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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 3, 1997
PHOENIX INFORMATION SYSTEMS CORP.
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(Exact Name Of Registrant As Specified In Its Charter)
Delaware 0-26532 13-3337797
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
100 Second Avenue South, Suite 1100, St. Petersburg, Florida 33701
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(Address Of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (813) 894-8021
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Former Name or Former Address, if Changed Since Last Report
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ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Phoenix Information Systems Corp. ("Phoenix" or "the Debtor") is a
publicly traded holding company incorporated in Delaware. Phoenix owns a 70%
interest in a joint venture with China Southern Airlines, named Hainan-Phoenix
Information Systems Ltd. Phoenix has not generated any significant revenues,
earnings or history of operations from inception through November 30, 1997.
Consequently, Phoenix's continued existence depended primarily upon its ability
to raise capital. On December 3, 1997, Phoenix announced that after an extensive
and unsuccessful search for additional financing it has determined to seek
protection under Chapter 11 of the Bankruptcy Code. Phoenix also announced that,
subject to court approval, it has arranged for debtor-in-possession financing
and a sale of all its assets for $20 million to S-C Phoenix Partners, a major
shareholder. The terms and conditions of the sale include a $1 million breakup
fee and a non-solicitation arrangement that prohibits the Company from actively
seeking other buyers or offers of financing.
On December 3, 1997, Phoenix entered into a Summary Term Sheet for
Asset Purchase and Debtor-in-Possession Financing Agreement ("Credit Agreement"
as described in, and attached as Exhibit 10.42 to, Phoenix's Current Report on
Form 8-K, date of earliest event reported December 3,1997) with S-C Phoenix
Partners. All assets of the Debtor, tangible and intangible, real and personal,
including all stock and joint venture and partnership interests of the Debtor,
choses 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 S-C Phoenix
Partners as "excluded assets" in the proposed Definitive Sale Documentation
shall be purchased for $20,000,000 in cash or cash equivalents (including setoff
against any amounts outstanding under the debtor-in-possession financing and
credit against Series C Preferred Stock). The Definitive Sale Documentation
contains such terms and conditions, representations and warranties and
convenants as are customarily found in agreements to purchase substantially all
of the assets of a debtor and such additional provisions deemed appropriate by
the parties for this transaction.
On December 4, 1997, Phoenix, and two of its subsidiaries, Phoenix
Systems Group, Inc. ("PSG") and Phoenix Systems Ltd. ("PSL"), filed voluntary
petitions (the "Motion") for relief under Chapter 11, Title 11 of the United
States Code (the "Bankruptcy Code") with the United States Bankruptcy Court for
the District of Delaware, Wilmington, Delaware 19801 (the "Court"). The Court
agreed to consolidate the petitions and provide for the joint administration of
their respective cases. Pursuant to Sections 1107 and 1108 of the Bankruptcy
Code, Phoenix, as debtor and debtor-in-possession, will continue to manage and
operate its assets and businesses in the ordinary course of business, pending
the confirmation of the plan of reorganization and subject to the supervision
and orders of the Court. By operating as debtor-in-possession under Chapter 11
of the Bankruptcy Code, the existing directors and officers of Phoenix will
continue to manage the operations of Phoenix subject to the
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supervision and orders of the Court. Phoenix (case number 97-2498) listed assets
of $28,414,261 and liabilities of $874,736. Phoenix's assets include
intercompany receivables from PSG of $7,261,277 and from PSL of $12,581,578. PSG
(case number 97-2499) listed assets of $435,197 and liabilities of $7,265,561.
PSL (case number 97-2500) listed assets of $11,196,327 and liabilities of
$13,017,251.
On December 7, 1997, the Debtor filed a supplement to the Debtors'
motion of December 4, 1997, called "Debtors' Supplement to Motion of Debtors For
An Order (1) (A) Approving Certain Bid Protection and Material Change Provisions
of Asset Purchase Agreement, Pending Court of Agreement, (B) Finding That These
Provisions Have Been Proposed In Good Faith, And, (C) Approving Dates And Notice
Procedures For Final Hearing As To Asset Purchase Agreement, And (2) Approving
Asset Purchase Agreement At Final Hearing." See Exhibit 10.43 to, Phoenix's
Current Report on Form 8-K, date of earliest event reported December 3, 1997).
On December 9, 1997, the Court ruled on the "Interim Order Authorizing
Debtor To Obtain Postpetition Financing Pursuant To Sections 364(c)(1) And
364(d) Of The Bankruptcy Code" (described in, and attached as Exhibit 10.44 to,
Phoenix's Current Report on Form 8-K, date of earliest event reported December
3, 1997). Upon the Motion dated December 4, 1997 the Court found, determined,
ordered and adjudged that (i) it has core jurisdiction over these proceedings;
(ii) the Motion is granted in all respects, and all objections thereto are
overruled; (iii) the execution, delivery and performance by the Debtor of a
Credit Agreement, dated as of December 3, 1997 is approved; (iv) the Debtor may
obtain postpetition financing pursuant to the Credit Agreement up to the
principal amount of $600,000; and (v) that the Debtor has an immediate need to
obtain financing in an interim basis pending a final hearing on the Motion (the
"Final Hearing") to permit the orderly continuation of its business and to
preserve its property so that it may be disposed of in a manner which will
maximize its value, and to satisfy other working capital needs. Pending entry of
a Final Order approving the Motion, Phoenix is immediately authorized to borrow
pursuant to the Credit Agreement up to an aggregate of $300,000 for the purposes
and upon the terms and conditions provided for by the Credit Agreement. The
Final Hearing shall be held on December 19, 1997 at 1:00 p.m.
On December 9, 1997, the Court ruled on the "Order (A) Scheduling Final
Hearing On Debtor's Motion To Sell Substantially All Of Their Assets And
Approving Form Of Notice, (B) Approving Certain Terms Of Sale, And (C)
Establishing Competitive Bid Procedures" (described in, and attached as Exhibit
10.45 to, Phoenix's Current Report on Form 8-K, date of earliest event reported
December 3, 1997). Upon the Motion dated December 4, 1997 and the Supplement to
the Motion dated December 7, 1997, the Court found, determined, ordered and
adjudged that (i) it has core jurisdiction over these proceedings; (ii) the
Motion is granted in all respects, and all objections thereto are overruled;
(iii) the form of notice, notice and publication procedures, Bid Protection and
Material Change Provisions, and bidding procedures proposed by the Debtors are
reasonable and proper under the circumstances, and a hearing on
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shortened notice is required for the protection of the Debtors' estates and to
maximize the value of the Debtors' assets; and (iv) a Final Sale Hearing on the
Debtors' Motion for an order authorizing and approving the Asset Sale to the
Purchaser pursuant to the terms of the Credit Agreement dated December 3, 1997
and the Definitive Sale Documentation referred to in the Motion shall be held on
January 14, 1998 at 1:30 p.m.
As of the date of this filing, Phoenix had the following issued and
outstanding stock: 51,842,176 shares of Common Stock, 201,820 shares of Series A
Preferred Stock, 843,950 shares of Series B Preferred Stock, and 896,866 shares
of Series C Preferred Stock.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Not applicable
(c) Exhibits
10.42 Summary Term Sheet for Asset Purchase and Debtor in Possession
Financing Agreement, as amended, dated December 3, 1997.
10.43 Debtors' Supplement to Motion of Debtors For An Order (1) (A) Approving
Certain Bid Protection and Material Change Provisions of Asset Purchase
Agreement, Pending Court of Agreement, (B) Finding That These
Provisions Have Been Proposed In Good Faith, And, (C) Approving Dates
And Notice Procedures For Final Hearing As To Asset Purchase Agreement,
And (2) Approving Asset Purchase Agreement At Final Hearing, dated
December 7, 1997
10.44 Interim Order Authorizing Debtor To Obtain Postpetition Financing
Pursuant To Sections 364(c)(1) And 364(d) Of The Bankruptcy Code, dated
December 9, 1997.
10.45 Order (A) Scheduling Final Hearing On Debtor's Motion To Sell
Substantially All Of Their Assets And Approving Form Of Notice, (B)
Approving Certain Terms Of Sale, and (C) Establishing Competitive Bid
Procedures, dated December 9, 1997.
99 Press Release Issued by Phoenix Information Systems Corp. on December
3, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Phoenix has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Phoenix Information Systems Corp.
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(Registrant)
December 18, 1997 By /s/ Delbert F. Bloss
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(Signature)
Delbert F. Bloss, President & CEO
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(Print the name and title of the signing officer)
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EXHIBITS TO FORM 8-K
DATE OF EARLIEST EVENT REPORTED: DECEMBER 3, 1997
FOR
PHOENIX INFORMATION SYSTEMS CORP.
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INDEX TO EXHIBITS
10.42 Summary Term Sheet for Asset Purchase and Debtor in Possession
Financing Agreement, as amended, dated December 3, 1997.
10.43 Debtors' Supplement to Motion of Debtors For An Order (1) (A) Approving
Certain Bid Protection and Material Change Provisions of Asset Purchase
Agreement, Pending Court of Agreement, (B) Finding That These
Provisions Have Been Proposed In Good Faith, And, (C) Approving Dates
And Notice Procedures For Final Hearing As To Asset Purchase Agreement,
And (2) Approving Asset Purchase Agreement At Final Hearing, dated
December 7, 1997
10.44 Interim Order Authorizing Debtor To Obtain Postpetition Financing
Pursuant To Sections 364(c)(1) And 364(d) Of The Bankruptcy Code, dated
December 9, 1997.
10.45 Order (A) Scheduling Final Hearing On Debtor's Motion To Sell
Substantially All Of Their Assets And Approving Form Of Notice, (B)
Approving Certain Terms Of Sale, And (C) Establishing Competitive Bid
Procedures, dated December 9, 1997.
99 Press Release Issued by Phoenix Information Systems Corp. on December
3, 1997.
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EXHIBIT 10.42
Summary Term Sheet for Asset Purchase and Debtor in Possession
Financing Agreement, as amended, dated December 3, 1997.
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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,
choses 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 PURCHASER'S 1. Purchaser shall have received on or
CLOSING: before 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
2. Entry of Purchaser and Debtor on or
before December 3, 1997 into the Definitive
DIP
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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
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
(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
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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
4. 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.
5. 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
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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 AVAILABILITY Up to $600,000 available as follows:
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
COLLATERAL AND First lien on all Assets under section 364(d) of the
SUPERPRIORITY CLAIM: Bankruptcy Code. Upon either (a) event of default or
(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
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ADDITIONAL CONDITIONS Entry of Lender and Debtor on or before December 3,
OF DIP FACILITY: 1997 into definitive documentation in form and
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:
6. 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
7. 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.
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(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
EVENTS OF DEFAULT/ Such events of default as are customarily found in
TERMINATION EVENTS: DIP facilities and others appropriate in Lender's
judgment, including:
8. Non-payment when due of amounts due
under DIP Facility
9. Breach of any covenant contained in
Definitive DIP Documentation or Definitive
Sale Documentation
10. 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
11. 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
12. 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 to this
3rd day of December, 1997
/s/ Delbert F. Bloss, Jr. /s/ Purnendu Chatterjee
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By: Delbert F. Bloss, Jr. By: Purnendu Chatterjee
Title: President and CEO Title: Manager
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EXHIBIT 10.43
Debtors' Supplement to Motion of Debtors For An Order (1) (A) Approving
Certain Bid Protection and Material Change Provisions of Asset Purchase
Agreement, Pending Court of Agreement, (B) Finding That These Provisions Have
Been Proposed In Good Faith, And, (C) Approving Dates And Notice Procedures
For Final Hearing As To Asset Purchase Agreement, And (2) Approving Asset
Purchase Agreement At Final Hearing, dated December 7, 1997
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UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- ------------------------------------X
In re: Chapter 11
Case Nos. 97-
2498 through
PHOENIX INFORMATION SYSTEMS 97-2500 (RRM)
CORP., et al. (Jointly Administered)
Debtors.
- ------------------------------------X
DEBTORS' SUPPLEMENT TO MOTION OF DEBTORS FOR AN ORDER (1) (A) APPROVING CERTAIN
BID PROTECTION AND MATERIAL CHANGE PROVISIONS OF ASSET PURCHASE AGREEMENT,
PENDING COURT APPROVAL OF AGREEMENT, (B) FINDING THAT THESE PROVISIONS HAVE BEEN
PROPOSED IN GOOD FAITH, AND (C) APPROVING DATES AND NOTICE PROCEDURES FOR FINAL
HEARING AS TO ASSET PURCHASE AGREEMENT, AND (2) APPROVING ASSET PURCHASE
AGREEMENT AT FINAL HEARING
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TO THE HONORABLE RODERICK R. MCKELVIE,
UNITED STATES DISTRICT JUDGE
The debtors and debtors in possession herein (collectively, the
"Debtors"), by and through their attorneys, LeBoeuf, Lamb, Greene & MacRae,
L.L.P., and Young, Conaway, Stargatt & Taylor, hereby file this supplement to
the Debtors' motion (the "Sale Motion") submitted to this Court on December 4,
1997 for an order (a) approving certain bid protection and material change
provisions regarding a sale of the Debtors' assets, (b) finding that these
provisions have been proposed in good faith, and (c) approving dates and notice
procedures for the final hearing as to the sale of assets, and (d) ultimately
approving asset purchase agreement at the final hearing, and respectfully
represents as follows:
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JURISDICTION
1. This Court has core jurisdiction over these proceedings and the
parties and property affected hereby pursuant to 28 U.S.C. ss.ss. 157(b) and
1334.
