CID leads to a claim or legal proceeding against us or our businesses that results in the imposition of damages,
non-monetary relief, significant compliance, litigation or settlement costs or any other losses, in each case for which we are not indemnified by the seller of
the acquired business, or are otherwise unable to recover against the seller, such damages, relief, costs or losses could materially and adversely impact our
business, financial condition and operating results.
Additionally, prior to their acquisition by us, Practice Fusion received a request for documents and information from the U.S. Attorney’s Office for
the District of Vermont pursuant to a CID. Subsequent to their acquisition by us, Practice Fusion received additional requests for documents and
information pursuant to additional CIDs and HIPAA subpoenas. These requests related to the certification of Practice Fusion’s software under the U.S.
Department of Health and Human Services’ Electronic Health Record Incentive Program, compliance with the Anti-Kickback Statute, and related business
practices. On January 27, 2020, Practice Fusion entered into a series of agreements to resolve these investigations. See risk factor entitled “The failure by
Practice Fusion to comply with the terms of its settlement agreements with the DOJ could have a material and adverse impact on our business, results of
operations and financial condition, and, even if Practice Fusion complies with those settlement agreements, the costs and burdens of compliance could be
significant, and we may face additional investigations and proceedings from other governmental entities or third parties related to the same or similar
conduct underlying the agreements with the DOJ.”
Furthermore, the success of our acquisitions will depend, in part, on our ability to integrate our existing businesses with those of the acquired
businesses, including the integration of employees, products and technologies. These integrations are inherently complex, costly and time-consuming
processes and involve numerous risks, including, but not limited to, unanticipated expenses and the diversion of financial, managerial and other resources
from both our existing operations and those of the acquired businesses. The integration of foreign acquisitions presents additional challenges associated
with integrating operations across different cultures and languages, as well as currency and regulatory risks associated with specific countries.
If we fail to properly evaluate and execute acquisitions or investments, or if we fail to successfully integrate acquired businesses, we may not be
able to achieve projected results or support the amount of consideration paid for such acquired businesses or investments, which could materially and
adversely impact our business, financial condition and operating results.
Finally, if we finance acquisitions or investments by issuing equity or convertible or other debt securities or loans, our existing stockholders may be diluted,
or we could face constraints related to the terms of and repayment obligations related to the incurrence of indebtedness. This could materially and adversely
impact our stock price.
The realignment of our sales, services and support organizations could adversely affect client relationships and affect our future growth.
We periodically make adjustments to our sales, services and support organizations in response to market opportunities, management changes,
product introductions and other internal and external considerations. These changes could result in a temporary lack of focus and reduced productivity. In
addition, these adjustments could result in our clients experiencing a change in our employees with whom they interact. Any of these changes could
adversely impact individual client relationships, client retention, and sales of products and services to existing clients. It is also possible that these changes
could adversely affect our ability to sell our products and services to new clients. Any such events could materially and adversely impact our business,
financial condition and operating results.
Our clients may not accept our products and services or may delay decisions whether to purchase our products and services.
Our business model depends on our ability to sell our products and services. Acceptance of our products and services may require our clients to
adopt different behavior patterns and new methods of conducting business and exchanging information. We cannot provide assurance that our clients will
integrate our products and services into their workflow or that participants in the healthcare market will accept our products and services as a replacement
for traditional methods of conducting healthcare transactions. Achieving market acceptance for our products and services will require substantial sales and
marketing efforts and the expenditure of significant financial and other resources to create awareness and demand by participants in the healthcare industry.
If we fail to achieve broad acceptance of our products and services by physicians, hospitals and other healthcare industry participants, or if we fail
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to position our services as a preferred method for information management and healthcare delivery, our business, financial condition and operating results
could be materially and adversely impacted.
It is difficult to predict the sales cycle and implementation schedule for our products and services.
The duration of the sales cycle and implementation schedule for our products and services depends on a number of factors, including the nature and
size of the potential client and the extent of the commitment being made by the potential client, all of which may be difficult to predict. Our sales and
marketing efforts with respect to hospitals and large health organizations generally involve a lengthy sales cycle due to these organizations’ complex
decision-making processes. Additionally, in light of increased government involvement in healthcare and related changes in the operating environment for
healthcare organizations, our current and potential clients may react by reducing or deferring investments, including their purchases of our solutions or
services. If clients take longer than we expect to decide whether to purchase our solutions, our selling expenses could increase and our revenues could
decrease, which could materially and adversely impact our business, financial condition and operating results. If clients take longer than we expect to
implement our solutions, our recognition of related revenue would be delayed, which could also materially and adversely impact our business, financial
condition and operating results.
The implementation of large and complex contracts requires us to devote sufficient personnel, systems, equipment, technology and other resources
necessary to ensure a timely and successful implementation. In addition, due to the amount of resources dedicated to implement large and complex
contracts, our ability to successfully bid for and implement other new customer contracts may be adversely affected. If we fail to implement large and
complex contracts successfully and in a timely manner, or if as a result of resource constraints, we fail to properly implement other new customer contracts,
we may face significant challenges that will adversely affect our business, financial condition and operating results.
Our future success depends upon our ability to grow, and if we are unable to manage our growth effectively, we may incur unexpected expenses
and be unable to meet our clients’ requirements.
We will need to expand our operations if we successfully achieve market acceptance for our products and services. We cannot be certain that our
systems, procedures, controls and existing space will be adequate to support expansion of our operations. Our future operating results will depend on the
ability of our officers and employees to manage changing business conditions and to effectively maintain and improve our technical, administrative,
financial control and reporting systems. We may not be able to expand and upgrade our systems and infrastructure to accommodate these increases.
Difficulties in managing any future growth, including as a result of integrating any prior or future acquisition with our existing businesses, could cause us
to incur unexpected expenses, render us unable to meet our clients’ requirements, and consequently could materially and adversely impact our business,
financial condition and operating results.
We are working to expand our operations in markets outside of the United States. There can be no assurance that these efforts will be successful.
We have limited experience in marketing, selling, implementing and supporting our products and services abroad. Expansion of our global sales and
operations may require us to divert the efforts of our technical and management personnel and could result in significant expense to us, which could
materially and adversely impact our operating results.
We may be unable to successfully introduce new products or services or fail to keep pace with advances in technology.
The successful implementation of our business model depends on our ability to adapt to evolving technologies and increasingly aggressive industry
standards and introduce new products and services accordingly. We cannot provide assurance that we will be able to introduce new products on schedule, or at
all, or that such products will achieve market acceptance. Moreover, competitors may develop competitive products that could adversely affect our operating
results. Any failure by us to introduce planned products or other new products or to introduce these products on schedule could have an adverse effect on our
revenue growth and operating results.
If we cannot adapt to changing technologies, our products and services may become obsolete and our business could suffer. Because the markets in
which we operate are characterized by rapid technological change, we may be unable to anticipate changes in our current and potential clients’ or users’
requirements that could make our existing technology obsolete. Our success will depend, in part, on our ability to continue to enhance our existing products
and services, develop new technology that addresses the increasingly sophisticated and varied needs of our prospective clients and users, license leading
technologies and respond to technological advances and emerging industry standards and practices, all on a timely and cost-effective basis. The
development of our proprietary technology entails significant technical and business risks. We may not be successful in using new technologies effectively
or adapting our proprietary technology to evolving client or user requirements or emerging industry standards. Any of the foregoing could materially and
adversely impact our business, financial condition and operating results.
Our business depends in part on our ability to establish and maintain additional strategic relationships.
To be successful, we must continue to maintain our existing strategic relationships and establish additional strategic relationships with leaders in a
number of the markets in which we operate. This is critical to our success because we believe that these relationships contribute to our ability to:
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extend the reach of our products and services to a larger number of physicians and hospitals and to other participants in the healthcare
industry;
develop and deploy new products and services;
further enhance our brand; and
generate additional revenue and cash flows.
Entering into strategic relationships is complicated because strategic partners may decide to compete with us in some or all of the markets in which
we operate. In addition, we may not be able to maintain or establish relationships with key participants in the healthcare industry if we conduct business
with their competitors.
We depend, in part, on our strategic partners’ ability to generate increased acceptance and use of our products and services. If we lose any of these
strategic relationships or fail to establish additional relationships, or if our strategic relationships fail to benefit us as expected, this could materially and
adversely impact our business, financial condition and operating results.
We may be unable to protect, and we may incur significant costs in enforcing, our intellectual property rights.
Our patents, trademarks, trade secrets, copyrights, and other intellectual property rights are important assets to us. Various events outside of our
control pose a threat to our intellectual property rights, as well as to our products, services, and technologies. For instance, any of our current or future
intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Any of our pending or future patent
applications, whether or not being currently challenged, may not be issued with the scope of the claims we seek, if at all.
We have taken efforts to protect our proprietary rights, including a combination of license agreements, confidentiality policies and procedures,
confidentiality provisions in employment agreements, confidentiality agreements with third parties, and technical security measures, as well as our reliance
on copyright, patent, trademark, trade secret and unfair competition laws. These efforts may not be sufficient or effective. For example, the secrecy of our
trade secrets or other confidential information could be compromised by our employees or by third parties, which could cause us to lose the competitive
advantage resulting from those trade secrets or that confidential information. Unauthorized third parties may try to copy or reverse engineer portions of our
products or otherwise infringe upon, misappropriate or use our intellectual property. We may not be able to discover or determine the extent of any
unauthorized use of our proprietary rights. We may also conclude that, in some instances, the benefits of protecting our intellectual property rights may be
outweighed by the expense.
In addition, our platforms incorporate “open source” software components that are licensed to us under various public domain licenses. Open
source license terms are often ambiguous, and there is little or no legal precedent governing the interpretation of many of the terms of certain of these
licenses. Therefore, the potential impact of such terms on our business is somewhat unknown. Further, some enterprises may be reluctant or unwilling to
use cloud-based services, because they have concerns regarding the risks associated with the security and reliability, among other things, of the technology
delivery model associated with these services. If enterprises do not perceive the benefits of our services, then the market for these services may not expand
as much or develop as quickly as we expect, either of which would adversely affect our business, financial condition, or operating results.
Legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain and evolving. The laws of
some foreign countries may not be as protective of intellectual property rights as those in the United States, and effective intellectual property protection
may not be available in every country in which our products and services are distributed.
Any impairment of our intellectual property rights, or our failure to protect our intellectual property rights adequately, could give our competitors’
access to our technology and could materially and adversely impact our business and operating results. Any increase in the unauthorized use of our
intellectual property could also divert the efforts of our technical and management personnel and result in significant additional expense to us, which could
materially and adversely impact our operating results. Finally, we may be required to spend significant resources to monitor and protect our intellectual
property rights, including with respect to legal proceedings, which could result in substantial costs and diversion of resources and could materially and
adversely impact our business, financial condition and operating results.
We could be impacted by unfavorable results of legal proceedings and claims, such as being found to have infringed on a third party’s intellectual
property rights.
We are subject to various legal proceedings and claims that have not yet been fully resolved, including the CIDs and those discussed under Note 22,
“Contingencies,” to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K,
and additional claims may arise in the future. For example, companies in our industry, including many of our competitors, have been subject to litigation
based on allegations of patent infringement or other violations of intellectual property rights. In particular, patent holding companies often engage in
litigation seeking to monetize patents that they have purchased or otherwise obtained. As the number of competitors, patents and patent holding companies
in our industry increases, the functionality of our products and services expands, and as we enter into new geographies and markets, the number of
intellectual
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property rights-related actions against us has increased and is likely to continue to increase. We are vigorously defending against these actions in a number
of jurisdictions.
If we are found to infringe one or more patents or other intellectual property rights, regardless of whether we can develop non-infringing
technology, we may be required to pay substantial damages or royalties to a third party, and we may be subject to a temporary or permanent injunction
prohibiting us from marketing or selling certain products or services. Furthermore, certain of our agreements require us to indemnify our clients and third-
party service providers for third party intellectual property infringement claims, which would increase the costs to us of an adverse ruling on such claims
and could adversely impact our relationships with our clients and third party service providers. In certain cases, we may consider the desirability of entering
into licensing agreements, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur. These
license agreements may also significantly increase our operating expenses.
Regardless of the merit of particular claims, legal proceedings may be expensive, time-consuming, disruptive to our operations and distracting to
our management. If one or more legal matters were resolved against or settled by us in a reporting period for amounts in excess of management’s
expectations, our consolidated financial statements for that reporting period could be materially and adversely impacted. Such an outcome could result in
significant compensatory, punitive or other monetary damages; disgorgement of revenue or profits; remedial corporate measures; or other injunctive or
equitable relief against us, any of which could materially and adversely impact our business, financial condition and operating results.
We maintain insurance coverage that may apply in the event we are involved in a legal proceeding or claim. This coverage may not continue to be
available on acceptable terms, may not be available in sufficient amounts to cover one or more claims against us, and may include larger self-insured
retentions or exclusions for certain products or services. In addition, the insurer might disclaim coverage as to any future claim. This could increase the
magnitude of the impact of one or more legal proceedings or claims being resolved against or settled by us.
Our exposure to risks associated with various claims, including the use of intellectual property, may be increased as a result of acquisitions of other
companies. For example, we may have a lower level of visibility into the development process with respect to intellectual property, or the care taken to
safeguard against infringement risks, with respect to the acquired company or its technology. In addition, third parties may make infringement or related
claims after we have acquired companies that had not been asserted prior to the acquisition.
Our success depends on the continued service and availability of key personnel.
Much of our future performance depends on the continued availability and service of our key personnel, including our Chief Executive Officer and
our President, the other members of our senior management team, and our other highly qualified personnel, as well as being able to hire additional highly
qualified personnel who have a deep understanding of our industry. Competition in our industry for such personnel, especially with respect to sales and
technical personnel, is intense. We are required to expend significant resources on identifying, hiring, developing, motivating and retaining such personnel
throughout our organization. Many of the companies with whom we compete for such personnel have greater resources than us and may be able to offer
more attractive terms of employment. Our investment in training and developing our employees makes them more attractive to our clients and competitors,
who may then seek to recruit them. Furthermore, our compensation arrangements, such as our equity award programs, may not always be successful in
attracting new employees and retaining and motivating our existing employees. Our failure to attract new highly qualified personnel, or our failure to retain
and motivate our existing key personnel, could materially and adversely impact our business, financial condition and operating results.
Our independent content and service providers may fail to perform adequately or comply with laws, regulations or contractual covenants.
We depend on independent content and service providers for communications and information services and for some of the benefits we provide
through our software applications and services, including the maintenance of managed care pharmacy guidelines, drug interaction reviews, the routing of
transaction data to third-party payers and the hosting of our applications. Our ability to rely on these services could be impaired as a result of the failure of
such providers to comply with applicable laws, regulations and contractual covenants or as a result of events affecting such providers, such as power loss,
telecommunication failures, software or hardware errors, computer viruses and similar disruptive problems, fire, flood and natural disasters. Any such
failure or event could adversely affect our relationships with our clients and damage our reputation. This could materially and adversely impact our
business, financial condition and operating results.
We may have no means of replacing content or services on a timely basis or at all if they are inadequate or in the event of a service interruption or
failure. We also rely on independent content providers for the majority of the clinical, educational and other healthcare information that we provide. In
addition, we depend on our content providers to deliver high quality content from reliable sources and to continually upgrade their content in response to
demand and evolving healthcare industry trends. If these parties fail to develop and maintain high quality, attractive content, the value of our brand and our
business, financial condition and operating results could be materially and adversely impacted.
We may be liable for use of content we provide.
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We provide content for use by healthcare providers in treating patients. Third-party content suppliers provide certain of this content. If this content
is incorrect or incomplete, adverse consequences, including death, may occur and give rise to product liability and other claims against us. In addition,
certain of our solutions provide applications that relate to patient clinical information, and a court or government agency may take the position that our
delivery of health information directly, including through licensed practitioners, or delivery of information by a third party site that a consumer accesses
through our websites, exposes us to personal injury liability, or other liability for wrongful delivery or handling of healthcare services or erroneous health
information. While we maintain insurance coverage in an amount that we believe is sufficient for our business, we cannot provide assurance that this
coverage will prove to be adequate or will continue to be available on acceptable terms, if at all. A claim that is brought against us that is uninsured or
under-insured could materially and adversely impact our business, financial condition and operating results. Even unsuccessful claims could result in
substantial costs and diversion of management and other resources.
Changes to the healthcare regulatory landscape could force us to reduce our prices.
We may be subject to pricing pressures with respect to our future sales arising from various sources, including practices of managed care
organizations, group purchasing arrangements made through government programs such as the Regional Extension Centers, and government action
affecting reimbursement levels related to physicians, hospitals, home health professionals or any combination thereof under Medicare, Medicaid and other
government health programs. Our clients and the other entities with which we have a business relationship are affected by changes in statutes, regulations
and limitations in governmental spending for Medicare, Medicaid and other programs. Recent government actions and future legislative and administrative
changes could limit government spending for the Medicare and Medicaid programs, limit payments to hospitals and other providers, increase emphasis on
competition, impose price controls, initiate new and expanded value-based reimbursement programs and create other programs that potentially could have
an adverse effect on our clients and the other entities with which we have a business relationship. If our pricing experiences significant downward pressure,
our business will be less profitable and our financial condition and operating results could be materially and adversely affected.
Our failure to license and integrate third-party technologies could harm our business.
We depend upon licenses for some of the technology used in our solutions from third-party vendors and intend to continue licensing technologies
from third parties. These technologies may not continue to be available to us on commercially reasonable terms or at all. Most of these licenses can be
renewed only by mutual consent and may be terminated if we breach the terms of the license and fail to cure the breach within a specified period of time.
Our inability to obtain, maintain or comply with any of these licenses could delay development until equivalent technology can be identified, licensed and
integrated, which would harm our business, financial condition and operating results.
Most of our third-party licenses are non-exclusive, and our competitors may obtain the right to use any of the technology covered by these licenses
and use the technology to compete directly with us. Our use of third-party technologies exposes us to increased risks, including, but not limited to, risks
associated with the integration of new technology into our solutions, the diversion of our resources from development of our own proprietary technology
and our inability to generate revenue from licensed technology sufficient to offset associated acquisition and maintenance costs. In addition, if our vendors
choose to discontinue support of the licensed technology in the future or are unsuccessful in their continued research and development efforts, we may not
be able to modify or adapt our own solutions.
Our business is subject to the risks of global operations.
We operate in several countries outside of the United States, including significant operations in Canada, India, Israel, the UK and Australia, and we
are further expanding our global sales efforts. This subjects our business to risks and challenges associated with operating globally, which include:
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changes in local political, economic, social and labor conditions;
natural disasters, acts of war, terrorism, pandemics or security breaches;
different employee/employer relationships, existence of workers’ councils and labor unions, and other challenges caused by distance, language
and cultural differences;
restrictions on foreign ownership and investments, and stringent foreign exchange controls that may prevent us from repatriating, or make it
cost-prohibitive for us to repatriate, cash earned in countries outside of the United States;
import and export requirements, tariffs, trade disputes and barriers;
longer payment cycles in some countries, increased credit risk and higher levels of payment fraud;
uncertainty regarding liability for our products and services, including uncertainty as a result of local laws and lack of legal precedent;
different or lesser protection of our intellectual property;
different legal and regulatory requirements that may apply to our products and/or how we operate;
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the discontinuation of the London Interbank Offered Rate (“LIBOR”) and the replacement with an alternative reference rate, which may
adversely impact interest rates; and
localization of our products and services, including translation into foreign languages and associated expenses.
All of the foregoing risks could prevent or restrict us from offering products or services to a particular market, could increase our operating costs,
and could otherwise materially and adversely impact our business, financial condition and operating results.
In addition, our compliance with complex foreign and United States laws and regulations that apply to our global operations increases our cost of
doing business. These numerous and sometimes conflicting laws and regulations include, but are not limited to, internal control and disclosure rules, data
privacy requirements, anti-corruption laws (such as the United States Foreign Corrupt Practices Act) and other local laws prohibiting corrupt payments to
government officials, and antitrust and competition regulations. Violations of these laws and regulations could result in, among other things, fines and
penalties, criminal sanctions, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and
could also affect our global expansion efforts, our business and our operating results. Although we have implemented policies and procedures designed to
ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, agents or distributors, or third parties with
whom we do business, will not violate our policies. Furthermore, potential changes in data privacy and protection requirements may increase our future
legal and regulatory compliance burden.
Finally, since we conduct business in currencies other than the United States dollar, but report our financial results in United States dollars, we face
exposure to fluctuations in currency exchange rates. Significant fluctuations in exchange rates between the United States dollar and foreign currencies may
make our products and services more expensive for our global clients, or otherwise materially and adversely impact our operating results. We may
occasionally hedge our global currency exposure; however, hedging programs are inherently risky and could expose us to additional risks.
Risks Related to Our Common Stock and Indebtedness
Our Board of Directors is authorized to issue preferred stock, and our certificate of incorporation, bylaws and debt instruments contain anti-
takeover provisions.
Our Board of Directors (our “Board”) has the authority to issue up to 1,000,000 shares of preferred stock and to determine the preferences, rights
and privileges of those shares without any further vote or action by our stockholders. In the event that we issue shares of preferred stock in the future that
have preference over our common stock with respect to payment of dividends or upon our liquidation, dissolution or winding-up, or if we issue shares of
preferred stock that are convertible into our common stock at greater than a one-to-one ratio, the voting and other rights of the holders of our common stock
or our stock price could be materially and adversely impacted. The ability of our Board to issue shares of preferred stock without any action on the part of
our stockholders could discourage, delay or prevent a change in control of our company or changes in our management that certain of our stockholders may
deem advantageous, which could lower our stock price.
Our certificate of incorporation and bylaws also contain provisions that could discourage, delay, or prevent a change in control of our company or
changes in our management that certain of our stockholders may deem advantageous, which could lower our stock price. These provisions, among other
things, prohibit our stockholders from acting by written consent or calling a special meeting of stockholders, and provide that our Board is expressly
authorized to make, alter or repeal our bylaws. Additionally:
•
•
•
the indenture (the “Indenture”) governing our 0.875% Convertible Senior Notes due 2027 (the “Convertible Notes”) may prohibit us from
engaging in a change of control of our company unless, among other things, the surviving entity assumes our obligations under the Convertible
Notes;
if a change of control of our company occurs, the Indenture may permit holders of the Convertible Notes to require us to repurchase all or a
portion of the Convertible Notes, and may also require us to pay a make-whole premium (in either cash, shares of our common stock or a
combination of cash or shares of our common stock) by increasing the conversion rate for a note holder who elects to convert; and
immediately prior to a change of control of our company, the Second Amended Credit Agreement (as defined under Note 10, “Debt,” to our
consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K) may require
us to repay all indebtedness outstanding thereunder.
These provisions in our certificate of incorporation, bylaws, and debt instruments could discourage, delay or prevent a change of control of our
company or changes in our management that certain of our stockholders may deem advantageous, and therefore could limit our stock price.
Finally, our certificate of incorporation includes an election to be governed by Section 203 of the Delaware General Corporation Law, which
prohibits us from engaging in any business combination with an interested stockholder for a period of three years from the date the person became an
interested stockholder, unless certain conditions are met. This provision could discourage, delay or prevent a change of control of our company by making
it more difficult for stockholders or potential acquirers to effect such a
24
change of control without negotiation, and may apply even if some of our stockholders consider the acquisition beneficial to them. This provision could
also adversely affect our stock price.
Our stock price is subject to volatility.
The market for our common stock has experienced and may experience significant price and volume fluctuations in response to a number of
factors, many of which are beyond our control. Additionally, the stock market in general, and the market prices for companies in our industry in particular,
have experienced extreme volatility that has often been unrelated or disproportionate to the operating performance of those companies. These broad market
and industry fluctuations may materially and adversely impact our stock price, regardless of our actual operating performance. Furthermore, volatility in
our stock price could force us to increase our cash compensation to employees or grant larger stock awards than we have historically, which could
materially and adversely impact our financial condition and operating results.
Some companies that have experienced volatility in the trading price of their stock have been the subject of securities class action litigation. If we
are the subject of such litigation, it could result in substantial costs to us and divert our management’s attention and resources, which could materially and
adversely impact our financial condition and operating results.
Our quarterly operating results may vary.
Our quarterly operating results have varied in the past, and we expect that our quarterly operating results will continue to vary in future periods
depending on a number of factors, some of which we have no control over, including clients’ budgetary constraints and internal acceptance procedures, the
sales, service and implementation cycles for our software products, potential downturns in the healthcare market and in economic conditions generally, and
other factors described in this “Risk Factors” section.
We base our expense levels in part on our expectations concerning future revenue, and these expense levels are relatively fixed in the short-term. If
we have lower revenue than expected, we may not be able to reduce our spending in the short-term in response. Any shortfall in revenue could materially
and adversely impact our operating results. In addition, our product sales cycle for larger sales is lengthy and unpredictable, making it difficult to estimate
our future bookings for any given period. If we do not achieve projected booking targets for a given period, securities analysts may change their
recommendations on our stock price. For these and other reasons, we may not meet the earnings estimates of securities analysts or investors, and our stock
price could be materially and adversely impacted.
Our indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations.
Our level of indebtedness could have important consequences. For example, it could make it more difficult for us to satisfy our obligations, increase
our vulnerability to general adverse economic and industry conditions, require us to dedicate a substantial portion of our cash flow from operations to
payments on our indebtedness, and otherwise place us at a competitive disadvantage compared to our competitors who have less indebtedness. We may
also be able to incur substantial additional indebtedness in the future. If new indebtedness is added to our current indebtedness levels, the related risks that
we face could intensify.
The Second Amended Credit Agreement and the Indenture each contain, and any future indebtedness would likely contain, a number of restrictive
covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to take actions that may be in our best
interests. Additionally, the Second Amended Credit Agreement requires us to satisfy and maintain specified financial ratios. Our ability to meet those
financial ratios can be affected by events beyond our control, and we may not be able to continue to meet those ratios. A breach of any of these covenants
could result in an event of default under the Second Amended Credit Agreement or the Indenture.
Under the Indenture, holders of the Convertible Notes have the right to require us to repurchase their Convertible Notes upon the occurrence of a
“fundamental change” (as defined in the Indentures) at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be
repurchased, plus accrued and unpaid interest, if any. However, we may not have enough available cash or be able to obtain financing at the time we are
required to make such repurchases of the Convertible Notes. Our failure to repurchase the Convertible Notes at a time when the repurchase is required
would constitute a default under the Indenture, which may result in acceleration of our outstanding indebtedness. In addition, if, upon the occurrence of a
“fundamental change” (as defined in the Indenture), holders of at least $35 million aggregate principal amount of the Convertible Notes require us to
repurchase their respective Convertible Notes, this will result in a default under the Second Amended Credit Agreement, which may result in, among other
things, the requirement to immediately repay all outstanding amounts owed thereunder.
Upon the occurrence of an event of default under the Second Amended Credit Agreement or the Indenture, our lenders could terminate all
commitments to extend further credit, and some or all of our outstanding indebtedness may become immediately due and payable. We may not have or be
able to obtain sufficient funds to make these accelerated payments. Additionally, we have pledged substantially all of our tangible and intangible property
as collateral under the Second Amended Credit Agreement, and the lenders under the Second Amended Credit Agreement could proceed against such
collateral if we were unable to timely repay these amounts.
25
The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
In the event the conditional conversion feature of the Convertible Notes is triggered, holders of the Convertible Notes will be entitled to convert the
Convertible Notes at any time during specified periods at their option. See Note 10, “Debt,” to our consolidated financial statements included in Part II,
Item 8, “Financial Statements and Supplementary Data” of this Form 10-K. If one or more holders elect to convert their Convertible Notes, unless we elect
to satisfy our conversion obligation by delivering solely shares of our common stock, we would be required to settle a portion or all of our conversion
obligations through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Convertible
Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a
current rather than long-term liability, which would result in a material reduction of our net working capital.
The accounting method for convertible debt securities that may be settled in cash, such as the Convertible Notes, could have a material effect on
our reported financial results.
Under applicable accounting standards, an entity must separately account for the liability and equity components of the convertible debt
instruments (such as the Convertible Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic
interest cost. The effect on the accounting for the Convertible Notes is that the equity component is required to be included in the additional paid-in capital
section of stockholders’ equity on our consolidated balance sheet, and the value of the equity component would be treated as original issue discount for
purposes of accounting for the debt component of the Convertible Notes. As a result, we will be required to record a greater amount of non-cash interest
expense in current periods presented as a result of the amortization of the discounted carrying value of the Convertible Notes to their face amount over the
term of the Convertible Notes. We will report lower net income in our financial results because interest is required to include both the current period’s
amortization of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial results, the trading
price of our common stock and the trading price of the Convertible Notes.
In addition, under certain circumstances, convertible debt instruments (such as the Convertible Notes) that may be settled entirely or partly in cash
are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the Convertible Notes are
not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Convertible Notes exceeds their principal
amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common
stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards
in the future will continue to permit the use of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares
issuable upon conversion of the Convertible Notes, then our diluted earnings per share would be adversely affected.
In August 2020, the FASB issued Accounting Standards Update No. 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20)
and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity”. The new standard changes the accounting for the convertible debt instruments described above. An entity may no longer be required to
separately account for the liability and equity components of convertible debt instruments. This could have the impact of reducing non-cash interest
expense, and thereby increasing net income. Additionally, the treasury stock method for calculating earnings per share will no longer be allowed for
convertible debt instruments whose principal amount may be settled using shares. Rather, the if-converted method may be required, which would decrease
our diluted weighted-average earnings per share. We are currently evaluating the impact of this accounting guidance, which is not effective for fiscal years
and interim periods within those fiscal years, until after December 15, 2021. The new standard is discussed under Note 1, “Basis of Presentation,” to our
consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.
General Risk Factors
We could be subject to changes in our tax rates, the adoption of new United States or international tax legislation or exposure to additional tax
liabilities.
We are subject to taxation in the United States and numerous foreign jurisdictions. Current economic and political conditions make tax rates in any
jurisdiction, including those in the United States, subject to significant change. Our future effective tax rates could also be affected by changes in the mix of
our earnings in countries with differing statutory tax rates, changes in the valuation of our deferred tax assets and liabilities, or changes in tax laws or their
interpretation, including changes in tax laws affecting our products and services and the healthcare industry more generally. We are also subject to the
examination of our tax returns and other documentation by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of an
adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes. There can be no assurance as to the outcome of
these examinations or that our assessments of the likelihood of an adverse outcome will be correct. If our effective tax rates were to increase, particularly in
the United States, or if the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, then this could materially
and adversely impact our financial condition and operating results.
26
Our business and reputation may be impacted by IT system failures or other disruptions.
We may be subject to IT systems failures and network disruptions. These may be caused by natural disasters, accidents, power disruptions,
telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, or other events or disruptions. System redundancy
may be ineffective or inadequate, and our disaster recovery planning may not be sufficient for all eventualities. Such failures or disruptions could prevent
access to or the delivery of certain of our products or services, compromise our data or our clients’ data or result in delayed or cancelled orders, as well as
potentially expose us to third party claims. System failures and disruptions could also impede our transactions processing services and financial reporting.
War, terrorism, geopolitical uncertainties, public health issues and other business disruptions have caused and could cause damage to the global
economy, and thus have a material and adverse impact on our business, financial condition and operating results. Our business operations are subject to
interruption by natural disasters, fire, power shortages, terrorist attacks and other hostile acts, labor disputes, public health issues and other issues beyond
our control. Such events could decrease our demand for our products or services or make it difficult or impossible for us to develop and deliver our
products or services to our clients. A significant portion of our research and development activities, our corporate headquarters, our IT systems and certain
of our other critical business operations are concentrated in a few geographic areas. In the event of a business disruption in one or more of those areas, we
could incur significant losses, require substantial recovery time and experience significant expenditures in order to resume operations, which could
materially and adversely impact our business, financial condition and operating results.
Our failure to maintain proper and effective internal controls over financial reporting could impair our ability to produce accurate and timely
financial statements.
We maintain internal financial and accounting controls and procedures that are designed to provide reasonable assurance regarding the reliability of
our financial reporting and the preparation of our financial statements in accordance with accounting principles generally accepted in the United States
(“GAAP”). Ensuring that we have adequate internal financial and accounting controls and procedures in place, such that we can provide accurate financial
statements on a timely basis, is a costly and time-consuming process that requires significant management attention. Additionally, if our independent
registered public accounting firm, which is subject to oversight by the Public Company Accounting Oversight Board, is not satisfied with our internal
controls over financial reporting, or if the firm interprets the relevant rules, regulations or requirements related to the maintenance of internal controls over
financial reporting differently than we do, then it may issue an adverse opinion.
As we continue to expand our business, the challenges involved in implementing adequate internal controls over financial reporting will increase.
Any failure to maintain adequate controls, any inability to produce accurate financial statements on a timely basis, or any adverse opinion issued by
our independent registered public accounting firm related to our internal controls over financial reporting, could increase our operating costs and materially
and adversely impact our operating results. In addition, investors’ perceptions that our internal controls over financial reporting are inadequate, or that we
are unable to produce accurate financial statements on a timely basis, may harm our stock price and make it more difficult for us to effectively market and
sell our services to clients, which could materially and adversely impact our business, financial condition, and operating results. This could also subject us
to sanctions or investigations by Nasdaq, the SEC or other applicable regulatory authorities, which could require the commitment of additional financial
and management resources.
We could suffer losses due to asset impairment charges.
We are required under GAAP to test our goodwill and indefinite-lived intangible assets for impairment on an annual basis, as well as on an interim
basis if indicators for potential impairment, such as a decline in our stock price, exist. Additional indicators that are considered include, but are not limited
to, significant changes in performance relative to expected operating results and negative economic trends. In addition, we periodically review our finite-
lived intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Factors that may be
considered a change in circumstances indicating that the carrying value of our intangible assets may not be recoverable include slower growth rates or the
divestiture of a business or asset below its carrying value. We may be required to record a charge to earnings in our consolidated financial statements
during the period in which any impairment of our goodwill or intangible assets is determined. This could materially and adversely impact on our operating
results.
There are inherent uncertainties in management’s estimates, judgments and assumptions used in assessing recoverability of goodwill and intangible
assets. Any changes in key assumptions, including failure to meet business plans, a further deterioration in the market or other unanticipated events and
circumstances, may affect the accuracy or validity of such estimates and could potentially result in an impairment charge.
Item 1B. Unresolved Staff Comments
None.
27
Item 2. Properties
Our corporate headquarters are located in Chicago, Illinois. As of December 31, 2020, we leased 1.1 million square feet of building space
worldwide. Our facilities are primarily located in the United States, although we also maintain facilities in Australia, Canada, India, Israel, Singapore and
the United Kingdom. Our facilities house various sales, services, support, development, and data processing functions, as well as certain ancillary functions
and other back-office functions related to our current operations. We believe that our existing facilities are adequate to meet our current business
requirements. If we require additional space, we believe that we will be able to obtain such space on acceptable, commercially reasonable terms.
Item 3. Legal Proceedings
Refer to Note 22, “Contingencies,” to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary
Data” of this Form 10-K.
Item 4. Mine Safety Disclosures
Not applicable.
28
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information for Common Stock
Our common stock is traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “MDRX.”
Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
PART II
On August 2, 2018, we announced that our Board approved a stock purchase program (the “2018 Program”) under which we could repurchase up
to $250 million of our common stock through December 31, 2020. We repurchased 4.1 million shares of our common stock under the 2018 Program for a
total of $46.7 million during the fourth quarter of 2020.
On November 18, 2020, we announced that our Board approved a new stock purchase program (the “2020 Program”) under which we may
repurchase up to $300 million of our common stock through December 31, 2021. The 2020 Program replaced the 2018 Program. During the fourth quarter
of 2020, we repurchased 14.1 million shares of our common stock under the 2020 Program. This is inclusive of shares repurchased through the accelerated
share repurchase agreements noted below.
On November 30, 2020, we entered into separate Master Confirmations (each, a “Master Confirmation”) and Supplemental Confirmations (each,
together with the related Master Confirmation, an “ASR Agreement”), with JPMorgan Chase Bank, National Association and Wells Fargo Bank, National
Association (each, an “ASR Counterparty”, or collectively, “ASR Counterparties”), to purchase shares of our common stock for a total payment of $200.0
million (the “Prepayment Amount”). Under the terms of the ASR Agreements, on November 30, 2020, we paid the Prepayment Amount to the ASR
Counterparties and received on December 2, 2020 an initial delivery of 11.7 million shares of our common stock, which is approximately 80% of the total
number of shares that could be repurchased under the ASR Agreements if the final purchase price per share equaled the closing price of our common stock
on November 30, 2020. These repurchased shares became treasury shares and were recorded as a $165.7 million reduction to shareholder’s equity. The
remaining $34.3 million of the Prepayment Amount was recorded as a reduction to shareholders’ equity as an unsettled forward contract indexed to our
common stock. We excluded the potential share impact of any remaining shares subject to repurchase from the computation of diluted earnings per share as
these shares would be anti-dilutive for the year ended December 31, 2020. The approximate dollar value of shares of our common stock that may yet be
purchased under the 2020 Program following the ASR Agreements is $67.2 million as of December 31, 2020.
At final settlement, depending on the final purchase price per share, the ASR Counterparties may be required to deliver additional shares of our
common stock to the Company, or, under certain circumstances, we may be required to make a cash payment to each ASR Counterparty or may elect to
deliver the equivalent value in shares of our common stock. The final purchase price per share under each ASR Agreement will generally be based on the
average of daily volume-weighted average prices of shares of our common stock during the term set forth in the such ASR Agreement. The ASR
Agreements contain provisions customary for agreements of this type, including provisions for adjustments to the transaction terms, the circumstances
generally under which the ASR Agreements may be accelerated, extended or terminated early by the ASR Counterparties and various acknowledgments,
representations and warranties made by the parties to one another. Final settlement of the ASR Agreements is expected to be completed during the second
quarter of 2021, although the settlement may be accelerated at the ASR Counterparties’ option.
29
Any future stock repurchase transactions may be made through open market transactions, block trades, privately negotiated transactions (including
accelerated share repurchase transactions) or other means, subject to our working capital needs, cash requirements for investments, debt repayment
obligations, economic and market conditions at the time, including the price of our common stock, and other factors that we consider relevant. Our stock
repurchase program may be accelerated, suspended, delayed or discontinued at any time.
(In thousands, except per share amounts)
Period (Based on Trade Date)
10/01/20—10/31/20
11/01/20—11/30/20
12/01/20—12/31/20
Total
Number
Of Shares
Purchased
Average
Price
Paid Per
Share(1)(2)
0 $
6,535 $
11,696
18,231 $
0.00
12.16
12.16
Total Number
Of Shares
Purchased
As Part Of
Publicly
Announced
Plans Or
Programs
Approximate
Dollar Value
Of Shares
That May Yet
Be Purchased
Under The
Plans Or
Programs
0 $
6,535 $
11,696 $
18,231
46,647
267,196
67,196
(1) Average price paid per share excludes effect of accelerated share repurchases. See additional disclosure above regarding our accelerated share repurchase activity during
2020.
(2) Excludes broker commissions in the case of open market transactions.
Dividend Policy
We currently do not intend to declare or pay cash dividends on our shares of common stock in the foreseeable future. Any future determination to
pay cash dividends will be at the discretion of our Board and will depend upon our results of operations, financial condition, current and anticipated cash
needs, contractual restrictions, restrictions imposed by applicable law and other factors that our Board deems relevant. The covenants in the Senior Secured
Credit Facility (as defined below) include a restriction on our ability to declare dividends and other payments in respect of our capital stock. See Note 10,
“Debt,” to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K for further
information regarding our Senior Secured Credit Facility.
Stockholders
According to the records of our transfer agent, as of February 22, 2021, there were 356 holders of record of our common stock, including banks,
brokers and other nominees who hold shares of our common stock on behalf of an indeterminate number of beneficial owners.
30
Performance Graph
The following graph compares the cumulative 5-Year total return to stockholders on our common stock relative to the cumulative total returns of
the Nasdaq Composite index and the Nasdaq Health Services index for the period commencing on December 31, 2015 through December 31, 2020, and
assuming an initial investment of $100. Data for the Nasdaq Composite index and the Nasdaq Health Services index assumes reinvestment of dividends.
The following will not be deemed incorporated by reference into any of our other filings under the Exchange Act or the Securities Act of 1933, as
amended, except to the extent we specifically incorporate it by reference into such filings. Note that historic stock price performance is not necessarily
indicative of future stock price performance.
Allscripts Healthcare Solutions, Inc.
NASDAQ Composite
NASDAQ Health Services
2015
2016
2017
2018
2019
2020
100.00
100.00
100.00
66.38
108.87
78.91
94.60
141.13
90.89
62.68
137.12
108.53
63.82
187.44
151.08
93.89
271.64
242.42
31
Item 6. Selected Financial Data
The selected consolidated financial data shown below should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and Part II, Item 8, “Financial Statements and Supplementary Data” in this Form 10-K to fully
understand factors that may affect the comparability of the information presented below. The consolidated statements of operations data for the years ended
December 31, 2020, 2019 and 2018 and the balance sheet data as of December 31, 2020 and 2019 are derived from our audited consolidated financial
statements included elsewhere in this Form 10-K. The consolidated statements of operations data for the years ended December 31, 2017 and 2016 and the
balance sheet data as of December 31, 2018, 2017 and 2016 are derived from audited consolidated financial statements that are not included in this Form
10-K. The historical results are not necessarily indicative of results to be expected for any future period.
(In thousands, except per share amounts)
Consolidated Statements of Operations Data:
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Research and development
Asset impairment charges
Goodwill impairment charge
Amortization of intangible and acquisition-related assets
Loss from operations
Interest expense
Other income (loss), net
Gain on sale of businesses, net
Impairment of long-term investments
Equity in net income (loss) of unconsolidated investments
Loss from continuing operations before income taxes
Income tax benefit
Loss from continuing operations, net of tax
Income from discontinued operations
Gain on sale of discontinued operations
Income tax effect on discontinued operations
Income from discontinued operations, net of tax
Net income (loss)
Net loss (income) attributable to non-controlling interest
Accretion of redemption preference on redeemable
convertible non-controlling interest -
discontinued operations
Net income (loss) attributable to Allscripts Healthcare
Solutions, Inc. stockholders
Net income (loss) attributable to Allscripts Healthcare
Solutions, Inc. stockholders per share:
Basic:
Continuing operations
Discontinued operations
Net income (loss) attributable to Allscripts Healthcare
Solutions, Inc. stockholders per share
Diluted:
Continuing operations
Discontinued operations
Net income (loss) attributable to Allscripts Healthcare
Solutions, Inc. stockholders per share
$
2020
2019(1)
2018(2)
2017(3)
2016(4)
Year Ended December 31,
$
1,502,700
937,005
565,695
389,941
206,061
74,969
0
25,604
(130,880)
(34,104)
54
0
(1,575)
17,194
(149,311)
16,692
(132,619)
71,448
1,156,504
(394,926)
833,026
700,407
0
1,632,611 $
1,022,324
610,287
400,808
245,443
10,837
25,700
27,188
(99,689)
(43,172)
(138,904)
0
(651)
665
(281,751)
43,340
(238,411)
75,235
0
(19,426)
55,809
(182,602)
424
1,617,841 $
996,450
621,391
432,849
258,736
58,166
13,466
26,558
(168,384)
(50,914)
69
172,258
(15,487)
259
(62,199)
18,983
(43,216)
2,501
500,471
(51,949)
451,023
407,807
4,527
1,364,697 $
840,843
523,854
389,569
195,787
0
0
17,316
(78,818)
(37,540)
(512)
0
(165,290)
821
(281,339)
41,214
(240,125)
79,386
0
6,564
85,950
(154,175)
1,566
1,255,697
765,831
489,866
327,415
170,861
4,650
0
15,878
(28,938)
(29,478)
829
0
0
(7,501)
(65,088)
37,393
(27,695)
50,304
0
(19,579)
30,725
3,030
(146)
0
0
(48,594)
(43,850)
(28,536)
$
700,407
$
(182,178) $
363,740 $
(196,459) $
(25,652)
$
$
$
$
$
$
(0.83)
5.23
$
$
(1.43) $
0.33 $
(0.22) $
2.29 $
(1.32) $
0.23 $
(0.15)
0.01
4.40
$
(1.10) $
2.07 $
(1.09) $
(0.14)
(0.83)
5.23
$
$
(1.43) $
0.33 $
(0.22) $
2.29 $
(1.32) $
0.23 $
(0.15)
0.01
4.40
$
(1.10)
$
2.07
$
(1.09) $
(0.14)
(1) Results of operations for the year ended December 31, 2019 include the results of operations of (i) Pinnacle and Diabetes and Collaborative Registries subsequent to the
date of acquisition, which was July 2, 2019 and (ii) a third party engaged in a specialty prescription drug platform subsequent to the date of acquisition, which was June
10, 2019.
(2) Results of operations for the year ended December 31, 2018 include the results of operations of: (i) Health Grid Holding Company subsequent to the date of acquisition,
which was May 18, 2018 and (ii) Practice Fusion, Inc., subsequent to the date of acquisition, which was February 13, 2018.
32
(3) Results of operations for the year ended December 31, 2017 include the results of operations of: (i) Enterprise Information Solutions (“EIS”) subsequent to the date of
acquisition, which was October 2, 2017; and (ii) NantHealth’s patient/provider engagement solutions business for the period subsequent to the date of acquisition, which
was August 25, 2017.
(4) Results of operations for the year ended December 31, 2016 include the results of operations of: (i) a third party for the period subsequent to the date of acquisition,
which was December 2, 2016; (ii) a third party for the period subsequent to the date of acquisition, which was October 14, 2016; and (iii) a third party for the period
subsequent to the date of acquisition of a controlling interest, which was September 8, 2016.
(In thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable securities
Working capital (deficit)
Goodwill and intangible assets, net
Total assets
Long-term debt
Total stockholders’ equity
2020
2019
As of December 31,
2018
2017
2016
$
$
537,465
218,445
1,261,331
2,917,618
167,587
1,666,243
137,539 $
(369,428)
1,341,238
3,205,739
551,004
1,285,188
184,795 $
61,235
1,408,438
3,181,484
647,539
1,580,427
130,994 $
(32,515)
1,216,653
4,230,150
906,725
1,160,072
71,545
(62,610)
1,048,385
3,832,159
717,853
1,273,201
33
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in Part II, Item 8,
“Financial Statements and Supplementary Data” of this Form 10-K under the heading “Financial Statements and Supplementary Data” and the other
financial information that appears elsewhere in this Form 10-K. We assume no obligation to revise or update any forward-looking statements for any
reason, except as required by law.
Overview
Our Business Overview and Regulatory Environment
We deliver information technology (“IT”) solutions and services to help healthcare organizations achieve optimal clinical, financial and
operational results. We sell our solutions to physicians, hospitals, governments, health systems, health plans, life sciences companies, retail clinics, retail
pharmacies, pharmacy benefit managers, insurance companies, employer wellness clinics, and post-acute organizations, such as home health and hospice
agencies. We help our clients improve the quality and efficiency of health care with solutions that include electronic health records (“EHRs”), information
connectivity, private cloud hosting, outsourcing, analytics, patient access and population health management. We derive our revenues primarily from sales
of our proprietary software (either as a perpetual license sale or under a subscription delivery model), support and maintenance services, and managed
services, such as outsourcing, private cloud hosting and revenue cycle management.
Our solutions empower healthcare professionals with the data, insights and connectivity to other caregivers they need to succeed in an industry
that is rapidly changing from fee-for-service models to fee-for-value advanced payment models. We believe we offer some of the most comprehensive
solutions in our industry today. Healthcare organizations can effectively manage patients and patient populations across all care settings using a
combination of our physician, hospital, health system, post-acute care and population health management products and services. We believe these solutions
will help transform health care as the industry seeks new ways to manage risk, improve quality and reduce costs.
Globally, healthcare providers face the urgency of the COVID-19 crisis, as well as an aging population and the challenge of caring for an
increasing number of patients with chronic diseases. At the same time, practitioners worldwide are also under growing pressure to demonstrate the delivery
of high-quality care at lower costs and to fully embrace expectations of efficient, patient-centered information exchange. Congressional oversight of EHRs
and health information technology has increased in recent years. This increased oversight could impact our clients and our business. The passage of the
21st Century Cures Act in December 2016 assuaged some concerns about interoperability and possible U.S. Food and Drug Administration (“FDA”)
oversight of EHRs, and the ensuing regulations on data blocking and interoperability were released by the Department of Health and Human Services
(“HHS”) in March 2020. Some aspects of the new regulations will have a significant effect on our business processes and how our clients must exchange
patient information. In particular, Allscripts will need to complete development work to satisfy the revised and new certification criterion, and we and our
clients will be making adjustments to business practices associated with information exchange and provision of Electronic Health Information.
Population health management, analytics, data connectivity based on open APIs and other exchange mechanisms, and patient engagement are
strategic imperatives that can help address these challenges. In the United States, for example, such initiatives are critical tools for success under the
framework of the QPP, launched by the Centers for Medicare & Medicaid Services (“CMS”) in response to the passage of the Medicare Access and CHIP
Reauthorization Act (“MACRA”). As healthcare providers and payers continue to migrate from volume-based to value-based care delivery and also weigh
compliance with the newly finalized information blocking and interoperability regulations from the Office of the National Coordinator for Health
Information Technology (“ONC”) and CMS, solutions that are connected to the consumer marketplace are the key to market leadership in the new
healthcare reality. Additionally, there is a small but growing portion of the market interested in payment models not reliant on insurance, such as the direct
primary care model, where doctors and other healthcare professionals understand the clinical value of the interoperable EHR separate and apart from
payment mechanisms established by public or commercial payers or associated reporting requirements.
We believe our solutions are delivering value to our clients by providing them with powerful connectivity, as well as increasingly robust patient
engagement and care coordination tools, enabling users to successfully participate in alternative payment models that reward high value care delivery.
Population health management is commonly viewed as one of the critical next frontiers in healthcare delivery, and we expect this evolving area to be a key
driver of our future growth, both domestically and globally.
Recent advances in molecular science and computer technology are creating opportunities for the delivery of personalized medicine solutions. We
believe these solutions will transform the coordination and delivery of health care, ultimately improving patient outcomes.
Specific to the United States, the healthcare IT industry in which we operate continues to experience a period of change, primarily due to new laws
and regulations, as well as modifications to industry standards. Various incentives that exist today (including alternative payment models that reward high
value care delivery) have been rapidly moving health care toward a time where EHRs are as common as practice management or other financial systems in
all provider offices. As a result, we believe that legislation, such as the aforementioned MACRA, as well as other government-driven initiatives (including
at the state level), will continue to affect healthcare IT adoption and expansion, including products and solutions like ours. We also believe that we are well-
positioned in the market to take advantage of the ongoing opportunity presented by these changes.
34
The recently finalized ONC regulation on interoperability, information blocking and certification is the most recent major government action that
will affect the health IT industry. The rule requires that we evaluate changes to business processes related to requests for the access, exchange or use of
Electronic Health Information, as defined in the ONC regulation. The rule, which involves complex and specific requirements, will necessitate adjustments
in our interactions with the market, but we also believe it may lead healthcare organizations to further invest in technologies, such as those sold by
Allscripts, that facilitate the exchange of health data and support patients’ access to their information. Given Allscripts’ OPEN strategy, the Company’s
application programming interface-based approach to connectivity launched more than a decade ago that exemplified for policy makers the potential
benefits of APIs, we expect that Allscripts may be better positioned to adjust more quickly than some other companies in our sector to the requirement to
remove barriers to information exchange.
In addition, given that CMS annually proposes new and revised regulations, including payment rules for upcoming years, which require the use of
EHRs and other health information technology even as we comply with previously published rules, Allscripts continues to prepare on an ongoing basis for
additional areas in which we must execute compliance. Similarly, our ability to achieve newly expanded applicable product certification requirements
resulting from changing strategies at the ONC and the scope of related development and other efforts required to meet regulatory standards could both
materially impact our capacity to maximize the market opportunity. All of our market-facing EHR solutions and several other relevant products have
successfully completed the testing process and are certified as 2015 Edition-compliant by an ONC-Authorized Certification Body (the most recent edition),
and we remain committed to satisfying the new certification requirements and meeting the 2015 Edition conditions of certification that were finalized in
March 2020 by the ONC.
The MACRA encouraged the adoption of health IT necessary to satisfy new requirements more closely associating the report of quality
measurements to Medicare payments. Following the finalization of the Physician Fee Schedule rule each year, providers accepting payment from Medicare
must select one of two payment models: the Merit-based Incentive Payment System (“MIPS”) or an Advanced Alternative Payment Model (“APM”). Both
of these approaches require substantive reporting on quality measures. Additionally, the MIPS consolidated several preexisting incentive programs,
including Medicare Meaningful Use and Physician Quality Reporting System, under one umbrella, as required by statute. We believe this law, coupled with
other pay for value programs, continues to drive additional interest in our products among providers who were not eligible for or chose not to participate in
the Health Information Technology for Economic and Clinical Health Act (“HITECH”) incentive program but now need EHR and other health IT solutions
and among those looking to purchase more robust systems to comply with increasingly complex MACRA requirements. Additional regulations continue to
be released annually, clarifying requirements related to reporting and quality measures, which will enable physician populations and healthcare
organizations to make strategic decisions about the purchase of analytic software or other solutions important to comply with the new law and associated
regulations.
Given the ongoing expansion of payment models requiring analytics, reporting and greater data connectivity, we believe large physician groups
will continue to purchase and enhance their use of EHR technology; while the number of very large practices with over 100 physicians that have not yet
acquired such technology is insignificant, the number of those considering replacement purchases is increasing. Such practices may choose to replace older
EHR technology in the future as regulatory requirements (such as those related to Advanced APMs) and business realities dictate the need for updates and
upgrades, as well as additional features and functionality. As incentive payment strategies shift again through policies released by the new Biden
Administration in the United States (including the anticipated growth in Medicaid payment models) and the role of commercial payers and their continued
expansion of alternative payment models and interest in attaining larger volumes of clinical data, we expect that there will be additional incentives for
purchase and expansion of EHR technology.
We also continue to see activity in local community-based buying, whereby individual hospitals, health systems and integrated delivery networks
subsidize the purchase of EHR licenses or related services for local, affiliated physicians and physicians across their employed physician base in order to
leverage buying power and to help those practices take advantage of payment reform opportunities. This activity has also resulted in a pull-through effect
where smaller practices affiliated with a community hospital are motivated to participate in a variety of incentive programs, while the subsidizing health
system expands connectivity within the local provider community. We believe that the rules related to exceptions to the Stark Law and Anti-Kickback
Statute, which were revised to continue to allow hospitals and other organizations to subsidize the purchase of EHRs, will possibly further contribute to the
growth of this market dynamic. We expect that these regulatory revisions from HHS will further support value-based payment models and their associated
purchasing arrangements between hospitals and physician practices, including allowing subsidization of replacement EHRs and not just initial purchases.
The associated challenge we face is to successfully position, sell, implement and support our products sold to hospitals, health systems or integrated
delivery networks that subsidize their affiliated physicians. We believe the community programs we have in place will help us penetrate these markets.
We believe we have taken and continue to take the proper steps to maximize the opportunity presented by the QPP and other new payment
programs. However, given the effects the laws are having on our clients, there can be no assurance that they will result in significant new orders for us in
the near term, and if they do, that we will have the capacity to meet the additional market demand in a timely fashion.
35
Additionally, other public laws to reform the United States healthcare system contain various provisions that may impact us and our clients. The
previous Trump Administration and several state governments took steps to alter aspects of the PPACA, including through litigation being reviewed by the
United States Supreme Court, which continues to create uncertainty for us and for our clients. We expect that the new Biden Administration will take a
different approach to the PPACA, including attempting to expand the number of citizens covered by health insurance, which would be favorable for our
clients. Some laws currently in place may have a positive impact by requiring the expanded use of EHRs, quality measurement, prescription drug
monitoring and analytics tools to participate in certain federal, state or private sector programs. Others, such as laws or regulations mandating reductions in
reimbursement for certain types of providers, restrictions on “surprise billing” for certain services and by certain provider types, or increasing regulatory
oversight of our products or our business practices, may have a negative impact by reducing the resources available to purchase our products. Increases in
fraud and abuse enforcement and payment adjustments for non-participation in certain programs or overpayment of certain incentive payments may also
adversely affect participants in the healthcare sector, including us.
Allscripts continues to see increased opportunities stemming from the large stores of patient data accumulated from our industry-leading client
base and partnerships with other EHR companies, including NextGen Healthcare Inc., a leading provider of ambulatory-focused healthcare technology
solutions. Through collaboration with researchers and life sciences companies, we believe Allscripts may play a role in the study of real-world evidence as
it relates to post-market surveillance of new medicines or the study of therapeutics related to COVID-19, as examples. We continue to closely monitor
regulations and/or guidance from HHS, the CDC and the FDA, as well as any new laws that take shape in Congress that may touch third-party uses of
patient data and/or any related privacy implications for patient consent.
Congressional focus on addressing the opioid epidemic in part through technological applications and reducing clinician burden is likely to
continue. Further, CMS has finalized changes to the Evaluation & Management coding structure that ties closely to our clients’ requirements to document
the care they are delivering prior to payment. We expect these changes may have a positive effect on clinician satisfaction with our EHRs, though the
fundamentals of payment will remain in transition to value-based payment models.
New payment and delivery system reform programs, including those modeled after those of the Medicare program, are increasingly being rolled
out at the state level through Medicaid administrators, as well as through the private sector, presenting additional opportunities for us to provide software
and services to our clients who participate. We also must take steps to comply with state-specific laws and regulations governing companies in the health
information technology space.
Impacts of COVID-19
The global outbreak of COVID-19 has severely restricted the level of economic activity around the world and the degrees of any economic recovery
in various jurisdictions have not been linear. We have been carefully monitoring the COVID-19 pandemic and its impact on our global operations and the
demand for our products. We are conducting business with certain modifications to employee travel, employee work locations, and cost reduction
initiatives, among other modifications. We will continue to actively monitor the situation and may take further actions that alter our business operations as
may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, partners and stockholders.
Allscripts, as is true of other health IT vendors, has been asked by the White House, HHS, the CDC, and state and local governments to support
public health efforts to contain the pandemic by expanding COVID-19 reporting options available to our clients. Our technology has been instrumental to
the provision of high-quality care, aiding not only public health surveillance, including tracking which patients have received a vaccine, but also in clinical
decision support interventions to aid in triage, diagnosis and treatment; information exchange as patients are moved from site to site; predictive analytics
based on local data for surge anticipation; and patient transitions as they leave the acute care environment for post-acute rehabilitative care.
The COVID-19 pandemic negatively impacted revenue for the year ended December 31, 2020, as we saw delays in deals with upfront software
revenue and professional services implementations across our inpatient and outpatient base. We also experienced lower revenue from our clients as patient
volumes were lower for most of our clients. During 2020, we implemented cost reduction actions across all functional disciplines of the Company,
including headcount reductions and temporary salary measures. We believe our cost reduction actions and current liquidity provide us with operating and
financial flexibility to assist us in navigating through this uncertain environment.
The extent to which the COVID-19 pandemic will continue to impact the Company’s results of operations and financial condition will depend on
future developments that are highly uncertain and cannot be predicted. Future developments include new information that may emerge concerning the
duration and severity of the COVID-19 pandemic, resurgences or additional “waves” of outbreaks of COVID-19 in various jurisdictions (including new
strains or mutations of the virus), the impact of COVID-19 on economic activity, the actions taken by health authorities and policy makers to contain its
impacts on public health and the global economy and the availability and effectiveness of vaccines. See Part I, Item 1A, Risk Factors, for an additional
discussion of risks related to COVID-19.
36
Summary of Results
During 2020, we continued to make progress on our key strategic, financial and operational imperatives aimed at driving higher client satisfaction,
improving our competitive positioning by expanding the depth and breadth of our products and, ultimately, positioning the Company for sustainable long-
term growth both domestically and globally. In that regard, we had success across the below key areas:
•
•
•
U.S. Core Solutions and Services: During 2020, we extended our engagement with our largest customer, Northwell Health, along with PIH
Health Inc., Medway NHS Foundation Trust, Hospital Corporation of America and others. We also extended our long-standing strategic
alliance with Microsoft to enable the expanded development and delivery of cloud-based health IT solutions. The five-year extension with
Microsoft will support our cloud-based SunriseTM electronic health record, making Microsoft the cloud provider for the solution and opening
up co-innovation opportunities to help transform healthcare with smarter, more scalable technology.
Value-based Care: During 2020, we introduced innovative solutions to our clients to help them manage through the COVID-19 pandemic. Our
innovative solutions consisted of the rapid deployment of FollowMyHealth telehealth, COVID-19 specific workflows for our SunriseTM
solution, capacity surveillance, regulatory reporting and vaccine administration tasks within our EHRs and IT services staffing to supplement
our client teams.
Capital Deployment and Operational Efficiency: During 2020, we significantly improved our leverage profile by divesting two businesses,
CarePort and EPSi, for $1.35 billion and $365.0 million, respectively. The net proceeds from these divestitures will allow us to reduce debt,
invest in growth for our solutions and support significant share repurchases. During 2020, we also implemented cost reduction initiatives
across all functional disciplines of the Company to reduce low-value operating costs, align our cost base with the COVID-19 impact on
revenues and improve our margins.
Total revenue for the year ended December 31, 2020 was $1.5 billion, a decrease of 8% compared with the year ended December 31, 2019.
Software delivery, support and maintenance revenue totaled $915 million in the year ended December 31, 2020, a decrease of 9% compared to the prior
year. Client services revenue totaled $588 million in the year ended December 31, 2020, a decrease of 6% compared to the prior year.
Gross profit decreased during 2020 compared to 2019, primarily due to a decrease in revenues and higher amortization of software development
costs. The decrease was partially offset by the impact of the cost reduction initiatives. Gross margin slightly increased by 0.2% to 37.6% compared with the
prior year period gross margin of 37.4%, primarily due to the previously mentioned cost reduction initiatives.
Our contract backlog as of both December 31, 2020 and December 31, 2019 was $4.1 billion, respectively.
Revenues and Expenses
Revenues are derived primarily from sales of our proprietary software (either under a perpetual or term license delivery model), subscription-based
software sales, post-contract client support and maintenance services, and managed services solutions, such as outsourcing, private cloud hosting and
revenue cycle management.
Cost of revenue consists primarily of salaries, incentive compensation and benefits for our billable professionals, third-party software costs, third-
party transaction processing and consultant costs, amortization of acquired proprietary technology and capitalized software development costs, depreciation
and other direct engagement costs.
Selling, general and administrative expenses consist primarily of salaries, incentive compensation and benefits for management and administrative
personnel, sales commissions and marketing expenses, facilities costs, depreciation and amortization and other general operating expenses.
Research and development expenses consist primarily of salaries, incentive compensation and benefits for our development personnel, third‑party
contractor costs and other costs directly or indirectly related to development of new products and upgrading and enhancing existing products.
Asset impairment charges consist primarily of non-cash charges related to the retirement of hosting assets, the abandonment of a lease, our decision
to discontinue several software development projects and the impairment of several intangible assets.
Goodwill impairment charges incurred related to our Hospital and Health System business and to the acquisition of the patient/provider
engagement solutions business from NantHealth during the years ended December 31, 2019 and 2018, respectively.
Amortization of intangible and acquisition-related assets consists of amortization of customer relationships, tradenames and other intangibles
acquired through business combinations recorded under the purchase method of accounting.
Interest expense consists primarily of interest on the 0.875% Convertible Senior Notes (the “0.875% Notes”), on the 1.25% Cash Convertible
Senior Notes (the “1.25% Notes”) and on the outstanding debt under our senior secured credit facility, including the amortization of debt discounts and debt
issuance costs. On July 1, 2020, the 1.25% Notes matured and were paid in full.
Other income (loss), net included a settlement with the Department of Justice related to our Practice Fusion business.
37
Gain on sale of businesses, net consists of net gains from the divestitures during 2018 of the OneContent and Strategic Sourcing businesses, both of
which had been acquired in the fourth quarter of 2017 with the EIS Business.
Impairment of long-term investments primarily consists of other-than-temporary and realized losses associated with our available for sale
marketable securities.
Equity in net income of unconsolidated investments represents our share of the equity earnings of our investments in third parties accounted for
under the equity method, including a gain on the sale of a third-party equity-method investment and the amortization of cost basis adjustments.
Income from discontinued operations during the years ended December 31, 2020, 2019 and 2018 includes activity associated with CarePort and
EPSi. Income from discontinued operations during the year ended December 31, 2018 includes activity associated with Netsmart LLC (“Netsmart”) and of
two solutions acquired with the EIS Business, which were sunset in 2018.
Gain on sale of discontinued operations consists of net gains from the divestitures of EPSi and CarePort during 2020 and our investment in
Netsmart during 2018.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that
affect the amounts reported and disclosed in our consolidated financial statements and the accompanying notes. The accounting policies and estimates
discussed in this section are those that we consider to be particularly critical to an understanding of our consolidated financial statements because their
application involves significant judgment regarding the effect of inherently uncertain matters on our financial results. Actual results could differ materially
from these estimates under different assumptions or conditions.
Revenue Recognition
Refer to Note 2, “Revenue from Contracts with Customers” to our consolidated financial statements included in Part II, Item 8, “Financial
Statements and Supplementary Data” of this Form 10-K for a detailed discussion about our revenue recognition accounting policies.
Credit Loss for Contracts Assets
Refer to Note 2, “Revenue from Contracts with Customers” to our consolidated financial statements included in Part II, Item 8, “Financial
Statements and Supplementary Data” of this Form 10-K for a detailed discussion about our credit loss accounting policy related to contract assets.
Credit Loss for Trade Accounts Receivable
Refer to Note 3, “Accounts Receivable” to our consolidated financial statements included in Part II, Item 8, “Financial Statements and
Supplementary Data” of this Form 10-K for a detailed discussion about our credit loss accounting policy related to trade accounts receivable.
Business Combinations
Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets
acquired and the liabilities assumed. While we use our best estimates and assumptions as a part of the purchase price allocation process to accurately value
assets acquired, including intangible assets, and the liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to
refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair
values of the assets acquired and the liabilities assumed, with a corresponding offset to goodwill. Upon the conclusion of the measurement period or final
determination of the values of assets acquired or the liabilities assumed, whichever comes first, any subsequent adjustments are reflected in our
consolidated statement of operations.
Goodwill and Intangible Assets
Goodwill and intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but are tested
for impairment annually or between annual tests when an impairment indicator exists. If an optional qualitative goodwill impairment assessment is not
performed, we are required to determine the fair value of each reporting unit. If a reporting unit’s fair value is lower than its carrying value, an impairment
loss equal to the excess will be recorded not to exceed the carrying amount of goodwill assigned to the reporting unit. The recoverability of indefinite-lived
intangible assets is assessed by comparison of the carrying value of an asset to its estimated fair value. If we determine that the carrying value of an asset
exceeds its estimated fair value, an impairment loss equal to the excess will be recorded.
38
The determination of the fair value of our reporting units is based on a combination of a market approach, which considers benchmark company
market multiples, and an income approach, which utilizes discounted cash flows for each reporting unit and other Level 3 inputs. Under the income
approach, we determine fair value based on the present value of the most recent cash flow projections for each reporting unit as of the date of the analysis,
and calculate a terminal value utilizing a terminal growth rate. The significant assumptions under this approach include, among others: income projections,
which are dependent on sales to new and existing clients, new product introductions, client behavior, competitor pricing, operating expenses, the discount
rate and the terminal growth rate. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as
our expectations of future performance and the expected economic environment, which are partly based on our historical experience. Our estimates are
subject to change given the inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate are based on our
judgment of the rates that would be utilized by a hypothetical market participant. As part of the goodwill impairment testing, we also consider our market
capitalization in assessing the reasonableness of the fair values estimated for our reporting units.
During 2020, we made organizational changes that affected our reportable segments. Refer to Note 19, “Business Segments” to our consolidated
financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K for detailed discussion about these
changes.
We performed our 2020 goodwill impairment test as of October 1, 2020. The fair value of each of our reporting units substantially exceeded its
carrying value and no indicators of impairment were identified as a result of the annual impairment test. If future anticipated cash flows from our reporting
units are significantly lower or materialize at a later time than projected, our goodwill could be impaired, which could result in significant charges to
earnings.
We performed our 2019 goodwill impairment test as of October 1, 2019. As a result of this test, we concluded that the carrying value of the
Hospitals and Health Systems (“HHS”) reporting unit, which is now reported within the Core Clinical and Financial Solutions reporting unit, exceeded its
fair value. As a result, we recognized a goodwill impairment charge of $25.7 million. This goodwill impairment charge is reflected on the “Goodwill
impairment charge” line in our consolidated statements of operations. The fair values of all other reporting units substantially exceeded their carrying
values. As of December 31, 2019, the goodwill allocated to the HHS reporting unit was $485.5 million.
We performed our 2018 goodwill impairment test as of October 1, 2018. We concluded that the carrying value of the NantHealth reporting unit
exceeded its fair value as a result of this test. Our latest available financial forecasts at the time of the annual goodwill impairment test reflected that
projected future operating costs exceeded projected revenues resulting in negative operating margins for the NantHealth reporting unit. As a result, we
recognized a goodwill impairment charge of $13.5 million, representing the entire goodwill balance assigned to the NantHealth reporting unit.
In accordance with GAAP, definite-lived intangible assets are required to be amortized over their respective estimated useful lives and reviewed for
impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We estimate the useful lives of our
intangible assets and ratably amortize the value over the estimated useful lives of those assets. If the estimates of the useful lives should change, we will
amortize the remaining book value over the remaining useful lives or, if an asset is deemed to be impaired, a write-down of the value of the asset may be
required at such time.
Software Development Costs
We capitalize purchased software upon acquisition if it is accounted for as internal-use or if it meets the future alternative use criteria. For software
to be sold, we capitalize incurred labor costs for software development from the time technological feasibility of the software is established, or when the
preliminary project phase is completed in the case of internal use software, until the software is available for general release. Research and development
costs and other computer software maintenance costs related to software development are expensed as incurred. We estimate the useful life of our
capitalized software and amortize its value over that estimated life. If the actual useful life is shorter than our estimated useful life, we will amortize the
remaining book value over the remaining useful life or the asset may be deemed to be impaired and, accordingly, a write-down of the value of the asset
may be recorded as a charge to earnings.
The carrying value of capitalized software is dependent on the ability to recover its value through future revenue from the sale of the software. At
each balance sheet date, the unamortized capitalized costs of a software product are compared with the net realizable value of that product. The net
realizable value is the estimated future gross revenues from that product reduced by the estimated future costs of completing and disposing of that product,
including the costs of performing maintenance and client support required to satisfy our responsibility at the time of sale. The amount by which the
unamortized capitalized costs of a software product exceed the net realizable value of that asset is written off. If we determine that the value of the
capitalized software could not be recovered, a write-down of the value of the capitalized software to its recoverable value is recorded as a charge to
earnings.
39
Income Taxes
We account for income taxes using the liability method, which requires the recognition of deferred tax assets or liabilities for the tax-effected
temporary differences between the financial reporting and tax bases of our assets and liabilities and for net operating loss and tax credit carryforwards. The
objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and
assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in
addressing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The deferred tax assets
are recorded net of a valuation allowance when, based on the weight of available evidence, we believe it is more likely than not that some portion or all of
the recorded deferred tax assets will not be realized in future periods. We consider many factors when assessing the likelihood of future realization of our
deferred tax assets, including recent cumulative earnings experience, expectations of future taxable income, the ability to carryback losses and other
relevant factors.
In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities. A
change in the assessment of the outcomes of such matters could materially impact our consolidated financial statements.
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for
anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes may be required. If we ultimately determine that
payment of these amounts is unnecessary, then we reverse the liability and recognize a tax benefit during the period in which we determine that the liability
is no longer necessary. We also recognize tax benefits to the extent that it is more likely than not that our positions will be sustained if challenged by the
taxing authorities. To the extent we prevail in matters for which liabilities have been established, or are required to pay amounts in excess of our liabilities,
our effective tax rate in a given period may be materially affected. An unfavorable tax settlement would require cash payments and may result in an
increase in our effective tax rate in the year of resolution. A favorable tax settlement would be recognized as a reduction in our effective tax rate in the year
of resolution. We report interest and penalties related to uncertain income tax positions in the income tax (provision) benefit line of our consolidated
statements of operations.
We file income tax returns in the United States federal jurisdiction, numerous states in the United States and multiple countries outside of the
United States.
Fair Value Measurements
Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent
sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. We utilize
valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The fair values of assets and liabilities
required to be measured at fair value are categorized based upon the level of judgment associated with the inputs used to measure their value in one of three
categories (Levels 1 to 3). The values of assets and liabilities assigned to Level 3 require the most judgement and are based unobservable inputs or prices
for which little or no market data exists. Therefore, Level 3 values can be susceptible to significant fluctuations, both positive and negative, from changes
in the underlying assumption used by management. Refer to Note 6, “Fair Value Measurements and Other Investments” to our consolidated financial
statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K for detailed information about financial assets
and liabilities measured at fair value on a recurring basis.
Recent Accounting Pronouncements
For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial
statements, refer to Note 1, “Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included in Part II, Item 8,
“Financial Statements and Supplementary Data” of this Form 10-K.
40
Overview of Consolidated Results
(In thousands)
Revenue:
Software delivery, support and maintenance
Client services
Total revenue
Cost of revenue:
Software delivery, support and maintenance
Client services
Amortization of software development and
acquisition-related assets
Total cost of revenue
Gross profit
Gross margin %
Selling, general and administrative expenses
Research and development
Asset impairment charges
Goodwill impairment charge
Amortization of intangible and acquisition-related assets
Loss from operations
Interest expense
Other income (loss), net
Gain on sale of businesses, net
Impairment of long-term investments
Equity in net income of unconsolidated investments
Loss from continuing operations before income taxes
Income tax benefit
Effective tax rate
Loss from continuing operations, net of tax
Income from discontinued operations
Gain on sale of discontinued operations
Income tax effect on discontinued operations
Income from discontinued operations, net of tax
Net income (loss)
Net loss attributable to non-controlling interests
Accretion of redemption preference on redeemable
convertible non-controlling interest -
discontinued operations
2020
Year Ended December 31,
2019
2018
2020 %
Change
from 2019
2019 %
Change
from 2018
$
$
914,662
588,038
1,502,700
1,004,195
628,416
1,632,611
$
1,011,624
606,217
1,617,841
287,954
530,652
118,399
937,005
565,695
37.6%
389,941
206,061
74,969
0
25,604
(130,880)
(34,104)
54
0
(1,575)
17,194
(149,311)
16,692
11.2%
(132,619)
71,448
1,156,504
(394,926)
833,026
700,407
0
319,140
595,310
107,874
1,022,324
610,287
37.4%
400,808
245,443
10,837
25,700
27,188
(99,689)
(43,172)
(138,904)
0
(651)
665
(281,751)
43,340
15.4%
(238,411)
75,235
0
(19,426)
55,809
(182,602)
424
315,102
584,666
96,682
996,450
621,391
38.4%
432,849
258,736
58,166
13,466
26,558
(168,384)
(50,914)
69
172,258
(15,487)
259
(62,199)
18,983
30.5%
(43,216)
2,501
500,471
(51,949)
451,023
407,807
4,527
0
0
(48,594)
(8.9%)
(6.4%)
(8.0%)
(9.8%)
(10.9%)
9.8%
(8.3%)
(7.3%)
(2.7%)
(16.0%)
NM
(100.0%)
(5.8%)
31.3%
(21.0%)
(100.0%)
NM
141.9%
NM
(47.0%)
(61.5%)
(44.4%)
(5.0%)
NM
NM
NM
NM
(100.0%)
NM
NM
(0.7%)
3.7%
0.9%
1.3%
1.8%
11.6%
2.6%
(1.8%)
(7.4%)
(5.1%)
(81.4%)
90.9%
2.4%
(40.8%)
(15.2%)
NM
(100.0%)
(95.8%)
156.8%
NM
128.3%
NM
NM
(100.0%)
(62.6%)
(87.6%)
(144.8%)
(90.6%)
(100.0%)
(150.1%)
Net income (loss) attributable to Allscripts Healthcare
Solutions, Inc. stockholders
$
700,407
$
(182,178) $
363,740
NM—We define “NM” as not meaningful for increases or decreases greater than 200%.
Revenue
Recurring revenue consists of subscription-based software sales, support and maintenance revenue, recurring transactions revenue and recurring
revenue from managed services solutions, such as outsourcing, private cloud hosting and revenue cycle management. Non-recurring revenue consists of
perpetual software licenses sales, hardware resale and non-recurring transactions revenue, and project-based client services revenue.
(In thousands)
Revenue:
Recurring revenue
Non-recurring revenue
Total revenue
2020
Year Ended December 31,
2019
2018
2020 %
Change
from 2019
2019 %
Change
from 2018
$
$
1,222,731 $
279,969
1,502,700 $
1,278,456
$
354,155
1,632,611 $
1,313,281
304,560
1,617,841
(4.4%)
(20.9%)
(8.0%)
(2.7%)
16.3%
0.9%
41
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
Recurring revenue decreased during the year ended December 31, 2020 compared to prior year due to attrition. The decrease was partially offset by
an increase in subscription revenue. Non-recurring revenue decreased due to lower upfront software revenues and project delays that impacted client
services revenue. The decrease was partially offset by new deals in upfront software revenue.
The percentage of recurring and non-recurring revenue of our total revenue was 81% and 19%, respectively, during the year ended December 31,
2020 and 78% and 22%, respectively, during the year ended December 31, 2019.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Recurring revenue decreased during the year ended December 31, 2019 compared to prior year due to attrition within the EIS and other businesses
partially offset with growth in subscription revenue. The sale of the OneContent business on April 2, 2018 also contributed to the decline in recurring
revenue. The OneContent business was acquired as part of the EIS Business acquisition on October 2, 2017, and it contributed $13 million of recurring
revenue during the first quarter of 2018, including $1 million of amortization of acquisition-related deferred revenue adjustments. Non-recurring revenue
increased due to higher sales of perpetual software licenses for our acute solutions and hardware in 2019 compared to 2018, partially offset by lower client
services revenue related to the timing of software activations.
The percentage of recurring and non-recurring revenue of our total revenue was 78% and 22%, respectively, during the year ended December 31,
2019, compared with 81% and 19%, respectively, during the year ended December 31, 2018.
Gross Profit
(In thousands)
Total cost of revenue
Gross profit
Gross margin %
2020
937,005
565,695
$
$
Year Ended December 31,
2019
1,022,324
610,287
$
$
$
$
2018
996,450
621,391
2020 %
Change
from 2019
2019 %
Change
from 2018
(8.3%)
(7.3%)
2.6%
(1.8%)
37.6%
37.4%
38.4%
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
Gross profit decreased during the year ended December 31, 2020 compared to prior year primarily due to attrition, revenue mix, project delays and
higher amortization of software development costs. The decrease was partially offset by new business in software subscription revenues and cost reduction
initiatives.
Gross margin slightly increased during the year ended December 31, 2020 compared to prior year primarily due to cost reduction initiatives.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Gross profit and margin decreased during the year ended December 31, 2019 compared to prior year primarily due to an increase in hosting
migration costs, higher amortization of software development, recognition of previously deferred costs and the sale of the OneContent business on April 2,
2018, which carried a higher gross margin compared with our other businesses. These were partially offset with an increase in organic sales for
VeradigmTM and our acute solutions in 2019.
Selling, General and Administrative Expenses
(In thousands)
Selling, general and administrative expenses
2020
389,941 $
Year Ended December 31,
2019
400,808 $
$
2018
432,849
2020 %
Change
from 2019
2019 %
Change
from 2018
(2.7%)
(7.4%)
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
Selling, general and administrative expenses decreased during the year ended December 31, 2020 compared with the prior year, primarily due to
the impact of cost reduction initiatives.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Selling, general and administrative expenses decreased during the year ended December 31, 2019 compared with the prior year, primarily due to
headcount reduction actions taken during 2018 as part of the integration of EIS, Practice Fusion and Health Grid acquisitions. The sale of OneContent in
2018 also contributed to the decrease because there were one-time incentive compensation expenses. These decreases were partially offset with an increase
in legal costs.
42
Research and Development
(In thousands)
Research and development
2020
206,061 $
Year Ended December 31,
2019
245,443 $
$
2018
258,736
2020 %
Change
from 2019
2019 %
Change
from 2018
(16.0%)
(5.1%)
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
Research and development expenses decreased during the year ended December 31, 2020 compared with the prior year, primarily due to the impact
of cost reduction initiatives.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Research and development expenses decreased during the year ended December 31, 2019 compared with prior year. This decrease was primarily
due to the sale of OneContent on April 2, 2018, as there were $10 million of one-time incentive compensation costs recorded within Research and
development expense as a result of the sale.
Asset Impairment Charges
(In thousands)
Asset impairment charges
2020
Year Ended December 31,
2019
2018
2020 %
Change
from 2019
2019 %
Change
from 2018
$
74,969 $
10,837 $
58,166
NM
(81.4%)
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
Asset impairment charges increased during the year ended December 31, 2020 compared with the prior year. We recorded a non-cash asset
impairment charge of $23.1 million related to the write-off of the remaining Health Grid acquired customer relationship intangible balance. This was
partially offset by the write-off of $13.9 million related to the Health Grid contingent consideration accrual. We recorded $31.2 million of non-cash asset
impairment charges related to the write-off of capitalized software due to the asset values exceeding the product’s net realizable value. The write-off was
primarily related to one product in which we determined it would no longer be placed into service. We also recorded a $34.3 million non-cash asset
impairment charge due to the write-off of deferred costs related to our private cloud hosting operations. The write-off was driven by the expectation of
improved efficiencies in the utilization of our contract compared with historical deferred costs, which was identified through our broader cost reduction
initiatives. Asset impairment charges for the year ended December 31, 2019 were primarily the result of impairing the remaining NantHealth acquired
customer relationship intangible balance of $8.1 million. We also recognized non-cash impairment charges of $2.7 million on the retirement of certain
hosting assets due to data center migrations.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Asset impairment charges for the year ended December 31, 2019 were primarily the result of impairing the remaining NantHealth acquired
customer relationship intangible balance of $8.1 million. We also recognized non-cash impairment charges of $2.7 million on the retirement of certain
hosting assets due to data center migrations. We incurred non-cash asset impairment charges during the year ended December 31, 2018 of $33.2 million
related to the write-off of capitalized software as a result of our decision to discontinue several software development projects. We also recognized $22.9
million of non-cash asset impairment charges in 2018 related to our acquisition of the patient/provider engagement solutions business from NantHealth in
2017, which included the write-downs of $2.2 million of acquired technology and $20.7 million, representing the unamortized value assigned to the
modification of our existing commercial agreement with NantHealth, as we no longer expect to recover the value assigned to these assets. The remaining
$2.1 million of non-cash asset impairment charges recorded during the year ended December 31, 2018 relate to the disposal of fixed assets as a result of
relocating and consolidating business functions and locations from recent acquisitions.
Goodwill Impairment Charge
(In thousands)
Goodwill impairment charge
2020
Year Ended December 31,
2019
2018
2020 %
Change
from 2019
2019 %
Change
from 2018
$
0 $
25,700 $
13,466
(100.0%)
90.9%
Year Ended December 31, 2020 Compared with the Years Ended December 31, 2019 and 2018
We recorded a goodwill impairment charge of $25.7 million related to our Hospitals and Health Systems reporting unit during the year ended
December 31, 2019. We impaired all of the goodwill previously recognized as part of the acquisition of NantHealth’s patient/provider engagement
solutions business following the completion of our annual goodwill impairment during the year ended December 31, 2018. Refer to Note 8, “Goodwill and
Intangible Assets” to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K
for further information regarding these impairments.
43
Amortization of Intangible and Acquisition-Related Assets
(In thousands)
Amortization of intangible and acquisition-related
assets
2020
Year Ended December 31,
2019
2018
2020 %
Change
from 2019
2019 %
Change
from 2018
$
25,604
$
27,188 $
26,558
(5.8%)
2.4%
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
The decrease in amortization expense for the year ended December 31, 2020 compared with the prior year was due to normal amortization expense
in 2020 and certain intangible assets being fully amortized in 2019.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
The slight increase in amortization expense for the year ended December 31, 2019 compared with the prior year was due to incremental
amortization expense associated with intangible assets as part of business combinations completed during 2018.
Interest Expense
(In thousands)
Interest expense
2020
Year Ended December 31,
2019
2018
2020 %
Change
from 2019
2019 %
Change
from 2018
$
34,104 $
43,172 $
50,914
(21.0%)
(15.2%)
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
The decrease in interest expense for the year ended December 31, 2020 compared with the prior year was primarily due to a decline in the effective
interest rates on outstanding debt, along with allocating a portion of interest expense to discontinued operations related to the required paydown of
outstanding debt as a result of sale of CarePort and EPSi. The decrease was partially offset by the increase in debt discounts and issuance cost amortization
related to the early retirement of the senior secured term loan.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Interest expense during the year ended December 31, 2019 decreased compared to the prior year due to lower average outstanding borrowings
partially offset by higher interest rates.
Other income (loss), net
(In thousands)
Other income (loss), net
2020
$
Year Ended December 31,
2019
(138,904) $
54 $
2018
2020 %
Change
from 2019
2019 %
Change
from 2018
69
(100.0%)
NM
Year Ended December 31, 2020 Compared with the Years Ended December 31, 2019 and 2018
Other income (loss), net for the year ended December 31, 2019 consisted of a $145 million settlement with the DOJ related to the Company’s civil
and criminal investigations of Practice Fusion. Refer to Note 22, “Contingencies” to our consolidated financial statements included in Part II, Item 8,
“Financial Statements and Supplementary Data” of this Form 10-K for further information regarding the investigations. This was partially offset by a $5
million reversal of an earnout related to a prior acquisition. Other income (loss), net also consists of a combination of interest income and miscellaneous
receipts and expenses.
Gain on Sale of Businesses, Net
(In thousands)
Gain on sale of businesses, net
2020
$
Year Ended December 31,
2019
0 $
0 $
2018
172,258
2020 %
Change
from 2019
2019 %
Change
from 2018
NM
(100.0%)
Year Ended December 31, 2020 Compared with the Years Ended December 31, 2019 and 2018
Gain on sale of businesses, net for the year ended December 31, 2018 consists of a gain of $177.9 million and a loss of $5.6 million from the
divestitures of the OneContent and Strategic Sourcing businesses, respectively, both of which were acquired as part of the EIS Business acquisition during
the fourth quarter of 2017.
44
Impairment of Long-term Investments
(In thousands)
Impairment of long-term investments
2020
Year Ended December 31,
2019
2018
2020 %
Change
from 2019
2019 %
Change
from 2018
$
(1,575) $
(651) $
(15,487)
141.9%
(95.8%)
Year Ended December 31, 2020 Compared with the Years Ended December 31, 2019 and 2018
Impairment of long-term investments during the year ended December 31, 2020 consisted of $1.6 million, which included $1.0 million related to
one of our cost-method investments and $0.6 million related to one of our third-party equity-method investments. Impairment of long-term investments
during the year ended December 31, 2019 consisted of an impairment of $1.7 million associated with one of our long-term equity investments. The
impairment was partially offset with a $1.0 million recovery of a long-term equity investment that had previously been impaired. During the year ended
December 31, 2018, we recognized non-cash charges on two of our cost-method equity investments and a related note receivable. These charges equaled
the cost bases of the investments and the related note receivable prior to the impairment.
Equity in Net Income of Unconsolidated Investments
(In thousands)
Equity in net income of unconsolidated
investments
2020
Year Ended December 31,
2019
2018
2020 %
Change
from 2019
2019 %
Change
from 2018
$
17,194
$
665 $
259
NM
156.8%
Year Ended December 31, 2020 Compared with the Years Ended December 31, 2019 and 2018
Equity in net income of unconsolidated investments represents our share of the equity earnings (losses) of our investments in third parties
accounted for under the equity method of accounting based on one quarter lag. During the year ended December 31, 2020, we recorded a $16.8 million
gain from the sale of a third-party equity-method investment.
Income Tax Benefit
(In thousands)
Income tax benefit
Effective tax rate
2020
Year Ended December 31,
2019
2018
2020 %
Change
from 2019
2019 %
Change
from 2018
$
16,692
$
43,340
$
18,983
(61.5%)
128.3%
11.2%
15.4%
30.5%
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
Our provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate due primarily to valuation allowance,
permanent differences, income attributable to foreign jurisdictions taxed at rates different from the United States federal statutory income tax rate, state
taxes, tax credits and certain discrete items. Our effective tax rate for the year ended December 31, 2020, compared with the prior year, differs primarily
due to the non-deductible portion of the Department of Justice settlement recorded in the year ended December 31, 2019 and the valuation allowance of
$16.9 million recorded in the year ended December 31, 2020, compared to the $0.9 million valuation allowance recorded in the year ended December 31,
2019. In evaluating our ability to recover our deferred tax assets within the jurisdictions from which they arise, we consider all available evidence,
including scheduled reversals of deferred tax liabilities, tax-planning strategies, and results of recent operations. In evaluating the objective evidence that
historical results provide, we consider three years of cumulative operating income (loss). In the year ended December 31, 2020, we recorded $16.9 million
of valuation allowance, primarily against foreign deferred tax assets.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
The United States Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017 and introduced significant changes to the income tax
law in the United States. Effective in 2018, the Tax Act reduced the United States statutory tax rate from 35% to 21% and created new taxes on certain
foreign-sourced earnings and certain related-party payments, which are referred to as the Global Intangible Low-taxed Income ("GILTI") tax and Base
Erosion and Anti-Abuse Tax (“BEAT”) rules, respectively. In addition, in 2017 we were subject to a one-time transition tax on accumulated foreign
subsidiary earnings not previously subject to income tax in the United States.
45
Our provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate due primarily to valuation allowance,
permanent differences, income attributable to foreign jurisdictions taxed at rates different from the United States federal statutory income tax rate, state
taxes, tax credits and certain discrete items. Our effective tax rate for the year ended December 31, 2019, compared with the prior year, differs primarily
due to the fact that the permanent items, credits and the impact of foreign earnings had a greater impact on the pre-tax income of $13.1 million in the year
ended December 31, 2018, compared to the impacts of these items on a pre-tax loss of $206.5 million for the year ended December 31, 2019. In evaluating
our ability to recover our deferred tax assets within the jurisdictions from which they arise, we consider all available evidence, including scheduled
reversals of deferred tax liabilities, tax-planning strategies, and results of recent operations. In evaluating the objective evidence that historical results
provide, we consider three years of cumulative operating income (loss). In the year ended December 31, 2019, we recorded $0.9 million of valuation
allowance, mostly against foreign deferred tax assets.
Discontinued Operations
(In thousands)
Income from discontinued operations
Gain on sale of discontinued operations
Income tax effect on discontinued operations
Income from discontinued operations, net of tax
2020
Year Ended December 31,
2019
2018
$
71,448 $
1,156,504
(394,926)
833,026 $
$
75,235 $
0
(19,426)
55,809 $
2,501
500,471
(51,949)
451,023
2020 %
Change
from 2019
(5.0%)
NM
NM
NM
2019 %
Change
from 2018
NM
(100.0%)
(62.6%)
(87.6%)
Year Ended December 31, 2020 Compared with the Years Ended December 31, 2019 and 2018
During 2020, we implemented a strategic initiative to sell two of our businesses, EPSi and CarePort. Since both businesses were part of the same
strategic initiative and were sold within the same period, the combined sale of EPSi and CarePort represents a strategic shift that had a major effect on our
operations and financial results. These businesses are now reported together as discontinued operations for all periods presented. On October 15, 2020, we
completed the sale of the EPSi business. Prior to the sale, EPSi was part of the Unallocated category as it did not meet the requirements to be a reportable
segment nor the criteria to be aggregated into our two reportable segments. On its own, the divestiture of the EPSi business did not represent a strategic
shift that had a major effect on our operations and financial results. However, the combined sale of EPSi and CarePort represented a strategic shift that had
a major effect on our operations and financial results. Therefore, EPSi is treated as a discontinued operation. On December 31, 2020, we completed the sale
of the CarePort business. Prior to the sale, CarePort was part of the Data, Analytics and Care Coordination reportable segment. On its own, the divestiture
of the CarePort business represents a strategic shift that had a major effect on our operations and financial results. Refer to Note 18, “Discontinued
Operations” to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K for
additional information regarding discontinued operations.
On December 31, 2018, we sold all of the Class A Common Units of Netsmart owned by the Company. Prior to the sale, Netsmart comprised a
separate reportable segment, which due to its significance to our historical consolidated financial statements and results of operations, is now reported as a
discontinued operation as a result of the sale for all periods presented. The loss from discontinued operations represents the net of losses incurred by
Netsmart for the year ended December 31, 2018 partly offset by earnings attributable to two solutions acquired during the fourth quarter of 2017 as part of
the EIS Business that we no longer support effective as of March 31, 2018. Refer to Note 18, “Discontinued Operations” to our consolidated financial
statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K for additional information regarding discontinued
operations.
Non-Controlling Interests
(In thousands)
Net loss attributable to non-controlling interests
Accretion of redemption preference on
redeemable convertible non-controlling interest
- discontinued operations
$
$
2020
Year Ended December 31,
2019
0 $
424 $
2018
2020 %
Change
from 2019
2019 %
Change
from 2018
4,527
(100.0%)
(90.6%)
0 $
0 $
(48,594)
NM
(100.0%)
Year Ended December 31, 2020 Compared with the Years Ended December 31, 2019 and 2018
The net loss attributable to non-controlling interest represents the share of earnings of consolidated affiliates that is attributable to the affiliates’
common stock that is not owned by us for each of the periods presented. The remaining minority interest of Pulse8 was purchased during the first quarter of
2019. We have no remaining non-controlling interest activities to report. The accretion of redemption preference on redeemable convertible non-controlling
interest represents the accretion of liquidation preference at 11% per annum to the value of the preferred units of Netsmart, prior to the sale of our
investment in Netsmart on December 31, 2018.
46
Segment Operations
Overview of Segment Results
(In thousands)
Revenue:
Core Clinical and Financial Solutions
Data, Analytics and Care Coordination
Unallocated Amounts
Total revenue
Gross Profit:
Core Clinical and Financial Solutions
Data, Analytics and Care Coordination
Unallocated Amounts
Total gross profit
Loss from operations:
Core Clinical and Financial Solutions
Data, Analytics and Care Coordination
Unallocated Amounts
Total loss from operations
2020
Year Ended December 31,
2019
2018
2020 %
Change
from 2019
2019 %
Change
from 2018
$
$
$
$
$
$
1,254,249 $
261,321
(12,870)
1,502,700
$
434,288
131,407
0
565,695
(116,139)
(14,741)
0
(130,880)
$
$
$
$
1,377,147 $
262,664
(7,200)
1,632,611
473,033
137,254
0
610,287
(80,465)
(19,224)
0
(99,689)
$
$
$
$
$
1,379,499
246,718
(8,376)
1,617,841
(8.9%)
(0.5%)
78.8%
(8.0%)
(0.2%)
6.5%
(14.0%)
0.9%
491,421
129,970
0
621,391
(158,440)
(9,944)
0
(168,384)
(8.2%)
(4.3%)
NM
(7.3%)
(3.7%)
5.6%
NM
(1.8%)
44.3%
(23.3%)
NM
31.3%
(49.2%)
93.3%
NM
(40.8%)
The results for the years ended December 31, 2019 and 2018 have been recast to conform to the current year presentation, which reflects several
changes made to our organizational and reporting structure during the year ended December 31, 2020. Refer to Note 19, “Business Segments” to our
consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K for detailed discussion
about these changes to our segments.
Core Clinical and Financial Solutions
Our Core Clinical and Financial Solutions segment derives its revenue from the sale of software applications for patient engagement, integrated
clinical and financial management solutions, which primarily include EHR-related software, financial and practice management software, related
installation, support and maintenance, outsourcing, private cloud hosting, and revenue cycle management.
(In thousands)
Revenue
Gross profit
Gross margin %
Loss from operations
Operating margin %
2020
1,254,249
434,288
$
$
Year Ended December 31,
2019
1,377,147
473,033
$
$
$
$
2018
1,379,499
491,421
2020 %
Change
from 2019
2019 %
Change
from 2018
(8.9%)
(8.2%)
(0.2%)
(3.7%)
34.6%
34.3%
35.6%
$
(116,139)
$
(80,465)
$
(158,440)
44.3%
(49.2%)
(9.3%)
(5.8%)
(11.5%)
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
Core Clinical and Financial Solutions revenue decreased during the year ended December 31, 2020, compared with the prior year due to attrition,
lower upfront software revenues and project delays that impacted client services revenue. The decrease was partly offset by an increase in hardware
revenues. In 2019, hardware revenues were included within “Unallocated Amounts”, but in 2020 we began to allocate hardware revenues between the
operating segments.
Gross profit decreased during the year ended December 31, 2020 compared with the prior year primarily due to the previously mentioned attrition,
revenue profile and project delays. The decrease was partially offset by cost reduction initiatives. Gross margin increased slightly during the year ended
December 31, 2020 compared with the prior year primarily due to cost reduction initiatives.
Loss from operations increased during the year ended December 31, 2020 compared with the prior year due to a decline in gross profit. The
decrease was partially offset by cost reduction initiatives.
47
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Core Clinical and Financial Solutions revenue decreased during the year ended December 31, 2019, compared with the prior year due to attrition
within the EIS and other businesses and the sale of the OneContent and Strategic Sourcing businesses on March 15, 2018 and on April 2, 2018,
respectively. These businesses were acquired as part of the EIS business acquisition on October 2, 2017 and contributed $16 million of revenue during the
first quarter of 2018, including $1 million of amortization of acquisition-related deferred revenue adjustments. These decreases were partly offset by higher
sales of perpetual software licenses for our acute solutions in 2019 compared to 2018 and additional revenue from the 2018 acquisition of Health Grid.
Gross profit and margin decreased during the year ended December 31, 2019 compared with the prior year primarily due to the previously
mentioned attrition and increased hosting migration costs. These were partially offset with lower costs due to the decline in sales. The sale of OneContent,
which had higher overall profitability, compared with our other Core Clinical and Financials Solutions businesses, contributed to the decline of gross profit
and margin.
Loss from operations decreased during the year ended December 31, 2019 compared with prior year, primarily due to the result of (i) lower asset
impairment and goodwill charges, (ii) lower net transaction-related severance and (iii) lower personnel costs from the headcount reduction actions taken
along with the one-time incentive compensation expenses related to the One-Content sale in 2018. Operating margin increased during the year ended
December 31, 2019 compared with prior year, as the decline in gross profit was offset by the previously mentioned items that attributed to the decline in
loss from operations.
Data, Analytics and Care Coordination
Our Data, Analytics and Care Coordination segment derives its revenue from the sale of practice reimbursement and payer and life sciences
solutions, which are mainly targeted at physician practices, payers, life sciences companies and other key healthcare stakeholders. These solutions enable
clients to transition, analyze, coordinate care and improve the quality, efficiency and value of healthcare delivery across the entire care community.
(In thousands)
Revenue
Gross profit
Gross margin %
Loss from operations
Operating margin %
2020
261,321
131,407
$
$
Year Ended December 31,
2019
262,664
137,254
$
$
$
$
2018
246,718
129,970
2020 %
Change
from 2019
2019 %
Change
from 2018
(0.5%)
(4.3%)
6.5%
5.6%
50.3%
52.3%
52.7%
$
(14,741)
$
(19,224)
$
(9,944)
(23.3%)
93.3%
(5.6%)
(7.3%)
(4.0%)
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
Data, Analytics and Care Coordination revenue decreased slightly during the year ended December 31, 2020 compared with the prior year,
primarily due to decreases in outsourcing and transaction-related revenues. The decrease was partially offset by an increase in subscription revenue.
Gross profit and margin decreased during the year ended December 31, 2020 compared with the prior year, primarily due to the previously
mentioned decreases in revenue and an increase in transfer pricing costs.
Loss from operations decreased during the year ended December 31, 2020 compared with the prior year, primarily due to lower selling, general and
administrative, and research and development expenses driven by cost reduction initiatives. Operating margin increased during the year ended December
31, 2020 compared with the prior year, as the decline in gross profit was offset by cost reduction initiatives.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Data, Analytics and Care Coordination revenue increased during the year ended December 31, 2019 compared with the prior year due to an
increase in organic sales. Gross profit increased during the year ended December 31, 2019 due to an increase in organic sales and cost reductions partially
offset with headcount growth and hosting migration costs. The acquisition of Practice Fusion during the first quarter of 2018 also contributed to the
increases.
Gross margin and operating margin decreased during the year ended December 31, 2019, compared with the prior year, primarily due to (i) an
increase in hosting migration costs, (ii) costs associated with recent acquisitions, (iii) headcount growth and (iv) partially offset with other cost reductions.
48
Unallocated Amounts
The EPSi operating segment was included in the “Unallocated Amounts” category until it was sold on October 15, 2020. Prior to the sale, EPSi did
not meet the requirements to be a reportable segment nor the criteria to be aggregated into the two reportable segments. Following the sale of EPSi, the
“Unallocated Amounts” category consists of transfer pricing revenues.
(In thousands)
Revenue
Gross profit
Gross margin %
Income from operations
Operating margin %
$
$
$
2020
(12,870) $
0
$
0.0%
0
0.0%
$
(7,200) $
0
$
0.0%
0
$
0.0%
Year Ended December 31,
2019
2020 %
Change
from 2019
2019 %
Change
from 2018
78.8%
NM
(14.0%)
NM
NM
NM
2018
(8,376)
0
0.0%
0
0.0%
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
Revenue decreased during the year ended December 31, 2020 compared to the prior year due to an increase in transfer pricing revenues.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Revenue increased during the year ended December 31, 2019 compared to the prior year due to a decrease in transfer pricing revenues.
Contract Backlog
Contract backlog represents the value of bookings and support and maintenance contracts that have not yet been recognized as revenue. A summary
of contract backlog by revenue category is as follows:
(In millions)
Software delivery, support and maintenance
Client services
Total contract backlog
As of December 31,
2020
2019
% Change
$
$
2,153
1,918
4,071
$
$
2,239
1,811
4,050
Total contract backlog as of December 31, 2020 increased compared with December 31, 2019. Total contract backlog can fluctuate between
periods based on the level of revenue and bookings as well as the timing and mix of renewal activity and periodic revalidations.
We estimate that the aggregate contract backlog as of December 31, 2020 will be recognized as revenue in future years as follows:
Year Ended December 31,
2021
2022
2023
2024
2025
Thereafter
Total
Liquidity and Capital Resources
(Percentage of
Total Backlog)
(3.8%)
5.9%
0.5%
35%
19%
15%
11%
8%
12%
100%
The primary factors that influence our liquidity include, but are not limited to, the amount and timing of our revenues, cash collections from our
clients, capital expenditures and investments in research and development efforts, including investments in or acquisitions of third parties, and divestitures.
Our liquidity was influenced by the COVID-19 pandemic during the year ended December 31, 2020. We increased cash on hand through additional credit
facility borrowings to provide financial flexibility and enhance our ability to address potential future uncertainties regarding the impact of the COVID-19
pandemic. As of December 31, 2020, our principal sources of liquidity consisted of cash and cash equivalents of $538 million and available borrowing
capacity of $899 million under our senior secured revolving facility (“Revolving Facility”). The change in our cash and cash equivalents balance is
reflective of the following:
49
Operating Cash Flow Activities
(In thousands)
Net income (loss)
Less: Income from discontinued operations
Loss from continuing operations
Non-cash adjustments to net income (loss)
Cash impact of changes in operating assets and liabilities
Net cash provided by (used in) operating activities - continuing
operations
Net cash (used in) provided by operating activities - discontinued
operations
Net cash (used in) provided by operating activities
$
2020
700,407 $
833,026
(132,619)
297,200
(152,248)
Year Ended December 31,
2019
(182,602) $
55,809
(238,411)
267,685
(13,879)
2018
407,807 $
451,023
(43,216)
128,662
(87,238)
2020 $
Change
from 2019
2019 $
Change
from 2018
$
883,009
777,217
105,792
29,515
(138,369)
(590,409)
(395,214)
(195,195)
139,023
73,359
12,333
15,395
(1,792)
(3,062)
17,187
(119,048)
(106,715) $
$
30,859
46,254 $
69,683
67,891 $
(149,907)
(152,969)
$
(38,824)
(21,637)
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
Net cash provided by operating activities – continuing operations increased during the year ended December 31, 2020, compared with the prior
year. The decrease in loss from operations and the increase from non-cash adjustments to net income in 2020 is partially related to the absence of a
goodwill impairment charge. The increase in non-cash adjustments to net income in 2020 is primarily related to an increase in asset impairment charges
and an increase in deferred taxes, which were partially offset by lower depreciation and the amortization of right-of-use assets, the sale of a third-party
equity-method investment and a decrease in stock-based compensation expenses. The net income and the cash impact of changes in operating assets and
liabilities during 2020 reflects $147 million of payments and interests related to the settlement with the DOJ in connection with the Practice Fusion
investigations.
Net cash used in operating activities – discontinued operations during the year ended December 31, 2020 reflects transaction expenses and the
additional tax provision related to the gain from the sales of EPSi and CarePort on October 15, 2020 and December 31, 2020, respectively.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
During the year ended December 31, 2019, we had net cash provided by operating activities – continuing operations compared to net use of cash
from operating activities – continuing operations during the year ended December 31, 2018. The increase in loss from operations and in non-cash
adjustments to net loss in 2019 partially related to the absence in the gains on sale of divestitures, such as OneContent in 2018. The increase in non-cash
adjustments to net loss in 2019 also related to higher depreciation and the amortization of right-of-use assets. The net loss and the cash impact of changes in
operating assets and liabilities during 2019 reflects the $145 million settlement with the DOJ in connection with the Practice Fusion investigations.
Net cash provided by operating activities – discontinued operations decreased during the year ended December 31, 2019 compared to the prior year,
primarily due to the advance income tax payment related to the gain realized on the sale of our investment in Netsmart on December 31, 2018.
Investing Cash Flow Activities
(In thousands)
Capital expenditures
Capitalized software
Cash paid for business acquisitions, net of cash acquired
Cash received from sale of businesses, net of cash divested
Purchases of equity securities, other investments and related
intangible assets, net
Sale of other investments
Other proceeds from investing activities
Net cash provided by (used in) investing activities - continuing
operations
Net cash used in investing activities - discontinued operations
Net cash provided by (used in) investing activities
Year Ended December 31,
2019
(16,450) $
$
2020
(17,025) $
(87,993)
0
1,710,000
(103,317)
(23,443)
0
2018
(30,345) $
(103,454)
(177,233)
807,764
2020 $
Change
from 2019
(575)
15,324
23,443
1,710,000
$
2019 $
Change
from 2018
13,895
137
153,790
(807,764)
(7,097)
24,967
0
(8,235)
1,044
14
(16,934)
0
54
1,138
23,923
(14)
8,699
1,044
(40)
1,622,852
(7,664)
$ 1,615,188 $
(150,387)
(10,669)
(161,056) $
1,773,239
479,852
(231,839)
3,005
248,013 $ 1,776,244
$
(630,239)
221,170
(409,069)
50
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
Net cash provided by investing activities – continuing operations during the year ended December 31, 2020 primarily resulted from the cash
received from the sales of EPSi and CarePort on October 15, 2020 and December 31, 2020, respectively.
Net cash used in investing activities – discontinuing operations decreased during the year ended December 31, 2020 compared to the prior year,
primarily due to a decrease in capitalized software costs for EPSi and CarePort.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Net cash used in investing activities – continuing operations during the year ended December 31, 2019 resulted from the absence of the sale of
businesses compared to prior year. The sale of Netsmart and OneContent produced significant investing cash inflows during 2018, which was partially
offset with cash paid for the acquisitions of Practice Fusion and Health Grid. Capital expenditures also decreased in 2019 compared with prior year.
Net cash used in investing activities – discontinued operations decreased during the year ended December 31, 2019 compared to the prior year,
primarily due to the sale of our investment in Netsmart on December 31, 2018.
Financing Cash Flow Activities
2020
Year Ended December 31,
2019
2018
2020 $
Change
from 2019
2019 $
Change
from 2018
$
0 $
0 $
(In thousands)
Proceeds from sale or issuance of common stock
Taxes paid related to net share settlement of equity awards
Proceeds from issuance of 0.875% Convertible Senior Notes
Payments for issuance costs on 0.875% Convertible Senior Notes
Payments for capped call transaction on 0.875% Convertible Senior
Notes
Repayment of Convertible Senior Notes
Credit facility payments
Credit facility borrowings, net of issuance costs
Repurchase of common stock
Accelerated share repurchase program
Payment of acquisition and other financing obligations
Purchases of subsidiary shares owned by non-controlling interest
Net cash (used in) provided by financing activities - continuing
operations
Net cash provided by financing activities - discontinued operations
(6,033)
0
(758)
0
(352,361)
(1,315,000)
903,625
(134,863)
(200,000)
(4,369)
0
(7,286)
218,000
(5,445)
(17,222)
0
(220,000)
279,241
(111,460)
0
(14,685)
(53,800)
(1,109,759)
0
67,343
0
Net cash (used in) provided by financing activities
$ (1,109,759) $
67,343 $
Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
1,283 $
(9,466)
0
0
0 $
1,253
(218,000)
4,687
0
0
(713,751)
430,843
(138,928)
0
(5,198)
(7,198)
17,222
(352,361)
(1,095,000)
624,384
(23,403)
(200,000)
10,316
53,800
(1,283)
2,180
218,000
(5,445)
(17,222)
0
493,751
(151,602)
27,468
0
(9,487)
(46,602)
(442,415)
149,432
(292,983) $ (1,177,102) $
(1,177,102)
0
509,758
(149,432)
360,326
Net cash used in financing activities – continuing operations increased during the year ended December 31, 2020 primarily due to (i) the repayment
of debt under our senior secured credit facility, (ii) the absence of issuance of new debt, (iii) the repayment of certain convertible senior notes and (iv) the
payment made to the accelerated share purchase program. This was partially offset by credit facility borrowings in 2020 and the absence of purchasing the
remaining minority interest in Pulse8.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Net cash provided by financing activities – continuing operations increased during the year ended December 31, 2019 primarily due to inflows
resulting from (i) the issuance of the 0.875% Convertible Senior Notes, (ii) lower credit facility payments, which were partially offset by less credit facility
borrowings, and (iii) a decrease in the repurchase of common stock. The inflows were partially offset by the purchase of the remaining minority interest in
Pulse8 during 2019.
Net cash provided by financing activities – discontinued operations during the year ended December 31, 2018 resulted from borrowings by
Netsmart used to finance business acquisitions.
51
Future Capital Requirements
The following table summarizes future payments under our 0.875% Convertible Senior Notes and Revolving Facility as of December 31, 2020:
(In thousands)
Principal payments:
Total
2021
2022
2023
2024
2025
Thereafter
0.875% Convertible Senior Notes (1)
Total principal payments
$
207,911 $
207,911
0 $
0
0 $
0
0 $
0
0 $
0
0 $
0
207,911
207,911
Interest payments:
0.875% Convertible Senior Notes
Revolving Facility (2)
Total interest payments
12,904
5,056
17,960
Total future debt payments
$ 225,871 $
2,898
2,247
5,145
5,145 $
1,820
2,247
4,067
4,067 $
1,819
562
2,381
2,381 $
1,819
0
1,819
1,819 $
1,819
0
1,819
1,819 $
2,729
0
2,729
210,640
(1) Amount represents the face value of the 0.875% Convertible Senior Notes, which includes both the liability and equity portions.
(2) Assumes no additional borrowings after December 31, 2020 and that all drawn amounts are repaid upon maturity. However, amounts represent unused fees related to the
available borrowing capacity on the Revolving Facility.
Revolving Credit Facilities
We have a $900 million Revolving Facility that expires on February 15, 2023. A total of up to $50 million of the Revolving Facility is available for
the issuance of letters of credit, up to $10 million of the Revolving Facility is available for swingline loans, and up to $100 million of the Revolving
Facility could be borrowed under certain foreign currencies. We had no borrowings and $1.1 million of letters of credit outstanding under the Revolving
Facility as of December 31, 2020. We had $899 million available, net of outstanding letters of credit, under the Revolving Facility as of December 31,
2020. There can be no assurance that we will be able to draw on the full available balance of the Revolving Facility if the financial institutions that have
extended such credit commitments become unwilling or unable to fund such borrowings. Refer to Note 10, “Debt” to our consolidated financial statements
included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K for further information.
Other Matters Affecting Future Capital Requirements
Our total investment in research and development efforts during 2020 decreased compared to 2019, as the Company implemented cost reduction
initiatives. Our total spending consists of research and development costs directly recorded to expense, which are offset by the capitalization of eligible
development costs.
We believe that our cash and cash equivalents of $538 million as of December 31, 2020, our future cash flows, our borrowing capacity under our
Revolving Facility and access to capital markets, taken together, provide adequate resources to meet future operating needs as well as scheduled payments
of short and long-term debt. We cannot provide assurance that our actual cash requirements will not be greater than we expect as of the date of this Form
10-K. We will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services and technologies, and the
repurchase of our common stock under our stock repurchase program, each of which might impact our liquidity requirements or cause us to borrow under
our Revolving Facility or issue additional equity or debt securities.
If sources of liquidity are not available or if we cannot generate sufficient cash flow from operations during the next twelve months, we might be
required to obtain additional sources of funds through additional operating improvements, capital market transactions, asset sales or financing from third
parties, a combination thereof or otherwise. We cannot provide assurance that these additional sources of funds will be available or, if available, would
have reasonable terms.
52
Contractual Obligations and Commitments
We enter into obligations with third parties in the ordinary course of business. The following table summarizes our significant contractual
obligations as of December 31, 2020 and the effect such obligations are expected to have on our liquidity and cash in future periods, assuming all
obligations reach maturity. We do not believe that our cash flow requirements can be assessed based upon this analysis of these obligations as the funding
of these future cash obligations will be from future cash flows from the sale of our products and services that are not reflected in the following table.
(In thousands)
Balance sheet obligations: (1)
Debt:
Principal payments
Interest payments
Other obligations: (2)
Non-cancelable operating leases
Purchase obligations (3)
Agreement with Atos
Letters of credit
Total contractual obligations
Total
2021
2022
Payments due by period
2024
2023
2025
Thereafter
$
207,911 $
17,960
0 $
0 $
0 $
0 $
5,145
4,067
2,381
1,819
0 $ 207,911
2,729
1,819
127,727
75,542
350,318
1,061
26,090
36,727
85,601
1,061
24,501
24,273
80,895
0
22,752
8,155
74,788
0
17,388
4,508
73,168
0
$
780,519 $ 154,624 $ 133,736 $ 108,076 $
96,883 $
14,927
1,879
35,866
0
22,069
0
0
0
54,491 $ 232,709
(1) Our liability for uncertain tax positions was $29 million as of December 31, 2020. Liabilities that may result from this exposure have been excluded from the table
above since we cannot predict, with reasonable reliability, the outcome of discussions with the respective taxing jurisdictions, which may or may not result in cash
settlements. We have also excluded net deferred tax liabilities of $12 million from the amounts presented in the table as the future amounts that will be settled in cash
are uncertain.
(2) We have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K as of December 31, 2020. We have obligations to pay contingent consideration
associated with acquisitions of $1.0 million as of December 31, 2020. Such contingent consideration obligations are excluded from the above table since their payment
is based on future financial objectives, the achievement of which we cannot predict.
(3) Purchase obligations consist of minimum purchase commitments for telecommunication services, computer equipment, maintenance, consulting and other
commitments.
53
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to interest rate risk, primarily changes in United States interest rates and changes in LIBOR (including the transition away from
LIBOR), and primarily due to our borrowing under the Senior Secured Credit Facility. As of December 31, 2020, we had no debt outstanding under the
Senior Secured Credit Facility, which minimizes our exposure to interest rate risk.
We have global operations; therefore, we are exposed to risks related to foreign currency fluctuations. Foreign currency fluctuations through
December 31, 2020 have not had a material impact on our financial position or operating results. We believe most of our global operations are naturally
hedged for foreign currency risk as our foreign subsidiaries invoice their clients and satisfy their obligations primarily in their local currencies. Exceptions
to this are our development and shared services center in India and our local operations in Israel, where we are required to make payments in local currency
but which we fund in United States dollars. We have entered into non-deliverable forward foreign currency exchange contracts with reputable banking
counterparties in order to hedge a portion of our forecasted future Indian Rupee-denominated (“INR”) expenses against foreign currency fluctuations
between the United States dollar and the INR. These forward contracts cover a percentage of forecasted monthly INR expenses over time. As of December
31, 2020, there were six forward contracts outstanding that were staggered to mature monthly starting in January 2021 and ending in June 2021. In the
future, we may enter into additional forward contracts to increase the amount of hedged monthly INR expenses or initiate hedges for monthly periods
beyond June 2021. As of December 31, 2020, the notional amount for each of the outstanding forward contracts was 225 million INR, or the equivalent of
$3.1 million, based on the exchange rate between the United States dollar and the INR in effect as of December 31, 2020. These amounts also approximate
the forecasted future INR expenses we target to hedge in any one month in the future. The forward contracts resulted in net gains of $0.6 million and $0.3
million during the years ended December 31, 2020 and 2019, respectively.
We continually monitor our exposure to foreign currency fluctuations and may use additional derivative financial instruments and hedging
transactions in the future if, in our judgment, circumstances warrant. There can be no guarantee that the impact of foreign currency fluctuations in the
future will not be significant and will not have a material impact on our financial position or results of operations.
54
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Allscripts Healthcare Solutions, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Allscripts Healthcare Solutions, Inc., a Delaware corporation, and subsidiaries
(the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and
cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedules included under Item
15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the
Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 26, 2021
expressed an unqualified opinion.
Change in accounting principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for measurement of credit
losses on financial instruments in 2020 due to the adoption of FASB Accounting Standards Codification (Topic 326), Financial Instruments – Credit
Losses.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical
audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition - Determination of distinct performance obligations and application of stand-alone selling prices.
55
As discussed in Note 2 to the consolidated financial statements, the Company enters into contracts with customers that often include multiple
promises to transfer products and services including sales of proprietary software, support and maintenance, as well as client services including managed
services solutions, such as private cloud hosting, outsourcing and revenue cycle management, as well as other client services or project-based revenue from
implementation, training, consulting, and outsourced IT services. Given the nature and volume of the Company’s product and service offerings included in
a single contract, there is complexity related to the determination of which of these promises result in distinct performance obligations within the context of
the contract. Judgment is required by management to determine the various performance obligations and to allocate the transaction price in each contract to
these distinct performance obligations using relative stand-alone selling prices as well as a residual allocation approach for certain software licenses. We
identified the determination of distinct performance obligations and application of stand-alone selling prices as a critical audit matter.
The principal consideration for our determination that the identification of distinct performance obligations and the application of stand-alone
selling prices is a critical audit matter is the especially challenging auditor judgment required when evaluating the determination of distinct performance
obligations and execution of the allocation of transaction price using stand-alone selling prices due to the mix and volume of products and services offered
with terms that are specific to each contract. The range of prices used to establish the stand-alone selling price for the undelivered performance obligations
directly affect the amount of product license revenue recognized using a residual approach.
Our audit procedures related to the identification of distinct performance obligations and the application of stand-alone selling prices included the
following, among others:
• We evaluated the design and tested the operating effectiveness of controls relating to the identification of performance obligations, the
determination of stand-alone selling prices and the allocation of the contractual transaction price to each distinct performance obligation.
• We inspected a selection of contracts with customers and performed the following procedures:
•
•
•
•
Obtained and read all selected contracts, contract amendments and sales orders for each selected arrangement and tested the
identification of significant terms;
Evaluated management’s identification of all distinct performance obligations in each arrangement and recalculated management’s
allocation of the contract’s transaction price to each distinct performance obligation;
Evaluated management’s estimate of stand-alone selling prices by testing a historical analysis of stand-alone sales of the performance
obligations and testing the completeness and accuracy of the data used in the development of the stand-alone selling prices; and
Evaluated the timing of revenue recognition for each performance obligation and tested the accuracy of management’s computations of
revenue recognized in the financial statements.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2014.
Raleigh, North Carolina
February 26, 2021
56
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Allscripts Healthcare Solutions, Inc.
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Allscripts Healthcare Solutions, Inc., a Delaware corporation, and subsidiaries (the
“Company”) as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by
COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the
consolidated financial statements of the Company as of and for the year ended December 31, 2020, and our report dated February 26, 2021 expressed an
unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting
(“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are
a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Raleigh, North Carolina
February 26, 2021
57
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance of $31,596 and $22,005 as of
December 31, 2020 and December 31, 2019, respectively
Contract assets, net of allowance of $1,068 and $0 as of December 31, 2020
and December 31, 2019, respectively
Income tax receivable
Prepaid expenses and other current assets
Current assets attributable to discontinued operations
Total current assets
Fixed assets, net
Software development costs, net
Intangible assets, net
Goodwill
Deferred taxes, net
Contract assets - long-term, net of allowance of $4,273 and $0 as of
December 31, 2020 and December 31, 2019, respectively
Right-of-use assets - operating leases
Other assets
Long-term assets attributable to discontinued operations
Total assets
58
December 31, 2020
December 31, 2019
$
531,104 $
6,361
347,355
106,717
25,421
136,264
0
1,153,222
72,162
193,202
286,602
974,729
5,790
43,682
96,601
91,628
0
$
2,917,618 $
129,668
7,871
424,415
93,292
0
144,145
41,871
841,262
87,953
222,692
367,128
974,110
5,704
63,525
95,757
119,587
428,021
3,205,739
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except per share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Accrued compensation and benefits
Deferred revenue
Current maturities of long-term debt
Current operating lease liabilities
Current liabilities attributable to discontinued operations
Total current liabilities
Long-term debt
Deferred revenue
Deferred taxes, net
Long-term operating lease liabilities
Other liabilities
Long-term liabilities attributable to discontinued operations
Total liabilities
Commitments and contingencies
Stockholders’ equity:
Preferred stock: $0.01 par value, 1,000 shares authorized,
no shares issued and outstanding as of December 31, 2020 and December 31, 2019
Common stock: $0.01 par value, 349,000 shares authorized as of December 31, 2020
and December 31, 2019; 274,558 and 139,942 shares issued and outstanding
as of December 31, 2020, respectively; 272,609 and 162,475 shares issued
and outstanding as of December 31, 2019, respectively
Treasury stock: at cost, 134,616 and 110,134 shares as of December 31, 2020 and
December 31, 2019, respectively
Additional paid-in capital
Retained earnings (accumulated deficit)
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31, 2020
December 31, 2019
$
35,905 $
100,262
118,771
334,764
0
22,264
322,811
934,777
167,587
3,471
18,186
93,463
33,891
0
1,251,375
102,823
270,281
65,782
335,619
364,465
22,328
49,392
1,210,690
551,004
11,068
21,038
93,588
30,320
2,843
1,920,551
0
0
2,745
2,725
(870,558)
1,902,776
633,118
(1,838)
1,666,243
2,917,618 $
(571,157)
1,907,348
(49,336)
(4,392)
1,285,188
3,205,739
$
The accompanying notes are an integral part of these consolidated financial statements.
