UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 9)*
PHOENIX INFORMATION SYSTEMS CORP.
-----------------------------------------
(Name of Issuer)
Common Stock, $.01 Par Value
------------------------------------------
(Title of Class of Securities)
719077109
---------------------
(CUSIP Number)
Stephen M. Vine, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
399 Park Avenue
New York, New York 10022
(212) 872-1000
-------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 23, 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 51 Pages
Exhibit Index: Page 16
<PAGE>
SCHEDULE 13D
CUSIP No. 719077109 Page 2 of 51 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. [_]
b. [X]
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 38,944,999
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 38,944,999
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
38,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
55.63%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 719077109 Page 3 of 51 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. [_]
b. [X]
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 38,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
38,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
38,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
55.63%
14 Type of Reporting Person*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 719077109 Page 4 of 51 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. [_]
b. [X]
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 38,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
38,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
38,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
55.63%
14 Type of Reporting Person*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 719077109 Page 5 of 51 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. [_]
b. [X]
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 38,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
38,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
38,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
55.63%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 719077109 Page 6 of 51 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. [_]
b. [X]
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 38,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
38,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
38,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
55.63%
14 Type of Reporting Person*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 719077109 Page 7 of 51 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. [_]
b. [X]
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 38,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
38,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
38,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
55.63%
14 Type of Reporting Person*
IA; IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 719077109 Page 8 of 51 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. [_]
b. [X]
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 38,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
38,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
38,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
55.63%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 719077109 Page 9 of 51 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. [_]
b. [X]
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 38,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
38,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
38,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
55.63%
14 Type of Reporting Person*
IA; PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 719077109 Page 10 of 51 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. [_]
b. [X]
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 38,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
38,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
38,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
55.63%
14 Type of Reporting Person*
IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 11 of 51 Pages
This Amendment No. 9 to Schedule 13D relates to the shares of
Common Stock, $.01 par value (the "Shares"), of Phoenix Information Systems
Corp. (the "Issuer") and supplementally amends the initial statement on Schedule
13D dated December 16, 1994 and all prior amendments thereto (collectively, the
"Initial Statement"). This Amendment No. 9 is being filed to report the
acquisition of 833,333 shares of Series C Convertible Preferred Stock, par value
$0.01 per share (the "Series C Shares") from the Issuer. 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
supplementally amended as set forth herein.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On December 23, 1996, Phoenix Partners and the Issuer entered
into a Series C Convertible Preferred Stock Purchase Agreement (the "Preferred
Stock Purchase Agreement") pursuant to which Phoenix Partners purchased the
Series C Shares upon the terms specified in the Preferred Stock Purchase
Agreement, a copy of which is attached as Exhibit AI hereto. The aggregate
purchase price for the Series C Shares was $15,000,000. Phoenix Partners
received the $15,000,000 to purchase the Series C Shares from its partners. The
partners of Phoenix Partners advanced the subject funds out of working capital
or personal funds.
The Shares held for the accounts of the Reporting Persons may be
held through margin accounts maintained with brokers, which extend margin credit
as and when required to open or carry positions in its margin accounts, subject
to applicable federal margin regulations, stock exchange rules and such firm's
credit policies. The positions held in the margin accounts, including the
Shares, are pledged as collateral security for the repayment of debit balances
in the respective accounts.
ITEM 4. PURPOSE OF TRANSACTION.
Phoenix Partners entered into the Preferred Stock Purchase
Agreement and purchased the Series C Shares pursuant thereto for investment
purposes. Pursuant to the Preferred Stock Purchase Agreement, the Issuer issued
and sold to Phoenix the Series C Shares with such designations as are set forth
in the Certificate of Designation (the "Certificate of Designation"), a copy of
which is attached as Exhibit A to the Preferred Stock Purchase Agreement.
Pursuant to the Certificate of Designation, Phoenix Partners may convert its
Series C Shares at any time into that amount of Shares obtained by multiplying
ten by the Conversion Rate (as such is defined in the Certificate of
Designation) then in effect. On the day immediately preceding the date of such
conversion, Phoenix Partners shall receive a dividend of Series C Shares equal
to the difference between (a) the amount of share dividends that would have
accrued under Section 1.1 of the Certificate of Designation from the date of
issuance until January 1, 2003, as if such Series C Shares shall have remained
outstanding until January 1, 2003, and (b) share dividends actually paid to such
Holder as of the date of conversion on each January 1, April 1, July 1 and
October 1 prior thereto, pursuant to the calculations set forth in the
Certificate of Designation. These additional Series C Shares, once received, may
also be converted into additional Shares as set forth above.
<PAGE>
Page 12 of 51 Pages
Except as described herein, none of the Reporting Persons, nor,
to the best of their knowledge, any of the other individuals identified in
response to Item 2, has any plans or proposals which relate to or would result
in any of the transactions described in subparagraphs (a) through (j) of Item 4
of Schedule 13D. The Reporting Person reserves the right to acquire additional
securities of the Issuer, to dispose of such securities at any time or to
formulate other purposes, plans or proposals regarding the Issuer or any of its
securities, to the extent deemed advisable in light of general investment and
trading policies, market conditions or other factors.
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 38,944,999 (approximately 55.63% 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) 15,659,999 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, (vi) 140,000 Shares issuable upon conversion of 140,000
warrants issued pursuant to the Additional Warrant Agreement, (vii) 700,000
Shares issuable upon conversion of the Early Purchase Warrant, and (viii)
15,000,000 Shares issuable upon conversion of the Series C Shares.
(c) Except as described in Item 3 and Item 4 hereof, which is
incorporated in this Item 5(c) by reference, there have been no transactions in
the Shares effected since October 26, 1996 (60 days prior to the date hereof) by
any of the Reporting Persons.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS IN RELATIONSHIP WITH
RESPECT TO SECURITIES OF THE ISSUER.
On December 23, 1996, the Issuer and Phoenix Partners entered
into a Registration Rights Agreement (the "December Registration Rights
Agreement"), a copy of which is attached as Exhibit AJ hereto. Pursuant to the
December Registration Rights Agreement, the Issuer granted certain registration
rights to Phoenix Partners with respect to Shares issuable upon conversion of
the Series C Shares. The December Registration Rights Agreement grants to
Phoenix Partners certain demand registration rights in addition to "piggy-back"
registration rights, each as set forth in the December Registration Rights
Agreement.
From time to time, the Reporting Persons may lend portfolio
securities to brokers, banks or other financial institutions. These loans
typically obligate the borrower to return the securities, or an equal amount of
securities of the same class to the lender and typically provide that the
borrower is entitled to exercise voting rights and to retain dividends during
the term of the loan. From time to time to the extent permitted by applicable
<PAGE>
Page 13 of 51 Pages
laws, each of the Reporting Persons may borrow securities, including the Shares,
for the purpose of effecting, and may effect, short sale transactions, and may
purchase securities for the purpose of closing out short positions in such
securities.
Except as set forth herein, 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).
(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).
(ai) Series C Convertible Preferred Stock Purchase Agreement,
dated December 23, 1996, between Phoenix Information Systems Corp. and S-C
Phoenix Partners.
(aj) Registration Rights Agreement, dated December 23, 1996, by
and between Phoenix Information Systems Corp. and S-C Phoenix Partners.
(ak) Power of Attorney dated July 27, 1995 granted by Mr. George
Soros in favor of Mr. Michael C. Neus.
<PAGE>
Page 14 of 51 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: December 27, 1996 S-C PHOENIX PARTNERS
By: S-C Phoenix Holdings, L.L.C.
By: /S/ GARY GLADSTEIN
------------------------
Gary Gladstein
Manager
Date: December 27, 1996 QUANTUM INDUSTRIAL PARTNERS LDC
By: /S/ GARY GLADSTEIN
-----------------------------
Gary Gladstein
Attorney-in-Fact
Date: December 27, 1996 QIH MANAGEMENT INVESTOR, L.P.
By: QIH MANAGEMENT, INC.,
its general partner
By: /S/ GARY GLADSTEIN
------------------------
Gary Gladstein
President
Date: December 27, 1996 QIH MANAGEMENT, INC.
By: /S/ GARY GLADSTEIN
-----------------------------
Gary Gladstein
President
<PAGE>
Page 15 of 50 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: December 27, 1996 S-C PHOENIX HOLDINGS, L.L.C.
By: /S/ GARY GLADSTEIN
-----------------------------
Gary Gladstein
Manager
Date: December 27, 1996 GEORGE SOROS
By: /S/ MICHAEL NEUS
-----------------------------
Michael Neus
Attorney-in-Fact
Date: December 27, 1996 WINSTON PARTNERS, L.P.
By: Chatterjee Fund Management,
L.P., its General Partner
By: Purnendu Chatterjee,
its General Partner
By: /S/ PETER HURWITZ
-----------------------------
Peter Hurwitz
Attorney-in-Fact
Date: December 27, 1996 CHATTERJEE FUND MANAGEMENT, L.P.
By: Purnendu Chatterjee,
its General Partner
By: /S/ PETER HURWITZ
------------------------
Peter Hurwitz
Attorney-in-Fact
Date: December 27, 1996 PURNENDU CHATTERJEE
By: /S/ PETER HURWITZ
-----------------------------
Peter Hurwitz
Attorney-in-Fact
<PAGE>
Page 16 of 51 Pages
EXHIBIT INDEX
Exhibit
- -------
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).
AI Series C Convertible Preferred Stock Purchase Agreement,
dated December 23, 1996, between Phoenix Information Systems
Corp. and S-C Phoenix Partners.
AJ Registration Rights Agreement, dated December 23, 1996, by
and between Phoenix Information Systems Corp. and S-C
Phoenix Partners.
AK Power of Attorney dated July 27, 1995 granted by Mr. George
Soros in favor of Mr. Michael C. Neus.
Page 17 of 50 Pages
EXHIBIT AI
_______________________________________________________________________________
_______________________________________________________________________________
PHOENIX INFORMATION SYSTEMS CORP.
______________________
______________________
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
_______________________________________________________________________________
_______________________________________________________________________________
December 23, 1996
<PAGE>
Page 18 of 51 Pages
SERIES C CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
THIS SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREE- MENT,
dated December 23, 1996, is by and between PHOENIX INFORMATION SYSTEMS CORP., a
Delaware corporation (the "Company"), and S-C PHOENIX PARTNERS, a New York
general partnership ("Purchaser").
WHEREAS, the Company desires to issue and sell a total of 833,333
of its shares of Series C Convertible Preferred Stock, par value $0.01 per share
("Series C Shares"), with such designations as are set forth on the Certificate
of Designation (the "Certificate of Designation") annexed hereto as Exhibit A,
which are convertible into shares of its common stock, par value $0.01 per share
("Common Stock"), on the terms and conditions provided in the Certificate of
Designation;
WHEREAS, Purchaser desires and has agreed to purchase the Series
C Shares subject to the terms and conditions set forth herein; and
WHEREAS, the parties desire to set forth their mutual agreements
with respect to the sale and purchase of the Series C Shares.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Sale and Purchase of the Series C Shares. Subject to the terms
----------------------------------------
and conditions hereof, the Company hereby sells, transfers, assigns, conveys and
delivers to Purchaser, and Purchaser purchases from the Company, the Series C
Shares. Simultaneously herewith, the Company shall deliver to Purchaser a stock
certificate representing the Series C Shares, duly executed by the Company
against payment therefor in an amount equal to the $15,000,000 (or $18.00 per
share) by wire transfer of immediately available funds to the Company's account
as follows:
Account Name : Phoenix Information Systems Corp.
Account No. : 1263680853
Bank : Barnett Bank of Pinellas County
Address : One Progress Plaza
200 Central Avenue
St. Petersburg, FL 33701
(813) 892-1502
ABA No. : 063000047
or to such other account or accounts as the Company may designate in writing.
2. Representations, Warranties and Covenants of the Company. To
---------------------------------------------------------
induce Purchaser to enter into this Agreement and to purchase the Series C
Shares, the Company hereby represents, warrants and covenants to Purchaser that:
<PAGE>
Page 19 of 51 Pages
2.1 Organization, Standing, etc. The Company is a corporation
-----------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to issue
the Series C Shares and the shares of Common Stock issuable upon conversion
thereof (collectively, the "Securities") and to otherwise perform its
obligations hereunder and under the Certificate of Designation and the
Registration Rights Agreement (the "Registration Rights Agreement") between the
Company and Purchaser being executed simultaneously herewith in the form of
Exhibit B hereto. The Company has all requisite corporate power and authority to
own, lease and operate its business as presently conducted.
2.2 Corporate Acts and Proceedings. Each of this Agreement and
--------------------------------
the Registration Rights Agreement has been duly authorized by all necessary
corporate action on behalf of the Company, has been duly executed and delivered
by authorized officers of the Company, and is a valid and binding agreement on
the part of the Company that is enforceable against the Company in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
to judicial limitations on the enforcement of the remedy of specific performance
and other equitable remedies. All corporate action necessary to the
authorization, creation, issuance and delivery of the Series C Shares has been
taken by the Company and the Certificate of Designation has been filed in the
office of the Secretary of State of the State of Delaware. The 833,333 Series C
Shares, when issued and fully paid for pursuant to this Agreement, the Share
Dividends (as defined in the Certificate of Designation) on the Series C Shares
and the Common Stock, when issued upon conversion of the Series C Shares in
accordance with the terms thereof, will be duly and validly issued and fully
paid and nonassessable and will not subject the holders thereof to statutory
personal liability by reason of being such holders.
2.3 Capitalization. As of December 5, 1996, the authorized
--------------
capital stock of the Company consisted of 125,000,000 shares of Common Stock, of
which 48,214,739 are issued and outstanding as of the date hereof, and 5,000,000
shares of preferred stock of which 1,250,000 shares are designated as Series A
Convertible Preferred Stock, par value $.01 per share ("Series A Shares"), of
which 818,750 which are issued and outstanding, 1,250,000 shares are designated
as Series B Convertible Preferred Stock, par value $.01 per share ("Series B
Shares"), all of which are issued and outstanding, and 2,500,000 shares are
designated as Series C Shares, none of which are issued and outstanding. The
Common Stock, the Series A Shares, the Series B Shares and the Series C Shares
are collectively referred to as the "Equity Securities." All outstanding Equity
Securities have been duly and validly issued and are fully paid and
nonassessable. Except as set forth on Schedule 2.3, as of December 5, 1996,
------------
the Company has not issued any options, warrants or other rights of any kind to
acquire shares of the Company's capital stock or securities convertible into or
exchange- able for such shares, or commit itself to do any of the foregoing.
Except as set forth on Schedule 2.3, there are no contracts, commitments,
------------
agreements, understandings, arrangements, registration rights, or restrictions
or preemptive rights to which the Company is a party or by which it is bound
relating to Equity Securities or other securities of the Company, whether or not
outstanding.
2.4 Non-Contravention. Neither the execution, delivery and
-----------------
performance of this Agreement or the Registration Rights Agreement nor the
consummation of the transactions contemplated herein or therein will violate or
be in conflict with any provision of the certificate of incorporation or bylaws
<PAGE>
Page 20 of 51 Pages
of the Company, or violate or be in conflict with any material debt, note, bond,
lease, mortgage, indenture, license, obligation, contract, commitment,
franchise, permit, instrument or other agreement or obligation to which the
Company is a party, or violate or be in conflict with any law, judgment, decree,
order, regulation or ordinance by which the Company is bound or affected.
2.5 Reports Under Securities Exchange Act of 1934. During the
------------------------------------------------
period that the Company has been subject to the reporting requirements of the
Securities Exchange Act of 1934 ("1934 Act"), the Company has filed all reports
required to be filed pursuant thereto (collectively, "Reports"). As of their
respective dates, all such Reports filed by the Company (including all
exhibits and schedules thereto and documents incorporated by reference therein),
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Purchaser shall be entitled to rely on all such Reports for purposes
of the transactions contemplated by this Agreement. The Company covenants and
agrees to continue to make all required filings under the 1934 Act as may be
necessary to permit Purchaser to avail itself of the provisions of Rule 144
promulgated under the Securities Act of 1933 ("1933 Act") at such time as Rule
144 shall become available to Purchaser and to provide Purchaser with copies
thereof promptly after filing. The Company has no knowledge of any facts,
particular to the Company, which are reasonably likely to prevent or
unreasonably delay the registration under the 1933 Act of the Common Stock as
contemplated by the Registration Rights Agreement.
2.6 No Brokers or Finders. No person, firm or corporation has or
---------------------
will have, as a result of any act or omission by the Company, any right,
interest or valid claim against the Company or Purchaser for any commission, fee
or other compensation as a finder or broker, or in any similar capacity, in
connection with the transactions contemplated by this Agreement except as set
forth on Schedule 2.6. The Company shall indemnify and hold Purchaser harmless
------------
against any and all liability with respect to any such commission, fee or other
compensation which may be payable or which shall be determined to be payable as
a result of the actions of the Company in connection with the transactions
contemplated by this Agreement.
2.7 Governmental Authorization; Third Party Consents. No
------------------------------------------------------
approval, consent, compliance, exemption, authorization or other action by, or
notice to or filing with, any governmental authority or any other entity, and no
lapse of a waiting period, is necessary or required in connection with the
execution, delivery or performance by the Company, or enforcement against the
Company, of this Agreement and the Registration Rights Agreement or the
transactions contemplated hereby or thereby.
2.8 Litigation. Except as set forth in the Reports, there are no
----------
legal actions, suits, proceedings, claims or disputes pending, or to the
knowledge of the Company, overtly threatened, at law, in equity, in arbitration
or before any governmental authority against or affecting the Company.
<PAGE>
Page 21 of 51 Pages
2.9 Compliance with Laws. The Company is in compliance in all
---------------------
material respects with all laws, ordinances, regulations and orders of all U.S.
and foreign governmental entities applicable to the Company, except as disclosed
in the Reports.
2.10 Intellectual Property. Except as specifically set forth in
----------------------
the Reports, the Company owns or is licensed or otherwise has the right to use
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, franchises and other rights, all products, processes and methods,
computer software, computer programs and similar intangible assets of the
Company that are material to the operation of its business as presently
conducted and as proposed to be conducted.
