-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CeDKjRLipeU61cMVU+MOHs+5EkNlfEcz6qEl4ZXLnMCgo3Z460ntBXQmJ2PGUvee jYvDdmipDIZAXgjOLVj24A== 0000950123-95-003674.txt : 19951213 0000950123-95-003674.hdr.sgml : 19951213 ACCESSION NUMBER: 0000950123-95-003674 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19951212 SROS: NONE GROUP MEMBERS: CHATTERJEE FUND MANAGEMENT, L.P. GROUP MEMBERS: PURNENDU CHATTERJEE GROUP MEMBERS: QIH MANAGEMENT INVESTOR, L.P. GROUP MEMBERS: QIH MANAGEMENT, INC. GROUP MEMBERS: QUANTUM INDUSTRIAL PARTNERS LDC GROUP MEMBERS: S-C PHOENIX HOLDINGS, L.L.C. GROUP MEMBERS: S-C PHOENIX PARTNERS GROUP MEMBERS: SOROS GEORGE GROUP MEMBERS: WINSTON PARTNERS, L.P. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PHOENIX INFORMATION SYSTEMS CORP CENTRAL INDEX KEY: 0000792157 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 133337797 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-44587 FILM NUMBER: 95601076 BUSINESS ADDRESS: STREET 1: 100 SECOND AVE SOUTH STREET 2: STE 1100 CITY: ST PETERSBURG STATE: FL ZIP: 33701 BUSINESS PHONE: 8138947674 MAIL ADDRESS: STREET 1: 100 SECOND AVE STREET 2: STE 1100 CITY: ST PETERSBERG STATE: FL ZIP: 33701 FORMER COMPANY: FORMER CONFORMED NAME: DYNASTY TRAVEL GROUP INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CS PRIMO CORP DATE OF NAME CHANGE: 19910718 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SOROS GEORGE CENTRAL INDEX KEY: 0000900203 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 888 SEVENTH AVENUE STREET 2: 33RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10106 BUSINESS PHONE: 212-262--6 MAIL ADDRESS: STREET 1: 888 SEVENTH AVE STREET 2: 33RD FLR CITY: NEW YORK STATE: NY ZIP: 10106 SC 13D/A 1 AMENDMENT NO. 5 TO SCHEDULE 13D 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 5)* PHOENIX INFORMATION SYSTEMS CORP. --------------------------------- (Name of Issuer) Common Stock, $.01 Par Value --------------------------------- (Title of Class of Securities) 719077109 --------------------------------- (CUSIP Number) Stephen M. Vine, Esq. Akin, Gump, Strauss, Hauer & Feld, L.L.P. 399 Park Avenue New York, New York 10022 (212) 872-1000 --------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) December 7, 1995 --------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box / /. Check the following box if a fee is being paid with the statement / /. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosure provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Continued on following page(s) Page 1 of 26 Pages Exhibit Index: Page 27 2 SCHEDULE 13D CUSIP NO. 719077109 PAGE 2 OF 26 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person S-C Phoenix Partners 2 Check the Appropriate Box If a Member of a Group* a. / x / b. / / 3 SEC Use Only 4 Source of Funds* AF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization New York 7 Sole Voting Power Number of 19,909,999 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 19,909,999 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 19,909,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 38.71% 14 Type of Reporting Person* PN *SEE INSTRUCTIONS BEFORE FILLING OUT! 3 SCHEDULE 13D CUSIP NO. 719077109 PAGE 3 OF 26 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Quantum Industrial Partners LDC 2 Check the Appropriate Box If a Member of a Group* a. / x / b. / / 3 SEC Use Only 4 Source of Funds* WC 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization Cayman Islands 7 Sole Voting Power Number of 1,000,000 Shares Beneficially 8 Shared Voting Power Owned By 19,909,999 Each Reporting 9 Sole Dispositive Power Person 1,000,000 With 10 Shared Dispositive Power 19,909,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 20,909,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 40.65% 14 Type of Reporting Person* CO *SEE INSTRUCTIONS BEFORE FILLING OUT! 4 SCHEDULE 13D CUSIP NO. 719077109 PAGE 4 OF 26 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person S-C Phoenix Holdings, L.L.C. 2 Check the Appropriate Box If a Member of a Group* a. / x / b. / / 3 SEC Use Only 4 Source of Funds* AF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 1,000,000 Shares Beneficially 8 Shared Voting Power Owned By 19,909,999 Each Reporting 9 Sole Dispositive Power Person 1,000,000 With 10 Shared Dispositive Power 19,909,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 20,909,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 40.65% 14 Type of Reporting Person* OO *SEE INSTRUCTIONS BEFORE FILLING OUT! 5 SCHEDULE 13D CUSIP NO. 719077109 PAGE 5 OF 26 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person QIH Management Investor, L.P. 2 Check the Appropriate Box If a Member of a Group* a. / x / b. / / 3 SEC Use Only 4 Source of Funds* AF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 20,909,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 20,909,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 20,909,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 40.65% 14 Type of Reporting Person* PN *SEE INSTRUCTIONS BEFORE FILLING OUT! 6 SCHEDULE 13D CUSIP NO. 719077109 PAGE 6 OF 26 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person QIH Management, Inc. 2 Check the Appropriate Box If a Member of a Group* a. / x / b. / / 3 SEC Use Only 4 Source of Funds* AF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 20,909,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 20,909,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 20,909,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 40.65% 14 Type of Reporting Person* CO *SEE INSTRUCTIONS BEFORE FILLING OUT! 7 SCHEDULE 13D CUSIP NO. 719077109 PAGE 7 OF 26 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person George Soros 2 Check the Appropriate Box If a Member of a Group* a. / x / b. / / 3 SEC Use Only 4 Source of Funds* PF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization United States 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 21,909,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 21,909,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 21,909,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 42.60% 14 Type of Reporting Person* IA; IN *SEE INSTRUCTIONS BEFORE FILLING OUT! 8 SCHEDULE 13D CUSIP NO. 719077109 PAGE 8 OF 26 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Winston Partners, L.P. 2 Check the Appropriate Box If a Member of a Group* a. / x / b. / / 3 SEC Use Only 4 Source of Funds* WC 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 20,909,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 20,909,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 20,909,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 40.65% 14 Type of Reporting Person* PN *SEE INSTRUCTIONS BEFORE FILLING OUT! 9 SCHEDULE 13D CUSIP NO. 719077109 PAGE 9 OF 26 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Chatterjee Fund Management, L.P. 2 Check the Appropriate Box If a Member of a Group* a. / x / b. / / 3 SEC Use Only 4 Source of Funds* AF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 20,909,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 20,909,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 20,909,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 40.65% 14 Type of Reporting Person* IA; PN *SEE INSTRUCTIONS BEFORE FILLING OUT! 10 SCHEDULE 13D CUSIP NO. 719077109 PAGE 10 OF 26 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Purnendu Chatterjee 2 Check the Appropriate Box If a Member of a Group* a. / x / b. / / 3 SEC Use Only 4 Source of Funds* AF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization United States 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 20,909,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 20,909,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 20,909,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 40.65% 14 Type of Reporting Person* IA; IN *SEE INSTRUCTIONS BEFORE FILLING OUT! 11 ITEM 1. SECURITY AND ISSUER. This Amendment No. 5 to Schedule 13D relates to the shares of Common Stock, $.01 par value (the "Shares"), of Phoenix Information Systems Corp. (the "Issuer"). The address of the principal executive offices of the Issuer is 100 Second Avenue South, Suite 1100, St. Petersburg, Florida 33701. This Amendment No. 5 amends the initial statement on Schedule 13D dated December 16, 1994 and all prior amendments thereto (collectively, the "Initial Statement"). This Amendment No. 5 is being filed to report the execution by the Issuer and certain of the Reporting Persons of certain agreements pursuant to which, among other things, Phoenix Holdings and Quantum Industrial (each as defined herein) have each received warrants to purchase up to 1,000,000 Shares. This Amendment No. 5 contains certain information previously disclosed on Schedule 13D as it is the first amendment to be filed on EDGAR. The information set forth in the Initial Statement is amended and restated as set forth herein. 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 ("Quantum Industrial"); (iii) S-C Phoenix Holdings, L.L.C. ("Phoenix Holdings"); (iv) QIH Management Investor, L.P. ("QIHMI"); (v) QIH Management, Inc. ("QIH Management"); (vi) Mr. George Soros ("Mr. Soros"); (vii) Winston Partners, L.P. ("Winston"); (viii) Chatterjee Fund Management, L.P. ("CFM"); and (ix) Dr. Purnendu Chatterjee ("Dr. Chatterjee"). The Reporting Persons Phoenix Partners and Phoenix Holdings Phoenix Partners is a New York general partnership with its principal place of business at 888 Seventh Avenue, New York, New York 10106. Phoenix Partners was formed primarily to invest in the issuer. Quantum Industrial and Phoenix Holdings are the only partners of Phoenix Partners. Phoenix Holdings is a Delaware limited liability company with its principal place of business at 888 Seventh Avenue, New York, New York 10106. Phoenix Holdings was formed as a general investment partnership. Mr. Soros and Winston are the managing members of Phoenix Holdings. W. James Peet ("Mr. Peet"), an employee of Chatterjee Management Company, a Delaware corporation controlled by Dr. Chatterjee ("CMC"), is a non-managing member of Phoenix Holdings. Neither Phoenix Partners nor Phoenix Holdings has, during the past five years, been (a) convicted in a criminal proceeding, or (b) a party to any civil proceeding as a result of which it has been subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws. 12 Page 12 Quantum Industrial, QIHMI, QIH Management and Mr. Soros Quantum Industrial, a general partner of Phoenix Partners, is a Cayman Islands exempted limited duration company with its principal address at Kaya Flamboyan 9, Curacao, Netherlands Antilles. Quantum Industrial is a private investment fund which is engaged in a variety of direct and indirect investments. Current information concerning the identity and background of the directors and officers of Quantum Industrial is set forth in Annex B hereto, which is incorporated by reference in response to this Item 2. QIHMI, a Delaware limited partnership, is vested with investment discretion with respect to the portfolio assets held for the account of Quantum Industrial pursuant to a management agreement with Quantum Industrial. The principal business of QIHMI is to provide management and advisory services to, and to invest in, Quantum Industrial. QIH Management, a Delaware corporation of which Mr. Soros is the sole shareholder, is the general partner of QIHMI. QIHMI and QIH Management have their principal offices at 888 Seventh Avenue, New York, New York 10106. QIHMI, by reason of its investment discretion over the securities owned by Quantum Industrial, and QIH Management, as the sole general partner of QIHMI, may each be deemed the beneficial holder of securities (including the Shares) held by Quantum Industrial for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act"). Mr. Soros is the sole shareholder and person ultimately in control of QIH Management. The principal occupation of Mr. Soros, a United States citizen, is his direction of the activities of QIH Management and Soros Fund Management ("SFM"), an investment advisor of which Mr. Soros is the sole proprietor. Mr. Soros has his principal office at 888 Seventh Avenue, New York, New York 10106. Information concerning the identity and background of the Managing Directors of SFM is set forth in Annex A hereto, which is incorporated by reference in response to this Item 2. Pursuant to regulations promulgated under Section 13(d) of the 1934 Act, Mr. Soros (as the sole shareholder of QIH Management and the person ultimately in control of QIH Management) may be deemed a "beneficial owner" of securities, including the Shares, held for the account of Quantum Industrial as a result of QIH Management's position as the general partner of QIHMI. During the past five years, none of Quantum Industrial, QIHMI, QIH Management nor Mr. Soros has been (a) convicted in a criminal proceeding, or (b) a party to any civil proceeding as a result of which it has been subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to federal or state securities laws, or finding any violation with respect to such laws. Winston, CFM and Dr. Chatterjee Winston is a Delaware limited partnership which is principally engaged in investing in securities. CFM is a Delaware limited partnership and the general partner of Winston. The sole business purpose of CFM is to serve as the sole general partner of Winston. The principal office of Winston and CFM is located at 888 Seventh Avenue, New York, New York 10106. During the past five years, neither Winston nor CFM has been (a) convicted in a criminal proceeding, or (b) a party to any civil proceeding as a result of which it has been subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws. 13 Page 13 Dr. Chatterjee is the sole general partner of CFM, the sole general partner of Winston. The principal occupation of Dr. Chatterjee, a United States citizen, is as an investment manager. Dr. Chatterjee's principal business address is located at 888 Seventh Avenue, New York, New York 10106. On January 13, 1993, the Securities and Exchange Commission (the "Commission") filed a civil complaint in the United States District Court for the District of Massachusetts against certain defendants, including Dr. Chatterjee, wherein the Commission alleged that Dr. Chatterjee engaged in conduct in violation of, or aided and abetted certain alleged violations of, Sections 10(b) and 14(e) of the 1934 Act and certain rules promulgated thereunder. Dr. Chatterjee settled the Commission's action on the same date it was filed without admitting or denying the allegations of the complaint. Dr. Chatterjee consented to the entry of a final judgment restraining and enjoining him from inter alia, violating, or aiding and abetting violations of, Sections 10(b) and 14(e) of the 1934 Act and the rules promulgated thereunder. Dr. Chatterjee also agreed to pay a civil penalty of $643,855. During the past five years, Dr. Chatterjee, has not been convicted in any criminal proceeding. Pursuant to regulations promulgated under Section 13(d) of the 1934 Act, Dr. Chatterjee, as the sole general partner of CFM and the person ultimately in control of Winston, and CFM, as the sole general partner of Winston, may each be deemed a "beneficial owner" of securities, including the Shares, held by Winston. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. On December 9, 1994, Phoenix Partners and the Issuer entered into a Note Purchase Agreement (the "Note Purchase Agreement") pursuant to which Phoenix Partners was to purchase from the Issuer up to an aggregate of $10 million of convertible notes (the "Notes") in the amounts and upon the terms specified in the Note Purchase Agreement, a copy of which is attached as Exhibit D to the Initial Statement. Concurrent with the execution of the Note Purchase Agreement, Phoenix Partners purchased from the Issuer the Tranche A Notes (as defined in the Note Purchase Agreement) in the aggregate principal amount of $3 million. Concurrent with the execution of the Note Purchase Agreement, Phoenix Partners purchased 1,360,000 Shares from Robert P. Gordon ("Gordon"), the chief executive officer and founder of the Issuer, pursuant to the terms of a Stock Purchase Agreement (the "Stock Purchase Agreement"), a copy of which is attached as Exhibit F to the Initial Statement. The aggregate purchase price for the 1,360,000 Shares was $1,224,000. On February 17, 1995, Phoenix Partners purchased from the Issuer the Tranche B Notes in the principal amount of $1,200,000 pursuant to the terms of the Note Purchase Agreement. On March 15, 1995, the Issuer and Phoenix Partners executed a letter agreement (the "Letter Agreement"), a copy of which is attached as Exhibit M to Amendment No. 2 to the Initial Statement, pursuant to which Phoenix Partners purchased from the Issuer a Tranche C Note in the principal amount of $1,000,000. As a result of the purchase of the Tranche C Note in the principal amount of $1,000,000. 14 Page 14 In addition to warrants issued pursuant to the Warrant Agreement, on March 15, 1995, the Issuer issued to Phoenix Partners a three-year warrant (the "Second Warrant Agreement") to purchase 2,500,000 Shares at a purchase price of $2.00 per Share. A copy of the Second Warrant Agreement is attached as Exhibit N to Amendment No. 2 to the Initial Statement. As of August 3, 1995, Phoenix Partners and the Issuer entered into a letter agreement (the "August Letter Agreement"), a copy of which is attached as Exhibit O to Amendment No. 3 to the Initial Statement, which modified the Note Purchase Agreement and pursuant to which Phoenix Partners purchased from the Issuer the remaining $200,000 Tranche C Note and a $150,000 Tranche D Note. As of September 15, 1995, Phoenix Partners and the Issuer entered into a letter agreement (the "September Letter Agreement"), a copy of which is attached as Exhibit S to Amendment No. 4 to the Initial Statement and the terms of which are more fully described in Item 4 hereto, which modified the Note Purchase Agreement and certain other agreements related thereto. Pursuant to the September Letter Agreement, Phoenix Partners, among other things, purchased from the Issuer a Tranche D Note in the principal amount of $1,200,000. Phoenix Partners received (i) the $3,000,000 to purchase the Tranche A Notes, (ii) the $1,224,000 to purchase the 1,360,000 Shares from Gordon, (iii) the $1,200,000 to purchase the Tranche B Notes, (iv) the $1,000,000 to purchase the Tranche C Note, (v) the $200,000 to purchase the $200,000 Tranche C Note, (vi) the $150,000 to purchase the $150,000 Tranche D Note and (vii) the $1,200,000 to purchase the $1,200,000 Tranche D Note from its partners. The partners of Phoenix Partners advanced the subject funds out of working capital or personal funds. ITEM 4. PURPOSE OF TRANSACTION. Phoenix Partners acquired the Tranche A Notes (and the Shares into which the Tranche A Notes were converted) for investment purposes and pursuant to the terms of the Note Purchase Agreement. The Note Purchase Agreement provided for outstanding principal on the Notes to bear interest at the Eurodollar Rate and to be due on the first anniversary of each Note and quarterly thereafter. The Tranche A Notes were convertible into Shares at the option of Phoenix Partners upon the occurrence of certain conditions and were to be automatically converted into Shares at the rate of $0.50 per Share upon the first to occur of the following: (i) the listing of the Shares on The NASDAQ Stock Market Small-Cap or the National Market System; (ii) the achievement of certain operating targets set forth in the Note Agreement; and (iii) the expiration of six months from the date of the purchase by Phoenix Partners of the full $10 million aggregate amount of Notes. The Note Purchase Agreement required the Issuer to offer Phoenix Partners additional tranches of Notes upon the achievement by the Issuer of certain operational targets. The Issuer was permitted to request that Phoenix Partners purchase additional Notes notwithstanding the failure to occur of the stated operational targets, but any rejection of such a request would not diminish Phoenix Partners' rights under the Note Purchase Agreement. Phoenix Partners has no obligation to purchase additional Notes. The Issuer has an obligation to offer the additional Notes upon the occurrence of certain conditions and, as set forth in the Note Purchase Agreement, the Notes were anticipated to be offered according to the following schedule: 15 Page 15
Anticipated Rate of Note Amount Date of Issuance Conversion into Shares - ---- ------ ---------------- ---------------------- Tranche B $1,200,000 01/31/95 $0.60 Tranche C $1,200,000 03/31/95 $0.60 Tranche D $2,500,000 06/30/95 $1.00 Tranche E $2,100,000 10/31/95 $1.50
