Exhibit 4.1
EXHIBIT C
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RESTRICTED STOCK PURCHASE AGREEMENT
This Restricted Stock Agreement is made as of June 1, 2001, by DAOU
Systems, Inc., a Delaware corporation (the "Company"), and Neil Cassidy
("Cassidy").
Background Statement
In connection with Cassidy providing services to the Company pursuant
to an Employment Agreement of October 2, 2000 (the "Employment Agreement") and
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the Amendment No. 1 to the Employment Agreement, effective as of June 1, 2001
("Amended Agreement"), the Company's Board of Directors has granted to Cassidy
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the right to purchase 150,000 shares of Common Stock of the Company, which are
subject to a limited repurchase right (such shares, as adjusted for stock
splits, recapitalizations, combinations and the like, are hereinafter referred
to as the "Restricted Shares"), at a purchase price of $ 0.29 per share.
Agreement
The parties, intending to be legally bound, agree as follows:
1. Grant of Award Subject to Right of Repurchase.
1.1 Stock Award. The Company hereby agrees to issue to Cassidy
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150,000 Shares of its Common Stock upon his payment to the Company of the
purchase price therefor of $0.29 per share, which shall be paid through his
execution and delivery of the promissory note attached hereto. The Shares shall
be subject to the limitations provided below in this Section 1.
1.2 Scope of Repurchase Right. 25/36ths of the Restricted Shares
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shall be subject to a limited right (but not an obligation) of repurchase by the
Company (the "Right of Repurchase"). Cassidy shall not transfer, assign,
encumber or otherwise dispose of any unvested Restricted Shares, except as
provided in the following sentence. Cassidy may transfer any Restricted Shares,
subject to the Right of Repurchase, (i) by beneficiary designation, will or
intestate succession or (ii) to Cassidy's spouse, children or grandchildren or
to a trust or family limited partnership established by Cassidy for the benefit
of Cassidy or Cassidy's spouse, children or grandchildren, provided in either
case that the Transferee agrees in writing on a form prescribed by the Company
to be bound by all provisions of this Agreement. If Cassidy transfers any
Restricted Shares, then this Section 1 shall apply to the Transferee to the same
extent as to Cassidy.
1.3 Condition Precedent to Exercise. The Right of Repurchase may be
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exercised at any time during the term hereof and for up to sixty (60) days
following the termination of Cassidy's Employment as that term is defined in the
Employment Agreement; provided that the
Right of Repurchase shall expire with respect to the Restricted Shares in the
event that the Company terminates Cassidy's employment without Cause (as defined
in the Employment Agreement).
1.4 Lapse of Repurchase Right. Cassidy shall acquire a vested
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interest in and the Company's Right of Repurchase shall lapse with respect to
1/36th of the Restricted Shares upon Cassidy's completion of each of the next
twenty five (25) months of continuous employment after the date hereof, such
that Cassidy would be fully vested in the Restricted Shares at the expiration of
twenty five (25) months from the date hereof. The Right of Repurchase shall
lapse with respect to all remaining Restricted Shares if the Company is subject
to a Change in Control (as defined in the Employment Agreement) before Cassidy's
employment terminates.
1.5 Repurchase Cost. If the Company exercises the Right of
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Repurchase, it shall pay Cassidy an amount in cash or Cash Equivalents equal to
$.29 per share (equal to the purchase price) for each of the Restricted Shares
being repurchased. "Cash Equivalents" for purposes of this Agreement includes a
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reduction of all or part of any unpaid interest and principal of the above
referenced promissory note.
1.6 Exercise of Repurchase Right. The Right of Repurchase shall be
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exercisable only by written notice delivered to Cassidy prior to the expiration
of the sixty (60) day period specified in Section 1.3 above. The notice shall
set forth the date on which the repurchase is to be effected. Such date shall
not be more than thirty (30) days after the date of the notice. The
certificate(s) representing the Restricted Shares to be repurchased shall, prior
to the close of business on the date specified for the repurchase, be delivered
to the Company properly endorsed for transfer. The Company shall, concurrently
with the receipt of such certificate(s), pay to Cassidy the purchase price
determined according to Subsection 1.5 above. Payment shall be made in cash (or,
in the Company's sole discretion, by a reduction of any accrued and unpaid
interest or unpaid principal outstanding pursuant to the promissory note). The
Right of Repurchase shall terminate with respect to any Restricted Shares for
which it has not been timely exercised pursuant to this Subsection 1.6.
