EXHIBIT 4.2
EXHIBIT 4 to RESTRICTED STOCK AGREEMENT
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REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of June 1, 2001, is among
DAOU Systems, Inc., a Delaware corporation (the "Company"), and Xxxxxxx Xxxxx
(the "Investor")."
RECITALS
WHEREAS, the Company and the Investor are parties to that certain
Restricted Stock Agreement, dated June 1, 2001 (the "Purchase Agreement"); and
WHEREAS, the Parties desire to enter into an agreement concerning the
registration of the shares of common stock, par value $.001 per share (the
"Common Stock"), to be issued pursuant to the Purchase Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
REGISTRATION RIGHTS
1.1 Definitions. For purposes of this Agreement:
(a) the term "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, as amended (the "Act"), and the declaration or
ordering of effectiveness of such registration statement or
document;
(b) the term "Registrable Securities" means the Common Stock issued
pursuant to the Purchase Agreement, excluding in all cases,
however, any Registrable Securities sold by a person in a
transaction in which such person's rights under this Article I
are not assigned;
(c) the number of shares of "Registrable Securities then outstanding"
will be the number of shares of Common Stock outstanding which
are Registrable Securities;
(d) the term "Holder" means any person owning or having the right to
acquire Registrable Securities or any permitted assignee thereof;
and
(e) the term "Form S-1" means such form under the Act as in effect on
the date of this Agreement or any registration form under the Act
subsequently adopted by the Securities and Exchange Commission
("SEC") which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company
with the SEC.
1.2 Form S-1 Registration.
As soon as reasonably practicable after the written request of the
Holders of a majority of the Registrable Securities, the Company shall file with
the SEC one or more Registration Statements on Form S-1 (or other similar form)
covering the continuous sale of the Registrable Securities pursuant to Rule 415
under the Securities Act or any successor thereto (each, a "Shelf Registration
Statement"), in the manner specified therein. The Company shall use all
reasonable efforts to cause each Shelf Registration Statement to be declared
effective by the SEC as soon as reasonably practicable after its filing with the
SEC, and upon reasonable notice from a Holder (and in any event no less than ten
(10) days) that the Holder intends to sell pursuant to a Shelf Registration
Statement, the Company will file such amendments and supplements as necessary to
update the Shelf Registration Statement so that it will be effective for any
such sale of Registrable Securities until the earlier of (x) such time as all of
the Registrable Securities are sold pursuant to such Shelf Registration
Statement or (y) each Holder is able to sell within any ninety (90) day period
all Registrable Securities owned by such Holder pursuant to SEC Rules as then in
effect, including Rule 144 under the Securities Act, or any successor thereto
("SEC Rule 144") (the "Effective Period"); provided that in the event that
Company determines in good faith that, because it has under consideration a
significant (as defined under Regulation S-X of the SEC) acquisition or
disposition or other material transaction or corporate event that has not been
publicly disclosed or that it is in the process of preparing for filing with the
SEC an Annual Report on Form 10-K, a Quarterly Report on Form 10-Q or a Current
Report on Form 8-K or other form, a Shelf Registration Statement may contain a
material misstatement or omission, the Company may cause such Shelf Registration
Statement to not be used during the period in question. The Company agrees it
will use its best efforts to ensure that such deferral will be for the shortest
period of time reasonably required not exceeding, in the aggregate, ninety (90)
days in any twelve (12) month period.
1.3 Company Registration.
In the event that (i) the Company fails to satisfy its obligations
pursuant to Section 1.2 or (ii) for any period of not less than thirty (30)
consecutive days a Shelf Registration Statement may not be used for any reason,
and if (but without any obligation to do so) the Company proposes to register
(including for this purpose a registration effected by the Company for
shareholders other than the Holders) any of its stock or other securities under
the Act in connection with the public offering of such securities solely for
cash (other than a registration relating solely to the sale of securities to
participants in a Company stock plan, or a registration on any form which does
not include substantially the same information as would be required to be
included in a registration statement covering the sale of the Registrable
Securities), the Company will, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within twenty (20) days after mailing of such notice by the Company in
accordance with Section 2.5, the Company will cause to be registered under the
Act all of the Registrable Securities that each such Holder has requested to be
registered.
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1.4 Obligations of the Company.
Except as otherwise expressly specified in this Agreement, whenever
required under this Article I to effect the registration of any Registrable
Securities, the Company will, as expeditiously as reasonably practicable:
(a) 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 the Act with respect to the disposition of
all securities covered by such registration statement.
(b) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may
reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
(c) Use its best efforts to register and qualify the securities
covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as will be
reasonably requested by the Holders, provided that the Company
will not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
1.5 Furnish Information.
It will be a condition precedent to the obligations of the Company to
take any action pursuant to this Article I with respect to the Registrable
Securities of any selling Holder that such Holder will furnish to the Company
such information regarding itself, the Registrable Securities held by it, the
intended method of disposition of such securities and all of the other pertinent
information as will be required to effect the registration of such Holder's
Registrable Securities.
1.6 Expenses of Registration.
Subject to restrictions under applicable state securities laws, all
expenses other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant to Sections
1.2 and 1.3, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, and fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one counsel
representing the Holders will be borne by the Company.
1.7 Indemnification. If any Registrable Securities are included in a
registration statement under this Article I:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, each of its directors and each of its
officers, any underwriter (as defined in the Act) for such Holder
and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), against any losses,
claims,
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damages, or liabilities (joint or several) to which they may
become subject under the Act, or the Exchange Act, 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 Act, the Exchange Act, or
any rule or regulation promulgated under the Act, or the Exchange
Act; and the Company will pay to each such Holder, director,
officer, underwriter or controlling person, any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity
agreement contained in this Subsection 1.7(a) will 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 will not be unreasonably
withheld), nor will 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 Violation which occurs
in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration
by any such Holder, director, officer, underwriter or controlling
person.
(b) To the extent permitted by law, each selling Holder will
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 Act, any other Holder selling securities in such
registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages,
or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act or the Exchange Act
insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon 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 such Holder expressly for
use in connection with such registration; and each such Holder
will pay any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this Subsection
1.7(b), in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that
the indemnity agreement contained in this Subsection 1.7(b) will
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 Holder, which consent will not be unreasonably
withheld; provided, that, in no event will any indemnity under
this Subsection 1.7(b) exceed the proceeds from the offering net
of sales commission, if any, received by such Holder.
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(c) Promptly after receipt by an indemnified party under this Section
1.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party
under this Section 1.7, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying
party will have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense
thereof with counsel satisfactory to the indemnified party (which
shall not unreasonably withhold its approval); provided, however,
that an indemnified party (together with all other indemnified
parties which may be represented without conflict by one counsel)
will have the right to retain one separate counsel, with the
reasonable fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel
retained by the indemnifying party is inappropriate due to actual
or potential differing interests between such 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 of the commencement
of any such action, if prejudicial to its ability to defend such
action, will relieve such indemnifying party of any liability to
the indemnified party under this Section 1.7, but the omission so
to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 1.7.
(d) If the indemnification provided for in this Section 1.7 is held
by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim,
damage, or expense referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party to this
Agreement, will contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with
the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other
relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party will be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied
by the indemnifying party or by the indemnified party and the
parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) The obligations of the Company and Holders under this Section 1.7
will survive the completion of any offering of Registrable
Securities in a registration statement under this Article I, and
otherwise.
1.8 Reports Under 1934 Act.
With a view to making available to the Holders the benefits of Rule 144
promulgated under the Act and any other rule or regulation of the SEC that may
at any time permit a Holder to
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sell securities of the Company to the public without registration or pursuant to
a registration on Form S-1, the Company will:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Exchange
Act; and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of
SEC Rule 144, the Act and the Exchange Act, or that it qualifies
as a registrant whose securities may be resold pursuant to Form
S-3 (at any time after it so qualifies), (ii) a copy of the most
recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant
to such form.
1.9 Rule 144 Availability.
Notwithstanding anything to the contrary above in this Article I, prior
to exercising any right provided for in this Article I each Holder will (i)
evaluate in good faith whether such Holder is otherwise permitted to sell the
entire amount of Registrable Securities it is then seeking to register within
the time period it desires to sell pursuant to Rule 144 of the Exchange Act, or
any successor regulation thereto and (ii) exercise such rights only in the case
that it determines in good faith that such rights are necessary to sell such
Registrable Securities in a timely manner.
ARTICLE II
MISCELLANEOUS
2.1 Successors and Assigns.
Except as otherwise provided in this Agreement, the terms and
conditions of this Agreement will inure to the benefit of and be binding upon
the respective successors and assigns of the parties (including transferees of
any shares of Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties to this
Agreement or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
2.2 Governing Law.
This Agreement will be governed by and construed under the laws of the
State of Delaware.
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2.3 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same instrument.
2.4 Titles and Subtitles.
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
2.5 Notices.
Unless otherwise provided, any notice required or permitted under this
Agreement will be given in writing and will be deemed effectively given upon
personal delivery to the party to be notified, by telecopy upon the appropriate
answer-back, or upon deposit with the United States Post Office, by registered
or certified mail, postage prepaid and addressed to the party to be notified at
the address indicated for such party on Schedule 1 or at such other address as
such party may designate by ten (10) days' advance written notice to the other
parties.
2.6 Expenses.
If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party will be entitled to reasonable
attorneys' fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
2.7 Amendments and Waivers.
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this paragraph will be binding upon each Holder of any Registrable Securities
then outstanding, each future Holder of all such Registrable Securities, and the
Company.
2.8 Severability.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision will be excluded from this
Agreement and the balance of the Agreement will be interpreted as if such
provision were so excluded and will be enforceable in accordance with its terms.
2.9 Aggregation of Stock.
All shares of Registrable Securities held or acquired by affiliated
entities or persons will be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
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2.10 Entire Agreement, Amendment, Waiver.
This Agreement (including the Schedules to this Agreement, if any)
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects of this Agreement and thereof.
2.11 Adjustments for Stock Splits.
Wherever in this Agreement there is a reference to a specific number of
shares of Common Stock of the Company of any class or series, or a reference to
any amount of dollars per any such share, then, upon the occurrence of any
subdivision, combination or stock dividend of such class or series of stock, the
specific number of shares or the specific dollar amount so referenced in this
Agreement will automatically be proportionately adjusted to reflect the effect
on the outstanding shares of such class of series of stock by such subdivision,
combination or stock dividend.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
DAOU SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
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Title: Chief Executive Officer
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THE INVESTOR:
/s/ Xxxxxxx X. Xxxxx
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Xxxxxxx Xxxxx
Signature Page to Registration Rights Agreement,
Executed August 1, 2001,
to be Effective as of the Date First Written Above
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EXHIBIT 4.2
SCHEDULE 1
INVESTOR
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NAME AND ADDRESS
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Xxxxxxx Xxxxx
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxx 0000-X
Xxxxxxxxxxxx, XX 00000
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