59
(In thousands, except per share amounts)
Revenue:
Software delivery, support and maintenance
Client services
Total revenue
Cost of revenue:
Software delivery, support and maintenance
Client services
Amortization of software development and
acquisition-related assets
Total cost of revenue
Gross profit
Selling, general and administrative expenses
Research and development
Asset impairment charges
Goodwill impairment charge
Amortization of intangible and acquisition-related assets
Loss from operations
Interest expense
Other income (loss), net
Gain on sale of businesses, net
Impairment of long-term investments
Equity in net income of unconsolidated investments
Loss before income taxes
Income tax benefit
Loss from continuing operations, net of tax
Income from discontinued operations
Gain on sale of discontinued operations
Income tax effect on discontinued operations
Income from discontinued operations, net of tax
Net income (loss)
Net loss attributable to non-controlling interests
Accretion of redemption preference on redeemable
convertible non-controlling interest - discontinued operations
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
2020
Year Ended December 31,
2019
2018
$
914,662 $
588,038
1,502,700
1,004,195 $
628,416
1,632,611
1,011,624
606,217
1,617,841
287,954
530,652
118,399
937,005
565,695
389,941
206,061
74,969
0
25,604
(130,880)
(34,104)
54
0
(1,575)
17,194
(149,311)
16,692
(132,619)
71,448
1,156,504
(394,926)
833,026
700,407
0
319,140
595,310
107,874
1,022,324
610,287
400,808
245,443
10,837
25,700
27,188
(99,689)
(43,172)
(138,904)
0
(651)
665
(281,751)
43,340
(238,411)
75,235
0
(19,426)
55,809
(182,602)
424
0
0
315,102
584,666
96,682
996,450
621,391
432,849
258,736
58,166
13,466
26,558
(168,384)
(50,914)
69
172,258
(15,487)
259
(62,199)
18,983
(43,216)
2,501
500,471
(51,949)
451,023
407,807
4,527
(48,594)
363,740
(0.22)
2.29
2.07
(0.22)
2.29
2.07
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders
$
700,407 $
(182,178) $
Net income (loss) attributable to Allscripts Healthcare
Solutions, Inc. stockholders per share:
Basic
Continuing operations
Discontinued operations
Net income (loss) attributable to Allscripts Healthcare
Solutions, Inc. stockholders per share
Diluted
Continuing operations
Discontinued operations
Net income (loss) attributable to Allscripts Healthcare
Solutions, Inc. stockholders per share
$
(0.83) $
5.23
(1.43) $
0.33
$
4.40 $
(1.10)
$
$
(0.83) $
5.23
(1.43) $
0.33
$
4.40 $
(1.10)
$
The accompanying notes are an integral part of these consolidated financial statements.
60
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Net income (loss)
Other comprehensive income (loss):
Foreign currency translation adjustments
Change in fair value of derivatives qualifying as cash flow hedges
Other comprehensive income (loss) before income tax (expense) benefit
Income tax (expense) benefit related to items in other comprehensive income
(loss)
Total other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive loss attributable to non-controlling interests
Comprehensive income (loss), net
2020
Year Ended December 31,
2019
2018
$
700,407 $
(182,602) $
407,807
1,435
1,509
2,944
(390)
2,554
702,961
0
1,192
(262)
930
67
997
(181,605)
424
$
702,961 $
(181,181) $
(2,908)
(873)
(3,781)
377
(3,404)
404,403
4,527
408,930
The accompanying notes are an integral part of these consolidated financial statements.
61
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
Number of common shares
Balance at beginning of year
Common stock issued under stock compensation plans, net of shares withheld for employee taxes
Balance at end of year
Common stock
Balance at beginning of year
Common stock issued under stock compensation plans, net of shares withheld for employee taxes
Balance at end of year
Number of treasury stock shares
Balance at beginning of year
Issuance of treasury stock
Purchase of treasury stock
Accelerated share repurchase program
Balance at end of year
Treasury stock
Balance at beginning of year
Issuance of treasury stock
Purchase of treasury stock
Accelerated share repurchase program
Balance at end of year
Additional paid-in capital
Balance at beginning of year
Stock-based compensation
Common stock issued under stock compensation plans, net of shares withheld for employee taxes
Issuance of 0.875% Convertible Senior Notes
Capped call transactions
Allocation of discounts and debt issuance costs for issuance of 0.875% Convertible Senior Notes
Accretion of redemption preference on redeemable convertible non-controlling interest -discontinued
operations
Subsidiary issuance of common stock
Accelerated share repurchase program
Issuance of treasury stock
Warrants issued
Acquisition of non-controlling interest
Balance at end of year
Retained earnings (accumulated deficit)
Balance at beginning of year
Net income (loss) less net loss attributable to non-controlling interests
ASU 2016-13 implementation adjustments
ASC 606 implementation adjustments
Balance at end of year
Accumulated other comprehensive loss
Balance at beginning of year
Foreign currency translation adjustments, net
Unrecognized gain (loss) on derivatives qualifying as cash flow hedges, net of tax
Unrecognized gain on available for sale securities, net of tax
Balance at end of year
Non-controlling interest
Balance at beginning of year
Acquisition of non-controlling interest
Net loss attributable to non-controlling interests
Balance at end of year
Total Stockholders’ Equity at beginning of year
Total Stockholders’ Equity at end of year
2020
Year Ended December 31,
2019
2018
272,609
1,949
274,558
2,725
20
2,745
$
$
(110,134)
198
(12,984)
(11,696)
(134,616)
(571,157) $
1,193
(134,863)
(165,731)
(870,558) $
$
1,907,348
34,036
(6,059)
0
797
0
0
0
(34,269)
(440)
1,363
0
1,902,776
$
(49,336) $
700,407
(17,953)
0
633,118
$
(4,392) $
1,435
1,119
0
(1,838) $
0
0
0
0
1,285,188
1,666,243
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
270,955
1,654
272,609
2,709
16
2,725
$
$
(99,731)
61
(10,464)
0
(110,134)
(460,543) $
846
(111,460)
0
(571,157) $
$
1,881,494
38,713
(7,227)
40,058
(17,222)
(1,140)
0
0
0
(144)
2,729
(29,913)
1,907,348
$
132,842
(182,178)
$
0
0
(49,336) $
(5,389) $
1,192
(195)
0
(4,392) $
$
29,314
(28,890)
(424)
0
1,580,427
1,285,188
$
$
$
269,335
1,620
270,955
2,693
16
2,709
(88,504)
76
(11,303)
0
(99,731)
(322,735)
1,121
(138,929)
0
(460,543)
1,781,059
34,638
(8,197)
0
0
0
72,386
0
0
(61)
2,729
(1,060)
1,881,494
(338,150)
412,334
0
58,658
132,842
(1,985)
(2,908)
(496)
0
(5,389)
39,190
(5,349)
(4,527)
29,314
1,160,072
1,580,427
The accompanying notes are an integral part of these consolidated financial statements.
62
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Net income (loss)
Less: Income from discontinued operations
Loss from continuing operations
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
Operating right-of-use asset amortization
Stock-based compensation expense
Deferred taxes
Asset impairment charges
Goodwill impairment charge
Impairment of long-term investments
Equity in net income of unconsolidated investments
Gain on sale of businesses, net
Other (income) loss, net
Changes in operating assets and liabilities (net of businesses acquired):
Accounts receivable and contract assets, net
Prepaid expenses and other assets
Accounts payable
Accrued expenses
Accrued compensation and benefits
Deferred revenue
Other liabilities
Operating leases
Accrued DOJ settlement
Net cash provided by (used in) operating activities - continuing operations
Net cash (used in) provided by operating activities - discontinued operations
Net cash (used in) provided by operating activities
Cash flows from investing activities:
Capital expenditures
Capitalized software
Cash paid for business acquisitions, net of cash acquired
Cash received from sale of businesses, net of cash divested
Purchases of equity securities, other investments and related intangible assets, net
Sale of other investments
Other proceeds from investing activities
Net cash provided by (used in) investing activities - continuing operations
Net cash used in investing activities - discontinued operations
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from sale or issuance of common stock
Taxes paid related to net share settlement of equity awards
Proceeds from issuance of 0.875% Convertible Senior Notes
Payments for issuance costs on 0.875% Convertible Senior Notes
Payments for capped call transaction on 0.875% Convertible Senior Notes
Repayment of Convertible Senior Notes
Credit facility payments
Credit facility borrowings, net of issuance costs
Repurchase of common stock
Accelerated share repurchase program
Payment of acquisition and other financing obligations
Purchases of subsidiary shares owned by non-controlling interest
Net cash (used in) provided by financing activities - continuing operations
Net cash provided by financing activities - discontinued operations
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period
2020
Year Ended December 31,
2019
2018
$
$
700,407
833,026
(132,619)
(182,602) $
55,809
(238,411)
192,269
20,720
34,036
(3,275)
74,969
0
1,575
(17,194)
0
(5,900)
35,163
(34,418)
(66,987)
(3,064)
49,492
28,667
5,334
(19,266)
(147,169)
12,333
(119,048)
(106,715)
(17,025)
(87,993)
0
1,710,000
(7,097)
24,967
0
1,622,852
(7,664)
1,615,188
0
(6,033)
0
(758)
0
(352,361)
(1,315,000)
903,625
(134,863)
(200,000)
(4,369)
0
(1,109,759)
0
(1,109,759)
1,212
399,926
137,539
537,465
$
$
198,226
21,882
38,982
(37,970)
10,837
25,700
651
(665)
0
10,042
(9,430)
(16,251)
27,552
(3,894)
(32,764)
(92,067)
(7,555)
(24,470)
145,000
15,395
30,859
46,254
(16,450)
(103,317)
(23,443)
0
(8,235)
1,044
14
(150,387)
(10,669)
(161,056)
0
(7,286)
218,000
(5,445)
(17,222)
0
(220,000)
279,241
(111,460)
0
(14,685)
(53,800)
67,343
0
67,343
203
(47,256)
184,795
137,539
$
407,807
451,023
(43,216)
184,357
0
34,638
4,144
58,166
13,466
15,487
(259)
(172,258)
(9,079)
(120,522)
(96,701)
(10,809)
43,424
20,441
65,029
11,900
0
0
(1,792)
69,683
67,891
(30,345)
(103,454)
(177,233)
807,764
(16,934)
0
54
479,852
(231,839)
248,013
1,283
(9,466)
0
0
0
0
(713,751)
430,843
(138,928)
0
(5,198)
(7,198)
(442,415)
149,432
(292,983)
(624)
22,297
162,498
184,795
The accompanying notes are an integral part of these consolidated financial statements.
63
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Allscripts Healthcare Solutions, Inc. (“Allscripts”) and its wholly-owned subsidiaries
and controlled affiliates. All significant intercompany balances and transactions have been eliminated. Each of the terms “we,” “us,” “our” or the
“Company” as used herein refers collectively to Allscripts Healthcare Solutions, Inc. and its wholly-owned subsidiaries and controlled affiliates, unless
otherwise stated.
Use of Estimates
The preparation of consolidated financial statements in accordance with generally accepted accounting principles in the United States of America
(“GAAP”) requires us to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the
accompanying notes. Our estimates and assumptions consider the economic implications of COVID-19 on our critical and significant accounting estimates.
Actual results could differ materially from these estimates.
Change in Presentation
During the first quarter of 2020, we changed our reportable segments from Provider, Veradigm and Unallocated to Core Clinical and Financial
Solutions, Data, Analytics and Care Coordination, and Unallocated. The business units reported within the historical segments have been reallocated into
the new segments. Refer to Note 19 “Business Segments” for further discussion on the impact of the change.
Certain reclassifications were made to prior period amounts in order to conform to the current period presentation. These reclassifications had no
impact on the reported consolidated prior period financial results.
Cash and Cash Equivalents
We consider all highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. The fair values
of these investments approximate their carrying values.
Other Financial Assets and Liabilities
We have investments in equity instruments for which it is not practicable to estimate fair value primarily because of their illiquidity and restricted
marketability. Such investments are recorded initially at cost, less impairment and changes resulting from observable price changes and equity methods of
accounting. Refer to Note 6, “Fair Value Measurements and Other Investments” for additional information about these investments.
Our long-term financial liabilities include amounts outstanding under our Senior Secured Credit Facility (as defined in Note 10, “Debt”), with
carrying values that approximate fair value since the interest rates approximate current market rates. As of December 31, 2019, the carrying amount of the
1.25% Notes (as defined in Note 10, “Debt”) approximated fair value since the effective interest rate on the 1.25% Notes approximated current market
rates. On July 1, 2020, the 1.25% Notes matured and were paid in full. See Note 10, “Debt” for further information regarding our long-term financial
liabilities.
Derivative Financial Instruments
Derivative instruments are recognized as either assets or liabilities and are measured at fair value. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and the resulting designation. See Note 16, “Derivative Financial Instruments” for information
regarding gains and losses from derivative instruments during the years ended December 31, 2020, 2019 and 2018.
Trade Accounts Receivable
Accounts receivable are recorded at the invoiced amounts and do not bear interest.
Contingent Liabilities
A liability is contingent if the amount is not presently known but may become known in the future as a result of the occurrence of some uncertain
future event. We accrue a liability for an estimated loss if we determine that the potential loss is probable of occurring and the amount can be reasonably
estimated. Significant judgment is required in both the determination of probability and the determination as to whether the amount of an exposure is
reasonably estimable, and accruals are based only on the information available to our management at the time the judgment is made.
64
The assessment of contingent liabilities, including legal and income tax contingencies, involves the use of estimates, assumptions and judgments.
Our estimates are based on our belief that future events will validate the current assumptions regarding the ultimate outcome of these exposures. However,
there can be no assurance that future events, such as court decisions or Internal Revenue Service (“IRS”) positions, will not differ from our assessments.
Fixed Assets
Fixed assets are stated at cost. Depreciation and amortization are computed under the straight-line method over the estimated useful lives of the
related assets. The depreciable life of leasehold improvements is the shorter of the lease term or the useful life. Upon asset retirement or other disposition,
the fixed asset cost and the related accumulated depreciation or amortization are removed from the accounts, and any gain or loss is included in the
consolidated statements of operations. Amounts incurred for repairs and maintenance are expensed as incurred.
Business Combinations
Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the
assets acquired and the liabilities assumed. While we use our best estimates and assumptions as a part of the purchase price allocation process to accurately
value the assets acquired, including intangible assets, and the liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject
to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair
values of the assets acquired and the liabilities assumed, with a corresponding offset to goodwill. Upon the conclusion of the measurement period or final
determination of the values of assets acquired or the liabilities assumed, whichever comes first, any subsequent adjustments are reflected in our
consolidated statements of operations.
Goodwill and Intangible Assets
Goodwill and intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but are tested
for impairment annually or between annual tests when an impairment indicator exists. If an optional qualitative goodwill impairment assessment is not
performed, we are required to determine the fair value of each reporting unit. If a reporting unit’s fair value is lower than the carrying value, an impairment
loss equal to the excess will be recorded not to exceed the carrying amount of goodwill assigned to the reporting unit. The recoverability of indefinite-lived
intangible assets is assessed by comparison of the carrying value of an asset to its estimated fair value. If we determine that the carrying value of an asset
exceeds its estimated fair value, an impairment loss equal to the excess will be recorded.
The determination of the fair value of our reporting units is based on a combination of a market approach, which considers benchmark company
market multiples, and an income approach, which utilizes discounted cash flows for each reporting unit and other Level 3 inputs. Under the income
approach, we determine fair value based on the present value of the most recent cash flow projections for each reporting unit as of the date of the analysis
and calculate a terminal value utilizing a terminal growth rate. The significant assumptions under this approach include, among others: income projections,
which are dependent on sales to new and existing clients, new product introductions, client behavior, competitor pricing, operating expenses, the discount
rate, and the terminal growth rate. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as
our expectations of future performance and the expected future economic environment, which are partly based upon our historical experience. Our
estimates are subject to change given the inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate are
based on our judgment of the rates that would be utilized by a hypothetical market participant. As part of the goodwill impairment testing, we also consider
our market capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units.
In accordance with GAAP, definite-lived intangible assets are required to be amortized over their respective estimated useful lives and reviewed for
impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We estimate the useful lives of our
intangible assets and ratably amortize their value over the estimated useful lives of those assets. If the estimates of the useful lives should change, we will
amortize the remaining book value over the remaining useful lives or, if an asset is deemed to be impaired, a write-down of the value of the asset may be
required at such time.
Long-Lived Assets and Long-Lived Assets to Be Disposed Of
We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
65
Software Development Costs
We capitalize purchased software upon acquisition if it is accounted for as internal-use software or if it meets the future alternative use criteria. For
software to be sold, we capitalize incurred labor costs for software development from the time technological feasibility of the software is established, or
when the preliminary project phase is completed in the case of internal-use software, until the software is available for general release. Research and
development costs and other computer software maintenance costs related to software development are expensed as incurred. We estimate the useful life of
our capitalized software and amortize its value over that estimated life. If the actual useful life is determined to be shorter than our estimated useful life, we
will amortize the remaining book value over the remaining useful life or the asset may be deemed to be impaired and, accordingly, a write-down of the
value of the asset may be recorded as a charge to earnings. Upon the availability for general release, we commence amortization of the capitalized software
costs on a product by product basis. Amortization of capitalized software is recorded using the greater of (i) the ratio of current revenues to total and
anticipated future revenues for the applicable product or (ii) the straight-line method over the remaining estimated economic life, which is estimated to be
three to five years.
At each balance sheet date, the unamortized capitalized costs of a software product are compared with the net realizable value of that product. The
net realizable value is the estimated future gross revenues from that product reduced by the estimated future costs of completing and disposing of that
product, including the costs of performing maintenance and client support required to satisfy our responsibility set forth at the time of sale. The amount by
which the unamortized capitalized costs of a software product exceed the net realizable value of that asset is written off. If we determine that the value of
the capitalized software could not be recovered, a write-down of the value of the capitalized software to its recoverable value is recorded as a charge to
earnings.
The unamortized balances of capitalized software were as follows:
(In thousands)
Software development costs
Less: accumulated amortization
Software development costs, net
December 31,
2020
327,519 $
(134,317)
193,202 $
2019
393,728
(171,036)
222,692
$
$
Capitalized software development costs, write-offs included in asset impairment changes and amortization of capitalized software development
costs included in cost of revenue are illustrated in the following table:
(In thousands)
Capitalized software development costs
Write-offs and divestitures of capitalized software development costs
Amortization of capitalized software development costs
Income Taxes
2020
Year Ended December 31,
2019
87,993 $
31,214 $
86,269 $
103,317 $
0 $
72,840 $
$
$
$
2018
103,454
34,083
59,653
We account for income taxes using the liability method, which requires the recognition of deferred tax assets or liabilities for the tax-effected
temporary differences between the financial reporting and tax bases of our assets and liabilities and for net operating loss and tax credit carryforwards. The
objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and
assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in
addressing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The deferred tax assets
are recorded net of a valuation allowance when, based on the weight of available evidence, we believe it is more likely than not that some portion or all of
the recorded deferred tax assets will not be realized in future periods. We consider many factors when assessing the likelihood of future realization of our
deferred tax assets, including recent cumulative earnings experience, expectations of future taxable income, the ability to carryback losses and other
relevant factors.
In addition, we are subject to the continuous examination of our income tax returns by the IRS and other tax authorities. A change in the assessment
of the outcomes of such matters could materially impact our consolidated financial statements.
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for
anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes may be required. If we ultimately determine that
payment of these amounts is unnecessary, then we reverse the liability and recognize a tax benefit during the period in which we determine that the liability
is no longer necessary. We also recognize tax benefits to the extent that it is more likely than not that our positions will be sustained if challenged by the
taxing authorities. To the extent we prevail in matters for which liabilities have been established or are required to pay amounts in excess of our liabilities,
our effective tax rate in a given period may be materially affected. An unfavorable tax settlement would require cash payments and may result in an
increase in our effective tax rate in the year of resolution. A favorable tax settlement would be recognized as a reduction in our effective tax rate in the year
of resolution. We report interest and penalties related to uncertain income tax positions in the income tax (provision) benefit line of our consolidated
statements of operations.
66
We file income tax returns in the United States federal jurisdiction, numerous states in the United States and multiple countries outside of the
United States.
Stock-Based Compensation
We account for stock-based compensation in accordance with GAAP, which requires the measurement and recognition of compensation expense for
all share-based payment awards made to employees and non-employee directors based on their estimated fair value. We measure stock-based compensation
cost at the grant date based on the fair value of the award and recognize the expense over the requisite service period typically on a straight-line basis, net
of estimated forfeitures. We recognize stock-based compensation cost for awards with performance conditions if and when we conclude that it is probable
that the performance conditions will be achieved. The fair value of service-based restricted stock units and restricted stock awards is measured at their
underlying closing share price on the date of grant. The fair value of market-based restricted stock units is measured using the Monte Carlo pricing model.
The net proceeds from stock-based compensation activities are reflected as a financing activity within the accompanying consolidated statements of cash
flows. We settle employee stock option exercises and stock awards with newly issued common shares. Refer to Note 12, “Stock Award Plan” for detailed
discussion about our stock-based incentive plan.
Employee Benefit Plans
We provide employees with defined contribution savings plans. We recognize expense for our contributions to the savings plans at the time
employees make contributions to the plans and we contributed the following amounts to these plans:
(In thousands)
Company contributions to employee benefit plans
Foreign Currency
2020
Year Ended December 31,
2019
2018
$
21,143 $
23,998 $
28,803
The determination of the functional currency of our foreign subsidiaries is made based on the appropriate economic and management indicators.
Our foreign subsidiaries use the local currency of their respective countries as the functional currency, with the exception of our operating subsidiaries in
India and Israel which use the United States dollar as a functional currency. The assets and liabilities of foreign subsidiaries whose functional currency is
the local currency are translated into United States dollars at the exchange rates in effect at the consolidated balance sheet date, while revenues and
expenses are translated at the average rates of exchange during the year. Translation gains and losses are not included in determining net income or loss but
are included as a separate component of accumulated other comprehensive loss. Gains and losses resulting from foreign currency transactions are included
in determining net income or loss and have not been material in any years presented in the accompanying consolidated statements of operations. We
periodically enter into non-deliverable forward foreign currency exchange contracts in order to hedge a portion of our forecasted future Indian Rupee-
denominated (“INR”) expenses against foreign currency fluctuations between the United States dollar and the INR. See Note 16, “Derivative Financial
Instruments,” for information regarding these foreign currency exchange contracts.
Concentrations of Credit Risk
Financial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, marketable securities and trade
receivables. We primarily maintain our cash balances with one major commercial bank domestically and several commercial banks internationally.
We sell our products and services to healthcare providers. Credit risk with respect to trade receivables is generally diversified due to the large
number of clients and their geographic dispersion. To reduce credit risk, we perform ongoing credit evaluations of significant clients and their payment
histories. In general, we do not require collateral from our clients, but we do enter into advance deposit agreements, if appropriate.
The majority of our revenue is derived from clients located in the United States. The majority of long-lived assets are also located in the United
States. For the year ended December 31, 2020, we had one client that accounted for 12% of our revenue. Other than this one client, no single client
accounted for more than 10% of our revenue in the years ended December 31, 2020, 2019 and 2018. No client represented more than 10% of accounts
receivable as of December 31, 2020 and 2019.
Recently Adopted Accounting Pronouncements
We adopted Accounting Standards Update No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments” (“ASU 2016-13”) on January 1, 2020 using the cumulative-effect adjustment transition method. The guidance in ASU 2016-13
replaces the previous GAAP incurred loss impairment methodology. The new impairment model requires immediate recognition of estimated credit losses
expected to occur for most financial assets and certain other instruments. For available-for-sale debt securities with unrealized losses, the losses are
recognized as allowances rather than reductions in the amortized cost of the securities. ASU 2016-13 is effective for annual periods beginning after
December 15, 2019, and interim periods within those annual periods. Refer to Note 2 “Revenue from Contracts with Customers” and Note 3 “Accounts
Receivable” for further discussion on the impact of adoption.
67
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2018-13, “Fair Value Measurement
(Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which eliminates, adds
and modifies certain disclosure requirements for fair value measurements. Entities will no longer be required to disclose the amount of and reasons for
transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted-average of
significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for all entities for interim and annual periods
beginning after December 15, 2019, with early adoption permitted. We adopted ASU 2018-13 on January 1, 2020, and the adoption had no impact on our
consolidated financial statements.
In March 2020, the FASB issued Accounting Standards Update No. 2020-04, “Reference Rate Reform (Topic 848) – Facilitation of the Effects of
Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides optional expedients and exceptions for applying GAAP to contracts,
hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2020-04 apply only to
contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference
rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. We adopted ASU 2020-04 on March 12, 2020, and
the adoption had no impact on our consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued Accounting Standards Update No. 2019-12, “Income Taxes (Topic 740)” (“ASU 2019-12”), which is part of
the FASB’s overall simplification initiative to reduce the costs and complexity of applying accounting standards while maintaining or improving the
usefulness of the information provided to users of financial statements. ASU 2019-12 simplifies accounting guidance for intraperiod allocations, deferred
tax liabilities, year-to-date losses in interim periods, franchise taxes, step-up in tax basis of goodwill, separate entity financial statements and interim
recognition of tax laws or rate changes. ASU 2019-12 is effective for public business entities for annual reporting periods beginning after December 15,
2020, with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on our consolidated financial statements.
In August 2020, the FASB issued Accounting Standards Update No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity” (“ASU 2020-06”). The amendments in ASU 2020-06 simplify the accounting for convertible instruments by removing major separation
models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the
derivative scope exceptions and also simplifies the diluted earnings per share calculation in certain areas. The standard is effective for public business
entities, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years and interim periods within those fiscal years,
beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and adoption must be
as of the beginning of the fiscal year. We are currently evaluating the impact of this accounting guidance.
2. Revenue from Contracts with Customers
Our two primary revenue streams are (i) software delivery, support and maintenance and (ii) client services. Software delivery, support and
maintenance revenue consists of all of our proprietary software sales (either under a perpetual or term license delivery model), subscription-based software
sales, transaction-related revenue, the resale of hardware and third-party software and revenue from post-contract client support and maintenance services,
which include telephone support services, maintaining and upgrading software and ongoing enhanced maintenance. Client services revenue consists of
revenue from managed services solutions, such as private cloud hosting, outsourcing and revenue cycle management, as well as other client services and
project-based revenue from implementation, training and consulting services. For other clients, we offer an outsourced service in which we assume partial
to total responsibility for a healthcare organization’s IT operations using our employees.
Costs to Obtain or Fulfill a Contract
Capitalized costs to obtain or fulfill a contract are amortized over periods ranging from two to six years which represent the initial contract term or
a longer period, if renewals are expected and the renewal commission, if any, is not commensurate with the initial commission. We classify such capitalized
costs as current or non-current based on the expected timing of expense recognition. The current and non-current portions are included in Prepaid expenses
and other current assets, and Other assets, respectively, in our consolidated balance sheets.
At December 31, 2020 and 2019, we had capitalized costs to obtain or fulfill a contract of $16.8 million and $18.4 million, respectively, in Prepaid
and other current assets and $27.9 million and $28.9 million, respectively, in Other assets. During the year ended December 31, 2020 and 2019, we
recognized $23.6 million and $30.5 million, respectively, of amortization expense related to such capitalized costs, which is included in selling, general and
administrative expenses.
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Contract Balances
The timing of revenue recognition, billings and cash collections results in billed and unbilled accounts receivables, contract assets and customer
advances and deposits. Accounts receivable, net includes both billed and unbilled amounts where the right to receive payment is unconditional and only
subject to the passage of time. Contract assets include amounts where revenue recognized exceeds the amount billed to the customer and the right to
payment is not solely subject to the passage of time. Deferred revenue includes advanced payments and billings in excess of revenue recognized. Our
contract assets and deferred revenue are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are
classified as current or long-term based on the timing of when we expect to complete the related performance obligations and bill the customer. Deferred
revenue is classified as current or long-term based on the timing of when we expect to recognize revenue.
In general, with the exception of fixed fee project-based client service offerings (such as implementation services), we sell our software solutions
on date-based milestone events where control transfers and use of the software occurs on the delivery date but the associated payments for the software
license occur on future milestone dates. In such instances, unbilled amounts are included in contract assets since our right to receive payment is conditional
upon the continued functionality of the software and the provision of ongoing support and maintenance. Our fixed fee project-based client service offerings
typically require us to provide the services with either a significant portion or all amounts due prior to service completion. Since our right to payment is not
unconditional, amounts associated with work prior to the completion date are also deemed to be contract assets.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under the FASB
Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”). A performance obligation is considered distinct when both
(i) a customer can benefit from the product or service either on its own or together with other resources that are readily available to the customer and (ii) the
promised product or service is separately identifiable from other promises in the contract. Activities related to the fulfillment of a contract that do not
transfer products or services to a customer, such as contract preparation or legal review of contract terms, are not deemed to be performance obligations.
We generally sell our solutions through contracts with multiple performance obligations where we provide the customer with (1) software licenses,
(2) support and maintenance, (3) embedded content such as third-party software and (4) client services. Incremental solutions, such as hardware and
managed services are also provided based upon a customer’s preferences and requirements. We deem that a customer is typically able to benefit from a
product or service on its own or together with readily available resources when we sell such product or service on a standalone basis. We have historically
sold the majority of our performance obligations, with the exception of software licenses, on a standalone basis. Incremental solutions, such as hardware,
client services and managed services, are often negotiated and fulfilled on an independent sales order basis as customer needs and requirements change
over the course of a relationship period. In addition, support and maintenance and embedded content are provided on a stand-alone basis through the
renewal process.
One of the product offerings under our CareInMotionTM platform requires significant client service customization to enable the functionality of the
software before the customer can obtain benefit from using the product. The significant customization cannot be performed by a third party. Software
products and client services are separately identifiable in these contracts, but the performance obligations are not considered distinct in the context of the
contract. Therefore, these products and services are treated as a combined performance obligation.
Our support and maintenance obligations include multiple discrete performance obligations, with the two largest being unspecified product
upgrades or enhancements, and technical support, which can be offered at various points during a contract period. We believe that the multiple discrete
performance obligations within our overall support and maintenance obligations can be viewed as a single performance obligation since both the
unspecified product upgrades and technical support are activities to fulfill the maintenance performance obligation and are rendered concurrently.
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The breakdown of revenue recognized based on the origination of performance obligations and elected accounting expedients is presented in the
table below:
(In thousands)
Revenue related to deferred revenue balance at beginning of period
Revenue related to new performance obligations satisfied during the
period
Revenue recognized under "right-to-invoice" expedient
Reimbursed travel expenses, shipping and other revenue
Total revenue
(In thousands)
Revenue related to deferred revenue balance at beginning of period
Revenue related to new performance obligations satisfied during the
period
Revenue recognized under "right-to-invoice" expedient
Reimbursed travel expenses, shipping and other revenue
Total revenue
Three Months
Ended
March 31, 2020
Three Months
Ended
June 30, 2020
$
105,366 $
119,545 $
Three Months
Ended
September 30,
2020
Three Months
Ended
December 31, 2020
138,279
118,300 $
216,580
58,059
1,359
381,364 $
195,308
54,082
369
369,304 $
192,658
54,313
347
365,618 $
182,690
65,108
337
386,414
$
Three Months
Ended
March 31, 2019
Three Months
Ended
June 30, 2019
$
93,602 $
113,288 $
Three Months
Ended
September 30,
2019
Three Months
Ended
December 31, 2019
136,460
116,812 $
248,126
55,923
1,467
399,118 $
233,293
62,245
2,057
410,883 $
227,954
61,814
1,700
408,280 $
214,952
60,826
2,092
414,330
$
The aggregate amount of contract transaction price related to remaining unsatisfied performance obligations (commonly referred to as “backlog”)
represents contracted revenue that has not yet been recognized and includes both deferred revenue and amounts that will be invoiced and recognized as
revenue in future periods. Total backlog equaled $4.1 billion as of December 31, 2020, of which we expect to recognize approximately 35% over the next
12 months, and the remaining 65% thereafter.
Transaction price and allocation
Our contracts with customers often include multiple distinct performance obligations such as software licenses, software support and maintenance,
hardware, client services, private cloud hosting and Software-as-a-Service. We adjust the transaction price on a contract-by-contract basis for (i) the effect
of the time value of money when a contract has a significant financing component and/or (ii) customer discounts and incentives deemed to be variable
consideration. We then allocate the contract transaction price to the distinct performance obligations in the contract. Such allocation is based on the stand-
alone selling price (“SSP”) of each distinct performance obligation. The transaction price allocated to each distinct performance obligation is adjusted for
discounts offered to customers that are outside of the Company’s established sufficiently narrow ranges for distinct performance obligations’ SSPs on a
relative SSP basis.
We use observable stand-alone pricing to determine the SSP for each distinct performance obligation. Such observable SSPs are based upon our
listed sales prices and consider discounts offered to customers. In instances where SSP is not directly observable because we do not sell the product or
service separately, we determine the SSP through the residual approach or cost-plus margin models using information that includes market conditions and
other observable inputs. Such instances primarily relate to sales of new products and service offerings and our acute suite of software licenses. Our acute
suite of software licenses is sold to a diverse set of customers for a broad range of amounts and, therefore, SSP is not discernible from past transactions due
to the high variability of selling prices.
Our products and services are generally not sold with a right of return, except for certain hardware sales, which are not material to our consolidated
revenue. We may provide credits or incentives on a contract-by-contract basis which are accounted for either as a material right or as variable
consideration, respectively, when allocating the transaction price. Such credits and incentives have historically not been significant. We do not provide
additional warranties to clients above and beyond warranties that the solutions purchased will perform in accordance with the agreed-upon specifications.
On rare occasions, when additional warranties are granted, we evaluate on a case-by-case basis whether the additional warranty granted represents a
separate performance obligation.
70
Accounting Policy Elections and Practical Expedients
We have elected to exclude from the measurement of the transaction price all taxes (e.g., sales, use, value-added) assessed by government
authorities and collected from a customer. Therefore, revenue is recognized net of such taxes.
We contract with customers to deliver and ship tangible products within the normal course of business, such as computer hardware. The control of
the products transfers to the customer when the product reaches the shipper based on free on board (FOB) shipping clauses in these situations. We have
elected to use the practical expedient allowed under ASC 606 to account for shipping and handling activities that occur after the customer has obtained
control of a promised good as fulfillment costs rather than as an additional promised service and, therefore, we do not allocate a portion of the transaction
price to a shipping service obligation. We record as revenue any amounts billed to customers for shipping and handling costs and record as cost of revenue
the actual shipping costs incurred.
Our standard contract terms allow for the reimbursement by a customer for certain travel expenses necessary to provide on-site services to the
customer, such as implementation and training. Such reimbursed travel expenses are reported on a gross basis. Since such reimbursed travel expenses do
not represent a distinct good or service nor incremental value provided to a customer, a performance obligation is deemed not to exist. In certain situations,
however, when the allowable reimbursable expenses amount is capped, we believe that such cap represents the most likely amount of variable
consideration and the capped amount is included in the total contract transaction price.
In accordance with ASC 606, if an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the
customer of the entity’s performance completed to date, the entity may recognize revenue in the amount to which the entity has a right to invoice (“right-to-
invoice” practical expedient). We have elected to utilize this expedient as it relates to transaction-based services (such as revenue cycle management) and
electronic data interchange transactions.
Revenue Recognition
We recognize revenue only when we satisfy an identified performance obligation (or bundle of obligations) by transferring control of a promised
product or service to a customer. We consider a product or service to be transferred when a customer obtains control because a customer has sole
possession of the right to use (or the right to direct the use of) the product or service for the remainder of its economic life or to consume the product or
service in its own operations. We evaluate the transfer of control primarily from the customer’s perspective as this reduces the risk that revenue is
recognized for activities that do not transfer control to the customer.
The majority of our revenue is recognized over time because a customer continuously and simultaneously receives and consumes the benefits of our
performance. The exceptions to this pattern are our sales of perpetual and term software licenses, and hardware, where we determined that a customer
obtains control of the asset upon granting of access, delivery or shipment. The following table summarizes the pattern of revenue recognition for our most
significant performance obligations:
Performance Obligation
Support and maintenance
("SMA")
Software as a service ("SaaS")
Private cloud hosting
Revenue Type
Software delivery, support and
maintenance
Software delivery, support and
maintenance
Client services
Recurring or
Non-recurring
Nature
Recurring
Revenue
Recognition
Pattern
Over time
Recurring
Over time
Recurring
Over time
Client/Education services
Client services
Non-recurring
Over time
Outsourcing services
Client services
Recurring
Over time
Payerpath
(transaction volume)
Software delivery, support and
maintenance
Recurring
Over time
Measure of progress
Output method (time elapsed) – revenue is
recognized ratably over the contract term
Output method (time elapsed) – revenue is
recognized ratably over the contract term
Output method (time elapsed) – revenue is
recognized ratably over the contract term
Input method (cost to cost) – revenue is
recognized proportionally over the service
implementation based on hours
Input method (cost to cost) – revenue is
recognized proportionally over the outsourcing
period
Output method ("right-to-invoice" practical
expedient) – value transferred to the customer is
reflected on invoicing.
Upon electronic delivery
Software licenses
Hardware
Software delivery, support and
maintenance
Software delivery, support and
maintenance
Non-recurring
Point in time
Non-recurring
Point in time
Upon shipment
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Recurring software delivery, support and maintenance revenue consists of recurring subscription-based software sales, support and maintenance
revenue, and recurring transaction-related revenue. Non-recurring software delivery, support and maintenance revenue consists of perpetual software
licenses sales, resale of hardware and non-recurring transaction-related revenue. Recurring client services revenue consists of revenue from managed
services solutions, such as outsourcing, private cloud hosting and revenue cycle management. Non-recurring client services revenue consists of project-
based client services revenue.
SMA, SaaS and private cloud hosting performance obligations are deemed to be performance obligations satisfied evenly over time as these are
fulfilled as stand-ready obligations to perform. Client services, such as those relating to implementation, consulting, training or education, are generally not
fulfilled evenly over the contract period, but rather over a shorter timeline where work effort can increase, or decline based upon stages of the project work
effort. These client services are typically quoted to a customer as a fixed fee amount that covers the implementation effort. Delivery progress for these
services is measured by establishing an approved cost budget with labor hour inputs utilized to gauge percentage of completion of the work effort.
Therefore, revenue for our client, education and outsourcing services is recognized proportionally with the progress of the implementation work effort.
Payerpath transaction volume and other transaction-based service obligations, such as revenue cycle management services, are fulfilled over time
but are not provided evenly over the contract period and reliable inputs are not available to track progress of completion. We determined that value is
provided to the customer throughout the contract period and the pricing charged to the customer varies on a monthly basis, based upon the volume of the
customer’s transactions processed in that respective period. The invoiced amount to the customer represents this value and, accordingly, the practical
expedient to recognize revenue based upon invoicing is most appropriate.
We considered the specific implementation guidance for accounting for licenses of intellectual property (“IP”) to determine if point in time or over
time recognition was more appropriate. The first step in the licensing framework is to determine whether the license is distinct or combined with other
goods and services. For most of our software licensing products, the licenses are distinct, with the exception of one of our product offerings under
our CareInMotionTM platform, which requires a significant client service customization. In all instances, we determined that we are offering functional IP
as compared with a symbolic IP. Functional IP is a right to use IP because the IP has standalone functionality and a customer can use the IP as it exists at a
point in time.
Disaggregation of Revenue
We disaggregate our revenue from contracts with customers based on the type of revenue and nature of revenue stream, as we believe those
categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. The below tables
summarize revenue by type and nature of revenue stream as well as by our reportable segments:
(In thousands)
Revenue:
Recurring revenue
Non-recurring revenue
Total revenue
(In thousands)
Software delivery, support and maintenance
Client services
Total revenue
(In thousands)
Software delivery, support and maintenance
Client services
Total revenue
(In thousands)
Software delivery, support and maintenance
Client services
Total revenue
2020
Year Ended December 31,
2019
2018
$
$
1,222,731 $
279,969
1,502,700 $
1,278,456
354,155
1,632,611
$
$
1,313,281
304,560
1,617,841
Core Clinical and
Financial Solutions
Data, Analytics and
Care Coordination
Unallocated Amounts
Total
Year Ended December 31, 2020
676,655 $
577,594
1,254,249
$
250,877 $
10,444
261,321 $
(12,870) $
0
(12,870) $
914,662
588,038
1,502,700
Core Clinical and
Financial Solutions
Data, Analytics and
Care Coordination
Unallocated Amounts
Total
Year Ended December 31, 2019
761,836 $
615,311
1,377,147
$
249,561 $
13,103
262,664 $
(7,202) $
2
(7,200) $
1,004,195
628,416
1,632,611
Core Clinical and
Financial Solutions
Data, Analytics and
Care Coordination
Unallocated Amounts
Total
Year Ended December 31, 2018
791,417 $
588,082
1,379,499
$
237,320 $
9,398
246,718 $
(17,113) $
8,737
(8,376) $
1,011,624
606,217
1,617,841
$
$
$
$
$
$
72
Contract Assets – Estimate of Credit Losses
We adopted ASU 2016-13 on January 1, 2020 using the cumulative-effect adjustment transition method. The new guidance required the recognition
of lifetime estimated credit losses expected to occur for contract assets. The guidance also required that we pool assets with similar risk characteristics and
consider current economic conditions when estimating losses. The adoption of ASU 2016-13 for contract assets was recorded as a debit to retained earnings
of $5.3 million as of January 1, 2020.
At adoption, we segmented the contract asset population into pools based on their risk assessment. Risks related to contract assets are a customer’s
inability to pay or bankruptcy. Each pool was defined by their internal credit assessment, and business size. The pools were aligned with management’s
review of financial performance. In the fourth quarter of 2020, we used each customer’s primary business unit in our pooling determination. This
assessment provides additional information of the customer including size, segment and industry. Using this perspective, we added one new pool. We
reallocated pools and loss rates accordingly and noted slight shifts in each pool. The new pools are aligned with management’s review of financial
performance. As of December 31, 2020, no other adjustments to the pools were necessary.
We utilized a loss-rate method to measure expected credit loss for each pool. The loss rate is calculated using a twenty-four-month lookback period
of credit memos and adjustments divided by the average contract asset balance for each pool during that period. We considered current economic
conditions, including how the COVID-19 pandemic is impacting the global economy, internal forecasts, cash collection and credit memos written during
the current period when assessing loss rates. We reviewed these factors and concluded that no adjustments should be made to the historical loss rate data.
The December 31, 2020 analysis resulted in no change in the ending estimate of credit losses.
Changes in the estimate of credit losses for contract assets are presented in the table below.
(In thousands)
Balance at January 1, 2020
Current period provision
Balance at December 31, 2020
Less: Contract assets, short-term
Total contract assets, long-term
$
$
$
Total
5,341
0
5,341
1,068
4,273
3. Accounts Receivable
Trade Accounts Receivable – Estimate of Credit Losses
We adopted ASU 2016-13 on January 1, 2020 using the cumulative-effect adjustment transition method. The new guidance required the recognition
of lifetime estimated credit losses expected to occur for trade accounts receivable. The guidance also required that we pool assets with similar risk
characteristics and consider current economic conditions when estimating losses. The adoption of ASU 2016-13 for trade accounts receivable was recorded
as a debit to retained earnings of $12.6 million as of January 1, 2020.
At adoption, we segmented the accounts receivable population into pools based on their risk assessment. Risks related to trade accounts receivable
are a customer’s inability to pay or bankruptcy. Each pool was defined by their internal credit assessment, and business size. The pools were aligned with
management’s review of financial performance. In the fourth quarter of 2020, we used each customer’s primary business unit in our pooling determination.
This assessment provides additional information of the customer including size, segment and industry. Using this perspective, we added one new pool. We
reallocated pools and loss rates accordingly and noted slight shifts in each pool. The new pools are aligned with management’s review of financial
performance. As of December 31, 2020, no other adjustments to the pools were necessary.
We utilized a loss-rate method to measure expected credit loss for each pool. The loss rate is calculated using a twelve-month lookback period of
credit memos and adjustments divided by the average accounts receivable balance for each pool during that period. We considered current economic
conditions, including how the COVID-19 pandemic is impacting the global economy, internal forecasts, cash collection and credit memos written during
the current period when assessing loss rates. We reviewed these factors and concluded that no adjustments should be made to the historical loss rate data.
73
Changes in the estimate of credit losses for trade accounts receivable are presented in the tables below.
(In thousands)
Balance at January 1, 2020
Current period provision
Write-offs
Recoveries
Balance at December 31, 2020
4. Leases
$
$
Total
33,256
8,726
(10,484)
98
31,596
We determine whether an arrangement is a lease at inception. Assets leased under an operating lease arrangement are recorded in Right-of-use
assets – operating leases, and the associated lease liabilities are included in Current operating lease liabilities and Long-term operating lease liabilities
within the consolidated balance sheets. Assets leased under finance lease arrangements are recorded within fixed assets and the associated lease liabilities
are recorded within Accrued expenses and Other liabilities within the consolidated balance sheets.
Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease
payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease
payments over the expected lease term. Since our lease arrangements do not provide an implicit rate, we use our incremental borrowing rate in conjunction
with the market swap rate for the expected remaining lease term at commencement date for new leases in determining the present value of future lease
payments. Our expected lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
Operating lease expense is recognized on a straight-line basis over the lease term.
We have elected the group of practical expedients under ASU 2016-02 to forego assessing upon adoption: (1) whether any expired contracts are or
contain leases; (2) the lease classification for any existing or expired leases and (3) any indirect costs that would have qualified for capitalization for any
existing leases. We have lease agreements with lease and non-lease components, which are generally accounted for separately except for real estate and
vehicle leases, which we have elected to combine through a practical expedient under ASU 2016-02. Non-lease components for our leases typically
comprise of executory costs, which under the practical expedient allows for executory costs to be recorded as lease payments. Additionally, for certain
equipment leases, we apply a portfolio approach to effectively record right-of-use assets and liabilities.
Our operating leases mainly include office leases and our finance leases include office and computer equipment leases. Our finance leases are not
significant. Our leases have remaining lease terms up to 8 years, some of which include options to extend the leases for up to 5 years, which may include
options to terminate the leases within 1 year. Operating costs associated with leased assets are as follows:
(In thousands)
Operating lease cost (1)
Less: Sublease income
Total operating lease costs
Year Ended December 31,
2020
2019
$
$
25,394 $
(1,121)
24,273 $
27,235
(3,265)
23,970
(1) Operating lease costs are recognized on a straight-line basis and are included in Selling, general and administrative expenses within the consolidated statement of
operations.
Supplemental information for operating leases is as follows:
(In thousands)
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for operating lease obligations
The balance sheet location and balances for operating leases are as follows:
(In thousands, except lease term and discount rate)
Right-of-use assets - operating leases
Current operating lease liabilities
Long-term operating lease liabilities
Weighted average remaining lease term (in years)
Weighted average discount rate
74
Year Ended December 31,
2020
2019
$
$
26,638 $
21,770 $
29,348
141,787
$
$
$
December 31, 2020
December 31, 2019
$
$
$
96,601
22,264
93,463
6
3.6%
95,757
22,328
93,588
6
4.4%
The future maturities of our leasing arrangements including lease and non-lease components are shown in the below table. The maturities are
calculated using foreign currency exchange rates in effect as of December 31, 2020.
(In thousands)
2021
2022
2023
2024
2025
Thereafter
Total lease liabilities
Less: Amount representing interest
Less: Short-term lease liabilities
Total long-term lease liabilities
5. Business Combinations and Divestitures
2020 Divestitures
December 31, 2020
Operating Leases
26,090
24,501
22,752
17,388
14,927
22,069
127,727
(12,000)
(22,264)
93,463
$
$
On December 31, 2020, we completed the sale of our CarePort business to a subsidiary of WellSky Corp., a Delaware corporation (“WellSky”),
pursuant to a purchase agreement (the “CarePort Purchase Agreement”) by which WellSky purchased substantially all of the assets of the CarePort
business. The total consideration for CarePort was $1.35 billion, which is subject to certain adjustments for liabilities assumed by WellSky and net working
capital as described in the CarePort Purchase Agreement. We realized a pre-tax gain upon the sale of $933.9 million, which is included in the Gain on sale
of discontinued operations line in our consolidated statements of operations for the year ended December 31, 2020. The divestiture is being treated as a
discontinued operation as of December 31, 2020. Refer to Note 18, “Discontinued Operations” for further details regarding the historical assets, liabilities
and results of operations of CarePort. On December 31, 2020, we repaid $161.0 million of the Term Loan (as defined below) as a result of the sale, which
was a mandatory prepayment in accordance with the Second Amended Credit Agreement (as defined below).
On October 15, 2020, we completed the sale of our EPSi business to Strata Decision Technology LLC, an Illinois limited liability company
(“Strata”), and Roper Technologies, Inc., a Delaware corporation pursuant to a purchase agreement (the “EPSi Purchase Agreement”) by which
Strata purchased substantially all of the assets of the EPSi business. The total consideration for EPSi was $365.0 million, which is subject to certain
adjustments for liabilities assumed by Strata and net working capital as described in the EPSi Purchase Agreement. We realized a pre-tax gain upon the sale
of $222.6 million, which is included in the Gain on sale of discontinued operations line in our consolidated statements of operations for the year ended
December 31, 2020. The divestiture is being treated as a discontinued operation as of December 31, 2020. Refer to Note 18, “Discontinued Operations” for
further details regarding the historical assets, liabilities and results of operations of EPSi. On October 29, 2020, we repaid $19.0 million of the Term Loan
as a result of the sale, which was a mandatory prepayment in accordance with the Second Amended Credit Agreement.
2019 Business Combinations
We acquired the Pinnacle and Diabetes Collaborative Registries from the American College of Cardiology (“ACC”) as part of our broader strategic
partnership with the ACC on July 2, 2019. The total purchase price was $19.7 million, consisting of an initial payment of $11.7 million plus up to an
aggregate of $8.0 million pending the attainment certain milestones over the next 18 months. The contingent consideration of up to $8.0 million was valued
at $5.0 million at the time of closing. As part of this partnership, we operate Pinnacle and Diabetes Collaborative Registries, which extends our EHR-
enabled ambulatory network to create a large-scale chronic disease network. The business is included in our Data, Analytics and Care Coordination
business segment.
We acquired the assets of a business engaged in the development, implementation, customization, marketing, licensing and sale of a specialty
prescription drug platform including software that collects, saves and transmits information required to fill a prescription on June 10, 2019. The drug
platform and software will enable healthcare providers, pharmacists and payors to digitally interact with one another to fill a prescription. The business is
included in our Data, Analytics and Care Coordination business segment.
75
We acquired all of the outstanding minority interest in Pulse8, Inc. on March 1, 2019 for $53.8 million (subject to adjustments for net working
capital and a contingency holdback), plus up to a $5.0 million earnout based upon revenue targets through 2019. Pulse8, Inc. is a healthcare analytics and
technology company that provides business intelligence software solutions for health plans and at-risk providers to enable them to analyze their risk
adjustment and quality management programs. We initially acquired a controlling stake in Pulse 8, Inc. on September 8, 2016. This transaction was treated
as an equity transaction, and the cash payment is reported as part of cash flow from financing activities in the consolidated statement of cash flows for the
year ended December 31, 2019.
2018 Business Combinations and Divestitures
Acquisition of Health Grid
On May 18, 2018, we acquired all the capital stock of Health Grid Holding Company, a Delaware corporation (“Health Grid”), for a total price of
$110.0 million, consisting of an initial payment of $60.0 million plus up to an aggregate of $50.0 million in future earnout payments based on Health Grid
achieving certain revenue targets over the three years following the acquisition. At the time of closing, we pre-paid $10.0 million of the earnout payments
and the remaining contingent consideration of up to $40.0 million was valued at $23.9 million. Health Grid is a patient engagement solutions provider that
assists independent providers, hospitals and health systems to improve patient interactions and satisfaction. We have integrated the capabilities of Health
Grid into our FollowMyHealth® platform. The consideration paid for Health Grid is shown below:
Aggregate purchase price
First earnout payment paid by Allscripts
Fair value of contingent consideration payment
Closing purchase price adjustments
Total consideration paid for Health Grid
(In thousands)
60,000
10,000
23,915
2,009
95,924
$
$
The allocation of the fair value of the consideration transferred as of the acquisition date of May 18, 2018 is shown in the table below. The
allocation of purchase price was finalized in the fourth quarter of 2018. The goodwill is not deductible for tax purposes.
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other assets
Fixed assets
Intangible assets
Goodwill
Accounts payable and accrued expenses
Deferred revenue
Long-term deferred tax liability
Net assets acquired
(In thousands)
1,783
3,968
185
200
41,000
53,953
(478)
(700)
(3,987)
95,924
$
$
The following table summarizes the preliminary fair values of the identifiable intangible assets and their estimated useful lives:
Description
Customer Relationships
Technology
Useful Life
(In years)
15
8
Fair Value
(In thousands)
$
$
28,000
13,000
41,000
76
We incurred $0.5 million of acquisition costs which are included in selling, general and administrative expenses in the accompanying consolidated
statement of operations for the year ended December 31, 2018. The results of operations of Health Grid were not material to our consolidated results of
operations for the year ended December 31, 2018.
Acquisition of Practice Fusion, Inc.
On February 13, 2018, we completed the acquisition of Practice Fusion, Inc., a Delaware corporation (“Practice Fusion”), for aggregate
consideration of $113.6 million paid in cash. Practice Fusion offers an affordable certified cloud-based electronic health record (“EHR”) for traditionally
hard-to-reach small, independent physician practices. The consideration paid for Practice Fusion is shown below:
Aggregate purchase price
Add: Net working capital surplus
Add: Closing cash
Less: Adjustment to assumed indebtedness
Total consideration paid for Practice Fusion
(In thousands)
100,000
373
14,951
(1,684)
113,640
$
$
The allocation of the fair value of the consideration transferred as of the acquisition date of February 13, 2018 is shown in the table below. The
allocation of the purchase price was finalized during the fourth quarter of 2018. The goodwill is not deductible for tax purposes.
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other current assets
Fixed assets
Intangible assets
Goodwill
Other assets
Accounts payable and accrued expenses
Deferred revenue
Long-term deferred tax liability
Other liabilities
Net assets acquired
The following table summarizes the fair values of the identifiable intangible assets and their estimated useful lives:
Description
Customer Relationships - Physician Practices
Customer Relationships - Pharmaceutical Partners
Technology
Tradenames
Useful Life
(In years)
15
20
8
10
(In thousands)
14,951
13,328
809
1,764
67,100
35,092
42
(7,378)
(2,400)
(8,853)
(815)
113,640
Fair Value
(In thousands)
29,000
19,400
14,800
3,900
67,100
$
$
$
$
We incurred $1.2 million of acquisition costs which are included in selling, general and administrative expenses in the consolidated statement of
operations for the year ended December 31, 2018. The results of operations of Practice Fusion were not material to our consolidated results of operations
for the year ended December 31, 2018.
Netsmart LLC Divestiture
On December 31, 2018, we sold all of the Class A Common Units of Netsmart LLC, a Delaware limited liability company (“Netsmart”), owned by
the Company in exchange for $566.6 million, plus a final settlement as determined following the closing pursuant to the terms of the sales agreement.
Netsmart was originally acquired in April 2016, and we realized a pre-tax gain on sale of $500.5 million, which is included on the Gain on sale of
discontinued operations line in our consolidated statements of operations for the year ended December 31, 2018. The divestiture of Netsmart is being
treated as a discontinued operation as of December 31, 2018. Refer to Note 18, “Discontinued Operations” for further details regarding the historical assets,
liabilities and results of operations of Netsmart.
77
Other Acquisitions and Divestitures
On June 15, 2018, we acquired all the outstanding minority interests in a third party for $6.9 million. We initially acquired a controlling interest in
the third party in April 2015. Therefore, this transaction was treated as an equity transaction, and the cash payment is reported as part of cash flow from
financing activities in the consolidated statement of cash flows for the year ended December 31, 2018.
On April 2, 2018, we sold substantially all of the assets of the Allscripts’ business providing hospitals and health systems document and other
content management software and services generally known as “OneContent” to Hyland Software, Inc., an Ohio corporation (“Hyland”). Allscripts
acquired the OneContent business during the fourth quarter of 2017 through the acquisition of the EIS Business (as defined below). Certain assets of
Allscripts relating to the OneContent business were excluded from the transaction and retained by Allscripts. In addition, Hyland assumed certain liabilities
related to the OneContent business. The total consideration for the OneContent business was $260 million, which was subject to certain adjustments for
liabilities assumed by Hyland and net working capital. We realized a pre-tax gain upon sale of $177.9 million which is included in the Gain on sales of
businesses, net line in our consolidated statements of operations for the year ended December 31, 2018.
On March 15, 2018, we contributed certain assets and liabilities of our Strategic Sourcing business unit, acquired as part of the acquisition of the
EIS Business in 2017, into a new entity together with $2.7 million of cash as additional consideration. In exchange for our contributions, we obtained a
35.7% interest in the new entity, which was valued at $4.0 million and is included in Other assets in our consolidated balance sheet as of December 31,
2018. This investment is accounted for under the equity method of accounting. As a result of this transaction, we recognized an initial pre-tax loss of $0.9
million and $4.7 million in additional losses due to measurement period adjustments upon the finalization of carve-out balances, mainly related to accounts
receivable. These losses are included on the “Gain on sale of businesses, net” line in our consolidated statements of operations for the year ended December
31, 2018.
On February 6, 2018, we acquired all of the common stock of a cloud-based analytics software platform provider for a purchase price of $8.0
million in cash. The allocation of the consideration is as follows: $1.1 million of intangible assets related to technology; $0.6 million to customer
relationships; $6.6 million of goodwill; $0.8 million to accounts receivable; deferred revenue of $0.6 million and $0.5 million of long-term deferred income
tax liabilities. The allocation was finalized in the fourth quarter of 2018. The acquired intangible asset related to technology will be amortized over 8 years
using a method that approximates the pattern of economic benefits to be gained from the intangible asset. The customer relationship was amortized over
one year. The goodwill is not deductible for tax purposes. The results of operations of this acquisition were not material to our consolidated financial
statements.
6. Fair Value Measurements and Other Investments
Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent
sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. We utilize
valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The fair values of assets and liabilities
required to be measured at fair value are categorized based upon the level of judgment associated with the inputs used to measure their value in one of the
following three categories:
Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. We held no Level 1 financial instruments at
December 31, 2020 or 2019.
Level 2: Quoted prices for similar instruments in active markets with inputs that are observable, either directly or indirectly. Our Level 2 derivative
financial instruments include foreign currency forward contracts valued based upon observable values of spot and forward foreign currency exchange rates.
Refer to Note 16, “Derivative Financial Instruments,” for further information regarding these derivative financial instruments.
Level 3: Unobservable inputs are significant to the fair value of the asset or liability, and include situations where there is little, if any, market
activity for the asset or liability. Level 3 instruments include the estimated fair value of contingent consideration related to completed acquisitions. The fair
values are based on discounted cash flow analyses reflecting the likelihood of achieving specified performance measures or events and captures the
contractual nature of the contingencies, commercial risk or time value of money. Changes in fair value for contingent consideration adjustments are
recorded in Other (loss) income, net in the consolidated statements of operations. Level 3 instruments also included the 1.25% Call Option asset and the
1.25% embedded cash conversion option liability (together the “1.25% Notes Call Spread Overlay” as further described in Note 10, “Debt”) that are not
actively traded. These derivative instruments were designed with the intent that changes in their fair values would substantially offset, with limited net
impact to our earnings. The sensitivity of changes in the unobservable inputs to the valuation pricing model used to value these instruments is not material
to our consolidated results of operations. On July 1, 2020, these instruments matured and were repaid in full.
