REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of September 22, 1995, by and
between Diagnostic/Retrieval Systems, Inc., a Delaware
corporation (the "Company"), and Forum Capital Markets L.P. (the
"Initial Purchaser"). The Company proposes to issue and sell to
the Initial Purchaser, upon the terms set forth in a purchase
agreement of even date herewith (the "Purchase Agreement"), up to
$25,000,000 aggregate principal amount of its Senior Subordinated
Convertible Debentures due 2003 (the "Debentures"), which
Debentures are convertible into Common Stock (as defined herein)
as provided in the Debentures and the Indenture (as defined
herein). As an inducement to the Initial Purchaser to enter into
the Purchase Agreement and in satisfaction of a condition to the
Initial Purchaser's obligations thereunder, the Company agrees
with the Initial Purchaser, for the benefit of the Initial
Purchaser and the other Holders (as defined herein), as follows:
1. Definitions.
As used in this Agreement, the following capitalized terms
shall have the following meanings:
"ACT" means the Securities Act of 1933, as amended from time
to time.
"CLOSING DATE" has the meaning set forth in the Purchase
Agreement.
"COMMON STOCK" means the Class A Common Stock, par value
$.01 per share, of the Company, or any successor class thereto,
issuable upon conversion of the Debentures.
"COMMISSION" means the Securities and Exchange Commission.
"DAMAGES PAYMENT DATE" means with respect to the Debentures
and the outstanding shares of Common Stock, if any, each Interest
Payment Date.
"EFFECTIVENESS PERIOD" has the meaning set forth in Section
2 hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended from time to time.
"HOLDERS" means Persons owning Transfer Restricted
Securities.
"INDENTURE" means the Indenture, to be dated the date
hereof, between the Company and The Trust Company of New Jersey,
as trustee (the "TRUSTEE"), pursuant to which the Debentures are
to be issued, as such Indenture is amended or supplemented from
time to time in accordance with the terms thereof.
"INTEREST PAYMENT DATE" has the meaning set forth in the
Form of Debenture attached as Exhibit A to the Indenture.
"LIQUIDATED DAMAGES" has the meaning set forth in Section 4
hereof.
"OPTION CLOSING DATE" has the meaning set forth in the
Purchase Agreement.
"PERSON" means an individual, partnership, corporation,
limited liability company, trust or unincorporated organization,
or a government or agency or political subdivision thereof.
"PROSPECTUS" means the prospectus included in the Shelf
Registration Statement, as amended or supplemented by any
prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material
incorporated by reference into such Prospectus.
"RECORD HOLDER" means (i) with respect to any Damages
Payment Date relating to the Debentures, each Person who is a
Holder of Debentures on the record date with respect to the
Interest Payment Date on which such Damages Payment Date shall
occur and (ii) with respect to any Damages Payment Date relating
to the Common Stock, each Person who is a Holder of Common Stock
on the day that is fifteen days prior to the succeeding Damages
Payment Date.
"REGISTRATION DEFAULT" has the meaning set forth in Section
4 hereof.
"SHELF REGISTRATION STATEMENT" has the meaning set forth in
Section 2 hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Section 77aaa-77bbbb) as in effect on the date of the Indenture.
"TRANSFER RESTRICTED SECURITIES" means each Debenture and,
if such Debenture has been converted, each share of Common Stock
issued in connection with such conversion, until (a) the date on
which such Debenture or shares of Common Stock, as applicable,
have been effectively registered under the Act and disposed of in
accordance with the Shelf Registration Statement or (b) the date
on which such Debenture or shares of Common Stock, as applicable,
are distributed to the public pursuant to Rule 144 or any other
applicable exemption under the Act without additional restriction
upon public resale.
"UNDERWRITTEN OFFERING" means a registration in which
securities of the Company are sold to an underwriter for
reoffering to the public.
2. Shelf Registration. The Company shall use its
reasonable best efforts to file a registration statement with the
Commission within 90 days after the Closing Date relating to the
offer and sale of the Transfer Restricted Securities by Holders
from time to time pursuant to Rule 415 under the Act and in
accordance with the methods of distribution set forth therein,
which registration statement may be substituted for by one or
more subsequent registration statements each relating to the
offer and sale of the Transfer Restricted Securities by Holders
from time to time (as in effect from time to time, the "Shelf
Registration Statement"), and the Company shall use its
reasonable best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission within 150
days after the Closing Date, provided, however, that the Company
may delay such filing or effectiveness under the circumstances
and during the periods described in Section 3 hereof. In
addition, the Company shall use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective,
supplemented and amended for a period (the "Effectiveness
Period") of not less than three years following the later of the
Closing Date or any Option Closing Date or such shorter period
that will terminate when all the shares of Common Stock and the
Debentures covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement.
3. Delay Periods; Suspension of Sales.
(a) If at any time prior to the expiration of the
Effectiveness Period, counsel to the Company (which counsel shall
be experienced in securities laws matters) has determined in good
faith that the filing of the Shelf Registration Statement or the
compliance by the Company with its disclosure obligations in
connection with the Shelf Registration Statement would require
the disclosure of material information which the Company has a
bona fide business purpose for preserving as confidential, then
the Company may delay the filing of the Shelf Registration
Statement (if not then filed) and shall not be required to
maintain the effectiveness thereof or amend or supplement the
Shelf Registration Statement for a period (an "Information Delay
Period") expiring upon the earlier to occur of (A) the date on
which such material information is disclosed to the public or
ceases to be material or the Company is able to so comply with
its disclosure obligations and Commission requirements or (B) 30
days after counsel to the Company makes such good faith
determination. There shall not be more than four Information
Delay Periods during the Effectiveness Period, and there shall
not be two Information Delay Periods during any contiguous 90 day
period.
(b) If at any time prior to the expiration of the
Effectiveness Period, the Company is advised by a nationally
recognized investment banking firm selected by the Company that,
in such firm's written reasonable opinion addressed to the
Company (a copy of which shall be delivered to each Holder of
Transfer Restricted Securities registered under the Shelf
Registration Statement), sales of Common Stock pursuant to the
Shelf Registration Statement at such time would materially
adversely affect any immediately planned underwritten public
equity financing by the Company of at least $5 million, the
Company shall not be required to maintain the effectiveness of
the Shelf Registration Statement or amend or supplement the Shelf
Registration Statement for a period (a "Transaction Delay
Period") commencing on the date of pricing of such equity
financing and expiring upon the earliest to occur of (i) the
abandonment of such financing or (ii) 90 days after the
completion of such financing. There shall not be more than two
Transaction Delay Periods during the Effectiveness Period.
(c) A Transaction Delay Period and an Information Delay
Period are hereinafter collectively referred to as "Delay
Periods" or a "Delay Period." The Company will give prompt
written notice, in the manner prescribed by Section 10(a) hereof,
to each Holder of each Delay Period. Such notice shall be given
(i) in the case of a Transaction Delay Period, 30 days in advance
of the commencement of such Delay Period and (ii) in the case of
an Information Delay Period, as soon as practicable after the
circumstances giving rise thereto are identified. Such notice
shall state to the extent, if any, as is practicable, an estimate
of the duration of such Delay Period. Each Holder, by his
acceptance of any Transfer Restricted Securities, agrees that (i)
upon receipt of such notice of an Information Delay Period it
will forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, (ii)
upon receipt of such notice of a Transaction Delay Period it will
forthwith discontinue disposition of the Common Stock pursuant to
the Shelf Registration Statement and (iii) in either such case,
will not deliver any prospectus forming a part of the Shelf
Registration Statement in connection with any sale of Transfer
Restricted Securities or Common Stock, as the case may be, until
the expiration of such Delay Period.
4. Liquidated Damages. If (i) the Shelf Registration
Statement is not filed with the Commission within 90 days after
the Closing Date, (ii) the applicable Registration Statement has
not been declared effective by the Commission within 150 days
after the Closing Date (the "Effectiveness Target Date"), or
(iii) at any time prior to the third anniversary of the later of
the Closing Date or any Option Closing Date, the Shelf
Registration Statement is filed and declared effective but shall
thereafter cease to be effective (other than as a result of the
effectiveness of a successor registration statement) or fail to
be useable for its intended purpose without being succeeded
promptly by a post-effective amendment to the Shelf Registration
Statement that cures such failure and that is itself declared
effective within 45 days after the Shelf Registration Statement
ceases to be effective (each such event referred to in clauses
(i) through (iii), a "Registration Default"), the Company will
pay liquidated damages ("Liquidated Damages") to each Holder who
has complied with its obligations under this Agreement. During
the first 90-day period immediately following the occurrence of
such Registration Default, the amount of such Liquidated Damages
shall be $.05 per week per $1,000 principal amount of Debentures
and, if applicable, $.01 per week per share (subject to
adjustment in the event of stock splits, stock consolidations,
stock dividends and the like) of Common Stock constituting
Transfer Restricted Securities registered under the Shelf
Registration Statement. During each subsequent 90-day period
following the occurrence of such Registration Default, the amount
of Liquidated Damages shall increase by an additional $.05 per
week per $1,000 principal amount of Debentures and $.01 per week
per share (subject to adjustment as set forth above) of Common
Stock constituting Transfer Restricted Securities registered
under the Shelf Registration Statement; provided, however, the
maximum amount of Liquidated Damages shall be $.20 per week per
$1,000 principal amount of Debentures and $.04 per week per share
(subject to adjustment as set forth above) of Common Stock
constituting Transfer Restricted Securities registered under the
Shelf Registration Statement. All accrued Liquidated Damages
shall be paid by the Company to Record Holders entitled thereto
on the next succeeding Damages Payment Date by wire transfer of
immediately available funds or by federal funds check. Following
the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease, but any Liquidated Damages accrued through
the date of cure shall be paid to Record Holders on the next
succeeding Damages Payment Date. If the Registration Defaults
described in either of clauses (i) or (ii) above arose solely
because the applicable Holder or Holders failed to provide the
Company with certain information within 20 business days after
request therefor pursuant to Section 5(m), Liquidated Damages in
respect thereof will not begin to accrue until five business days
after such information has been provided to the Company.
All of the Company's obligations set forth in the preceding
paragraph which are outstanding with respect to any Transfer
Restricted Security at the time such security ceases to be a
Transfer Restricted Security shall survive until such time as all
such obligations with respect to such security shall have been
satisfied in full.
5. Registration Procedures.
In connection with the Shelf Registration Statement and any
Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities, the following
provisions shall apply:
(a) The Company shall furnish to each Holder, prior to the
filing thereof with the Commission, a copy of the Shelf
Registration Statement and each amendment thereto or each
amendment or supplement to the Prospectus included therein, and
shall use its reasonable best efforts to reflect in each such
document, when so filed with the Commission, such comments as any
Holder reasonably may propose.
(b) The Company shall take such action as may be necessary
so that (i) the Shelf Registration Statement and any amendment
thereto and any Prospectus forming a part thereof and any
supplement or amendment thereto complies in all material respects
with the Act and the rules and regulations thereunder, (ii) the
Shelf Registration and any amendment thereto (in either case,
other than with respect to written information furnished to the
Company by or on behalf of any Holder specifically for inclusion
therein) does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make any statement
therein not misleading and (C) the Prospectus and any supplement
thereto (in either case, other than with respect to such
information from Holders), does not include an untrue statement
of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) The Company shall promptly advise the Holders of
Transfer Restricted Securities registered under the Shelf
Registration Statement (which advice pursuant to clauses (ii) -
(iv) shall be accompanied by an instruction to suspend the use of
the Prospectus until the requisite changes have been made) and,
if requested by such Persons, to confirm such advice in writing;
(i) when the Shelf Registration Statement and any
amendment thereto has been filed with the Commission and
when the Shelf Registration Statement or any post-effective
amendment thereto has become effective;
(ii) of any request by the Commission for amendments
to the Shelf Registration Statement or amendments or
supplements to the Prospectus or for additional information
relating thereto;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Shelf Registration
Statement or of the suspension by any state securities
commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding
purposes; and
(iv) of the happening of any event that requires the
making of any changes in the Shelf Registration Statement or
the Prospectus so that, as of such date, the Shelf
Registration Statement and the Prospectus do not contain an
untrue statement of a material fact and do not omit to state
a material fact required to be stated therein or necessary
to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they
were made) not misleading.
(d) If at any time the Commission shall issue any stop
order suspending the effectiveness of the Shelf Registration
Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted
Securities under state securities or Blue Sky laws, the Company
shall use its reasonable best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
(e) The Company shall furnish to each Holder of Transfer
Restricted Securities included under the Shelf Registration
Statement, without charge, at least one copy of the Shelf
Registration Statement and each post-effective amendment thereto,
including all financial statements and schedules, documents
incorporated by reference therein and, if the Holder so requests
in writing, all exhibits (including exhibits incorporated therein
by reference).
(f) The Company shall, during the Effectiveness Period,
deliver to each Holder of Transfer Restricted Securities included
under the Shelf Registration Statement, without charge, as many
copies of the Prospectus (including each preliminary prospectus)
included in the Shelf Registration Statement and any amendment or
supplement thereto as such Holder may reasonably request; and the
Company consents to the use of the Prospectus and any amendment
or supplement thereto by each of the selling Holders in
connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment
or supplement thereto during the Effectiveness Period.
(g) Prior to any public offering pursuant to the Shelf
Registration Statement, the Company shall use its reasonable best
efforts to register or qualify or cooperate with the Holders of
Transfer Restricted Securities registered thereunder, the
underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of such
Transfer Restricted Securities under the securities or Blue Sky
laws of such jurisdictions as such Holders or underwriters
reasonably request in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in
such jurisdictions of such Transfer Restricted Securities;
provided, however, that the Company will not be required to
qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action that would subject it
to general service of process or to taxation in any jurisdiction
where it is not then so subject.
(h) Unless any Transfer Restricted Securities shall be in
book-entry form only, the Company shall cooperate with the
Holders and the underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Transfer
Restricted Securities to be sold under the Shelf Registration
Statement, free of any restrictive legends and in such
denominations and registered in such names as the Holders or the
underwriter(s), if any, may request in connection with the sales
of Transfer Restricted Securities pursuant to the Shelf
Registration Statement.
(i) Upon the occurrence of any event contemplated by
Section 5(c)(ii) - (iv), the Company shall file (and use its
reasonable best efforts to have declared as soon as possible) a
post-effective amendment to the Shelf Registration Statement or
an amendment or supplement to the Prospectus or file any other
required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities registered under the
Shelf Registration Statement, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading. Each
Holder of Transfer Restricted Securities registered under the
Shelf Registration Statement agrees by acquisition of such
Transfer Restricted Securities that, upon receipt of any notice
from the Company of the existence of any fact of the kind
described in Section 5(c)(ii) - (iv) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the Shelf Registration Statement until
such Holder receives copies of the supplemented or amended
Prospectus contemplated by this Section 5(i), or until such
Holder is advised in writing by the Company that the use of the
Prospectus may be resumed, and such Holder has received copies of
any additional or supplemental filings which are incorporated by
reference in the Prospectus. If so directed by the Company, each
Holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Transfer Restricted
Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the time period
regarding the Company's obligations to maintain the effectiveness
of the Shelf Registration Statement set forth in Section 2 hereof
shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to
Section 5(c) hereof to and including the date when such Holder
shall have received the copies of the supplemented or amended
Prospectus contemplated by this Section 5(i).
(j) The Company shall provide a CUSIP number for all
Transfer Restricted Securities registered under the Shelf
Registration Statement, in the event of and at the time of any
distribution thereof to Holders, not later than the effective
date of the Shelf Registration Statement and provide the Trustee
and the transfer agent for the Common Stock with printed
certificates for such Transfer Restricted Securities which are in
a form eligible for deposit with the Depository Trust Company.
(k) The Company shall use its reasonable best efforts to
comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders
or otherwise provide in accordance with Section 11(a) of the Act,
as soon as practicable after the effective date of the Shelf
Registration Statement an earnings statement satisfying the
provisions of Section 11(a) of the Act.
(l) The Company shall cause the Indenture to be qualified
under the TIA in a timely manner not later than the effective
date of the Shelf Registration Statement, and, in connection
therewith, cooperate with the Trustee and the Holders of
Debentures to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with
the terms of the TIA.
(m) The Company may require each Holder of Transfer
Restricted Securities to be registered under the Shelf
Registration Statement to furnish to the Company such information
regarding such Holder and the distribution of such Holder's
securities thereunder as the Company may from time to time
reasonably require for inclusion in the Shelf Registration
Statement and the Company may exclude from such registration the
Transfer Restricted Securities of any Holder that fails to
furnish such information within a reasonable time after receiving
such request.
(n) The Company shall, if requested by the Holders of
Transfer Restricted Securities being sold in an Underwritten
Offering or the underwriter(s) thereof, promptly incorporate in
the Shelf Registration Statement or Prospectus, pursuant to a
supplement or post-effective amendment, if necessary, such
information as such underwriters and Holders reasonably agree
should be included therein and to which the Company does not
reasonably object including, without limitation, information
relating to the plan of distribution of the Transfer Restricted
Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to such underwriter(s),
the purchase price being paid therefor and with respect to any
other terms of the offering of the Transfer Restricted Securities
to be sold in such offering; and shall make all required filings
of such Prospectus supplement or post-effective amendment as soon
as practicable after the Company is notified of the matters to be
incorporated in such Prospectus supplement or post-effective
amendment.
(o) The Company shall enter into such customary agreements
(including an underwriting agreement in customary form, if
applicable) and take all such other appropriate actions in order
to expedite or facilitate the disposition of the Transfer
Restricted Securities pursuant to the Shelf Registration
Statement, and in connection therewith, the Company shall (1)
make such representations and warranties to the Holders of
Transfer Restricted Securities registered thereunder and the
underwriter(s), if any, in form, substance and scope as are
customarily made by issuers to underwriters in primary
underwritten offerings; (2) obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to such
underwriters and the Holders of a majority of the Transfer
Restricted Securities being sold) addressed to each such Holder
and underwriter covering such matters as are customarily covered
in opinions requested in underwritten offerings and such other
matters as may be reasonably requested by such Holders and
underwriters; (3) if and to the extent permitted by Statement of
Auditing Standards No. 72, obtain comfort letters and updates
thereof from the Company's independent certified public
accountants addressed to the underwriters requesting the same,
such letters to be in customary form and covering matters of the
type customarily covered in comfort letters in connection with
primary underwritten offerings; (4) in connection with an
Underwritten Offering only, set forth in full or incorporate by
reference in the underwriting agreement the indemnification
provisions and procedures of Section 6 hereof with respect to all
parties to be indemnified pursuant to said Section; and (5)
deliver such documents and certificates as may be reasonably
requested by such Holders or underwriters to evidence compliance
with Section 5(i) and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Company pursuant to this Section 5(o). The foregoing actions set
forth in clauses (1), (2), (3) and (5) of this Section 5(o) shall
be performed at each closing under any underwriting or similar
agreement as and to the extent required thereunder.
(p) The Company shall make available at reasonable times
for inspection by the Holders of the Transfer Restricted
Securities, any underwriter participating in any disposition
pursuant to the Shelf Registration Statement, and any attorney or
accountant retained by any such Holders or underwriters, all
financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries; and cause the
Company's officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with the Shelf Registration
Statement subsequent to the filing thereof as is customary for
similar due diligence examinations; provided, however, that any
information that is designated in writing by the Company, in good
faith, as confidential at the time of delivery of such
information shall be kept confidential by such Holders or any
such underwriter, attorney or accountant, unless such disclosure
is made in connection with a court proceeding or required by law,
or such information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality; and provided, further that the foregoing
inspection and information gathering shall, to the greatest
extent possible, be coordinated on behalf of the Holders and the
other parties entitled thereto by one counsel designated by and
on behalf of such Holders and other parties.
(q) The Company shall use its reasonable best efforts,
subject to any applicable rules thereto, to cause all Common
Stock included among the Transfer Restricted Securities to be
listed on each securities exchange on which the Common Stock is
listed and, if requested by the Holders of a majority in
aggregate principal amount of Debentures, to list the Debentures
registered under the Shelf Registration Statement on a national
securities exchange or the Nasdaq Stock Market.
6. Registration Expenses.
(a) Except as otherwise provided in Section 8, the Company
shall bear all expenses incurred in connection with the
performance of or compliance with its obligations under Sections
2, 4 and 5 hereof, including without limitation all registration
and filing fees, fees and expenses of compliance with securities
or blue sky laws, printing expenses, messenger and delivery
expenses and fees and disbursements of counsel for the Company
and all independent certified public accountants, and other
persons retained by the Company (all such expenses being herein
called "Registration Expenses"). Registration Expenses shall
also include the Company's internal expenses (including, without
limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any
liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed or on
the Nasdaq Stock Market. The Company will reimburse the Holders
for the reasonable fees and disbursements of one firm of
attorneys chosen by the Holders of a majority of the Debentures
to be sold pursuant to the Shelf Registration Statement to act as
counsel therefor in connection therewith not to exceed $15,000.
(b) Each Holder will pay any discounts and commissions
incurred upon the sale of securities by it under the Shelf
Registration Statement.
7. Indemnification and Contribution.
(a) In connection with any Shelf Registration Statement,
the Company shall indemnify and hold harmless each Holder, its
officers and directors and each Person who controls such Holder
within the meaning of the Act against any and all losses, claims,
damages or liabilities and expenses whatsoever as incurred,
insofar as such losses, claims, damages, liabilities and expenses
arise out of or are based upon any untrue or alleged untrue
statement of material fact contained in the Shelf Registration
Statement, or any Prospectus or preliminary Prospectus or any
amendment thereof or supplement thereto or arise out of or are
based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and agrees to reimburse
each such indemnified Person, as incurred, for any legal or other
expense reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that (i) the Company will
not be liable in any case to the extent that any loss, claim,
damage, liability or expense arises out of or is based upon any
such untrue or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with
written information furnished to the Company by or on behalf of
any such Holder specifically for inclusion therein and (ii) the
foregoing indemnity with respect to any untrue statement or
alleged untrue statement or omission or alleged omission made in
any preliminary prospectus relating to the Shelf Registration
Statement shall not inure to the benefit of any Holder (or any
person controlling such Holder) from whom the person asserting
any such loss, claim, damage or liability purchases any of the
Transfer Restricted Securities that are the subject thereof if
such person did not receive a copy of the final prospectus (or
the final prospectus as supplemented) at or prior to the written
confirmation of the sale of such Transfer Restricted Securities
to such person and the untrue statement or alleged omission
contained in the preliminary prospectus was corrected in the
final prospectus (or the final prospectus as supplemented).
The Company also agrees to indemnify or contribute to losses
of, as provided in Section 6(d), any underwriters of Transfer
Restricted Securities registered under the Shelf Registration
Statement, their officers and directors and each Person, if any,
who controls any such underwriter (within the meaning of the Act)
on substantially the same basis as that of the indemnification of
the Holders provided in this Section 7(a) and shall, if requested
by any Holder, enter into an underwriting agreement reflecting
such agreement, as provided in Section 5(o) hereof.
(b) Each Holder shall indemnify and hold harmless the
Company, its directors and officers and each Person, if any, who
controls the Company (within the meaning of the Act) against any
and all losses, claims, damages, liabilities and expenses
described in the indemnity contained in Section 7(a) hereof, as
incurred, resulting from any untrue or alleged untrue statement
of material fact contained in the Shelf Registration Statement or
any amendment thereof or supplement thereto or any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading to the extent, but only to the extent, that such loss,
claim, damage, liability or expense relates to or arises from
information relating to such Holder furnished in writing by such
Holder specifically for use in the Shelf Registration Statement;
provided, however, that the obligation to indemnify will be
individual to each Holder and will be limited to the amount of
net proceeds received by such Holder from the sale of Transfer
Restricted Securities pursuant to the Shelf Registration
Statement.
(c) Any Person entitled to indemnification hereunder shall
give notice as promptly as reasonably practicable to each
indemnifying party of any claim or action commenced against it in
respect of which indemnity may be sought hereunder; provided,
however, that failure to so notify an indemnifying party shall
not relieve such indemnifying party from any obligation that it
may have pursuant to this Section except to the extent that it
has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; provided
further, however, that the failure to notify the indemnifying
party shall not relieve it from any liability that it may have to
an indemnified party otherwise than on account of this indemnity
agreement. If any such claim or action shall be brought against
an indemnified party, the indemnified party shall notify the
indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying
party shall not be liable to the indemnified party under this
Section 6 for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof;
provided, however, that an indemnified party will have the right
to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense
of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the
indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are
different from or in addition to those available to the
indemnifying party, (3) a conflict or potential conflict exists
(based on advice of counsel to the indemnified party) between the
indemnified party and indemnifying party (in which case the
indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving
notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements and other charges of counsel
will be at the expense of the indemnifying party or parties. It
is understood that the indemnifying party or parties shall not,
in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of
attorneys (in addition to any local counsel) at any one time for
all such indemnified party or parties. Each indemnified party,
as a condition to the indemnity agreements contained in Sections
6(a) and 6(b), shall use all reasonable efforts to cooperate with
the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement
or any such action effected without its written consent, but if
settled with its written consent or if there be a final judgment
of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from
and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the
subject matter of such proceeding.
(d) If a claim by an indemnified party for indemnification
under this Section 6 is found unenforceable in a final judgment
by a court of competent jurisdiction (not subject to further
appeal or review) even though the express provisions hereof
provide for indemnification in such case, then each applicable
indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified as a result of such losses in such proportion as is
appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the actions,
statements or omissions that resulted in such losses as well as
any other relevant equitable considerations. The relative fault
of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to
information supplied by, such indemnifying party or indemnified
party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as
a result of any losses shall be deemed to include, subject to the
limitations set forth in Section 7(c) herein, any legal or other
fees or expenses reasonably incurred by such party in connection
with any investigation or proceedings.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section, an
indemnifying party that is a Holder shall not be required to
contribute any amount in excess of the amount by which the total
price at which the Transfer Restricted Securities sold by such
indemnifying party and distributed to the public were offered to
the public exceeds the amount of any damages that such
indemnifying party has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be
entitled any contribution from any person who was not guilty of
such fraudulent misrepresentation.
8. Rules 144 and 144A. The Company shall use commercially
reasonable efforts to file the reports required to be filed by it
under the Act and the Exchange Act in a timely manner and, if at
any time the Company is not required to file such reports, it
will, upon the written request of any Holder of Transfer
Restricted Securities, make publicly available other information
so long as necessary to permit sales of such Holder's securities
pursuant to Rules 144 and 144A. The Company covenants that it
will take such further action as any Holder of Transfer
Restricted Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell
securities without registration under the Act within the
limitation of the exemptions provided by Rules 144 and 144A
(including the requirements of Rule 144A(d)(4)).
9. Underwritten Registrations. If any of the Transfer
Restricted Securities included under the Shelf Registration
Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders
of a majority of the shares of Common Stock included among such
Transfer Restricted Securities (calculated as if all of the then
outstanding Debentures were converted into Common Stock at the
time of such selection), provided, however, that such managing
underwriters shall be reasonably satisfactory to the Company and
the Company shall not be obligated to arrange for more than one
underwritten offering during the Effectiveness Period.
No Person may participate in any underwritten registration
hereunder unless such Person (i) agrees to sell such Person's
Transfer Restricted Securities on the basis reasonably provided
in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents
reasonably required under the terms of such underwriting
arrangements and (iii) at least 20% of the outstanding Transfer
Restricted Securities are included in such underwritten offering.
The Holders participating in any underwritten offering shall be
responsible for any expenses customarily borne by selling
securityholders, including underwriting discounts and commissions
and fees and expenses of counsel to the selling securityholders.
10. Miscellaneous.
(a) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may
not be given, unless the Company has obtained the written consent
of Holders of a majority of the Common Stock issued or issuable
upon conversion of the Debentures (calculated as if all of the
then outstanding Debentures were converted into Common Stock at
the time of such consent). Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of the
Holders of Transfer Restricted Securities being sold pursuant to
the Shelf Registration Statement and that does not directly or
indirectly affect the rights of other Holders may be given by
Holders of a majority of the shares of Common Stock included
among such Transfer Restricted Securities.
(b) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-
delivery, first-class mail, telex, telecopier, or air courier
guaranteeing overnight delivery:
(1) if to a Holder, at the address of such Holder
maintained by the Registrar under the Indenture;
(2) if to the Initial Purchaser, at the address set
forth in the Purchase Agreement;
(3) if to the Company, at its address set forth in the
Purchase Agreement;
or to such other addresses as the recipient party has specified
to the sending party by prior written notice to the sending
party.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally
delivered; one business day after being delivered to a next-day
air courier; five business days after being deposited in the
mail; when answered back, if faxed; and when receipt is
acknowledged by the recipient's telecopier machine, if
telecopied.
(c) Remedies. In the event of a breach by the Company or
by a Holder of any of their respective obligations under this
Agreement, each Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and
each Holder agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees
that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy
at law would be adequate.
(d) Severability. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law. If
any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(e) No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities
which is inconsistent with or violates the rights granted to the
Holders in this Agreement.
(f) Successors and Assigns. All covenants and agreements
in this Agreement by or on behalf of any of the parties hereto
will bind and inure to the benefit of their respective heirs,
executors, administrators, successors, legal representatives and
assigns. In addition, whether or not any express assignment has
been made, the provisions of this Agreement which are for the
benefit of Holders are also for the benefit of, and enforceable
by, any subsequent Holder.
(g) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need
not contain the signatures of more than one party, but all such
counterparts taken together will constitute one and the same
Agreement.
(h) Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute
a part of this Agreement.
(i) Governing Law. All questions concerning the
construction, validity and interpretation of this Agreement shall
be governed by and construed in accordance with the domestic laws
of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State
of New York.
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxx
--------------------------------
Its: Chief Executive Officer and President
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FORUM CAPITAL MARKETS L.P., acting
on behalf of itself and as the
representative of the Holders
By: /s/ Xxxxxxx X. XxXxxxx
---------------------------------
Its: Managing Director
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