<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 8)*
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)
March 15, 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 48 Pages
Exhibit Index: Page 16
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 2 OF 48 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
S-C Phoenix Partners
2 Check the Appropriate Box If a Member of a Group*
a. /x/
b. / /
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) / /
6 Citizenship or Place of Organization
New York
7 Sole Voting Power
Number of 23,944,999
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 23,944,999
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
23,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
44.34%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 3 OF 48 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Quantum Industrial Partners LDC
2 Check the Appropriate Box If a Member of a Group*
a. /x/
b. / /
3 SEC Use Only
4 Source of Funds*
WC
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) / /
6 Citizenship or Place of Organization
Cayman Islands
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 23,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
23,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
23,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
44.34%
14 Type of Reporting Person*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 4 OF 48 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
S-C Phoenix Holdings, L.L.C.
2 Check the Appropriate Box If a Member of a Group*
a. /x/
b. / /
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) / /
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 23,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
23,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
23,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
44.34%
14 Type of Reporting Person*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 5
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 5 OF 48 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
QIH Management Investor, L.P.
2 Check the Appropriate Box If a Member of a Group*
a. /x/
b. / /
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) / /
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 23,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
23,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
23,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
44.34%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 6
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 6 OF 48 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
QIH Management, Inc.
2 Check the Appropriate Box If a Member of a Group*
a. /x/
b. / /
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) / /
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 23,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
23,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
23,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
44.34%
14 Type of Reporting Person*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 7
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 7 OF 48 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
George Soros
2 Check the Appropriate Box If a Member of a Group*
a. /x/
b. / /
3 SEC Use Only
4 Source of Funds*
PF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) / /
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 23,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
23,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
23,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
44.34%
14 Type of Reporting Person*
IA; IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 8
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 8 OF 48 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Winston Partners, L.P.
2 Check the Appropriate Box If a Member of a Group*
a. /x/
b. / /
3 SEC Use Only
4 Source of Funds*
WC
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) / /
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 23,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
23,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
23,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
44.34%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 9
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 9 OF 48 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Chatterjee Fund Management, L.P.
2 Check the Appropriate Box If a Member of a Group*
a. /x/
b. / /
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) / /
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 23,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
23,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
23,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
44.34%
14 Type of Reporting Person*
IA; PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 10
SCHEDULE 13D
CUSIP NO. 719077109 PAGE 10 OF 48 PAGES
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Purnendu Chatterjee
2 Check the Appropriate Box If a Member of a Group*
a. /x/
b. / /
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) / /
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 23,944,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
23,944,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
23,944,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* / /
13 Percent of Class Represented By Amount in Row (11)
44.34%
14 Type of Reporting Person*
IA; IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 11
Page 11 of 48 Pages
This Amendment No. 8 to Schedule 13D relates to the shares of
Common Stock, $.01 par value (the "Shares"), of Phoenix Information Systems
Corp. (the "Issuer") and amends the initial statement on Schedule 13D dated
December 16, 1994 and all prior amendments thereto (collectively, the "Initial
Statement"). This Amendment No. 8 is being filed to report the acquisition of a
Tranche E Note in the amount of $2,100,000 (the "Tranche E Note") and the
subsequent conversion of the Tranche E Note into 1,400,000 Shares, as well as
the acquisition of the Early Purchase Warrant (as such term is defined herein)
in consideration for the accelerated funding and early conversion of the Tranche
E Note. Capitalized terms used herein but not defined herein shall have the
meanings assigned to them in the Initial Statement. The information set forth in
the Initial Statement is amended as set forth herein.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
On December 9, 1994, Phoenix Partners and the Issuer entered
into the Note Purchase Agreement, a copy of which is attached as Exhibit D to
the Initial Statement. Pursuant to the Note Purchase Agreement, on March 15,
1996, Phoenix Partners and the Issuer entered into a letter agreement (the
"March 1996 Letter Agreement"), a copy of which is attached as Exhibit AF
hereto. Pursuant to the March 1996 Letter Agreement, Phoenix Partners, among
other things, purchased from the Issuer a Tranche E Note in the principal
amount of $2,100,000, a copy of which is attached as Exhibit AG hereto, using
the working capital or personal funds of its partners. Concurrently therewith,
Phoenix Partners converted the Tranche E Note into 1,400,000 Shares at a
conversion price of $1.50 per share (subject to the issuance of additional
shares upon adjustment of the conversion price as provided in the Tranche E
Note). In addition, pursuant to the March 1996 Letter Agreement and a warrant
agreement between Phoenix Partners and the Issuer dated March 15, 1996, a copy
of which is attached as Exhibit AH hereto, in exchange for the accelerated
funding and early conversion of the Tranche E Note, for no additional
consideration, Phoenix Partners received a warrant (the "Early Purchase
Warrant") to purchase an additional 700,000 Shares at an exercise price of
$3.00 per Share.
ITEM 4. PURPOSE OF TRANSACTION.
Phoenix Partners entered into the March 1996 Letter Agreement
for investment purposes and pursuant to the terms of the Note Purchase
Agreement. The March 1996 Letter Agreement provides that, depending on the
number of the following goals that the Issuer can demonstrate have been fully
and completely achieved within the time frames specified, the Conversion Price
shall be deemed to have been, upon conversion, reduced to an amount or amounts
agreed to by the parties, subject to a $1.00 per Share minimum conversion price:
(a) Execution of a letter of intent with a second Chinese airline
with at least three 737 class airplanes by April 30, 1996
which shall become a binding agreement approved by the Civil
Aviation Administration in China ("CAAC") within 60 days from
the date of execution.
(b) The System becomes Fully Operational (as such term is defined
in the March 1996 Letter Agreement) with Hainan Airlines by
May 31, 1996.
(c) Execution of a letter of intent with a second U.S. airline by
May 31, 1996 which shall become a binding agreement within 60
days from the date of execution and which airline shall be in
operation by July 31, 1996.
(d) Execution of a letter of intent with a CAAC carrier by May
31, 1996 which shall become a binding agreement within 60 days
from the date of execution.
(e) Completion of one or more financings aggregating $2.5 million
or more by May 10, 1996, if common stock, at a price of $2.50
or more, or, if a convertible security, with a floor (minimum
conversion price) of not less than $1.50.
<PAGE> 12
Page 12 of 48 Pages
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 23,944,999 (approximately
44.34% 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 and (vii) 700,000
Shares issuable upon conversion of the Early Purchase Warrant.
(c) Except as described in Item 4 hereof, which is
incorporated in this Item 5(c) by reference, there have been no transactions in
the Shares effected since February 16, 1996 (the date of the most recent filing
on Schedule 13D).
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS IN RELATIONSHIP WITH
RESPECT TO SECURITIES OF THE ISSUER.
