-----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, JqGGiSN4TkohVwXVh5BpVDaDnxIOXnKFQCzGgccADEyM5hBDCPqa9iwNo8cS029d w1O3ris+qzri6De31Ytj2A== 0000950123-96-001263.txt : 19960325 0000950123-96-001263.hdr.sgml : 19960325 ACCESSION NUMBER: 0000950123-96-001263 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19960322 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: 96537647 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 SCHEDULE 13D - AMENDMENT NO. 8 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 8)* PHOENIX INFORMATION SYSTEMS CORP. (Name of Issuer) Common Stock, $.01 Par Value (Title of Class of Securities) 719077109 (CUSIP Number) Stephen M. Vine, Esq. Akin, Gump, Strauss, Hauer & Feld, L.L.P. 399 Park Avenue New York, New York 10022 (212) 872-1000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 15, 1996 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box / /. Check the following box if a fee is being paid with the statement / /. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d- 1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosure provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Continued on following page(s) Page 1 of 48 Pages Exhibit Index: Page 16 2 SCHEDULE 13D CUSIP NO. 719077109 PAGE 2 OF 48 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person S-C Phoenix Partners 2 Check the Appropriate Box If a Member of a Group* a. /x/ b. / / 3 SEC Use Only 4 Source of Funds* AF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization New York 7 Sole Voting Power Number of 23,944,999 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 23,944,999 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 23,944,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 44.34% 14 Type of Reporting Person* PN *SEE INSTRUCTIONS BEFORE FILLING OUT! 3 SCHEDULE 13D CUSIP NO. 719077109 PAGE 3 OF 48 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Quantum Industrial Partners LDC 2 Check the Appropriate Box If a Member of a Group* a. /x/ b. / / 3 SEC Use Only 4 Source of Funds* WC 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization Cayman Islands 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 23,944,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 23,944,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 23,944,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 44.34% 14 Type of Reporting Person* CO *SEE INSTRUCTIONS BEFORE FILLING OUT! 4 SCHEDULE 13D CUSIP NO. 719077109 PAGE 4 OF 48 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person S-C Phoenix Holdings, L.L.C. 2 Check the Appropriate Box If a Member of a Group* a. /x/ b. / / 3 SEC Use Only 4 Source of Funds* AF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 23,944,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 23,944,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 23,944,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 44.34% 14 Type of Reporting Person* OO *SEE INSTRUCTIONS BEFORE FILLING OUT! 5 SCHEDULE 13D CUSIP NO. 719077109 PAGE 5 OF 48 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person QIH Management Investor, L.P. 2 Check the Appropriate Box If a Member of a Group* a. /x/ b. / / 3 SEC Use Only 4 Source of Funds* AF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 23,944,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 23,944,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 23,944,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 44.34% 14 Type of Reporting Person* PN *SEE INSTRUCTIONS BEFORE FILLING OUT! 6 SCHEDULE 13D CUSIP NO. 719077109 PAGE 6 OF 48 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person QIH Management, Inc. 2 Check the Appropriate Box If a Member of a Group* a. /x/ b. / / 3 SEC Use Only 4 Source of Funds* AF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 23,944,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 23,944,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 23,944,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 44.34% 14 Type of Reporting Person* CO *SEE INSTRUCTIONS BEFORE FILLING OUT! 7 SCHEDULE 13D CUSIP NO. 719077109 PAGE 7 OF 48 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person George Soros 2 Check the Appropriate Box If a Member of a Group* a. /x/ b. / / 3 SEC Use Only 4 Source of Funds* PF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization United States 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 23,944,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 23,944,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 23,944,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 44.34% 14 Type of Reporting Person* IA; IN *SEE INSTRUCTIONS BEFORE FILLING OUT! 8 SCHEDULE 13D CUSIP NO. 719077109 PAGE 8 OF 48 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Winston Partners, L.P. 2 Check the Appropriate Box If a Member of a Group* a. /x/ b. / / 3 SEC Use Only 4 Source of Funds* WC 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 23,944,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 23,944,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 23,944,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 44.34% 14 Type of Reporting Person* PN *SEE INSTRUCTIONS BEFORE FILLING OUT! 9 SCHEDULE 13D CUSIP NO. 719077109 PAGE 9 OF 48 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Chatterjee Fund Management, L.P. 2 Check the Appropriate Box If a Member of a Group* a. /x/ b. / / 3 SEC Use Only 4 Source of Funds* AF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 23,944,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 23,944,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 23,944,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 44.34% 14 Type of Reporting Person* IA; PN *SEE INSTRUCTIONS BEFORE FILLING OUT! 10 SCHEDULE 13D CUSIP NO. 719077109 PAGE 10 OF 48 PAGES 1 Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Purnendu Chatterjee 2 Check the Appropriate Box If a Member of a Group* a. /x/ b. / / 3 SEC Use Only 4 Source of Funds* AF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / / 6 Citizenship or Place of Organization United States 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 23,944,999 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 23,944,999 11 Aggregate Amount Beneficially Owned by Each Reporting Person 23,944,999 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares* / / 13 Percent of Class Represented By Amount in Row (11) 44.34% 14 Type of Reporting Person* IA; IN *SEE INSTRUCTIONS BEFORE FILLING OUT! 11 Page 11 of 48 Pages This Amendment No. 8 to Schedule 13D relates to the shares of Common Stock, $.01 par value (the "Shares"), of Phoenix Information Systems Corp. (the "Issuer") and amends the initial statement on Schedule 13D dated December 16, 1994 and all prior amendments thereto (collectively, the "Initial Statement"). This Amendment No. 8 is being filed to report the acquisition of a Tranche E Note in the amount of $2,100,000 (the "Tranche E Note") and the subsequent conversion of the Tranche E Note into 1,400,000 Shares, as well as the acquisition of the Early Purchase Warrant (as such term is defined herein) in consideration for the accelerated funding and early conversion of the Tranche E Note. Capitalized terms used herein but not defined herein shall have the meanings assigned to them in the Initial Statement. The information set forth in the Initial Statement is amended as set forth herein. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION On December 9, 1994, Phoenix Partners and the Issuer entered into the Note Purchase Agreement, a copy of which is attached as Exhibit D to the Initial Statement. Pursuant to the Note Purchase Agreement, on March 15, 1996, Phoenix Partners and the Issuer entered into a letter agreement (the "March 1996 Letter Agreement"), a copy of which is attached as Exhibit AF hereto. Pursuant to the March 1996 Letter Agreement, Phoenix Partners, among other things, purchased from the Issuer a Tranche E Note in the principal amount of $2,100,000, a copy of which is attached as Exhibit AG hereto, using the working capital or personal funds of its partners. Concurrently therewith, Phoenix Partners converted the Tranche E Note into 1,400,000 Shares at a conversion price of $1.50 per share (subject to the issuance of additional shares upon adjustment of the conversion price as provided in the Tranche E Note). In addition, pursuant to the March 1996 Letter Agreement and a warrant agreement between Phoenix Partners and the Issuer dated March 15, 1996, a copy of which is attached as Exhibit AH hereto, in exchange for the accelerated funding and early conversion of the Tranche E Note, for no additional consideration, Phoenix Partners received a warrant (the "Early Purchase Warrant") to purchase an additional 700,000 Shares at an exercise price of $3.00 per Share. ITEM 4. PURPOSE OF TRANSACTION. Phoenix Partners entered into the March 1996 Letter Agreement for investment purposes and pursuant to the terms of the Note Purchase Agreement. The March 1996 Letter Agreement provides that, depending on the number of the following goals that the Issuer can demonstrate have been fully and completely achieved within the time frames specified, the Conversion Price shall be deemed to have been, upon conversion, reduced to an amount or amounts agreed to by the parties, subject to a $1.00 per Share minimum conversion price: (a) Execution of a letter of intent with a second Chinese airline with at least three 737 class airplanes by April 30, 1996 which shall become a binding agreement approved by the Civil Aviation Administration in China ("CAAC") within 60 days from the date of execution. (b) The System becomes Fully Operational (as such term is defined in the March 1996 Letter Agreement) with Hainan Airlines by May 31, 1996. (c) Execution of a letter of intent with a second U.S. airline by May 31, 1996 which shall become a binding agreement within 60 days from the date of execution and which airline shall be in operation by July 31, 1996. (d) Execution of a letter of intent with a CAAC carrier by May 31, 1996 which shall become a binding agreement within 60 days from the date of execution. (e) Completion of one or more financings aggregating $2.5 million or more by May 10, 1996, if common stock, at a price of $2.50 or more, or, if a convertible security, with a floor (minimum conversion price) of not less than $1.50. 12 Page 12 of 48 Pages ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) The aggregate number of Shares of which each of the Reporting Persons may be deemed a beneficial owner is 23,944,999 (approximately 44.34% of the total number of Shares which would be outstanding assuming the exercise or conversion by Phoenix Partners of all of the convertible securities that it holds). This number consists of (i) 15,659,999 Shares held by Phoenix Partners, (ii) 4,000,000 Shares issuable to Phoenix Partners upon exercise of the 4,000,000 warrants presently exercisable by Phoenix Partners pursuant to the terms of the Warrant Agreement, (iii) the 2,500,000 Shares issuable to Phoenix Partners pursuant to the terms of the Second Warrant Agreement, (iv) 600,000 Shares issuable upon exercise of the 600,000 warrants issued to Phoenix Partners pursuant to the Second Conversion Warrants, (v) 345,000 Shares issuable upon exercise of the warrant issued to Phoenix Partners pursuant to the February Warrant Agreement, (vi) 140,000 Shares issuable upon conversion of 140,000 warrants issued pursuant to the Additional Warrant Agreement and (vii) 700,000 Shares issuable upon conversion of the Early Purchase Warrant. (c) Except as described in Item 4 hereof, which is incorporated in this Item 5(c) by reference, there have been no transactions in the Shares effected since February 16, 1996 (the date of the most recent filing on Schedule 13D). ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS IN RELATIONSHIP WITH RESPECT TO SECURITIES OF THE ISSUER. Except as set forth above in Item 3, Item 4 and Item 5 hereto and as described in previous filings, the Reporting Persons do not have any contracts, arrangements, understandings or relationships with respect to any securities of the Issuer. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS (a) Joint Filing Agreement, dated as of December 16, 1994 by and between S-C Phoenix Partners, S-C Phoenix Holdings, L.L.C., Quantum Industrial Partners LDC, QIH Management Investor, L.P., QIH Management, Inc., Mr. George Soros, Winston Partners, L.P., Chatterjee Fund Management, L.P. and Dr. Purnendu Chatterjee (filed as Exhibit A to the Initial Statement and incorporated herein by reference). (b) Power of Attorney dated December 16, 1994 granted by Quantum Industrial Partners LDC in favor of Mr. Sean Warren (filed as Exhibit B to the Initial Statement and incorporated herein by reference). (c) Power of Attorney dated October 27, 1994 granted by Mr. George Soros in favor of Mr. Sean Warren (filed as Exhibit C to the Initial Statement and incorporated herein by reference). 13 Page 13 of 48 Pages (d) Power of Attorney dated November 18, 1994 granted by Winston Partners, L.P. in favor of Mr. Peter A. Hurwitz (filed as Exhibit J to Amendment No. 1 to the Initial Statement and incorporated herein by reference). (e) Power of Attorney dated November 18, 1994 granted by Chatterjee Fund Management, L.P. in favor of Mr. Peter A. Hurwitz (filed as Exhibit K to Amendment No. 1 to the Initial Statement and incorporated herein by reference). (f) Power of Attorney dated November 18, 1994 granted by Dr. Purnendu Chatterjee in favor of Mr. Peter A. Hurwitz (filed as Exhibit L to Amendment No. 1 to the Initial Statement and incorporated herein by reference). (af) Letter Agreement dated March 15, 1996, between S-C Phoenix Partners and Phoenix Information Systems Corp. (ag) $2,100,000 Tranche E Note purchased from Phoenix Information Systems Corp. by S-C Phoenix Partners on March 15, 1996. (ah) Warrant Agreement dated March 15, 1996, between S-C Phoenix Partners and Phoenix Information Systems Corp. 14 Page 14 of 48 Pages SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Date: March 22, 1996 S-C PHOENIX PARTNERS By: S-C Phoenix Holdings, L.L.C. By: /s/ Sean C. Warren -------------------------- Sean C. Warren Manager Date: March 22, 1996 QUANTUM INDUSTRIAL PARTNERS LDC By: /s/ Sean C. Warren ------------------------ Sean C. Warren Attorney-in-Fact Date: March 22, 1996 QIH MANAGEMENT INVESTOR, L.P. By: QIH MANAGEMENT, INC., general partner By: /s/ Sean C. Warren ---------------------- Sean C. Warren Vice President Date: March 22, 1996 QIH MANAGEMENT, INC. By: /s/ Sean C. Warren ----------------------- Sean C. Warren Vice President Date: March 22, 1996 S-C PHOENIX HOLDINGS, L.L.C. By: /s/ Sean C. Warren ----------------------- Sean C. Warren Manager 15 Page 15 of 48 Pages SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Date: March 22, 1996 GEORGE SOROS By: /s/ Sean C. Warren ----------------------- Sean C. Warren Attorney-in-Fact Date: March 22, 1996 WINSTON PARTNERS, L.P. By: /s/ Peter A. Hurwitz ----------------------- Peter A. Hurwitz Attorney-in-Fact Date: March 22, 1996 CHATTERJEE FUND MANAGEMENT, L.P. By: /s/ Peter A. Hurwitz ----------------------- Peter A. Hurwitz Attorney-in-Fact Date: March 22, 1996 PURNENDU CHATTERJEE By: /s/ Peter A. Hurwitz ----------------------- Peter A. Hurwitz Attorney-in-Fact 16 Page 16 of 48 Pages EXHIBIT INDEX
Page A. Joint Filing Agreement, dated as of December 16, 1994 by and between S-C Phoenix Partners, S-C Phoenix Holdings, L.L.C., Quantum Industrial Partners LDC, QIH Management Investor, L.P., QIH Management, Inc., Mr. George Soros, Winston Partners, L.P., Chatterjee Fund Management, L.P. and Dr. Purnendu Chatterjee (filed as Exhibit A to the Initial Statement and incorporated herein by reference)........................................................... B. Power of Attorney dated December 16, 1994 granted by Quantum Industrial Partners LDC in favor of Mr. Sean Warren (filed as Exhibit B to the Initial Statement and incorporated herein by reference).................................. C. Power of Attorney dated October 27, 1994 granted by Mr. George Soros in favor of Mr. Sean Warren (filed as Exhibit C to the Initial Statement and incorporated herein by reference)........................................................... D. Power of Attorney dated November 18, 1994 granted by Winston Partners, L.P. in favor of Mr. Peter A. Hurwitz (filed as Exhibit J to Amendment No. 1 to the Initial Statement and incorporated herein by reference)...................................... E. Power of Attorney dated November 18, 1994 granted by Chatterjee Fund Management, L.P. in favor of Mr. Peter A. Hurwitz (filed as Exhibit K to Amendment No. 1 to the Initial Statement and incorporated herein by reference)............................................................................................. F. Power of Attorney dated November 18, 1994 granted by Dr. Purnendu Chatterjee in favor of Mr. Peter A. Hurwitz (filed as Exhibit L to Amendment No. 1 to the Initial Statement and incorporated herein by reference)............................................................................................. AF. Letter Agreement dated March 15, 1996 between S-C Phoenix Partners and Phoenix Information Systems Corp....................................................................17 AG. Tranche E Note purchased from Phoenix Information Systems Corp. by S-C Phoenix Partners on March 15, 1996...............................................................21 AH. Warrant Agreement dated March 15, 1996, between S-C Phoenix Partners and Phoenix Information Systems Corp...........................................................26
EX-99.AF 2 LETTER AGREEMENT DATED MARCH 15, 1996 1 Page 17 of 48 Pages EXHIBIT AF PHOENIX INFORMATION SYSTEMS CORP. March 15, 1996 S-C Phoenix Partners 888 Seventh Avenue New York, New York 10106 Tranche E Note Gentlemen: Reference is made to the Convertible Note Purchase Agreement (as amended, "Agreement") dated December 9, 1994 between the undersigned ("Company") and you ("S-C Partners"), as amended by letter agreements dated March 15, 1995, August 3, 1995 and September 15, 1995 and February 12, 1996. Capitalized terms are used herein as defined in the Agreement. Pursuant to the Agreement, S-C Partners has purchased, and the Company has issued, the Tranche A Note, the Tranche B Note, the Tranche C Notes and the Tranche D Notes, which Notes have been converted into 12,900,000 shares of Common Stock, in the aggregate. As of the date hereof, S-C Partners is purchasing, and the Company is issuing, the Tranche E Note in the principal amount of $2,100,000 (the "Tranche E Note"). This will confirm our agreement respecting the issuance and conversion of the Tranche E Note and a warrant to purchase shares of the Company's Common Stock as follows: 1. Notwithstanding anything to the contrary contained therein, the Tranche E Note is being purchased and converted effective on the date hereof in accordance with its terms. The number of shares ("Conversion Shares") into which the principal amount of the Note is being converted is 1,400,000 (subject to adjustment as provided in the Note); provided, however, that, in consideration of S-C Partners' conversion of the Tranche E Note, the Company agrees that the Conversion Price shall be deemed to have been, upon conversion, reduced to an amount or amounts agreed to by the parties in good faith based on the number of the following goals that the Company can demonstrate have been fully and completely achieved within the time frames specified, provided, however, that in no event shall the Conversion Price be below $1.00: 1 2 Page 18 of 48 Pages A. Execution of a letter of intent with a second Chinese airline with at least three 737 class airplanes by April 30, 1996 which shall become a binding agreement approved by the Civil Aviation Administration in China ("CAAC") within 60 days from the date of execution. B. The System becomes Fully Operational with Hainan Airlines by May 31, 1996 C. Execution of a letter of intent with a second U.S. airline by May 31, 1996 which shall become a binding agreement within 60 days from the date of execution and which airline shall be in operation by July 31, 1996. D. Execution of a letter of intent with a CAAC carrier by May 31, 1996 which shall become a binding agreement within 60 days therefrom. E. Completion of one or more financings aggregating $2.5 million or more by May 10, 1996, if common stock, at a price of $2.50 or more, or, if a convertible security, with a floor (minimum conversion price) of not less than $1.50 Upon any deemed change in the Conversion Price, the Company shall issue to S-C Partners certificates representing such additional number of shares of Common Stock such that S-C Partners shall receive the aggregate number of shares of Common Stock it would have received had such change actually occurred on the date of conversion. 2. To the extent that the conditions set forth in Section 3.2(n) of the Agreement to the issuance of the Tranche E Note have not been satisfied as of the date hereof, S-C Partners hereby unconditionally waives the requirement that such conditions be met and discharges the Company from responsibility therefor, subject to the terms and conditions of this letter agreement. 3. In consideration of the foregoing, the Company is issuing to S-C Partners, on the date hereof, a warrant ("Early Purchase Warrant") to purchase 700,000 shares of its Common Stock, in the form of Exhibit A hereto. 2 3 Page 19 of 48 Pages 4. S-C Partners hereby represents and warrants as follows: A. The Tranche E Note, the Conversion Shares and the Early Purchase Warrant ("Securities") being acquired by S-C Partners are being acquired for investment for its own account and not with the view to, or for resale in connection with, any distribution or public offering thereof. S-C Partners understands that such Securities have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or any state securities laws by reason of their contemplated issuance in transactions exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof and applicable state securities laws, and that the reliance of the Company and others upon these exemptions is predicated in part upon this representation by S-C Partners. S-C Partners further understands that such Securities may not be transferred or resold without (1) registration under the Securities Act and any applicable state securities laws, or (2) an exemption from the requirements of the Securities Act and applicable state securities laws. B. S-C Partners understands that an exemption from such registration is not presently available pursuant to Rule 144 promulgated under the Securities Act by the Securities and Exchange Commission (the "Commission") and that, in any event, S-C Partners may not sell any such Securities pursuant to Rule 144 prior to the expiration of a two-year period after it has acquired such Securities. S-C Partners understands that any sales pursuant to Rule 144 can be made only in full compliance with the provisions of Rule 144. C. The address of S-C Partner's principal office is set forth on its Certificate of Representations dated the date hereof. S-C Partners qualifies as an "accredited investor" for purposes of Regulation D promulgated under the Securities Act for the reasons specified in such Certificate of Representations. S-C Partners acknowledges that the Company has made available to it at a reasonable time prior to the execution of the Certificate of Representations the opportunity to ask questions and receive answers concerning the terms and conditions of the sale of securities contemplated by the Agreement, and to obtain any additional information (which the Company possesses or can acquire without unreasonable effort or expense) as may be necessary to verify the accuracy of the information furnished to it. S-C Partners (1) is able to bear of loss of its entire investment in the Securities being acquired by it without any material adverse effect on its business, operations or prospects, and (2) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment to be made by it pursuant to the Agreement and pursuant hereto. 5. Except as modified hereby, the Agreement remains in full force and effect. 6. This Agreement A. represents the entire agreement among the parties with respect to the subject matter hereof, superseding all prior agreements and understandings, written or oral, B. may be amended only in writing, C. may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute one agreement, D. shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and assigns and 3 4 Page 20 of 48 Pages E. shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts entered into and to be performed wholly within such State. If the foregoing accurately reflects our agreement, please sign where indicated below. Very truly yours, /s/ Robert P. Gordon AGREED: Robert P. Gordon S-C PHOENIX PARTNERS Chairman / CEO By S-C Phoenix Holdings, L.L.C., its general partner By:/s/ Sean C. Warren _____________________________ Name: Sean C. Warren Title: Manager 4 EX-99.AG 3 TRANCHE E NOTE PURCHASED DATED MARCH 15, 1996 1 Page 21 of 48 Pages EXHIBIT AG THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS. PHOENIX INFORMATION SYSTEMS CORP. TRANCHE E CONVERTIBLE NOTE $2,100,000 March 15, 1996 PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation ("Company"), hereby promises to pay to S-C PHOENIX PARTNERS ("Holder") at its office at 888 Seventh Avenue, New York, New York 10106, the principal sum of Two Million One Hundred Thousand U.S. Dollars (U.S. $2,100,000), on the Maturity Date (as defined in the Agreement referred to below), together with interest thereon as hereinbelow provided. This Note is the eighth in a series of Notes referred to in, and is entitled to the benefits of, the Convertible Note Purchase Agreement ("Agreement"), dated December 9, 1994, as amended, among the Company and S-C Phoenix Partners, among others. Capitalized terms are used herein as therein defined unless otherwise defined herein. 1. Interest. Interest shall accrue on the outstanding principal amount hereof from the date hereof until payment in full at the Eurodollar Rate and shall be payable on the first anniversary hereof and, thereafter, quarterly on the last day of each Interest Period and upon conversion pursuant to Section 3 hereof. 2. Payments. Each payment due hereunder shall be made in immediately available funds at the office of Holder, or to such account as Holder may designate to the Company in writing, without any setoff or counterclaim. This Note may be converted into shares of Common Stock in accordance with Section 3 hereof. Upon such conversion, and payment of all interest due hereon, the Company will not be obligated to make any further payment hereunder and the Holder, by its acceptance hereof, agrees that it will promptly surrender this Note to the Company upon such conversion or payment hereof in full. 3. Conversion. (a) This Note shall convert into shares of Common Stock at the Conversion Price (as defined below), 1 2 Page 22 of 48 Pages (i) automatically, upon any date prior to the Maturity Date and after the date ("Full Funding Date") on which Notes in the aggregate principal amount of $10,000,000 shall have been sold pursuant to the Agreement on which the first of the following shall occur: (A) the consummation of any offering of the Company's capital stock for a purchase price of not less than $2.00 per share and $5,000,000 in the aggregate and the listing of the Common Stock on The NASDAQ Stock Market Small- Cap or National Market System; (B) the Company having Operating Revenues of $5,000,000 or more in any twelve (12) consecutive month period or (C) the date which is six (6) months from the Full Funding Date; (ii) on any date subsequent to the date hereof and prior to the date referred to in clause (i)(C) of this Section 3(a), at the written election of the Purchaser to convert all Notes; (iii) upon the failure of the Purchaser to purchase any Notes offered to it pursuant to an Offer Notice, at the written election of the Purchaser to convert all outstanding Notes; (iv) upon the termination of the Company's rights under Section 7.1 of the Agreement, at the written election of the Purchaser not to purchase any additional Notes and to convert all outstanding Notes; and (v) upon the System being in Commercial Operation (as such term is defined in that certain letter agreement, dated March 15, 1994, by and between the Company and the Purchaser) in China in connection with an airline of comparable size to Hainan Airlines, at the written election of the Company to cause the conversion of this Note. (b) For purposes hereof, "Conversion Price" shall mean $1.50. No fractional shares of Common Stock shall be issued upon conversion. In lieu of any fractional shares to which Holder would otherwise be entitled, the Company shall pay cash in an amount equal to such fraction multiplied by the Conversion Price. (c) The Company shall provide prompt written notice of the conversion of this Note to Holder, which notice shall be certified by the Chief Financial Officer or the Chief Operating Officer of the Company (and, in the case of conversion pursuant to Section 3(a)(i)(B), by the Company's independent auditors) and shall set forth the date on which conversion shall have occurred ("Conversion Date"), the event resulting in such conversion, and the number of shares of Common Stock which Holder shall be entitled to receive as a result of such conversion. Upon conversion, the Holder shall be entitled to receive the number of shares of Common Stock calculated by dividing the principal amount hereof by the Conversion Price. 2 3 Page 23 of 48 Pages (d) Within a reasonable time, not exceeding ten (10) days after the Conversion Date, the Company shall deliver or cause to be delivered to Holder, in Holder's name, certificates representing the number of fully paid and non-assessable shares of Common Stock into which this Note has been converted in accordance with the provisions of this Section 3. Within a reasonable time, not exceeding ten (10) days after receipt by the Holder of such certificates, the Holder shall surrender this Note to the Company for cancellation. Subject to the following provisions of this Section 3, such conversion shall be deemed to have occurred on the Conversion Date so that the Holder shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. (e) The issuance of certificates of shares of Common Stock upon the conversion of this Note shall be made without charge of any kind by the Company to the Holder for any costs in respect of the issuance of such certificates. (f) The Conversion Price shall be subject to adjustment as follows: (i) In the event the Company shall issue additional shares of Common Stock (or securities convertible into or exchangeable for Common Stock) in a stock dividend, stock distribution or subdivision paid with respect to Common Stock, or declare any dividend or other distribution payable with additional shares of Common Stock (or securities convertible into or exchangeable for Common Stock) with respect to Common Stock or effect a split or subdivision of the outstanding shares of Common Stock, the Conversion Price shall, concurrently with the effectiveness of such stock dividend, stock distribution or subdivision, or the earlier declaration thereof, be proportionately decreased. (ii) In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Conversion Price shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. (iii) In the event of any consolidation or merger of the Company with or into another corporation or the conveyance of all or substantially all of the assets of the Company to another corporation or entity, this Note shall thereafter be convertible into the number of shares of capital stock or other securities or property to which a holder of the number of shares of Common Stock deliverable upon conversion hereof would have been entitled upon such consolidation, merger or conveyance; and, in any such case, appropriate adjustment shall be made in the application of the provisions herein set forth with respect to the rights and interests of the Holder thereafter, to the end that the provisions set forth herein (including provisions with respect to adjustments in the Conversion Price) shall thereafter be applicable, as nearly as may be practicable, in relation to any shares of stock or other property thereafter deliverable upon the conversion hereof. At the request of the Purchaser, the resulting or surviving entity in any such 3 4 Page 24 of 48 Pages consolidation or merger, if other than the Company, shall acknowledge in writing Purchaser's rights hereunder. (g) The Company will not, by amendment of its Articles of Incorporation or By-Laws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company but will at all times in good faith assist in the carrying out of all the provisions of this Section 3 and in taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the Holder against impairment. (h) The Company shall reserve and keep available out of its authorized by unissued Common Stock such number of shares of Common Stock as shall from time to time be sufficient to effect conversion hereof in accordance herewith. 4. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) the Company fails to pay principal hereof when the same shall become due and payable; (b) the Company fails to make two (2) successive interest payments hereon or three (3) interest payments in a twelve (12) consecutive month period; (c) the failure by the Company to perform any of its other material obligations hereunder, under the Agreement or under the other Transaction Documents which failure shall continue for a period of thirty (30) days after receipt of notice thereof by the Company; (d) any representations or warranties of the Company contained in the Agreement shall prove to have been false in any material respect when made; (e) any proceedings involving the Company or any of its consolidated subsidiaries are commenced by or against the Company or any of its consolidated subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law or statute of federal government or any state government and, if such proceedings are instituted against the Company or any such consolidated subsidiary, the Company or any such consolidated subsidiary by any action or failure to act indicates its approval of, consent to or acquiescence therein, or an order shall be entered approving the petition in such proceedings and, within sixty (60) days after the entry thereof, such order is not vacated, or stayed on appeal or otherwise, or shall not otherwise have ceased to continue in effect; then, (i) as to the Events of Default under clauses (a) and (b), above, the Holder may, at its option, declare this Note to be forthwith due and payable in cash, (ii) as to the Events of Default under clauses (c) and (d) above, The Chatterjee Group ("TCG") may, at its option, declare all Notes to be forthwith due and payable in cash and (iii) as to an Event of Default under clause (e) above, this Note shall thereupon become immediately due and payable in cash. Upon any acceleration of this Note pursuant to the immediately preceding sentence the Holder may pursue all remedies available to it at law or equity, and all rights available to it under this Note and the Note Purchase Agreement including, without limitation, the right to convert this Note into shares of Common Stock. During the pendency of any Event of Default, interest shall accrue on the outstanding principal amount hereof at a rate that is two percent (2%) higher than the Eurodollar Rate. 4 5 Page 25 of 48 Pages 5. Amendments and Waivers. Except as otherwise provided in the Agreement, this Note may be amended and the observance of any term hereof or thereof and any rights hereunder or thereunder may be waived by TCG without the consent of Holder. No waiver of any right in any instance shall constitute a continuing waiver of successive rights and any one shall govern only the particular matters waived. 6. Assignment. All terms and provisions of this Note shall be binding upon the Company and inure to the benefit of the Holder and their respective successors. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned (whether voluntarily, involuntarily, by valid operation or law or otherwise) by the Holder without the prior written consent of the Company, except to any Affiliate of the Holder, subject only to such Affiliate's compliance with applicable securities laws. 7. Governing Law. This Note shall be governed by and construed in accordance with the substantive laws of the State of New York (without regard to the laws of conflict that might otherwise apply) as to all matters including without limitation matters of validity, construction, effect, performance and remedies. 8. Waiver of Presentment. The Company waives presentment, protest, notice of dishonor and all forms of notice required to hold the Company liable on this Note. 9. Other Notes. All Notes issued and delivered pursuant to the Agreement shall rank equally and ratably without priority over one another. IN WITNESS WHEREOF, the Company has executed this Note on date first above written. PHOENIX INFORMATION SYSTEMS CORP. By: /s/ Robert P. Gordon ---------------------------------- Title: Chairman / CEO EX-99.AH 4 WARRANT AGREEMENT DATED MARCH 15, 1996 1 Page 26 of 48 Pages EXHIBIT AH WARRANT AGREEMENT WARRANT AGREEMENT, dated as of March 15, 1996 (the "Agreement"), by and between PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation (the "Company") S-C PHOENIX PARTNERS, a New York general partnership ("S-C" and, together with its successors and permitted assigns, the "Holder"). WHEREAS, the Company proposes to issue and deliver its warrant certificates ("Warrant Certificates") evidencing 700,000 warrants (the "Warrants") each to purchase one newly issued share of common stock, par value $0.01 per share, of the Company ("Common Stock") in connection with that certain Convertible Note Purchase Agreement, dated as of December 9, 1994, by and between the Company and S-C (the "Note Purchase Agreement") and that certain letter agreement, dated the date hereof, by and between the Company and S-C. NOW THEREFORE, in consideration of the foregoing and for the purpose of defining the terms and provisions of the Warrants and the respective rights and obligations thereunder of the Company and the Holder, the Company and the Holder agree as follows: 1. Certain Definitions. The following terms, as used in this Agreement, have the following meanings: (1) "Affiliate" means, with respect to S-C, (A)(a) any Person controlling, controlled by or under common control with S-C and (b) if (1) controlling S-C, such Person has a forty percent (40%) or more voting and beneficial ownership interest in S-C, (2) controlled 1 2 Page 27 of 48 Pages by S-C has a forty percent (40%) or more voting and beneficial ownership interest in such Person and (3) under common control with S-C, the Person(s) having such common control have forty percent (40%) or more voting and beneficial ownership interest in S-C and such Person, and (B) any Person for which George Soros d/b/a Soros Fund Management or Chatterjee Fund Management Co. LP, a Delaware limited partnership, is acting as investment manager or investment adviser, in each case with investment discretion. For purposes of this definition, the term "control," when used with respect to any Person, shall include the power to exercise discretion over the investments of such Person, and the terms "controlling" and "controlled" have corresponding meanings. (2) "Business Day" means any day other than a Saturday, Sunday or day on which banks in New York City are closed for general business. (3) "Common Stock" has the meaning set forth in the preamble. (4) "Exercise Period" means the period beginning on the date hereof and ending at 5 p.m. New York City time on the third anniversary of the date on which the Company shall have satisfied the conditions contained in clauses (a) and (b) of the definition of "Tranche E Target Date" set forth in the Note Purchase Agreement. (5) "Exercise Price" means $3.00 per share (as provided in Section 3 and subject to adjustment as provided in Section 4). (6) "Expiration Date" for the Warrants means the last day of the Exercise Period. (7) "Holder" has the meaning set forth in the preamble. 2 3 Page 28 of 48 Pages (8) "Investor Representative" shall be S-C Phoenix Holdings, L.L.C., a Delaware limited liability company and a general partner of S-C, or its successor in interest, or the assigned representative of such Person (it being agreed that at all times there shall be no more than one Investor Representative). (9) "Person" means any individual, corporation, limited liability company, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. (10) "Underlying Common Stock" means the shares of Common Stock purchasable by the Holder upon the exercise of the Warrants. (11) "Warrants" has the meaning set forth in the preamble. (12) "Warrant Certificates" means the certificates evidencing the Warrants. 2. Issue of Warrants. The Warrant Certificates shall be in registered form only and substantially in the form attached hereto as Exhibit A, shall be dated the date on which signed by an authorized signatory of the Company and may have such legends and endorsements typed, stamped or printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement and the Options Agreement. Warrant Certificates evidencing 700,000 Warrants may be executed by any authorized officer of the Company. Warrant Certificates evidencing all 700,000 Warrants shall be delivered in the name of the Holder to the Investor Representative on the date hereof. 3 4 Page 29 of 48 Pages 3. Exercise Price; Exercise of Warrants. (1) Exercise Price. Each Warrant shall entitle the Holder, subject to the provisions of this Agreement, to purchase one share of Common Stock at a purchase price per share equal to the Exercise Price. (2) Exercise of Warrants Generally. (i) Exercise During Exercise Period. The aggregate number of Warrants that may be exercised at any time during the Exercise Period shall be 700,000. All Warrants not exercised during the Exercise Period shall expire at 5 p.m. New York City time on the Expiration Date. (ii) Liquidation Event. If the Company is liquidated in accordance with the provisions of its Certificate of Incorporation, then the Warrants shall be deemed to have been exercised. (iii) Method of Exercise; Payment of Exercise Price. In order to exercise any or all of the Warrants represented by a Warrant Certificate, the Holder must surrender the Warrant Certificate to the Company for exercise, with the reverse side of the Warrant Certificate duly executed, together with any required payment in full of the Exercise Price for each share of Underlying Common Stock to which the Holder is entitled, any such payment of the Exercise Price to be made by check or wire transfer to an account designated by the Company. If the Holder elects to exercise only a portion of the Warrants represented by the Warrant Certificate or Certificates registered in its name, then the remaining portion of the Warrants shall be returned to the Holder in the form of a new Warrant Certificate. Upon surrender of a Warrant Certificate and the payment of the Exercise Price in conformity with the 4 5 Page 30 of 48 Pages foregoing provisions, the Company shall promptly issue to the Holder share certificates representing the Underlying Common Stock to which the Holder is entitled, registered in the name of the Holder or the name or names of such Affiliates of the Holder as may be directed in writing by the Holder, and shall deliver such share certificates to the Person or Persons entitled to receive the same. The Company shall issue such share certificates within five Business Days after the payment of the Exercise Price of the Warrants by the Holder, but such shares shall be deemed issued and outstanding on the date the Warrant is exercised and the Exercise Price is paid to the Company. (c) Exercise by Surrender of Warrant; Exercise with Shares of Common Stock. In addition to the method of exercise set forth in Section 3(b)(3) above and in lieu of any cash payment required thereunder, the Holder shall have the right at any time and from time to time to exercise the Warrants in full or in part (i) by surrendering its Warrant Certificate in the manner specified in Section 3(b)(3) in exchange for the number of shares of Common Stock equal to the product of (x) the number of shares as to which the Warrants are being exercised multiplied by (y) a fraction, the numerator of which is the Market Price (as defined hereafter) of the Common Stock less the Exercise Price and the denominator of which is such Market Price, or (ii) by surrendering the Warrant Certificate in the manner specified in Section 3(b)(3) above and making any required payment in whole or in part of the Exercise Price for each share of Underlying Common Stock to which the Holder is entitled with shares of Common Stock (valued at the Market Price). As used herein, "Market Price" shall mean the average of the closing prices of the Common Stock sales on all domestic exchanges on which the 5 6 Page 31 of 48 Pages Common Stock may at the time be listed, or, if there shall have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock shall not be so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 3:30 p.m. New York City time, or if on any day the Common Stock shall not be quoted in the NASDAQ System, the average of the high and low bid and asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporation or any similar successor organization, in each such case averaged over a period of 30 consecutive Business Days immediately prior to the date of exercise; provided that if the Common Stock is listed on any domestic exchange the term "Business Days" as used in this sentence shall mean business days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic exchange or quoted in the NASDAQ System or the domestic over-the-counter market, the Market Price shall be deemed to be the fair market value thereof as of the date of exercise, determined by an independent appraiser selected by the Company and acceptable to the Holder. 4. Adjustments. The Exercise Price shall be subject to adjustment as follows: (a) If, in connection with a financing or series of financings in an aggregate amount equal to or exceeding $1 million or at any 6 7 Page 32 of 48 Pages time following the date hereof, the Company issues additional shares of Common Stock (or other securities convertible into or exchangeable for Common Stock) for a price lower than $3.00 per share, the Exercise Price with respect to the Warrants shall be automatically and immediately reduced to such lower price, without any action or request on the part of the Holder. The Company shall notify the Holder of such reduced Exercise Price in writing prior to any such issuance or additional shares of Common Stock (or other securities convertible into or exchangeable for Common Stock); provided that if the Company should enter into any agreement in connection with such issuance of additional shares of Common Stock (or other securities convertible into or exchangeable for Common Stock), the Company shall immediately notify the Holder in writing thereof and, upon such issuance of shares of Common Stock (or other securities convertible into or exchangeable for Common Stock), the Exercise Price shall be automatically reduced to such reduced Exercise Price, effective retroactively to the effective date of such agreement, whether or not the Warrants have been exercised during the time period between the effective date of such agreement and the date of such issuance (and if the Warrants have been exercised during such period, the Company shall promptly pay to the Holder the difference between the payment made by the Holder on such exercise and the payment that would have been required if the Warrants were exercised at such reduced Exercise Price). 7 8 Page 33 of 48 Pages (b) In the event the Company shall issue additional shares of Common Stock (or securities convertible into or exchangeable for Common Stock) in a stock dividend, stock distribution or subdivision paid with respect to Common Stock, or declare any dividend or other distribution payable with additional shares of Common Stock (or securities convertible into or exchangeable for Common Stock) with respect to Common Stock or effect a split or subdivision of the outstanding shares of Common Stock, the Exercise Price shall, concurrently with the effectiveness of such stock dividend, stock distribution or subdivision, or the earlier declaration thereof, be proportionately decreased, and the number of Underlying Common Stock shall be proportionately adjusted so that, to avoid dilution of the Holder's position, the Holder shall thereafter be entitled to receive at such adjusted price an additional number of shares of the Company's Common Stock which such Holder would have owned or would have been entitled to receive upon or by reason of any of the events described above, had the Warrants been exercised immediately prior to the happening of such event. (c) In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Exercise Price shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased and the number of Underlying Common Stock shall be proportionately adjusted 8 9 Page 34 of 48 Pages so that the Holder of any Warrant exercised after such date shall be entitled to receive, upon payment of the same aggregate amount as would have been payable before such date, the aggregate number of shares of Common Stock which the Holder would have owned upon such exercise and been entitled to receive, if such Warrant had been exercised immediately prior to the happening of such combination or consolidation. (d) In the event of any consolidation or merger of the Company with or into another corporation or the conveyance of all or substantially all of the assets of the Company to another corporation or entity, the Warrants shall thereafter be exercisable for the number of shares of capital stock or other securities or property to which a holder of the number of shares of Common Stock deliverable upon conversion hereof would have been entitled upon such consolidation, merger or conveyance; and, in any such case, appropriate adjustment shall be made in the application of the provisions herein set forth with respect to the rights and interests of the Holder thereafter, to the end that the provisions set forth herein (including provisions with respect to adjustments in the Exercise Price) shall thereafter be applicable, as nearly as may be practicable, in relation to any shares of stock or other property thereafter deliverable upon the exercise of Warrants. At the request of the Holder, the resulting or surviving entity in any such consolidation or merger, if other than the Company, shall acknowledge in writing the Holder's rights hereunder. 9 10 Page 35 of 48 Pages 5. Loss or Mutilation. Upon receipt by the Company of evidence satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Warrant Certificate and of indemnity satisfactory to it, and (in the case of mutilation) upon surrender and cancellation thereof, then, in the absence of notice to the Company that the Warrants represented thereby have been acquired by a bona fide purchaser, the Company shall deliver to the Holder, in exchange for or in lieu of the lost, stolen, destroyed or mutilated Warrant Certificate, a new Warrant Certificate of the same tenor and for a like aggregate number of Warrants. Upon the issuance of any new Warrant Certificate under this Section 5, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and other expenses in connection herewith. Every new Warrant Certificate executed and delivered pursuant to this Section 5 in lieu of any lost, stolen or destroyed Warrant Certificate shall constitute a contractual obligation of the Company, whether or not the allegedly lost, stolen or destroyed Warrant Certificate shall be at any time enforceable by anyone, and shall be entitled to the benefit of this Agreement equally and proportionately with any and all other Warrant Certificates duly executed and delivered hereunder. The provisions of this Section 5 are exclusive and shall preclude (to the extent lawful) all other rights or remedies with respect to the replacement of mutilated, lost, stolen, or destroyed Warrant Certificates. 10 11 Page 36 of 48 Pages 6. Reservation and Authorization of Common Stock. The Company shall, at all times until the Warrants have been exercised or have expired, reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as is sufficient for the purpose of permitting the exercise in full of all outstanding Warrants. 7. Limitations on Transfer; Warrant Transfer Books. The Warrants may be sold, transferred, pledged, assigned, hypothecated or otherwise disposed of (collectively, "transferred") only to Affiliates of the Holder. The Company shall cause to be kept at the principal executive office of the Company a register in which, subject to such reasonable regulations as it may prescribe, the Company shall provide the registration of Warrant Certificates and transfers or exchanges of Warrant Certificates as herein provided. The Holder of a Warrant Certificate, by its acceptance thereof, covenants and agrees that the Warrants are being acquired, and the Underlying Common Stock to be purchased upon the exercise of this Warrant will be acquired, as an investment and not with a view to the distribution thereof and will not be sold or transferred except in accordance with the applicable provisions of the Securities Act of 1933, as amended (the "Act") and the rules and regulations promulgated thereunder, and that neither this Warrant nor any of the Underlying Common Stock may be offered or sold except (i) pursuant to an effective registration statement under the Act, (ii) to the extent applicable, pursuant to Rule 144 11 12 Page 37 of 48 Pages under the Act (or any similar rule under the Act relating to the disposition of securities), or (iii) pursuant to an exemption from registration under the Act. The Warrant Certificates and, upon exercise of the Warrants, in part or in whole, certificates representing the Underlying Common Stock shall bear a legend substantially similar to the following: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"), and may not be offered or sold except (i) pursuant to an effective registration statement under the Act, (ii) to the extent applicable, pursuant to Rule 144 under the Act (or any similar rule under the Act relating to the disposition of securities), or (iii) pursuant to an exemption from registration under the Act." At the option of the Holder, Warrant Certificates may be exchanged at such office upon payment of the charges hereinafter provided. Whenever any Warrant Certificates are so surrendered for exchange, the Company shall execute and deliver the Warrant Certificates that the Holder is entitled to receive. All Warrant Certificates issued upon any registration of transfer or exchange of Warrant Certificates shall be the valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Warrant Certificates surrendered for such registration of transfer or exchange. Every Warrant Certificate surrendered for registration of transfer or exchange shall (if so required by the Company) be duly endorsed, or be accompanied by a written instrument of transfer in 12 13 Page 38 of 48 Pages form satisfactory to the Company duly executed by the Holder. No service charge shall be made for any registration of transfer or exchange of Warrant Certificates. The Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer of Warrant Certificates. 8. No Voting or Dividend Rights. Prior to the exercise of the Warrants, the Holder, as a Holder of Warrant Certificates, shall not be entitled to any rights of a shareholder of the Company, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive right, but each Holder of Warrant Certificates shall receive all notices sent to shareholders of the Company, including any notice of meetings of shareholders, and shall have the right to attend or observe such meetings. 9. Notices. Any notice, demand or delivery authorized by this Agreement shall be in writing and shall be sufficiently given or made upon receipt thereof, if made by personal delivery or facsimile transmission (with confirmed receipt thereof), or four Business Days after mailed, if sent by first-class mail, postage prepaid, addressed to the Investor Representative or the Company, as the case may be, at their respective addresses below, or such other address as shall have been furnished in accordance with this Section 10 to the party giving or making such notice, demand or delivery: 13 14 Page 39 of 48 Pages (1) If to the Company, to it at: Phoenix Information Systems Corp. 100 Second Avenue South, Suite 100 St. Petersburg, Florida 33701 Attention: Robert P. Gordon, Chairman Facsimile: 813-821-7565 (2) If to the Holder, to the Investor Representative at: S-C Phoenix Holdings, L.L.C. c/o The Chatterjee Group 888 Seventh Avenue, Suite 3000 New York, New York 10106 Attention: Mr. James Peet Facsimile: 212-489-2005 With a copy to: Peter A. Hurwitz, Esq. With an additional copy to: Soros Fund Management 888 Seventh Avenue, Suite 3300 New York, New York 10106 Attention: Sean A. Warren, Esq. Facsimile: 212-489-2005 10. Applicable Law. This Agreement and each Warrant Certificate issued hereunder shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to the conflicts of law principles thereof. The Company and each Holder hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement and the transactions contemplated hereby. The Company and the Holder irrevocably waive, to the fullest extent permitted by law, any objection which they may now or hereafter have to the laying of the venue of any such proceeding 14 15 Page 40 of 48 Pages brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 11. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. The Holder may not assign any of its rights hereunder separate from a transfer of the Warrants in accordance with Section 7 hereof. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. 12. Counterparts. This Agreement may be executed by one or more of the parties to this Agreement in any number of separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13. Captions and Headings. The captions and headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 14. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Holder. Any amendment or waiver effected in accordance with this paragraph shall be binding upon the Holder, each future holder of the Warrants and the Company. 15 16 Page 41 of 48 Pages 15. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provisions shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. PHOENIX INFORMATION SYSTEMS CORP. By /s/ Robert P. Gordon ------------------------------- Name: Robert P. Gordon Title: Chairman / CEO S-C PHOENIX PARTNERS By S-C PHOENIX HOLDINGS, L.L.C., a General Partner By /s/ Sean C. Warren -------------------------------- Name: Sean C. Warren Title: Manager 16 17 Page 42 of 48 Pages EXHIBIT A FORM OF WARRANT CERTIFICATE THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT. THIS WARRANT CERTIFICATE AND THE WARRANTS REPRESENTED HEREBY ARE TRANSFERABLE ONLY IN ACCORDANCE WITH THE PROVISIONS SET FORTH IN THE WARRANT AGREEMENT REFERRED TO BELOW. WARRANTS TO PURCHASE COMMON STOCK OF PHOENIX INFORMATION SYSTEMS CORP. No.___ 700,000 Warrants This certifies that _______________________ is the owner of the number of Warrants set forth above, each of which represents the right to purchase from PHOENIX INFORMATION SYSTEMS CORP., a Delaware corporation (the "Company"), the number of shares of Common Stock, par value $0.01 per share, of the Company ("Common Stock") determined in accordance with the Warrant Agreement referred to below at the purchase price set forth in the Warrant Agreement (the "Exercise Price"), upon surrender hereof at the office of the Company at 100 Second Avenue South, Suite 1100, St. Petersburg, Florida 33701 with the Exercise Subscription Form on the reverse hereof duly executed and with payment in full (by bank check or wire transfer to an account designated by the Company) of the purchase price for the shares 17 18 Page 43 of 48 Pages as to which the Warrant(s) represented by this Warrant Certificate are exercised, or by surrender of this Warrant Certificate in lieu of cash payment, all subject to the terms and conditions hereof and of the Warrant Agreement referred to below. The Warrants will expire at 5 p.m. New York City time on the Expiration Date. This Warrant Certificate is issued under and in accordance with a Warrant Agreement, dated as of March 15, 1996 (the "Warrant Agreement"), between the Company and S-C Phoenix Partners, is subject to the terms and provisions contained therein, to all of which terms and provisions the holder of this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Company and the holders of the Warrants. Capitalized defined terms used herein have the same meanings as in the Warrant Agreement. Copies of the Warrant Agreement are on file at the office of the Company and may be obtained by writing to the Company at the following address: 100 Second Avenue South Suite 1100 St. Petersburg, Florida 33701 The number of shares of the Common Stock of the Company purchasable upon the exercise of each Warrant and the price per share are set forth in the Warrant Agreement. 18 19 Page 44 of 48 Pages All shares of Common Stock issuable by the Company upon the exercise of Warrants and the payment of the Exercise Price therefor shall be validly issued, fully paid and nonassessable. The Company shall not be required, however, to pay any tax, withholding or other charge imposed in connection with the issuance of any shares of Common Stock upon the exercise of Warrants, and, in such case, the Company shall not be required to issue or deliver any stock certificate until such tax, withholding or other charge has been paid or it has been established to the Company's satisfaction that no tax, withholding or other charge is due. This Warrant Certificate and all rights hereunder are transferable, subject to the terms of the Warrant Agreement, by the registered holder hereof, in whole or in part, upon surrender of this Warrant Certificate duly endorsed, or accompanied by a written instrument of transfer in form satisfactory to the Company duly executed by the registered holder and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer. Upon any partial transfer, the Company will issue and deliver to such holder a new Warrant Certificate or Certificates with respect to any portion not so transferred. This Warrant Certificate shall be void and all rights represented hereby shall cease on the Expiration Date. 19 20 Page 45 of 48 Pages Dated: March 15, 1996 PHOENIX INFORMATION SYSTEMS CORP. By /s/ Robert P. Gordon ___________________________ Name: Robert P. Gordon Title: Chairman / CEO 20 21 Page 46 of 48 Pages FORM OF REVERSE OF WARRANT CERTIFICATE EXERCISE SUBSCRIPTION FORM (To be executed only upon exercise of Warrant) To: Phoenix Information Systems Corp. The undersigned irrevocably exercises ____________ of the Warrants evidenced by this Warrant Certificate for the purchase of shares of Common Stock, par value $0.01 per share, of PHOENIX INFORMATION SYSTEMS CORP. and has arranged to make payment of $___________ (such payment being made by bank check or wire transfer to the account designated by Phoenix Information Systems Corp., and constituting the Exercise Price (as defined in the Warrant Agreement) for the shares as to which the Warrants evidenced by this Warrant Certificate are exercised) or has surrendered this Warrant Certificate in lieu of cash payment in accordance with the terms of Section 3(c) of the Warrant Agreement, all on the terms and conditions specified in this Warrant Certificate and the Warrant Agreement herein referred to. The undersigned hereby irrevocably surrenders this Warrant Certificate and all right, title and interest therein to Phoenix Information Systems Corp. and directs that the shares of Common Stock deliverable upon the exercise of said Warrants be 21 22 Page 47 of 48 Pages registered or placed in the name and at the address specified below and delivered thereto. Date:_________, 19__. __________________________(1) Signature of Owner _____________________________ (Street Address) _____________________________ (City) (State) (Zip Code) Securities and/or check to be issued to: Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: _______________ (1) The signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. 22 23 Page 48 of 48 Pages FORM OF ASSIGNMENT For VALUE RECEIVED, the undersigned registered holder of this Warrant Certificate hereby sells, assigns and transfers unto the Assignee(s) named below (including the undersigned with respect to any Warrants constituting a part of the Warrants evidenced by this Warrant Certificate not being assigned hereby) all of the right of the undersigned under this Warrant Certificate, with respect to the number of Warrants set forth below:
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. 23 -----END PRIVACY-ENHANCED MESSAGE-----