2.11 Taxes.
(a) Except as disclosed in the Reports, the Company has filed all
returns with respect to all federal, state, county, local, foreign and
other taxes, whether or not measured in whole or in part by net income
(collectively, "Taxes"), required to be filed through the date hereof
in a manner consistent with prior years. Except as disclosed in the
Reports (and any interest, additions to tax and penalties incurred
since the date of the last Report in connection with matters disclosed
therein), the Company has paid all Taxes (in- cluding deficiencies,
interest, additions to tax and penalties with respect thereto) that
are shown as due through the date hereof, or that are claimed or
asserted by any taxing authority to be due through the date hereof,
with respect to the operations of the Company in each case except for
those Taxes that are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set
aside. Except as disclosed in the Reports (and any interest, additions
to tax and penalties incurred since the date of the Reports in
connection with matters disclosed therein), with respect to any period
for which Tax returns have not yet been filed, or for which Taxes are
not yet due or owing, the Company has no liability for Taxes in each
case other than Taxes incurred in the ordinary course of business or
for which accruals are reflected in the financial statements contained
in the Reports.
(b) Except as disclosed in the Reports, no audit or other
proceedings by any court, taxing authority, or similar entity is
pending or, to the knowledge of the Company, overtly threatened with
respect to any Taxes due from or with respect to the operations of the
Company or any Tax return filed by or with respect to the operations
of the Company. No assessment of Taxes is proposed against the Company
or its assets.
2.12 Financial Condition. The Company has furnished Purchaser
with true and complete copies of its latest Reports. The Company's financial
statements contained in the Reports fairly present the financial position of the
Company as of the dates thereof, and the results of operations and cash flows of
the Company for the periods set forth therein, all in conformity with generally
accepted accounting principles consistently applied during the periods involved,
subject, with respect to quarterly periods, to year-end adjustments.
<PAGE>
Page 22 of 51 Pages
2.13 Disclosure. This Agreement does not contain any untrue
---------
statement of a material fact or omit to state a material fact necessary in order
to make any statement contained herein or therein, in the light of the
circumstances under which it was made, not misleading. There is no fact known to
the Company that has not been disclosed to Purchaser orally or in writing or in
the Reports that materially adversely affects or, insofar as the Company can
reasonably foresee, will materially adversely affect the Company or the ability
of the Company to perform its obligations under this Agreement or the
Registration Rights Agreement or to consummate the transactions contemplated
hereby or thereby; provided, however, that any disclosure made herein with
respect to any particular representation or warranty shall be deemed a
disclosure for all purposes hereof.
2.14 Material Adverse Change. Since the date of the last Report
------------------------
there has not been any material adverse change nor, to the knowledge of the
Company, is any such change overtly threatened, in the assets, business,
operations or financial condition of the Company.
3. Representations of Purchaser. Purchaser represents, warrants
----------------------------
and covenants to the Company that:
3.1 Organization, etc. Purchaser is a general partnership duly
------------------
organized and validly existing under the laws of the State of New York and has
the requisite power and authority and has been duly authorized to perform its
obligations hereunder and under the Registration Rights Agreement.
3.2 Investment Intent. (a) The Securities being acquired by it
------------------
are being purchased for investment for its own account and not with the view to,
or for resale in connection with, any distribution or public offering thereof.
Purchaser understands that such Securities have not been registered under the
1933 Act or any state securities laws by reason of their contemplated issu- ance
in transactions exempt from the registration requirements of the 1933 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 Purchaser. Purchaser further understands that
such Securities may not be transferred or resold without (i) registration under
the 1933 Act and any applicable state securities laws, or (ii) an exemption from
the requirements of the 1933 Act and applicable state securities laws.
(b) Purchaser understands that an exemption from such
registration is not presently available pursuant to Rule 144 promulgated under
the 1933 Act by the Securities and Exchange Commission and that in any event
Purchaser may not sell any such Securities pursuant to Rule 144 prior to the
expiration of the period required under Rule 144 after it has acquired such
Securities. Purchaser understands that any sales pursuant to Rule 144 can be
made only in full compliance with the provisions of Rule 144.
<PAGE>
Page 23 of 51 Pages
3.3 Location of Principal Office; Qualifications as an Accredited
-------------------------------------------------------------
Investor. The address of Purchaser's principal office is set forth in Section
- --------
7.1 hereof. Purchaser qualifies as an "accredited investor" for purposes of
Regulation D promulgated under the 1933 Act. Purchaser acknowledges that the
Company has made available to it the opportunity to ask questions and receive
answers concerning the terms and conditions of the sale of securities
contemplated by this 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.
Purchaser (a) is able to bear the risk 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 (b) 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 this Agreement.
3.4 Acts and Proceedings. This Agreement has been duly authorized
--------------------
by all necessary action on the part of Purchaser. This Agreement, with respect
to Purchaser, has been duly executed and delivered. This Agreement is a valid
and binding agreement of Purchaser, en- forceable against it in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, fraudulent conveyance, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and to judicial
limitations on the enforcement of the remedy of specific performance and other
equitable remedies.
3.5 No Brokers or Finders. No person, firm or corporation has or
---------------------
will have, as a result of any act or omission by Purchaser, any right, interest
or valid claim against the Company for any commission, fee or other compensation
as a finder or broker, or in any similar capacity, in connection with the
transactions contemplated by this Agreement, except as set forth on Schedule
2.6. Purchaser shall indemnify and hold the Company harmless against any and all
liability with respect to any such commission, fee or other compensation which
may be payable or which shall be determined to be payable as a result of the
actions of Purchaser in connection with the transactions contemplated by this
Agreement.
4. Additional Agreements and Covenants.
-----------------------------------
4.1 Financial Statements. The Company shall provide to Purchaser
--------------------
unaudited monthly and quarterly financial statements, within 30 days after the
last day of each calendar month and within 45 days after the last day of each
fiscal quarter, respectively. In addition, the Company shall provide to
Purchaser audited annual financial statements within 90 days after the end of
each fiscal year. The Company shall provide to Purchaser such additional
information regarding its business and financial condition as Purchaser shall
reasonably request.
4.2 Press Releases. The Company and Purchaser shall consult with
--------------
each other with respect to any press release or public announcement pertaining
to this Agreement or the Registration Rights Agreement, and shall not issue such
press release or make any such public announcement prior to such consultation,
except that (a) the Company may issue any such release or make any such public
announcement as it shall determine, in its sole discretion, may be required by
applicable law after consultation with Purchaser to the extent references to
Purchaser shall be required to be disclosed and (b) Purchaser and its affiliates
may make disclosure on any reports Purchaser or its affiliates shall furnish to
their investors.
4.3 Confidentiality. Purchaser shall keep confidential any and
---------------
all confidential information regarding the Company, including its business,
financial condition, operations, assets, employees and properties, except as may
be required by law.
<PAGE>
Page 24 of 51 Pages
4.4 Further Assurances. The Company, on the one hand, and
-------------------
Purchaser, on the other hand, agree from time to time after the date hereof,
upon the request of the other, to do, execute, acknowledge and deliver, or cause
to be done, executed, acknowledged or delivered, all such further acts,
documents and assurances as may be necessary or appropriate to carry out the
terms of this Agreement.
4.5 Additional Payments. At the option of any Holder (as defined
-------------------
in the Certificate of Designation), such Holder shall have the right to pay
additional consideration upon any conversion, liquidation or issuance of Series
C Shares or Common Stock to the extent necessary to permit such conversion,
liquidation or issuance to comply with applicable law, but any such payment
pursuant to such option shall not in any way reduce the obligation of the
Company under this Agreement if such payment were not to be made.
5. Restriction on Transfer of Securities
-------------------------------------
5.1 Restrictions. The Securities are only transferable pursuant
------------
to (a) an offering registered under the 1933 Act, (b) Rule 144 promulgated
thereunder (or any similar rule then in effect) if such rule is available, or
(c) subject to the conditions specified elsewhere in this Sec- tion 5, any other
legally available means of transfer.
5.2 Legend. Each certificate evidencing Securities shall be
------
endorsed with the following legend:
"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 REGIS- TRATION
STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECU- RITIES LAWS OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COM- PANY THAT THE
TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND
STATE SECURITIES LAWS."
5.3 Removal of Legend. Any legend endorsed on a certificate
------------------
pursuant to Section 5.2 hereof shall be removed, and the Company shall issue a
Security without such legend to the holder of such Security, if such Security is
being disposed of pursuant to a registration under the 1933- Act or pursuant to
Rule 144 or any similar rule then in effect or if such holder provides that
Compa- ny with an opinion of counsel satisfactory to the Company to the effect
that a transfer of such Security may be made without registration. In addition,
if the holder of such Security delivers to the Company an opinion of such
counsel to the effect that no subsequent transfer of such Security shall require
registration under the 1933 Act, the Company shall promptly upon such
contemplated transfer deliver new Securities that shall not bear the legend set
forth in Section 5.2.
<PAGE>
Page 25 of 51 Pages
6. Indemnification.
---------------
6.1 Indemnitors; Indemnified Persons. For purposes of this
----------------------------------
Section 6, each party which, pursuant to this Section 6, agrees to indemnify any
other person or entity shall be referred to, as applicable, as the "Indemnitor"
with respect to such persons and entities, and each such person and entity which
shall be indemnified by the Indemnitor shall be referred to as the "Indemnified
Person."
6.2 Company Indemnity. The Company hereby agrees to indemnify and
-----------------
hold harmless Purchaser and its directors, officers, controlling persons (within
the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act),
agents and employees from and against any and all claims, liabilities, losses,
damages and expenses incurred by such Indemnified Person (including reasonable
attorneys' fees and disbursements) which shall be caused by or related to or
arise out of any material breach of any representation, warranty, covenant or
agreement of the Company con- tained in this Agreement, and shall reimburse such
Indemnified Person for all costs and expenses (including reasonable attorneys'
fees and disbursements) as they shall be incurred, in connection with
investigating, preparing for, or defending any action, claim, investigation,
inquiry or other proceeding, whether or not in connection with pending or
threatened litigation, which shall have been caused by or related to or arise
out of such breach, whether or not such Indemnified Person shall be named as a
party thereto and whether or not any liability shall result therefrom. The
Company shall not, however, be responsible for any claims, liabilities, losses,
damages, or expenses pursuant to this Section 6.2 or otherwise which shall be
finally judicially determined to have resulted primarily from an Indemnified
Person's bad faith, willful misconduct or gross negligence, or any material
breach by Purchaser of this Agreement. The Company further agrees that the
Company shall not, without the prior written consent of Purchaser, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder unless such settlement, compromise or consent shall include an
unconditional release of each Indemnified Person hereunder from all liability
arising out of such claim, action, suit or proceeding.
6.3 Purchaser Indemnity. Purchaser hereby agrees to indemnify and
-------------------
hold harmless each of the Company and its directors, officers, controlling
persons (within the meaning of Section 15 of the 1933 Act or Section 20(a) of
the 1934 Act), agents, including without limitation Robert Conrads, and
employees from and against any and all claims, liabilities, losses, damages and
expenses incurred by such Indemnified Person (including reasonable attorneys'
fees and disbursements) which shall be caused by or related to or arise out of
such Purchaser's material breach of any representation, warranty, covenant or
agreement of such Purchaser contained in this Agree- ment, and shall reimburse
such Indemnified Person for all costs and expenses (including reasonable
attorneys' fees and disbursements) as they shall be incurred, in connection with
investigating, prepar- ing for, or defending any action, claim, investigation,
inquiry or other proceeding, whether or not in connection with pending or
threatened litigation, which shall be caused by or related to or arise out of
such breach, whether or not such Indemnified Person shall be named as a party
thereto and whether or not any liability results therefrom. Purchaser shall not,
however, be responsible for any claims, liabilities, losses, damages, or
expenses pursuant to this Section 6.3 or otherwise which shall be finally
judicially determined to have resulted primarily from an Indemnified Person's
bad faith, willful misconduct or gross negligence, or any material breach by the
<PAGE>
Page 26 of 51 Pages
Company of this Agreement. Purchaser further agrees that it shall not, without
the prior written consent of the Company, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder unless
such settlement, compromise or consent shall include an unconditional release of
each Indemnified Person hereunder from all liability arising out of such claim,
action, suit or proceeding.
6.4 Defense. Promptly after receipt by an Indemnified Person of
-------
notice of the commencement of any action or proceeding with respect to which
indemnification may be sought hereunder, such person shall notify the Indemnitor
of the commencement of such action or proceeding, but failure so to notify the
Indemnitor shall not relieve the Indemnitor from any liability which the
Indemnitor may have hereunder or otherwise, unless the Indemnitor shall be
materially prejudiced by such failure. If the Indemnitor shall so elect, the
Indemnitor shall assume the defense of such action or proceeding, including the
employment of counsel reasonably satisfactory to such Indemnified Person and
shall pay the fees and disbursements of such counsel. In the event, however,
that such Indemnified Person reasonably shall determine in its judgment that
having common counsel would present such counsel with a conflict of interest or
alternative defenses shall be available to an Indemnified Person or if the
Indemnitor shall fail to assume the defense of the action or proceeding in a
timely manner, then such Indemnified Person may employ separate counsel to
represent or defend it in any such action or proceeding, and the Indemnitor
shall pay the reasonable fees and disbursements of such counsel; provided,
--------
however, that the Indemnitor shall not be required to pay the fees and
- -------
disbursements of more than one separate counsel for all Indemnified Persons in
any jurisdiction in any single action or proceeding. In any action or proceeding
the defense of which the Indemnitor shall assume, the Indemnified Person shall
have the right to participate in such litigation and to retain its own counsel
at such Indemnified Person's own expense, so long as such participation shall
not interfere with the Indemnitor's control of such litigation.
7. Miscellaneous.
------------
7.1 Notices. All notices, requests, demands and other
-------
communications required or permitted hereunder shall be made in writing and
shall be deemed to have been duly given and effective: (i) on the date of
delivery, if delivered personally; (ii) on the earlier of the fourth (4th) day
after mailing or the date of the return receipt acknowledgement, if mailed,
postage prepaid, by certified or registered mail, return receipt requested; or
(iii) on the date of transmission if sent by facsimile, telecopy, telegraph,
telex or other similar telegraphic communications equipment,
(a) if to Purchaser, at 888 Seventh Avenue, New York, New York
10106, Attn: Peter Hurwitz, Esq.; facsimile number: (212) 489-2005 or
at such other address or facsimile number as the Purchaser may specify
by written notice to the Company, or
(b) if the Company at 100 Second Avenue South, Suite 1100, St.
Petersburg, Florida 33701, Attention: Robert P. Gordon, Chairman or
Paul W. Henry, Director; facsimile number: (813) 895-0378 or at such
other address or facsimile number as the Company may specify by
written notice to Purchaser.
<PAGE>
Page 27 of 51 Pages
7.2 Benefit of Agreement. All terms and provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
7.3 Governing Law. This Agreement and the legal relations among
-------------
the parties hereto shall be governed by and construed in accordance with the
internal law of the State of New York (without regard to the laws of conflict
that might otherwise apply) as to all matters includ- ing without limitation
matters of validity, construction, effect, performance and remedies.
7.4 Headings. The headings of the Sections of this Agreement have
--------
been inserted for convenience of reference only and do not constitute a part of
this Agreement.
7.5 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.6 Entire Agreement. This Agreement represents the entire
-----------------
agreement among the parties with respect to the subject matter hereof
superseding all prior agreements and understandings, written or oral.
7.7 Expenses. Each party shall be responsible and shall pay for
--------
all expenses incurred by it in connection with the preparation, negotiation and
execution of this Agreement and the Registration Rights Agreement and the
consummation of the transactions contemplated herein and therein; provided,
--------
however, that the Company shall reimburse Purchaser for reasonable attorneys'
- -------
fees which shall actually be incurred by it in connection herewith (including
fees incurred in connection with the preparation, negotiation and execution and
delivery of this Agreement) up to a maximum amount of $30,000.
7.8 Arbitration. Any dispute hereunder or otherwise arising out
-----------
of relating to this Agreement (except for disputes directly relating to a third
party claim for which indemnification may be required to the extent an action
shall have been commenced by a third party in a court or other forum) shall be
resolved only by arbitration by a single arbitrator. The arbitration shall be
held in New York, New York and shall be conducted by the American Arbitration
Association (the "AAA") pursuant to its Commercial Arbitration Rules. The
arbitrator shall be selected by the Company and Purchaser, or, failing such
selection within ten days after any party shall have requested such arbitration,
shall be selected by the AAA. The decision of the arbitrator shall be final and
binding upon the parties, and the judgment upon the arbitral award may be
entered by any court of competent jurisdiction, in law or in equity. Such
decision shall include an award to the prevailing party of all costs and
expenses (including, without limitation, reasonable attorney's fees) incurred in
connection with the resolution of any such dispute. Any award shall include
interest payable thereon at a rate of ten percent per annum from the date of the
commencement of the arbitration. The parties expressly agree that the arbitrator
shall have the power to incorporate injunctive relief or require specific
performance as part of any award.
<PAGE>
Page 28 of 51 Pages
7.9 Schedules. All Schedules referred to herein refer to
---------
information provided in a separate disclosure document but shall be deemed to be
a part hereof for purposes of representations and covenants herein.
Next Page is Signature Page
<PAGE>
Page 29 of 51 Pages
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
stated above.
PHOENIX INFORMATION
SYSTEMS CORP.
By:______________________________
Title:
S-C PHOENIX PARTNERS
By:______________________________
Name:
Title:
<PAGE>
Page 30 of 51 Pages
Schedule 2.3
Capitalization
See attached list.
<PAGE>
Page 31 of 51 Pages
Preemptive Rights
- -----------------
1. Rights granted pursuant to the Convertible Note Purchase Agreement,
dated December 9, 1994, between the Company and Purchaser.
2. Rights granted pursuant to the Offshore Convertible Securities
Subscription Agreement of the Company to Infinity Investors Ltd.
3. Rights granted pursuant to Regulation S Securities Subscription
Agreement, dated as of September 30, 1996, among the Company, Infinity
Investors Ltd. and Fairway Capital Limited.
Registration Rights
- -------------------
1. Rights granted pursuant to the Registration Rights Agreement, dated as
of December 9, 1994, between the Company and Purchaser.
