UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No.12)*
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.
590 Madison Avenue
New York, New York 10022
(212) 872-1000
---------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 3, 1997
---------------------------------
(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 [_].
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 25 Pages
Exhibit Index: Page 18
<PAGE>
Page 2 of 25 Pages
SCHEDULE 13D
CUSIP No. 719077109
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*
Not applicable
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 39,269,999
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 39,269,999
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
39,269,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[X]
13 Percent of Class Represented By Amount in Row (11)
53.68%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 3 of 25 Pages
SCHEDULE 13D
CUSIP No. 719077109
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*
Not applicable
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 40,269,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
40,269,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
40,269,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[X]
13 Percent of Class Represented By Amount in Row (11)
54.31%
14 Type of Reporting Person*
OO; IV
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 4 of 25 Pages
SCHEDULE 13D
CUSIP No. 719077109
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*
Not applicable
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 1,000,000
Shares
Beneficially 8 Shared Voting Power
Owned By 39,269,999
Each
Reporting 9 Sole Dispositive Power
Person 1,000,000
With
10 Shared Dispositive Power
39,269,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
40,269,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[X]
13 Percent of Class Represented By Amount in Row (11)
54.31%
14 Type of Reporting Person*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 5 of 25 Pages
SCHEDULE 13D
CUSIP No. 719077109
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*
Not applicable
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 40,269,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
40,269,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
40,269,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[X]
13 Percent of Class Represented By Amount in Row (11)
54.31%
14 Type of Reporting Person*
PN; IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 6 of 25 Pages
SCHEDULE 13D
CUSIP No. 719077109
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*
Not applicable
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 40,269,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
40,269,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
40,269,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[X]
13 Percent of Class Represented By Amount in Row (11)
54.31%
14 Type of Reporting Person*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 7 of 25 Pages
SCHEDULE 13D
CUSIP No. 719077109
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Soros Fund Management LLC
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
Not applicable
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 40,269,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
40,269,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
40,269,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[X]
13 Percent of Class Represented By Amount in Row (11)
54.31%
14 Type of Reporting Person*
OO; IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 8 of 25 Pages
SCHEDULE 13D
CUSIP No. 719077109
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
George Soros (in the capacity described herein)
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
Not applicable
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 41,269,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
41,269,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
41,269,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
54.92%
14 Type of Reporting Person*
IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 9 of 25 Pages
SCHEDULE 13D
CUSIP No. 719077109
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Stanley F. Druckenmiller (in the capacity described herein)
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
Not applicable
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 40,269,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
40,269,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
40,269,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[X]
13 Percent of Class Represented By Amount in Row (11)
54.31%
14 Type of Reporting Person*
IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 10 of 25 Pages
SCHEDULE 13D
CUSIP No. 719077109
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*
Not applicable
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 40,269,999
Each
Reporting 9 Sole Dispositive Power
Person
With
10 Shared Dispositive Power
40,269,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
40,269,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
|X|
13 Percent of Class Represented By Amount in Row (11)
54.31%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 11 of 25 Pages
SCHEDULE 13D
CUSIP No. 719077109
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*
Not applicable
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 40,269,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
40,269,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
40,269,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
|X|
13 Percent of Class Represented By Amount in Row (11)
54.31%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 12 of 25 Pages
SCHEDULE 13D
CUSIP No. 719077109
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*
Not applicable
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 41,269,999
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
41,269,999
11 Aggregate Amount Beneficially Owned by Each Reporting Person
41,269,999
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
54.92%
14 Type of Reporting Person*
IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 13 of 25 Pages
This Amendment No. 12 to Schedule 13D relates to shares of Common
Stock, $.01 par value per share (the "Shares"), of Phoenix Information Systems,
Corp. (the "Issuer"). This Amendment No. 12 amends the initial statement on
Schedule 13D dated December 16, 1994 and all amendments thereto (collectively,
the "Initial Statement") filed by certain of the Reporting Persons (as defined
herein). This Amendment No. 12 is being filed by the Reporting Persons to report
that Phoenix Partners (as defined below) has entered into a binding term sheet
with the Issuer which provides for the financing and sale of substantially all
of the assets of the Issuer to Phoenix Partners. Capitalized terms used herein
but not defined herein shall have the meanings ascribed to them in the Initial
Statement. The Initial Statement is supplementally amended as follows.
Item 2. Identity and Background.
This statement is being filed on behalf of each of the following
persons (collectively, the "Reporting Persons"):
(i) S-C Phoenix Partners ("Phoenix Partners");
(ii) Quantum Industrial Partners LDC ("QIP");
(iii) S-C Phoenix Holdings, L.L.C. ("Phoenix Holdings");
(iv) QIH Management Investor, L.P. ("QIHMI");
(v) QIH Management, Inc. ("QIH Management");
(vi) SFM LLC;
(vii) George Soros ("Mr. Soros");
(viii) Stanley F. Druckenmiller ("Mr. Druckenmiller");
(ix) Winston Partners, L.P. ("Winston");
(x) Chatterjee Fund Management, L.P. ("CFM"); and
(xi) Dr. Purnendu Chatterjee ("Dr. Chatterjee").
<PAGE>
Page 14 of 25 Pages
Item 4. Purpose of Transaction.
On December 3, 1997, Phoenix Partners and the Issuer signed a binding
term sheet providing for debtor-in-possession financing and the sale of
substantially all the assets of the Issuer to Phoenix Partners for $20,000,000
plus the assumption of specified liabilities. Both the debtor-in-possession
credit facility and the sale of assets are subject to bankruptcy court approval.
The debtor-in-possession credit facility will provide up to $600,000 in
financing subject to customary conditions. Phoenix Partners and the Issuer will
enter into a definitive asset purchase agreement which will provide for a
$1,000,000 breakup fee and a nonsolicitation agreement which will prohibit the
Issuer from actively seeking alternative purchasers, in addition to conditions,
representations and warranties customarily found in agreements to purchase all
the assets of a debtor-in-possession. The Reporting Persons reserve the right to
acquire, or cause to be acquired, additional securities of the Issuer, to
dispose of, or cause to be disposed, such securities at any time or to formulate
for 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 of the Reporting Persons and/or SFM Clients, market conditions
or other factors.
Item 7. Material to be Filed as Exhibits.
AL. Summary Term Sheet for Asset Purchase and Debtor in Possession
Financing Agreement dated as of December 3, 1997 between Phoenix Partners and
the Issuer.
<PAGE>
Page 15 of 25 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 8, 1997 S-C PHOENIX PARTNERS
By: S-C Phoenix Holding, L.L.C.
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Authorized Person
QUANTUM INDUSTRIAL PARTNERS LDC
By: /S/ MICHAEL C. NEUS
---------------------------------------
Michael C. Neus
Attorney-in-Fact
S-C PHOENIX HOLDINGS, L.L.C.
By: /S/ MICHAEL C. NEUS
---------------------------------------
Michael C. Neus
Authorized Person
QIH MANAGEMENT INVESTOR, L.P.
By: QIH MANAGEMENT, INC., its general
partner
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Vice President
QIH MANAGEMENT, INC.
By: /S/ MICHAEL C. NEUS
---------------------------------------
Michael C. Neus
Vice President
<PAGE>
Page 16 of 25 Pages
SOROS FUND MANAGEMENT LLC
By: /S/ MICHAEL C. NEUS
---------------------------------------
Michael C. Neus
Assistant General Counsel
GEORGE SOROS
By: /S/ MICHAEL C. NEUS
---------------------------------------
Michael C. Neus
Attorney-in-Fact
STANLEY F. DRUCKENMILLER
By: /S/ MICHAEL C. NEUS
---------------------------------------
Michael C. Neus
Attorney-in-Fact
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
<PAGE>
Page 17 of 25 Pages
CHATTERJEE FUND MANAGEMENT, L.P.
By: Purnendu Chatterjee, its
General Partner
By: /S/ PETER HURWITZ
----------------------------------
Peter Hurwitz
Attorney-in-Fact
PURNENDU CHATTERJEE
By: /S/ PETER HURWITZ
---------------------------------------
Peter Hurwitz
Attorney-in-Fact
<PAGE>
Page 18 of 25 Pages
EXHIBIT INDEX
Page No.