The conversion rate of each of the tranches and the timing of purchase, if any, were subject to adjustment upon the occurrence of certain conditions set forth in the Note Purchase Agreement. If Phoenix Partners did not purchase all the Notes offered to it, the Issuer had the option to purchase all, but not less than all, of the Notes previously sold by the Issuer, together with all, but not less than all, of the Shares into which the Notes may have been converted, together with all of the Shares purchased by Phoenix Partners pursuant to the Stock Purchase Agreement. In the event that the Issuer proposed to issue any additional Shares or securities convertible into Shares, Phoenix Partners had the right to purchase, on the same terms and conditions of such proposed issuance, an amount of Shares sufficient to permit Phoenix Partners to maintain ownership of that percentage of outstanding Shares which Phoenix Partners owned on a fully diluted basis immediately prior to such proposed issuance. Pursuant to the terms of the Note Purchase Agreement, Phoenix Partners is entitled to propose one person to serve on the Board of Directors of the Issuer and, after the purchase by Phoenix Partners of Notes in the aggregate amount of $10 million, Phoenix Partners was to become entitled to propose such number of directors to the Board of Directors as is necessary to provide Phoenix Partners with proportionate representation on the Board of Directors. On March 15, 1995, Peet agreed to join the Issuer's Board of Directors. In connection with the execution of the Note Purchase Agreement, Phoenix Partners and the Issuer entered into a warrant agreement (the "Warrant Agreement") dated as of December 9, 1994. A copy of the Warrant Agreement is attached as Exhibit E to the Initial Statement. The Warrant Agreement provided for the purchase of Shares by Phoenix Partners at $3.00 per share in an amount equal to (A) the product of (i) 4,000,000 multiplied by (ii) a fraction, the numerator of which was the aggregate principal amount of the Notes purchased by Phoenix Partners and the denominator of which is $10,000,000, minus (B) the aggregate number of warrants which have been exercised by Phoenix Partners prior to such time. Concurrent with the execution of each of the Note Purchase Agreement and the Warrant Agreement, Phoenix Partners entered into the Stock Purchase Agreement with Gordon. Pursuant to the Stock Purchase Agreement, Gordon agreed that, until the earlier of three years from the date of the Stock Purchase Agreement and the date on which Phoenix Partners ceases to own at least 5% of the outstanding Shares, he will vote Shares held by him and use his best efforts to cause others to vote (i) in favor of directors designated by Phoenix Partners and (ii) to amend the Issuer's Certificate of Incorporation to provide authorization for the issuance of up to 80 million Shares. On February 17, 1995, Phoenix Partners purchased from the Issuer the Tranche B Notes in the principal amount of $1,200,000 pursuant to the terms of the Note Purchase Agreement. Phoenix Partners acquired the Tranche B Notes (and the Shares into which the Tranche B Notes were converted) for investment purposes and pursuant to the terms of the Note Purchase Agreement. As a result of the purchase of the Tranche B Notes in the principal amount of $1,200,000, Phoenix Partners received warrants to purchase an additional 480,000 Shares pursuant to the Warrant Agreement. 16 Page 16 On March 15, 1995, Phoenix Partners and the Issuer executed the Letter Agreement. Concurrent therewith and in accordance with the terms of the Letter Agreement, the Tranche A Note was converted into 6,000,000 Shares, the Tranche B Note was converted into 2,000,000 Shares and the $1,000,000 Tranche C Note purchased on March 15, 1995 was converted into 1,666,666 Shares. On August 3, 1995, Phoenix Partners acquired the remaining $200,000 Tranche C Note and the $150,000 Tranche D Note (and the Shares into which such notes were convertible) for investment purposes and pursuant to the terms of the Note Purchase Agreement and the August Letter Agreement. The remaining $200,000 Tranche C Note and the $150,000 Tranche D Note were convertible into Shares at the option of the Issuer upon the System being in Commercial Operation (as each term is defined in the Letter Agreement) in China in connection with an airline of comparable size to Hainan Airlines, a company organized under the laws of the People's Republic of China ("Hainan"). The remaining $200,000 Tranche C Note and the $150,000 Tranche D Note are convertible into Shares at the rate of $0.72 per Share should Phoenix Partners fail to purchase additional Notes from the Issuer upon receipt of a request from the Issuer to so purchase. The August Letter Agreement amended the Warrant Agreement to provide that 175,000 warrants became immediately exercisable on August 3, 1995 and an additional 175,000 warrants would become exercisable at the end of each 30-day period thereafter, if at the end of such period the System is not in Commercial Operation; provided, however, that in no event would more than 4,000,000 warrants be exercisable pursuant to the Warrant Agreement. The August Letter Agreement provided that if the System had not been installed in China in connection with an airline of comparable size to Hainan Airlines and/or the System was not operational within 90 days of August 3, 1995, the Issuer would issue to Phoenix Partners warrants (the "Additional Warrants") to purchase 140,000 Shares at an exercise price of (i) 0.85 multiplied by (ii) the lowest average weekly closing price of the Shares during the ninety day period commencing on August 3, 1995. As of September 15, 1995, Phoenix Partners and the Issuer entered into the September Letter Agreement. Pursuant to the September Letter Agreement, Phoenix Partners purchased a Tranche D Note in the principal amount of $1,200,000 and converted such Tranche D Note into 1,200,000 Shares. A copy of the form of Tranche D Note is attached as Exhibit T to Amendment No. 4 to the Initial Statement. The Tranche D Note was converted into Shares at a conversion price of $1.00 per Share, resulting in the receipt by Phoenix Partners of 1,200,000 Shares. However, the Issuer agreed that should it fail to meet certain operational targets by January 15, 1996, the conversion price would be adjusted so that the conversion will have deemed to have occurred at a lower price, with an absolute minimum conversion price of $0.60 per Share. 17 Page 17 Upon any deemed change in the conversion price in the Tranche D Note purchased and converted on September 15, 1995, the Issuer will issue to Phoenix Partners certificates representing such additional Shares. In addition to the purchase of the Tranche D Note in the principal amount of $1,200,000 pursuant to the September Letter Agreement, Phoenix Partners converted the Tranche C Note in the principal amount of $200,000 and the Tranche D Note in the principal amount of $150,000 into 333,333 Shares and 250,000 Shares, respectively. Further, Phoenix Partners was granted warrants (the "Second Conversion Warrants") to purchase up to 600,000 Shares at $4.00 per Share at any time prior to September 15, 1998. A copy of the agreement relating to the Second Conversion Warrants is attached as Exhibit U to Amendment No. 4 to the Initial Statement. The September Letter Agreement further amended the Warrant Agreement to provide that all 4,000,000 warrants became immediately exercisable and will remain so during the Exercise Period (as defined in the Warrant Agreement). In consideration of the issuance of the Second Conversion Warrants, Phoenix Partners agreed that the Additional Warrants to be issued pursuant to the August Letter Agreement would be issued only if the System has not been installed in China in connection with an airline of comparable size to Hainan Airlines and/or the System is not operational on or before January 15, 1996. American Aviation Limited ("AA"), a limited life company organized under the laws of Mauritius and owned equally by Phoenix Holdings and Quantum Industrial, has agreed to acquire 25% of the equity of Hainan. On December 7, 1995, the Issuer, Phoenix Holdings and Quantum Industrial executed an options agreement (the "Options Agreement"), a copy of which is attached hereto as Exhibit V which (i) grants to the Issuer the option (the "Call Option") to acquire a 50% interest (in whole but not in part) in AA and (ii) grants to Phoenix Holdings and Quantum Industrial the option to sell (the "Put Option") to the Issuer up to their entire interest in AA. The Issuer's Call Option is exercisable for a period of one year from the date of the acquisition by AA (the "Acquisition Date") of a 25% interest in Hainan. The exercise price of the Call Option has been set at $15 million. The Put Option is exercisable in increments of 50% during the period from the second anniversary of the Acquisition Date through the fifth anniversary of the Acquisition Date. The Put Option exercise price shall be determined in accordance with certain calculations set forth in the Options Agreement. The Options Agreement provides under certain circumstances, the constituent documents of AA shall be amended to provide that, notwithstanding the percentage interest of each of the shareholders in AA, AA will distribute all dividends in respect of AA shares according to certain calculations set forth in the Options Agreement. 18 Page 18 In consideration of the issuance by Phoenix Holdings and Quantum Industrial of the Call Option, the Issuer issued to each of Phoenix Holdings and Quantum Industrial warrants to purchase 1,000,000 Shares pursuant to the warrant agreement attached hereto as Exhibit W (the "Four Dollar Warrant Agreement") and shall issue warrants to purchase 1,000,000 Shares pursuant to the warrant agreement attached hereto as Exhibit X (the "Three-Year Warrant Agreement"). The Four Dollar Warrant Agreement provides for the exercise of warrants at $4.00 per Share for the period beginning on December 18, 1995 and ending on the earlier of (i) 120 days after December 18, 1995 and (ii) 25 days subsequent to the Acquisition Date. The Three-Year Warrant Agreement provides for the exercise of warrants from the second anniversary of the Acquisition Date through the fifth anniversary of the Acquisition Date at a price per Share equal to 85% of the Market Price (as defined in the Three-Year Warrant Agreement) of the Shares averaged over the 10 business days prior to the Acquisition Date through the 20 business days subsequent to the Acquisition Date. If AA fails to complete the acquisition of the equity of Hainan, the Issuer will have no obligations under the Three-Year Warrant Agreement. Both the Four Dollar Warrant Agreement and the Three-Year Warrant Agreement provide for adjustments to the number of Shares to be purchased or the exercise price thereof should the Issuer's capital structure be modified. In addition, both the Four Dollar Warrant Agreement and the Three-Year Warrant Agreement provide that all warrants shall be deemed to have been exercised if the Issuer is liquidated in accordance with its Certificate of Incorporation. Phoenix Partners, Phoenix Holdings and Quantum Industrial have acquired all of the securities described herein as having been acquired for its account for investment purposes and pursuant to the terms of each of the documents discussed herein and in the Initial Statement. Except as set forth above and as contemplated by the Stock Purchase Agreement, none of the Reporting Persons has any present plans or proposals that would result in any change in the business, policies, management, structure or capitalization of the Issuer. The Reporting Persons reserve the right to acquire additional securities of the Issuer, to dispose of such securities at any time, or to formulate other purposes, plans or proposals regarding the Issuer or any of its securities, to the extent deemed advisable in light of their general investment and trading policies, market conditions and other factors. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) (i) The aggregate number of Shares of which Phoenix Partners may be deemed the beneficial owner is 19,909,999 (approximately 38.71% of the total number of Shares which would be outstanding assuming the exercise or conversion by the Reporting Persons of all of the convertible securities that they hold). This number consists of i) 12,809,999 Shares held by Phoenix Partners, ii) 4,000,000 Shares issuable to Phoenix Partners upon exercise of the 4,000,000 warrants presently exercisable by Phoenix Partners pursuant to the terms of the Warrant Agreement, iii) the 2,500,000 Shares issuable to Phoenix Partners pursuant to the terms of the Second Warrant Agreement, iv) 600,000 Shares issuable upon exercise of the 600,000 warrants issued to Phoenix Partners pursuant to the Second Conversion Warrants. 19 Page 19 (ii) The aggregate number of Shares of which each of the Reporting Persons other than Phoenix Partners and Mr. Soros may be deemed a beneficial owner is 20,909,999 (approximately 40.65% of the total number of Shares which would be outstanding assuming the exercise or conversion by the Reporting Persons of all of the convertible securities that they hold). This number comprises all of the Shares which Phoenix Partners may be deemed to own beneficially plus 1,000,000 Shares issuable upon exercise of the 1,000,000 Four Dollar Warrants. Quantum Industrial, and each Reporting Person who may be deemed a beneficial owner of Shares held by Quantum Industrial, may be deemed the beneficial owner of all the securities held by Phoenix Partners and the 1,000,000 Shares issuable directly to Quantum Industrial upon exercise of the Four Dollar Warrants. Phoenix Holdings, and each Reporting Person who may be deemed a beneficial owner of Shares held by Phoenix Holdings, may be deemed the beneficial owner of all the securities held by Phoenix Partners and the 1,000,000 Shares issuable directly to Phoenix Holdings upon exercise of the Four Dollar Warrants. In either case, each of the Reporting Persons other than Phoenix Partners and Mr. Soros may be deemed the beneficial owner of 20,909,999 Shares. (iii) Mr. Soros may be deemed the beneficial owner of an aggregate of 21,909,999 Shares by virtue of the fact that he may be deemed to own (i) the 19,909,999 Shares owned by Phoenix Partners, (ii) the 1,000,000 Shares issuable upon exercise of the 1,000,000 Four Dollar Warrants held directly by Quantum Industrial and (iii) the 1,000,000 Shares issuable upon exercise of the 1,000,000 Four Dollar Warrants held directly by Phoenix Holdings. Shares issuable upon exercise of the Three Year Warrants are not reported herein as being beneficially owned by the Reporting Persons because such warrants are not exercisable until 1997. Shares issuable upon exercise of the 140,000 Additional Warrants issued pursuant to the August Letter Agreement are also not reported herein as being beneficially owned by Phoenix Partners. The issuance of such Additional Warrants is conditioned on the occurrence (or non-occurrence) by January 15, 1996 of certain events not within the control of Phoenix Partners or the Reporting Persons. (iv) Mr. Peet, a non-managing member of Phoenix Holdings and a director of the Issuer, was granted options to purchase up to 108,000 Shares by virtue of his position as a director of the Issuer pursuant to the Issuer's uniform compensation plan. Three thousand (3,000) options become exercisable each month from April 1995 through March 1998. All unexercised options terminate should Mr. Peet cease to be a director of the Issuer prior to March 31, 1998. Mr. Peet expressly disclaims beneficial ownership of any securities of the Issuer not held directly by him and the Reporting Persons expressly disclaim beneficial ownership of any securities held directly by Mr. Peet. (b) (i) Phoenix Partners has the sole power to direct the voting and disposition of the securities of the Issuer (including the Shares) that it holds directly. Each of the other Reporting Persons may be deemed to have shared power to direct the voting and disposition of the securities of the Issuer (including the Shares) held by Phoenix Partners. (ii) Phoenix Holdings has the sole power to direct the voting and disposition of the securities of the Issuer that it holds directly. Each of Mr. Soros, Winston, CFM and Dr. Chatterjee may be deemed to have shared power to direct the voting and disposition of the securities of the Issuer held by Phoenix Holdings. (iii) Quantum Industrial has the sole power to direct the voting and disposition of the securities of the Issuer that it holds directly. Each of QIHMI, QIH Management and Mr. Soros may be deemed to have shared power to direct the voting and disposition of the securities of the Issuer held by Quantum Industrial. (iv) Mr. Peet has the sole power to direct the voting and disposition of any securities of the Issuer (including the Shares issuable upon exercise of the options) that he holds directly. (c) Except as described in Item 4 hereof, which is incorporated in this Item 5(c) by reference, there have been no transactions in the Shares effected since October 11, 1995. (d) (i) The partners of Phoenix Partners have the right to participate in the receipt of dividends from, or proceeds for the sale of, securities held by Phoenix Partners in accordance with their percentage interest in the partnership. 20 Page 20 (ii) The members of Phoenix Holdings have the right to participate in the receipt of dividends from, or proceeds for the sale of, securities held by Phoenix Holdings in accordance with their percentage interest in the Phoenix Holdings. (iii) The shareholders of Quantum Industrial have the right to participate in the receipt of dividends from, or proceeds for the sale of, securities held by Quantum Industrial in accordance with their percentage interest in Quantum Industrial. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS IN RELATIONSHIP WITH RESPECT TO SECURITIES OF THE ISSUER. As described in Item 5, on December 9, 1994, Phoenix Holdings and Quantum Industrial entered into a Partnership Agreement for the purposes of acquiring the Shares. A copy of the Partnership Agreement is attached to the Initial Statement as Exhibit G. Pursuant to a Registration Rights Agreement, a copy of which is attached as Exhibit H to the Initial Statement (the "Registration Rights Agreement"), the Issuer granted certain registration rights to Phoenix Partners with respect to Shares issued pursuant to either the Note Purchase Agreement or the Warrant Agreement. The Registration Rights Agreement grants to Phoenix Partners certain demand registration rights in addition to "piggy-back" registration rights, each as set forth in the Registration Rights Agreement. The Issuer entered into a consulting agreement dated as of December 9, 1994 (the "Consulting Agreement"), a copy of which is attached to the Initial Statement as Exhibit I, with CMC pursuant to which CMC will provide certain consulting and advisory services to the Issuer for a monthly fee of $10,000. The Consulting Agreement will terminate on the earlier of (i) December 9, 1996 and (ii) such time as Phoenix Partners fails to purchase any Notes pursuant to the Note Purchase Agreement or Phoenix Partners makes a Demand (as defined in the Note Purchase Agreement). Pursuant to a Registration Rights Agreement, a copy of which is attached hereto as Exhibit Y (the "Second Registration Rights Agreement"), the Issuer granted certain registration rights to Phoenix Holdings and Quantum Industrial with respect to Shares issued pursuant to either the Three Year Warrant or the Four Dollar Warrant. The Second Registration Rights Agreement grants to Phoenix Holdings and Quantum Industrial certain demand registration rights in addition to "piggy-back" registration rights, each as set forth in the Second Registration Rights Agreement. Concurrent with the execution of the Second Registration Rights Agreement, Phoenix Partners and the Issuer executed the First Amendment to the Registration Rights Agreement dated as of December 9, 1994, (the "First Amendment"), a copy of which is attached hereto as Exhibit Z, which amends the Registration Rights Agreement dated as of December 9, 1994 to clarify certain provisions therein. Except as set forth above and as described in Item 4 and Item 5 hereto, the Reporting Person does not have any contracts, arrangements, understandings or relationships with respect to any securities of the Issuer. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. (a) Joint Filing Agreement, dated as of December 16, 1994 by and between S-C Phoenix Partners, S-C Phoenix Holdings, L.L.C., Quantum Industrial Partners LDC, QIH Management Investor, L.P., QIH Management, Inc., Mr. George Soros, Winston Partners, L.P., Chatterjee Fund Management, L.P. and Dr. Purnendu Chatterjee (filed as Exhibit A to the Initial Statement and incorporated herein by reference). (b) Power of Attorney dated December 16, 1994 granted by Quantum Industrial Partners LDC in favor of Mr. Sean Warren (filed as Exhibit B to the Initial Statement and incorporated herein by reference). (c) Power of Attorney dated October 27, 1994 granted by Mr. George Soros in favor of Mr. Sean Warren (filed as Exhibit C to the Initial Statement and incorporated herein by reference). 21 Page 21 (d) Convertible Note Purchase Agreement dated December 9, 1994, between S-C Phoenix Partners and Phoenix Information Systems Corp. (filed as Exhibit D to the Initial Statement and incorporated herein by reference). (e) Warrant Agreement dated December 9, 1994, between S-C Phoenix Partners and Phoenix Information Systems Corp. (filed as Exhibit E to the Initial Statement and incorporated herein by reference). (f) Stock Purchase Agreement dated December 9, 1994, between S-C Phoenix Partners and Robert P. Gordon (filed as Exhibit F to the Initial Statement and incorporated herein by reference). (g) Partnership Agreement of S-C Phoenix Partners dated as of December 9, 1994 between Quantum Industrial Partners LDC and S-C Phoenix Holdings, L.L.C. (filed as Exhibit G to the Initial Statement and incorporated herein by reference). (h) Registration Rights Agreement dated December 9, 1994, between S-C Phoenix Partners and Phoenix Information Systems Corp. (filed as Exhibit H to the Initial Statement and incorporated herein by reference). (i) Consulting Agreement dated as of December 9, 1994 between Chatterjee Management Company and Phoenix Information Systems Corp. (filed as Exhibit I to the Initial Statement and incorporated herein by reference). (j) Power of Attorney dated November 18, 1994 granted by Winston Partners, L.P. in favor of Mr. Peter A. Hurwitz (filed as Exhibit J to Amendment No. 1 to the Initial Statement and incorporated herein by reference). (k) Power of Attorney dated November 18, 1994 granted by Chatterjee Fund Management, L.P. in favor of Mr. Peter A. Hurwitz (filed as Exhibit K to Amendment No. 1 to the Initial Statement and incorporated herein by reference). (l) Power of Attorney dated November 18, 1994 granted by Dr. Purnendu Chatterjee in favor of Mr. Peter A. Hurwitz (filed as Exhibit L to Amendment No. 1 to the Initial Statement and incorporated herein by reference). (m) Letter Agreement dated as of March 15, 1995 between Phoenix Information Systems Corp. and S-C Phoenix Partners (filed as Exhibit M to Amendment No. 2 to the Initial Statement and incorporated herein by reference). (n) Warrant Agreement dated as of March 15, 1995 between Phoenix Information Systems Corp. and S-C Phoenix Partners (filed as Exhibit N to Amendment No. 2 to the Initial Statement and incorporated herein by reference). (o) Letter Agreement dated August 3, 1995 between S-C Phoenix Partners and Phoenix Information Systems Corp. (filed as Exhibit O to Amendment No. 3 to the Initial Statement and incorporated herein by reference). 22 Page 22 (p) $200,000 Tranche C Convertible Note dated August 3, 1995 executed by Phoenix Information Systems Corp. in favor of S-C Phoenix Partners (filed as Exhibit P to Amendment No. 3 to the Initial Statement and incorporated herein by reference). (q) $150,000 Tranche D Convertible Note dated August 3, 1995 executed by Phoenix Information Systems Corp. in favor of S-C Phoenix Partners (filed as Exhibit Q to Amendment No. 3 to the Initial Statement and incorporated herein by reference). (r) Power of Attorney dated January 3, 1989 granted by George Soros in favor of Gary S. Gladstein. (filed as Exhibit R to Amendment No. 3 to the Initial Statement and incorporated herein by reference). (s) Letter Agreement dated September 15, 1995 between S-C Phoenix Partners and Phoenix Information Systems Corp. (filed as Exhibit S to Amendment No. 4 to the Initial Statement and incorporated herein by reference). (t) $1,200,000 Tranche D Convertible Note dated September 15, 1995 executed by Phoenix Information Systems Corp. in favor of S-C Phoenix Partners (filed as Exhibit T to Amendment No. 4 to the Initial Statement and incorporated herein by reference). (u) Warrant Agreement dated September 15, 1995 between S-C Phoenix Partners and Phoenix Information Systems Corp. (filed as Exhibit U to Amendment No. 4 to the Initial Statement and incorporated herein by reference). (v) Options Agreement dated December 7, 1995 between S-C Phoenix Holdings, L.L.C., Quantum Industrial Partners LDC and Phoenix Information Systems Corp. (w) Warrant Agreement dated December 7, 1995 between S-C Phoenix Holdings, L.L.C., Quantum Industrial Partners LDC and Phoenix Information Systems Corp. (x) Warrant Agreement dated December 7, 1995 between S-C Phoenix Holdings, L.L.C., Quantum Industrial Partners LDC and Phoenix Information Systems Corp. (y) Registration Rights Agreement dated December 7, 1995 between S-C Phoenix Holdings, L.L.C., Quantum Industrial Partners LDC and Phoenix Information Systems Corp. (z) First Amendment to the Registration Rights Agreement dated December 7, 1995 between S-C Phoenix Partners and Phoenix Information Systems Corp. 23 Page 23 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 12, 1995 S-C PHOENIX PARTNERS By: S-C Phoenix Holdings, L.L.C. By: /s/ Sean C. Warren ----------------------------- Sean C. Warren Manager Date: December 12, 1995 QUANTUM INDUSTRIAL PARTNERS LDC By: /s/ Sean C. Warren -------------------------------------- Sean C. Warren Attorney-in-Fact Date: December 12, 1995 QIH MANAGEMENT INVESTOR, L.P. By: QIH MANAGEMENT, INC., general partner By: /s/ Sean C. Warren ----------------------------- Sean C. Warren Vice President Date: December 12, 1995 QIH MANAGEMENT, INC. By: /s/ Sean C. Warren -------------------------------------- Sean C. Warren Vice President Date: December 12, 1995 S-C PHOENIX HOLDINGS, L.L.C. By: /s/ Sean C. Warren -------------------------------------- Sean C. Warren Manager 24 Page 24 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 12, 1995 GEORGE SOROS By: /s/ Sean C. Warren -------------------------------------- Sean C. Warren Attorney-in-Fact Date: December 12, 1995 WINSTON PARTNERS, L.P. By: /s/ Peter A. Hurwitz -------------------------------------- Peter A. Hurwitz Attorney-in-Fact Date: December 12, 1995 CHATTERJEE FUND MANAGEMENT, L.P. By: /s/ Peter A. Hurwitz -------------------------------------- Peter A. Hurwitz Attorney-in-Fact Date: December 12, 1995 PURNENDU CHATTERJEE By: /s/ Peter A. Hurwitz -------------------------------------- Peter A. Hurwitz Attorney-in-Fact 25 Page 25 ANNEX A The following is a list of all of the persons who serve as Managing Directors of Soros Fund Management ("SFM"): Scott K. H. Bessent Walter Burlock Stanley Druckenmiller Arminio Fraga Gary Gladstein Robert K. Jermain David N. Kowitz Donald H. Krueger Elizabeth Larson Jay Misra Gabriel S. Nechamkin Steven Okin Dale Precoda Lief D. Rosenblatt Mark D. Sonnino Sean C. Warren Each of the above-listed persons is a United States citizen whose principal occupation is serving as Managing Director of SFM, and each has a business address c/o Soros Fund Management, 888 Seventh Avenue, New York, New York 10106. During the past five years, none of the above-listed persons has been (i) convicted in a criminal proceeding, or (ii) a party to any civil proceeding as a result of which any such persons has been subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violations with respect to such laws. 26 Page 26 ANNEX B DIRECTORS AND OFFICERS OF QUANTUM INDUSTRIAL PARTNERS LDC
Name/Title/Citizenship Principal Occupation Business Address ---------------------- -------------------- ---------------- Curacao Corporation Managing Director of Kaya Flamboyan 9 Company N.V. Netherlands Antilles Curacao, Managing Director corporations Netherlands Antilles (Netherlands Antilles) Inter Caribbean Services Limited Administrative services Citco Building Secretary Wickhams Cay (British Virgin Islands) Road Town Tortola British Virgin Islands
27 Page 27 INDEX OF EXHIBITS
EXHIBIT PAGE - ------- ---- V Options Agreement dated December 7, 1995 between S-C Phoenix Partners, Quantum Industrial Partners LDC and Phoenix Information Systems Corp. W Warrant Agreement dated December 7, 1995 between S-C Phoenix Partners, Quantum Industrial Partners LDC and Phoenix Information Systems Corp. X Warrant Agreement dated December 7, 1995 between S-C Phoenix Partners, Quantum Industrial Partners LDC and Phoenix Information Systems Corp. Y Registration Rights Agreement dated December 7, 1995 between S-C Phoenix Partners, Quantum Industrial Partners LDC and Phoenix Information Systems Corp. Z Amendment No. 1 to Registration Rights Agreement dated December 7, 1995 between S-C Phoenix Partners, Quantum Industrial Partners LDC and Phoenix Information Systems Corp.
EX-99.V 2 OPTIONS AGREEMENT 1 EXHIBIT V OPTIONS AGREEMENT THIS OPTIONS AGREEMENT, dated December 7, 1995, is among PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation ("Phoenix"), S-C PHOENIX HOLDINGS, L.L.C., a limited liability company organized under the laws of Delaware ("S-C"), and QUANTUM INDUSTRIAL PARTNERS LDC, a limited duration company organized under the laws of the Cayman Islands ("Quantum"). WHEREAS, AMERICAN AVIATION LIMITED ("AA"), an offshore limited life company organized under the laws of Mauritius, fifty (50%) percent of which is owned by S-C and fifty (50%) percent of which is owned by Quantum, has agreed to acquire ("Acquisition") twenty five (25%) percent of the equity of HAINAN AIRLINES, a company limited by shares organized under the laws of the People's Republic of China ("Hainan"); WHEREAS, S-C and Quantum own in the aggregate one hundred (100%) percent of AA and, on or before the closing of the Acquisition, will contribute to AA funds sufficient to enable AA to consummate the Acquisition; WHEREAS, S-C and Quantum desire to grant to Phoenix an option to acquire a fifty (50%) percent interest in AA on the terms and conditions hereinbelow set forth; WHEREAS, Phoenix desires to grant to each of S-C and Quantum an option to sell Phoenix up to one hundred (100%) percent of its interest in AA on the terms and conditions hereinbelow set forth. NOW THEREFORE, in consideration of the premises, and the mutual agreements herein contained, the parties hereby agree as follows: SECTION 1. DEFINITIONS. For purposes of this Agreement, the following terms shall have the meanings specified below: "AA" shall have the meaning set forth in the recitals. "AA AMOUNT" shall mean the greater of (a) the AA Investment or (b) eighty five (85%) percent of the aggregate AA Market Price for all outstanding AA Shares owned by S-C and Quantum. "AA INVESTMENT" shall mean twenty five million ($25,000,000) dollars, in the event the Call Option has not 2 2 been exercised, or ten million ($10,000,000) dollars, in the event that the Call Option has been exercised. "AA MARKET PRICE" shall mean the average of the closing prices of sales of AA Shares on all domestic exchanges on which AA Shares may at the time be listed, or, if there shall have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day AA Shares shall not be so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 3:30 P.M., New York time, or if on any day AA Shares shall not be quoted in the NASDAQ System, the average of the high and low bid and asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporation, or any similar successor organization, in each such case averaged over a period of 15 consecutive business days prior to the day as of which the AA Market Price is being determined; provided that if AA Shares are listed on any domestic exchange the term "business days" as used in this sentence shall mean business days on which such exchange is open for trading. If at any time AA Shares are not listed on any domestic exchange or quoted in the NASDAQ System or the domestic over-the-counter market, the AA Market Price shall be deemed to be the fair market value thereof determined by an independent appraiser selected by S-C and Quantum and acceptable to Phoenix, taking into account the share of Hainan owned by AA, the underlying value of Hainan, the value of control, if any, of AA and all other pertinent factors of value other than liquidity of AA Shares. "AA PAYMENTS" shall mean the aggregate amount of all cash dividend payments made by or on behalf of AA to S-C and Quantum, in respect of or relating to the AA Shares, but expressly excluding the $2,000,000 financing fee received or receivable by S-C, Quantum or any affiliate of S-C or Quantum in connection with the Acquisition or any other fee or other compensation paid or payable to S-C, Quantum or any affiliate of S-C or Quantum for services rendered. "AA SHARES" shall mean shares of the capital of AA consisting of ordinary shares of $1.00 each. "ACTUAL PHOENIX VALUE" shall mean the amount resulting when the Phoenix Share Price is multiplied by the Put Exercise Price. "ACQUISITION DATE" shall mean the date on which the closing of the Acquisition occurs. "ACQUISITION" shall have the meaning set forth in the recitals. 3 3 "AFFILIATE" shall mean, with respect to S-C and Quantum, (A)(a) any person or entity controlling, controlled by or under common control with S-C or Quantum and (b) if (1) controlling S-C or Quantum, such person or entity has a forty percent (40%) or more voting and beneficial ownership interest in S-C or Quantum, (2) controlled by S-C or Quantum, has a forty percent (40%) or more voting and beneficial ownership interest in such person or entity and (3) under common control with S-C or Quantum, the person(s) or entity(ies) having such common control have a forty percent (40%) or more voting and beneficial ownership interest in S-C or Quantum and such person or entity, and (B) any person or entity for which George Soros d/b/a Soros Fund Management or Chatterjee Fund Management Co. LP, a Delaware limited partnership, is acting as investment manager or investment adviser, in each case with investment discretion. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or day on which banks in New York City are closed for general business. "CALL EXERCISE PRICE" shall have the meaning set forth in Section 2.1 hereof. "CALL OPTION" shall have the meaning set forth in Section 2.1 hereof. "CALL TERM" shall have the meaning set forth in Section 2.1 hereof. "DETERMINATION DATE" shall mean a date during the Put Term selected by S-C or Quantum and identified in an Exercise Notice, which date shall be on or before the date of the applicable Exercise Notice, but shall not be more than ten Business Days prior to the date of such notice. "EXERCISE NOTICE" shall have the meaning given in Section 3.3 hereof. "FIRST PREFERENCE PERIOD" shall mean the time period commencing on the Preference Date and ending on the earlier of the Flip or the 100% Put Date. "FIRST PREFERENCE PERIOD AMOUNT" shall mean the amount equal to the quotient of (x) $8,000,000 minus Pre-Preference Period Payments, divided by (y) the sum of seventy-two (72%) percent plus ten (10%) percent of the aggregate Percentage Interest in AA held by S-C and Quantum on the Preference Date. "FLIP" shall have the meaning set forth in Section 2.4 hereof. 4 4 "HAINAN" shall have the meaning set forth in the recitals. "LIQUIDATION AMOUNT" shall mean an amount equal to the excess, if any, of $8,000,000 over AA Payments made prior to the Liquidation Date. "LIQUIDATION DATE" shall have the meaning set forth in Section 2.6 hereof. "LIQUIDATION DIFFERENTIAL" shall mean an amount equal to the sum of the Pre-Liquidation Differential plus, if any, the Post-Liquidation Differential. "100% PUT" shall have the meaning given in Section 2.4 hereof. "PAYMENT DIFFERENTIAL" shall mean an amount equal to the difference between (i) the Percentage Interest in AA owned by Phoenix on the Preference Date multiplied by the total amount of dividend payments made by AA during the time period following the Preference Date until the applicable Determination Date, and (ii) all amounts received by Phoenix through such Determination Date pursuant to Section 2.4; provided that any amounts paid to Phoenix pursuant to Section 2.4(c) shall be excluded from the foregoing formula for purposes of calculating the Payment Differential. "PERCENTAGE INTEREST" shall mean the percentage obtained by dividing the number of AA Shares owned by a party by the aggregate number of AA Shares then outstanding. "PHOENIX" shall have the meaning set forth in the preamble. "PHOENIX MARKET PRICE" shall mean the average of the closing prices of the Phoenix Stock sales on all domestic exchanges on which the Phoenix Stock may at the time be listed, or, if there shall have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Phoenix Stock shall not be so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 3:30 P.M., New York time, or if on any day the Phoenix Stock shall not be quoted in the NASDAQ System, the average of the high and low bid and asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporation, or any similar successor organization, in each such case averaged over the business days occurring during a 5 5 period of 30 consecutive calendar days prior to the day as of which the Phoenix Market Price is being determined; provided that if the Phoenix Stock is listed on any domestic exchange the term "business days" as used in this sentence shall mean business days on which such exchange is open for trading. If at any time the Phoenix Stock is not listed on any domestic exchange or quoted in the NASDAQ System or the domestic over-the-counter market, the Phoenix Market Price shall be deemed to be the fair market value thereof as of the Determination Date determined by an independent appraiser selected by Phoenix and acceptable to S-C and Quantum taking into account the share of AA owned by Phoenix if any, the underlying value of AA (if Phoenix owns any AA Shares), the value of control, if any, of Phoenix and all other pertinent factors other than liquidity of Phoenix Stock. "PHOENIX SHARE PRICE" shall mean eighty-five (85%) percent of the Phoenix Market Price. "PHOENIX STOCK" shall mean the common stock, par value $0.01, of Phoenix. "POST-LIQUIDATION DIFFERENTIAL" shall mean the amount resulting when the Liquidation Amount is multiplied by a fraction, the numerator of which is the Percentage Interest in AA held by Phoenix in the Preference Date and the denominator of which is the aggregate Percentage Interest in AA held by S-C and Quantum on the Preference Date. "PREFERENCE DATE" shall have the meaning set forth in Section 2.4 hereof. "PRE-LIQUIDATION DIFFERENTIAL" shall mean an amount equal to the difference between (i) AA Payments made during the time period following the Preference Date until (but not including) the Liquidation Date, multiplied by a fraction, the numerator of which is equal to the Percentage Interest in AA held by Phoenix on the Preference Date and the denominator of which is equal to the aggregate Percentage Interest in AA held by S-C and Quantum on the Preference Date, and (ii) all amounts received by Phoenix during the same time period; provided that any amounts paid to Phoenix pursuant to Section 2.4(c) shall be excluded from the foregoing formula for purposes of calculating the Pre-Liquidation Differential. "PRE-PREFERENCE PERIOD PAYMENTS" shall mean AA Payments made prior to the Preference Date. "PRINCIPAL DIFFERENTIAL" shall mean an amount equal to two times the difference between (i) the Percentage Interest in AA owned by Phoenix on the Preference Date multiplied by 6 6 the First Preference Period Amount, and (ii) all amounts received by Phoenix during the First Preference Period. "PUT CLOSING" shall mean the time at which (a) Phoenix shall cause to be issued to S-C and Quantum the number of Phoenix Shares equal to the Put Exercise Price and (b) S-C and Quantum shall cause to be issued to Phoenix the AA Shares sold pursuant to the Put Option. "PUT EXERCISE PRICE" shall have the meaning set forth in Section 3.1 hereof. "PUT OPTION" shall have the meaning set forth in Section 3.1 hereof. "PUT TERM" shall have the meaning set forth in Section 3.1 hereof. "QUANTUM" shall have the meaning set forth in the preamble. "S-C" shall have the meaning set forth in the preamble. For purposes hereof, the term "dividends" shall include payments made by AA to redeem AA Shares. "SECOND PREFERENCE PERIOD AMOUNT" shall mean the number resulting when the First Preference Period Amount is multiplied by a fraction, the numerator of which is (x) eighty (80%) percent minus the Percentage Interest in AA held by S-C and Quantum on the Preference Date, and the denominator of which is (y) the Percentage Interest in AA held by S-C and Quantum on the Preference Date minus twenty (20%) percent. SECTION 2. CALL OPTION. 