2. Rights granted to Robert Conrads and described in Schedule 2.6.
3. Rights granted to Robert P. Gordon.
4. Rights granted pursuant to the Registration Rights Agreement, dated as
of September 30, 1996, among the Company, Infinity Investors Ltd. and
Fairway Capital Limited.
5. Rights granted pursuant to the Registration Rights Agreement, dated as
of September 30, 1996, between the Company and Infinity Investors Ltd.
<PAGE>
Page 32 of 51 Pages
Schedule 2.6
Brokers and Finders
In connection with this Agreement, the Company has agreed to
accelerate options to purchase 105,000 shares of Common Stock, which were
granted to Robert Conrads pursuant to a Unanimous Written Consent of the Board
of Directors of the Company dated as of September 28, 1995. The exercise price
for such options is $3.60 per share, and such options shall expire on the second
anniversary of the date of this Agreement. In addition, the Company has agreed
that such options shall have piggyback registration rights with no underwriter
cutbacks.
Page 33 of 51 Pages
EXHIBIT A
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF SERIES C
CONVERTIBLE PREFERRED STOCK OF PHOENIX INFORMATION SYSTEMS CORP.
The undersigned, being a duly elected officer of Phoenix
Information Systems Corp. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 151 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the Corporation, the Board of
Directors adopted the following resolution creating a series of 1,500,000 shares
of preferred stock designated as Series C Convertible Preferred Stock.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority
conferred upon the Board of Directors of this Corporation in accordance with the
provisions of the Certificate of Incorporation, there is hereby established a
series of the authorized preferred stock of the Corporation, $.01 par value per
share, which series shall be designated as "Series C Convertible Preferred
Stock," and which shall consist of 1,500,000 shares (collectively, the "Series C
Shares" or singularly, a "Series C Share") and shall have the following dividend
rights, voting rights, liquidation preferences and other rights, qualifications,
limitations and restrictions:
8. Dividend Rights
---------------
8.1 Share Dividends. The holder of record of each Series C Share
---------------
(a "Holder") as of the Record Date (as hereinafter defined) shall be entitled to
receive on each January 1, April 1, July 1 and October 1 during the period
commencing on April 1, 1997 and ending on January 1, 2003 (each, a "Dividend
Payment Date") cumulative dividends ("Share Dividends") of additional Series C
Shares equal to 0.0247935 additional Series C Shares (a) for each such Series C
Share held by such Holder on such Record Date and (b) for each Series C Share
accrued as a Share Dividend (whether or not declared or paid).
8.2 Share Dividend Payment. To the extent permitted by applicable
----------------------
law and not prohibited pursuant to the terms of applicable credit instruments,
senior securities or the Certificate of Incorporation of the Corporation, Share
Dividends, if and when declared on each Series C Share, shall be declared at
least twenty (20) business days prior to the next Dividend Payment Date for
payment on the next Dividend Payment Date to the Holders of record on the date
determined in such declaration, which date shall in no event be more than ten
(10) business days after the date of declaration (the "Record Date").
<PAGE>
Page 34 of 51 Pages
8.3 Participatory Dividends. The Series C Shares shall
-------------------------
participate in all dividends declared and paid on shares of Common Stock to the
same extent as though and as if the Series C Shares had been converted on the
day immediately preceding the record date for the payment of such dividends.
8.4 No Other Dividends. Except as set forth in this Section 1 and
------------------
Section 2 below, the Series C Shares shall be entitled to no other dividends or
distributions.
9. Rights on Liquidation and Ranking. In the event of any liquidation,
---------------------------------
dissolution or winding up (collectively, a "Liquidation") of the Corporation,
whether voluntary or involuntary, each issued and outstanding Series C Share
shall be entitled to receive an amount equal to the greater of (a) the amount
such Series C Share would receive if it were converted into Common Stock
pursuant to Section 4.2 immediately prior to the Record Date for distribution
upon liquidation or (b) the lesser of (i) eighteen dollars ($18.00) or (ii) an
amount obtained by dividing (A) the difference between (1) fifteen million
dollars ($15,000,000) and (2) the product of the shares of Common Stock, par
value $.01 per share, of the Corporation ("Common Stock") into which Series C
Shares shall have been converted pursuant to Section 4 hereof and the Target
Threshold (as defined in Section 4.3(d) hereof) at which each of such Series C
Shares shall have been converted by (B) the number of Series C Shares issued and
outstanding, which amount shall be paid in cash (the "Liquidation Preference").
The full Liquidation Preference shall be paid, or determined and set apart,
prior to any distribution in respect of the Common Stock. In the event that the
assets of the Corporation available for distribution to its stockholders shall
be insufficient to pay the full liquidation preferences (including the
Liquidation Preference) for each series of the Corporation's securities entitled
thereto, the entire amount of assets of the Corporation available for
distribution to stockholders shall be paid first, ratably in respect of
-----
liquidation preferences applicable to the Corporation's Series A Convertible
Preferred Stock, par value $.01 per share, and Series B Convertible Preferred
Stock, par value $.01 per share, and such other securities of the Corporation
which, by their terms, shall rank senior, as to liquidation, to the Series C
Shares, second, ratably in respect of the liquidation preferences applicable to
------
the Series C Shares and such other securities of the Corporation which, by their
terms, shall rank on a parity with the Series C Shares as to liquidation, third,
-----
in respect of liquidation preferences applicable to shares of such other
securities which shall rank junior, as to liquidation, to the Series C Shares,
and holders of Common Stock shall receive nothing. A reorganization or any other
consolidation, share exchange or merger of the Corporation with or into any
other corporation (collectively, a "Merger"), or any other sale of all or
substantially all of the assets of the Corporation, shall not be deemed to be a
Liquidation of the Corporation within the meaning of this Section 2, and the
Series C Shares shall be entitled only to the rights contained in the Delaware
General Corporation Law and the rights contained in other Sections hereof.
10. Voting Rights.
-------------
10.1 Voting Rights. In addition to the rights hereinafter specified in
-------------
this Section 3 and any other rights provided by law or the By-laws of the
<PAGE>
Page 35 of 51 Pages
Corporation, each Series C Share shall entitle the Holder to such number of
votes per share as shall equal the number of shares of Common Stock which would
have been obtained upon the conversion of such Series C Share at the time in
question as provided in Section 4 hereof, and shall further entitle the Holder
to vote on all matters, including, without limitation, the election of directors
of the Corporation, as to which holders of Common Stock shall be entitled to
vote (with the number of votes specified in this Section 3.1), together with
such holders of Common Stock as one class and in the same manner and with the
same effect as such holders of Common Stock. Copies of all notices sent to the
holders of Common Stock shall be simultaneously sent to each Holder.
10.2 Voting as a Class. The Corporation shall not without the
-------------------
affirmative consent or approval of the Holders of a majority of the outstanding
Series C Shares, given by written consent in lieu of a meeting or by vote at a
meeting called for such purpose for which notice shall have been given to the
Holders of the Series C Shares in the manner provided by law (i) in any manner
authorize, create, designate, issue or sell any class or series of capital stock
(including any shares of treasury stock) or rights, options, warrants or other
securities convertible into or exercisable for capital stock or any debt
security which by its terms shall be convertible into or exchangeable for any
equity security or shall have any other equity feature or any security that
shall be a combination of debt and equity, which, in each case, as to the
payment of dividends and distributions to be made upon a Liquidation shall be on
parity with or senior to the Series C Shares; (ii) effect a sale of all or
substantially all of the Corporation's assets, a Merger or a Liquidation; (iii)
repurchase or redeem any Common Stock other than pursuant to employee vesting or
repurchase agreements in effect from time to time and purchases from officers,
directors and employees upon termination of their relationship with the
Corporation and other than as may be required by any binding commitment of the
Corporation which shall have existed as of the first date of issuance of the
Series C Shares; or (iv) declare or pay any dividends on Common Stock.
11. Conversion Rights--Common Stock.
-------------------------------
11.1 Dividends on Conversion. The Holder of any Series C Shares
------------------------
which shall be the subject of a conversion pursuant to this Section 4 hereof
shall, on the Conversion Date (as defined in Section 4.6 hereof), receive on the
day immediately preceding such Conversion Date, an amount of Series C Shares
equal to the difference between (a) the amount of Share Dividends that would
have accrued under Section 1.1 hereof from the date of issuance of such Series C
Shares until January 1, 2003, as if such Series C Shares shall have remained
outstanding until January 1, 2003, and (b) Share Dividends actually paid to such
Holder.
11.2 Optional Conversion. Each Series C Share shall be
---------------------
convertible, together with all Share Dividends thereon, at the option of the
Holder thereof, at any time and from time to time into that number of fully paid
and non-assessable shares of Common Stock obtained by multiplying ten by the
Conversion Rate then in effect. For purposes hereof, "Conversion Rate" shall
mean the reciprocal of the Target Threshold (as defined below), expressed as an
absolute number.
<PAGE>
Page 36 of 51 Pages
11.3 Automatic Conversion. Upon the occurrence of an Event of
---------------------
Conversion, each outstanding Series C Share, by virtue of, and simultaneously
with the occurrence of the Event of Conversion and without any action on the
part of the Holder, shall be deemed automatically converted into such number of
fully paid and nonassessable shares of Common Stock as shall have been obtained
by the Holder upon the voluntary conversion of such Series C Share on the date
of the Event of Conversion as provided in Section 4.2. For purposes hereof, (a)
"Event of Conversion" means the earlier of (i) January 1, 2003, or (ii) the date
on which the Market Price of the Common Stock shall be at least $3.60 per share;
provided, however, that such date shall not occur prior to June 23, 1997; (b)
- -------- -------
Market Price" on any day means the average of the closing bid prices per share
of Common Stock on the National Association of Securities Dealers Inc.
Over-The-Counter Bulletin Board (the "Nasdaq System"), or on the principal
exchange where the Common Stock is then traded, in each case, for the ten (10)
consecutive Trading Days immediately preceding the date of determination; and
(c) "Trading Day" means a business day in which the principal market on which
the Common Stock is traded is open for trading for at least four hours. If at
the time of any computation pursuant to this paragraph the Common Stock is not
then traded on any trading market, the "Market Price" for the purposes hereof
shall be the fair value as reasonably determined in good faith by the Board of
Directors of the Corporation.
11.4 Adjustments Upon Issuances of Shares and Certain Events.
-------------------------------------------------------
(a) If the Common Stock issuable on conversion of the Series
C Shares shall be changed into the same or a different number of shares of any
other class or classes of stock, whether by capital reorganization,
reclassification or otherwise, the Holders shall, upon its conversion, be
entitled to receive, in lieu of the Common Stock which the Holders would have
become entitled to receive but for such change, a number of shares of such other
class or classes of stock that would have been subject to receipt by the Holders
if they had exercised their rights of conversion of the Series C Shares
immediately before that change.
(b) If at any time there shall be a Merger, then, as a part
of such Merger, lawful provision shall be made so that the Holders thereafter
shall be entitled to receive upon conversion of the Series C Shares, the number
of shares of stock or other securities or property of the Corporation, or of the
successor corporation resulting from such Merger to which holders of Common
Stock deliverable upon conversion of the Series C Shares would have been
entitled on such Merger if the Series C Shares had been converted immediately
before that Merger to the end that the provisions of this Section shall be
applicable after that event as nearly equivalently as may be practicable.
(c) Any adjustment made pursuant to paragraphs (a) or (b)
above shall become effective at the close of business on the day upon which such
reclassification, Merger or similar transaction shall become effective.
(d) In case the Corporation shall sell or issue shares
(including by way of stock dividend, distribution, stock split or reverse split)
<PAGE>
Page 37 of 51 Pages
of Common Stock, warrants, options, or other rights to purchase Common Stock or
securities convertible or exchangeable into any of the foregoing excluding
shares of Common Stock any of the foregoing issued or reserved for issuance by
the Corporation:
(i) in any transaction described in paragraphs (a) or
(b) above;
(ii) upon conversion of the Series C Shares;
(iii) upon conversion, exercise or exchange of rights,
options, warrants or convertible or exchangeable securities outstanding or as to
which a binding commitment shall have existed as of the first date of the
issuance of the Series C Shares or which may be issued to employees, consultants
and directors of such Corporation in such capacities pursuant to any plan
approved by the Board of Directors of the Corporation from time to time; or
(iv) as compensation to officers, directors,
consultants and others performing services to the Corporation, provided the
number of such shares of Common Stock shall not be in excess, in the aggregate,
of 10% of the outstanding shares of Common Stock from time to time.
and the price per share (determined in the case of rights, options, warrants or
convertible or exchangeable securities as the quotient of (x) the aggregate
consideration received or receivable by the Corporation upon the sale and
issuance of such rights, options, warrants or convertible or exchangeable
securities plus the total consideration payable to the Corporation upon such
exercise or conversion divided by (y) the total number of shares of Common Stock
covered by such rights, options, warrants or convertible or exchangeable
securities) shall be lower than the Target Threshold (as defined below) on the
date of such issuance, then the Target Threshold in effect immediately prior to
such issuance shall upon such issuance be reduced to equal the number determined
by multiplying such Target Threshold by a fraction, the numerator of which shall
be an amount equal to the sum of (A) the number of shares of Common Stock
outstanding on a fully-diluted basis (except with respect to shares of Common
Stock issuable on conversion of Series C Shares) immediately prior to such
issuance plus (B) the number of shares of Common Stock which the aggregate
consideration received for the issuance of such additional shares of Common
Stock would purchase at such Target Threshold, and the denominator of which
shall be the total number of shares of Common Stock outstanding, on a fully
diluted basis (except with respect to shares of Common Stock issuable on
conversion of Series C Shares), immediately after such issuance. Such adjustment
shall be made successively whenever such an issuance shall be made hereunder
and, in the event any adjustment shall be made in respect of the issuance of any
rights, options warrants or convertible or exchangeable securities, which shall
lapse or terminate unexercised or converted, the Target Threshold shall be
readjusted to the amount it would have been had no such issuance occurred. For
purposes hereof, "Target Threshold" means $1.00 or such lower number to which it
may be adjusted, from time to time, pursuant to this Section 4.4(d).
<PAGE>
Page 38 of 51 Pages
(e) For the purposes of any computation to be made in accordance
with Section 4.4(d), the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of Common Stock for
a consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by the
Corporation for such shares (or, if the shares of Common Stock shall be offered
by the Corporation for subscription, the subscription price, or, if shares of
Common Stock shall be sold to underwriters or dealers for public offering
without a subscription offering, the public offering price, before deducting
therefrom any compensation paid or discount allowed in the sale, underwriting or
purchase thereof by underwriters or dealers or others performing similar
services, or any expenses incurred in connection therewith).
(ii) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Corporation) of shares of
Common Stock for a consideration part or all of which shall be other than cash,
the amount of the consideration therefor other than cash shall be deemed to be
the value of such consideration as determined in good faith by the Board of
Directors of the Corporation.
(iii) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Corporation shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of stockholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(iv) The reclassification of securities of the Corporation, other
than shares of Common Stock, into securities including shares of Common Stock
shall be deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately after the opening of business on the
day following the record date for the determination of security holders entitled
to receive such shares, and the value of the consideration allocable to such
shares of Common Stock shall be determined as provided in clause (ii) of this
Section 4.4(e).
(v) The number of shares of Common Stock at any one time
outstanding shall include the aggregate number of shares issued or issuable
(other than in respect of the Series C Shares) upon the exercise of then
outstanding options, rights, warrants and upon the conversion or exchange for
then outstanding convertible or exchangeable securities.
11.5 No Impairment. The Corporation shall not, by amendment of its
--------------
Certificate of Incorporation or through any recapitalization, transfer of
assets, Merger, dissolution or any other voluntary action or inaction, avoid or
seek to avoid the observance or performance of any of the terms to be observed
<PAGE>
Page 39 of 51 Pages
or performed hereunder by the Corporation, but shall at all times in good faith
assist in the carrying out of all the provisions of this Certificate of
Designation and in taking all such actions as may be necessary or appropriate in
order to protect the conversion rights of the Holders against impairment.
11.6 Conversion Method. Any Holder of Series C Shares may, at any
-----------------
time, exercise the conversion rights as to such Series C Shares by delivering to
the Corporation during regular business hours, care of the then transfer agent
(the "Transfer Agent") for the Corporation, a notice requesting conversion on a
specified date and the number of Series C Shares that the Holder shall elect to
convert (a "Notice of Conversion"), with a copy of such Notice of Conversion
transmitted via facsimile to the Corporation. The Notice of Conversion shall
also state the names and address of the persons to whom certificates for shares
of Common Stock shall be issued, the denominations of such certificates and
reasonable delivery instructions with respect thereto. Each conversion shall be
deemed to have been effected immediately on the close of business on the date
such Notice of Conversion shall be received (including receipt via facsimile) by
the Transfer Agent (the "Conversion Date"); provided, that the Holder shall be
--------
required to deliver to the Corporation the certificate or certificates
representing the Series C Shares so to be converted, within four (4) Trading
Days after the Conversion Date. The person in whose name any certificate for
shares of Common Stock shall be issuable upon the conversion shall be deemed to
have become the holder of record of the Common Stock at such time. If the stock
transfer books of the Corporation shall be closed on the Conversion Date, the
Conversion Date for purposes of determining record ownership shall be the next
succeeding day on which the stock transfer books shall be open (and the
conversion shall be deemed to have been effected immediately prior to the close
of business on that day), but in all cases the conversion shall be at the
Conversion Rate in effect on the Conversion Date. As promptly as practicable
after the Conversion Date, the Corporation shall cause the Transfer Agent to
issue and deliver to such Holder, at the expense of the Corporation and in
accordance with such Holder's delivery instructions, a certificate or
certificates for the number of full shares of Common Stock to which such Holder
shall be entitled and cash with respect to any fractional interest in a share of
Common Stock as provided in Section 4.7 below. The Corporation shall accept and
act upon one or more Notices of Conversion in the order in which such notices
shall be received by the Transfer Agent in accordance with the foregoing notice
procedures.
11.7 Fractional Shares of Common Stock. No fractional shares of
----------------------------------
Common Stock or scrip shall be issued upon conversion of Series C Shares. If
more than one Series C Share shall be surrendered for conversion at any one time
by the same Holder, the number of full shares of Common Stock issuable upon
conversion of such Series C Shares shall be computed on the basis of the
aggregate number of Series C Shares so surrendered. Instead of any fractional
shares of Common Stock which otherwise would be issuable upon conversion of any
Series C Shares, the Corporation shall pay a cash adjustment in respect of such
fractional interest based upon the Market Price in effect at the close of
business on the last business day prior to the Conversion Date.