BACKGROUND
2. The Debtors' dire financial condition and the events leading up to
their filing for relief under chapter 11 of the Bankruptcy Code are set forth in
the Sale Motion and the accompanying affidavit of Peter J. Ford, the Debtors'
Vice President and Chief Financial Officer ("Ford Affidavit") of December 4,
1997. The Sale Motion and the Ford Affidavit also set forth the reasons why the
Debtors have determined to sell substantially all of their assets as promptly as
possible in their sound business judgment and to preserve and protect the value
of their estates.
3. The purpose of this supplement to the Sale Motion is to provide this
Court, in a more detailed fashion, with the Debtors' suggested notice and
competitive bidding procedures with respect to the proposed sale.
4. As set forth in the Sale Motion and the Ford Affidavit, the Debtors
have made extensive, good faith prepetition efforts to identify and solicit
offers from potential purchasers of their assets. Over the past year, the
Debtors have approached several parties to discuss the sale of their assets, yet
no serious bids resulted from such process with the exception of the proposed
purchaser's bid. In addition, the Debtors and their advisors have actively,
although unsuccessfully, pursued alternative forms of financing and the
restructuring of their businesses. As a result, the Debtors believe that the
current offer represents the highest and best prepetition offer obtainable for
the assets of the Debtors.
2
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5. The Debtors desire to provide wide notice of their proposed sale
(within the constraints imposed by their current financial and business
condition) to ensure that (a) all creditors and equity security holders of the
Debtors receive notice of the final hearing, (b) parties to executory contracts
and unexpired leases that the Debtors wish to assume and assign pursuant to the
sale are given proper notice of the proposed disposition of their contracts, and
(c) any higher and better offer for the Debtors' business and assets is
identified.
6. The Debtors intend to accomplish (a) above by proposing to serve
copies of a notice substantially in the form annexed to this supplement to the
Sale Motion (the "Sale Notice") to all the persons listed in the Debtors'
respective lists of creditors and all preferred equity security holders. The
Debtors cannot notice all common stockholders because the common stock of the
parent Debtor which is a public company (the subsidiaries are wholly-owned) is
widely held. Thus, notice to such holders would be difficult to complete, unduly
burdensome and extremely expensive. The Debtors, therefore, propose publication
in the Wall Street Journal and The New York Times to inform such holders of the
sale.
7. In case such creditors are not noticed in the provisions mentioned
above, the Debtors also intend to serve the Sale Notice on all persons who are
known to the Debtors to assert liens or other interests on assets to be sold.
The United States Trustee, the Securities and Exchange Commission, any party who
has filed a notice of appearance and the chair of any official committee shall
also receive the notice.
8. In addition, the Debtors have established a procedure for assumption
and assignment of executory contracts and unexpired leases to be assumed
pursuant to the sale of substantially all of the Debtors' assets (the "Assigned
Contracts"). Ten days after the date the
3
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proposed Order sought by this supplement to the Sale Motion is signed, the
Debtors shall serve on each non-debtor party to an executory contract or
unexpired lease notice stating: (a) that such Assigned Contract is to be assumed
and assigned to the Purchaser as part of the asset sale, (b) the notice and
amount of any default of the Debtors, within their knowledge, whether monetary
or otherwise, under such Assigned Contract, and (c) the dollar amount believed
by the Debtors to be necessary, or the other actions believed to be necessary,
to cure such default ("Debtors' Notice of Assigned Contracts").
9. Any non-Debtor party to an Assigned Contract who contests the
Debtors' Notice of Assigned Contracts including, but not limited to, the nature
or amount of any outstanding named defaults, within five days of the date of
service of the Debtors' Notice of Assigned Contracts, shall file a statement
stating such party's position concerning the nature and amount of any
outstanding defaults.
10. The procedures provided for above are designed to consensually
resolve any issue with contract parties regarding the sale of the Debtors'
assets by setting forth clear notice procedures. Contract parties are given
ample notice and ability to respond to any issues that they may have regarding
the Debtors' assumption of contracts. Because a sale of substantially all of the
assets of the Debtors is the best manner for contract parties to be made whole
regarding the obligations of the Debtors, the procedures set forth herein
maximize recoveries for such parties while providing fair and proper notice.
11. Finally, the Debtors have provided that, within five (5) business
days of the date an order approving bidding procedures is signed, the Purchaser
shall enter into a sale contract with the Debtors (the "Definitive Sale
Documentation"). The Debtors have also
4
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provided for procedures for making higher and better offers than that of the
purchaser under the proposed sale. This auction process assures maximum value
for the assets of the Debtor. These procedures first include consideration of
only certain types of qualified offers ("Overbids") and culminate in an open
auction. The following are the Overbid requirements:
(i) Overbids must propose consideration having a readily
ascertainable fair market value of not less than $50,000 in excess of
the sum of $20,000,000 and any amounts payable to Purchaser for
expenses up to $400,000, subject to adjustments no less favorable to
the Debtors than those contained in the Definitive Sale Documentation,
plus the assumption of the post-closing liabilities to be assumed by
the Purchaser under the Definitive Sale Documentation.
(ii) Overbids must be in substantially the form of the
Definitive Sale Documentation marked to show all changes thereto and
must be on terms and conditions no less favorable to the Debtors than
the terms and conditions contained in the Definitive Sale
Documentation, including, but not limited to, the time of closing.
(iii) Overbids must be delivered to the Debtors with copies to
the Purchaser not later than 4:00 p.m. on the third business day prior
to the date set for the final sale hearing and must be accompanied by
appropriate evidence of the bidder's financial ability to consummate
such a transaction on or prior to the closing date.
(iv) Overbids must provide for a cash deposit at the time
such Overbid is submitted of not less than 10% of the aggregate
purchase price payable thereunder.
5
<PAGE> 7
(v) With respect to subsequent Overbids (including any by
the Purchaser), Overbids must include additional consideration of at
least $50,000 over the previous bid.
12. The proposed Order also provides that if any qualified Overbids are
timely received, an auction will be conducted on the second business day
following the due date for Overbids. At the auction, bidding begins with the
highest and best qualifying Overbid and does not conclude until each
participating bidder has had the opportunity to submit any additional Overbid
with full knowledge of the existing highest bid. The proposed Order requires
that the bidder provide a cash deposit of 10% of the aggregate purchase price of
its offer to the Debtors immediately prior to such auction.