2.1 OPTION TERMS. S-C and Quantum hereby grant to Phoenix an option ("Call Option") to purchase such number of AA Shares as shall, upon exercise, equal a Percentage Interest in AA not to exceed fifty (50%) percent in the aggregate. The Call Option shall be exercisable in accordance with Section 2.3 hereof, in whole but not in part, on any Business Day during the period ("Call Term") commencing on the Acquisition Date and ending on the first anniversary thereof. The exercise price for the Call Option shall be $15,000,000 ("Call Exercise Price"). 2.2 CONSIDERATION. In consideration of the issuance of the Call Option by S-C and Quantum to Phoenix, Phoenix shall, on the Acquisition Date, issue to S-C and Quantum warrants to acquire an aggregate of four million 7 7 (4,000,000) shares of Phoenix Stock pursuant to the warrant agreements (the "Warrant Agreements") in the forms of Exhibits A-1 and A-2 hereto. S-C and Quantum will receive registration rights applicable to the shares of common stock issued upon exercise of the warrants, as set forth in the Registration Rights Agreement attached as Exhibit C hereto. Phoenix shall enter into the First Amendment to the Registration Rights Agreement, attached as Exhibit D hereto. 2.3 EXERCISE. At least five (5) Business Days prior to the date upon which Phoenix desires to exercise the Call Option, Phoenix shall deliver to S-C and Quantum written notice of such exercise. Such notice shall specify the Business Day for the purchase of the AA Shares. On the date specified in any such notice, Phoenix shall wire transfer the Call Exercise Price in immediately available funds to such account or accounts as S-C and Quantum shall designate to Phoenix. Promptly upon receipt thereof, S-C and Quantum shall cause Phoenix to be issued, in Phoenix's name as set forth in the notice, the AA Shares so purchased in certificated form and without legends except in respect of such restrictions on transfer as may be imposed by applicable Federal and state securities and "blue sky" laws. 2.4 AA PREFERENCE DISTRIBUTIONS. At such time (the "Preference Date") as Phoenix shall first acquire a Percentage Interest in AA greater than twenty (20%) percent (whether upon an exercise of the Call Option or on an exercise of the Put Option, provided that if Phoenix first acquires such Percentage Interest pursuant to an exercise of the Put Option, the Preference Date will be deemed to be the applicable Determination Date for such exercise), and until such time (the "100% Put") as S-C and Quantum shall have exercised the Put Option with respect to one hundred (100%) percent of the aggregate Percentage Interest in AA they then hold without regard to the adjustment required by Section 3.2(c)(assuming that a Put Closing has occurred with respect to such exercise and if so, effective as of the Determination Date for such Put Closing), the Articles of Association of AA shall be amended, effective on the Preference Date, to provide that, notwithstanding the respective Percentage Interests of S-C, Quantum and Phoenix, AA will distribute all dividends in respect of AA Shares as follows: (a) in the event that, as of such time, AA Payments are less than $8,000,000, (i) the initial ten (10%) percent) of the First Preference Period Amount shall be distributed in accordance with the Percentage Interests in AA held on the Preference Date by S-C and Quantum on the one hand, and Phoenix on the other hand; and (ii) the remaining ninety (90%) percent of the First 8 8 Preference Period Amount shall be distributed eighty (80%) percent to S-C and Quantum and twenty (20%) percent to Phoenix, in each case until the earlier of (x) such time ("Flip") as AA Payments equal $8,000,000 or (y) the 100% Put; (b) from and after the Flip, (i) the initial ten (10%) percent of the Second Preference Period Amount shall be distributed in accordance with the Percentage Interests in AA held on the Preference Date by S-C and Quantum on the one hand, and Phoenix on the other hand; and (ii) the remaining ninety (90%) percent of the Second Preference Period Amount shall be distributed twenty (20%) percent to S-C and Quantum and eighty (80%) percent to Phoenix; (c) thereafter, one hundred (100%) percent to Phoenix until such time as Phoenix shall have received interest in an amount equal to five (5%) percent (based on a 365/366 day year and actual days elapsed) on the Principal Differential, calculated for the time period commencing on the date on which the First Preference Period Amount is first distributed eighty (80%) percent to S-C and Quantum and twenty (20%) percent to Phoenix and ending on the date on which Phoenix receives the amount it would have received prior to the Flip if all distributions made pursuant to Section 2.4(a) were instead made pursuant to Section 2.4(d); and (d) thereafter, in accordance with the Percentage Interests in AA then held by S-C and Quantum on the one hand and by Phoenix on the other hand. 2.5 Notwithstanding the foregoing, if, immediately following the 100% Put, the sum of AA Payments plus the Aggregate Phoenix Value (such sum, the "SCQ Amount") is less than $8 million, AA will distribute all dividends in respect of AA Shares as follows: (a)(i) first, the First Partial Payment Amount shall be distributed in accordance with the respective Percentage Interests held by S-C, Quantum and Phoenix; and (ii) thereafter, eighty (80%) percent to S-C and Quantum and twenty (20%) percent to Phoenix; in each case until the SCQ Amount is equal to $8 million (the "end date"); (b) from and after the end date, (i) the Second Partial Payment Amount shall be distributed in accordance with the respective Percentage Interests held by S-C, Quantum and Phoenix; and (ii) thereafter, the Recapture Amount shall be distributed twenty (20%) percent to S-C and Quantum and 9 9 eighty (80%) percent to Phoenix, or, if the aggregate Percentage Interest in AA held by S-C and Quantum is less than twenty (20%), to S-C, Quantum and Phoenix in accordance with their respective Percentage Interests in AA; (c) thereafter, in accordance with the respective Percentage Interests in AA held by S-C, Quantum and Phoenix. (d) For purposes of this Section 2.5, the following terms shall have the meanings specified below: "Aggregate Phoenix Value" shall mean the amount equal to the sum of (x) the amount resulting when the number of Phoenix Shares received by S-C and Quantum on an exercise of the Put Option is multiplied by the Phoenix Share Price as of the Determination Date for such exercise, plus (y) the amount resulting when the number of Phoenix Shares received by S-C and Quantum on any other exercise of the Put Option is multiplied by the Phoenix Share Price as of the Determination Date for such exercise. "First Partial Payment Amount" shall mean an amount equal to thirty-five (35%) percent of the number resulting when the difference between (x) the Percentage Interest in AA held by Phoenix immediately following the 100% Put and (y) twenty (20%) percent, is multiplied by (z) the excess, if any, of $8 million over the SCQ Amount immediately following exercise of the 100% Put. "Payment A Amount" shall mean the amount resulting when the total amount of dividends paid by AA during the time period immediately following the 100% Put and ending on the end date, but excluding the First Partial Payment Amount, is multiplied by a fraction the numerator of which is equal to (x) eighty (80%) percent minus the Percentage Interest in AA held by S-C and Quantum immediately following the 100% Put, and the denominator of which is equal to (y) the Percentage Interest in AA held by S-C and Quantum immediately following the 100% Put minus twenty (20%) percent. "Recapture Amount" shall mean the amount equal to the sum of (i) the Payment A Amount plus (ii) the number resulting when (x) the total amount of dividends paid by AA during the time period following the Preference Date and ending immediately prior to the 100% Put, but excluding amounts paid pursuant to Section 2.4(a)(i), is multiplied by (y) a fraction the numerator of which is equal to eighty (80%) percent minus the Percentage Interest in AA held by S-C and Quantum on the Preference Date, and the denominator of which is equal to the Percentage Interest in AA held by S-C and Quantum immediately following the 100% Put minus twenty (20%) percent. 10 10 "SCQ Amount" shall have the meaning given in this Section 2.5. "Second Partial Payment Amount" shall mean an amount equal to thirty-five (35%) of the number resulting when the excess, if any, of (x) the aggregate Percentage Interest in AA held by S-C and Quantum immediately following the 100% Put over (y) twenty (20%) percent, is multiplied by (z) the Recapture Amount. (e) For purposes of this Section 2.5, all calculations based on the occurrence of the 100% Put shall apply solely following the Put Closing for the 100% Put but, following such closing, shall be effective as of the Determination Date for such 100% Put. 2.6 OTHER AA DISTRIBUTIONS. During any time period in which Phoenix owns a Percentage Interest in AA equal to or less than twenty (20%) percent or following the 100% Put Date, AA will make all dividend payments in accordance with the Percentage Interests in AA then held by S-C and Quantum, on the one hand, and by Phoenix, on the other hand. 2.7 LIQUIDATION, REORGANIZATION OR SALE. (a) In the event of the sale, corporate reorganization or liquidation of AA on or following the Preference Date (the date of such event, the "Liquidation Date"), the proceeds of such sale, reorganization or liquidation shall be distributed as follows: (i) one hundred (100%) percent of the Liquidation Amount to S-C and Quantum; (ii) thereafter, one hundred (100%) percent of the Liquidation Differential to Phoenix; and (iii) thereafter, to S-C, Quantum and Phoenix in accordance with the amounts in their respective capital accounts with respect to their ownership in AA immediately prior to such sale, reorganization or liquidation. The Articles of Association of AA shall be amended following (but effective as of) the Preference Date to reflect the provisions of this Section 2.6. (b) The foregoing provisions of Section 2.6(a) shall no longer apply following the 100% Put (assuming that a Put Closing has occurred with respect to such exercise and, if so, effective as of the Determination Date for such Put Closing); provided however, that the provisions of Section 2.6(a) shall be applicable following such 100% Put if the SCQ Amount is less than $8 million, in which case the definition of "Liquidation Amount" shall be deemed to mean an amount equal to $8,000,000 minus the SCQ Amount. 11 11 SECTION 3. PUT OPTION. 3.1 OPTION TERMS. Phoenix hereby grants to S-C and Quantum, effective as of the Acquisition Date, an option ("Put Option") to sell to Phoenix such number of AA Shares as shall, upon exercise, equal (a) at the sole option of S-C and Quantum, fifty (50%) percent or one hundred (100%) percent of their aggregate Percentage Interest in AA (if S-C and Quantum then own one hundred (100%) percent of AA) or (b) one hundred (100%) percent of their aggregate Percentage Interest in AA (if S-C and Quantum then own less than one hundred (100%) percent of AA, either as a result of a prior exercise of the Put Option or in the event the Call Option has been exercised, subject in each case to adjustment as required by Section 3.2(c). The Put Option shall be exercisable in accordance with Section 3.3 hereof at any time during the period ("Put Term"), commencing on the second anniversary of the Acquisition Date and ending on the fifth anniversary of the Acquisition Date. The price payable by Phoenix upon exercise of the Put Option shall be determined as set forth in Section 3.2 hereof ("Put Exercise Price"). The effectiveness of the Put Option and the Call Option shall be conditioned on the amendment to the certificate of incorporation of Phoenix referred to in Section 5.1(d) hereof. 3.2 PUT EXERCISE PRICE. (a) If upon exercising the Put Option one hundred (100%) percent of the aggregate Percentage Interest in AA then held by S-C and Quantum is to be sold to Phoenix, the Put Exercise Price shall be a number of shares of Phoenix Stock, determined as of the Determination Date, equal to the lower of (i) eight million (8,000,000) shares, in the event the Call Option has not been exercised, or four million (4,000,000) shares, in the event the Call Option has been exercised and (ii) the number obtained by dividing (x) the amount equal to the AA Amount minus the Payment Differential by (y) the Phoenix Share Price. (b) If upon the exercise of the Put Option fifty (50%) percent of the aggregate Percentage Interest then held by S-C and Quantum in AA is to be sold to Phoenix and the Call Option has not been exercised, the Put Exercise Price shall be a number of shares of Phoenix Stock, determined as of the Determination Date, equal to the lower of (i) four million (4,000,000) shares and (ii) one-half of the number obtained by dividing (x) the amount equal to the AA Amount minus the Payment Differential by (y) the Phoenix Share Price. (c) Notwithstanding any provision herein to the contrary: (i) if, after determining the Put Exercise Price 12 12 pursuant to Section 3.2(a), the Actual Phoenix Value is less than the AA Amount, then the Percentage Interest in AA sold to Phoenix for such Put Exercise Price shall be reduced, pro rata, by the same percentage by which the Actual Phoenix Value is less than the AA Amount; and (ii) if, after determining the Put Exercise Price pursuant to Section 3.2(b), the Actual Phoenix Value is less than one- half the AA Amount, then the Percentage Interest in AA sold to Phoenix for such Put Exercise Price shall be reduced, pro rata by the same percentage by which the Actual Phoenix Value is less than one-half the AA Amount. 3.3 EXERCISE. The Put Option may be exercised by S-C or Quantum at any time during the Put Term by delivery of a written notice of exercise ("Exercise Notice") to Phoenix, irrevocable except as provided below, which notice will set forth the Determination Date, the Percentage Interest in AA held by S-C and Quantum, respectively, to be sold to Phoenix and the Put Exercise Price as determined by S-C and Quantum. Unless S-C and Quantum receive a written objection from Phoenix (an "objection notice") within five Business Days of the date of delivery of an Exercise Notice, the Put Closing shall occur on the sixth Business Day following the delivery date of such Exercise Notice and the Put Exercise Price shall be the price specified in such Exercise Notice. If S-C and Quantum receive a timely and complete objection notice from Phoenix, the parties shall cooperate in good faith to determine the Put Exercise Price in accordance with the provisions of Section 3.2 within fifteen Business Days from the date S-C and Quantum receive such objection notice and the Put Closing shall occur on the first Business Day following the date on which the Put Exercise Price is so determined. The objection notice delivered by Phoenix shall specify in detail the basis for the objection and Phoenix's determination of the Put Exercise Price. If the parties cannot agree to a determination of the Put Exercise Price within twenty Business Days of the date of an Exercise Notice, S-C or Quantum may revoke such Exercise Notice. The Phoenix Shares and the AA Shares shall be in certificated form and without legends except in respect of such restrictions on transfer as may be imposed by applicable Federal and state securities and "blue sky" laws. A Certificate of Representations in the form of Exhibit B hereto shall be delivered to Phoenix at the Put Closing. At the Put Closing the parties shall, if necessary, make an adjustment with respect to any dividend payments made by AA between the applicable Determination Date and date of such Put Closing so that any such dividends shall be distributed to S-C, Quantum and Phoenix in accordance with the provisions of Sections 2.4, 2.5 and 2.6, as then applicable, as if the Put Closing occurred on such Determination Date. 13 13 SECTION 4. SHARES. The Phoenix Shares issued to S-C or Quantum upon exercise of the Put Option shall be, upon such issuance, fully paid and non-assessable. The AA Shares conveyed by S-C and Quantum upon exercise of the Call Option and/or Put Option shall be, upon such conveyance, fully paid, non-assessable, subject to no call or right of redemption and free and clear of all liens, claims and encumbrances of any nature. SECTION 5. REPRESENTATIONS AND WARRANTIES. 5.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PHOENIX. Phoenix hereby represents, warrants and covenants to each of S-C and Quantum that: (a) Phoenix is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has the requisite corporate power and authority to own its properties and to carry on its business in all material respects as it is now being conducted. Phoenix has the requisite corporate power and authority to perform its obligations hereunder. (b) This Agreement has been duly authorized by all necessary corporate action on behalf of Phoenix, has been duly executed and delivered by authorized officers of Phoenix, and is a valid and binding agreement on the part of Phoenix that is enforceable against Phoenix in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or other similar laws affecting the enforcement of creditors' rights generally and to judicial limitations on the enforcement of the remedy of specific performance and other equitable remedies. (c) Neither the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated herein or therein will violate or be in conflict with any provision of the certificate of incorporation or bylaws of Phoenix or violate or be in conflict with any material debt, note, bond, lease, mortgage, indenture, license, obligation, contract, commitment, franchise, permit, instrument or other agreement or obligation to which Phoenix is a party, or violate or be in conflict with any law, judgment, decree, order, regulation or ordinance by which Phoenix is bound or affected. (d) Phoenix shall use its best efforts to cause its certificate of incorporation to be amended on or 14 14 before February 15, 1996 to increase its authorized number of shares of capital stock so that Phoenix will at all times have a sufficient number of shares of Phoenix Stock authorized and reserved for issuance to enable it to pay the Put Exercise Price and to issue the shares of Phoenix Stock required upon an exercise of the Warrants under the Warrant Agreements. (e) The AA Shares which may be acquired by it will be purchased for investment for its own account and not with the view to, or for resale in connection with, any distribution or public offering thereof. Phoenix understands that the AA Shares have not been and may not be registered under the Securities Act of 1933, as amended (the "Securities Act") or any state securities laws by reason of their contemplated issuance in transactions exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof and applicable state securities laws, and that the reliance of Phoenix and others upon these exemptions is predicated in part upon this representation by Phoenix. Phoenix further understands that the AA Shares may not be transferred or resold without (i) registration under the Securities Act and any applicable state securities laws, or (ii) an exemption from the requirements of the Securities Act and applicable state securities laws. Phoenix understands that an exemption from such registration is not presently available pursuant to Rule 144 promulgated under the Securities Act by the Securities and Exchange Commission (the "Commission") and that in any event Phoenix may not sell any AA Shares pursuant to Rule 144 prior to the expiration of a two-year period after it has acquired such AA Shares. Phoenix understands that any sales pursuant to Rule 144 can be made only in full compliance with the provisions of Rule 144. (f) At the date hereof Phoenix is, and at the time of delivery of the Phoenix Stock to be delivered by it to S-C or Quantum on the exercise of the Put Option and on the exercise of the warrants will be, the sole lawful owner of and has, and will have, good and marketable title to such Phoenix Stock free and clear of any liens, charges, pledges, equities, encumbrances, security interests, community property rights, restrictions on transfer or other defects in title (collectively, "Liens"). Upon delivery of the Phoenix Stock to be delivered to S-C and Quantum hereunder, good and marketable title to such Phoenix Stock will pass to S-C and Quantum, free and clear of all Liens. 