UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 17)*
Physician Computer Network, Inc.
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
71940 K 109
(CUSIP Number)
Jonathan Klein, Esq.
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street, 20th Floor
New York, New York 10036
(212) 626-0800
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
April 1, 1998
(Date of Event which Requires Filing of this Statement)
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 9 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 71940 K 109 Page 2 of 9 Pages
1 NAME OF REPORTING PERSON
Jeffry Picower
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) /X/
(b) //
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) //
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7 SOLE VOTING POWER
0
8 SHARED VOTING POWER
34,681,522
9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
34,681,522
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
34,681,522
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
//
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
53.7%
14 TYPE OF REPORTING PERSON*
IN
<PAGE>
SCHEDULE 13D
CUSIP No. 71940 K 109 Page 3 of 9 Pages
1 NAME OF REPORTING PERSON
Decisions Incorporated
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) /X/
(b) //
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) //
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7 SOLE VOTING POWER
0
8 SHARED VOTING POWER
34,681,522
9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
34,681,522
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
34,681,522
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
//
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
53.7%
14 TYPE OF REPORTING PERSON*
CO
<PAGE>
SCHEDULE 13D
CUSIP No. 71940 K 109 Page 4 of 9 Pages
1 NAME OF REPORTING PERSON
JA Special Limited Partnership
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) /X/
(b) //
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) //
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7 SOLE VOTING POWER
34,681,522
8 SHARED VOTING POWER
0
9 SOLE DISPOSITIVE POWER
34,681,522
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
34,681,522
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
//
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
53.7%
14 TYPE OF REPORTING PERSON*
PN
<PAGE>
SCHEDULE 13D - AMENDMENT NO. 16
The undersigned, Jeffry M. Picower ("Picower"), Decisions Incorporated,
a Delaware corporation ("Decisions") and JA Special Limited Partnership, a
Delaware limited partnership ("JA Special"), (collectively the "Registrants")
amend the Schedule 13D dated December 9, 1991 (the "Initial Filing"), as amended
by Amendment No. 1 to the Initial Filing dated December 26, 1991, Amendment No.
2 to the Initial Filing dated May 11, 1992, Amendment No. 3 to the Initial
Filing dated November 18, 1992, Amendment No. 4 to the Initial Filing dated
November 23, 1992, Amendment No. 5 to the Initial Filing dated December 9, 1992,
Amendment No. 6 to the Initial Filing dated December 21, 1992, Amendment No. 7
to the Initial Filing dated February 22, 1993, Amendment No. 8 to the Initial
Filing dated May 10, 1993, Amendment No. 9 to the Initial Filing dated December
31, 1993, Amendment No. 10 to the Initial Filing dated January 27, 1994,
Amendment No. 11 to the Initial Filing dated January 4, 1995, Amendment No. 12
to the Initial Filing dated August 3, 1995, Amendment No. 13 to the Initial
Filing dated September 18, 1995, Amendment No. 14 to the Initial Filings dated
August 2, 1996, Amendment No. 15 to the Initial Filing dated January 28, 1998,
Amendment No. 16 to the Initial Filing dated February 20, 1998 with regard to
the shares of common stock, par value $.01 per share ("Shares"), of Physician
Computer Network, Inc. (the "Issuer"), a corporation organized under the laws of
New Jersey as set forth below. Unless otherwise indicated, capitalized terms
contained herein shall have the meanings set forth in the Initial Filing.
Item 3. Source and Amount of Funds or Other Consideration
Item 3 is hereby amended by the addition of the following:
On April 1, 1998, JA Special acquired the Warrant (as defined in Item 6
below) pursuant to the transactions described in Item 6 below. Simultaneously
with the issuance of the Warrant, and as more fully described below, JA Special
acquired the Preferred Shares (as defined in Item 6 below). The source of the
funding for the purchase of the Preferred Shares was working capital of the
Registrants.
Item 4. Purpose of the Transaction
Item 4 is hereby amended to add the following:
Registrants acquired the Shares for investment purposes.
Item 5. Interest in Securities of the Issuer
Item 5 is hereby amended to add the following:
As of April 1, 1998, the Registrants may be deemed to
beneficially own in the aggregate 34,681,522 shares of common stock, par value
$.01 per share, of the Issuer (the "PCN Common Stock"), representing
approximately 53.7% (computed in accordance with rule 13d-3(d)(1)) of the
Issuer's outstanding common stock as of November 13, 1997 in the Issuers most
recent filing on Form 10-Q dated November 15, 1997 filed with the Securities and
Exchange Commission.) Registrants have direct beneficial ownership of the PCN
Common Stock as follows:
<TABLE>
<CAPTION>
Approximate Percentage
of Outstanding Shares
Number of Shares computed in accordance
Name PCN Common Stock with rule 13d-3(d)(1))
<S> <C> <C>
JA Special 34,681,522 53.7% <F1>
Limited
Partnership
- -----
<FN>
<F1> Including the 6,000,000 Shares subject to the Warrant which
is not exercisable by its terms within 60 days, but may be deemed
to be required to be included herein in accordance with rule 13d-
3(d)(1).
</FN>
</TABLE>
On April 1, 1998, JA Special acquired the Warrant and the Preferred
Shares in accordance with the terms of the Purchase Agreement (as defined in
Item 6 below) pursuant to the transactions described in Item 6 below.
In addition, concurrent with the foregoing transactions, the September
Warrant was modified to reflect a repricing of the September Warrant and the
addition of transfer and exercise restrictions.
<PAGE>
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to the Issuer
Item 6 is hereby amended to add the following:
On April 1, 1998, JA Special entered into a Stock Purchase Agreement
(the "Purchase Agreement") (a copy of which is attached hereto as Exhibit 2
hereto and is incorporated herein by reference). Pursuant to the Purchase
Agreement the parties entered into a series of agreements with the Issuer more
fully described in this Item 6 whereby, among other things, JA Special acquired
11,000 shares of Series B Cumulative Preferred Stock (the "Preferred Shares')
and a Common Stock Purchase Warrant to acquire 6,000,000 Shares (the "Warrant").
Pending the completion by the Issuer of various agreements with the Issuer's
senior lenders (the "Senior Lenders") the executed Purchase Agreement, the
executed Warrant, the stock certificate evidencing the Preferred Shares, the
Letter Agreement and checks totaling $11,000,000 were placed in escrow with
counsel to the Issuer pursuant to the Escrow Agreement (as defined below).
The Preferred Shares have a liquidation preference of $1,000 per share and
accrue dividends at the rate of 15% per annum on the liquidation preference for
the period commencing on March 31, 1998 and ending on March 31, 1999. The
dividend rate thereafter shall increase 1% per annum on the anniversary date of
the issuance of the Series B Preferred Stock to a maximum dividend rate of 18%
per annum. The redemption of the Preferred Shares, in whole or in part, is in
the sole discretion of the Issuer. A holder of the Preferred Share has no right
to require the redemption of the Preferred Shares. The Preferred Shares are more
fully described in Exhibit A to Exhibit 2 to this Schedule 13D which is
incorporated herein by reference.
The Issuer issued to JA Special a Common Stock Purchase Warrant, dated
April 1, 1998 (the "Warrant"), whereby JA Special was granted the right to
acquire 6,000,000 Shares at an exercise price of $1.00 per share at any time
after the Exercise Date and prior to March 31, 2003. The Warrant is not
exercisable until the earlier of April 1, 1999 and any of: (i) the sale by one
or more of the shareholders of the Issuer in one or more transactions of a
majority of the outstanding PCN Common Stock; (ii) the merger or consolidation
of the Issuer with or into any other person, in a transaction in which the
shareholders of the Issuer immediately prior to the consummation of such
transaction collectively own less than 50% of the Shares and voting power of the
entity surviving; such transaction (or any other business combination
transaction having a similar effect); or (iii) the sale of all or substantially
all of the assets of the Issuer in a single transaction or a series of related
transactions (the "Exercise Date"). The Warrant may not be exercised as to fewer
than 1,000,000 Shares unless there are less than 1,000,000 Shares as to which
the warrant is then exercisable. The Warrant is attached as Exhibit 3 to this
Schedule 13D which is incorporated herein by reference.
The Issuer and JA Special entered into a letter agreement, dated April 1,
1998 (the "Letter Agreement"), whereby the Common Stock Purchase Warrant dated
September 13, 1995 (the "September Warrant"), issued to Picower and subsequently
transferred to JA Special, was amended to reflect that the September Warrant,
which is currently exercisable , was repriced from $5.00 to $1.00 per share
minus the $.30 per share cash consideration originally paid for such warrant and
the imposition of transfer and exercise restrictions. The Letter Agreement is
attached as Exhibit 4 to this Schedule 13D which is incorporated herein by
reference.
Pending the completion by the Issuer of various agreements with the
Senior Lenders the executed Purchase Agreement, the executed Warrant, the stock
certificate evidencing the Preferred Shares, the Letter Agreement and checks
totaling $11,000,000 were placed into escrow with counsel to the Issuer pursuant
to an escrow agreement, dated April 1, 1998, among the Issuer, JA Special and
Gordon Altman Butowsky Weitzen Shalov & Wein (the "Escrow Agreement"). The
escrow may only be released upon an authorization from JA Special and the
Issuer. The Escrow Agreement is attached as Exhibit 5 to this Schedule 13D which
is incorporated herein by reference.
<PAGE>
Item 7. To Be Filed as Exhibits
Exhibit 1 -- Joint Filing Agreement
Exhibit 2 -- Copy of Stock Purchase Agreement between the
Registrant and JA Special Limited Partnership dated
April 1, 1998.
Exhibit 3 -- Copy of Common Stock Purchase Warrant dated
April 1, 1998 to purchase 6,000,000 shares issued
pursuant to the Stock Purchase Agreement dated April
1, 1998.
Exhibit 4 -- Copy of Letter Agreement between
the Registrant and JA Special Limited Partnership
dated April 1, 1998 amending the Common Stock
Purchase Warrant dated September 13, 1995.
Exhibit 5 -- Copy of Escrow Agreement among the Registrant,
JA Special Limited Partnership and Gordon Altman
Butowsky Weitzen Shalov & Wein dated April 1, 1998.
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: April 6, 1998
/s/ Jeffry M. Picower
-----------------------------
Jeffry M. Picower
DECISIONS INCORPORATED
By: /s/ April C. Freilich
---------------------------
April C. Freilich
President
JA SPECIAL LIMITED PARTNERSHIP
By: Decisions Incorporated
General Partner
By: /s/ April C. Freilich
--------------------------
April C. Freilich
President
EXHIBIT 1
JOINT FILING AGREEMENT
In accordance with Rule 13D-1(f) under the Securities Exchange
Act of 1934, as amended, the undersigned agree to the joint filing on behalf of
each of them of a statement on Schedule 13D (including amendments thereto) with
respect to the Shares of common stock, par value $.01 per share, of Physician
Computer Network, Inc., and further agree that this Joint Filing Agreement be
included as an Exhibit to such joint filings. In evidence thereof, the
undersigned, being duly authorized, have executed this Joint Filing Agreement
this 6th day of April, 1998.
/s/ Jeffry M. Picower
--------------------------
Jeffry M. Picower
DECISIONS INCORPORATED
By: /s/ April C. Freilich
--------------------------
April C. Freilich
President
JA SPECIAL LIMITED PARTNERSHIP
By: Decisions Incorporated
General Partner
By: /s/ April C. Freilich
-------------------------
April C. Freilich
President
STOCK PURCHASE AGREEMENT
BETWEEN
PHYSICIAN COMPUTER NETWORK, INC.
AND
JA SPECIAL LIMITED PARTNERSHIP
DATED APRIL 1, 1998
<PAGE>
TABLE OF CONTENTS
1. PURCHASE AND SALE OF PREFERRED SHARES................................1
2. CONSIDERATION........................................................2
3. WARRANT..............................................................2
4. LETTER...............................................................2
5. GUARANTY.............................................................2
6. ESCROW...............................................................2
7. REPRESENTATIONS AND WARRANTIES OF THE SELLER.........................2
7.1. Existence and Authority; Corporate Organization.............2
7.2. Capitalization and Ownership of Capital Stock...............3
7.3. Issuance of Preferred Shares................................3
7.4. Authorization of Agreement..................................3
7.5. Brokers.....................................................3
8. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER......................3
8.1. Existence and Authority; Corporate Organization.............4
8.2. Authorization of Agreement..................................4
8.3. Brokers.....................................................4
9. GENERAL..............................................................4
9.1. Expenses, Etc...............................................4
9.2. Further Assurances..........................................4
9.3. Further Agreements..........................................4
9.4. Waivers.....................................................4
9.5. Binding Effect; Benefits....................................5
9.6. Notices.....................................................5
9.7. Entire Agreement............................................6
9.8. Headings....................................................6
9.9. Counterparts................................................6
9.10. Governing Law; Submission to Jurisdiction...................6
9.11. Third Party Beneficiaries...................................6
9.12. Severability................................................6
9.13. Amendments..................................................6
<PAGE>
STOCK PURCHASE AGREEMENT
AGREEMENT, dated April 1, 1998 by and between PHYSICIAN
COMPUTER NETWORK, INC., a New Jersey corporation (the "Seller"), and JA SPECIAL
LIMITED PARTNERSHIP, a Delaware limited partnership ("Purchaser").
BACKGROUND
The Seller is engaged in the business of developing, marketing
and supporting information technology to physician-based healthcare
organizations, including group practices, integrated delivery networks, MSOs,
IPAs and other models of physician organizations. The Seller's application
software products address the financial, clinical, administrative and management
needs within these organizations and facilitate electronic connectivity between
them and other healthcare industry entities including hospitals, clinical
laboratories, managed care providers and insurance intermediaries (the
"Business").
The Seller is authorized to issue 1,000,000 shares of
Preferred Stock, par value $.01 per share, of which 11,000 shares have been
designated Series B Cumulative Preferred Stock (the "Preferred Shares") having
such terms, preferences, rights and limitations as are set forth in the
Certificate of Amendment to the Restated Certificate of Incorporation attached
as Exhibit A hereto.
The Seller desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase, all of the Preferred Shares and the warrant (the
"Warrant") in the form of Exhibit B hereto (the "Warrant"), upon the terms and
conditions set forth herein. In addition, the parties hereto have entered into
the letter agreement attached hereto as Exhibit C (the "Letter Agreement") and
an affiliate of the Purchaser will execute a guaranty (the "Guaranty") of $2
million of the amount owed by the Seller under its existing senior credit
facility in such form as shall be agreed to among the Seller, an affiliate of
the Purchaser and the lenders (the "Senior Lenders") under that credit facility.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES
The Seller is hereby issuing and selling to Purchaser, and
Purchaser is hereby purchasing from Seller, the Preferred Shares.
1
<PAGE>
2. CONSIDERATION
The consideration being paid by the Purchaser to the Seller
shall be Eleven Million ($11,000,000) Dollars (the "Purchase Price").
3. WARRANT
The Seller is hereby issuing the Warrant to the Purchaser.
4. LETTER
The parties hereto acknowledges that they have entered into
the Letter Agreement.
5. GUARANTY
The Purchaser will (or will cause one of its affiliates to)
execute and deliver the Guaranty at such time as the Company enters into a
forbearance against and related documentation with the Senior Lenders.
6. ESCROW
The parties hereto have entered into an escrow agreement in
the form of Exhibit D hereto, into which they have deposited: (i) a certificate
representing the Preferred Shares and the Warrant; (ii) the Purchase Price; and
(iii) this Agreement and the Letter Agreement. The property held in escrow will
be disbursed as contemplated in the escrow agreement.
7. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to and agrees with
the Purchaser as follows:
7.1. Existence and Authority; Corporate Organization.
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey. The
Seller is authorized or licensed to do business in each jurisdiction in which
the character and location of its properties and assets or the nature of its
business makes such qualification necessary, except to the extent that the
failure to so qualify would not have a material adverse effect on the Seller or
the Business. The Seller has all requisite power and authority
2
<PAGE>
to execute, deliver and perform this Agreement, the Warrant and the Letter
Agreement and to consummate the transactions contemplated hereby and thereby and
has all requisite power and authority, licenses, permits and franchises to own
or lease and operate its properties and carry on the Business as it is presently
being conducted.
(b) The corporate stock records and minute books of the Seller
contain a record that is complete and accurate of all formal actions taken by
the shareholders and the directors of the Seller, in their capacities as
shareholders or directors of Seller, and all such records and the minute book
have been made available to Purchaser for review.
7.2. Capitalization and Ownership of Capital Stock. As of the
date of this Agreement, the authorized capital stock of the Seller consists of
75,000,000 shares of Common Stock, par value $.01 per share, and 1,000,000
shares of Preferred Stock, par value $.01 per share. There are no shares of
Preferred Stock issued and outstanding as of the date of this Agreement. All of
the shares of capital stock of the Seller are fully paid and non-assessable.
7.3. Issuance of Preferred Shares. The Preferred Shares are
and all common stock issued in accordance with the terms of the Warrant will be,
duly authorized and, when issued and paid for in accordance with the terms
hereof, shall be validly issued, fully paid and nonassessable, free and clear of
all liens, claims, encumbrances or restrictions of any kind.
7.4. Authorization of Agreement. The execution, delivery and
performance of this Agreement, the Warrant and the Letter Agreement by the
Seller, and the consummation of the transactions contemplated hereby, have been
duly and validly authorized by all necessary corporate action, including,
without limitation, approval by the Seller's Board of Directors. This Agreement,
the Warrant and the Letter Agreement have been duly and validly executed and
delivered by the Seller. This Agreement, the Warrant and the Letter Agreement
constitute the valid and binding obligation of the Seller, enforceable in
accordance with its terms.
7.5. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement.
8. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Purchaser hereby represents and warrants to and agrees with
the Seller as follows:
3
<PAGE>
8.1. Existence and Authority; Corporate Organization.
Purchaser is a limited partnership duly organized and validly existing under the
laws of the State of Delaware. Decisions Incorporated, the general partner of
the Purchaser has all requisite power and authority to execute, deliver and
perform this Agreement by and on behalf of the Purchaser and to consummate the
transactions contemplated hereby.
8.2. Authorization of Agreement. The execution, delivery and
performance of this Agreement and the Letter Agreement by the Purchaser and the
consummation of the transactions contemplated hereby, has been duly and validly
authorized by all necessary corporate action, including approval by the Board of
Directors of the general partner of the Purchaser. This Agreement and the Letter
Agreement have been duly and validly executed and delivered by the general
partner of the Purchaser by and on behalf of the Purchaser and constitutes the
valid and binding obligation of the Purchaser, enforceable in accordance with
its terms.
8.3. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon any arrangement
made by and on behalf of the Purchaser.
9. GENERAL
9.1. Expenses, Etc. The parties hereto shall pay their own
respective taxes, expenses, costs and fees, including, without limitation, the
fees and expenses of their respective counsel and accountants and other experts.
9.2. Further Assurances. After the Closing, at the request of
the Purchaser, the Seller shall execute, acknowledge and deliver to the
Purchaser, without further consideration, all such further assignments,
conveyances, endorsements, deeds, powers of attorney, consents and other
documents and take such other action as the Purchaser may reasonably request to
consummate the transactions contemplated by this Agreement.
9.3. Further Agreements. The Purchaser will promptly execute
and deliver to the Senior Lenders any and all documents and assurances and take
such further action as may from time to time be reasonably requested by the
Senior Lenders in order to carry out the intent and purpose of the agreement
between the Seller and the Senior Lenders.
9.4. Waivers. Any breach of any obligation, covenant,
agreement or condition contained herein shall be deemed waived by
the non-breaching party only by a writing, setting forth with
4
<PAGE>
particularity the breach being waived and the scope of the waiver, but such
waiver shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other breach. No waiver shall be implied from any conduct or
action of the non-breaching party. No failure or delay by any party in
exercising any right, power or privilege hereunder, and no course of dealing by
any party, shall operate as a waiver of any right, power or privilege hereunder,
nor shall any single or partial exercise of any other right, power or privilege.
9.5. Binding Effect; Benefits. This Agreement shall inure to
the benefit of, and shall be binding upon, the parties hereto and their
respective successors and permitted assigns. This Agreement may not be assigned
by any party hereto without the prior written consent of the other parties
hereto except that no such consent shall be required for assignment to a party
acquiring all or substantially all of either party's stock or assets provided
that such party assumes all of the Seller's obligations hereunder. Except as
otherwise set forth herein, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and permitted assigns any rights, remedies, obligations,
or liabilities under or by reason of this Agreement.
9.6. Notices. All notices, requests, demands and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
in person, or transmitted by telecopy, or upon receipt after dispatch by
certified or registered first class mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made, at the following
addresses or telecopy numbers (or such others as shall be provided in writing
hereinafter):
(i) If to the Purchaser, to:
JA Special Limited Partnership
22 Saw Mill River Road
Hawthorne, New York 10532
(iii)If to the Seller, to:
Physician Computer Network, Inc.
1200 The American Road
Morris Plains, NJ 07950
Attention: Chief Operating Officer
Telecopy No.: (201) 490-3108
With copies to:
5
<PAGE>
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
Attention: Jonathan Klein, Esq.
Telecopy No.: (212) 626-0799
9.7. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
9.8. Headings. The section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
9.9. Counterparts. This Agreement may be executed in any
number of counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall be deemed to be one and the same
instrument.
9.10. Governing Law; Submission to Jurisdiction. This
Agreement shall be construed as to both validity and performance and enforced in
accordance with and governed by the laws of the State of New York, without
giving effect to the conflicts of law principles thereof.
9.11. Third Party Beneficiaries. Nothing in this Agreement is
intended to, or shall be construed so as to create any third party beneficiary
to this Agreement or otherwise confer any rights upon any person, firm or
corporation that is not a party hereto.
9.12. Severability. If any term or provision of this Agreement
shall to any extent be invalid or unenforceable, the remainder of this Agreement
shall not be affected thereby, and each term and provision of the Agreement
shall be valid and enforced to the fullest extent permitted by law.
9.13. Amendments. This Agreement may not be modified or
changed except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought.
6
<PAGE>
[INTENTIONALLY BLANK]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly authorized and executed on the date first above written.
PHYSICIAN COMPUTER NETWORK, INC.
By: /s/ Paul Antinori
________________________________
JA SPECIAL LIMITED PARTNERSHIP
BY: DECISIONS INCORPORATED, GENERAL PARTNER
By: /s/ Jeffry M. Picower
________________________________
8
<PAGE>
EXHIBIT A
ARTICLE THIRD (h)
1. Designation. The designation of the series of Preferred
Stock fixed by this resolution shall be "Series B Cumulative Preferred
Stock" (hereinafter referred to as the "Series B Preferred Stock").
2. Dividends.
(a) Rank. All Series B Preferred Stock shall rank:
(i) junior to all of the preferred stock of the Corporation
hereafter created specifically ranking by its terms senior to
the Series B Preferred Stock ("Senior Securities") (provided
that no such preferred stock may be created without the
affirmative vote of the holders of shares of Series B
Preferred Stock pursuant to Section 4 hereof); (ii) prior to
all of the Corporation's Common Stock, par value $.01 per
share ("Common Stock"), and any other preferred stock of the
Corporation hereafter created either specifically ranking by
its terms junior to the Series B Preferred Stock or not
specifically ranking by its terms senior to or on parity with
the Series B Preferred Stock ("Junior Securities"); and (iii)
on parity with any other preferred stock of the Corporation
hereafter created specifically ranking by its terms on parity
with the Series B Preferred Stock("Parity
Securities")(provided that no such preferred stock may be
created without the affirmative vote of the holders of shares
of Series B Preferred Stock pursuant to Section 4 hereof), in
each case, as to redemption, as to payment of dividends and as
to distributions of assets upon liquidation, dissolution or
winding up of the Corporation or otherwise, whether voluntary
or involuntary (all such distributions being referred to
collectively as "Distributions"). No dividend may be declared
or paid on any other class of capital stock of the Corporation
unless and until all of the shares of
<PAGE>
Series B Preferred Stock have been redeemed in accordance with
Section 6 hereof.
(b) Dividends. The dividend rate of the Series B
Preferred Stock shall initially be computed at a rate of
fifteen percent (15%) per annum on the Base Amount for the
period commencing on March 31, 1998 and ending on March 31,
1999. The dividend rate thereafter shall increase one percent
(1%) per annum on the anniversary date of the issuance of the
Series B Preferred Stock to a maximum dividend rate of
eighteen percent (18%) per annum. The "Base Amount" shall
initially be and shall never be less than $1,000.00 per share.
Dividends shall be payable annually in arrears out of funds
legally available therefor (such annual period being
hereinafter referred to as "Dividend Period"), with the first
dividend payable, beginning on March 31, 1999 and on each date
that is one year after the date on which the prior dividends
were payable (the "Dividend Payment Dates"). Dividends on
shares of Series B Preferred Stock shall be cumulative and
shall commence to accrue and be cumulative from the date such
shares have been issued. Accrued dividends which are not paid
on a Dividend Payment Date shall be added to the Base Amount
on the Dividend Payment Date. The Base Amount shall be reduced
(but not below $1,000.00 per share) by the amount of accrued
and unpaid dividends due but not paid on previous Dividend
Payment Dates when such dividends shall have been paid. In
order to determine the holders of Series B Preferred Stock
entitled to receive dividends, the Corporation shall fix a
record date ("Record Date") not more than sixty days prior to
any dividend payment date. If any such dividend payment date
should fall on a day that is not a Business Day, then the
Corporation shall pay the applicable dividend on the next
succeeding Business Day. "Business Day" shall mean a day other
than a Saturday, Sunday or other day on which the national
securities exchange or quotation system on which the Common
<PAGE>
Stock of the Corporation is traded or quoted, is authorized or
required by law to close.
3. No Conversion. The shares of the Series B
Preferred Stock shall not be convertible into any other
security.
4. No Voting Rights. Except as may otherwise be required by
law and as set forth below in this Section 4, the holders of the shares
of Series B Preferred Stock (the "Holders") shall not be entitled to
any vote in respect to such shares. Without the consent of the Holders
of at least two-thirds of the outstanding shares of Series B Preferred
Stock, the Corporation may not (i) create any class or series of
Preferred Stock which shall have parity as to Distributions with or
shall have preference as to Distributions over the Series B Preferred
Stock; (ii) reissue any shares of Series A Convertible Preferred Stock
redeemed by the Corporation prior to the issuance of shares of Series B
Preferred Stock; or (iii) alter or change the provisions of the
Corporation's Certificate of Incorporation, as amended, so as to
adversely affect the voting power, preferences or special rights of the
Holders.
5. Liquidation Price. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of
the Corporation, the amount that shall be paid to the Holder of each
share of Series B Preferred Stock shall be $1,000 and an additional sum
representing accrued and unpaid dividends, if any, on such Series B
Preferred Stock as of the date of such liquidation, dissolution or
winding up (hereinafter called the "Redemption Price"). Upon any
liquidation, dissolution or winding up of the Corporation, the Holders
will be entitled to be paid, before any distribution or payment is made
upon any of the Corporation's equity securities other than the Series B
Preferred Stock, an amount in cash equal to the aggregate Redemption
Price of all shares outstanding, and the Holders will not be entitled
to any further payment. If, upon any such liquidation,
<PAGE>
dissolution or winding up of the Corporation, the Corporation's assets
to be distributed among the Holders are insufficient to permit payment
to such Holders of the aggregate amount which they are entitled to be
paid, then the available assets to be distributed will be distributed
ratably among such Holders based upon the aggregate Redemption Price of
the Series B Preferred Stock held by each such Holder. The Corporation
will mail written notice of such liquidation, dissolution or winding up
not less than 60 days prior to the payment date stated therein, to each
Holder of record. Neither the consolidation or merger of the
Corporation into or with any other corporation or corporations, nor the
sale or transfer by the Corporation of all or any part of its assets,
nor the reduction of the capital stock of the Corporation will be
deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this Section 5.
6. Redemption.
(a) Optional Redemption. The Series B Preferred Stock
may be redeemed at any time at the option of the Corporation
by action of the Board of Directors, in whole or in part, at
any time or from time to time upon notice and in the manner
provided below. Any such optional redemption shall be made
ratably in accordance with the share holdings of the Holders
and by payment of the Redemption Price. The Corporation may
also, from time to time, purchase or otherwise acquire, in
open market or private transactions, issued and outstanding
shares of Series B Preferred Stock without limitations as to
price or amount.
(b) Procedure for Redemption. The Series B Preferred
Stock shall be redeemed in the following manner:
(i) Shares of Series B Preferred Stock
redeemed, purchased or otherwise acquired by the
Corporation shall be held as treasury shares and may
be sold or disposed of or
<PAGE>
shall be reclassified or retired and canceled
as may be determined by the Board of
Directors.
(ii) Notice of redemption of any shares of
Series B Preferred Stock shall be given by the
Corporation not less than 10 nor more than 50 days
prior to the Redemption Date, by mail or delivery to
the Holders of record of the shares to be redeemed at
their respective addresses then appearing on the
records of the Corporation. On or before the
Redemption Date, each Holder shall surrender to the
Corporation or its designated agent, at such place as
it may designate in the redemption notice,
certificates evidencing a number of shares of Series
B Preferred Stock at least equal to the number of
shares held by such Holder subject to the call for
redemption. Upon such surrender, the Holder shall be
entitled to receive payment of the Redemption Price,
without interest, and, in the event of a partial
redemption, a certificate representing the balance,
if any, of shares of Series B Preferred Stock covered
by the surrendered certificate or certificates but
not subject to the call for redemption.
(iii) If on the Redemption Date (A) notice
of redemption has been mailed or delivered as
provided herein, (B) the Corporation has set aside
all funds necessary to pay the amount due for all
shares of Series B Preferred Stock subject to
redemption, and (C) all such funds are available for
the sole purpose of paying such amount, then all
shares of Series B Preferred Stock subject to
redemption shall, whether or not the certificates for
such shares have been surrendered for cancellation,
be deemed to be no longer outstanding for any purpose
and all rights with respect to such shares shall
cease, except the right of the Holder to receive the
Redemption Price, without
<PAGE>
interest. If the Corporation shall not have funds
legally available for the redemption of the shares to
be redeemed pursuant to this Section 6 on the
Redemption Date, such redemption shall be made on the
earliest practicable date next following the Business
Day on which the Corporation shall first have funds
legally available for the redemption of such shares
as shall be specified in the notice of redemption.
7. No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation, or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale
of securities or any other voluntary action, avoid or seek to avoid the
observance of any of the terms of the Series B Preferred Stock, but
will at all times, in good faith, assist in taking all actions as may
be necessary or appropriate to carry out the terms of the Series B
Preferred Stock.
<PAGE>
EXHIBIT B
This Warrant and any shares acquired upon the exercise of this Warrant
have not been registered under the Securities Act of 1933, as amended,
and may not be transferred, sold or otherwise disposed of except while
such a registration is in effect or pursuant to an exemption from
registration under said Act.
PHYSICIAN COMPUTER NETWORK, INC.
