NextGen Healthcare Files Preliminary Proxy Statement in Connection with Annual Meeting
8/23/2021 8:00:00 AM
Announces Governance Enhancements to Further Align with Best Practice
Revises Director Slate to Include Only Individuals Who Are Committed to Serving All of NextGen Healthcare Shareholders’ Best Interests
Highlights Transformation that
All members of the NextGen Healthcare Board of Directors, other than Sheldon (“Shelly”) Razin and
Dear Fellow Shareholders,
Over the past five years, our Board of Directors and management team have executed a strategic plan that has positioned the Company for enhanced value creation and significant profitable growth at an increasing rate. For some time, the Board has been engaged in a thoughtful review of the Board’s composition and the Company’s corporate governance to ensure we drive NextGen Healthcare’s continued transformation.
This work led to the recent announcement of two new independent directors –
It also led to the decision to submit two corporate governance proposals for consideration at the Annual Meeting:
A change in the Company’s incorporation from the state of
Californiato the state of Delaware: We began considering this change several years ago and began taking actions in January 2021when we moved our principal executive office to Atlanta, GAwhere we have significant operations and businesses. Reincorporating in Delawarepromotes shareholder-friendly corporate governance and reflects the prevailing standard with more than 66% of all Fortune 500 companies and more than 90% of the Company’s peer group incorporated there.
The elimination of cumulative voting currently in place and adoption of a majority vote standard in the election of directors in uncontested director elections, with a customary provision for plurality voting in contested director elections: As part of this provision, the Company will also adopt proxy access, which allows shareholders who meet certain requirements to include their own director nominees in the Company’s proxy materials. The reincorporation proposal will be conditioned on the elimination of cumulative voting by shareholders.
Eliminating cumulative voting and adopting a “one share, one vote” framework ensures that a minority shareholder is unable to accumulate shares and override the will of the majority including with respect to the election of directors. This is the prevailing election standard among the Company’s peers and the vast majority of S&P 500 companies. It also aligns with our institutional investors’ governance policies.
These changes build on NextGen Healthcare’s existing strong corporate governance, including, among others, the annual election of directors; the separation of the Chair and Chief Executive Officer; the ability of shareholders to call a special meeting; and a majority vote standard for shareholders to amend certain provisions under the Company’s Articles of Incorporation and Bylaws.
Do NOT be Misled by Shelly’s False Claims – Shelly Has Rejected All of the Board’s Efforts to Be Constructive, Surreptitiously Sought Alternative Directors for Nomination and Shunned Our Attempts to Reach a Mutually Agreeable Settlement
We believe approval of these governance proposals is warranted on their merits. We also believe approval is necessary to protect our shareholders’ interests now and in future elections, particularly given the unwarranted, costly and disruptive proxy campaign that Shelly has launched in an attempt to control and dominate NextGen Healthcare’s Board of Directors.
Shelly is the Company’s founder and a long tenured, 47-year director. Without eliminating cumulative voting, Shelly would be able to unilaterally make key decisions that could disenfranchise other shareholders, including controlling multiple Board seats in perpetuity. Shelly’s public statement that he does not seek to be on the Board forever is disingenuous based on his contrary first-hand statements to existing Board members.
It is clear that Shelly is trying to exploit cumulative voting in order to advance his own agenda under the assumption that his own candidacy is not at risk.
- Shelly had full access to and knowledge of the director search and evaluation process; and
- Shelly, like all Board members, had the opportunity to vet the Board’s slate and offer alternative candidates for consideration.
However, Shelly willfully chose to circumvent good governance and offered no candidate suggestions. The first time we learned that Shelly desired – and had secretly interviewed other candidates – was when he publicly announced his alternative, control slate of directors. Shelly certainly appears to be putting his needs above those of the other shareholders when a director is required to act in the best interests of all shareholders.
We have tried to work constructively with Shelly, including offering to reach a mutually agreeable solution that would enable us to avoid his proxy contest. To that end, we agreed to renominate Shelly and
Your Board’s Independent Director Nominees Represent All Shareholders’ Interests and Have the Skills and Experience to Drive Value Creation
It is the Board’s view that as the Company evolves, so should the Board’s composition. With the appointments of
Given Shelly’s actions and proxy campaign, we are revising the Board’s slate so that it reflects only directors who serve ALL of our shareholders’ best interests. The slate now includes:
Craig A. Barbarosh, independent director
George H. Bristol, independent director
Julie D. Klapstein, independent director
Jeffrey H. Margolis, independent director
Geraldine McGinty, independent director
Morris Panner, independent director
Pamela Puryear, independent director
These individuals have current, highly relevant healthcare, technology, and consumer services experience directly linked to NextGen Healthcare’s strategy and our ability to deliver market leading performance and accelerated growth.
We intend to add two additional nominees to the Board’s director slate in advance of the Annual Meeting:
- We will consider the four new independent individuals Shelly has nominated as part of the director search process underway.
- We are making good progress on the selection of a new CEO and expect that individual to be a valuable contributor on the Board.
We Are Proud of Our Accomplishments and Confident in the Future
When Shelly’s role as Board Chair of the Company concluded,
New leadership has transformed the Company into a market leader with integrated and scalable platforms and an exceptionally engaged team of executives and employees. Over the past five years, we have delivered compelling results:
Became a top-rated Electronic Health Record and Practice Management vendor as measured by
- Increased Net Promoter Score well above healthcare and technology industry averages;
Improved employee engagement by 33%, jumping well above benchmark and turning
NextGen Healthcareinto a destination for top talent;
Increased highly-valued subscription services annual revenue 91% to
- Increased recurring revenue to 90% of total revenue from 84%;
- Made strategic acquisitions in analytics, telehealth, integrated care and patient experience, which have materially broadened our portfolio and contributed to the Company’s accelerating revenue growth profile and its longer-term annual revenue growth goal.
Our FY21 results show we are continuing the momentum, exceeding expectations even through the pandemic. We are committed to continuing to deliver on our value creation objectives by shaping the future of digital healthcare solutions through integrated, consumer-centric models of care enabled by technology.
Thank You for Your Support
We will soon be filing our definitive proxy materials and look forward to engaging with our shareholders on these important matters.
Not a Proxy Solicitation; Certain Information Concerning the Participants
This communication is not a solicitation of proxies from any security holder of
Shareholders will be able to obtain, free of charge, copies of the applicable proxy statement, any amendments or supplements thereto and any other documents when filed by
Forward Looking Statements
This communication may contain forward-looking statements within the meaning of the federal securities laws, including but not limited to, statements regarding future events including but not limited to the COVID-19 pandemic, developments in the healthcare sector and regulatory framework, the Company's future performance, as well as management's expectations, beliefs, intentions, plans, estimates or projections relating to the future (including, without limitation, statements concerning revenue, net income, and earnings per share). Risks and uncertainties exist that may cause the results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements and additional risks and uncertainties are set forth in Part I, Item A of our most recent Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q, including but not limited to: volatility and uncertainty in the global economy, financial markets and on our customers in light of the continuing COVID-19 pandemic, including the potential (i) slowdown or shutdown of preventive and elective medical procedures, (ii) delay in the contracting for additional products and services by our customers and (iii) delay in the sales cycle for new customers; a determination by the jury that the Company has liability in litigation advanced by a former director and shareholder; the volume and timing of systems sales and installations; length of sales cycles and the installation process; the possibility that products will not achieve or sustain market acceptance; seasonal patterns of sales and customer buying behavior; impact of incentive payments under The American Recovery and Reinvestment Act on sales and the ability of the Company to meet continued certification requirements; uncertainties related to the future impact of
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