Except as set forth above in Item 3, Item 4 and Item 5 hereto
and as described in previous filings, the Reporting Persons do not have any
contracts, arrangements, understandings or relationships with respect to any
securities of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
(a) Joint Filing Agreement, dated as of December 16, 1994 by
and between S-C Phoenix Partners, S-C Phoenix Holdings, L.L.C., Quantum
Industrial Partners LDC, QIH Management Investor, L.P., QIH Management, Inc.,
Mr. George Soros, Winston Partners, L.P., Chatterjee Fund Management, L.P. and
Dr. Purnendu Chatterjee (filed as Exhibit A to the Initial Statement and
incorporated herein by reference).
(b) Power of Attorney dated December 16, 1994 granted by
Quantum Industrial Partners LDC in favor of Mr. Sean Warren (filed as Exhibit B
to the Initial Statement and incorporated herein by reference).
(c) Power of Attorney dated October 27, 1994 granted by Mr.
George Soros in favor of Mr. Sean Warren (filed as Exhibit C to the Initial
Statement and incorporated herein by reference).
<PAGE> 13
Page 13 of 48 Pages
(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).
(af) Letter Agreement dated March 15, 1996, between S-C
Phoenix Partners and Phoenix Information Systems Corp.
(ag) $2,100,000 Tranche E Note purchased from Phoenix
Information Systems Corp. by S-C Phoenix Partners on March 15, 1996.
(ah) Warrant Agreement dated March 15, 1996, between S-C
Phoenix Partners and Phoenix Information Systems Corp.
<PAGE> 14
Page 14 of 48 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: March 22, 1996 S-C PHOENIX PARTNERS
By: S-C Phoenix Holdings, L.L.C.
By: /s/ Sean C. Warren
--------------------------
Sean C. Warren
Manager
Date: March 22, 1996 QUANTUM INDUSTRIAL PARTNERS LDC
By: /s/ Sean C. Warren
------------------------
Sean C. Warren
Attorney-in-Fact
Date: March 22, 1996 QIH MANAGEMENT INVESTOR, L.P.
By: QIH MANAGEMENT, INC., general partner
By: /s/ Sean C. Warren
----------------------
Sean C. Warren
Vice President
Date: March 22, 1996 QIH MANAGEMENT, INC.
By: /s/ Sean C. Warren
-----------------------
Sean C. Warren
Vice President
Date: March 22, 1996 S-C PHOENIX HOLDINGS, L.L.C.
By: /s/ Sean C. Warren
-----------------------
Sean C. Warren
Manager
<PAGE> 15
Page 15 of 48 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: March 22, 1996 GEORGE SOROS
By: /s/ Sean C. Warren
-----------------------
Sean C. Warren
Attorney-in-Fact
Date: March 22, 1996 WINSTON PARTNERS, L.P.
By: /s/ Peter A. Hurwitz
-----------------------
Peter A. Hurwitz
Attorney-in-Fact
Date: March 22, 1996 CHATTERJEE FUND MANAGEMENT, L.P.
By: /s/ Peter A. Hurwitz
-----------------------
Peter A. Hurwitz
Attorney-in-Fact
Date: March 22, 1996 PURNENDU CHATTERJEE
By: /s/ Peter A. Hurwitz
-----------------------
Peter A. Hurwitz
Attorney-in-Fact
<PAGE> 16
Page 16 of 48 Pages
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
A. Joint Filing Agreement, dated as of December 16, 1994 by and between
S-C Phoenix Partners, S-C Phoenix Holdings, L.L.C., Quantum Industrial
Partners LDC, QIH Management Investor, L.P., QIH Management, Inc.,
Mr. George Soros, Winston Partners, L.P., Chatterjee Fund Management,
L.P. and Dr. Purnendu Chatterjee (filed as Exhibit A to the Initial
Statement and incorporated herein by reference)...........................................................
B. Power of Attorney dated December 16, 1994 granted by Quantum
Industrial Partners LDC in favor of Mr. Sean Warren (filed as
Exhibit B to the Initial Statement and incorporated herein by reference)..................................
C. Power of Attorney dated October 27, 1994 granted by Mr. George Soros
in favor of Mr. Sean Warren (filed as Exhibit C to the Initial
Statement and incorporated herein by reference)...........................................................
D. Power of Attorney dated November 18, 1994 granted by Winston Partners,
L.P. in favor of Mr. Peter A. Hurwitz (filed as Exhibit J to Amendment
No. 1 to the Initial Statement and incorporated herein by reference)......................................
E. Power of Attorney dated November 18, 1994 granted by Chatterjee Fund
Management, L.P. in favor of Mr. Peter A. Hurwitz (filed as Exhibit K
to Amendment No. 1 to the Initial Statement and incorporated herein
by reference).............................................................................................
F. Power of Attorney dated November 18, 1994 granted by Dr. Purnendu
Chatterjee in favor of Mr. Peter A. Hurwitz (filed as Exhibit L to
Amendment No. 1 to the Initial Statement and incorporated herein
by reference).............................................................................................
AF. Letter Agreement dated March 15, 1996 between S-C Phoenix Partners
and Phoenix Information Systems Corp....................................................................17
AG. Tranche E Note purchased from Phoenix Information Systems Corp.
by S-C Phoenix Partners on March 15, 1996...............................................................21
AH. Warrant Agreement dated March 15, 1996, between S-C Phoenix
Partners and Phoenix Information Systems Corp...........................................................26
</TABLE>
<PAGE> 1
Page 17 of 48 Pages
EXHIBIT AF
PHOENIX INFORMATION SYSTEMS CORP.
March 15, 1996
S-C Phoenix Partners
888 Seventh Avenue
New York, New York 10106
Tranche E Note
Gentlemen:
Reference is made to the Convertible Note Purchase Agreement
(as amended, "Agreement") dated December 9, 1994 between the undersigned
("Company") and you ("S-C Partners"), as amended by letter agreements dated
March 15, 1995, August 3, 1995 and September 15, 1995 and February 12, 1996.
Capitalized terms are used herein as defined in the Agreement. Pursuant to the
Agreement, S-C Partners has purchased, and the Company has issued, the Tranche A
Note, the Tranche B Note, the Tranche C Notes and the Tranche D Notes, which
Notes have been converted into 12,900,000 shares of Common Stock, in the
aggregate. As of the date hereof, S-C Partners is purchasing, and the Company is
issuing, the Tranche E Note in the principal amount of $2,100,000 (the "Tranche
E Note").
This will confirm our agreement respecting the issuance and
conversion of the Tranche E Note and a warrant to purchase shares of the
Company's Common Stock as follows:
1. Notwithstanding anything to the contrary contained therein,
the Tranche E Note is being purchased and converted effective on the
date hereof in accordance with its terms. The number of shares
("Conversion Shares") into which the principal amount of the Note is
being converted is 1,400,000 (subject to adjustment as provided in the
Note); provided, however, that, in consideration of S-C Partners'
conversion of the Tranche E Note, the Company agrees that the
Conversion Price shall be deemed to have been, upon conversion, reduced
to an amount or amounts agreed to by the parties in good faith based on
the number of the following goals that the Company can demonstrate have
been fully and completely achieved within the time frames specified,
provided, however, that in no event shall the Conversion Price be below
$1.00:
1
<PAGE> 2
Page 18 of 48 Pages
A. Execution of a letter of intent with a second Chinese
airline with at least three 737 class airplanes by
April 30, 1996 which shall become a binding agreement
approved by the Civil Aviation Administration in
China ("CAAC") within 60 days from the date of
execution.
B. The System becomes Fully Operational with Hainan
Airlines by May 31, 1996
C. Execution of a letter of intent with a second U.S.
airline by May 31, 1996 which shall become a binding
agreement within 60 days from the date of execution
and which airline shall be in operation by July 31,
1996.
D. Execution of a letter of intent with a CAAC carrier
by May 31, 1996 which shall become a binding
agreement within 60 days therefrom.
E. Completion of one or more financings aggregating $2.5
million or more by May 10, 1996, if common stock, at
a price of $2.50 or more, or, if a convertible
security, with a floor (minimum conversion price) of
not less than $1.50
Upon any deemed change in the Conversion Price, the Company shall issue
to S-C Partners certificates representing such additional number of
shares of Common Stock such that S-C Partners shall receive the
aggregate number of shares of Common Stock it would have received had
such change actually occurred on the date of conversion.
2. To the extent that the conditions set forth in Section
3.2(n) of the Agreement to the issuance of the Tranche E Note have not
been satisfied as of the date hereof, S-C Partners hereby
unconditionally waives the requirement that such conditions be met and
discharges the Company from responsibility therefor, subject to the
terms and conditions of this letter agreement.
3. In consideration of the foregoing, the Company is issuing
to S-C Partners, on the date hereof, a warrant ("Early Purchase
Warrant") to purchase 700,000 shares of its Common Stock, in the form
of Exhibit A hereto.
2
<PAGE> 3
Page 19 of 48 Pages
4. S-C Partners hereby represents and warrants as
follows:
A. The Tranche E Note, the Conversion Shares and the
Early Purchase Warrant ("Securities") being acquired by S-C
Partners are being acquired for investment for its own account
and not with the view to, or for resale in connection with,
any distribution or public offering thereof. S-C Partners
understands that such Securities have not been registered
under the Securities Act of 1933, as amended (the "Securities
Act") or any state securities laws by reason of their
contemplated issuance in transactions exempt from the
registration requirements of the Securities Act pursuant to
Section 4(2) thereof and applicable state securities laws, and
that the reliance of the Company and others upon these
exemptions is predicated in part upon this representation by
S-C Partners. S-C Partners further understands that such
Securities may not be transferred or resold without (1)
registration under the Securities Act and any applicable state
securities laws, or (2) an exemption from the requirements of
the Securities Act and applicable state securities laws.
B. S-C Partners understands that an exemption from
such registration is not presently available pursuant to Rule
144 promulgated under the Securities Act by the Securities and
Exchange Commission (the "Commission") and that, in any event,
S-C Partners may not sell any such Securities pursuant to Rule
144 prior to the expiration of a two-year period after it has
acquired such Securities. S-C Partners understands that any
sales pursuant to Rule 144 can be made only in full compliance
with the provisions of Rule 144.
C. The address of S-C Partner's principal office is
set forth on its Certificate of Representations dated the date
hereof. S-C Partners qualifies as an "accredited investor" for
purposes of Regulation D promulgated under the Securities Act
for the reasons specified in such Certificate of
Representations. S-C Partners acknowledges that the Company
has made available to it at a reasonable time prior to the
execution of the Certificate of Representations the
opportunity to ask questions and receive answers concerning
the terms and conditions of the sale of securities
contemplated by the Agreement, and to obtain any additional
information (which the Company possesses or can acquire
without unreasonable effort or expense) as may be necessary to
verify the accuracy of the information furnished to it. S-C
Partners (1) is able to bear of loss of its entire investment
in the Securities being acquired by it without any material
adverse effect on its business, operations or prospects, and
(2) has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits
and risks of the investment to be made by it pursuant to the
Agreement and pursuant hereto.
5. Except as modified hereby, the Agreement remains
in full force and effect.
6. This Agreement A. represents the entire agreement
among the parties with respect to the subject matter hereof,
superseding all prior agreements and understandings, written or oral,
B. may be amended only in writing, C. may be executed in counterparts,
each of which shall be deemed an original and all of which shall
constitute one agreement, D. shall inure to the benefit of, and be
binding upon, the parties hereto and their respective successors and
assigns and
3
<PAGE> 4
Page 20 of 48 Pages
E. shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts entered into and to be
performed wholly within such State.
If the foregoing accurately reflects our agreement, please
sign where indicated below.
Very truly yours,
/s/ Robert P. Gordon
AGREED:
Robert P. Gordon
S-C PHOENIX PARTNERS Chairman / CEO
By S-C Phoenix Holdings, L.L.C.,
its general partner
By:/s/ Sean C. Warren
_____________________________
Name: Sean C. Warren
Title: Manager
4
<PAGE> 1
Page 21 of 48 Pages
EXHIBIT AG
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL
AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT THE TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE
FEDERAL AND STATE SECURITIES LAWS.
PHOENIX INFORMATION SYSTEMS CORP.
TRANCHE E CONVERTIBLE NOTE
$2,100,000 March 15, 1996
PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation
("Company"), hereby promises to pay to S-C PHOENIX PARTNERS ("Holder") at its
office at 888 Seventh Avenue, New York, New York 10106, the principal sum of Two
Million One Hundred Thousand U.S. Dollars (U.S. $2,100,000), on the Maturity
Date (as defined in the Agreement referred to below), together with interest
thereon as hereinbelow provided.
This Note is the eighth in a series of Notes referred to in,
and is entitled to the benefits of, the Convertible Note Purchase Agreement
("Agreement"), dated December 9, 1994, as amended, among the Company and S-C
Phoenix Partners, among others. Capitalized terms are used herein as therein
defined unless otherwise defined herein.
1. Interest. Interest shall accrue on the outstanding
principal amount hereof from the date hereof until payment in full at the
Eurodollar Rate and shall be payable on the first anniversary hereof and,
thereafter, quarterly on the last day of each Interest Period and upon
conversion pursuant to Section 3 hereof.
2. Payments. Each payment due hereunder shall be made in
immediately available funds at the office of Holder, or to such account as
Holder may designate to the Company in writing, without any setoff or
counterclaim. This Note may be converted into shares of Common Stock in
accordance with Section 3 hereof. Upon such conversion, and payment of all
interest due hereon, the Company will not be obligated to make any further
payment hereunder and the Holder, by its acceptance hereof, agrees that it will
promptly surrender this Note to the Company upon such conversion or payment
hereof in full.
3. Conversion. (a) This Note shall convert into shares of
Common Stock at the Conversion Price (as defined below),
1
<PAGE> 2
Page 22 of 48 Pages
(i) automatically, upon any date prior to the
Maturity Date and after the date ("Full Funding Date") on which Notes
in the aggregate principal amount of $10,000,000 shall have been sold
pursuant to the Agreement on which the first of the following shall
occur: (A) the consummation of any offering of the Company's capital
stock for a purchase price of not less than $2.00 per share and
$5,000,000 in the aggregate and the listing of the Common Stock on The
NASDAQ Stock Market Small- Cap or National Market System; (B) the
Company having Operating Revenues of $5,000,000 or more in any twelve
(12) consecutive month period or (C) the date which is six (6) months
from the Full Funding Date;
(ii) on any date subsequent to the date hereof and
prior to the date referred to in clause (i)(C) of this Section 3(a), at
the written election of the Purchaser to convert all Notes;
(iii) upon the failure of the Purchaser to purchase
any Notes offered to it pursuant to an Offer Notice, at the written
election of the Purchaser to convert all outstanding Notes;
(iv) upon the termination of the Company's rights
under Section 7.1 of the Agreement, at the written election of the
Purchaser not to purchase any additional Notes and to convert all
outstanding Notes; and
(v) upon the System being in Commercial Operation (as
such term is defined in that certain letter agreement, dated March 15,
1994, by and between the Company and the Purchaser) in China in
connection with an airline of comparable size to Hainan Airlines, at
the written election of the Company to cause the conversion of this
Note.
(b) For purposes hereof, "Conversion Price" shall mean $1.50.
No fractional shares of Common Stock shall be issued upon conversion. In lieu of
any fractional shares to which Holder would otherwise be entitled, the Company
shall pay cash in an amount equal to such fraction multiplied by the Conversion
Price.
(c) The Company shall provide prompt written notice of the
conversion of this Note to Holder, which notice shall be certified by the Chief
Financial Officer or the Chief Operating Officer of the Company (and, in the
case of conversion pursuant to Section 3(a)(i)(B), by the Company's independent
auditors) and shall set forth the date on which conversion shall have occurred
("Conversion Date"), the event resulting in such conversion, and the number of
shares of Common Stock which Holder shall be entitled to receive as a result of
such conversion. Upon conversion, the Holder shall be entitled to receive the
number of shares of Common Stock calculated by dividing the principal amount
hereof by the Conversion Price.
2
<PAGE> 3
Page 23 of 48 Pages
(d) Within a reasonable time, not exceeding ten (10) days
after the Conversion Date, the Company shall deliver or cause to be delivered to
Holder, in Holder's name, certificates representing the number of fully paid and
non-assessable shares of Common Stock into which this Note has been converted in
accordance with the provisions of this Section 3. Within a reasonable time, not
exceeding ten (10) days after receipt by the Holder of such certificates, the
Holder shall surrender this Note to the Company for cancellation. Subject to the
following provisions of this Section 3, such conversion shall be deemed to have
occurred on the Conversion Date so that the Holder shall be treated for all
purposes as having become the record holder of such shares of Common Stock at
such time.
(e) The issuance of certificates of shares of Common Stock
upon the conversion of this Note shall be made without charge of any kind by the
Company to the Holder for any costs in respect of the issuance of such
certificates.
(f) The Conversion Price shall be subject to adjustment as
follows:
(i) In the event the Company shall issue additional
shares of Common Stock (or securities convertible into or exchangeable
for Common Stock) in a stock dividend, stock distribution or
subdivision paid with respect to Common Stock, or declare any dividend
or other distribution payable with additional shares of Common Stock
(or securities convertible into or exchangeable for Common Stock) with
respect to Common Stock or effect a split or subdivision of the
outstanding shares of Common Stock, the Conversion Price shall,
concurrently with the effectiveness of such stock dividend, stock
distribution or subdivision, or the earlier declaration thereof, be
proportionately decreased.
(ii) In the event the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the
Conversion Price shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased.
(iii) In the event of any consolidation or merger of
the Company with or into another corporation or the conveyance of all
or substantially all of the assets of the Company to another
corporation or entity, this Note shall thereafter be convertible into
the number of shares of capital stock or other securities or property
to which a holder of the number of shares of Common Stock deliverable
upon conversion hereof would have been entitled upon such
consolidation, merger or conveyance; and, in any such case, appropriate
adjustment shall be made in the application of the provisions herein
set forth with respect to the rights and interests of the Holder
thereafter, to the end that the provisions set forth herein (including
provisions with respect to adjustments in the Conversion Price) shall
thereafter be applicable, as nearly as may be practicable, in relation
to any shares of stock or other property thereafter deliverable upon
the conversion hereof. At the request of the Purchaser, the resulting
or surviving entity in any such
3
<PAGE> 4
Page 24 of 48 Pages
consolidation or merger, if other than the Company, shall acknowledge
in writing Purchaser's rights hereunder.
(g) The Company will not, by amendment of its Articles of
Incorporation or By-Laws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 3 and in taking of all such action as may be necessary or appropriate in
order to protect the conversion rights of the Holder against impairment.
(h) The Company shall reserve and keep available out of its
authorized by unissued Common Stock such number of shares of Common Stock as
shall from time to time be sufficient to effect conversion hereof in accordance
herewith.
4. Events of Default. If any of the following events ("Events
of Default") shall occur and be continuing: (a) the Company fails to pay
principal hereof when the same shall become due and payable; (b) the Company
fails to make two (2) successive interest payments hereon or three (3) interest
payments in a twelve (12) consecutive month period; (c) the failure by the
Company to perform any of its other material obligations hereunder, under the
Agreement or under the other Transaction Documents which failure shall continue
for a period of thirty (30) days after receipt of notice thereof by the Company;
(d) any representations or warranties of the Company contained in the Agreement
shall prove to have been false in any material respect when made; (e) any
proceedings involving the Company or any of its consolidated subsidiaries are
commenced by or against the Company or any of its consolidated subsidiaries
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law or statute of federal government or any
state government and, if such proceedings are instituted against the Company or
any such consolidated subsidiary, the Company or any such consolidated
subsidiary by any action or failure to act indicates its approval of, consent to
or acquiescence therein, or an order shall be entered approving the petition in
such proceedings and, within sixty (60) days after the entry thereof, such order
is not vacated, or stayed on appeal or otherwise, or shall not otherwise have
ceased to continue in effect; then, (i) as to the Events of Default under
clauses (a) and (b), above, the Holder may, at its option, declare this Note to
be forthwith due and payable in cash, (ii) as to the Events of Default under
clauses (c) and (d) above, The Chatterjee Group ("TCG") may, at its option,
declare all Notes to be forthwith due and payable in cash and (iii) as to an
Event of Default under clause (e) above, this Note shall thereupon become
immediately due and payable in cash. Upon any acceleration of this Note pursuant
to the immediately preceding sentence the Holder may pursue all remedies
available to it at law or equity, and all rights available to it under this Note
and the Note Purchase Agreement including, without limitation, the right to
convert this Note into shares of Common Stock. During the pendency of any Event
of Default, interest shall accrue on the outstanding principal amount hereof at
a rate that is two percent (2%) higher than the Eurodollar Rate.
4
<PAGE> 5
Page 25 of 48 Pages
5. Amendments and Waivers. Except as otherwise provided in
the Agreement, this Note may be amended and the observance of any term hereof or
thereof and any rights hereunder or thereunder may be waived by TCG without the
consent of Holder. No waiver of any right in any instance shall constitute a
continuing waiver of successive rights and any one shall govern only the
particular matters waived.
6. Assignment. All terms and provisions of this Note shall be
binding upon the Company and inure to the benefit of the Holder and their
respective successors. Neither this Note nor any of the rights, interests or
obligations hereunder may be assigned (whether voluntarily, involuntarily, by
valid operation or law or otherwise) by the Holder without the prior written
consent of the Company, except to any Affiliate of the Holder, subject only to
such Affiliate's compliance with applicable securities laws.
7. Governing Law. This Note shall be governed by and
construed in accordance with the substantive laws of the State of New York
(without regard to the laws of conflict that might otherwise apply) as to all
matters including without limitation matters of validity, construction, effect,
performance and remedies.
8. Waiver of Presentment. The Company waives presentment,
protest, notice of dishonor and all forms of notice required to hold the Company
liable on this Note.
9. Other Notes. All Notes issued and delivered pursuant to
the Agreement shall rank equally and ratably without priority over one another.
IN WITNESS WHEREOF, the Company has executed this Note on date
first above written.
PHOENIX INFORMATION SYSTEMS CORP.
By: /s/ Robert P. Gordon
----------------------------------
Title: Chairman / CEO
<PAGE> 1
Page 26 of 48 Pages
EXHIBIT AH
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of March 15, 1996 (the
"Agreement"), by and between PHOENIX INFORMATION SYSTEMS CORP., a Delaware
corporation (the "Company") S-C PHOENIX PARTNERS, a New York general partnership
("S-C" and, together with its successors and permitted assigns, the "Holder").
WHEREAS, the Company proposes to issue and deliver its warrant
certificates ("Warrant Certificates") evidencing 700,000 warrants (the
"Warrants") each to purchase one newly issued share of common stock, par value
$0.01 per share, of the Company ("Common Stock") in connection with that certain
Convertible Note Purchase Agreement, dated as of December 9, 1994, by and
between the Company and S-C (the "Note Purchase Agreement") and that certain
letter agreement, dated the date hereof, by and between the Company and S-C.
NOW THEREFORE, in consideration of the foregoing and for the
purpose of defining the terms and provisions of the Warrants and the respective
rights and obligations thereunder of the Company and the Holder, the Company and
the Holder agree as follows:
1. Certain Definitions. The following terms, as used in this
Agreement, have the following meanings:
(1) "Affiliate" means, with respect to S-C, (A)(a) any Person
controlling, controlled by or under common control with S-C and (b) if (1)
controlling S-C, such Person has a forty percent (40%) or more voting and
beneficial ownership interest in S-C, (2) controlled
1
<PAGE> 2
Page 27 of 48 Pages
by S-C has a forty percent (40%) or more voting and beneficial ownership
interest in such Person and (3) under common control with S-C, the Person(s)
having such common control have forty percent (40%) or more voting and
beneficial ownership interest in S-C and such Person, and (B) any Person for
which George Soros d/b/a Soros Fund Management or Chatterjee Fund Management Co.
LP, a Delaware limited partnership, is acting as investment manager or
investment adviser, in each case with investment discretion. For purposes of
this definition, the term "control," when used with respect to any Person, shall
include the power to exercise discretion over the investments of such Person,
and the terms "controlling" and "controlled" have corresponding meanings.
(2) "Business Day" means any day other than a Saturday, Sunday
or day on which banks in New York City are closed for general business.
(3) "Common Stock" has the meaning set forth in the preamble.
(4) "Exercise Period" means the period beginning on the date
hereof and ending at 5 p.m. New York City time on the third anniversary of the
date on which the Company shall have satisfied the conditions contained in
clauses (a) and (b) of the definition of "Tranche E Target Date" set forth in
the Note Purchase Agreement.
(5) "Exercise Price" means $3.00 per share (as provided in
Section 3 and subject to adjustment as provided in Section 4).
(6) "Expiration Date" for the Warrants means the last day of
the Exercise Period.
(7) "Holder" has the meaning set forth in the preamble.
2
<PAGE> 3
Page 28 of 48 Pages
(8) "Investor Representative" shall be S-C Phoenix Holdings,
L.L.C., a Delaware limited liability company and a general partner of S-C, or
its successor in interest, or the assigned representative of such Person (it
being agreed that at all times there shall be no more than one Investor
Representative).
(9) "Person" means any individual, corporation, limited
liability company, partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
(10) "Underlying Common Stock" means the shares of Common
Stock purchasable by the Holder upon the exercise of the Warrants.
(11) "Warrants" has the meaning set forth in the preamble.
(12) "Warrant Certificates" means the certificates evidencing
the Warrants.
2. Issue of Warrants. The Warrant Certificates shall be in
registered form only and substantially in the form attached hereto as Exhibit A,
shall be dated the date on which signed by an authorized signatory of the
Company and may have such legends and endorsements typed, stamped or printed
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement and the Options Agreement. Warrant Certificates
evidencing 700,000 Warrants may be executed by any authorized officer of the
Company. Warrant Certificates evidencing all 700,000 Warrants shall be delivered
in the name of the Holder to the Investor Representative on the date hereof.
3
<PAGE> 4
Page 29 of 48 Pages
3. Exercise Price; Exercise of Warrants.
(1) Exercise Price. Each Warrant shall entitle the
Holder, subject to the provisions of this Agreement, to purchase one share of
Common Stock at a purchase price per share equal to the Exercise Price.
(2) Exercise of Warrants Generally.
(i) Exercise During Exercise Period. The
aggregate number of Warrants that may be exercised at any time during the
Exercise Period shall be 700,000. All Warrants not exercised during the Exercise
Period shall expire at 5 p.m. New York City time on the Expiration Date.
(ii) Liquidation Event. If the Company is
liquidated in accordance with the provisions of its Certificate of
Incorporation, then the Warrants shall be deemed to have been exercised.
(iii) Method of Exercise; Payment of
Exercise Price. In order to exercise any or all of the Warrants represented by a
Warrant Certificate, the Holder must surrender the Warrant Certificate to the
Company for exercise, with the reverse side of the Warrant Certificate duly
executed, together with any required payment in full of the Exercise Price for
each share of Underlying Common Stock to which the Holder is entitled, any such
payment of the Exercise Price to be made by check or wire transfer to an account
designated by the Company. If the Holder elects to exercise only a portion of
the Warrants represented by the Warrant Certificate or Certificates registered
in its name, then the remaining portion of the Warrants shall be returned to the
Holder in the form of a new Warrant Certificate. Upon surrender of a Warrant
Certificate and the payment of the Exercise Price in conformity with the
4
<PAGE> 5
Page 30 of 48 Pages
foregoing provisions, the Company shall promptly issue to the Holder share
certificates representing the Underlying Common Stock to which the Holder is
entitled, registered in the name of the Holder or the name or names of such
Affiliates of the Holder as may be directed in writing by the Holder, and shall
deliver such share certificates to the Person or Persons entitled to receive the
same. The Company shall issue such share certificates within five Business Days
after the payment of the Exercise Price of the Warrants by the Holder, but such
shares shall be deemed issued and outstanding on the date the Warrant is
exercised and the Exercise Price is paid to the Company.
(c) Exercise by Surrender of Warrant; Exercise with
Shares of Common Stock. In addition to the method of exercise set forth in
Section 3(b)(3) above and in lieu of any cash payment required thereunder, the
Holder shall have the right at any time and from time to time to exercise the
Warrants in full or in part (i) by surrendering its Warrant Certificate in the
manner specified in Section 3(b)(3) in exchange for the number of shares of
Common Stock equal to the product of (x) the number of shares as to which the
Warrants are being exercised multiplied by (y) a fraction, the numerator of
which is the Market Price (as defined hereafter) of the Common Stock less the
Exercise Price and the denominator of which is such Market Price, or (ii) by
surrendering the Warrant Certificate in the manner specified in Section 3(b)(3)
above and making any required payment in whole or in part of the Exercise Price
for each share of Underlying Common Stock to which the Holder is entitled with
shares of Common Stock (valued at the Market Price). As used herein, "Market
Price" shall mean the average of the closing prices of the Common Stock sales on
all domestic exchanges on which the
5
<PAGE> 6
Page 31 of 48 Pages
Common Stock may at the time be listed, or, if there shall have been no sales on
any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day the
Common Stock shall not be so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System as of 3:30 p.m. New York City time, or
if on any day the Common Stock shall not be quoted in the NASDAQ System, the
average of the high and low bid and asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporation or any similar successor organization, in each such case averaged
over a period of 30 consecutive Business Days immediately prior to the date of
exercise; provided that if the Common Stock is listed on any domestic exchange
the term "Business Days" as used in this sentence shall mean business days on
which such exchange is open for trading. If at any time the Common Stock is not
listed on any domestic exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the Market Price shall be deemed to be the fair market
value thereof as of the date of exercise, determined by an independent appraiser
selected by the Company and acceptable to the Holder.
4. Adjustments. The Exercise Price shall be subject
to adjustment as follows:
(a) If, in connection with a financing or series of
financings in an aggregate amount equal to or exceeding $1 million or at any
6
<PAGE> 7
Page 32 of 48 Pages
time following the date hereof, the Company issues additional shares of
Common Stock (or other securities convertible into or exchangeable for Common
Stock) for a price lower than $3.00 per share, the Exercise Price with respect
to the Warrants shall be automatically and immediately reduced to such lower
price, without any action or request on the part of the Holder. The Company
shall notify the Holder of such reduced Exercise Price in writing prior to any
such issuance or additional shares of Common Stock (or other securities
convertible into or exchangeable for Common Stock); provided that if the Company
should enter into any agreement in connection with such issuance of additional
shares of Common Stock (or other securities convertible into or exchangeable for
Common Stock), the Company shall immediately notify the Holder in writing
thereof and, upon such issuance of shares of Common Stock (or other securities
convertible into or exchangeable for Common Stock), the Exercise Price shall be
automatically reduced to such reduced Exercise Price, effective retroactively to
the effective date of such agreement, whether or not the Warrants have been
exercised during the time period between the effective date of such agreement
and the date of such issuance (and if the Warrants have been exercised during
such period, the Company shall promptly pay to the Holder the difference between
the payment made by the Holder on such exercise and the payment that would have
been required if the Warrants were exercised at such reduced Exercise Price).
7
<PAGE> 8
Page 33 of 48 Pages
(b) In the event the Company shall issue additional
shares of Common Stock (or securities convertible into or exchangeable for
Common Stock) in a stock dividend, stock distribution or subdivision paid with
respect to Common Stock, or declare any dividend or other distribution payable
with additional shares of Common Stock (or securities convertible into or
exchangeable for Common Stock) with respect to Common Stock or effect a split or
subdivision of the outstanding shares of Common Stock, the Exercise Price shall,
concurrently with the effectiveness of such stock dividend, stock distribution
or subdivision, or the earlier declaration thereof, be proportionately
decreased, and the number of Underlying Common Stock shall be proportionately
adjusted so that, to avoid dilution of the Holder's position, the Holder shall
thereafter be entitled to receive at such adjusted price an additional number of
shares of the Company's Common Stock which such Holder would have owned or would
have been entitled to receive upon or by reason of any of the events described
above, had the Warrants been exercised immediately prior to the happening of
such event.
(c) In the event the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, the Exercise Price shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased and the number of Underlying Common Stock shall be
proportionately adjusted
8
<PAGE> 9
Page 34 of 48 Pages
so that the Holder of any Warrant exercised after such date shall be entitled to
receive, upon payment of the same aggregate amount as would have been payable
before such date, the aggregate number of shares of Common Stock which the
Holder would have owned upon such exercise and been entitled to receive, if such
Warrant had been exercised immediately prior to the happening of such
combination or consolidation.
(d) In the event of any consolidation or merger of
the Company with or into another corporation or the conveyance of all or
substantially all of the assets of the Company to another corporation or entity,
the Warrants shall thereafter be exercisable for the number of shares of capital
stock or other securities or property to which a holder of the number of shares
of Common Stock deliverable upon conversion hereof would have been entitled upon
such consolidation, merger or conveyance; and, in any such case, appropriate
adjustment shall be made in the application of the provisions herein set forth
with respect to the rights and interests of the Holder thereafter, to the end
that the provisions set forth herein (including provisions with respect to
adjustments in the Exercise Price) shall thereafter be applicable, as nearly as
may be practicable, in relation to any shares of stock or other property
thereafter deliverable upon the exercise of Warrants. At the request of the
Holder, the resulting or surviving entity in any such consolidation or merger,
if other than the Company, shall acknowledge in writing the Holder's rights
hereunder.