Common Stock Purchase Warrant
("Warrant")
April 1, 1998
PHYSICIAN COMPUTER NETWORK, INC., a New Jersey corporation
(the "Company"), for value received, hereby certifies that JA Special Limited
Partnership, or registered assigns, is entitled to purchase from the Company
6,000,000 duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock, par value $.01 per share (the "Common Stock"), of the Company
at the purchase price per share of $1.00 (the "Initial Warrant Price"), at any
time from and after the first to occur of: (i) April 1, 1999 and (ii) a Trigger
Event (the "Exercise Date"), and prior to 5:00 p.m., Eastern Standard time, on
March 31, 2003 (the "Expiration Date"), all subject to the terms, conditions and
adjustments set forth below in this Warrant.
Certain capitalized terms used in this Warrant and Form of Subscription
attached hereto are defined in Section 13 hereof.
1. EXERCISE OR CONVERSION OF WARRANT.
1.1. Manner of Exercise or Conversion; Payment. This Warrant may be
exercised by the holder hereof, in whole or in part, at any time and from time
to time, except that this Warrant may not be exercised as to fewer than one
million (1,000,000) shares of Common Stock unless there are less than one
million (1,000,000) shares of Common Stock as to which this Warrant is then
exercisable. This Warrant may be exercised by the holder hereof, during normal
business hours on any Business Day from and after the Exercise Date, and prior
to the Expiration Date, by surrender of this Warrant to the Company at its
office maintained
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<PAGE>
pursuant to Section 12.2(a) hereof, accompanied by a subscription in
substantially the form attached to this Warrant (or a reasonable facsimile
thereof) duly executed by such holder and accompanied by payment, in cash or by
check payable to the order of the Company (or by any combination of such
methods), in the amount obtained by multiplying (a) the number of shares of
Common Stock (without giving effect to any adjustment thereof) designated in
such subscription by (b) the Initial Warrant Price, and such holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities)
determined as provided in Sections 2 through 4 hereof.
1.2. When Exercise Effective. The exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in Section 1.1 hereof. Upon such exercise the Person or Persons in
whose name or names any certificate or certificates for shares of Common Stock
(or Other Securities) shall be issuable upon such exercise as provided in
Section 1.3 hereof shall be deemed to have become the holder or holders of
record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable after
the exercise of this Warrant, and in any event within five Business Days
thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the holder hereof, or, subject to Section 9 hereof, as such holder (upon payment
by such holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) to which such holder
shall be entitled upon such exercise plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash in an amount equal to the
same fraction of the Market Price per share on the Business Day next preceding
the date of such exercise.
2. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
2.1. General; Number of Shares; Warrant Price. The number of shares of
Common Stock which the holder of this Warrant shall be entitled to receive upon
the exercise hereof shall be deter mined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Section 2) be
issuable upon such exercise, as designated by the holder hereof pursuant to
Section 1.1 hereof, by the fraction of which (a) the
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<PAGE>
numerator is the Initial Warrant Price and (b) the denominator is the Warrant
Price in effect on the date of such exercise. The "Warrant Price" (i) shall
initially be the Initial Warrant Price, (ii) shall be adjusted and readjusted
from time to time as provided in this Section 2 and, (iii) as so adjusted or
readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Section 2.
2.2. Adjustment of Warrant Price; Issuance of Additional Shares of
Common Stock. In case the Company at any time or from time to time after the
date hereof shall issue or sell Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section 2.3 or
2.4 hereof) without consideration or for a consideration per share less than the
greater of the Current Market Price or the Warrant Price in effect immediately
prior to such issue or sale, then, and in each such case, subject to Section 2.7
hereof, such Warrant Price shall be reduced, concurrently with such issue or
sale, to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Warrant Price by a fraction:
(a) the numerator of which shall be (i) the number of
shares of Common Stock outstanding immediate ly prior to such
issue or sale plus (ii) the number of shares of Common Stock
which the aggregate consider ation received by the Company for
the total number of such Additional Shares of Common Stock so
issued or sold would purchase at the greater of such Current
Market Price and such Warrant Price; and
(b) the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such
issue or sale.
2.3. Treatment of Options and Convertible Securities. In
case the Company at any time for from time to time after the date
hereof shall issue, sell, grant or assume, or shall fix a record
date for the determination of holders of any class of securities
entitled to receive, any Options or Convertible Securities, then,
and in each such case, the maximum number of Additional Shares of
Common Stock (as set forth in the instrument relating thereto,
without regard to any provisions contained therein for a subse
quent adjustment of such number the purpose of which is to
protect against dilution) at any time issuable upon the exercise
of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible
Securities and Options therefor, shall be deemed to be Additional
Shares of Common Stock issued as of the time of such issue, sale,
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<PAGE>
grant or assumption or, in case such a record date shall have been fixed, as of
the close of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading); provided, however, that such Additional Shares of Common stock shall
not be deemed to have been issued unless the consideration per share (determined
pursuant to Section 2.5 hereof) of such shares would be less than the greater of
the Current Market Price or the Warrant Price in effect on the date of and
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the com mencement of ex-dividend
trading), as the case may be; and provided, further, that:
(a) whether or not an adjustment of the Warrant Price
is required in connection with the issuance, sale grant or
assumption of such Options or Convertible Securities, no
adjustment or further adjustment of the Warrant Price shall be
made as a result of the exercise of such Options or the
conversion or exchange of such Convertible Securities and the
consequent issue or sale of Convertible Securities or shares
of Common Stock;
(b) in any case in which Additional Shares of Common
Stock are deemed to be issued, if such Options or Convertible
Securities by their terms provide, with the passage of time or
otherwise, for any increase in the consideration payable to
the Company, or decrease in the number of Additional Shares of
Common Stock issuable, upon the exercise, conversion or
exchange thereof (by change of rate or otherwise), the Warrant
Price computed on the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend trading, as
the case may be, with respect thereof), and any subsequent
adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such Options, or
the rights of conversion or exchange under such Convertible
Securities, which are outstanding at such time;
(c) in any case in which Additional Shares of Common
Stock are deemed to be issued, upon the expira tion (or
purchase by the Company and cancellation or retirement) of any
such Options which shall not have been exercised, or the
expiration of any rights of
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<PAGE>
conversion or exchange under any such Convertible Securities
the rights of conversion or exchange under which shall not
have been exercised, the Warrant Price computed upon the
original issue, sale, grant or assumption thereof (or upon the
occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be, with
respect thereto), and any subsequent adjustments based
thereon, shall, upon (and effective as of) such expiration (or
such cancellation or retirement, as the case may be), be
recomputed as if:
(i) in the case of Options or Convertible
Securities, the only Additional Shares of Common
Stock issued or sold were the Additional Shares of
Common Stock, if any, actually issued or sold upon
the exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the consider
ation actually received by the Company upon such
exercise, or for the issue or sale of all such
Convertible Securities which were actually con verted
or exchanged, plus the additional consider ation, if
any, actually received by the Company upon such
conversion or exchange, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued or sold upon the exercise of such
Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to have then
been issued was the consideration actually received
by the Company for the issue, sale, grant or
assumption of all such Options, whether or not
exercised, plus the consideration deemed to have been
received by the Company (pursuant to Section 2.5
hereof) upon the issue or sale of such Con vertible
Securities with respect to which such Options were
actually exercised; and
(d) no readjustment pursuant to clause (b) or (c)
above (either individually or cumulatively together with all
prior readjustments as made in respect of such Options or
Convertible Securities) shall have the effect of increasing
the Warrant Price by a proportion (relative to the Warrant
Price in effect immediately
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<PAGE>
prior to such readjustment) in excess of the inverse of the
aggregate proportional adjustment thereof made in respect of
the issue, sale, grant or assumption of such Options or
Convertible Securities or the fact that such Options or
Convertible Securities were outstanding at the time other
shares of Common Stock, Options or Convertible Securities were
issued.
If the consideration provided for in any Option or the additional consideration,
if any, payable upon the conversion or exchange of any Convertible Security
shall be reduced, or the rate at which any Option is exercisable or any
Convertible Security is convert ible into or exchangeable for shares of Common
Stock shall be increased, at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then, effective
concurrently with each such change, the Warrant Price then in effect shall first
be adjusted to eliminate the effects (if any) of the issuance (or deemed
issuance) of such Option or Convertible Security on the Warrant Price and then
readjusted as if such Option or Convertible Security had been issued on the date
of such change with the terms in effect after such change, but only if as a
result of such adjustment the Warrant Price then in effect hereunder is thereby
reduced.
2.4. Treatment of Stock Dividends, Stock Splits, etc. In
case the Company at any time or from time to time after the date
hereof shall declare or pay any dividend on the Common Stock
payable in Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in Common Stock), then, and in each such
case, Additional Shares of Common Stock shall be deemed to have
been issued (a) in the case of any such dividend, immediately
after the close of business on the record date for the determina
tion of holders of any class of securities entitled to receive
such dividend, or (b) in the case of any such subdivision, at the
close of business on the day immediately prior to the day upon
which such corporate action becomes effective.
2.5. Computation of Consideration. For the purposes of this
Section 2:
(a) the consideration for the issue or sale of any Additional
Shares of Common Stock shall, irrespective of the accounting treatment
of such consideration:
(i) insofar as it consists of cash, be computed
at the amount of cash actually received by the Company
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<PAGE>
net of any expenses paid or incurred by the Company or any
commissions or compensation paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services in connection with such issue or sale;
(ii) insofar as it consists of property (includ ing
securities) other than cash actually received by the Company,
be computed at the fair value thereof at the time of such
issue or sale, as determined in good faith by the Board of
Directors of the Company;
(iii) insofar as it consists neither of cash nor of
other property, be computed as having no value; and
(iv) in case Additional Shares of Common Stock are
issued or sold together with other stock or securi ties or
other assets of the Company for a consideration which covers
both, be the portion of such consideration so received,
computed as provided in clauses (i), (ii) and (iii) above,
allocable to such Additional Shares of Common Stock, all as
determined in good faith by the Board of Directors of the
Company;
(b) Additional Shares of Common Stock deemed to have been
issued pursuant to Section 2.3 hereof shall be deemed to have been
issued for a consideration per share determined by dividing:
(i) the total amount of cash and other property, if
any, received and receivable by the Company as direct
consideration for the issue, sale, grant or assumption of the
Options or Convertible Securities in question, plus the
minimum aggregate amount of addi tional consideration (as set
forth in the instruments relating thereto, without regard to
any provision contained therein for a subsequent adjustment of
such consideration the purpose of which is to protect against
dilution) payable to the Company upon the exercise in full of
such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible
Securities, the exercise of such Options for Convertible
Securities and the conver sion or exchange of such Convertible
Securities, in each case computing such consideration as
provided in the foregoing clause (a),
by
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<PAGE>
(ii) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment
of such number the purpose of which is to protect against
dilution) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible securities; and
(c) Additional Shares of Common Stock deemed to have been
issued pursuant to Section 2.4 hereof shall be deemed to have been
issued for no consideration.
2.6. Adjustments for Combinations, etc. In case the out standing shares
of Common Stock shall be combined or consoli dated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.7. Minimum Adjustment of Warrant Price. If the amount of any
adjustment of the Warrant Price required pursuant to this Section 2 would be
less than one-tenth (1/10) of one percent (1%) of the Warrant Price in effect at
the time such adjustment is otherwise so required to be made, such amount shall
be carried forward and adjustment with respect thereto made at the time of and
together with any subsequent adjustment which, together with such amount and any
other amount or amounts so carried forward, shall aggregate at least one tenth
(1/10) of one percent (1%) of such Warrant Price.
2.8. Shares Deemed Outstanding. For all purposes of the computations to
be made pursuant to this Section 2: (i) there shall be deemed to be outstanding
as of the date hereof all shares of Common Stock (a) issuable pursuant to the
exercise of Options and conversion of Convertible Securities outstanding at the
close of business on April 1, 1998, including, without limitation, this Warrant,
and (b) issuable pursuant to the exercise of any options heretofore or hereafter
granted under the Company's Stock Option Plans; (ii) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
Section 2.3 or 2.4 hereof, such Additional Shares shall be deemed to be
outstanding; (iii) treasury shares shall not be deemed to be outstanding; and
(iv) no adjustment shall be made in the Warrant Price upon the issuance of
shares of Common Stock pursuant to Options and Convertible Securities so deemed
to be outstanding, but this Section 2.8 shall not prevent other adjustments in
the Warrant Price arising by virtue of such
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<PAGE>
outstanding Options or Convertible Securities pursuant to the provisions of
Section 2.3 hereof; provided, however, that, for purposes of calculating
adjustments to the Warrant Price, there shall be deemed to be outstanding
immediately after giving effect to any issuance of shares of Common Stock,
Options or Convertible Securities all shares of Common Stock issuable upon the
exercise of Options and conversion of Convertible Securities then out standing
(including without limitation the Warrants) after giving effect to the
antidilution provisions contained in all such outstanding Options and
Convertible Securities which cause an adjustment in the number of shares of
Common Stock so issuable, either by virtue of such issuance of shares of Common
Stock, Options or Convertible Securities or by virtue of the operation of such
antidilution provisions.
3. CONSOLIDATION, MERGER, ETC.
3.1. Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date hereof (a) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securi ties shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person or otherwise consummate a Sale of the
Company, or (d) shall effect a capital reorganization or reclassification of the
Common Stock or Other Securities (other than a capital reorganization or
reclassification to the extent that such capital reorganization or
reclassification results in the issue of Additional Shares of Common Stock for
which adjustment in the Warrant Price is provided in Section 2.2.1 or 2.2.2.
hereof), then, and in the case of each such transaction, proper provision shall
be made so that, upon the basis and the terms and in the manner provided in this
Warrant, the holder of this Warrant, upon the exercise hereof at any time after
the consummation of such transaction, shall be entitled to receive (at the
aggregate Warrant Price in effect at the time of such consummation for all
Common Stock or Other Securities issuable upon such exercise immediately prior
to such consummation), in lieu of the Common Stock or Other Securities issuable
upon such exercise prior to such consummation, the greatest amount of
securities, cash or other property to which such holder would actually have been
entitled as a shareholder upon such
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<PAGE>
consummation if such holder had exercised the rights represented by this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possi ble to the adjustments provided for
in Sections 2, 3 and 4 hereof; provided, however, that if a purchase, tender or
exchange offer shall have been made to and accepted by the holders of more than
50% of the outstanding shares of Common Stock, and if the holder of the Warrant
so designates in a notice given to the Company on or before the date immediately
preceding the date of the consummation of such transaction, the holder of the
Warrant shall be entitled to receive the greatest amount of securities, cash or
other property to which such holder would actually have been entitled as a
shareholder if the holder of the Warrant had exercised the Warrant prior to the
expiration of such purchase, tender or exchange offer and accepted such offer,
subject to adjustments (from and after the consummation of such purchase, tender
or exchange offer) as nearly equivalent as possible to the adjustments provided
for in Sections 2, 3 and 4 hereof.
3.2. Assumption of Obligations. Notwithstanding anything contained in
the Warrants to the contrary, the Company will not effect any of the
transactions described in clauses (a) through (d) of Section 3.1 hereof unless,
prior to the consummation thereof, each person (other than the Company) which
may be required to deliver any stock, securities, cash or property upon the
exercise of this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the holder of this Warrant, (b)
the obligations of the Company under this Warrant (and if the Company shall
survive the consum mation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company under this Warrant), (c) the obliga tions of the Company under
the Registration Rights Agreement and (d) the obligation to deliver to such
holder such shares of stock, securities, cash or property as, in accordance with
the foregoing provisions of this Section 3, such holder may be entitled to
receive, and such Person shall have similarly deliv ered to such holder an
opinion of counsel for such Person, which counsel shall be reasonably
satisfactory to such holder, stating that this Warrant shall thereafter continue
in full force and effect and the terms hereof (including without limitation all
of the provisions of this Section 3) shall be applicable to the stock,
securities, cash or property which such Person may be required to deliver upon
any exercise of this Warrant or the exercise of any rights pursuant hereto.
4. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the
provisions of Section 2 or 3 hereof are not strictly
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<PAGE>
applicable but the failure to make any adjustment would not, in the opinion of
the holder of this Warrant, fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles of such
Sections, then, in each such case, at the request of such holder, the Company
shall appoint a firm of independent investment bankers of recognized national
standing (which shall be independent of the Company and shall be satisfactory to
the holder of this Warrant), which shall give their opinion upon the adjustment,
if any, on a basis consistent with the essential intent and principles
established in Sections 2 and 3 hereof, necessary to preserve, without dilution,
the purchase rights represented by this Warrant. Upon receipt of such opinion,
the Company will promptly mail a copy thereof to the holder of this Warrant and
shall make the adjust ments described therein.
5. NO DILUTION OR IMPAIRMENT. The Company will not, by amend ment of its
certificate of incorporation or through any consoli dation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock on the exercise of the
Warrants from time to time outstanding and (c) will not take any action which
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of shares of Common Stock
(or Other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such exercise.
6. ACCOUNTANTS' REPORT AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable upon
the exercise of this Warrant, the Company at its expense will promptly compute
such adjustment or readjustment in accordance with the terms of this Warrant and
cause independent certified public accounts of recognized nation al standing
(which may be the regular auditors of the Company)
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selected by the Company to verify such computation (other than any computation
of the fair value of property as determined in good faith by the Board of
Directors of the Company) and prepare a report setting forth such adjustment or
readjustment and showing in reasonable detail the method of calculation thereof
and the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or to be received by the Company for
any Additional Shares of Common Stock issued or sold or deemed to have been
issued, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Warrant Price in effect immediately prior to such issue
or sale and as adjusted and readjusted (if required by Section 2 hereof) on
account thereof. The Company will forthwith mail a copy of each such report to
the holder of this Warrant and will, upon the written request at any time of the
holder of this Warrant, furnish to such holder a like report setting forth the
Warrant Price at the time in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all such reports at its office
maintained pursuant to Section 12.2(a) hereof and will cause the same to be
available for inspection at such office during normal business hours by the
holder of this Warrant or any prospective purchaser of a Warrant designated by
the holder thereof.
7. NOTICES OF CORPORATE ACTION. In the event of
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, reclas
sification or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other
Person, or
(c) any voluntary or involuntary dissolution, liquida
tion or winding-up of the Company,
(d) any issuance of any Common Stock, Convertible
Security or Option by the Company, or
(e) any Sale of the Company,
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the Company will mail to the holder of this Warrant a notice specifying (i) the
date or expected date on which any record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribu tion or right, (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolida tion, merger,
transfer, dissolution, liquidation, winding-up or Sale of the Company is to take
place, the time, if any such time is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up and a description in reasonable detail of the transaction and (iii)
the date of such issuance, together with a description of the security so issued
and the consideration received by the Company therefor. Such notice shall be
mailed at least 30 days prior to the date therein specified.
8. REGISTRATION OF COMMON STOCK. If any shares of Common Stock required to be
reserved for purposes of exercise of this Warrant require registration with or
approval of any governmental author ity under any federal or state law (other
than the Securities Act) before such shares may be issued upon exercise, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or approved, as the case may
be. This Warrant and the shares of Common Stock (or Other Securities) issuable
upon exercise of this Warrant shall constitute Registrable Securities (as such
term is defined in the Registration Rights Agreement). The holder of this
Warrant shall be entitled to all of the benefits afforded to a holder of any
such Registrable Securities under the Registra tion Rights Agreement and such
holder, by its acceptance of this Warrant, agrees to be bound by and to comply
with the terms and conditions of the Registration Rights Agreement applicable to
such holder as a holder of such Registrable Securities. As promptly as
practicable following the issuance of this Warrant to the Initial Holder and, in
any event within 15 Business Days thereafter, the Company will, at its expense,
arrange for the listing, upon official notice of issuance, of the shares of
Common Stock issuable upon exercise hereof. At any such time as the Warrants are
listed on any national securities exchange or the Common Stock is listed on any
other national securities exchange, the Company will, at its expense, obtain
promptly and maintain the approval for listing on each such exchange, upon
official notice of issuance, of the shares of Common Stock issuable upon
exercise of the Warrant and maintain the listing of
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such shares or Warrant, as the case may be, after their issuance; and the
Company will also list on such national securities exchange, will register under
the Exchange Act and will maintain such listing of, any Other Securities that at
any time are issuable upon exercise of the Warrant, if and at the time that any
securities of the same class shall be listed on such national securities
exchange by the Company.
9. RESTRICTIONS ON TRANSFER.
9.1. Restrictive Legend. Except as otherwise permitted by this Section
9, each certificate for Common Stock (or Other Securities) issued upon the
exercise of this Warrant, each certificate issued upon the direct or indirect
transfer of any such Common Stock (or Other Securities), this Warrant and any
Warrant issued upon direct or indirect transfer or in substitu tion for this
Warrant pursuant to Section 12 hereof shall bear the legend set forth on the
face of this Warrant and shall be transferable only upon satisfaction of the
conditions specified in this Section 9.
9.2. Notice of Proposed Transfer, Opinion of Counsel. Prior
to any transfer of any Restricted Securities which are not
registered under an effective registration statement under the
Securities Act, the holder thereof will give written notice to
the Company of such holder's intention to effect such transfer
and to comply in all other respects with this Section 9.2. Each
such notice (a) shall describe the manner and circumstances of
the proposed transfer, and (b) shall designate counsel for the
holder giving such notice. The holder giving such notice will
submit a copy thereof to the counsel designated in such notice.
The following provisions shall then apply:
(a) If in the opinion of such counsel the proposed transfer
may be effected without registration of such Restricted Securities
under the Securities Act, such holder shall thereupon be entitled to
transfer such Restricted Securities in accordance with the terms of the
notice delivered by such holder to the Company. Except as provided in
Section 9.3 hereof, each certificate representing such Restricted
Securities issued upon or in connection with such transfer shall bear
the restrictive legends required by Section 9.1 hereof.
(b) If in the opinion of such counsel the proposed transfer
may not legally be effected without registration of such Restricted
Securities under the Securities Act (such opinion to state the basis of
the legal conclusions reached
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therein), such holder shall not be entitled to transfer such Restricted
Securities until either (x) receipt by the Company of a further notice
from such holder pursuant to the foregoing provisions of this Section
9.2 and fulfillment of the provisions of clause (a) and (y) such
Restricted Securi ties have been effectively registered under the
Securities Act.
The Company will pay the reasonable fees and disbursements of counsel for any
holder of Restricted Securities and of counsel for the Company in connection
with all opinions rendered by them pursuant to this Section 9.2 and pursuant to
Section 9.3 hereof. Notwithstanding any other provision of this Section 9, no
opinion of counsel shall be necessary for a transfer of Restricted Securities by
the holder thereof to a subsidiary, shareholder or affiliate of such holder, if
the transferee agrees in writing to be subject to the terms hereof to the same
extent as if such transferee were the Initial Holder hereof.
9.3. Termination of Restrictions. The restrictions imposed by this
Section 9 upon the transferability of Restricted Securi ties shall cease and
terminate as to any particular Restricted Securities (a) when such Restricted
Securities shall have been effectively registered under the Securities Act, or
(b) when, in the opinions of both counsel for the holder thereof and counsel for
the Company, such restrictions are no longer required in order to insure
compliance with the Securities Act. Whenever such restrictions shall cease and
terminate as to any Restricted Securities, the holder thereof shall be entitled
to receive from the Company, without expense (other than applicable transfer
taxes, if any), new securities of like tenor not bearing the applicable legends
required by Section 9.1 hereof.
9.4. Warrant Transfer. Anything contained in this Warrant to the
contrary notwithstanding, this Warrant may be transferred, sold or assigned in
whole or in part, at any time and from time to time, except that this Warrant
may not be transferred, sold or assigned as to fewer than one million
(1,000,000) shares of Common Stock unless there are less than one million
(1,000,000) shares of Common Stock as to which this Warrant is then exercisable.
10. AVAILABILITY OF INFORMATION. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company will comply with the reporting requirements of Sections 13 and
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15(d) of the Exchange Act and will comply with all other public information
reporting requirements of the Commission (including Rule 144 promulgated by the
Commission under the Securities Act) from time to time in effect and relating to
the availability of an exemption from the Securities Act for the sale of any Re
stricted Securities. The Company will also cooperate with each holder of any
Restricted Securities in supplying such information as may be necessary for such
holder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Restricted Securi ties.
The Company will furnish to the holder of this Warrant, promptly upon their
becoming available, copies of all financial statements, reports, notices and
proxy statements sent or made available generally by the Company to its
stockholders, and copies of all regular and periodic reports and all
registration statements and prospectuses filed by the Company with any securi
ties exchange or with the Commission.
11. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep
available, solely for issuance and delivery upon exercise of the Warrant, the
number of shares of Common Stock of each class (or Other Securities) from time
to time issuable upon exercise of the Warrant. All shares of Common Stock (or
Other Securities) issuable upon exercise of the Warrant shall be duly authorized
and, when issued upon such exercise, shall be validly issued and, in the case of
shares, fully paid and nonassessable with no liability on the part of the
holders thereof.
12. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANT.
12.1. Ownership of Warrant. The Company may treat the person in whose
name this Warrant is registered on the register kept at the office of the
Company maintained pursuant to Section 12.2(a) hereof as the owner and holder
thereof for all purposes, except that, if and when the Warrant is properly
assigned in blank, the Company shall treat the assignee thereof as the owner of
the Warrant for all purposes. Subject to Section 9 hereof, the Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant first
having been issued.
12.2. Office; Transfer and Exchange of Warrant.
(a) The Company will maintain an office (which may be an
agency maintained at a bank) in New York or New Jersey
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where notices, presentations and demands in respect of this Warrant may
be made upon it. Such office shall be main tained at 1200 The American
Road, Morris Plains, New Jersey 07950, until such time as the Company
shall notify the holder of the Warrant of any change of location of
such
office.
(b) The Company shall cause to be kept at its office
maintained pursuant to Section 12.2(a) hereof a register for the
registration and transfer of the Warrant. The name and address of the
holder of the Warrant, the transfers thereof and the names and
addresses of transferees of the Warrant shall be registered in such
register. The Person in whose name the Warrant shall be so registered
shall be deemed and treated as the owner and holder thereof for all
purposes of this Warrant, and the Company shall not be affected by any
notice or knowledge to the contrary.
(c) Upon the surrender of the Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to Section 12.2(a) hereof, the Company at its
expense will (subject to compliance with Section 9 hereof, if
applicable) execute and deliver to or upon the order of the holder
thereof a new Warrant of like tenor, in the name of such holder or as
such holder (upon payment by such holder of any applicable transfer
taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant so surrendered.
12.3. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction of the Warrant
held by a Person other than the Initial Holder or any institutional investor,
upon delivery of indemnity reasonably satisfactory to the Company in form and
amount or, in the case of any such mutilation, upon surrender of the Warrant for
cancellation at the office of the Company maintained pursuant to Section 12.2(a)
hereof, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor and dated the date hereof.
13. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective
meanings:
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Additional Shares of Common Stock: All shares (including treasury
shares) of Common Stock issued or sold (or, pursuant to Section 2.3 or 2.4
hereof, deemed to be issued) by the Company after the date hereof, whether or
not subsequently reacquired or retired by the Company, other than the shares of
Common Stock issued: (i) upon the exercise of the Warrant; (ii) upon the
exercise of options granted pursuant to the Company's Stock Option Plan, as the
same may be amended from time to time; (iii) in connection with the financing of
the acquisition by the Company of VERSYSS Incorporated; or (iv) in connection
with the exercise of any Options or the conversion of any Convertible Securities
which are deemed to be outstanding in accordance with Section 2.8 hereof.
Book Value: Shall mean, in respect of any share of Common Stock on any
date herein specified, the quotient of (a) the amount by which (i) the Company's
consolidated total assets exceeds (ii) the Company's consolidated total
liabilities, in each case determined (A) as of the last day of the most recent
fiscal year of the Company ended prior to such date, or (B) as of the last day
of the most recent calendar month ended prior to such date, whichever is higher,
divided by (b) the number of Fully Diluted Outstanding shares of Common Stock.
Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in New York, New York are authorized by
law to be closed. Any reference to "days" (unless Business Days are specified)
shall mean calendar days.
Commission: The Securities and Exchange Commission or any
other federal agency at the time administering the Securities
Act.
Common Stock: As defined in the introduction to this Warrant, such term
to include any stock into which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common Stock, and all other
stock of any class or classes (however designated) of the Company the holders of
which have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends after the
payment of dividends and distri butions on any shares entitled to preference.
Company: As defined in the introduction to this Warrant, such term to
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with Section 3 hereof.
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Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.
Current Market Price: On any date specified herein, the average daily
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no class of the Common Stock is then listed or admitted to trading on any nation
al securities exchange or quoted in the over-the-counter market, the Current
Market Price shall be the Market Price on such date; provided, however, that in
the event that the Company has entered into a firm commitment underwriting
agreement with an underwriter (i) pursuant to which the Company and such
underwriter have determined an offering price for the sale of Common Stock in a
public offering as a result of arms length negotiations within the 20 day period
described above or (ii) relating to the public offering of Convertible
Securities then, in the case of (i), the Current Market Price of shares of
Common Stock issued and sold in such public offering shall be such offering
price and in the case of (ii), the Current Market Price shall be the lower of
Current Market Price or Market Price on the date immediately preceding the date
the offering price of such Convertible Securities was determined in connection
with the filing of the Registration Statement which is declared effective
covering such Convertible Securities filed pursuant to the Securities Act.
Exercise Date: As defined in the introduction to this
Warrant.
Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Expiration Date: As defined in the introduction to this
Warrant.
Fully Diluted Outstanding: When used with reference to Common Stock,
shall mean at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant outstanding on such date and
other options or warrants to purchase, or securities convertible into, shares of
Common Stock outstanding on such date which would be deemed outstanding in
accordance with generally accepted accounting principles as from time to time in
effect for purposes of deeming book value or net income per share.
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Initial Holder: JA Special Limited Partnership.
Market Price: On any date specified herein, the amount per share of
Common Stock equal to (a) the last sale price of Common Stock, regular way, on
such date or, if no such sale takes place on such date, the average of the
closing bid and asked prices thereof on such date, in each case as officially
reported on the principal national securities exchange on which Common Stock is
then listed or admitted to trading, or (b) if Common Stock is not then listed or
admitted to trading on any national securities exchange but is designated as a
national market system security by the NASD, the last trading price of Common
Stock on such date, or (c) if there shall have been no trading on such date or
if Common Stock is not so designated, the average of the closing bid and asked
prices of Common Stock on such date as shown by the NASD automated quotation
system, or (d) if Common Stock is not then listed or admitted to trading on any
national exchange or quoted in the over-the-counter market, the higher of (x)
Book Value per share or (y) the fair value thereof determined in good faith by
the Board of Directors of the Company as of a date which is within 15 days of
the date as of which the determination is to be made.
NASD: The National Association of Securities Dealers, Inc.
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities other than options granted pur suant to the Company's Stock Option
Plan as the same may be amended from time to time.
Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which the
holder of the Warrant at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securi ties pursuant to
Section 3 hereof or otherwise.
Person: A corporation, an association, a partnership, an
organization, a business, an individual, a government or politi
cal subdivision thereof or a governmental agency.