15 15 5.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF S-C AND QUANTUM. Each of S-C and Quantum, each with respect to itself, hereby represents, warrants and covenants to Phoenix that: (a) S-C is a limited liability company, duly organized and validly existing under the laws of Delaware, and has the requisite power and authority and has been duly authorized to perform its obligations hereunder. (b) Quantum is a limited duration company, duly organized and validly existing under the laws of the Cayman Islands, and has the requisite power and authority and has been duly authorized to perform its obligations hereunder. (c) This Agreement has been duly authorized by all necessary action on the part of S-C and Quantum. This Agreement has been duly executed and delivered. This Agreement is a valid and binding agreement, enforceable against S-C and Quantum in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or other similar laws affecting the enforcement of creditors' rights generally and to judicial limitations on the enforcement of the remedy of specific performance and other equitable remedies. (d) The Phoenix Stock which may be acquired by S-C or Quantum will be purchased for investment for the account of S-C or Quantum and not with the view to, or for resale in connection with, any distribution or public offering thereof. S-C and Quantum understand that the Phoenix Stock has not been and may not be registered under the Securities Act) or any state securities laws by reason of its contemplated issuance in transactions exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof and applicable state securities laws, and that the reliance of Phoenix upon these exemptions is predicated in part upon this representation by S-C and Quantum. S-C and Quantum further understand that the Phoenix Stock may not be transferred or resold without (i) registration under the Securities Act and any applicable state securities laws, or (ii) an exemption from the requirements of the Securities Act and applicable state securities laws. S-C and Quantum understand that an exemption from such registration is not presently available pursuant to Rule 144 promulgated under the Securities 16 16 Act by the Commission and that in any event Phoenix Stock may not be sold pursuant to Rule 144 prior to the expiration of a two-year period after the acquisition of such Phoenix Stock. S-C and Quantum understand that any sales pursuant to Rule 144 can be made only in full compliance with the provisions of Rule 144. (e) At the date hereof each of S-C and Quantum is, and at the time of delivery of the AA Shares to be sold by it to Phoenix will be, the sole lawful owner of and has, and will have, good and marketable title to such AA Shares free and clear of any liens, charges, pledges, equities, encumbrances, security interests, community property rights, restrictions on transfer or other defects in title (collectively, "Liens"). Upon delivery of and payment for the AA Shares to be sold by S-C or Quantum hereunder, good and marketable title to such shares will pass to Phoenix, free and clear of all Liens. There are no outstanding options, warrants, rights or other agreements or arrangements to which S-C or Quantum is a party requiring S-C or Quantum at any time to transfer any of the AA Shares to be sold to Phoenix under the Call Option. (f) S-C and Quantum shall cause AA to at all times during the Call Term to own twenty-five (25%) percent or more of the outstanding capital stock of Hainan. (g) S-C and Quantum will not, during the Call Term, cause AA to (i) amend, modify or supplement its Articles of Association in a manner that would materially deprive Phoenix of the value it has bargained for under this Agreement, (ii) conduct any business other than the holding of the interests in Hainan or (iii) incur any indebtedness. (h) S-C and Quantum have delivered to Phoenix true and complete copies of the Articles of Association of AA and of the material agreements entered into by AA in connection with the Acquisition. SECTION 6. MISCELLANEOUS. 6.1 REPRESENTATIVE. S-C (or such other entity as S-C and Quantum may designate in writing to Phoenix) shall serve as the representative (the "Representative") of S-C and Quantum for purposes of receiving or delivering notices and instructions hereunder or accepting, paying or delivering the shares of stock or other consideration to be received, paid or delivered to or by S-C Quantum pursuant to the terms of this Agreement. Phoenix shall be entitled to deliver to the Representative notices addressed to either or both of S-C and 17 17 Quantum, and Phoenix may take such action (consistent with the terms of this Agreement) as may be required by such notices or instructions as may be delivered to Phoenix by the Representative, including instructions concerning the issuance of warrants or shares of stock or the payment of other consideration as required hereby. 6.2 NOTICES. Every notice or other communication provided for in this Agreement to be given by one party to the other shall be in writing and shall be deemed given on the date delivered, if by hand delivery, or on the fourth day from the date sent, if by registered mail, postage prepaid to the other party at the address set forth below, or to such other address as may hereafter be designated by a party in writing pursuant hereto: If to the Company, to: Phoenix Information Systems Corp. 100 Second Avenue South, Suite 100 St. Petersburg, Florida 33701 Attention: Paul Henry If to S-C and Quantum, to the Representative at: S-C Phoenix Holdings, L.L.C. c/o The Chatterjee Group 888 Seventh Avenue, Suite 3000 New York, New York 10106 Attention: Peter Hurwitz, Esq. 6.3 ENTIRE AGREEMENT. This Agreement (including all other documents or instruments required to be delivered in connection herewith) constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes any and all previous agreements between them relating to the subject matter hereof whether written, oral or implied, and may not be changed or modified except by written agreement, signed by the party to be bound or his duly authorized representative. 6.4 WAIVERS. Failure of either party hereto to insist upon strict performance of the terms, conditions and provisions of this Agreement shall not be deemed a waiver of such terms, conditions or provisions or a waiver of future compliance therewith. No waiver of any terms, conditions or provisions hereof shall be deemed to have been made unless expressed in writing and signed by both parties, and shall not be construed as, or constitute, a continuing waiver of such term, condition or provision, or waiver of any other violation or, breach of or default under any other term, 18 18 condition or provision of this Agreement or any other agreements provided for herein. 6.5 SECTION HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not be given any effect in the construction or interpretation of this Agreement. 6.6 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal law of the State of New York, without reference to any choice of law provisions thereof. 6.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors permitted transferees and assigns. No party may assign or transfer any of its rights, benefits or obligations hereunder without the prior written consent of each other party hereto, except that S-C and Quantum may each transfer or assign its rights, benefits or obligations hereunder to one or more of its Affiliates without the prior written consent of any other party hereto. 6.8 FEES AND EXPENSES. Fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby including, without limitation, counsel fees, brokerage, finders or financial advisor fees and accounting fees, regardless of whether any of the transactions contemplated hereby are consummated ("Expenses") shall be paid as follows: (a) Expenses incurred prior to July 5, 1995, shall be paid by the party which incurred such Expenses; (b) Expenses incurred after July 5, 1995, and prior to October 24, 1995, relating to the Acquisition will be shared equally by Phoenix on the one hand and S-C and Quantum on the other hand; (c) Expenses incurred after October 24, 1995, relating to the Acquisition shall be paid by S-C and Quantum; (d) Expenses relating to the organization of AA, whenever incurred, shall be paid by S-C and Quantum; and (e) Expenses in the nature of legal fees and disbursements relating to the preparation of this Agreement (exclusive of any negotiations, term sheets or letters of intent preliminary hereto) shall be paid 19 19 (i) by Phoenix to the extent incurred by Phoenix and (ii) by Phoenix to the extent incurred by S-C and Quantum, up to a maximum of $30,000. (f) Expenses in the nature of brokerage, finders, financial advisory and similar fees shall be paid by the party initiating contact with such broker, finder or financial advisor. 6.9 TAX ELECTIONS. The parties agree that, upon the written request of Phoenix following any acquisition of AA Shares, they shall cause AA to make an election under Section 754 of the Internal Revenue Code of 1986, as amended, and any other similar election under any United States Federal, state or local income tax laws requested by Phoenix. 6.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. 20 20 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. PHOENIX INFORMATION SYSTEMS CORP. By:________________________________ Title: S-C PHOENIX HOLDINGS, L.L.C. By:______________________________ Title: QUANTUM INDUSTRIAL PARTNERS LDC By:______________________________ Title: 21 21 EXHIBIT A-1 Form of Warrant 22 22 EXHIBIT A-2 Form of Warrant 23 23 EXHIBIT B Form of Certificate of Representations The undersigned, in connection with the Options Agreement, dated December 7, 1995 (the "Agreement"), among Phoenix Information Systems Corp., a Delaware corporation (the "Company"), and S-C Phoenix Holdings, L.L.C., a limited liability company organized under the laws of ____________, hereby makes each of the representations contained in Section 5.2 of the Agreement and further represents that it has performed, in all material respect, each of its obligations thereunder. The undersigned further represents that it qualifies as an "accredited investor" as that term is used in Regulation D promulgated under the Securities Act of 1933, as amended , because it is an entity, all of whose equity owners are accredited investors. S-C PHOENIX HOLDINGS, L.L.C. By:__________________________________ Title: 24 24 EXHIBIT C Form of Registration Rights Agreement 25 25 Form of Certificate of Representations The undersigned, in connection with the Options Agreement, dated December 7, 1995 (the "Agreement"), among Phoenix Information Systems Corp., a Delaware corporation (the "Company"), and Quantum Industrial Partners LDC, a limited duration company organized under the laws of ____________, hereby makes each of the representations contained in Section 5.2 of the Agreement and further represents that it has performed, in all material respect, each of its obligations thereunder. The undersigned further represents that it qualifies as an "accredited investor" as that term is used in Regulation D promulgated under the Securities Act of 1933, as amended , because it is an entity, all of whose equity owners are accredited investors. QUANTUM INDUSTRIAL PARTNERS LDC By:__________________________________ Title: EX-99.W 3 WARRANT AGREEMENT 1 EXHIBIT W WARRANT AGREEMENT WARRANT AGREEMENT, dated as of December 7, 1995 (the "Agreement"), by and among PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation (the "Company"), S-C PHOENIX HOLDINGS, L.L.C., a limited liability company organized under the laws of Delaware ("S-C") and QUANTUM INDUSTRIAL PARTNERS LDC, a limited duration company organized under the laws of the Cayman Islands ("Quantum," each of S-C and Quantum, together with the successors and permitted assigns of each, a "Holder"). WHEREAS, the Company proposes to issue and deliver its warrant certificates ("Warrant Certificates") evidencing 2,000,000 warrants (the "Warrants") each to purchase one newly issued share of common stock, par value $0.01 per share, of the Company ("Common Stock") in connection with that certain Options Agreement, dated December 7, 1995, by and among the Company, S-C and Quantum (the "Options Agreement"). NOW THEREFORE, in consideration of the foregoing and for the purpose of defining the terms and provisions of the Warrants and the respective rights and obligations thereunder of the Company and each Holder, the Company and each Holder agree as follows: 1. Certain Definitions. The following terms, as used in this Agreement, have the following meanings: 2 (a) "Affiliate" means, with respect to S-C and Quantum, (A)(a) any Person controlling, controlled by or under common control with S-C or Quantum and (b) if (1) controlling S-C or Quantum, such Person has a forty percent (40%) or more voting and beneficial ownership interest in S-C or Quantum, (2) controlled by S-C or Quantum has a forty percent (40%) or more voting and beneficial ownership interest in such Person and (3) under common control with S-C or Quantum, the Person(s) having such common control have forty percent (40%) or more voting and beneficial ownership interest in S-C or Quantum and such Person, and (B) any Person for which George Soros d/b/a Soros Fund Management or Chatterjee Fund Management Co. LP, a Delaware limited partnership, is acting as investment manager or investment adviser, in each case with investment discretion. For purposes of this definition, the term "control," when used with respect to any Person, shall include the power to exercise discretion over the investments of such Person, and the terms "controlling" and "controlled" have corresponding meanings. (b) "Business Day" means any day other than a Saturday, Sunday or day on which banks in New York City are closed for general business. (c) "Common Stock" has the meaning set forth in the preamble. (d) "Exercise Period" means the period beginning on the Seventh Business Day following the date hereof (as defined in the Options Agreement) and ending at 5 p.m. New York City time 2 3 on the earlier to occur of (i) the 25th Business Day following the Acquisition Date (as defined in the Options Agreement) and (ii) the 120th day following such Seventh Business Day from the date hereof. (e) "Exercise Price" means $4 per share (as provided in Section 3 and subject to adjustment as provided in Section 4). (f) "Expiration Date" for the Warrants means the last day of the Exercise Period. (g) "Holder" has the meaning set forth in the pre amble. (h) "Investor Representative" shall be [S-C Phoenix Holdings, L.L.C., a Delaware limited liability company, or its successor in interest, or the assigned representative of such Person (it being agreed that at all times there shall be no more than one Investor Representative)]. (i) "Person" means any individual, corporation, limited liability company, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. (j) "Underlying Common Stock" means the shares of Common Stock purchasable by each Holder upon the exercise of the Warrants. (k) "Warrants" has the meaning set forth in the preamble. 3 4 (1) "Warrant Certificates" means the certificates evidencing the Warrants. 2. Issue of Warrants. The Warrant Certificates shall be in registered form only and substantially in the form attached hereto as Exhibit A, shall be dated the date on which signed by an authorized signatory of the Company and may have such legends and endorsements typed, stamped or printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement and the Options Agreement. Warrant Certificates evidencing 2,000,000 Warrants may be executed by any authorized officer of the Company. Warrant Certificates evidencing all 2,000,000 Warrants shall be delivered in the names of the Holders to the Investor Representative at the closing of the Acquisition (as defined in the Options Agreement). 3. Exercise Price; Exercise of Warrants. (a) Exercise Price. Each Warrant shall entitle the Holder, subject to the provisions of this Agreement, to purchase one share of Common Stock at a purchase price per share equal to the Exercise Price. (b) Exercise of Warrants Generally. (1) Exercise During Exercise Period. The aggregate number of Warrants that may be exercised at any time during the Exercise Period shall be 2,000,000. All Warrants not exercised during the Exercise Period shall expire at 5 p.m. New York City time on the Expiration Date. 4 5 (2) Liquidation Event. If the Company is liquidated in accordance with the provisions of its Certificate of Incorporation, then the Warrants shall be deemed to have been exercised. (3) Method of Exercise; Payment of Exercise Price. In order to exercise any or all of the Warrants repre sented by a Warrant Certificate, the Holder thereof must sur render the Warrant Certificate to the Company for exercise, with the reverse side of the Warrant Certificate duly executed, together with any required payment in full of the Exercise Price for each share of Underlying Common Stock to which such Holder is entitled, any such payment of the Exercise Price to be made by check or wire transfer to an account designated by the Company. If a Holder elects to exercise only a portion of the Warrants represented by the Warrant Certificate or Certificates registered in its name, then the remaining portion of such Warrants shall be returned to such Holder in the form of a new Warrant Certificate. Upon surrender of a Warrant Certificate and the payment of the Exercise Price in conformity with the fore going provisions, the Company shall promptly issue to the Holder of such Warrant Certificate share certificates representing the Underlying Common Stock to which such Holder is entitled, registered in the name of such Holder or the name or names of such Affiliates of such Holder as may be directed in writing by such Holder, and shall deliver such share certificates to the Person or Persons entitled to receive the same. The Company 5 6 shall issue such share certificates within five Business Days after the payment of the Exercise Price of the Warrants by such Holder, but such shares shall be deemed issued and outstanding on the date the Warrant is exercised and the Exercise Price is paid to the Company. (c) Exercise by Surrender of Warrant; Exercise with Shares of Common Stock. In the event that the Acquisition (as defined in the Options Agreement) is consummated, in addition to the method of exercise set forth in Section 3(b)(3) above and in lieu of any cash payment required thereunder, each Holder shall have the right at any time and from time to time to exercise the Warrants in full or in part (i) by surrendering its Warrant Certificate in the manner specified in Section 3(b)(3) in exchange for the number of shares of Common Stock equal to the product of (x) the number of shares as to which the Warrants are being exercised multiplied by (y) a fraction, the numerator of which is the Market Price (as defined hereafter) of the Common Stock less the Exercise Price and the denominator of which is such Market Price, or (ii) by surrendering the Warrant Certificate in the manner specified in Section 3(b)(3) above and making any required payment in whole or in part of the Exercise Price for each share of Underlying Common Stock to which such Holder is entitled with shares of Common Stock (valued at the Market Price). As used herein, "Market Price" shall mean the average of the closing prices of the Common Stock sales on all domestic exchanges on which the Common Stock may at the time be 6 7 listed, or, if there shall have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock shall not be so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 3:30 p.m. New York City time, or if on any day the Common Stock shall not be quoted in the NASDAQ System, the average of the high and low bid and asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporation or any similar successor organization, in each such case averaged over a period of 10 consecutive Business Days immediately prior to through 20 Business Days immediately following the Acquisition (as defined in the Options Agreement); provided that if the Common Stock is listed on any domestic exchange the term "Business Days" as used in this sentence shall mean business days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic exchange or quoted in the NASDAQ System or the domestic over-the-counter market, the Market Price shall be deemed to be the fair market value thereof as of the date of exercise, determined by an independent appraiser selected by the Company and acceptable to the Holders. 