EXHIBIT 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT dated as of
December 23, 1996, is by and between PHOENIX INFORMATION
SYSTEMS CORP., a Delaware corporation (the "Company"), and
S-C Phoenix Partners, a New York general partnership (the
"Rights Holder").
This Agreement is made pursuant to the Series C
Convertible Preferred Stock Purchase Agreement (the
"Purchase Agreement") dated the date hereof, between the
Company and the Rights Holder relating to the purchase by
the Rights Holder of 1,388,888.889 shares of Series C
Convertible Preferred Stock, par value $.01 per share, of
the Company (the "Shares"), which are convertible into
shares of common stock, par value $.01 per share, of the
Company ("Common Shares"). In order to induce the Rights
Holder to purchase the Shares, the Company has agreed to
provide registration rights with respect to the Common
Shares issuable upon conversion of the Shares, as set forth
herein.
Accordingly, the parties hereby agree as follows:
1. Definitions. For the purposes of this Agree-
ment:
(a) The terms, "register," "registered" and
"registration" refer to a registration effected by preparing
and filing a registration statement or similar document in
compliance with the Securities Act of 1933 (the "1933 Act"),
and the declaration or ordering of effectiveness of such
registration statement or document; and
(b) The term "Registrable Securities" means
(i) the Common Shares issued to the Rights Holder upon
conversion of the Shares, and (ii) any other Common Shares
issued by the Company that are acquired by the Rights Holder
by purchase or transfer or issued to the Rights Holder by
the Company upon the conversion or exercise of any warrant,
right or other security that is issued as a dividend or
other distribution with respect to, in exchange for or in
replacement of any Common Shares or other securities of the
Company.
2. Registration Rights.
2.1 Registration upon Demand. (a) At any time
after the date hereof, upon the written request of the
holders of fifty (50%) percent or more of the Registrable
Securities to which rights hereunder have been assigned in
accordance herewith (also "Rights Holders"), requesting that
the Company effect the registration under the 1933 Act of
all or part of the Registrable Securities, which request
shall specify the intended method of distribution thereof,
the Company shall use its best efforts to so register (a
"Demand Registration"), as expeditiously as may be
practicable, the Registrable Securities that such holders
have requested the Company to register; provided, however,
that the Rights Holders shall have the right to make only
two Demand Registrations; and provided further that at least
180 days shall have elapsed after the effective date of the
first Demand Registration before any Rights Holders may
request the second Demand Registration hereunder or under
any other registration rights agreement relating to
securities of the Company to which the Rights Holders are
parties.
(b) If at any time after the date hereof the
Company is eligible to file a Registration Statement on
Form S-3 under the 1933 Act, upon written request of any
Rights Holder, the Company shall use its best efforts to
prepare and file such Registration Statement with the
Securities and Exchange Commission (the "Commission"),
registering all or part of the Registrable Securities, at
such Rights Holder's expense; provided, that in each such
registration the price of the Registrable Securities being
offered, without regard to any discounts or commissions,
shall be at least $1,000,000.
2.2 "Piggy-back" Registrations. If, at any time
after the date hereof, the Company proposes to register any
securities under the 1933 Act in connection with any
offering of its securities, whether or not for its own
account, the Company shall furnish prompt written notice to
the Rights Holders of the Company's intention to effect such
registration and the intended method of distribution in
connection therewith. Upon the written request of the
Rights Holders made to the Company within 30 days after the
receipt of such notice, the Company shall include in such
registration the number of Registrable Securities requested
to be registered by such Rights Holders (a "Piggy-back
Registration").
2.3 Obligations of the Company. Whenever the
Company is required under this Section 2 to effect the
registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Commission a
registration statement with respect to such Registrable
Securities and use its best efforts to cause such
registration statement to become effective and keep such
registration statement effective for up to 60 days;
(b) Prepare and file with the SEC such amendments
and supplements to such registration statement and the
prospectus used in connection with such registration
statement as may be necessary to comply with the provisions
of applicable law with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish to each Rights Holder such numbers of
copies of a prospectus, including a preliminary prospectus,
in conformity with the requirements of applicable law, and
such other documents as it may reasonably request in order
to facilitate the disposition of Registrable Securities
owned by such Rights Holder;
(d) Use its best efforts to register and qualify
the securities covered by such registration statement under
such other securities laws of such states as shall be
reasonably requested by the Rights Holders or the
underwriters, in the case of an underwritten offering;
provided that the Company shall not be required in connec-
tion therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process
in any such jurisdictions;
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with
the managing underwriter of such offering. The managing
underwriter shall be selected by Rights Holders holding a
majority of the Registrable Securities to be included in
such registration in the case of a Demand Registration,
which managing underwriter shall be reasonably satisfactory
to the Company. The Rights Holders also shall enter into
and perform their obligations under such an agreement; and
(f) Notify the Rights Holders, at any time when a
prospectus relating thereto is required to be delivered
under applicable law, of the happening of any event as a
result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading in the light of the
circumstances then existing.
(g) Use commercially reasonable efforts to list
such Registrable Securities on any national securities
exchange on which any Common Shares are listed or, if the
Common Shares are not listed on a national securities
exchange, use commercially reasonable efforts to qualify
such Registrable Securities for inclusion on the automated
quotation system of the National Association of Securities
Dealers, Inc.
2.4 Furnish Information. It shall be a condition
precedent to the obligation of the Company to take any
action pursuant to this Section 2 that each Rights Holder
shall furnish to the Company such information regarding such
Rights Holders, the Registrable Securities held by it and
the intended method of disposition of such Registrable
Securities as shall be required to effect the registration
of the Registrable Securities.
2.5 Expenses of Registration. With respect to a
Demand Registration or Piggy-back Registration, the Company
shall bear and pay all expenses incurred in connection with
any registration, filing or qualification of Registrable
Securities including (without limitation) all registration,
filing and qualification fees, printers' and accounting
fees, fees and disbursements of counsel for the Company and,
in the case of a Demand Registration, one counsel selected
by the Rights Holders, but excluding underwriting discounts
and commissions relating to Registrable Securities.
2.6 Underwriting Requirements. In connection
with any offering involving an underwriting of Common Shares
in which a Rights Holder has "piggy-back" rights, the
Company shall not be required under Section 2.2 to include
any of the Registrable Securities of the Rights Holder in
the registration of the securities to be included in such
underwriting unless the Rights Holder accepts the terms of
the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity
as the underwriters determine in their reasonable discretion
will not jeopardize the success of the offering by the
Company. If the total amount of securities, including
Registrable Securities requested by the Rights Holders and
any other shareholder to be included in such offering,
exceeds the number of securities that the underwriters
determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required
to include in the offering up to 105,000 Common Shares held
by Xxxxxx Xxxxxxx ("Xxxxxxx") and only such number of
Registrable Securities as, together with the securities, if
any, being registered by all other shareholders, including
Xxxxxx X. Xxxxxx ("Xxxxxx") and the other holders of
registration rights with respect to securities of the
Company on the date hereof (the "Other Rights Holders"), the
underwriters determine in their reasonable discretion will
not jeopardize the success of the offering. The securities
of all other shareholders (other than Xxxxxx, Conrads and
the Other Rights Holders) shall be reduced (or eliminated)
in order to satisfy the reduction required by the
underwriters before any Registrable Securities of the Rights
Holder are reduced (or eliminated). For so long as a Rights
Holder has rights pursuant to Sections 2.1 and 2.2 hereof,
if the Company grants to any person any rights to have his
or its securities included in any registration statement to
be filed by the Company, such rights shall be subordinate to
the rights granted to the Rights Holder herein.
2.7 Indemnification. In the event any
Registrable Securities are included in a registration state-
ment under this Section 2:
(a) To the extent permitted by law, the Company
shall indemnify and hold harmless the Rights Holder, any
underwriter (as defined in the 1933 Act or other applicable
law) for the Rights Holder, each person, if any, who
controls the Rights Holder or underwriter within the meaning
of the 1933 Act or the Securities Exchange Act of 1934 (the
"1934 Act") or other applicable law, and any officer,
director, partner or other person who controls such entity
within the meaning of the 1933 Act or other applicable law
or agent thereof, against any and all losses, claims,
damages or liabilities (joint or several) to which any of
the foregoing persons may become subject under the 1933 Act
or other applicable law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement,
including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to
make the statements therein not misleading or (iii) any
violation or alleged violation by the Company of the 1933
Act or other applicable law, or any rule or regulation
promulgated under the 1933 Act or other applicable law; and
the Company shall pay to the Rights Holder, underwriter or
controlling person any reasonable legal or other expenses
incurred by it in connection with investigating or defending
any such loss, claim, damage, liability or action; provided
that the indemnity agreement contained in this Section
2.7(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such
loss, claim, damage, liability or action to the extent that
it arises out of or is based upon (A) a Violation that
occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with
such registration by the Rights Holder or such underwriter
or controlling person or (B) the use by any party, after
receipt of a notice from the Company pursuant to Section
2.3(f) above, of the prospectus referred to in such notice.
(b) To the extent permitted by law, the Rights
Holder shall indemnify and hold harmless the Company, each
of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls
the Company within the meaning of the 1933 Act or other
applicable law, any underwriter and any controlling person
of any such underwriter, against any losses, claims, damages
or liabilities (joint or several) to which any of the
foregoing persons may become subject under the 1933 Act or
other applicable law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise
out of or are based upon (i) any Violation, in each case to
the extent (and only to the extent) that such Violation
occurs in reliance upon and in conformity with written
information furnished by the Rights Holder expressly for use
in connection with such registration, or (ii) the use by the
Rights Holder, after receipt of a notice from the Company
pursuant to Section 2.3(f) above, of the prospectus referred
to in such notice; and the Rights Holder shall pay any
reasonable legal or other expenses incurred by any person to
be indemnified pursuant to this Section 2.7(b) in connection
with investigating or defending any such loss, claim,
damage, liability or action; provided that the indemnity
agreement contained in this Section 2.7(b) shall not apply
to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected
without the consent of the Rights Holder, which consent
shall not be unreasonably withheld; and provided, further,
that in no event shall any indemnity under this Section
2.7(b) exceed the proceeds from the offering received by the
Rights Holder.
(c) Promptly after receipt by an indemnified
party under this Section 2.7 of notice of the commencement
of any action (including any governmental action), such
indemnified party shall, if a claim in respect thereof is to
be made against any indemnifying party under this Section
2.7, deliver to the indemnifying party a written notice of
the commencement thereof, and the indemnifying party shall
have the right to participate in and, to the extent the
indemnifying party so desires, to assume the defense
thereof; provided that an indemnified party (together with
all other indemnified parties that may be represented
without conflict by one counsel) shall have the right to
retain one separate counsel, with the fees and expenses to
be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or
potential differing interests between indemnified party and
any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time after the
commencement of any such action, if prejudicial to the
ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party
under this Section 2.7, but the omission so to deliver
written notice to the indemnifying party shall not relieve
it of any liability that it may have to any indemnified
party otherwise than under this Section 2.7.
(d) The obligations of the Company to the Rights
Holder under this Section 2.7 shall survive the completion
of any offering of Registrable Securities under any
registration statement pursuant to this Section 2 or
otherwise.
2.8 "Market Stand-off" Agreement. The Rights
Holder hereby agrees that, during the period specified by
the Company and the managing underwriter in connection with
any underwritten public offering of any of the Company's
securities, the Rights Holder shall not, to the extent
reasonably requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of any
securities of the Company held by the Rights Holder at any
time during such period, except for any Common Shares
included in such registration; provided, that private
transfers of such securities shall not be restricted during
such period; and provided further, that such period shall
not extend more than 15 days prior to or beyond 120 days
after the closing of the offering and, provided, further,
that, with the exception of Conrads, such restriction shall
be no more extensive in scope or duration than the
restrictions imposed on any other person who has been
granted registration rights or is an officer or director of
the Company. In order to enforce the foregoing covenant,
the Company may impose stop transfer instructions with
respect to the Registrable Securities of the Rights Holder
(and the shares or securities of every other person subject
to the foregoing restriction) until the end of such period.
3. Miscellaneous.
3.1 Successors and Assigns. The provisions of
this Agreement shall inure to the benefit of and be binding
upon the respective successors and permitted assigns of the
parties hereto; provided, however, that the Company shall
not assign any of its obligations hereunder without the
prior written consent of the Rights Holder and that the
Rights Holder may not assign any of its rights hereunder
except to transferees to which it has transferred any
Registrable Securities, in accordance the Purchase
Agreement. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties
hereto or their respective successors and permitted assigns
any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided
herein.
3.2 Governing Law. This Agreement shall be
governed by and construed in accordance with the internal
laws of the State of New York, without regard to the
conflicts of law principles thereof.
3.3 Counterparts. This Agreement may be executed
by one or more of the parties to this Agreement on separate
counterparts, each of which shall be deemed an original, but
both of which together shall constitute one and the same
instrument.
3.4 Captions and Headings. The captions and
headings used in this Agreement are used for convenience
only and are not to be considered in construing or inter-
preting this Agreement.
3.5 Notices. Any notice, demand or delivery
authorized by this Agreement shall be in writing and shall
be sufficiently given or made upon receipt thereof, if made
by personal delivery or facsimile transmission (with
confirmed receipt thereof), or four business days after
mailed, if sent by first-class mail, postage prepaid,
addressed, to the Rights Holder or the Company, as the case
may be, at their respective addresses below, or such other
address as shall have been furnished to the party giving or
making such notice, demand or delivery:
(a) If to the Company, to it at:
Phoenix Information Systems Corp.
000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Chairman
Facsimile: 000-000-0000
(b) If to the Rights Holder, to it at:
S-C Phoenix Partners
c/o S-C Phoenix Holdings, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx Fund Management
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile: 000-000-0000
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IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed as of the date first above
written.
S-C Phoenix Partners
By S-C PHOENIX HOLDINGS, L.L.C.,
a General Partner
By________________________________
Name:
Title:
PHOENIX INFORMATION SYSTEMS CORP.
By________________________________
Name:
Title:
