DAOU SYSTEMS, INC.
INVESTORS' RIGHTS AGREEMENT
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OCTOBER 26, 1995
TABLE OF CONTENTS
PAGE
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ARTICLE I
REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 REQUEST FOR REGISTRATION . . . . . . . . . . . . . . . . . . . . . . 2
1.3 COMPANY REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 OBLIGATIONS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . 3
1.5 FURNISH INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 EXPENSES OF DEMAND REGISTRATION. . . . . . . . . . . . . . . . . . . 4
1.7 EXPENSES OF COMPANY REGISTRATION . . . . . . . . . . . . . . . . . . 5
1.8 UNDERWRITING REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . . 5
1.9 [Reserved.]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.11 REPORTS UNDER 1934 ACT . . . . . . . . . . . . . . . . . . . . . . . 7
1.12 FORM S-3 REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . 8
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . 9
1.14 "MARKET STAND-OFF" AGREEMENT . . . . . . . . . . . . . . . . . . . . 9
1.15 TERMINATION OF REGISTRATION RIGHTS . . . . . . . . . . . . . . . . .10
1.16 RULE 144 AVAILABILITY. . . . . . . . . . . . . . . . . . . . . . . .10
ARTICLE II
COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . .10
2.1 DELIVERY OF FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . .10
2.2 INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.3 TERMINATION OF INFORMATION AND INSPECTION COVENANTS. . . . . . . . .11
2.4 RIGHT OF FIRST OFFER . . . . . . . . . . . . . . . . . . . . . . . .11
2.5 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
2.6 BOARD REPRESENTATION . . . . . . . . . . . . . . . . . . . . . . . .13
2.7 INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . .13
2.8 ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .13
2.9 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . .14
2.10 TERMINATION OF CERTAIN COVENANTS . . . . . . . . . . . . . . . . . .14
2.11 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . .15
2.12 COMMON STOCK LEGENDS.. . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE III
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.1 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . .15
3.2 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.3 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.4 TITLES AND SUBTITLES . . . . . . . . . . . . . . . . . . . . . . . .15
3.5 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.6 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
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3.7 AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . .16
3.8 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
3.9 AGGREGATION OF STOCK . . . . . . . . . . . . . . . . . . . . . . . .16
3.10 ENTIRE AGREEMENT; AMENDMENT; WAIVER. . . . . . . . . . . . . . . . .16
3.11 ADJUSTMENTS FOR STOCK SPLITS . . . . . . . . . . . . . . . . . . . .16
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INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT, dated as of October 26, 1995, is among
DAOU SYSTEMS, INC., a California corporation (the "COMPANY"), and the investors
listed on SCHEDULE 1 to this Agreement, each of which is referred to in this
Agreement as an "INVESTOR."
RECITALS
WHEREAS, the Company and the Investors are parties to the Series A
Preferred Stock Purchase Agreement of even date herewith (the "SERIES A
AGREEMENT") and Xxxxxx X. Xxxx, Xxxxxxx X. Xxxx and Xxxxxx X. Xxxx (each
individually or "FOUNDER" and collectively the "FOUNDERS") and the Investors are
parties to the Common Stock Purchase Agreement of even date herewith (the
"COMMON STOCK AGREEMENT"); and
WHEREAS, in order to induce the Company to enter into the Series A
Agreement and Common Stock Agreement and to induce the Investors to invest funds
in the Company pursuant to the Series A Agreement and Common Stock Agreement,
the Investors and the Company hereby agree that this Agreement will govern the
rights of the Investor to cause the Company to register shares of the Company's
common stock (the "COMMON STOCK") issued or issuable to the Investors and
certain other matters as set forth in this 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 (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock (whether sold
pursuant to the Series A Agreement or issuable upon exercise of those certain
Series A Preferred Stock Purchase Warrants, dated October 26, 1995, expiring
October 26, 2000 and issued to Xxxxxxx & Company and Xxxxxxx Capital,
S.B.I.C. L.P.) and the Common Stock sold to the Investors pursuant to the
Common Stock Agreement, and (ii) any Common Stock issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, such Series A Preferred Stock or Common Stock, 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;
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(c) the number of shares of "REGISTRABLE SECURITIES THEN OUTSTANDING"
will be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities;
(d) the term "HOLDER" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
SECTION 1.13; and
(e) the term "FORM S-3" 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 REQUEST FOR REGISTRATION.
(a) If the Company receives at any time after the earlier of
(i) August 31, 1997, or (ii) three (3) months after the effective date of the
first registration statement for a public offering of securities of the Company
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction), a written request from the Holders
of a majority of the Registrable Securities (but not less than 33 1/3% of the
originally issued Series A Preferred Stock) that the Company file a registration
statement under the Act covering the registration of the Company's Common Stock
where the offering price per share is at least $7.00 per share (appropriately
adjusted for any stock split, dividend, combination or other recapitalization)
and anticipated aggregate offering price, net of underwriting discounts and
commissions, exceeds $15,000,000, then the Company will, within ten days of the
receipt thereof, give written notice of such request to all Holders and will,
subject to the limitations of SUBSECTION 1.2(b), as soon as practicable, and in
any event will use its best efforts to (1) file within 60 days of the receipt of
such request, a registration statement under the Act of all Registrable
Securities which the Holders request to be registered within 20 days of the
mailing of such notice by the Company in accordance with SECTION 3.5 and
(2) cause such registration statement to be effective as soon as reasonably
practicable thereafter.
(b) If the Holders initiating the registration request pursuant to
this Agreement ("INITIATING HOLDERS") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they will so
advise the Company as a part of their request made pursuant to this SECTION 1.2
and the Company will include such information in the written notice referred to
in SUBSECTION 1.2(a). The underwriter will be selected by the Company subject
to the acceptance by a majority in interest of the Initiating Holders, which
acceptance will not be unreasonably withheld. In such event, the right of any
Holder to include such Holder's Registrable Securities in such registration will
be conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided in this Agreement. All Holders
proposing to distribute their securities through such underwriting will
(together with the Company as provided in SUBSECTION 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority
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in interest of the Initiating Holders. Notwithstanding any other provision
of this SECTION 1.2, if the underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares
to be underwritten, then the Initiating Holders will so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant to this
Agreement, and the number of shares of Registrable Securities that may be
included in the underwriting will be allocated among all Holders thereof,
including the Initiating Holders, in proportion (as nearly as practicable) to
the amount of Registrable Securities of the Company owned by each Holder;
provided, however, that the number of shares of Registrable Securities to be
included in such underwriting will not be reduced unless all other securities
are first entirely excluded from the underwriting.
(c) The Company is obligated to effect only one such registration
pursuant to this SECTION 1.2.
(d) Notwithstanding the foregoing, if the Company furnishes to
Holders requesting a registration statement pursuant to this SECTION 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company will have the right to defer such filing one
time for a period of not more than 60 days after receipt of the request of the
Initiating Holders.
1.3 COMPANY REGISTRATION. 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 20 days after mailing of such notice by the Company in
accordance with SECTION 3.5, the Company will, subject to the provisions of
SECTION 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered; provided,
however, that the Company will not be obligated to effect more than two such
registrations of Holders' Registrable Securities.
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 possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to 120 days.
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(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 the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers 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.
(d) 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.
(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. Each Holder participating
in such underwriting will also enter into and perform its obligations under such
an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act 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.
1.5 FURNISH INFORMATION.
(a) 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, and the intended method of disposition of such securities as will be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company will have no obligation with respect to any
registration requested pursuant to SECTION 1.2 or SECTION 1.12 if, due to the
operation of SUBSECTION 1.5(a), the anticipated aggregate offering price of the
Registrable Securities to be included in the registration does not equal or
exceed the anticipated aggregate offering price required to originally trigger
the Company's obligation to initiate such registration as specified in
SUBSECTION 1.2(a) or SUBSECTION 1.12(b)(ii), whichever is applicable.
1.6 EXPENSES OF DEMAND REGISTRATION. Subject to restrictions under
applicable state securities laws, all expenses other than underwriting discounts
and commissions incurred in
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connection with registrations, filings or qualifications pursuant to
SECTION 1.2, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, and fees and disbursements
of counsel for the Company will be borne by the Company; PROVIDED, HOWEVER,
that the Company will not be required to pay for any expenses of any
registration proceeding begun pursuant to SECTION 1.2 if the registration
request is subsequently withdrawn at the request of the Holders of a majority
of the Registrable Securities to be registered (in which case all
Participating Holders will bear such expenses), unless (i) the Holders of a
majority of the originally issued Series A Preferred Stock agree to forfeit
their right to one demand registration pursuant to SECTION 1.2 or (ii) such
withdrawal was caused by a material adverse change in the Company that has
arisen subsequent to the time of the request.
1.7 EXPENSES OF COMPANY REGISTRATION. Subject to restrictions under
applicable state securities laws, the Company will bear and pay all expenses
incurred in connection with any registration, filing or qualification of
Registrable Securities with respect to the registrations pursuant to SECTION 1.3
for each Holder (which right may be assigned as provided in SECTION 1.13),
including (without limitation) all registration, filing, and qualification fees,
printers and accounting fees relating or apportionable thereto, but excluding
underwriting discounts and commissions relating to Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering involving
an underwriting of shares of the Company's capital stock, the Company will not
be required under SECTION 1.3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then the Company will have a right to
limit the number of shares to such number as it will determine in good faith
will not jeopardize the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the Company determines in good faith is
compatible with the success of the offering, then the Company will be required
to include in the offering only that number of such securities, including
Registrable Securities, which the Company determines in good faith will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling shareholders according to the total
amount of securities entitled to be included therein owned by each selling
shareholder or in such other proportions as will mutually be agreed to by such
selling shareholder; provided that any Registrable Securities held by officers
and directors of the Company will be excluded from such registration to the
extent required by such limitations). For purposes of the preceding
parenthetical concerning apportionment, for any selling shareholder which is a
Holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and shareholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons will be deemed to be a single "SELLING
SHAREHOLDER," and any pro-rata reduction with respect to such "selling
shareholder" will be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder," as defined in this sentence.
1.9 [RESERVED.]
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1.10 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, 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 1.10(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 underwriter, 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 1.10(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 1.10(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 1.10(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 1.10 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 1.10,
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 mutually satisfactory to the parties; 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 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 1.10, 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 1.10.
(d) If the indemnification provided for in this SECTION 1.10 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) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement will
control.
(f) The obligations of the Company and Holders under this
SECTION 1.10 will survive the completion of any offering of Registrable
Securities in a registration statement under this ARTICLE I, and otherwise.
1.11 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 sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company will:
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(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after 90 days after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) 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
(d) 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 (at any time
after 90 days after the effective date of the first registration statement filed
by the Company), the Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), 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.
1.12 FORM S-3 REGISTRATION. In case the Company will receive from any
Holder or Holders of at least 10% of the originally issued Series A Preferred
Stock or such lesser percentage provided the proposed sale of Registrable
Securities equals or exceeds the aggregate price threshold specified in
SUBSECTION 1.12(b)(ii) below) a written request or requests that the Company
effect a registration on Form S-3 and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such Holder
or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company will not be obligated to effect any such registration,
qualification or compliance, pursuant to this SECTION 1.12: (i) if Form S-3 (or
any successor short-form registration) is not available for such offering by the
Holders; (ii) if the Holders, together with the holders of any other securities
of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate price
to the public (net of any underwriters' discounts or commissions) of less than
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$5,000,000; (iii) if the Company furnishes to the Holders a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such Form S-3 Registration to be effected at
such time, in which event the Company will have the right to defer the filing of
the Form S-3 registration statement for a period of not more than 60 days after
receipt of the request of the Holder or Holders under this SECTION 1.12;
provided, however, that the Company will not utilize this right more than once
in any twelve-month period; (iv) if the Company has, already effected two
registrations on Form S-3 for the Holders pursuant to this SECTION 1.12; or
(v) in any particular jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company will file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders; provided, however, that the Company will not be obligated to
effect more than two registrations pursuant to this SECTION 1.12. All expenses
incurred in connection with a registration requested pursuant to SECTION 1.12,
including (without limitation) all registration, filing, qualification,
printer's and accounting fees and the reasonable fees and disbursements of
counsel for the Company, but excluding any underwriters' discounts or
commissions associated with Registrable Securities, will be borne by the
Company. Registrations effected pursuant to this SECTION 1.12 will not be
counted as demands for registration or registrations effected pursuant to
SECTIONS 1.2 or 1.3, respectively.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this ARTICLE I may be assigned (but
only with all related obligations) by a Holder to a transferee or assignee of
such securities who, after such assignment or transfer, holds at least 250,000
shares (as may be determined by reference to SECTION 3.9) of Registrable
Securities (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations), PROVIDED the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; and PROVIDED, FURTHER, that
such assignment will be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act and PROVIDED, FURTHER, that such assignment will be
effective only in connection with a transfer or assignment of such securities
effected prior to the effective date of a public offering with an aggregate net
offering price in the amount referenced in SECTION 1.2 of this Agreement.
1.14 "MARKET STAND-OFF" AGREEMENT. Notwithstanding the rights granted
pursuant to SECTION 1.2(a), each Investor hereby agrees that, during the period
of duration (not to exceed 180 days) specified by the Company and an underwriter
of Common Stock or other securities of the Company, following the effective date
of a registration statement of the Company filed under the Act, it will not, to
the extent 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 (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except Common Stock included in such
registration; provided, however, that:
-9-
(a) such agreement will be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(b) all officers and directors of the Company and all other persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.15 TERMINATION OF REGISTRATION RIGHTS. No Holder will be entitled to
exercise any right provided for in this ARTICLE I after seven years following
the consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public.
1.16 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 Registerable Securities in a timely manner.
ARTICLE II
COVENANTS OF THE COMPANY
2.1 DELIVERY OF FINANCIAL STATEMENTS. So long as any Investor holds in
the aggregate, a minimum of 100,000 shares of Common Stock and Series A
Preferred Stock (and/or any Common Stock issued upon conversion thereof) (each
such Investor being a "MAJOR INVESTOR"), the Company will deliver to each such
Major Investor (subject to such Major Investor's agreement to maintain it in
strict confidence):
(a) as soon as practicable, but in any event within 90 days after the
end of each fiscal year of the Company, an income statement for such fiscal
year, a balance sheet of the Company and statement of shareholder's equity as of
the end of such year, and a schedule as to the sources and applications of funds
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles ("GAAP"),
and audited and certified by independent public accountants of nationally
recognized standing selected by the Company;
(b) as soon as practicable, but in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the Company, an
unaudited profit or loss statement, schedule as to the sources and application
of funds for such fiscal quarter and an unaudited balance sheet as of the end of
such fiscal quarter.
-10-
(c) within 30 days of the end of each month, an unaudited income
statement and schedule as to the sources and application of funds and balance
sheet for and as of the end of such month, in reasonable detail;
(d) as soon as practicable, but in any event, prior to the end of
each fiscal year, a budget for the next fiscal year;
(e) with respect to the financial statements called for in
SUBSECTIONS (b) and (c) of this SECTION 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such financial
statements were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment; and
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Major Investor or
any assignee of the Major Investor may from time to time reasonably request,
provided, however, that the Company will not be obligated under this
SUBSECTION 2.1(f) or any other subsection of SECTION 2.1 to provide information
which it deems in good faith to be a trade secret or similar confidential
information.
2.2 INSPECTION. The Company will permit each Major Investor, at such
Major Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, employees and independent accountants
all at such reasonable times as may be requested by the Major Investor;
provided, however, that the Company will not be obligated pursuant to this
SECTION 2.2 to provide access to any information which it reasonably considers
to be a trade secret or similar confidential information.
2.3 TERMINATION OF INFORMATION AND INSPECTION COVENANTS. The covenants
set forth in SUBSECTIONS 2.1 and SECTION 2.2 will terminate as to Investors and
be of no further force or effect when the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
firm commitment underwritten offering of its securities to the general public is
consummated or when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the Exchange Act, whichever event
first occurs.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions specified
in this SECTION 2.4, the Company hereby grants to each Investor a right of first
offer with respect to future sales by the Company of its Shares (as defined
below). For purposes of this SECTION 2.4, Investor includes any general
partners and affiliates of an Investor. An Investor will be entitled to
apportion the right of first offer hereby granted it among itself and its
partners and affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("OFFERED SHARES"), the Company will
-11-
first make an offering of such Offered Shares to each Investor in accordance
with the following provisions:
(a) NOTICE. The Company will deliver a notice by certified mail
("NOTICE") to the Investors stating (i) its bona fide intention to offer such
Offered Shares, (ii) the number of such Offered Shares to be offered, and (iii)
the price and terms, if any, upon which it proposes to offer such Offered
Shares.
(b) MECHANICS. (i) Within 20 calendar days after receipt of the
Notice, the Investor may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Offered Shares which
equals the proportion that the number of shares of Common Stock issued and held,
or issuable upon conversion of the Series A Preferred Stock then held, by such
Investor bears to the total number of shares of Common Stock outstanding
(assuming full conversion and exercise of all convertible or exercisable
securities) (that number of shares of Common Stock being the Investor's "PRO
RATA PORTION"). (ii) The Company will promptly, in writing, inform each
Investor which purchases all of its Pro Rata Portion (a "FULLY-EXERCISING
INVESTOR") of any other Investor's failure to do likewise (a "NON-FULLY
EXERCISING INVESTOR"). (iii) During the ten-day period commencing after receipt
of such information, each Fully-Exercising Investor will be entitled to obtain
that portion of the Offered Shares not subscribed for by the Investors which is
equal to the proportion that the number of shares of Common Stock issued and
held, or issuable upon conversion of Series A Preferred Stock then held, by such
Fully-Exercising Investor bears to the total number of shares of Common Stock
issued and held, or issuable upon conversion of the Series A Preferred Stock
then held, by all Fully-Exercising Investors who wish to purchase some of the
unsubscribed shares.
(c) If all Offered Shares referred to in the Notice are not
elected to be obtained as provided in SUBSECTION 2.4(b) the Company may,
during the 30-day period following the expiration of the period provided in
SUBSECTION 2.4(b) offer the remaining unsubscribed portion of such Offered
Shares to any person or persons at a price not less than, and upon terms no
more favorable to the offeree than those specified in the Notice. If the
Company does not enter into an agreement for the sale of the Offered Shares
within such period, or if such agreement is not consummated within 30 days of
the execution thereof, the right provided pursuant to this Agreement will be
deemed to be revived and such Offered Shares will not be offered unless first
reoffered to the Investors in accordance with this Agreement.
(d) EXCLUDED OFFERS. The right of first offer in this SECTION 2.4
will not be applicable (i) to the issuance or sale of Common Stock (or options
therefor) under any stock incentive or option plan otherwise approved by the
Board of Directors to employees for the primary purpose of soliciting or
retaining their employment, (ii) to or after consummation of a bona fide, firmly
underwritten public offering of shares of Common Stock, registered under the Act
pursuant to a registration statement on Form S-1, at an offering price of at
least $7.00 per share (appropriately adjusted for any stock split, dividend,
combination or other recapitalization) and $15,000,000 in the aggregate,
(iii) to the issuance of securities pursuant to the conversion or exercise of
convertible or exercisable securities, (iv) to the issuance of securities in
connection with a bona fide business acquisition of or by the Company, whether
by merger, consolidation, sale of assets, sale or exchange
-12-
of stock or otherwise or (v) to the issuance of stock, warrants or other
securities or rights to consultants, directors or other persons or entities
with which the Company has strategic business relationships provided that the
terms of such issuance have been approved by the Board of Directors.
2.5 INSURANCE. The Company will obtain and maintain in full force and
effect for a period of at least five years from the date of this Agreement
(unless such key employee is terminated or resigns) term life insurance in the
amount of $2 million on the lives of Georges and Xxxxxx Xxxx, with proceeds
payable to the Company. Furthermore, the Company will use its best efforts to
obtain, as soon as is commercially reasonable subsequent to the Closing, general
liability insurance, with policy limits of $3,000,000 per occurrence and
$5,000,000 in the aggregate.
2.6 BOARD REPRESENTATION. So long as each of (a) Xxxxx Partners II, L.P.,
Xxxxx Partners International II, L.P., and Xxxxx Employee Fund, L.P.
(collectively, "Xxxxx") or (b) Information Associates, L.P. and Information
Associates, C.V. (collectively "Information Associates") owns not less than
181,818 shares of the Series A Preferred Stock it is purchasing under this
Agreement, (or an equivalent amount of Common Stock issued upon conversion
thereof), the Company will use its best efforts to cause the election to the
Board of Directors and thereafter maintain a Director nominated by Xxxxx and a
Director nominated by Trident. Furthermore, as soon as all vacancies on the
Board of Directors have been filled, the Company will use its best efforts to
amend the Company's Restated Bylaws to change the minimum quorum required for
meetings of the Board of Directors from one-third to a majority of the
authorized number of Directors.
2.7 INDEPENDENT ACCOUNTANTS. The Company will retain independent public
accountants of recognized national standing. For the purposes of SECTION 2.7,
the independent public accountants of national standing will consist of these
firms comprising the "Big Six" as they are recognized currently, and their
respective successors.
2.8 ADDITIONAL COVENANTS. So long as not less than 50% of the originally
issued Series A Preferred Stock is still outstanding, the Company agrees as
follows:
(a) the Company will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, (i) all lawful taxes, assessments, and
governmental charges or levies imposed upon the income, profits, property, or
business of the Company or any subsidiary; provided, however, that any such tax,
assessment, charge, or levy need not be paid if the validity thereof will
currently be contested in good faith by appropriate proceedings and if the
Company will have set aside on its books adequate reserves with respect thereof,
and provided further, that the Company will pay all such taxes, assessments,
charges, or levies forthwith upon the commencement of proceedings to foreclose
any lien that may have attached as security therefor and (ii) in conformance
with customary trade terms, all other indebtedness incident to the operations of
the Company;
(b) the Company will keep its properties and those of its
subsidiaries in good repair, working order, and condition, reasonable wear and
tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions, and improvements thereto; and the Company and
its subsidiaries will at all times comply with the provisions of all material
leases to
-13-
which any of them is a party or under which any of them occupies property so
as to prevent any loss or forfeiture thereof or thereunder;
(c) the Company will keep its assets and those of its subsidiaries
that are of an insurable character insured by financially sound and reputable
insurers against loss or damage by fire, extended coverage, and explosion
insurance in amounts customary for companies in similar businesses similarly
situated; and the Company will maintain, with financially sound and reputable
insurers, insurance against other hazards, risks, and liabilities to persons and
property to the extent and in the manner customary for companies in similar
businesses similarly situated;
(d) the Company will keep true records and books of account in which
full, true, and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with GAAP applied on a
consistent basis;
(e) the Company and all its subsidiaries will duly observe and
conform to all valid requirements of governmental authorities relating to the
conduct of their businesses or to their property or assets;
(f) the Company will maintain in full force and effect its corporate
existence, rights, and franchises and all licenses and other rights to use
patents, processes, licenses, trademarks, trade names, or copyrights owned or
possessed by it or any subsidiary and deemed by the Company to be necessary to
the conduct of its business;
(g) the Company will indemnify fully all directors of the Company to
the maximum extent permitted by applicable law, except that directors' and
officers' liability insurance will only be obtained with the express approval of
the Company's Board of Directors.
2.9 NEGATIVE COVENANTS. So long as not less than 50% of the originally
issued Series A Preferred Stock is still outstanding, the Company will not,
without the prior written consent of the holders of not less than 50% of
outstanding Series A Preferred Stock:
(a) grant any increase in compensation, options or other
extraordinary renumeration to any member of management in connection with the
sale of the Company, or any of its subsidiaries, or the termination of
employment or otherwise, unless such plan or action has been approved by a
majority of the then disinterested members of the Board of Directors;
(b) declare any dividend on the Common Stock of the Company without
the affirmative vote of at least one of the members of the Board of Directors
nominated by the holders of the Series A Preferred Stock;
(c) grant any person registration rights which will be exercisable
prior to August 31, 1997 or otherwise on terms more favorable than the
registration rights granted to the Investors pursuant to this Agreement.
-14-
2.10 TERMINATION OF CERTAIN COVENANTS. The covenants set forth in
SECTIONS 2.6, 2.7, 2.8 and 2.9 will terminate and be of no further force or
effect upon the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with
the firm commitment underwritten offering of its securities to the general
public.
2.11 USE OF PROCEEDS. The proceeds of the sale of the Series A Preferred
Stock pursuant to the Series A Agreement will be used for general working
capital purposes with a portion intended to be used for the expansion of
regional offices and systems integration business across the United States.
2.12 COMMON STOCK LEGENDS. The Company will, as soon as reasonably
practicable, make an application to the California Department of Corporations
for approval to remove the legends restricting transfer set forth on the
Company's shares of Common Stock pursuant to Section 25102(h) of the California
Corporations Code (the "25102(h) legend"). In the event that, on or before the
9th month anniversary of the date of this Agreement, such 25102(h) legends have
not been removed from such share certificates, the Company will issue to the
holders of such shares of the Company's Common Stock, at such holders' option,
one share of the Company's Series A Preferred Stock in consideration for the
delivery for the exchange of each share of the Company's Common Stock and one
dollar ($1.00). The holder of such shares of Common Stock will exercise such
option by providing the Company with written notice of the holders intention to
exercise such option no later than 10 days after such 9th month anniversary,
together with delivery of the shares of Common Stock to be exchanged, along with
one dollar ($1.00) per each such share subject to adjustment upward or downward,
if applicable, for stock splits, dividends, etc.
ARTICLE III
MISCELLANEOUS
3.1 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.
3.2 GOVERNING LAW. This Agreement will be governed by and construed under
the laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California.
3.3 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.
3.4 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.
-15-
3.5 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 the signature page of this
Agreement, or at such other address as such party may designate by ten days'
advance written notice to the other parties.
3.6 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.
3.7 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.
3.8 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.
3.9 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.
3.10 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement (including the
Exhibits 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.
3.11 ADJUSTMENTS FOR STOCK SPLITS. Wherever in this Agreement there is a
reference to a specific number of shares of Common Stock or Preferred 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-16-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE COMPANY:
DAOU SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxx
------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Chief Executive Officer
THE INVESTORS:
XXXXX PARTNERS II, L.P.,
a Delaware Limited Partnership
By: GWW Partners, L.P.,
a Delaware Limited Partnership
By: /s/
------------------------------------
General Partner
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
XXXXX PARTNERS INTERNATIONAL II, L.P.,
a Delaware Limited Partnership
By: GWW Partners, L.P.,
a Delaware Limited Partnership
By: /s/
------------------------------------
General Partner
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
[SIGNATURE PAGE TO DAOU SYSTEMS, INC.
INVESTORS' RIGHTS AGREEMENT]
-17-
THE INVESTORS:
XXXXX EMPLOYEE FUND, L.P.,
a Delaware Limited Partnership
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx
General Partner
000 Xxxxx Xxx.
Xxxxx 0000
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
[SIGNATURE PAGE TO DAOU SYSTEMS, INC.
INVESTORS' RIGHTS AGREEMENT]
-18-
THE INVESTORS:
PYXIS CORPORATION,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxxx
Vice President
Chief Financial Officer
0000 Xxxxxx Xxxx Xxxxx
Xxx Xxxxx, XX 00000
Fax: (000) 000-0000
[SIGNATURE PAGE TO DAOU SYSTEMS, INC.
INVESTORS' RIGHTS AGREEMENT]
-19-
THE INVESTORS:
INFORMATION ASSOCIATES, L.P,
a Delaware Limited Partnership
By: Trident Capital Management, LLC,
a Delaware Limited Liability Company
By: /s/
--------------------------------------
Managing Director
0000 Xxxx Xxxx Xxxx
Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
[SIGNATURE PAGE TO DAOU SYSTEMS, INC.
INVESTORS' RIGHTS AGREEMENT]
-20-
THE INVESTORS:
HLM PARTNERS, VII L.P.,
a Delaware Limited Partnership
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Xxxxxx X. Xxxxxx, a general partner
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
NEEDHAM CAPITAL, S.B.I.C. L.P.,
a Delaware Limited Partnership
By: /s/ Xxxx X. Xxxxxxxxxx
------------------------------------
Xxxx X. Xxxxxxxxxx, a general partner
000 Xxxx Xxxxxx
Xxxxx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
NEEDHAM EMERGING GROWTH PARTNERS, L.P.,
a Delaware Limited Partnership
By: /s/ Xxx Xxxxxxxxxx
------------------------------------
Xxx Xxxxxxxxxx, a general partner
000 Xxxx Xxxxxx
Xxxxx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
[SIGNATURE PAGE TO DAOU SYSTEMS, INC.
INVESTORS' RIGHTS AGREEMENT]
-21-
THE INVESTORS:
THE CHASE MANHATTAN BANK NA CUST. FBO
XXXXXXX X. XXXXXX, XXX ROLLOVER,
TAX ID NO. 00-0000000
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Xxxxxx Xxxxxxx, Custodian
Second Vice President
[SIGNATURE PAGE TO DAOU SYSTEMS, INC.
INVESTORS' RIGHTS AGREEMENT]
-22-
THE INVESTORS:
/s/ Xxx Xxxxxxxxxx
-----------------------------------------
Xxx Xxxxxxxxxx
00 Xxxxxx Xxxxx Xxxxx
Xxxxxxxxx 00-XX
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
/s/ Xxxxxxx Sud
----------------------------------------
Xxxxxxx Sud
00 Xxxx 00xx Xxxxxx
Xxxxxxxxx 00X
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
[SIGNATURE PAGE TO DAOU SYSTEMS, INC.
INVESTORS' RIGHTS AGREEMENT]
-23-
THE INVESTORS:
INFORMATION ASSOCIATES, C.V.,
a Netherlands Antilles Limited
Partnership
By: Trident Capital Management, LLC,
a Delaware Limited Liability Company
By: /s/
------------------------------------
Managing Director
0000 Xxxx Xxxx Xxxx
Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
[SIGNATURE PAGE TO DAOU SYSTEMS, INC.
INVESTORS' RIGHTS AGREEMENT]
-24-
SCHEDULE 1
INVESTORS
--------------------------------------------------------------------------------
NAME AND ADDRESS
--------------------------------------------------------------------------------
Xxxxx Partners II, L.P.
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Partners International II, L.P.
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Employee Fund, L.P.
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
--------------------------------------------------------------------------------
Information Associates, L.P.
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
--------------------------------------------------------------------------------
Information Associates, C.V.
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
--------------------------------------------------------------------------------
Pyxis Corporation
0000 Xxxxxxx Xxxx Xxxxx
Xxx Xxxxx, XX 00000
--------------------------------------------------------------------------------
HLM Partners, VII L.P.
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Needham Capital S.B.I.C., L.P.
000 Xxxx Xxxxxx
Xxxxx Xxxxx
Xxx Xxxx, XX 00000
--------------------------------------------------------------------------------
Needham Emerging Growth Partners, L.P.
000 Xxxx Xxxxxx
Xxxxx Xxxxx
Xxx Xxxx, XX 00000
--------------------------------------------------------------------------------
-1-
SCHEDULE 1
INVESTORS
--------------------------------------------------------------------------------
NAME AND ADDRESS
--------------------------------------------------------------------------------
XXXXXXX X. XXXXXX, XXX Rollover
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx 00X
Xxx Xxxx, Xxx Xxxx 00000
--------------------------------------------------------------------------------
Xxx Xxxxxxxxxx
00 Xxxxxx Xxxxx Xxxxx
Xxxxxxxxx 00-XX
Xxx Xxxx, Xxx Xxxx 00000
--------------------------------------------------------------------------------
Xxxxxxx Sud
00 Xxxx 00xx Xxxxxx
Xxxxxxxxx 00X
Xxx Xxxx, Xxx Xxxx 00000
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