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Registration Rights Agreement: The Registration Rights
Agreement, dated as of February 22, 1993, between the Company and
Jeffry M. Picower.
Restricted Securities: All of the following: (a) the Warrant bearing
the applicable legend or legends referred to in Section 9.1 hereof, (b) any
shares of Common Stock (or Other Securities) which have been issued upon the
exercise of Warrants and which are evidenced by a certificate or certificates
bearing the applicable legend or legends referred to in such Section, (c) unless
the context otherwise requires, any shares of Common Stock (or Other Securities)
which are at the time issuable upon the exercise of Warrants and which, when so
issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such Section.
Sale of the Company: any of: (i) the sale by one or more of the
shareholders of the Company in one or more transactions of a majority of the
outstanding common stock of the Company; (ii) the merger or consolidation of the
Company with or into any other Person, in a transaction in which the
shareholders of the Company immediately prior to the consummation of such
transaction collectively own less than 50% of the common stock and voting power
of the entity surviving; such transaction (or any other business combination
transaction having a similar effect); or (iii) the sale of all or substantially
all of the assets of the Company in a single transaction or a series of related
transactions.
Securities Act: The Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Stock Option Plan: Collectively, the Company's Amended and Restated
1993 Incentive and Non-Incentive Stock Option Plan, as amended from time to
time, the Company's Amended and Restated 1993 Non-Employee Directors
Non-Incentive Stock Option Plan, as amended from time to time, and the Company's
Value Added Reseller Stock Option Plan, as amended from time to time.
Trigger Event: Trigger Event: The earlier to occur of: (i) five (5)
business days preceding the Sale of the Company; or (ii) in the event that the
Sale of the Company shall require the approval of the holders of the Common
Stock, five (5) business days prior to the date fixed by the Company as the
record date for determination of the holders of Common Stock entitled to vote
thereon.
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Warrant Price: As defined in Section 2.1 hereof.
Warrants: As defined in the introduction to this Warrant.
14. REMEDIES. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.
15. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company or otherwise.
16. NOTICES. All notices, requests, demands and other communi cations provided
for hereunder shall be in writing (including telegraphic communication) and
mailed, telecopied, telegraphed or delivered:
If to the Holder:
JA Special Limited Partnership
22 Saw Mill River Road
Hawthorne, New York 10532
If to the Company to:
Physician Computer Network, Inc.
1200 The American Road
Morris Plains, New Jersey 07950
Attention: Chief Financial Officer
or at such other address as shall be designated in a written notice to the other
parties complying as to delivery with the terms of this Section 16.
All such notices, requests, demands and other communications shall,
when mailed (registered mail, return receipt requested,
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postage prepaid), personally delivered, or telegraphed, to be effective four
days after deposit in the mails, when personally delivered, or when delivered to
the telegraph company, respec tively, addressed as aforesaid, unless otherwise
provided herein and, when telecopied, shall be effective upon actual receipt.
17. FILING FEES. In the event that prior to and in connection with the exercise
or conversion of this Warrant or any other option or warrant held by the holder
of this Warrant, any filing or notice is required to be made with any
governmental authority or agency (including, without limitation, pursuant to the
Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and any
regulations promulgated thereunder) then the Company shall bear and reimburse
such holder for all filings fees and similar costs required to be paid in
connection therewith.
[INTENTIONALLY BLANK]
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18. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the internal laws of the State of New York. The section headings in
this Warrant are for purposes of convenience only and shall not constitute a
part hereof.
PHYSICIAN COMPUTER NETWORK, INC.
By:
_______________________________
Title:
_______________________________
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FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To Physician Computer Network, Inc.
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder * shares of the
Common Stock and herewith makes payment of $ therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to , whose
address is
.
Dated:
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
- --------
*/ Insert here the number of shares called for on the face of this Warrant
without making any adjustment for Additional Shares of Common Stock or any other
stock or other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise.
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FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the
within Warrant hereby sells, assigns and transfer unto
the right represented by such Warrant to purchase
*
Dated:
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- --------
*/ Insert here the number of shares called for on the face of this Warrant
without making any adjustment for Additional Shares of Common Stock or any other
stock or other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise.
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EXHIBIT C
PHYSICIAN COMPUTER NETWORK, INC.
1200 The American Road
Morris Plains, New Jersey 07950
April 1, 1998
JA Special Limited Partnership
22 Saw Mill River Road
Hawthorne, New York 10532
Gentlemen:
Reference is made to the Common Stock Purchase Warrant (the
"Warrant"), dated September 13, 1995, issued by Physician Computer Network, Inc.
("PCN") to Jeffry M. Picower and assigned by Mr. Picower to JA Special Limited
Partnership ("JA"). Unless otherwise defined, all capitalized terms used herein
shall have the meanings ascribed to them in the Warrant.
PCN and JA wish to amend and modify certain of the terms and
provisions of the Warrant. By executing this letter in the spaces provided
below, each of PCN and JA agree that the Warrant is amended and modified as
follows:
1. The Warrant may only be exercised by the holder thereof
from and after the first to occur of: (i) September 12, 2002; or (ii) the
Trigger Event. Accordingly, the term "Exercise Date" shall mean the first to
occur of: (i) September 12, 2002; or (ii) the Trigger Event.
2. "Trigger Event" shall mean the earlier to occur of: (i)
five (5) business days preceding the Sale of the Company; (ii) in the event that
the Sale of the Company shall require the approval of the holders of the Common
Stock, five (5) business days prior to the date fixed by the Company as the
record date for determination of the holders of Common Stock entitled to vote
thereon; and (iii) the Market Price Date (as defined below).
3. As used herein, the "Market Price Date" means the
forty-fifth consecutive Business Day on which the Market Price of the Common
Stock is $5.00 per share or greater (appropriately adjusted for stock splits,
stock dividends and the like); provided, however, that for this purpose, there
shall only be deemed to be a Market Price of the Common Stock in accordance with
clauses (a) and (b) of the definition of Market Price contained in the Warrant
and, under all other circumstance there shall be deemed to be no Market Price of
the Common Stock.
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4. "Sale of the Company" shall mean any of: (i) the
sale by one or more of the shareholders of the Company in one or
more transactions of a majority of the outstanding common stock
of the Company, (ii) the merger or consolidation of the Company
with or into any other Person in a transaction in which the
shareholders of the Company immediately prior to the consummation
of such transaction collectively own less than 50% of the common
stock and voting power of the entity surviving such transaction
(or any other business combination transaction having a similar
effect), or (iii) the sale of all or substantially all of the
assets of the Company in a single transaction or series of
related transactions.
5. The holder of the Warrant shall exercise the Warrant in
accordance with the terms thereof no later then twenty (20) business days
following the Market Price Date, unless, the Expiration Date has occurred on or
prior to the end of such twenty (20) day period.
6. The Warrant shall not be transferable or assignable to any
Person other than a Permitted Assignee (as defined below).
7. As used herein, a "Permitted Assignee" shall mean Jeffry M.
Picower, his spouse, lineal ancestor or descendants, brothers, sisters, children
and grandchildren, or a trust for the benefit of Jeffry M. Picower or any one or
more member of such class; and, upon the death of an individual member of such
class, such individual's executor, administrator or personal representative, as
the case may be, and any Person (other than an individual) controlled, directly
or indirectly, by any of the foregoing. Control shall be deemed to exist when a
Person beneficially owns, directly or indirectly, the securities or other
interests (a) having voting power under ordinary circumstances to elect at least
a majority of the directors (or persons performing similar functions) of another
Person or (b) representing a majority in interest of the equity of another
Person.
In consideration of the foregoing, PCN agrees that the Initial
Warrant Price is hereby changed to $0.70 per share (an amount determined by
subtracting the $0.30 per share cash consideration previously paid for such
Warrants from $1.00).
Except as specifically provided herein, nothing contained in
this letter agreement shall be deemed to have amended or modified any of the
terms or provisions of the Warrant and the Warrant remains in full force and
effect. In the event that any term or provision of the Warrant conflicts with
any of the terms or provisions of this letter agreement, the terms and
provisions of this letter agreement shall govern. The parties agree that
promptly following the execution and delivery of this
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letter agreement, JA shall exchange the Warrant for an Amended and Restated
Warrant containing the terms and provisions set forth herein.
Please acknowledge your agreement with the foregoing by
executing this letter in the space provided below.
Very truly yours,
PHYSICIAN COMPUTER NETWORK, INC.
By:_____________________________
AGREED AND ACCEPTED as of the date first above written:
JA SPECIAL LIMITED PARTNERSHIP
By: Decisions Incorporated,
General Partner
By:_________________
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EXHIBIT D
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement"), dated April 1, 1998,
is by and among JA Special Limited Partnership ("JA") Gordon Altman Butowsky
Weitzen Shalov & Wein (the "Escrow Agent") and Physician Computer Network, Inc.
(the "Company").
BACKGROUND
JA and the Company are parties to the Stock Purchase Agreement dated
April 1, 1998 (the "Purchase Agreement"). Unless otherwise defined herein, each
capitalized term used herein shall have the meaning attributed to it in the
Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment of Escrow Agent. The parties hereto hereby
appoint the Escrow Agent as their agent to hold and to release the Escrowed
Property (as hereinafter defined) on the terms and conditions hereinafter set
forth, and the Escrow Agent hereby accepts such appointment.
2. Deposit. Simultaneously with the execution and delivery of
this Agreement by the parties hereto:(i) JA shall deposit with the Escrow Agent,
checks payable to the Company in the aggregate amount of $11 million (the
"Checks"); (ii) the Company shall deposit with the Escrow Agent the Warrant and
certificates representing the Preferred Shares (the "Instruments") and (iii)
both parties shall deposit with the Escrow Agent, the Purchase Agreement and the
Letter Agreement (the "Documents" and together with the Checks and the
Instruments, the "Escrowed Property").
3. Distribution. The Escrow Agent shall only release the
Escrowed Property, in accordance with: (A) the joint written instructions of JA
and the Company indicating that: (i) the Instruments should immediately be
delivered to JA; (ii) the Checks should immediately be delivered to the Company;
and (iii) copies of the Documents should immediately be delivered to each of JA
and the Company, and each of JA and the Company agrees to enter into such joint
instructions at such time as the currently contemplated documentation with the
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Company's Senior Lenders regarding loan forbearance and related matters has been
completed to the mutual reasonable satisfaction of JA and the Company; (B) an
order of a court of competent jurisdiction; or (C) such other joint written
instructions of JA and the Company as are given to the Escrow Agreement.
4. Duties and Obligations. It is agreed that the duties and
obligations of the Escrow Agent are those herein specifically provided and no
other. The Escrow Agent shall not have any liability under, or duty to inquire
into, the terms and provisions of any agreement, other than this Escrow
Agreement. The Escrow Agent's duties are ministerial in nature and the Escrow
Agent shall not incur any liability whatsoever so long as it has acted in good
faith, except for willful misconduct or gross negligence.
The Escrow Agent may consult with counsel of its choice (other
than any lawyer practicing with the Escrow Agent, if any), and shall not be
liable for any action taken, suffered or omitted by it in accordance with the
advice of such counsel. The Escrow Agent shall not be bound by any modification,
amendment, termination, cancellation, rescission or supersession of this Escrow
Agreement unless the same shall be in writing and signed by all of the parties
hereto.
In the event that the Escrow Agent shall be uncer tain as to
its duties or rights hereunder or shall receive in structions, claims or demands
from any party hereto which, in its opinion, conflict with any of the provisions
of this Escrow Agreement, it shall be entitled to refrain from taking any action
and its sole obligation shall be to keep all Escrowed Property then held by it
pursuant to this Escrow Agreement until it shall be directed otherwise by a
final, binding, non-appealable order or judgment of a court of competent
jurisdiction.
The Escrow Agent shall not incur any liability for following
the instructions herein contained or expressly pro vided for.
The Escrow Agent shall not have any responsibility for the
genuineness or validity of any document or other item deposited with it or any
liability for action in accordance with any written instructions or certificates
given to it hereunder and reasonably believed by it to be signed by the proper
parties. In taking any action hereunder, the Escrow Agent may rely on and follow
instructions given by JA and the Company.
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The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to initiate or defend any
legal proceedings which may be instituted against it in respect of the subject
matter of these instructions. If it does elect to act, it will do so only if it
is indemnified against the reasonable cost and expense of such defense or
initiation.
Nothing contained in this Escrow Agreement will limit or
restrict the Escrow Agent, in its capacity as attorneys, from rendering legal
services to any person.
5. Resignation. The Escrow Agent may at any time resign
hereunder by giving written notice of its resignation to the parties hereto at
the addresses set forth in Section 8 hereof, at least two (2) business days
prior to the date specified for such resignation to take effect, and, upon the
effective date of such resignation, any Escrowed Property then held the by
Escrow Agent hereunder shall be delivered by it to a financial institution,
designated by the Company (the "Substituted Escrow Agreement"), whereupon all of
Gordon Altman Butowsky Weitzen Shalov & Wein's obligations hereunder shall cease
and terminate. If no such person shall have been designated by such date, all
obligations of the Escrow Agent hereunder shall nevertheless cease and terminate
except that the Escrow Agent's sole responsibility thereafter shall be to keep
all the Escrowed Property then held by it and to deliver the same to a person
designated in writing by the Company and JA or in accordance with the directions
of a final, binding, non-appealable order or judgment of a court of competent
jurisdiction. Any successor Escrow Agent shall execute and deliver to the
predecessor Escrow Agent and the parties hereto, an instrument accepting such
appointment and agreeing to the terms of this Escrow Agreement, and thereupon
such successor Escrow Agent shall, without further act, become vested with the
rights, powers and duties of the predecessor Escrow Agent as if originally named
herein.
6. Indemnification. JA and the Company, jointly and severally,
agree to indemnify, defend and hold the Escrow Agent harmless from and against
any and all loss, damage, tax, liability and expense that may be incurred by the
Escrow Agent arising out of or in connection with its acceptance of appointment
as Escrow Agent hereunder, except as caused by its gross negligence or willful
misconduct, including, without limitation, the legal costs and expenses of (a)
defending itself against any claim or liability in connection with its
performance hereunder and (b) participating (whether as a party or otherwise) or
appearing in any action brought to
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adjudicate the rights or obligations of the respective parties
hereto.
7. Disputes. If there arises a dispute concerning a party's
entitlement to some or all of the Escrowed Property, the prevailing party shall
be entitled to recover its reasonable costs (including attorneys' fees) incurred
in connection with such dispute.
8. Notices. All notices, requests, demands, waivers,
consents, approvals or other communications to any party hereunder shall be in
writing and shall be deemed to have been duly given if: (a) delivered personally
to such party; or (b) sent to such party by telegram or telecopy, with a copy
sent on the same day for overnight delivery by Federal Express to the following
addresses:
If to JA or the Company:
as set forth in the notice
provisions of the Purchase Agreement
If to Escrow Agent, to it as follows:
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
Attention: Keith L. Schaitkin
Telephone No. (212) 626-0838
Telecopier No. (212) 626-0799
or, in each case, to such other address as the addressee may have specified in
notice duly given to the sender as provided herein. Such notice, request,
demand, waiver, consent, approval or other communications will be deemed to have
been given as of the date so delivered, telegraphed or telecopied.
9. Binding Nature. This Escrow Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
10. Governing Law. This Escrow Agreement shall be governed by
and interpreted under the laws of the State of New York applicable to contracts
made and performed therein without giving effect to the principles of conflict
of laws thereof.
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11. Amendment; Waiver. No amendment, modification or waiver of
the provisions of this Escrow Agreement shall be effective unless in a writing
executed by the party against whom such amendment or modification is sought to
be enforced (or in the case of a waiver by the party waiving one or more of its
rights hereunder).
12. Counterparts. This Escrow Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
collectively all of such counterparts shall constitute one and the same
agreement.
13. Headings. The headings contained in this
Escrow Agreement are inserted for convenience only and shall
not constitute a part hereof.
14. Third Party Beneficiary. This Agreement is solely for the
benefit of the parties hereto. No provision of this Agreement shall create any
third party beneficiary.
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement on the date first above written.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
By:_____________________________
PHYSICIAN COMPUTER NETWORK, INC.
By:_____________________________
Name:
Title:
JA SPECIAL LIMITED PARTNERSHIP
By: Decision, Inc.,
General Partner
By:____________________________
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This Warrant and any shares acquired upon the exercise of this Warrant have not
been registered under the Securities Act of 1933, as amended, and may not be
transferred, sold or otherwise disposed of except while such a registration is
in effect or pursuant to an exemption from registration under said Act.
PHYSICIAN COMPUTER NETWORK, INC.
Common Stock Purchase Warrant
("Warrant")
April 1, 1998
PHYSICIAN COMPUTER NETWORK, INC., a New Jersey corporation
(the "Company"), for value received, hereby certifies that JA Special Limited
Partnership, or registered assigns, is entitled to purchase from the Company
6,000,000 duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock, par value $.01 per share (the "Common Stock"), of the Company
at the purchase price per share of $1.00 (the "Initial Warrant Price"), at any
time from and after the first to occur of: (i) April 1, 1999 and (ii) a Trigger
Event (the "Exercise Date"), and prior to 5:00 p.m., Eastern Standard time, on
March 31, 2003 (the "Expiration Date"), all subject to the terms, conditions and
adjustments set forth below in this Warrant.
Certain capitalized terms used in this Warrant and Form of Subscription
attached hereto are defined in Section 13 hereof.
1. EXERCISE OR CONVERSION OF WARRANT.
1.1. Manner of Exercise or Conversion; Payment. This Warrant may be
exercised by the holder hereof, in whole or in part, at any time and from time
to time, except that this Warrant may not be exercised as to fewer than one
million (1,000,000) shares of Common Stock unless there are less than one
million (1,000,000) shares of Common Stock as to which this Warrant is then
exercisable. This Warrant may be exercised by the holder hereof, during normal
business hours on any Business Day from and
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after the Exercise Date, and prior to the Expiration Date, by surrender of this
Warrant to the Company at its office maintained pursuant to Section 12.2(a)
hereof, accompanied by a subscription in substantially the form attached to this
Warrant (or a reasonable facsimile thereof) duly executed by such holder and
accompanied by payment, in cash or by check payable to the order of the Company
(or by any combination of such methods), in the amount obtained by multiplying
(a) the number of shares of Common Stock (without giving effect to any
adjustment thereof) designated in such subscription by (b) the Initial Warrant
Price, and such holder shall thereupon be entitled to receive the number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
(or Other Securities) determined as provided in Sections 2 through 4 hereof.
1.2. When Exercise Effective. The exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in Section 1.1 hereof. Upon such exercise the Person or Persons in
whose name or names any certificate or certificates for shares of Common Stock
(or Other Securities) shall be issuable upon such exercise as provided in
Section 1.3 hereof shall be deemed to have become the holder or holders of
record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable after
the exercise of this Warrant, and in any event within five Business Days
thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the holder hereof, or, subject to Section 9 hereof, as such holder (upon payment
by such holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) to which such holder
shall be entitled upon such exercise plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash in an amount equal to the
same fraction of the Market Price per share on the Business Day next preceding
the date of such exercise.
2. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
2.1. General; Number of Shares; Warrant Price. The number of shares of
Common Stock which the holder of this Warrant shall be entitled to receive upon
the exercise hereof shall be deter mined by multiplying the number of shares of
Common Stock which
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would otherwise (but for the provisions of this Section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to Section 1.1 hereof, by
the fraction of which (a) the numerator is the Initial Warrant Price and (b) the
denominator is the Warrant Price in effect on the date of such exercise. The
"Warrant Price" (i) shall initially be the Initial Warrant Price, (ii) shall be
adjusted and readjusted from time to time as provided in this Section 2 and,
(iii) as so adjusted or readjusted, shall remain in effect until a further
adjustment or readjustment thereof is required by this Section 2.
2.2. Adjustment of Warrant Price; Issuance of Additional Shares of
Common Stock. In case the Company at any time or from time to time after the
date hereof shall issue or sell Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section 2.3 or
2.4 hereof) without consideration or for a consideration per share less than the
greater of the Current Market Price or the Warrant Price in effect immediately
prior to such issue or sale, then, and in each such case, subject to Section 2.7
hereof, such Warrant Price shall be reduced, concurrently with such issue or
sale, to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Warrant Price by a fraction:
(a) the numerator of which shall be (i) the number of
shares of Common Stock outstanding immediate ly prior to such
issue or sale plus (ii) the number of shares of Common Stock
which the aggregate consider ation received by the Company for
the total number of such Additional Shares of Common Stock so
issued or sold would purchase at the greater of such Current
Market Price and such Warrant Price; and
(b) the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such
issue or sale.
2.3. Treatment of Options and Convertible Securities. In case the Company
at any time for from time to time after the date hereof shall issue, sell, grant
or assume, or shall fix a record date for the determination of holders of any
class of securities entitled to receive, any Options or Convertible Securities,
then, and in each such case, the maximum number of Additional Shares of Common
Stock (as set forth in the instrument relating thereto, without regard to any
provisions contained therein for a subse quent adjustment of such number the
purpose of which is to protect against dilution) at any time issuable upon the
exercise
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of such Options or, in the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible Securities and Options therefor,
shall be deemed to be Additional Shares of Common Stock issued as of the time of
such issue, sale, grant or assumption or, in case such a record date shall have
been fixed, as of the close of business on such record date (or, if the Common
Stock trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading); provided, however, that such Additional Shares of Common
stock shall not be deemed to have been issued unless the consideration per share
(determined pursuant to Section 2.5 hereof) of such shares would be less than
the greater of the Current Market Price or the Warrant Price in effect on the
date of and immediately prior to such issue, sale, grant or assumption or
immediately prior to the close of business on such record date (or, if the
Common Stock trades on an ex-dividend basis, on the date prior to the com
mencement of ex-dividend trading), as the case may be; and provided, further,
that:
(a) whether or not an adjustment of the Warrant Price
is required in connection with the issuance, sale grant or
assumption of such Options or Convertible Securities, no
adjustment or further adjustment of the Warrant Price shall be
made as a result of the exercise of such Options or the
conversion or exchange of such Convertible Securities and the
consequent issue or sale of Convertible Securities or shares
of Common Stock;
(b) in any case in which Additional Shares of Common
Stock are deemed to be issued, if such Options or Convertible
Securities by their terms provide, with the passage of time or
otherwise, for any increase in the consideration payable to
the Company, or decrease in the number of Additional Shares of
Common Stock issuable, upon the exercise, conversion or
exchange thereof (by change of rate or otherwise), the Warrant
Price computed on the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend trading, as
the case may be, with respect thereof), and any subsequent
adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such Options, or
the rights of conversion or exchange under such Convertible
Securities, which are outstanding at such time;
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(c) in any case in which Additional Shares of Common
Stock are deemed to be issued, upon the expira tion (or
purchase by the Company and cancellation or retirement) of any
such Options which shall not have been exercised, or the
expiration of any rights of conversion or exchange under any
such Convertible Securities the rights of conversion or
exchange under which shall not have been exercised, the
Warrant Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend trading, as
the case may be, with respect thereto), and any subsequent
adjustments based thereon, shall, upon (and effective as of)
such expiration (or such cancellation or retirement, as the
case may be), be recomputed as if:
(i) in the case of Options or Convertible
Securities, the only Additional Shares of Common
Stock issued or sold were the Additional Shares of
Common Stock, if any, actually issued or sold upon
the exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the consider
ation actually received by the Company upon such
exercise, or for the issue or sale of all such
Convertible Securities which were actually con verted
or exchanged, plus the additional consider ation, if
any, actually received by the Company upon such
conversion or exchange, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued or sold upon the exercise of such
Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to have then
been issued was the consideration actually received
by the Company for the issue, sale, grant or
assumption of all such Options, whether or not
exercised, plus the consideration deemed to have been
received by the Company (pursuant to Section 2.5
hereof) upon the issue or sale of such Con vertible
Securities with respect to which such Options were
actually exercised; and
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(d) no readjustment pursuant to clause (b) or (c)
above (either individually or cumulatively together with all
prior readjustments as made in respect of such Options or
Convertible Securities) shall have the effect of increasing
the Warrant Price by a proportion (relative to the Warrant
Price in effect immediately prior to such readjustment) in
excess of the inverse of the aggregate proportional adjustment
thereof made in respect of the issue, sale, grant or
assumption of such Options or Convertible Securities or the
fact that such Options or Convertible Securities were
outstanding at the time other shares of Common Stock, Options
or Convertible Securities were issued.
If the consideration provided for in any Option or the additional consideration,
if any, payable upon the conversion or exchange of any Convertible Security
shall be reduced, or the rate at which any Option is exercisable or any
Convertible Security is convert ible into or exchangeable for shares of Common
Stock shall be increased, at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then, effective
concurrently with each such change, the Warrant Price then in effect shall first
be adjusted to eliminate the effects (if any) of the issuance (or deemed
issuance) of such Option or Convertible Security on the Warrant Price and then
readjusted as if such Option or Convertible Security had been issued on the date
of such change with the terms in effect after such change, but only if as a
result of such adjustment the Warrant Price then in effect hereunder is thereby
reduced.
2.4. Treatment of Stock Dividends, Stock Splits, etc. In case the Company
at any time or from time to time after the date hereof shall declare or pay any
dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determina tion of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
2.5. Computation of Consideration. For the purposes of this
Section 2:
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(a) the consideration for the issue or sale of any Additional
Shares of Common Stock shall, irrespective of the accounting treatment
of such consideration:
(i) insofar as it consists of cash, be computed at
the amount of cash actually received by the Company net of any
expenses paid or incurred by the Company or any commissions or
compensation paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services in
connection with such issue or sale;
(ii) insofar as it consists of property (includ ing
securities) other than cash actually received by the Company,
be computed at the fair value thereof at the time of such
issue or sale, as determined in good faith by the Board of
Directors of the Company;
(iii) insofar as it consists neither of cash nor of
other property, be computed as having no value; and
(iv) in case Additional Shares of Common Stock are
issued or sold together with other stock or securi ties or
other assets of the Company for a consideration which covers
both, be the portion of such consideration so received,
computed as provided in clauses (i), (ii) and (iii) above,
allocable to such Additional Shares of Common Stock, all as
determined in good faith by the Board of Directors of the
Company;
(b) Additional Shares of Common Stock deemed to have been
issued pursuant to Section 2.3 hereof shall be deemed to have been
issued for a consideration per share determined by dividing:
(i) the total amount of cash and other property, if
any, received and receivable by the Company as direct
consideration for the issue, sale, grant or assumption of the
Options or Convertible Securities in question, plus the
minimum aggregate amount of addi tional consideration (as set
forth in the instruments relating thereto, without regard to
any provision contained therein for a subsequent adjustment of
such consideration the purpose of which is to protect against
dilution) payable to the Company upon the exercise in full of
such Options or the conversion or exchange of such Convertible
Securities or, in the case
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of Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conver sion or
exchange of such Convertible Securities, in each case
computing such consideration as provided in the foregoing
clause (a),
by
(ii) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment
of such number the purpose of which is to protect against
dilution) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible securities; and
(c) Additional Shares of Common Stock deemed to have been
issued pursuant to Section 2.4 hereof shall be deemed to have been
issued for no consideration.
2.6. Adjustments for Combinations, etc. In case the out standing shares
of Common Stock shall be combined or consoli dated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.7. Minimum Adjustment of Warrant Price. If the amount of any
adjustment of the Warrant Price required pursuant to this Section 2 would be
less than one-tenth (1/10) of one percent (1%) of the Warrant Price in effect at
the time such adjustment is otherwise so required to be made, such amount shall
be carried forward and adjustment with respect thereto made at the time of and
together with any subsequent adjustment which, together with such amount and any
other amount or amounts so carried forward, shall aggregate at least one tenth
(1/10) of one percent (1%) of such Warrant Price.
2.8. Shares Deemed Outstanding. For all purposes of the computations to
be made pursuant to this Section 2: (i) there shall be deemed to be outstanding
as of the date hereof all shares of Common Stock (a) issuable pursuant to the
exercise of Options and conversion of Convertible Securities outstanding at the
close of business on April 1, 1998, including, without limitation, this Warrant,
and (b) issuable pursuant to the exercise of any options heretofore or hereafter
granted under the Company's Stock Option Plans; (ii) immediately after any
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Additional Shares of Common Stock are deemed to have been issued pursuant to
Section 2.3 or 2.4 hereof, such Additional Shares shall be deemed to be
outstanding; (iii) treasury shares shall not be deemed to be outstanding; and
(iv) no adjustment shall be made in the Warrant Price upon the issuance of
shares of Common Stock pursuant to Options and Convertible Securities so deemed
to be outstanding, but this Section 2.8 shall not prevent other adjustments in
the Warrant Price arising by virtue of such outstanding Options or Convertible
Securities pursuant to the provisions of Section 2.3 hereof; provided, however,
that, for purposes of calculating adjustments to the Warrant Price, there shall
be deemed to be outstanding immediately after giving effect to any issuance of
shares of Common Stock, Options or Convertible Securities all shares of Common
Stock issuable upon the exercise of Options and conversion of Convertible
Securities then out standing (including without limitation the Warrants) after
giving effect to the antidilution provisions contained in all such outstanding
Options and Convertible Securities which cause an adjustment in the number of
shares of Common Stock so issuable, either by virtue of such issuance of shares
of Common Stock, Options or Convertible Securities or by virtue of the operation
of such antidilution provisions.
3. CONSOLIDATION, MERGER, ETC.
3.1. Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date hereof (a) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securi ties shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person or otherwise consummate a Sale of the
Company, or (d) shall effect a capital reorganization or reclassification of the
Common Stock or Other Securities (other than a capital reorganization or
reclassification to the extent that such capital reorganization or
reclassification results in the issue of Additional Shares of Common Stock for
which adjustment in the Warrant Price is provided in Section 2.2.1 or 2.2.2.
hereof), then, and in the case of each such transaction, proper provision shall
be made so that, upon the basis and the terms and in the manner provided in this
Warrant, the holder of
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this Warrant, upon the exercise hereof at any time after the consummation of
such transaction, shall be entitled to receive (at the aggregate Warrant Price
in effect at the time of such consummation for all Common Stock or Other
Securities issuable upon such exercise immediately prior to such consummation),
in lieu of the Common Stock or Other Securities issuable upon such exercise
prior to such consummation, the greatest amount of securities, cash or other
property to which such holder would actually have been entitled as a shareholder
upon such consummation if such holder had exercised the rights represented by
this Warrant immediately prior thereto, subject to adjustments (subsequent to
such consummation) as nearly equivalent as possi ble to the adjustments provided
for in Sections 2, 3 and 4 hereof; provided, however, that if a purchase, tender
or exchange offer shall have been made to and accepted by the holders of more
than 50% of the outstanding shares of Common Stock, and if the holder of the
Warrant so designates in a notice given to the Company on or before the date
immediately preceding the date of the consummation of such transaction, the
holder of the Warrant shall be entitled to receive the greatest amount of
securities, cash or other property to which such holder would actually have been
entitled as a shareholder if the holder of the Warrant had exercised the Warrant
prior to the expiration of such purchase, tender or exchange offer and accepted
such offer, subject to adjustments (from and after the consummation of such
purchase, tender or exchange offer) as nearly equivalent as possible to the
adjustments provided for in Sections 2, 3 and 4 hereof.