78
The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of the respective balance sheet
dates:
(In thousands)
Foreign exchange
derivative assets
1.25% Call Option
Total assets
Contingent consideration
- current
Contingent consideration
- long-term
1.25% Embedded
cash conversion
option
Total liabilities
Balance Sheet
Classifications
Prepaid expenses
and other
current assets
Other assets
Accrued
expenses
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
December 31, 2020
December 31, 2019
$
$
0 $ 1,509 $
0
0 $ 1,509 $
0
0 $ 1,509 $
0
0 $ 1,509 $
0
0 $
0
0 $
0 $
0
0 $
0 $
84
84 $
0
84
84
$
0 $
0 $ 1,011 $ 1,011 $
0 $
0 $ 17,100 $ 17,100
Other liabilities
0
0
0
0
0
0
2,415
2,415
Other liabilities
0
0 $
$
0
0 $ 1,011 $ 1,011 $
0
0
0
0 $
0
185
185
0 $ 19,700 $ 19,700
The changes in Level 3 assets and liabilities measured at fair value on a recurring basis at December 31, 2020 are summarized as follows:
(In thousands)
Balance at December 31, 2018
Additions
Payments/write-downs(1)
Fair value adjustments
Balance at December 31, 2019
Additions
Payments/write-downs(2)
Fair value adjustments
Balance at December 31, 2020
Contingent Consideration
1.25% Notes Call Spread Overlay
$
$
$
25,624
12,073
(18,624)
442
19,515
770
(19,274)
0
1,011
$
$
$
(870)
0
0
769
(101)
0
0
101
0
(1) Payments and write-downs for the year ended December 31, 2019 primarily consisted of $10.0 million in payments for the Health Grid earnout and a $5.0 million
write-down related to the Pulse8 earnout.
(2) Payments and write-downs for the year ended December 31, 2020 primarily consisted of $4.0 million in payments for the ACC earnout and a $13.9 million write-down
related to the Health Grid earnout.
The following table summarizes the quantitative information about our Level 3 fair value measurements at December 31, 2020:
(In thousands, except the discount rate)
Financial instruments:
Fair Value
Valuation Technique
Contingent consideration
$
1,011
Probability Weighted
Discounted cash flow
Total financial instruments
$
1,011
(1) The weighted average is calculated based upon the absolute fair value of the instruments.
79
December 31, 2020
Significant Unobservable
Inputs
Ranges of Inputs
Weighted
Average (1)
Discount rate
Registry members
Patient data volume
Projected year of
payment
5.3% to 5.5%
0 to 1,551
0 to 52,845
2020 to 2021
5.4%
776
26,422
Long-term Investments
The following table summarizes our other equity investments which are included in Other assets in the accompanying consolidated balance sheets:
(In thousands, except for number of investees)
Equity method investments (1)
Cost less impairment
Total long-term equity investments
Number of Investees
at December 31, 2020
Original
Cost
Carrying Value at
December 31, 2020
December 31, 2019
3 $
8
11 $
7,099 $
37,568
44,667 $
10,744 $
25,059
35,803 $
11,332
32,462
43,794
(1) Allscripts share of the earnings of our equity method investees is reported based on a one quarter lag.
During 2020, we recorded a $16.8 million gain from the sale of a third-party equity-method investment. The gain is recognized in the Equity in net
income (loss) of unconsolidated investments line in the consolidated statements of operations.
During 2018, we acquired certain non-marketable equity securities of two third parties and entered into a commercial agreement with one of the
third parties for total consideration of $11.7 million. During 2018, we also acquired a $1.8 million non-marketable convertible note of a third party. These
investments are recorded in the Other asset caption within the consolidated balance sheets.
It is not practicable to estimate the fair value of our equity investments primarily because of their illiquidity and restricted marketability as of
December 31, 2020. The factors we considered in trying to determine fair value include, but are not limited to, available financial information, the issuer’s
ability to meet its current obligations, the issuer’s subsequent or planned raises of capital and observable price changes in orderly transactions.
Impairment and Recovery of Long-Term Investments
Management performs a quarterly assessment of each of our investments on an individual basis to determine if there are any declines in fair value.
Based on our review in the third quarter of 2020, we recognized a $1.0 million non-cash impairment charge related to one of our cost-method investments,
which equaled the cost basis of our initial investment. In the second quarter of 2020, we reached a settlement agreement with one of our third-party equity-
method investments, which resulted in the recognition of a $0.6 million non-cash impairment charge. We recognized non-cash impairment charges of $1.7
million during 2019 related to one of our long-term investments. We also recovered $1.0 million from a third-party cost-method investment that we had
previously impaired. The non-cash impairment charges and the amount recovered are recognized in the Impairment (recovery) of long-term investments
line in the consolidated statements of operations for the year ended December 31, 2020 and 2019.
7. Fixed Assets
Fixed assets consist of the following:
(Dollar amounts in thousands)
Computer equipment and software
Facility furniture, fixtures and equipment
Leasehold improvements
Assets under finance leases
Fixed assets, gross
Less: Accumulated depreciation and amortization
Fixed assets, net
Estimated
Useful Life
3 to 10 years
5 to 7 years
Shorter of 7 years or life of lease
1 to 3 years
December 31,
December 31,
2020
2019
$
$
329,564 $
25,932
40,115
524
396,135
(323,973)
72,162 $
343,756
24,282
38,948
524
407,510
(319,557)
87,953
Accumulated amortization for assets under finance leases totaled $0.5 million and $0.4 million as of December 31, 2020 and 2019, respectively.
(In thousands)
Fixed assets depreciation and amortization expense, including finance leases
2020
Year Ended December 31,
2019
2018
$
32,324 $
46,705 $
46,951
80
8. Goodwill and Intangible Assets
Goodwill and intangible assets consist of the following:
(In thousands)
Intangibles subject to amortization:
Proprietary technology
Customer contracts and relationships
Total
Intangibles not subject to amortization:
Registered trademarks
Goodwill
Total
December 31, 2020
December 31, 2019
Gross
Carrying
Amount
Accumulated
Amortization
Intangible
Assets, Net
Gross
Carrying
Amount
Accumulated
Amortization
Intangible
Assets, Net
$
$
535,092 $
674,336
1,209,428 $
(465,292) $
(509,534)
(974,826) $
69,800 $
164,802
234,602 $
534,873 $
701,805
1,236,678 $
(433,017) $
(488,533)
(921,550) $
101,856
213,272
315,128
$
52,000
974,729
$
1,026,729
$
$
52,000
974,110
1,026,110
During the first quarter of 2020, we changed our reportable segments from Provider, Veradigm and Unallocated to Core Clinical and Financial
Solutions, Data, Analytics and Care Coordination, and Unallocated. As a result of this change, our reporting units became Core Clinical and Financial
Solutions, Data, Analytics and Care Coordination, and EPSi. Refer to Note 19, “Business Segments,” for further discussion on the impact of the change to
our reportable segments. During the second quarter of 2020, we made two changes in our reporting units. We transferred the Follow My Health business,
previously included in the Data, Analytics and Care Coordination reporting unit, to the Core Clinical and Financial Solutions reporting unit. We also
transferred Payerpath, a portion of the Ambulatory business that was previously included in the Clinical and Financial Solutions reporting unit, to the Data,
Analytics and Care Coordination reporting unit.
During 2020, as a result of these organizational changes, we performed interim goodwill impairment tests as of January 1, 2020 and April 1, 2020.
The fair value of each reporting unit substantially exceeded its carrying value, and no indicators of impairment were identified.
We performed our annual 2020 goodwill impairment test as of October 1, 2020. The fair value of each reporting unit substantially exceeded its
carrying value, and no indicators of impairment were identified.
We performed our 2019 goodwill impairment test as of October 1, 2019. As a result of this test, we concluded that the carrying value of the
historical Hospitals and Health Systems (“HHS”) reporting unit exceeded its fair value. As a result, we recognized a goodwill impairment charge of $25.7
million. This goodwill impairment charge is reflected on the Goodwill impairment charge line in our consolidated statements of operations. The historical
HHS reporting unit is now reported within the Core Clinical and Financial Solutions reporting unit. The fair values of all other reporting units substantially
exceeded their carrying values. As of December 31, 2019, the goodwill allocated to the historical HHS reporting unit was $485.5 million.
We performed our 2018 goodwill impairment test as of October 1, 2018. We concluded that the carrying value of the historical NantHealth
reporting unit exceeded its fair value as a result of this test. Our latest available financial forecasts at the time of the annual goodwill impairment test
reflected that projected future operating costs exceeded projected revenues resulting in negative operating margins for the historical NantHealth reporting
unit. We recognized a goodwill impairment charge of $13.5 million as a result, representing the entire goodwill balance assigned to the historical
NantHealth reporting unit. This goodwill impairment charge is reflected on the Goodwill impairment charge line in our consolidated statements of
operations for the year ended December 31, 2018.
The determination of the fair value of our reporting units is based on a combination of a market approach, which considers benchmark company
market multiples, and an income approach, which utilizes discounted cash flows for each reporting unit and other Level 3 inputs. We determine fair value
based on the present value of the most recent cash flow projections for each reporting unit as of the date of the analysis and calculate a terminal value
utilizing a terminal growth rate under the income approach. The significant assumptions under this approach include, among others: income projections,
which are dependent on sales to new and existing clients, new product introductions, client behavior, competitor pricing, operating expenses, the discount
rate, and the terminal growth rate. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as
our expectations of future performance and the expected future economic environment, which are partly based upon our historical experience. Our
estimates are subject to change given the inherent uncertainty in predicting future results. The discount rate and the terminal growth rate are based on our
judgment of the rates that would be utilized by a hypothetical market participant. We also consider our market capitalization in assessing the reasonableness
of the combined fair values estimated for our reporting units as part of goodwill impairment testing.
We recognized an intangible asset impairment charge of $23.1 million relating to Health Grid’s remaining customer relationship intangible balance
during 2020. We also recognized an intangible asset impairment charge of $8.1 million relating to
81
NantHealth’s remaining customer relationship intangible balance during 2019. In addition, we recognized an intangible asset impairment charge of $2.2
million during 2018 relating to NantHealth’s acquired proprietary technology because the carrying value of this definite-lived intangible assets no longer
appeared recoverable based on latest available financial forecasts at the time of the annual goodwill impairment test. These impairment charges are
included in the Asset impairment charges line in our consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018.
As of December 31, 2020, there were no accumulated impairment losses associated with goodwill. Accumulated impairment losses associated with
goodwill totaled $39.2 million and $13.5 million as of December 31, 2019 and 2018, respectively. Changes in the carrying amounts of goodwill by
reportable segment for the years ended December 31, 2020 and 2019 were as follows:
(In thousands)
Balance as of December 31, 2018
Additions
Goodwill impairment charge
Foreign exchange translation
Balance as of December 31, 2019
Goodwill impairment charge
Foreign exchange translation
Balance as of December 31, 2020
Core Clinical and
Financial Solutions
Data, Analytics and
Care Coordination
Total
$
$
760,294 $
0
(25,700)
289
734,883
0
619
735,502 $
225,543 $
13,684
0
0
239,227
0
0
239,227 $
985,837
13,684
(25,700)
289
974,110
0
619
974,729
Additions to goodwill in 2019 resulted from the purchase of the Pinnacle and Diabetes Collaborative Registries and a prescription drug software
company. Refer to Note 5, “Business Combinations and Divestitures” for additional information regarding these transactions. As stated above, we also
recognized a goodwill impairment charge in 2019 for $25.7 million related to the HHS reporting unit.
Intangible assets are being amortized over their estimated useful lives, and amortization expense related to intangible assets was as follows:
(In thousands)
Proprietary technology amortization included in cost of revenue
Intangible amortization included in operating expenses
Total intangible amortization expense
2020
Year Ended December 31,
2019
2018
$
$
32,130
25,604
57,734
$
$
35,034
27,188
62,222
$
$
37,029
26,558
63,587
Future amortization expense for the intangible assets as of December 31, 2020, based on foreign currency exchange rates in effect as of such date,
is as follows:
Year Ended December 31,
2021
2022
2023
2024
2025
Thereafter
Total
$
$
(In thousands)
50,556
44,155
27,943
23,799
20,180
67,969
234,602
82
9. Asset Impairment Charges
During the year ended December 31, 2020, we recorded several non-cash asset impairment charges. We recorded a non-cash asset impairment
charge of $23.1 million related to the write-off of the remaining Health Grid acquired customer relationship intangible balance. This was partially offset by
the write-off of $13.9 million related to the Health Grid contingent consideration accrual. We recorded $31.2 million of non-cash asset impairment charges
related to the write-off of capitalized software due to the asset values exceeding the product’s net realizable value. The write-off was primarily related to
one product in which we determined it would no longer be placed into service. We also recorded a $34.3 million non-cash asset impairment charge due to
the write-off of deferred costs related to our private cloud hosting operations. The write-off was driven by the expectation of improved efficiencies in the
utilization of our contract compared with historical deferred costs, which was identified through our broader cost reduction initiatives. Impairment of long-
term investments during the year ended December 31, 2020 consisted of $1.6 million, which included $1.0 million related to one of our cost-method
investments and $0.6 million related to one of our third-party equity-method investments. Refer to Note 6, “Fair Value Measurements and Other
Investments” for further information regarding the long-term investment impairments.
Asset impairment charges incurred during the year ended December 31, 2019 were primarily the result of impairing the remaining NantHealth
acquired customer relationship intangible balance of $8.1 million. We also recognized non-cash impairment charges of $2.7 million on the retirement of
certain hosting assets due to data center migrations. Impairment of long-term investments during the year ended December 31, 2019 consisted of an
impairment of $1.7 million associated with one of our long-term equity investments. We also recovered $1.0 million from one of our long-term equity
investments that we had previously impaired. We also recorded a goodwill impairment charge of $25.7 million related to our HHS reporting unit. Refer to
Note 8, “Goodwill and Intangible Assets” for further information regarding this impairment.
We incurred several non-cash asset impairment charges during the year ended December 31, 2018. We recorded non-cash asset impairment charges
of $33.2 million related to the write-off of capitalized software as a result of our decision to discontinue several software development projects. We also
recorded $22.9 million of non-cash asset impairment charges related to our acquisition of the patient/provider engagement solutions business from
NantHealth in 2017, which included the write-downs of $2.2 million of acquired technology and $20.7 million, representing the unamortized value
assigned to the modification of our existing commercial agreement with NantHealth, as we no longer expected to recover the value assigned to these assets.
The remaining $2.1 million of non-cash asset impairment charges recorded during the year ended December 31, 2018 relate to the disposal of fixed assets
as a result of relocating and consolidating business functions and locations from recent acquisitions.
We recorded a goodwill impairment charge of $13.5 million related to NantHealth during the year ended December 31, 2018. Refer to Note 8,
“Goodwill and Intangible Assets” for further information regarding this impairment. We recognized non-cash impairment charges of $15.5 million in 2018
related to two of our cost-method equity investments and a related note receivable. These charges equaled the cost bases of the investments and the related
note receivable prior to the impairment.
The following table summarizes the non-cash asset impairment charges recorded during the periods indicated and where they appear in the
corresponding consolidated statements of operations:
(In thousands)
Asset impairment charges
Goodwill impairment charge
Impairment of long-term investments
Year Ended December 31,
2020
2019
2018
74,969 $
0 $
1,575 $
10,837 $
25,700 $
651 $
58,166
13,466
15,487
$
$
$
83
10. Debt
Debt outstanding, excluding lease obligations, consisted of the following:
(In thousands)
0.875% Convertible Senior Notes (1)
1.25% Cash Convertible
Senior Notes
Senior Secured Credit Facility
Total debt
Less: Debt payable within
one year
Total long-term debt, less
current maturities
December 31, 2020
Unamortized
Discount and
Debt Issuance
Costs
Principal
Balance
Net Carrying
Amount
Principal
Balance
December 31, 2019
Unamortized
Discount and
Debt Issuance
Costs
Net Carrying
Amount
$
167,853 $
(3,166) $
171,019 $
177,942 $
4,697 $
173,245
0
0
0
3,432
$
167,853 $
266 $
0
(3,432)
167,587 $
345,000
410,000
932,942 $
7,552
5,224
17,473 $
337,448
404,776
915,469
0
0
0
364,653
188
364,465
$
167,853 $
266 $
167,587 $
568,289 $
17,285 $
551,004
(1) Principal balance is $207,911 thousand; $167,853 thousand is recognized in debt and $40,058 thousand is recognized in additional paid-in capital.
Interest expense consisted of the following:
(In thousands)
Interest expense
Amortization of discounts and debt issuance costs
Total interest expense
2020
Year Ended December 31,
2019
2018
$
$
18,113
15,991
34,104
$
$
26,648
16,524
43,172
$
$
35,366
15,548
50,914
Interest expense related to the 0.875% Convertible Senior Notes and the 1.25% Cash Convertible Senior Notes, which is included in total interest
expense above, consisted of the following:
(In thousands)
Coupon interest
Amortization of discounts and debt issuance costs
Total interest expense related to the convertible notes
Allscripts 0.875% Convertible Senior Notes
2020
Year Ended December 31,
2019
2018
$
$
4,016
13,484
17,500
$
$
4,429
14,926
19,355
$
$
4,312
13,867
18,179
On December 9, 2019, we issued $200.0 million aggregate principal amount of Allscripts’ 0.875% Convertible Senior Notes due 2027 (the
“0.875% Notes”) in a private offering. The 0.875% Notes are Allscripts’ senior, unsecured obligations that bear interest at a rate of 0.875% per year,
payable semiannually in arrears on January 1 and July 1 of each year, commencing on July 1, 2020. The 0.875% Notes will mature on January 1, 2027,
unless earlier repurchased by us or converted in accordance with their terms prior to such date.
The 0.875% Notes are convertible at the option of the holders (in whole or in part) at any time prior to the close of business on the business day
immediately preceding July 1, 2026 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending
on December 31, 2019 (and only during such calendar quarter), if the last reported sale price of Allscripts’ common stock for at least 20 trading days
(whether or not consecutive) during the period of 30 consecutive trading days ending on and including the last trading day of the immediately preceding
calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any
five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 0.875% Notes for each trading
day of the measurement period was less than 98% of the product of the last reported sale price of Allscripts’ common stock and the conversion rate on each
such trading day; or (3) upon the occurrence of certain corporate events as specified in the indenture governing the 0.875% Notes (the “0.875% Notes
Indenture”). On or after July 1, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may
convert all or any portion of their 0.875% Notes at any time, regardless of the foregoing conditions. Upon conversion, Allscripts will pay or deliver, as the
case may be, cash, shares of Allscripts’ common stock, or a combination of cash and shares of Allscripts’ common stock, at Allscripts’ election, in amounts
determined in the manner set forth in the 0.875% Notes Indenture.
84
The initial conversion rate for the 0.875% Notes will be 75.0962 shares of Allscripts’ common stock per $1,000 principal amount of the 0.875%
Notes, which is equivalent to an initial conversion price of approximately $13.32 per share of Allscripts’ common stock. The initial conversion price of the
0.875% Notes represents a premium of approximately 32.5% to $10.05 per share last reported sale price of Allscripts’ common stock on December 4,
2019. The conversion rate will be subject to adjustment upon the occurrence of certain specified events, but will not be adjusted for any accrued and unpaid
interest. In addition, upon the occurrence of a “make-whole fundamental change” (as defined in Section 1.01 of the 0.875% Notes Indenture), Allscripts’
will, in certain circumstances, increase the conversion rate by a number of additional shares of Allscripts’ common stock for a holder that elects to convert
its 0.875% Notes in connection with such make-whole fundamental change. We may not redeem the 0.875% Notes prior to the maturity date, and no
sinking fund is provided for the 0.875% Notes.
Upon the occurrence of a “fundamental change” (as defined in Section 1.01 of the 0.875% Notes Indenture), holders of the 0.875% Notes may
require us to repurchase all or any portion of their 0.875% Notes in principal amounts of $1,000 or an integral multiple thereof at a fundamental change
repurchase price in cash equal to 100% of the principal amount of the 0.875% Notes to be repurchased, plus any accrued and unpaid interest, if any, to, but
excluding, the fundamental change repurchase date.
The 0.875% Notes Indenture contains customary terms and covenants, including that upon certain events of default, including cross acceleration to
certain other indebtedness of Allscripts and its subsidiaries, either the trustee under the 0.875% Notes Indenture or the holders of not less than 25% in
aggregate principal amount of the 0.875% Notes then outstanding may declare the unpaid principal of the 0.875% Notes and accrued and unpaid interest, if
any, thereon immediately due and payable.
In December 2019, in connection with the 0.875% Notes offering, we entered into privately negotiated capped call transactions with JPMorgan
Chase Bank, National Association, New York Branch, Wells Fargo Bank, National Association, Bank of America, N.A. and Deutsche Bank AG, London
Branch (the “option counterparties”). The capped call transactions are expected generally to reduce the potential dilution to Allscripts’ common stock upon
any conversion of 0.875% Notes and/or offset any cash payments Allscripts is required to make in excess of the principal amount of the converted 0.875%
Notes upon conversion of the 0.875% Notes, as the case may be, in the event that the market price of Allscripts’ common stock is greater than the strike
price of the capped call transactions (which initially corresponds to the initial conversion price of the 0.875% Notes of approximately $13.32 per share of
Allscripts’ common stock and is subject to certain adjustments under the terms of the capped call transactions), with such reduction and/or offset subject to
a cap based on the cap price of the capped call transactions. The cap price of the capped call transactions is initially $17.5875 per share, representing a
premium of 75% above the last reported sale price of $10.05 per share of Allscripts’ common stock on December 4, 2019, and is subject to certain
adjustments under the terms of the capped call transactions. The capped call transactions cover, subject to anti-dilution adjustments substantially similar to
those applicable to the 0.875% Notes, the number of shares of Allscripts’ common stock that underlie the 0.875% Notes. The capped call transactions are
not part of the terms of the 0.875% Notes and will not affect any holder’s rights under the 0.875% Notes. Holders of the 0.875% Notes will not have any
rights with respect to the capped call transactions.
The aggregate net proceeds of the 0.875% Notes were $195.0 million after deducting $5.0 million for the initial purchasers’ discount but before
deducting other estimated expenses. On December 9, 2019, we used $15.8 million of the net proceeds to pay the cost of the capped call transactions and the
remainder of $179.2 million to repay outstanding borrowings under our senior secured revolving credit facility.
On December 18, 2019, the initial purchasers notified us of the partial exercise of their option to purchase additional 0.875% Notes. On December
20, 2019 we issued an additional $18.0 million in aggregate principal amount of the 0.875% Notes (the “Option Notes”) pursuant to a partial exercise of the
initial purchasers’ option to purchase additional 0.875% Notes. The Option Notes have the same terms as the 0.875% Notes previously described and are
issued pursuant to the same 0.875% Notes Indenture. The net proceeds from the sale of the Option Notes totaled $17.5 million after deducting $0.5 million
in debt issuance costs. In connection with the initial purchasers’ exercise of their option to purchase the Option Notes, we entered into additional privately
negotiated capped call transactions (the “additional capped call transactions”) with each of the option counterparties. On December 20, 2019, we used $1.4
million of the net proceeds to pay the cost of additional capped call transactions and the remainder to repay additional outstanding borrowings under our
senior secured revolving credit facility.
85
The issuance in December 2019 of the combined $218.0 million aggregate purchase amount of the 0.875% Notes and the Option Notes
(collectively, the “0.875% Convertible Senior Notes”) incurred $0.7 million in debt issuance costs, which were paid in January 2020. We have separately
recorded liability and equity components of the 0.875% Convertible Senior Notes including any discounts and issuance costs by allocating the proceeds
from the issuance between the liability component and the embedded conversion option, or equity component. This allocation was completed by first
estimating an interest rate at the time of issuance for similar notes that do not include an embedded conversion option. The semi-annual interest rate of
1.95% was used to compute the initial fair value of the liability component, which totaled $177.9 million at the time of issuance. The excess of the initial
proceeds received from the 0.875% Convertible Senior Notes and the $177.9 million liability component was allocated to the equity component, which
totaled $40.1 million at the time of issuance before deducting any paid capped call fees. The equity component of $40.1 million, the $17.2 million in paid
capped call fees and an allocation of $1.1 million in combined discounts and issuance costs were recorded in Additional paid-in capital within the
consolidated balance sheets in December 2019. These were recorded as a discount that will be accreted into interest expense through January 1, 2027 using
the interest method.
In June 2020, we paid $7.7 million to repurchase $10.1 million of the aggregate principal amount of the 0.875% Convertible Senior Notes, which
resulted in a $0.5 million gain. In connection with the repurchase, the capped call transaction was partially terminated, and we received $0.3 million, which
resulted in a recognition of $0.8 million in equity to offset the capped call fees and a $0.5 million loss. The remaining principal amount of the 0.875%
Convertible Senior Notes at December 31, 2020 totaled $207.9 million. The carrying value of the combined equity component, net of capped call fees,
issuance costs and accretion, at December 31, 2020 totaled $16.1 million.
Allscripts Senior Secured Credit Facility
On February 15, 2018, Allscripts and Healthcare LLC entered into a Second Amended and Restated Credit Agreement (the “Second Amended
Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent. The Second Amended Credit Agreement provides for a $400 million
senior secured term loan (the “Term Loan”) and a $900 million senior secured revolving facility (the “Revolving Facility”), each with a five-year term.
Collectively, the Term Loan and the Revolving Facility are referred to herein as the “Senior Secured Credit Facility.” The Term Loan is repayable in
quarterly installments, which commenced on June 30, 2018. A total of up to $50 million of the Revolving Facility is available for the issuance of letters of
credit, up to $10 million of the Revolving Facility is available for swingline loans, and up to $100 million of the Revolving Facility could be borrowed
under certain foreign currencies.
On August 7, 2019, we entered into a First Amendment to the Second Amended Credit Agreement in order to remain compliant with the covenants
of our Second Amended Credit Agreement. The First Amendment provides the financial flexibility to settle the U.S. Department of Justice’s investigations
as discussed in Note 22, “Contingencies” while maintaining our compliance with the covenants of our Second Amended Credit Agreement. None of the
original terms of our Second Amended Credit Agreement relating to scheduled future principal payments, applicable interest rates and margins or
borrowing capacity under our Revolving Facility were amended. In connection with this amendment, we incurred fees and other costs totaling
$0.8 million, of which a majority was capitalized.
On July 20, 2020, we entered into a Second Amendment to the Second Amended Credit Agreement. None of the original terms of our Second
Amended Credit Agreement relating to scheduled future principal payments, applicable interest rates and margins or borrowing capacity under our
Revolving Facility were amended. In connection with this amendment, we incurred fees and other costs totaling $1.4 million, of which a majority was
capitalized.
The proceeds of the Revolving Facility can be used to finance Allscripts’ working capital needs and for general corporate purposes, including,
without limitation, for financing permitted acquisitions, and for share repurchases. Allscripts is also permitted to add one or more incremental revolving
and/or term loan facilities in an aggregate amount of up to $600 million, subject to certain conditions.
86
The initial applicable interest rate margin for Base Rate borrowings is 1.00%, and for Eurocurrency Rate borrowings is 2.00%. On and after
December 31, 2020, the interest rate margins will be determined from a pricing table and will depend upon Allscripts’ total leverage ratio. The applicable
margins for Base Rate borrowings under the Second Amended Credit Agreement range from 0.50% to 1.25% depending on Allscripts’ total leverage ratio
range. The applicable margins for Eurocurrency Rate loans range from 1.50% to 2.25%, depending on Allscripts’ total leverage ratio.
Subject to certain agreed upon exceptions, all obligations under the Senior Secured Credit Facility remain guaranteed by each of our existing and
future direct and indirect material domestic subsidiaries other than Coniston Exchange LLC and certain domestic subsidiaries owned by our foreign
subsidiaries (the “Guarantors”) pursuant to a related Guarantee and Collateral Agreement among Allscripts Healthcare Solutions, Inc., Allscripts
Healthcare, LLC, certain of our other subsidiaries, and JPMorgan Chase Bank, N.A., as administrative agent. Our obligations under the Senior Secured
Credit Facility, any swap agreements and any cash management arrangements provided by any lender, remain secured, subject to permitted liens and other
agreed upon exceptions, by a perfected first priority security interest in all of the tangible and intangible assets (including, without limitation, intellectual
property, material owned real property and all of the capital stock of each Guarantor and, in the case of foreign subsidiaries, up to 65% of the capital stock
of first tier material foreign subsidiaries) of Allscripts Healthcare Solutions, Inc. and certain of our subsidiary guarantors.
The Second Amended Credit Agreement requires us to maintain a minimum interest coverage ratio of 3.5 to 1.0 and a maximum total net leverage
ratio of 4.25 to 1.0. The minimum interest coverage ratio is calculated by dividing earnings before interest expense, income tax expense, depreciation and
amortization expense by cash interest expense, subject to various agreed upon adjustments. The total net leverage ratio is calculated by dividing total
indebtedness reduced by a portion of domestic unrestricted cash, by earnings before interest expense, income tax expense, depreciation and amortization
expense, subject to various agreed upon adjustments. The Second Amended Credit Agreement also provides that during the four-quarter period following
permitted acquisitions that are financed in whole or in part with indebtedness and the consideration paid by us is $100 million or more, we are required to
maintain a maximum total leverage ratio of 4.5 to 1.0. In addition, the Second Amended Credit Agreement requires mandatory prepayments of the debt
outstanding under the Senior Secured Credit Facility in certain specific circumstances, and contains a number of covenants which, among other things,
restrict our ability to incur additional indebtedness, engage in mergers, or declare dividends or other payments in respect of our capital stock.
The Second Amended Credit Agreement also contains certain customary events of default, including relating to non-payment, breach of covenants,
cross-default, bankruptcy and change of control.
As of December 31, 2020, $1.1 million in letters of credit were outstanding under the Second Amended Credit Agreement. No amounts under the
Term Loan or the Revolving Facility were outstanding under the Second Amended Credit Agreement.
As of December 31, 2020, the interest rate on the Senior Secured Credit Facility was LIBOR plus 2.00%, which totaled 2.15%. We were in
compliance with all financial covenants under the Second Amended Credit Agreement as of December 31, 2020.
As of December 31, 2020, we had $898.9 million available borrowing capacity, net of outstanding letters of credit, under the Revolving Facility.
There can be no assurance that we will be able to draw on the full available balance of the Revolving Facility if the financial institutions that have extended
such credit commitments become unwilling or unable to fund such borrowings.
In connection with the sale of our EPSi business on October 15, 2020, which is further discussed in Note 5, “Business Combinations and
Divestitures”, the terms of our Second Amended and Restated Credit Agreement required us to make a mandatory prepayment of our Term Loan in the
amount of $19.0 million on October 29, 2020.
In connection with the sale of our CarePort business on December 31, 2020, which is further discussed in Note 5, “Business Combinations and
Divestitures”, the terms of our Second Amended and Restated Credit Agreement required us to make a mandatory prepayment of our Term Loan in the
amount of $161.0 million on December 31, 2020.
Allscripts 1.25% Cash Convertible Senior Notes
On June 18, 2013, we issued $345.0 million aggregate principal amount of Allscripts' 1.25% Cash Convertible Senior Notes due 2020 (the “1.25%
Notes”). The aggregate net proceeds of the 1.25% Notes were $305.1 million, after payment of the net cost of the 1.25% Notes Call Spread Overlay (as
described below) and transaction costs.
87
Interest on the 1.25% Notes was payable semiannually in arrears on January 1st and July 1st of each year, at a fixed annual rate of 1.25%. The
1.25% Notes were not repurchased or converted prior to maturing on July 1, 2020. The 1.25% Notes were repaid utilizing $345.0 million drawn against the
Revolving Facility.
The 1.25% Notes were convertible only into cash, and not into shares of our common stock or any other securities. Holders could have converted
their 1.25% Notes solely into cash at their option at any time prior to the close of business on the business day immediately preceding January 1, 2020 only
under the following circumstances: (1) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of our common
stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the
immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business
day period immediately after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 1.25% Notes for each
trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each
such trading day; or (3) upon the occurrence of specified corporate events. On or after January 1, 2020 until the close of business on the second scheduled
trading day immediately preceding the maturity date, holders could have converted their 1.25% Notes solely into cash at any time, regardless of the
foregoing circumstances. Upon conversion, in lieu of receiving shares of our common stock, a holder would have received an amount in cash, per $1,000
principal amount of the 1.25% Notes, equal to the settlement amount, determined in the manner set forth in the indenture governing the 1.25% Notes (the
“1.25% Notes Indenture”).
The initial conversion rate was 58.1869 shares of our common stock per $1,000 principal amount of the 1.25% Notes (equivalent to an initial
conversion price of approximately $17.19 per share of common stock). The conversion rate was subject to adjustment in some events but was not adjusted
for any accrued and unpaid interest. In addition, in the event that certain corporate events had occurred prior to the maturity date, we would have paid a
cash make-whole premium by increasing the conversion rate for a holder who elected to convert such holder’s 1.25% Notes in connection with such a
corporate event in certain circumstances. We did not redeem the 1.25% Notes prior to the maturity date, and no sinking fund was provided for the 1.25%
Notes.
If we would have undergone a fundamental change (as defined in the 1.25% Notes Indenture), holders could have required us to repurchase for cash
all or part of their 1.25% Notes at a repurchase price equal to 100% of the principal amount of the 1.25% Notes to be repurchased, plus accrued and unpaid
interest to, but excluding, the fundamental change repurchase date. The 1.25% Notes Indenture provided for customary events of default, including cross
acceleration to certain other indebtedness of ours, and our subsidiaries.
The 1.25% Notes were senior unsecured obligations, and ranked senior in right of payment to any of our indebtedness that was expressly
subordinated in right of payment to the 1.25% Notes; equal in right of payment to any of our unsecured indebtedness that was not so subordinated;
effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally
junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.
The 1.25% Notes contained an embedded cash conversion option. We determined that the embedded cash conversion option was a derivative
financial instrument, required to be separated from the 1.25% Notes and accounted for separately as a derivative liability, with changes in fair value
reported in our consolidated statements of operations until the cash conversion option transaction settled or expired. The initial fair value liability of the
embedded cash conversion option was $82.8 million, which simultaneously reduced the carrying value of the 1.25% Notes (effectively an original issuance
discount). For further discussion of the derivative financial instruments relating to the 1.25% Notes, refer to Note 16, “Derivative Financial Instruments.”
The reduced carrying value of the 1.25% Notes resulted in a debt discount that was amortized to the 1.25% Notes’ principal amount through the
recognition of non-cash interest expense over the expected term of the 1.25% Notes, which extended through their maturity date of July 1, 2020. This has
resulted in our recognition of interest expense on the 1.25% Notes at an effective rate approximating what we would have incurred had nonconvertible debt
with otherwise similar terms been issued. The effective interest rate of the 1.25% Notes at issuance was 5.4%, which was imputed based on the
amortization of the fair value of the embedded cash conversion option over the remaining term of the 1.25% Notes. We recorded interest expense until the
1.25% Notes matured on July 1, 2020.
In connection with the settlement of the 1.25% Notes, we paid $8.4 million in transaction costs. Such costs were allocated to the 1.25% Notes, the
1.25% Call Option (as defined below) and the 1.25% Warrants (as defined below). The amount allocated to the 1.25% Notes, or $8.3 million, was
capitalized and was amortized over the expected term of the 1.25% Notes.
88
1.25% Notes Call Spread Overlay
In June 2013, concurrent with the issuance of the 1.25% Notes, we entered into privately negotiated hedge transactions (collectively, the “1.25%
Call Option”) and warrant transactions (collectively, the “1.25% Warrants”), with certain of the initial purchasers of the 1.25% Notes (collectively, the
“Call Spread Overlay”). Assuming full performance by the counterparties, the 1.25% Call Option was intended to offset cash payments in excess of the
principal amount due upon any conversion of the 1.25% Notes. We used $82.8 million from the initial proceeds of the 1.25% Notes to pay for the 1.25%
Call Option, and simultaneously received $51.2 million from the sale of the 1.25% Warrants, for a net cash outlay of $31.6 million for the Call Spread
Overlay. The 1.25% Call Option was a derivative financial instrument and is discussed further in Note 16, “Derivative Financial Instruments.” The 1.25%
Warrants were equity instruments and are further discussed in Note 13, “Stockholders’ Equity.”
Future Debt Payments
The following table summarizes future debt payments as of December 31, 2020:
(In thousands)
0.875% Convertible Senior Notes (1)
Total
$ 207,911 $
$ 207,911 $
(1) Amount represents the face value of the 0.875% Convertible Senior Notes, which includes both the liability and equity portions.
0 $
0 $
0 $
0 $
0 $
0 $
Total debt
2021
2022
2023
2024
0 $
0 $
2025
Thereafter
207,911
207,911
0 $
0 $
11. Income Taxes
The following is a geographic breakdown of loss from continuing operations before income tax benefits:
(In thousands)
United States
Foreign
Loss from continuing operations before income taxes
The following is a summary of the components of the benefit for income taxes:
(In thousands)
Current tax provision
Federal
State
Foreign
Deferred tax provision
Federal
State
Foreign
Income tax benefit
2020
(148,174) $
(1,137)
(149,311) $
Year Ended December 31,
2019
(287,088) $
5,337
(281,751) $
2018
(61,292)
(907)
(62,199)
2020
Year Ended December 31,
2019
2018
(19,346)
(219)
3,803
(15,762)
2,931
(2,981)
(880)
(930)
(16,692)
$
$
$
(8,232)
(1,809)
5,054
(4,987)
(28,732)
(8,763)
(858)
(38,353)
(43,340)
$
(14,018)
(3,859)
5,015
(12,862)
(5,781)
236
(576)
(6,121)
(18,983)
$
$
$
$
89
Taxes computed at the statutory federal income tax rate of 21% for the years ended December 31, 2020, 2019 and 2018 are reconciled to the
provision for income taxes as follows:
(In thousands)
United States federal tax at statutory rate
Items affecting federal income tax rate
Non-deductible acquisition and reorganization expenses
Non-deductible portion of Department of Justice Settlement
Research credits
Change in unrecognized tax benefits
State income taxes, net of federal benefit
Compensation
Meals and entertainment
Impact of foreign operations
Provision-to-Return adjustments
Deemed Dividends
Federal, state and local rate changes
US Tax reform impact
Goodwill impairment
Non-deductible items
Noncontrolling interest
True-up of prior year income of Consolidated Investment
Valuation allowance
Other
Income tax benefit
2020
Year Ended December 31,
2019
2018
$
(31,355) $
(59,170) $
(13,062)
0
0
(6,500)
3,204
(2,940)
5,314
118
1,443
(2,362)
352
0
0
0
28
0
0
16,949
$
(943)
(16,692) $
31
18,546
(6,126)
1,046
(7,411)
4,664
549
3,079
(383)
473
(630)
(2,972)
5,397
43
0
0
922
(1,398)
(43,340) $
291
0
(6,185)
3
(2,916)
3,213
616
3,627
(2,140)
373
0
0
0
34
951
913
(5,208)
507
(18,983)
Significant components of our deferred tax assets and liabilities consist of the following:
(In thousands)
Deferred tax assets
Accruals and reserves, net
Allowance for doubtful accounts
Stock-based compensation, net
Deferred revenue
Operating and finance lease liabilities
Net operating loss carryforwards
Research and development tax credit
Other
Less: Valuation Allowance
Total deferred tax assets
Deferred tax liabilities
Prepaid expense
Property and equipment, net
Acquired intangibles, net
Operating and finance right-of-use assets
Total deferred tax liabilities
Net deferred tax liabilities
The deferred tax assets (liabilities) are classified in the consolidated balance sheets as follows:
(In thousands)
Non-current deferred tax assets, net
Non-current deferred tax liabilities, net
Non-current deferred tax liabilities, net
90
December 31,
2020
2019
18,260 $
9,571
8,428
35,016
22,902
35,695
251
4,519
(35,491)
99,151
(4,329)
(2,062)
(86,841)
(18,315)
(111,547)
(12,396) $
29,627
11,507
10,382
21,786
22,085
37,717
899
7,488
(19,219)
122,272
(5,372)
(3,695)
(111,284)
(17,255)
(137,606)
(15,334)
December 31,
2020
2019
5,790 $
(18,186)
(12,396) $
5,704
(21,038)
(15,334)
$
$
$
$
We had federal net operating loss (“NOL”) carryforwards of $164 million and $174 million as of December 31, 2020, and 2019, respectively. The
federal NOL carryforward includes U.S. NOL carryovers of $4.3 million and Israeli NOL carryovers of $49 million that do not expire. We also had state
NOL carryforwards of $2.5 million for the years ended December 31, 2020 and 2019. The NOL carryforwards expire in various amounts starting in 2021
for both federal and state tax purposes. The utilization of the federal NOL carryforwards is subject to limitation under the rules regarding changes in stock
ownership as determined by the Internal Revenue Code.
For federal purposes, 2017 to 2020 tax years remain subject to income tax examination by federal authorities. For our state tax jurisdictions, 2017
to 2020 tax years remain open to income tax examination by state tax authorities. Tax years remain open in various foreign jurisdictions beginning in 2015.
We have a subsidiary in India that is entitled to a tax holiday that allows for tax-free operations during such tax holiday. This tax holiday for the subsidiary
began to partially expire in 2012 and fully expired in 2017. Tax savings realized from this holiday totaled $0.4 million for the year ended December 31,
2017, which reduced our loss per share by less than $0.01 through 2017. There is a potential for a partial tax holiday for 5 years beginning on April 1,
2017, which is contingent upon a certain level of capital expenditure spending, among other conditions. Tax savings impact of $0.2 million has been
recorded for this potential tax holiday for the year ended December 31, 2020, which impacted our diluted earnings per share by less than $0.01 in this year.
GAAP principles prescribe a threshold of more-likely-than-not to be sustained upon examination for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. These principles also provide guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosure and transition.
Changes in the amounts of unrecognized tax benefits were as follows:
(In thousands)
Beginning balance as of January 1
Increases for tax positions related to the current year
Increases for tax positions related to prior years
Increases acquired in business acquisitions
Foreign currency translation
Reductions due to lapsed statute of limitations
Ending balance as of December 31
2020
Year Ended December 31,
2019
2018
$
$
20,604 $
8,053
427
0
2
(201)
28,885 $
19,821 $
1,240
95
0
3
(555)
20,604 $
10,939
8,977
367
540
(5)
(997)
19,821
We had gross unrecognized tax benefits of $28.9 million and $20.6 million as of December 31, 2020 and 2019, respectively. The main driver of the
increase in the unrecognized tax benefits as of December 31, 2020 is $6.4 million related to the uncertain positions taken on the state tax treatment of the
gains on the sales of our EPSi and CarePort businesses. If the current gross unrecognized tax benefits were recognized, the result would be an increase in
our income tax benefit of $30.8 million and $20.7 million, for 2020 and 2019, respectively. These amounts are net of accrued interest and penalties relating
to unrecognized tax benefits of $2.0 million and $0.4 million, respectively. We believe that it is reasonably possible that $0.2 million of our currently
remaining unrecognized tax benefits may be recognized by the end of 2021, as a result of a lapse of the applicable statute of limitations.
We recognized interest and penalties related to uncertain tax positions in our consolidated statements of operations as follows:
(In thousands)
Interest and penalties included in the provision for income taxes
2020
Year Ended December 31,
2019
2018
$
1,620 $
229 $
543
The amount of interest and penalties included in our consolidated balance sheets is as follows:
(In thousands)
Interest and penalties included in the liability for uncertain tax positions
427
During the year ended December 31, 2020, we reversed valuation allowance of $1.0 million related to the unvested stock compensation of covered
2,048 $
$
December 31,
2020
2019
officers due to the potential deduction limitations under Section 162(m) provisions. We recorded $17.9 million against deferred tax assets of certain U.S.
and foreign deferred tax assets. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all
available positive and negative evidence, including scheduled reversals of deferred tax liabilities, tax-planning strategies, and results of recent operations.
In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss). Using all available
evidence, we determined that it was uncertain that we will realize the deferred tax asset for certain of these carryforwards within the carryforward period.
91
We file income tax returns in the United States federal jurisdiction, numerous states in the United States and multiple countries outside of the
United States. We are subject to the continuous examination of our income tax returns by the IRS and other tax authorities. A change in the assessment of
the outcomes of such matters could materially impact our consolidated financial statements.
We intend to indefinitely reinvest the undistributed earnings of our foreign subsidiaries as a general rule, as most of our foreign subsidiaries have
third party customers, as well as formal sales proposals that could require significant resources. Specifically, our subsidiary in India may repatriate all
current 2020 earnings at the discretion of management. As of December 31, 2020, we have no other plans to repatriate any other funds at this time. A
Netherlands holding company currently holds all of our foreign subsidiaries. Our holding company makes it more efficient for us to share resources
between the respective foreign subsidiaries. As we have determined that the earnings of these subsidiaries are not required as a source of funding for our
U.S. operations, such earnings are not planned to be distributed to the United States in the foreseeable future. Determination of the amount of unrecognized
income tax liability related to these undistributed foreign subsidiary earnings, if repatriated, is currently not practicable.
12. Stock Award Plan
Total recognized stock-based compensation expense is included in our consolidated statements of operations as shown in the table below. Stock-
based compensation expense includes both non-cash expense related to grants of stock-based awards as well as cash expense related to the employee
discount applied to purchases of our common stock under our employee stock purchase plan.
(In thousands)
Cost of revenue:
Software delivery, support and maintenance
Client services
Total cost of revenue
Selling, general and administrative expenses
Research and development
Total stock-based compensation expense
2020
Year Ended December 31,
2019
2018
$
$
1,640 $
4,421
6,061
25,002
7,827
38,890 $
2,075 $
4,067
6,142
27,348
9,200
42,690 $
2,184
3,997
6,181
24,213
8,937
39,331
The estimated income tax benefit of stock-based compensation expense included in the provision for income taxes for the year ended December 31,
2020 is approximately $4.8 million. No stock-based compensation costs were capitalized during the years ended December 31, 2020, 2019 and 2018. The
calculation of stock-based compensation expenses includes an estimate for forfeitures at the time of grant. This estimate can be revised in subsequent
periods if actual forfeitures differ from those estimates, which are based on historical trends. Total unrecognized stock-based compensation expense related
to non-vested awards and options was $51.3 million as of December 31, 2020, and this expense is expected to be recognized over a weighted-average
period of 2.3 years.
Allscripts Long-Term Incentive Plan
Allscripts adopted the 2019 Stock Incentive Plan (the “Plan”), which became effective May 23, 2019. The Plan provides for the granting of stock
options, service-based awards, performance-based share awards and market-based share awards, among other awards. The maximum number of shares
available for awards under the Plan is 5.5 million, plus the number of available shares of common stock under the Amended and Restated 2011 Stock
Incentive plan as of the effective date of the Plan. There were 8.2 million shares as of December 31, 2020 of common stock reserved for issuance under
future share-based awards to be granted to any of Allscripts employees, officers, directors or independent consultants at terms and prices to be determined
by our Board, and subject to the terms of the Plan.
We issue service-based, performance-based and market-based awards in the form of restricted stock units or stock options. A description of each
category of awards is presented below.
Service-based Share Awards
Service-based share awards include stock options and restricted stock units, and typically vest over a four-year period commencing on the date of
grant subject to continued service with the Company. Upon termination of an employee’s employment, any unvested service-based share awards are
forfeited unless otherwise provided in an employee’s employment agreement. Share units are awarded to directors and vest within one year. We recognize
the expense for service-based share awards over the requisite service period on a straight-line basis, net of estimated forfeitures.
There was $42.6 million of total estimated unrecognized stock-based compensation expense related to the service-based share awards as of
December 31, 2020, which is expected to be recognized over a weighted-average period of 2.4 years.
92
Performance-based Share Awards
Performance-based share awards include restricted stock units. The purpose of such awards is to align management’s compensation with our
financial performance and other operational objectives and, in certain cases, to retain key employees over a specified performance period. Awards granted
under this category are based on the achievement of various targeted financial measures as defined by the Plan. The awards are earned based on actual
results achieved compared to targeted amounts. Stock-based compensation expense related to these awards is recognized over a three-year vesting period
under the accelerated attribution method if and when we conclude that it is probable that the performance conditions will be achieved.
There was $2.4 million of total estimated unrecognized stock-based compensation expense as of December 31, 2020, assuming various target
attainments related to the performance-based share awards, which is expected to be recognized over a weighted-average period of 2.2 years.
Market-based Share Awards
Market-based share awards include restricted stock units. The purpose of such awards is to align management’s compensation with the performance
of our common stock relative to the market. Awards granted under this category are dependent on our total shareholder returns relative to a specified peer
group of companies over three-year performance periods with vesting based on three annual performance segments from the grant dates. Fair values of the
awards were estimated at the date of the grants using the Monte Carlo pricing model. The Compensation Committee of our Board determines the number of
awards that will vest considering overall performance over the three-year performance period following the completion of a performance period. Stock-
based compensation expense related to these awards is recognized over the three-year vesting periods under the accelerated attribution method.
There was $6.3 million of total estimated unrecognized stock-based compensation expense as of December 31, 2020, which is expected to be
recognized over a weighted-average period of 1.7 years.
Restricted Stock Units
The following table summarizes the activity for restricted stock units during the periods presented:
(In thousands, except per share amounts)
Unvested restricted stock units as of December 31, 2017
Awarded
Vested
Forfeited
Unvested restricted stock units as of December 31, 2018
Awarded
Vested
Forfeited
Unvested restricted stock units as of December 31, 2019
Awarded
Vested
Forfeited
Unvested restricted stock units as of December 31, 2020
Net Share-settlements
Shares
Weighted-Average
Grant Date Fair Value
7,259 $
4,024
(2,222)
(1,111)
7,950
4,777
(2,360)
(1,453)
8,914
5,607
(2,756)
(2,097)
9,668 $
12.57
13.25
13.03
12.43
12.81
10.15
12.62
12.20
11.53
6.88
11.69
10.79
8.95
Upon vesting, restricted stock units are generally net share-settled upon vesting to cover the required withholding tax and the remaining amount is
converted into an equivalent number of shares of common stock. The majority of restricted stock units that vested during the years ended December 31,
2020, 2019 and 2018 were net-share settled such that we withheld shares with value equivalent to the employees’ minimum statutory tax obligations for the
applicable income and other employment taxes and remitted the equivalent amount of cash to the appropriate taxing authorities. Total payments for the
employees’ minimum statutory tax obligations are reflected as a financing activity within the accompanying consolidated statements of cash flows. The
total shares withheld during the years ended December 31, 2020, 2019 and 2018 were 808 thousand, 705 thousand and 695 thousand, respectively, and
were based on the value of the restricted stock units on their vesting date as determined by our closing stock price. These net-share settlements had the
effect of share repurchases by us as they reduced the number of shares that would have otherwise been issued at the vesting date.
93
Stock Options
The following table summarizes the status of stock options outstanding and the changes during the periods presented:
(In thousands, except per share amounts)
Balance as of December 31, 2017
Options granted
Options exercised
Options forfeited
Balance as of December 31, 2018
Options granted
Options exercised
Options forfeited
Balance as of December 31, 2019
Options granted
Options exercised
Options forfeited
Balance as of December 31, 2020
Options
Outstanding
Weighted-Average
Exercise Price
Options
Exercisable
Weighted-Average
Exercise Price
1,635 $
0
(92)
(211)
1,332
0
0
(98)
1,234
0
0
(1,234)
0 $
13.85
0.00
14.01
14.74
13.69
0
0
14.01
13.67
0
0
13.67
0.00
1,635 $
13.85
1,332
13.69
1,234
13.67
0 $
0.00
We estimated the fair value of our service-based stock option awards on the date of grant using the Black-Scholes-Merton option-pricing model.
Option valuation models, including the Black-Scholes-Merton option-pricing model, require the input of certain assumptions that involve judgment.
Changes in the input assumptions can materially affect the fair value estimates and, ultimately, how much we recognize as stock-based compensation
expense. Our stock options had a contractual term of 7 years.
The aggregate intrinsic value of stock options outstanding or exercisable as of December 31, 2020 was zero, as all outstanding stock options were
forfeited as of December 31, 2020. The intrinsic value of stock options outstanding represents the amount that would have been received by the option
holders had all option holders exercised their stock options as of that date.
The following activity occurred under the Plan:
(In thousands)
Total intrinsic value of stock options exercised
Total fair value of share awards vested
Allscripts Employee Stock Purchase Plan
2020
Year Ended December 31,
2019
$
$
0 $
32,218 $
0 $
29,793 $
2018
69
28,954
Our Employee Stock Purchase Plan (the “ESPP”) allows eligible employees to authorize payroll deductions of up to 20% of their base salary to be
applied toward the purchase of full shares of common stock on the last business day of each offering period. Offering periods under the ESPP are three
months in duration and begin on each March 1st, June 1st, September 1st, and December 1st. Shares are purchased on the last day of each offering period at
a discount of 15% to the fair market value of our common stock as reported on Nasdaq based on the lower of the closing price either on the first or last
business day of each offering period. Employees are limited to purchasing shares under the ESPP having a collective fair market value no greater than
$25,000 in any one calendar year. The shares available for purchase under the ESPP may be drawn from either authorized but previously unissued shares of
common stock or from reacquired shares of common stock, including shares purchased by us in the open market and held as treasury shares.
We treat the ESPP as a compensatory plan in accordance with GAAP. For each of the years ended December 31, 2020 and 2019, there were 2.0
million shares purchased under the ESPP.
13. Stockholders’ Equity
Stock Repurchases
On August 2, 2018, we announced that our Board approved a stock purchase program (the “2018 Program”) under which we could repurchase up to
$250 million of our common stock through December 31, 2020. During 2020, we repurchased 10.6 million shares of our common stock under the 2018
Program for a total of $102.0 million. During 2019, we repurchased 10.5 million shares of our common stock under the 2018 Program for a total of $111.5
million.
94
On November 18, 2020, we announced that our Board approved a new stock purchase program (the “2020 Program”) under which we may
repurchase up to $300 million of our common stock through December 31, 2021. The 2020 Program replaced the 2018 Program. During the fourth quarter
of 2020, we repurchased 14.1 million of our common stock under the 2020 Program. This is inclusive of shares repurchased through the accelerated share
repurchase agreements noted below.
On November 30, 2020, we entered into separate Master Confirmations (each, a “Master Confirmation”) and Supplemental Confirmations (each,
together with the related Master Confirmation, an “ASR Agreement”), with JPMorgan Chase Bank, National Association and Wells Fargo Bank, National
Association (each, an “ASR Counterparty”, or collectively, “ASR Counterparties”), to purchase shares of our common stock for a total payment of $200.0
million (the “Prepayment Amount”). Under the terms of the ASR Agreements, on November 30, 2020, we paid the Prepayment Amount to the ASR
Counterparties and received on December 2, 2020 an initial delivery of 11.7 million shares of our common stock, which is approximately 80% of the total
number of shares that could be repurchased under the ASR Agreements if the final purchase price per share equaled the closing price of our common stock
on November 30, 2020. These repurchased shares became treasury shares and were recorded as a $165.7 million reduction to shareholder’s equity. The
remaining $34.3 million of the Prepayment Amount was recorded as a reduction to shareholders’ equity as an unsettled forward contract indexed to our
common stock. We excluded the potential share impact of any remaining shares subject to repurchase from the computation of diluted earnings per share as
these shares would be anti-dilutive for the year ended December 31, 2020. The approximate dollar value of shares of our common stock that may yet be
purchased under the 2020 Program following the ASR Agreements is $67.2 million as of December 31, 2020.
At final settlement, depending on the final purchase price per share, the ASR Counterparties may be required to deliver additional shares of our
common stock to the Company, or, under certain circumstances, we may be required to make a cash payment to each ASR Counterparty or may elect to
deliver the equivalent value in shares of our common stock. The final purchase price per share under each ASR Agreement will generally be based on the
average of daily volume-weighted average prices of shares of our common stock during a term set forth in the such ASR Agreement. The ASR Agreements
contain provisions customary for agreements of this type, including provisions for adjustments to the transaction terms, the circumstances generally under
which the ASR Agreements may be accelerated, extended or terminated early by the ASR Counterparties and various acknowledgments, representations
and warranties made by the parties to one another. Final settlement of the ASR Agreements is expected to be completed during the second quarter of 2021,
although the settlement may be accelerated at the ASR Counterparties’ option.
Any future stock repurchase transactions may be made through open market transactions, block trades, privately negotiated transactions (including
accelerated share repurchase transactions) or other means, subject to our working capital needs, cash requirements for investments, debt repayment
obligations, economic and market conditions at the time, including the price of our common stock, and other factors that we consider relevant. Our stock
repurchase program may be accelerated, suspended, delayed or discontinued at any time.
Issuance of Common Stock and Warrants
On December 31, 2020, we completed the issuance of a warrant to a commercial partner, as part of a new and expanded commercial relationship,
pursuant to which the warrant holder has the right to purchase 1.5 million shares of our common stock at an exercise price of $9.82 per share, (the closing
price of the Company’s common stock on the date definitive agreements with respect to the new and expanded commercial relationship were executed),
subject to customary anti-dilution adjustments. The warrant vests in four equal annual installments of 375 thousand shares beginning on December 31,
2020 with each additional installment vesting annually thereafter. The warrant expires on December 31, 2026 and becomes void if certain specified changes
to the parties’ commercial relationship occur. The warrant was issued and sold in reliance upon an exemption from registration under the Securities Act of
1933, as amended (the “Securities Act”), afforded by Section 4(a)(2) of the Securities Act and rules promulgated thereunder and corresponding provisions
of state securities laws. The commercial partner is an “accredited investor” as defined in Rule 501(a) under the Securities Act. The warrant is not actively
traded and was valued based on an option pricing model that used observable and unobservable market data for inputs. The warrant was valued at $12.4
million and is being amortized into earnings over the three-year vesting period. Beginning in January 2021, the amortization of the warrant value will be
included in stock-based compensation expense in the accompanying consolidated statements of cash flows. As of December 31, 2020, the warrant has not
been exercised.
On June 30, 2016, we issued to a commercial partner, as part of an overall commercial relationship, unregistered warrants to purchase (i) 900,000
shares of our common stock, par value $0.01 per share, at a price per share of $12.47, (ii) 1,000,000 shares of our common stock at a price per share of
$14.34 and (iii) 1,100,000 shares of our common stock at a price per share of $15.59, in each case subject to customary anti-dilution adjustments. The
warrants vested in four equal annual installments of 750 thousand shares beginning in June 2017 and expire in June 2026. Our issuance of the warrants was
a private placement exempt from registration pursuant to Section 4(a)(2) under the Securities Act. These warrants are not actively traded and were valued
based on an option pricing model that used observable and unobservable market data for inputs. The warrants were valued at $11 million and were
amortized into earnings over the four-year vesting period. The amortization expense is included as a reduction to revenue in the accompanying consolidated
statements of operations. On December 30, 2020, the commercial partner exercised its warrants to purchase 900,000 shares on a cashless basis. Based on a
price per share of $14.18, which was calculated in accordance with the agreement, it resulted in a delivery of 108 thousand shares. As of December 31,
2020, no additional warrants have been exercised.
95
In June 2013, in connection with the issuance of the 1.25% Notes, we issued the 1.25% Warrants exercisable for 20.1 million shares of our common
stock (subject to anti-dilution adjustments under certain circumstances) with an initial exercise price of $23.135 per share, subject to customary
adjustments. The net proceeds from the sale of the 1.25% Warrants of $51.2 million are included as additional paid in capital in the accompanying
consolidated balance sheets as of December 31, 2020 and 2019. The 1.25% Warrants began to expire as of October 1, 2020, with expiration continuing to
expire over the next 70 trading days. The 1.25% Warrants are exercisable only upon expiration. Additionally, if the market value per share of our common
stock exceeds the strike price of the 1.25% Warrants on any trading day during the 70 trading day measurement period, we will, for each such trading day,
be obligated to issue to the counterparties a number of shares equal in value to the product of the amount by which such market value exceeds such strike
price and 1/70th of the aggregate number of shares of our common stock underlying the 1.25% Warrants transactions, subject to a share delivery cap. For
each 1.25% Warrant that is exercised, we will deliver to the option counterparties a number of shares of our common stock equal to the amount by which
the settlement price exceeds the exercise price, divided by the settlement price, plus cash in lieu of fractional shares. We will not receive any additional
proceeds if the 1.25% Warrants are exercised. The number of warrants and the strike price are subject to adjustment under certain circumstances. The
1.25% Warrants could separately have a dilutive effect to the extent that the market value per share of our common stock (as measured under the terms of
the warrant transactions) exceeds the applicable strike price of the 1.25% Warrants. As of December 31, 2020, none of the 1.25% Warrants have been
exercised.
Issuance of 0.875% Convertible Senior Notes
In December 2019, we issued the 0.875% Convertible Senior Notes that, at the option of the holders, may be converted into cash, Allscripts’
common stock or a combination of cash and Allscripts’ common stock. The issuance of the 0.875% Convertible Senior Notes generated a $40.1 million
equity component for the embedded conversion option, which was recorded as Additional paid-in capital within the consolidated balance sheets as a
discount that will be accreted into interest expense through January 1, 2027 using the interest method. The carrying value of the embedded conversion
option was $16.1 million as of December 31, 2020. Refer to Note 10, “Debt” for further information regarding the 0.875% Convertible Senior Notes and
embedded conversion option.
96
14. Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average shares of common stock outstanding. For
purposes of calculating diluted earnings per share, the denominator includes both the weighted average shares of common stock outstanding and dilutive
common stock equivalents. Dilutive common stock equivalents consist of stock options, restricted stock unit awards and warrants calculated under the
treasury stock method.
The calculations of earnings (loss) per share are as follows:
(In thousands, except per share amounts)
Basic income (loss) per Common Share:
Loss from continuing operations, net of tax
Net loss attributable to non-controlling interests
Net loss from continuing operations attributable to Allscripts Healthcare Solutions, Inc.
stockholders
Income from discontinued operations, net of tax
Accretion of redemption preference on redeemable convertible non-controlling interest -
discontinued operations
Net income from discontinued operations attributable to Allscripts Healthcare Solutions, Inc.
stockholders
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders
$
2020
Year Ended December 31,
2019
2018
$
(132,619) $
0
(238,411)
424
$
$
(132,619) $
(237,987) $
833,026
55,809
(43,216)
4,527
(38,689)
451,023
0
0
(48,594)
833,026
700,407 $
55,809
(182,178) $
402,429
363,740
Weighted-average common shares outstanding
159,281
166,306
176,038
Basic loss from continuing operations per Common Share
Basic income from discontinued operations per Common Share
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders per
Common Share
$
$
$
(0.83) $
5.23 $
(1.43) $
0.33 $
(0.22)
2.29
4.40 $
(1.10) $
2.07
Diluted income (loss) per Common Share:
Loss from continuing operations, net of tax
Net loss attributable to non-controlling interests
Net loss from continuing operations attributable to Allscripts Healthcare Solutions, Inc.
stockholders
Income from discontinued operations, net of tax
Accretion of redemption preference on redeemable convertible non-controlling interest -
discontinued operations
Net income from discontinued operations attributable to Allscripts Healthcare Solutions, Inc.
stockholders
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders
$
Weighted-average common shares outstanding
Dilutive effect of stock options, restricted stock unit awards and warrants
Weighted-average common shares outstanding assuming dilution
$
(132,619) $
0
(238,411) $
424
$
$
(132,619) $
(237,987) $
833,026 $
55,809 $
(43,216)
4,527
(38,689)
451,023
0
0
(48,594)
833,026
700,407 $
55,809
(182,178) $
159,281
0
159,281
166,306
0
166,306
402,429
363,740
176,038
0
176,038
Diluted (loss) income from continuing operations per Common Share
Diluted income from discontinued operations per Common Share
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders per
Common Share
$
$
$
(0.83) $
5.23 $
(1.43) $
0.33 $
(0.22)
2.29
4.40 $
(1.10) $
2.07
97
As a result of the loss from continuing operations, net of tax for the years ended December 31, 2020, 2019 and 2018, we used basic weighted-
average common shares outstanding in the calculation of diluted loss per share, since the inclusion of any stock equivalents would be anti-dilutive.
The following stock options, restricted stock unit awards and warrants are not included in the computation of diluted earnings (loss) per share as the
effect of including such stock options, restricted stock unit awards and warrants in the computation would be anti-dilutive:
(In thousands)
Shares subject to anti-dilutive stock options, restricted stock unit awards and warrants excluded
from calculation
2020
Year Ended December 31,
2019
2018
42,845
27,945
26,175
15. Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
Changes in the balances of each component included in accumulated other comprehensive loss (“AOCI”) are presented in the tables below. All
amounts are net of tax and exclude non-controlling interest.
(In thousands)
Balance as of December 31, 2017 (1)
Other comprehensive (loss) income before reclassifications
Net (gains) losses reclassified from accumulated other comprehensive loss
Net other comprehensive (loss) income
Balance as of December 31, 2018 (2)
Other comprehensive income (loss) before reclassifications
Net (gains) losses reclassified from accumulated other comprehensive loss
Net other comprehensive income (loss)
Balance as of December 31, 2019 (2)
Other comprehensive income (loss) before reclassifications
Net (gains) losses reclassified from accumulated other comprehensive loss
Net other comprehensive income (loss)
Balance as of December 31, 2020 (3)
$
Foreign Currency
Translation
Adjustments
Unrealized Net Gains
(Losses) on Foreign
Exchange Contracts
Total
(2,676)
(2,908)
0
(2,908)
(5,584)
1,192
0
1,192
(4,392)
1,435
0
1,435
(2,957) $
691
(264)
(232)
(496)
195
61
(256)
(195)
0
1,587
(468)
1,119
1,119 $
(1,985)
(3,172)
(232)
(3,404)
(5,389)
1,253
(256)
997
(4,392)
3,022
(468)
2,554
(1,838)
(1) Net of taxes of $445 thousand for unrealized net gains on marketable securities and foreign exchange contract derivatives.
(2) Tax effects for the years ended December 31, 2019 and 2018 include $149 thousand arising from the revaluations of tax effects included in accumulated other
comprehensive income.
(3) Net of taxes of $390 thousand for unrealized net gains on foreign exchange contract derivatives.
Income Tax Effects Related to Components of Other Comprehensive Loss
The following tables reflect the tax effects allocated to each component of other comprehensive loss (“OCI”)
(In thousands)
Foreign currency translation adjustments
Derivatives qualifying as cash flow hedges:
Foreign exchange contracts:
Net gains (losses) arising during the period
Net (gains) losses reclassified into income
Net change in unrealized gains (losses) on foreign exchange contracts
Other comprehensive income (loss)
$
98
Before-Tax Amount
$
1,435 $
Year Ended December 31, 2020
Tax Effect
Net Amount
0 $
1,435
2,139
(630)
1,509
2,944 $
(552)
162
(390)
(390) $
1,587
(468)
1,119
2,554
Net change in unrealized (losses) gains on foreign exchange contracts
Other comprehensive income
$
(In thousands)
Foreign currency translation adjustments
Derivatives qualifying as cash flow hedges:
Foreign exchange contracts:
Net gains (losses) arising during the period
Net (gains) losses reclassified into income
(In thousands)
Foreign currency translation adjustments
Derivatives qualifying as cash flow hedges:
Foreign exchange contracts:
Net (losses) gains arising during the period
Net (gains) losses reclassified into income (1)
Before-Tax Amount
$
1,192 $
Year Ended December 31, 2019
Tax Effect
Net Amount
0 $
1,192
82
(344)
(262)
930 $
(21)
88
67
67 $
61
(256)
(195)
997
Before-Tax Amount
$
(2,908) $
Year Ended December 31, 2018
Tax Effect
Net Amount
0 $
(2,908)
(357)
(516)
(873)
(3,781) $
93
284
377
377 $
(264)
(232)
(496)
(3,404)
Net change in unrealized (losses) gains on foreign exchange contracts
Other comprehensive (loss) income
$
(1) Net of taxes of $68 thousand for unrealized net gains on foreign exchange contract derivatives.
16. Derivative Financial Instruments
The following tables provide information about the fair values of our derivative financial instruments as of the respective balance sheet dates:
(In thousands)
Derivatives qualifying as cash flow hedges:
Foreign exchange contracts
Derivatives not subject to hedge accounting:
1.25% Call Option
1.25% Embedded cash conversion option
Total derivatives
Asset Derivatives
Liability Derivatives
Balance Sheet Location
Fair Value
Balance Sheet Location
Fair Value
December 31, 2020
Prepaid expenses and
other current assets
Other assets
N/A
$
1,509 Accrued expenses
$
0 N/A
Other liabilities
$
1,509
$
0
0
0
(In thousands)
Derivatives qualifying as cash flow hedges:
Foreign exchange contracts
Derivatives not subject to hedge accounting:
1.25% Call Option
1.25% Embedded cash conversion option
Total derivatives
N/A – We define “N/A” as disclosure not being applicable
Asset Derivatives
Liability Derivatives
Balance Sheet Location
Fair Value
Balance Sheet Location
Fair Value
December 31, 2019
Prepaid expenses and
other current assets
Other assets
N/A
99
$
0 Accrued expenses
$
0
84 N/A
Other liabilities
$
84
$
185
185
Foreign Exchange Contracts
We have entered into non-deliverable forward foreign currency exchange contracts with reputable banking counterparties to hedge a portion of our
forecasted future INR expenses against foreign currency fluctuations between the United States dollar and the INR. These forward contracts cover a
percentage of forecasted monthly INR expenses over time. As of December 31, 2020, there were six forward contracts outstanding that were staggered to
mature monthly starting in January 2021 and ending in June 2021. In the future, we may enter into additional forward contracts to increase the amount of
hedged monthly INR expenses or initiate hedges for monthly periods beyond June 2021. As of December 31, 2020, the notional amount for each of the
outstanding forward contracts was 225 million INR, or the equivalent of $3.1 million, based on the exchange rate between the United States dollar and the
INR in effect as of December 31, 2020. These amounts also approximate the forecasted future INR expenses we target to hedge in any one month in the
future. As of December 31, 2020, we estimate that $1.5 million of net unrealized derivative gains included in accumulated other comprehensive income
will be reclassified into income within the next six months.
The following tables show the impact of derivative instruments designated as cash flow hedges on the consolidated statements of operations and the
consolidated statements of comprehensive income (loss):
(In thousands)
Amount of Gain (Loss)
Recognized in OCI
Year Ended December 31,
2019
2018
2020
Location of Gain (Loss) Reclassified
from
AOCI into Income
Amount of Gain (Loss) Reclassified
from AOCI into Income
Year Ended December 31,
2019
2018
2020
Foreign exchange contracts
$
2,139 $
82 $
(357) Cost of Revenue
$
249 $
124 $
165
Selling, general and
administrative
expenses
Research and
development
122
83
259
137
138
214
1.25% Call Option
In June 2013, concurrent with the issuance of the 1.25% Notes, we entered into the 1.25% Call Option with certain of the initial purchasers of the
1.25% Notes (the “Option Counterparties”). Assuming full performance by the Option Counterparties, the 1.25% Call Option was intended to offset cash
payments in excess of the principal amount due upon any conversion of the 1.25% Notes. On July 1, 2020, the 1.25% Notes matured and were repaid in
full (refer to Note 10, “Debt”), and the 1.25% Call Option expired.
Aside from the initial payment of a premium to the Option Counterparties of $82.8 million for the 1.25% Call Option, we were not required to
make any cash payments to the Option Counterparties under the 1.25% Call Option, and, subject to the terms and conditions thereof, would have been
entitled to receive from the Option Counterparties an amount of cash, generally equal to the amount by which the market price per share of our common
stock exceeded the strike price of the 1.25% Call Option during the relevant valuation period. The strike price under the 1.25% Call Option was equal to
the conversion price of the 1.25% Notes of $17.19 per share of our common stock.
The 1.25% Call Option, which was indexed to our common stock, was a derivative asset that required mark-to-market accounting treatment, due to
the cash settlement features, until the 1.25% Call Option settled or expired. The 1.25% Call Option was measured and reported at fair value on a recurring
basis within Level 3 of the fair value hierarchy. For further discussion of the inputs used to determine the fair value of the 1.25% Call Option, refer to Note
6, “Fair Value Measurements and Other Investments.”
The 1.25% Call Option did not qualify for hedge accounting treatment. Therefore, the change in fair value of this instrument was recognized
immediately in our consolidated statements of operations in Other income (loss), net. Because the terms of the 1.25% Call Option were substantially
similar to those of the 1.25% Notes embedded cash conversion option, discussed next, we expected the net effect of those two derivative instruments on our
results of operations to be minimal.
100
1.25% Notes Embedded Cash Conversion Option
The embedded cash conversion option within the 1.25% Notes was required to be separated from the 1.25% Notes and accounted for separately as
a derivative liability, with changes in fair value recognized immediately in our consolidated statements of operations in Other income (loss), net until the
cash conversion option settled or expired. The cash conversion option expired without ever having required settlement prior to the maturity of the 1.25%
Notes. The initial fair value liability of the embedded cash conversion option was $82.8 million, which simultaneously reduced the carrying value of the
1.25% Notes (effectively an original issuance discount). The embedded cash conversion option was measured and reported at fair value on a recurring basis
within Level 3 of the fair value hierarchy. For further discussion of the inputs used to determine the fair value of the embedded cash conversion option,
refer to Note 6, “Fair Value Measurements and Other Investments.”
The following table shows the net impact of the changes in fair values of the 1.25% Call Option and 1.25% Notes’ embedded cash conversion
option in the consolidated statements of operations:
(In thousands)
1.25% Call Option
1.25% Embedded cash conversion option
Net income included in Other income, net
17. Commitments
Commitment with Strategic Partner
2020
Year Ended December 31,
2019
2018
$
$
(84) $
185
101 $
(9,020) $
9,789
769 $
(37,474)
37,803
329
We completed renegotiations with Atos to improve the operating cost structure of our private cloud hosting operations during 2019. The new
agreement also provides for the payment of initial annual base fees of $35 million per year (an increase from $30 million) plus charges for volume-based
services currently projected using volumes estimated based on historical actuals and forecasted projections. Expenses under our agreements with Atos,
which are included in cost of revenue in our consolidated statements of operations, are as follows:
(In thousands)
Expenses incurred under Atos agreements
18. Discontinued Operations
EPSi and CarePort Discontinued Operations
2020
Year Ended December 31,
2019
2018
$
102,730 $
100,089 $
55,903
During 2020, we implemented a strategic initiative to sell two of our businesses, EPSi and CarePort. Since both businesses were part of the same
strategic initiative and were sold within the same period, the combined sale of EPSi and CarePort represents a strategic shift that had a major effect on our
operations and financial results. These businesses are now reported together as discontinued operations for all periods presented.
On October 15, 2020, we completed the sale of our EPSi business in exchange for $365.0 million, which is subject to certain adjustments for
liabilities assumed by Strata and net working capital as described in the EPSi Purchase Agreement. Prior to the sale, EPSi was part of the Unallocated
category as it did not meet the requirements to be a reportable segment nor the criteria to be aggregated into our two reportable segments. On its own, the
divestiture of the EPSi business did not represent a strategic shift that had a major effect on our operations and financial results. However, the combined
sale of EPSi and CarePort represented a strategic shift that had a major effect on our operations and financial results. Therefore, EPSi is treated as a
discontinued operation. Refer to Note 5, “Business Combinations and Divestitures” for additional information about this transaction.
On December 31, 2020, we completed the sale of our CarePort business in exchange for $1.35 billion, which is subject to certain adjustments for
liabilities assumed by WellSky and net working capital as described in the CarePort Purchase Agreement. Prior to the sale, CarePort was part of the Data,
Analytics and Care Coordination reportable segment. On its own, the divestiture of the CarePort business represents a strategic shift that had a major effect
on our operations and financial results. Refer to Note 5, “Business Combinations and Divestitures” for additional information about this transaction.
101
The following table summarizes the major classes of assets and liabilities of EPSi and CarePort, as reported on the consolidated balance sheets as of
December 31, 2020 and 2019:
(In thousands)
Carrying amounts of major classes of assets associated with EPSi and CarePort included as part of
discontinued operations:
December 31, 2020
December 31, 2019
Accounts receivable, net of allowance of $1,874 as of December 31, 2019
Contract assets, net of allowance of $0 as of December 31, 2019
Prepaid expenses and other current assets
Total current assets attributable to discontinued operations
Fixed assets, net
Software development costs, net
Intangible assets, net
Goodwill
Contract assets - long-term, net of allowance of $0 as of December 31, 2019
Right-of-use assets - operating leases
Other assets
Total long-term assets attributable to discontinued operations
Carrying amounts of major classes of liabilities associated with EPSi and CarePort included as part
of discontinued operations:
Accounts payable
Accrued expenses
Income tax payable
Accrued compensation and benefits
Deferred revenue
Current operating lease liabilities
Total current liabilities attributable to discontinued operations
Deferred revenue long-term
Long-term operating lease liabilities
$
$
$
Total long-term liabilities attributable to discontinued operations
$
102
0 $
0
0
0
0
0
0
0
0
0
0
0 $
0 $
6,669
316,142
0
0
0
322,811
0
0
0 $
35,336
2,690
3,845
41,871
386
21,237
7,014
387,907
4,034
2,263
5,180
428,021
1,190
381
0
2,788
44,224
809
49,392
1,269
1,574
2,843
The following table summarizes the major income and expense line items of EPSi and CarePort as reported in the consolidated statement of
operations for the years ended December 31, 2020, 2019 and 2018:
(In thousands)
Major income and expense line items related to EPSi and
CarePort:
Revenue:
Software delivery, support and maintenance
Client services
Total revenue
Cost of revenue:
Software delivery, support and maintenance
Client services
Amortization of software development and acquisition-related
assets
Total cost of revenue
Gross profit
Selling, general and administrative expenses
Research and development
Amortization of intangible assets
Income from discontinued operations for EPSi and CarePort
Interest expense
Other (expense) income, net
Gain on sale of discontinued operations
Income from discontinued operations for EPSi and CarePort
before income taxes
Income tax provision(1)
Income from discontinued operations, net of tax for EPSi and
CarePort(2)
2020
2019
2018
Year ended December 31,
$
122,791
14,030
136,821
11,424
15,585
9,053
36,062
100,759
15,539
8,269
29
76,922
(5,241)
(192)
1,156,504
1,227,993
(394,926)
$
$
122,268
16,763
139,031
12,482
15,124
8,166
35,772
103,259
18,964
9,065
29
75,201
0
2
0
75,203
(19,417)
116,639
15,482
132,121
10,737
12,038
6,194
28,969
103,152
18,118
9,673
29
75,332
0
5
0
75,337
(19,452)
$
833,067
$
55,786
$
55,885
(1)
(2)
Income tax provision does not agree to the consolidated statement of operations for the year ended December 31, 2019 due to residual amounts related to Netsmart.
Income from discontinued operations, net of tax for EPSi and CarePort does not agree to the consolidated statement of operations for the years ended December 31,
2020 and 2019 due to residual amounts related to Netsmart.
Netsmart Discontinued Operation
On December 31, 2018, we sold all of the Class A Common Units of Netsmart held by the Company in exchange for $566.6 million in cash plus a
final settlement as determined following the closing. Prior to the sale, Netsmart comprised a separate reportable segment, which due to its significance to
our historical consolidated financial statements and results of operations, is reported as a discontinued operation as a result of the sale. Refer to Note 5,
“Business Combinations and Divestitures” for additional information about this transaction.
103
The following table summarizes Netsmart’s major income and expense line items as reported in the consolidated statements of operations for the
year ended December 31, 2018:
(In thousands)
Major income and expense line items related to Netsmart:(1)
Revenue:
Software delivery, support and maintenance
Client services
Total revenue
Cost of revenue:
Software delivery, support and maintenance
Client services
Amortization of software development and acquisition related assets
Total cost of revenue
Gross profit
Selling, general and administrative expenses
Research and development
Amortization of intangible and acquisition-related assets
Loss from discontinued operations of Netsmart
Interest expense
Other income
Gain on sale of discontinued operations
Income from discontinued operations of Netsmart before income taxes
Income tax provision
Income from discontinued operations, net of tax for Netsmart
Year ended December 31,
2018
214,065
131,166
345,231
60,100
94,061
34,357
188,518
156,713
125,807
25,315
24,029
(18,438)
(59,541)
101
500,471
422,593
(31,186)
391,407
$
$
(1) Activity includes both Netsmart and intercompany transactions that would not have been eliminated if Netsmart’s results were not consolidated.
Horizon Clinicals and Series2000 Revenue Cycle Discontinued Operation
Two of the product offerings acquired with the EIS Business in 2017, Horizon Clinicals and Series2000 Revenue Cycle, were sunset after March
31, 2018. The decision to discontinue maintaining and supporting these solutions was made prior to our acquisition of the EIS Business and, therefore, they
are presented below as discontinued operations. Until the end of the first quarter of 2018, we were involved in ongoing maintenance and support for these
solutions until customers transitioned to other platforms. No disposal gains or losses were recognized during the year ended December 31, 2018 related to
these discontinued solutions. We had $0.9 million of accrued expenses associated with the Horizon Clinicals and Series2000 Revenue Cycle businesses on
the consolidated balance sheet as of December 31, 2018.
104
The following table summarizes the major income and expense line items of these discontinued solutions, as reported in the consolidated statements
of operations for the year ended December 31, 2018:
(In thousands)
Major classes of line items constituting pretax profit (loss) of discontinued operations for Horizon Clinicals
and Series2000 Revenue Cycle:
Revenue:
Software delivery, support and maintenance
Client services
Total revenue
Cost of revenue:
Software delivery, support and maintenance
Client services
Total cost of revenue
Gross profit
Research and development
Year ended December 31,
2018
$
Income from discontinued operations for Horizon Clinicals and Series2000 Revenue Cycle before income
taxes
Income tax provision
Income from discontinued operations, net of tax for Horizon Clinicals and Series2000 Revenue Cycle
$
9,441
404
9,845
2,322
830
3,152
6,693
1,651
5,042
(1,311)
3,731
19. Business Segments
We primarily derive our revenues from sales of our proprietary software (either as a direct license sale or under a subscription delivery model),
which also serves as the basis for our recurring service contracts for software support and maintenance and certain transaction-related services. In addition,
we provide various other client services, including installation, and managed services such as outsourcing, private cloud hosting and revenue cycle
management.
During the first quarter of 2020, we realigned our reporting structure to organize the Company around strategic business units to maximize delivery
of client commitments, operational effectiveness and competitiveness. As a result, we had three operating segments: (i) Core Clinical and Financial
Solutions, (ii) Data, Analytics and Care Coordination and (iii) EPSi. The Core Clinical and Financial Solutions and Data, Analytics and Care Coordination
operating segments are the equivalent to the two current reportable segments described below.
During the second quarter of 2020, (i) certain operations were moved between the Core Clinical and Financial Solutions segment, and the Data,
Analytics and Care Coordination segment and (ii) a transfer price allocation was recorded between the Core Clinical and Financial Solutions segment and
the Data, Analytics and Care Coordination segment. In addition, the (i) corporate general and administrative expenses (including marketing expenses) and
(ii) revenue and the associated cost from the resale of certain ancillary products, primarily hardware, that were previously in the “Unallocated Amounts”
were allocated between the three operating segments.
The new reportable segments are (i) Core Clinical and Financial Solutions and (ii) Data, Analytics and Care Coordination. The new Core Clinical
and Financial Solutions segment derives its revenue from the sale of software applications for patient engagement, integrated clinical and financial
management solutions, which primarily include EHR-related software, financial and practice management software, related installation, support and
maintenance, outsourcing, private cloud hosting and revenue cycle management. The new Data, Analytics and Care Coordination segment derives its
revenue from the sale of practice reimbursement and payer and life sciences solutions, which are mainly targeted at physician practices, payers, life
sciences companies and other key healthcare stakeholders. These solutions enable clients to transition, analyze, coordinate care and improve the quality,
efficiency and value of healthcare delivery across the entire care community. The EPSi operating segment was included in the “Unallocated
Amounts” category as it did not meet the requirements to be a reportable segment nor the criteria to be aggregated into the two reportable segments. The
segment disclosures below for the years ended December 31, 2019 and 2018 have been revised to conform to the current year presentation.
105
On October 15, 2020, we completed the sale of our EPSi business. As noted above, prior to the sale, EPSi was included in “Unallocated Amounts.”
On December 31, 2020, we completed the sale of our CarePort business. Prior to the sale, CarePort was included in the Data, Analytics and Care
Coordination reportable segment. The divestitures of EPSi and CarePort are being treated as discontinued operations as they were part of the same strategic
initiative, were sold within the same period, and have a combined major effect on our consolidated financial statements and results of operations. Refer to
Note 5, “Business Combinations and Divestitures” and to Note 18, “Discontinued Operations” for additional information.
We sold all of our investment in Netsmart on December 31, 2018. Prior to the sale, Netsmart comprised a separate reportable segment, which due
to its significance to our historical consolidated financial statements and results of operations, is reported as a discontinued operation as a result of the sale.
In addition, the results of operations related to two of the product offerings acquired with the EIS Business (Horizon Clinicals and Series2000) that were
sunset in 2018 are also presented throughout these financial statements as discontinued operations. These two product offerings were included within the
historical Provider reportable segment, which is now reported within the Core Clinical and Financial Solutions segment. Refer to Note 18, “Discontinued
Operations.”
Our Chief Operating Decision Maker (“CODM”) uses segment revenues, gross profit and loss from operations as measures of performance and to
make decisions about the allocation of resources. We do not track our assets by segment.
(In thousands)
Revenue:
Core Clinical and Financial Solutions
Data, Analytics and Care Coordination
Unallocated Amounts
Total revenue
Gross profit:
Core Clinical and Financial Solutions
Data, Analytics and Care Coordination
Unallocated Amounts
Total gross profit
Loss from operations:
Core Clinical and Financial Solutions
Data, Analytics and Care Coordination
Unallocated Amounts
Total loss from operations
20. Supplemental Disclosures
2020
Year Ended December 31,
2019
2018
$
$
$
$
$
$
1,254,249
261,321
(12,870)
1,502,700
434,288
131,407
0
565,695
(116,139)
(14,741)
0
(130,880)
$
$
$
$
$
$
1,377,147
262,664
(7,200)
1,632,611
473,033
137,254
0
610,287
(80,465)
(19,224)
0
(99,689)
$
$
$
$
$
$
1,379,499
246,718
(8,376)
1,617,841
491,421
129,970
0
621,391
(158,440)
(9,944)
0
(168,384)
The majority of the restricted cash balance as of December 31, 2020 represents the remaining balance of the escrow account established as part of
the acquisition of Netsmart in 2016 to be used by Netsmart to facilitate the integration of our HomecareTM business within Netsmart and an escrow fund
related to a previous acquisition associated with the acquired EIS Business.
(In thousands)
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
106
December 31
2020
2019
$
$
531,104 $
6,361
537,465 $
129,668
7,871
137,539
(In thousands)
Cash paid during the period for:
Interest, including convertible senior notes
Income taxes paid, net of tax refunds
Non-cash transactions:
Accretion of redemption preference on redeemable convertible non-controlling interest -
discontinued operations
Obligations incurred to purchase capitalized software or enter into finance leases
Contributions of assets in exchange for equity interest
Issuance of treasury stock to commercial partner
Accrued expenses consist of the following:
(In thousands)
Royalties, certain third-party product costs and licenses
Practice Fusion settlement
Other
Total Accrued expenses
2020
Year Ended December 31,
2019
2018
$
$
$
$
$
$
24,616
76,595
$
$
23,917
42,972
$
$
33,200
10,108
0
$
0
$
48,594
0
0
752
$
$
$
0
0
701
$
$
$
1,501
4,000
1,121
December 31,
2020
2019
$
$
37,841
0
62,421
100,262
$
$
35,064
145,000
90,217
270,281
Other consists of various accrued expenses and no individual item accounted for more than 5% of the current liabilities balance at the respective
balance sheet dates.
Prepaid and other current assets consists of the following:
(In thousands)
Prepaid assets
Other current assets
Total Prepaid and other current assets
Other assets consist of the following:
(In thousands)
Fair value of 1.25% Call Option
Long-term deferred hosting fees
Long-term prepaid commissions
Investments in non-marketable securities
Long-term deposits and other assets
Total Other assets
21. Geographic Information
December 31,
2020
2019
132,944
3,320
136,264
$
$
142,191
1,954
144,145
December 31,
2020
2019
0
11,025
27,882
35,805
16,916
91,628
$
$
84
36,002
28,876
43,806
10,819
119,587
$
$
$
$
Revenues are attributed to geographic regions based on the location where the sale originated. Our revenues by geographic area are summarized
below:
(In thousands)
United States
Canada
Other international
Total
2020
1,439,737 $
15,624
47,339
1,502,700 $
Year Ended December 31,
2019
1,562,107 $
16,495
54,009
1,632,611 $
$
$
2018
1,565,057
15,377
37,407
1,617,841
107
A summary of our long-lived assets, comprised of fixed assets by geographic area, is presented below:
(In thousands)
United States
India
Israel
Canada
Other international
Total
22. Contingencies
December 31,
2020
2019
$
$
62,016
5,876
2,611
187
1,472
72,162
$
$
77,736
5,321
3,240
51
1,605
87,953
In addition to commitments and obligations in the ordinary course of business, we are currently subject to various legal proceedings and claims that
have not been fully adjudicated. We intend to vigorously defend ourselves, as appropriate, in these matters.
No less than quarterly, we review the status of each significant matter and assess our potential financial exposure. We accrue a liability for an
estimated loss if the potential loss from any legal proceeding or claim is considered probable and the amount can be reasonably estimated. Significant
judgment is required in both the determination of probability and the determination as to whether the amount of an exposure is reasonably estimable, and
accruals are based only on the information available to our management at the time the judgment is made.
The outcome of legal proceedings is inherently uncertain, and we may incur substantial defense costs and expenses defending any of these matters.
In the opinion of our management, the ultimate disposition of pending legal proceedings or claims will not have a material adverse effect on our
consolidated financial position, liquidity or results of operations. However, if one or more of these additional legal proceedings were resolved against or
settled by us in a reporting period for amounts in excess of our management’s expectations, our consolidated financial statements for that and subsequent
reporting periods could be materially adversely affected. Additionally, the resolution of a legal proceeding against us could prevent us from offering our
products and services to current or prospective clients or cause us to incur increased compliance costs, either of which could further adversely affect our
operating results.
The Enterprise Information Solutions business (the “EIS Business”) acquired from McKesson Corporation (“McKesson”) on October 2, 2017 is
subject to a May 2017 civil investigative demand (“CID”) from the U.S. Attorney’s Office for the Eastern District of New York. The CID requests
documents and information related to the certification McKesson obtained for Horizon Clinicals in connection with the U.S. Department of Health and
Human Services’ Electronic Health Record Incentive Program. In August 2018, McKesson received an additional CID seeking similar information for
Paragon. McKesson has agreed, with respect to the CIDs, to indemnify Allscripts for amounts paid or payable to the government (or any private relator)
involving any products or services marketed, sold or licensed by the EIS Business as of or prior to the closing of the acquisition.
Practice Fusion, acquired by Allscripts on February 13, 2018, received in March 2017 a request for documents and information from the U.S.
Attorney’s Office for the District of Vermont pursuant to a CID. Between April 2018 and June 2019, Practice Fusion received from the U.S. Department of
Justice (the “DOJ”) seven additional requests for documents and information through four additional CIDs and three Health Insurance Portability and
Accountability Act (“HIPAA”) subpoenas related to both the certification Practice Fusion obtained in connection with the U.S. Department of Health and
Human Services’ Electronic Health Record Incentive Program and Practice Fusion’s compliance with the Anti-Kickback Statute (“AKS”) and HIPAA as it
relates to certain business practices engaged in by Practice Fusion. In March 2019, Practice Fusion received a grand jury subpoena in connection with a
criminal investigation related to Practice Fusion’s compliance with the AKS. On January 27, 2020, Practice Fusion entered into the Settlement Agreements
resolving the investigations conducted by the DOJ and the U.S. Attorney’s Office. See risk factor entitled “The failure by Practice Fusion to comply with
the terms of its settlement agreements with the DOJ could have a material and adverse impact on our business, results of operations and financial condition,
and, even if Practice Fusion complies with those settlement agreements, the costs and burdens of compliance could be significant, and we may face
additional investigations and proceedings from other governmental entities or third parties related to the same or similar conduct underlying the agreements
with the DOJ.” The terms of Settlement Agreements resolved, among other things, allegations that Practice Fusion, long before its acquisition by Allscripts
and concerning conduct about which Allscripts was unaware at the time of the acquisition, violated the AKS through the manner by which a sponsored
Clinical Decision Support arrangement was sold to an opioid manufacturer and other AKS allegations made by the DOJ against Practice Fusion as well as
False Claims Act allegations pertaining to Meaningful Use payments the federal government made to users of Practice Fusion’s EHR system. The
Settlement Agreements also required Practice Fusion to pay a criminal fine of $25.3 million, a forfeiture payment of $959,700 and a civil settlement of
$118.6 million, which included $5.2 million designated for the state Medicaid program expenditures, all of which have now been paid in full.
108
23. Quarterly Financial Information (Unaudited)
The following tables contain a summary of our unaudited quarterly consolidated results of operations for our last eight fiscal quarters, which have been
restated to illustrate CarePort and EPSi as discontinued operations.
(In thousands, except per share amounts)
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Research and development
Asset impairment charges
Amortization of intangible and acquisition-related assets
Loss from operations
Interest expense
Other income (loss), net
Impairment of long-term investments
Equity in net (loss) income of unconsolidated investments
Loss from continuing operations before income taxes
Income tax benefit (provision)
Loss from continuing operations, net of tax
Income from discontinued operations
Gain on sale of discontinued operations
Income tax effect on discontinued operations
Income from discontinued operations, net of tax
Net income (loss)
Net income (loss) attributable to Allscripts Healthcare Solutions,
Inc. stockholders
Net income (loss) attributable to Allscripts Healthcare Solutions,
Inc. stockholders per share: (3)
Basic
Continuing operations
Discontinued operations
Net income (loss) attributable to Allscripts Healthcare Solutions,
Inc. stockholders per share
Diluted
Continuing operations
Discontinued operations
Net income (loss) attributable to Allscripts Healthcare Solutions,
Inc. stockholders per share
$
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
Quarter Ended
$
386,414
225,391
161,023
93,777
54,287
74,759
6,278
(68,078)
(6,458)
9
0
(223)
(74,750)
10,051
(64,699)
16,847
1,156,504
(380,828)
792,523
727,824
$
365,618
230,480
135,138
93,442
46,352
210
6,295
(11,161)
(6,667)
398
(1,025)
383
(18,072)
4,116
(13,956)
19,545
0
(5,047)
14,498
542
$
369,304
231,706
137,598
109,897
46,045
0
6,321
(24,665)
(10,314)
(875)
(550)
16,834
(19,570)
(2,009)
(21,579)
18,838
0
(4,864)
13,974
(7,605)
381,364
249,428
131,936
92,825
59,377
0
6,710
(26,976)
(10,665)
522
0
200
(36,919)
4,534
(32,385)
16,218
0
(4,187)
12,031
(20,354)
$
727,824
$
542
$
(7,605)
$
(20,354)
(0.43)
5.25
4.82
(0.43)
5.25
4.82
$
$
$
$
$
$
$
$
$
$
$
$
109
(0.09)
0.09
0.00
(0.09)
0.09
0.00
$
$
$
$
$
$
(0.13)
0.08
(0.05)
(0.13)
0.08
(0.05)
$
$
$
$
$
$
(0.20)
0.07
(0.13)
(0.20)
0.07
(0.13)
(In thousands, except per share amounts)
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Research and development
Asset impairment charges
Goodwill impairment charge
Amortization of intangible and acquisition-related assets
Loss from operations
Interest expense
Other income (loss), net
(Impairment) recovery of long-term investments
Equity in net income (loss) of unconsolidated investments
Loss from continuing operations before income taxes
Income tax benefit
Loss from continuing operations, net of tax
Income from discontinued operations
Income tax effect on discontinued operations
Income from discontinued operations, net of tax
Net loss
Net loss attributable to non-controlling interest
Net loss attributable to Allscripts Healthcare Solutions, Inc.
stockholders
Net loss attributable to Allscripts Healthcare Solutions, Inc.
stockholders per share: (3)
Basic
Continuing operations
Discontinued operations
Net loss attributable to Allscripts Healthcare Solutions, Inc.
stockholders per share
Diluted
Continuing operations
Discontinued operations
Net loss attributable to Allscripts Healthcare Solutions, Inc.
stockholders per share
$
December 31,
September 30,
2019
2019 (2)
June 30,
2019 (1)
March 31,
2019
Quarter Ended
$
414,330
261,711
152,619
108,275
60,112
6,800
25,700
6,834
(55,102)
(11,725)
4,796
(1,696)
125
(63,602)
29,738
(33,864)
20,078
(5,184)
14,894
(18,970)
0
$
408,280
259,767
148,513
96,080
61,062
248
0
6,840
(15,717)
(10,839)
781
0
386
(25,389)
5,645
(19,744)
18,899
(4,880)
14,019
(5,725)
0
$
410,883
251,680
159,203
100,462
61,922
3,691
0
6,724
(13,596)
(10,424)
(144,994)
0
218
(168,796)
5,262
(163,534)
18,339
(4,735)
13,604
(149,930)
0
399,118
249,166
149,952
95,991
62,347
98
0
6,790
(15,274)
(10,184)
513
1,045
(64)
(23,964)
2,695
(21,269)
17,919
(4,627)
13,292
(7,977)
424
$
(18,970)
$
(5,725)
$
(149,930)
$
(7,553)
$
$
$
$
$
$
(0.21)
0.09
(0.12)
(0.21)
0.09
(0.12)
$
$
$
$
$
$
(0.11)
0.08
(0.03)
(0.11)
0.08
(0.03)
$
$
$
$
$
$
(0.98)
0.08
(0.90)
(0.98)
0.08
(0.90)
$
$
$
$
$
$
(0.12)
0.08
(0.04)
(0.12)
0.08
(0.04)
(1) Results of operations for the quarter include the results of operations of a third party engaged in a specialty prescription drug platform since June 10, 2019.
(2) Results of operations for the quarter include the results of operations of Pinnacle and Diabetes and Collaborative Registries since July 2, 2019.
(3) The sum of the quarterly per share amounts may not equal per share amounts reported for year to date periods. This is due to changes in the number of weighted-average
shares outstanding and the effects of rounding for each period.
110
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted
an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e)
promulgated under the Exchange Act, as of the end of the period covered by this Form 10-K.
Based on management’s evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures are
designed to, and were effective as of December 31, 2020 to, provide assurance at a reasonable level that the information we are required to disclose in reports
that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and
that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to
allow for timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our chief executive officer and chief
financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020 based on the
guidelines established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework). Our internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP.
Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of
December 31, 2020. We reviewed the results of management’s assessment with the Audit Committee of our Board. The effectiveness of our internal control
over financial reporting as of December 31, 2020 has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in
its report which is included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.
Changes in Internal Control over Financial Reporting
We have implemented internal controls related to the new credit loss accounting standard which we adopted on January 1, 2020. There have been
no changes in our internal control over financial reporting during the quarter ended December 31, 2020, which were identified in connection with
management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our chief executive officer and chief financial officer, do not expect that our disclosure controls or our internal control
over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that we have detected all control issues and instances of fraud, if any, within our Company. These inherent
limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the
controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-
effective control system, misstatements due to error or fraud may occur and not be detected.
111
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information concerning our executive officers required by this Item is incorporated by reference from Part I, Item 1 of this Form 10-K, under
the heading “Information about our Executive Officers.”
Other information required by this Item is incorporated by reference from the information contained under the proposal “Election of Directors,” the
heading “Directors,” and the subheadings “Section 16(a) Beneficial Ownership Reporting Compliance,” “Code of Conduct” and “Audit Committee
Financial Experts” under the heading “Corporate Governance” in our 2021 Proxy Statement (the “2021 Proxy Statement”) to be filed with the U.S.
Securities and Exchange Commission (the “SEC”) within 120 days after December 31, 2020.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference from information contained under the headings “Compensation Discussion and
Analysis” and “Executive Compensation” and the subheadings “Board Oversight of Risk Management,” “Compensation Committee Interlocks and Insider
Participation,” and “Compensation of Directors” under the heading “Corporate Governance” in the 2021 Proxy Statement to be filed with the SEC within
120 days after December 31, 2020.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated by reference from information contained under the headings “Security Ownership of Certain
Beneficial Owners and Management” and “Equity Compensation Plan Information” in the 2021 Proxy Statement to be filed with the SEC within 120 days
after December 31, 2020.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this Item is incorporated by reference from information contained under the subheadings “Certain Relationships and
Related Transactions” and “Board Meetings” under the heading “Corporate Governance” in the 2021 Proxy Statement to be filed with the SEC within 120
days after December 31, 2020.
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated by reference from information contained under the subheadings “Fees and Related Expenses
Paid to Auditors” and “Pre-Approval of Audit and Permissible Non-Audit Services of the Independent Registered Public Accounting Firm” under the
proposal “Ratification of Appointment of Independent Registered Public Accounting Firm” in the 2021 Proxy Statement to be filed with the SEC within
120 days after December 31, 2020.
112
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Financial Statements
Our consolidated financial statements are included in Part II of this Form 10-K:
PART IV
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
Schedule II—Valuation and Qualifying Accounts
Page
55
57
58
60
61
62
63
64
(In thousands)
Allowance for doubtful accounts and sales credits
Year ended December 31, 2019
Year ended December 31, 2018
Balance at
Beginning of
Year
Charged to
Expenses/
Against
Revenue
Write-Offs,
Net of
Recoveries
Balance at
End of
Year
$
$
25,826
12,317
3,467
21,081
(7,288) $
(7,572) $
22,005
25,826
All other schedules are omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated financial statements and notes thereto.
113
2.1
2.2
2.3
2.4
2.5
2.6
(a)(3) Exhibits
Exhibit
Number
Exhibit Description
* Purchase Agreement, dated as of August 1, 2017, by and between
McKesson Corporation and Allscripts Healthcare, LLC.
Amendment No. 1 to Purchase Agreement, dated as of October 2, 2017, by
and between McKesson Corporation and Allscripts Healthcare, LLC.
Filed
Herewith
Furnished
Herewith Form Exhibit
Filing Date
Incorporated by Reference
8-K 2.1
August 4, 2017
10-Q 2.3
November 9, 2017
* Asset Purchase Agreement, dated as of February 15, 2018, by and among
8-K 2.1
February 16, 2018
Hyland Software, Inc., Allscripts Healthcare, LLC, PF2 EIS LLC,
Allscripts Software, LLC and Allscripts Healthcare Solutions, Inc.
* Agreement and Plan of Merger, dated as of January 5, 2018, by and among
Allscripts Healthcare, LLC, Presidio Sub, Inc., Practice Fusion, Inc. and
Fortis Advisors LLC, as representative of the Holders
* Agreement and Plan of Merger, dated as of April 27, 2018, by and among
Allscripts Healthcare, LLC, FollowMyHealth Merger Sub, Inc., Health
Grid Holding Company, the persons listed on the schedules thereto and Raj
Toleti in his capacity as the representative of the Stockholders
* Unit Purchase Agreement, dated as of December 7, 2018, by and among
Allscripts Healthcare, LLC, Allscripts Next, LLC, Allscripts Healthcare
Solutions, Inc. and the Purchasers named in the schedules thereto.
10-Q 2.2
May 8, 2018
10-Q 2.2
August 6, 2018
8-K 2.1
December 11, 2018
2.7
* Asset Purchase Agreement, dated as of July 30, 2020, by and among
8-K 2.1
August 3, 2020
Allscripts Healthcare Solutions, Inc., a Delaware corporation, Allscripts
Healthcare, LLC, a North Carolina limited liability company, Allscripts
Software, LLC, a Delaware limited liability company, Strata Decision
Technology LLC, an Illinois limited liability company, and, solely for
purposes of Article VI and Section 12.18 thereof, Roper Technologies,
Inc.
2.8
* Purchase Agreement, dated as of October 12, 2020, by and among
8-K 2.1
October 15, 2020
Allscripts Healthcare, LLC, a North Carolina limited liability company,
Carbonite Buyer, Inc., a Delaware corporation, and, solely for purposes of
Section 9.13(f) thereof, WellSky Corporation, a Delaware corporation
Fifth Amended and Restated Certificate of Incorporation of Allscripts
Healthcare Solutions, Inc.
By-Laws of Allscripts Healthcare Solutions, Inc.
Indenture, dated as of December 9, 2019, by and between Allscripts
Healthcare Solutions, Inc. and U.S. Bank National Association
Form of 0.875% Convertible Senior Note due 2027 (included in Exhibit
4.1)
Description of the Registrant’s Securities Registered Pursuant to Section
12 of the Securities Exchange Act of 1934
X
3.1
3.2
4.1
4.2
4.3
114
10-K 3.1
February 29, 2016
8-K 3.1
8-K 4.1
August 20, 2015
December 4, 2019
8-K 4.2
December 4, 2019
Exhibit
Number
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Exhibit Description
Second Amended and Restated Credit Agreement, dated as of February
15, 2018, by and among Allscripts Healthcare Solutions, Inc., Allscripts
Healthcare, LLC, the lenders from time to time parties thereto, JPMorgan
Chase Bank, N.A., as Administrative Agent, and Fifth Third Bank,
KeyBank National Association, SunTrust Bank, and Wells Fargo Bank,
National Association, as Syndication Agents
First Amendment, dated as of August 7, 2019, to the Second Amended
and Restated Credit Agreement, dated as of February 15, 2018, among
Allscripts Healthcare Solutions, Inc., Allscripts Healthcare, LLC, the
lenders from time to time party thereto, and JPMorgan Chase Bank, N.A.,
as Administrative Agent
Second Amendment, dated as of July 20, 2020, to the Second Amended
and Restated Credit Agreement, dated as of February 16, 2018, among
Allscripts Healthcare Solutions, Inc., Allscripts Healthcare, LLC, the
lenders from time to time parties thereto and JPMorgan Chase Bank, N.A.
as Administrative Agent
Guarantee and Collateral Agreement, dated as of June 28, 2013, by and
among Allscripts Healthcare Solutions, Inc., Allscripts Healthcare, LLC
and certain other subsidiaries party thereto, and JPMorgan Chase Bank,
N.A., as administrative agent
Accelerated Share Repurchase Master Confirmation dated November 30,
2020
Accelerated Share Repurchase Master Confirmation dated November 30,
2020
Deferred Prosecution Agreement, dated January 27, 2020
Civil Settlement Agreement, dated January 26, 2020
Letter Agreement, dated April 8, 2020, between the U.S. Department of
Justice and Practice Fusion, amending Exhibit A of the Civil Settlement
Agreement dated January 26, 2020
10.10
Capped call transaction confirmation, dated as of December 4, 2019, by
and between JPMorgan Chase Bank, National Association, New York
Branch and Allscripts Healthcare Solutions, Inc.
Filed
Herewith
Furnished
Herewith
Form Exhibit
Filing Date
Incorporated by Reference
8-K 10.1
February 15, 2018
8-K 10.2
August 9, 2019
10-Q 10.2
July 31, 2020
8-K 10.2
July 2, 2013
8-K 10.1
January 28, 2020
8-K 10.2
January 28, 2020
10-Q 10.1
May 8, 2020
8-K 10.1
December 4, 2019
X
X
10.11
Capped call transaction confirmation, dated as of December 4, 2019, by
8-K 10.2
December 4, 2019
and between Wells Fargo Bank, National Association and Allscripts
Healthcare Solutions, Inc.
10.12
Capped call transaction confirmation, dated as of December 4, 2019, by
8-K 10.3
December 4, 2019
and between Bank of America, N.A. and Allscripts Healthcare Solutions,
Inc.
115
Exhibit
Number
10.13
10.14
10.15
10.16
10.17
Exhibit Description
Capped call transaction confirmation, dated as of December 4, 2019, by
and between Deutsche Bank AG, London Branch and Allscripts
Healthcare Solutions, Inc.
Additional capped call transaction confirmation, dated as of December
18, 2019, by and between JPMorgan Chase Bank, National Association,
New York Branch and Allscripts Healthcare Solutions, Inc.
Additional capped call transaction confirmation, dated as of December
18, 2019, by and between Wells Fargo Bank, National Association and
Allscripts Healthcare Solutions, Inc.
Additional capped call transaction confirmation, dated as of December
18, 2019, by and between Bank of America, N.A. and Allscripts
Healthcare Solutions, Inc.
Additional capped call transaction confirmation, dated as of December
18, 2019, by and between Deutsche Bank AG, London Branch and
Allscripts Healthcare Solutions, Inc.
10.18
† Allscripts Healthcare Solutions, Inc., Amended and Restated 1993 Stock
Incentive Plan (as amended and restated effective October 8, 2009)
10.19
† Allscripts Healthcare Solutions, Inc. Second Amended and Restated
2011 Stock Incentive Plan
10.20
† Allscripts Healthcare Solutions, Inc. Amended and Restated 2019 Stock
Incentive Plan
Filed
Herewith
Furnished
Herewith
Form
Exhibit
Filing Date
Incorporated by Reference
8-K
10.4
December 4, 2019
8-K
10.1
December 18, 2019
8-K
10.2
December 18, 2019
8-K
10.3
December 18, 2019
8-K
10.4
December 18, 2019
10-Q
10.3
October 13, 2009
8-K
S-8
10.1
May 24, 2017
4.3
May 22, 2020
10.21
† Amended and Restated Allscripts Healthcare Solutions, Inc. Director
10-Q
10.16
August 9, 2013
Deferred Compensation Plan
10.22
† Form of Restricted Stock Unit Award Agreement (Directors)
10-KT
10.37
March 1, 2011
10.23
† Form of Restricted Stock Unit Award Agreement (February 2011)
10-KT
10.38
March 1, 2011
10.24
† Form of Performance-Based Restricted Stock Unit Award Agreement
10-KT
10.39
March 1, 2011
10.25
† Form of Performance-Based Restricted Stock Unit Award Agreement
10-KT
10.40
March 1, 2011
(TSR)
10.26
† Form of Restricted Stock Unit Award Agreement for Non-Employee
10-Q
10.4
August 9, 2011
Directors (2011 Stock Incentive Plan)
10.27
† Form of Time-Based Vesting Restricted Stock Unit Award Agreement
10-Q
10.5
August 9, 2011
for Employees (2011 Stock Incentive Plan)
116
Exhibit
Number
Exhibit Description
10.28
† Form of Stock Option Agreement
10.29
† Form of Performance-Based Restricted Stock Unit Award Agreement
(TSR)
Filed
Herewith
Furnished
Herewith
Form
Exhibit
Filing Date
Incorporated by Reference
10-K
10-K
10.38
March 1, 2013
10.39
March 1, 2013
10.30
† Form of Performance-Based Restricted Stock Unit Award Agreement
10-K
10.29
March 3, 2014
(TSR) (February 2014)
10.31
† Form of Performance-Based Restricted Stock Unit Award Agreement
10-K
10.40
March 1, 2013
(TSR) for Paul M. Black
10.32
10.33
10.34
†
†
†
Amendment to Performance-Based Restricted Stock Unit Award
Agreement, dated February 25, 2014, between Allscripts Healthcare
Solutions, Inc. and Paul M. Black
Amendment No. 1 to Performance-Based Restricted Stock Unit Award
Agreement, dated December 24, 2012, between Allscripts Healthcare
Solutions, Inc. and Paul M. Black
Amendment No. 2 to Performance-Based Restricted Stock Unit Award
Agreement, dated December 24, 2012, between Allscripts Healthcare
Solutions, Inc. and Paul M. Black
10.35
† Form of Restricted Stock Unit Award Agreement for Paul M. Black
Employment Agreement, dated as of December 19, 2012, between
Allscripts Healthcare Solutions, Inc. and Paul M. Black
10-K
10.31
March 2, 2015
10-K
10.31
March 3, 2014
8-K
99.1
December 31, 2014
8-K
8-K
10.41
March 1, 2013
10.1
December 19, 2012
Amendment No. 1 to Employment Agreement, effective October 1,
2015, between Allscripts Healthcare Solutions, Inc. and Paul M. Black
8-K
10.1
October 7, 2015
Employment Agreement, dated as of October 10, 2012 but effective as of
October 29, 2012, between Allscripts Healthcare Solutions, Inc. and
Richard Poulton
10-K
10.67
March 1, 2013
First Amendment to Employment Agreement between Allscripts
Healthcare Solutions, Inc. and Richard Poulton
8-K
10.1
August 3, 2020
Employment Agreement, dated as of October 10, 2012 but effective as of
November 12, 2012, between Allscripts Healthcare Solutions, Inc. and
Dennis Olis
10-K
10.39
March 3, 2014
Employment Agreement, dated as of May 28, 2013, between Allscripts
Healthcare Solutions, Inc. and Brian Farley
10-K
10.40
March 3, 2014
Employment Agreement, dated as of October 30, 2016, effective
November 1, 2016, between Allscripts Healthcare Solutions, Inc. and
Lisa Khorey
10-K
10.49
February 27, 2017
117
10.36
10.37
10.38
10.39
10.40
10.41
10.42
†
†
†
†
†
†
†
Exhibit
Number
21.1
23.1
24.1
31.1
31.2
32.1
Exhibit Description
Subsidiaries
Consent of Grant Thornton LLP
Powers of Attorney (included on the signature page hereto)
Rule 13a - 14(a) Certification of Chief Executive Officer
Rule 13a - 14(a) Certification of Chief Financial Officer
Section 1350 Certifications of Chief Executive Officer and Chief
Financial Officer
101.INS
Inline XBRL Instance Document – the instance document does not
appear in the Interactive Data File because its XBRL tags are embedded
within the Inline document
101.SCH
Inline XBRL Taxonomy Extension Schema
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
101.DEF
Inline XBRL Taxonomy Definition Linkbase
104
The cover page from the Company’s Annual Report on Form 10-K for
the year ended December 31, 2020, formatted in Inline XBRL and
included in Exhibit 101
Indicates management contract or compensatory plan.
†
* Omitted schedules will be furnished supplementally to the SEC upon request
Item 16. Form 10-K Summary
None.
118
Filed
Herewith
Furnished
Herewith
Form
Exhibit
Filing Date
Incorporated by Reference
X
X
X
X
X
X
X
X
X
X
X
X
X
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 26, 2021
Allscripts Healthcare Solutions, Inc.
By:
/s/ Paul M. Black
Paul M. Black
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Paul M. Black and
Richard J. Poulton, jointly and severally, his or her attorney-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any
amendments to this Annual Report on From 10-K and to file the same, with exhibits thereto and other documents in connections therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Paul M. Black
Paul M. Black
/s/ Richard J. Poulton
Richard J. Poulton
/s/ Elizabeth A. Altman
Elizabeth A. Altman
/s/ Mara G. Aspinall
Mara G. Aspinall
/s/ P. Gregory Garrison
P. Gregory Garrison
/s/ Jonathan J. Judge
Jonathan J. Judge
/s/ Michael A. Klayko
Michael A. Klayko
/s/ Dave B. Stevens
Dave B. Stevens
/s/ David D. Stevens
David D. Stevens
/s/ Carol J. Zierhoffer
Carol J. Zierhoffer
Title
Chief Executive Officer and Director
(Principal Executive Officer)
President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Chairman of the Board and Director
Director
Director
Director
119
Date
February 26, 2021
February 26, 2021
February 26, 2021
February 26 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
Exhibit 4.3
DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
Allscripts Healthcare Solutions, Inc. (“Allscripts,” “we,” “us” or “our”) has one class of securities registered under Section 12
of the Securities Exchange Act of 1934: our common stock. The following summary of the material terms of our capital stock is
not meant to be complete and is qualified by reference to Allscripts’ Fifth Amended and Restated Certificate of Incorporation (the
“Certificate of Incorporation”) and Allscripts’ By-Laws, as amended and restated (the “By-Laws”), each of which is attached as
an exhibit to our Annual Report on Form 10-K, and to all applicable provisions of the General Corporation Law of the State of
Delaware (the “DGCL”).
Authorized Capital Stock
Allscripts’ current authorized capital stock consists of 349,000,000 shares of common stock, $0.01 par value per share, and
1,000,000 shares of preferred stock, $0.01 par value per share.
Allscripts Common Stock
Voting and Other Rights. Holders of Allscripts common stock are entitled to one vote for each share held of record on all matters
submitted to a vote of stockholders, including the election of directors, and do not have cumulative voting rights. Generally,
matters other than the election of directors to be decided by the stockholders will be decided by the vote of holders of a majority
of the shares of Allscripts common stock entitled to vote on the subject matter and represented in person or by proxy at a meeting
at which a quorum is present except where a different standard is required by the DGCL. Each director is elected by the vote of
the majority of the votes cast with respect to that director’s election. The rights, preferences and privileges of holders of common
stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of preferred stock that
Allscripts may designate and issue at any time in the future.
Dividend Rights; Rights Upon Liquidation. Holders of Allscripts common stock are entitled to receive dividends ratably, if any,
as may be declared by the board of directors out of legally available funds. Upon Allscripts’ liquidation, dissolution or winding-
up, holders of Allscripts common stock are entitled to share ratably in all assets remaining after payment of Allscripts’ debts and
other liabilities, subject to the rights of holders of shares of any series of preferred stock that Allscripts may designate and issue at
any time in the future.
Other Rights. Holders of Allscripts common stock currently have no pre-emptive, subscription or conversion rights. There are no
sinking fund provisions or redemption provisions applicable to Allscripts common stock.
Allscripts Preferred Stock
The Allscripts board of directors is authorized, without further stockholder approval but subject to any limitations prescribed by
law, to establish from time to time one or more classes or series of preferred stock covering up to an aggregate of 1,000,000
shares of preferred stock, and to issue these shares of preferred stock in one or more series. Each class or series of Allscripts
preferred stock will cover the number of shares and will have the preferences, voting powers, qualifications and special or
relative rights or privileges as are determined by the board of directors, which may include, among others, dividend rights,
liquidation preferences, voting rights, conversion rights and redemption rights.
The Allscripts board of directors may authorize the issuance of preferred stock with voting or conversion rights that could dilute
the voting power or other rights of the holders of Allscripts common stock. The issuance of preferred stock could also delay,
defer or prevent a change of control of Allscripts or otherwise negatively affect the market price of Allscripts common stock.
Anti-Takeover Provisions
Some provisions of Delaware law and our Certificate of Incorporation and By-Laws could make the following more difficult:
•
•
•
acquisition of us by means of a tender offer;
acquisition of us by means of a proxy contest or otherwise; or
removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors.
We believe that these provisions give our board of directors the flexibility to exercise its fiduciary duties in a manner consistent
with the interests of our stockholders.
Advance Notice Requirements. Our By-Laws establish advance notice procedures with respect to stockholder proposals and the
nomination of candidates for election as directors.
Delaware Law. Our Certificate of Incorporation contains an election to be governed by Section 203 of the DGCL. Section 203 of
the DGCL generally prohibits certain “business combinations,” including certain mergers, sales and leases of assets and tender or
exchange offers, by a corporation or certain subsidiaries with an interested stockholder who beneficially owns 15% or more of a
corporation’s voting stock, within three years after the person or entity becomes an interested stockholder, unless:
•
the board of directors of the corporation has approved, before the acquisition time, either the
business combination or the transaction that resulted in the person becoming an interested
stockholder,
2
•
•
upon consummation of the transaction that resulted in the person becoming an interested
stockholder, the person owns at least 85% of the corporation’s voting stock (excluding shares
owned by directors who are officers and shares owned by employee stock plans in which
participants do not have the right to determine confidentially whether shares will be tendered in a
tender or exchange offer), or
after the person or entity becomes an interested stockholder, the business combination is
approved by the board of directors and authorized by the vote of at least two-thirds of the
outstanding voting stock not owned by the interested stockholder.
No Stockholder Action by Written Consent; Special Meeting of Stockholders. Our Certificate of Incorporation prohibits our
stockholders from acting by written consent without a meeting, and provides that special meetings of the stockholders may be
called only by the Chairman of our board of directors or the board of directors in the manner provided in the By-Laws.
Undesignated Preferred Stock. The ability of our board of directors to issue shares of preferred stock without any action on the
part of our stockholders may impede a takeover of us and prevent a transaction favorable to the holders of our common stock.
3
Exhibit 10.5
EXECUTED VERSION
November 30, 2020
From:
To:
Wells Fargo Bank, National Association
30 Hudson Yards
New York, NY 10001-2170
Email: CorporateDerivativeNotifications@wellsfargo.com
Allscripts Healthcare Solutions, Inc.
222 Merchandise Mart Plaza, Suite 2024
Chicago, IL 60654
Attention: Richard J. Poulton
Telephone No.:312.506.1216
Email:rick.poulton@allscripts.com; legal.notices@allscripts.com
Re:
Master Confirmation—Uncollared Accelerated Share Repurchase
This master confirmation (this “Master Confirmation”), dated as of November 30, 2020, is intended to set forth certain terms and provisions
of certain Transactions (each, a “Transaction”) entered into from time to time between Wells Fargo Bank, National Association (“Wells Fargo”) and
Allscripts Healthcare Solutions, Inc., a Delaware corporation (“Counterparty”). This Master Confirmation, taken alone, is neither a commitment by either
party to enter into any Transaction nor evidence of a Transaction. The additional terms of any particular Transaction shall be set forth in a Supplemental
Confirmation in the form of Schedule A hereto (a “Supplemental Confirmation”), which shall reference this Master Confirmation and supplement, form a
part of, and be subject to this Master Confirmation. This Master Confirmation and each Supplemental Confirmation together shall constitute a
“Confirmation” as referred to in the Agreement specified below.
The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the
International Swaps and Derivatives Association, Inc., are incorporated into this Master Confirmation. This Master Confirmation and each Supplemental
Confirmation evidence a complete binding agreement between Counterparty and Wells Fargo as to the subject matter and terms of each Transaction to
which this Master Confirmation and such Supplemental Confirmation relate and shall supersede all prior or contemporaneous written or oral
communications with respect thereto.
This Master Confirmation and each Supplemental Confirmation supplement, form a part of, and are subject to an agreement in the form of the
ISDA 2002 Master Agreement (the “Agreement”) as if Wells Fargo and Counterparty had executed the Agreement on the date of this Master Confirmation
(but without any Schedule except for (i) the election of New York law as the governing law (without reference to its choice of law provisions), (ii) the
election that subparagraph (ii) of Section 2(c) of the Agreement will not apply to the Transactions, (iii) the election that the “Cross Default” provisions of
Section 5(a)(vi) of the Agreement shall apply to Wells Fargo, with a “Threshold Amount” of 3% of the shareholders’ equity of Wells Fargo & Company
and as if “Specified Indebtedness” had the meaning specified in Section 14 of the Agreement, except that such term shall not include obligations in respect
of deposits received in the ordinary course of Wells Fargo’s banking business (provided that (a) the text “, or becoming capable at such time of being
declared,” shall be deleted from Section 5(a)(vi)(1) of the Agreement and (b) the following provision shall be added to the end of Section 5(a)(vi) of the
Agreement: “but a default under clause (2) above shall not constitute an Event of Default if (x) the default was caused solely by error or omission of an
administrative or operational nature, (y) funds were available to enable the party to make the payment when due and
1
(z) the payment is made within two Local Business Days of such party’s receipt of written notice of its failure to pay”), and (iv) as otherwise provided
herein or in a Supplemental Confirmation).
The Transactions shall be the sole Transactions under the Agreement. If there exists any ISDA Master Agreement between Wells Fargo and
Counterparty or any confirmation or other agreement between Wells Fargo and Counterparty pursuant to which an ISDA Master Agreement is deemed to
exist between Wells Fargo and Counterparty, then notwithstanding anything to the contrary in such ISDA Master Agreement, such confirmation or
agreement or any other agreement to which Wells Fargo and Counterparty are parties, the Transactions shall not be considered Transactions under, or
otherwise governed by, such existing or deemed ISDA Master Agreement, and the occurrence of any Event of Default or Termination Event under the
Agreement with respect to either party or any Transaction shall not, by itself, give rise to any right or obligation under any such other agreement or deemed
agreement. Notwithstanding anything to the contrary in any other agreement between the parties or their Affiliates, the Transactions shall not be “Specified
Transactions” (or similarly treated) under any other agreement between the parties or their Affiliates.
All provisions contained or incorporated by reference in the Agreement shall govern this Master Confirmation and each Supplemental
Confirmation except as expressly modified herein or in the related Supplemental Confirmation.
If, in relation to any Transaction to which this Master Confirmation and a Supplemental Confirmation relate, there is any inconsistency between
the Agreement, this Master Confirmation, such Supplemental Confirmation and the Equity Definitions, the following will prevail for purposes of such
Transaction in the order of precedence indicated: (i) such Supplemental Confirmation; (ii) this Master Confirmation; (iii) the Equity Definitions; and (iv)
the Agreement.
1.
Each Transaction constitutes a Share Forward Transaction for the purposes of the Equity Definitions. Set forth below are the terms and
conditions that, together with the terms and conditions set forth in the Supplemental Confirmation relating to any Transaction, shall govern such
Transaction.
General Terms.
Trade Date:
Buyer:
Seller:
Shares:
Exchange:
Related Exchange(s):
Prepayment/Variable Obligation:
Prepayment Amount:
Prepayment Date:
Valuation.
VWAP Price:
For each Transaction, as set forth in the related Supplemental Confirmation.
Counterparty
Wells Fargo
The common stock of Counterparty, par value USD 0.01 per share (Exchange
symbol “MDRX”).
The NASDAQ Global Select Market
All Exchanges
Applicable
For each Transaction, as set forth in the related Supplemental Confirmation.
For each Transaction, as set forth in the related Supplemental Confirmation.
For any Exchange Business Day, the volume-weighted average price at which
the Shares trade as reported in the composite transactions for United States
exchanges and quotation systems, during the regular trading session for the
Exchange on such Exchange Business Day, excluding
2
(i) trades that do not settle regular way, (ii) opening (regular way) reported
trades in the consolidated system on such Exchange Business Day, (iii) trades
that occur in the last ten minutes before the scheduled close of trading on the
Exchange on such Exchange Business Day and ten minutes before the
scheduled close of the primary trading in the market where the trade is
effected, and (iv) trades on such Exchange Business Day that do not satisfy
the requirements of Rule 10b-18(b)(3) under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), as determined in good faith by the
Calculation Agent (all such trades other than any trades described in clauses
(i) to (iv) above, “Rule 10b-18 Eligible Transactions”). The Calculation
Agent shall refer to the Bloomberg Page “MDRX US AQR SEC”
(or any successor thereto) for such Exchange Business Day to determine the
VWAP Price, unless the Calculation Agent, in its reasonable judgment,
determines that such source does not accurately reflect the VWAP Price or
unless such source is unavailable.
For each Transaction, the arithmetic average of the VWAP Prices for all of
the Calculation Dates in the Calculation Period for such Transaction, subject
to “Valuation Disruption” below.
Forward Price:
Forward Price Adjustment Amount:
For each Transaction, as set forth in the related Supplemental Confirmation.
Calculation Period:
For each Transaction, the period from, and including, the Calculation Period
Start Date for such Transaction to, and including, the Termination Date for
such Transaction.
Calculation Period Start Date:
For each Transaction, as set forth in the related Supplemental Confirmation.
Termination Date:
For each Transaction, the Scheduled Termination Date for such Transaction;
provided that Wells Fargo shall have the right to designate any Calculation
Date on or after the First Acceleration Date to be the Termination Date for all
or any part of such Transaction (an “Accelerated Termination Date”) by
delivering a notice (an “Acceleration Notice”) to Counterparty of any such
designation prior to 6:00 p.m. (New York City time) on the Calculation Date
immediately following the designated Accelerated Termination Date. Wells
Fargo shall specify in each Acceleration Notice the portion of the Prepayment
Amount that is subject to acceleration (which may be less than the full
Prepayment Amount). If the portion of the Prepayment Amount that is subject
to acceleration is less than the full Prepayment Amount, then the Calculation
Agent shall adjust the terms of the Transaction as appropriate to take into
account the occurrence of such Accelerated Termination Date (including
cumulative adjustments to take into account all prior Accelerated Termination
Dates).
3
Calculation Dates:
Scheduled Termination Date:
First Acceleration Date:
Valuation Disruption:
For each Transaction, each date that is both an Exchange Business Day and is
set forth as a Calculation Date in the related Supplemental Confirmation.
For each Transaction, as set forth in the related Supplemental Confirmation,
subject to postponement as provided in “Valuation Disruption” below.
For each Transaction, as set forth in the related Supplemental Confirmation.
The definition of “Market Disruption Event” in Section 6.3(a) of the Equity
Definitions is hereby amended by deleting the words “at any time during the
one-hour period that ends at the relevant Valuation Time, Latest Exercise
Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case
may be” and inserting the words “at any time on any Scheduled Trading Day
during the Calculation Period or Settlement Valuation Period” after the word
“material,” in the third line thereof.
Section 6.3(d) of the Equity Definitions is hereby amended by deleting the
remainder of the provision following the term “Scheduled Closing Time” in
the fourth line thereof.
Notwithstanding anything to the contrary in the Equity Definitions, if a
Disrupted Day occurs (i) in the Calculation Period, the Calculation Agent
may, in its good faith and commercially reasonable discretion, postpone the
Scheduled Termination Date, or (ii) in the Settlement Valuation Period, the
Calculation Agent may extend the Settlement Valuation Period. The
Calculation Agent may also determine that (i) such Disrupted Day is a
Disrupted Day in full, in which case the VWAP Price for such Disrupted Day
shall not be included for purposes of determining the Forward Price or the
Settlement Price, as the case may be, or (ii) such Disrupted Day is a
Disrupted Day only in part, in which case the VWAP Price for such Disrupted
Day shall be determined by the Calculation Agent in a good faith and
commercially reasonable manner based on Rule 10b-18 Eligible Transactions
in the Shares on such Disrupted Day taking into account the nature and
duration of the relevant Market Disruption Event, and the weighting of the
VWAP Price for the relevant Calculation Dates during the Calculation Period
or the Settlement Valuation Period, as the case may be, shall be adjusted in a
good faith and commercially reasonable manner by the Calculation Agent for
purposes of determining the Forward Price or the Settlement Price, as the
case may be, with such adjustments based on, among other factors, the
duration of any Market Disruption Event and the volume, historical trading
patterns and price of the Shares. Any Exchange Business Day on which, as of
the date hereof, the Exchange is scheduled to close prior to its normal close of
trading shall be deemed not to be an Exchange Business Day; if a closure of
the Exchange prior to its normal close of trading on any Exchange Business
Day is scheduled following the
4
date hereof, then such Exchange Business Day shall be deemed to be a
Disrupted Day in full.
If a Disrupted Day occurs during the Calculation Period for any Transaction
or the Settlement Valuation Period for any Transaction, as the case may be,
and each of the nine immediately following Scheduled Trading Days is a
Disrupted Day (a “Disruption Event”), then the Calculation Agent, in its
good faith and commercially reasonable discretion, may deem such
Disruption Event (and each consecutive Disrupted Day thereafter) to be either
(x) a Potential Adjustment Event in respect of such Transaction or (y) an
Additional Termination Event
in respect of such Transaction, with
Counterparty as the sole Affected Party and such Transaction as the sole
Affected Transaction.
Settlement Terms.
Settlement Procedures:
For each Transaction:
Number of Shares to be Delivered:
(i)
if the Number of Shares to be Delivered for such Transaction is
positive, Physical Settlement shall be applicable to such Transaction;
provided that Wells Fargo does not, and shall not, make the agreement
or the representations set forth in Section 9.11 of the Equity Definitions
related to the restrictions imposed by applicable securities laws with
respect to any Shares delivered by Wells Fargo to Counterparty under
any Transaction; or
(ii)
if the Number of Shares to be Delivered for such Transaction is
negative, then the Counterparty Settlement Provisions in Annex A
hereto shall apply to such Transaction.
For each Transaction, a number of Shares (rounded down to the nearest whole
number) equal to (a)(i) the Prepayment Amount for such Transaction, divided
by (ii)(A) the Forward Price for such Transaction minus (B) the Forward
Price Adjustment Amount for such Transaction, minus (b) the number of
Initial Shares for such Transaction; provided that if the result of the
calculation in clause (a)(ii) is equal to or less than the Floor Price for such
Transaction, then the Number of Shares to be Delivered for such Transaction
shall be determined as if clause (a)(ii) were replaced with “(ii) the Floor Price
for such Transaction”. For the avoidance of doubt, if the Forward Price
Adjustment Amount for any Transaction is a negative number, clause (a)(ii)
of the immediately preceding sentence shall be equal to (A) the Forward Price
for such Transaction, plus (B) the absolute value of the Forward Price
Adjustment Amount.
Floor Price:
For each Transaction, as set forth in the related Supplemental Confirmation.
5
Excess Dividend Amount:
Settlement Date:
Settlement Currency:
Initial Share Delivery:
For the avoidance of doubt, all references to the Excess Dividend Amount
shall be deleted from Section 9.2(a)(iii) of the Equity Definitions.
For each Transaction, if the Number of Shares to be Delivered for all or such
portion of such Transaction is positive (x) in the case of an Accelerated
Termination Date, the date that is one Settlement Cycle immediately
following the date on which Wells Fargo delivers notice of such Accelerated
Termination Date and (y) in the case of a Termination Date occurring on the
Scheduled Termination Date, the date that is one Settlement Cycle
immediately following the Termination Date, in either case, for all or such
portion of such Transaction (the final Settlement Date, the “Final Settlement
Date”).
USD
For each Transaction, Wells Fargo shall deliver a number of Shares equal to
the Initial Shares for such Transaction to Counterparty on the Initial Share
Delivery Date for such Transaction in accordance with Section 9.4 of the
Equity Definitions, with such Initial Share Delivery Date deemed to be a
“Settlement Date” for purposes of such Section 9.4.
Initial Share Delivery Date:
For each Transaction, as set forth in the related Supplemental Confirmation.
Initial Shares:
Share Adjustments.
Potential Adjustment Event:
For each Transaction, as set forth in the related Supplemental Confirmation.
Notwithstanding anything to the contrary in Section 11.2(e) of the Equity
Definitions, neither an Extraordinary Dividend nor the issuance of additional
stock options, restricted stock or restricted stock units in the ordinary course
pursuant to Counterparty’s employee equity incentive plan shall constitute a
Potential Adjustment Event.
In addition to the events described in Section 11.2(e) of the Equity
Definitions, it shall constitute an additional Potential Adjustment Event if (x)
the Scheduled Termination Date for any Transaction is postponed pursuant to
“Valuation Disruption” above (including, for the avoidance of doubt,
pursuant to Section 8 hereof), (y) a Regulatory Disruption as described in
Section 8 hereof occurs or (z) a Disruption Event occurs. In the case of any
event described in clause (x), (y) or (z) above occurs, the Calculation Agent
may, in a good faith and commercially reasonable manner, adjust any
relevant terms of such Transaction as necessary to preserve as nearly as
practicable the fair value of such Transaction to Wells Fargo prior to such
postponement, Regulatory Disruption or Disruption Event, as the case may
be; provided that the Calculation Agent shall not adjust any of the dates
6
Excess Dividend:
Consequences of Excess Dividend:
Method of Adjustment:
Relevant Dividend Period:
Relevant Dividend Period End Date:
identified as Calculation Dates in the related Supplemental Confirmation.
Any dividend or distribution on the Shares (other than any dividend or
distribution of the type described in Section 11.2(e)(i) or Section 11.2(e)(ii)
(A) of
the Equity Definitions or any Extraordinary Dividend).
the per Share cash dividend or
“Extraordinary Dividend” means
distribution, or a portion thereof, declared by Counterparty on the Shares that
is classified by the board of directors of Counterparty as an “extraordinary”
dividend.
The declaration by the Issuer of any Excess Dividend, the ex-dividend date
for which occurs or is scheduled to occur during the Relevant Dividend
Period for any Transaction, may, at Wells Fargo’s election in its sole
discretion, either (x) constitute an Additional Termination Event in respect of
such Transaction, with Counterparty as the sole Affected Party and such
Transaction as the sole Affected Transaction or (y) result in an adjustment, by
the Calculation Agent, to the Floor Price as the Calculation Agent determines
appropriate to preserve the fair value of such Transaction after taking into
account such Excess Dividend.
Calculation Agent Adjustment
For each Transaction, the period from, and including, the Trade Date for such
Transaction to, and including, the Relevant Dividend Period End Date for
such Transaction.
For each Transaction, if the Number of Shares to be Delivered for such
Transaction is negative, the last day of the Settlement Valuation Period;
otherwise, the Termination Date for such Transaction.
Extraordinary Events.
Consequences of Merger Events:
(a) Share-for-Share:
(b) Share-for-Other:
(c) Share-for-Combined:
Tender Offer:
Cancellation and Payment
Cancellation and Payment
Cancellation and Payment
Applicable; provided that (a) Section 12.1(d) of the Equity Definitions shall
be amended by replacing “10%” in the third line thereof with “20%”, (b)
Section 12.1(l) of the Equity Definitions shall be amended by (i) deleting the
parenthetical in the fifth line thereof, (ii) replacing “that” in the fifth line
thereof with “whether or not such announcement” and (iii) adding
immediately after the words “Tender Offer” in the fifth line thereof “, and any
publicly announced change or amendment to such an announcement
(including, without limitation, the announcement of an abandonment of such
intention)” and (c) Sections 12.3(a) and 12.3(d) of the Equity Definitions
7
shall each be amended by replacing each occurrence of the words “Tender
Offer Date” by “Announcement Date.”
Consequences of Tender Offers:
(a) Share-for-Share:
(b) Share-for-Other:
Modified Calculation Agent Adjustment
Modified Calculation Agent Adjustment
(c) Share-for-Combined:
Modified Calculation Agent Adjustment
Any adjustment to the terms of any Transaction and the determination of any amounts due upon termination of any Transaction hereunder
as a result of a Merger Event or Tender Offer shall be made without duplication in respect of any prior adjustment hereunder (including,
without limitation, any prior adjustment pursuant to Section 12 or 13 hereof).
Nationalization, Insolvency or Delisting:
Cancellation and Payment; provided that in addition to the provisions of
Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a
Delisting if the Exchange is located in the United States and the Shares are
not immediately re-listed, re-traded or re-quoted on any of the New York
Stock Exchange, The NASDAQ Global Select Market or The NASDAQ
Global Market (or their respective successors); if the Shares are immediately
re-listed, re-traded or re-quoted on any such exchange or quotation system,
such exchange or quotation system shall be deemed to be the Exchange.
Additional Disruption Events:
(a) Change in Law:
Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is
hereby amended by (i) replacing the phrase “the interpretation” in the third
line thereof with the phrase “, or public announcement of, the formal or
informal interpretation”, (ii) replacing the word “Shares” where it appears in
clause (X) thereof with the words “Hedge Positions” and (iii) immediately
following the word “Transaction” in clause (X) thereof, adding the phrase “in
the manner contemplated by the Hedging Party on the Trade Date”; provided
further that Section 12.9(a)(ii) of the Equity Definitions is hereby amended
by replacing the parenthetical beginning after the word “regulation” in the
second line thereof with the words “(including, for the avoidance of doubt
and without limitation, (x) any tax law or (y) adoption or promulgation of
new regulations authorized or mandated by existing statute)”.
(b) Failure to Deliver:
(c) Insolvency Filing:
(d) Loss of Stock Borrow:
Applicable
Applicable
Applicable
Maximum Stock Loan Rate:
For each Transaction, as set forth in the related Supplemental Confirmation.
Hedging Party:
Determining Party:
Wells Fargo
Wells Fargo
8
(e) Hedging Disruption:
Hedging Party:
Determining Party:
(f) Increased Cost of Hedging:
Hedging Party:
Determining Party:
(g) Increased Cost of Stock Borrow:
Applicable
Wells Fargo
Wells Fargo
Applicable
Wells Fargo
Wells Fargo
Applicable
Initial Stock Loan Rate:
For each Transaction, as set forth in the related Supplemental Confirmation.
Hedging Party:
Determining Party:
Hedging Adjustments:
Wells Fargo
Wells Fargo
For the avoidance of doubt, whenever the Calculation Agent is called upon to
make an adjustment pursuant to the terms of this Master Confirmation or the
Equity Definitions to take into account the effect of an event, the Calculation
Agent shall make such adjustment by reference to the effect of such event on
Wells Fargo, assuming that Wells Fargo maintains a commercially reasonable
Hedge Position.
Non-Reliance/Agreements and
Acknowledgements Regarding
Hedging Activities/Additional
Acknowledgements:
Applicable
2. Calculation Agent.
Wells Fargo; provided that, following the occurrence and during the
continuation of an Event of Default pursuant to Section 5(a)(vii) of the
Agreement with respect to which Wells Fargo is the Defaulting Party,
Counterparty shall have the right to select a leading dealer in the market for
U.S. corporate equity derivatives reasonably acceptable to Wells Fargo to
replace Wells Fargo as Calculation Agent, and the parties shall work in good
faith to execute any appropriate documentation required by such replacement
Calculation Agent.
Whenever the Calculation Agent is required to act or to exercise judgment in
any way with respect to any Transaction hereunder, it will do so in a good
faith and commercially reasonable manner. Notwithstanding anything to the
contrary in this Master Confirmation or any Supplemental Confirmation, the
Calculation Agent shall not adjust the dates identified as Calculation Dates in
the relevant Supplemental Confirmation for any Transaction.
Following any determination, adjustment or calculation by the Calculation
Agent hereunder, the Calculation Agent shall deliver to Counterparty, within
five Exchange Business Days after a written request by Counterparty, a
9
report in a commonly used file format for the storage and manipulation of
financial data (including the methodology, interest rates, quotations and
market data (including volatility) but without disclosing any proprietary or
confidential models or other proprietary or confidential information)
displaying in reasonable detail the basis for such determination, adjustment or
calculation, as the case may be.
3.
Account Details.
(a)
Account for payments to Counterparty:
As separately notified by Counterparty
Account for delivery of Shares to Counterparty:
As separately notified by Counterparty
(b)
Account for payments to Wells Fargo:
Wells Fargo’s USD payment instructions:
Wells Fargo’s delivery instructions:
ABA: 121-000-248
Wells Fargo Bank, National Association
Charlotte, NC
Internal Acct No. 01020304464228
A/C Name: WFB Equity Derivatives
DTC Number: 2072
Agent ID: 52196
Institution ID: 52196
4.
Offices.
(a)
(b)
5.
Notices.
The Office of Counterparty for each Transaction is: Inapplicable, Counterparty is not a Multibranch Party.
The Office of Wells Fargo for each Transaction is: Charlotte
Wells Fargo Bank, National Association
301 S Tryon St Fl 1, Charlotte
NC, 28282
(a)
Address for notices or communications to Counterparty:
Allscripts Healthcare Solutions, Inc.
222 Merchandise Mart Plaza, Suite 2024
Chicago, IL 60654
Attention:
Telephone No.:
Email:
Richard J. Poulton
312.506.1216
rick.poulton@allscripts.com; legal.notices@allscripts.com
10
(b)
Address for notices or communications to Wells Fargo:
Wells Fargo Bank, National Association (“Wells Fargo”)
30 Hudson Yards
New York, NY 10001-2170
Email: CorporateDerivativeNotifications@wellsfargo.com
Notwithstanding anything to the contrary in the Agreement, all notices to Wells Fargo in connection with the Transaction are
effective only upon receipt of email message to CorporateDerivativeNotifications@wellsfargo.com.
6.
Representations, Warranties and Agreements.
(a)
Additional Representations, Warranties and Covenants of Each Party. In addition to the representations, warranties and covenants
in the Agreement, each party represents, warrants and covenants to the other party that:
(i)
(ii)
It is an “eligible contract participant” (as such term is defined in the Commodity Exchange Act, as amended).
The offer and sale of each Transaction to it is intended to be exempt from registration under the Securities Act of 1933,
as amended (the “Securities Act”), by virtue of Section 4(a)(2) thereof. Accordingly, each party represents and
warrants to the other that (A) it has the financial ability to bear the economic risk of its investment in each Transaction
and is able to bear a total loss of its investment, (B) it is an “accredited investor” as that term is defined under
Regulation D under the Securities Act and (C) the disposition of each Transaction is restricted under this Master
Confirmation, the Securities Act and state securities laws.
(b)
Additional Representations, Warranties and Covenants of Counterparty. In addition to the representations, warranties and
covenants in the Agreement, Counterparty represents, warrants and covenants to Wells Fargo that:
(i)
(ii)
As of the Trade Date for each Transaction hereunder, Counterparty is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Each of this Master Confirmation and the Supplemental
Confirmation for such Transaction has been duly authorized, executed and delivered by Counterparty and (assuming
due authorization, execution and delivery thereof by Wells Fargo) this Master Confirmation, as supplemented by such
Supplemental Confirmation, constitutes a valid and legally binding obligation of Counterparty. Counterparty has all
corporate power to enter into this Master Confirmation and such Supplemental Confirmation and to consummate the
transactions contemplated hereby and thereby and to purchase the Shares and deliver any Settlement Shares in
accordance with the terms hereof and thereof.
As of the Trade Date for each Transaction hereunder, the execution and delivery by Counterparty of, and the
performance by Counterparty of its obligations under, this Master Confirmation and the Supplemental Confirmation for
such Transaction, and the consummation of the transactions herein and therein contemplated, do not conflict with or
violate (A) any provision of the certificate of incorporation, by-laws or other constitutive documents of Counterparty,
(B) any statute or order, rule, regulation or judgment of any court or governmental agency or body having jurisdiction
over Counterparty or any of its subsidiaries or any of their respective assets or (C) any contractual restriction binding on
or affecting Counterparty or any of its subsidiaries or any of its assets.
(iii)
As of the Trade Date for each Transaction hereunder, all governmental and other consents that are required to have been
obtained by Counterparty with respect to performance, execution and delivery of this Master Confirmation and the
Supplemental Confirmation
11
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
for such Transaction have been obtained and are in full force and effect and all conditions of any such consents have
been complied with.
As of the Trade Date for each Transaction hereunder, (A) such Transaction is being entered into pursuant to a publicly
disclosed Share buy-back program and its Board of Directors has approved the use of derivatives to effect the Share
buy-back program, and (B) there is no internal policy of Counterparty, whether written or oral, that would prohibit
Counterparty from entering into any aspect of such Transaction, including, without limitation, the purchases of Shares
to be made pursuant to such Transaction.
As of the Trade Date for each Transaction hereunder, the purchase or writing of such Transaction and the transactions
contemplated hereby will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.
As of the Trade Date for each Transaction hereunder, it is not entering into such Transaction, and as of the date of any
election with respect to any Transaction hereunder, it is not making such election, in each case (A) on the basis of, and
is not aware of, any material non-public information regarding Counterparty or the Shares, (B) in anticipation of, in
connection with, or to facilitate, a distribution of its securities, a self tender offer or a third-party tender offer in
violation of the Exchange Act or (C) to create actual or apparent trading activity in the Shares (or any security
convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares
(or any security convertible into or exchangeable for the Shares).
Counterparty (A) is capable of evaluating investment risks independently, both in general and with regard to all
transactions and investment strategies involving a security or securities; (B) will exercise independent judgment in
evaluating the recommendations of any broker-dealer or its associated persons, unless it has otherwise notified the
broker-dealer in writing; and (C) has total assets of at least USD 50,000,000 as of the date hereof.
As of the Trade Date for each Transaction hereunder, and as of the date of any election with respect to any Transaction
hereunder, Counterparty is in compliance with its reporting obligations under the Exchange Act and its most recent
Annual Report on Form 10-K, together with all reports subsequently filed by it pursuant to the Exchange Act, taken
together and as amended and supplemented to the date of this representation, do not, as of their respective filing dates,
contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
Counterparty has made, and will make, all filings required to be made by it with the Securities and Exchange
Commission, any securities exchange or any other regulatory body with respect to each Transaction.
(A) The Shares are not, as of the Calculation Period Start Date, and (B) Counterparty will not, at any time during any
Regulation M Period (as defined below) for any Transaction, cause the Shares to be, subject to a “restricted period” (as
defined in Regulation M under the Exchange Act) unless, in the case of clause (B), Counterparty has provided written
notice to Wells Fargo of such restricted period not later than the Scheduled Trading Day immediately preceding the first
day of such “restricted period”; Counterparty acknowledges that any such notice may cause a Disrupted Day to occur
pursuant to Section 8 hereof; accordingly, Counterparty acknowledges that its delivery of such notice must comply with
the standards set forth in Section 9 hereof. Counterparty is not currently contemplating any “distribution” (as defined in
Regulation M under the Exchange Act) of Shares, or any security for which Shares are a “reference security” (as
defined in Regulation M under the Exchange Act). “Regulation M Period” means, for any Transaction, (A) the
Relevant Period (as defined below) for such Transaction, (B) the Settlement Valuation Period, if any, for such
Transaction and (C) the Seller Termination
12
(xi)
(xii)
(xiii)
(xiv)
Purchase Period (as defined below), if any, for such Transaction. “Relevant Period” means, for any Transaction, the
period commencing on the Calculation Period Start Date for such Transaction and ending on the later of (1) the earlier
of (x) the Scheduled Termination Date and (y) the last Additional Relevant Day (as specified in the related
Supplemental Confirmation) for such Transaction, or such earlier day as elected by Wells Fargo and communicated to
Counterparty on such day (or, if later, the First Acceleration Date without regard to any acceleration thereof pursuant to
“Special Provisions for Acquisition Transaction Announcements” below) and (2) if Section 16 hereof is applicable to
such Transaction, the date on which all deliveries owed pursuant to Section 16 hereof have been made.
As of the Trade Date, the Prepayment Date, the Initial Share Delivery Date, the Settlement Date, any Cash Settlement
Payment Date and any Settlement Method Election Date for each Transaction, Counterparty is not, and will not be,
“insolvent” (as such term is defined under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States
Code) (the “Bankruptcy Code”)) and Counterparty would be able to purchase a number of Shares with a value equal to
the Prepayment Amount in compliance with the laws of the jurisdiction of Counterparty’s incorporation.
Counterparty is not, and after giving effect to each Transaction will not be, required to register as an “investment
company” as such term is defined in the Investment Company Act of 1940, as amended.
Counterparty shall cooperate with Wells Fargo, and execute and deliver, or use its commercially reasonable efforts to
cause to be executed and delivered, all such other instruments, and to obtain all consents, approvals or authorizations of
any person, and take all such other actions as Wells Fargo may reasonably request from time to time, consistent with the
terms of the Agreement, this Master Confirmation and any Supplemental Confirmation, to effectuate the purposes of the
Agreement, this Master Confirmation, any Supplemental Confirmation and any Transaction.
Counterparty has not entered, and will not enter, into any repurchase transaction other than any Other Specified
Repurchase Agreement (as defined below) with respect to the Shares (or any security convertible into or exchangeable
for the Shares) (including, without limitation, any agreements similar to the Transactions described herein) where any
initial hedge period, calculation period, relevant period, settlement valuation period or seller termination purchase
period (each however defined) in such other transaction will overlap at any time (including, without limitation, as a
result of extensions in such initial hedge period, calculation period, relevant period, settlement valuation period or seller
termination purchase period as provided in the relevant agreements) with any Relevant Period, any Settlement Valuation
Period (if applicable) or any Seller Termination Purchase Period (if applicable) under this Master Confirmation. In the
event that the initial hedge period, relevant period, calculation period or settlement valuation period in any other
transaction (other than any Other Specified Repurchase Agreement) overlaps with any Relevant Period, any Settlement
Valuation Period (if applicable) or any Seller Termination Purchase Period (if applicable) under this Master
Confirmation as a result of any postponement of the Scheduled Termination Date or extension of the Settlement
Valuation Period pursuant to “Valuation Disruption” above or any analogous provision in such other transaction,
Counterparty shall promptly amend such other transaction to avoid any such overlap.
(xv)
Counterparty shall, at least one day prior to the first day of the Calculation Period, the Settlement Valuation Period, if
any, or the Seller Termination Purchase Period, if any, for any Transaction, notify Wells Fargo of the total number of
Shares purchased in Rule 10b-18 purchases of blocks pursuant to the once-a-week block exception set forth in
paragraph (b)(4) of Rule 10b-18 under the Exchange Act (“Rule 10b-18”) by or for Counterparty or any of its
“affiliated purchasers” (as defined in Rule 10b-18) during each of the four calendar weeks preceding such day and
during the calendar week in which such day occurs
13
(“Rule 10b-18 purchase” and “blocks” each being used as defined in Rule 10b-18), which notice shall be substantially
in the form set forth in Schedule B hereto.
(xvi)
(xvii)
As of the Trade Date for each Transaction hereunder, and as of the date of any election with respect to any Transaction
hereunder, there has not been any Merger Announcement (as defined below).
The assets of Counterparty do not constitute “plan assets” under the Employee Retirement Income Security Act of
1974, as amended, the Department of Labor Regulations promulgated thereunder or similar law.
(xviii)
Counterparty represents that it is not a “financial end user” as defined in 12 CFR §45.2.
7.
8.
Additional Representations. Warranties and Covenants of Wells Fargo. In addition to the representations, warranties and covenants in the
Agreement, Wells Fargo represents, warrants and covenants to Counterparty that Wells Fargo shall use its commercially reasonable efforts,
during the Calculation Period, any Settlement Valuation Period and any Seller Termination Purchase Period for each Transaction, to make all
purchases of Shares in connection with such Transaction in a manner that would comply with the limitations set forth in clauses (b)(1), (b)(2),
(b)(3) and (b)(4) and (c) of Rule 10b-18, as if such rule were applicable to such purchases and taking into account any applicable Securities and
Exchange Commission no-action letters as appropriate, and subject to any delays between the execution and reporting of a trade of the Shares
on the Exchange and other circumstances beyond Wells Fargo’s control; provided that, during a Calculation Period, the foregoing agreement
shall not apply to purchases made to dynamically hedge for Wells Fargo’s own account or the account of its affiliate(s) the optionality arising
under a Transaction (including, for the avoidance of doubt, timing optionality); and provided further that, without limiting the generality of this
Section 7, (x) Wells Fargo shall not be responsible for any failure to comply with Rule 10b-18(b)(3) to the extent any transaction that was
executed (or deemed to be executed) by or on behalf of Counterparty or an “affiliated purchaser” (as defined under Rule 10b-18) pursuant to a
separate agreement is not deemed to be an “independent bid” or an “independent transaction” for purposes of Rule 10b-18(b)(3) and (y) Wells
Fargo shall not be responsible for any failure to comply with Rule 10b-18(b)(1) to the extent Counterparty fails to comply with Section 10
hereof.
Regulatory Disruption. In the event that Wells Fargo concludes, in its sole discretion, that it is appropriate with respect to any legal,
regulatory or self-regulatory requirements or related policies and procedures (whether or not such requirements, policies or procedures are
imposed by law or have been voluntarily adopted by Wells Fargo), for it to refrain from or decrease any market activity on any Scheduled
Trading Day or Days during the Calculation Period or, if applicable, the Settlement Valuation Period, Wells Fargo may by written notice to
Counterparty elect to deem that a Market Disruption Event has occurred and will be continuing on such Scheduled Trading Day or Days.
9.
10b5-1 Plan. Counterparty represents, warrants and covenants to Wells Fargo that:
(a)
Counterparty is entering into this Master Confirmation and each Transaction hereunder in good faith and not as part of a plan or
scheme to evade the prohibitions of Rule 10b5-1 under the Exchange Act (“Rule 10b5-1”) or any other antifraud or anti-
manipulation provisions of the federal or applicable state securities laws and that it has not entered into or altered and will not enter
into or alter any corresponding or hedging transaction or position with respect to the Shares. For the avoidance of doubt, the parties
hereto acknowledge that entry into any Other Specified Repurchase Agreement (as defined below) shall not fall within the ambit of
the previous sentence. Counterparty acknowledges that it is the intent of the parties that each Transaction entered into under this
Master Confirmation comply with the requirements of paragraphs (c)(1)(i)(A) and (B) of Rule 10b5-1 and each Transaction entered
into under this Master Confirmation shall be interpreted to comply with the requirements of Rule 10b5-1(c). “Other Specified
Repurchase Agreement” means, for any Transaction, any other prepaid variable share repurchase transaction entered into on the
Trade Date for such Transaction.
14
(b)
(c)
(d)
During the Calculation Period and the Settlement Valuation Period, if any, for any Transaction and in connection with the delivery
of any Alternative Delivery Units for any Transaction, Wells Fargo (or its agent or Affiliate) may effect transactions in Shares in
connection with such Transaction. The timing of such transactions by Wells Fargo, the price paid or received per Share pursuant to
such transactions and the manner in which such transactions are made, including, without limitation, whether such transactions are
made on any securities exchange or privately, shall be within the sole judgment of Wells Fargo. Counterparty acknowledges and
agrees that all such transactions shall be made in Wells Fargo’s sole judgment and for Wells Fargo’s own account.
Counterparty does not have, and shall not attempt to exercise, any control or influence over how, when or whether Wells Fargo (or
its agent or Affiliate) makes any “purchases or sales” (within the meaning of Rule 10b5-1(c)(1)(i)(B)(3)) in connection with any
Transaction, including, without limitation, over how, when or whether Wells Fargo (or its agent or Affiliate) enters into any hedging
transactions. Counterparty represents and warrants that it has consulted with its own advisors as to the legal aspects of its adoption
and implementation of this Master Confirmation and each Supplemental Confirmation under Rule 10b5-1.
Counterparty acknowledges and agrees that any amendment, modification, waiver or termination of this Master Confirmation or
any Supplemental Confirmation must be effected in accordance with the requirements for the amendment or termination of a “plan”
as defined in Rule 10b5-1(c). Without limiting the generality of the foregoing, any such amendment, modification, waiver or
termination shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5, and no such
amendment, modification or waiver shall be made at any time at which Counterparty or any officer, director, manager or similar
person of Counterparty is aware of any material non-public information regarding Counterparty or the Shares.
Counterparty Purchases. Counterparty (or any “affiliate” or “affiliated purchaser” as defined in Rule 10b-18) shall not, without the prior
written consent of Wells Fargo, directly or indirectly (including, without limitation, by means of a derivative instrument) purchase, offer to
purchase, place any bid or limit order that would effect a purchase of, or commence any tender offer relating to, any Shares (or equivalent
interest, including, without limitation, a unit of beneficial interest in a trust or limited partnership or a depository share), listed contracts on the
Shares or securities that are convertible into, or exchangeable or exercisable for Shares (including, without limitation, any Rule 10b-18
purchases of blocks (as defined in Rule 10b-18)) during any Relevant Period, any Settlement Valuation Period (if applicable) or any Seller
Termination Purchase Period (if applicable), under this Master Confirmation except pursuant to any Other Specified Repurchase Agreement
that is intended to comply with the requirements of Rule 10b5-1(c) of the Exchange Act. However, the foregoing shall not (a) limit
Counterparty’s ability to purchase Shares in connection with any company employee, officer or director equity plan or any dividend
reinvestment plan, in each case, that is not expected to result in market transactions, (b) limit Counterparty’s ability to withhold Shares to cover
tax liabilities associated with any such plan, (c) prohibit any purchases effected by or for an issuer “plan” by an “agent independent of the
issuer” (each as defined in Rule 10b-18), (d) otherwise restrict Counterparty’s or any of its affiliates’ ability to repurchase Shares under
privately negotiated, off exchange transactions with any of its employees, officers, directors, affiliates or any third party that are not expected to
result in market transactions or (e) limit Counterparty’s ability to grant stock and options to “affiliated purchasers” (as defined in Rule 10b-18)
or the ability of such affiliated purchasers to acquire such stock or options in connection with Counterparty’s compensation policies for
directors, officers and employees or any agreements with respect to the compensation of directors, officers or employees of any entities that are
acquisition targets of Counterparty.
10.
11.
Special Provisions for Merger Transactions. Notwithstanding anything to the contrary herein or in the Equity Definitions:
(a)
Counterparty agrees that it:
(i)
will not during the period commencing on the Trade Date for any Transaction and ending on the last day of the Relevant
Period or, if applicable, the later of the last day of the Settlement Valuation Period and the last day of the Seller
Termination Purchase Period,
15
for such Transaction make, or permit to be made, any public announcement (as defined in Rule 165(f) under the
Securities Act) of any Merger Transaction or potential Merger Transaction (a “Merger Announcement”) unless such
Merger Announcement is made prior to the opening or after the close of the regular trading session on the Exchange for
the Shares;
(ii)
(iii)
shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) notify Wells
Fargo following any such Merger Announcement that such Merger Announcement has been made; and
shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) provide Wells
Fargo with written notice specifying (i) Counterparty’s average daily Rule 10b-18 Purchases (as defined in Rule 10b-
18) during the three full calendar months immediately preceding the announcement date of any Merger Transaction or
potential Merger Transaction that were not effected through Wells Fargo or its Affiliates and (ii) the number of Shares
purchased pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months
preceding the announcement date of any Merger Transaction or potential Merger Transaction. Such written notice shall
be deemed to be a certification by Counterparty to Wells Fargo that such information is true and correct. In addition,
Counterparty shall promptly notify Wells Fargo of the earlier to occur of the completion of such transaction and the
completion of the vote by target shareholders.
(b)
(c)
Counterparty acknowledges that any such Merger Announcement or delivery of a notice with respect thereto may cause the terms of
any Transaction to be adjusted or such Transaction to be terminated; accordingly, Counterparty acknowledges that its delivery of
such notice must comply with the standards set forth in Section 9 hereof.
Upon the occurrence of any Merger Announcement (whether made by Counterparty or a third party), Wells Fargo in its good faith
and reasonable discretion may (i) make adjustments to the terms of any Transaction (other than the dates identified as Calculation
Dates in the related Supplemental Confirmation), including, without limitation, the Scheduled Termination Date or the Forward
Price Adjustment Amount, and/or suspend the Calculation Period and/or any Settlement Valuation Period or (ii) treat the occurrence
of such Merger Announcement as an Additional Termination Event with Counterparty as the sole Affected Party and the
Transactions hereunder as the Affected Transactions and with the amount under Section 6(e) of the Agreement determined taking
into account the fact that the Calculation Period or Settlement Valuation Period, as the case may be, had fewer Scheduled Trading
Days than originally anticipated.
“Merger Transaction” means any merger, acquisition or similar transaction involving a recapitalization as contemplated by Rule 10b-18(a)
(13)(iv) under the Exchange Act.
12.
Special Provisions for Acquisition Transaction Announcements. Notwithstanding anything to the contrary herein or in the Equity
Definitions:
(a)
If an Acquisition Transaction Announcement occurs on or prior to the Final Settlement Date for any Transaction, then the
Calculation Agent shall make such adjustments to the exercise, settlement, payment or any other terms of such Transaction as the
Calculation Agent determines appropriate (including, without limitation and for the avoidance of doubt, adjustments that would
allow the Number of Shares to be Delivered to be less than zero), at such time or at multiple times as the Calculation Agent
determines appropriate, to account for the economic effect on such Transaction of such event (including adjustments to account for
changes in volatility, expected dividends, stock loan rate, value of any commercially reasonable Hedge Positions in connection with
the Transaction and liquidity relevant to the Shares or to such Transaction). If an Acquisition Transaction Announcement occurs
after the Trade Date, but prior to the First Acceleration Date of any Transaction, the First Acceleration Date shall be the date of such
Acquisition Transaction Announcement. If the Number of Shares to be Delivered for any settlement of any Transaction is a
16
(b)
(c)
negative number, then the terms of the Counterparty Settlement Provisions in Annex A hereto shall apply.
“Acquisition Transaction Announcement” means (i) the announcement of an Acquisition Transaction or an event that, if
consummated, would result in an Acquisition Transaction, (ii) an announcement that Counterparty or any of its subsidiaries has
entered into an agreement, a letter of intent or an understanding designed to result in an Acquisition Transaction, (iii) the
announcement of the intention to solicit or enter into, or to explore strategic alternatives or other similar undertaking that would
reasonably be expected to include, an Acquisition Transaction, (iv) any other announcement that in the good faith and commercially
reasonable judgment of the Calculation Agent may result in an Acquisition Transaction, or (v) any announcement of any change or
amendment to any previous Acquisition Transaction Announcement (including any announcement of the abandonment of any such
previously announced Acquisition Transaction, agreement, letter of intent, understanding or intention). For the avoidance of doubt,
announcements as used in the definition of Acquisition Transaction Announcement refer to any public announcement whether made
by the Issuer or a third party.
“Acquisition Transaction” means (i) any Merger Event (for purposes of this definition the definition of Merger Event shall be read
with the references therein to “100%” being replaced by “25%” and references to “50%” being replaced by “75%” and without
reference to the clause beginning immediately following the definition of Reverse Merger therein to the end of such definition),
Tender Offer or Merger Transaction or any other transaction involving the merger of Counterparty with or into any third party, (ii)
the sale or transfer of all or substantially all of the assets of Counterparty, (iii) a recapitalization, reclassification, binding share
exchange or other similar transaction with respect to Counterparty, (iv) any acquisition by Counterparty or any of its subsidiaries
where the aggregate consideration transferable by Counterparty or its subsidiaries exceeds 25% of the market capitalization of
Counterparty, (v) any lease, exchange, transfer, disposition (including, without limitation, by way of spin-off or distribution) of
assets (including, without limitation, any capital stock or other ownership interests in subsidiaries) or other similar event by
Counterparty or any of its subsidiaries where the aggregate consideration transferable or receivable by or to Counterparty or its
subsidiaries exceeds 25% of the market capitalization of Counterparty or (vi) any transaction in which Counterparty or its board of
directors has a legal obligation to make a recommendation to its shareholders in respect of such transaction (whether pursuant to
Rule 14e-2 under the Exchange Act or otherwise).
13.
Acknowledgments.
(a)
The parties hereto intend for:
(i)
(ii)
(iii)
(iv)
each Transaction to be a “securities contract” as defined in Section 741(7) of the Bankruptcy Code and a “forward
contract” as defined in Section 101(25) of the Bankruptcy Code, and the parties hereto to be entitled to the protections
afforded by, among other Sections, Sections 362(b)(6), 362(b)(27), 362(o), 546(e), 546(j), 555, 556, 560 and 561 of the
Bankruptcy Code;
the Agreement to be a “master netting agreement” as defined in Section 101(38A) of the Bankruptcy Code;
a party’s right to liquidate, terminate or accelerate any Transaction, net out or offset termination values or payment
amounts, and to exercise any other remedies upon the occurrence of any Event of Default or Termination Event under
the Agreement with respect to the other party or any Extraordinary Event that results in the termination or cancellation
of any Transaction to constitute a “contractual right” (as defined in the Bankruptcy Code); and
all payments for, under or in connection with each Transaction, all payments for the Shares (including, for the
avoidance of doubt, payment of the Prepayment Amount) and the
17
transfer of such Shares to constitute “settlement payments” and “transfers” (as defined in the Bankruptcy Code).
(b)
Counterparty acknowledges that:
(i)
(ii)
(iii)
(iv)
(v)
during the term of any Transaction, Wells Fargo and its Affiliates may buy or sell Shares or other securities or buy or
sell options or futures contracts or enter into swaps or other derivative securities to establish, adjust or unwind its hedge
position with respect to such Transaction;
Wells Fargo and its Affiliates may also be active in the market for the Shares and Share-linked transactions other than in
connection with hedging activities in relation to any Transaction;
Wells Fargo shall make its own determination as to whether, when or in what manner any hedging or market activities
in Counterparty’s securities shall be conducted and shall do so in a manner that it deems appropriate to hedge its price
and market risk with respect to the Forward Price and the VWAP Price;
any market activities of Wells Fargo and its Affiliates with respect to the Shares may affect the market price and
volatility of the Shares, as well as the Forward Price, the VWAP Price and the Settlement Price, each in a manner that
may be adverse to Counterparty; and
each Transaction is a derivatives transaction in which it has granted Wells Fargo an option; Wells Fargo may purchase
shares for its own account at an average price that may be greater than, or less than, the price paid by Counterparty
under the terms of the related Transaction.
14.
15.
16.
No Collateral, Netting or Setoff. Notwithstanding any provision of the Agreement or any other agreement between the parties to the contrary,
the obligations of Counterparty hereunder are not secured by any collateral. Obligations under any Transaction shall not be netted, recouped or
set off (including pursuant to Section 6 of the Agreement) against any other obligations of the parties, whether arising under the Agreement,
this Master Confirmation or any Supplemental Confirmation, or under any other agreement between the parties hereto, by operation of law or
otherwise, and no other obligations of the parties shall be netted, recouped or set off (including pursuant to Section 6 of the Agreement) against
obligations under any Transaction, whether arising under the Agreement, this Master Confirmation or any Supplemental Confirmation, or under
any other agreement between the parties hereto, by operation of law or otherwise, and each party hereby waives any such right of setoff, netting
or recoupment.
Delivery of Shares. Notwithstanding anything to the contrary herein, Wells Fargo may, by prior notice to Counterparty, satisfy its obligation to
deliver any Shares or other securities on any date due (an “Original Delivery Date”) by making separate deliveries of Shares or such securities,
as the case may be, at more than one time on or prior to such Original Delivery Date, so long as the aggregate number of Shares and other
securities so delivered on or prior to such Original Delivery Date is equal to the number required to be delivered on such Original Delivery
Date.
Alternative Termination Settlement. In the event that (a) an Early Termination Date (whether as a result of an Event of Default or a
Termination Event) occurs or is designated with respect to any Transaction or (b) any Transaction is cancelled or terminated upon the
occurrence of an Extraordinary Event (except as a result of (i) a Nationalization, Insolvency or Merger Event in which the consideration to be
paid to holders of Shares consists solely of cash, (ii) a Merger Event or Tender Offer that is within Counterparty’s control, or (iii) an Event of
Default in which Counterparty is the Defaulting Party or a Termination Event in which Counterparty is the Affected Party other than an Event
of Default of the type described in Section 5(a)(iii), (v), (vi), (vii) or (viii) of the Agreement or a Termination Event of the type described in
Section 5(b) of the Agreement, in each case that resulted from an event or events outside Counterparty’s control), if either party would owe any
amount to the other party pursuant to Section 6(d)(ii) of the Agreement or any Cancellation Amount pursuant to Article 12 of the Equity
Definitions (any such amount, a “Payment Amount”), then, in lieu of any payment
18
of such Payment Amount, unless Counterparty makes an election to the contrary no later than the Early Termination Date or the date on which
such Transaction is terminated or cancelled, Counterparty or Wells Fargo, as the case may be, shall deliver to the other party a number of
Shares (or, in the case of a Nationalization, Insolvency or Merger Event, a number of units, each comprising the number or amount of the
securities or property that a hypothetical holder of one Share would receive in such Nationalization, Insolvency or Merger Event, as the case
may be (each such unit, an “Alternative Delivery Unit”)) with a value equal to the Payment Amount, as determined by the Calculation Agent
over a commercially reasonable period of time (and the parties agree that, in making such determination of value, the Calculation Agent may
take into account a number of factors, including, without limitation, the market price of the Shares or Alternative Delivery Units on the Early
Termination Date or the date of early cancellation or termination, as the case may be, and, if such delivery is made by Wells Fargo, the prices at
which Wells Fargo purchases Shares or Alternative Delivery Units on any Calculation Date to fulfill its delivery obligations under this Section
16); provided that in determining the composition of any Alternative Delivery Unit, if the relevant Nationalization, Insolvency or Merger Event
involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible
amount of cash; and provided further that Counterparty may elect that the provisions of this Section 16 above providing for the delivery of
Shares or Alternative Delivery Units, as the case may be, shall not apply only if Counterparty represents and warrants to Wells Fargo, in writing
on the date it notifies Wells Fargo of such election, that, as of such date, Counterparty is not aware of any material non-public information
regarding Counterparty or the Shares and is making such election in good faith and not as part of a plan or scheme to evade compliance with
the federal securities laws. If delivery of Shares or Alternative Delivery Units, as the case may be, pursuant to this Section 16 is to be made by
Counterparty, paragraphs 2 through 7 of Annex A hereto shall apply as if (A) such delivery were a settlement of such Transaction to which Net
Share Settlement applied, (B) the Cash Settlement Payment Date were the Early Termination Date or the date of early cancellation or
termination, as the case may be, and (C) the Forward Cash Settlement Amount were equal to (x) zero minus (y) the Payment Amount owed by
Counterparty. For the avoidance of doubt, if Counterparty validly elects for the provisions of this Section 16 relating to the delivery of Shares
or Alternative Delivery Units, as the case may be, not to apply to any Payment Amount, the provisions of Article 12 of the Equity Definitions,
or the provisions of Section 6(d)(ii) of the Agreement, as the case may be, shall apply. If delivery of Shares or Alternative Delivery Units, as
the case may be, is to be made by Wells Fargo pursuant to this Section 1616, the period during which Wells Fargo purchases Shares or
Alternative Delivery Units to fulfill its delivery obligations under this Section 166 shall be referred to as the “Seller Termination Purchase
Period”; provided that the parties hereby agree that such purchases shall be made solely on Calculation Dates for the relevant Transaction.
17.
18.
Calculations and Payment Date upon Early Termination. The parties acknowledge and agree that in calculating (a) the Close-Out Amount
pursuant to Section 6 of the Agreement and (b) the amount due upon cancellation or termination of any Transaction (whether in whole or in
part) pursuant to Article 12 of the Equity Definitions as a result of an Extraordinary Event, Wells Fargo may (but need not) determine such
amount based on (i) expected losses assuming a commercially reasonable (including, without limitation, with regard to reasonable legal and
regulatory guidelines and taking into account the existence of any Other Specified Repurchase Transaction) risk bid were used to determine loss
or (ii) the price at which one or more market participants would offer to sell to the Seller a block of Shares equal in number to the Seller’s
hedge position in relation to the Transaction. Notwithstanding anything to the contrary in Section 6(d)(ii) of the Agreement or Article 12 of the
Equity Definitions, all amounts calculated as being due in respect of an Early Termination Date under Section 6(e) of the Agreement or upon
cancellation or termination of the relevant Transaction under Article 12 of the Equity Definitions will be payable on the day that notice of the
amount payable is effective; provided that if Counterparty elects to receive or deliver Shares or Alternative Delivery Units in accordance with
Section 16 hereof, such Shares or Alternative Delivery Units shall be delivered on a date selected in a good faith and commercially reasonable
manner by Wells Fargo as promptly as practicable.
Limit on Beneficial Ownership. Notwithstanding any other provisions hereof, Wells Fargo may not be entitled to take delivery of any Shares
deliverable hereunder to the extent (but only to the extent) that, after such receipt of any Shares hereunder, the Equity Percentage would exceed
7.5%. Any purported delivery hereunder shall be void and have no effect to the extent (but only to the extent) that, after such delivery the
Equity Percentage would exceed 7.5%. If any delivery owed to Wells Fargo hereunder is not made, in whole or in part, as a result of this
provision, Counterparty’s obligation to make such delivery shall not be
19
19.
20.
21.
22.
23.
24.
extinguished and Counterparty shall make such delivery as promptly as practicable after, but in no event later than one Business Day after,
Wells Fargo gives notice to Counterparty that, after such delivery, the Equity Percentage would not exceed 7.5%. The “Equity Percentage” as
of any day is the fraction, expressed as a percentage, (A) the numerator of which is the number of Shares that Wells Fargo and any of its
affiliates or any other person subject to aggregation with Wells Fargo for purposes of the “beneficial ownership” test under Section 13 of the
Exchange Act, or any “group” (within the meaning of Section 13) of which Wells Fargo is or may be deemed to be a part beneficially owns
(within the meaning of Section 13 of the Exchange Act), without duplication, on such day (or, to the extent that for any reason the equivalent
calculation under Section 16 of the Exchange Act and the rules and regulations thereunder results in a higher number, such higher number) and
(B) the denominator of which is the number of Shares outstanding on such day.
Maximum Share Delivery. Notwithstanding anything to the contrary in this Master Confirmation, in no event shall Wells Fargo be required to
deliver any Shares, or any Shares or other securities comprising Alternative Delivery Units, in respect of any Transaction in excess of the
Maximum Number of Shares set forth in the Supplemental Confirmation for such Transaction.
Additional Termination Events. Notwithstanding anything to the contrary in Section 6 of the Agreement, if a Termination Price is specified
in the Supplemental Confirmation for any Transaction, then an Additional Termination Event will occur without any notice or action by Wells
Fargo or Counterparty if the price of the Shares on the Exchange at any time falls below such Termination Price, with Counterparty as the sole
Affected Party and such Transaction as the sole Affected Transaction.
Non-confidentiality. Wells Fargo and Counterparty hereby acknowledge and agree that each is authorized to disclose every aspect of this
Master Confirmation, any Supplemental Confirmation and the transactions contemplated hereby and thereby to any and all persons, without
limitation of any kind, and there are no express or implied agreements, arrangements or understandings to the contrary.
[RESERVED].
[RESERVED].
Assignment and Transfer. Notwithstanding anything to the contrary in the Agreement, Wells Fargo may not assign any of its rights or duties
hereunder to any one or more of its Affiliates without the prior written consent of Counterparty, which consent will not be unreasonably
withheld or delayed; provided that such assignment shall not be permitted if Counterparty will either (x) be required to pay an additional
amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) of the Agreement under the law as of the date of the transfer or assignment,
or (y) receive a payment from which an amount has been deducted or withheld for or on account of any Tax in respect of which the other party
is not required to pay an additional amount, in either case, as a result of such assignment.. Notwithstanding any other provision in this Master
Confirmation to the contrary requiring or allowing Wells Fargo to purchase, sell, receive or deliver any Shares or other securities to or from
Counterparty, Wells Fargo may designate any of its Affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise
to perform Wells Fargo’s obligations in respect of any Transaction and any such designee may assume such obligations. Wells Fargo may
assign the right to receive Settlement Shares to any third party who may legally receive Settlement Shares. Wells Fargo shall be discharged of
its obligations to Counterparty only to the extent of any such performance. For the avoidance of doubt, Wells Fargo hereby acknowledges that
notwithstanding any such designation hereunder, to the extent any of Wells Fargo’s obligations in respect of any Transaction are not completed
by its designee, Wells Fargo shall be obligated to continue to perform or to cause any other of its designees to perform in respect of such
obligations.
25.
Amendments to the Equity Definitions.
(a)
Section 11.2(a) of the Equity Definitions is hereby amended by deleting the words “a diluting or concentrative” and replacing them
with the word “an”; and adding the phrase “or such Transaction” at the end of the sentence.
20
(b)
(c)
(d)
Section 11.2(c) of the Equity Definitions is hereby amended by (i) replacing the words “a diluting or concentrative” with “an” in the
fifth line thereof, (ii) adding the phrase “or such Transaction” after the words “the relevant Shares” in the same sentence, (iii)
deleting the words “diluting or concentrative” in the sixth to last line thereof, and (iv) deleting the phrase “(provided that no
adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the
relevant Shares)” and replacing it with the phrase “(and, for the avoidance of doubt, adjustments may be made to account solely for
changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares).”
Section 11.2(e)(vii) of the Equity Definitions is hereby amended by deleting the words “a diluting or concentrative” and replacing
them with the words “a material”; and adding the phrase “or the relevant Transaction” at the end of the sentence.
Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (i) deleting from the fourth line thereof the word “or” after the
word “official” and inserting a comma therefor, and (ii) deleting the semi-colon at the end of subsection (B) thereof and inserting
the following words therefor “or (C) at Wells Fargo’s option, the occurrence of any of the events specified in Section 5(a)(vii) (1)
through (9) of the ISDA Master Agreement with respect to that Issuer.”
(e)
Section 12.9(b)(iv) of the Equity Definitions is hereby amended by:
(i)
(ii)
deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each
case” in subsection (B); and
replacing the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares” with the phrase “such
Lending Party does not lend Shares” in the penultimate sentence.
(f)
Section 12.9(b)(v) of the Equity Definitions is hereby amended by:
(i)
(ii)
adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and
(1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C), (3) deleting
the penultimate sentence in its entirety and replacing it with the sentence “The Hedging Party will determine the
Cancellation Amount payable by one party to the other” and (4) deleting clause (X) in the final sentence.
(g)
Section 12.9(b)(vi) of the Equity Definitions is hereby amended by:
(i)
(ii)
adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and
(1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C) and (3)
deleting the final sentence in its entirety and replacing it with the sentence “The Hedging Party will determine the
Cancellation Amount payable by one party to the other”.
26.
Extraordinary Dividend. If Counterparty declares any Extraordinary Dividend that has an ex-dividend date during the period commencing on
the Trade Date for any Transaction and ending of the last day of the Relevant Period or, if applicable, the later of the last day of the Settlement
Valuation Period and the last day of the Seller Termination Purchase Period, for such Transaction, then prior to or on the date on which such
Extraordinary Dividend is paid by Counterparty to holders of record, Counterparty shall pay to Wells Fargo, for each Transaction under this
Master Confirmation, an amount in cash equal to the product of (i) the amount of such Extraordinary Dividend and (ii) the theoretical short
delta number of shares as of the opening of business on the related ex-dividend date, as determined by the Calculation Agent, required for Wells
Fargo to hedge its exposure to such Transaction.
21
27.
Tax Matters.
(a)
For the purpose of Section 3(e) of the Agreement, each of Counterparty and Wells Fargo hereby represents that it is not required by
any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to
make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 9(h) of the
Agreement or amounts payable hereunder that may be considered to be interest for United States federal income tax purposes) to be
made by it to the other party under the Agreement. In making this representation, it may rely on (i) the accuracy of any
representations made by the other party pursuant to Section 3(f) of the Agreement, (ii) the satisfaction of the agreement contained in
Section 4(a)(i) or 4(a)(iii) of the Agreement and the accuracy and effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or 4(a)(iii) of the Agreement and (iii) the satisfaction of the agreement of the other party contained in
Section 4(d) of the Agreement, except that it will not be a breach of this representation where reliance is placed on clause (ii) above
and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or
commercial position.
(b)
For the purpose of Section 3(f) of the Agreement,
(i)
Counterparty makes the following representation to Wells Fargo:
Counterparty is a “U.S. person” (as that term is used in Section 1.1441-4(a)(3)(ii) of United States Treasury
Regulations) for United States federal income tax purposes.
(ii) Wells Fargo makes the following representation to Counterparty:
Wells Fargo is a national banking association organized or formed under the laws of the United States and is a United
States resident for United States federal income tax purposes.
(c)
(d)
“Tax” and “Indemnifiable Tax”, each as defined in Section 14 of the Agreement, shall not include any U.S. federal withholding tax
imposed or collected pursuant to Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”),
any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the
Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in
connection with the implementation of such Sections of the Code (a “FATCA Withholding Tax”). For the avoidance of doubt, a
FATCA Withholding Tax is a Tax the deduction or withholding of which is required by applicable law for the purposes of Section
2(d) of the Agreement.
Each party shall provide to the other party a valid U.S. Internal Revenue Service Form W-9 or any successor thereto, (i) on or
before the date of execution of this Master Confirmation and (ii) promptly upon learning that any such tax form previously provided
by such party has become obsolete or incorrect. Additionally, each party shall, promptly upon request by the other party, provide
such other tax forms and documents reasonably requested by the other party.
28.
29.
Status of Claims in Bankruptcy. Wells Fargo acknowledges and agrees that neither this Master Confirmation nor any Supplemental
Confirmation is intended to convey to Wells Fargo rights against Counterparty with respect to any Transaction that are senior to the claims of
common stockholders of Counterparty in any United States bankruptcy proceedings of Counterparty; provided that nothing herein shall limit or
shall be deemed to limit Wells Fargo’s right to pursue remedies in the event of a breach by Counterparty of its obligations and agreements with
respect to any Transaction; provided further that nothing herein shall limit or shall be deemed to limit Wells Fargo’s rights in respect of any
transactions other than any Transaction.
Wall Street Transparency and Accountability Act. In connection with Section 739 of the Wall Street Transparency and Accountability Act
of 2010 (“WSTAA”), the parties hereby agree that neither the enactment of WSTAA or any regulation under the WSTAA, nor any requirement
under WSTAA or an
22
amendment made by WSTAA, nor any similar legal certainty provision in any legislation enacted, or rule or regulation promulgated, on or after
the date of this Master Confirmation, shall limit or otherwise impair either party’s otherwise applicable rights to terminate, renegotiate, modify,
amend or supplement any Supplemental Confirmation, this Master Confirmation or the Agreement, as applicable, arising from a termination
event, force majeure, illegality, increased costs, regulatory change or similar event under any Supplemental Confirmation, this Master
Confirmation, the Equity Definitions incorporated herein, or the Agreement (including, without limitation, rights arising from Change in Law,
Loss of Stock Borrow, Increased Cost of Stock Borrow, Hedging Disruption, Increased Cost of Hedging, or Illegality).
30.
31.
Communications with Employees of Wells Fargo Securities LLC. If Counterparty interacts with any employee of Wells Fargo Securities
LLC with respect to any Transaction, Counterparty is hereby notified that such employee will act solely as an authorized representative of Wells
Fargo Bank, National Association (and not as a representative of Wells Fargo Securities LLC) in connection with such Transaction.
Waiver of Jury Trial. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING RELATING TO THE AGREEMENT,
THIS MASTER CONFIRMATION, EACH SUPPLEMENTAL CONFIRMATION, THE TRANSACTIONS HEREUNDER AND ALL
MATTERS ARISING IN CONNECTION WITH THE AGREEMENT, THIS MASTER CONFIRMATION AND ANY SUPPLEMENTAL
CONFIRMATION AND THE TRANSACTIONS HEREUNDER. EACH PARTY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF SUCH A SUIT, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II)
ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THE TRANSACTIONS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS PROVIDED HEREIN.
32.
Counterparts.
(a)
This Master Confirmation may be executed in any number of counterparts, all of which shall constitute one and the same
instrument, and any party hereto may execute this Master Confirmation by signing and delivering one or more counterparts.
Counterparts may be delivered via facsimile, electronic mail (including any electronic signature covered by the U.S. federal ESIGN
Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g.,
DocuSign and AdobeSign (any such signature, an “Electronic Signature”)) or other transmission method and any counterpart so
delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. The words
“execution,” “signed,” “signature” and words of like import in this Master Confirmation or in any other certificate, agreement or
document related to this Master Confirmation shall include any Electronic Signature, except to the extent electronic notices are
expressly prohibited under this Master Confirmation or the Agreement
(b)
Notwithstanding anything to the contrary in the Agreement, either party may deliver to the other party a notice relating to any Event
of Default or Termination Event under this Master Confirmation by e-mail.
33.
U.S. Resolution Stay Protocol. The parties acknowledge and agree that (i) to the extent that prior to the date hereof both parties have adhered
to the 2018 ISDA U.S. Resolution Stay Protocol (the “Protocol”), the terms of the Protocol are incorporated into and form a part of the
Agreement, and for such purposes the Agreement shall be deemed a Protocol Covered Agreement, Wells Fargo shall be deemed a Regulated
Entity and Counterparty shall be deemed an Adhering Party; (ii) to the extent that prior to the date hereof the parties have executed a separate
agreement the effect of which is to amend the qualified financial contracts between them to conform with the requirements of the QFC Stay
Rules (the “Bilateral Agreement”), the terms of the Bilateral Agreement are incorporated into and form a part of the Agreement, and for such
purposes the Agreement shall be deemed a Covered Agreement, Wells Fargo shall be deemed a Covered Entity and Counterparty shall be
deemed a Counterparty Entity; or (iii) if clause (i) and clause (ii) do not apply, the terms of Section 1 and Section 2 and the related defined
terms (together, the “Bilateral Terms”) of the form of bilateral template entitled “Full-Length Omnibus (for use between U.S. G-SIBs and
Corporate Groups)”
23
published by ISDA on November 2, 2018 (currently available on the 2018 ISDA U.S. Resolution Stay Protocol page at www.isda.org and, a
copy of which is available upon request), the effect of which is to amend the qualified financial contracts between the parties thereto to conform
with the requirements of the QFC Stay Rules, are hereby incorporated into and form a part of the Agreement, and for such purposes the
Agreement shall be deemed a “Covered Agreement,” Wells Fargo shall be deemed a “Covered Entity” and Counterparty shall be deemed a
“Counterparty Entity.” In the event that, after the date of the Agreement, both parties hereto become adhering parties to the Protocol, the terms
of the Protocol will replace the terms of this paragraph. In the event of any inconsistencies between the Agreement and the terms of the
Protocol, the Bilateral Agreement or the Bilateral Terms (each, the “QFC Stay Terms”), as applicable, the QFC Stay Terms will govern. Terms
used in this paragraph without definition shall have the meanings assigned to them under the QFC Stay Rules. For purposes of this paragraph,
references to “the Agreement” include any related credit enhancements entered into between the parties or provided by one to the other. In
addition, the parties agree that the terms of this paragraph shall be incorporated into any related covered affiliate credit enhancements, with all
references to Wells Fargo replaced by references to the covered affiliate support provider.
“QFC Stay Rules” means the regulations codified at 12 C.F.R. 252.2, 252.81–8, 12 C.F.R. 382.1-7 and 12 C.F.R. 47.1-8, which, subject to
limited exceptions, require an express recognition of the stay-and-transfer powers of the FDIC under the Federal Deposit Insurance Act and the
Orderly Liquidation Authority under Title II of the Dodd Frank Wall Street Reform and Consumer Protection Act and the override of default
rights related directly or indirectly to the entry of an affiliate into certain insolvency proceedings and any restrictions on the transfer of any
covered affiliate credit enhancements.
34.
CARES Act. Counterparty (x) represents and warrants that it has not, as of the Trade Date, applied for or received a loan, loan guarantee,
direct loan (as that term is defined in the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”)) and is not in material breach
of any Material Governmental Restrictions (as defined below) under any or other investment, or any financial assistance or relief under any
program or facility (collectively “Financial Assistance”) that (a) is established under applicable law (whether in existence as of the Trade Date
or subsequently enacted, adopted or amended), including without limitation the CARES Act and the Federal Reserve Act, as amended, and (b)
(i) requires under applicable law (or any regulation, guidance, interpretation or other pronouncement of a governmental authority with
jurisdiction for such program or facility) as a condition of such Financial Assistance, that Counterparty comply with certain a requirements (the
“Material Governmental Restrictions”) not to, or otherwise agree, attest, certify or warrant that it has not, as of the date specified in such
condition, repurchased, or will not repurchase, any equity security of Counterparty, and that it has not, as of the date specified in such condition,
made a capital distribution or will not make a capital distribution, or (ii) for which the terms of the Transaction would cause Counterparty to fail
to satisfy any condition for application for or receipt or retention of the Financial Assistance and (y) acknowledges that entering into the
Transaction may limit its ability to receive such loan, loan guarantee, or direct loan Financial Assistance.
24
Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Master Confirmation and returning it to us.
Very truly yours,
WELLS FARGO BANK, NATIONAL ASSOCIATION
/s/ Thomas Yates
By:
Authorized Signatory
Name:Thomas Yates
Accepted and confirmed
as of the date first set
forth above:
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
/s/ Richard J. Poulton
By:
Authorized Signatory
Name:Richard J. Poulton
FORM OF SUPPLEMENTAL CONFIRMATION
[__________], 20[__]
SCHEDULE A
From:
To:
Wells Fargo Bank, National Association
30 Hudson Yards
New York, NY 10001-2170
Email: CorporateDerivativeNotifications@wellsfargo.com
Allscripts Healthcare Solutions, Inc.
222 Merchandise Mart Plaza, Suite 2024
Chicago, IL 60654
Attention: [Chief Financial Officer]
Telephone No.:[____________]
Facsimile No.:[____________]
Re:
Supplemental Confirmation—Uncollared Accelerated Share Repurchase
The purpose of this Supplemental Confirmation is to confirm the terms and conditions of the Transaction entered into between Wells Fargo
Bank, National Association (“Wells Fargo”) and Allscripts Healthcare Solutions, Inc., a Delaware corporation (“Counterparty”) on the Trade Date
specified below. This Supplemental Confirmation is a binding contract between Wells Fargo and Counterparty as of the relevant Trade Date for the
Transaction referenced below.
1.
This Supplemental Confirmation supplements, forms part of, and is subject to the Master Confirmation, dated as of November 30, 2020 (the
“Master Confirmation”), between Wells Fargo and Counterparty, as amended and supplemented from time to time. All provisions contained in the
Master Confirmation govern this Supplemental Confirmation except as expressly modified below.
2.
The terms of the Transaction to which this Supplemental Confirmation relates are as follows:
Trade Date:
Forward Price Adjustment Amount:
Calculation Period Start Date:
Scheduled Termination Date:
First Acceleration Date:
Prepayment Amount:
Prepayment Date:
Initial Shares:
[__________], 20[__]
USD [___]
[__________], 20[__]
[__________], 20[__]
[__________], 20[__]
USD [___]
[__________], 20[__]
[___] Shares; provided that if, in connection with the Transaction, Wells
Fargo is unable to borrow or otherwise acquire a number of Shares equal to
the Initial Shares for delivery to Counterparty on the Initial Share Delivery
Date, the Initial Shares delivered on the Initial Share Delivery Date shall be
reduced to such number of Shares that Wells Fargo is able to so borrow or
otherwise acquire. All Shares delivered to Counterparty in respect of the
Transaction pursuant to this paragraph shall be the “Initial Shares” for
purposes of “Number of Shares to be Delivered” in the Master Confirmation.
A-1
Initial Share Delivery Date:
Maximum Stock Loan Rate:
Initial Stock Loan Rate:
Maximum Number of Shares:
Floor Price:
Termination Price:
Additional Relevant Days:
Reserved Shares:
[__________], 20[__]
[__] basis points per annum
[__] basis points per annum
[__]1 Shares
USD 0.01 per Share
USD [___] per Share
The [___] Exchange Business Days immediately following the Calculation
Period.
Notwithstanding anything to the contrary in the Master Confirmation, as of
the date of this Supplemental Confirmation, the Reserved Shares shall be
equal to [___] Shares.
1
To be approximately 50% of the total number of Shares outstanding on the Trade Date.
A-2
Calculation Dates:
1.
4.
7.
10.
[_]
2.
5.
8.
11.
[_]
3.
6.
9.
12.
[_]
If necessary, the Calculation Agent may add additional Calculation Dates beginning with [__________], 20[__] and continuing with every other Scheduled
Trading Day thereafter.
3.
Counterparty represents and warrants to Wells Fargo that neither it nor any “affiliated purchaser” (as defined in Rule 10b-18 under the Exchange
Act) has made any purchases of blocks pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act during either (i) the four full calendar weeks
immediately preceding the Trade Date or (ii) during the calendar week in which the Trade Date occurs, except as set forth in any notice delivered pursuant
to Section 6(b)(xv) of the Master Confirmation.
4.
any party hereto may execute this Supplemental Confirmation by signing and delivering one or more counterparts.
This Supplemental Confirmation may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and
Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Supplemental Confirmation and returning it
to us.
Very truly yours,
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:
Authorized Signatory
Name:
Accepted and confirmed
as of the Trade Date:
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
By:
Authorized Signatory
Name:
A-3
FORM OF CERTIFICATE OF RULE 10B-18 PURCHASES
[Letterhead of Counterparty]
SCHEDULE B
Wells Fargo Bank, National Association (“Wells Fargo”)
30 Hudson Yards
New York, NY 10001-2170
Email: CorporateDerivativeNotifications@wellsfargo.com
Re:
Uncollared Accelerated Share Repurchase
Ladies and Gentlemen:
In connection with our entry into the Master Confirmation, dated as of November [_], 2020, between Wells Fargo Bank, National Association
and Allscripts Healthcare Solutions, Inc., a Delaware corporation, as amended and supplemented from time to time (the “Master Confirmation”) and the
Supplemental Confirmation thereto, dated as of November 30, 2020, we hereby represent that set forth below is the total number of shares of our common
stock purchased by or for us or any of our affiliated purchasers in Rule 10b-18 purchases of blocks (all as defined in Rule 10b-18 under the Securities
Exchange Act of 1934) pursuant to the once-a-week block exception set forth in Rule 10b-18(b)(4) during the four full calendar weeks immediately
preceding the first day of the [Calculation Period][Settlement Valuation Period][Seller Termination Purchase Period] (as defined in the Master
Confirmation) and the week during which the first day of such [Calculation Period][Settlement Valuation Period][Seller Termination Purchase Period]
occurs.
Number of Shares: __________________
We understand that you will use this information in calculating trading volume for purposes of Rule 10b-18.
B-1
Confirmed as of the date first written above:
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
By:
Authorized Signatory
Name:
[Signature Page to Rule 10b-18 Certificate]
COUNTERPARTY SETTLEMENT PROVISIONS
The following Counterparty Settlement Provisions shall apply to any Transaction to the extent indicated under the Master
ANNEX A
1.
Confirmation:
Settlement Currency:
Settlement Method Election:
USD
Applicable; provided that (i) Section 7.1 of the Equity Definitions is hereby
amended by deleting the word “Physical” in the sixth line thereof and replacing it
with the words “Net Share” and (ii) the Electing Party may make a settlement
method election only if the Electing Party represents and warrants to Wells Fargo in
writing on the date it notifies Wells Fargo of its election that, as of such date, the
Electing Party is not aware of any material non-public information regarding
Counterparty or the Shares and is electing the settlement method in good faith and
not as part of a plan or scheme to evade compliance with the federal securities laws.
Electing Party:
Counterparty
Settlement Method Election Date:
The earlier of (i) the Scheduled Termination Date and (ii) the second Exchange
Business Day immediately following the Accelerated Termination Date (in which
case the election under Section 7.1 of the Equity Definitions shall be made no later
than 10 minutes prior to the open of trading on the Exchange on such second
Exchange Business Day), as the case may be.
Default Settlement Method:
Cash Settlement
Forward Cash Settlement Amount:
Settlement Price:
Settlement Valuation Period:
Cash Settlement:
Cash Settlement Payment Date:
Net Share Settlement Procedures:
An amount equal to (a) the Number of Shares to be Delivered, multiplied by (b) the
Settlement Price.
An amount equal to the average of the VWAP Prices for the Calculation Dates in
the Settlement Valuation Period, plus USD 0.02, subject to Valuation Disruption as
specified in the Master Confirmation (in each case, plus interest on such amount
during the Settlement Valuation Period at the rate of interest for Counterparty’s long
term, unsecured and unsubordinated indebtedness, as determined by the Calculation
Agent).
A number of Scheduled Trading Days selected by Wells Fargo in its reasonable
discretion, beginning on the Scheduled Trading Day immediately following the
earlier of (i) the Scheduled Termination Date or (ii) the Exchange Business Day
immediately following the Termination Date.
If Cash Settlement is applicable, then Buyer shall pay to Wells Fargo the absolute
value of the Forward Cash Settlement Amount on the Cash Settlement Payment
Date.
The Exchange Business Day immediately following the last day of the Settlement
Valuation Period.
If Net Share Settlement is applicable, Net Share Settlement shall be made in
accordance with paragraphs 2 through 7 below.
Annex A-1
2.
Net Share Settlement shall be made by delivery on the Cash Settlement Payment Date of a number of Shares satisfying the
conditions set forth in paragraph 3 below (the “Registered Settlement Shares”), or a number of Shares not satisfying such conditions (the “Unregistered
Settlement Shares”), in either case with a value equal to 101% (in the case of Registered Settlement Shares) or 105% (in the case of Unregistered
Settlement Shares) of the absolute value of the Forward Cash Settlement Amount, with such Shares’ value based on the value thereof to Wells Fargo
(which value shall, in the case of Unregistered Settlement Shares, take into account a commercially reasonable illiquidity discount), in each case as
determined by the Calculation Agent. If all of the conditions for delivery of either Registered Settlement Shares or Unregistered Settlement Shares have
not been satisfied, Cash Settlement shall be applicable in accordance with paragraph 1 above notwithstanding Counterparty’s election of Net Share
Settlement.
3.
Counterparty may only deliver Registered Settlement Shares pursuant to paragraph 2 above if:
(a)
a registration statement covering public resale of the Registered Settlement Shares by Wells Fargo (the “Registration Statement”)
shall have been filed with the Securities and Exchange Commission under the Securities Act and been declared or otherwise become effective on or prior to
the date of delivery, and no stop order shall be in effect with respect to the Registration Statement; a printed prospectus relating to the Registered
Settlement Shares (including, without limitation, any prospectus supplement thereto, the “Prospectus”) shall have been delivered to Wells Fargo, in such
quantities as Wells Fargo shall reasonably have requested, on or prior to the date of delivery;
(b)
the form and content of the Registration Statement and the Prospectus (including, without limitation, any sections describing the
plan of distribution) shall be satisfactory to Wells Fargo;
(c)
as of or prior to the date of delivery, Wells Fargo and its agents shall have been afforded a reasonable opportunity to conduct a due
diligence investigation with respect to Counterparty customary in scope for underwritten offerings of equity securities of similar size and the results of such
investigation are satisfactory to Wells Fargo, in its discretion; and
(d)
as of the date of delivery, an agreement (the “Underwriting Agreement”) shall have been entered into with Wells Fargo in
connection with the public resale of the Registered Settlement Shares by Wells Fargo substantially similar to underwriting agreements customary for
underwritten offerings of equity securities of similar size, in form and substance satisfactory to Wells Fargo, which Underwriting Agreement shall include,
without limitation, provisions substantially similar to those contained in such underwriting agreements relating, without limitation, to the indemnification
of, and contribution in connection with the liability of, Wells Fargo and its Affiliates and the provision of customary opinions, accountants’ comfort letters
and lawyers’ negative assurance letters.
4.
(a)
If Counterparty delivers Unregistered Settlement Shares pursuant to paragraph 2 above:
all Unregistered Settlement Shares shall be delivered to Wells Fargo (or any Affiliate of Wells Fargo designated by Wells Fargo)
pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) thereof;
(b)
as of or prior to the date of delivery, Wells Fargo and any potential purchaser of any such shares from Wells Fargo (or any Affiliate
of Wells Fargo designated by Wells Fargo) identified by Wells Fargo shall be afforded a commercially reasonable opportunity to conduct a due diligence
investigation with respect to Counterparty customary in scope for private placements of equity securities (including, without limitation, the right to have
made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them);
(c)
as of the date of delivery, Counterparty shall enter into an agreement (a “Private Placement Agreement”) with Wells Fargo (or any
Affiliate of Wells Fargo designated by Wells Fargo) in connection with the private placement of such shares by Counterparty to Wells Fargo (or any such
Affiliate) and the private resale of such shares by Wells Fargo (or any such Affiliate), substantially similar to private placement purchase agreements
customary for private placements of equity securities, in form and substance commercially reasonably satisfactory to Wells Fargo, which Private Placement
Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating,
without limitation, to the indemnification of, and contribution in connection with the liability of, Wells Fargo and its Affiliates and the provision of
customary opinions, accountants’ comfort letters and lawyers’ negative assurance letters, and shall provide for the payment by
Annex A-2
Counterparty of all fees and expenses of Wells Fargo (and any such Affiliate) in connection with such resale, including, without limitation, all fees and
expenses of counsel for Wells Fargo, and shall contain representations, warranties, covenants and agreements of Counterparty reasonably necessary or
advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales; and
(d)
in connection with the private placement of such shares by Counterparty to Wells Fargo (or any such Affiliate) and the private
resale of such shares by Wells Fargo (or any such Affiliate), Counterparty shall, if so requested by Wells Fargo, prepare, in cooperation with Wells Fargo, a
private placement memorandum in form and substance reasonably satisfactory to Wells Fargo.
5.
Wells Fargo, itself or through an Affiliate (the “Selling Agent”) or any underwriter(s), will sell all, or such lesser portion as may be
required hereunder, of the Registered Settlement Shares or Unregistered Settlement Shares and any Makewhole Shares (as defined below) (together, the
“Settlement Shares”) delivered by Counterparty to Wells Fargo pursuant to paragraph 6 below commencing on the Cash Settlement Payment Date and
continuing until the date on which the aggregate Net Proceeds (as such term is defined below) of such sales, as determined by Wells Fargo, is equal to the
absolute value of the Forward Cash Settlement Amount (such date, the “Final Resale Date”). If the proceeds of any sale(s) made by Wells Fargo, the
Selling Agent or any underwriter(s), net of any fees and commissions (including, without limitation, underwriting or placement fees) customary for similar
transactions under the circumstances at the time of the offering, together with carrying charges and expenses incurred in connection with the offer and sale
of the Shares (including, without limitation, the covering of any over-allotment or short position (syndicate or otherwise)) (the “Net Proceeds”) exceed the
absolute value of the Forward Cash Settlement Amount, Wells Fargo will refund, in USD, such excess to Counterparty on the date that is three (3)
Currency Business Days following the Final Resale Date, and, if any portion of the Settlement Shares remains unsold, Wells Fargo shall return to
Counterparty on that date such unsold Shares.
6.
If the Calculation Agent determines that the Net Proceeds received from the sale of the Registered Settlement Shares or Unregistered
Settlement Shares or any Makewhole Shares, if any, pursuant to this paragraph 6 are less than the absolute value of the Forward Cash Settlement Amount
(the amount in USD by which the Net Proceeds are less than the absolute value of the Forward Cash Settlement Amount being the “Shortfall” and the date
on which such determination is made, the “Deficiency Determination Date”), Counterparty shall on the Exchange Business Day next succeeding the
Deficiency Determination Date (the “Makewhole Notice Date”) deliver to Wells Fargo, through the Selling Agent, a notice of Counterparty’s election that
Counterparty shall either (i) pay an amount in cash equal to the Shortfall on the day that is one Currency Business Day after the Makewhole Notice Date, or
(ii) deliver additional Shares. If Counterparty elects to deliver to Wells Fargo additional Shares, then Counterparty shall deliver additional Shares in
compliance with the terms and conditions of paragraph 3 or paragraph 4 above, as the case may be (the “Makewhole Shares”), on the first Clearance
System Business Day which is also an Exchange Business Day following the Makewhole Notice Date in such number as the Calculation Agent reasonably
believes would have a market value on that Exchange Business Day equal to the Shortfall. Such Makewhole Shares shall be sold by Wells Fargo in
accordance with the provisions above; provided that if the sum of the Net Proceeds from the sale of the originally delivered Shares and the Net Proceeds
from the sale of any Makewhole Shares is less than the absolute value of the Forward Cash Settlement Amount then Counterparty shall, at its election,
either make such cash payment or deliver to Wells Fargo further Makewhole Shares until such Shortfall has been reduced to zero.
7.
Notwithstanding the foregoing, in no event shall the aggregate number of Settlement Shares for any Transaction be greater than the
Reserved Shares minus the amount of any Shares actually delivered by Counterparty under any other Transaction under this Master Confirmation (the
result of such calculation, the “Capped Number”). Counterparty represents and warrants (which shall be deemed to be repeated on each day that a
Transaction is outstanding) that the Capped Number is equal to or less than the number of Shares determined according to the following formula:
Annex A-3
A – B
Where
A =
B =
the number of authorized but unissued shares of Counterparty that are not reserved for future issuance
on the date of the determination of the Capped Number; and
the maximum number of Shares required to be delivered to third parties if Counterparty elected Net
Share Settlement of all transactions in the Shares (other than Transactions in the Shares under this
Master Confirmation) with all third parties that are then currently outstanding and unexercised.
“Reserved Shares” means initially, 14,619,883 Shares. The Reserved Shares may be increased or decreased in a Supplemental Confirmation.
If at any time, as a result of this paragraph 7, Counterparty fails to deliver to Wells Fargo any Settlement Shares, Counterparty shall, to the
extent that Counterparty has at such time authorized but unissued Shares not reserved for other purposes, promptly notify Wells Fargo thereof and deliver
to Wells Fargo a number of Shares not previously delivered as a result of this paragraph 7. Counterparty agrees to use its commercially reasonable efforts
to cause the number of authorized but unissued Shares to be increased, if necessary, to an amount sufficient to permit Counterparty to fulfill its obligation
to deliver any Settlement Shares.
Annex A-4
Exhibit 10.6
EXECUTED VERSION
November 30, 2020
From:
To:
JPMorgan Chase Bank, National Association
New York Branch
383 Madison Avenue
New York, NY, 10179
Allscripts Healthcare Solutions, Inc.
222 Merchandise Mart Plaza, Suite 2024
Chicago, IL 60654
Attention: Richard J. Poulton
Telephone No.:312.506.1216
Email:rick.poulton@allscripts.com; legal.notices@allscripts.com
Re:
Master Confirmation—Uncollared Accelerated Share Repurchase
This master confirmation (this “Master Confirmation”), dated as of November 30, 2020, is intended to set forth certain terms and provisions
of certain Transactions (each, a “Transaction”) entered into from time to time between JPMorgan Chase Bank, National Association (“JPMorgan”) and
Allscripts Healthcare Solutions, Inc., a Delaware corporation (“Counterparty”). This Master Confirmation, taken alone, is neither a commitment by either
party to enter into any Transaction nor evidence of a Transaction. The additional terms of any particular Transaction shall be set forth in a Supplemental
Confirmation in the form of Schedule A hereto (a “Supplemental Confirmation”), which shall reference this Master Confirmation and supplement, form a
part of, and be subject to this Master Confirmation. This Master Confirmation and each Supplemental Confirmation together shall constitute a
“Confirmation” as referred to in the Agreement specified below.
The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the
International Swaps and Derivatives Association, Inc., are incorporated into this Master Confirmation. This Master Confirmation and each Supplemental
Confirmation evidence a complete binding agreement between Counterparty and JPMorgan as to the subject matter and terms of each Transaction to which
this Master Confirmation and such Supplemental Confirmation relate and shall supersede all prior or contemporaneous written or oral communications
with respect thereto.
This Master Confirmation and each Supplemental Confirmation supplement, form a part of, and are subject to an agreement in the form of the
ISDA 2002 Master Agreement (the “Agreement”) as if JPMorgan and Counterparty had executed the Agreement on the date of this Master Confirmation
(but without any Schedule except for (i) the election of New York law as the governing law (without reference to its choice of law provisions), (ii) the
election that subparagraph (ii) of Section 2(c) of the Agreement will not apply to the Transactions, (iii) the election that the “Cross Default” provisions of
Section 5(a)(vi) of the Agreement shall apply to JPMorgan, with a “Threshold Amount” of 3% of the shareholders’ equity of JPMorgan Chase & Co. and as
if “Specified Indebtedness” had the meaning specified in Section 14 of the Agreement, except that such term shall not include obligations in respect of
deposits received in the ordinary course of JPMorgan’s banking business (provided that (a) the text “, or becoming capable at such time of being declared,”
shall be deleted from Section 5(a)(vi)(1) of the Agreement and (b) the following provision shall be added to the end of Section 5(a)(vi) of the Agreement:
“but a default under clause (2) above shall not constitute an Event of Default if (x) the default was caused solely by error or omission of an administrative
or operational nature, (y) funds were available to enable the party to make the payment when due and (z) the payment is made within two Local Business
Days of such party’s receipt of written notice of its failure to pay”), and (iv) as otherwise provided herein or in a Supplemental Confirmation).
The Transactions shall be the sole Transactions under the Agreement. If there exists any ISDA Master Agreement between JPMorgan and
Counterparty or any confirmation or other agreement between JPMorgan and Counterparty pursuant to which an ISDA Master Agreement is deemed to
exist between JPMorgan and Counterparty, then notwithstanding anything to the contrary in such ISDA Master Agreement, such confirmation or agreement
or any other agreement to which JPMorgan and Counterparty are parties, the Transactions shall not be considered Transactions under, or otherwise
governed by, such existing or deemed ISDA Master Agreement, and the occurrence
1
of any Event of Default or Termination Event under the Agreement with respect to either party or any Transaction shall not, by itself, give rise to any right
or obligation under any such other agreement or deemed agreement. Notwithstanding anything to the contrary in any other agreement between the parties
or their Affiliates, the Transactions shall not be “Specified Transactions” (or similarly treated) under any other agreement between the parties or their
Affiliates.
All provisions contained or incorporated by reference in the Agreement shall govern this Master Confirmation and each Supplemental
Confirmation except as expressly modified herein or in the related Supplemental Confirmation.
If, in relation to any Transaction to which this Master Confirmation and a Supplemental Confirmation relate, there is any inconsistency between
the Agreement, this Master Confirmation, such Supplemental Confirmation and the Equity Definitions, the following will prevail for purposes of such
Transaction in the order of precedence indicated: (i) such Supplemental Confirmation; (ii) this Master Confirmation; (iii) the Equity Definitions; and (iv)
the Agreement.
1.
Each Transaction constitutes a Share Forward Transaction for the purposes of the Equity Definitions. Set forth below are the terms and
conditions that, together with the terms and conditions set forth in the Supplemental Confirmation relating to any Transaction, shall govern such
Transaction.
General Terms.
Trade Date:
Buyer:
Seller:
Shares:
Exchange:
Related Exchange(s):
Prepayment/Variable Obligation:
Prepayment Amount:
Prepayment Date:
Valuation.
VWAP Price:
For each Transaction, as set forth in the related Supplemental Confirmation.
Counterparty
JPMorgan
The common stock of Counterparty, par value USD 0.01 per share (Exchange
symbol “MDRX”).
The NASDAQ Global Select Market
All Exchanges
Applicable
For each Transaction, as set forth in the related Supplemental Confirmation.
For each Transaction, as set forth in the related Supplemental Confirmation.
For any Exchange Business Day, the volume-weighted average price at which
the Shares trade as reported in the composite transactions for United States
exchanges and quotation systems, during the regular trading session for the
Exchange on such Exchange Business Day, excluding (i) trades that do not
settle regular way, (ii) opening (regular way) reported trades in the
consolidated system on such Exchange Business Day, (iii) trades that occur in
the last ten minutes before the scheduled close of trading on the Exchange on
such Exchange Business Day and ten minutes before the scheduled close of
the primary trading in the market where the trade is effected, and (iv) trades
on such Exchange Business Day that do not satisfy the requirements of Rule
10b-18(b)(3) under the Securities
2
(i)
in clauses
Exchange Act of 1934, as amended (the “Exchange Act”), as determined in
good faith by the Calculation Agent (all such trades other than any trades
described
(iv) above, “Rule 10b-18 Eligible
Transactions”). The Calculation Agent shall refer to the Bloomberg Page
“MDRX US AQR SEC” (or any successor thereto) for such
Exchange Business Day to determine the VWAP Price, unless the Calculation
Agent, in its reasonable judgment, determines that such source does not
accurately reflect the VWAP Price or unless such source is unavailable.
to
Forward Price:
For each Transaction, the arithmetic average of the VWAP Prices for all of
the Calculation Dates in the Calculation Period for such Transaction, subject
to “Valuation Disruption” below.
Forward Price Adjustment Amount:
For each Transaction, as set forth in the related Supplemental Confirmation.
Calculation Period:
For each Transaction, the period from, and including, the Calculation Period
Start Date for such Transaction to, and including, the Termination Date for
such Transaction.
Calculation Period Start Date:
For each Transaction, as set forth in the related Supplemental Confirmation.
Termination Date:
Calculation Dates:
Scheduled Termination Date:
For each Transaction, the Scheduled Termination Date for such Transaction;
provided that JPMorgan shall have the right to designate any Calculation Date
on or after the First Acceleration Date to be the Termination Date for all or
any part of such Transaction (an “Accelerated Termination Date”) by
delivering a notice (an “Acceleration Notice”) to Counterparty of any such
designation prior to 6:00 p.m. (New York City time) on the Calculation Date
immediately following
the designated Accelerated Termination Date.
JPMorgan shall specify in each Acceleration Notice the portion of the
Prepayment Amount that is subject to acceleration (which may be less than
the full Prepayment Amount). If the portion of the Prepayment Amount that
is subject to acceleration is less than the full Prepayment Amount, then the
Calculation Agent shall adjust the terms of the Transaction as appropriate to
take into account the occurrence of such Accelerated Termination Date
(including cumulative adjustments to take into account all prior Accelerated
Termination Dates).
For each Transaction, each date that is both an Exchange Business Day and is
set forth as a Calculation Date in the related Supplemental Confirmation.
For each Transaction, as set forth in the related Supplemental Confirmation,
subject to postponement as provided in “Valuation Disruption” below.
First Acceleration Date:
For each Transaction, as set forth in the related Supplemental Confirmation.
3
Valuation Disruption:
The definition of “Market Disruption Event” in Section 6.3(a) of the Equity
Definitions is hereby amended by deleting the words “at any time during the
one-hour period that ends at the relevant Valuation Time, Latest Exercise
Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case
may be” and inserting the words “at any time on any Scheduled Trading Day
during the Calculation Period or Settlement Valuation Period” after the word
“material,” in the third line thereof.
Section 6.3(d) of the Equity Definitions is hereby amended by deleting the
remainder of the provision following the term “Scheduled Closing Time” in
the fourth line thereof.
Notwithstanding anything to the contrary in the Equity Definitions, if a
Disrupted Day occurs (i) in the Calculation Period, the Calculation Agent
may, in its good faith and commercially reasonable discretion, postpone the
Scheduled Termination Date, or (ii) in the Settlement Valuation Period, the
Calculation Agent may extend the Settlement Valuation Period. The
Calculation Agent may also determine that (i) such Disrupted Day is a
Disrupted Day in full, in which case the VWAP Price for such Disrupted Day
shall not be included for purposes of determining the Forward Price or the
Settlement Price, as the case may be, or (ii) such Disrupted Day is a
Disrupted Day only in part, in which case the VWAP Price for such Disrupted
Day shall be determined by the Calculation Agent in a good faith and
commercially reasonable manner based on Rule 10b-18 Eligible Transactions
in the Shares on such Disrupted Day taking into account the nature and
duration of the relevant Market Disruption Event, and the weighting of the
VWAP Price for the relevant Calculation Dates during the Calculation Period
or the Settlement Valuation Period, as the case may be, shall be adjusted in a
good faith and commercially reasonable manner by the Calculation Agent for
purposes of determining the Forward Price or the Settlement Price, as the
case may be, with such adjustments based on, among other factors, the
duration of any Market Disruption Event and the volume, historical trading
patterns and price of the Shares. Any Exchange Business Day on which, as of
the date hereof, the Exchange is scheduled to close prior to its normal close of
trading shall be deemed not to be an Exchange Business Day; if a closure of
the Exchange prior to its normal close of trading on any Exchange Business
Day is scheduled following the date hereof, then such Exchange Business
Day shall be deemed to be a Disrupted Day in full.
If a Disrupted Day occurs during the Calculation Period for any Transaction
or the Settlement Valuation Period for any Transaction, as the case may be,
and each of the nine immediately following Scheduled Trading Days is a
Disrupted Day (a “Disruption Event”), then the Calculation Agent, in its
good faith and commercially reasonable discretion, may deem such
Disruption Event (and each consecutive Disrupted Day thereafter) to be
4
either (x) a Potential Adjustment Event in respect of such Transaction or (y)
an Additional Termination Event in respect of such Transaction, with
Counterparty as the sole Affected Party and such Transaction as the sole
Affected Transaction.
Settlement Terms.
Settlement Procedures:
For each Transaction:
Number of Shares to be Delivered:
Floor Price:
Excess Dividend Amount:
Settlement Date:
(i)
if the Number of Shares to be Delivered for such Transaction is
positive, Physical Settlement shall be applicable to such Transaction;
provided that JPMorgan does not, and shall not, make the agreement or
the representations set forth in Section 9.11 of the Equity Definitions
related to the restrictions imposed by applicable securities laws with
respect to any Shares delivered by JPMorgan to Counterparty under any
Transaction; or
(ii)
if the Number of Shares to be Delivered for such Transaction is
negative, then the Counterparty Settlement Provisions in Annex A
hereto shall apply to such Transaction.
For each Transaction, a number of Shares (rounded down to the nearest whole
number) equal to (a)(i) the Prepayment Amount for such Transaction, divided
by (ii)(A) the Forward Price for such Transaction minus (B) the Forward
Price Adjustment Amount for such Transaction, minus (b) the number of
Initial Shares for such Transaction; provided that if the result of the
calculation in clause (a)(ii) is equal to or less than the Floor Price for such
Transaction, then the Number of Shares to be Delivered for such Transaction
shall be determined as if clause (a)(ii) were replaced with “(ii) the Floor Price
for such Transaction”. For the avoidance of doubt, if the Forward Price
Adjustment Amount for any Transaction is a negative number, clause (a)(ii)
of the immediately preceding sentence shall be equal to (A) the Forward Price
for such Transaction, plus (B) the absolute value of the Forward Price
Adjustment Amount.
For each Transaction, as set forth in the related Supplemental Confirmation.
For the avoidance of doubt, all references to the Excess Dividend Amount
shall be deleted from Section 9.2(a)(iii) of the Equity Definitions.
For each Transaction, if the Number of Shares to be Delivered for all or such
portion of such Transaction is positive (x) in the case of an Accelerated
Termination Date, the date that is one Settlement Cycle immediately
following the date on which JPMorgan delivers notice of such Accelerated
Termination Date and (y) in the case of a Termination Date occurring on the
Scheduled Termination Date, the date that is one Settlement Cycle
immediately following the Termination Date, in either case, for all or
5
Settlement Currency:
Initial Share Delivery:
such portion of such Transaction (the final Settlement Date, the “Final
Settlement Date”).
USD
For each Transaction, JPMorgan shall deliver a number of Shares equal to the
Initial Shares for such Transaction to Counterparty on the Initial Share
Delivery Date for such Transaction in accordance with Section 9.4 of the
Equity Definitions, with such Initial Share Delivery Date deemed to be a
“Settlement Date” for purposes of such Section 9.4.
Initial Share Delivery Date:
For each Transaction, as set forth in the related Supplemental Confirmation.
Initial Shares:
Share Adjustments.
Potential Adjustment Event:
Excess Dividend:
Consequences of Excess Dividend:
For each Transaction, as set forth in the related Supplemental Confirmation.
Notwithstanding anything to the contrary in Section 11.2(e) of the Equity
Definitions, neither an Extraordinary Dividend nor the issuance of additional
stock options, restricted stock or restricted stock units in the ordinary course
pursuant to Counterparty’s employee equity incentive plan shall constitute a
Potential Adjustment Event.
In addition to the events described in Section 11.2(e) of the Equity
Definitions, it shall constitute an additional Potential Adjustment Event if (x)
the Scheduled Termination Date for any Transaction is postponed pursuant to
“Valuation Disruption” above (including, for the avoidance of doubt,
pursuant to Section 8 hereof), (y) a Regulatory Disruption as described in
Section 8 hereof occurs or (z) a Disruption Event occurs. In the case of any
event described in clause (x), (y) or (z) above occurs, the Calculation Agent
may, in a good faith and commercially reasonable manner, adjust any
relevant terms of such Transaction as necessary to preserve as nearly as
practicable the fair value of such Transaction to JPMorgan prior to such
postponement, Regulatory Disruption or Disruption Event, as the case may
be; provided that the Calculation Agent shall not adjust any of the dates
identified as Calculation Dates in the related Supplemental Confirmation.
Any dividend or distribution on the Shares (other than any dividend or
distribution of the type described in Section 11.2(e)(i) or Section 11.2(e)(ii)
the Equity Definitions or any Extraordinary Dividend).
(A) of
“Extraordinary Dividend” means
the per Share cash dividend or
distribution, or a portion thereof, declared by Counterparty on the Shares that
is classified by the board of directors of Counterparty as an “extraordinary”
dividend.
The declaration by the Issuer of any Excess Dividend, the ex-dividend date
for which occurs or is scheduled to occur
6
Method of Adjustment:
Relevant Dividend Period:
Relevant Dividend Period End Date:
during the Relevant Dividend Period for any Transaction, may, at JPMorgan’s
election in its sole discretion, either (x) constitute an Additional Termination
Event in respect of such Transaction, with Counterparty as the sole Affected
Party and such Transaction as the sole Affected Transaction or (y) result in an
adjustment, by the Calculation Agent, to the Floor Price as the Calculation
Agent determines appropriate to preserve the fair value of such Transaction
after taking into account such Excess Dividend.
Calculation Agent Adjustment
For each Transaction, the period from, and including, the Trade Date for such
Transaction to, and including, the Relevant Dividend Period End Date for
such Transaction.
For each Transaction, if the Number of Shares to be Delivered for such
Transaction is negative, the last day of the Settlement Valuation Period;
otherwise, the Termination Date for such Transaction.
Extraordinary Events.
Consequences of Merger Events:
(a) Share-for-Share:
(b) Share-for-Other:
(c) Share-for-Combined:
Tender Offer:
Cancellation and Payment
Cancellation and Payment
Cancellation and Payment
Applicable; provided that (a) Section 12.1(d) of the Equity Definitions shall
be amended by replacing “10%” in the third line thereof with “20%”, (b)
Section 12.1(l) of the Equity Definitions shall be amended by (i) deleting the
parenthetical in the fifth line thereof, (ii) replacing “that” in the fifth line
thereof with “whether or not such announcement” and (iii) adding
immediately after the words “Tender Offer” in the fifth line thereof “, and any
publicly announced change or amendment to such an announcement
(including, without limitation, the announcement of an abandonment of such
intention)” and (c) Sections 12.3(a) and 12.3(d) of the Equity Definitions
shall each be amended by replacing each occurrence of the words “Tender
Offer Date” by “Announcement Date.”
Consequences of Tender Offers:
(a) Share-for-Share:
(b) Share-for-Other:
Modified Calculation Agent Adjustment
Modified Calculation Agent Adjustment
(c) Share-for-Combined:
Modified Calculation Agent Adjustment
Any adjustment to the terms of any Transaction and the determination of any amounts due upon termination of any Transaction hereunder
as a result of a Merger Event or Tender Offer shall be made without duplication in respect of any prior adjustment hereunder (including,
without limitation, any prior adjustment pursuant to Section 12 or 13 hereof).
7
Nationalization, Insolvency or Delisting:
Cancellation and Payment; provided that in addition to the provisions of
Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a
Delisting if the Exchange is located in the United States and the Shares are
not immediately re-listed, re-traded or re-quoted on any of the New York
Stock Exchange, The NASDAQ Global Select Market or The NASDAQ
Global Market (or their respective successors); if the Shares are immediately
re-listed, re-traded or re-quoted on any such exchange or quotation system,
such exchange or quotation system shall be deemed to be the Exchange.
Additional Disruption Events:
(a) Change in Law:
Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is
hereby amended by (i) replacing the phrase “the interpretation” in the third
line thereof with the phrase “, or public announcement of, the formal or
informal interpretation”, (ii) replacing the word “Shares” where it appears in
clause (X) thereof with the words “Hedge Positions” and (iii) immediately
following the word “Transaction” in clause (X) thereof, adding the phrase “in
the manner contemplated by the Hedging Party on the Trade Date”; provided
further that Section 12.9(a)(ii) of the Equity Definitions is hereby amended
by replacing the parenthetical beginning after the word “regulation” in the
second line thereof with the words “(including, for the avoidance of doubt
and without limitation, (x) any tax law or (y) adoption or promulgation of
new regulations authorized or mandated by existing statute)”.
(b) Failure to Deliver:
(c) Insolvency Filing:
(d) Loss of Stock Borrow:
Applicable
Applicable
Applicable
Maximum Stock Loan Rate:
For each Transaction, as set forth in the related Supplemental Confirmation.
Hedging Party:
Determining Party:
(e) Hedging Disruption:
Hedging Party:
Determining Party:
(f) Increased Cost of Hedging:
Hedging Party:
Determining Party:
(g) Increased Cost of Stock Borrow:
JPMorgan
JPMorgan
Applicable
JPMorgan
JPMorgan
Applicable
JPMorgan
JPMorgan
Applicable
8
2.
Initial Stock Loan Rate:
For each Transaction, as set forth in the related Supplemental Confirmation.
Hedging Party:
Determining Party:
Hedging Adjustments:
JPMorgan
JPMorgan
For the avoidance of doubt, whenever the Calculation Agent is called upon to
make an adjustment pursuant to the terms of this Master Confirmation or the
Equity Definitions to take into account the effect of an event, the Calculation
Agent shall make such adjustment by reference to the effect of such event on
JPMorgan, assuming that JPMorgan maintains a commercially reasonable
Hedge Position.
Non-Reliance/Agreements and
Acknowledgements Regarding
Hedging Activities/Additional
Acknowledgements:
Applicable
Calculation Agent.JPMorgan; provided that, following the occurrence and
during the continuation of an Event of Default pursuant to Section 5(a)(vii) of
the Agreement with respect to which JPMorgan is the Defaulting Party,
Counterparty shall have the right to select a leading dealer in the market for
U.S. corporate equity derivatives reasonably acceptable to JPMorgan to
replace JPMorgan as Calculation Agent, and the parties shall work in good
faith to execute any appropriate documentation required by such replacement
Calculation Agent.
Whenever the Calculation Agent is required to act or to exercise judgment in
any way with respect to any Transaction hereunder, it will do so in a good
faith and commercially reasonable manner. Notwithstanding anything to the
contrary in this Master Confirmation or any Supplemental Confirmation, the
Calculation Agent shall not adjust the dates identified as Calculation Dates in
the relevant Supplemental Confirmation for any Transaction.
Following any determination, adjustment or calculation by the Calculation
Agent hereunder, the Calculation Agent shall deliver to Counterparty, within
five Exchange Business Days after a written request by Counterparty, a report
in a commonly used file format for the storage and manipulation of financial
data (including the methodology, interest rates, quotations and market data
(including volatility) but without disclosing any proprietary or confidential
models or other proprietary or confidential information) displaying in
reasonable detail the basis for such determination, adjustment or calculation,
as the case may be.
3.
Account Details.
(a)
Account for payments to Counterparty:
9
As separately notified by Counterparty
Account for delivery of Shares to Counterparty:
As separately notified by Counterparty
(b)
Account for payments to JPMorgan:
Bank:
ABA#:
Acct No.:
Beneficiary:
Ref:
JPMorgan Chase Bank, N.A.
021000021
099997979
JPMorgan Chase Bank, N.A. New York
Derivatives
Account for delivery of Shares to JPMorgan:
DTC 0352
4.
Offices.
(a)
(b)
The Office of Counterparty for each Transaction is: Inapplicable, Counterparty is not a Multibranch Party.
The Office of JPMorgan for each Transaction is: New York
JPMorgan Chase Bank, National Association
New York Branch
383 Madison Avenue
New York, NY, 10179
5.
Notices.
(a)
Address for notices or communications to Counterparty:
Allscripts Healthcare Solutions, Inc.
222 Merchandise Mart Plaza, Suite 2024
Chicago, IL 60654
Attention:
Telephone No.:
Email:
Richard J. Poulton
312.506.1216
rick.poulton@allscripts.com; legal.notices@allscripts.com
(b)
Address for notices or communications to JPMorgan:
JPMorgan Chase Bank, National Association
EDG Marketing Support
Email:
edg_notices@jpmorgan.com
edg_ny_corporate_sales_support@jpmorgan.com
With a copy to:
Sanjeet S. Dewal
Managing Director
Attention:
Title:
Telephone No:
Email Address:
(212) 622-8783
sanjeet.s.dewal@jpmorgan.com
10
6.
Representations, Warranties and Agreements.
(a)
Additional Representations, Warranties and Covenants of Each Party. In addition to the representations, warranties and covenants
in the Agreement, each party represents, warrants and covenants to the other party that:
(i)
(ii)
It is an “eligible contract participant” (as such term is defined in the Commodity Exchange Act, as amended).
The offer and sale of each Transaction to it is intended to be exempt from registration under the Securities Act of 1933,
as amended (the “Securities Act”), by virtue of Section 4(a)(2) thereof. Accordingly, each party represents and
warrants to the other that (A) it has the financial ability to bear the economic risk of its investment in each Transaction
and is able to bear a total loss of its investment, (B) it is an “accredited investor” as that term is defined under
Regulation D under the Securities Act and (C) the disposition of each Transaction is restricted under this Master
Confirmation, the Securities Act and state securities laws.
(b)
Additional Representations, Warranties and Covenants of Counterparty. In addition to the representations, warranties and
covenants in the Agreement, Counterparty represents, warrants and covenants to JPMorgan that:
(i)
(ii)
(iii)
(iv)
As of the Trade Date for each Transaction hereunder, Counterparty is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Each of this Master Confirmation and the Supplemental
Confirmation for such Transaction has been duly authorized, executed and delivered by Counterparty and (assuming
due authorization, execution and delivery thereof by JPMorgan) this Master Confirmation, as supplemented by such
Supplemental Confirmation, constitutes a valid and legally binding obligation of Counterparty. Counterparty has all
corporate power to enter into this Master Confirmation and such Supplemental Confirmation and to consummate the
transactions contemplated hereby and thereby and to purchase the Shares and deliver any Settlement Shares in
accordance with the terms hereof and thereof.
As of the Trade Date for each Transaction hereunder, the execution and delivery by Counterparty of, and the
performance by Counterparty of its obligations under, this Master Confirmation and the Supplemental Confirmation for
such Transaction, and the consummation of the transactions herein and therein contemplated, do not conflict with or
violate (A) any provision of the certificate of incorporation, by-laws or other constitutive documents of Counterparty,
(B) any statute or order, rule, regulation or judgment of any court or governmental agency or body having jurisdiction
over Counterparty or any of its subsidiaries or any of their respective assets or (C) any contractual restriction binding on
or affecting Counterparty or any of its subsidiaries or any of its assets.
As of the Trade Date for each Transaction hereunder, all governmental and other consents that are required to have been
obtained by Counterparty with respect to performance, execution and delivery of this Master Confirmation and the
Supplemental Confirmation for such Transaction have been obtained and are in full force and effect and all conditions
of any such consents have been complied with.
As of the Trade Date for each Transaction hereunder, (A) such Transaction is being entered into pursuant to a publicly
disclosed Share buy-back program and its Board of Directors has approved the use of derivatives to effect the Share
buy-back program, and (B) there is no internal policy of Counterparty, whether written or oral, that would prohibit
Counterparty from entering into any aspect of such Transaction, including, without limitation, the purchases of Shares
to be made pursuant to such Transaction.
11
(v)
(vi)
(vii)
(viii)
(ix)
(x)
As of the Trade Date for each Transaction hereunder, the purchase or writing of such Transaction and the transactions
contemplated hereby will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.
As of the Trade Date for each Transaction hereunder, it is not entering into such Transaction, and as of the date of any
election with respect to any Transaction hereunder, it is not making such election, in each case (A) on the basis of, and
is not aware of, any material non-public information regarding Counterparty or the Shares, (B) in anticipation of, in
connection with, or to facilitate, a distribution of its securities, a self tender offer or a third-party tender offer in
violation of the Exchange Act or (C) to create actual or apparent trading activity in the Shares (or any security
convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares
(or any security convertible into or exchangeable for the Shares).
Counterparty (A) is capable of evaluating investment risks independently, both in general and with regard to all
transactions and investment strategies involving a security or securities; (B) will exercise independent judgment in
evaluating the recommendations of any broker-dealer or its associated persons, unless it has otherwise notified the
broker-dealer in writing; and (C) has total assets of at least USD 50,000,000 as of the date hereof.
As of the Trade Date for each Transaction hereunder, and as of the date of any election with respect to any Transaction
hereunder, Counterparty is in compliance with its reporting obligations under the Exchange Act and its most recent
Annual Report on Form 10-K, together with all reports subsequently filed by it pursuant to the Exchange Act, taken
together and as amended and supplemented to the date of this representation, do not, as of their respective filing dates,
contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
Counterparty has made, and will make, all filings required to be made by it with the Securities and Exchange
Commission, any securities exchange or any other regulatory body with respect to each Transaction.
(A) The Shares are not, as of the Calculation Period Start Date, and (B) Counterparty will not, at any time during any
Regulation M Period (as defined below) for any Transaction, cause the Shares to be, subject to a “restricted period” (as
defined in Regulation M under the Exchange Act) unless, in the case of clause (B), Counterparty has provided written
notice to JPMorgan of such restricted period not later than the Scheduled Trading Day immediately preceding the first
day of such “restricted period”; Counterparty acknowledges that any such notice may cause a Disrupted Day to occur
pursuant to Section 8 hereof; accordingly, Counterparty acknowledges that its delivery of such notice must comply with
the standards set forth in Section 9 hereof. Counterparty is not currently contemplating any “distribution” (as defined in
Regulation M under the Exchange Act) of Shares, or any security for which Shares are a “reference security” (as
defined in Regulation M under the Exchange Act). “Regulation M Period” means, for any Transaction, (A) the
Relevant Period (as defined below) for such Transaction, (B) the Settlement Valuation Period, if any, for such
Transaction and (C) the Seller Termination Purchase Period (as defined below), if any, for such Transaction. “Relevant
Period” means, for any Transaction, the period commencing on the Calculation Period Start Date for such Transaction
and ending on the later of (1) the earlier of (x) the Scheduled Termination Date and (y) the last Additional Relevant Day
(as specified in the related Supplemental Confirmation) for such Transaction, or such earlier day as elected by
JPMorgan and communicated to Counterparty on such day (or, if later, the First Acceleration Date without regard to any
acceleration thereof pursuant to “Special Provisions for Acquisition Transaction Announcements” below) and (2) if
Section 16 hereof is applicable to such Transaction, the date on which all deliveries owed pursuant to Section 16 hereof
have been made.
12
(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
As of the Trade Date, the Prepayment Date, the Initial Share Delivery Date, the Settlement Date, any Cash Settlement
Payment Date and any Settlement Method Election Date for each Transaction, Counterparty is not, and will not be,
“insolvent” (as such term is defined under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States
Code) (the “Bankruptcy Code”)) and Counterparty would be able to purchase a number of Shares with a value equal to
the Prepayment Amount in compliance with the laws of the jurisdiction of Counterparty’s incorporation.
Counterparty is not, and after giving effect to each Transaction will not be, required to register as an “investment
company” as such term is defined in the Investment Company Act of 1940, as amended.
Counterparty shall cooperate with JPMorgan, and execute and deliver, or use its commercially reasonable efforts to
cause to be executed and delivered, all such other instruments, and to obtain all consents, approvals or authorizations of
any person, and take all such other actions as JPMorgan may reasonably request from time to time, consistent with the
terms of the Agreement, this Master Confirmation and any Supplemental Confirmation, to effectuate the purposes of the
Agreement, this Master Confirmation, any Supplemental Confirmation and any Transaction.
Counterparty has not entered, and will not enter, into any repurchase transaction other than any Other Specified
Repurchase Agreement (as defined below) with respect to the Shares (or any security convertible into or exchangeable
for the Shares) (including, without limitation, any agreements similar to the Transactions described herein) where any
initial hedge period, calculation period, relevant period, settlement valuation period or seller termination purchase
period (each however defined) in such other transaction will overlap at any time (including, without limitation, as a
result of extensions in such initial hedge period, calculation period, relevant period, settlement valuation period or seller
termination purchase period as provided in the relevant agreements) with any Relevant Period, any Settlement Valuation
Period (if applicable) or any Seller Termination Purchase Period (if applicable) under this Master Confirmation. In the
event that the initial hedge period, relevant period, calculation period or settlement valuation period in any other
transaction (other than any Other Specified Repurchase Agreement) overlaps with any Relevant Period, any Settlement
Valuation Period (if applicable) or any Seller Termination Purchase Period (if applicable) under this Master
Confirmation as a result of any postponement of the Scheduled Termination Date or extension of the Settlement
Valuation Period pursuant to “Valuation Disruption” above or any analogous provision in such other transaction,
Counterparty shall promptly amend such other transaction to avoid any such overlap.
Counterparty shall, at least one day prior to the first day of the Calculation Period, the Settlement Valuation Period, if
any, or the Seller Termination Purchase Period, if any, for any Transaction, notify JPMorgan of the total number of
Shares purchased in Rule 10b-18 purchases of blocks pursuant to the once-a-week block exception set forth in
paragraph (b)(4) of Rule 10b-18 under the Exchange Act (“Rule 10b-18”) by or for Counterparty or any of its
“affiliated purchasers” (as defined in Rule 10b-18) during each of the four calendar weeks preceding such day and
during the calendar week in which such day occurs (“Rule 10b-18 purchase” and “blocks” each being used as defined in
Rule 10b-18), which notice shall be substantially in the form set forth in Schedule B hereto.
As of the Trade Date for each Transaction hereunder, and as of the date of any election with respect to any Transaction
hereunder, there has not been any Merger Announcement (as defined below).
The assets of Counterparty do not constitute “plan assets” under the Employee Retirement Income Security Act of
1974, as amended, the Department of Labor Regulations promulgated thereunder or similar law.
13
7.
8.
Additional Representations. Warranties and Covenants of JPMorgan. In addition to the representations, warranties and covenants in the
Agreement, JPMorgan represents, warrants and covenants to Counterparty that JPMorgan shall use its commercially reasonable efforts, during
the Calculation Period, any Settlement Valuation Period and any Seller Termination Purchase Period for each Transaction, to make all
purchases of Shares in connection with such Transaction in a manner that would comply with the limitations set forth in clauses (b)(1), (b)(2),
(b)(3) and (b)(4) and (c) of Rule 10b-18, as if such rule were applicable to such purchases and taking into account any applicable Securities and
Exchange Commission no-action letters as appropriate, and subject to any delays between the execution and reporting of a trade of the Shares
on the Exchange and other circumstances beyond JPMorgan’s control; provided that, during a Calculation Period, the foregoing agreement shall
not apply to purchases made to dynamically hedge for JPMorgan’s own account or the account of its affiliate(s) the optionality arising under a
Transaction (including, for the avoidance of doubt, timing optionality); and provided further that, without limiting the generality of this Section
7, (x) JPMorgan shall not be responsible for any failure to comply with Rule 10b-18(b)(3) to the extent any transaction that was executed (or
deemed to be executed) by or on behalf of Counterparty or an “affiliated purchaser” (as defined under Rule 10b-18) pursuant to a separate
agreement is not deemed to be an “independent bid” or an “independent transaction” for purposes of Rule 10b-18(b)(3) and (y) JPMorgan shall
not be responsible for any failure to comply with Rule 10b-18(b)(1) to the extent Counterparty fails to comply with Section 10 hereof.
Regulatory Disruption. In the event that JPMorgan concludes, in its sole discretion, that it is appropriate with respect to any legal, regulatory
or self-regulatory requirements or related policies and procedures (whether or not such requirements, policies or procedures are imposed by law
or have been voluntarily adopted by JPMorgan), for it to refrain from or decrease any market activity on any Scheduled Trading Day or Days
during the Calculation Period or, if applicable, the Settlement Valuation Period, JPMorgan may by written notice to Counterparty elect to deem
that a Market Disruption Event has occurred and will be continuing on such Scheduled Trading Day or Days.
9.
10b5-1 Plan. Counterparty represents, warrants and covenants to JPMorgan that:
(a)
(b)
(c)
Counterparty is entering into this Master Confirmation and each Transaction hereunder in good faith and not as part of a plan or
scheme to evade the prohibitions of Rule 10b5-1 under the Exchange Act (“Rule 10b5-1”) or any other antifraud or anti-
manipulation provisions of the federal or applicable state securities laws and that it has not entered into or altered and will not enter
into or alter any corresponding or hedging transaction or position with respect to the Shares. For the avoidance of doubt, the parties
hereto acknowledge that entry into any Other Specified Repurchase Agreement (as defined below) shall not fall within the ambit of
the previous sentence. Counterparty acknowledges that it is the intent of the parties that each Transaction entered into under this
Master Confirmation comply with the requirements of paragraphs (c)(1)(i)(A) and (B) of Rule 10b5-1 and each Transaction entered
into under this Master Confirmation shall be interpreted to comply with the requirements of Rule 10b5-1(c). “Other Specified
Repurchase Agreement” means, for any Transaction, any other prepaid variable share repurchase transaction entered into on the
Trade Date for such Transaction.
During the Calculation Period and the Settlement Valuation Period, if any, for any Transaction and in connection with the delivery
of any Alternative Delivery Units for any Transaction, JPMorgan (or its agent or Affiliate) may effect transactions in Shares in
connection with such Transaction. The timing of such transactions by JPMorgan, the price paid or received per Share pursuant to
such transactions and the manner in which such transactions are made, including, without limitation, whether such transactions are
made on any securities exchange or privately, shall be within the sole judgment of JPMorgan. Counterparty acknowledges and
agrees that all such transactions shall be made in JPMorgan’s sole judgment and for JPMorgan’s own account.
