DAOU SYSTEMS, INC.
[_______________] SHARES(1)
COMMON STOCK
UNDERWRITING AGREEMENT
August __, 0000
XXXXXXXXX & XXXXX LLC
XXXX. XXXXX & SONS INCORPORATED
XXXXX & COMPANY
x/x Xxxxxxxxx & Xxxxx LLC
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
Daou Systems, Inc., a Delaware corporation (herein called the Company),
proposes to issue and sell [_________] shares of its authorized but unissued
Common Stock, $0.001 par value (herein called the Common Stock), and the
stockholders of the Company named in Schedule II hereto (herein collectively
called the Selling Securityholders) propose to sell an aggregate of [_______]
shares of Common Stock of the Company (said [_________] shares of Common Stock
being herein called the Underwritten Stock). The Company and the Selling
Securityholders propose to grant to the Underwriters (as hereinafter defined) an
option to purchase up to an aggregate of [_________] additional shares of Common
Stock (herein called the Option Stock, and with the Underwritten Stock herein
collectively called the Stock). The Common Stock is more fully described in the
Registration Statement and the Prospectus hereinafter mentioned.
The Company and the Selling Securityholders severally hereby confirm the
agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the Underwriters, which term shall also include any
underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent
and warrant that you have been authorized by each of the other Underwriters to
enter into this Agreement on its behalf and to act for it in the manner herein
provided.
--------------------
(1) Plus an option to purchase from the Company and the Selling Securityholders
up to an aggregate of [_________] additional shares to cover over-allotments.
1.
1. REGISTRATION STATEMENT. The Company has filed with the Securities and
Exchange Commission (herein called the Commission) a registration statement on
Form SB-2 (No. 333-_____), including the related preliminary prospectus, for
the registration under the Securities Act of 1933, as amended (herein called the
Securities Act), of the Stock. Copies of such registration statement and of
each amendment thereto, if any, including the related preliminary prospectus
(meeting the requirements of Rule 430A of the rules and regulations of the
Commission) heretofore filed by the Company with the Commission have been
delivered to you.
The term Registration Statement as used in this Agreement shall mean such
registration statement, including all exhibits and financial statements, all
information omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, in the form in which it became effective, and any
registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (herein called a Rule
462(b) registration statement), and, in the event of any amendment thereto after
the effective date of such registration statement (herein called the Effective
Date), shall also mean (from and after the effectiveness of such amendment) such
registration statement as so amended (including any Rule 462(b) registration
statement). The term Prospectus as used in this Agreement shall mean the
prospectus relating to the Stock first filed with the Commission pursuant to
Rule 424(b) and Rule 430A (or if no such filing is required, as included in the
Registration Statement) and, in the event of any supplement or amendment to such
prospectus after the Effective Date, shall also mean (from and after the filing
with the Commission of such supplement or the effectiveness of such amendment)
such prospectus as so supplemented or amended. The term Preliminary Prospectus
as used in this Agreement shall mean each preliminary prospectus included in
such registration statement prior to the time it becomes effective.
The Registration Statement has been declared effective under the Securities
Act, and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. The Company has caused to be delivered
to you copies of each Preliminary Prospectus and has consented to the use of
such copies for the purposes permitted by the Securities Act.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SECURITYHOLDERS.
(a) The Company represents and warrants as follows:
(i) The Registration Statement has been carefully prepared by
the Company in conformity with the requirements of the Securities Act, and the
rules and regulations of the Commission thereunder and has been filed with the
Commission under the Securities Act. The Company meets the eligibility
requirements and has complied
2.
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 of the
Commission) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you.
(ii) Each of the Company and its subsidiaries 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, 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 Securityholders, have been duly
authorized and validly issued and are fully paid and non-assessable; the portion
of the Stock to be issued and sold by the Company has 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 Stock or the issue and sale thereof. No further approval
or authority of the stockholders or the Board of Directors of the Company will
be required for the transfer and sale of the Stock to be sold by the Selling
Securityholders or the issuance and sale of the Stock as contemplated herein.
(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 Stock 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 Securities Act and the rules and regulations
of the Commission. 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
3.
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, 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 and its subsidiaries, taken as a whole, 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.
(vii) All documents filed by the Company with the Commission
pursuant to the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and none of such documents
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; and any further documents so filed or any further amendment or
supplement thereto, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder and will not 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.
(viii) 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.
(ix) 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
4.
amount. The Company occupies its leased properties under valid and binding
leases conforming to the description thereof set forth in the Registration
Statement.
(x) 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.
(xi) 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 or any of its subsidiaries, 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.
(xii) 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 Stock 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.
(xiii) 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 Stock 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.
(xiv) The Company holds all material licenses, certificates and
permits from governmental authorities which are necessary to the conduct of its
business
5.
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.
(xv) 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 Securities Act
and the rules and regulations of the Commission.
(xvi) The Common Stock is registered pursuant to Section 12(g)
of the Exchange Act . The Stock to be sold by the Selling Securityholders is
listed and duly admitted to trading on the Nasdaq National Market, and, prior to
the Closing Date, the Stock to be issued and sold by the Company will be
authorized for listing by the Nasdaq National Market upon official notice of
issuance.
(b) Each of the Selling Securityholders severally (and not jointly
with the other Selling Securityholders) represents and warrants as follows:
(i) Such Selling Securityholder has, and on the Closing Date
(as such date is hereinafter defined) will have, good and marketable title to
the Stock to be sold by such Selling Securityholder, free of any liens,
encumbrances and claims, and full right, power and authority to effect the sale
and delivery of such Stock; and upon the delivery of and payment for such Stock
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 Securityholder of the
transactions herein contemplated and the fulfillment by such Selling
Securityholder 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
Securityholder is a party, or of any order, rule or regulation applicable to
such Selling Securityholder of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(iii) Such Selling Securityholder 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.
6.
(iv) Such Selling Securityholder is familiar with the
Registration Statement and, insofar as it relates to such Selling
Securityholder, 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
Securityholder 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 any actual knowledge that the representations and warranties contained in
Section 2 of this Agreement are not true and correct. The sale of the Stock by
such Selling Securityholder pursuant hereto is not prompted by actual knowledge
of any information concerning the Company which is not set forth in the
Registration Statement.
(v) Certificates in negotiable form for the shares of the
Stock to be sold by such Selling Securityholder have been placed in custody
under a Custody Agreement for delivery under this Agreement with the Custodian;
such Selling Securityholder specifically agrees that the shares of the Stock
represented by the certificates so held in custody for such Selling
Securityholder are subject to the interests of the several Underwriters and the
Company, that the arrangements made by such Selling Securityholder for such
custody, including the Power of Attorney provided for in such Custody Agreement,
are to that extent irrevocable, and that the obligations of such Selling
Securityholder shall not be terminated by any act of such Selling Securityholder
or by operation of law, whether by the death or incapacity of such Selling
Securityholder (or, in the case of a Selling Securityholder that is not an
individual, the dissolution or liquidation of such Selling Securityholder) or
the occurrence of any other event; if any such death, incapacity, dissolution,
liquidation or other such event should occur before the delivery of such shares
of the Stock hereunder, certificates for such shares of the Stock shall be
delivered by the Custodian in accordance with the terms and conditions of this
Agreement as if such death, incapacity, dissolution, liquidation or other event
had not occurred, regardless of whether the Custodian shall have received
notice of such death, incapacity, dissolution, liquidation or other event.
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject to
the terms and conditions herein set forth, the Company agrees to issue and sell
[________] shares of the Underwritten Stock to the several Underwriters, each
Selling Securityholder agrees to sell to the several Underwriters the number of
shares of the Underwritten Stock set forth in Schedule II opposite the name of
such Selling Securityholder, and each of the Underwriters agrees to purchase
from the Company and the Selling Securityholders the respective aggregate number
of shares of Underwritten Stock set forth opposite its name
7.
in Schedule I. The price at which such shares of Underwritten Stock shall be
sold by the Company and the Selling Securityholders and purchased by the several
Underwriters shall be $[___] per share. The obligation of each Underwriter to
the Company and each of the Selling Securityholders shall be to purchase from
the Company and the Selling Securityholders that number of shares of the
Underwritten Stock which represents the same proportion of the total number of
shares of the Underwritten Stock to be sold by each of the Company and the
Selling Securityholders pursuant to this Agreement as the number of shares of
the Underwritten Stock set forth opposite the name of such Underwriter in
Schedule I hereto represents of the total number of shares of the Underwritten
Stock to be purchased by all Underwriters pursuant to this Agreement, as
adjusted by you in such manner as you deem advisable to avoid fractional shares.
In making this Agreement, each Underwriter is contracting severally and not
jointly; except as provided in paragraphs (b) and (c) of this Section 3, the
agreement of each Underwriter is to purchase only the respective number of
shares of the Underwritten Stock specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or
refuse (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8 or 9 hereof) to purchase and
pay for the number of shares of the Stock agreed to be purchased by such
Underwriter or Underwriters, the Company or the Selling Securityholders shall
immediately give notice thereof to you, and the non-defaulting Underwriters
shall have the right within 24 hours after the receipt by you of such notice to
purchase, or procure one or more other Underwriters to purchase, in such
proportions as may be agreed upon between you and such purchasing Underwriter or
Underwriters and upon the terms herein set forth, all or any part of the shares
of the Stock which such defaulting Underwriter or Underwriters agreed to
purchase. If the non-defaulting Underwriters fail so to make such arrangements
with respect to all such shares and portion, the number of shares of the Stock
which each non-defaulting Underwriter is otherwise obligated to purchase under
this Agreement shall be automatically increased on a pro rata basis to absorb
the remaining shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase; PROVIDED, HOWEVER, that the non-defaulting
Underwriters shall not be obligated to purchase the shares and portion which the
defaulting Underwriter or Underwriters agreed to purchase if the aggregate
number of such shares of the Stock exceeds 10% of the total number of shares of
the Stock which all Underwriters agreed to purchase hereunder. If the total
number of shares of the Stock which the defaulting Underwriter or Underwriters
agreed to purchase shall not be purchased or absorbed in accordance with the two
preceding sentences, the Company and the Selling Securityholders shall have the
right, within 24 hours next succeeding the 24-hour period above referred to, to
make arrangements with other underwriters or purchasers satisfactory to you for
purchase of such shares and portion on the terms herein set forth. In any such
case, either you or the Company and the Selling Securityholders shall have the
right to postpone the Closing Date determined as provided in Section 5
8.
hereof for not more than seven business days after the date originally fixed as
the Closing Date pursuant to said Section 5 in order that any necessary changes
in the Registration Statement, the Prospectus or any other documents or
arrangements may be made. If neither the non-defaulting Underwriters nor the
Company and the Selling Securityholders shall make arrangements within the
24-hour periods stated above for the purchase of all the shares of the Stock
which the defaulting Underwriter or Underwriters agreed to purchase hereunder,
this Agreement shall be terminated without further act or deed and without any
liability on the part of the Company or the Selling Securityholders to any non-
defaulting Underwriter and without any liability on the part of any non-
defaulting Underwriter to the Company or the Selling Securityholders. Nothing
in this paragraph (b), and no action taken hereunder, shall relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth, the
Company and the Selling Securityholders each grant an option to the several
Underwriters to purchase, severally and not jointly, up to [_______] shares in
the aggregate of the Option Stock from the Company and up to [_______] shares in
the aggregate of the Option Stock from the Selling Securityholders at the same
price per share as the Underwriters shall pay for the Underwritten Stock. Said
option may be exercised only to cover over-allotments in the sale of the
Underwritten Stock by the Underwriters and may be exercised in whole or in part
at any time (but not more than once) on or before the thirtieth day after the
date of this Agreement upon written or telegraphic notice by you to the Company
setting forth the aggregate number of shares of the Option Stock as to which the
several Underwriters are exercising the option. Delivery of certificates for
the shares of Option Stock, and payment therefor, shall be made as provided in
Section 5 hereof. The number of shares of the Option Stock to be purchased by
each Underwriter shall be the same percentage of the total number of shares of
the Option Stock to be purchased by the several Underwriters as such Underwriter
is purchasing of the Underwritten Stock, as adjusted by you in such manner as
you deem advisable to avoid fractional shares.