-------
AL. Summary Term Sheet for Asset Purchase and
Debtor in Possession Financing Agreement
dated as of December 3, 1997 between S-C
Phoenix Partners and Phoenix Information
Systems
Corp............................................. 19
Page 19 of 25 Pages
EXHIBIT AL
Summary Term Sheet for Asset Purchase
and Debtor in Possession Financing Agreement
Seller/Borrower: Phoenix Information Systems Corp. (the "Debtor")
Purchaser/Lender: SC Phoenix Partners (the "Purchaser")
Purchased Assets: All assets of the Debtor, tangible and
intangible, real and personal, including all stock and
joint venture and partnership interests of the Debtor,
chose in action, accounts receivable and cash, and the
proceeds of all of the foregoing, including executory
contracts and unexpired leases with the exception of
any assets, executory contracts and unexpired leases
listed by the Purchaser as "excluded assets" in the
Definitive Sale Documentation (defined below)
(collectively, the "Assets")
Purchase Price: $20,000,000 in cash or cash equivalents
(including setoff against any amounts outstanding under
DIP Facility (defined below) and credit against Series
C Preferred)
Definitive Sale Purchaser and Debtor shall enter into a definitive
Documentation: Purchase and Sale Agreement (the "Definitive Sale
Documentation") on or before December 9, 1997. The
Definitive Sale Documentation and any related
documentation shall be satisfactory to Purchaser and
its counsel in all respects. The Definitive Sale
Documentation shall contain such conditions,
representations and warranties and covenants as are
customarily found in agreements to purchase
substantially all of the assets of a debtor and such
additional provisions appropriate in Purchaser's
judgment for this transaction, including:
Conditions to 1. Purchaser shall have received on or before
Purchaser'sClosing: December 26, 1997 a letter from China Southern
Airlines that (1) confirms China Southern's
ongoing commitment to the joint venture, (2)
commits to the development of a rollout plan as
soon as reasonably possible but in no event later
than January 30, 1998, (3) establishes a firm date
for having an adequate project team in place to
achieve cutover, and (4) establishes a firm date
for cutover
<PAGE>
Page 20 of 25 Pages
2. Entry of Purchaser and Debtor on or before
December 3, 1997 into the Definitive DIP
Documentation (defined below)
3. Satisfactory completion (in Purchaser's sole
determination) on or before December 23, 1997 of
business, operational and legal due diligence of
Debtor, including as to the amount of allowable
claims against the Debtor
4. Entry on or before December 8, 1997 of an order of
the bankruptcy court ("Interim Order") in form and
substance satisfactory to Purchaser and its
counsel, including a finding that Interim DIP
Facility (defined below) and preliminary aspects
of Assets sale transaction (notice provision,
break-up fee, non- solicitation provision) are in
good faith and otherwise comply with sections
364(e) and 363(m) of the Bankruptcy Code,
authorizing and approving:
(a) Interim DIP Facility
(b) Reimbursement of all of Purchaser's expenses
(including, without limitation, expenses of
counsel and other consultants and internal
legal expenses attributable to the DIP
Facility and Assets sale transaction) in
connection with Assets sale transaction and
DIP Facility, not to exceed $400,000, which
obligation shall be secured by a senior lien
on the Assets under section 364(d) of the
Bankruptcy Code and a superpriority claim
under sections 364(c)(1) and 503(b) of the
Bankruptcy Code over expenses of the kind
specified in sections 503(b), 506(c), 507(b)
and 726(b) of the Bankruptcy Code
("Superpriority Claim")
(c) Break-up fee of $1,000,000, to be paid as a
Superiority Claim from the proceeds of any
alternative transaction, whether pursuant to
section 363(b) or 1129 of the Bankruptcy
Code, payable immediately upon closing of
such alternative transaction
-2-
<PAGE>
Page 21 of 25 Pages
(d) Debtor's agreement (i) not to solicit, either
directly or indirectly, any offers to
purchase, or otherwise finance, any of the
Assets and (ii) to provide Purchaser with the
terms of any offers received by the Debtor as
promptly as practicable, but in any event
within 24 hours of such receipt
(e) Debtor's agreement to provide Purchaser with
notice of any event or occurrence having a
material effect on the business, conditions
or prospects, financial or otherwise, of the
Debtor's business or the Assets, as promptly
as practicable, but any event within 24 hours
of the Debtor's receipt of such information
(f) The date of the final hearing on the DIP
Facility and hearing on the sale of the
Assets and approving the form and manner of
notice
5. Entry on or before December 30, 1997 of a final
order of the bankruptcy court, in form and
substance satisfactory to Purchaser and its
counsel, including (i) a finding that the Assets
purchase is in good faith and otherwise satisfies
section 363(m) of the Bankruptcy Code, (ii)
channeling injunction of all claims and interests
against the Seller, its directors and officers and
Purchaser to the Asset sale proceeds, (iii)
authorizing and approving the sale of the Assets
to Purchaser pursuant to the Definitive Sale
Documentation free and clear of all claims and
interests under sections 363(b) and (f) of the
Bankruptcy Code and the assignment to Purchaser of
all specified executory contracts and unexpired
leases under section 365 of the Bankruptcy Code,
and (iv) such other terms as Purchaser may
require.
-3-
<PAGE>
Page 22 of 25 Pages
6. Debtor shall provide Purchaser and its counsel
with copies of all proposed pleadings and orders
in the bankruptcy case pertaining to the Assets or
their proposed sale or to the DIP Facility, with
sufficient time to permit review and comment by
Purchaser. The Debtor shall not issue any press
release in which Purchaser or any affiliate or
agent of Purchaser is mentioned without
Purchaser's prior review and approval.
DIP Facility: Working capital facility to provide requirements for
Debtor's continued ordinary course operations (as
provided in Budget (defined below) and certified in
advance to Lender by a responsible officer of the
Borrower) until hearing on Asset sale ("DIP Facility")
Amount and Up to $600,000 available as follows:
Availability of DIP
Facility: $75,000 initial availability to be made on or before
December 8, 1997 ("Initial DIP Facility"). Up to
$525,000 to be made thereafter on or before Asset sale
hearing, subject to such conditions precedent to
subsequent advances as are customarily found in DIP
facilities, including absence of event of
default/termination event
Interest: 14 percent per annum; after an event of default, 16
percent per annum. Interest shall be payable currently.
Maturity: Borrowings under the DIP Facility are to be repaid in
full on the date which is the earlier of (a) December
30, 1997, (b) consummation of the transaction
contemplated by the Definitive Sale Documentation, or
(c) the occurrence of an event of default
-4-
<PAGE>
Page 23 of 25 Pages
Collateral and First lien on all Assets under section 364(d) of the
Superpriority Bankruptcy Code. Upon either (a) event of default or
Claim: (b) termination of the DIP Facility, the automatic stay
shall be lifted without further action on the part of
Purchaser (other than five days' prior notice to the
Debtor and any official committee) to permit Purchaser
to foreclose on or take other action with respect to
the collateral; provided that the Debtor and any
official committee shall have such five days to attempt
to prevent such lifting of the automatic stay on the
sole basis that such event of default or termination
event has not occurred. All liens shall be
automatically perfected pursuant to bankruptcy court
order; however, the automatic stay shall be modified to
permit other perfection at Purchaser's option
Superpriority Claim, other than with respect to fees of
U.S. trustee and bankruptcy court-approved professional
fees not to exceed $425,000, which shall be pari passu
with Lender's claim
Fees: All fees shall be included in expense reimbursement and
break-up fee agreed to and authorized in connection
with the Definitive Sale Documentation
Additional Entry of Lender and Debtor on or before December 3,
Conditions of DIP 1997 into definitive documentation in form and
Facility: substance satisfactory to Lender and its counsel
("Definitive DIP Documentation"). The Definitive DIP
Documentation shall contain such conditions,
representations and warranties and covenants as are
customarily found in DIP facilities and additional
provisions appropriate in Lender's judgment for this
transaction, including:
-5-
<PAGE>
Page 24 of 25 Pages
1. Conditions
(a) Entry into Definitive Sale Documentation on
or before December 9, 1997
(b) Satisfactory completion (in Lender's sole
determination) on or before December 8, 1997
of business, operational and legal due
diligence of the Debtor
(c) Entry of Interim Order on or before December
8, 1997
(d) Entry on or before December 19, 1997 of a
final order of the bankruptcy court
satisfactory to Lender and its counsel,
including finding of good faith and otherwise
of satisfaction of section 364(e),
authorizing and approving the DIP Facility
2. Covenants
(a) Debtor will observe a budget to be negotiated
in Definitive DIP Documentation (the
"Budget"). The Budget will allow for ongoing
payments of professional and United States
Trustee fees, subject to bankruptcy court
approval, in an amount not to exceed
$425,000; provided that no such fees shall be
used for the purpose of investigating or
attacking Purchaser, its claims or interests
or the DIP Facility or Asset purchase in any
manner.
(b) Weekly cash flow and other agreed financial
reporting compliance.
(c) Negative pledge; no other financing under
section 364 of the Bankruptcy Code
(d) Debtor to use best efforts to preserve and
protect the value of the Assets
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<PAGE>
Page 25 of 25 Pages
Events of Such events of default as are customarily found in DIP
Default/Termination facilities and others appropriate in Lender's judgment,
Events: including:
1. Non-payment when due of amounts due under DIP
Facility
2. Breach of any covenant contained in Definitive DIP
Documentation or Definitive Sale Documentation
3. Dismissal of bankruptcy case, any conversion to
chapter 7, appointment of a bankruptcy trustee or
an examiner or other person with expanded powers,
termination of the Debtor's exclusive right to
file a plan or reorganization, or the incurrence
of other indebtedness under section 364 of the
Bankruptcy Code
4. Any stay or modification of the Interim Order or
interim or final orders of the bankruptcy court
approving the sale of the Assets under the
Definitive Sale Documentation or the DIP Facility
5. The filing of a chapter 11 plan or a motion for
approval of an agreement with respect to the
disposition of the Assets that does not provide
for the sale of the Assets pursuant to the
Definitive Sale Documentation or that is otherwise
not satisfactory to the Lender
Governing Law: Internal law of the State of New York
Agreed of this
3rd day of December, 1997
/s/ Delbert F. Bloss, Jr. /s/ Purnendu Chatterjee
- ------------------------------ --------------------------
By: Delbert F. Bloss, Jr. By: Purendndu Chatterjee
Title: President and CEO Title: Manager
-7-
