<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 7)*
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)
February 12, 1996
(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 76 Pages
Exhibit Index: 17
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 2 OF 76 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 21,844,999
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 21,844,999
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
21,844,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
13 Percent of Class Represented By Amount in Row (11)
42.27%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 3 OF 76 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 0
Shares
Beneficially 8 Shared Voting Power
Owned By 21,844,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
21,844,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
21,844,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
13 Percent of Class Represented By Amount in Row (11)
42.27%
14 Type of Reporting Person*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 4 OF 76 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 0
Shares
Beneficially 8 Shared Voting Power
Owned By 21,844,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
21,844,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
21,844,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
13 Percent of Class Represented By Amount in Row (11)
42.27%
14 Type of Reporting Person*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 5
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 5 OF 76 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 21,844,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
21,844,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
21,844,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
13 Percent of Class Represented By Amount in Row (11)
42.27%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 6
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 6 OF 76 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 21,844,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
21,844,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
21,844,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
13 Percent of Class Represented By Amount in Row (11)
42.27%
14 Type of Reporting Person*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 7
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 7 OF 76 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 21,844,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
21,844,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
21,844,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
13 Percent of Class Represented By Amount in Row (11)
42.27%
14 Type of Reporting Person*
IA; IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 8
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 8 OF 76 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 21,844,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
21,844,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
21,844,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
13 Percent of Class Represented By Amount in Row (11)
42.27%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 9
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 9 OF 76 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 21,844,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
21,844,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
21,844,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
13 Percent of Class Represented By Amount in Row (11)
42.27%
14 Type of Reporting Person*
IA; PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 10
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 10 OF 76 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 21,844,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
21,844,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
21,844,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
13 Percent of Class Represented By Amount in Row (11)
42.27%
14 Type of Reporting Person*
IA; IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 11
Page 11 of 76 Pages
This Amendment No. 7 to Schedule 13D relates to the shares of
Common Stock, $.01 par value (the "Shares"), of Phoenix Information Systems
Corp. (the "Issuer") and amends the initial statement on Schedule 13D dated
December 16, 1994 and all prior amendments thereto (collectively, the "Initial
Statement"). This Amendment No. 7 is being filed to report the acquisition of
300,000 additional Shares as a result of the decrease in the conversion price
of the $1,200,000 Tranche D Note (as previously described in Amendment No. 4),
the acquisition of warrants to purchase 140,000 shares pursuant to the August
Letter Agreement as a result of the occurrence of a condition precedent
thereto, the receipt of a warrant to purchase an additional 345,000 Shares as a
result of the acquisition of another Tranche D Note in the amount of $1,150,000
(the "$1,150,000 Tranche D Note"), and the purchase and conversion of the
$1,150,000 Tranche D Note into 1,150,000 Shares. Capitalized terms used herein
but not defined herein shall have the meanings assigned to them in the Initial
Statement. The information set forth in the Initial Statement is amended as
set forth herein.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
On 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 out of the working capital or personal funds of its partners.
As of February 12, 1996, pursuant to the terms of the August Letter Agreement
and a subsequent agreement executed as of the date thereof (the "Additional
Warrant Agreement"), a copy of which is attached as Exhibit AA hereto, as well
as a letter agreement executed concurrently with the Additional Warrant
Agreement (the "Additional Warrant Letter Agreement") a copy of which is
attached as Exhibit AB hereto, for no additional consideration, Phoenix
Partners received the 140,000 Additional Warrants (as described in the August
Letter Agreement).
On 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 thereto, 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, using
the working capital or personal funds of its partners. Concurrently therewith,
Phoenix Partners converted the $1,200,000 Tranche D Note into 1,200,000 Shares
at a $1.00 per Share conversion price. Subsequently, as of February 12, 1996,
the conversion price of the $1,200,000 Tranche D Note decreased to $0.80 per
Share; therefore, for no additional consideration, Phoenix Partners received
300,000 additional Shares pursuant to the terms of the September Letter
Agreement.
On February 12, 1996, Phoenix Partners and the Issuer entered
into an agreement (the "February Warrant Agreement"), a copy of which is
attached as Exhibit AC hereto and the terms of which are more fully described
in Item 4 hereof, which modified the Note Purchase Agreement and certain other
agreements related thereto. Pursuant to the February Warrant Agreement,
Phoenix Partners, among other things, purchased from the Issuer the $1,150,000
Tranche D Note, using the working capital or personal funds of its partners.
Concurrently therewith, Phoenix Partners converted the $1,150,000 Tranche D
Note for 1,150,000 Shares at a $1.00 per Share conversion price. In addition,
pursuant to the February Warrant Agreement, on February 12, 1996, Phoenix
Partners and the Issuer entered into a letter agreement (the "February Letter
Agreement"), a copy of which is attached as Exhibit AD hereto and the terms of
which are more fully described in Item 4 hereof, whereby Phoenix Partners
received
<PAGE> 12
Page 12 of 76 Pages
a warrant to purchase an additional 345,000 Shares, for no additional
consideration, in exchange for the acquisition of the $1,150,000 Tranche D
Note.
ITEM 4. PURPOSE OF TRANSACTION.
Phoenix Partners entered into the August Letter Agreement and
the September Letter Agreement for investment purposes and pursuant to the
terms of the Note Purchase 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 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. This
provision in the August Letter Agreement was subsequently modified in the
September Letter Agreement whereby the Additional Warrants would only be issued
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 on or
before January 15, 1996. On February 12, 1996, Phoenix Partners and the Issuer
agreed that this condition had not been met in full by January 15, 1996;
therefore, pursuant to the terms of the Additional Warrant Agreement and the
Additional Warrant Letter Agreement, Phoenix Partners received the 140,000
Additional Warrants exercisable at a price of $3.23 per Share.