3.2. Assumption of Obligations. Notwithstanding anything contained in
the Warrants to the contrary, the Company will not effect any of the
transactions described in clauses (a) through (d) of Section 3.1 hereof unless,
prior to the consummation thereof, each person (other than the Company) which
may be required to deliver any stock, securities, cash or property upon the
exercise of this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the holder of this Warrant, (b)
the obligations of the Company under this Warrant (and if the Company shall
survive the consum mation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company under this Warrant), (c) the obliga tions of the Company under
the Registration Rights Agreement and (d) the obligation to deliver to such
holder such shares of stock, securities, cash or property as, in accordance with
the foregoing provisions of this Section 3, such holder may be entitled to
receive, and such Person shall have similarly deliv ered to such holder an
opinion of counsel for such Person, which
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counsel shall be reasonably satisfactory to such holder, stating that this
Warrant shall thereafter continue in full force and effect and the terms hereof
(including without limitation all of the provisions of this Section 3) shall be
applicable to the stock, securities, cash or property which such Person may be
required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
4. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the
provisions of Section 2 or 3 hereof are not strictly applicable but the failure
to make any adjustment would not, in the opinion of the holder of this Warrant,
fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principles of such Sections, then, in each such
case, at the request of such holder, the Company shall appoint a firm of
independent investment bankers of recognized national standing (which shall be
independent of the Company and shall be satisfactory to the holder of this
Warrant), which shall give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in Sections 2
and 3 hereof, necessary to preserve, without dilution, the purchase rights
represented by this Warrant. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the holder of this Warrant and shall make the
adjust ments described therein.
5. NO DILUTION OR IMPAIRMENT. The Company will not, by amend ment of its
certificate of incorporation or through any consoli dation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock on the exercise of the
Warrants from time to time outstanding and (c) will not take any action which
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of shares of Common Stock
(or Other
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Securities) then authorized by the Company's certificate of incorporation and
available for the purpose of issue upon such exercise.
6. ACCOUNTANTS' REPORT AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable upon
the exercise of this Warrant, the Company at its expense will promptly compute
such adjustment or readjustment in accordance with the terms of this Warrant and
cause independent certified public accounts of recognized nation al standing
(which may be the regular auditors of the Company) selected by the Company to
verify such computation (other than any computation of the fair value of
property as determined in good faith by the Board of Directors of the Company)
and prepare a report setting forth such adjustment or readjustment and showing
in reasonable detail the method of calculation thereof and the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have been issued, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Warrant Price in effect immediately prior to such issue or sale and as
adjusted and readjusted (if required by Section 2 hereof) on account thereof.
The Company will forthwith mail a copy of each such report to the holder of this
Warrant and will, upon the written request at any time of the holder of this
Warrant, furnish to such holder a like report setting forth the Warrant Price at
the time in effect and showing in reasonable detail how it was calculated. The
Company will also keep copies of all such reports at its office maintained
pursuant to Section 12.2(a) hereof and will cause the same to be available for
inspection at such office during normal business hours by the holder of this
Warrant or any prospective purchaser of a Warrant designated by the holder
thereof.
7. NOTICES OF CORPORATE ACTION. In the event of
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, reclas
sification or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and
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any other Person or any transfer of all or substantially all the
assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquida
tion or winding-up of the Company,
(d) any issuance of any Common Stock, Convertible
Security or Option by the Company, or
(e) any Sale of the Company,
the Company will mail to the holder of this Warrant a notice specifying (i) the
date or expected date on which any record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribu tion or right, (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolida tion, merger,
transfer, dissolution, liquidation, winding-up or Sale of the Company is to take
place, the time, if any such time is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up and a description in reasonable detail of the transaction and (iii)
the date of such issuance, together with a description of the security so issued
and the consideration received by the Company therefor. Such notice shall be
mailed at least 30 days prior to the date therein specified.
8. REGISTRATION OF COMMON STOCK. If any shares of Common Stock required to be
reserved for purposes of exercise of this Warrant require registration with or
approval of any governmental author ity under any federal or state law (other
than the Securities Act) before such shares may be issued upon exercise, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or approved, as the case may
be. This Warrant and the shares of Common Stock (or Other Securities) issuable
upon exercise of this Warrant shall constitute Registrable Securities (as such
term is defined in the Registration Rights Agreement). The holder of this
Warrant shall be entitled to all of the benefits afforded to a holder of any
such Registrable Securities under the Registra tion Rights Agreement and such
holder, by its acceptance of this Warrant, agrees to be bound by and to comply
with the terms and
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conditions of the Registration Rights Agreement applicable to such holder as a
holder of such Registrable Securities. As promptly as practicable following the
issuance of this Warrant to the Initial Holder and, in any event within 15
Business Days thereafter, the Company will, at its expense, arrange for the
listing, upon official notice of issuance, of the shares of Common Stock
issuable upon exercise hereof. At any such time as the Warrants are listed on
any national securities exchange or the Common Stock is listed on any other
national securities exchange, the Company will, at its expense, obtain promptly
and maintain the approval for listing on each such exchange, upon official
notice of issuance, of the shares of Common Stock issuable upon exercise of the
Warrant and maintain the listing of such shares or Warrant, as the case may be,
after their issuance; and the Company will also list on such national securities
exchange, will register under the Exchange Act and will maintain such listing
of, any Other Securities that at any time are issuable upon exercise of the
Warrant, if and at the time that any securities of the same class shall be
listed on such national securities exchange by the Company.
9. RESTRICTIONS ON TRANSFER.
9.1. Restrictive Legend. Except as otherwise permitted by this Section
9, each certificate for Common Stock (or Other Securities) issued upon the
exercise of this Warrant, each certificate issued upon the direct or indirect
transfer of any such Common Stock (or Other Securities), this Warrant and any
Warrant issued upon direct or indirect transfer or in substitu tion for this
Warrant pursuant to Section 12 hereof shall bear the legend set forth on the
face of this Warrant and shall be transferable only upon satisfaction of the
conditions specified in this Section 9.
9.2. Notice of Proposed Transfer, Opinion of Counsel. Prior
to any transfer of any Restricted Securities which are not
registered under an effective registration statement under the
Securities Act, the holder thereof will give written notice to
the Company of such holder's intention to effect such transfer
and to comply in all other respects with this Section 9.2. Each
such notice (a) shall describe the manner and circumstances of
the proposed transfer, and (b) shall designate counsel for the
holder giving such notice. The holder giving such notice will
submit a copy thereof to the counsel designated in such notice.
The following provisions shall then apply:
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(a) If in the opinion of such counsel the proposed transfer
may be effected without registration of such Restricted Securities
under the Securities Act, such holder shall thereupon be entitled to
transfer such Restricted Securities in accordance with the terms of the
notice delivered by such holder to the Company. Except as provided in
Section 9.3 hereof, each certificate representing such Restricted
Securities issued upon or in connection with such transfer shall bear
the restrictive legends required by Section 9.1 hereof.
(b) If in the opinion of such counsel the proposed transfer
may not legally be effected without registration of such Restricted
Securities under the Securities Act (such opinion to state the basis of
the legal conclusions reached therein), such holder shall not be
entitled to transfer such Restricted Securities until either (x)
receipt by the Company of a further notice from such holder pursuant to
the foregoing provisions of this Section 9.2 and fulfillment of the
provisions of clause (a) and (y) such Restricted Securi ties have been
effectively registered under the Securities Act.
The Company will pay the reasonable fees and disbursements of counsel for any
holder of Restricted Securities and of counsel for the Company in connection
with all opinions rendered by them pursuant to this Section 9.2 and pursuant to
Section 9.3 hereof. Notwithstanding any other provision of this Section 9, no
opinion of counsel shall be necessary for a transfer of Restricted Securities by
the holder thereof to a subsidiary, shareholder or affiliate of such holder, if
the transferee agrees in writing to be subject to the terms hereof to the same
extent as if such transferee were the Initial Holder hereof.
9.3. Termination of Restrictions. The restrictions imposed by this
Section 9 upon the transferability of Restricted Securi ties shall cease and
terminate as to any particular Restricted Securities (a) when such Restricted
Securities shall have been effectively registered under the Securities Act, or
(b) when, in the opinions of both counsel for the holder thereof and counsel for
the Company, such restrictions are no longer required in order to insure
compliance with the Securities Act. Whenever such restrictions shall cease and
terminate as to any Restricted Securities, the holder thereof shall be entitled
to receive from the Company, without expense (other than applicable transfer
taxes, if any), new securities of like tenor not bearing the applicable legends
required by Section 9.1 hereof.
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9.4. Warrant Transfer. Anything contained in this Warrant to the
contrary notwithstanding, this Warrant may be transferred, sold or assigned in
whole or in part, at any time and from time to time, except that this Warrant
may not be transferred, sold or assigned as to fewer than one million
(1,000,000) shares of Common Stock unless there are less than one million
(1,000,000) shares of Common Stock as to which this Warrant is then exercisable.
10. AVAILABILITY OF INFORMATION. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company will comply with the reporting requirements of Sections 13 and 15(d) of
the Exchange Act and will comply with all other public information reporting
requirements of the Commission (including Rule 144 promulgated by the Commission
under the Securities Act) from time to time in effect and relating to the
availability of an exemption from the Securities Act for the sale of any Re
stricted Securities. The Company will also cooperate with each holder of any
Restricted Securities in supplying such information as may be necessary for such
holder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Restricted Securi ties.
The Company will furnish to the holder of this Warrant, promptly upon their
becoming available, copies of all financial statements, reports, notices and
proxy statements sent or made available generally by the Company to its
stockholders, and copies of all regular and periodic reports and all
registration statements and prospectuses filed by the Company with any securi
ties exchange or with the Commission.
11. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep
available, solely for issuance and delivery upon exercise of the Warrant, the
number of shares of Common Stock of each class (or Other Securities) from time
to time issuable upon exercise of the Warrant. All shares of Common Stock (or
Other Securities) issuable upon exercise of the Warrant shall be duly authorized
and, when issued upon such exercise, shall be validly issued and, in the case of
shares, fully paid and nonassessable with no liability on the part of the
holders thereof.
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12. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANT.
12.1. Ownership of Warrant. The Company may treat the person in whose
name this Warrant is registered on the register kept at the office of the
Company maintained pursuant to Section 12.2(a) hereof as the owner and holder
thereof for all purposes, except that, if and when the Warrant is properly
assigned in blank, the Company shall treat the assignee thereof as the owner of
the Warrant for all purposes. Subject to Section 9 hereof, the Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant first
having been issued.
12.2. Office; Transfer and Exchange of Warrant.
(a) The Company will maintain an office (which may be an
agency maintained at a bank) in New York or New Jersey where notices,
presentations and demands in respect of this Warrant may be made upon
it. Such office shall be main tained at 1200 The American Road, Morris
Plains, New Jersey 07950, until such time as the Company shall notify
the holder of the Warrant of any change of location of such office.
(b) The Company shall cause to be kept at its office
maintained pursuant to Section 12.2(a) hereof a register for the
registration and transfer of the Warrant. The name and address of the
holder of the Warrant, the transfers thereof and the names and
addresses of transferees of the Warrant shall be registered in such
register. The Person in whose name the Warrant shall be so registered
shall be deemed and treated as the owner and holder thereof for all
purposes of this Warrant, and the Company shall not be affected by any
notice or knowledge to the contrary.
(c) Upon the surrender of the Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to Section 12.2(a) hereof, the Company at its
expense will (subject to compliance with Section 9 hereof, if
applicable) execute and deliver to or upon the order of the holder
thereof a new Warrant of like tenor, in the name of such holder or as
such holder (upon payment by such holder of any applicable transfer
taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant so surrendered.
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12.3. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction of the Warrant
held by a Person other than the Initial Holder or any institutional investor,
upon delivery of indemnity reasonably satisfactory to the Company in form and
amount or, in the case of any such mutilation, upon surrender of the Warrant for
cancellation at the office of the Company maintained pursuant to Section 12.2(a)
hereof, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor and dated the date hereof.
13. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective
meanings:
Additional Shares of Common Stock: All shares (including treasury
shares) of Common Stock issued or sold (or, pursuant to Section 2.3 or 2.4
hereof, deemed to be issued) by the Company after the date hereof, whether or
not subsequently reacquired or retired by the Company, other than the shares of
Common Stock issued: (i) upon the exercise of the Warrant; (ii) upon the
exercise of options granted pursuant to the Company's Stock Option Plan, as the
same may be amended from time to time; (iii) in connection with the financing of
the acquisition by the Company of VERSYSS Incorporated; or (iv) in connection
with the exercise of any Options or the conversion of any Convertible Securities
which are deemed to be outstanding in accordance with Section 2.8 hereof.
Book Value: Shall mean, in respect of any share of Common Stock on any
date herein specified, the quotient of (a) the amount by which (i) the Company's
consolidated total assets exceeds (ii) the Company's consolidated total
liabilities, in each case determined (A) as of the last day of the most recent
fiscal year of the Company ended prior to such date, or (B) as of the last day
of the most recent calendar month ended prior to such date, whichever is higher,
divided by (b) the number of Fully Diluted Outstanding shares of Common Stock.
Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in New York, New York are authorized by
law to be closed. Any reference to "days" (unless Business Days are specified)
shall mean calendar days.
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Commission: The Securities and Exchange Commission or any
other federal agency at the time administering the Securities
Act.
Common Stock: As defined in the introduction to this Warrant, such term
to include any stock into which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common Stock, and all other
stock of any class or classes (however designated) of the Company the holders of
which have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends after the
payment of dividends and distri butions on any shares entitled to preference.
Company: As defined in the introduction to this Warrant, such term to
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with Section 3 hereof.
Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.
Current Market Price: On any date specified herein, the average daily
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no class of the Common Stock is then listed or admitted to trading on any nation
al securities exchange or quoted in the over-the-counter market, the Current
Market Price shall be the Market Price on such date; provided, however, that in
the event that the Company has entered into a firm commitment underwriting
agreement with an underwriter (i) pursuant to which the Company and such
underwriter have determined an offering price for the sale of Common Stock in a
public offering as a result of arms length negotiations within the 20 day period
described above or (ii) relating to the public offering of Convertible
Securities then, in the case of (i), the Current Market Price of shares of
Common Stock issued and sold in such public offering shall be such offering
price and in the case of (ii), the Current Market Price shall be the lower of
Current Market Price or Market Price on the date immediately preceding the date
the offering price of such Convertible Securities was determined in connection
with the filing of the Registration Statement which is declared effective
covering such Convertible Securities filed pursuant to the Securities Act.
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Exercise Date: As defined in the introduction to this
Warrant.
Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Expiration Date: As defined in the introduction to this
Warrant.
Fully Diluted Outstanding: When used with reference to Common Stock,
shall mean at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant outstanding on such date and
other options or warrants to purchase, or securities convertible into, shares of
Common Stock outstanding on such date which would be deemed outstanding in
accordance with generally accepted accounting principles as from time to time in
effect for purposes of deeming book value or net income per share.
Initial Holder: JA Special Limited Partnership.
Market Price: On any date specified herein, the amount per share of
Common Stock equal to (a) the last sale price of Common Stock, regular way, on
such date or, if no such sale takes place on such date, the average of the
closing bid and asked prices thereof on such date, in each case as officially
reported on the principal national securities exchange on which Common Stock is
then listed or admitted to trading, or (b) if Common Stock is not then listed or
admitted to trading on any national securities exchange but is designated as a
national market system security by the NASD, the last trading price of Common
Stock on such date, or (c) if there shall have been no trading on such date or
if Common Stock is not so designated, the average of the closing bid and asked
prices of Common Stock on such date as shown by the NASD automated quotation
system, or (d) if Common Stock is not then listed or admitted to trading on any
national exchange or quoted in the over-the-counter market, the higher of (x)
Book Value per share or (y) the fair value thereof determined in good faith by
the Board of Directors of the Company as of a date which is within 15 days of
the date as of which the determination is to be made.