11.8 Taxes. All shares of Common Stock issued upon conversion of
-----
Series C Shares shall be validly issued, fully paid and nonassessable. The
<PAGE>
Page 40 of 51 Pages
Corporation shall pay any and all documentary stamp or similar issue or transfer
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series C Shares pursuant hereto. The Corporation
shall not, however, be required or pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of shares of Common Stock in
a name other than that in which the Series C Shares so converted shall have been
registered, and no such issue or delivery shall be made unless and until the
person requesting such transfer shall have paid to the Corporation the amount of
any such tax or shall have established to the satisfaction of the Corporation
that such tax shall have been paid or that no such tax shall be payable.
11.9 Surrendered Series C Shares. All certificates representing
---------------------------
Series C Shares which shall be converted shall be appropriately cancelled on the
books of the Corporation, and the Series C Shares so converted represented by
such certificates shall be restored to the status of authorized but unissued
Series C Shares.
11.10 Available Common Stock and Series C Shares. The Corporation
------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
Series C Shares, such number of shares of Common Stock as shall from time to
time be sufficient to effect a conversion of all outstanding Series C Shares
under this Section 4, as such number may from time to time be adjusted pursuant
thereto, and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding Series C Shares, the Corporation shall promptly take such corporate
action as may, in the opinion of its counsel and subject to any necessary
approval of its stockholders, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose. The Corporation shall at all times reserve and keep available
out of its authorized but unissued Series C Shares, solely for the purpose of
issuing Share Dividends, such number of Series C Shares as shall from time to
time be sufficient to issue all such Share Dividends, and if at any time the
number of authorized but unissued Series C Shares shall not be sufficient to
issue all such Share Dividends, the Corporation shall promptly take such
corporate action as may, in the opinion of its counsel and subject to any
necessary approval of its stockholders, be necessary to increase its authorized
but unissued shares of Series C Shares to such number of shares as shall be
sufficient for such purpose.
11.11 Notice to Holders. Promptly upon the occurrence of any
-----------------
event which shall require an adjustment to the conversion rights of the Series C
Shares, the Corporation shall mail to each Holder at the Holder's address as it
appears in the stock records of the Corporation, a notice describing such event
and the adjustment. Upon any adjustment in the Conversion Rate or Target
Threshold, the Corporation shall mail to each Holder at the Holder's address as
it appears in the stock records of the Corporation a notice setting forth the
adjusted Conversion Rate or Target Threshold and the method of calculation
thereof. Any such adjustment shall be conclusive evidence of the correctness of
the adjustment, absent manifest error. In the event that the Company shall (a)
propose at any time to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights or (b) effect any transaction of the type described in
<PAGE>
Page 41 of 51 Pages
Section 4.4 hereof involving a change in the Common Stock, then, in connection
with each such event, the Company shall send to the Holders of the Series C
Shares at least 10 days' prior written notice of the date on which a record
shall be taken for making such offer or, in the case of (b), for voting on any
such transaction or, if no vote of stockholders shall be required, when such
transaction shall take place (and specifying the time on which the holders of
Common Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such event).
RESOLVED FURTHER, that the President or Vice President and the
Secretary or any Assistant Secretary of the Corporation are each authorized to
do or cause to be done all such acts or things and to make, execute and deliver
or cause to be made, executed and delivered all such agreements, documents,
instruments and certificates in the name and on behalf of the Corporation or
otherwise as they deem necessary, desirable or appropriate to execute or carry
out the purpose and intent of the foregoing resolution.
<PAGE>
Page 42 of 51 Pages
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate
PHOENIX INFORMATON SYSTEMS CORP.
By: _______________________________
Title: ________________________
_________________________
Secretary
EXHIBIT AJ
----------
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT dated as of December 20, 1996,
is by and between PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation (the
"Company"), and S-C Phoenix Partners, a New York general partnership (the
"Rights Holder").
This Agreement is made pursuant to the Series C Convertible
Preferred Stock Purchase Agreement (the "Purchase Agreement") dated the date
hereof, between the Company and the Rights Holder relating to the purchase by
the Rights Holder of 1,388,888.889 shares of Series C Convertible Preferred
Stock, par value $.01 per share, of the Company (the "Shares"), which are
convertible into shares of common stock, par value $.01 per share, of the
Company ("Common Shares"). In order to induce the Rights Holder to purchase the
Shares, the Company has agreed to provide registration rights with respect to
the Common Shares issuable upon conversion of the Shares, as set forth herein.
Accordingly, the parties hereby agree as follows:
12. Definitions. For the purposes of this Agreement:
-----------
(a) The terms, "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933 (the "1933 Act"),
and the declaration or ordering of effectiveness of such registration statement
or document; and
(b) The term "Registrable Securities" means (i) the Common Shares
issued to the Rights Holder upon conversion of the Shares, and (ii) any other
Common Shares issued by the Company that are acquired by the Rights Holder by
purchase or transfer or issued to the Rights Holder by the Company upon the
conversion or exercise of any warrant, right or other security that is issued as
a dividend or other distribution with respect to, in exchange for or in
replacement of any Common Shares or other securities of the Company.
13. Registration Rights.
-------------------
13.1 Registration upon Demand. (a) At any time after the date
--------------------------
hereof, upon the written request of the holders of fifty (50%) percent or more
of the Registrable Securities to which rights hereunder have been assigned in
accordance herewith (also "Rights Holders"), requesting that the Company effect
the registration under the 1933 Act of all or part of the Registrable
Securities, which request shall specify the intended method of distribution
thereof, the Company shall use its best efforts to so register (a "Demand
<PAGE>
Page 44 of 51 Pages
Registration"), as expeditiously as may be practicable, the Registrable
Securities that such holders have requested the Company to register; provided,
however, that the Rights Holders shall have the right to make only two Demand
Registrations; and provided further that at least 180 days shall have elapsed
after the effective date of the first Demand Registration before any Rights
Holders may request the second Demand Registration hereunder or under any other
registration rights agreement relating to securities of the Company to which the
Rights Holders are parties.
(b) If at any time after the date hereof the Company is eligible
to file a Registration Statement on Form S-3 under the 1933 Act, upon written
request of any Rights Holder, the Company shall use its best efforts to prepare
and file such Registration Statement with the Securities and Exchange Commission
(the "Commission"), registering all or part of the Registrable Securities, at
such Rights Holder's expense; provided, that in each such registration the price
of the Registrable Securities being offered, without regard to any discounts or
commissions, shall be at least $1,000,000.
13.2 "Piggy-back" Registrations. If, at any time after the date
--------------------------
hereof, the Company proposes to register any securities under the 1933 Act in
connection with any offering of its securities, whether or not for its own
account, the Company shall furnish prompt written notice to the Rights Holders
of the Company's intention to effect such registration and the intended method
of distribution in connection therewith. Upon the written request of the Rights
Holders made to the Company within 30 days after the receipt of such notice, the
Company shall include in such registration the number of Registrable Securities
requested to be registered by such Rights Holders (a "Piggy-back Registration").
13.3 Obligations of the Company. Whenever the Company is required
--------------------------
under this Section 2 to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Commission a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective and keep such registration
statement effective for up to 60 days;
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
applicable law with respect to the disposition of all securities covered by such
registration statement;
(c) Furnish to each Rights Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of applicable law, and such other documents as it may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by such Rights Holder;
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities laws of such
<PAGE>
Page 45 of 51 Pages
states as shall be reasonably requested by the Rights Holders or the
underwriters, in the case of an underwritten offering; provided that the Company
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process in any
such jurisdictions;
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. The managing
underwriter shall be selected by Rights Holders holding a majority of the
Registrable Securities to be included in such registration in the case of a
Demand Registration, which managing underwriter shall be reasonably satisfactory
to the Company. The Rights Holders also shall enter into and perform their
obligations under such an agreement; and
(f) Notify the Rights Holders, at any time when a prospectus
relating thereto is required to be delivered under applicable law, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(g) Use commercially reasonable efforts to list such Registrable
Securities on any national securities exchange on which any Common Shares are
listed or, if the Common Shares are not listed on a national securities
exchange, use commercially reasonable efforts to qualify such Registrable
Securities for inclusion on the automated quotation system of the National
Association of Securities Dealers, Inc.
13.4 Furnish Information. It shall be a condition precedent to
--------------------
the obligation of the Company to take any action pursuant to this Section 2 that
each Rights Holder shall furnish to the Company such information regarding such
Rights Holders, the Registrable Securities held by it and the intended method of
disposition of such Registrable Securities as shall be required to effect the
registration of the Registrable Securities.
13.5 Expenses of Registration. With respect to a Demand
---------------------------
Registration or Piggy-back Registration, the Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities including (without limitation) all registration,
filing and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company and, in the case of a Demand
Registration, one counsel selected by the Rights Holders, but excluding
underwriting discounts and commissions relating to Registrable Securities.
