\nAll members of the NextGen Healthcare Board of Directors, other than Sheldon (\u201cShelly\u201d) Razin and Lance Rosenzweig, issued the following open letter to shareholders, cautioning shareholders not to be misled by Shelly\u2019s false claims:\n<\/p>\n
\nDear Fellow Shareholders,\n<\/p>\n
\nOver 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\u2019s composition and the Company\u2019s corporate governance to ensure we drive NextGen Healthcare\u2019s continued transformation.\n<\/p>\n
\nThis work led to the recent announcement of two new independent directors \u2013 Geraldine McGinty, MD, MBA, FACR and Pamela S. Puryear, PhD, MBA \u2013 following a search that began in February with the assistance of Spencer Stuart.\n<\/p>\n
\nIt also led to the decision to submit two corporate governance proposals for consideration at the Annual Meeting:\n<\/p>\n
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- A change in the Company\u2019s incorporation from the state of California to the state of Delaware:<\/b> We began considering this change several years ago and began taking actions in January 2021 when we moved our principal executive office to Atlanta, GA where we have significant operations and businesses. Reincorporating in Delaware promotes 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\u2019s peer group incorporated there.\n<\/li>\n<\/ul>\n
- \n
- 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:<\/b> 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\u2019s proxy materials. The reincorporation proposal will be conditioned on the elimination of cumulative voting by shareholders.\n
Eliminating cumulative voting and adopting a \u201cone share, one vote\u201d 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\u2019s peers and the vast majority of S&P 500 companies. It also aligns with our institutional investors\u2019 governance policies.\n<\/li>\n<\/ul>\n
\nThese changes build on NextGen Healthcare\u2019s 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\u2019s Articles of Incorporation and Bylaws.\n<\/p>\n
Do NOT be Misled by Shelly\u2019s False Claims <\/b>\u2013 Shelly<\/b>Has Rejected All of the Board\u2019s Efforts to Be Constructive, Surreptitiously Sought Alternative Directors for Nomination and Shunned Our Attempts to Reach a Mutually Agreeable Settlement<\/b><\/p>\n
\nWe believe approval of these governance proposals is warranted on their merits. We also believe approval is necessary to protect our shareholders\u2019 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\u2019s Board of Directors.\n<\/p>\n
\nShelly is the Company\u2019s 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\u2019s 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.\n<\/p>\n
\nIt 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.\n<\/p>\n
- \n
- \nShelly had full access to and knowledge of the director search and evaluation process; and\n<\/li>\n
- \nShelly, like all Board members, had the opportunity to vet the Board\u2019s slate and offer alternative candidates for consideration.\n<\/li>\n<\/ul>\n
\nHowever, Shelly willfully chose to circumvent good governance and offered no candidate suggestions. The first time we learned that Shelly desired \u2013 and had secretly interviewed other candidates \u2013 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.\n<\/p>\n
\nWe 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 Lance Rosenzweig, who Shelly has coopted as his loyal cumulative voting designee for the 2021 Annual Meeting. Lance was already knowingly scheduled to rotate off the Board last year but was accommodated for an additional year at Shelly\u2019s urging. Moreover, Shelly has repeatedly promoted Lance as his choice for NextGen Healthcare\u2019s CEO. We have turned Lance\u2019s name over to our search firm to vet and screen.\n<\/p>\n
Your Board\u2019s Independent Director Nominees Represent All Shareholders\u2019 Interests and Have the Skills and Experience to Drive Value Creation <\/b><\/p>\n
\nIt is the Board\u2019s view that as the Company evolves, so should the Board\u2019s composition. With the appointments of Dr. McGinty and Dr. Puryear and the prior appointment of Julie Klapstein, a third of NextGen Healthcare\u2019s directors will be new to the Board in the past four years. Collectively these directors bring outstanding records in strategy, executive management, operations, clinical practice and talent development all relevant to the healthcare industry, while also advancing board diversity.\n<\/p>\n
\nGiven Shelly\u2019s actions and proxy campaign, we are revising the Board\u2019s slate so that it reflects only directors who serve ALL of our shareholders\u2019 best interests. The slate now includes:\n<\/p>\n
- \n
- \nCraig A. Barbarosh, independent director\n<\/li>\n
- \nGeorge H. Bristol, independent director\n<\/li>\n
- \nJulie D. Klapstein, independent director\n<\/li>\n
- \nJeffrey H. Margolis, independent director\n<\/li>\n
- \nDr. Geraldine McGinty, independent director\n<\/li>\n
- \nMorris Panner, independent director\n<\/li>\n
- \nDr. Pamela Puryear, independent director\n<\/li>\n<\/ul>\n
\nThese individuals have current, highly relevant healthcare, technology, and consumer services experience directly linked to NextGen Healthcare\u2019s strategy and our ability to deliver market leading performance and accelerated growth.\n<\/p>\n
\nWe intend to add two additional nominees to the Board\u2019s director slate in advance of the Annual Meeting:\n<\/p>\n
- \n
- \nWe will consider the four new independent individuals Shelly has nominated as part of the director search process underway.\n<\/li>\n
- \nWe are making good progress on the selection of a new CEO and expect that individual to be a valuable contributor on the Board.\n<\/li>\n<\/ul>\n
We Are Proud of Our Accomplishments and Confident in the Future<\/b><\/p>\n
\nWhen Shelly\u2019s role as Board Chair of the Company concluded, NextGen Healthcare was a deteriorating business with unproductive R&D investments and a disenfranchised customer base. Moreover, Shelly\u2019s capital allocation plan prioritized $400 million in dividends that thwarted sustainable high growth and largely benefitted him personally.\n<\/p>\n
\nNew 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:\n<\/p>\n
- \n
- \nBecame a top-rated Electronic Health Record and Practice Management vendor as measured by KLAS Research;\n<\/li>\n
- \nIncreased Net Promoter Score well above healthcare and technology industry averages;\n<\/li>\n
- \nImproved employee engagement by 33%, jumping well above benchmark and turning NextGen Healthcare into a destination for top talent;\n<\/li>\n
- \nIncreased highly-valued subscription services annual revenue 91% to $148 million;\n<\/li>\n
- \nIncreased recurring revenue to 90% of total revenue from 84%;\n<\/li>\n
- \nMade strategic acquisitions in analytics, telehealth, integrated care and patient experience, which have materially broadened our portfolio and contributed to the Company\u2019s accelerating revenue growth profile and its longer-term annual revenue growth goal.\n<\/li>\n<\/ul>\n
\nOur 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.\n<\/p>\n
Thank You for Your Support<\/b><\/p>\n
\nWe will soon be filing our definitive proxy materials and look forward to engaging with our shareholders on these important matters.\n<\/p>\n
\nSincerely,\n<\/p>\n
- 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:<\/b> 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\u2019s proxy materials. The reincorporation proposal will be conditioned on the elimination of cumulative voting by shareholders.\n
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