9
<PAGE> 10
Page 35 of 48 Pages
5. Loss or Mutilation. Upon receipt by the Company of
evidence satisfactory to it of the ownership of and the loss, theft, destruction
or mutilation of any Warrant Certificate and of indemnity satisfactory to it,
and (in the case of mutilation) upon surrender and cancellation thereof, then,
in the absence of notice to the Company that the Warrants represented thereby
have been acquired by a bona fide purchaser, the Company shall deliver to the
Holder, in exchange for or in lieu of the lost, stolen, destroyed or mutilated
Warrant Certificate, a new Warrant Certificate of the same tenor and for a like
aggregate number of Warrants. Upon the issuance of any new Warrant Certificate
under this Section 5, the Company may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and other expenses in connection herewith. Every new Warrant Certificate
executed and delivered pursuant to this Section 5 in lieu of any lost, stolen or
destroyed Warrant Certificate shall constitute a contractual obligation of the
Company, whether or not the allegedly lost, stolen or destroyed Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled to
the benefit of this Agreement equally and proportionately with any and all other
Warrant Certificates duly executed and delivered hereunder. The provisions of
this Section 5 are exclusive and shall preclude (to the extent lawful) all other
rights or remedies with respect to the replacement of mutilated, lost, stolen,
or destroyed Warrant Certificates.
10
<PAGE> 11
Page 36 of 48 Pages
6. Reservation and Authorization of Common Stock. The Company
shall, at all times until the Warrants have been exercised or have expired,
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as is sufficient for the
purpose of permitting the exercise in full of all outstanding Warrants.
7. Limitations on Transfer; Warrant Transfer Books. The
Warrants may be sold, transferred, pledged, assigned, hypothecated or otherwise
disposed of (collectively, "transferred") only to Affiliates of the Holder. The
Company shall cause to be kept at the principal executive office of the Company
a register in which, subject to such reasonable regulations as it may prescribe,
the Company shall provide the registration of Warrant Certificates and transfers
or exchanges of Warrant Certificates as herein provided.
The Holder of a Warrant Certificate, by its acceptance
thereof, covenants and agrees that the Warrants are being acquired, and the
Underlying Common Stock to be purchased upon the exercise of this Warrant will
be acquired, as an investment and not with a view to the distribution thereof
and will not be sold or transferred except in accordance with the applicable
provisions of the Securities Act of 1933, as amended (the "Act") and the rules
and regulations promulgated thereunder, and that neither this Warrant nor any of
the Underlying Common Stock may be offered or sold except (i) pursuant to an
effective registration statement under the Act, (ii) to the extent applicable,
pursuant to Rule 144
11
<PAGE> 12
Page 37 of 48 Pages
under the Act (or any similar rule under the Act relating to the disposition of
securities), or (iii) pursuant to an exemption from registration under the Act.
The Warrant Certificates and, upon exercise of the Warrants,
in part or in whole, certificates representing the Underlying Common Stock shall
bear a legend substantially similar to the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except (i) pursuant to
an effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under the Act relating to the disposition of
securities), or (iii) pursuant to an exemption from
registration under the Act."
At the option of the Holder, Warrant Certificates may be
exchanged at such office upon payment of the charges hereinafter provided.
Whenever any Warrant Certificates are so surrendered for exchange, the Company
shall execute and deliver the Warrant Certificates that the Holder is entitled
to receive. All Warrant Certificates issued upon any registration of transfer or
exchange of Warrant Certificates shall be the valid obligations of the Company,
evidencing the same obligations, and entitled to the same benefits under this
Agreement, as the Warrant Certificates surrendered for such registration of
transfer or exchange.
Every Warrant Certificate surrendered for registration of
transfer or exchange shall (if so required by the Company) be duly endorsed, or
be accompanied by a written instrument of transfer in
12
<PAGE> 13
Page 38 of 48 Pages
form satisfactory to the Company duly executed by the Holder. No service charge
shall be made for any registration of transfer or exchange of Warrant
Certificates. The Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer of Warrant Certificates.
8. No Voting or Dividend Rights. Prior to the exercise of the
Warrants, the Holder, as a Holder of Warrant Certificates, shall not be entitled
to any rights of a shareholder of the Company, including, without limitation,
the right to vote, to receive dividends or other distributions or to exercise
any preemptive right, but each Holder of Warrant Certificates shall receive all
notices sent to shareholders of the Company, including any notice of meetings of
shareholders, and shall have the right to attend or observe such meetings.
9. Notices. Any notice, demand or delivery authorized by this
Agreement shall be in writing and shall be sufficiently given or made upon
receipt thereof, if made by personal delivery or facsimile transmission (with
confirmed receipt thereof), or four Business Days after mailed, if sent by
first-class mail, postage prepaid, addressed to the Investor Representative or
the Company, as the case may be, at their respective addresses below, or such
other address as shall have been furnished in accordance with this Section 10 to
the party giving or making such notice, demand or delivery:
13
<PAGE> 14
Page 39 of 48 Pages
(1) If to the Company, to it at:
Phoenix Information Systems Corp.
100 Second Avenue South, Suite 100
St. Petersburg, Florida 33701
Attention: Robert P. Gordon, Chairman
Facsimile: 813-821-7565
(2) If to the Holder, to the Investor
Representative at:
S-C Phoenix Holdings, L.L.C.
c/o The Chatterjee Group
888 Seventh Avenue, Suite 3000
New York, New York 10106
Attention: Mr. James Peet
Facsimile: 212-489-2005
With a copy to: Peter A. Hurwitz, Esq.
With an additional copy to:
Soros Fund Management
888 Seventh Avenue, Suite 3300
New York, New York 10106
Attention: Sean A. Warren, Esq.
Facsimile: 212-489-2005
10. Applicable Law. This Agreement and each Warrant
Certificate issued hereunder shall be governed by, and construed in accordance
with, the internal laws of the State of New York, without regard to the
conflicts of law principles thereof. The Company and each Holder hereby submit
to the nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in New
York City for purposes of all legal proceedings arising out of or relating to
this Agreement and the transactions contemplated hereby. The Company and the
Holder irrevocably waive, to the fullest extent permitted by law, any objection
which they may now or hereafter have to the laying of the venue of any such
proceeding
14
<PAGE> 15
Page 40 of 48 Pages
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
11. Successors and Assigns. The provisions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties. The Holder may not assign any of its rights
hereunder separate from a transfer of the Warrants in accordance with Section 7
hereof. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
12. Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement in any number of separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13. Captions and Headings. The captions and headings used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
14. Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holder. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon the Holder, each future holder of the Warrants and the Company.
15
<PAGE> 16
Page 41 of 48 Pages
15. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provisions shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
PHOENIX INFORMATION SYSTEMS CORP.
By /s/ Robert P. Gordon
-------------------------------
Name: Robert P. Gordon
Title: Chairman / CEO
S-C PHOENIX PARTNERS
By S-C PHOENIX HOLDINGS, L.L.C.,
a General Partner
By /s/ Sean C. Warren
--------------------------------
Name: Sean C. Warren
Title: Manager
16
<PAGE> 17
Page 42 of 48 Pages
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE
AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT
APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR ANY
SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION
OF SECURITIES), OR (iii) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE ACT.
THIS WARRANT CERTIFICATE AND THE WARRANTS
REPRESENTED HEREBY ARE TRANSFERABLE ONLY
IN ACCORDANCE WITH THE PROVISIONS SET FORTH IN
THE WARRANT AGREEMENT REFERRED TO BELOW.
WARRANTS TO PURCHASE COMMON STOCK
OF PHOENIX INFORMATION SYSTEMS CORP.
No.___ 700,000 Warrants
This certifies that _______________________ is the owner
of the number of Warrants set forth above, each of which represents the right to
purchase from PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation (the
"Company"), the number of shares of Common Stock, par value $0.01 per share, of
the Company ("Common Stock") determined in accordance with the Warrant Agreement
referred to below at the purchase price set forth in the Warrant Agreement (the
"Exercise Price"), upon surrender hereof at the office of the Company at 100
Second Avenue South, Suite 1100, St. Petersburg, Florida 33701 with the Exercise
Subscription Form on the reverse hereof duly executed and with payment in full
(by bank check or wire transfer to an account designated by the Company) of the
purchase price for the shares
17
<PAGE> 18
Page 43 of 48 Pages
as to which the Warrant(s) represented by this Warrant Certificate are
exercised, or by surrender of this Warrant Certificate in lieu of cash payment,
all subject to the terms and conditions hereof and of the Warrant Agreement
referred to below. The Warrants will expire at 5 p.m. New York City time on the
Expiration Date.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement, dated as of March 15, 1996 (the "Warrant Agreement"),
between the Company and S-C Phoenix Partners, is subject to the terms and
provisions contained therein, to all of which terms and provisions the holder of
this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is
hereby incorporated herein by reference and made a part hereof. Reference is
hereby made to the Warrant Agreement for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Company and the holders of the Warrants. Capitalized defined terms used herein
have the same meanings as in the Warrant Agreement. Copies of the Warrant
Agreement are on file at the office of the Company and may be obtained by
writing to the Company at the following address:
100 Second Avenue South
Suite 1100
St. Petersburg, Florida 33701
The number of shares of the Common Stock of the Company purchasable upon the
exercise of each Warrant and the price per share are set forth in the Warrant
Agreement.
18
<PAGE> 19
Page 44 of 48 Pages
All shares of Common Stock issuable by the Company upon the
exercise of Warrants and the payment of the Exercise Price therefor shall be
validly issued, fully paid and nonassessable. The Company shall not be required,
however, to pay any tax, withholding or other charge imposed in connection with
the issuance of any shares of Common Stock upon the exercise of Warrants, and,
in such case, the Company shall not be required to issue or deliver any stock
certificate until such tax, withholding or other charge has been paid or it has
been established to the Company's satisfaction that no tax, withholding or other
charge is due. This Warrant Certificate and all rights hereunder are
transferable, subject to the terms of the Warrant Agreement, by the registered
holder hereof, in whole or in part, upon surrender of this Warrant Certificate
duly endorsed, or accompanied by a written instrument of transfer in form
satisfactory to the Company duly executed by the registered holder and upon
payment of any necessary transfer tax or other governmental charge imposed upon
such transfer. Upon any partial transfer, the Company will issue and deliver to
such holder a new Warrant Certificate or Certificates with respect to any
portion not so transferred.
This Warrant Certificate shall be void and all rights
represented hereby shall cease on the Expiration Date.
19
<PAGE> 20
Page 45 of 48 Pages
Dated: March 15, 1996
PHOENIX INFORMATION SYSTEMS CORP.
By /s/ Robert P. Gordon
___________________________
Name: Robert P. Gordon
Title: Chairman / CEO
20
<PAGE> 21
Page 46 of 48 Pages
FORM OF REVERSE OF WARRANT CERTIFICATE
EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: Phoenix Information Systems Corp.
The undersigned irrevocably exercises ____________ of the
Warrants evidenced by this Warrant Certificate for the purchase of shares of
Common Stock, par value $0.01 per share, of PHOENIX INFORMATION SYSTEMS CORP.
and has arranged to make payment of $___________ (such payment being made by
bank check or wire transfer to the account designated by Phoenix Information
Systems Corp., and constituting the Exercise Price (as defined in the Warrant
Agreement) for the shares as to which the Warrants evidenced by this Warrant
Certificate are exercised) or has surrendered this Warrant Certificate in lieu
of cash payment in accordance with the terms of Section 3(c) of the Warrant
Agreement, all on the terms and conditions specified in this Warrant Certificate
and the Warrant Agreement herein referred to. The undersigned hereby irrevocably
surrenders this Warrant Certificate and all right, title and interest therein to
Phoenix Information Systems Corp. and directs that the shares of Common Stock
deliverable upon the exercise of said Warrants be
21
<PAGE> 22
Page 47 of 48 Pages
registered or placed in the name and at the address specified
below and delivered thereto.
Date:_________, 19__.
__________________________(1)
Signature of Owner
_____________________________
(Street Address)
_____________________________
(City) (State) (Zip Code)
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
_______________
(1) The signature must correspond with the name as written upon the face of
this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
22
<PAGE> 23
Page 48 of 48 Pages
FORM OF ASSIGNMENT
For VALUE RECEIVED, the undersigned registered holder of this
Warrant Certificate hereby sells, assigns and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by this Warrant Certificate not being assigned
hereby) all of the right of the undersigned under this Warrant Certificate, with
respect to the number of Warrants set forth below:
<TABLE>
<CAPTION>
Social Security
Names of or other Identifying Number of
Assignees Address Number of Assignee(s) Warrants
- --------- ------- --------------------- ---------
<S> <C> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint _______________ the
undersigned's attorney to make such transfer on the books of Phoenix Information
Systems Corp. maintained for the purpose, with full power of substitution.
Dated: ___________, 19__
__________________________
_________________________
_______________
(1) The signature must correspond with the name as written upon the face of
this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
23