Counterparty does not have, and shall not attempt to exercise, any control or influence over how, when or whether JPMorgan (or its
agent or Affiliate) makes any “purchases or sales” (within the meaning of Rule 10b5-1(c)(1)(i)(B)(3)) in connection with any
Transaction, including, without limitation, over how, when or whether JPMorgan (or its agent or Affiliate) enters into any hedging
transactions. Counterparty represents and warrants that it has consulted with its own advisors as to
14
10.
the legal aspects of its adoption and implementation of this Master Confirmation and each Supplemental Confirmation under Rule
10b5-1.
(d)
(e)
Counterparty acknowledges and agrees that any amendment, modification, waiver or termination of this Master Confirmation or
any Supplemental Confirmation must be effected in accordance with the requirements for the amendment or termination of a “plan”
as defined in Rule 10b5-1(c). Without limiting the generality of the foregoing, any such amendment, modification, waiver or
termination shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5, and no such
amendment, modification or waiver shall be made at any time at which Counterparty or any officer, director, manager or similar
person of Counterparty is aware of any material non-public information regarding Counterparty or the Shares.
Counterparty shall not, directly or indirectly, communicate any information relating to the Shares or any Transaction (including,
without limitation, any notices required by Section 11(a) hereof) to any employee of JPMorgan, other than as set forth in the
Communications Procedures attached as Annex B hereto.
Counterparty Purchases. Counterparty (or any “affiliate” or “affiliated purchaser” as defined in Rule 10b-18) shall not, without the prior
written consent of JPMorgan, directly or indirectly (including, without limitation, by means of a derivative instrument) purchase, offer to
purchase, place any bid or limit order that would effect a purchase of, or commence any tender offer relating to, any Shares (or equivalent
interest, including, without limitation, a unit of beneficial interest in a trust or limited partnership or a depository share), listed contracts on the
Shares or securities that are convertible into, or exchangeable or exercisable for Shares (including, without limitation, any Rule 10b-18
purchases of blocks (as defined in Rule 10b-18)) during any Relevant Period, any Settlement Valuation Period (if applicable) or any Seller
Termination Purchase Period (if applicable), under this Master Confirmation except pursuant to any Other Specified Repurchase Agreement
that is intended to comply with the requirements of Rule 10b5-1(c) of the Exchange Act. However, the foregoing shall not (a) limit
Counterparty’s ability to purchase Shares in connection with any company employee, officer or director equity plan or any dividend
reinvestment plan, in each case, that is not expected to result in market transactions, (b) limit Counterparty’s ability to withhold Shares to cover
tax liabilities associated with any such plan, (c) prohibit any purchases effected by or for an issuer “plan” by an “agent independent of the
issuer” (each as defined in Rule 10b-18), (d) otherwise restrict Counterparty’s or any of its affiliates’ ability to repurchase Shares under
privately negotiated, off exchange transactions with any of its employees, officers, directors, affiliates or any third party that are not expected to
result in market transactions or (e) limit Counterparty’s ability to grant stock and options to “affiliated purchasers” (as defined in Rule 10b-18)
or the ability of such affiliated purchasers to acquire such stock or options in connection with Counterparty’s compensation policies for
directors, officers and employees or any agreements with respect to the compensation of directors, officers or employees of any entities that are
acquisition targets of Counterparty.
11.
Special Provisions for Merger Transactions. Notwithstanding anything to the contrary herein or in the Equity Definitions:
(a)
Counterparty agrees that it:
(i)
will not during the period commencing on the Trade Date for any Transaction and ending on the last day of the Relevant
Period or, if applicable, the later of the last day of the Settlement Valuation Period and the last day of the Seller
Termination Purchase Period, for such Transaction make, or permit to be made, any public announcement (as defined in
Rule 165(f) under the Securities Act) of any Merger Transaction or potential Merger Transaction (a “Merger
Announcement”) unless such Merger Announcement is made prior to the opening or after the close of the regular
trading session on the Exchange for the Shares;
15
(ii)
(iii)
shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) notify
JPMorgan following any such Merger Announcement that such Merger Announcement has been made; and
shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) provide
JPMorgan with written notice specifying (i) Counterparty’s average daily Rule 10b-18 Purchases (as defined in Rule
10b-18) during the three full calendar months immediately preceding the announcement date of any Merger Transaction
or potential Merger Transaction that were not effected through JPMorgan or its Affiliates and (ii) the number of Shares
purchased pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months
preceding the announcement date of any Merger Transaction or potential Merger Transaction. Such written notice shall
be deemed to be a certification by Counterparty to JPMorgan that such information is true and correct. In addition,
Counterparty shall promptly notify JPMorgan of the earlier to occur of the completion of such transaction and the
completion of the vote by target shareholders.
(b)
(c)
Counterparty acknowledges that any such Merger Announcement or delivery of a notice with respect thereto may cause the terms of
any Transaction to be adjusted or such Transaction to be terminated; accordingly, Counterparty acknowledges that its delivery of
such notice must comply with the standards set forth in Section 9 hereof.
Upon the occurrence of any Merger Announcement (whether made by Counterparty or a third party), JPMorgan in its good faith
and reasonable discretion may (i) make adjustments to the terms of any Transaction (other than the dates identified as Calculation
Dates in the related Supplemental Confirmation), including, without limitation, the Scheduled Termination Date or the Forward
Price Adjustment Amount, and/or suspend the Calculation Period and/or any Settlement Valuation Period or (ii) treat the occurrence
of such Merger Announcement as an Additional Termination Event with Counterparty as the sole Affected Party and the
Transactions hereunder as the Affected Transactions and with the amount under Section 6(e) of the Agreement determined taking
into account the fact that the Calculation Period or Settlement Valuation Period, as the case may be, had fewer Scheduled Trading
Days than originally anticipated.
“Merger Transaction” means any merger, acquisition or similar transaction involving a recapitalization as contemplated by Rule 10b-18(a)
(13)(iv) under the Exchange Act.
12.
Special Provisions for Acquisition Transaction Announcements. Notwithstanding anything to the contrary herein or in the Equity
Definitions:
(a)
(b)
If an Acquisition Transaction Announcement occurs on or prior to the Final Settlement Date for any Transaction, then the
Calculation Agent shall make such adjustments to the exercise, settlement, payment or any other terms of such Transaction as the
Calculation Agent determines appropriate (including, without limitation and for the avoidance of doubt, adjustments that would
allow the Number of Shares to be Delivered to be less than zero), at such time or at multiple times as the Calculation Agent
determines appropriate, to account for the economic effect on such Transaction of such event (including adjustments to account for
changes in volatility, expected dividends, stock loan rate, value of any commercially reasonable Hedge Positions in connection with
the Transaction and liquidity relevant to the Shares or to such Transaction). If an Acquisition Transaction Announcement occurs
after the Trade Date, but prior to the First Acceleration Date of any Transaction, the First Acceleration Date shall be the date of such
Acquisition Transaction Announcement. If the Number of Shares to be Delivered for any settlement of any Transaction is a
negative number, then the terms of the Counterparty Settlement Provisions in Annex A hereto shall apply.
“Acquisition Transaction Announcement” means (i) the announcement of an Acquisition Transaction or an event that, if
consummated, would result in an Acquisition Transaction, (ii) an announcement that Counterparty or any of its subsidiaries has
entered into an agreement, a letter of intent or an understanding designed to result in an Acquisition Transaction, (iii) the
announcement
16
of the intention to solicit or enter into, or to explore strategic alternatives or other similar undertaking that would reasonably be
expected to include, an Acquisition Transaction, (iv) any other announcement that in the good faith and commercially reasonable
judgment of the Calculation Agent may result in an Acquisition Transaction, or (v) any announcement of any change or amendment
to any previous Acquisition Transaction Announcement (including any announcement of the abandonment of any such previously
announced Acquisition Transaction, agreement, letter of intent, understanding or intention). For the avoidance of doubt,
announcements as used in the definition of Acquisition Transaction Announcement refer to any public announcement whether made
by the Issuer or a third party.
(c)
“Acquisition Transaction” means (i) any Merger Event (for purposes of this definition the definition of Merger Event shall be read
with the references therein to “100%” being replaced by “25%” and references to “50%” being replaced by “75%” and without
reference to the clause beginning immediately following the definition of Reverse Merger therein to the end of such definition),
Tender Offer or Merger Transaction or any other transaction involving the merger of Counterparty with or into any third party, (ii)
the sale or transfer of all or substantially all of the assets of Counterparty, (iii) a recapitalization, reclassification, binding share
exchange or other similar transaction with respect to Counterparty, (iv) any acquisition by Counterparty or any of its subsidiaries
where the aggregate consideration transferable by Counterparty or its subsidiaries exceeds 25% of the market capitalization of
Counterparty, (v) any lease, exchange, transfer, disposition (including, without limitation, by way of spin-off or distribution) of
assets (including, without limitation, any capital stock or other ownership interests in subsidiaries) or other similar event by
Counterparty or any of its subsidiaries where the aggregate consideration transferable or receivable by or to Counterparty or its
subsidiaries exceeds 25% of the market capitalization of Counterparty or (vi) any transaction in which Counterparty or its board of
directors has a legal obligation to make a recommendation to its shareholders in respect of such transaction (whether pursuant to
Rule 14e-2 under the Exchange Act or otherwise).
13.
Acknowledgments.
(a)
The parties hereto intend for:
(i)
(ii)
(iii)
(iv)
each Transaction to be a “securities contract” as defined in Section 741(7) of the Bankruptcy Code and a “forward
contract” as defined in Section 101(25) of the Bankruptcy Code, and the parties hereto to be entitled to the protections
afforded by, among other Sections, Sections 362(b)(6), 362(b)(27), 362(o), 546(e), 546(j), 555, 556, 560 and 561 of the
Bankruptcy Code;
the Agreement to be a “master netting agreement” as defined in Section 101(38A) of the Bankruptcy Code;
a party’s right to liquidate, terminate or accelerate any Transaction, net out or offset termination values or payment
amounts, and to exercise any other remedies upon the occurrence of any Event of Default or Termination Event under
the Agreement with respect to the other party or any Extraordinary Event that results in the termination or cancellation
of any Transaction to constitute a “contractual right” (as defined in the Bankruptcy Code); and
all payments for, under or in connection with each Transaction, all payments for the Shares (including, for the
avoidance of doubt, payment of the Prepayment Amount) and the transfer of such Shares to constitute “settlement
payments” and “transfers” (as defined in the Bankruptcy Code).
(b)
Counterparty acknowledges that:
17
(i)
(ii)
(iii)
(iv)
(v)
during the term of any Transaction, JPMorgan and its Affiliates may buy or sell Shares or other securities or buy or sell
options or futures contracts or enter into swaps or other derivative securities to establish, adjust or unwind its hedge
position with respect to such Transaction;
JPMorgan and its Affiliates may also be active in the market for the Shares and Share-linked transactions other than in
connection with hedging activities in relation to any Transaction;
JPMorgan shall make its own determination as to whether, when or in what manner any hedging or market activities in
Counterparty’s securities shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and
market risk with respect to the Forward Price and the VWAP Price;
any market activities of JPMorgan and its Affiliates with respect to the Shares may affect the market price and volatility
of the Shares, as well as the Forward Price, the VWAP Price and the Settlement Price, each in a manner that may be
adverse to Counterparty; and
each Transaction is a derivatives transaction in which it has granted JPMorgan an option; JPMorgan may purchase
shares for its own account at an average price that may be greater than, or less than, the price paid by Counterparty
under the terms of the related Transaction.
14.
15.
16.
No Collateral, Netting or Setoff. Notwithstanding any provision of the Agreement or any other agreement between the parties to the contrary,
the obligations of Counterparty hereunder are not secured by any collateral. Obligations under any Transaction shall not be netted, recouped or
set off (including pursuant to Section 6 of the Agreement) against any other obligations of the parties, whether arising under the Agreement,
this Master Confirmation or any Supplemental Confirmation, or under any other agreement between the parties hereto, by operation of law or
otherwise, and no other obligations of the parties shall be netted, recouped or set off (including pursuant to Section 6 of the Agreement) against
obligations under any Transaction, whether arising under the Agreement, this Master Confirmation or any Supplemental Confirmation, or under
any other agreement between the parties hereto, by operation of law or otherwise, and each party hereby waives any such right of setoff, netting
or recoupment.
Delivery of Shares. Notwithstanding anything to the contrary herein, JPMorgan may, by prior notice to Counterparty, satisfy its obligation to
deliver any Shares or other securities on any date due (an “Original Delivery Date”) by making separate deliveries of Shares or such securities,
as the case may be, at more than one time on or prior to such Original Delivery Date, so long as the aggregate number of Shares and other
securities so delivered on or prior to such Original Delivery Date is equal to the number required to be delivered on such Original Delivery
Date.
Alternative Termination Settlement. In the event that (a) an Early Termination Date (whether as a result of an Event of Default or a
Termination Event) occurs or is designated with respect to any Transaction or (b) any Transaction is cancelled or terminated upon the
occurrence of an Extraordinary Event (except as a result of (i) a Nationalization, Insolvency or Merger Event in which the consideration to be
paid to holders of Shares consists solely of cash, (ii) a Merger Event or Tender Offer that is within Counterparty’s control, or (iii) an Event of
Default in which Counterparty is the Defaulting Party or a Termination Event in which Counterparty is the Affected Party other than an Event
of Default of the type described in Section 5(a)(iii), (v), (vi), (vii) or (viii) of the Agreement or a Termination Event of the type described in
Section 5(b) of the Agreement, in each case that resulted from an event or events outside Counterparty’s control), if either party would owe any
amount to the other party pursuant to Section 6(d)(ii) of the Agreement or any Cancellation Amount pursuant to Article 12 of the Equity
Definitions (any such amount, a “Payment Amount”), then, in lieu of any payment of such Payment Amount, unless Counterparty makes an
election to the contrary no later than the Early Termination Date or the date on which such Transaction is terminated or cancelled, Counterparty
or JPMorgan, as the case may be, shall deliver to the other party a number of Shares (or, in the case of a Nationalization, Insolvency or Merger
Event, a number of units, each comprising the number or amount of the securities or property that a hypothetical holder of one Share would
receive in such Nationalization,
18
Insolvency or Merger Event, as the case may be (each such unit, an “Alternative Delivery Unit”)) with a value equal to the Payment Amount,
as determined by the Calculation Agent over a commercially reasonable period of time (and the parties agree that, in making such
determination of value, the Calculation Agent may take into account a number of factors, including, without limitation, the market price of the
Shares or Alternative Delivery Units on the Early Termination Date or the date of early cancellation or termination, as the case may be, and, if
such delivery is made by JPMorgan, the prices at which JPMorgan purchases Shares or Alternative Delivery Units on any Calculation Date to
fulfill its delivery obligations under this Section 16); provided that in determining the composition of any Alternative Delivery Unit, if the
relevant Nationalization, Insolvency or Merger Event involves a choice of consideration to be received by holders, such holder shall be deemed
to have elected to receive the maximum possible amount of cash; and provided further that Counterparty may elect that the provisions of this
Section 16 above providing for the delivery of Shares or Alternative Delivery Units, as the case may be, shall not apply only if Counterparty
represents and warrants to JPMorgan, in writing on the date it notifies JPMorgan of such election, that, as of such date, Counterparty is not
aware of any material non-public information regarding Counterparty or the Shares and is making such election in good faith and not as part of
a plan or scheme to evade compliance with the federal securities laws. If delivery of Shares or Alternative Delivery Units, as the case may be,
pursuant to this Section 16 is to be made by Counterparty, paragraphs 2 through 7 of Annex A hereto shall apply as if (A) such delivery were a
settlement of such Transaction to which Net Share Settlement applied, (B) the Cash Settlement Payment Date were the Early Termination Date
or the date of early cancellation or termination, as the case may be, and (C) the Forward Cash Settlement Amount were equal to (x) zero minus
(y) the Payment Amount owed by Counterparty. For the avoidance of doubt, if Counterparty validly elects for the provisions of this Section 16
relating to the delivery of Shares or Alternative Delivery Units, as the case may be, not to apply to any Payment Amount, the provisions of
Article 12 of the Equity Definitions, or the provisions of Section 6(d)(ii) of the Agreement, as the case may be, shall apply. If delivery of
Shares or Alternative Delivery Units, as the case may be, is to be made by JPMorgan pursuant to this Section 1616, the period during which
JPMorgan purchases Shares or Alternative Delivery Units to fulfill its delivery obligations under this Section 166 shall be referred to as the
“Seller Termination Purchase Period”; provided that the parties hereby agree that such purchases shall be made solely on Calculation Dates
for the relevant Transaction.
Calculations and Payment Date upon Early Termination. The parties acknowledge and agree that in calculating (a) the Close-Out Amount
pursuant to Section 6 of the Agreement and (b) the amount due upon cancellation or termination of any Transaction (whether in whole or in
part) pursuant to Article 12 of the Equity Definitions as a result of an Extraordinary Event, JPMorgan may (but need not) determine such
amount based on (i) expected losses assuming a commercially reasonable (including, without limitation, with regard to reasonable legal and
regulatory guidelines and taking into account the existence of any Other Specified Repurchase Transaction) risk bid were used to determine loss
or (ii) the price at which one or more market participants would offer to sell to the Seller a block of Shares equal in number to the Seller’s
hedge position in relation to the Transaction. Notwithstanding anything to the contrary in Section 6(d)(ii) of the Agreement or Article 12 of the
Equity Definitions, all amounts calculated as being due in respect of an Early Termination Date under Section 6(e) of the Agreement or upon
cancellation or termination of the relevant Transaction under Article 12 of the Equity Definitions will be payable on the day that notice of the
amount payable is effective; provided that if Counterparty elects to receive or deliver Shares or Alternative Delivery Units in accordance with
Section 16 hereof, such Shares or Alternative Delivery Units shall be delivered on a date selected in a good faith and commercially reasonable
manner by JPMorgan as promptly as practicable.
Limit on Beneficial Ownership. Notwithstanding any other provisions hereof, JPMorgan may not be entitled to take delivery of any Shares
deliverable hereunder to the extent (but only to the extent) that, after such receipt of any Shares hereunder, the Equity Percentage would exceed
7.5%. Any purported delivery hereunder shall be void and have no effect to the extent (but only to the extent) that, after such delivery the
Equity Percentage would exceed 7.5%. If any delivery owed to JPMorgan hereunder is not made, in whole or in part, as a result of this
provision, Counterparty’s obligation to make such delivery shall not be extinguished and Counterparty shall make such delivery as promptly as
practicable after, but in no event later than one Business Day after, JPMorgan gives notice to Counterparty that, after such delivery, the Equity
Percentage would not exceed 7.5%. The “Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of
which is the number of Shares that JPMorgan and any of its affiliates or any other person subject to aggregation with JPMorgan for purposes of
the “beneficial ownership” test under
17.
18.
19
Section 13 of the Exchange Act, or any “group” (within the meaning of Section 13) of which JPMorgan is or may be deemed to be a part
beneficially owns (within the meaning of Section 13 of the Exchange Act), without duplication, on such day (or, to the extent that for any
reason the equivalent calculation under Section 16 of the Exchange Act and the rules and regulations thereunder results in a higher number,
such higher number) and (B) the denominator of which is the number of Shares outstanding on such day.
19.
Maximum Share Delivery. Notwithstanding anything to the contrary in this Master Confirmation, in no event shall JPMorgan be required to
deliver any Shares, or any Shares or other securities comprising Alternative Delivery Units, in respect of any Transaction in excess of the
Maximum Number of Shares set forth in the Supplemental Confirmation for such Transaction.
20.
Additional Termination Events.
21.
22.
23.
24.
(a)
(b)
The occurrence of an event described in paragraph III of Annex B hereto will constitute an Additional Termination Event, with
Counterparty as the sole Affected Party and the Transactions specified in such paragraph III as the Affected Transactions.
Notwithstanding anything to the contrary in Section 6 of the Agreement, if a Termination Price is specified in the Supplemental
Confirmation for any Transaction, then an Additional Termination Event will occur without any notice or action by JPMorgan or
Counterparty if the price of the Shares on the Exchange at any time falls below such Termination Price, with Counterparty as the
sole Affected Party and such Transaction as the sole Affected Transaction.
Non-confidentiality. JPMorgan and Counterparty hereby acknowledge and agree that, subject to Section 9(e) hereof, each is authorized to
disclose every aspect of this Master Confirmation, any Supplemental Confirmation and the transactions contemplated hereby and thereby to any
and all persons, without limitation of any kind, and there are no express or implied agreements, arrangements or understandings to the contrary.
[RESERVED].
[RESERVED].
Assignment and Transfer. Notwithstanding anything to the contrary in the Agreement, JPMorgan may not assign any of its rights or duties
hereunder to any one or more of its Affiliates without the prior written consent of Counterparty, which consent will not be unreasonably
withheld or delayed; provided that such assignment shall not be permitted if Counterparty will either (x) be required to pay an additional
amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) of the Agreement under the law as of the date of the transfer or assignment,
or (y) receive a payment from which an amount has been deducted or withheld for or on account of any Tax in respect of which the other party
is not required to pay an additional amount, in either case, as a result of such assignment.. Notwithstanding any other provision in this Master
Confirmation to the contrary requiring or allowing JPMorgan to purchase, sell, receive or deliver any Shares or other securities to or from
Counterparty, JPMorgan may designate any of its Affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to
perform JPMorgan’s obligations in respect of any Transaction and any such designee may assume such obligations. JPMorgan may assign the
right to receive Settlement Shares to any third party who may legally receive Settlement Shares. JPMorgan shall be discharged of its
obligations to Counterparty only to the extent of any such performance. For the avoidance of doubt, JPMorgan hereby acknowledges that
notwithstanding any such designation hereunder, to the extent any of JPMorgan’s obligations in respect of any Transaction are not completed by
its designee, JPMorgan shall be obligated to continue to perform or to cause any other of its designees to perform in respect of such obligations.
25.
Amendments to the Equity Definitions.
(a)
Section 11.2(a) of the Equity Definitions is hereby amended by deleting the words “a diluting or concentrative” and replacing them
with the word “an”; and adding the phrase “or such Transaction” at the end of the sentence.
20
(b)
(c)
(d)
Section 11.2(c) of the Equity Definitions is hereby amended by (i) replacing the words “a diluting or concentrative” with “an” in the
fifth line thereof, (ii) adding the phrase “or such Transaction” after the words “the relevant Shares” in the same sentence, (iii)
deleting the words “diluting or concentrative” in the sixth to last line thereof, and (iv) deleting the phrase “(provided that no
adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the
relevant Shares)” and replacing it with the phrase “(and, for the avoidance of doubt, adjustments may be made to account solely for
changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares).”
Section 11.2(e)(vii) of the Equity Definitions is hereby amended by deleting the words “a diluting or concentrative” and replacing
them with the words “a material”; and adding the phrase “or the relevant Transaction” at the end of the sentence.
Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (i) deleting from the fourth line thereof the word “or” after the
word “official” and inserting a comma therefor, and (ii) deleting the semi-colon at the end of subsection (B) thereof and inserting
the following words therefor “or (C) at JPMorgan’s option, the occurrence of any of the events specified in Section 5(a)(vii) (1)
through (9) of the ISDA Master Agreement with respect to that Issuer.”
(e)
Section 12.9(b)(iv) of the Equity Definitions is hereby amended by:
(i)
(ii)
deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each
case” in subsection (B); and
replacing the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares” with the phrase “such
Lending Party does not lend Shares” in the penultimate sentence.
(f)
Section 12.9(b)(v) of the Equity Definitions is hereby amended by:
(i)
(ii)
adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and
(1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C), (3) deleting
the penultimate sentence in its entirety and replacing it with the sentence “The Hedging Party will determine the
Cancellation Amount payable by one party to the other” and (4) deleting clause (X) in the final sentence.
(g)
Section 12.9(b)(vi) of the Equity Definitions is hereby amended by:
(i)
(ii)
adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and
(1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C) and (3)
deleting the final sentence in its entirety and replacing it with the sentence “The Hedging Party will determine the
Cancellation Amount payable by one party to the other”.
26.
Extraordinary Dividend. If Counterparty declares any Extraordinary Dividend that has an ex-dividend date during the period commencing on
the Trade Date for any Transaction and ending of the last day of the Relevant Period or, if applicable, the later of the last day of the Settlement
Valuation Period and the last day of the Seller Termination Purchase Period, for such Transaction, then prior to or on the date on which such
Extraordinary Dividend is paid by Counterparty to holders of record, Counterparty shall pay to JPMorgan, for each Transaction under this
Master Confirmation, an amount in cash equal to the product of (i) the amount of such Extraordinary Dividend and (ii) the theoretical short
delta number of shares as of the opening of business on the related ex-dividend date, as determined by the Calculation Agent, required for
JPMorgan to hedge its exposure to such Transaction.
21
27.
Tax Matters.
(a)
For the purpose of Section 3(e) of the Agreement, each of Counterparty and JPMorgan hereby represents that it is not required by
any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to
make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 9(h) of the
Agreement or amounts payable hereunder that may be considered to be interest for United States federal income tax purposes) to be
made by it to the other party under the Agreement. In making this representation, it may rely on (i) the accuracy of any
representations made by the other party pursuant to Section 3(f) of the Agreement, (ii) the satisfaction of the agreement contained in
Section 4(a)(i) or 4(a)(iii) of the Agreement and the accuracy and effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or 4(a)(iii) of the Agreement and (iii) the satisfaction of the agreement of the other party contained in
Section 4(d) of the Agreement, except that it will not be a breach of this representation where reliance is placed on clause (ii) above
and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or
commercial position.
(b)
For the purpose of Section 3(f) of the Agreement,
(i)
Counterparty makes the following representation to JPMorgan:
Counterparty is a “U.S. person” (as that term is used in Section 1.1441-4(a)(3)(ii) of United States Treasury
Regulations) for United States federal income tax purposes.
(ii)
JPMorgan makes the following representation to Counterparty:
JPMorgan is a “U.S. person” (as that term is used in Section 1.1441-4(a)(3)(ii) of United States Treasury Regulations)
for United States federal income tax purposes.
(c)
(d)
“Tax” and “Indemnifiable Tax”, each as defined in Section 14 of the Agreement, shall not include any U.S. federal withholding tax
imposed or collected pursuant to Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”),
any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the
Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in
connection with the implementation of such Sections of the Code (a “FATCA Withholding Tax”). For the avoidance of doubt, a
FATCA Withholding Tax is a Tax the deduction or withholding of which is required by applicable law for the purposes of Section
2(d) of the Agreement.
Each party shall provide to the other party a valid U.S. Internal Revenue Service Form W-9 or any successor thereto, (i) on or
before the date of execution of this Master Confirmation and (ii) promptly upon learning that any such tax form previously provided
by such party has become obsolete or incorrect. Additionally, each party shall, promptly upon request by the other party, provide
such other tax forms and documents reasonably requested by the other party.
28.
Status of Claims in Bankruptcy. JPMorgan acknowledges and agrees that neither this Master Confirmation nor any Supplemental
Confirmation is intended to convey to JPMorgan rights against Counterparty with respect to any Transaction that are senior to the claims of
common stockholders of Counterparty in any United States bankruptcy proceedings of Counterparty; provided that nothing herein shall limit or
shall be deemed to limit JPMorgan’s right to pursue remedies in the event of a breach by Counterparty of its obligations and agreements with
respect to any Transaction; provided further that nothing herein shall limit or shall be deemed to limit JPMorgan’s rights in respect of any
transactions other than any Transaction.
22
29.
30.
31.
Wall Street Transparency and Accountability Act. In connection with Section 739 of the Wall Street Transparency and Accountability Act
of 2010 (“WSTAA”), the parties hereby agree that neither the enactment of WSTAA or any regulation under the WSTAA, nor any requirement
under WSTAA or an amendment made by WSTAA, nor any similar legal certainty provision in any legislation enacted, or rule or regulation
promulgated, on or after the date of this Master Confirmation, shall limit or otherwise impair either party’s otherwise applicable rights to
terminate, renegotiate, modify, amend or supplement any Supplemental Confirmation, this Master Confirmation or the Agreement, as
applicable, arising from a termination event, force majeure, illegality, increased costs, regulatory change or similar event under any
Supplemental Confirmation, this Master Confirmation, the Equity Definitions incorporated herein, or the Agreement (including, without
limitation, rights arising from Change in Law, Loss of Stock Borrow, Increased Cost of Stock Borrow, Hedging Disruption, Increased Cost of
Hedging, or Illegality).
Communications with Employees of J.P. Morgan Securities LLC. If Counterparty interacts with any employee of J.P. Morgan Securities
LLC with respect to any Transaction, Counterparty is hereby notified that such employee will act solely as an authorized representative of
JPMorgan Chase Bank, N.A. (and not as a representative of J.P. Morgan Securities LLC) in connection with such Transaction.
Waiver of Jury Trial. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING RELATING TO THE AGREEMENT,
THIS MASTER CONFIRMATION, EACH SUPPLEMENTAL CONFIRMATION, THE TRANSACTIONS HEREUNDER AND ALL
MATTERS ARISING IN CONNECTION WITH THE AGREEMENT, THIS MASTER CONFIRMATION AND ANY SUPPLEMENTAL
CONFIRMATION AND THE TRANSACTIONS HEREUNDER. EACH PARTY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF SUCH A SUIT, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II)
ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THE TRANSACTIONS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS PROVIDED HEREIN.
32.
Counterparts.
(a)
This Master Confirmation may be executed in any number of counterparts, all of which shall constitute one and the same
instrument, and any party hereto may execute this Master Confirmation by signing and delivering one or more counterparts.
Counterparts may be delivered via facsimile, electronic mail (including any electronic signature covered by the U.S. federal ESIGN
Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g.,
DocuSign and AdobeSign (any such signature, an “Electronic Signature”)) or other transmission method and any counterpart so
delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. The words
“execution,” “signed,” “signature” and words of like import in this Master Confirmation or in any other certificate, agreement or
document related to this Master Confirmation shall include any Electronic Signature, except to the extent electronic notices are
expressly prohibited under this Master Confirmation or the Agreement
(b)
Notwithstanding anything to the contrary in the Agreement, either party may deliver to the other party a notice relating to any Event
of Default or Termination Event under this Master Confirmation by e-mail.
33.
U.S. Resolution Stay Protocol. The parties acknowledge and agree that (i) to the extent that prior to the date hereof both parties have adhered
to the 2018 ISDA U.S. Resolution Stay Protocol (the “Protocol”), the terms of the Protocol are incorporated into and form a part of the
Agreement, and for such purposes the Agreement shall be deemed a Protocol Covered Agreement, JPMorgan shall be deemed a Regulated
Entity and Counterparty shall be deemed an Adhering Party; (ii) to the extent that prior to the date hereof the parties have executed a separate
agreement the effect of which is to amend the qualified financial contracts between them to conform with the requirements of the QFC Stay
Rules (the “Bilateral Agreement”), the terms of the Bilateral Agreement are incorporated into and form a part of the Agreement, and for such
purposes the Agreement shall be deemed a Covered Agreement, JPMorgan shall be deemed a Covered Entity and
23
Counterparty shall be deemed a Counterparty Entity; or (iii) if clause (i) and clause (ii) do not apply, the terms of Section 1 and Section 2 and
the related defined terms (together, the “Bilateral Terms”) of the form of bilateral template entitled “Full-Length Omnibus (for use between
U.S. G-SIBs and Corporate Groups)” published by ISDA on November 2, 2018 (currently available on the 2018 ISDA U.S. Resolution Stay
Protocol page at www.isda.org and, a copy of which is available upon request), the effect of which is to amend the qualified financial contracts
between the parties thereto to conform with the requirements of the QFC Stay Rules, are hereby incorporated into and form a part of the
Agreement, and for such purposes the Agreement shall be deemed a “Covered Agreement,” JPMorgan shall be deemed a “Covered Entity” and
Counterparty shall be deemed a “Counterparty Entity.” In the event that, after the date of the Agreement, both parties hereto become adhering
parties to the Protocol, the terms of the Protocol will replace the terms of this paragraph. In the event of any inconsistencies between the
Agreement and the terms of the Protocol, the Bilateral Agreement or the Bilateral Terms (each, the “QFC Stay Terms”), as applicable, the
QFC Stay Terms will govern. Terms used in this paragraph without definition shall have the meanings assigned to them under the QFC Stay
Rules. For purposes of this paragraph, references to “the Agreement” include any related credit enhancements entered into between the parties
or provided by one to the other. In addition, the parties agree that the terms of this paragraph shall be incorporated into any related covered
affiliate credit enhancements, with all references to JPMorgan replaced by references to the covered affiliate support provider.
“QFC Stay Rules” means the regulations codified at 12 C.F.R. 252.2, 252.81–8, 12 C.F.R. 382.1-7 and 12 C.F.R. 47.1-8, which, subject to
limited exceptions, require an express recognition of the stay-and-transfer powers of the FDIC under the Federal Deposit Insurance Act and the
Orderly Liquidation Authority under Title II of the Dodd Frank Wall Street Reform and Consumer Protection Act and the override of default
rights related directly or indirectly to the entry of an affiliate into certain insolvency proceedings and any restrictions on the transfer of any
covered affiliate credit enhancements.
CARES Act. Counterparty represents and warrants that it has not applied, and throughout the term of any Transaction shall not apply, for a
loan, loan guarantee, direct loan (as that term is defined in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”)) or
other investment, or to receive any financial assistance or relief (howsoever defined) under any program or facility that (a) is established under
applicable law (whether in existence as of the Trade Date for such Transaction or subsequently enacted, adopted or amended), including
without limitation the CARES Act and the Federal Reserve Act, as amended, and (b) requires under applicable law (or any regulation,
guidance, interpretation or other pronouncement thereunder), as a condition of such loan, loan guarantee, direct loan (as that term is defined in
the CARES Act), investment, financial assistance or relief, that Counterparty agree, attest, certify or warrant that it has not, as of the date
specified in such condition, repurchased, or will not repurchase, any equity security of Counterparty, and that it has not, as of the date specified
in such condition, made a capital distribution or will not make a capital distribution. Counterparty further represents and warrants that the
Prepayment Amount for any Transaction is not being paid, in whole or in part, directly or indirectly, with funds received under or pursuant to
any program or facility, including the U.S. Small Business Administration’s “Paycheck Protection Program”, that (a) is established under
applicable law (whether in existence as of the Trade Date for such Transaction or subsequently enacted, adopted or amended), including
without limitation the CARES Act and the Federal Reserve Act, as amended, and (b) requires under such applicable law (or any regulation,
guidance, interpretation or other pronouncement of a governmental authority with jurisdiction for such program or facility) that such funds be
used for specified or enumerated purposes that do not include the purchase of Shares pursuant to any Transaction (either by specific reference
thereto or by general reference to transactions with the attributes thereof in all relevant respects).
34.
24
Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Master Confirmation and returning it to us.
Very truly yours,
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
/s/ Sanjeet Dewal
By:
Authorized Signatory
Name:
Sanjet Dewal
Managing Director
Accepted and confirmed
as of the date first set
forth above:
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
/s/ Richard J. Poulton
By:
Authorized Signatory
Name:
Richard J. Poulton
FORM OF SUPPLEMENTAL CONFIRMATION
[__________], 20[__]
SCHEDULE A
From:
JPMorgan Chase Bank, National Association
New York Branch
383 Madison Avenue
New York, NY, 10179
To:
Allscripts Healthcare Solutions, Inc.
222 Merchandise Mart Plaza, Suite 2024
Chicago, IL 60654
Attention: Richard J. Poulton
Telephone No.:312.506.1216
Email:rick.poulton@allscripts.com; legal.notices@allscripts.com
Re:
Supplemental Confirmation—Uncollared Accelerated Share Repurchase
The purpose of this Supplemental Confirmation is to confirm the terms and conditions of the Transaction entered into between JPMorgan
Chase Bank, National Association (“JPMorgan”) and Allscripts Healthcare Solutions, Inc., a Delaware corporation (“Counterparty”) on the Trade Date
specified below. This Supplemental Confirmation is a binding contract between JPMorgan and Counterparty as of the relevant Trade Date for the
Transaction referenced below.
1.
This Supplemental Confirmation supplements, forms part of, and is subject to the Master Confirmation, dated as of November 30, 2020 (the
“Master Confirmation”), between JPMorgan and Counterparty, as amended and supplemented from time to time. All provisions contained in the Master
Confirmation govern this Supplemental Confirmation except as expressly modified below.
2.
The terms of the Transaction to which this Supplemental Confirmation relates are as follows:
Trade Date:
Forward Price Adjustment Amount:
Calculation Period Start Date:
Scheduled Termination Date:
First Acceleration Date:
Prepayment Amount:
Prepayment Date:
Initial Shares:
[__________], 20[__]
USD [___]
[__________], 20[__]
[__________], 20[__]
[__________], 20[__]
USD [___]
[__________], 20[__]
[___] Shares; provided that if, in connection with the Transaction,
JPMorgan is unable to borrow or otherwise acquire a number of Shares
equal to the Initial Shares for delivery to Counterparty on the Initial
Share Delivery Date, the Initial Shares delivered on the Initial Share
Delivery Date shall be reduced to such number of Shares that
JPMorgan is able to so borrow or otherwise acquire. All Shares
delivered to Counterparty in respect of the Transaction pursuant to this
paragraph shall be the “Initial Shares”
A-1
Initial Share Delivery Date:
Maximum Stock Loan Rate:
Initial Stock Loan Rate:
Maximum Number of Shares:
Floor Price:
Termination Price:
Additional Relevant Days:
Reserved Shares:
Calculation Dates:
for purposes of “Number of Shares to be Delivered” in the Master
Confirmation.
[__________], 20[__]
[__] basis points per annum
[__] basis points per annum
[__]1 Shares
USD 0.01 per Share
USD [___] per Share
The [___] Exchange Business Days immediately following the
Calculation Period.
Notwithstanding anything to the contrary in the Master Confirmation,
as of the date of this Supplemental Confirmation, the Reserved Shares
shall be equal to [___] Shares.
[_]
[_]
[_]
If necessary, the Calculation Agent may add additional Calculation Dates beginning with [__________], 20[__] and continuing with every other Scheduled
Trading Day thereafter.
3.
Counterparty represents and warrants to JPMorgan that neither it nor any “affiliated purchaser” (as defined in Rule 10b-18 under the Exchange
Act) has made any purchases of blocks pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act during either (i) the four full calendar weeks
immediately preceding the Trade Date or (ii) during the calendar week in which the Trade Date occurs, except as set forth in any notice delivered pursuant
to Section 6(b)(xv) of the Master Confirmation.
4.
any party hereto may execute this Supplemental Confirmation by signing and delivering one or more counterparts.
This Supplemental Confirmation may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and
1
To be approximately 50% of the total number of Shares outstanding on the Trade Date.
A-2
Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Supplemental Confirmation and returning it
to us.
Very truly yours,
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
By:
Authorized Signatory
Name:
Accepted and confirmed
as of the Trade Date:
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
By:
Authorized Signatory
Name:
A-3
FORM OF CERTIFICATE OF RULE 10B-18 PURCHASES
[Letterhead of Counterparty]
SCHEDULE B
JPMorgan Chase Bank, National Association
New York Branch
383 Madison Avenue
New York, NY, 10179
Re:
Uncollared Accelerated Share Repurchase
Ladies and Gentlemen:
In connection with our entry into the Master Confirmation, dated as of November 30, 2020, between JPMorgan Chase Bank, National
Association and Allscripts Healthcare Solutions, Inc., a Delaware corporation, as amended and supplemented from time to time (the “Master
Confirmation”) and the Supplemental Confirmation thereto, dated as of November 30, 2020, we hereby represent that set forth below is the total number
of shares of our common stock purchased by or for us or any of our affiliated purchasers in Rule 10b-18 purchases of blocks (all as defined in Rule 10b-18
under the Securities Exchange Act of 1934) pursuant to the once-a-week block exception set forth in Rule 10b-18(b)(4) during the four full calendar weeks
immediately preceding the first day of the [Calculation Period][Settlement Valuation Period][Seller Termination Purchase Period] (as defined in the Master
Confirmation) and the week during which the first day of such [Calculation Period][Settlement Valuation Period][Seller Termination Purchase Period]
occurs.
Number of Shares: __________________
We understand that you will use this information in calculating trading volume for purposes of Rule 10b-18.
B-1
Confirmed as of the date first written above:
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
By:
Authorized Signatory
Name:
[Signature Page to Rule 10b-18 Certificate]
COUNTERPARTY SETTLEMENT PROVISIONS
The following Counterparty Settlement Provisions shall apply to any Transaction to the extent indicated under the Master
ANNEX A
1.
Confirmation:
Settlement Currency:
Settlement Method Election:
USD
Applicable; provided that (i) Section 7.1 of the Equity Definitions is hereby
amended by deleting the word “Physical” in the sixth line thereof and replacing it
with the words “Net Share” and (ii) the Electing Party may make a settlement
method election only if the Electing Party represents and warrants to JPMorgan in
writing on the date it notifies JPMorgan of its election that, as of such date, the
Electing Party is not aware of any material non-public information regarding
Counterparty or the Shares and is electing the settlement method in good faith and
not as part of a plan or scheme to evade compliance with the federal securities laws.
Electing Party:
Counterparty
Settlement Method Election Date:
The earlier of (i) the Scheduled Termination Date and (ii) the second Exchange
Business Day immediately following the Accelerated Termination Date (in which
case the election under Section 7.1 of the Equity Definitions shall be made no later
than 10 minutes prior to the open of trading on the Exchange on such second
Exchange Business Day), as the case may be.
Default Settlement Method:
Cash Settlement
Forward Cash Settlement Amount:
Settlement Price:
Settlement Valuation Period:
Cash Settlement:
Cash Settlement Payment Date:
Net Share Settlement Procedures:
An amount equal to (a) the Number of Shares to be Delivered, multiplied by (b) the
Settlement Price.
An amount equal to the average of the VWAP Prices for the Calculation Dates in
the Settlement Valuation Period, plus USD 0.02, subject to Valuation Disruption as
specified in the Master Confirmation (in each case, plus interest on such amount
during the Settlement Valuation Period at the rate of interest for Counterparty’s long
term, unsecured and unsubordinated indebtedness, as determined by the Calculation
Agent).
A number of Scheduled Trading Days selected by JPMorgan in its reasonable
discretion, beginning on the Scheduled Trading Day immediately following the
earlier of (i) the Scheduled Termination Date or (ii) the Exchange Business Day
immediately following the Termination Date.
If Cash Settlement is applicable, then Buyer shall pay to JPMorgan the absolute
value of the Forward Cash Settlement Amount on the Cash Settlement Payment
Date.
The Exchange Business Day immediately following the last day of the Settlement
Valuation Period.
If Net Share Settlement is applicable, Net Share Settlement shall be made in
accordance with paragraphs 2 through 7 below.
Annex A-1
2.
Net Share Settlement shall be made by delivery on the Cash Settlement Payment Date of a number of Shares satisfying the
conditions set forth in paragraph 3 below (the “Registered Settlement Shares”), or a number of Shares not satisfying such conditions (the “Unregistered
Settlement Shares”), in either case with a value equal to 101% (in the case of Registered Settlement Shares) or 105% (in the case of Unregistered
Settlement Shares) of the absolute value of the Forward Cash Settlement Amount, with such Shares’ value based on the value thereof to JPMorgan (which
value shall, in the case of Unregistered Settlement Shares, take into account a commercially reasonable illiquidity discount), in each case as determined by
the Calculation Agent. If all of the conditions for delivery of either Registered Settlement Shares or Unregistered Settlement Shares have not been
satisfied, Cash Settlement shall be applicable in accordance with paragraph 1 above notwithstanding Counterparty’s election of Net Share Settlement.
3.
Counterparty may only deliver Registered Settlement Shares pursuant to paragraph 2 above if:
(a)
a registration statement covering public resale of the Registered Settlement Shares by JPMorgan (the “Registration Statement”)
shall have been filed with the Securities and Exchange Commission under the Securities Act and been declared or otherwise become effective on or prior to
the date of delivery, and no stop order shall be in effect with respect to the Registration Statement; a printed prospectus relating to the Registered
Settlement Shares (including, without limitation, any prospectus supplement thereto, the “Prospectus”) shall have been delivered to JPMorgan, in such
quantities as JPMorgan shall reasonably have requested, on or prior to the date of delivery;
(b)
the form and content of the Registration Statement and the Prospectus (including, without limitation, any sections describing the
plan of distribution) shall be satisfactory to JPMorgan;
(c)
as of or prior to the date of delivery, JPMorgan and its agents shall have been afforded a reasonable opportunity to conduct a due
diligence investigation with respect to Counterparty customary in scope for underwritten offerings of equity securities of similar size and the results of such
investigation are satisfactory to JPMorgan, in its discretion; and
(d)
as of the date of delivery, an agreement (the “Underwriting Agreement”) shall have been entered into with JPMorgan in
connection with the public resale of the Registered Settlement Shares by JPMorgan substantially similar to underwriting agreements customary for
underwritten offerings of equity securities of similar size, in form and substance satisfactory to JPMorgan, which Underwriting Agreement shall include,
without limitation, provisions substantially similar to those contained in such underwriting agreements relating, without limitation, to the indemnification
of, and contribution in connection with the liability of, JPMorgan and its Affiliates and the provision of customary opinions, accountants’ comfort letters
and lawyers’ negative assurance letters.
4.
(a)
If Counterparty delivers Unregistered Settlement Shares pursuant to paragraph 2 above:
all Unregistered Settlement Shares shall be delivered to JPMorgan (or any Affiliate of JPMorgan designated by JPMorgan) pursuant
to the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) thereof;
(b)
as of or prior to the date of delivery, JPMorgan and any potential purchaser of any such shares from JPMorgan (or any Affiliate of
JPMorgan designated by JPMorgan) identified by JPMorgan shall be afforded a commercially reasonable opportunity to conduct a due diligence
investigation with respect to Counterparty customary in scope for private placements of equity securities (including, without limitation, the right to have
made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them);
(c)
as of the date of delivery, Counterparty shall enter into an agreement (a “Private Placement Agreement”) with JPMorgan (or any
Affiliate of JPMorgan designated by JPMorgan) in connection with the private placement of such shares by Counterparty to JPMorgan (or any such
Affiliate) and the private resale of such shares by JPMorgan (or any such Affiliate), substantially similar to private placement purchase agreements
customary for private placements of equity securities, in form and substance commercially reasonably satisfactory to JPMorgan, which Private Placement
Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating,
without limitation, to the indemnification of, and contribution in connection with the liability of, JPMorgan and its Affiliates and the provision of
customary opinions,
Annex A-2
accountants’ comfort letters and lawyers’ negative assurance letters, and shall provide for the payment by Counterparty of all fees and expenses of
JPMorgan (and any such Affiliate) in connection with such resale, including, without limitation, all fees and expenses of counsel for JPMorgan, and shall
contain representations, warranties, covenants and agreements of Counterparty reasonably necessary or advisable to establish and maintain the availability
of an exemption from the registration requirements of the Securities Act for such resales; and
(d)
in connection with the private placement of such shares by Counterparty to JPMorgan (or any such Affiliate) and the private resale
of such shares by JPMorgan (or any such Affiliate), Counterparty shall, if so requested by JPMorgan, prepare, in cooperation with JPMorgan, a private
placement memorandum in form and substance reasonably satisfactory to JPMorgan.
5.
JPMorgan, itself or through an Affiliate (the “Selling Agent”) or any underwriter(s), will sell all, or such lesser portion as may be
required hereunder, of the Registered Settlement Shares or Unregistered Settlement Shares and any Makewhole Shares (as defined below) (together, the
“Settlement Shares”) delivered by Counterparty to JPMorgan pursuant to paragraph 6 below commencing on the Cash Settlement Payment Date and
continuing until the date on which the aggregate Net Proceeds (as such term is defined below) of such sales, as determined by JPMorgan, is equal to the
absolute value of the Forward Cash Settlement Amount (such date, the “Final Resale Date”). If the proceeds of any sale(s) made by JPMorgan, the Selling
Agent or any underwriter(s), net of any fees and commissions (including, without limitation, underwriting or placement fees) customary for similar
transactions under the circumstances at the time of the offering, together with carrying charges and expenses incurred in connection with the offer and sale
of the Shares (including, without limitation, the covering of any over-allotment or short position (syndicate or otherwise)) (the “Net Proceeds”) exceed the
absolute value of the Forward Cash Settlement Amount, JPMorgan will refund, in USD, such excess to Counterparty on the date that is three (3) Currency
Business Days following the Final Resale Date, and, if any portion of the Settlement Shares remains unsold, JPMorgan shall return to Counterparty on that
date such unsold Shares.
6.
If the Calculation Agent determines that the Net Proceeds received from the sale of the Registered Settlement Shares or Unregistered
Settlement Shares or any Makewhole Shares, if any, pursuant to this paragraph 6 are less than the absolute value of the Forward Cash Settlement Amount
(the amount in USD by which the Net Proceeds are less than the absolute value of the Forward Cash Settlement Amount being the “Shortfall” and the date
on which such determination is made, the “Deficiency Determination Date”), Counterparty shall on the Exchange Business Day next succeeding the
Deficiency Determination Date (the “Makewhole Notice Date”) deliver to JPMorgan, through the Selling Agent, a notice of Counterparty’s election that
Counterparty shall either (i) pay an amount in cash equal to the Shortfall on the day that is one Currency Business Day after the Makewhole Notice Date, or
(ii) deliver additional Shares. If Counterparty elects to deliver to JPMorgan additional Shares, then Counterparty shall deliver additional Shares in
compliance with the terms and conditions of paragraph 3 or paragraph 4 above, as the case may be (the “Makewhole Shares”), on the first Clearance
System Business Day which is also an Exchange Business Day following the Makewhole Notice Date in such number as the Calculation Agent reasonably
believes would have a market value on that Exchange Business Day equal to the Shortfall. Such Makewhole Shares shall be sold by JPMorgan in
accordance with the provisions above; provided that if the sum of the Net Proceeds from the sale of the originally delivered Shares and the Net Proceeds
from the sale of any Makewhole Shares is less than the absolute value of the Forward Cash Settlement Amount then Counterparty shall, at its election,
either make such cash payment or deliver to JPMorgan further Makewhole Shares until such Shortfall has been reduced to zero.
7.
Notwithstanding the foregoing, in no event shall the aggregate number of Settlement Shares for any Transaction be greater than the
Reserved Shares minus the amount of any Shares actually delivered by Counterparty under any other Transaction under this Master Confirmation (the
result of such calculation, the “Capped Number”). Counterparty represents and warrants (which shall be deemed to be repeated on each day that a
Transaction is outstanding) that the Capped Number is equal to or less than the number of Shares determined according to the following formula:
Where
A = the number of authorized but unissued shares of Counterparty that are not reserved for future issuance on the date
of the determination of the Capped Number; and
A – B
Annex A-3
B = the maximum number of Shares required to be delivered to third parties if Counterparty elected Net Share
Settlement of all transactions in the Shares (other than Transactions in the Shares under this Master Confirmation) with
all third parties that are then currently outstanding and unexercised.
“Reserved Shares” means initially, 14,619,883 Shares. The Reserved Shares may be increased or decreased in a Supplemental Confirmation.
If at any time, as a result of this paragraph 7, Counterparty fails to deliver to JPMorgan any Settlement Shares, Counterparty shall, to the extent
that Counterparty has at such time authorized but unissued Shares not reserved for other purposes, promptly notify JPMorgan thereof and deliver to
JPMorgan a number of Shares not previously delivered as a result of this paragraph 7. Counterparty agrees to use its commercially reasonable efforts to
cause the number of authorized but unissued Shares to be increased, if necessary, to an amount sufficient to permit Counterparty to fulfill its obligation to
deliver any Settlement Shares.
Annex A-4
COMMUNICATIONS PROCEDURES
November 30, 2020
ANNEX B
I.
Introduction
Allscripts Healthcare Solutions, Inc. (“Counterparty”) and JPMorgan Chase Bank, National Association (“JPMorgan”) have adopted these
communications procedures (the “Communications Procedures”) in connection with entering into the Master Confirmation (the “Master
Confirmation”), dated as of November 30, 2020, between JPMorgan and Counterparty relating to Uncollared Accelerated Share Repurchase
transactions. These Communications Procedures supplement, form part of, and are subject to the Master Confirmation.
II.
Communications Rules
For each Transaction, from the Trade Date for such Transaction until the date all payments or deliveries of Shares have been made with respect
to such Transaction, Counterparty and its Employees and Designees shall not engage in any Program-Related Communication with, or disclose any
Material Non-Public Information to, any EDG Trading Personnel. Except as set forth in the preceding sentence, the Master Confirmation shall not limit
Counterparty and its Employees and Designees in their communication with Affiliates and Employees of JPMorgan, including, without limitation,
Employees who are EDG Permitted Contacts.
III.
Termination
If, in the sole judgment of any EDG Trading Personnel or any Affiliate or Employee of JPMorgan participating in any Communication with
Counterparty or any Employee or Designee of Counterparty, such Communication would not be permitted by these Communications Procedures, such
EDG Trading Personnel or Affiliate or Employee of JPMorgan shall immediately terminate such Communication. In such case, or if such EDG Trading
Personnel or Affiliate or Employee of JPMorgan determines following completion of any Communication with Counterparty or any Employee or Designee
of Counterparty that such Communication was not permitted by these Communications Procedures, such EDG Trading Personnel or such Affiliate or
Employee of JPMorgan shall promptly consult with his or her supervisors and with counsel for JPMorgan regarding such Communication. If, in the
reasonable judgment of JPMorgan’s counsel following such consultation, there is more than an insignificant risk that such Communication could materially
jeopardize the availability of the affirmative defenses provided in Rule 10b5-1 under the Exchange Act with respect to any ongoing or contemplated
activities of JPMorgan or its Affiliates in respect of any Transaction pursuant to the Master Confirmation, it shall be an Additional Termination Event
pursuant to Section 20(a) of the Master Confirmation, with Counterparty as the sole Affected Party and all Transactions under the Master Confirmation as
Affected Transactions.
IV.
Definitions
Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Master Confirmation. As used herein,
the following words and phrases shall have the following meanings:
“Communication” means any contact or communication (whether written, electronic, oral or otherwise) between Counterparty or any of its
Employees or Designees, on the one hand, and JPMorgan or any of its Affiliates or Employees, on the other hand.
“Designee” means a person designated, in writing or orally, by Counterparty to communicate with JPMorgan on behalf of Counterparty.
“EDG Permitted Contact” means any of Mr. David Aidelson, Mr. Elliot Chalom, Ms. Yana Chernobilsky, Mr. Sanjeet S. Dewal, Mr. Ganaraj
S. Hegde, Mr. Noah L. Wynkoop or any of their designees; provided that JPMorgan may amend the list of EDG Permitted Contacts by delivering a revised
list of EDG Permitted Contacts to Counterparty.
Annex B-1
“EDG Trading Personnel” means Mr. Michael Captain, Ms. Jennifer Hilibrand, Mr. Spyros Kallipolitis, Mr. Michael Tatro and any other
Employee of the public side of the Equity Derivatives Group of JPMorgan Chase & Co.; provided that JPMorgan may amend the list of EDG Trading
Personnel by delivering a revised list of EDG Trading Personnel to Counterparty; and provided further that, for the avoidance of doubt, the persons listed as
EDG Permitted Contacts are not EDG Trading Personnel.
“Employee” means, with respect to any entity, any owner, principal, officer, director, employee or other agent or representative of such entity,
and any Affiliate of any of such owner, principal, officer, director, employee, agent or representative.
“Material Non-Public Information” means information relating to Counterparty or the Shares that (a) has not been widely disseminated by
wire service, in one or more newspapers of general circulation, by communication from Counterparty to its shareholders or in a press release, or contained
in a public filing made by Counterparty with the Securities and Exchange Commission and (b) a reasonable investor might consider to be of importance in
making an investment decision to buy, sell or hold Shares. For the avoidance of doubt and solely by way of illustration, information should be presumed
“material” if it relates to such matters as dividend increases or decreases, earnings estimates, changes in previously released earnings estimates, significant
expansion or curtailment of operations, a significant increase or decline of orders, significant merger or acquisition proposals or agreements, significant
new products or discoveries, extraordinary borrowing, major litigation, liquidity problems, extraordinary management developments, purchase or sale of
substantial assets and similar matters.
“Program-Related Communication” means any Communication the subject matter of which relates to the Master Confirmation or any
Transaction under the Master Confirmation or any activities of JPMorgan (or any of its Affiliates) in respect of the Master Confirmation or any Transaction
under the Master Confirmation.
Annex B-2
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
SUBSIDIARIES
Subsidiary
Allscripts Holdings, LLC
Allscripts Holdings 2, LLC
Coniston Exchange, LLC
Allscripts Healthcare US, LP
Allscripts Healthcare, LLC
Allscripts Managed Services, LLC
Allscripts Software, LLC
California Healthcare Medical Billing, LLC
Allscripts Analytics, LLC
Allscripts Next, LLC
2bPrecise, LLC
2bPrecise Ltd.
PF2 EIS LLC
Practice Fusion, Inc.
Ringadoc, Inc.
Evalytica, LLC
Health Grid Holding Company LLC
HealthGrid Coordinated Care Solutions LLC.
Health Grid, LLC
Mahathi Software LLC.
PF2 Enterprise Information Solutions Canada
Allscripts Canada Corporation
Allscripts Healthcare IT (Canada) Corporation (f/k/a NantHealth Canada, Inc.)
Allscripts Healthcare International Holdings, LLC
Allscripts (Mauritius) Limited
Allscripts (India) LLP
Nant Health Technologies Private Limited
Allscripts Healthcare IT (Malaysia) SDN. BHD.
Allscripts Healthcare IT (Singapore) PTE. LTD.
Allscripts Healthcare IT (Australia) PTY. LTD.
Allscripts Healthcare (IT) UK LTD.
Allscripts (United Kingdom) Limited
dbMotion, Ltd.
dbMotion, Inc.
Allscripts CV
Allscripts BV
Allscripts Healthcare IT (Mauritius) Limited
Core Medical Solutions Holdings PTY LTD.
Core Medical Solutions PTY. LTD.
Pulse8, LLC
EXHIBIT 21.1
Jurisdiction or
State of
Organization
Delaware
Delaware
Delaware
Delaware
North Carolina
Delaware
Delaware
California
Delaware
Delaware
Delaware
Israel
Delaware
Delaware
Delaware
California
Delaware
Delaware
Florida
Florida
Canada
Canada
Canada
Delaware
Mauritius
India
India
Malaysia
Singapore
Australia
United Kingdom
United Kingdom
Israel
Delaware
Netherlands
Netherlands
Mauritius
Australia
Australia
Maryland
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated February 26, 2021, with respect to the consolidated financial statements and internal control over financial
reporting included in the Annual Report of Allscripts Healthcare Solutions, Inc. on Form 10-K for the year ended December 31, 2020. We
consent to the incorporation by reference of said reports in the Registration Statements of Allscripts Healthcare Solutions, Inc. on Forms S-8
(File No. 333-37238, File No. 333-90129, File No. 333-104416, File No. 333-107793, File No. 333-59212, File No. 333-135282, File No.
333-141600, File No. 333-154775, File No. 333-164294, File No. 333-167846, File No. 333-175053, File No. 333-175819, File No. 333-
188902, File No. 333-196415, File No. 333-218174, File No. 333-225329, File No. 333-231748, File No. 333-238590 and File No. 333-
238591).
Exhibit 23.1
/s/ GRANT THORNTON LLP
Raleigh, North Carolina
February 26, 2021
Exhibit 31.1
I, Paul M. Black, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Allscripts Healthcare Solutions, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a.
b.
c.
d.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):
a.
b.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: February 26, 2021
/s/ Paul M. Black
Paul M. Black
Chief Executive Officer
Exhibit 31.2
I, Richard J. Poulton, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Allscripts Healthcare Solutions, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a.
b.
c.
d.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):
a.
b.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: February 26, 2021
/s/ Richard J. Poulton
Richard J. Poulton
President and Chief Financial Officer
The following statement is being made to the Securities and Exchange Commission solely for purposes of Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. 1350), which carries with it certain criminal penalties in the event of a knowing or willful misrepresentation.
Exhibit 32.1
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Re: Allscripts Healthcare Solutions, Inc.
Ladies and Gentlemen:
In accordance with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 USC 1350), each of the undersigned hereby certifies that:
(i) this Annual Report on Form 10-K for the year ended December 31, 2020, which this statement accompanies, fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(ii) the information contained in this Annual Report on Form 10-K for the year ended December 31, 2020, fairly presents, in all material respects, the
financial condition and results of operations of Allscripts Healthcare Solutions, Inc.
Date: February 26, 2021
/s/ Paul M. Black
Paul M. Black
Chief Executive Officer
/s/ Richard J. Poulton
Richard J. Poulton
President and Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to Allscripts Healthcare Solutions, Inc. and will be retained by
Allscripts Healthcare Solutions, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.