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 $1,200,000 Tranche D Note into 1,200,000
Shares. A copy of the form of the $1,200,000 Tranche D Note is attached as
Exhibit T to Amendment No. 4 to the Initial Statement. The $1,200,000 Tranche
D Note was converted into 1,200,000 Shares at a conversion price of $1.00 per
Share. 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 been deemed to have occurred at a lower price,
with an absolute minimum conversion price of $0.60 per Share. Upon any deemed
change in the conversion price in the $1,200,000 Tranche D Note purchased and
converted on September 15, 1995, the Issuer would issue to Phoenix Partners
certificates representing such additional Shares. As of January 15, 1996, the
parties had not agreed as to whether the operational targets were met in full.
On February 12, 1996, the parties agreed operational targets were not met in
full by January 15, 1996; therefore, Phoenix Partners and the Issuer entered
into the Additional Warrant Letter Agreement pursuant to which the conversion
price of the $1,200,000 Tranche D Note decreased to $0.80 and thus, as of
February 12, 1996, Phoenix Partners received an additional 300,000 Shares.
As of February 12, 1996, Phoenix Partners and the Issuer
entered into the February Warrant Agreement. Pursuant to the February Warrant
Agreement, Phoenix Partners purchased the $1,150,000 Tranche D Note and
converted the $1,150,000 Tranche D Note into 1,150,000 Shares. A copy of the
form of the $1,150,000 Tranche D Note is attached as Exhibit AE hereto. The
$1,150,000 Tranche D Note was converted into Shares at a conversion price of
$1.00 per Share, resulting in the receipt by Phoenix Partners of 1,150,000
Shares. However, pursuant to the terms of the February Letter Agreement, the
Issuer agreed that in the event the System is not Fully Operational (as defined
in the February Letter Agreement) on or before each of the dates stated
therein, the Conversion Price (as defined in the February Warrant Agreement)
shall be adjusted according to the amounts set forth in the terms of the
$1,150,000 Tranche D Note so that the conversion will have deemed to have
occurred at the lower price. Upon any deemed change in the conversion price in
the $1,150,000 Tranche D Note purchased and converted on February 12, 1996, the
Issuer will issue to Phoenix Partners certificates representing such additional
Shares. In consideration of the acquisition of the $1,150,000 Tranche D
<PAGE> 13
Page 13 of 76 Pages
Note, Phoenix Partners received from the Issuer a warrant to purchase 345,000
Shares for a purchase price of $3.00 per share.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The aggregate number of Shares of which each of the
Reporting Persons may be deemed a beneficial owner is 21,844,999 (approximately
42.27% of the total number of Shares which would be outstanding assuming the
exercise or conversion by Phoenix Partners of all of the convertible securities
that it holds). This number consists of (i) 14,259,999 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, (v) 345,000 Shares
issuable upon exercise of the warrant issued to Phoenix Partners pursuant to
the February Warrant Agreement and (vi) 140,000 Shares issuable upon conversion
of the warrants issued pursuant to the Additional Warrant Agreement.
(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 February 7, 1996 (the date of the most recent filing
on Schedule 13D).
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS IN RELATIONSHIP WITH
RESPECT TO SECURITIES OF THE ISSUER.
Except as set forth above in Item 4 and Item 5 hereto and as
described in previous filings, 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).
(d) 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).
<PAGE> 14
Page 14 of 76 Pages
(e) 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).
(f) 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).
(g) 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).
(h) 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).
(aa) Additional Warrant Agreement dated February 12, 1996
between S-C Phoenix Partners and Phoenix Information Systems Corp.
(ab) Additional Letter Agreement dated February 12, 1996
between S-C Phoenix Partners and Phoenix Information Systems Corp.
(ac) Warrant Agreement dated February 12, 1996 between S-C
Phoenix Partners and Phoenix Information Systems Corp.
(ad) Letter Agreement dated February 12, 1996 between S-C
Phoenix Partners and Phoenix Information Systems Corp.
(ae) $1,150,000 Tranche D Note purchased from Phoenix
Information Systems Corp. by S-C Phoenix Partners on February 12, 1996.
<PAGE> 15
PAGE 15 of 76 PAGES
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: February 16, 1996 S-C PHOENIX PARTNERS
By: S-C Phoenix Holdings, L.L.C.
By: /s/ Sean C. Warren
----------------------------------
Sean C. Warren
Manager
Date: February 16, 1996 QUANTUM INDUSTRIAL PARTNERS LDC
By: /s/ Sean C. Warren
---------------------------------------
Sean C. Warren
Attorney-in-Fact
Date: February 16, 1996 QIH MANAGEMENT INVESTOR, L.P.
By: QIH MANAGEMENT, INC., general partner
By: /s/ Sean C. Warren
----------------------------------
Sean C. Warren
Vice President
Date: February 16, 1996 QIH MANAGEMENT, INC.
By: /s/ Sean C. Warren
---------------------------------------
Sean C. Warren
Vice President
Date: February 16, 1996 S-C PHOENIX HOLDINGS, L.L.C.
By: /s/ Sean C. Warren
---------------------------------------
Sean C. Warren
Manager
<PAGE> 16
PAGE 16 OF 76 PAGES
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: February 16, 1996 GEORGE SOROS
By: /s/ Sean C. Warren
-------------------------------
Sean C. Warren
Attorney-in-Fact
Date: February 16, 1996 WINSTON PARTNERS, L.P.
By: /s/ Peter A. Hurwitz
-------------------------------
Peter A. Hurwitz
Attorney-in-Fact
Date: February 16, 1996 CHATTERJEE FUND MANAGEMENT, L.P.
By: /s/ Peter A. Hurwitz
-------------------------------
Peter A. Hurwitz
Attorney-in-Fact
Date: February 16, 1996 PURNENDU CHATTERJEE
By: /s/ Peter A. Hurwitz
-------------------------------
Peter A. Hurwitz
Attorney-in-Fact
<PAGE> 17
PAGE 17 of 76 PAGES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
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) . . . . . . . . . . . . . . .
