<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 5)*
PHOENIX INFORMATION SYSTEMS CORP.
---------------------------------
(Name of Issuer)
Common Stock, $.01 Par Value
---------------------------------
(Title of Class of Securities)
719077109
---------------------------------
(CUSIP Number)
Stephen M. Vine, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
399 Park Avenue
New York, New York 10022
(212) 872-1000
---------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 7, 1995
---------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement / /. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*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 disclosure
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).
Continued on following page(s)
Page 1 of 26 Pages
Exhibit Index: Page 27
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 2 OF 26 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
S-C Phoenix Partners
2 Check the Appropriate Box If a Member of a Group*
a. / x /
b. / /
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) / /
6 Citizenship or Place of Organization
New York
7 Sole Voting Power
Number of 19,909,999
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 19,909,999
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
19,909,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
38.71%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 3 OF 26 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Quantum Industrial Partners LDC
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
Cayman Islands
7 Sole Voting Power
Number of 1,000,000
Shares
Beneficially 8 Shared Voting Power
Owned By 19,909,999
Each
Reporting 9 Sole Dispositive Power
Person 1,000,000
With
10 Shared Dispositive Power
19,909,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
20,909,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
40.65%
14 Type of Reporting Person*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 4 OF 26 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
S-C Phoenix Holdings, L.L.C.
2 Check the Appropriate Box If a Member of a Group*
a. / x /
b. / /
3 SEC Use Only
4 Source of Funds*
AF
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
7 Sole Voting Power
Number of 1,000,000
Shares
Beneficially 8 Shared Voting Power
Owned By 19,909,999
Each
Reporting 9 Sole Dispositive Power
Person 1,000,000
With
10 Shared Dispositive Power
19,909,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
20,909,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
40.65%
14 Type of Reporting Person*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 5
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 5 OF 26 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
QIH Management Investor, L.P.
2 Check the Appropriate Box If a Member of a Group*
a. / x /
b. / /
3 SEC Use Only
4 Source of Funds*
AF
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
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 20,909,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
20,909,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
20,909,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
40.65%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 6
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 6 OF 26 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
QIH Management, Inc.
2 Check the Appropriate Box If a Member of a Group*
a. / x /
b. / /
3 SEC Use Only
4 Source of Funds*
AF
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
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 20,909,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
20,909,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
20,909,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
40.65%
14 Type of Reporting Person*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 7
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 7 OF 26 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
George Soros
2 Check the Appropriate Box If a Member of a Group*
a. / x /
b. / /
3 SEC Use Only
4 Source of Funds*
PF
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
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 21,909,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
21,909,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
21,909,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
42.60%
14 Type of Reporting Person*
IA; IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 8
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 8 OF 26 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Winston Partners, L.P.
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
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 20,909,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
20,909,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
20,909,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
40.65%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 9
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 9 OF 26 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Chatterjee Fund Management, L.P.
2 Check the Appropriate Box If a Member of a Group*
a. / x /
b. / /
3 SEC Use Only
4 Source of Funds*
AF
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
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 20,909,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
20,909,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
20,909,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
40.65%
14 Type of Reporting Person*
IA; PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 10
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 10 OF 26 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Purnendu Chatterjee
2 Check the Appropriate Box If a Member of a Group*
a. / x /
b. / /
3 SEC Use Only
4 Source of Funds*
AF
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
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 20,909,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
20,909,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
20,909,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
40.65%
14 Type of Reporting Person*
IA; IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 11
ITEM 1. SECURITY AND ISSUER.
This Amendment No. 5 to Schedule 13D relates to the shares of Common
Stock, $.01 par value (the "Shares"), of Phoenix Information Systems Corp. (the
"Issuer"). The address of the principal executive offices of the Issuer is 100
Second Avenue South, Suite 1100, St. Petersburg, Florida 33701. This Amendment
No. 5 amends the initial statement on Schedule 13D dated December 16, 1994 and
all prior amendments thereto (collectively, the "Initial Statement"). This
Amendment No. 5 is being filed to report the execution by the Issuer and certain
of the Reporting Persons of certain agreements pursuant to which, among other
things, Phoenix Holdings and Quantum Industrial (each as defined herein)
have each received warrants to purchase up to 1,000,000 Shares. This
Amendment No. 5 contains certain information previously disclosed on
Schedule 13D as it is the first amendment to be filed on EDGAR. The
information set forth in the Initial Statement is amended and restated as
set forth herein.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is being filed on behalf of each of the following
persons (collectively, the "Reporting Persons"):
(i) S-C Phoenix Partners ("Phoenix Partners");
(ii) Quantum Industrial Partners LDC ("Quantum Industrial");
(iii) S-C Phoenix Holdings, L.L.C. ("Phoenix Holdings");
(iv) QIH Management Investor, L.P. ("QIHMI");
(v) QIH Management, Inc. ("QIH Management");
(vi) Mr. George Soros ("Mr. Soros");
(vii) Winston Partners, L.P. ("Winston");
(viii) Chatterjee Fund Management, L.P. ("CFM"); and
(ix) Dr. Purnendu Chatterjee ("Dr. Chatterjee").
The Reporting Persons
Phoenix Partners and Phoenix Holdings
Phoenix Partners is a New York general partnership with its principal
place of business at 888 Seventh Avenue, New York, New York 10106. Phoenix
Partners was formed primarily to invest in the issuer. Quantum Industrial and
Phoenix Holdings are the only partners of Phoenix Partners.
Phoenix Holdings is a Delaware limited liability company with its
principal place of business at 888 Seventh Avenue, New York, New York 10106.
Phoenix Holdings was formed as a general investment partnership. Mr. Soros and
Winston are the managing members of Phoenix Holdings. W. James Peet ("Mr.
Peet"), an employee of Chatterjee Management Company, a Delaware corporation
controlled by Dr. Chatterjee ("CMC"), is a non-managing member of Phoenix
Holdings.
Neither Phoenix Partners nor Phoenix Holdings has, during the past five
years, been (a) convicted in a criminal proceeding, or (b) a party to any civil
proceeding as a result of which it has been subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws, or finding any
violation with respect to such laws.
<PAGE> 12
Page 12
Quantum Industrial, QIHMI, QIH Management and Mr. Soros
Quantum Industrial, a general partner of Phoenix Partners, is a Cayman
Islands exempted limited duration company with its principal address at Kaya
Flamboyan 9, Curacao, Netherlands Antilles. Quantum Industrial is a private
investment fund which is engaged in a variety of direct and indirect
investments. Current information concerning the identity and background of the
directors and officers of Quantum Industrial is set forth in Annex B hereto,
which is incorporated by reference in response to this Item 2.
QIHMI, a Delaware limited partnership, is vested with investment
discretion with respect to the portfolio assets held for the account of Quantum
Industrial pursuant to a management agreement with Quantum Industrial. The
principal business of QIHMI is to provide management and advisory services to,
and to invest in, Quantum Industrial. QIH Management, a Delaware corporation of
which Mr. Soros is the sole shareholder, is the general partner of QIHMI. QIHMI
and QIH Management have their principal offices at 888 Seventh Avenue, New York,
New York 10106. QIHMI, by reason of its investment discretion over the
securities owned by Quantum Industrial, and QIH Management, as the sole general
partner of QIHMI, may each be deemed the beneficial holder of securities
(including the Shares) held by Quantum Industrial for purposes of Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "1934 Act").
Mr. Soros is the sole shareholder and person ultimately in control of
QIH Management. The principal occupation of Mr. Soros, a United States citizen,
is his direction of the activities of QIH Management and Soros Fund Management
("SFM"), an investment advisor of which Mr. Soros is the sole proprietor. Mr.
Soros has his principal office at 888 Seventh Avenue, New York, New York 10106.
Information concerning the identity and background of the Managing Directors of
SFM is set forth in Annex A hereto, which is incorporated by reference in
response to this Item 2. Pursuant to regulations promulgated under Section 13(d)
of the 1934 Act, Mr. Soros (as the sole shareholder of QIH Management and the
person ultimately in control of QIH Management) may be deemed a "beneficial
owner" of securities, including the Shares, held for the account of Quantum
Industrial as a result of QIH Management's position as the general partner of
QIHMI.
During the past five years, none of Quantum Industrial, QIHMI, QIH
Management nor Mr. Soros has been (a) convicted in a criminal proceeding, or (b)
a party to any civil proceeding as a result of which it has been subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to federal or state securities laws, or finding
any violation with respect to such laws.
Winston, CFM and Dr. Chatterjee
Winston is a Delaware limited partnership which is principally engaged
in investing in securities. CFM is a Delaware limited partnership and the
general partner of Winston. The sole business purpose of CFM is to serve as the
sole general partner of Winston. The principal office of Winston and CFM is
located at 888 Seventh Avenue, New York, New York 10106. During the past five
years, neither Winston nor CFM has been (a) convicted in a criminal proceeding,
or (b) a party to any civil proceeding as a result of which it has been subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws, or finding any violation with respect to such laws.
<PAGE> 13
Page 13
Dr. Chatterjee is the sole general partner of CFM, the sole general
partner of Winston. The principal occupation of Dr. Chatterjee, a United States
citizen, is as an investment manager. Dr. Chatterjee's principal business
address is located at 888 Seventh Avenue, New York, New York 10106.
On January 13, 1993, the Securities and Exchange Commission (the
"Commission") filed a civil complaint in the United States District Court for
the District of Massachusetts against certain defendants, including Dr.
Chatterjee, wherein the Commission alleged that Dr. Chatterjee engaged in
conduct in violation of, or aided and abetted certain alleged violations of,
Sections 10(b) and 14(e) of the 1934 Act and certain rules promulgated
thereunder. Dr. Chatterjee settled the Commission's action on the same date it
was filed without admitting or denying the allegations of the complaint. Dr.
Chatterjee consented to the entry of a final judgment restraining and enjoining
him from inter alia, violating, or aiding and abetting violations of, Sections
10(b) and 14(e) of the 1934 Act and the rules promulgated thereunder. Dr.
Chatterjee also agreed to pay a civil penalty of $643,855. During the past five
years, Dr. Chatterjee, has not been convicted in any criminal proceeding.
Pursuant to regulations promulgated under Section 13(d) of the 1934
Act, Dr. Chatterjee, as the sole general partner of CFM and the person
ultimately in control of Winston, and CFM, as the sole general partner of
Winston, may each be deemed a "beneficial owner" of securities, including the
Shares, held by Winston.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On December 9, 1994, Phoenix Partners and the Issuer entered into a
Note Purchase Agreement (the "Note Purchase Agreement") pursuant to which
Phoenix Partners was to purchase from the Issuer up to an aggregate of $10
million of convertible notes (the "Notes") in the amounts and upon the terms
specified in the Note Purchase Agreement, a copy of which is attached as Exhibit
D to the Initial Statement. Concurrent with the execution of the Note Purchase
Agreement, Phoenix Partners purchased from the Issuer the Tranche A Notes (as
defined in the Note Purchase Agreement) in the aggregate principal amount of $3
million.
Concurrent with the execution of the Note Purchase Agreement,
Phoenix Partners purchased 1,360,000 Shares from Robert P. Gordon ("Gordon"),
the chief executive officer and founder of the Issuer, pursuant to the terms of
a Stock Purchase Agreement (the "Stock Purchase Agreement"), a copy of which is
attached as Exhibit F to the Initial Statement. The aggregate purchase price
for the 1,360,000 Shares was $1,224,000.
On February 17, 1995, Phoenix Partners purchased from the Issuer the
Tranche B Notes in the principal amount of $1,200,000 pursuant to the terms of
the Note Purchase Agreement.
On March 15, 1995, the Issuer and Phoenix Partners executed a letter
agreement (the "Letter Agreement"), a copy of which is attached as Exhibit M to
Amendment No. 2 to the Initial Statement, pursuant to which Phoenix Partners
purchased from the Issuer a Tranche C Note in the principal amount of
$1,000,000. As a result of the purchase of the Tranche C Note in the principal
amount of $1,000,000.
<PAGE> 14
Page 14
In addition to warrants issued pursuant to the Warrant Agreement, on
March 15, 1995, the Issuer issued to Phoenix Partners a three-year warrant (the
"Second Warrant Agreement") to purchase 2,500,000 Shares at a purchase price of
$2.00 per Share. A copy of the Second Warrant Agreement is attached as Exhibit N
to Amendment No. 2 to the Initial Statement.
As of August 3, 1995, Phoenix Partners and the Issuer entered into a
letter agreement (the "August Letter Agreement"), a copy of which is attached as
Exhibit O to Amendment No. 3 to the Initial Statement, which modified the Note
Purchase Agreement and pursuant to which Phoenix Partners purchased from the
Issuer the remaining $200,000 Tranche C Note and a $150,000 Tranche D Note.
As of September 15, 1995, Phoenix Partners and the Issuer entered into
a letter agreement (the "September Letter Agreement"), a copy of which is
attached as Exhibit S to Amendment No. 4 to the Initial Statement and the terms
of which are more fully described in Item 4 hereto, which modified the Note
Purchase Agreement and certain other agreements related thereto. Pursuant to the
September Letter Agreement, Phoenix Partners, among other things, purchased from
the Issuer a Tranche D Note in the principal amount of $1,200,000.
Phoenix Partners received (i) the $3,000,000 to purchase the Tranche A
Notes, (ii) the $1,224,000 to purchase the 1,360,000 Shares from Gordon, (iii)
the $1,200,000 to purchase the Tranche B Notes, (iv) the $1,000,000 to purchase
the Tranche C Note, (v) the $200,000 to purchase the $200,000 Tranche C Note,
(vi) the $150,000 to purchase the $150,000 Tranche D Note and (vii) the
$1,200,000 to purchase the $1,200,000 Tranche D Note from its partners. The
partners of Phoenix Partners advanced the subject funds out of working capital
or personal funds.
ITEM 4. PURPOSE OF TRANSACTION.
Phoenix Partners acquired the Tranche A Notes (and the Shares into
which the Tranche A Notes were converted) for investment purposes and pursuant
to the terms of the Note Purchase Agreement. The Note Purchase Agreement
provided for outstanding principal on the Notes to bear interest at the
Eurodollar Rate and to be due on the first anniversary of each Note and
quarterly thereafter. The Tranche A Notes were convertible into Shares at the
option of Phoenix Partners upon the occurrence of certain conditions and were to
be automatically converted into Shares at the rate of $0.50 per Share upon the
first to occur of the following: (i) the listing of the Shares on The NASDAQ
Stock Market Small-Cap or the National Market System; (ii) the achievement of
certain operating targets set forth in the Note Agreement; and (iii) the
expiration of six months from the date of the purchase by Phoenix Partners of
the full $10 million aggregate amount of Notes.
The Note Purchase Agreement required the Issuer to offer Phoenix
Partners additional tranches of Notes upon the achievement by the Issuer of
certain operational targets. The Issuer was permitted to request that Phoenix
Partners purchase additional Notes notwithstanding the failure to occur of the
stated operational targets, but any rejection of such a request would not
diminish Phoenix Partners' rights under the Note Purchase Agreement. Phoenix
Partners has no obligation to purchase additional Notes. The Issuer has an
obligation to offer the additional Notes upon the occurrence of certain
conditions and, as set forth in the Note Purchase Agreement, the Notes were
anticipated to be offered according to the following schedule:
<PAGE> 15
Page 15
<TABLE>
<CAPTION>
Anticipated Rate of
Note Amount Date of Issuance Conversion into Shares
- ---- ------ ---------------- ----------------------
<S> <C> <C> <C>
Tranche B $1,200,000 01/31/95 $0.60
Tranche C $1,200,000 03/31/95 $0.60
Tranche D $2,500,000 06/30/95 $1.00
Tranche E $2,100,000 10/31/95 $1.50
</TABLE>
The conversion rate of each of the tranches and the timing of purchase,
if any, were subject to adjustment upon the occurrence of certain conditions set
forth in the Note Purchase Agreement. If Phoenix Partners did not purchase all
the Notes offered to it, the Issuer had the option to purchase all, but not less
than all, of the Notes previously sold by the Issuer, together with all, but not
less than all, of the Shares into which the Notes may have been converted,
together with all of the Shares purchased by Phoenix Partners pursuant to the
Stock Purchase Agreement. In the event that the Issuer proposed to issue any
additional Shares or securities convertible into Shares, Phoenix Partners had
the right to purchase, on the same terms and conditions of such proposed
issuance, an amount of Shares sufficient to permit Phoenix Partners to maintain
ownership of that percentage of outstanding Shares which Phoenix Partners owned
on a fully diluted basis immediately prior to such proposed issuance.
Pursuant to the terms of the Note Purchase Agreement, Phoenix Partners
is entitled to propose one person to serve on the Board of Directors of the
Issuer and, after the purchase by Phoenix Partners of Notes in the aggregate
amount of $10 million, Phoenix Partners was to become entitled to propose such
number of directors to the Board of Directors as is necessary to provide Phoenix
Partners with proportionate representation on the Board of Directors. On March
15, 1995, Peet agreed to join the Issuer's Board of Directors.
In connection with the execution of the Note Purchase Agreement,
Phoenix Partners and the Issuer entered into a warrant agreement (the "Warrant
Agreement") dated as of December 9, 1994. A copy of the Warrant Agreement is
attached as Exhibit E to the Initial Statement. The Warrant Agreement provided
for the purchase of Shares by Phoenix Partners at $3.00 per share in an amount
equal to (A) the product of (i) 4,000,000 multiplied by (ii) a fraction, the
numerator of which was the aggregate principal amount of the Notes purchased by
Phoenix Partners and the denominator of which is $10,000,000, minus (B)
the aggregate number of warrants which have been exercised by Phoenix Partners
prior to such time.
Concurrent with the execution of each of the Note Purchase Agreement
and the Warrant Agreement, Phoenix Partners entered into the Stock Purchase
Agreement with Gordon. Pursuant to the Stock Purchase Agreement, Gordon agreed
that, until the earlier of three years from the date of the Stock Purchase
Agreement and the date on which Phoenix Partners ceases to own at least 5% of
the outstanding Shares, he will vote Shares held by him and use his best efforts
to cause others to vote (i) in favor of directors designated by Phoenix Partners
and (ii) to amend the Issuer's Certificate of Incorporation to provide
authorization for the issuance of up to 80 million Shares.
On February 17, 1995, Phoenix Partners purchased from the Issuer the
Tranche B Notes in the principal amount of $1,200,000 pursuant to the terms of
the Note Purchase Agreement. Phoenix Partners acquired the Tranche B Notes (and
the Shares into which the Tranche B Notes were converted) for investment
purposes and pursuant to the terms of the Note Purchase Agreement. As a result
of the purchase of the Tranche B Notes in the principal amount of $1,200,000,
Phoenix Partners received warrants to purchase an additional 480,000 Shares
pursuant to the Warrant Agreement.
<PAGE> 16
Page 16
On March 15, 1995, Phoenix Partners and the Issuer executed the Letter
Agreement. Concurrent therewith and in accordance with the terms of the Letter
Agreement, the Tranche A Note was converted into 6,000,000 Shares, the Tranche B
Note was converted into 2,000,000 Shares and the $1,000,000 Tranche C Note
purchased on March 15, 1995 was converted into 1,666,666 Shares.
On August 3, 1995, Phoenix Partners acquired the remaining $200,000
Tranche C Note and the $150,000 Tranche D Note (and the Shares into which such
notes were convertible) for investment purposes and pursuant to the terms of
the Note Purchase Agreement and the August Letter Agreement. The remaining
$200,000 Tranche C Note and the $150,000 Tranche D Note were convertible into
Shares at the option of the Issuer upon the System being in Commercial
Operation (as each term is defined in the Letter Agreement) in China in
connection with an airline of comparable size to Hainan Airlines, a company
organized under the laws of the People's Republic of China ("Hainan"). The
remaining $200,000 Tranche C Note and the $150,000 Tranche D Note are
convertible into Shares at the rate of $0.72 per Share should Phoenix Partners
fail to purchase additional Notes from the Issuer upon receipt of a request
from the Issuer to so purchase.
The August Letter Agreement amended the Warrant Agreement to provide
that 175,000 warrants became immediately exercisable on August 3, 1995 and an
additional 175,000 warrants would become exercisable at the end of each 30-day
period thereafter, if at the end of such period the System is not in Commercial
Operation; provided, however, that in no event would more than 4,000,000
warrants be exercisable pursuant to the Warrant Agreement.
The August Letter Agreement provided that if the System had not been
installed in China in connection with an airline of comparable size to Hainan
Airlines and/or the System was not operational within 90 days of August 3, 1995,
the Issuer would issue to Phoenix Partners warrants (the "Additional Warrants")
to purchase 140,000 Shares at an exercise price of (i) 0.85 multiplied by (ii)
the lowest average weekly closing price of the Shares during the ninety day
period commencing on August 3, 1995.
As of September 15, 1995, Phoenix Partners and the Issuer entered into
the September Letter Agreement. Pursuant to the September Letter Agreement,
Phoenix Partners purchased a Tranche D Note in the principal amount of
$1,200,000 and converted such Tranche D Note into 1,200,000 Shares. A copy of
the form of Tranche D Note is attached as Exhibit T to Amendment No. 4 to the
Initial Statement. The Tranche D Note was converted into Shares at a conversion
price of $1.00 per Share, resulting in the receipt by Phoenix Partners of
1,200,000 Shares. However, the Issuer agreed that should it fail to meet
certain operational targets by January 15, 1996, the conversion price would be
adjusted so that the conversion will have deemed to have occurred at a lower
price, with an absolute minimum conversion price of $0.60 per Share.
<PAGE> 17
Page 17
Upon any deemed change in the conversion price in the Tranche D Note purchased
and converted on September 15, 1995, the Issuer will issue to Phoenix Partners
certificates representing such additional Shares.
In addition to the purchase of the Tranche D Note in the principal
amount of $1,200,000 pursuant to the September Letter Agreement, Phoenix
Partners converted the Tranche C Note in the principal amount of $200,000 and
the Tranche D Note in the principal amount of $150,000 into 333,333 Shares and
250,000 Shares, respectively. Further, Phoenix Partners was granted warrants
(the "Second Conversion Warrants") to purchase up to 600,000 Shares at $4.00 per
Share at any time prior to September 15, 1998. A copy of the agreement relating
to the Second Conversion Warrants is attached as Exhibit U to Amendment No. 4 to
the Initial Statement.
The September Letter Agreement further amended the Warrant Agreement
to provide that all 4,000,000 warrants became immediately exercisable and will
remain so during the Exercise Period (as defined in the Warrant Agreement).
In consideration of the issuance of the Second Conversion Warrants,
Phoenix Partners agreed that the Additional Warrants to be issued pursuant to
the August Letter Agreement would be issued only if the System has not been
installed in China in connection with an airline of comparable size to Hainan
Airlines and/or the System is not operational on or before January 15, 1996.
American Aviation Limited ("AA"), a limited life company organized
under the laws of Mauritius and owned equally by Phoenix Holdings and Quantum
Industrial, has agreed to acquire 25% of the equity of Hainan. On December 7,
1995, the Issuer, Phoenix Holdings and Quantum Industrial executed an options
agreement (the "Options Agreement"), a copy of which is attached hereto as
Exhibit V which (i) grants to the Issuer the option (the "Call Option") to
acquire a 50% interest (in whole but not in part) in AA and (ii) grants to
Phoenix Holdings and Quantum Industrial the option to sell (the "Put Option")
to the Issuer up to their entire interest in AA.
The Issuer's Call Option is exercisable for a period of one year from
the date of the acquisition by AA (the "Acquisition Date") of a 25% interest in
Hainan. The exercise price of the Call Option has been set at $15 million. The
Put Option is exercisable in increments of 50% during the period from the second
anniversary of the Acquisition Date through the fifth anniversary of the
Acquisition Date. The Put Option exercise price shall be determined in
accordance with certain calculations set forth in the Options Agreement.
The Options Agreement provides under certain circumstances, the
constituent documents of AA shall be amended to provide that, notwithstanding
the percentage interest of each of the shareholders in AA, AA will distribute
all dividends in respect of AA shares according to certain calculations set
forth in the Options Agreement.
<PAGE> 18
Page 18
In consideration of the issuance by Phoenix Holdings and Quantum
Industrial of the Call Option, the Issuer issued to each of Phoenix Holdings
and Quantum Industrial warrants to purchase 1,000,000 Shares pursuant to the
warrant agreement attached hereto as Exhibit W (the "Four Dollar Warrant
Agreement") and shall issue warrants to purchase 1,000,000 Shares pursuant to
the warrant agreement attached hereto as Exhibit X (the "Three-Year Warrant
Agreement").
The Four Dollar Warrant Agreement provides for the exercise of
warrants at $4.00 per Share for the period beginning on December 18, 1995 and
ending on the earlier of (i) 120 days after December 18, 1995 and (ii) 25 days
subsequent to the Acquisition Date.
The Three-Year Warrant Agreement provides for the exercise of warrants
from the second anniversary of the Acquisition Date through the fifth
anniversary of the Acquisition Date at a price per Share equal to 85% of the
Market Price (as defined in the Three-Year Warrant Agreement) of the Shares
averaged over the 10 business days prior to the Acquisition Date through the 20
business days subsequent to the Acquisition Date. If AA fails to complete the
acquisition of the equity of Hainan, the Issuer will have no obligations under
the Three-Year Warrant Agreement.
Both the Four Dollar Warrant Agreement and the Three-Year Warrant
Agreement provide for adjustments to the number of Shares to be purchased or the
exercise price thereof should the Issuer's capital structure be modified. In
addition, both the Four Dollar Warrant Agreement and the Three-Year Warrant
Agreement provide that all warrants shall be deemed to have been exercised if
the Issuer is liquidated in accordance with its Certificate of Incorporation.
Phoenix Partners, Phoenix Holdings and Quantum Industrial have
acquired all of the securities described herein as having been acquired for
its account for investment purposes and pursuant to the terms of each of the
documents discussed herein and in the Initial Statement.
Except as set forth above and as contemplated by the Stock Purchase
Agreement, none of the Reporting Persons has any present plans or proposals that
would result in any change in the business, policies, management, structure or
capitalization of the Issuer. The Reporting Persons reserve the right to acquire
additional securities of the Issuer, to dispose of such securities at any time,
or to formulate other purposes, plans or proposals regarding the Issuer or any
of its securities, to the extent deemed advisable in light of their general
investment and trading policies, market conditions and other factors.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) (i) The aggregate number of Shares of which Phoenix Partners may
be deemed the beneficial owner is 19,909,999 (approximately 38.71% of the total
number of Shares which would be outstanding assuming the exercise or conversion
by the Reporting Persons of all of the convertible securities that they hold).
This number consists of i) 12,809,999 Shares held by Phoenix Partners, ii)
4,000,000 Shares issuable to Phoenix Partners upon exercise of the 4,000,000
warrants presently exercisable by Phoenix Partners pursuant to the terms of the
Warrant Agreement, iii) the 2,500,000 Shares issuable to Phoenix Partners
pursuant to the terms of the Second Warrant Agreement, iv) 600,000 Shares
issuable upon exercise of the 600,000 warrants issued to Phoenix Partners
pursuant to the Second Conversion Warrants.
<PAGE> 19
Page 19
(ii) The aggregate number of Shares of which each of the
Reporting Persons other than Phoenix Partners and Mr. Soros may be deemed a
beneficial owner is 20,909,999 (approximately 40.65% of the total number of
Shares which would be outstanding assuming the exercise or conversion by the
Reporting Persons of all of the convertible securities that they hold). This
number comprises all of the Shares which Phoenix Partners may be deemed to
own beneficially plus 1,000,000 Shares issuable upon exercise of the
1,000,000 Four Dollar Warrants. Quantum Industrial, and each Reporting Person
who may be deemed a beneficial owner of Shares held by Quantum Industrial, may
be deemed the beneficial owner of all the securities held by Phoenix Partners
and the 1,000,000 Shares issuable directly to Quantum Industrial upon exercise
of the Four Dollar Warrants. Phoenix Holdings, and each Reporting Person who
may be deemed a beneficial owner of Shares held by Phoenix Holdings, may be
deemed the beneficial owner of all the securities held by Phoenix Partners and
the 1,000,000 Shares issuable directly to Phoenix Holdings upon exercise of
the Four Dollar Warrants. In either case, each of the Reporting Persons other
than Phoenix Partners and Mr. Soros may be deemed the beneficial owner of
20,909,999 Shares.
(iii) Mr. Soros may be deemed the beneficial owner of an
aggregate of 21,909,999 Shares by virtue of the fact that he may be deemed to
own (i) the 19,909,999 Shares owned by Phoenix Partners, (ii) the 1,000,000
Shares issuable upon exercise of the 1,000,000 Four Dollar Warrants held
directly by Quantum Industrial and (iii) the 1,000,000 Shares issuable upon
exercise of the 1,000,000 Four Dollar Warrants held directly by Phoenix
Holdings.
Shares issuable upon exercise of the Three Year
Warrants are not reported herein as being beneficially owned by the Reporting
Persons because such warrants are not exercisable until 1997. Shares issuable
upon exercise of the 140,000 Additional Warrants issued pursuant to the August
Letter Agreement are also not reported herein as being beneficially owned by
Phoenix Partners. The issuance of such Additional Warrants is conditioned on the
occurrence (or non-occurrence) by January 15, 1996 of certain events not within
the control of Phoenix Partners or the Reporting Persons.
(iv) Mr. Peet, a non-managing member of Phoenix Holdings and a
director of the Issuer, was granted options to purchase up to 108,000 Shares by
virtue of his position as a director of the Issuer pursuant to the Issuer's
uniform compensation plan. Three thousand (3,000) options become exercisable
each month from April 1995 through March 1998. All unexercised options
terminate should Mr. Peet cease to be a director of the Issuer prior to March
31, 1998. Mr. Peet expressly disclaims beneficial ownership of any securities
of the Issuer not held directly by him and the Reporting Persons expressly
disclaim beneficial ownership of any securities held directly by Mr. Peet.
(b) (i) Phoenix Partners has the sole power to direct the voting and
disposition of the securities of the Issuer (including the Shares) that it holds
directly. Each of the other Reporting Persons may be deemed to have shared power
to direct the voting and disposition of the securities of the Issuer (including
the Shares) held by Phoenix Partners.
(ii) Phoenix Holdings has the sole power to direct the voting and
disposition of the securities of the Issuer that it holds directly. Each of
Mr. Soros, Winston, CFM and Dr. Chatterjee may be deemed to have shared power
to direct the voting and disposition of the securities of the Issuer held by
Phoenix Holdings.
(iii) Quantum Industrial has the sole power to direct the voting
and disposition of the securities of the Issuer that it holds directly. Each of
QIHMI, QIH Management and Mr. Soros may be deemed to have shared power to
direct the voting and disposition of the securities of the Issuer held by
Quantum Industrial.
(iv) Mr. Peet has the sole power to direct the voting and
disposition of any securities of the Issuer (including the Shares issuable upon
exercise of the options) that he holds directly.
(c) Except as described in Item 4 hereof, which is incorporated in
this Item 5(c) by reference, there have been no transactions in the Shares
effected since October 11, 1995.
(d) (i) The partners of Phoenix Partners have the right to participate
in the receipt of dividends from, or proceeds for the sale of, securities held
by Phoenix Partners in accordance with their percentage interest in the
partnership.
<PAGE> 20
Page 20
(ii) The members of Phoenix Holdings have the right to participate in
the receipt of dividends from, or proceeds for the sale of, securities held by
Phoenix Holdings in accordance with their percentage interest in the Phoenix
Holdings.
(iii) The shareholders of Quantum Industrial have the right to
participate in the receipt of dividends from, or proceeds for the sale of,
securities held by Quantum Industrial in accordance with their percentage
interest in Quantum Industrial.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS IN RELATIONSHIP WITH
RESPECT TO SECURITIES OF THE ISSUER.
As described in Item 5, on December 9, 1994, Phoenix Holdings and
Quantum Industrial entered into a Partnership Agreement for the purposes of
acquiring the Shares. A copy of the Partnership Agreement is attached to the
Initial Statement as Exhibit G.
Pursuant to a Registration Rights Agreement, a copy of which is
attached as Exhibit H to the Initial Statement (the "Registration Rights
Agreement"), the Issuer granted certain registration rights to Phoenix Partners
with respect to Shares issued pursuant to either the Note Purchase Agreement or
the Warrant Agreement. The Registration Rights Agreement grants to Phoenix
Partners certain demand registration rights in addition to "piggy-back"
registration rights, each as set forth in the Registration Rights Agreement.
The Issuer entered into a consulting agreement dated as of December 9,
1994 (the "Consulting Agreement"), a copy of which is attached to the Initial
Statement as Exhibit I, with CMC pursuant to which CMC will provide certain
consulting and advisory services to the Issuer for a monthly fee of $10,000.
The Consulting Agreement will terminate on the earlier of (i) December 9, 1996
and (ii) such time as Phoenix Partners fails to purchase any Notes pursuant to
the Note Purchase Agreement or Phoenix Partners makes a Demand (as defined in
the Note Purchase Agreement).
Pursuant to a Registration Rights Agreement, a copy of which is
attached hereto as Exhibit Y (the "Second Registration Rights Agreement"), the
Issuer granted certain registration rights to Phoenix Holdings and Quantum
Industrial with respect to Shares issued pursuant to either the Three Year
Warrant or the Four Dollar Warrant. The Second Registration Rights Agreement
grants to Phoenix Holdings and Quantum Industrial certain demand registration
rights in addition to "piggy-back" registration rights, each as set forth in the
Second Registration Rights Agreement. Concurrent with the execution of the
Second Registration Rights Agreement, Phoenix Partners and the Issuer executed
the First Amendment to the Registration Rights Agreement dated as of December
9, 1994, (the "First Amendment"), a copy of which is attached hereto as Exhibit
Z, which amends the Registration Rights Agreement dated as of December 9, 1994
to clarify certain provisions therein.
Except as set forth above and as described in Item 4 and Item 5 hereto,
the Reporting Person does not have any contracts, arrangements, understandings
or relationships with respect to any securities of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
(a) Joint Filing Agreement, dated as of December 16, 1994 by and
between S-C Phoenix Partners, S-C Phoenix Holdings, L.L.C., Quantum Industrial
Partners LDC, QIH Management Investor, L.P., QIH Management, Inc., Mr. George
Soros, Winston Partners, L.P., Chatterjee Fund Management, L.P. and Dr. Purnendu
Chatterjee (filed as Exhibit A to the Initial Statement and incorporated herein
by reference).
(b) Power of Attorney dated December 16, 1994 granted by Quantum
Industrial Partners LDC in favor of Mr. Sean Warren (filed as Exhibit B to the
Initial Statement and incorporated herein by reference).
(c) Power of Attorney dated October 27, 1994 granted by Mr. George
Soros in favor of Mr. Sean Warren (filed as Exhibit C to the Initial Statement
and incorporated herein by reference).
<PAGE> 21
Page 21
(d) Convertible Note Purchase Agreement dated December 9, 1994,
between S-C Phoenix Partners and Phoenix Information Systems Corp. (filed as
Exhibit D to the Initial Statement and incorporated herein by reference).
(e) Warrant Agreement dated December 9, 1994, between S-C Phoenix
Partners and Phoenix Information Systems Corp. (filed as Exhibit E to the
Initial Statement and incorporated herein by reference).
(f) Stock Purchase Agreement dated December 9, 1994, between S-C
Phoenix Partners and Robert P. Gordon (filed as Exhibit F to the Initial
Statement and incorporated herein by reference).
(g) Partnership Agreement of S-C Phoenix Partners dated as of December
9, 1994 between Quantum Industrial Partners LDC and S-C Phoenix Holdings, L.L.C.
(filed as Exhibit G to the Initial Statement and incorporated herein by
reference).
(h) Registration Rights Agreement dated December 9, 1994, between S-C
Phoenix Partners and Phoenix Information Systems Corp. (filed as Exhibit H to
the Initial Statement and incorporated herein by reference).
(i) Consulting Agreement dated as of December 9, 1994 between
Chatterjee Management Company and Phoenix Information Systems Corp. (filed as
Exhibit I to the Initial Statement and incorporated herein by reference).
(j) Power of Attorney dated November 18, 1994 granted by Winston
Partners, L.P. in favor of Mr. Peter A. Hurwitz (filed as Exhibit J to Amendment
No. 1 to the Initial Statement and incorporated herein by reference).
(k) Power of Attorney dated November 18, 1994 granted by Chatterjee
Fund Management, L.P. in favor of Mr. Peter A. Hurwitz (filed as Exhibit K to
Amendment No. 1 to the Initial Statement and incorporated herein by reference).
(l) Power of Attorney dated November 18, 1994 granted by Dr. Purnendu
Chatterjee in favor of Mr. Peter A. Hurwitz (filed as Exhibit L to Amendment No.
1 to the Initial Statement and incorporated herein by reference).
(m) Letter Agreement dated as of March 15, 1995 between Phoenix
Information Systems Corp. and S-C Phoenix Partners (filed as Exhibit M to
Amendment No. 2 to the Initial Statement and incorporated herein by reference).
(n) Warrant Agreement dated as of March 15, 1995 between Phoenix
Information Systems Corp. and S-C Phoenix Partners (filed as Exhibit N to
Amendment No. 2 to the Initial Statement and incorporated herein by reference).
(o) Letter Agreement dated August 3, 1995 between S-C Phoenix Partners
and Phoenix Information Systems Corp. (filed as Exhibit O to Amendment No. 3 to
the Initial Statement and incorporated herein by reference).
<PAGE> 22
Page 22
(p) $200,000 Tranche C Convertible Note dated August 3, 1995 executed
by Phoenix Information Systems Corp. in favor of S-C Phoenix Partners (filed as
Exhibit P to Amendment No. 3 to the Initial Statement and incorporated herein by
reference).
(q) $150,000 Tranche D Convertible Note dated August 3, 1995 executed
by Phoenix Information Systems Corp. in favor of S-C Phoenix Partners (filed as
Exhibit Q to Amendment No. 3 to the Initial Statement and incorporated herein by
reference).
(r) Power of Attorney dated January 3, 1989 granted by George Soros in
favor of Gary S. Gladstein. (filed as Exhibit R to Amendment No. 3 to the
Initial Statement and incorporated herein by reference).
(s) Letter Agreement dated September 15, 1995 between S-C Phoenix
Partners and Phoenix Information Systems Corp. (filed as Exhibit S to Amendment
No. 4 to the Initial Statement and incorporated herein by reference).
(t) $1,200,000 Tranche D Convertible Note dated September 15, 1995
executed by Phoenix Information Systems Corp. in favor of S-C Phoenix Partners
(filed as Exhibit T to Amendment No. 4 to the Initial Statement and incorporated
herein by reference).
(u) Warrant Agreement dated September 15, 1995 between S-C Phoenix
Partners and Phoenix Information Systems Corp. (filed as Exhibit U to Amendment
No. 4 to the Initial Statement and incorporated herein by reference).
(v) Options Agreement dated December 7, 1995 between S-C Phoenix
Holdings, L.L.C., Quantum Industrial Partners LDC and Phoenix Information
Systems Corp.
(w) Warrant Agreement dated December 7, 1995 between S-C Phoenix
Holdings, L.L.C., Quantum Industrial Partners LDC and Phoenix Information
Systems Corp.
(x) Warrant Agreement dated December 7, 1995 between S-C Phoenix
Holdings, L.L.C., Quantum Industrial Partners LDC and Phoenix Information
Systems Corp.
(y) Registration Rights Agreement dated December 7, 1995 between S-C
Phoenix Holdings, L.L.C., Quantum Industrial Partners LDC and Phoenix
Information Systems Corp.
(z) First Amendment to the Registration Rights Agreement dated
December 7, 1995 between S-C Phoenix Partners and Phoenix Information Systems
Corp.
<PAGE> 23
Page 23
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Date: December 12, 1995 S-C PHOENIX PARTNERS
By: S-C Phoenix Holdings, L.L.C.
By: /s/ Sean C. Warren
-----------------------------
Sean C. Warren
Manager
Date: December 12, 1995 QUANTUM INDUSTRIAL PARTNERS LDC
By: /s/ Sean C. Warren
--------------------------------------
Sean C. Warren
Attorney-in-Fact
Date: December 12, 1995 QIH MANAGEMENT INVESTOR, L.P.
By: QIH MANAGEMENT, INC., general partner
By: /s/ Sean C. Warren
-----------------------------
Sean C. Warren
Vice President
Date: December 12, 1995 QIH MANAGEMENT, INC.
By: /s/ Sean C. Warren
--------------------------------------
Sean C. Warren
Vice President
Date: December 12, 1995 S-C PHOENIX HOLDINGS, L.L.C.
By: /s/ Sean C. Warren
--------------------------------------
Sean C. Warren
Manager
<PAGE> 24
Page 24
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Date: December 12, 1995 GEORGE SOROS
By: /s/ Sean C. Warren
--------------------------------------
Sean C. Warren
Attorney-in-Fact
Date: December 12, 1995 WINSTON PARTNERS, L.P.
By: /s/ Peter A. Hurwitz
--------------------------------------
Peter A. Hurwitz
Attorney-in-Fact
Date: December 12, 1995 CHATTERJEE FUND MANAGEMENT, L.P.
By: /s/ Peter A. Hurwitz
--------------------------------------
Peter A. Hurwitz
Attorney-in-Fact
Date: December 12, 1995 PURNENDU CHATTERJEE
By: /s/ Peter A. Hurwitz
--------------------------------------
Peter A. Hurwitz
Attorney-in-Fact
<PAGE> 25
Page 25
ANNEX A
The following is a list of all of the persons who serve as
Managing Directors of Soros Fund Management ("SFM"):
Scott K. H. Bessent
Walter Burlock
Stanley Druckenmiller
Arminio Fraga
Gary Gladstein
Robert K. Jermain
David N. Kowitz
Donald H. Krueger
Elizabeth Larson
Jay Misra
Gabriel S. Nechamkin
Steven Okin
Dale Precoda
Lief D. Rosenblatt
Mark D. Sonnino
Sean C. Warren
Each of the above-listed persons is a United States citizen whose principal
occupation is serving as Managing Director of SFM, and each has a business
address c/o Soros Fund Management, 888 Seventh Avenue, New York, New York 10106.
During the past five years, none of the above-listed persons has been (i)
convicted in a criminal proceeding, or (ii) a party to any civil proceeding as a
result of which any such persons has been subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws, or finding any violations with
respect to such laws.
<PAGE> 26
Page 26
ANNEX B
DIRECTORS AND OFFICERS OF QUANTUM INDUSTRIAL PARTNERS LDC
<TABLE>
<CAPTION>
Name/Title/Citizenship Principal Occupation Business Address
---------------------- -------------------- ----------------
<S> <C> <C>
Curacao Corporation Managing Director of Kaya Flamboyan 9
Company N.V. Netherlands Antilles Curacao,
Managing Director corporations Netherlands Antilles
(Netherlands Antilles)
Inter Caribbean Services Limited Administrative services Citco Building
Secretary Wickhams Cay
(British Virgin Islands) Road Town
Tortola
British Virgin Islands
</TABLE>
<PAGE> 27
Page 27
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ------- ----
<S> <C>
V Options Agreement dated December 7, 1995 between S-C Phoenix
Partners, Quantum Industrial Partners LDC and Phoenix
Information Systems Corp.
W Warrant Agreement dated December 7, 1995 between S-C Phoenix
Partners, Quantum Industrial Partners LDC and Phoenix
Information Systems Corp.
X Warrant Agreement dated December 7, 1995 between S-C Phoenix
Partners, Quantum Industrial Partners LDC and Phoenix
Information Systems Corp.
Y Registration Rights Agreement dated December 7, 1995 between
S-C Phoenix Partners, Quantum Industrial Partners LDC and
Phoenix Information Systems Corp.
Z Amendment No. 1 to Registration Rights Agreement dated
December 7, 1995 between S-C Phoenix Partners, Quantum
Industrial Partners LDC and Phoenix Information Systems Corp.
</TABLE>
<PAGE> 1
EXHIBIT V
OPTIONS AGREEMENT
THIS OPTIONS AGREEMENT, dated December 7, 1995, is among
PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation ("Phoenix"), S-C
PHOENIX HOLDINGS, L.L.C., a limited liability company organized under the laws
of Delaware ("S-C"), and QUANTUM INDUSTRIAL PARTNERS LDC, a limited duration
company organized under the laws of the Cayman Islands ("Quantum").
WHEREAS, AMERICAN AVIATION LIMITED ("AA"), an offshore limited
life company organized under the laws of Mauritius, fifty (50%) percent of which
is owned by S-C and fifty (50%) percent of which is owned by Quantum, has agreed
to acquire ("Acquisition") twenty five (25%) percent of the equity of HAINAN
AIRLINES, a company limited by shares organized under the laws of the People's
Republic of China ("Hainan");
WHEREAS, S-C and Quantum own in the aggregate one hundred
(100%) percent of AA and, on or before the closing of the Acquisition, will
contribute to AA funds sufficient to enable AA to consummate the Acquisition;
WHEREAS, S-C and Quantum desire to grant to Phoenix an option
to acquire a fifty (50%) percent interest in AA on the terms and conditions
hereinbelow set forth;
WHEREAS, Phoenix desires to grant to each of S-C and Quantum an
option to sell Phoenix up to one hundred (100%) percent of its interest in AA on
the terms and conditions hereinbelow set forth.
NOW THEREFORE, in consideration of the premises, and the mutual
agreements herein contained, the parties hereby agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meanings specified below:
"AA" shall have the meaning set forth in the recitals.
"AA AMOUNT" shall mean the greater of (a) the AA Investment or (b)
eighty five (85%) percent of the aggregate AA Market Price for all outstanding
AA Shares owned by S-C and Quantum.
"AA INVESTMENT" shall mean twenty five million ($25,000,000) dollars,
in the event the Call Option has not
<PAGE> 2
2
been exercised, or ten million ($10,000,000) dollars, in the event that the Call
Option has been exercised.
"AA MARKET PRICE" shall mean the average of the closing prices of sales
of AA Shares on all domestic exchanges on which AA Shares may at the time be
listed, or, if there shall have been no sales on any such exchange on any day,
the average of the highest bid and lowest asked prices on all such exchanges at
the end of such day, or, if on any day AA Shares shall not be so listed, the
average of the representative bid and asked prices quoted in the NASDAQ System
as of 3:30 P.M., New York time, or if on any day AA Shares shall not be quoted
in the NASDAQ System, the average of the high and low bid and asked prices on
such day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporation, or any similar successor organization, in each
such case averaged over a period of 15 consecutive business days prior to the
day as of which the AA Market Price is being determined; provided that if AA
Shares are listed on any domestic exchange the term "business days" as used in
this sentence shall mean business days on which such exchange is open for
trading. If at any time AA Shares are not listed on any domestic exchange or
quoted in the NASDAQ System or the domestic over-the-counter market, the AA
Market Price shall be deemed to be the fair market value thereof determined by
an independent appraiser selected by S-C and Quantum and acceptable to Phoenix,
taking into account the share of Hainan owned by AA, the underlying value of
Hainan, the value of control, if any, of AA and all other pertinent factors of
value other than liquidity of AA Shares.
"AA PAYMENTS" shall mean the aggregate amount of all cash dividend
payments made by or on behalf of AA to S-C and Quantum, in respect of or
relating to the AA Shares, but expressly excluding the $2,000,000 financing fee
received or receivable by S-C, Quantum or any affiliate of S-C or Quantum in
connection with the Acquisition or any other fee or other compensation paid or
payable to S-C, Quantum or any affiliate of S-C or Quantum for services
rendered.
"AA SHARES" shall mean shares of the capital of AA consisting of
ordinary shares of $1.00 each.
"ACTUAL PHOENIX VALUE" shall mean the amount resulting when the Phoenix
Share Price is multiplied by the Put Exercise Price.
"ACQUISITION DATE" shall mean the date on which the closing of the
Acquisition occurs.
"ACQUISITION" shall have the meaning set forth in the recitals.
<PAGE> 3
3
"AFFILIATE" shall mean, with respect to S-C and Quantum, (A)(a) any
person or entity controlling, controlled by or under common control with S-C or
Quantum and (b) if (1) controlling S-C or Quantum, such person or entity has a
forty percent (40%) or more voting and beneficial ownership interest in S-C or
Quantum, (2) controlled by S-C or Quantum, has a forty percent (40%) or more
voting and beneficial ownership interest in such person or entity and (3) under
common control with S-C or Quantum, the person(s) or entity(ies) having such
common control have a forty percent (40%) or more voting and beneficial
ownership interest in S-C or Quantum and such person or entity, and (B) any
person or entity for which George Soros d/b/a Soros Fund Management or
Chatterjee Fund Management Co. LP, a Delaware limited partnership, is acting as
investment manager or investment adviser, in each case with investment
discretion.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or day
on which banks in New York City are closed for general business.
"CALL EXERCISE PRICE" shall have the meaning set forth in Section 2.1
hereof.
"CALL OPTION" shall have the meaning set forth in Section 2.1 hereof.
"CALL TERM" shall have the meaning set forth in Section 2.1 hereof.
"DETERMINATION DATE" shall mean a date during the Put Term selected by
S-C or Quantum and identified in an Exercise Notice, which date shall be on or
before the date of the applicable Exercise Notice, but shall not be more than
ten Business Days prior to the date of such notice.
"EXERCISE NOTICE" shall have the meaning given in Section 3.3 hereof.
"FIRST PREFERENCE PERIOD" shall mean the time period commencing on the
Preference Date and ending on the earlier of the Flip or the 100% Put Date.
"FIRST PREFERENCE PERIOD AMOUNT" shall mean the amount equal to the
quotient of (x) $8,000,000 minus Pre-Preference Period Payments, divided by (y)
the sum of seventy-two (72%) percent plus ten (10%) percent of the aggregate
Percentage Interest in AA held by S-C and Quantum on the Preference Date.
"FLIP" shall have the meaning set forth in Section 2.4 hereof.
<PAGE> 4
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"HAINAN" shall have the meaning set forth in the recitals.
"LIQUIDATION AMOUNT" shall mean an amount equal to the excess, if any,
of $8,000,000 over AA Payments made prior to the Liquidation Date.
"LIQUIDATION DATE" shall have the meaning set forth in Section 2.6
hereof.
"LIQUIDATION DIFFERENTIAL" shall mean an amount equal to the sum of the
Pre-Liquidation Differential plus, if any, the Post-Liquidation Differential.
"100% PUT" shall have the meaning given in Section 2.4 hereof.
"PAYMENT DIFFERENTIAL" shall mean an amount equal to the difference
between (i) the Percentage Interest in AA owned by Phoenix on the Preference
Date multiplied by the total amount of dividend payments made by AA during the
time period following the Preference Date until the applicable Determination
Date, and (ii) all amounts received by Phoenix through such Determination Date
pursuant to Section 2.4; provided that any amounts paid to Phoenix pursuant to
Section 2.4(c) shall be excluded from the foregoing formula for purposes of
calculating the Payment Differential.
"PERCENTAGE INTEREST" shall mean the percentage obtained by dividing
the number of AA Shares owned by a party by the aggregate number of AA Shares
then outstanding.
"PHOENIX" shall have the meaning set forth in the preamble.
"PHOENIX MARKET PRICE" shall mean the average of the closing prices of
the Phoenix Stock sales on all domestic exchanges on which the Phoenix Stock may
at the time be listed, or, if there shall have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day the Phoenix Stock
shall not be so listed, the average of the representative bid and asked prices
quoted in the NASDAQ System as of 3:30 P.M., New York time, or if on any day the
Phoenix Stock shall not be quoted in the NASDAQ System, the average of the high
and low bid and asked prices on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporation, or any similar
successor organization, in each such case averaged over the business days
occurring during a
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period of 30 consecutive calendar days prior to the day as of which the Phoenix
Market Price is being determined; provided that if the Phoenix Stock is listed
on any domestic exchange the term "business days" as used in this sentence shall
mean business days on which such exchange is open for trading. If at any time
the Phoenix Stock is not listed on any domestic exchange or quoted in the NASDAQ
System or the domestic over-the-counter market, the Phoenix Market Price shall
be deemed to be the fair market value thereof as of the Determination Date
determined by an independent appraiser selected by Phoenix and acceptable to S-C
and Quantum taking into account the share of AA owned by Phoenix if any, the
underlying value of AA (if Phoenix owns any AA Shares), the value of control, if
any, of Phoenix and all other pertinent factors other than liquidity of Phoenix
Stock.
"PHOENIX SHARE PRICE" shall mean eighty-five (85%) percent of the
Phoenix Market Price.
"PHOENIX STOCK" shall mean the common stock, par value $0.01, of
Phoenix.
"POST-LIQUIDATION DIFFERENTIAL" shall mean the amount resulting when
the Liquidation Amount is multiplied by a fraction, the numerator of which is
the Percentage Interest in AA held by Phoenix in the Preference Date and the
denominator of which is the aggregate Percentage Interest in AA held by S-C and
Quantum on the Preference Date.
"PREFERENCE DATE" shall have the meaning set forth in Section 2.4
hereof.
"PRE-LIQUIDATION DIFFERENTIAL" shall mean an amount equal to the
difference between (i) AA Payments made during the time period following the
Preference Date until (but not including) the Liquidation Date, multiplied by a
fraction, the numerator of which is equal to the Percentage Interest in AA held
by Phoenix on the Preference Date and the denominator of which is equal to the
aggregate Percentage Interest in AA held by S-C and Quantum on the Preference
Date, and (ii) all amounts received by Phoenix during the same time period;
provided that any amounts paid to Phoenix pursuant to Section 2.4(c) shall be
excluded from the foregoing formula for purposes of calculating the
Pre-Liquidation Differential.
"PRE-PREFERENCE PERIOD PAYMENTS" shall mean AA Payments made prior to
the Preference Date.
"PRINCIPAL DIFFERENTIAL" shall mean an amount equal to two times the
difference between (i) the Percentage Interest in AA owned by Phoenix on the
Preference Date multiplied by
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the First Preference Period Amount, and (ii) all amounts received by Phoenix
during the First Preference Period.
"PUT CLOSING" shall mean the time at which (a) Phoenix shall cause to
be issued to S-C and Quantum the number of Phoenix Shares equal to the Put
Exercise Price and (b) S-C and Quantum shall cause to be issued to Phoenix the
AA Shares sold pursuant to the Put Option.
"PUT EXERCISE PRICE" shall have the meaning set forth in Section 3.1
hereof.
"PUT OPTION" shall have the meaning set forth in Section 3.1 hereof.
"PUT TERM" shall have the meaning set forth in Section 3.1 hereof.
"QUANTUM" shall have the meaning set forth in the preamble.
"S-C" shall have the meaning set forth in the preamble.
For purposes hereof, the term "dividends" shall include payments made by AA to
redeem AA Shares.
"SECOND PREFERENCE PERIOD AMOUNT" shall mean the number resulting when
the First Preference Period Amount is multiplied by a fraction, the numerator of
which is (x) eighty (80%) percent minus the Percentage Interest in AA held by
S-C and Quantum on the Preference Date, and the denominator of which is (y) the
Percentage Interest in AA held by S-C and Quantum on the Preference Date minus
twenty (20%) percent.
SECTION 2. CALL OPTION.
2.1 OPTION TERMS. S-C and Quantum hereby grant to Phoenix an
option ("Call Option") to purchase such number of AA Shares as shall, upon
exercise, equal a Percentage Interest in AA not to exceed fifty (50%) percent in
the aggregate. The Call Option shall be exercisable in accordance with Section
2.3 hereof, in whole but not in part, on any Business Day during the period
("Call Term") commencing on the Acquisition Date and ending on the first
anniversary thereof. The exercise price for the Call Option shall be $15,000,000
("Call Exercise Price").
2.2 CONSIDERATION. In consideration of the issuance of
the Call Option by S-C and Quantum to Phoenix, Phoenix shall, on the
Acquisition Date, issue to S-C and Quantum warrants to acquire an aggregate of
four million
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(4,000,000) shares of Phoenix Stock pursuant to the warrant agreements (the
"Warrant Agreements") in the forms of Exhibits A-1 and A-2 hereto. S-C and
Quantum will receive registration rights applicable to the shares of common
stock issued upon exercise of the warrants, as set forth in the Registration
Rights Agreement attached as Exhibit C hereto. Phoenix shall enter into the
First Amendment to the Registration Rights Agreement, attached as Exhibit D
hereto.
2.3 EXERCISE. At least five (5) Business Days prior to the date
upon which Phoenix desires to exercise the Call Option, Phoenix shall deliver to
S-C and Quantum written notice of such exercise. Such notice shall specify the
Business Day for the purchase of the AA Shares. On the date specified in any
such notice, Phoenix shall wire transfer the Call Exercise Price in immediately
available funds to such account or accounts as S-C and Quantum shall designate
to Phoenix. Promptly upon receipt thereof, S-C and Quantum shall cause Phoenix
to be issued, in Phoenix's name as set forth in the notice, the AA Shares so
purchased in certificated form and without legends except in respect of such
restrictions on transfer as may be imposed by applicable Federal and state
securities and "blue sky" laws.
2.4 AA PREFERENCE DISTRIBUTIONS. At such time (the "Preference
Date") as Phoenix shall first acquire a Percentage Interest in AA greater than
twenty (20%) percent (whether upon an exercise of the Call Option or on an
exercise of the Put Option, provided that if Phoenix first acquires such
Percentage Interest pursuant to an exercise of the Put Option, the Preference
Date will be deemed to be the applicable Determination Date for such exercise),
and until such time (the "100% Put") as S-C and Quantum shall have exercised the
Put Option with respect to one hundred (100%) percent of the aggregate
Percentage Interest in AA they then hold without regard to the adjustment
required by Section 3.2(c)(assuming that a Put Closing has occurred with respect
to such exercise and if so, effective as of the Determination Date for such Put
Closing), the Articles of Association of AA shall be amended, effective on the
Preference Date, to provide that, notwithstanding the respective Percentage
Interests of S-C, Quantum and Phoenix, AA will distribute all dividends in
respect of AA Shares as follows:
(a) in the event that, as of such time, AA Payments are less
than $8,000,000, (i) the initial ten (10%) percent) of the First
Preference Period Amount shall be distributed in accordance with the
Percentage Interests in AA held on the Preference Date by S-C and
Quantum on the one hand, and Phoenix on the other hand; and (ii) the
remaining ninety (90%) percent of the First
<PAGE> 8
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Preference Period Amount shall be distributed eighty (80%) percent to
S-C and Quantum and twenty (20%) percent to Phoenix, in each case until
the earlier of (x) such time ("Flip") as AA Payments equal $8,000,000
or (y) the 100% Put;
(b) from and after the Flip, (i) the initial ten (10%) percent
of the Second Preference Period Amount shall be distributed in
accordance with the Percentage Interests in AA held on the Preference
Date by S-C and Quantum on the one hand, and Phoenix on the other hand;
and (ii) the remaining ninety (90%) percent of the Second Preference
Period Amount shall be distributed twenty (20%) percent to S-C and
Quantum and eighty (80%) percent to Phoenix;
(c) thereafter, one hundred (100%) percent to Phoenix until
such time as Phoenix shall have received interest in an amount equal to
five (5%) percent (based on a 365/366 day year and actual days elapsed)
on the Principal Differential, calculated for the time period
commencing on the date on which the First Preference Period Amount is
first distributed eighty (80%) percent to S-C and Quantum and twenty
(20%) percent to Phoenix and ending on the date on which Phoenix
receives the amount it would have received prior to the Flip if all
distributions made pursuant to Section 2.4(a) were instead made
pursuant to Section 2.4(d); and
(d) thereafter, in accordance with the Percentage
Interests in AA then held by S-C and Quantum on the one hand and by
Phoenix on the other hand.
2.5 Notwithstanding the foregoing, if, immediately following
the 100% Put, the sum of AA Payments plus the Aggregate Phoenix Value (such sum,
the "SCQ Amount") is less than $8 million, AA will distribute all dividends in
respect of AA Shares as follows:
(a)(i) first, the First Partial Payment Amount shall be
distributed in accordance with the respective Percentage Interests held by S-C,
Quantum and Phoenix; and (ii) thereafter, eighty (80%) percent to S-C and
Quantum and twenty (20%) percent to Phoenix; in each case until the SCQ Amount
is equal to $8 million (the "end date");
(b) from and after the end date, (i) the Second Partial Payment
Amount shall be distributed in accordance with the respective Percentage
Interests held by S-C, Quantum and Phoenix; and (ii) thereafter, the Recapture
Amount shall be distributed twenty (20%) percent to S-C and Quantum and
<PAGE> 9
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eighty (80%) percent to Phoenix, or, if the aggregate Percentage Interest in
AA held by S-C and Quantum is less than twenty (20%), to S-C, Quantum and
Phoenix in accordance with their respective Percentage Interests in AA;
(c) thereafter, in accordance with the respective
Percentage Interests in AA held by S-C, Quantum and Phoenix.
(d) For purposes of this Section 2.5, the following terms
shall have the meanings specified below:
"Aggregate Phoenix Value" shall mean the amount equal to the
sum of (x) the amount resulting when the number of Phoenix Shares received by
S-C and Quantum on an exercise of the Put Option is multiplied by the Phoenix
Share Price as of the Determination Date for such exercise, plus (y) the amount
resulting when the number of Phoenix Shares received by S-C and Quantum on any
other exercise of the Put Option is multiplied by the Phoenix Share Price as of
the Determination Date for such exercise.
"First Partial Payment Amount" shall mean an amount equal to
thirty-five (35%) percent of the number resulting when the difference between
(x) the Percentage Interest in AA held by Phoenix immediately following the 100%
Put and (y) twenty (20%) percent, is multiplied by (z) the excess, if any, of $8
million over the SCQ Amount immediately following exercise of the 100% Put.
"Payment A Amount" shall mean the amount resulting when the
total amount of dividends paid by AA during the time period immediately
following the 100% Put and ending on the end date, but excluding the First
Partial Payment Amount, is multiplied by a fraction the numerator of which is
equal to (x) eighty (80%) percent minus the Percentage Interest in AA held by
S-C and Quantum immediately following the 100% Put, and the denominator of which
is equal to (y) the Percentage Interest in AA held by S-C and Quantum
immediately following the 100% Put minus twenty (20%) percent.
"Recapture Amount" shall mean the amount equal to the sum of
(i) the Payment A Amount plus (ii) the number resulting when (x) the total
amount of dividends paid by AA during the time period following the Preference
Date and ending immediately prior to the 100% Put, but excluding amounts paid
pursuant to Section 2.4(a)(i), is multiplied by (y) a fraction the numerator of
which is equal to eighty (80%) percent minus the Percentage Interest in AA held
by S-C and Quantum on the Preference Date, and the denominator of which is equal
to the Percentage Interest in AA held by S-C and Quantum immediately following
the 100% Put minus twenty (20%) percent.
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"SCQ Amount" shall have the meaning given in this Section 2.5.
"Second Partial Payment Amount" shall mean an amount equal to
thirty-five (35%) of the number resulting when the excess, if any, of (x) the
aggregate Percentage Interest in AA held by S-C and Quantum immediately
following the 100% Put over (y) twenty (20%) percent, is multiplied by (z) the
Recapture Amount.
(e) For purposes of this Section 2.5, all calculations based on
the occurrence of the 100% Put shall apply solely following the Put Closing for
the 100% Put but, following such closing, shall be effective as of the
Determination Date for such 100% Put.
2.6 OTHER AA DISTRIBUTIONS. During any time period in which
Phoenix owns a Percentage Interest in AA equal to or less than twenty (20%)
percent or following the 100% Put Date, AA will make all dividend payments in
accordance with the Percentage Interests in AA then held by S-C and Quantum, on
the one hand, and by Phoenix, on the other hand.
2.7 LIQUIDATION, REORGANIZATION OR SALE. (a) In the event of
the sale, corporate reorganization or liquidation of AA on or following the
Preference Date (the date of such event, the "Liquidation Date"), the proceeds
of such sale, reorganization or liquidation shall be distributed as follows: (i)
one hundred (100%) percent of the Liquidation Amount to S-C and Quantum; (ii)
thereafter, one hundred (100%) percent of the Liquidation Differential to
Phoenix; and (iii) thereafter, to S-C, Quantum and Phoenix in accordance with
the amounts in their respective capital accounts with respect to their ownership
in AA immediately prior to such sale, reorganization or liquidation. The
Articles of Association of AA shall be amended following (but effective as of)
the Preference Date to reflect the provisions of this Section 2.6.
(b) The foregoing provisions of Section 2.6(a)
shall no longer apply following the 100% Put (assuming that a Put Closing has
occurred with respect to such exercise and, if so, effective as of the
Determination Date for such Put Closing); provided however, that the provisions
of Section 2.6(a) shall be applicable following such 100% Put if the SCQ Amount
is less than $8 million, in which case the definition of "Liquidation Amount"
shall be deemed to mean an amount equal to $8,000,000 minus the SCQ Amount.
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SECTION 3. PUT OPTION.
3.1 OPTION TERMS. Phoenix hereby grants to S-C and Quantum,
effective as of the Acquisition Date, an option ("Put Option") to sell to
Phoenix such number of AA Shares as shall, upon exercise, equal (a) at the sole
option of S-C and Quantum, fifty (50%) percent or one hundred (100%) percent of
their aggregate Percentage Interest in AA (if S-C and Quantum then own one
hundred (100%) percent of AA) or (b) one hundred (100%) percent of their
aggregate Percentage Interest in AA (if S-C and Quantum then own less than one
hundred (100%) percent of AA, either as a result of a prior exercise of the Put
Option or in the event the Call Option has been exercised, subject in each case
to adjustment as required by Section 3.2(c). The Put Option shall be exercisable
in accordance with Section 3.3 hereof at any time during the period ("Put
Term"), commencing on the second anniversary of the Acquisition Date and ending
on the fifth anniversary of the Acquisition Date. The price payable by Phoenix
upon exercise of the Put Option shall be determined as set forth in Section 3.2
hereof ("Put Exercise Price"). The effectiveness of the Put Option and the Call
Option shall be conditioned on the amendment to the certificate of incorporation
of Phoenix referred to in Section 5.1(d) hereof.
3.2 PUT EXERCISE PRICE. (a) If upon exercising the Put Option
one hundred (100%) percent of the aggregate Percentage Interest in AA then held
by S-C and Quantum is to be sold to Phoenix, the Put Exercise Price shall be a
number of shares of Phoenix Stock, determined as of the Determination Date,
equal to the lower of (i) eight million (8,000,000) shares, in the event the
Call Option has not been exercised, or four million (4,000,000) shares, in the
event the Call Option has been exercised and (ii) the number obtained by
dividing (x) the amount equal to the AA Amount minus the Payment Differential by
(y) the Phoenix Share Price.
(b) If upon the exercise of the Put Option fifty (50%)
percent of the aggregate Percentage Interest then held by S-C and Quantum in AA
is to be sold to Phoenix and the Call Option has not been exercised, the Put
Exercise Price shall be a number of shares of Phoenix Stock, determined as of
the Determination Date, equal to the lower of (i) four million (4,000,000)
shares and (ii) one-half of the number obtained by dividing (x) the amount equal
to the AA Amount minus the Payment Differential by (y) the Phoenix Share Price.
(c) Notwithstanding any provision herein to the contrary:
(i) if, after determining the Put Exercise Price
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pursuant to Section 3.2(a), the Actual Phoenix Value is less than the AA Amount,
then the Percentage Interest in AA sold to Phoenix for such Put Exercise Price
shall be reduced, pro rata, by the same percentage by which the Actual Phoenix
Value is less than the AA Amount; and (ii) if, after determining the Put
Exercise Price pursuant to Section 3.2(b), the Actual Phoenix Value is less than
one- half the AA Amount, then the Percentage Interest in AA sold to Phoenix for
such Put Exercise Price shall be reduced, pro rata by the same percentage by
which the Actual Phoenix Value is less than one-half the AA Amount.
3.3 EXERCISE. The Put Option may be exercised by S-C or Quantum
at any time during the Put Term by delivery of a written notice of exercise
("Exercise Notice") to Phoenix, irrevocable except as provided below, which
notice will set forth the Determination Date, the Percentage Interest in AA held
by S-C and Quantum, respectively, to be sold to Phoenix and the Put Exercise
Price as determined by S-C and Quantum. Unless S-C and Quantum receive a written
objection from Phoenix (an "objection notice") within five Business Days of the
date of delivery of an Exercise Notice, the Put Closing shall occur on the sixth
Business Day following the delivery date of such Exercise Notice and the Put
Exercise Price shall be the price specified in such Exercise Notice. If S-C and
Quantum receive a timely and complete objection notice from Phoenix, the parties
shall cooperate in good faith to determine the Put Exercise Price in accordance
with the provisions of Section 3.2 within fifteen Business Days from the date
S-C and Quantum receive such objection notice and the Put Closing shall occur on
the first Business Day following the date on which the Put Exercise Price is so
determined. The objection notice delivered by Phoenix shall specify in detail
the basis for the objection and Phoenix's determination of the Put Exercise
Price. If the parties cannot agree to a determination of the Put Exercise Price
within twenty Business Days of the date of an Exercise Notice, S-C or Quantum
may revoke such Exercise Notice. The Phoenix Shares and the AA Shares shall be
in certificated form and without legends except in respect of such restrictions
on transfer as may be imposed by applicable Federal and state securities and
"blue sky" laws. A Certificate of Representations in the form of Exhibit B
hereto shall be delivered to Phoenix at the Put Closing. At the Put Closing the
parties shall, if necessary, make an adjustment with respect to any dividend
payments made by AA between the applicable Determination Date and date of such
Put Closing so that any such dividends shall be distributed to S-C, Quantum and
Phoenix in accordance with the provisions of Sections 2.4, 2.5 and 2.6, as then
applicable, as if the Put Closing occurred on such Determination Date.
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SECTION 4. SHARES. The Phoenix Shares issued to S-C or Quantum upon
exercise of the Put Option shall be, upon such issuance, fully paid and
non-assessable. The AA Shares conveyed by S-C and Quantum upon exercise of the
Call Option and/or Put Option shall be, upon such conveyance, fully paid,
non-assessable, subject to no call or right of redemption and free and clear of
all liens, claims and encumbrances of any nature.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
5.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PHOENIX.
Phoenix hereby represents, warrants and covenants to each of S-C and Quantum
that:
(a) Phoenix is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has
the requisite corporate power and authority to own its properties and
to carry on its business in all material respects as it is now being
conducted. Phoenix has the requisite corporate power and authority to
perform its obligations hereunder.
(b) This Agreement has been duly authorized by all necessary
corporate action on behalf of Phoenix, has been duly executed and
delivered by authorized officers of Phoenix, and is a valid and binding
agreement on the part of Phoenix that is enforceable against Phoenix in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and to judicial limitations on the
enforcement of the remedy of specific performance and other equitable
remedies.
(c) Neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated herein
or therein will violate or be in conflict with any provision of the
certificate of incorporation or bylaws of Phoenix or violate or be in
conflict with any material debt, note, bond, lease, mortgage,
indenture, license, obligation, contract, commitment, franchise,
permit, instrument or other agreement or obligation to which Phoenix is
a party, or violate or be in conflict with any law, judgment, decree,
order, regulation or ordinance by which Phoenix is bound or affected.
(d) Phoenix shall use its best efforts to cause its
certificate of incorporation to be amended on or
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before February 15, 1996 to increase its authorized number of shares of
capital stock so that Phoenix will at all times have a sufficient
number of shares of Phoenix Stock authorized and reserved for issuance
to enable it to pay the Put Exercise Price and to issue the shares of
Phoenix Stock required upon an exercise of the Warrants under the
Warrant Agreements.
(e) The AA Shares which may be acquired by it will be purchased
for investment for its own account and not with the view to, or for
resale in connection with, any distribution or public offering thereof.
Phoenix understands that the AA Shares have not been and may not be
registered under the Securities Act of 1933, as amended (the
"Securities Act") or any state securities laws by reason of their
contemplated issuance in transactions exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof and
applicable state securities laws, and that the reliance of Phoenix and
others upon these exemptions is predicated in part upon this
representation by Phoenix. Phoenix further understands that the AA
Shares may not be transferred or resold without (i) registration under
the Securities Act and any applicable state securities laws, or (ii) an
exemption from the requirements of the Securities Act and applicable
state securities laws.
Phoenix understands that an exemption from such
registration is not presently available pursuant to Rule 144
promulgated under the Securities Act by the Securities and Exchange
Commission (the "Commission") and that in any event Phoenix may not
sell any AA Shares pursuant to Rule 144 prior to the expiration of a
two-year period after it has acquired such AA Shares. Phoenix
understands that any sales pursuant to Rule 144 can be made only in
full compliance with the provisions of Rule 144.
(f) At the date hereof Phoenix is, and at the time of delivery
of the Phoenix Stock to be delivered by it to S-C or Quantum on the
exercise of the Put Option and on the exercise of the warrants will be,
the sole lawful owner of and has, and will have, good and marketable
title to such Phoenix Stock free and clear of any liens, charges,
pledges, equities, encumbrances, security interests, community property
rights, restrictions on transfer or other defects in title
(collectively, "Liens"). Upon delivery of the Phoenix Stock to be
delivered to S-C and Quantum hereunder, good and marketable title to
such Phoenix Stock will pass to S-C and Quantum, free and clear of all
Liens.
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5.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF S-C AND
QUANTUM. Each of S-C and Quantum, each with respect to
itself, hereby represents, warrants and covenants to Phoenix that:
(a) S-C is a limited liability company, duly organized and
validly existing under the laws of Delaware, and has the requisite
power and authority and has been duly authorized to perform its
obligations hereunder.
(b) Quantum is a limited duration company, duly organized and
validly existing under the laws of the Cayman Islands, and has the
requisite power and authority and has been duly authorized to perform
its obligations hereunder.
(c) This Agreement has been duly authorized by all necessary
action on the part of S-C and Quantum. This Agreement has been duly
executed and delivered. This Agreement is a valid and binding
agreement, enforceable against S-C and Quantum in accordance with its
terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and to judicial limitations on the
enforcement of the remedy of specific performance and other equitable
remedies.
(d) The Phoenix Stock which may be acquired by S-C or Quantum
will be purchased for investment for the account of S-C or Quantum and
not with the view to, or for resale in connection with, any
distribution or public offering thereof. S-C and Quantum understand
that the Phoenix Stock has not been and may not be registered under the
Securities Act) or any state securities laws by reason of its
contemplated issuance in transactions exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof and
applicable state securities laws, and that the reliance of Phoenix upon
these exemptions is predicated in part upon this representation by S-C
and Quantum. S-C and Quantum further understand that the Phoenix Stock
may not be transferred or resold without (i) registration under the
Securities Act and any applicable state securities laws, or (ii) an
exemption from the requirements of the Securities Act and applicable
state securities laws.
S-C and Quantum understand that an exemption from such
registration is not presently available pursuant to Rule 144
promulgated under the Securities
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Act by the Commission and that in any event Phoenix Stock may not be
sold pursuant to Rule 144 prior to the expiration of a two-year period
after the acquisition of such Phoenix Stock. S-C and Quantum understand
that any sales pursuant to Rule 144 can be made only in full compliance
with the provisions of Rule 144.
(e) At the date hereof each of S-C and Quantum is, and at the
time of delivery of the AA Shares to be sold by it to Phoenix will be,
the sole lawful owner of and has, and will have, good and marketable
title to such AA Shares free and clear of any liens, charges, pledges,
equities, encumbrances, security interests, community property rights,
restrictions on transfer or other defects in title (collectively,
"Liens"). Upon delivery of and payment for the AA Shares to be sold by
S-C or Quantum hereunder, good and marketable title to such shares will
pass to Phoenix, free and clear of all Liens. There are no outstanding
options, warrants, rights or other agreements or arrangements to which
S-C or Quantum is a party requiring S-C or Quantum at any time to
transfer any of the AA Shares to be sold to Phoenix under the Call
Option.
(f) S-C and Quantum shall cause AA to at all times during the
Call Term to own twenty-five (25%) percent or more of the outstanding
capital stock of Hainan.
(g) S-C and Quantum will not, during the Call Term, cause AA to
(i) amend, modify or supplement its Articles of Association in a manner
that would materially deprive Phoenix of the value it has bargained for
under this Agreement, (ii) conduct any business other than the holding
of the interests in Hainan or (iii) incur any indebtedness.
(h) S-C and Quantum have delivered to Phoenix true and complete
copies of the Articles of Association of AA and of the material
agreements entered into by AA in connection with the Acquisition.
SECTION 6. MISCELLANEOUS.
6.1 REPRESENTATIVE. S-C (or such other entity as S-C and
Quantum may designate in writing to Phoenix) shall serve as the representative
(the "Representative") of S-C and Quantum for purposes of receiving or
delivering notices and instructions hereunder or accepting, paying or delivering
the shares of stock or other consideration to be received, paid or delivered to
or by S-C Quantum pursuant to the terms of this Agreement. Phoenix shall be
entitled to deliver to the Representative notices addressed to either or both of
S-C and
<PAGE> 17
17
Quantum, and Phoenix may take such action (consistent with the terms of this
Agreement) as may be required by such notices or instructions as may be
delivered to Phoenix by the Representative, including instructions concerning
the issuance of warrants or shares of stock or the payment of other
consideration as required hereby.
6.2 NOTICES. Every notice or other communication provided for
in this Agreement to be given by one party to the other shall be in writing and
shall be deemed given on the date delivered, if by hand delivery, or on the
fourth day from the date sent, if by registered mail, postage prepaid to the
other party at the address set forth below, or to such other address as may
hereafter be designated by a party in writing pursuant hereto:
If to the Company, to:
Phoenix Information Systems Corp.
100 Second Avenue South, Suite 100
St. Petersburg, Florida 33701
Attention: Paul Henry
If to S-C and Quantum, to the
Representative at:
S-C Phoenix Holdings, L.L.C.
c/o The Chatterjee Group
888 Seventh Avenue, Suite 3000
New York, New York 10106
Attention: Peter Hurwitz, Esq.
6.3 ENTIRE AGREEMENT. This Agreement (including all other
documents or instruments required to be delivered in connection herewith)
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof, and supersedes any and all previous agreements between
them relating to the subject matter hereof whether written, oral or implied, and
may not be changed or modified except by written agreement, signed by the party
to be bound or his duly authorized representative.
6.4 WAIVERS. Failure of either party hereto to insist upon
strict performance of the terms, conditions and provisions of this Agreement
shall not be deemed a waiver of such terms, conditions or provisions or a waiver
of future compliance therewith. No waiver of any terms, conditions or provisions
hereof shall be deemed to have been made unless expressed in writing and signed
by both parties, and shall not be construed as, or constitute, a continuing
waiver of such term, condition or provision, or waiver of any other violation
or, breach of or default under any other term,
<PAGE> 18
18
condition or provision of this Agreement or any other agreements provided for
herein.
6.5 SECTION HEADINGS. The headings contained in this
Agreement are for reference purposes only and shall not be given any effect in
the construction or interpretation of this Agreement.
6.6 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal law of the State of New York,
without reference to any choice of law provisions thereof.
6.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors permitted transferees and assigns. No party may assign or transfer
any of its rights, benefits or obligations hereunder without the prior written
consent of each other party hereto, except that S-C and Quantum may each
transfer or assign its rights, benefits or obligations hereunder to one or more
of its Affiliates without the prior written consent of any other party hereto.
6.8 FEES AND EXPENSES. Fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
including, without limitation, counsel fees, brokerage, finders or financial
advisor fees and accounting fees, regardless of whether any of the transactions
contemplated hereby are consummated ("Expenses") shall be paid as follows:
(a) Expenses incurred prior to July 5, 1995, shall be paid by
the party which incurred such Expenses;
(b) Expenses incurred after July 5, 1995, and prior to October
24, 1995, relating to the Acquisition will be shared equally by Phoenix
on the one hand and S-C and Quantum on the other hand;
(c) Expenses incurred after October 24, 1995, relating to the
Acquisition shall be paid by S-C and Quantum;
(d) Expenses relating to the organization of AA, whenever
incurred, shall be paid by S-C and Quantum; and
(e) Expenses in the nature of legal fees and disbursements
relating to the preparation of this Agreement (exclusive of any
negotiations, term sheets or letters of intent preliminary hereto)
shall be paid
<PAGE> 19
19
(i) by Phoenix to the extent incurred by Phoenix and (ii) by Phoenix to
the extent incurred by S-C and Quantum, up to a maximum of $30,000.
(f) Expenses in the nature of brokerage, finders, financial
advisory and similar fees shall be paid by the party initiating contact
with such broker, finder or financial advisor.
6.9 TAX ELECTIONS. The parties agree that, upon the written
request of Phoenix following any acquisition of AA Shares, they shall cause AA
to make an election under Section 754 of the Internal Revenue Code of 1986, as
amended, and any other similar election under any United States Federal, state
or local income tax laws requested by Phoenix.
6.10 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
<PAGE> 20
20
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
PHOENIX INFORMATION SYSTEMS CORP.
By:________________________________
Title:
S-C PHOENIX HOLDINGS, L.L.C.
By:______________________________
Title:
QUANTUM INDUSTRIAL PARTNERS LDC
By:______________________________
Title:
<PAGE> 21
21
EXHIBIT A-1
Form of Warrant
<PAGE> 22
22
EXHIBIT A-2
Form of Warrant
<PAGE> 23
23
EXHIBIT B
Form of Certificate of Representations
The undersigned, in connection with the Options Agreement,
dated December 7, 1995 (the "Agreement"), among Phoenix Information Systems
Corp., a Delaware corporation (the "Company"), and S-C Phoenix Holdings, L.L.C.,
a limited liability company organized under the laws of ____________, hereby
makes each of the representations contained in Section 5.2 of the Agreement and
further represents that it has performed, in all material respect, each of its
obligations thereunder.
The undersigned further represents that it qualifies as an
"accredited investor" as that term is used in Regulation D promulgated under the
Securities Act of 1933, as amended , because it is an entity, all of whose
equity owners are accredited investors.
S-C PHOENIX HOLDINGS, L.L.C.
By:__________________________________
Title:
<PAGE> 24
24
EXHIBIT C
Form of Registration Rights Agreement
<PAGE> 25
25
Form of Certificate of Representations
The undersigned, in connection with the Options Agreement,
dated December 7, 1995 (the "Agreement"), among Phoenix Information Systems
Corp., a Delaware corporation (the "Company"), and Quantum Industrial Partners
LDC, a limited duration company organized under the laws of ____________, hereby
makes each of the representations contained in Section 5.2 of the Agreement and
further represents that it has performed, in all material respect, each of its
obligations thereunder.
The undersigned further represents that it qualifies as an
"accredited investor" as that term is used in Regulation D promulgated under the
Securities Act of 1933, as amended , because it is an entity, all of whose
equity owners are accredited investors.
QUANTUM INDUSTRIAL PARTNERS LDC
By:__________________________________
Title:
<PAGE> 1
EXHIBIT W
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of December 7, 1995 (the
"Agreement"), by and among PHOENIX INFORMATION SYSTEMS CORP., a Delaware
corporation (the "Company"), S-C PHOENIX HOLDINGS, L.L.C., a limited liability
company organized under the laws of Delaware ("S-C") and QUANTUM INDUSTRIAL
PARTNERS LDC, a limited duration company organized under the laws of the Cayman
Islands ("Quantum," each of S-C and Quantum, together with the successors and
permitted assigns of each, a "Holder").
WHEREAS, the Company proposes to issue and deliver its warrant
certificates ("Warrant Certificates") evidencing 2,000,000 warrants (the
"Warrants") each to purchase one newly issued share of common stock, par value
$0.01 per share, of the Company ("Common Stock") in connection with that certain
Options Agreement, dated December 7, 1995, by and among the Company, S-C and
Quantum (the "Options Agreement").
NOW THEREFORE, in consideration of the foregoing and for the
purpose of defining the terms and provisions of the Warrants and the respective
rights and obligations thereunder of the Company and each Holder, the Company
and each Holder agree as follows:
1. Certain Definitions. The following terms, as used
in this Agreement, have the following meanings:
<PAGE> 2
(a) "Affiliate" means, with respect to S-C and Quantum, (A)(a)
any Person controlling, controlled by or under common control with S-C or
Quantum and (b) if (1) controlling S-C or Quantum, such Person has a forty
percent (40%) or more voting and beneficial ownership interest in S-C or
Quantum, (2) controlled by S-C or Quantum has a forty percent (40%) or more
voting and beneficial ownership interest in such Person and (3) under common
control with S-C or Quantum, the Person(s) having such common control have forty
percent (40%) or more voting and beneficial ownership interest in S-C or Quantum
and such Person, and (B) any Person for which George Soros d/b/a Soros Fund
Management or Chatterjee Fund Management Co. LP, a Delaware limited partnership,
is acting as investment manager or investment adviser, in each case with
investment discretion. For purposes of this definition, the term "control," when
used with respect to any Person, shall include the power to exercise discretion
over the investments of such Person, and the terms "controlling" and
"controlled" have corresponding meanings.
(b) "Business Day" means any day other than a Saturday, Sunday
or day on which banks in New York City are closed for general business.
(c) "Common Stock" has the meaning set forth in the
preamble.
(d) "Exercise Period" means the period beginning on
the Seventh Business Day following the date hereof (as defined
in the Options Agreement) and ending at 5 p.m. New York City time
2
<PAGE> 3
on the earlier to occur of (i) the 25th Business Day following the Acquisition
Date (as defined in the Options Agreement) and (ii) the 120th day following such
Seventh Business Day from the date hereof.
(e) "Exercise Price" means $4 per share (as provided
in Section 3 and subject to adjustment as provided in Section 4).
(f) "Expiration Date" for the Warrants means the last
day of the Exercise Period.
(g) "Holder" has the meaning set forth in the pre amble.
(h) "Investor Representative" shall be [S-C Phoenix Holdings,
L.L.C., a Delaware limited liability company, or its successor in interest, or
the assigned representative of such Person (it being agreed that at all times
there shall be no more than one Investor Representative)].
(i) "Person" means any individual, corporation, limited
liability company, partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
(j) "Underlying Common Stock" means the shares of Common Stock
purchasable by each Holder upon the exercise of the Warrants.
(k) "Warrants" has the meaning set forth in the preamble.
3
<PAGE> 4
(1) "Warrant Certificates" means the certificates
evidencing the Warrants.
2. Issue of Warrants. The Warrant Certificates shall be in
registered form only and substantially in the form attached hereto as Exhibit A,
shall be dated the date on which signed by an authorized signatory of the
Company and may have such legends and endorsements typed, stamped or printed
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement and the Options Agreement. Warrant Certificates
evidencing 2,000,000 Warrants may be executed by any authorized officer of the
Company. Warrant Certificates evidencing all 2,000,000 Warrants shall be
delivered in the names of the Holders to the Investor Representative at the
closing of the Acquisition (as defined in the Options Agreement).
3. Exercise Price; Exercise of Warrants.
(a) Exercise Price. Each Warrant shall entitle
the Holder, subject to the provisions of this Agreement, to purchase one share
of Common Stock at a purchase price per share equal to the Exercise Price.
(b) Exercise of Warrants Generally.
(1) Exercise During Exercise Period. The
aggregate number of Warrants that may be exercised at any time during the
Exercise Period shall be 2,000,000. All Warrants not exercised during the
Exercise Period shall expire at 5 p.m. New York City time on the Expiration
Date.
4
<PAGE> 5
(2) Liquidation Event. If the Company
is liquidated in accordance with the provisions of its Certificate of
Incorporation, then the Warrants shall be deemed to have been exercised.
(3) Method of Exercise; Payment of
Exercise Price. In order to exercise any or all of the Warrants repre sented by
a Warrant Certificate, the Holder thereof must sur render the Warrant
Certificate to the Company for exercise, with the reverse side of the Warrant
Certificate duly executed, together with any required payment in full of the
Exercise Price for each share of Underlying Common Stock to which such Holder is
entitled, any such payment of the Exercise Price to be made by check or wire
transfer to an account designated by the Company. If a Holder elects to exercise
only a portion of the Warrants represented by the Warrant Certificate or
Certificates registered in its name, then the remaining portion of such Warrants
shall be returned to such Holder in the form of a new Warrant Certificate. Upon
surrender of a Warrant Certificate and the payment of the Exercise Price in
conformity with the fore going provisions, the Company shall promptly issue to
the Holder of such Warrant Certificate share certificates representing the
Underlying Common Stock to which such Holder is entitled, registered in the name
of such Holder or the name or names of such Affiliates of such Holder as may be
directed in writing by such Holder, and shall deliver such share certificates to
the Person or Persons entitled to receive the same. The Company
5
<PAGE> 6
shall issue such share certificates within five Business Days after the payment
of the Exercise Price of the Warrants by such Holder, but such shares shall be
deemed issued and outstanding on the date the Warrant is exercised and the
Exercise Price is paid to the Company.
(c) Exercise by Surrender of Warrant; Exercise
with Shares of Common Stock. In the event that the Acquisition (as defined in
the Options Agreement) is consummated, in addition to the method of exercise set
forth in Section 3(b)(3) above and in lieu of any cash payment required
thereunder, each Holder shall have the right at any time and from time to time
to exercise the Warrants in full or in part (i) by surrendering its Warrant
Certificate in the manner specified in Section 3(b)(3) in exchange for the
number of shares of Common Stock equal to the product of (x) the number of
shares as to which the Warrants are being exercised multiplied by (y) a
fraction, the numerator of which is the Market Price (as defined hereafter) of
the Common Stock less the Exercise Price and the denominator of which is such
Market Price, or (ii) by surrendering the Warrant Certificate in the manner
specified in Section 3(b)(3) above and making any required payment in whole or
in part of the Exercise Price for each share of Underlying Common Stock to which
such Holder is entitled with shares of Common Stock (valued at the Market
Price). As used herein, "Market Price" shall mean the average of the closing
prices of the Common Stock sales on all domestic exchanges on which the Common
Stock may at the time be
6
<PAGE> 7
listed, or, if there shall have been no sales on any such exchange on any day,
the average of the highest bid and lowest asked prices on all such exchanges at
the end of such day, or, if on any day the Common Stock shall not be so listed,
the average of the representative bid and asked prices quoted in the NASDAQ
System as of 3:30 p.m. New York City time, or if on any day the Common Stock
shall not be quoted in the NASDAQ System, the average of the high and low bid
and asked prices on such day in the domestic over-the-counter market as reported
by the National Quotation Bureau, Incorporation or any similar successor
organization, in each such case averaged over a period of 10 consecutive
Business Days immediately prior to through 20 Business Days immediately
following the Acquisition (as defined in the Options Agreement); provided that
if the Common Stock is listed on any domestic exchange the term "Business Days"
as used in this sentence shall mean business days on which such exchange is open
for trading. If at any time the Common Stock is not listed on any domestic
exchange or quoted in the NASDAQ System or the domestic over-the-counter market,
the Market Price shall be deemed to be the fair market value thereof as of the
date of exercise, determined by an independent appraiser selected by the Company
and acceptable to the Holders.
4. Adjustments. The Exercise Price shall be subject
to adjustment as follows:
(a) In the event the Company shall issue
additional shares of Common Stock (or securities convertible into
7
<PAGE> 8
or exchangeable for Common Stock) in a stock dividend, stock distribution or
subdivision paid with respect to Common Stock, or declare any dividend or other
distribution payable with additional shares of Common Stock (or securities
convertible into or exchangeable for Common Stock) with respect to Common Stock
or effect a split or subdivision of the outstanding shares of Common Stock, the
Exercise Price shall, concurrently with the effectiveness of such stock
dividend, stock distribution or subdivision, or the earlier declaration thereof,
be proportionately decreased.
(b) In the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price
shall, concurrently with the effectiveness of such combination or consolidation,
be proportionately increased.
(c) In the event of any consolidation or merger
of the Company with or into another corporation or the conveyance of all or
substantially all of the assets of the Company to another corporation or entity,
the Warrants shall thereafter be exercisable for the number of shares of capital
stock or other securities or property to which a holder of the number of shares
of Common Stock deliverable upon conversion hereof would have been entitled upon
such consolidation, merger or conveyance; and, in any such case, appropriate
adjustment shall be made in the application of the provisions herein set forth
with respect to the rights and interests of each Holder thereafter, to the end
8
<PAGE> 9
that the provisions set forth herein (including provisions with respect to
adjustments in the Exercise Price) shall thereafter be applicable, as nearly as
may be practicable, in relation to any shares of stock or other property
thereafter deliverable upon the exercise of Warrants. At the request of a
Holder, the resulting or surviving entity in any such consolidation or merger,
if other than the Company, shall acknowledge in writing such Holder's rights
hereunder.
5. Loss or Mutilation. Upon receipt by the Company of evidence
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of any Warrant Certificate and of indemnity satisfactory to it, and
(in the case of mutilation) upon surrender and cancellation thereof, then, in
the absence of notice to the Company that the Warrants represented thereby have
been acquired by a bona fide purchaser, the Company shall deliver to the Holder
of such Warrant Certificate, in exchange for or in lieu of the lost, stolen,
destroyed or mutilated Warrant Certificate, a new Warrant Certificate of the
same tenor and for a like aggregate number of Warrants. Upon the issuance of any
new Warrant Certificate under this Section 5, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and other expenses in connection herewith.
Every new Warrant Certificate executed and delivered pursuant to this Section 5
in lieu of any lost, stolen or destroyed Warrant Certificate shall constitute a
contractual obligation of the Company, whether or
9
<PAGE> 10
not the allegedly lost, stolen or destroyed Warrant Certificate shall be at any
time enforceable by anyone, and shall be entitled to the benefit of this
Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 5 are exclusive and shall preclude (to the extent lawful) all other
rights or remedies with respect to the replacement of mutilated, lost, stolen,
or destroyed Warrant Certificates.
6. Reservation and Authorization of Common Stock. The Company
shall, at all times until the Warrants have been exercised or have expired,
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as is sufficient for the
purpose of permitting the exercise in full of all outstanding Warrants.
7. Limitations on Transfer; Warrant Transfer Books.
The Warrants may be sold, transferred, pledged, assigned, hypothecated or
otherwise disposed of (collectively, "transferred") only to Affiliates of a
Holder. The Company shall cause to be kept at the principal executive office of
the Company a register in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide the registration of Warrant
Certificates and transfers or exchanges of Warrant Certificates as herein
provided.
The Holder of a Warrant Certificate, by its acceptance
thereof, covenants and agrees that the Warrants are being acquired, and the
Underlying Common Stock to be purchased upon
10
<PAGE> 11
the exercise of this Warrant will be acquired, as an investment and not with a
view to the distribution thereof and will not be sold or transferred except in
accordance with the applicable provisions of the Securities Act of 1933, as
amended (the "Act") and the rules and regulations promulgated thereunder, and
that neither this Warrant nor any of the Underlying Common Stock may be offered
or sold except (i) pursuant to an effective registration statement under the
Act, (ii) to the extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under the Act relating to the disposition of securities), or (iii)
pursuant to an exemption from registration under the Act. Upon exercise of any
Warrant, the Holder thereof shall deliver to the Company a Certificate of
Representation as set forth in the Options Agreement.
The Warrant Certificates and, upon exercise of the Warrants,
in part or in whole, certificates representing the Underlying Common Stock shall
bear a legend substantially similar to the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except (i) pursuant to
an effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under the Act relating to the disposition of
securities), or (iii) pursuant to an exemption from
registration under the Act."
At the option of a Holder, Warrant Certificates may be
exchanged at such office upon payment of the charges hereinafter
11
<PAGE> 12
provided. Whenever any Warrant Certificates are so surrendered for exchange, the
Company shall execute and deliver the Warrant Certificates that the Holder
thereof is entitled to receive. All Warrant Certificates issued upon any
registration of transfer or exchange of Warrant Certificates shall be the valid
obligations of the Company, evidencing the same obligations, and entitled to the
same benefits under this Agreement, as the Warrant Certificates surrendered for
such registration of transfer or exchange.
Every Warrant Certificate surrendered for registration of
transfer or exchange shall (if so required by the Company) be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the
Company duly executed by the Holder thereof. No service charge shall be made for
any registration of transfer or exchange of Warrant Certificates. The Company
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer of
Warrant Certificates.
8. No Voting or Dividend Rights. Prior to the exercise of the
Warrants, neither Holder, as a Holder of Warrant Certificates, shall be entitled
to any rights of a shareholder of the Company, including, without limitation,
the right to vote, to receive dividends or other distributions or to exercise
any preemptive right, but each Holder of Warrant Certificates shall receive all
notices sent to shareholders of the Company,
12
<PAGE> 13
including any notice of meetings of shareholders, and shall have the right to
attend or observe such meetings.
9. Termination. Notwithstanding anything in this Agreement to
the contrary, if a Holder materially breaches its obligations under the Options
Agreement with respect to the Call Option (as such term is defined in the Option
Agreement), this Agreement shall terminate upon such breach with respect to the
breaching Holder. In the event of termination as provided herein, this
Agreement, including all unexercised Warrants issued to such breaching Holder,
shall become void with respect to such Holder. Nothing in this Section 9 shall
be construed to limit any right or remedy of the Company in the event of such
breach.
10. Notices. Any notice, demand or delivery authorized by this
Agreement shall be in writing and shall be sufficiently given or made upon
receipt thereof, if made by personal delivery or facsimile transmission (with
confirmed receipt thereof), or four Business Days after mailed, if sent by
first-class mail, postage prepaid, addressed to the Investor Representative or
the Company, as the case may be, at their respective addresses below, or such
other address as shall have been furnished in accordance with this Section 10 to
the party giving or making such notice, demand or delivery:
(a) If to the Company, to it at:
Phoenix Information Systems Corp.
100 Second Avenue South, Suite 100
St. Petersburg, Florida 33701
Attention: Robert P. Gordon, Chairman
Facsimile: 813-821-7565
13
<PAGE> 14
(b) If to the Holder, to the Investor
Representative at:
------------------------
c/o The Chatterjee Group
888 Seventh Avenue, Suite 3000
New York, New York 10106
Attention: Mr. James Peet
Facsimile: 212-489-2005
With a copy to: Peter A. Hurwitz, Esq.
[With a copy to:
Soros Fund Management
888 Seventh Avenue, Suite 3300
New York, New York 10106
Attention: Sean A. Warren, Esq.
Facsimile: 212-489-2005]
11. Applicable Law. This Agreement and each Warrant
Certificate issued hereunder shall be governed by, and construed in accordance
with, the internal laws of the State of New York, without regard to the
conflicts of law principles thereof. The Company and each Holder hereby submit
to the nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in New
York City for purposes of all legal proceedings arising out of or relating to
this Agreement and the transactions contemplated hereby. The Company and each
Holder irrevocably waive, to the fullest extent permitted by law, any objection
which they may now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
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<PAGE> 15
12. Successors and Assigns. The provisions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties. Neither Holder may assign any of its rights
hereunder separate from a transfer of the Warrants in accordance with Section 7
hereof. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
13. Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement in any number of separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
14. Captions and Headings. The captions and headings used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
15. Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and each Holder.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each Holder, each future holder of the Warrants and the Company.
15
<PAGE> 16
16. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provisions shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
PHOENIX INFORMATION SYSTEMS CORP.
By
-------------------------------
Name:
Title:
S-C PHOENIX HOLDINGS, L.L.C.
By
-------------------------------
Name:
Title:
QUANTUM INDUSTRIAL PARTNERS LDC
By
-------------------------------
Name:
Title:
16
<PAGE> 17
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE
AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT
APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR ANY
SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION
OF SECURITIES), OR (iii) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE ACT.
THIS WARRANT CERTIFICATE AND THE WARRANTS
REPRESENTED HEREBY ARE TRANSFERABLE ONLY
IN ACCORDANCE WITH THE PROVISIONS SET FORTH IN
THE WARRANT AGREEMENT REFERRED TO BELOW.
WARRANTS TO PURCHASE COMMON STOCK
OF PHOENIX INFORMATION SYSTEMS CORP.
No.___ 2,000,000 Warrants
This certifies that _________________________ is the owner of
the number of Warrants set forth above, each of which represents the right to
purchase from PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation (the
"Company"), the number of shares of Common Stock, par value $0.01 per share, of
the Company ("Common Stock") determined in accordance with the Warrant Agreement
referred to below at the purchase price set forth in the Warrant Agreement (the
"Exercise Price"), upon surrender hereof at the office of the Company at 100
Second Avenue South, Suite 1100, St. Petersburg, Florida 33701 with the Exercise
Subscription Form on the reverse hereof duly executed and with payment in full
(by bank check or wire transfer to an account designated by the Company) of the
purchase price for the shares as to which the Warrant(s)
<PAGE> 18
represented by this Warrant Certificate are exercised, or by surrender of this
Warrant Certificate in lieu of cash payment, all subject to the terms and
conditions hereof and of the Warrant Agreement referred to below. The Warrants
will expire at 5 p.m. New York City time on the Expiration Date.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement, dated as of November ____, 1995 (the "Warrant
Agreement"), among the Company and S-C Phoenix Holdings, L.L.C. and Quantum
Industrial Partners LDC, is subject to the terms and provisions contained
therein, to all of which terms and provisions the holder of this Warrant
Certificate consents by acceptance hereof. The Warrant Agreement is hereby
incorporated herein by reference and made a part hereof. Reference is hereby
made to the Warrant Agreement for a full description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Company and the
holders of the Warrants. Capitalized defined terms used herein have the same
meanings as in the Warrant Agreement. Copies of the Warrant Agreement are on
file at the office of the Company and may be obtained by writing to the Company
at the following address:
100 Second Avenue South
Suite 1100
St. Petersburg, Florida 33701
The number of shares of the Common Stock of the Company purchasable upon the
exercise of each Warrant and the price per share are set forth in the Warrant
Agreement.
A-2
<PAGE> 19
All shares of Common Stock issuable by the Company upon the
exercise of Warrants and the payment of the Exercise Price therefor shall be
validly issued, fully paid and nonassessable. The Company shall not be required,
however, to pay any tax, withholding or other charge imposed in connection with
the issuance of any shares of Common Stock upon the exercise of Warrants, and,
in such case, the Company shall not be required to issue or deliver any stock
certificate until such tax, withholding or other charge has been paid or it has
been established to the Company's satisfaction that no tax, withholding or other
charge is due. This Warrant Certificate and all rights hereunder are
transferable, subject to the terms of the Warrant Agreement, by the registered
holder hereof, in whole or in part, upon surrender of this Warrant Certificate
duly endorsed, or accompanied by a written instrument of transfer in form
satisfactory to the Company duly executed by the registered holder and upon
payment of any necessary transfer tax or other governmental charge imposed upon
such transfer. Upon any partial transfer, the Company will issue and deliver to
such holder a new Warrant Certificate or Certificates with respect to any
portion not so transferred.
This Warrant Certificate shall be void and all rights
represented hereby shall cease on the Expiration Date.
Dated:___________, 19__
PHOENIX INFORMATION SYSTEMS CORP.
A-3
<PAGE> 20
By
---------------------------
Name:
Title:
A-4
<PAGE> 21
FORM OF REVERSE OF WARRANT CERTIFICATE
EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: Phoenix Information Systems Corp.
The undersigned irrevocably exercises ____________ of the
Warrants evidenced by this Warrant Certificate for the purchase of shares of
Common Stock, par value $0.01 per share, of PHOENIX INFORMATION SYSTEMS CORP.
and has arranged to make payment of $___________ (such payment being made by
bank check or wire transfer to the account designated by Phoenix Information
Systems Corp., and constituting the Exercise Price (as defined in the Warrant
Agreement) for the shares as to which the Warrants evidenced by this Warrant
Certificate are exercised) or has surrendered this Warrant Certificate in lieu
of cash payment in accordance with the terms of Section 3(c) of the Warrant
Agreement, all on the terms and conditions specified in this Warrant Certificate
and the Warrant Agreement herein referred to. The undersigned has delivered to
the Company the Certificate of Representations as set forth in the Warrant
Agreement. The undersigned hereby irrevocably surrenders this Warrant
Certificate and all right, title and interest therein to Phoenix Information
Systems Corp. and directs that the shares of Common Stock deliverable upon the
<PAGE> 22
exercise of said Warrants be registered or placed in the name and at the address
specified below and delivered thereto.
Date:_________, 19__.
1/
----------------------------
Signature of Owner
------------------------------
(Street Address)
------------------------------
(City) (State) (Zip Code)
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
- ------------------------
1/ The signature must correspond with the name as written upon the face of
this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
3
<PAGE> 23
FORM OF ASSIGNMENT
For VALUE RECEIVED, the undersigned registered holder of this
Warrant Certificate hereby sells, assigns and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by this Warrant Certificate not being assigned
hereby) all of the right of the undersigned under this Warrant Certificate, with
respect to the number of Warrants set forth below:
<TABLE>
<CAPTION>
Social Security
Names of or other Identifying Number of
Assignees Address Number of Assignee(s) Warrants
- --------- ------- --------------------- --------
<S> <C> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint _______________ the
undersigned's attorney to make such transfer on the books of Phoenix Information
Systems Corp. maintained for the purpose, with full power of substitution.
Dated: ___________, 19__
------------------------------
- -------------------------
- -------------
(1) The signature must correspond with the name as written upon the face of
this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
4
<PAGE> 1
EXHIBIT X
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of December 7, 1995 (the
"Agreement"), by and among PHOENIX INFORMATION SYSTEMS CORP., a Delaware
corporation (the "Company"), S-C PHOENIX HOLDINGS, L.L.C., a limited liability
company organized under the laws of Delaware ("S-C") and QUANTUM INDUSTRIAL
PARTNERS LDC, a limited duration company organized under the laws of the Cayman
Islands ("Quantum," each of S-C and Quantum, together with the successors and
permitted assigns of each, a "Holder").
WHEREAS, the Company proposes to issue and deliver its warrant
certificates ("Warrant Certificates") evidencing 2,000,000 warrants (the
"Warrants") each to purchase one newly issued share of common stock, par value
$0.01 per share, of the Company ("Common Stock") in connection with that
certain Options Agreement, dated December 7, 1995, by and among the Company,
S-C and Quantum (the "Options Agreement").