1.7 Additional Shares or Substituted Securities. In the event of the
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declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as an ordinary cash dividend) that by reason of such transaction are
distributed with respect to any Restricted Shares or into which such Restricted
Shares thereby become convertible shall immediately be subject to the Right of
Repurchase. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the
Restricted Shares. After each such transaction, appropriate adjustments shall
also be made to the price per share to be paid upon the exercise of the Right of
Repurchase in order to reflect any change in the Company's outstanding
securities effected without receipt of consideration therefor; provided,
however, that the aggregate purchase price payable for the Restricted Shares
shall remain the same.
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1.8 Termination of Rights as Stockholder. If the Company makes
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available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Restricted Shares to be repurchased in
accordance with this Section 1, then after such time the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
1.9 Escrow. The certificate(s) for Restricted Shares shall be
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deposited in escrow with the Company to be held in accordance with the
provisions of this Agreement. Any new, substituted or additional securities or
other property described in Section 1.7 above shall immediately be delivered to
the Company to be held in escrow, but only to the extent the Shares are at the
time Restricted Shares. All regular cash dividends on Restricted Shares (or
other securities at the time held in escrow) shall be paid directly to Cassidy
and shall not be held in escrow. Restricted Shares, together with any other
assets or securities held in escrow hereunder, shall be (i) surrendered to the
Company for repurchase and cancellation upon the Company's exercise of its Right
of Repurchase or (ii) released to Cassidy, within ten days of Cassidy's request,
to the extent the Shares are vested, no longer subject to the repurchase right
herein and no longer pledged pursuant to that certain Stock Pledge Agreement,
dated of even date herewith by and between Cassidy and the Company (the "Pledge
Agreement") (but not more frequently than once every six (6) months). In any
event, all Shares that have vested (and any other vested assets and securities
attributable thereto) and are no longer subject to the repurchase right and no
longer pledged pursuant to the Pledge Agreement, shall be released within sixty
(60) days after Cassidy's cessation of Employment.
2. Representations of Cassidy. Cassidy hereby represents, warrants,
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acknowledges, and agrees that Cassidy has the power and authority to execute and
deliver this Agreement and to perform its obligations.
3. Representations of the Company. The Company hereby represents,
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warrants, acknowledges, and agrees that:
3.1 The Company has full corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the Company,
enforceable in accordance with its terms and conditions. The Company need not
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
3.2 Neither the execution and the delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Company is subject.
3.3 When issued upon the terms and conditions of this Agreement (and
paid for as contemplated by this Agreement), the Shares will be validly issued
and fully paid and
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non-assessable, with no personal liability attached to the ownership thereof and
not subject to any preemptive rights, rights of first refusal or other similar
rights of the stockholders of the Company.
4. Miscellaneous.
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4.1 Market Stand-Off. In connection with any underwritten public
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offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act, Cassidy shall not,
without the prior written consent of the Company's managing underwriter, (i)
lend, offer, pledge, sell, contract to sell, 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, directly or
indirectly, any shares of Common Stock of the Company ("Stock") or any
securities convertible into or exercisable or exchangeable for Stock (whether
such shares or any such securities are then owned by Cassidy or are thereafter
acquired), or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Stock, whether any such transaction described in clause (i) or (ii) above is
to be settled by delivery of Stock or such other securities, in cash or
otherwise. Such restriction (the "Market Stand-Off") shall be in effect for such
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period of time following the date of the final prospectus for the offering as
may be requested by the Company or such underwriters. In no event, however,
shall such period exceed ninety (90) days. In the event of the declaration of a
stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company's outstanding
securities without receipt of consideration, any new, substituted or additional
securities that are by reason of such transaction distributed with respect to
any shares of Stock subject to the Market Stand-Off, or into which such shares
thereby become convertible, shall immediately be subject to the Market
Stand-Off. In order to enforce the Market Stand-Off, the Company may impose
stop-transfer instructions with respect to the Stock until the end of the
applicable stand-off period. The Company's underwriters shall be beneficiaries
of the Agreement set forth in this Section 4.1. Cassidy shall be subject to this
Subsection 4.1 only if all of the directors, officers and any five percent (5%)
or greater shareholders of the Company are subject to similar arrangements.
4.2 Rights of the Company. The Company shall not be required to (i)
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transfer on its books any Shares that have been sold or transferred in
contravention of this Agreement or (ii) treat as the owner of Shares, or
otherwise to accord voting, dividend or liquidation rights to, any transferee to
whom Shares have been transferred in contravention of this Agreement.
4.3 Successors and Assigns. Except as otherwise expressly provided
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to the contrary, the provisions of this Agreement shall inure to the benefit of,
and be binding upon, the Company and its successors and assigns and be binding
upon Cassidy and Cassidy's legal representatives, heirs, legatees, distributees,
assigns and transferees by operation of law, whether or not any such person has
become a party to this Agreement or has agreed in writing to join herein and to
be bound by the terms, conditions and restrictions hereof.
4.4 No Retention of Rights. Nothing in this Agreement shall confer
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upon Cassidy any right to continue his employment for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Company (or any Parent or Subsidiary employing
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or retaining Cassidy) to terminate Cassidy's employment at any time and for any
reason, with or without cause, or of Cassidy under any other Agreement between
Cassidy and the Company, which rights are hereby expressly reserved by each.
4.5 Tax Election. Subjecting the Shares to a Right of Repurchase may
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result in adverse tax consequences that may be avoided or mitigated by filing an
election under Code Section 83(b) of the Internal Revenue Code of 1986, as
amended (the "Code"). Such election may be filed only within thirty (30) days
after the date of purchase. Cassidy should consult with Cassidy's tax advisor to
determine the tax consequences of subjecting the Shares to a Right of Repurchase
and the advantages and disadvantages of filing the Code Section 83(b) election.
Cassidy acknowledges that it is Cassidy's sole responsibility, and not the
Company's, to file a timely election under Code Section 83(b), even if Cassidy
requests the Company or its representatives to make this filing Cassidy's
behalf.
4.6 Legend. All certificates evidencing Restricted Shares shall bear
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the following legends:
"THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN
COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN COMPANY
AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN
INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO COMPANY
CERTAIN REPURCHASE RIGHTS UPON TERMINATION OF EMPLOYMENT WITH
COMPANY. THE SECRETARY OF COMPANY WILL UPON WRITTEN REQUEST
FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT
CHARGE."
4.7 Notice. Any notice required by the terms of this Agreement shall
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be given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail,
with postage and fees prepaid. Notice shall be addressed to the Company at its
principal executive office and to Cassidy at the address that Cassidy most
recently provided to the Company.
4.8 Entire Agreement. This Agreement constitutes the entire contract
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between the parties hereto with regard to the subject matter hereof. It
supersedes any other agreements, representations or understandings (whether oral
or written and whether express or implied) relating to the subject matter
hereof.
4.9 Governing Law. This Agreement shall be governed by, and
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construed in accordance with, the laws of the State of California, as such laws
are applied to contracts entered into and to be performed entirely within such
State.
4.10 Amendments and Waivers. Any term of this Agreement may be
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amended and the observance of any term of this Agreement may be waived (either
generally or in a particular
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instance and either retroactively or prospectively), only with the written
consent of the Company and the holders of a majority of the then outstanding
shares of the Company's capital stock that is not owned by Cassidy.
4.11 Severability. If one or more provisions of this Agreement are
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held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
4.12 Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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COMPANY:
DAOU SYSTEMS, INC.
By: /s/ James T. Roberto
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Name: James T. Roberto
Its: President, Chief Executive Officer
CASSIDY:
/s/ Neil R. Cassidy
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Neil R. Cassidy
Signature Page to Restricted Stock Agreement,
Executed August 28, 2001,
to be Effective as of the Date First Written Above
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EXHIBIT 1 to RESTRICTED STOCK AGREEMENT
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SPOUSE'S AGREEMENT
The undersigned, being the spouse ("Spouse") of _________________________ (the
"Investor"), agrees to be bound by the provisions of this Agreement to the
extent applicable to the undersigned.
Name:_____________________________
IF THE INVESTOR IS AN INDIVIDUAL WHO IS LEGALLY DOMICILED OR A RESIDENT IN THE
STATE OF CALIFORNIA, OR ANY OTHER "COMMUNITY PROPERTY" STATE, THE SPOUSE OF THE
INVESTOR MUST CHECK ONE OF THE FOLLOWING:
_____ The Investor is acquiring ____ The Investor is acquiring the Shares
the Shares as community as separate property (the Investor
property in one or both should consult independent counsel
names (both spouses in making a determination as to
must sign) whether he is using separate
property to purchase the Shares)
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Signature of the Investor
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Type or print name of the Investor
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Signature of Spouse
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Type or print name of Spouse
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IF SEPARATE PROPERTY IS BEING USED TO PURCHASE THE SHARES, THE SPOUSE OF THE
INVESTOR MUST SIGN THE FOLLOWING ACKNOWLEDGEMENT:
I hereby acknowledge that my Spouse is making this investment in the Shares with
his separate property and funds.
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Signature of the Investor's Spouse
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Type or print name of the Investor's Spouse
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EXHIBIT 2 to RESTRICTED STOCK AGREEMENT
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Secured Promissory Note
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US $43,500 San Diego, California June 1, 2001
FOR VALUE RECEIVED, the undersigned, Neil Cassidy ("Maker"), hereby
promises to pay to the order of DAOU Systems, Inc., a Delaware corporation (the
"Company"), the principal sum of Forty Three Thousand, Five Hundred Dollars
($43,500) with interest on the unpaid balance thereof from the date that such
principal amount was advanced until maturity at the rate per annum equal to
6.75% (the "Applicable Rate") computed on the basis of a 365-day year and actual
days elapsed, both principal and interest payable as hereinafter provided in
lawful money of the United States of America at the offices of the Company in
San Diego, California, or at such other place as from time to time may be
designated by the holder of this Note.
The outstanding principal balance of this Note and accrued interest
thereon shall be due and payable in full on or before May 31, 2006.
Maker shall have the right to prepay, without penalty, upon ten (10)
business days' notice to the holder, at any time and from time to time prior to
maturity, all or any part of the unpaid principal balance of this Note.
All payments or prepayments received hereunder, shall first be applied
to any costs or expenses of enforcing this Note, next to accrued, but unpaid
interest, and then to unpaid principal.
It is the intent of the payee of this Note and the undersigned in the
execution of this Note to contract in strict compliance with applicable usury
law. In furtherance thereof, the said payee and the undersigned stipulate and
agree that none of the terms and provisions contained in this Note, or in any
other instrument executed in connection herewith, shall ever be construed to
create a contract to pay for the use, forbearance or detention of money,
interest at a rate in excess of the maximum interest rate permitted to be
charged by applicable law; that neither the undersigned nor any other parties
now or hereafter becoming liable for payment of this Note shall ever be
obligated or required to pay interest on this Note at a rate in excess of the
maximum interest that may be lawfully charged under applicable law; and that the
provisions of this paragraph shall control over all other provisions of this
Note and any other instruments now or hereafter executed in connection herewith
which may be in apparent conflict herewith. The term "applicable law" as used in
this Note shall mean the laws of the State of California or the laws of the
United States, whichever laws allow the greater rate of interest, as such laws
now exist or may be changed or amended or come into effect in the future.
This Note is secured pursuant to the terms of that certain Stock Pledge
Agreement, dated of even date herewith, by and between the Company and Maker,
pursuant to which Maker pledges to the Company, and grants the Company a
security interest in 150,000 shares of the Company's common stock, par value
$.001 per share (the "Pledged Shares"), issued pursuant to
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that certain Stock Purchase Agreement of even date herewith, by and between the
Company and Maker, and any dividends or distribution received with respect to,
on account of, or in substitution for, the Pledged Shares.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or through any bankruptcy, receivership, probate
or other court proceedings or if this Note is placed in the hands of attorneys
for collection after default, the undersigned and all endorsers, guarantors and
sureties of this Note jointly and severally agree to pay to the holder of this
Note in addition to the principal and interest due and payable hereon all the
costs and expenses of said holder in enforcing this Note including, without
limitation, reasonable attorneys' fees and legal expenses.
All notices, consents, waivers, and other communications under this
Note must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by facsimile
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested or (c) when received by the addressee,
if sent by a nationally recognized overnight delivery service (receipt
requested), in each case to the appropriate addresses and facsimile numbers set
forth below (or to such other addresses and facsimile numbers as a party may
designate by notice to the other parties):
If to the Company: DAOU Systems, Inc.
5120 Shoreham Place
San Diego, California 92122
Attention: James Roberto
Facsimile No.: (858) 452-1338
With a copy to: Baker & McKenzie
101 W. Broadway, 12th Floor
San Diego, California 92121-3890
Attention: Abby B. Silverman
Facsimile No.: (619) 236-0429
If to Maker: Neil Cassidy
Address on file with the Company
If any provision of this Note is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Note will remain
in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
This Note shall bind and inure to the benefit of the successors and
assigns of the holder of this Note.
This Note may not be amended except by means of a written agreement
signed by the holder of this Note and the Maker. No waiver of a right in any
instance shall constitute a continuing waiver of successive rights, and any one
waiver shall govern only the particular matters waived.
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THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE
GOVERNED FOR ALL PURPOSES BY THE LAW OF THE STATE OF CALIFORNIA AND THE LAW OF
THE UNITED STATES APPLICABLE TO TRANSACTIONS WITHIN SUCH STATE.
"Maker"
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Neil R. Cassidy
Signature Page to Promissory Note
Executed August 28, 2001,
to be Effective as of the Date First Written Above
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EXHIBIT 3 to RESTRICTED STOCK AGREEMENT
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STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement is entered into as of June 1, 2001 (the
"Effective Date"), by and among DAOU Systems, Inc., a Delaware corporation (the
"Company"), and Neil Cassidy (the "Pledgor"), with reference to the following
facts:
Background Statement
The Company has agreed to sell to Pledgor 150,000 shares of the
Company's common stock, par value $.001 per share (the "Shares"), pursuant to
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that certain Stock Purchase Agreement, by and between the Company and Pledgor,
dated June 1, 2001 (the "Purchase Agreement").
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In addition the Company has agreed to loan to Pledgor $ 43,500 as
evidenced by that certain Secured Promissory Note (the "Note") dated June 1,
2001.
As a material inducement for the Company to make the loan to Pledgor
and to enter into the Purchase Agreement, Pledgor has agreed to secure his
obligations under the Note by granting the Company a first priority security
interest in the Shares.
Agreement
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions contained herein, the parties hereby agree as follows:
1. Security. The term "Pledged Stock" shall mean the 150,000
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Shares registered in the name of Pledgor, together with all certificates,
options, rights or other distributions issued as an addition to, in substitution
or in exchange for, or on account of, any such Shares, and all proceeds of the
foregoing, as further described in and subject to the provisions of Section 4
below, now or hereafter owned or acquired by Pledgor.
2. Grant of Security Interest. As security for full and
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timely payment, performance and satisfaction of the Obligations (as defined in
Section 3), Pledgor hereby grant to the Company a first priority security
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interest in the Pledged Stock. Upon the execution hereof, the Pledged Stock and
any related stock powers will be deposited in escrow with the Company pursuant
to Section 1.9 of the Purchase Agreement.
3. Obligations of Pledgor. As used herein, the term
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"Obligations" shall mean all of Pledgor's obligations, covenants and agreements
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under the Note.
4. Pledged Stock. In the event Pledgor will become entitled
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to receive or will receive, in connection with any of the Pledged Stock, (a) any
stock certificate, including any certificate representing a stock dividend or
any certificate in connection with any increase or
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reduction of capital, reclassification, merger, consolidation, sale of assets,
combination of shares, stock split or spin-off, (b) any option, warrant or
right, whether as an addition to or in substitution of any of the Pledged Stock,
or otherwise, (c) any dividend or distribution payable in property, including
securities issued as a dividend on the Pledged Stock, or (d) any other
distributions of any kind whatsoever, Pledgor will accept the same as encumbered
by the security interest created hereby, and will deliver the same forthwith to
the Company as the escrow agent (the "Escrow Agent"), in the exact form
received, including as appropriate, Pledgor's endorsement or appropriate stock
power duly executed in blank, as appropriate, to be held by the Escrow Agent, as
a part of the Pledged Stock, subject to the terms hereof; provided, however,
that as long as no Default (as defined in Section 7) is in existence, Pledgor
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will have sole voting rights with respect to the Pledged Stock.
5. Representations and Warranties of Pledgor. Pledgor
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warrants and represents to the Company that: (a) he has the power and authority
to enter into this Agreement and has the power and authority to pledge the
Pledged Stock for the purposes described herein, (b) Pledgor is the legal and
beneficial owner of all of the Pledged Stock, (c) all of the shares of the
Pledged Stock are owned by Pledgor free of any pledge, mortgage, lien or
security interest of any kind, except as created hereby, (d) the execution and
delivery by Pledgor of this Agreement, and the performance of its terms, will
not result in any violation or default under the terms of any agreement or
instrument, or any law or governmental rule or regulation applicable to Pledgor
or the Pledged Stock, and (e) upon execution and delivery by Pledgor of this
Agreement and upon delivery of the Pledged Stock to Escrow Agent, this Agreement
will create a valid and perfected first priority security interest in the
Pledged Stock, and the proceeds thereof, subject to no prior security interest.