D. 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) . . . . .
E. 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F. 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
G. 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
H. 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) . . . . .
AA. Additional Warrant Agreement dated February 12, 1996 between
S-C Phoenix Partners and Phoenix Information Systems Corp. . . . . . . . . . . 19
</TABLE>
<PAGE> 18
PAGE 18 OF 76 PAGES
<TABLE>
<S> <C>
AB. Additional Letter Agreement dated February 12, 1996 between
S-C Phoenix Partners and Phoenix Information Systems Corp. . . . . . . . . . . 42
AC. Warrant Agreement dated February 12, 1996 between S-C Phoenix
Partners and Phoenix Information Systems Corp. . . . . . . . . . . . . . . . . 44
AD. Letter Agreement dated February 12, 1996 between S-C Phoenix
Partners and Phoenix Information Systems Corp. . . . . . . . . . . . . . . . . 68
AE. $1,150,000 Tranche D Note purchased from Phoenix Information
Systems Corp. by S-C Phoenix Partners on February 12, 1996. . . . . . . . . . 72
</TABLE>
<PAGE> 1
PAGE 19 OF 76 PAGES
EXHIBIT AA
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of February 12, 1996 (the
"Additional Warrant Agreement"), by and between PHOENIX INFORMATION SYSTEMS
CORP., a Delaware corporation (the "Company") S-C PHOENIX PARTNERS, a New York
general partnership ("S-C" and, together with its successors and permitted
assigns, the "Holder").
WHEREAS, the Company proposes to issue and deliver its warrant
certificates ("Warrant Certificates") evidencing 140,000 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 Convertible Note Purchase Agreement, dated as of December 9, 1994, by
and between the Company and S-C (the "Note Purchase Agreement") and that
certain letter agreement referencing the "Additional Warrants", dated the date
hereof, by and between the Company and S-C.
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 the Holder, the Company
and the Holder agree as follows:
1. Certain Definitions. The following terms, as used in
this Additional Warrant Agreement, have the following meanings:
<PAGE> 2
PAGE 20 OF 76 PAGES
(a) "Affiliate" means, with respect to S-C, (A)(a) any
Person controlling, controlled by or under common control with S-C and (b) if
(1) controlling S-C, such Person has a forty percent (40%) or more voting and
beneficial ownership interest in S-C, (2) controlled by S-C has a forty percent
(40%) or more voting and beneficial ownership interest in such Person and (3)
under common control with S-C, the Person(s) having such common control have
forty percent (40%) or more voting and beneficial ownership interest in S-C 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
date hereof and ending at 5 p.m. New York City time on the third anniversary of
the date on which the Company shall have satisfied the conditions contained in
clauses (a) and (b) of the
2
<PAGE> 3
PAGE 21 OF 76 PAGES
definition of "Tranche E Target Date" set forth in the Note Purchase Agreement.
(e) "Exercise Price" means $3.23 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 preamble.
(h) "Investor Representative" shall be S-C Phoenix
Holdings, L.L.C., a Delaware limited liability company and a ganeral partner of
S-C, 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 the 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.
3
<PAGE> 4
Page 22 of 76 Pages
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 Additional Warrant Agreement and the Options
Agreement. Warrant Certificates evidencing 140,000 Warrants may be executed by
any authorized officer of the Company. Warrant Certificates evidencing all
140,000 Warrants shall be delivered in the name of the Holder to the Investor
Representative on the date hereof.
3. Exercise Price; Exercise of Warrants.
(a) Exercise Price. Each Warrant shall entitle
the Holder, subject to the provisions of this Additional Warrant 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 140,000. 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 of
Incorporation, then the Warrants shall be deemed to have been exercised.
<PAGE> 5
Page 23 of 76 Pages
(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 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 the 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 the 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 the Warrants shall be
returned to the 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 share certificates representing the Underlying Common Stock to which
the Holder is entitled, registered in the name of the Holder or the name or
names of such Affiliates of the Holder as may be directed in writing by the
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 the 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.
<PAGE> 6
PAGE 24 OF 76 PAGES
(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,
the 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 the 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 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
<PAGE> 7
PAGE 25 OF 76 PAGES
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 30
consecutive Business Days immediately prior to the date of exercise; 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 Holder.
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, 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, and the number of Underlying Common
<PAGE> 8
PAGE 26 OF 76 PAGES
Stock shall be proportionately adjusted so that, to avoid dilution of the
Holder's position, the Holder shall thereafter be entitled to receive at such
adjusted price an additional number of shares of the Company's Common Stock
which such Holder would have owned or would have been entitled to receive upon
or by reason of any of the events described above, had the Warrants been
exercised immediately prior to the happening of such event.
(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 and the number of Underlying Common Stock shall be
proportionately adjusted so that the Holder of any Warrant exercised after such
date shall be entitled to receive, upon payment of the same aggregate amount as
would have been payable before such date, the aggregate number of shares of
Common Stock which the Holder would have owned upon such exercise and been
entitled to receive, if such Warrant had been exercised immediately prior to
the happening of such combination or consolidation.
(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
<PAGE> 9
PAGE 27 OF 76 PAGES
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 the Holder
thereafter, to the end 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 the Holder, the resulting or surviving entity in any such
consolidation or merger, if other than the Company, shall acknowledge in
writing the 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, 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
<PAGE> 10
PAGE 28 OF 76 PAGES
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 to the benefit of this
Additional Warrant 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 the 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.
<PAGE> 11
PAGE 29 OF 76 PAGES
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 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.
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 the Holder, Warrant Certificates may be
exchanged at such office upon payment of the charges
<PAGE> 12
PAGE 30 OF 76 PAGES
hereinafter provided. Whenever any Warrant Certificates are so surrendered for
exchange, the Company shall execute and deliver the Warrant Certificates that
the Holder 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 Additional Warrant 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. 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, the Holder, as a Holder of Warrant Certificates, shall not 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.
<PAGE> 13
PAGE 31 OF 76 PAGES
9. Notices. Any notice, demand or delivery authorized
by this Additional Warrant 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
(b) If to the Holder, to the Investor
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: Mr. James Peet
Facsimile: 212-489-2005
With a copy to: Peter A. Hurwitz, Esq.