NASD: The National Association of Securities Dealers, Inc.
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Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities other than options granted pur suant to the Company's Stock Option
Plan as the same may be amended from time to time.
Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which the
holder of the Warrant at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securi ties pursuant to
Section 3 hereof or otherwise.
Person: A corporation, an association, a partnership, an
organization, a business, an individual, a government or politi
cal subdivision thereof or a governmental agency.
Registration Rights Agreement: The Registration Rights
Agreement, dated as of February 22, 1993, between the Company and
Jeffry M. Picower.
Restricted Securities: All of the following: (a) the Warrant bearing
the applicable legend or legends referred to in Section 9.1 hereof, (b) any
shares of Common Stock (or Other Securities) which have been issued upon the
exercise of Warrants and which are evidenced by a certificate or certificates
bearing the applicable legend or legends referred to in such Section, (c) unless
the context otherwise requires, any shares of Common Stock (or Other Securities)
which are at the time issuable upon the exercise of Warrants and which, when so
issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such Section.
Sale of the Company: any of: (i) the sale by one or more of the
shareholders of the Company in one or more transactions of a majority of the
outstanding common stock of the Company; (ii) the merger or consolidation of the
Company with or into any other Person, in a transaction in which the
shareholders of the Company immediately prior to the consummation of such
transaction collectively own less than 50% of the common stock and voting power
of the entity surviving; such transaction (or any other business combination
transaction having a similar effect); or (iii) the sale of all or substantially
all of the assets of the Company in a single transaction or a series of related
transactions.
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Securities Act: The Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Stock Option Plan: Collectively, the Company's Amended and Restated
1993 Incentive and Non-Incentive Stock Option Plan, as amended from time to
time, the Company's Amended and Restated 1993 Non-Employee Directors
Non-Incentive Stock Option Plan, as amended from time to time, and the Company's
Value Added Reseller Stock Option Plan, as amended from time to time.
Trigger Event: Trigger Event: The earlier to occur of: (i) five (5)
business days preceding the Sale of the Company; or (ii) in the event that the
Sale of the Company shall require the approval of the holders of the Common
Stock, five (5) business days prior to the date fixed by the Company as the
record date for determination of the holders of Common Stock entitled to vote
thereon.
Warrant Price: As defined in Section 2.1 hereof.
Warrants: As defined in the introduction to this Warrant.
14. REMEDIES. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.
15. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company or otherwise.
16. NOTICES. All notices, requests, demands and other communi cations provided
for hereunder shall be in writing (including telegraphic communication) and
mailed, telecopied, telegraphed or delivered:
-22-
<PAGE>
If to the Holder:
JA Special Limited Partnership
22 Saw Mill River Road
Hawthorne, New York 10532
If to the Company to:
Physician Computer Network, Inc.
1200 The American Road
Morris Plains, New Jersey 07950
Attention: Chief Financial Officer
or at such other address as shall be designated in a written notice to the other
parties complying as to delivery with the terms of this Section 16.
All such notices, requests, demands and other communications shall, when
mailed (registered mail, return receipt requested,postage prepaid), personally
delivered, or telegraphed, to be effective four days after deposit in the mails,
when personally delivered, or when delivered to the telegraph company, respec
tively, addressed as aforesaid, unless otherwise provided herein and, when
telecopied, shall be effective upon actual receipt.
17. FILING FEES. In the event that prior to and in connection with the exercise
or conversion of this Warrant or any other option or warrant held by the holder
of this Warrant, any filing or notice is required to be made with any
governmental authority or agency (including, without limitation, pursuant to the
Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and any
regulations promulgated thereunder) then the Company shall bear and reimburse
such holder for all filings fees and similar costs required to be paid in
connection therewith.
[INTENTIONALLY BLANK]
-23-
<PAGE>
18. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the internal laws of the State of New York. The section headings in
this Warrant are for purposes of convenience only and shall not constitute a
part hereof.
PHYSICIAN COMPUTER NETWORK, INC.
By: /s/ Paul Antinori
----------------------------------
Title: Vice President
-------------------------------
-24-
<PAGE>
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To Physician Computer Network, Inc.
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder ------------
<F1> shares of the Common Stock and herewith makes payment of $ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to , whose address is
.
<F1> Insert here the number of shares called for on the face of this Warrant
without making any adjustment for Additional Shares of Common Stock or any other
stock or other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise.
Dated: ----------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
-25-
<PAGE>
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the
within Warrant hereby sells, assigns and transfer unto
the right represented by such Warrant to purchase --
- ----------- <F2>
<F2> Insert here the number of shares called for on the face of this Warrant
without making any adjustment for Additional Shares of Common Stock or any other
stock or other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise.
Dated: -----------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
-26-
PHYSICIAN COMPUTER NETWORK, INC.
1200 The American Road
Morris Plains, New Jersey 07950
April 1, 1998
JA Special Limited Partnership
22 Saw Mill River Road
Hawthorne, New York 10532
Gentlemen:
Reference is made to the Common Stock Purchase Warrant (the
"Warrant"), dated September 13, 1995, issued by Physician Computer Network, Inc.
("PCN") to Jeffry M. Picower and assigned by Mr. Picower to JA Special Limited
Partnership ("JA"). Unless otherwise defined, all capitalized terms used herein
shall have the meanings ascribed to them in the Warrant.
PCN and JA wish to amend and modify certain of the terms and
provisions of the Warrant. By executing this letter in the spaces provided
below, each of PCN and JA agree that the Warrant is amended and modified as
follows:
1. The Warrant may only be exercised by the holder thereof
from and after the first to occur of: (i) September 12, 2002; or (ii) the
Trigger Event. Accordingly, the term "Exercise Date" shall mean the first to
occur of: (i) September 12, 2002; or (ii) the Trigger Event.
2. "Trigger Event" shall mean the earlier to occur of: (i)
five (5) business days preceding the Sale of the Company; (ii) in the event that
the Sale of the Company shall require the approval of the holders of the Common
Stock, five (5) business days prior to the date fixed by the Company as the
record date for determination of the holders of Common Stock entitled to vote
thereon; and (iii) the Market Price Date (as defined below).
3. As used herein, the "Market Price Date" means the
forty-fifth consecutive Business Day on which the Market Price of the Common
Stock is $5.00 per share or greater (appropriately adjusted for stock splits,
stock dividends and the like); provided, however, that for this purpose, there
shall only be deemed to be a Market Price of the Common Stock in accordance with
clauses (a) and (b) of the definition of Market Price contained in the Warrant
and, under all other circumstance there shall be deemed to be no Market Price of
the Common Stock.
<PAGE>
4. "Sale of the Company" shall mean any of: (i) the
sale by one or more of the shareholders of the Company in one or
more transactions of a majority of the outstanding common stock
of the Company, (ii) the merger or consolidation of the Company
with or into any other Person in a transaction in which the
shareholders of the Company immediately prior to the consummation
of such transaction collectively own less than 50% of the common
stock and voting power of the entity surviving such transaction
(or any other business combination transaction having a similar
effect), or (iii) the sale of all or substantially all of the
assets of the Company in a single transaction or series of
related transactions.
5. The holder of the Warrant shall exercise the Warrant in
accordance with the terms thereof no later then twenty (20) business days
following the Market Price Date, unless, the Expiration Date has occurred on or
prior to the end of such twenty (20) day period.
6. The Warrant shall not be transferable or assignable to any
Person other than a Permitted Assignee (as defined below).
7. As used herein, a "Permitted Assignee" shall mean Jeffry M.
Picower, his spouse, lineal ancestor or descendants, brothers, sisters, children
and grandchildren, or a trust for the benefit of Jeffry M. Picower or any one or
more member of such class; and, upon the death of an individual member of such
class, such individual's executor, administrator or personal representative, as
the case may be, and any Person (other than an individual) controlled, directly
or indirectly, by any of the foregoing. Control shall be deemed to exist when a
Person beneficially owns, directly or indirectly, the securities or other
interests (a) having voting power under ordinary circumstances to elect at least
a majority of the directors (or persons performing similar functions) of another
Person or (b) representing a majority in interest of the equity of another
Person.
In consideration of the foregoing, PCN agrees that the Initial
Warrant Price is hereby changed to $0.70 per share (an amount determined by
subtracting the $0.30 per share cash consideration previously paid for such
Warrants from $1.00).
Except as specifically provided herein, nothing contained in
this letter agreement shall be deemed to have amended or modified any of the
terms or provisions of the Warrant and the Warrant remains in full force and
effect. In the event that any term or provision of the Warrant conflicts with
any of the terms or provisions of this letter agreement, the terms and
provisions of this letter agreement shall govern. The parties agree that
promptly following the execution and delivery of this
2
<PAGE>
letter agreement, JA shall exchange the Warrant for an Amended and Restated
Warrant containing the terms and provisions set forth herein.
Please acknowledge your agreement with the foregoing by
executing this letter in the space provided below.
Very truly yours,
PHYSICIAN COMPUTER NETWORK, INC.
By: /s/ Paul Antinori
_____________________________
AGREED AND ACCEPTED as of the date first above written:
JA SPECIAL LIMITED PARTNERSHIP
By: Decisions Incorporated,
General Partner
By: /s/ Jeffry M. Picower
_________________________
3
For Immediate Release
Physician Computer Network, Inc. Announces Cash Infusion; Agreement with Senior
Lenders; Reduction in Force; Withdrawal by Auditors of 1996 Audit Report; and
Increased Loss Estimates.
Morris Plains, NJ (April 2, 1998) - Physician Computer Network, Inc. (Nasdaq:
PCNI) today announced that an entity controlled by the Company's Chairman of the
Board and largest shareholder has agreed to an $11 million equity investment in
the Company for which the Company is issuing shares of cumulative preferred
stock. The preferred stock has a liquidation preference of $11 million and pays
cumulative dividends at a rate increasing from 15% to 18% per annum during the
next four years. The preferred stock is not mandatorily redeemable by the
Company at any time. The Company also announced that it has reached agreement
with its senior lenders to restructure the Company's senior credit facility. As
part of the agreement, which is subject only to the completion of definitive
documentation, the Company has agreed to pay down $6 million of the
approximately $22.5 million currently outstanding under the credit facility and
the lenders are granting the Company a forbearance with respect to all existing
defaults under the credit facility, future revolving credit commitments by the
lenders have been terminated and the Company is agreeing to terms for the
repayment of outstanding senior indebtedness. The Chairman of the Board of the
Company has also agreed to guaranty $2 million of the senior debt. The proceeds
of the new investment, the shares of preferred stock and the warrant agreements
discussed below have been placed in escrow pending finalization of the
definitive documents with the Company's lenders.
The Chairman of the Board of the Company is the beneficial owner of a warrant to
purchase 5 million shares of the Company's common stock for $5 per share.
Contemporaneously with the new equity investment, he has agreed that the
warrant, which he purchased in 1995 and which may be exercised in whole and not
in part: (i) will not be transferable; (ii) will not be exercisable until
September 2002 except under circumstances in which the Company is sold or
undertakes certain other business combinations or if the market price of the
Company's common stock is $5 or more per share for forty-five consecutive
trading days; and (iii) must be exercised in whole in the event that the market
price of the Company's common stock is $5 or more per share for forty-five
consecutive trading days, and the Company has agreed to lower the exercise price
of that warrant to an amount equal to $1 per share minus the $0.30 per share
cash consideration originally paid for such warrant. In addition, the Company is
issuing to the investor a new warrant to purchase 6 million shares of the
Company's common stock for $1 per share. The new warrant is not exercisable
until the earlier of April 1, 1999 or the date on which the Company is sold or
undertakes certain other business combinations.
The Company's management believes that, as a result of the $11 million cash
infusion ($6 million of which will be used to repay the senior debt), the
agreement with the lenders and the expense reduction being undertaken,
management can focus its attention on the maintenance and servicing of the large
installed base of customers using the Company's products and on continued
product
<PAGE>
development and enhancement. The anticipated product releases for 1998 remain
on schedule.
The Company has also announced today that the Company has reduced its workforce
by approximately 140 employees representing approximately 20% of its workforce.
These reductions-in-force and other cost reduction efforts are being made by the
Company in order to bring its expenses better in line with its expected revenues
for the coming year. The Company believes these reductions will not adversely
affect operations or product release dates.
As previously announced, the completion of the Company's 1997 audit has been
delayed because the Company's independent auditors, KPMG Peat Marwick, have
identified certain instances during the 1997 period in which the Company has
improperly recognized items of revenue and expense. The auditors have recently
informed the Company that they are reviewing certain matters with respect to the
Company's consolidated financial statements as of and for the year ended
December 31, 1996, which, at a minimum will require that the Company's balance
sheet be restated in order to reclassify certain items of cash as receivables.
While the Company has not been advised whether or not any further restatement of
its 1996 consolidated financial statements will be required, it is possible that
upon the auditors' completion of their review of such matters further
restatement may be required. Further, the auditors have advised the Company that
they have withdrawn their auditors' report on the Company's consolidated
financial statements as of and for the year ended December 31, 1996 and that
such report should not be relied upon.
At this time, the Company does not have a projected date for the release of its
final results for the fourth quarter and the year ended December 31, 1997. As
previously announced, the Company expects to report a loss from operations for
the fourth quarter of 1997 and will restate its results for each of the first
three quarters of 1997 to report a loss from operations for each of those
quarters. In addition, as previously announced, the Company's results are also
expected to include certain one-time, non-cash, special charges unrelated to the
issues of revenue and expense recognition referred to above. These one-time
special charges relate primarily to the impairment of intangibles and the
carrying value of goodwill. To date, the 1997 net loss has not been determined,
but the Company currently estimates that such net loss will range between $77
million and $81 million, of which approximately $37 million constitutes the
special charges referred to above. The amount of 1997 losses from operations
were previously estimated to range between $27 million and $31 million and the
amount of such one-time charges were previously estimated to be approximately
$25 million, if not more.
The Company has appointed a special committee of its Board of Directors to
conduct an investigation and make recommendations regarding the circumstances
surrounding the Company's accounting irregularities. The committee has retained
Gary Lynch of Davis Polk & Wardwell as counsel for the investigation. In
addition, the Company has retained the firm of Alvarez & Marsal to provide the
Company with management and financial services.
The Company's expectations are preliminary, subject to the independent auditors
completing the 1997 audit. The estimated amount of losses, anticipated release
date for final results, and the potential consequences of the foregoing matters
discussed in this press release, including the arrangement with the lenders,
constitute forward-looking statements. Actual results for the Company's fourth
quarter and for the 1997 fiscal year could differ materially from those
<PAGE>
estimated, depending on a number of factors including whether all sales recorded
on account of any particular period meet applicable revenue recognition
requirements, the adequacy of estimated expense accruals and reserves and the
evaluation of the impairment of intangible assets. Additional factors which may
affect the Company's operations and business are described in the Business
section of Company's Annual Report on Form 10-K for the year ended December 31,
1996.
Physician Computer Network is a leader in developing, marketing and supporting
information technology to physician-based healthcare organizations, including
group practices, integrated delivery networks, MSOs, IPAs and other models of
physician organizations. PCN's application software products address the
financial, clinical, administrative and management needs within these
organizations and facilitate electronic connectivity between them and other
healthcare industry entities including hospitals, clinical laboratories, managed
care providers and insurance intermediaries.