4. Adjustments. The Exercise Price shall be subject to adjustment as follows: (a) In the event the Company shall issue additional shares of Common Stock (or securities convertible into 7 8 or exchangeable for Common Stock) in a stock dividend, stock distribution or subdivision paid with respect to Common Stock, or declare any dividend or other distribution payable with additional shares of Common Stock (or securities convertible into or exchangeable for Common Stock) with respect to Common Stock or effect a split or subdivision of the outstanding shares of Common Stock, the Exercise Price shall, concurrently with the effectiveness of such stock dividend, stock distribution or subdivision, or the earlier declaration thereof, be proportionately decreased. (b) In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Exercise Price shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. (c) In the event of any consolidation or merger of the Company with or into another corporation or the conveyance of all or substantially all of the assets of the Company to another corporation or entity, the Warrants shall thereafter be exercisable for the number of shares of capital stock or other securities or property to which a holder of the number of shares of Common Stock deliverable upon conversion hereof would have been entitled upon such consolidation, merger or conveyance; and, in any such case, appropriate adjustment shall be made in the application of the provisions herein set forth with respect to the rights and interests of each Holder thereafter, to the end 8 9 that the provisions set forth herein (including provisions with respect to adjustments in the Exercise Price) shall thereafter be applicable, as nearly as may be practicable, in relation to any shares of stock or other property thereafter deliverable upon the exercise of Warrants. At the request of a Holder, the resulting or surviving entity in any such consolidation or merger, if other than the Company, shall acknowledge in writing such Holder's rights hereunder. 5. Loss or Mutilation. Upon receipt by the Company of evidence satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Warrant Certificate and of indemnity satisfactory to it, and (in the case of mutilation) upon surrender and cancellation thereof, then, in the absence of notice to the Company that the Warrants represented thereby have been acquired by a bona fide purchaser, the Company shall deliver to the Holder of such Warrant Certificate, in exchange for or in lieu of the lost, stolen, destroyed or mutilated Warrant Certificate, a new Warrant Certificate of the same tenor and for a like aggregate number of Warrants. Upon the issuance of any new Warrant Certificate under this Section 5, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and other expenses in connection herewith. Every new Warrant Certificate executed and delivered pursuant to this Section 5 in lieu of any lost, stolen or destroyed Warrant Certificate shall constitute a contractual obligation of the Company, whether or 9 10 not the allegedly lost, stolen or destroyed Warrant Certificate shall be at any time enforceable by anyone, and shall be entitled to the benefit of this Agreement equally and proportionately with any and all other Warrant Certificates duly executed and delivered hereunder. The provisions of this Section 5 are exclusive and shall preclude (to the extent lawful) all other rights or remedies with respect to the replacement of mutilated, lost, stolen, or destroyed Warrant Certificates. 6. Reservation and Authorization of Common Stock. The Company shall, at all times until the Warrants have been exercised or have expired, reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as is sufficient for the purpose of permitting the exercise in full of all outstanding Warrants. 7. Limitations on Transfer; Warrant Transfer Books. The Warrants may be sold, transferred, pledged, assigned, hypothecated or otherwise disposed of (collectively, "transferred") only to Affiliates of a Holder. The Company shall cause to be kept at the principal executive office of the Company a register in which, subject to such reasonable regulations as it may prescribe, the Company shall provide the registration of Warrant Certificates and transfers or exchanges of Warrant Certificates as herein provided. The Holder of a Warrant Certificate, by its acceptance thereof, covenants and agrees that the Warrants are being acquired, and the Underlying Common Stock to be purchased upon 10 11 the exercise of this Warrant will be acquired, as an investment and not with a view to the distribution thereof and will not be sold or transferred except in accordance with the applicable provisions of the Securities Act of 1933, as amended (the "Act") and the rules and regulations promulgated thereunder, and that neither this Warrant nor any of the Underlying Common Stock may be offered or sold except (i) pursuant to an effective registration statement under the Act, (ii) to the extent applicable, pursuant to Rule 144 under the Act (or any similar rule under the Act relating to the disposition of securities), or (iii) pursuant to an exemption from registration under the Act. Upon exercise of any Warrant, the Holder thereof shall deliver to the Company a Certificate of Representation as set forth in the Options Agreement. The Warrant Certificates and, upon exercise of the Warrants, in part or in whole, certificates representing the Underlying Common Stock shall bear a legend substantially similar to the following: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"), and may not be offered or sold except (i) pursuant to an effective registration statement under the Act, (ii) to the extent applicable, pursuant to Rule 144 under the Act (or any similar rule under the Act relating to the disposition of securities), or (iii) pursuant to an exemption from registration under the Act." At the option of a Holder, Warrant Certificates may be exchanged at such office upon payment of the charges hereinafter 11 12 provided. Whenever any Warrant Certificates are so surrendered for exchange, the Company shall execute and deliver the Warrant Certificates that the Holder thereof is entitled to receive. All Warrant Certificates issued upon any registration of transfer or exchange of Warrant Certificates shall be the valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Warrant Certificates surrendered for such registration of transfer or exchange. Every Warrant Certificate surrendered for registration of transfer or exchange shall (if so required by the Company) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company duly executed by the Holder thereof. No service charge shall be made for any registration of transfer or exchange of Warrant Certificates. The Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer of Warrant Certificates. 8. No Voting or Dividend Rights. Prior to the exercise of the Warrants, neither Holder, as a Holder of Warrant Certificates, shall be entitled to any rights of a shareholder of the Company, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive right, but each Holder of Warrant Certificates shall receive all notices sent to shareholders of the Company, 12 13 including any notice of meetings of shareholders, and shall have the right to attend or observe such meetings. 9. Termination. Notwithstanding anything in this Agreement to the contrary, if a Holder materially breaches its obligations under the Options Agreement with respect to the Call Option (as such term is defined in the Option Agreement), this Agreement shall terminate upon such breach with respect to the breaching Holder. In the event of termination as provided herein, this Agreement, including all unexercised Warrants issued to such breaching Holder, shall become void with respect to such Holder. Nothing in this Section 9 shall be construed to limit any right or remedy of the Company in the event of such breach. 10. Notices. Any notice, demand or delivery authorized by this Agreement shall be in writing and shall be sufficiently given or made upon receipt thereof, if made by personal delivery or facsimile transmission (with confirmed receipt thereof), or four Business Days after mailed, if sent by first-class mail, postage prepaid, addressed to the Investor Representative or the Company, as the case may be, at their respective addresses below, or such other address as shall have been furnished in accordance with this Section 10 to the party giving or making such notice, demand or delivery: (a) If to the Company, to it at: Phoenix Information Systems Corp. 100 Second Avenue South, Suite 100 St. Petersburg, Florida 33701 Attention: Robert P. Gordon, Chairman Facsimile: 813-821-7565 13 14 (b) If to the Holder, to the Investor Representative at: ------------------------ c/o The Chatterjee Group 888 Seventh Avenue, Suite 3000 New York, New York 10106 Attention: Mr. James Peet Facsimile: 212-489-2005 With a copy to: Peter A. Hurwitz, Esq. [With a copy to: Soros Fund Management 888 Seventh Avenue, Suite 3300 New York, New York 10106 Attention: Sean A. Warren, Esq. Facsimile: 212-489-2005] 11. Applicable Law. This Agreement and each Warrant Certificate issued hereunder shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to the conflicts of law principles thereof. The Company and each Holder hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement and the transactions contemplated hereby. The Company and each Holder irrevocably waive, to the fullest extent permitted by law, any objection which they may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 14 15 12. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. Neither Holder may assign any of its rights hereunder separate from a transfer of the Warrants in accordance with Section 7 hereof. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. 13. Counterparts. This Agreement may be executed by one or more of the parties to this Agreement in any number of separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 14. Captions and Headings. The captions and headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 15. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and each Holder. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Holder, each future holder of the Warrants and the Company. 15 16 16. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provisions shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. PHOENIX INFORMATION SYSTEMS CORP. By ------------------------------- Name: Title: S-C PHOENIX HOLDINGS, L.L.C. By ------------------------------- Name: Title: QUANTUM INDUSTRIAL PARTNERS LDC By ------------------------------- Name: Title: 16 17 EXHIBIT A FORM OF WARRANT CERTIFICATE THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT. THIS WARRANT CERTIFICATE AND THE WARRANTS REPRESENTED HEREBY ARE TRANSFERABLE ONLY IN ACCORDANCE WITH THE PROVISIONS SET FORTH IN THE WARRANT AGREEMENT REFERRED TO BELOW. WARRANTS TO PURCHASE COMMON STOCK OF PHOENIX INFORMATION SYSTEMS CORP. No.___ 2,000,000 Warrants This certifies that _________________________ is the owner of the number of Warrants set forth above, each of which represents the right to purchase from PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation (the "Company"), the number of shares of Common Stock, par value $0.01 per share, of the Company ("Common Stock") determined in accordance with the Warrant Agreement referred to below at the purchase price set forth in the Warrant Agreement (the "Exercise Price"), upon surrender hereof at the office of the Company at 100 Second Avenue South, Suite 1100, St. Petersburg, Florida 33701 with the Exercise Subscription Form on the reverse hereof duly executed and with payment in full (by bank check or wire transfer to an account designated by the Company) of the purchase price for the shares as to which the Warrant(s) 18 represented by this Warrant Certificate are exercised, or by surrender of this Warrant Certificate in lieu of cash payment, all subject to the terms and conditions hereof and of the Warrant Agreement referred to below. The Warrants will expire at 5 p.m. New York City time on the Expiration Date. This Warrant Certificate is issued under and in accordance with a Warrant Agreement, dated as of November ____, 1995 (the "Warrant Agreement"), among the Company and S-C Phoenix Holdings, L.L.C. and Quantum Industrial Partners LDC, is subject to the terms and provisions contained therein, to all of which terms and provisions the holder of this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Company and the holders of the Warrants. Capitalized defined terms used herein have the same meanings as in the Warrant Agreement. Copies of the Warrant Agreement are on file at the office of the Company and may be obtained by writing to the Company at the following address: 100 Second Avenue South Suite 1100 St. Petersburg, Florida 33701 The number of shares of the Common Stock of the Company purchasable upon the exercise of each Warrant and the price per share are set forth in the Warrant Agreement. A-2 19 All shares of Common Stock issuable by the Company upon the exercise of Warrants and the payment of the Exercise Price therefor shall be validly issued, fully paid and nonassessable. The Company shall not be required, however, to pay any tax, withholding or other charge imposed in connection with the issuance of any shares of Common Stock upon the exercise of Warrants, and, in such case, the Company shall not be required to issue or deliver any stock certificate until such tax, withholding or other charge has been paid or it has been established to the Company's satisfaction that no tax, withholding or other charge is due. This Warrant Certificate and all rights hereunder are transferable, subject to the terms of the Warrant Agreement, by the registered holder hereof, in whole or in part, upon surrender of this Warrant Certificate duly endorsed, or accompanied by a written instrument of transfer in form satisfactory to the Company duly executed by the registered holder and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer. Upon any partial transfer, the Company will issue and deliver to such holder a new Warrant Certificate or Certificates with respect to any portion not so transferred. This Warrant Certificate shall be void and all rights represented hereby shall cease on the Expiration Date. Dated:___________, 19__ PHOENIX INFORMATION SYSTEMS CORP. A-3 20 By --------------------------- Name: Title: A-4 21 FORM OF REVERSE OF WARRANT CERTIFICATE EXERCISE SUBSCRIPTION FORM (To be executed only upon exercise of Warrant) To: Phoenix Information Systems Corp. The undersigned irrevocably exercises ____________ of the Warrants evidenced by this Warrant Certificate for the purchase of shares of Common Stock, par value $0.01 per share, of PHOENIX INFORMATION SYSTEMS CORP. and has arranged to make payment of $___________ (such payment being made by bank check or wire transfer to the account designated by Phoenix Information Systems Corp., and constituting the Exercise Price (as defined in the Warrant Agreement) for the shares as to which the Warrants evidenced by this Warrant Certificate are exercised) or has surrendered this Warrant Certificate in lieu of cash payment in accordance with the terms of Section 3(c) of the Warrant Agreement, all on the terms and conditions specified in this Warrant Certificate and the Warrant Agreement herein referred to. The undersigned has delivered to the Company the Certificate of Representations as set forth in the Warrant Agreement. The undersigned hereby irrevocably surrenders this Warrant Certificate and all right, title and interest therein to Phoenix Information Systems Corp. and directs that the shares of Common Stock deliverable upon the 22 exercise of said Warrants be registered or placed in the name and at the address specified below and delivered thereto. Date:_________, 19__. 1/ ---------------------------- Signature of Owner ------------------------------ (Street Address) ------------------------------ (City) (State) (Zip Code) Securities and/or check to be issued to: Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: - ------------------------ 1/ The signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. 3 23 FORM OF ASSIGNMENT For VALUE RECEIVED, the undersigned registered holder of this Warrant Certificate hereby sells, assigns and transfers unto the Assignee(s) named below (including the undersigned with respect to any Warrants constituting a part of the Warrants evidenced by this Warrant Certificate not being assigned hereby) all of the right of the undersigned under this Warrant Certificate, with respect to the number of Warrants set forth below:
Social Security Names of or other Identifying Number of Assignees Address Number of Assignee(s) Warrants - --------- ------- --------------------- --------
and does hereby irrevocably constitute and appoint _______________ the undersigned's attorney to make such transfer on the books of Phoenix Information Systems Corp. maintained for the purpose, with full power of substitution. Dated: ___________, 19__ ------------------------------ - ------------------------- - ------------- (1) The signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. 4 EX-99.X 4 WARRANT AGREEMENT 1 EXHIBIT X WARRANT AGREEMENT WARRANT AGREEMENT, dated as of December 7, 1995 (the "Agreement"), by and among PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation (the "Company"), S-C PHOENIX HOLDINGS, L.L.C., a limited liability company organized under the laws of Delaware ("S-C") and QUANTUM INDUSTRIAL PARTNERS LDC, a limited duration company organized under the laws of the Cayman Islands ("Quantum," each of S-C and Quantum, together with the successors and permitted assigns of each, a "Holder"). WHEREAS, the Company proposes to issue and deliver its warrant certificates ("Warrant Certificates") evidencing 2,000,000 warrants (the "Warrants") each to purchase one newly issued share of common stock, par value $0.01 per share, of the Company ("Common Stock") in connection with that certain Options Agreement, dated December 7, 1995, by and among the Company, S-C and Quantum (the "Options Agreement"). NOW THEREFORE, in consideration of the foregoing and for the purpose of defining the terms and provisions of the Warrants and the respective rights and obligations thereunder of the Company and each Holder, the Company and each Holder agree as follows: 1. Certain Definitions. The following terms, as used in this Agreement, have the following meanings: 2 (a) "Affiliate" means, with respect to S-C and Quantum, (A)(a) any Person controlling, controlled by or under common control with S-C or Quantum and (b) if (1) controlling S-C or Quantum, such Person has a forty percent (40%) or more voting and beneficial ownership interest in S-C or Quantum, (2) controlled by S-C or Quantum has a forty percent (40%) or more voting and beneficial ownership interest in such Person and (3) under common control with S-C or Quantum, the Person(s) having such common control have forty percent (40%) or more voting and beneficial ownership interest in S-C or Quantum and such Person, and (B) any Person for which George Soros d/b/a Soros Fund Management or Chatterjee Fund Management Co. LP, a Delaware limited partnership, is acting as investment manager or investment adviser, in each case with investment discretion. For purposes of this definition, the term "control," when used with respect to any Person, shall include the power to exercise discretion over the investments of such Person, and the terms "controlling" and "controlled" have corresponding meanings. (b) "Business Day" means any day other than a Saturday, Sunday or day on which banks in New York City are closed for general business. (c) "Common Stock" has the meaning set forth in the preamble. (d) "Exercise Period" means the period beginning on the second anniversary of the Acquisition Date and ending at 2 3 5 p.m. New York City time on the fifth anniversary of the Acquisition Date. (e) "Exercise Price" means an amount per share equal to eighty-five percent (85%) of the Market Price (as defined hereafter). As used herein, "Market Price" shall mean the average of the closing prices of the Common Stock sales on all domestic exchanges on which the Common Stock may at the time be listed, or, if there shall have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock shall not be so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 3:30 p.m. New York City time, or if on any day the Common Stock shall not be quoted in the NASDAQ System, the average of the high and low bid and asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporation or any similar successor organization, in each such case averaged over the period of 10 consecutive Business Days immediately prior to through 20 Business Days immediately following the Acquisition (as defined in the Options Agreement); provided that if the Common Stock is listed on any domestic exchange the term "Business Days" as used in this sentence shall mean business days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic exchange or quoted in the NASDAQ System or the domestic over-the-counter market, the Market Price shall 3 4 be deemed to be the fair market value thereof as of the date of exercise, determined by an independent appraiser selected by the Company and acceptable to each Holder. (f) "Expiration Date" for the Warrants means the last day of the Exercise Period. (g) "Holder" has the meaning set forth in the preamble. (h) "Investor Representative" shall be [S-C Phoenix Holdings, L.L.C., a Delaware limited liability company, or its successor in interest, or the assigned representative of such Person (it being agreed that at all times there shall be no more than one Investor Representative)]. (i) "Person" means any individual, corporation, limited liability company, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. (j) "Underlying Common Stock" means the shares of Common Stock purchasable by each Holder upon the exercise of the Warrants. (k) "Warrants" has the meaning set forth in the preamble. (l) "Warrant Certificates" means the certificates evidencing the Warrants. 