With an additional copy to:
Soros Fund Management
888 Seventh Avenue, Suite 3300
New York, New York 10106
Attention: Sean A. Warren, Esq.
Facsimile: 212-489-2005
10. Applicable Law. This Additional Warrant Agreement
and each Warrant Certificate issued hereunder shall be governed by, and
construed in accordance with, the internal laws of the
<PAGE> 14
PAGE 32 OF 76 PAGES
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 Additional Warrant Agreement and
the transactions contemplated hereby. The Company and the 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.
11. Successors and Assigns. The provisions of this
Additional Warrant Agreement shall inure to the benefit of and be binding upon
the respective successors and permitted assigns of the parties. The Holder may
not assign any of its rights hereunder separate from a transfer of the Warrants
in accordance with Section 7 hereof. Nothing in this Additional Warrant
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 Additional
Warrant Agreement.
12. Counterparts. This Additional Warrant Agreement may be
executed by one or more of the parties to this Additional Warrant Agreement in
any number of separate counterparts, each
<PAGE> 15
PAGE 33 OF 76 PAGES
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13. Captions and Headings. The captions and headings used in
this Additional Warrant Agreement are used for convenience only and are not to
be considered in construing or interpreting this Additional Warrant Agreement.
14. Amendments and Waivers. Any term of this Additional
Warrant Agreement may be amended and the observance of any term of this
Additional Warrant 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 the Holder. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon the Holder, each future
holder of the Warrants and the Company.
15. Severability. If one or more provisions of this
Additional Warrant Agreement are held to be unenforceable under applicable law,
such provisions shall be excluded from this Additional Warrant 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.
<PAGE> 16
PAGE 34 OF 76 PAGES
IN WITNESS WHEREOF, the parties hereto have caused this
Additional Warrant Agreement to be duly executed as of the day and year first
above written.
PHOENIX INFORMATION SYSTEMS CORP.
By /s/
----------------------------------
Name:
Title:
S-C PHOENIX PARTNERS
By S-C PHOENIX HOLDINGS, L.L.C.,
a General Partner
By /s/
----------------------------------
Name:
Title:
<PAGE> 17
PAGE 35 OF 76 PAGES
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 Additional Warrant Agreement REFERRED TO BELOW.
WARRANTS TO PURCHASE COMMON STOCK
OF PHOENIX INFORMATION SYSTEMS CORP.
No.___ 140,000 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 Additional
Warrant Agreement referred to below at the purchase price set forth in the
Additional 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) represented by this Warrant Certificate are
<PAGE> 18
PAGE 36 OF 76 PAGES
exercised, or by surrender of this Warrant Certificate in lieu of cash payment,
all subject to the terms and conditions hereof and of the Additional 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 Additional Warrant Agreement, dated as of February 12, 1996 (the
"Additional Warrant Agreement"), between the Company and S-C Phoenix Partners,
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 Additional Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Additional
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 Additional Warrant Agreement. Copies of the Additional 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
Additional Warrant Agreement.
<PAGE> 19
PAGE 37 OF 76 PAGES
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 Additional 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.
<PAGE> 20
PAGE 38 OF 76 PAGES
Dated:___________, 19__
PHOENIX INFORMATION SYSTEMS CORP.
By /s/
----------------------------------
Name:
Title:
<PAGE> 21
PAGE 39 OF 76 PAGES
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
Additional 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 Additional Warrant Agreement, all on the terms and conditions
specified in this Warrant Certificate and the Additional Warrant Agreement
herein referred to. 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
exercise of
<PAGE> 22
PAGE 40 OF 76 PAGES
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.
<PAGE> 23
PAGE 41 OF 76 PAGES
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.
<PAGE> 1
PAGE 42 OF 76 PAGES
EXHIBIT AB
PHOENIX INFORMATION SYSTEMS CORP.
February 12, 1996
S-C Phoenix Partners
888 Seventh Avenue
New York, New York 10106
Additional Warrant
Gentlemen:
Reference is made to the Convertible Note Purchase Agreement
(as amended, "Agreement") dated December 9, 1994 between the undersigned
("Company") and you ("S-C Partners"), as most recently amended by letter
agreement dated September 15, 1995 ("September Letter"). Capitalized terms are
used herein as defined in the Agreement and September Letter. Pursuant to the
September Letter, the Company agreed to issue to S-C Partners Additional
Warrants, and to adjust the Conversion Price of the Tranche D Note converted
pursuant to the September Letter, in the event that a certain event or events
did not occur by January 15, 1996.
The parties wish to modify the September Letter as follows:
1. The Company will issue the Additional Warrants, the
exercise price for which shall be $3.23 per share, pursuant to the Warrant
Agreement annexed hereto as Exhibit A.
2. The Conversion Price for the Tranche D Note issued
and converted pursuant to the September Letter shall be deemed to have been
$.80 per share and the Company shall issue an additional 300,000 shares
("Adjusted Conversion Shares") to S-C Partners to reflect such adjustment.
3. S-C Partners hereby represents and warrants as
follows:
(a) The Adjusted Conversion Shares and the
Additional Warrants ("Securities") being acquired by S-C
Partners are being acquired for investment for its own account
and not with the view to, or for resale in connection with,
any distribution or public offering thereof. S-C Partners
understands that such Securities have not been registered under
the Securities Act of 1933, as amended (the "Securities Act")
or any state securities laws by reason of their contemplated
issu-
<PAGE> 2
PAGE 43 OF 76 PAGES
ance 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 the
Company and others upon these exemptions is predicated in part
upon this representation by S-C Partners. S-C Partners further
understands that such Securities 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.
(b) S-C Partners 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, S-C Partners may not sell any such
Securities pursuant to Rule 144 prior to the expiration of a
two-year period after it has acquired such Securities. S-C
Partners understands that any sales pursuant to Rule 144 can
be made only in full compliance with the provisions of Rule
144.