13.6 Underwriting Requirements. In connection with any offering
--------------------------
involving an underwriting of Common Shares in which a Rights Holder has
"piggy-back" rights, the Company shall not be required under Section 2.2 to
include any of the Registrable Securities of the Rights Holder in the
registration of the securities to be included in such underwriting unless the
Rights Holder accepts the terms of the underwriting as agreed upon between the
<PAGE>
Page 46 of 51 Pages
Company and the underwriters selected by it, and then only in such quantity as
the underwriters determine in their reasonable discretion will not jeopardize
the success of the offering by the Company. If the total amount of securities,
including Registrable Securities requested by the Rights Holders and any other
shareholder to be included in such offering, exceeds the number of securities
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering up to 105,000 Common Shares held by Robert Conrads ("Conrads") and only
such number of Registrable Securities as, together with the securities, if any,
being registered by all other shareholders, including Robert P. Gordon
("Gordon") and the other holders of registration rights with respect to
securities of the Company on the date hereof (the "Other Rights Holders"), the
underwriters determine in their reasonable discretion will not jeopardize the
success of the offering. The securities of all other shareholders (other than
Gordon, Conrads and the Other Rights Holders) shall be reduced (or eliminated)
in order to satisfy the reduction required by the underwriters before any
Registrable Securities of the Rights Holder are reduced (or eliminated). For so
long as a Rights Holder has rights pursuant to Sections 2.1 and 2.2 hereof, if
the Company grants to any person any rights to have his or its securities
included in any registration statement to be filed by the Company, such rights
shall be subordinate to the rights granted to the Rights Holder herein.
13.7 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company shall indemnify
and hold harmless the Rights Holder, any underwriter (as defined in the 1933 Act
or other appli- cable law) for the Rights Holder, each person, if any, who
controls the Rights Holder or underwriter within the meaning of the 1933 Act or
the Securities Exchange Act of 1934 (the "1934 Act") or other applicable law,
and any officer, director, partner or other person who controls such entity
within the meaning of the 1933 Act or other applicable law or agent thereof,
against any and all losses, claims, damages or liabilities (joint or several) to
which any of the foregoing persons may become subject under the 1933 Act or
other applicable law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading or (iii) any
violation or alleged violation by the Company of the 1933 Act or other
applicable law, or any rule or regulation promulgated under the 1933 Act or
other applicable law; and the Company shall pay to the Rights Holder,
underwriter or controlling person any reasonable legal or other expenses
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action; provided that the indemnity agreement
<PAGE>
Page 47 of 51 Pages
contained in this Section 2.7(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any
such loss, claim, damage, liability or action to the extent that it arises out
of or is based upon (iii).1 a Violation that occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by the Rights Holder or such underwriter or controlling
person or Page 34 of 50 Pages (iii).2 the use by any party, after receipt of a
notice from the Company pursuant to Section 2.3(f) above, of the prospectus
referred to in such notice.
(b) To the extent permitted by law, the Rights Holder shall
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or other applicable law,
any underwriter and any controlling person of any such underwriter, against any
losses, claims, damages or liabilities (joint or several) to which any of the
foregoing persons may become subject under the 1933 Act or other applicable law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon (i) any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by the Rights Holder expressly
for use in connection with such registration, or (ii) the use by the Rights
Holder, after receipt of a notice from the Company pursuant to Section 2.3(f)
above, of the prospectus referred to in such notice; and the Rights Holder shall
pay any reasonable legal or other expenses incurred by any person to be
indemnified pursuant to this Section 2.7(b) in connection with investigating or
defending any such loss, claim, damage, liability or action; provided that the
--------
indemnity agreement contained in this Section 2.7(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Rights Holder, which consent
shall not be unreasonably withheld; and provided, further, that in no event
-------- -------
shall any indemnity under this Section 2.7(b) exceed the proceeds from the
offering received by the Rights Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.7 of notice of the commencement of any action (including any
governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under this Section 2.7,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in and, to the
extent the indemnifying party so desires, to assume the defense thereof;
provided that an indemnified party (together with all other indemnified parties
- --------
that may be represented without conflict by one counsel) shall have the right to
retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time after the commencement
of any such action, if prejudicial to the ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 2.7, but the omission so to deliver written notice to the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.7.
<PAGE>
Page 48 of 51 Pages
(d) The obligations of the Company to the Rights Holder under
this Section 2.7 shall survive the completion of any offering of Registrable
Securities under any registration statement pursuant to this Section 2 or
otherwise.
13.8 "Market Stand-off" Agreement. The Rights Holder hereby
-----------------------------
agrees that, during the period specified by the Company and the managing
underwriter in connection with any underwritten public offering of any of the
Company's securities, the Rights Holder shall not, to the extent reasonably
requested by the Company and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of any securities
of the Company held by the Rights Holder at any time during such period, except
for any Common Shares included in such registration; provided, that private
--------
transfers of such securities shall not be restricted during such period; and
provided further, that such period shall not extend more than 15 days prior to
- -------- -------
or beyond 120 days after the closing of the offering and, provided, further,
-------- -------
that, with the exception of Conrads, such restriction shall be no more extensive
in scope or duration than the restrictions imposed on any other person who has
been granted registration rights or is an officer or director of the Company. In
order to enforce the foregoing covenant, the Company may impose stop transfer
instructions with respect to the Registrable Securities of the Rights Holder
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
14. Miscellaneous.
-------------
14.1 Successors and Assigns. The provisions of this Agreement
-----------------------
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties hereto; provided, however, that the Company
-------- -------
shall not assign any of its obligations hereunder without the prior written
consent of the Rights Holder and that the Rights Holder may not assign any of
its rights hereunder except to transferees to which it has transferred any
Registrable Securities, in accordance the Purchase Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and permitted assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
14.2 Governing Law. This Agreement shall be governed by and
--------------
construed in accordance with the internal laws of the State of New York, without
regard to the conflicts of law principles thereof.
14.3 Counterparts. This Agreement may be executed by one or more
------------
of the parties to this Agreement on separate counterparts, each of which shall
be deemed an original, but both of which together shall constitute one and the
same instrument.
14.4 Captions and Headings. The captions and headings used in
----------------------
this Agreement are used for convenience only and are not to be considered in
construing or inter- preting this Agreement.
<PAGE>
Page 49 of 51 Pages
14.5 Notices. Any notice, demand or delivery authorized by this
-------
Agreement shall be in writing and shall be sufficiently given or made upon
receipt thereof, if made by personal delivery or facsimile transmission (with
confirmed receipt thereof), or four business days after mailed, if sent by
first-class mail, postage prepaid, addressed, to the Rights Holder or the
Company, as the case may be, at their respective addresses below, or such other
address as shall have been furnished to the party giving or making such notice,
demand or delivery:
(a) If to the Company, to it at:
Phoenix Information Systems Corp.
100 Second Avenue South, Suite 100
St. Petersburg, Florida 33701
Attention: Robert P. Gordon, Chairman
Facsimile: 813-895-0378
(b) If to the Rights Holder, to it at:
S-C Phoenix Partners
c/o S-C Phoenix Holdings, L.L.P.
888 Seventh Avenue
New York, New York 10106
Facsimile: (212) 489-2005
with a copy to:
Soros Fund Management
888 Seventh Avenue, Suite 3300
New York, New York 10106
Attention: Sean A. Warren, Esq.
Facsimile: 212-489-2005
[Next Page is Signature Page]
<PAGE>
Page 50 of 51 Pages
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first above written.
S-C Phoenix Partners
By: S-C PHOENIX HOLDINGS, L.L.C.,
a General Partner
By: __________________________________
Name:
Title:
PHOENIX INFORMATION SYSTEMS CORP.
By: __________________________________
Name:
Title:
Exhibit AK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that I, GEORGE SOROS, hereby make, constitute and
appoint MICHAEL C. NEUS as my agent and attorney in fact for the purpose of
executing in my name, in my personal capacity or in my capacity as sole
proprietor of Soros Fund Management all documents, certificates, instruments,
statements, filings and agreements ("documents") to be filed with or delivered
to any foreign or domestic governmental or regulatory body or required or
requested by any other person or entity pursuant to any legal or regulatory
requirement relating to the acquisition, ownership, management or disposition of
securities or other investments, and any other documents relating or ancillary
thereto, including but not limited to, all documents relating to filings with
the Securities and Exchange Commission (the "SEC") pursuant to the Securities
Act of 1933 or the Securities and Exchange Act of 1934 (the "Act") and the rules
and regulations promulgated thereunder, including: (1) all documents relating to
the beneficial ownership of securities required to be filed with the SEC
pursuant to Section 13(d) or Section 16(a) of the Act including, without
limitation: (a) any acquisition statements on Schedule 13D or Schedule 13G and
any amendments thereto, (b) any joint filing agreements pursuant to Rule
13d-1(f) and (c) any initial statements of, or statements of changes in,
beneficial ownership of securities on Form 3, Form 4 or Form 5 and (2) any
information statements on Form 13F required to be filed with the SEC pursuant to
Section 13(f) of the Act.
All past acts of the attorney-in-fact in furtherance of the foregoing are hereby
ratified and confirmed.
This power of attorney shall be valid from the date hereof until revoked by me.
IN WITNESS WHEREOF, I have executed this instrument this 27th day of July, 1995.
/s/ George Soros
-----------------------
GEORGE SOROS