13. Courts in this Circuit and this District have approved the
preconfirmation sale of substantially all of a debtor's assets in the debtors'
sound business judgment when there has been a showing that (i) interested
parties have been provided with adequate and reasonable notice, (ii) the sale
price is fair and reasonable, and (iii) the sale is in good faith. See, e.g., In
re Tempo Technology Corp., 202 B.R. 363 (D. Del. 1996); In re Delaware & Hudson
Railway Co., 124 B.R. 169 (D. Del. 1991). See also In re Abbotts Dairies of
Pennsylvania, Inc., 788 F.2d 143, 149-50 (3d Cir. 1986) (which held that when a
bankruptcy court authorizes the preconfirmation sale of assets, "it is required
to make a finding with respect to the 'good faith of the purchaser;" if the
purchaser acted in good faith, then an auction procedure is sufficient to
sustain a finding that the purchaser paid reasonable value for the assets). Cf.,
In re Solar Mfg. Corp., 176 F.2d 493, 495 (3d Cir. 1949) (pre-Bankruptcy Code
decision requiring showing of an emergency to justify sale. The Debtors
6
<PAGE> 8
submit that, even if Solar continues to apply, their compelling circumstances
satisfy its requirements.). Under the circumstances of the sale proposed herein,
the adequate notice, Overbid requirements and auction procedures assure that any
sale to the Purchaser be made in good faith.
14. As set forth in the attached proposed order, the Debtors seek
approval of notice and bidding procedures, (i) to provide actual notice to
parties in interest, including all creditors and shareholders and parties to
executory contracts or unexpired leases and secured parties whose interests
would be affected by the proposed sale, as well as publication notice, to afford
interested parties a reasonable opportunity to make a higher and better offer
for the Debtors' assets; (ii) to facilitate a serious and orderly sale process
with reasonable bidding rules; and (iii) to enable the Debtors to conduct an
auction, in the event of a competing bid, and to determine thereafter which bid
to recommend to this Court. These procedures are modeled on procedures adopted
in several other chapter 11 cases, and the Debtors believe them to be practical,
reasonable and fair.
7
<PAGE> 9
WHEREFORE: for reasons stated in the Sale Motion, in this supplement to
the Sale Motion and at any hearing on this matter, the Debtors respectfully
request that this Court enter the attached Order and grant such other and
further relief as this Court deems just and proper.
Dated: Wilmington, Delaware
December __, 1997
/s/ Brendan Linehan Shannon
------------------------------------------
James L. Patton, Jr. (No. 2202)
Brendan Linehan Shannon (No. 3136)
Young, Conaway, Stargatt & Taylor, LLP
11th & Market Streets
Wilmington Trust Center
Wilmington, Delaware 19801
(302) 571-6600
-and-
Angela J. Somers (AS-3095)
Carolyn Hochstadter Dicker (CD-3987)
LEBOEUF, LAMB, GREENE &
MACRAE, L.L.P.
125 West 55th Street
New York, New York 10019-5389
(212) 424-8000
Co-Counsel for the Debtors and Debtors in
Possession
<PAGE> 1
EXHIBIT 10.44
Interim Order Authorizing Debtor To Obtain Postpetition Financing Pursuant To
Sections 364(c)(1) And 364(d) Of The Bankruptcy Code, dated December 9, 1997.
<PAGE> 2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: )
) Chapter 11
PHOENIX INFORMATION SYSTEMS )
CORP., et al. ) Case Nos. 97-2498
) through 97-2500 (RRM)
Debtors. ) (Jointly Administered)
INTERIM ORDER AUTHORIZING DEBTOR TO OBTAIN
POSTPETITION FINANCING PURSUANT TO
SECTIONS 364(C)(1) AND 364(D) OF THE BANKRUPTCY CODE
Upon the Motion (the "Motion") dated December 4, 1997 of Phoenix
Information Systems Corp., debtor and debtor in possession (the "Debtor"),
seeking an order of this Court pursuant to sections 364(c)(1) and 364(d)(1) of
title 11 of the United States Code, 11 U.S.C. ss.ss. 101, et seq. (the
"Bankruptcy Code"), and Rule 4001 of the Federal Rules of Bankruptcy Procedure
(the "Bankruptcy Rules"), (1) authorizing the execution, delivery and
performance by the Debtor of a Credit Agreement, dated as of December 3, 1997
(the "Credit Agreement;" capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Credit Agreement),
entered into between the Debtor and SC Phoenix Partners ("Phoenix"), and (2)
authorizing the Debtor to obtain postpetition financing pursuant to the Credit
Agreement up to the
<PAGE> 3
principal amount of $600,000 (x) with priority pursuant to section 364(c)(1) of
the Bankruptcy Code over any and all administrative expenses of the kind
specified in sections 503(b) and 507(b) of the Bankruptcy Code, with the
exception of Carve-Out Expenses (which shall rank pari passu with such claim),
and (y) to be secured pursuant to section 364(d)(1) of the Bankruptcy Code by a
perfected first priority senior security interest in and lien upon all of the
Collateral, generally comprising all of the property, real and personal,
tangible and intangible, of the Debtor's estate under section 541 of the
Bankruptcy Code, with the exception of Collateral securing Permitted Liens, in
which case the lien thereon of Phoenix shall be a second priority security
interest, junior only to such Permitted Liens, and subject, in each case, to the
Carve-Out Expenses; and pursuant to Bankruptcy Rule 4001(c)(1), due notice of
the Motion having been given to, inter alia, all persons or entities entitled to
notice under Section 364(c) of the Bankruptcy Code and Bankruptcy Rule 4001(c),
Phoenix and the United States Trustee for this District; and upon the record of
the hearing held on December 8, 1997 and upon all of the pleadings filed with
the Court and all of the proceedings had before the Court, and after due
deliberation and consideration and sufficient cause appearing therefor;
2
<PAGE> 4
It is FOUND, DETERMINED, ORDERED AND ADJUDGED, that:
1. This Court has core jurisdiction over these proceedings and the
parties and property affected hereby pursuant to 28 U.S.C. ss.ss. 157(b) and
1334.
2. The Motion shall be, and hereby is, granted, and all objections
thereto are hereby overruled.
3. The Debtor has an immediate need to obtain financing in an interim
basis pending a final hearing on the Motion (the "Final Hearing") (i) to permit
the orderly continuation of its business and to preserve its property so that it
may be disposed of in a manner which will maximize its value, and (ii) to
satisfy other working capital needs.
4. The Debtor is unable to obtain adequate unsecured credit allowable
under section 503(b)(1) of the Bankruptcy Code as an administrative expense. The
Debtor is also unable to obtain credit secured by security interests or liens
junior to the existing security interests on the Collateral with the exception
of the Permitted Liens, pursuant to sections 364(c)(2) or (3) of the Bankruptcy
Code. A facility in the amount provided by the Credit Agreement is unavailable
to the Debtor without the Debtor granting to Phoenix (i) pursuant to section
364(c)(1) of the Bankruptcy Code, allowed claims with respect to all
3
<PAGE> 5
indebtedness and Obligations of the Debtor under the Credit Agreement and the
Notes and Security and Pledge Agreement related thereto, having priority over
any and all administrative expenses, claims or charges of the kind specified in
sections 503(b), 506(c), 507(b) and 726(b) of the Bankruptcy Code, with the
exception of Carve-Out Expenses (comprising (x) amounts payable pursuant to 28
U.S.C. ss. 1930(a) and (y) allowed fees and expenses of professionals retained
in the Chapter 11 Case pursuant to sections 327 and 1103 of the Bankruptcy Code
up to, but not exceeding $425,000 in the aggregate (inclusive of any holdbacks,
but excluding any unused retainers established prior to the Petition Date);
provided that such Carve-Out Expenses shall not be used for investigating or
attacking the Lender, its claims or interests, the Assets Sale or the Loans),
which shall rank pari passu with such allowed claims of Phoenix, and (ii)
pursuant to section 364(d)(1) of the Bankruptcy Code, security for such
Obligations by the granting of a first priority senior security interest in and
lien upon all of the Collateral with the exception of Collateral securing any
Permitted Lien, in which case the security interest in and lien of Phoenix upon
such Collateral shall be a second priority security interest, junior only to
such Permitted Lien, and subject in each case to the
4
<PAGE> 6
Carve-Out Expenses; provided that, Phoenix shall not have a lien on any rights
or recoveries of the Debtor under sections 544, 547, 548, 549, 550 or 553 of the
Bankruptcy Code (the "Avoidance Actions"). The ability of the Debtor to obtain
sufficient working capital and liquidity through the incurrence of indebtedness
for borrowed money and other financial accommodations is vital to the Debtor.
The preservation and maintenance of the value of the Debtor and its estate is
integral to the Debtor's reorganization efforts pursuant to the provisions of
chapter 11 of the Bankruptcy Code.
5. The Credit Agreement and other Facility Documents (defined below)
have been negotiated in good faith and at arm's-length between the Debtor and
Phoenix and any credit extended and Loans made to the Debtor by Phoenix pursuant
to the Credit Agreement shall be deemed to have been extended by Phoenix in good
faith, as that term is used in section 364(e) of the Bankruptcy Code. The liens,
security interests and priorities created or authorized in this Order are
entitled to the benefits and protection of section 364(e) of the Bankruptcy
Code. The liens, security interest and priorities created or authorized in this
Order are entitled to the benefits and protections of section 364(e) of the
Bankruptcy Code.
5
<PAGE> 7
6. Pending entry of a Final Order approving the Motion, the Debtor is
immediately authorized to borrow pursuant to the Credit Agreement up to an
aggregate of $300,000 for the purposes and upon the terms and conditions
provided for by the Credit Agreement.
7. The Debtor is expressly authorized and directed to execute and
deliver, among other documents, the Credit Agreement, the Security and Pledge
Agreement and the Notes in substantially the form of the exhibits attached to
the Credit Agreement (collectively, the "Facility Documents"). The terms and
conditions of the Facility Documents are approved, and the Debtor is authorized
and directed to execute, deliver and perform and do all acts that may be
required in connection with the Facility Documents. Upon execution and delivery
of the Facility Documents, the Facility Documents shall constitute valid and
binding obligations of the Debtor, enforceable against the Debtor in accordance
with their terms.
8. The Commitments of Phoenix to extend Loans under the Credit
Agreement are expressly subject to the conditions provided for in the Credit
Agreement.
9. For all of the Debtor's Obligations and indebtedness arising under
the Credit Agreement and the other Facility
6
<PAGE> 8
Documents, Phoenix hereby is granted pursuant to section 364(c)(1) of the
Bankruptcy Code an allowed claim having priority over any and all administrative
expenses, charges and claims of the kind specified in sections 503(b), 506(c),
507(b) and 726(b) of the Bankruptcy Code, with the exception of Carve-Out
Expenses (comprising (x) amounts payable pursuant to 28 U.S.C. ss. 1930(a), and
(y) allowed fees and expenses of professionals retained in the Chapter 11 Case
pursuant to sections 327 and 1103 of the Bankruptcy Code up to, but not
exceeding $425,000 in the aggregate (inclusive of any holdbacks, but excluding
any unused retainers established prior to the Petition Date); provided that such
Carve-Out Expenses shall not be used for investigating or attacking the Lender,
its claims or interests, the Assets Sale or the Loans), which Carve-Out Expenses
shall rank pari passu with such allowed claims of Phoenix. No other claim having
a priority superior to or pari passu with that granted by this Order to Phoenix
shall be granted while any amount under the Facility Documents is unpaid or the
Commitments remain outstanding.
10. No costs or expenses of administration of the Debtor's Chapter 11
Case or any future proceeding or case which may result therefrom, including in
any superseding chapter 7 case, shall be
7
<PAGE> 9
charged against the Collateral, pursuant to section 506(c) of the Bankruptcy
Code or otherwise, without the prior written consent of Phoenix, and no such
consent shall be implied from any action, inaction, or acquiescence by Phoenix.
11. As security for all of the Debtor's Obligations and indebtedness
arising under the Credit Agreement and the other Facility Documents, Phoenix
hereby is granted (effective immediately and without the necessity of the
execution by the Debtor of security agreements or otherwise), pursuant to
section 364(d)(1) of the Bankruptcy Code, a first priority perfected senior
security interest in and lien upon all of the Collateral, which liens shall
exclude Avoidance Actions, together with the proceeds thereof and the earnings
thereon, such security interests and liens described in this paragraph being
senior in all respects to any and all present and future liens, if any, which
encumber such Collateral, with the exception of Collateral securing any
Permitted Lien, in which case the security interest in and lien upon such
Collateral of Phoenix shall be a second priority security interest, junior only
to such Permitted Lien; provided that the security interests and liens of
Phoenix hereunder and under the Facility Documents shall be subject to the
Carve-Out Expenses. The security interests and liens granted to Phoenix
8
<PAGE> 10
hereunder (i) shall not be (x) subject to any lien or security interest which is
avoided and preserved for the benefit of the Debtor's estate under section 551
of the Bankruptcy Code or otherwise or (y) subordinated to or made pari passu
with any other lien or security interest under section 364(d) of the Bankruptcy
Code or otherwise, except as provided above with respect to Permitted Liens, and
(ii) are deemed valid, perfected and enforceable liens and security interests at
all times from and after the date of entry of this Order, without regard to
whether such liens and security interests are perfected under applicable
non-bankruptcy law.
12. The security interests and liens granted to Phoenix pursuant to
this Order shall be valid and perfected without the requirement that Phoenix or
any other entity file or record financing statements, notices of lien or similar
instruments in any jurisdiction or take any other action.
13. The Debtor shall use the amounts borrowed under the Credit
Agreement only for the purposes permitted thereunder.
14. The Court finds that the interests of the holders of any Permitted
Liens and any other liens on the Collateral are adequately protected pursuant to
section 364(d)(1) of the Bankruptcy Code.
9
<PAGE> 11
15. The Debtor is authorized and directed to do and perform all acts,
to make, execute and deliver all instruments and documents (including, without
limitation, the execution of the Credit Agreement security documents and
financing statements) and to pay all fees which may be reasonably required or
necessary for the Debtor's performance under the Credit Agreement, including,
without limitation: (i) execution of the Facility Documents, and (ii) the
non-refundable payment to Phoenix of the Break-Up Fee referred to in the Credit
Agreement and approved in this Court's Interim Sale Order of even date herewith,
when and if incurred, and such other costs and expenses as may be due from time
to time including, without limitation, reasonable attorneys' fees and
disbursements as provided in the Facility Documents.
16. Subject only to the provisions of Section 10.3 of the Credit
Agreement(judge inserted here the additional wording "as modified to provide 10
days notice"), the automatic stay under section 362 of the Bankruptcy Code
hereby is vacated and modified to the extent necessary so as to permit Phoenix
to exercise, upon the occurrence of an Event of Default (as defined in the
Credit Agreement), all rights and remedies provided for in the Facility
Documents. Notwithstanding any other provision of the Credit
10
<PAGE> 12
Agreement or this Order, Phoenix shall have no obligation to make any Loans upon
the occurrence of an Event of Default.
17. The Facility Documents and the provisions of this Order shall be
binding upon Phoenix, the Debtor and its estate, and any entity asserting a
lien, claim or interest in any of the Collateral, and their respective
successors and assigns (including any trustee hereinafter appointed or elected
for the estate of the Debtor) and shall inure to the benefit of Phoenix and the
Debtor and (except with respect to any trustee hereinafter appointed or elected
for the estate of the Debtor) their respective successors and assigns.
18. The provisions of this Order shall be effective upon entry of this
Order by the Clerk of the Court. All actions taken pursuant to this Order, and
the terms of this Order, shall survive the entry of, and shall govern with
respect to any conflict with, any order that may be entered confirming a Plan of
Reorganization of the Debtor or that may be entered converting the Chapter 11
Case to a chapter 7 case. The terms and provisions of this Order as well as the
liens and security interests and all rights of Phoenix and all Obligations of
the Debtor created or arising pursuant to this Order shall continue in this
Chapter 11 Case and any superseding proceedings under the
11
<PAGE> 13
Bankruptcy Code, and such liens and security interests shall maintain their
priority as provided by this Order until all Obligations are satisfied by
payment in full and are thereby discharged. So long as amounts are outstanding
under the Facility Documents, the Obligations of the Debtor under the Facility
Documents shall not be discharged by the entry of an order confirming a plan of
reorganization in this Chapter 11 Case and, pursuant to section 1141(d)(4) of
the Bankruptcy Code, the Debtor has waived such discharge.
19. To the extent any of the terms and conditions of the Credit
Agreement are in conflict with the terms of this Order, the provisions of this
Order shall control.
20. The notice given by the Debtor of the Motion constitutes due and
sufficient notice of the Motion.
21. The Final Hearing shall be held on December 19, 1998 at 1:00 p.m.
Objections, if any, to the relief requested at the Final Hearing shall be filed
with the Court (with a courtesy copy to Chambers) and served (so as to be
received) no later than 4:00 p.m. on December 16, 1998 upon LeBoeuf, Lamb,
Greene & MacRae, 125 West 55th Street, New York, NY 10019 (fax (212) 424-8500),
attention Peter Ivanick, Esq./Angela Somers, Esq., Paul, Weiss, Rifkind, Wharton
& Garrison, 1285 Avenue of the Americas, New
12
<PAGE> 14
York, NY 10019 (fax (212) 373-2366), attention Robert Drain, Esq, the Office of
the United States Trustee, 601 Walnut Street, Curtis Center, Suite 950 West,
Philadelphia, PA 19106, attention John D. McLaughlin, Esq., and counsel to any
official committee appointed by the Office of the United States Trustee.
13
<PAGE> 15
22. The Debtor shall provide notice of the entry of this Order and of
the Final Hearing to (i) all parties entitled to notice pursuant to Bankruptcy
Rule 4001(c), (ii) Phoenix, (iii) the Debtor's 20 largest creditors, (iv) all
persons or entities who have filed a notice of appearance under Bankruptcy Rule
2002, and (v) the United States Trustee for this District, on or before three
days after the entry of this Order, by first class mail.
Dated: Wilmington, Delaware
December __, 1997
-------------------------------------
UNITED STATES DISTRICT JUDGE
<PAGE> 1
EXHIBIT 10.45
Order (A) Scheduling Final Hearing On Debtor's Motion To Sell Substantially All
Of Their Assets And Approving Form Of Notice, (B) Approving Certain Terms Of
Sale, And (C) Establishing Competitive Bid Procedures, dated December 9, 1997.
<PAGE> 2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re ) Chapter 11
)
PHOENIX INFORMATION SYSTEMS )
CORP., PHOENIX SYSTEMS LTD. and ) Case No. 97-2498 (RRM)
PHOENIX SYSTEMS GROUP, INC., )
)
Debtors. ) Jointly Administered
ORDER (A) SCHEDULING FINAL HEARING ON
DEBTORS' MOTION TO SELL SUBSTANTIALLY ALL
OF THEIR ASSETS AND APPROVING FORM OF NOTICE,
(B) APPROVING CERTAIN TERMS OF SALE,
AND (C) ESTABLISHING COMPETITIVE BID PROCEDURES
Upon the Motion (the "Motion") dated December 4, 1997 and the
Supplement to the Motion dated December 7, 1997 of the above-captioned debtors
and debtors in possession (the "Debtors") for an order pursuant to sections
105(a), 363 and 365 of the Bankruptcy Code and Bankruptcy Rules 2002(a)(2),
2002(c)(i) and 2002(d), 6004, 6006, 9006, 9007, 9008 and 9014 (a) scheduling a
final hearing date on the Debtors' motion for authority to sell substantially
all of their assets pursuant to sections 105(a), 363(b) and 363(f) of the
Bankruptcy Code, including the assignment of certain executory contracts and
unexpired leases pursuant to section 365 of the Bankruptcy Code (the "Asset
Sale"), to SC Phoenix Partners (the "Purchaser"), and approving notice
procedures for such final hearing; (b) approving certain Bid Protection and
Material Change Provisions (defined below); and (c) establishing competitive
bidding procedures; and due notice of the Motion having been given to, inter
alia,
<PAGE> 3
each of the Debtors' twenty largest unsecured creditors, the United States
Trustee for this District, and those entities, if any, who have filed a notice
of appearance pursuant to Bankruptcy Rule 2002(i); and upon the record of the
hearing held on December 8, 1997 and upon all of the pleadings filed with the
Court and all of the proceedings had before the Court, and after due
deliberation and consideration and sufficient cause appearing therefor;
It is FOUND, DETERMINED, ORDERED AND ADJUDGED, that:
1. This Court has core jurisdiction over these proceedings and the
parties and property affected hereby pursuant to 28 U.S.C. ss.ss. 157(b) and
1334.