(c) The address of S-C Partner's principal office
is set forth on its Certificate of Representations dated the
date hereof. S-C Partners qualifies as an "accredited
investor" for purposes of Regulation D promulgated under the
Securities Act for the reasons specified in such Certificate
of Representations. S-C Partners acknowledges that the
Company has made available to it at a reasonable time prior to
the execution of the Certificate of Representations the
opportunity to ask questions and receive answers concerning
the terms and conditions of the sale of securities
contemplated by the Agreement, and to obtain any additional
information (which the Company possesses or can acquire
without unreasonable effort or expense) as may be necessary to
verify the accuracy of the information furnished to it. S-C
Partners (i) is able to bear of loss of its entire investment
in the Securities being acquired by it without any material
adverse effect on its business, operations or prospects, and
(ii) has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits
and risks of the investment to be made by it pursuant to the
Agreement and pursuant hereto.
4. Except as modified hereby, the Agreement
remains in full force and effect.
5. This Agreement (a) represents the entire
agreement among the parties with respect to the subject matter hereof,
superseding all prior agreements and understandings, written or oral, (b) may
be amended only in writing, (c) may be executed in counterparts, each of which
shall be deemed an original and all of which shall constitute one agreement,
(d) shall
<PAGE> 3
PAGE 44 OF 76 PAGES
inure to the benefit of, and be binding upon, the parties hereto and their
respective successors and assigns and (e) shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
entered into and to be performed wholly within such State.
If the foregoing accurately reflects our agreement, please
sign where indicated below.
Very truly yours,
AGREED:
S-C PHOENIX PARTNERS
By S-C Phoenix Holdings, L.L.C.,
its general partner
By: /s/
-----------------------------
Name:
Title:
<PAGE> 1
PAGE 45 OF 76 PAGES
EXHIBIT AC
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of February 12, 1996 (the "Agreement"), by
and between PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation (the
"Company") S-C PHOENIX PARTNERS, a New York general partnership ("S-C" and,
together with its successors and permitted assigns, the "Holder").
WHEREAS, the Company proposes to issue and deliver its warrant
certificates ("Warrant Certificates") evidencing 345,000 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
Convertible Note Purchase Agreement, dated as of December 9, 1994, by and
between the Company and S-C (the "Note Purchase Agreement") and that certain
letter agreement referencing the "Tranche D Note", dated the date hereof, by and
between the Company and S-C.
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 the Holder, the Company and the
Holder agree as follows:
1. Certain Definitions. The following terms, as used in this
Agreement, have the following meanings:
(a) "Affiliate" means, with respect to S-C, (A)(a) any Person
controlling, controlled by or under common control with S-C and (b) if (1)
controlling S-C, such Person has a forty
<PAGE> 2
PAGE 46 OF 76 PAGES
percent (40%) or more voting and beneficial ownership interest in S-C, (2)
controlled by S-C has a forty percent (40%) or more voting and beneficial
ownership interest in such Person and (3) under common control with S-C, the
Person(s) having such common control have forty percent (40%) or more voting and
beneficial ownership interest in S-C 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 date hereof
and ending at 5 p.m. New York City time on the third anniversary of the date on
which the Company shall have satisfied the conditions contained in clauses (a)
and (b) of the definition of "Tranche E Target Date" set forth in the Note
Purchase Agreement.
2
<PAGE> 3
PAGE 47 OF 76 PAGES
(e) "Exercise Price" means $3.00 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 preamble.
(h) "Investor Representative" shall be S-C Phoenix Holdings, L.L.C.,
a Delaware limited liability company and a ganeral partner of S-C, 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 the 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.
3
<PAGE> 4
PAGE 48 OF 76 PAGES
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 345,000 Warrants may be executed by any authorized officer of the
Company. Warrant Certificates evidencing all 345,000 Warrants shall be delivered
in the name of the Holder to the Investor Representative on the date hereof.
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 345,000. 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 of Incorporation, then the
Warrants shall be deemed to have been exercised.
4
<PAGE> 5
PAGE 49 OF 76 PAGES
(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 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 the 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 the 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 the Warrants shall be returned to the 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 share certificates
representing the Underlying Common Stock to which the Holder is entitled,
registered in the name of the Holder or the name or names of such Affiliates of
the Holder as may be directed in writing by the 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 the 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.
<PAGE> 6
PAGE 50 OF 76 PAGES
(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, the
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 the 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 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
<PAGE> 7
PAGE 51 OF 76 PAGES
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 30
consecutive Business Days immediately prior to the date of exercise; 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 Holder.
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, 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, and the number of Underlying Common
<PAGE> 8
PAGE 52 OF 76 PAGES
Stock shall be proportionately adjusted so that, to avoid dilution of the
Holder's position, the Holder shall thereafter be entitled to receive at such
adjusted price an additional number of shares of the Company's Common Stock
which such Holder would have owned or would have been entitled to receive upon
or by reason of any of the events described above, had the Warrants been
exercised immediately prior to the happening of such event.
(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
and the number of Underlying Common Stock shall be proportionately adjusted so
that the Holder of any Warrant exercised after such date shall be entitled to
receive, upon payment of the same aggregate amount as would have been payable
before such date, the aggregate number of shares of Common Stock which the
Holder would have owned upon such exercise and been entitled to receive, if such
Warrant had been exercised immediately prior to the happening of such
combination or consolidation.
(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
<PAGE> 9
PAGE 53 OF 76 PAGES
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 the Holder
thereafter, to the end 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 the Holder, the resulting or surviving entity in any such
consolidation or merger, if other than the Company, shall acknowledge in writing
the 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,
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
<PAGE> 10
PAGE 54 OF 76 PAGES
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 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 the 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.
<PAGE> 11
PAGE 55 OF 76 PAGES
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
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.
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 the Holder, Warrant Certificates may be exchanged at
such office upon payment of the charges
<PAGE> 12
PAGE 56 OF 76 PAGES
hereinafter provided. Whenever any Warrant Certificates are so surrendered for
exchange, the Company shall execute and deliver the Warrant Certificates that
the Holder 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. 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, the Holder, as a Holder of Warrant Certificates, shall not 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.
<PAGE> 13
PAGE 57 OF 76 PAGES
9. 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
(b) If to the Holder, to the Investor
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: Mr. James Peet
Facsimile: 212-489-2005
With a copy to: Peter A. Hurwitz, Esq.
With an additional copy to:
Soros Fund Management
888 Seventh Avenue, Suite 3300
New York, New York 10106
Attention: Sean A. Warren, Esq.
Facsimile: 212-489-2005
10. 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,
<PAGE> 14
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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 the 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.
11. 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. The Holder may not 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.
12. 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.
<PAGE> 15
PAGE 59 OF 76 PAGES
13. 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.
14. 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 the Holder. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon the Holder,
each future holder of the Warrants and the Company.
15. 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.
<PAGE> 16
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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 /s/
--------------------------------
Name:
Title:
S-C PHOENIX PARTNERS
By S-C PHOENIX HOLDINGS, L.L.C.,
a General Partner
By /s/
--------------------------------
Name:
Title:
<PAGE> 17
PAGE 61 OF 76 PAGES
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.___ 345,000 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) represented by this Warrant
Certificate are exercised, or by
<PAGE> 18
PAGE 62 OF 76 PAGES
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 February 12, 1996 (the "Warrant Agreement"),
between the Company and S-C Phoenix Partners, 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.
All shares of Common Stock issuable by the Company upon the exercise
of Warrants and the payment of the Exercise
<PAGE> 19
PAGE 63 OF 76 PAGES
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.
<PAGE> 20
PAGE 64 OF 76 PAGES
Dated: , 19
----------- --
PHOENIX INFORMATION SYSTEMS CORP.
By /s/
--------------------------------
Name:
Title:
<PAGE> 21
PAGE 65 OF 76 PAGES
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 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> 22
PAGE 66 OF 76 PAGES
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)
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.
<PAGE> 23
PAGE 67 OF 76 PAGES
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.
<PAGE> 1
PAGE 68 OF 76 PAGES
EXHIBIT AD
PHOENIX INFORMATION SYSTEMS CORP.
February 12, 1996
S-C Phoenix Partners
888 Seventh Avenue
New York, New York 10106
Tranche D Note
Gentlemen:
Reference is made to the Convertible Note Purchase Agreement (as
amended, "Agreement") dated December 9, 1994 between the undersigned ("Company")
and you ("S-C Partners"), as amended by letter agreements dated March 15, 1995,
August 3, 1995 and September 15, 1995 and February 12, 1996. Capitalized terms
are used herein as defined in the Agreement. Pursuant to the Agreement, S-C
Partners has purchased, and the Company has issued, the Tranche A Note, the
Tranche B Note, the Tranche C Notes and Tranche D Notes in the principal amount
of $1,350,000, which Notes have been converted into 12,749,999 shares of Common
Stock, in the aggregate. As of the date hereof, S-C Partners is purchasing, and
the Company is issuing, an additional Tranche D Note in the principal amount of
$1,150,000 (the "Current Note").
This will confirm our agreement respecting the issuance and conversion
of the Current Note and a warrant to purchase shares of the Company's Common
Stock as follows:
1. Notwithstanding anything to the contrary contained therein, the
Current Note is being purchased and converted effective on the date hereof
in accordance with its terms. The number of shares ("Conversion Shares")
into which the principal amount of the Note is being converted is 1,150,000
(subject to adjustment as provided in the Note); provided, however, that,
in consideration of S-C Partners' conversion of the Current Note, the
Company agrees that, in the event the System is not Fully Operational on or
before each of the dates set forth below, the Conversion Price shall be
deemed to have been, upon conversion, the amount set forth below opposite
such date.
<PAGE> 2
PAGE 69 OF 76 PAGES
<TABLE>
<CAPTION>
Date Conversion Price
<S> <C>
May 7, 1996 $.95
May 14, 1996 $.90
May 21, 1996 $.85
May 28, 1996 $.80
</TABLE>
Upon any deemed change in the Conversion Price, the Company shall issue to
S-C Partners certificates representing such additional number of shares of
Common Stock such that S-C Partners shall receive the aggregate number of
shares of Common Stock it would have received had such change actually
occurred on the date of conversion.
For purposes hereof, "Fully Operational" shall mean that the System is in
operation in most cities served by Hainan Airlines and Hainan Airlines is
relying primarily on the System to book its airline seats, which booking
must represent seventy (70%) percent or more of Hainan Airlines' total
internal bookings representing not less forty-five (45%) percent of its
total bookings.
2. Notwithstanding the issuance of the Current Note prior to the
Tranche D Target Date, the purchase of the Tranche E Note shall continue to
be subject to the conditions set forth in the Agreement, including, without
limitation, the occurrence of the Tranche E Target Date.
3. To the extent that the conditions set forth in Section 3.2(n) of
the Agreement to the issuance of the Current Note have not been satisfied
as of the date hereof, S-C Partners hereby unconditionally waives the
requirement that such conditions be met and discharges the Company from
responsibility therefor, subject to the terms and conditions of this letter
agreement.
4. In consideration of the foregoing, the Company is issuing, on the
date hereof, a warrant ("Early Purchase Warrant") to purchase 345,000
shares of its Common Stock for a purchase price of $3.00 per share. The
form of such warrant is annexed hereto as Exhibit A.
5. The warrant agreements between the Company and S-C Partners,
dated December 9, 1994 (4,000,000 shares), March 15, 1995 (2,500,000
shares), and September 15, 1995 (600,000 shares), and the warrant
certificates issued pursuant thereto, are hereby amended in their entirety
to conform in all respects to the Early Purchase Warrant except in respect
of Exercise Price (as defined in each of such warrant agreements) and the
number of Warrants (as defined in each of such warrant agreements) issuable
thereunder which shall remain as set forth in each of such warrant
agreements.