NOW THEREFORE, in consideration of the foregoing and for the
purpose of defining the terms and provisions of the Warrants and the respective
rights and obligations thereunder of the Company and each Holder, the Company
and each Holder agree as follows:
1. Certain Definitions. The following terms, as used in
this Agreement, have the following meanings:
<PAGE> 2
(a) "Affiliate" means, with respect to S-C and Quantum,
(A)(a) any Person controlling, controlled by or under common control with S-C
or Quantum and (b) if (1) controlling S-C or Quantum, such Person has a forty
percent (40%) or more voting and beneficial ownership interest in S-C or
Quantum, (2) controlled by S-C or Quantum has a forty percent (40%) or more
voting and beneficial ownership interest in such Person and (3) under common
control with S-C or Quantum, the Person(s) having such common control have
forty percent (40%) or more voting and beneficial ownership interest in S-C or
Quantum and such Person, and (B) any Person for which George Soros d/b/a Soros
Fund Management or Chatterjee Fund Management Co. LP, a Delaware limited
partnership, is acting as investment manager or investment adviser, in each
case with investment discretion. For purposes of this definition, the term
"control," when used with respect to any Person, shall include the power to
exercise discretion over the investments of such Person, and the terms
"controlling" and "controlled" have corresponding meanings.
(b) "Business Day" means any day other than a Saturday,
Sunday or day on which banks in New York City are closed for general business.
(c) "Common Stock" has the meaning set forth in the
preamble.
(d) "Exercise Period" means the period beginning on the
second anniversary of the Acquisition Date and ending at
2
<PAGE> 3
5 p.m. New York City time on the fifth anniversary of the Acquisition Date.
(e) "Exercise Price" means an amount per share equal to
eighty-five percent (85%) of the Market Price (as defined hereafter). As used
herein, "Market Price" shall mean the average of the closing prices of the
Common Stock sales on all domestic exchanges on which the Common Stock may at
the time be listed, or, if there shall have been no sales on any such exchange
on any day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day the Common Stock shall not
be so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 3:30 p.m. New York City time, or if on any day the
Common Stock shall not be quoted in the NASDAQ System, the average of the high
and low bid and asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau, Incorporation or any
similar successor organization, in each such case averaged over the period of
10 consecutive Business Days immediately prior to through 20 Business Days
immediately following the Acquisition (as defined in the Options Agreement);
provided that if the Common Stock is listed on any domestic exchange the term
"Business Days" as used in this sentence shall mean business days on which such
exchange is open for trading. If at any time the Common Stock is not listed on
any domestic exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the Market Price shall
3
<PAGE> 4
be deemed to be the fair market value thereof as of the date of exercise,
determined by an independent appraiser selected by the Company and acceptable
to each Holder.
(f) "Expiration Date" for the Warrants means the last day
of the Exercise Period.
(g) "Holder" has the meaning set forth in the preamble.
(h) "Investor Representative" shall be [S-C Phoenix
Holdings, L.L.C., a Delaware limited liability company, or its successor in
interest, or the assigned representative of such Person (it being agreed that
at all times there shall be no more than one Investor Representative)].
(i) "Person" means any individual, corporation, limited
liability company, partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
(j) "Underlying Common Stock" means the shares of Common
Stock purchasable by each Holder upon the exercise of the Warrants.
(k) "Warrants" has the meaning set forth in the preamble.
(l) "Warrant Certificates" means the certificates
evidencing the Warrants.
4
<PAGE> 5
2. Issue of Warrants. The Warrant Certificates shall be
in registered form only and substantially in the form attached hereto as
Exhibit A, shall be dated the date on which signed by an authorized signatory
of the Company and may have such legends and endorsements typed, stamped or
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement and the Options Agreement. Warrant
Certificates evidencing 2,000,000 Warrants may be executed by any authorized
officer of the Company. Warrant Certificates evidencing all 2,000,000 Warrants
shall be delivered in the names of the Holders to the Investor Representative
at the closing of the Acquisition (as defined in the Options Agreement).
3. Exercise Price; Exercise of Warrants.
(a) Exercise Price. Each Warrant shall entitle
the Holder, subject to the provisions of this Agreement, to purchase one share
of Common Stock at a purchase price per share equal to the Exercise Price.
(b) Exercise of Warrants Generally.
(1) Exercise During Exercise Period.
The aggregate number of Warrants that may be exercised at any time during the
Exercise Period shall be 2,000,000. All Warrants not exercised during the
Exercise Period shall expire at 5 p.m. New York City time on the Expiration
Date.
(2) Liquidation Event. If the Company
is liquidated in accordance with the provisions of its Certificate
5
<PAGE> 6
of Incorporation, then the Warrants shall be deemed to have been exercised.
(3) Method of Exercise; Payment of
Exercise Price. In order to exercise any or all of the Warrants represented by
a Warrant Certificate, the Holder thereof must surrender the Warrant
Certificate to the Company for exercise, with the reverse side of the Warrant
Certificate duly executed, together with any required payment in full of the
Exercise Price for each share of Underlying Common Stock to which such Holder
is entitled, any such payment of the Exercise Price to be made by check or wire
transfer to an account designated by the Company. If a Holder elects to
exercise only a portion of the Warrants represented by the Warrant Certificate
or Certificates registered in its name, then the remaining portion of such
Warrants shall be returned to such Holder in the form of a new Warrant
Certificate. Upon surrender of a Warrant Certificate and the payment of the
Exercise Price in conformity with the foregoing provisions, the Company shall
promptly issue to the Holder of such Warrant Certificate share certificates
representing the Underlying Common Stock to which such Holder is entitled,
registered in the name of such Holder or the name or names of such Affiliates
of such Holder as may be directed in writing by such Holder, and shall deliver
such share certificates to the Person or Persons entitled to receive the same.
The Company shall issue such share certificates within five Business Days after
the payment of the Exercise Price of the Warrants by such
6
<PAGE> 7
Holder, but such shares shall be deemed issued and outstanding on the date the
Warrant is exercised and the Exercise Price is paid to the Company.
(c) Exercise by Surrender of Warrant; Exercise
with Shares of Common Stock. In addition to the method of exercise set forth
in Section 3(b)(3) above and in lieu of any cash payment required thereunder,
each Holder shall have the right at any time and from time to time to exercise
the Warrants in full or in part (i) by surrendering its Warrant Certificate in
the manner specified in Section 3(b)(3) in exchange for the number of shares of
Common Stock equal to the product of (x) the number of shares as to which the
Warrants are being exercised multiplied by (y) a fraction, the numerator of
which is the Market Price (as defined hereafter) of the Common Stock less the
Exercise Price and the denominator of which is such Market Price, or (ii) by
surrendering the Warrant Certificate in the manner specified in Section 3(b)(3)
above and making any required payment in whole or in part of the Exercise Price
for each share of Underlying Common Stock to which such Holder is entitled with
shares of Common Stock (valued at the Market Price).
4. Adjustments. The Exercise Price shall be subject to
adjustment as follows:
(a) In the event the Company shall issue
additional shares of Common Stock (or securities convertible into or
exchangeable for Common Stock) in a stock dividend, stock distribution or
subdivision paid with respect to Common Stock,
7
<PAGE> 8
or declare any dividend or other distribution payable with additional shares of
Common Stock (or securities convertible into or exchangeable for Common Stock)
with respect to Common Stock or effect a split or subdivision of the
outstanding shares of Common Stock, the Exercise Price shall, concurrently with
the effectiveness of such stock dividend, stock distribution or subdivision, or
the earlier declaration thereof, be proportionately decreased.
(b) In the event the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, the Exercise Price shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
(c) In the event of any consolidation or merger
of the Company with or into another corporation or the conveyance of all or
substantially all of the assets of the Company to another corporation or
entity, the Warrants shall thereafter be exercisable for the number of shares
of capital stock or other securities or property to which a holder of the
number of shares of Common Stock deliverable upon conversion hereof would have
been entitled upon such consolidation, merger or conveyance; and, in any such
case, appropriate adjustment shall be made in the application of the provisions
herein set forth with respect to the rights and interests of each Holder
thereafter, to the end that the provisions set forth herein (including
provisions with respect to adjustments in the Exercise Price) shall thereafter
8
<PAGE> 9
be applicable, as nearly as may be practicable, in relation to any shares of
stock or other property thereafter deliverable upon the exercise of Warrants.
At the request of a Holder, the resulting or surviving entity in any such
consolidation or merger, if other than the Company, shall acknowledge in
writing such Holder's rights hereunder.
5. Loss or Mutilation. Upon receipt by the Company of
evidence satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate and of indemnity
satisfactory to it, and (in the case of mutilation) upon surrender and
cancellation thereof, then, in the absence of notice to the Company that the
Warrants represented thereby have been acquired by a bona fide purchaser, the
Company shall deliver to the Holder of such Warrant Certificate, in exchange
for or in lieu of the lost, stolen, destroyed or mutilated Warrant Certificate,
a new Warrant Certificate of the same tenor and for a like aggregate number of
Warrants. Upon the issuance of any new Warrant Certificate under this Section
5, the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and other
expenses in connection herewith. Every new Warrant Certificate executed and
delivered pursuant to this Section 5 in lieu of any lost, stolen or destroyed
Warrant Certificate shall constitute a contractual obligation of the Company,
whether or not the allegedly lost, stolen or destroyed Warrant Certificate
shall be at any time enforceable by anyone, and shall be entitled
9
<PAGE> 10
to the benefit of this Agreement equally and proportionately with any and all
other Warrant Certificates duly executed and delivered hereunder. The
provisions of this Section 5 are exclusive and shall preclude (to the extent
lawful) all other rights or remedies with respect to the replacement of
mutilated, lost, stolen, or destroyed Warrant Certificates.
6. Reservation and Authorization of Common Stock. The
Company shall, at all times until the Warrants have been exercised or have
expired, reserve and keep available for issue upon the exercise of Warrants
such number of its authorized but unissued shares of Common Stock as is
sufficient for the purpose of permitting the exercise in full of all
outstanding Warrants.
7. Limitations on Transfer; Warrant Transfer Books. The
Warrants may be sold, transferred, pledged, assigned, hypothecated or otherwise
disposed of (collectively, "transferred") only to Affiliates of a Holders. The
Company shall cause to be kept at the principal executive office of the Company
a register in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide the registration of Warrant Certificates
and transfers or exchanges of Warrant Certificates as herein provided.
The Holder of a Warrant Certificate, by its acceptance
thereof, covenants and agrees that the Warrants are being acquired, and the
Underlying Common Stock to be purchased upon the exercise of this Warrant will
be acquired, as an investment and not with a view to the distribution thereof
and will not be
10
<PAGE> 11
sold or transferred except in accordance with the applicable provisions of the
Securities Act of 1933, as amended (the "Act") and the rules and regulations
promulgated thereunder, and that neither this Warrant nor any of the Underlying
Common Stock may be offered or sold except (i) pursuant to an effective
registration statement under the Act, (ii) to the extent applicable, pursuant
to Rule 144 under the Act (or any similar rule under the Act relating to the
disposition of securities), or (iii) pursuant to an exemption from registration
under the Act. Upon exercise of any Warrant, the Holder thereof shall deliver
to the Company a Certificate of Representation as set forth in the Options
Agreement.
The Warrant Certificates and, upon exercise of the Warrants,
in part or in whole, certificates representing the Underlying Common Stock
shall bear a legend substantially similar to the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except (i) pursuant to
an effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under the Act relating to the disposition of
securities), or (iii) pursuant to an exemption from
registration under the Act."
At the option of a Holder, Warrant Certificates may be
exchanged at such office upon payment of the charges hereinafter provided.
Whenever any Warrant Certificates are so surrendered for exchange, the Company
shall execute and deliver the Warrant
11
<PAGE> 12
Certificates that the Holder thereof is entitled to receive. All Warrant
Certificates issued upon any registration of transfer or exchange of Warrant
Certificates shall be the valid obligations of the Company, evidencing the same
obligations, and entitled to the same benefits under this Agreement, as the
Warrant Certificates surrendered for such registration of transfer or exchange.
Every Warrant Certificate surrendered for registration of
transfer or exchange shall (if so required by the Company) be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the
Company duly executed by the Holder thereof. No service charge shall be made
for any registration of transfer or exchange of Warrant Certificates. The
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer of Warrant Certificates.
8. No Voting or Dividend Rights. Prior to the exercise
of the Warrants, neither Holder, as a Holder of Warrant Certificates, shall be
entitled to any rights of a shareholder of the Company, including, without
limitation, the right to vote, to receive dividends or other distributions or
to exercise any preemptive right, but each Holder of Warrant Certificates shall
receive all notices sent to shareholders of the Company, including any notice
of meetings of shareholders, and shall have the right to attend or observe such
meetings.
12
<PAGE> 13
9. Termination. Notwithstanding anything in this
Agreement to the contrary, if a Holder materially breaches its obligations
under the Options Agreement with respect to the Call Option (as such term is
defined in the Option Agreement), this Agreement shall terminate upon such
breach with respect to the breaching Holder. In the event of termination as
provided herein, this Agreement, including all unexercised Warrants issued to
such breaching Holder, shall become void with respect to such Holder. Nothing
in this Section 9 shall be construed to limit any right or remedy of the
Company in the event of such breach.
10. Notices. Any notice, demand or delivery authorized
by this Agreement shall be in writing and shall be sufficiently given or made
upon receipt thereof, if made by personal delivery or facsimile transmission
(with confirmed receipt thereof), or four Business Days after mailed, if sent
by first-class mail, postage prepaid, addressed to the Investor Representative
or the Company, as the case may be, at their respective addresses below, or
such other address as shall have been furnished in accordance with this Section
10 to the party giving or making such notice, demand or delivery:
(a) If to the Company, to it at:
Phoenix Information Systems Corp.
100 Second Avenue South, Suite 100
St. Petersburg, Florida 33701
Attention: Robert P. Gordon, Chairman
Facsimile: 813-821-7565
13
<PAGE> 14
(b) If to the Holder, to the Investor
Representative at:
_________________________________
c/o The Chatterjee Group
888 Seventh Avenue, Suite 3000
New York, New York 10106
Attention: Mr. James Peet
Facsimile: 212-489-2005
With a copy to: Peter A. Hurwitz, Esq.
[With a Copy to:
Soros Fund Management
888 Seventh Avenue, Suite 3300
New York, New York 10106
Attention: Sean A. Warren, Esq.
Facsimile: 212-489-20056]
11. Applicable Law. This Agreement and each Warrant
Certificate issued hereunder shall be governed by, and construed in accordance
with, the internal laws of the State of New York, without regard to the
conflicts of law principles thereof. The Company and each Holder hereby submit
to the nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in New
York City for purposes of all legal proceedings arising out of or relating to
this Agreement and the transactions contemplated hereby. The Company and each
Holder irrevocably waive, to the fullest extent permitted by law, any objection
which they may now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
14
<PAGE> 15
12. Successors and Assigns. The provisions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Neither Holder may assign any
of its rights hereunder separate from a transfer of the Warrants in accordance
with Section 7 hereof. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
13. Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement in any number of separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
14. Captions and Headings. The captions and headings used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
15. Amendments and Waivers. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and each Holder.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each Holder, each future holder of the Warrants and the Company.
15
<PAGE> 16
16. Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provisions
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
16
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
PHOENIX INFORMATION SYSTEMS CORP.
By________________________________
Name:
Title:
S-C PHOENIX HOLDINGS, L.L.C.
By________________________________
Name:
Title:
QUANTUM INDUSTRIAL PARTNERS LDC
By________________________________
Name:
Title:
17
<PAGE> 18
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE
AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT
APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR ANY
SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION
OF SECURITIES), OR (iii) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT.
THIS WARRANT CERTIFICATE AND THE WARRANTS
REPRESENTED HEREBY ARE TRANSFERABLE ONLY
IN ACCORDANCE WITH THE PROVISIONS SET FORTH IN
THE WARRANT AGREEMENT REFERRED TO BELOW.
WARRANTS TO PURCHASE COMMON STOCK
OF PHOENIX INFORMATION SYSTEMS CORP.
No.___ 2,000,000 Warrants
This certifies that __________________________ is the owner of
the number of Warrants set forth above, each of which represents the right to
purchase from PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation (the
"Company"), the number of shares of Common Stock, par value $0.01 per share, of
the Company ("Common Stock") determined in accordance with the Warrant
Agreement referred to below at the purchase price set forth in the Warrant
Agreement (the "Exercise Price"), upon surrender hereof at the office of the
Company at 100 Second Avenue South, Suite 1100, St. Petersburg, Florida 33701
with the Exercise Subscription Form on the reverse hereof duly executed and
with payment in full (by bank check or wire transfer to an account designated
by the Company) of the purchase price for the shares as to which
<PAGE> 19
the Warrant(s) represented by this Warrant Certificate are exercised, all
subject to the terms and conditions hereof and of the Warrant Agreement
referred to below. The Warrants will expire at 5:00 p.m. New York City time on
the Expiration Date.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement, dated as of November __, 1995 (the "Warrant
Agreement"), among the Company and S-C Phoenix Holdings, L.L.C. and Quantum
Industrial Partners LDC, and is subject to the terms and provisions contained
therein, to all of which terms and provisions the holder of this Warrant
Certificate consents by acceptance hereof. The Warrant Agreement is hereby
incorporated herein by reference and made a part hereof. Reference is hereby
made to the Warrant Agreement for a full description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Company and the
holders of the Warrants. Capitalized defined terms used herein have the same
meanings as in the Warrant Agreement. Copies of the Warrant Agreement are on
file at the office of the Company and may be obtained by writing to the Company
at the following address:
100 Second Avenue South
Suite 1100
St. Petersburg, Florida 33701
The number of shares of the Common Stock of the Company purchasable upon the
exercise of each Warrant and the price per share are set forth in the Warrant
Agreement.
A-2
<PAGE> 20
All shares of Common Stock issuable by the Company upon the
exercise of Warrants and the payment of the Exercise Price therefor shall be
validly issued, fully paid and nonassessable. The Company shall not be
required, however, to pay any tax, withholding or other charge imposed in
connection with the issuance of any shares of Common Stock upon the exercise of
Warrants, and, in such case, the Company shall not be required to issue or
deliver any stock certificate until such tax, withholding or other charge has
been paid or it has been established to the Company's satisfaction that no tax,
withholding or other charge is due. This Warrant Certificate and all rights
hereunder are transferable, subject to the terms of the Warrant Agreement, by
the registered holder hereof, in whole or in part, upon surrender of this
Warrant Certificate duly endorsed, or accompanied by a written instrument of
transfer in form satisfactory to the Company duly executed by the registered
holder and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer, the Company will
issue and deliver to such holder a new Warrant Certificate or Certificates with
respect to any portion not so transferred.
This Warrant Certificate shall be void and all rights
represented hereby shall cease on the Expiration Date.
Dated:___________, 19__
A-3
<PAGE> 21
PHOENIX INFORMATION SYSTEMS CORP.
By___________________________
Name:
Title:
A-4
<PAGE> 22
FORM OF REVERSE OF WARRANT CERTIFICATE
EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: Phoenix Information Systems Corp.
The undersigned irrevocably exercises ____________ of the
Warrants evidenced by this Warrant Certificate for the purchase of shares of
Common Stock, par value $0.01 per share, of PHOENIX INFORMATION SYSTEMS CORP.
and has arranged to make payment of $___________ (such payment being made by
bank check or wire transfer to the account designated by Phoenix Information
Systems Corp.), all at the Exercise Price (as defined in the Warrant Agreement)
and on the terms and conditions specified in this Warrant Certificate and the
Warrant Agreement herein referred to. The undersigned has delivered to the
Company the Certificate of Representations as set forth in the Warrant
Agreement. The undersigned hereby irrevocably surrenders this Warrant
Certificate and all right, title and interest therein to Phoenix Information
Systems Corp. and directs that the shares of Common Stock deliverable
<PAGE> 23
upon the exercise of said Warrants be registered or placed in the name and at
the address specified below and delivered thereto.
Date:_________, 19__.
____________________________1/
Signature of Owner
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
________________________
1/ The signature must correspond with the name as written upon the face of
this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
3
<PAGE> 24
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
4
<PAGE> 25
FORM OF ASSIGNMENT
For VALUE RECEIVED, the undersigned registered holder of this
Warrant Certificate hereby sells, assigns and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants
constituting a part of the Warrants evidenced by this Warrant Certificate not
being assigned hereby) all of the right of the undersigned under this Warrant
Certificate, with respect to the number of Warrants set forth below:
<TABLE>
<CAPTION>
Social Security
Names of or other Identifying Number of
Assignees Address Number of Assignee(s) Warrants
- --------- ------- --------------------- --------
<S> <C> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint _______________ the
undersigned's attorney to make such transfer on the books of Phoenix
Information Systems Corp. maintained for the purpose, with full power of
substitution.
Dated: ___________, 19__
______________________________
_________________________
_____________
(1) The signature must correspond with the name as written upon the face
of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
5
<PAGE> 1
EXHIBIT Y
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of December 7, 1995
(the "Agreement") by and among PHOENIX INFORMATION SYSTEMS CORP., a Delaware
corporation (the "Company"), and S-C PHOENIX HOLDING, L.L.C., a Delaware
limited liability company ("S-C") and QUANTUM INDUSTRIAL PARTNERS, LDC, a
Cayman Islands limited duration company ("Quantum") (each of S-C and Quantum,
together with its successors and permitted assigns, a "Rights Holder" and,
collectively, the "Rights Holders").
This Agreement is made pursuant to (a) the Options Agreement
dated the date hereof between the Company and the Rights Holders relating to
the grant by the Rights Holders to Phoenix of an option (the "Call Option") to
acquire a fifty percent (50%) interest in American Aviation Limited ("AA") and
the grant by Phoenix to the Rights Holders an option to sell to Phoenix up to
one hundred percent of their interest in AA and (b) the Warrant Agreements
dated as of the date hereof between the Company and the Rights Holders relating
to the purchase by the Rights Holder of warrants (the "Warrants") to purchase
4,000,000 shares of common stock of the Company ("Common Shares"). In order to
induce the Rights Holders to grant the Company the Call Option and to purchase
the Warrants, the Company has agreed to provide registration rights with
respect to the Common Shares issuable upon exercise of the Warrants, as set
forth herein.
<PAGE> 2
2
Accordingly, the parties hereby agree as follows:
1. Definitions. For the purposes of this Agreement:
(a) The terms, "register," "registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities
Act of 1933, as amended (the "1933 Act"), and the declaration or ordering of
effectiveness of such registration statement or document; and
(b) The term "Registrable Securities" means (i)
the Common Shares issued to either Rights Holder upon exercise of the Warrants
and (ii) any other Common Shares issued by the Company that are acquired by a
Rights Holder by purchase or transfer or issued to a Rights Holder by the
Company upon the conversion or exercise of any warrant, right or other
security, whether purchased, acquired by transfer or issued as a dividend or
other distribution with respect to, in exchange for or in replacement of any
Common Shares or other securities of the Company.
2. Registration Rights.
2.1 Registration upon Demand. If, for any
reason, any portion of the Registrable Securities has not been included in any
registration of the Company's shares of common stock effected pursuant to that
certain Registration Rights Agreement (the "Prior Rights Agreement") dated as
of December 9, 1994 by and between the Company and S-C Phoenix
<PAGE> 3
3
Partners, and if, for any reason, the unregistered portion of the Registrable
Securities of one or both Rights Holders is not eligible for registration
pursuant to the terms of the Prior Rights Agreement or the registration rights
granted by the Company under the Prior Rights Agreement are otherwise
unavailable to a Rights Holder, then, at any time after the date hereof, upon
the written request of S-C or Quantum or their respective successors in
interest, or such persons' or their designated representative (the "Investor
Representative") (it being agreed that at all times there shall be no more than
one Investor Representative for the Rights Holders) requesting that the Company
effect the registration under the 1933 Act of all or part of the Registrable
Securities (provided that any such part shall be not less than fifteen (15%)
percent of the Common Shares issued to a Rights Holder upon exercise of the
Warrants), which request shall specify the intended method of distribution
thereof, the Company shall use its best efforts to so register (a "Demand
Registration"), as expeditiously as may be practicable, the Registrable
Securities that the Rights Holders have requested the Company to register;
provided, however, that the Rights Holders, together, shall have the right to
make only one such Demand Registration hereunder. The parties will cooperate
to coordinate requests made under this Agreement for registration of the
Registrable Securities with registrations effected under the Prior Rights
Agreement.
<PAGE> 4
4
2.2 "Piggy-back" Registrations. If, at any time
after the date hereof, the Company proposes to register any securities under
the 1933 Act in connection with any offering of its securities, whether or not
for its own account, the Company shall furnish prompt written notice to each
Rights Holder of the Company's intention to effect such registration and the
intended method of distribution in connection therewith. Upon the written
request of a Rights Holder, made to the Company within 30 days after the
receipt of such notice, the Company shall include in such registration the
requested number of such Rights Holder's Registrable Securities (a "Piggy-back
Registration").
2.3 Obligations of the Company. Whenever the
Company is required under this Section 2 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the Securities
and Exchange Commission (the "SEC") a registration statement with respect to
such Registrable Securities and use its best efforts to cause such registration
statement to become effective, and keep such registration statement effective
for up to 60 days;
(b) Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions
<PAGE> 5
5
of applicable law with respect to the disposition of all securities covered by
such registration statement;
(c) Except in connection with an
underwritten offering, furnish to each Rights Holder such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of applicable law, and such other documents as it may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by each Rights Holder;
(d) Use its best efforts to register and
qualify the securities covered by such registration statement under such other
securities laws of such states as shall be reasonably requested by a Rights
Holder or the underwriters, in the case of an underwritten offering; provided
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such jurisdictions;
(e) In the event of any underwritten
public offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. The managing underwriter shall be selected by either or, if
applicable, both Rights Holders in the case of a demand of registration, which
managing underwriter shall be reasonably satisfactory to the Company. Each
Rights Holder also shall
<PAGE> 6
6
enter into and perform its obligations under such an agreement; and
(f) Notify each Rights Holder, at any
time when a prospectus relating thereto is required to be delivered under
applicable law, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
2.4 Furnish Information. It shall be a condition
precedent to the obligation of the Company to take any action pursuant to this
Section 2 with respect to a Rights Holder that such Rights Holder shall furnish
to the Company such information regarding such Rights Holder, the Registrable
Securities held by it and the intended method of disposition of such
Registrable Securities as shall be required to effect the registration of the
Registrable Securities.
2.5 Expenses of Registration. With respect to a
Demand Registration or Piggy-back Registration, the Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations made
pursuant to Section 2.1 or Section 2.2, as the case may be, including (without
limitation) all registration, filing
<PAGE> 7
7
and qualification fees, printers' and accounting fees, fees and disbursements
of counsel for the Company and each Rights Holder, but excluding underwriting
discounts and commissions relating to Registrable Securities.
2.6 Underwriting Requirements. In connection
with any offering involving an underwriting of Common Shares in which the
Rights Holder has "piggy-back" rights, the Company shall not be required under
Section 2.3 to include any of the securities of a Rights Holder in the
registration of the Securities to be included in such underwriting unless such
Rights Holder accepts the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it, and then only in such quantity as
the underwriters determine in their reasonable discretion will not jeopardize
the success of the offering by the Company. If the total amount of securities,
including Registrable Securities requested by a Rights Holder and any other
shareholder to be included in such offering, exceeds the number of securities
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only such number of Registrable Securities as, together with the
securities, if any, being registered by all other shareholders, including
Robert P. Gordon ("Gordon") and the other holders of registration rights with
respect to securities of the Company on the date hereof (the "Other Rights
Holders"), the underwriters determine in their
<PAGE> 8
8
reasonable discretion will not jeopardize the success of the offering. The
securities of all other shareholders (other than Gordon and the Other Rights
Holders) shall be reduced (or eliminated) in order to satisfy the reduction
required by the underwriters before any Registrable Securities of a Rights
Holder are reduced (or eliminated). For so long as a Rights Holder has rights
pursuant to Sections 2.1 and 2.2 hereof, if the Company grants to any person
any rights to have their securities included in any registration statement to
be filed by the Company, such rights shall be subordinate to the rights granted
to each Rights Holder herein.
2.7 Indemnification. In the event any
Registrable Securities are included in a registration statement under this
Section 2:
(a) To the extent permitted by law, the
Company shall indemnify and hold harmless each Rights Holder, any underwriter
(as defined in the 1933 Act or other applicable law) for a Rights Holder, each
person, if any, who controls a Rights Holder or underwriter within the meaning
of the 1933 Act or the United States Securities Exchange Act of 1934, as
amended (the "1934 Act") or other applicable law, and any officer, director or
agent thereof, against any and all losses, claims, damages or liabilities
(joint or several) to which any of the foregoing persons may become subject
under the 1933 Act or other applicable law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon
<PAGE> 9
9
any of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary to make the
statements therein not misleading or (iii) any violation or alleged violation
by the Company of the 1933 Act or other applicable law, or any rule or
regulation promulgated under the 1933 Act or other applicable law; and the
Company shall pay to each Rights Holder, underwriter or controlling person any
reasonable legal or other expenses incurred by it in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided that the indemnity agreement contained in this Section 2.7(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon (y) a Violation
that occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by the
applicable Rights Holder or such underwriter or
<PAGE> 10
10
controlling person or (z) the use by any party, after receipt of a notice from
the Company pursuant to Section 2.3(f) above, of the prospectus referred to in
such notice.
(b) To the extent permitted by law, each
Rights Holder shall indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the 1933 Act or
other applicable law, any underwriter and any controlling person of any such
underwriter, against any losses, claims, damages or liabilities (joint or
several) to which any of the foregoing persons may become subject under the
1933 Act or other applicable law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon (y)
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Rights Holder expressly for use in connection with such
registration, or (z) the use by such Rights Holder, after receipt of a notice
from the Company pursuant to Section 2.3(f) above, of the prospectus referred
to in such notice; and such Rights Holder shall pay any reasonable legal or
other expenses incurred by any person to be indemnified pursuant to this
Section 2.7(b) in connection with investigating or defending any such loss,
claim, damage, liability or action; provided that the indemnity agreement
contained in this Section 2.7(b) shall
<PAGE> 11
11
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Rights Holders, which consent shall not be unreasonably withheld; and provided,
further, that in no event shall any indemnity by a Rights Holder under this
Section 2.7(b) exceed the proceeds from the offering received by such Rights
Holder.
(c) Promptly after receipt by an
indemnified party under this Section 2.7 of notice of the commencement of any
action (including any governmental action), such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party under
this Section 2.7, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in and, to the extent the indemnifying party so desires, to assume
the defense thereof; provided that an indemnified party (together with all
other indemnified parties that may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of
<PAGE> 12
12
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.7, but the omission so to deliver
written notice to the indemnifying party shall not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
2.7.
(d) The obligations of the Company and
the Rights Holders under this Section 2.7 shall survive the completion of any
offering of Registrable Securities under a registration statement pursuant to
this Section 2 or otherwise.
2.8 "Market Stand-off" Agreement. Each Rights
Holder hereby agrees that, during the period specified by the Company and the
managing underwriter of Common Shares or other securities of the Company
following the effective date of a registration statement of the Company, such
Rights Holder shall not, to the extent reasonably requested by the Company and
such underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase
or otherwise transfer or dispose of any securities of the Company held by such
the Rights Holder at any time during such period, except any Common Shares
included in such registration; provided, that private transfers of such
securities shall not be restricted during such period; and provided further
that such period shall not
<PAGE> 13
13
extend more than 15 days prior to or beyond 120 days after the closing of the
offering. In order to enforce the foregoing covenant, the Company may impose
stop transfer instructions with respect to the Registrable Securities of a
Rights Holder (and the shares or securities of every other person subject to
the foregoing restriction) until the end of such period.
3. Miscellaneous.
3.1 Successors and Assigns. The provisions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties hereto; provided, however, that
the Company shall not assign any of its obligations hereunder without the prior
written consent of each Rights Holder and that neither Rights Holder may assign
any of its rights hereunder except to transferees to which it has transferred
any Warrants or shares of Common Stock, in accordance with the Options
Agreement and the Warrant Agreements. Nothing in this Agreement, express or
implied, is intended to confer upon any party 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, except as
expressly provided herein.
3.2 Governing Law. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York, without regard to the conflicts of law principles thereof.
<PAGE> 14
14
3.3 Counterparts. This Agreement may be executed
by one or more of the parties to this Agreement on separate counterparts, each
of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
3.4 Captions and Headings. The captions and
headings used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
3.5 Notices. Any notice, demand or delivery
authorized by this Agreement shall be in writing and shall be sufficiently
given or made upon receipt thereof, if made by personal delivery or facsimile
transmission (with confirmed receipt thereof), or four business days after
mailed, if sent by first-class mail, postage prepaid, addressed, to the
Investor Representative or the Company, as the case may be, at their respective
addresses below, or such other address as shall have been furnished to the
party giving or making such notice, demand or delivery:
(a) If to the Company, to it at:
Phoenix Information Systems Corp.
100 Second Avenue South, Suite 100
St. Petersburg, Florida 33701
Attention: Robert P. Gordon, Chairman
Facsimile: 813-821-7565
[(b) If to the Rights Holders, to the
Investor Representative at:
S-C Phoenix Holdings, L.L.C.
c/o The Chatterjee Group
888 Seventh Avenue, Suite 3300
New York, New York 10106
<PAGE> 15
15
Attention: Peter A. Hurwitz, Esq.
Facsimile: 212-489-2005
with a copy to:
Soros Fund Management
888 Seventh Avenue, Suite 3300
New York, New York 10106
Attention: Sean A. Warren, Esq.
Facsimile: 212-489-2005
<PAGE> 16
16
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first above written.
S-C PHOENIX HOLDINGS, L.L.C.,
By
-------------------------
Name:
Title:
QUANTUM INDUSTRIAL PARTNERS, LDC
BY
-------------------------
Name:
Title:
PHOENIX INFORMATION SYSTEMS CORP.
By
------------------------
Name:
Title:
<PAGE> 1
EXHIBIT Z
FIRST AMENDMENT
TO THE
REGISTRATION RIGHTS AGREEMENT
This FIRST AMENDMENT TO THE REGISTRATION RIGHTS AGREEMENT
("First Amendment") is made as of December 7, 1995 by and between PHOENIX
INFORMATION SYSTEMS CORP. (the "Company") and S-C PHOENIX PARTNERS ("S-C").
WHEREAS, the Company and S-C are parties to a certain
Registration Rights Agreement dated December 9, 1994 (the "Registration Rights
Agreement"); and
WHEREAS, the Company and S-C desire with this document to amend
the Registration Rights Agreement to clarify its scope;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledge, the Company and S-C
agree as follows:
Section 1.
Amendment to Registration Rights Agreement
The Registration Rights Agreement is hereby amended as follows:
1.01. Clause (iii) of Section 1(b) of the Registration Rights
Agreement is hereby deleted in its entirety and replaced with the following:
(iii) any other Common Shares issued by the Company
that are acquired by the Rights Holder or its
affiliates, including S-C Phoenix Holdings, L.L.C. and
Quantum Industrial Partners LDC, by purchase or
transfer or issued by the Company to the Rights Holder
or such affiliates upon the conversion or exercise of
any warrant, right
<PAGE> 2
2
or other security, whether purchased, acquired by
transfer or issued as a dividend or other distribution
with respect to, in exchange for or in replacement of
any Common Shares or other securities of the Company.
Section 2.
Ratification of the Registration Rights Agreement.
2.01. Nothing contained in this First Amendment shall
constitute or be deemed to constitute any limitation on the validity or
enforceability of the Registration Rights Agreement.
2.02. Except as expressly modified by this First Amendment, all
of the terms and conditions of the Registration Rights Agreement shall remain in
full force and effect in accordance with their terms.
Section 3.
Miscellaneous.
3.01. This First Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
<PAGE> 3
3
IN WITNESS WHEREOF, the parties have caused this First
Amendment to be duly executed as of the date first above written.
S-C PHOENIX PARTNERS
By S-C PHOENIX HOLDINGS, L.L.C.,
a General Partner
By______________________________
Name:
Title:
PHOENIX INFORMATION SYSTEMS CORP.
By______________________________
Name:
Title:
