3,850,000 SHARES
DAOU SYSTEMS, INC.
COMMON STOCK
($0.001 PAR VALUE)
UNDERWRITING AGREEMENT
February ___, 1997
Alex. Xxxxx & Sons Incorporated
Xxxxx & Company
Xxxxxxxxx & Xxxxx LLC
As Representative(s) of the
Several Underwriters
c/o Alex. Xxxxx & Sons Incorporated
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Gentlemen:
Daou Systems, Inc., a Delaware corporation (the "Company"), and certain
stockholders of the Company (the "Selling Stockholders") propose to sell to the
several underwriters (the "Underwriters") named in Schedule I hereto for whom
you are acting as representatives (the "Representatives") an aggregate of
3,850,000 shares of the Company's Common Stock, $0.001 par value (the "Firm
Shares"), of which 2,900,000 shares will be sold by the Company and 950,000
shares will be sold by the Selling Stockholders. The respective amounts of the
Firm Shares to be so purchased by the several Underwriters are set forth
opposite their names in Schedule I hereto, and the respective amounts to be sold
by the Selling Stockholders are set forth opposite their names in Schedule II
hereto. The Company and the Selling Stockholders are sometimes referred to
herein collectively as the "Sellers." The Company also proposes to sell at the
Underwriters' option an aggregate of up to 577,500 additional shares of the
Company's Common Stock (the "Option Shares") as set forth below.
As the Representatives, you have advised the Company and the Selling
Stockholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata portion
of the Option Shares if you elect to
1.
exercise the over-allotment option in whole or in part for the accounts of the
several Underwriters. The Firm Shares and the Option Shares (to the extent the
aforementioned option is exercised) are herein collectively called the "Shares."
This Underwriting Agreement, as amended, supplemented or modified from time to
time is referred to herein as the "Agreement".
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
STOCKHOLDERS.
(a) The Company represents and warrants as follows:
(i) A registration statement on Form SB-2 (File No. 333 -
18155) with respect to the Shares has been carefully prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder and has been
filed with the Commission under the Act. The Company has complied with the
conditions for the use of Form SB-2. Copies of such registration statement,
including any amendments thereto, the preliminary prospectuses (meeting the
requirements of Rule 430A of the Rules and Regulations) contained therein and
the exhibits, financial statements and schedules, as finally amended and
revised, have heretofore been delivered by the Company to you. Such
registration statement, herein referred to as the "Registration Statement,"
which shall be deemed to include all information omitted therefrom in reliance
upon Rule 430A and contained in the Prospectus referred to below, has been
declared effective by the Commission under the Act and no post-effective
amendment to the Registration Statement has been filed as of the date of this
Agreement. The form of prospectus first filed by the Company with the
Commission pursuant to its Rule 424(b) and Rule 430A, or if no form of
prospectus is required to be filed pursuant to Rule 424(b), the form of
prospectus included in the Registration Statement at the time it became
effective, is herein referred to as the "Prospectus." Each preliminary
prospectus included in the Registration Statement prior to the time it becomes
effective is herein referred to as a "Preliminary Prospectus."
(ii) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware with corporate power and authority to own its properties and conduct
its business as described in the Registration Statement; the Company is duly
qualified to transact business in all jurisdictions in which the conduct of its
business requires such qualification, except where the failure, individually or
in the aggregate, to be so qualified would not have a material adverse effect
upon the condition, financial or otherwise, results of operations,
2.
business affairs or business prospects of the Company (a "Material Adverse
Effect"); and the Company has no direct or indirect subsidiaries.
(iii) The outstanding shares of Common Stock of the Company,
including all shares to be sold by the Selling Stockholders, have been duly
authorized and validly issued and are fully paid and non-assessable; the portion
of the Shares to be issued and sold by the Company have been duly authorized and
when issued and paid for as contemplated herein will be validly issued,
fully-paid and non-assessable; and no preemptive rights of stockholders exist
with respect to any of the Shares or the issue and sale thereof.
(iv) The Shares conform with the statements concerning them in
the Registration Statement.
(v) The Commission has not issued an order preventing or
suspending the use of any Preliminary Prospectus relating to the proposed
offering of the Shares nor instituted proceedings for that purpose. The
Registration Statement contains and the Prospectus and any amendments or
supplements thereto will contain all statements which are required to be stated
therein by, and in all respects conform or will conform, as the case may be, to
the applicable requirements of, the Act and the Rules and Regulations. Neither
the Registration Statement nor any amendment thereto contains or will contain,
as the case may be, any untrue statement of a material fact or omits or will
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from the
Registration Statement or the Prospectus, or any such amendment or supplement,
in reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of any Underwriter through the Representatives,
specifically for use in the preparation thereof.
(vi) The financial statements of the Company, together with
related notes and schedules as set forth in the Registration Statement (the
"Financial Statements"), present fairly the financial position and the results
of operations of the Company, at the indicated dates and for the indicated
periods. The Financial Statements have been prepared in accordance with
generally accepted principles of accounting, consistently applied throughout the
periods involved, and all adjustments necessary for a fair presentation of
results for such periods have been made (subject in the case of financial
statements for interim periods, to normal and recurring year-end adjustments).
The summary financial and statistical data included in the Registration
Statement presents fairly the information shown therein and have been compiled
on a basis consistent with the Financial Statements presented therein.
3.
(vii) There is no action or proceeding pending or, to the
knowledge of the Company, threatened against the Company before any court or
administrative agency which, if determined adversely to the Company, might
result in any material adverse change in the business or condition of the
Company, except as set forth in the Registration Statement.
(viii) Except as described in the Prospectus, the Company has
good and marketable title to all of the properties and assets reflected in the
Financial Statements (or as described in the Registration Statement), subject to
no lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such Financial Statements (or as described in the Registration
Statement) or which are not material in amount. The Company occupies its leased
properties under valid and binding leases conforming to the description thereof
set forth in the Registration Statement.
(ix) The Company has filed all Federal, State and foreign
income tax returns which have been required to be filed and has paid all taxes
indicated by said returns and all assessments received by it to the extent that
such taxes have become due.
(x) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or supplemented, there
has not been any material adverse change or any development that may result in
a prospective material adverse change in or affecting the condition, financial
or otherwise, of the Company or the earnings, business affairs, management, or
business prospects of the Company, whether or not occurring in the ordinary
course of business, and there has not been any material transaction entered into
by the Company, other than transactions in the ordinary course of business and
changes and transactions contemplated by the Registration Statement, as it may
be amended or supplemented. The Company has no material contingent obligations
which are not disclosed in the Registration Statement, as it may be amended or
supplemented.
(xi) The Company is not in default under any agreement, lease,
contract, indenture or other instrument or obligation to which it is a party or
by which it or any of its properties is bound and which default is of material
significance in respect of the business or financial condition of the Company.
The sale of the shares by the Company hereunder will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust or other agreement or instrument
to which the Company is a party, or of the certificate of incorporation or
by-laws of the Company or any order, rule or regulation applicable to the
Company of any court or of any regulatory body or administrative agency or other
governmental body having jurisdiction which default would have a Material
Adverse Effect on the Company.
4.
(xii) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the National
Association of Securities Dealers, Inc. (the "NASD") or may be necessary to
qualify the Shares for public offering by the Underwriters under State or
foreign securities or Blue Sky laws) has been obtained or made and is in full
force and effect.
(xiii) The Company holds all material licenses, certificates and
permits from governmental authorities which are necessary to the conduct of its
business as described in the Prospectus, except for certificates, authorizations
or permits that are not material and do not interfere with the conduct of the
business of the Company; and the Company has not received notice of
infringement or of conflict with the asserted rights of others in respect of any
patents, patent rights, trade names, trademarks or copyrights, which
infringement, were it to result in an action determined adversely to the
Company, would have a Material Adverse Effect on the business of the Company.
(xiv) Ernst & Young LLP, who have certified certain of the
financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and the
Rules and Regulations.
(b) Each of the Selling Stockholders severally (and not jointly with
the other Selling Stockholders) represents and warrants as follows:
(i) Such Selling Stockholder has, and on the Closing Date
(as such date is hereinafter defined) will have, good and marketable title to
the Firm Shares to be sold by such Selling Stockholder, free of any liens,
encumbrances and claims, and full right, power and authority to effect the sale
and delivery of such Firm Shares; and upon the delivery of and payment for such
Firm Shares pursuant to this Agreement, good and marketable title thereto, free
of any liens, encumbrances and claims, will be transferred to the several
Underwriters.
(ii) The consummation by such Selling Stockholder of the
transactions herein contemplated and the fulfillment by such Selling Stockholder
of the terms hereof will not result in a breach of any of the terms and
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust or other agreement or instrument to which such Selling Stockholder is a
party, or of any order, rule or regulation applicable to such Selling
Stockholder of any court or of any regulatory body or administrative agency or
other governmental body having jurisdiction.
5.
(iii) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to, or which has constituted, or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock of the Company.
(iv) Such Selling Stockholder is familiar with the
Registration Statement and, insofar as it relates to such Selling Stockholder,
the Registration Statement does not and will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading. Such Selling Stockholder does not have
any actual knowledge that the Registration Statement contains any untrue
statement of material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or that the
representations and warranties contained in Section 1 of this Agreement are not
true and correct. The sale of the Firm Shares by such Selling Stockholder
pursuant hereto is not prompted by actual knowledge of any information
concerning the Company which is not set forth in the Registration Statement.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES. On the basis of the
representations, warranties and covenants herein contained, and subject to the
conditions herein set forth, the Sellers agree to sell to the Underwriters and
each Underwriter agrees, severally and not jointly, to purchase, at a price of
$_________ per share, the respective number of Firm Shares set forth opposite
the name of each Underwriter in Schedule 1 hereof, subject to adjustments in
accordance with Section 9 hereof. The number of Firm Shares to be purchased by
each Underwriter from each Seller shall be as nearly as practicable in the same
proportion to the total number of Firm Shares being sold by each Seller as the
number of firm Shares being purchased by each Underwriter bears to the total
number of Firm Shares to be sold hereunder. The obligations of the Company and
of each of the Selling Stockholders shall be several and not joint.
Certificates in negotiable form for the total number of the Shares to be
sold hereunder by the Selling Stockholders have been placed in custody with
Continental Stock Transfer and Trust Company as custodian (the "Custodian")
pursuant to the Custodian Agreement executed by each Selling Stockholder for
delivery of all Firm Shares to be sold hereunder by the Selling Stockholders.
Each of the Selling Stockholders specifically agrees that the Firm Shares
represented by the certificates held in custody for the Selling Stockholders
under the Custodian Agreement are subject to the interests of the Underwriters
hereunder, that the arrangements made by the Selling Stockholders for such
custody are to that extent irrevocable, and that the obligations of the Selling
Stockholders hereunder shall not be terminable by any act or deed of the Selling
Stockholders (or by any other person, firm or corporation including the Company,
6.
the custodian or the Underwriters) or by operation of law (including the death
of any individual Selling Stockholder or the dissolution of a corporate Selling
Stockholder) or by the occurrence of any other event or events, except as set
forth in the Custodian Agreement. If any such event should occur prior to the
delivery to the Underwriters of the Firm Shares hereunder, certificates for the
Firm Shares shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such event has not occurred. The Custodian
is authorized to receive and acknowledge receipt of the proceeds of sale of the
Shares held by it against delivery of such Shares.
Payment for the Firm Shares to be sold hereunder is to be made in Federal
Reserve funds immediately available by wire transfer to the account of the
Company at a bank acceptable to the Underwriters for the shares to be sold by
the Company and to the account of the custodian for the shares to be sold by the
Selling Stockholders, in each case against delivery of certificates therefor to
the Representatives for the several accounts of the Underwriters. Such payment
and delivery are to be made at the offices of Alex. Xxxxx & Sons Incorporated,
000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx, at 10:00 A.M., Baltimore time,
on the third (or if the Firm Shares are priced as contemplated by Rule 15c6-1(c)
of the Exchange Act, after 4:30 p.m., Baltimore time, the fourth) business day
after the date of this Agreement or at such other time and date not later than
five business days thereafter as you and the Company shall agree upon, such time
and date being herein referred to as the "Closing Date." (As used herein,
"business day" means a day on which the New York Stock Exchange is open for
trading and on which banks in New York are open for business and not permitted
by law or executive order to be closed; for purposes of Rule 15c6-1 under the
Securities Exchange Act, the Closing Date (if later than the otherwise
applicable settlement date) shall be the settlement date for payment of funds
and delivery of securities for all Firm Shares sold.) The certificates for the
Firm Shares will be delivered in such denominations and in such registrations as
the Representatives request in writing not later than the third full business
day prior to the Closing Date, and will be made available for inspection by the
Representatives at least one business day prior to the Closing Date.
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase the Option
Shares at the price per share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part but
only once and at any time upon written notice given within 30 days after the
date of this Agreement, by you, as Representatives of the several Underwriters,
to the Company setting forth the number of Option Shares as to which the several
Underwriters are exercising the option, the names and denominations in which the
Option Shares are to be registered and the time and date at which such
certificates are to be delivered. The time and date at which certificates for
Option Shares are to be delivered shall be determined by the Representatives but
shall not be earlier than three nor later
7.
than 10 full business days after the exercise of such option, nor in any event
prior to the Closing Date (such time and date being herein referred to as the
"Option Closing Date"). If the date of exercise of the option is three or more
days before the Closing Date, the notice of exercise shall set the Closing Date
as the Option Closing Date. The number of Option Shares to be purchased by each
Underwriter shall be in the same proportion to the total number of Option Shares
being purchased as the number of Firm Shares being purchased by such Underwriter
bears to the total number of Firm Shares, adjusted by you in such manner as to
avoid fractional shares. The option with respect to the Option Shares granted
hereunder may be exercised only to cover over-allotments in the sale of the Firm
Shares by the Underwriters. You, as Representatives of the several
Underwriters, may cancel such option at any time prior to its expiration by
giving written notice of such cancellation to the Company. To the extent, if
any, that the option is exercised, payment for the Option Shares shall be made
on the Option Closing Date in Federal Reserve funds immediately available by
wire transfer to the account of the Company at a bank acceptable to the
Underwriters against delivery of certificates therefor at the offices of Alex.
Xxxxx & Sons Incorporated, 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx.
3. OFFERING BY THE UNDERWRITERS. It is understood that the several
Underwriters are to make a public offering of the Firm Shares as soon as the
Representatives deem it advisable to do so. The Firm Shares are to be initially
offered to the public at the initial public offering price set forth in the
Prospectus. The Representatives may from time to time thereafter change the
public offering price and other selling terms. To the extent, if at all, that
any Option Shares are purchased pursuant to Section 2 hereof, the Underwriters
will offer them to the public on the foregoing terms.
It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Shares in accordance with a Master
Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. COVENANTS OF THE COMPANY AND THE SELLING STOCKHOLDERS.
(a) The Company covenants and agrees with the several Underwriters
that:
(i) The Company will (i) prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Rules and Regulations,
(ii) not file any amendment to the Registration Statement or supplement to the
Prospectus of which the Representatives shall not previously have been advised
and furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance
8.
with the Rules and Regulations and (iii) file on a timely basis all reports and
any definitive proxy or information statements required to be filed by the
Company with the Commission subsequent to the date of the Prospectus and prior
to the termination of the offering of the Shares by the Underwriters.
(ii) The Company will advise the Representatives promptly of
any request of the Commission for amendment of the Registration Statement or for
a supplement to the Prospectus or for any additional information, or of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose, and the Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, execute and deliver such documents, and
furnish such information as may be reasonably required for that purpose,
provided the Company shall not be required to qualify as a foreign corporation
or to consent to service of process in any jurisdiction where it is not now so
qualified or subject to service of process. The Company will, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or
before the Closing Date, four signed copies of the Registration Statement and
all amendments thereto including all exhibits filed therewith, and will deliver
to the Representatives such number of copies of the Registration Statement, but
without exhibits, and of all amendments thereto, as the Representatives may
reasonably request.
(v) If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer any event shall occur as a
result of which it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances existing
at the time the Prospectus is delivered to a purchaser, not misleading, or, if
it is necessary at any time to amend or
9.
supplement the Prospectus to comply with any law, the Company promptly will
prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances when it
is so delivered, be misleading, or so that the Prospectus will comply with law.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earnings
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earnings statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.
(vii) The Company will, for a period of five years from the
Closing Date, deliver to the Representatives copies of annual reports and copies
of all other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange or the Nasdaq National Market
pursuant to the requirements of such exchange or the Nasdaq National Market or
with the Commission pursuant to the Act or the Securities Exchange Act of 1934,
as amended. The Company will deliver to the Representatives similar reports
with respect to significant subsidiaries, as that term is defined in the Rules
and Regulations, which are not consolidated in the Company's financial
statements.
(viii) No offering, sale or other disposition of any Common
Stock of the Company will be made for a period of 180 days after the date of
this Agreement, directly or indirectly, by the Company otherwise than hereunder
or with the prior written consent of Alex. Xxxxx & Sons Incorporated, except
that the Company may, without such consent, issue shares pursuant to the
conversion or exchange of convertible or exchangeable securities or the exercise
of warrants or options, in each case outstanding on the date hereof, grants of
employee stock options pursuant to the terms of a plan in effect on the date
hereof and issuance of securities pursuant to the exercise of such options.
(ix) The Company will use its best efforts to list, subject to
notice of issuance, the Shares on the Nasdaq National Market.
(b) Each of the Selling Stockholders covenants and agrees severally
(and not jointly with the other Selling Stockholders) with the several
Underwriters that no offering, sale, pledge, contract to sell, grant of any
option to purchase or other disposition of any Common Stock of the Company
(including Common Stock which may be issued upon exercise of stock options or
warrants) or any securities convertible into, derivative
10.
of or exercisable or exchangeable for Common Stock will be made for a period of
180 days after the date of this Agreement, directly or indirectly, by such
Selling Stockholder otherwise than hereunder or with the prior written consent
of Alex. Xxxxx & Sons, Incorporated.
(c) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with
respect to the transactions herein contemplated, each of the Selling
Stockholders agrees severally (and not jointly with the other Selling
Stockholders) to deliver to you prior to or at the Closing Date a properly
completed and executed United States Treasury Department Form W-9 (or other
applicable from or statement specified by Treasury Department regulations in
lieu thereof).
5. COSTS AND EXPENSES. The Company will pay all costs, expenses and fees
incident to the performance of the obligations of the Sellers under this
Agreement, including, without limiting the generality of the foregoing, the
following: accounting fees of the Company; the fees and disbursements of
counsel for the Company and the Selling Stockholders (as reasonably approved by
the Company); the cost of printing and delivering to, or as requested by, the
Underwriters copies of the Registration Statement, Preliminary Prospectuses, the
Prospectus, this Agreement, the Agreement Among Underwriters, the Underwriters'
Selling Memorandum, the Underwriters' Questionnaire, the Invitation Letter, the
Power of Attorney, the Listing Application, the Blue Sky Survey and any
supplements or amendments thereto; the filing fees of the Commission; the filing
fees and expenses incident to securing any required review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of
the Shares; the Listing Fee of the Nasdaq National Market; and the reasonable
expenses, including the fees and disbursements of counsel for the Underwriters,
incurred in connection with the qualification of the Shares under State
Securities or Blue Sky laws. The Selling Stockholders have agreed with the
Company to reimburse the Company for a portion of such expenses. To the extent,
if at all, that any of the Selling Stockholders engage special legal counsel to
represent them individually in connection with this offering, the fees and
expenses of such counsel shall be borne by such Selling Stockholder.
Underwriting discounts and commissions payable on the shares sold by the Selling
Stockholders and any transfer taxes imposed on the sale of the Shares to the
several Underwriters will be paid by the Sellers pro rata. The Sellers shall
not, however, be required to pay for any of the Underwriters' expenses (other
than those related to qualification under State securities or Blue Sky laws and
any required review by the NASD) except that, if this Agreement shall not be
consummated because the conditions in Section 7 hereof are not satisfied, or
because this Agreement is terminated by the Representatives pursuant to
Section 6 hereof, or by reason of any failure, refusal or inability on the part
of the Company or the Selling Stockholders to perform any undertaking or satisfy
any condition of this Agreement or to
11.
comply with any of the terms hereof on their part to be performed, unless such
failure to satisfy said condition or to comply with said terms be due to the
default or omission of any Underwriter, then the Company shall reimburse the
several Underwriters for reasonable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with investigating,
marketing and proposing to market the Shares or in contemplation of performing
their obligations hereunder; but the Company and the Selling Stockholders shall
not in any event be liable to any of the several Underwriters for damages on
account of loss of anticipated profits from the sale by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The several
obligations of the Underwriters to purchase and pay for the Firm Shares on the
Closing Date and the Option Shares, if any, on the Option Closing Date are
subject to the accuracy, as of the Closing Date or the Option Closing Date, as
the case may be, of the representations and warranties of the Company and the
Selling Stockholders contained herein, and to the performance by the Company and
the Selling Stockholders of their covenants and obligations hereunder and to the
following additional conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued and no
proceedings for that purpose shall have been taken or, to the knowledge of the
Company or the Selling Stockholders, shall be contemplated by the Commission.
(b) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of Xxxxx & XxXxxxxx,
counsel for the Company and the Selling Stockholders, dated the Closing Date or
the Option Closing Date, as the case may be, addressed to the Underwriters to
the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and conduct
its business as described in the Prospectus; the Company is duly qualified to
transact business in each jurisdiction in which it is known to such counsel to
own or lease property or conduct business and the conduct of its business
requires such qualification, or in which the failure to qualify would have a
materially adverse effect upon the business of the Company; and the Company has
no direct or indirect subsidiaries.
(ii) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of its Common Stock have been duly authorized; the outstanding
shares of its Common Stock, including the Shares to be sold by the Selling
Stockholders, have been duly authorized and validly issued and are fully paid
and non-assessable; all of the Shares conform to the
12.
description thereof contained in the Prospectus; the certificates evidencing
the Shares are in due and proper form; the shares of Common Stock, including the
Option Shares, if any, to be sold by the Company pursuant to this Agreement have
been duly authorized and will be validly issued, fully paid and non-assessable
when sold as contemplated by this Agreement; and to the best knowledge of such
counsel no preemptive rights of stockholders exist with respect to any of the
Shares or the issue and sale thereof.
(iii) The Registration Statement was declared effective under
the Act and, to the best of the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings with respect thereto have been instituted or are pending or
threatened under the Act.
(iv) The Registration Statement, all Preliminary Prospectuses,
the Prospectus and each amendment or supplement thereto comply as to form in all
material respects with the requirements of the Act and the applicable rules and
regulations thereunder (except that such counsel need express no opinion as to
the financial statements, schedules and other financial information included
therein).
(v) The statements under the captions "Description of Capital
Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar as they
are descriptions of laws, regulations and rules, of legal and governmental
proceedings or of contracts, agreements, leases and other legal documents known
to such counsel, or refer to statements of law or legal conclusions are complete
and accurate in all material respects and fairly and correctly present the
information called for with respect to such documents and matters.
(vi) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
(vii) Except as set forth in the Prospectus, to the best
knowledge of such counsel, there are no pending or threatened proceedings
against the Company that, if determined adversely to the Company would,
individually or in the aggregate, have a Material Adverse Effect on the Company.
(viii) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the certificate of incorporation or bylaws of the
Company, or any agreement or instrument known to such counsel to which the
Company is a party or by which the Company may
13.
be bound which breach, default or violation would have a Material Adverse Effect
on the Company;
(ix) This Agreement has been duly authorized, executed and
delivered by the Company.
(x) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the National Association of Securities
Dealers, Inc. or as required by State or foreign securities and Blue Sky laws as
to which such counsel need express no opinion) except such as have been obtained
or made, specifying the same.
In rendering such opinion Xxxxx & XxXxxxxx may rely as to matters governed
by the laws of states other than California, the General Corporation Laws of the
State of Delaware or Federal laws on local counsel in such jurisdictions,
provided that Xxxxx & XxXxxxxx shall state that they believe that they and the
Underwriters are justified in relying on such other counsel. In addition to the
matters set forth above, Xxxxx & XxXxxxxx shall state that it has participated
in conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company and the
Representatives and counsel to the Underwriters at which the contents of the
Registration Statement and Prospectus and related matters were discussed and,
although such counsel has not undertaken to investigate or verify independently
and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus (except as otherwise expressly set forth herein), on the basis of the
foregoing, no facts have come to such counsel's attention that caused such
counsel to believe that any part of the Registration Statement (other than the
financial statements and notes thereto and other financial, statistical and
accounting data or schedules included therein, or omitted therefrom, as to which
no opinion need be expressed), as amended or supplemented, at the time such part
of the Registration Statement became effective, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading (other than
information omitted therefrom in reliance on Rule 430A under the Act), or the
Prospectus (other than the financial statements and notes thereto and other
financial, statistical and accounting data or schedules included therein, or
omitted therefrom, as to which no opinion need be expressed), as amended or
supplemented, on the date of filing thereof with the Commission and on the date
hereof, contained an untrue statement of a material fact or omitted 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.
14.
(c) The Representatives shall have received the opinion contemplated
in the Power of Attorney, executed and delivered by each Selling Stockholder and
an opinion, dated such Closing Date of Xxxx & Priest, LLP, counsel for the
Selling Stockholders, to the effect that:
(i) This Agreement has been duly authorized, executed and
delivered on behalf of the Selling Stockholders.
(ii) Each Selling Stockholder has full legal right, power and
authority, and has duly obtained any approval required by law (other than as
required by State securities and Blue Sky laws as to which such counsel need
express no opinion), to sell, assign, transfer and deliver the portion of the
Shares to be sold by such Selling Stockholder pursuant to this Agreement.
(iii) The Custodian Agreement executed and delivered by each
Selling Stockholder is a valid, irrevocable instrument legally sufficient for
the purposes intended.
(iv) The Underwriters (assuming that they are bona fide
purchasers within the meaning of the Uniform Commercial Code) have acquired good
and marketable title to the Shares being sold by each Selling Stockholder on the
Closing Date, free and clear of all claims, liens, encumbrances and security
interests whatsoever.
(d) The Representatives shall have received from Xxxxxx Godward LLP,
counsel for the Underwriters, an opinion dated the Closing Date or the Option
Closing Date, as the case may be, substantially to the effect specified in
subparagraphs (ii), (iii), (iv), (ix) and (xi) of Paragraph (b) of this Section
6, and that the Company is a validly incorporated and existing corporation
under the laws of the State of Delaware. In rendering such opinion Xxxxxx
Godward LLP may rely as to all matters governed other than by the laws of the
State of California, the General Corporation Laws of the State of Delaware or
Federal laws on the opinion of the local counsel referred to in paragraph (b) of
this Section 6. In addition to the matters set forth above, such opinion shall
also include a statement to the effect that nothing has come to the attention of
such counsel which leads them to believe that the Registration Statement, as of
the time it became effective under the Act, and the Prospectus or any amendment
or supplement thereto, on the date it was filed pursuant to Rule 424(b) and the
Registration Statement and the Prospectus, or any amendment or supplement
thereto, as of the Closing Date or the Option Closing Date, as the case may be,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading (except that such counsel need express no view as to
15.
financial statements, the notes thereto, schedules and other financial or
statistical information included therein). With respect to such statement,
Xxxxxx Godward LLP may state that their belief is based upon the procedures set
forth therein, but is without independent check and verification.
(e) The Representatives shall have received at or prior to the
Closing Date from Xxxxxx Godward LLP a memorandum or summary, in form and
substance satisfactory to the Representatives, with respect to the qualification
for offering and sale by the Underwriters of the Shares under the State
securities or Blue Sky laws of such jurisdictions as the Representatives may
reasonably have designated to the Company.
(f) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, a signed letter from Ernst & Young
LLP, dated the Closing Date or the Option Closing Date, as the case may be,
which shall confirm, on the basis of a review in accordance with the procedures
set forth in the letter singed by such firm and dated and delivered to the
Representatives on the date hereof that nothing has come to their attention
during the period from the date five days prior to the date hereof, to a date
not more than five days prior to the Closing Date or the Option Closing Date, as
the case may be, which would require any change in their letter dated the date
hereof if it were required to be dated and delivered on the Closing Date or the
Option Closing Date, as the case may be. All such letters shall be in form and
substance satisfactory to the Representatives.
(g) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates of
the President and the Chief Financial Officer of the Company to the effect that,
as of the Closing Date or the Option Closing Date, as the case may be, each of
them severally represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or are, to
his knowledge, contemplated by the Commission.
(ii) He does not know of any litigation instituted or
threatened against the Company of a character required to be disclosed in the
Registration Statement which is not so disclosed; he does not know of any
material contract required to be filed as an exhibit to the Registration
Statement which is not so filed; and the representations and warranties of the
Company contained in Section 1 hereof are true and correct as of the Closing
Date or the Option Closing Date, as the case may be.
16.
(iii) He has carefully examined the Registration Statement and
the Prospectus and, in his opinion, as of the effective date of the Registration
Statement, the statements contained in the Registration Statement were true and
correct, and such Registration Statement and Prospectus did not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading and, in his opinion, since the effective date
of the Registration Statement, no event has occurred which should have been set
forth in a supplement to or an amendment of the Prospectus which has not been so
set forth in such supplement or amendment.
(h) The Company and the Selling Stockholders shall have furnished to
the Representatives such further certificates and documents confirming the
representations and warranties contained herein and related matters as the
Representatives may reasonably have requested.
(i) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the Nasdaq National Market.
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Representatives and to Xxxxxx Godward LLP, counsel
for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representatives by notifying the Company and the Selling Stockholders of such
termination in writing or by telegram at or prior to the Closing Date or the
Option Closing Date, as the case may be.
In such event, the Selling Stockholders, the Company and the Underwriters
shall not be under any obligation to each other (except to the extent provided
in Sections 5 and 8 hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE SELLERS. The obligations of the
Sellers to sell and deliver the portion of the Shares required to be delivered
as and when specified in this Agreement are subject to the conditions that at
the Closing Date or the Option Closing Date, as the case may be, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and in effect or proceedings therefor initiated or threatened.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of
17.
the Act against any losses, claims, damages or liabilities to which such
Underwriter or such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (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, and will reimburse each Underwriter and
each such controlling person for any legal or other expenses reasonably incurred
by such Underwriter or such controlling person in connection with investigating
or defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement, or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or such amendment or supplement, in reliance upon and in conformity
with written information furnished to the Company by or through the
Representatives specifically for use in the preparation thereof and provided,
further, that such indemnity with respect to any untrue statement or
misstatement of a material fact contained in any Preliminary Prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages or liabilities purchased the shares that are
subject thereof if such person did not receive a copy of the Prospectus (or the
Prospectus as supplemented) at or prior to the confirmation of the sale of such
shares to such person in any case where delivery is required under the Act and
such untrue statement or omission of a material fact contained in any
preliminary prospectus was corrected in the Prospectus (or the Prospectus as
supplemented). This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(b) Each Selling Stockholder severally (and not jointly with the
other Selling Stockholders) agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act to the same extent as the indemnity from the Company to each
Underwriter set forth in Section 8(a) hereof, but only with respect to
information relating to such Selling Stockholder furnished by or on behalf of
such Selling Stockholder to the Company expressly for use in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto. In no event, however, shall the liability of any Selling
Stockholder for indemnification under this Section 8(b) exceed the net proceeds
received by such Selling Stockholder from the Underwriters in the offering.
This indemnity agreement will be in addition to any liability which the Selling
Stockholders may otherwise have.
(c) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
Registration
18.
Statement, the Selling Stockholders, and each person, if any, who controls the
Company or the Selling Stockholders within the meaning of the Act, against any
losses, claims, damages or liabilities to which the Company or any such
director, officer, Selling Stockholder or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made; and
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, Selling Stockholder or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that each Underwriter will
be liable in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission has been
made in the Registration Statement, any Preliminary Prospectus, the Prospectus
or such amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
(d) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a), (b) or (c) shall be available to any party who shall fail to give notice
as provided in this Section 8(d) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
prejudiced by the failure to give such notice, but the failure to give such
notice shall not relieve the indemnifying party or parties from any liability
which it or they may have to the indemnified party for contribution or otherwise
than on account of the provisions of Section 8(a), (b) or (c). In case any
such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party and shall pay as incurred the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel at its own expense. Notwithstanding
the foregoing, the indemnifying party shall pay as incurred the fees and
expenses of the counsel retained by
19.
the indemnified party in the event (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would, in the reasonable judgment of the
indemnified party, be inappropriate due to actual or potential differing
interests between them. It is understood that the indemnifying party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm for all such indemnified parties. Such firm shall be designated
in writing by you in the case of parties indemnified pursuant to Sections 8(a)
and (b) and by the Company and the Selling Stockholders in the case of parties
indemnified pursuant to Section 8(c). The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the 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 action in
respect to 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 such claims that are the subject matter of such action. An
indemnifying party will not be liable for any settlement of any action or claim
effected without its written consent.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company and
each Selling Stockholder on the one hand and the Underwriters on the other from
the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under Section 8(d) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and each
Selling Stockholder on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company and each Selling Stockholder on the one hand and the
Underwriters on the other shall be deemed to be in
20.
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and such Selling Stockholder bear
to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Stockholders on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholders and the Underwriters agree that it
would not be just and equitable if contributions pursuant to this Section 8(e)
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
8(e). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this Section 8(e) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (e), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation, and (iii) no Selling
Stockholder shall be required to contribute any amount in excess of the net
proceeds received by such Selling Stockholder from the Underwriters in the
offering. The Underwriters' obligations in this Section 8(e) to contribute are
several in proportion to their respective underwriting obligations and not
joint.
(f) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
9. DEFAULT BY UNDERWRITERS. If on the Closing Date or the Option Closing
Date, as the case may be, any Underwriter shall fail to purchase and pay for the
portion of the Shares which such Underwriter has agreed to purchase and pay for
on such date (otherwise than by reason of any default on the part of the Company
or a Selling
21.
Stockholder), you, as Representatives of the Underwriters, shall use your best
efforts to procure within 24 hours thereafter one or more of the other
Underwriters, or any others, to purchase from the Company and the Selling
Stockholders such amounts as may be agreed upon and upon the terms set forth
herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If during such
24 hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the remaining Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company and the
Selling Stockholders or you as the Representatives of the Underwriters will have
the right, by written notice given within the next 24-hour period to the parties
to this Agreement, to terminate this Agreement without liability on the part of
the non-defaulting Underwriters or of the Company or of the Selling Stockholders
except to the extent provided in Sections 5 and 8 hereof. In the event of a
default by any Underwriter or Underwriters, as set forth in this Section 9, the
Closing Date or Option Closing date, as the case may be, may be postponed for
such period, not exceeding seven days, as you, as Representatives, may determine
in order that the required changes in the Registration Statement or in the
Prospectus or in any other documents or arrangements may be effected. The term
"Underwriter" includes any person substituted for a defaulting Underwriter. Any
action taken under this Section 9 shall not relieve any defaulting Underwriter
from liability in respect of any default of such Underwriter under this
Agreement.
10. NOTICES. All communications hereunder shall be in writing and, except
as otherwise provided herein, will be mailed, delivered or telegraphed and
confirmed as follows: if to the Underwriters, to Alex. Xxxxx & Sons
Incorporated, 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000,
Attention: ______________________; if to the Company or the Selling
Stockholders, to Daou Systems, Inc., 0000 Xxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx
00000, Attention: President, with a copy to Xxxxx & XxXxxxxx, The Xxxxx Fargo
Plaza, 12th Floor, 000 Xxxx Xxxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000-0000, Attn:
Xxxx X. Xxxxxxxx, Esq., or if sent to the Selling Stockholders or any of them,
will be mailed, delivered or telegraphed and confirmed to the Selling
Stockholders at the addresses set forth on Schedule B below each Selling
Stockholder's name, with a copy to
22.
Xxxx & Priest LLP, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxxx X.
Xxxxxx, Esq.
11. TERMINATION. This Agreement may be terminated by you by notice to the
Sellers as follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 A.M. on
the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse change or
any development involving a prospective material adverse change in or affecting
the condition, financial or otherwise, of the Company or the earnings, business
affairs, management or business prospects of the Company, whether or not arising
in the ordinary course of business, (ii) any outbreak of hostilities or other
national or international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, calamity, crisis or change on the
financial markets of the United States would, in your reasonable judgment, make
the offering or delivery of the Shares impracticable, (iii) suspension of
trading in securities on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market or limitation on prices (other than
limitations on hours or numbers of days of trading) for securities on any such
Exchange or Market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your reasonable opinion
materially and adversely affects or will materially or adversely affect the
business or operations of the Company, (v) declaration of a banking moratorium
by either federal or New York State authorities, or (vi) the taking of any
action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
This Agreement also may be terminated by you, by notice to the Sellers, as
to any obligation of the Underwriters to purchase the Option Shares, upon the
occurrence at any time prior to the Option Closing Date of any of the events
described in subparagraph (b) above or as provided in Sections 6 and 9 of this
Agreement.
12. SUCCESSORS. This Agreement has been and is made solely for the
benefit of the Underwriters, the Company and the Selling Stockholders and their
respective successors, executors, administrators, heirs and assigns, and the
officers, directors and
23.
controlling persons referred to herein, and no other person will have any right
or obligation hereunder. The term "successors" shall not include any purchaser
of the Shares merely because of such purchase.
13. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or its directors or officers and (c) delivery of and payment for the
Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York, without regard to principles of conflicts of
laws.
24.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon this Agreement will become a binding agreement among the Selling
Stockholders, the Company and the several Underwriters in accordance with its
terms.
Very truly yours,
DAOU SYSTEMS, INC.
By
-----------------------------
Xxxxxx X. Xxxx, President
Selling Stockholders listed on Schedule II
By
-----------------------------------
, Attorney-in-Fact
------------
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
ALEX. XXXXX & SONS INCORPORATED
XXXXX & COMPANY
XXXXXXXXX & XXXXX LLC
As Representatives of the several Underwriters listed on Schedule I
By ALEX. XXXXX & SONS INCORPORATED
By
, Authorized Officer
--------------------
25.
SCHEDULE I
SCHEDULE OF UNDERWRITERS
NUMBER OF FIRM
SHARES TO BE
UNDERWRITER PURCHASED
Alex. Xxxxx & Sons Incorporated
Xxxxx & Company
Xxxxxxxxx & Xxxxx LLC
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Total
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SCHEDULE II
SCHEDULE OF SELLING STOCKHOLDERS
SELLING STOCKHOLDER NUMBER OF FIRM
SHARES TO BE SOLD
Xxxxxxx X. Xxxx
Xxxxxx X. Xxxx
Xxxxxx X. Xxxx
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Total
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