4. OFFERING BY UNDERWRITERS.
(a) The terms of the public offering by the Underwriters of the Stock
to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the public offering and increase or decrease the concessions and
discounts to dealers as they may determine.
(b) The information set forth in the last paragraph on the front
cover page and under "Underwriting" in the Registration Statement, any
Preliminary Prospectus and the Prospectus relating to the Stock filed by the
Company (insofar as such information relates to the Underwriters) constitutes
the only information furnished by the
9.
Underwriters to the Company for inclusion in the Registration Statement, any
Preliminary Prospectus, and the Prospectus, and you on behalf of the respective
Underwriters represent and warrant to the Company that the statements made
therein are correct.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the Underwritten Stock
and the Option Stock (if the option granted by Section 3(c) hereof shall have
been exercised not later than 7:00 A.M., San Francisco time, on the date two
business days preceding the Closing Date), and payment therefor, shall be made
at the office of Xxxxxx Godward LLP, 0000 Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxx
Xxxxx, Xxxxxxxxxx at 7:00 a.m., San Francisco time, on the fourth business day
after the date of this Agreement, or at such time on such other day, not later
than seven full business days after such fourth business day, as shall be agreed
upon in writing by the Company, the Selling Securityholders and you. The date
and hour of such delivery and payment (which may be postponed as provided in
Section 3(b) hereof) are herein called the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be exercised
after 7:00 a.m., San Francisco time, on the date two business days preceding the
Closing Date, delivery of certificates for the shares of Option Stock, and
payment therefor, shall be made at the office of Xxxxxx Godward LLP, 0000
Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx, at 7:00 a.m., San Francisco
time, on the third business day after the exercise of such option.
(c) Payment for the Stock purchased from the Company shall be made to
the Company or its order, and payment for the Stock purchased from the Selling
Securityholders shall be made to the Custodian, for the account of the Selling
Securityholders, in each case by wire transfer in same day funds. Such payment
shall be made upon delivery of certificates for the Stock to you for the
respective accounts of the several Underwriters against receipt therefor signed
by you. Certificates for the Stock to be delivered to you shall be registered
in such name or names and shall be in such denominations as you may request at
least one business day before the Closing Date, in the case of Underwritten
Stock, and at least one business day prior to the purchase thereof, in the case
of the Option Stock. Such certificates will be made available to the
Underwriters for inspection, checking and packaging at the offices of Lewco
Securities Corporation, 0 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 on the business day
prior to the Closing Date or, in the case of the Option Stock, by 3:00 p.m., New
York time, on the business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Securityholders for shares to be purchased by any Underwriter
whose wire transfer shall
10.
not have been received by you on the Closing Date or any later date on which
Option Stock is purchased for the account of such Underwriter. Any such payment
by you shall not relieve such Underwriter from any of its obligations hereunder.
6. FURTHER AGREEMENTS OF THE COMPANY AND THE SELLING SECURITYHOLDERS.
Each of the Company and the Selling Securityholders respectively covenants and
agrees as follows:
(a) The Company will (i) prepare and timely file with the Commission
under Rule 424(b) a Prospectus containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A and
(ii) not file any amendment to the Registration Statement or supplement to the
Prospectus of which you shall not previously have been advised and furnished
with a copy or to which you shall have reasonably objected in writing or which
is not in compliance with the Securities Act or the rules and regulations of the
Commission.
(b) The Company will promptly notify each Underwriter in the event of
(i) the request by the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, (iii) the institution or notice of intended institution
of any action or proceeding for that purpose, (iv) the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Stock for sale in any jurisdiction, or (v) the receipt by it of notice of the
initiation or threatening of any proceeding for such purpose. The Company and
the Selling Securityholders will make every reasonable effort to prevent the
issuance of such a stop order and, if such an order shall at any time be issued,
to obtain the withdrawal thereof at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to
you a signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each post-
effective amendment, if any, to the Registration Statement (together with, in
each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at
such office or offices as you may designate, as many copies of the Prospectus as
you may reasonably request, and (iii) thereafter from time to time during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many additional
copies of the Prospectus and as many copies of any supplement to the
11.
Prospectus and of any amended prospectus, filed by the Company with the
Commission, as you may reasonably request for the purposes contemplated by the
Securities Act.
(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer any event relating
to or affecting the Company, or of which the Company shall be advised in writing
by you, shall occur as a result of which it is necessary, in the opinion of
counsel for the Company or of counsel for the Underwriters, to supplement or
amend the Prospectus in order to make the Prospectus not misleading in the light
of the circumstances existing at the time it is delivered to a purchaser of the
Stock, the Company will forthwith prepare and file with the Commission a
supplement to the Prospectus or an amended prospectus so that the Prospectus as
so supplemented or amended will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time such
Prospectus is delivered to such purchaser, not misleading. If, after the
initial public offering of the Stock by the Underwriters and during such period,
the Underwriters shall propose to vary the terms of offering thereof by reason
of changes in general market conditions or otherwise, you will advise the
Company in writing of the proposed variation, and, if in the opinion either of
counsel for the Company or of counsel for the Underwriters such proposed
variation requires that the Prospectus be supplemented or amended, the Company
will forthwith prepare and file with the Commission a supplement to the
Prospectus or an amended prospectus setting forth such variation. The Company
authorizes the Underwriters and all dealers to whom any of the Stock may be sold
by the several Underwriters to use the Prospectus, as from time to time amended
or supplemented, in connection with the sale of the Stock in accordance with the
applicable provisions of the Securities Act and the applicable rules and
regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in the
qualification of the Stock for offer and sale under the securities or blue sky
laws of such jurisdictions as you may designate and, during the period in which
a prospectus is required by law to be delivered by an Underwriter or dealer, in
keeping such qualifications in good standing under said securities or blue sky
laws; PROVIDED, HOWEVER, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified. 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 you may reasonably request for distribution of the Stock.
12.
(g) During a period of five years commencing with the date hereof,
the Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to stockholders of
the Company and of all information, documents and reports filed with the
Commission.
(h) Not later than the 45th day following the end of the fiscal
quarter first occurring after the first anniversary of the Effective Date, the
Company will make generally available to its security holders an earnings
statement in accordance with Section 11(a) of the Securities Act and Rule 158
thereunder.
(i) The Company agrees to pay all costs and expenses incident to the
performance of their obligations under this Agreement, including all costs and
expenses incident to (i) the preparation, printing and filing with the
Commission and the NASD of the Registration Statement, any Preliminary
Prospectus and the Prospectus, (ii) the furnishing to the Underwriters of copies
of any Preliminary Prospectus and of the several documents required by
paragraph (c) of this Section 6 to be so furnished, (iii) the printing of this
Agreement and related documents delivered to the Underwriters, (iv) the
preparation, printing and filing of all supplements and amendments to the
Prospectus referred to in paragraph (d) of this Section 6, (v) the furnishing to
you and the Underwriters of the reports and information referred to in
paragraph (g) of this Section 6 and (vi) the printing and issuance of stock
certificates, including the transfer agent's fees. The Selling Securityholders
will pay any transfer taxes incident to the transfer to the Underwriters of the
shares the Stock being sold by the Selling Securityholders.
(j) The Company agrees to reimburse you, for the account of the
several Underwriters, for blue sky fees and related disbursements (including
counsel fees and disbursements and cost of printing memoranda for the
Underwriters) paid by or for the account of the Underwriters or their counsel in
qualifying the Stock under state securities or blue sky laws and in the review
of the offering by the NASD.
(k) The provisions of paragraphs (i) and (j) of this Section are
intended to relieve the Underwriters from the payment of the expenses and costs
which the Company hereby agrees to pay and shall not affect any agreement which
the Company and the Selling Securityholders may make, or may have made, for the
sharing of any such expenses and costs.
(l) The Company and each of the Selling Securityholders hereby agrees
that, without the prior written consent of Xxxxxxxxx & Xxxxx LLC on behalf of
the Underwriters, the Company or such Selling Securityholder, as the case may
be, will not, for a period of 90 days following the commencement of the public
offering of the Stock by the Underwriters, directly or indirectly, (i) sell,
offer, contract to sell, transfer the economic risk of ownership in, make any
short sale, pledge, sell any option or contract to
13.
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any shares of Common
Stock (including, without limitation, shares of Common Stock which may be deemed
to be beneficially owned by the undersigned in accordance with the rules and
regulations of the Commission and shares of Common Stock which may be issued
upon exercise of stock options or warrants) or any securities convertible into,
derivative of or exchangeable or exercisable for or any rights to purchase or
acquire Common Stock or (ii) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences or ownership of
Common Stock, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of Common Stock or such other securities, in cash
or otherwise. The foregoing sentence shall not apply to (A) the Stock to be
sold to the Underwriters pursuant to this Agreement, (B) shares of Common Stock
issued by the Company upon the exercise of options granted under the stock
option plans of the Company (the "Option Plans") or upon the exercise of
warrants outstanding as of the date hereof, all as described in the Preliminary
Prospectus, (C) options to purchase Common Stock granted under the Option Plans
and (D) shares of Common Stock issued under the Company's Employee Stock
Purchase Plan.
(m) If at any time during the 25-day period after the Registration
Statement becomes effective any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price for the Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of, and disseminate a press
release or other public statement, reasonably satisfactory to you, responding
to or commenting on such rumor, publication or event.
(n) The Company is familiar with the Investment Company Act of 1940,
as amended, and has in the past conducted its affairs, and will in the future
conduct its affairs, in such a manner to ensure that the Company was not and
will not be an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) Subject to the provisions of paragraph (f) of this Section 7, the
Company and the Selling Securityholders jointly and severally agree to indemnify
and hold harmless each Underwriter and each person (including each partner or
officer thereof) who controls any Underwriter within the meaning of Section 15
of the Securities Act from and against any and all losses, claims, damages or
liabilities, joint or several, to
14.
which such indemnified parties or any of them may become subject under the
Securities Act, the Exchange Act, or the common law or otherwise, and the
Company and the Selling Securityholders jointly and severally agree to reimburse
each such Underwriter and controlling person for any legal or other expenses
(including, except as otherwise hereinafter provided, reasonable fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement), or 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 (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that (1) the indemnity agreements of the Company
and the Selling Securityholders contained in this paragraph (a) shall not apply
to any such losses, claims, damages, liabilities or expenses if such statement
or omission was made in reliance upon and in conformity with information
furnished as herein stated or otherwise furnished in writing to the Company by
or on behalf of any Underwriter for use in any Preliminary Prospectus or the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto, (2) the indemnity agreement contained in this paragraph (a)
with respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages,
liabilities or expenses purchased the Stock which is the subject thereof (or to
the benefit of any person controlling such Underwriter) if at or prior to the
written confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of noncompliance by
the Company with paragraph (c) of Section 6 hereof, and (3) each Selling
Securityholder shall only be liable under this paragraph with respect to (A)
information pertaining to such Selling Securityholder furnished by or on behalf
of such Selling Securityholder expressly for use in any Preliminary Prospectus
or the Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto or (B) facts that would constitute a breach of any
representation or warranty of such Selling Securityholder set forth in Section
2(b) hereof. In no event, however, shall the liability of
15.
any Selling Securityholder for indemnification under this Section 7(a) exceed
the net proceeds received by such Selling Securityholder from the Underwriters
in this offering. The indemnity agreements of the Company and the Selling
Securityholders contained in this Section 2(a) and the representations and
warranties of the Company and the Selling Securityholders contained in Section 2
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Stock.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its officers who signs the Registration Statement on his
own behalf or pursuant to a power of attorney, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of
Section 15 of the Securities Act, and the Selling Securityholders from and
against any and all losses, claims, damages or liabilities, joint or several, to
which such indemnified parties or any of them may become subject under the
Securities Act, the Exchange Act, or the common law or otherwise and to
reimburse each of them for any legal or other expenses (including, except as
otherwise hereinafter provided, reasonable fees and disbursements of counsel)
incurred by the respective indemnified parties in connection with defending
against any such losses, claims, damages or liabilities or in connection with
any investigation or inquiry of, or other proceeding which may be brought
against, the respective indemnified parties, in each case arising out of or
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (including the Prospectus as part
thereof and any Rule 462(b) registration statement) or any post-effective
amendment thereto (including any Rule 462(b) registration statement) or 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
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus (as amended or as supplemented if the Company shall
have filed with the Commission any amendment thereof or supplement thereto) or
the omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, if such statement or omission was made in
reliance upon and in conformity with information furnished as herein stated or
otherwise furnished in writing to the Company by or on behalf of such
indemnifying Underwriter for use in the Registration Statement or the Prospectus
or any such amendment thereof or supplement thereto. The indemnity agreement of
each Underwriter contained in this paragraph (b) shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any indemnified party and shall survive the delivery of and payment for the
Stock.
(c) Each party indemnified under the provisions of paragraphs (a) and
(b) of this Section 7 agrees that, upon the service of a summons or other
initial legal
16.
process upon it in any action or suit instituted against it or upon its receipt
of written notification of the commencement of any investigation or inquiry of,
or proceeding against, it in respect of which indemnity may be sought on account
of any indemnity agreement contained in such paragraphs, it will promptly give
written notice (herein called the "Notice") of such service or notification to
the party or parties from whom indemnification may be sought hereunder. No
indemnification provided for in such paragraphs shall be available to any party
who shall fail so to give the Notice if the party to whom such Notice was not
given was unaware of the action, suit, investigation, inquiry or proceeding to
which the Notice would have related and was prejudiced by the failure to give
the Notice, but the omission so to notify such indemnifying party or parties of
any such service or notification shall not relieve such 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 such indemnity agreement. Any
indemnifying party shall be entitled at its own expense to participate in the
defense of any action, suit or proceeding against, or investigation or inquiry
of, an indemnified party. Any indemnifying party shall be entitled, if it so
elects within a reasonable time after receipt of the Notice by giving written
notice (herein called the Notice of Defense) to the indemnified party, to assume
(alone or in conjunction with any other indemnifying party or parties) the
entire defense of such action, suit, investigation, inquiry or proceeding, in
which event such defense shall be conducted, at the expense of the indemnifying
party or parties, by counsel chosen by such indemnifying party or parties and
reasonably satisfactory to the indemnified party or parties; PROVIDED, HOWEVER,
that (i) if the indemnified party or parties reasonably determine that there may
be a conflict between the positions of the indemnifying party or parties and of
the indemnified party or parties in conducting the defense of such action, suit,
investigation, inquiry or proceeding or that there may be legal defenses
available to such indemnified party or parties different from or in addition to
those available to the indemnifying party or parties, then counsel for the
indemnified party or parties shall be entitled to conduct the defense to the
extent reasonably determined by such counsel to be necessary to protect the
interests of the indemnified party or parties and (ii) in any event, the
indemnified party or parties shall be entitled to have counsel chosen by such
indemnified party or parties participate in, but not conduct, the defense. If,
within a reasonable time after receipt of the Notice, an indemnifying party
gives a Notice of Defense and the counsel chosen by the indemnifying party or
parties is reasonably satisfactory to the indemnified party or parties, the
indemnifying party or parties will not be liable under paragraphs (a) through
(c) of this Section 7 for any legal or other expenses subsequently incurred by
the indemnified party or parties in connection with the defense of the action,
suit, investigation, inquiry or proceeding, except that (A) the indemnifying
party or parties shall bear the legal and other expenses incurred in connection
with the conduct of the defense as referred to in clause (i) of the proviso to
the preceding sentence and (B) the indemnifying party or parties shall bear such
other expenses as it or they have authorized to be incurred by the indemnified
party or parties. If, within a reasonable time
17.
after receipt of the Notice, no Notice of Defense has been given, the
indemnifying party or parties shall be responsible for any legal or other
expenses incurred by the indemnified party or parties in connection with the
defense of the action, suit, investigation, inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 7, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in paragraph (a) or (b) of this Section 7 (i) in such
proportion as is appropriate to reflect the relative benefits received by each
indemnifying party from the offering of the Stock or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each indemnifying party in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, or actions in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Securityholders on the one hand and the Underwriters on
the other shall be deemed to be in the same respective proportions as the total
net proceeds from the offering of the Stock received by the Company and the
Selling Securityholders and the total underwriting discount received by the
Underwriters, as set forth in the table on the cover page of the Prospectus,
bear to the aggregate public offering price of the Stock. 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 each indemnifying party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission.
(e) The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be 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 into account
the equitable considerations referred to in the first sentence of this paragraph
(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities, or actions in respect thereof, referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation, preparing to defend or defending against any action or claim
which is the subject of this paragraph (d). Notwithstanding the provisions of
this paragraph (d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the Stock purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
18.
misrepresentation. The Underwriters' obligations in this paragraph (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).
(f) No indemnifying party will, without the prior written consent of
the indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
indemnified party or any person who controls such indemnified party within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act is
a party to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of such indemnified
party and each such controlling person from all liability arising out of such
claim, action, suit or proceeding. An indemnifying party will not be liable for
any settlement of any action or claim so effected without its written consent.
(g) The liability of each Selling Securityholder under the indemnity
and reimbursement agreements contained in the provisions of this Section 7
hereof shall be limited to an amount equal to net proceeds received by such
Selling Securityholder from the Underwriters in the offering. The Company and
the Selling Securityholders may agree, as among themselves and without limiting
the rights of the Underwriters under this Agreement, as to the respective
amounts of such liability for which they each shall be responsible.
8. TERMINATION. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company and the
Selling Securityholders if after the date of this Agreement trading in the
Common Stock shall have been suspended, or if there shall have occurred (i) the
engagement in hostilities or an escalation of major hostilities by the United
States or the declaration of war or a national emergency by the United States on
or after the date hereof, (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 in economic or
political conditions in the financial markets of the United States would, in the
Underwriters' reasonable judgment, make the offering or delivery of the Stock
impracticable, (iii) suspension of trading in securities generally or a material
adverse decline in value of securities generally on the New York Stock Exchange,
the American
19.
Stock Exchange, or The Nasdaq National Market, or limitations on prices (other
than limitations on hours or numbers of days of trading) for securities on
either such exchange or system, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of, or
commencement of any proceeding or investigation by, any court, legislative body,
agency or other governmental authority which in the Underwriters' 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 the Underwriters' reasonable opinion has a
material adverse effect on the securities markets in the United States. If this
Agreement shall be terminated pursuant to this Section 8, there shall be no
liability of the Company or the Selling Securityholders to the Underwriters and
no liability of the Underwriters to the Company or the Selling Securityholders;
PROVIDED, HOWEVER, that in the event of any such termination the Company and the
Selling Securityholders agree to indemnify and hold harmless the Underwriters
from all costs or expenses incident to the performance of the obligations of the
Company and the Selling Securityholders under this Agreement, including all
costs and expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company and by the Selling Securityholders of all their
respective obligations to be performed hereunder at or prior to the Closing Date
or any later date on which Option Stock is to be purchased, as the case may be,
and to the following further conditions:
(a) The Registration Statement shall have become effective; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Stock hereunder
and the validity and form of the certificates representing the Stock, all
corporate proceedings and other legal matters incident to the foregoing, and the
form of the Registration Statement and of the Prospectus (except as to the
financial statements contained therein), shall have been approved at or prior to
the Closing Date by Xxxxxx Godward LLP, counsel for the Underwriters.
(c) You shall have received from Xxxxx & XxXxxxxx, counsel for the
Company, and from Xxxx & Priest, LLP, counsel for the Selling Securityholders,
opinions, addressed to the Underwriters and dated the Closing Date, covering the
matters set forth in Annex A and Annex B hereto, respectively, and if Option
Stock is purchased at any date after the Closing Date, additional opinions from
each such counsel, addressed
20.
to the Underwriters and dated such later date, confirming that the statements
expressed as of the Closing Date in such opinions remain valid as of such later
date.
(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading, (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole, whether or not arising from transactions in the ordinary course of
business, and, since such dates, except in the ordinary course of business,
neither the Company nor any of its subsidiaries has entered into any material
transaction not referred to in the Registration Statement in the form in which
it originally became effective and the Prospectus contained therein,
(iv) neither the Company nor any of its subsidiaries has any material contingent
obligations which are not disclosed in the Registration Statement and the
Prospectus, (v) there are not any pending or known threatened legal proceedings
to which the Company or any of its subsidiaries is a party or of which property
of the Company or any of its subsidiaries is the subject which are material and
which are not disclosed in the Registration Statement and the Prospectus,
(vi) there are not any franchises, contracts, leases or other documents which
are required to be filed as exhibits to the Registration Statement which have
not been filed as required, (vii) the representations and warranties of the
Company herein are true and correct in all material respects as of the Closing
Date or any later date on which Option Stock is to be purchased, as the case may
be, and (viii) there has not been any material change in the market for
securities in general or in political, financial or economic conditions from
those reasonably foreseeable as to render it impracticable in your reasonable
judgment to make a public offering of the Stock, or a material adverse change in
market levels for securities in general (or those of companies in particular) or
financial or economic conditions which render it inadvisable to proceed.
(e) You shall have received on the Closing Date and on any later date
on which Option Stock is purchased a certificate, dated the Closing Date or such
later date, as the case may be, and signed by the President and the Chief
Financial Officer of the Company, stating that the respective signers of said
certificate have carefully examined the Registration Statement in the form in
which it originally became effective and the Prospectus contained therein and
any supplements or amendments thereto, and that the
21.
statements included in clauses (i) through (vii) of paragraph (d) of this
Section 9 are true and correct.
(f) You shall have received from Ernst & Young LLP, a letter or
letters, addressed to the Underwriters and dated the Closing Date and any later
date on which Option Stock is purchased, confirming that they are independent
public accountants with respect to the Company within the meaning of the
Securities Act and the applicable published rules and regulations thereunder and
based upon the procedures described in their letter delivered to you
concurrently with the execution of this Agreement (herein called the Original
Letter), but carried out to a date not more than three business days prior to
the Closing Date or such later date on which Option Stock is purchased
(i) confirming, to the extent true, that the statements and conclusions set
forth in the Original Letter are accurate as of the Closing Date or such later
date, as the case may be, and (ii) setting forth any revisions and additions to
the statements and conclusions set forth in the Original Letter which are
necessary to reflect any changes in the facts described in the Original Letter
since the date of the Original Letter or to reflect the availability of more
recent financial statements, data or information. The letters shall not
disclose any change, or any development involving a prospective change, in or
affecting the business or properties of the Company or any of its subsidiaries
which, in your sole judgment, makes it impractical or inadvisable to proceed
with the public offering of the Stock or the purchase of the Option Stock as
contemplated by the Prospectus.
(g) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several jurisdictions,
or other evidence satisfactory to you, of the qualification referred to in
paragraph (f) of Section 6 hereof.
(h) Prior to the Closing Date, the Stock to be issued and sold by the
Company shall have been duly authorized for listing by the Nasdaq National
Market upon official notice of issuance.
(i) On or prior to the Closing Date, you shall have received from all
directors, executive officers, and Selling Securityholders agreements, in form
reasonably satisfactory to Xxxxxxxxx & Xxxxx LLC, stating that without the prior
written consent of Xxxxxxxxx & Xxxxx LLC on behalf of the Underwriters, such
person or entity will not, for a period of 90 days following the commencement of
the public offering of the Stock by the Underwriters, directly or indirectly,
(i) sell, offer, contract to sell, transfer the economic risk of ownership in,
make any short sale, pledge, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to purchase
or otherwise transfer or dispose of any shares of Common Stock (including,
without limitation, shares of Common Stock which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations of the
22.
Commission and shares of Common Stock which may be issued upon exercise of stock
options or warrants) or any securities convertible into, derivative of or
exchangeable or exercisable for or any rights to purchase or acquire Common
Stock or (ii) enter into any swap or other agreement that transfers, in whole or
in part, any of the economic consequences or ownership of Common Stock, whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Xxxxxx Godward LLP, counsel for the Underwriters,
shall be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and to the Selling Securityholders. Any such termination shall be
without liability of the Company or the Selling Securityholders to the
Underwriters and without liability of the Underwriters to the Company or the
Selling Securityholders; PROVIDED, HOWEVER, that (i) in the event of such
termination, the Company and the Selling Securityholders agree to indemnify and
hold harmless the Underwriters from all costs or expenses incident to the
performance of the obligations of the Company and the Selling Securityholders
under this Agreement, including all costs and expenses referred to in
paragraphs (i) and (j) of Section 6 hereof, and (ii) if this Agreement is
terminated by you because of any refusal, inability or failure on the part of
the Company or the Selling Securityholders to perform any agreement herein, to
fulfill any of the conditions herein, or to comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company will
reimburse the Underwriters severally upon demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by them in connection with the transactions contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The obligation of the Company and the Selling Securityholders
to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not be
fulfilled, this Agreement may be terminated by the Company and the Selling
Securityholders by giving notice to you. Any such termination shall be without
liability of the Company and the Selling Securityholders to the Underwriters
and without liability of the Underwriters to the Company or the Selling
Securityholders; PROVIDED, HOWEVER, that in the event of
23.
any such termination the Company and the Selling Securityholders jointly and
severally agree to indemnify and hold harmless the Underwriters from all costs
or expenses incident to the performance of the obligations of the Company and
the Selling Securityholders under this Agreement, including all costs and
expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other
obligations under Section 7 of this Agreement, the Company hereby agrees to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 11 and the possibility that such payments might later be held
to be improper; PROVIDED, HOWEVER, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure
to the benefit of the Company, the Selling Securityholders and the several
Underwriters and, with respect to the provisions of Section 7 hereof, the
several parties (in addition to the Company, the Selling Securityholders and the
several Underwriters) indemnified under the provisions of said Section 7, and
their respective personal representatives, successors and assigns. Nothing in
this Agreement is intended or shall be construed to give to any other person,
firm or corporation any legal or equitable remedy or claim under or in respect
of this Agreement or any provision herein contained. The term "successors and
assigns" as herein used shall not include any purchaser, as such purchaser, of
any of the Stock from any of the several Underwriters.
13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Xxxxxxxxx & Xxxxx LLC, Xxx Xxxx Xxxxxx,
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000; and if to the Company, shall be mailed,
telegraphed or delivered to it at its office, 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-
9890, Attn: Xxxx X. Xxxxxxxx, Esq., and if to the Selling Securityholders or any
of them, shall be mailed, telegraphed or delivered to the Selling
Securityholders in care of Xxxx & Priest LLP, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attn: Xxxxx X. Xxxxxx, Esq.. All notices given by telegraph shall
be promptly confirmed by letter.
24.
14. 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 the Selling Securityholders or their respective directors or
officers, and (c) delivery and payment for the Stock under this Agreement;
PROVIDED, HOWEVER, that if this Agreement is terminated prior to the Closing
Date, the provisions of paragraphs (l) and (m) of Section 6 hereof shall be of
no further force or effect.
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 California.
25.
Please sign and return to the Company and to the Selling Securityholders in
care of the Company the enclosed duplicates of this letter, whereupon this
letter will become a binding agreement among the Company, the Selling
Securityholders and the several Underwriters in accordance with its terms.
Very truly yours,
DAOU SYSTEMS, INC.
By
--------------------------
Xxxxxx X. Xxxx
President
SELLING SECURITYHOLDERS:
[List Names of Selling Securityholders]
By
--------------------------
[Name]
Attorney-in-Fact
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
XXXXXXXXX & XXXXX LLC
XXXX. XXXXX & SONS INCORPORATED
XXXXX & COMPANY
By Xxxxxxxxx & Xxxxx LLC
By
--------------------------
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
SIGNATURE PAGE TO UNDERWRITING AGREEMENT
SCHEDULE I
UNDERWRITERS
NUMBER OF
SHARES
TO BE
UNDERWRITERS PURCHASED
------------ ---------
Xxxxxxxxx & Xxxxx LLC. . . . . . . . . . . . . . . . . . . .
Alex. Xxxxx & Sons Incorporated. . . . . . . . . . . . . . .
Xxxxx & Company. . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . [ ]
--------
--------
SCHEDULE I TO UNDERWRITING AGREEMENT
SCHEDULE II
SELLING SECURITYHOLDERS
NUMBER OF
NAME AND ADDRESS SHARES
OF SELLING SECURITYHOLDERS TO BE SOLD
-------------------------- ----------
-------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [ ]
-------
-------
SCHEDULE II TO UNDERWRITING AGREEMENT
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF XXXXX XXXXXXXX
COUNSEL FOR THE COMPANY
(i) Each of the Company and its subsidiaries 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 Stock to be sold by the Selling
Securityholders, have been duly authorized and validly issued and are fully paid
and non-assessable; all of the Stock conform to the description thereof
contained in the Prospectus; the certificates evidencing the Stock are in due
and proper form; the shares of Common Stock, including the Option Stock, 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, rights of first refusal or co-sale rights of stockholders
exist with respect to any of the Stock or the issue and sale thereof.
(iii) The Registration Statement was declared effective under
the Securities 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 Securities Act.
(iv) The Company meets the eligibility requirements for use of
Form SB-2 under the Securities Act, and 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
Securities 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
A-1.
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) All documents filed by the Company with the Commission
pursuant to the Securities Act or the Exchange Act or any further amendment or
supplement thereto made by the Company prior to the Closing Date (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), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material respects
with the requirements of the Securities Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder; and they have no
reason to believe that any of such documents, when such documents became
effective or were so filed, as the case may be, contained, in the case of a
registration statement which became effective under the Securities Act, 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,
or, in the case of other documents which were filed under the Exchange Act with
the Commission, an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made when such documents were so filed,
not misleading.
(viii) 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.
(ix) 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 be bound, which breach, default
or violation would have a Material Adverse Effect on the Company;
A-2.
(x) This Agreement has been duly authorized, executed and
delivered by the Company.
(xi) 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 NASD 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.
(xii) the information required to be set forth in the
Registration Statement in answer to Items 12 and 13 (insofar as it relates to
such counsel) of Form SB-2 is to the best of such counsel's knowledge accurately
and adequately set forth therein in all material respects or no response is
required with respect to such Items, and the description of the Company's stock
option plans and the options granted and which may be granted thereunder and the
options granted otherwise than under such plans set forth in the Prospectus
accurately and fairly presents the information required to be shown with respect
to said plans and options to the extent required by the Securities Act and the
rules and regulations of the Commission thereunder;
(xiii) based insofar as factual matters are concerned solely upon
certificates of the Selling Securityholders, the accuracy of which we have no
reason to question, (A) the Underwriting Agreement has been duly executed and
delivered by or on behalf of each of the Selling Securityholders; (B) the
Custody Agreement between the Selling Securityholders and [_________] , as
Custodian, and the Power of Attorney referred to in such Custody Agreement have
been duly executed and delivered by such Selling Securityholder; (C) the Custody
Agreement entered into by, and the Power of Attorney given by, such Selling
Securityholder is valid and binding on such Selling Securityholder; and (D) each
Selling Securityholder has full legal right and authority to enter into the
Underwriting Agreement and to sell, transfer and deliver in the manner provided
in the Underwriting Agreement the shares of Stock sold by such Selling
Securityholder hereunder;
(xiv) all holders of securities of the Company having rights to
the registration of shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have waived such rights or
such rights have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement;
(xv) good and marketable title to the shares of Stock sold by
the Selling Securityholders under the Underwriting Agreement, free and clear of
all liens,
A-3.
encumbrances, equities, security interests and claims, has been transferred to
the Underwriters who have severally purchased such shares of Stock under the
Underwriting Agreement, assuming for the purpose of this opinion that the
Underwriters purchased the same in good faith without notice of any adverse
claims; and
(xvi) the Stock sold by the Selling Securityholders is listed
and duly admitted to trading on the Nasdaq National Market, and the Stock issued
and sold by the Company will been duly authorized for listing by the Nasdaq
Stock Market upon official notice of issuance.
------------------------------------
Counsel rendering the foregoing opinion may rely as to questions of law not
involving the laws of the United States or of the State of California or of the
General Corporation Laws of the State of Delaware, upon opinions of local
counsel satisfactory in form and scope to counsel for the Underwriters. Copies
of any opinions so relied upon shall be delivered to the Representatives and to
counsel for the Underwriters and the foregoing opinion shall also state that
counsel knows of no reason the Underwriters are not entitled to rely upon the
opinions of such local 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
A-4.
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
A-5.
ANNEX B
MATTERS TO BE COVERED IN THE OPINION OF XXXX & PRIEST
COUNSEL FOR THE SELLING SECURITYHOLDERS
(i) This Agreement has been duly authorized, executed and
delivered on behalf of the Selling Securityholders.
(ii) Each Selling Securityholder 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
Stock to be sold by such Selling Securityholder pursuant to this Agreement.
(iii) The Custodian Agreement executed and delivered by each
Selling Securityholder 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 Stock being sold by each Selling Securityholder on
the Closing Date, free and clear of all claims, liens, encumbrances and security
interests whatsoever.
B-1.