6. S-C Partners hereby represents and warrants as follows:
(a) The Current Note, the Conversion Shares and the Early
Purchase Warrant ("Securities") being acquired by S-C Partners are
being acquired for investment for its own account and not with the
view to, or for resale in connection with, any distribution or public
offering thereof. S-C Partners understands that such Securities have
not been registered under
<PAGE> 3
PAGE 70 OF 76 PAGES
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 the Company and others upon
these exemptions is predicated in part upon this representation by S-C
Partners. S-C Partners further understands that such Securities 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.
(b) S-C Partners 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, S-C Partners may
not sell any such Securities pursuant to Rule 144 prior to the
expiration of a two-year period after it has acquired such Securities.
S-C Partners understands that any sales pursuant to Rule 144 can be
made only in full compliance with the provisions of Rule 144.
(c) The address of S-C Partner's principal office is set forth
on its Certificate of Representations dated the date hereof. S-C
Partners qualifies as an "accredited investor" for purposes of
Regulation D promulgated under the Securities Act for the reasons
specified in such Certificate of Representations. S-C Partners
acknowledges that the Company has made available to it at a reasonable
time prior to the execution of the Certificate of Representations the
opportunity to ask questions and receive answers concerning the terms
and conditions of the sale of securities contemplated by the
Agreement, and to obtain any additional information (which the Company
possesses or can acquire without unreasonable effort or expense) as
may be necessary to verify the accuracy of the information furnished
to it. S-C Partners (i) is able to bear of loss of its entire
investment in the Securities being acquired by it without any material
adverse effect on its business, operations or prospects, and (ii) has
such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of the investment to
be made by it pursuant to the Agreement and pursuant hereto.
7. Except as modified hereby, the Agreement remains in full
force and effect.
8. This Agreement (a) represents the entire agreement among the
parties with respect to the subject matter hereof, superseding all prior
agreements and understandings, written or oral, (b) may be amended only in
writing, (c) may be executed in counterparts, each of which shall be
<PAGE> 4
PAGE 71 OF 76 PAGES
deemed an original and all of which shall constitute one agreement, (d)
shall inure to the benefit of, and be binding upon, the parties hereto and
their respective successors and assigns and (e) shall be governed by and
construed in accordance with the laws of the State of New York applicable
to contracts entered into and to be performed wholly within such State.
If the foregoing accurately reflects our agreement, please sign where
indicated below.
Very truly yours,
AGREED:
S-C PHOENIX PARTNERS
By S-C Phoenix Holdings, L.L.C.,
its general partner
By: /s/
---------------------------------
Name:
Title:
<PAGE> 1
PAGE 72 OF 76 PAGES
EXHIBIT AE
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT THE TRANSFER IS EXEMPT FROM
REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
PHOENIX INFORMATION SYSTEMS CORP.
TRANCHE D CONVERTIBLE NOTE
$1,150,000 February 12, 1996
PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation ("Company"),
hereby promises to pay to S-C PHOENIX PARTNERS ("Holder") at its office at 888
Seventh Avenue, New York, New York 10106, the principal sum of One Million One
Hundred Fifty Thousand U.S. Dollars (U.S. $1,150,000), on the Maturity Date (as
defined in the Agreement referred to below), together with interest thereon as
hereinbelow provided.
This Note is the seventh in a series of Notes referred to in, and is
entitled to the benefits of, the Convertible Note Purchase Agreement
("Agreement"), dated December 9, 1994, as amended, among the Company and S-C
Phoenix Partners, among others. Capitalized terms are used herein as therein
defined unless otherwise defined herein.
1. Interest. Interest shall accrue on the outstanding principal
amount hereof from the date hereof until payment in full at the Eurodollar Rate
and shall be payable on the first anniversary hereof and, thereafter, quarterly
on the last day of each Interest Period and upon conversion pursuant to Section
3 hereof.
2. Payments. Each payment due hereunder shall be made in immediately
available funds at the office of Holder, or to such account as Holder may
designate to the Company in writing, without any setoff or counterclaim. This
Note may be con- verted into shares of Common Stock in accordance with Section 3
hereof. Upon such conversion, and payment of all interest due hereon, the
Company will not be obligated to make any further payment hereunder and the
Holder, by its acceptance hereof, agrees that it will promptly surrender this
Note to the Company upon such conversion or payment hereof in full.
3. Conversion. (a) This Note shall convert into shares of Common
Stock at the Conversion Price (as defined below),
<PAGE> 2
PAGE 73 OF 76 PAGES
(i) automatically, upon any date prior to the Maturity
Date and after the date ("Full Funding Date") on which Notes in the
aggregate principal amount of $10,000,000 shall have been sold
pursuant to the Agreement on which the first of the following shall
occur: (A) the consummation of any offering of the Company's capital
stock for a purchase price of not less than $2.00 per share and
$5,000,000 in the aggregate and the listing of the Common Stock on The
NASDAQ Stock Market Small-Cap or National Market System; (B) the
Company having Operating Revenues of $5,000,000 or more in any twelve
(12) consecutive month period or (C) the date which is six (6) months
from the Full Funding Date;
(ii) on any date subsequent to the date hereof and prior
to the date referred to in clause (i)(C) of this Section 3(a), at the
written election of the Purchaser to convert all Notes;
(iii) upon the failure of the Purchaser to purchase any
Notes offered to it pursuant to an Offer Notice, at the written
election of the Purchaser to convert all outstanding Notes;
(iv) upon the termination of the Company's rights under
Section 7.1 of the Agreement, at the written election of the Purchaser
not to purchase any additional Notes and to convert all outstanding
Notes; and
(v) upon the System being in Commercial Operation (as
such term is defined in that certain letter agreement, dated March 15,
1994, by and between the Company and the Purchaser) in China in
connection with an airline of comparable size to Hainan Airlines, at
the written election of the Company to cause the conversion of this
Note.
(b) For purposes hereof, "Conversion Price" shall mean $1.00. No
fractional shares of Common Stock shall be issued upon conversion. In lieu of
any fractional shares to which Holder would otherwise be entitled, the Company
shall pay cash in an amount equal to such fraction multiplied by the Conversion
Price.
(c) The Company shall provide prompt written notice of the
conversion of this Note to Holder, which notice shall be certified by the Chief
Financial Officer or the Chief Operating Officer of the Company (and, in the
case of conversion pursuant to Section 3(a)(i)(B), by the Company's independent
auditors) and shall set forth the date on which conversion shall have occurred
("Conversion Date"), the event resulting in such conversion, and the number of
shares of Common Stock which Holder shall be entitled to receive as a result of
such conversion. Upon conversion, the Holder shall be entitled to receive the
number of shares of Common Stock calculated by dividing the principal amount
hereof by the Conversion Price.
<PAGE> 3
PAGE 74 OF 76 PAGES
(d) Within a reasonable time, not exceeding ten (10) days after
the Conversion Date, the Company shall deliver or cause to be delivered to
Holder, in Holder's name, certificates representing the number of fully paid and
non-assessable shares of Common Stock into which this Note has been converted in
accordance with the provisions of this Section 3. Within a reasonable time, not
exceeding ten (10) days after receipt by the Holder of such certificates, the
Holder shall surrender this Note to the Company for cancellation. Subject to the
following provisions of this Section 3, such conversion shall be deemed to have
occurred on the Conversion Date so that the Holder shall be treated for all
purposes as having become the record holder of such shares of Common Stock at
such time.
(e) The issuance of certificates of shares of Common Stock upon
the conversion of this Note shall be made without charge of any kind by the
Company to the Holder for any costs in respect of the issuance of such
certificates.
(f) The Conversion Price shall be subject to adjustment as
follows:
(i) 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, 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 Conversion Price shall,
concurrently with the effectiveness of such stock dividend, stock
distribution or subdivision, or the earlier declaration thereof, be
proportionately decreased.
(ii) 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 Conversion Price
shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
(iii) 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, this Note shall thereafter be convertible into 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 the Holder thereafter, to
the end that the provisions set forth herein (including provisions
with respect to
<PAGE> 4
PAGE 75 OF 76 PAGES
adjustments in the Conversion 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 conversion hereof. At
the request of the Purchaser, the resulting or surviving entity in any
such consolidation or merger, if other than the Company, shall
acknowledge in writing Purchaser's rights hereunder.
(g) The Company will not, by amendment of its Articles of
Incorporation or By-Laws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 3 and in taking of all such action as may be necessary or appropriate in
order to protect the conversion rights of the Holder against impairment.
(h) The Company shall reserve and keep available out of its
authorized by unissued Common Stock such number of shares of Common Stock as
shall from time to time be sufficient to effect conversion hereof in accordance
herewith.
4. Events of Default. If any of the following events ("Events
of Default") shall occur and be continuing: (a) the Company fails to pay
principal hereof when the same shall become due and payable; (b) the Company
fails to make two (2) successive interest payments hereon or three (3) interest
payments in a twelve (12) consecutive month period; (c) the failure by the
Company to perform any of its other material obligations hereunder, under the
Agreement or under the other Transaction Documents which failure shall continue
for a period of thirty (30) days after receipt of notice thereof by the Company;
(d) any represen- tations or warranties of the Company contained in the
Agreement shall prove to have been false in any material respect when made; (e)
any proceedings involving the Company or any of its consolidated subsidiaries
are commenced by or against the Company or any of its consolidated subsidiaries
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law or statute of federal government or any
state government and, if such proceedings are instituted against the Company or
any such consolidated subsidiary, the Company or any such consolidated
subsidiary by any action or failure to act indicates its approval of, consent to
or acquiescence therein, or an order shall be entered approving the petition in
such proceedings and, within sixty (60) days after the entry thereof, such order
is not vacated, or stayed on appeal or otherwise, or shall not otherwise have
ceased to continue in effect; then, (i) as to the Events of Default under
clauses (a) and (b), above, the Holder may, at its option, declare this Note to
be forthwith due and payable in cash, (ii) as to the Events of Default under
clauses (c) and (d) above, The Chatterjee Group ("TCG") may, at its option,
declare all Notes to be forthwith due and payable in cash and (iii) as to an
Event of Default under clause (e) above, this Note shall thereupon become
immediate-
<PAGE> 5
PAGE 76 OF 76 PAGES
ly due and payable in cash. Upon any acceleration of this Note pursuant to the
immediately preceding sentence the Holder may pursue all remedies available to
it at law or equity, and all rights available to it under this Note and the Note
Purchase Agreement including, without limitation, the right to convert this Note
into shares of Common Stock. During the pendency of any Event of Default,
interest shall accrue on the outstanding principal amount hereof at a rate that
is two percent (2%) higher than the Eurodollar Rate.
5. Amendments and Waivers. Except as otherwise provided in the
Agreement, this Note may be amended and the observance of any term hereof or
thereof and any rights hereunder or thereunder may be waived by TCG without the
consent of Holder. No waiver of any right in any instance shall constitute a
continuing waiver of successive rights and any one shall govern only the
particular matters waived.
6. Assignment. All terms and provisions of this Note shall be
binding upon the Company and inure to the benefit of the Holder and their
respective successors. Neither this Note nor any of the rights, interests or
obligations hereunder may be assigned (whether voluntarily, involuntarily, by
valid operation or law or otherwise) by the Holder without the prior written
consent of the Company, except to any Affiliate of the Holder, subject only to
such Affiliate's compliance with applicable securities laws.
7. Governing Law. This Note shall be governed by and construed
in accordance with the substantive laws of the State of New York (without regard
to the laws of conflict that might otherwise apply) as to all matters including
without limitation matters of validity, construction, effect, performance and
remedies.
8. Waiver of Presentment. The Company waives presentment,
protest, notice of dishonor and all forms of notice required to hold the Company
liable on this Note.
9. Other Notes. All Notes issued and delivered pursuant to the
Agreement shall rank equally and ratably without priority over one another.
IN WITNESS WHEREOF, the Company has executed this Note on date
first above written.
PHOENIX INFORMATION SYSTEMS CORP.
By: /s/
----------------------------------------
Title:
