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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
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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.
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"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 Xxxxxx Xxxxx d/b/a Xxxxx 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.
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"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
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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
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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
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(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
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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
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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.
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"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.
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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
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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.
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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
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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.
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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
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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
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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.
000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxx
If to S-C and Quantum, to the
Representative at:
S-C Phoenix Holdings, L.L.C.
c/o The Chatterjee Group
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx, 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,
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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
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(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.
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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:
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EXHIBIT A-1
Form of Warrant
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EXHIBIT A-2
Form of Warrant
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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:
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EXHIBIT C
Form of Registration Rights Agreement
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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:
