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EXHIBIT AF
PHOENIX INFORMATION SYSTEMS CORP.
March 15, 1996
S-C Phoenix Partners
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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:
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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.
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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
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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/ Xxxxxx X. Xxxxxx
AGREED:
Xxxxxx X. Xxxxxx
X-X PHOENIX PARTNERS Chairman / CEO
By S-C Phoenix Holdings, L.L.C.,
its general partner
By:/s/ Xxxx X. Xxxxxx
_____________________________
Name: Xxxx X. Xxxxxx
Title: Manager
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