2. The Motion shall be, and hereby is, granted in all respects, and all
objections thereto are hereby overruled.
3. The form of notice, notice and publication procedures, Bid
Protection and Material Change Provisions, and bidding procedures proposed by
the Debtors are reasonable and proper under the circumstances, and have been
negotiated in good faith and at arm's length between the Debtors and the
Purchaser, and a hearing on shortened notice is required for the protection of
the Debtors' estates and to maximize the value of the Debtors' assets.
4. A final hearing ("Final Sale Hearing") on the Debtors' Motion for an
order authorizing and approving the Asset Sale to the Purchaser pursuant to the
terms of the Term Sheet between the Debtors and the Purchaser dated December 3,
1997 and the Definitive Sale Documentation referred to in the
2
<PAGE> 4
Motion shall be held on January 14, 1998 at 1:30 p.m. in the United States
Courthouse, 844 King Street, Wilmington, Delaware 19801, Courtroom 4A.
Objections, if any, to the relief requested at the Final Sale Hearing shall be
filed with the Court (with a courtesy copy to Chambers) and served (so as to be
received) no later than 4:30 p.m. on January 9, 1998 upon LeBoeuf, Lamb, Greene
& MacRae, L.L.P., 125 West 55th Street, New York, NY 10019 (fax (212) 424-8500),
attention: Ange1a J. Somers, Esq., and Paul, Weiss, Rifkind, Wharton & Garrison,
1285 Avenue of the Americas, New York, NY 10019 (fax (212) 373-2366), attention:
Robert Drain, Esq.
5. The Debtors shall provide notice of the Motion unless notice has
been given prior to the date of this Order, the entry of this Order and of the
Final Sale Hearing as follows:
(a) On or before December 12, 1997 the Debtors shall serve
copies of the notice in substantially the form annexed as Exhibit A to this
Order (the "Notice"), by first class mail, upon all persons listed on the
Debtors' respective lists of creditors (including taxing authorities) and all
preferred security holders and shall provide notice to equity security holders
as described in Subsection (c) of this paragraph.
(b) On or before December 12, 1997, the Debtors shall serve
copies of the Notice, by first class mail, together with copies of this order,
the Motion and the exhibits thereto to (i) all persons who are known to the
Debtors to assert liens or other interests in the assets to be sold; (ii) all
parties to
3
<PAGE> 5
executory contracts and unexpired leases that the Debtors propose to assume and
assign pursuant to the Asset Sale; (iii) the United States Trustee; (iv) the
Securities and Exchange Commission in Washington, D.C.; (v) any other persons or
entities filing a notice of appearance under Bankruptcy Rule 2002; and (vi) the
chair of any official committee.
(c) The Debtors shall publish the Notice on the first business
day following entry of this Order that the Debtors can practically arrange for
such publication, in the national and New York editions of the Wall Street
Journal and The New York Times.
6. The foregoing notice shall constitute good and sufficient notice of
the Motion and the Final Sale Hearing.
7. Within ten days after the date of this Order, the Debtors shall
further serve notice by Express Mail on or before December 19, 1997 on each
non-Debtor party to an executory contract or unexpired lease that is to be
assumed and assigned to the Purchaser as part of the Asset Sale (each, an
"Assigned Contract") specifying (a) that such Assigned Contract is to be assumed
and assigned to the Purchaser as part of the Asset Sale, (b) the notice and
amount of any default of the Debtors, within their knowledge, whether monetary
or otherwise, under such Assigned Contract, and (c) the dollar amount believed
by the Debtors to be necessary, or the other actions believed to be necessary,
to cure such default ("Debtors' Notice of Assigned Contracts").
4
<PAGE> 6
8. Any non-Debtor party to an Assigned Contract who contests the
Debtors' Notice of Assigned Contracts, including but not limited to the nature
or amount of any outstanding named defaults, within five days of the date of
service of the Debtors' Notice of Assigned Contracts, shall file a statement
stating such party's position concerning the nature and amount of any
outstanding defaults and shall file such statement with the Clerk of this Court,
with a courtesy copy to Chambers, and shall serve copies of the same upon each
of the persons specified in paragraph 4 hereof, so that the same are actually
received no later than 5:00 p.m. on December 30, 1997.
9. Any non-Debtor party to an Assigned Contract who fails to file a
statement in accordance with paragraph 8 hereof shall be forever barred and
estopped from asserting any default under such Assigned Contract (through the
date of the Debtors' notice) except as specified in tile Debtors' notice to such
person.
10. The Bid Protections and Material Change Provisions requested by the
Debtors are approved as follows:
(a) In the event the Definitive Sale Documentation is
terminated for any reason other than pursuant solely to (i) mutual consent of
the Debtors and Purchaser, or (ii) as a result of Purchaser's material violation
or breach, the Debtors shall reimburse the Purchaser for all its expenses
incurred in connection with the transactions contemplated therein (including,
without limitation, expenses of outside counsel and other consultants and
internal legal
5
<PAGE> 7
expenses attributable to the Assets Sale transaction), not to exceed $400,000
less any expenses reimbursed to Purchaser in connection with the DIP Facility
(as defined in the Motion). This obligation shall constitute an administrative
expense of the Debtors under sections 503(b) and 507(a)(1) of the Bankruptcy
Code. If the Definitive Sale Documentation is terminated as a result of the
Court's approval of a sale or other disposition of any material portion of the
assets of the Debtors or an equity interest in the Debtors, whether pursuant to
section 363(b) of the Bankruptcy Code's or a chapter 11 plan, by a person or
entity other than the Purchaser (an "Alternative Transaction"), such expenses
shall be paid simultaneously with the closing of any such Alternative
Transaction and out of the proceeds thereof. If such expenses become payable for
a reason other than as a result of an Alternative Transaction, such expenses
shall be paid only if provided for in a confirmed chapter 11 plan of
reorganization of the Debtors or by liquidation of the Debtors in Chapter 7.
(b) If a Termination Fee Event (defined below) occurs, the
Debtors shall pay $1,000,000 to the Purchaser as a Termination Fee; provided,
that the Sellers shall not be obligated to pay the Termination Fee if, prior to
the occurrence of the Termination Fee Event, the Definitive Sale Documentation
has validly been terminated pursuant solely to (i) mutual consent of the Debtors
and Purchaser, or (ii) as a result of Purchaser's material violation or breach.