4 5 2. Issue of Warrants. The Warrant Certificates shall be in registered form only and substantially in the form attached hereto as Exhibit A, shall be dated the date on which signed by an authorized signatory of the Company and may have such legends and endorsements typed, stamped or printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement and the Options Agreement. Warrant Certificates evidencing 2,000,000 Warrants may be executed by any authorized officer of the Company. Warrant Certificates evidencing all 2,000,000 Warrants shall be delivered in the names of the Holders to the Investor Representative at the closing of the Acquisition (as defined in the Options Agreement). 3. Exercise Price; Exercise of Warrants. (a) Exercise Price. Each Warrant shall entitle the Holder, subject to the provisions of this Agreement, to purchase one share of Common Stock at a purchase price per share equal to the Exercise Price. (b) Exercise of Warrants Generally. (1) Exercise During Exercise Period. The aggregate number of Warrants that may be exercised at any time during the Exercise Period shall be 2,000,000. All Warrants not exercised during the Exercise Period shall expire at 5 p.m. New York City time on the Expiration Date. (2) Liquidation Event. If the Company is liquidated in accordance with the provisions of its Certificate 5 6 of Incorporation, then the Warrants shall be deemed to have been exercised. (3) Method of Exercise; Payment of Exercise Price. In order to exercise any or all of the Warrants represented by a Warrant Certificate, the Holder thereof must surrender the Warrant Certificate to the Company for exercise, with the reverse side of the Warrant Certificate duly executed, together with any required payment in full of the Exercise Price for each share of Underlying Common Stock to which such Holder is entitled, any such payment of the Exercise Price to be made by check or wire transfer to an account designated by the Company. If a Holder elects to exercise only a portion of the Warrants represented by the Warrant Certificate or Certificates registered in its name, then the remaining portion of such Warrants shall be returned to such Holder in the form of a new Warrant Certificate. Upon surrender of a Warrant Certificate and the payment of the Exercise Price in conformity with the foregoing provisions, the Company shall promptly issue to the Holder of such Warrant Certificate share certificates representing the Underlying Common Stock to which such Holder is entitled, registered in the name of such Holder or the name or names of such Affiliates of such Holder as may be directed in writing by such Holder, and shall deliver such share certificates to the Person or Persons entitled to receive the same. The Company shall issue such share certificates within five Business Days after the payment of the Exercise Price of the Warrants by such 6 7 Holder, but such shares shall be deemed issued and outstanding on the date the Warrant is exercised and the Exercise Price is paid to the Company. (c) Exercise by Surrender of Warrant; Exercise with Shares of Common Stock. In addition to the method of exercise set forth in Section 3(b)(3) above and in lieu of any cash payment required thereunder, each Holder shall have the right at any time and from time to time to exercise the Warrants in full or in part (i) by surrendering its Warrant Certificate in the manner specified in Section 3(b)(3) in exchange for the number of shares of Common Stock equal to the product of (x) the number of shares as to which the Warrants are being exercised multiplied by (y) a fraction, the numerator of which is the Market Price (as defined hereafter) of the Common Stock less the Exercise Price and the denominator of which is such Market Price, or (ii) by surrendering the Warrant Certificate in the manner specified in Section 3(b)(3) above and making any required payment in whole or in part of the Exercise Price for each share of Underlying Common Stock to which such Holder is entitled with shares of Common Stock (valued at the Market Price). 4. Adjustments. The Exercise Price shall be subject to adjustment as follows: (a) In the event the Company shall issue additional shares of Common Stock (or securities convertible into or exchangeable for Common Stock) in a stock dividend, stock distribution or subdivision paid with respect to Common Stock, 7 8 or declare any dividend or other distribution payable with additional shares of Common Stock (or securities convertible into or exchangeable for Common Stock) with respect to Common Stock or effect a split or subdivision of the outstanding shares of Common Stock, the Exercise Price shall, concurrently with the effectiveness of such stock dividend, stock distribution or subdivision, or the earlier declaration thereof, be proportionately decreased. (b) In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Exercise Price shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. (c) In the event of any consolidation or merger of the Company with or into another corporation or the conveyance of all or substantially all of the assets of the Company to another corporation or entity, the Warrants shall thereafter be exercisable for the number of shares of capital stock or other securities or property to which a holder of the number of shares of Common Stock deliverable upon conversion hereof would have been entitled upon such consolidation, merger or conveyance; and, in any such case, appropriate adjustment shall be made in the application of the provisions herein set forth with respect to the rights and interests of each Holder thereafter, to the end that the provisions set forth herein (including provisions with respect to adjustments in the Exercise Price) shall thereafter 8 9 be applicable, as nearly as may be practicable, in relation to any shares of stock or other property thereafter deliverable upon the exercise of Warrants. At the request of a Holder, the resulting or surviving entity in any such consolidation or merger, if other than the Company, shall acknowledge in writing such Holder's rights hereunder. 5. Loss or Mutilation. Upon receipt by the Company of evidence satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Warrant Certificate and of indemnity satisfactory to it, and (in the case of mutilation) upon surrender and cancellation thereof, then, in the absence of notice to the Company that the Warrants represented thereby have been acquired by a bona fide purchaser, the Company shall deliver to the Holder of such Warrant Certificate, in exchange for or in lieu of the lost, stolen, destroyed or mutilated Warrant Certificate, a new Warrant Certificate of the same tenor and for a like aggregate number of Warrants. Upon the issuance of any new Warrant Certificate under this Section 5, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and other expenses in connection herewith. Every new Warrant Certificate executed and delivered pursuant to this Section 5 in lieu of any lost, stolen or destroyed Warrant Certificate shall constitute a contractual obligation of the Company, whether or not the allegedly lost, stolen or destroyed Warrant Certificate shall be at any time enforceable by anyone, and shall be entitled 9 10 to the benefit of this Agreement equally and proportionately with any and all other Warrant Certificates duly executed and delivered hereunder. The provisions of this Section 5 are exclusive and shall preclude (to the extent lawful) all other rights or remedies with respect to the replacement of mutilated, lost, stolen, or destroyed Warrant Certificates. 6. Reservation and Authorization of Common Stock. The Company shall, at all times until the Warrants have been exercised or have expired, reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as is sufficient for the purpose of permitting the exercise in full of all outstanding Warrants. 7. Limitations on Transfer; Warrant Transfer Books. The Warrants may be sold, transferred, pledged, assigned, hypothecated or otherwise disposed of (collectively, "transferred") only to Affiliates of a Holders. The Company shall cause to be kept at the principal executive office of the Company a register in which, subject to such reasonable regulations as it may prescribe, the Company shall provide the registration of Warrant Certificates and transfers or exchanges of Warrant Certificates as herein provided. The Holder of a Warrant Certificate, by its acceptance thereof, covenants and agrees that the Warrants are being acquired, and the Underlying Common Stock to be purchased upon the exercise of this Warrant will be acquired, as an investment and not with a view to the distribution thereof and will not be 10 11 sold or transferred except in accordance with the applicable provisions of the Securities Act of 1933, as amended (the "Act") and the rules and regulations promulgated thereunder, and that neither this Warrant nor any of the Underlying Common Stock may be offered or sold except (i) pursuant to an effective registration statement under the Act, (ii) to the extent applicable, pursuant to Rule 144 under the Act (or any similar rule under the Act relating to the disposition of securities), or (iii) pursuant to an exemption from registration under the Act. Upon exercise of any Warrant, the Holder thereof shall deliver to the Company a Certificate of Representation as set forth in the Options Agreement. The Warrant Certificates and, upon exercise of the Warrants, in part or in whole, certificates representing the Underlying Common Stock shall bear a legend substantially similar to the following: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"), and may not be offered or sold except (i) pursuant to an effective registration statement under the Act, (ii) to the extent applicable, pursuant to Rule 144 under the Act (or any similar rule under the Act relating to the disposition of securities), or (iii) pursuant to an exemption from registration under the Act." At the option of a Holder, Warrant Certificates may be exchanged at such office upon payment of the charges hereinafter provided. Whenever any Warrant Certificates are so surrendered for exchange, the Company shall execute and deliver the Warrant 11 12 Certificates that the Holder thereof is entitled to receive. All Warrant Certificates issued upon any registration of transfer or exchange of Warrant Certificates shall be the valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Warrant Certificates surrendered for such registration of transfer or exchange. Every Warrant Certificate surrendered for registration of transfer or exchange shall (if so required by the Company) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company duly executed by the Holder thereof. No service charge shall be made for any registration of transfer or exchange of Warrant Certificates. The Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer of Warrant Certificates. 8. No Voting or Dividend Rights. Prior to the exercise of the Warrants, neither Holder, as a Holder of Warrant Certificates, shall be entitled to any rights of a shareholder of the Company, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive right, but each Holder of Warrant Certificates shall receive all notices sent to shareholders of the Company, including any notice of meetings of shareholders, and shall have the right to attend or observe such meetings. 12 13 9. Termination. Notwithstanding anything in this Agreement to the contrary, if a Holder materially breaches its obligations under the Options Agreement with respect to the Call Option (as such term is defined in the Option Agreement), this Agreement shall terminate upon such breach with respect to the breaching Holder. In the event of termination as provided herein, this Agreement, including all unexercised Warrants issued to such breaching Holder, shall become void with respect to such Holder. Nothing in this Section 9 shall be construed to limit any right or remedy of the Company in the event of such breach. 10. Notices. Any notice, demand or delivery authorized by this Agreement shall be in writing and shall be sufficiently given or made upon receipt thereof, if made by personal delivery or facsimile transmission (with confirmed receipt thereof), or four Business Days after mailed, if sent by first-class mail, postage prepaid, addressed to the Investor Representative or the Company, as the case may be, at their respective addresses below, or such other address as shall have been furnished in accordance with this Section 10 to the party giving or making such notice, demand or delivery: (a) If to the Company, to it at: Phoenix Information Systems Corp. 100 Second Avenue South, Suite 100 St. Petersburg, Florida 33701 Attention: Robert P. Gordon, Chairman Facsimile: 813-821-7565 13 14 (b) If to the Holder, to the Investor Representative at: _________________________________ c/o The Chatterjee Group 888 Seventh Avenue, Suite 3000 New York, New York 10106 Attention: Mr. James Peet Facsimile: 212-489-2005 With a copy to: Peter A. Hurwitz, Esq. [With a Copy to: Soros Fund Management 888 Seventh Avenue, Suite 3300 New York, New York 10106 Attention: Sean A. Warren, Esq. Facsimile: 212-489-20056] 11. Applicable Law. This Agreement and each Warrant Certificate issued hereunder shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to the conflicts of law principles thereof. The Company and each Holder hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement and the transactions contemplated hereby. The Company and each Holder irrevocably waive, to the fullest extent permitted by law, any objection which they may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 14 15 12. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. Neither Holder may assign any of its rights hereunder separate from a transfer of the Warrants in accordance with Section 7 hereof. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. 13. Counterparts. This Agreement may be executed by one or more of the parties to this Agreement in any number of separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 14. Captions and Headings. The captions and headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 15. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and each Holder. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Holder, each future holder of the Warrants and the Company. 15 16 16. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provisions shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 16 17 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. PHOENIX INFORMATION SYSTEMS CORP. By________________________________ Name: Title: S-C PHOENIX HOLDINGS, L.L.C. By________________________________ Name: Title: QUANTUM INDUSTRIAL PARTNERS LDC By________________________________ Name: Title: 17 18 EXHIBIT A FORM OF WARRANT CERTIFICATE THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT. THIS WARRANT CERTIFICATE AND THE WARRANTS REPRESENTED HEREBY ARE TRANSFERABLE ONLY IN ACCORDANCE WITH THE PROVISIONS SET FORTH IN THE WARRANT AGREEMENT REFERRED TO BELOW. WARRANTS TO PURCHASE COMMON STOCK OF PHOENIX INFORMATION SYSTEMS CORP. No.___ 2,000,000 Warrants This certifies that __________________________ is the owner of the number of Warrants set forth above, each of which represents the right to purchase from PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation (the "Company"), the number of shares of Common Stock, par value $0.01 per share, of the Company ("Common Stock") determined in accordance with the Warrant Agreement referred to below at the purchase price set forth in the Warrant Agreement (the "Exercise Price"), upon surrender hereof at the office of the Company at 100 Second Avenue South, Suite 1100, St. Petersburg, Florida 33701 with the Exercise Subscription Form on the reverse hereof duly executed and with payment in full (by bank check or wire transfer to an account designated by the Company) of the purchase price for the shares as to which 19 the Warrant(s) represented by this Warrant Certificate are exercised, all subject to the terms and conditions hereof and of the Warrant Agreement referred to below. The Warrants will expire at 5:00 p.m. New York City time on the Expiration Date. This Warrant Certificate is issued under and in accordance with a Warrant Agreement, dated as of November __, 1995 (the "Warrant Agreement"), among the Company and S-C Phoenix Holdings, L.L.C. and Quantum Industrial Partners LDC, and is subject to the terms and provisions contained therein, to all of which terms and provisions the holder of this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Company and the holders of the Warrants. Capitalized defined terms used herein have the same meanings as in the Warrant Agreement. Copies of the Warrant Agreement are on file at the office of the Company and may be obtained by writing to the Company at the following address: 100 Second Avenue South Suite 1100 St. Petersburg, Florida 33701 The number of shares of the Common Stock of the Company purchasable upon the exercise of each Warrant and the price per share are set forth in the Warrant Agreement. A-2 20 All shares of Common Stock issuable by the Company upon the exercise of Warrants and the payment of the Exercise Price therefor shall be validly issued, fully paid and nonassessable. The Company shall not be required, however, to pay any tax, withholding or other charge imposed in connection with the issuance of any shares of Common Stock upon the exercise of Warrants, and, in such case, the Company shall not be required to issue or deliver any stock certificate until such tax, withholding or other charge has been paid or it has been established to the Company's satisfaction that no tax, withholding or other charge is due. This Warrant Certificate and all rights hereunder are transferable, subject to the terms of the Warrant Agreement, by the registered holder hereof, in whole or in part, upon surrender of this Warrant Certificate duly endorsed, or accompanied by a written instrument of transfer in form satisfactory to the Company duly executed by the registered holder and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer. Upon any partial transfer, the Company will issue and deliver to such holder a new Warrant Certificate or Certificates with respect to any portion not so transferred. This Warrant Certificate shall be void and all rights represented hereby shall cease on the Expiration Date. Dated:___________, 19__ A-3 21 PHOENIX INFORMATION SYSTEMS CORP. By___________________________ Name: Title: A-4 22 FORM OF REVERSE OF WARRANT CERTIFICATE EXERCISE SUBSCRIPTION FORM (To be executed only upon exercise of Warrant) To: Phoenix Information Systems Corp. The undersigned irrevocably exercises ____________ of the Warrants evidenced by this Warrant Certificate for the purchase of shares of Common Stock, par value $0.01 per share, of PHOENIX INFORMATION SYSTEMS CORP. and has arranged to make payment of $___________ (such payment being made by bank check or wire transfer to the account designated by Phoenix Information Systems Corp.), all at the Exercise Price (as defined in the Warrant Agreement) and on the terms and conditions specified in this Warrant Certificate and the Warrant Agreement herein referred to. The undersigned has delivered to the Company the Certificate of Representations as set forth in the Warrant Agreement. The undersigned hereby irrevocably surrenders this Warrant Certificate and all right, title and interest therein to Phoenix Information Systems Corp. and directs that the shares of Common Stock deliverable 23 upon the exercise of said Warrants be registered or placed in the name and at the address specified below and delivered thereto. Date:_________, 19__. ____________________________1/ Signature of Owner ______________________________ (Street Address) ______________________________ (City) (State) (Zip Code) ________________________ 1/ The signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. 3 24 Securities and/or check to be issued to: Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: 4 25 FORM OF ASSIGNMENT For VALUE RECEIVED, the undersigned registered holder of this Warrant Certificate hereby sells, assigns and transfers unto the Assignee(s) named below (including the undersigned with respect to any Warrants constituting a part of the Warrants evidenced by this Warrant Certificate not being assigned hereby) all of the right of the undersigned under this Warrant Certificate, with respect to the number of Warrants set forth below:
Social Security Names of or other Identifying Number of Assignees Address Number of Assignee(s) Warrants - --------- ------- --------------------- --------
and does hereby irrevocably constitute and appoint _______________ the undersigned's attorney to make such transfer on the books of Phoenix Information Systems Corp. maintained for the purpose, with full power of substitution. Dated: ___________, 19__ ______________________________ _________________________ _____________ (1) The signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. 5 EX-99.Y 5 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT Y REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT dated as of December 7, 1995 (the "Agreement") by and among PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation (the "Company"), and S-C PHOENIX HOLDING, L.L.C., a Delaware limited liability company ("S-C") and QUANTUM INDUSTRIAL PARTNERS, LDC, a Cayman Islands limited duration company ("Quantum") (each of S-C and Quantum, together with its successors and permitted assigns, a "Rights Holder" and, collectively, the "Rights Holders"). This Agreement is made pursuant to (a) the Options Agreement dated the date hereof between the Company and the Rights Holders relating to the grant by the Rights Holders to Phoenix of an option (the "Call Option") to acquire a fifty percent (50%) interest in American Aviation Limited ("AA") and the grant by Phoenix to the Rights Holders an option to sell to Phoenix up to one hundred percent of their interest in AA and (b) the Warrant Agreements dated as of the date hereof between the Company and the Rights Holders relating to the purchase by the Rights Holder of warrants (the "Warrants") to purchase 4,000,000 shares of common stock of the Company ("Common Shares"). In order to induce the Rights Holders to grant the Company the Call Option and to purchase the Warrants, the Company has agreed to provide registration rights with respect to the Common Shares issuable upon exercise of the Warrants, as set forth herein. 2 2 Accordingly, the parties hereby agree as follows: 1. Definitions. For the purposes of this Agreement: (a) The terms, "register," "registered" and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act of 1933, as amended (the "1933 Act"), and the declaration or ordering of effectiveness of such registration statement or document; and (b) The term "Registrable Securities" means (i) the Common Shares issued to either Rights Holder upon exercise of the Warrants and (ii) any other Common Shares issued by the Company that are acquired by a Rights Holder by purchase or transfer or issued to a Rights Holder by the Company upon the conversion or exercise of any warrant, right or other security, whether purchased, acquired by transfer or issued as a dividend or other distribution with respect to, in exchange for or in replacement of any Common Shares or other securities of the Company. 2. Registration Rights. 2.1 Registration upon Demand. If, for any reason, any portion of the Registrable Securities has not been included in any registration of the Company's shares of common stock effected pursuant to that certain Registration Rights Agreement (the "Prior Rights Agreement") dated as of December 9, 1994 by and between the Company and S-C Phoenix 3 3 Partners, and if, for any reason, the unregistered portion of the Registrable Securities of one or both Rights Holders is not eligible for registration pursuant to the terms of the Prior Rights Agreement or the registration rights granted by the Company under the Prior Rights Agreement are otherwise unavailable to a Rights Holder, then, at any time after the date hereof, upon the written request of S-C or Quantum or their respective successors in interest, or such persons' or their designated representative (the "Investor Representative") (it being agreed that at all times there shall be no more than one Investor Representative for the Rights Holders) requesting that the Company effect the registration under the 1933 Act of all or part of the Registrable Securities (provided that any such part shall be not less than fifteen (15%) percent of the Common Shares issued to a Rights Holder upon exercise of the Warrants), which request shall specify the intended method of distribution thereof, the Company shall use its best efforts to so register (a "Demand Registration"), as expeditiously as may be practicable, the Registrable Securities that the Rights Holders have requested the Company to register; provided, however, that the Rights Holders, together, shall have the right to make only one such Demand Registration hereunder. The parties will cooperate to coordinate requests made under this Agreement for registration of the Registrable Securities with registrations effected under the Prior Rights Agreement. 4 4 2.2 "Piggy-back" Registrations. If, at any time after the date hereof, the Company proposes to register any securities under the 1933 Act in connection with any offering of its securities, whether or not for its own account, the Company shall furnish prompt written notice to each Rights Holder of the Company's intention to effect such registration and the intended method of distribution in connection therewith. Upon the written request of a Rights Holder, made to the Company within 30 days after the receipt of such notice, the Company shall include in such registration the requested number of such Rights Holder's Registrable Securities (a "Piggy-back Registration"). 2.3 Obligations of the Company. Whenever the Company is required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the Securities and Exchange Commission (the "SEC") a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and keep such registration statement effective for up to 60 days; (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions 5 5 of applicable law with respect to the disposition of all securities covered by such registration statement; (c) Except in connection with an underwritten offering, furnish to each Rights Holder such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of applicable law, and such other documents as it may reasonably request in order to facilitate the disposition of Registrable Securities owned by each Rights Holder; (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities laws of such states as shall be reasonably requested by a Rights Holder or the underwriters, in the case of an underwritten offering; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such jurisdictions; (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. The managing underwriter shall be selected by either or, if applicable, both Rights Holders in the case of a demand of registration, which managing underwriter shall be reasonably satisfactory to the Company. Each Rights Holder also shall 6 6 enter into and perform its obligations under such an agreement; and (f) Notify each Rights Holder, at any time when a prospectus relating thereto is required to be delivered under applicable law, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. 2.4 Furnish Information. It shall be a condition precedent to the obligation of the Company to take any action pursuant to this Section 2 with respect to a Rights Holder that such Rights Holder shall furnish to the Company such information regarding such Rights Holder, the Registrable Securities held by it and the intended method of disposition of such Registrable Securities as shall be required to effect the registration of the Registrable Securities. 2.5 Expenses of Registration. With respect to a Demand Registration or Piggy-back Registration, the Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations made pursuant to Section 2.1 or Section 2.2, as the case may be, including (without limitation) all registration, filing 7 7 and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company and each Rights Holder, but excluding underwriting discounts and commissions relating to Registrable Securities. 2.6 Underwriting Requirements. In connection with any offering involving an underwriting of Common Shares in which the Rights Holder has "piggy-back" rights, the Company shall not be required under Section 2.3 to include any of the securities of a Rights Holder in the registration of the Securities to be included in such underwriting unless such Rights Holder accepts the terms of the underwriting as agreed upon between the Company and the underwriters selected by it, and then only in such quantity as the underwriters determine in their reasonable discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities requested by a Rights Holder and any other shareholder to be included in such offering, exceeds the number of securities that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only such number of Registrable Securities as, together with the securities, if any, being registered by all other shareholders, including Robert P. Gordon ("Gordon") and the other holders of registration rights with respect to securities of the Company on the date hereof (the "Other Rights Holders"), the underwriters determine in their 8 8 reasonable discretion will not jeopardize the success of the offering. The securities of all other shareholders (other than Gordon and the Other Rights Holders) shall be reduced (or eliminated) in order to satisfy the reduction required by the underwriters before any Registrable Securities of a Rights Holder are reduced (or eliminated). For so long as a Rights Holder has rights pursuant to Sections 2.1 and 2.2 hereof, if the Company grants to any person any rights to have their securities included in any registration statement to be filed by the Company, such rights shall be subordinate to the rights granted to each Rights Holder herein. 2.7 Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 2: (a) To the extent permitted by law, the Company shall indemnify and hold harmless each Rights Holder, any underwriter (as defined in the 1933 Act or other applicable law) for a Rights Holder, each person, if any, who controls a Rights Holder or underwriter within the meaning of the 1933 Act or the United States Securities Exchange Act of 1934, as amended (the "1934 Act") or other applicable law, and any officer, director or agent thereof, against any and all losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject under the 1933 Act or other applicable law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon 9 9 any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading or (iii) any violation or alleged violation by the Company of the 1933 Act or other applicable law, or any rule or regulation promulgated under the 1933 Act or other applicable law; and the Company shall pay to each Rights Holder, underwriter or controlling person any reasonable legal or other expenses incurred by it in connection with investigating or defending any such loss, claim, damage, liability or action; provided that the indemnity agreement contained in this Section 2.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon (y) a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by the applicable Rights Holder or such underwriter or 10 10 controlling person or (z) the use by any party, after receipt of a notice from the Company pursuant to Section 2.3(f) above, of the prospectus referred to in such notice. (b) To the extent permitted by law, each Rights Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the 1933 Act or other applicable law, any underwriter and any controlling person of any such underwriter, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject under the 1933 Act or other applicable law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon (y) any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Rights Holder expressly for use in connection with such registration, or (z) the use by such Rights Holder, after receipt of a notice from the Company pursuant to Section 2.3(f) above, of the prospectus referred to in such notice; and such Rights Holder shall pay any reasonable legal or other expenses incurred by any person to be indemnified pursuant to this Section 2.7(b) in connection with investigating or defending any such loss, claim, damage, liability or action; provided that the indemnity agreement contained in this Section 2.7(b) shall 11 11 not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Rights Holders, which consent shall not be unreasonably withheld; and provided, further, that in no event shall any indemnity by a Rights Holder under this Section 2.7(b) exceed the proceeds from the offering received by such Rights Holder. (c) Promptly after receipt by an indemnified party under this Section 2.7 of notice of the commencement of any action (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.7, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in and, to the extent the indemnifying party so desires, to assume the defense thereof; provided that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of 12 12 the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.7, but the omission so to deliver written notice to the indemnifying party shall not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.7. (d) The obligations of the Company and the Rights Holders under this Section 2.7 shall survive the completion of any offering of Registrable Securities under a registration statement pursuant to this Section 2 or otherwise. 2.8 "Market Stand-off" Agreement. Each Rights Holder hereby agrees that, during the period specified by the Company and the managing underwriter of Common Shares or other securities of the Company following the effective date of a registration statement of the Company, such Rights Holder shall not, to the extent reasonably requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of any securities of the Company held by such the Rights Holder at any time during such period, except any Common Shares included in such registration; provided, that private transfers of such securities shall not be restricted during such period; and provided further that such period shall not 13 13 extend more than 15 days prior to or beyond 120 days after the closing of the offering. In order to enforce the foregoing covenant, the Company may impose stop transfer instructions with respect to the Registrable Securities of a Rights Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. 3. Miscellaneous. 3.1 Successors and Assigns. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties hereto; provided, however, that the Company shall not assign any of its obligations hereunder without the prior written consent of each Rights Holder and that neither Rights Holder may assign any of its rights hereunder except to transferees to which it has transferred any Warrants or shares of Common Stock, in accordance with the Options Agreement and the Warrant Agreements. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. 3.2 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to the conflicts of law principles thereof. 14 14 3.3 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on separate counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument. 3.4 Captions and Headings. The captions and headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 3.5 Notices. Any notice, demand or delivery authorized by this Agreement shall be in writing and shall be sufficiently given or made upon receipt thereof, if made by personal delivery or facsimile transmission (with confirmed receipt thereof), or four business days after mailed, if sent by first-class mail, postage prepaid, addressed, to the Investor Representative or the Company, as the case may be, at their respective addresses below, or such other address as shall have been furnished to the party giving or making such notice, demand or delivery: (a) If to the Company, to it at: Phoenix Information Systems Corp. 100 Second Avenue South, Suite 100 St. Petersburg, Florida 33701 Attention: Robert P. Gordon, Chairman Facsimile: 813-821-7565 [(b) If to the Rights Holders, to the Investor Representative at: S-C Phoenix Holdings, L.L.C. c/o The Chatterjee Group 888 Seventh Avenue, Suite 3300 New York, New York 10106 15 15 Attention: Peter A. Hurwitz, Esq. Facsimile: 212-489-2005 with a copy to: Soros Fund Management 888 Seventh Avenue, Suite 3300 New York, New York 10106 Attention: Sean A. Warren, Esq. Facsimile: 212-489-2005 16 16 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. S-C PHOENIX HOLDINGS, L.L.C., By ------------------------- Name: Title: QUANTUM INDUSTRIAL PARTNERS, LDC BY ------------------------- Name: Title: PHOENIX INFORMATION SYSTEMS CORP. By ------------------------ Name: Title: EX-99.Z 6 FIRST AMENDMENT TO THE REGISTRATION RIGHTS AGRMT. 1 EXHIBIT Z FIRST AMENDMENT TO THE REGISTRATION RIGHTS AGREEMENT This FIRST AMENDMENT TO THE REGISTRATION RIGHTS AGREEMENT ("First Amendment") is made as of December 7, 1995 by and between PHOENIX INFORMATION SYSTEMS CORP. (the "Company") and S-C PHOENIX PARTNERS ("S-C"). WHEREAS, the Company and S-C are parties to a certain Registration Rights Agreement dated December 9, 1994 (the "Registration Rights Agreement"); and WHEREAS, the Company and S-C desire with this document to amend the Registration Rights Agreement to clarify its scope; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledge, the Company and S-C agree as follows: Section 1. Amendment to Registration Rights Agreement The Registration Rights Agreement is hereby amended as follows: 1.01. Clause (iii) of Section 1(b) of the Registration Rights Agreement is hereby deleted in its entirety and replaced with the following: (iii) any other Common Shares issued by the Company that are acquired by the Rights Holder or its affiliates, including S-C Phoenix Holdings, L.L.C. and Quantum Industrial Partners LDC, by purchase or transfer or issued by the Company to the Rights Holder or such affiliates upon the conversion or exercise of any warrant, right 2 2 or other security, whether purchased, acquired by transfer or issued as a dividend or other distribution with respect to, in exchange for or in replacement of any Common Shares or other securities of the Company. Section 2. Ratification of the Registration Rights Agreement. 2.01. Nothing contained in this First Amendment shall constitute or be deemed to constitute any limitation on the validity or enforceability of the Registration Rights Agreement. 2.02. Except as expressly modified by this First Amendment, all of the terms and conditions of the Registration Rights Agreement shall remain in full force and effect in accordance with their terms. Section 3. Miscellaneous. 3.01. This First Amendment may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. 3 3 IN WITNESS WHEREOF, the parties have caused this First Amendment to be duly executed as of the date first above written. S-C PHOENIX PARTNERS By S-C PHOENIX HOLDINGS, L.L.C., a General Partner By______________________________ Name: Title: PHOENIX INFORMATION SYSTEMS CORP. By______________________________ Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----