6
<PAGE> 8
A "Termination Fee Event" is the occurrence of any of the
following:
(i) The execution by the Debtors, or any trustee in
bankruptcy for the Debtors, of an agreement providing for an
Alternative Transaction; or
(ii) The confirmation of any chapter 11 plan in the
Bankruptcy Court, or the approval of any agreement or transaction by
the Bankruptcy Court, that provides for any Alternative Transaction
within twelve months of termination of the Definitive Sale
Documentation.
(c) The Debtors shall pay the Termination Fee simultaneously
with the closing of any such Alternative Transaction and out of the proceeds
thereof. The Debtors' obligation to pay the Termination Fee shall constitute an
administrative expense of the Debtors under sections 503(b) and 507(a)(1) of the
Bankruptcy Code.
11. The Purchaser will enter into the Definitive Sale Documentation
with the Debtors within five business days after the date of this Order. The
obligations of the Debtors to pay the expenses described in paragraph 10(a)
herein or the Termination Fee as described in paragraph 10(b) herein shall not
arise under this Order until the Definitive Sale Documentation has been
executed.
12. Any competing offers for assets of the Debtors ("Overbids") shall
be submitted and considered as follows:
7
<PAGE> 9
(a) Unless the Definitive Sale Documentation has been
terminated in accordance with its terms, the Debtors will not authorize or
permit any of their officers, directors, or employees, or any investment banker,
financial adviser, attorney, accountant, or any other representative to solicit,
initiate, or take any other action, direct or indirect, to facilitate any
initial inquiry or the making of any initial proposal that constitutes, or may
reasonably be expected to lead to, an Overbid; provided, however, that in the
event that (i) a proposed bidder first solicits, initiates or facilitates any
inquiry or the making of any proposal, and (ii) the Board of Directors of any of
the Debtors determines in good faith that it is necessary to do so to comply
with their fiduciary duties under corporate law or to comply with the provisions
of the Bankruptcy Code, the Debtors may, (x) provide public and non-public
information concerning the Debtors to those parties who first have delivered an
Overbid meeting the requirements of paragraph 12(b) hereof, provided that such
party executes a confidentiality agreement; and (y) participate in negotiations
or discussions concerning such Overbid. The Debtors shall immediately notify,
and in any event within 24 hours, the Purchaser orally and in writing of all
inquiries, or proposals or requests for information received from any party, and
the material terms and conditions of such inquiry, proposal or request and the
identity of the person making such inquiry, proposal or requests. Until the
auction provided for in paragraph 12(c) hereof, the Debtors shall keep the
Purchaser fully informed of the status and details (including amendments or
proposed amendments) of any
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such inquiry, proposal or request, and upon request by the Purchaser, shall
identify and furnish to the Purchaser all information provided in response to
any such inquiry, proposal or request.
(b) The Debtors will consider as higher and better offers only
those Overbid proposals that meet the following requirements:
(i) Overbids that propose consideration having a
readily ascertainable fair market value of not less than $50,000 in
excess of the sum of $20,000,000 and any amounts payable to Purchaser
pursuant to paragraph 10 hereof, subject to adjustments no less
favorable to the Debtors than those contained in the Definitive Sale
Documentation, plus the assumption of the post-closing liabilities to
be assumed by the Purchaser under the Definitive Sale Documentation;
provided that the Purchaser has supplied the Debtors with an itemized
statement reflecting such expenses referred to in paragraph 10 hereof
within three (3) days after a request has been made in writing to
Purchaser by the Debtors in conjunction with the receipt of an Overbid.
(ii) Overbids that are in substantially the form of
the Definitive Sale Documentation marked to show all changes thereto
and that are on terms and conditions no less favorable to the Debtors
than terms and conditions contained in the Definitive Sale
Documentation, including, but not limited to, the time of closing.
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(iii) Overbids that are delivered to the Debtors with
copies to the Purchaser not later than 4:00 p.m. on the third business
day prior to the date set for the Final Sale Hearing and that are
accompanied by appropriate evidence of the bidder's financial ability
to consummate such a transaction on or prior to the Closing Date.
(iv) Overbids that provide for a cash deposit at the
time such Overbid is submitted to the Debtors of not less than 10% of
the aggregate purchase price payable thereunder.
(v) With respect to subsequent Overbids (including
any by the Purchaser), Overbids that include additional consideration
of at least $50,000 over the previous bid.
(c) If any qualified Overbids are timely received, an auction
will be conducted on the second business day following the due date for Overbids
at the offices of counsel for the Debtors at which only the Purchaser and any
prospective purchaser who has timely submitted a qualifying Overbid in
conformity with clauses (b)(i) through (b)(v) above shall be entitled to
participate. At the auction, bidding shall begin with the highest and best
qualifying Overbid and shall not conclude until each participating bidder has
had the opportunity to submit any additional Overbid with full knowledge of the
existing highest bid. The Purchaser shall provide a cash deposit of 10% of the
aggregate purchase price of its offer to the Debtors immediately prior to such
auction.
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(d) Each of the Debtors shall determine in good faith whether
a submitted Overbid meets the requirements described herein and whether the
Asset sale pursuant to the Definitive Sale Documentation or such Overbid
constitutes the most favorable transaction, it being understood that the amount
of any stated purchase price shall not necessarily be determinative of the most
favorable transaction. The most favorable bid so determined by the Debtors shall
be submitted to the Court for approval at the Final Sale Hearing. The Purchaser
shall be deemed a party in interest with standing to appear and be heard in
connection with any motion, hearing or other proceeding relating to the
Definitive Sale Documentation or any Overbid.
Dated: Wilmington, Delaware
December __,1997
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UNITED STATES BANKRUPTCY JUDGE
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EXHIBIT 99
Press Release Issued by Phoenix Information Systems Corp. on December 3, 1997
<PAGE> 2
PHOENIX INFORMATION SYSTEMS CORP.
FOR IMMEDIATE RELEASE
PHOENIX TO FILE FOR CHAPTER 11 BANKRUPTCY PROTECTION
St. Petersburg, Florida, USA ... December 3, 1997... Phoenix Information Systems
Corp. ("Phoenix")(PHXS - OTC Bulletin Board) announces that after an extensive
and unsuccessful search for permanent financing it has determined to seek
protection under Chapter 11 of the Bankruptcy Code.
The Company also announces that, subject to court approval, it has
arranged for debtor-in-possession financing and a sale of all its major assets
for $20 million to S-C Phoenix Partners, a major shareholder. As part of the
terms and conditions of the sale, the Company has agreed to a $1 million breakup
fee and a non-solicitation arrangement that prohibits the Company from actively
seeking other buyers or offers of financing.
CONTACT: For further information, please call 800/664-7472 or 813/894-8021.
Paul Henry, Director
Michael Gordon, Investor Relations
DECEMBER 3, 1997 PHOENIX INFORMATION SYSTEMS CORP. -- PRESS RELEASE