6. Transfer of Interests. Pledgor hereby covenants that,
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until such time as the Obligations have been fully paid, performed and
satisfied, except as set forth in Section 1.2 of the Purchase Agreement, Pledgor
will not sell, convey or otherwise dispose of any of the Pledged Stock or any
interest therein, or create, incur or permit to exist any pledge, mortgage,
lien, charge, encumbrance or any security interest whatsoever in or with respect
to any of the Pledged Stock, or the proceeds thereof, other than the security
interest created hereby. No transfer shall be valid unless and until the
transferee agrees that such transfer is subject to the preexisting security
interest created hereby and such transferee executes a pledge agreement
reasonably satisfactory to the Company.
7. Default. As used herein, the term "Default" will mean the
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failure of full and timely payment or performance and satisfaction of any of the
Obligations.
8. Rights of the Company. Upon the occurrence of a Default,
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the Company may, at its option, do any one or more of the following: (a) declare
all indebtedness of Pledgor to Company to be immediately due and payable,
whereupon all unpaid principal and interest under the Note will become and be
immediately due and payable; (b) exercise any and all of the rights and remedies
of a secured party as provided for by law; (c) proceed by an action or actions
at law or in equity to recover the obligations secured hereby or to foreclose
under the terms of this Agreement and the Note and sell the collateral, or any
portion thereof, pursuant to a judgment or decree of a court or courts of
competent jurisdiction; (d) proceed immediately to have any or all of the
Pledged Stock registered in the Company's name or in the name of a nominee; (e)
enforce
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one or more remedies hereunder, successively or concurrently; and (f) proceed
immediately to dispose of and realize upon the Pledged Stock, or any part
thereof, and in connection therewith, sell or otherwise dispose of and deliver
the Pledged Stock, or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange, broker's board or at any of the
Company's offices or elsewhere, at such prices and on such terms as the Company
may deem best, for cash or on credit, or for future delivery without assumption
of any credit risk, with the right of the Company or any purchaser to purchase
at any such sale either the whole or any part of the Pledged Stock (in
connection with any such sale or disposition, the Company need not give more
than thirty (30) calendar days notice of the time and place of any public sale
or of the time after which a private sale may take place, which notice to
Pledgor hereby acknowledges to be reasonable).
9. Proceeds. The proceeds of any disposition of all or any
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part of the Pledged Stock, as provided in Section 8, will be applied as follows:
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(a) first, to the costs and expenses incurred in connection therewith or
incidental thereto, including the Company's attorneys' fees and legal expenses;
(b) second, to the satisfaction of the Obligations; (c) third, to the payment of
any other amounts required by applicable law; and (d) fourth, to Pledgor to the
extent of any surplus remaining. In the event that there is any deficiency due
to the fact that the proceeds from the aforesaid disposition of the Pledged
Stock were inadequate to satisfy the Obligations, Pledgor will not be liable to
the Company for such deficiency.
10. Private Sale. Pledgor recognize and acknowledge that the
------------
company may be unable to effect a public sale of all or a part of the Pledged
Stock and may elect to resort to one or more private sales to purchasers who
will be obligated to agree, among other things, to acquire the Pledged Stock for
their own account, for investment, and not with a view to the distribution or
resale thereof. Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable than those of public sales, and agrees that
such private sales will be deemed to have been made in a commercially reasonable
manner and that the Company has no obligation to delay sale of any Pledged Stock
to permit Pledgor to register it for public sale under the Securities Act of
1933, as amended.
11. Release of Pledged Stock. Upon the execution hereof,
------------------------
Pledgor will deliver to Escrow Agent the stock certificates representing the
Pledged Stock, including Pledgor's endorsement thereon or appropriate stock
powers duly executed in blank, as appropriate, to be held by the Escrow Agent in
accordance with the terms of this Agreement and Section 1.9 of the Purchase
Agreement.
12. Performance by Pledgor. Upon full payment and performance
----------------------
of all of the Obligations by Pledgor and upon payment of all additional costs
and expenses provided herein, this Agreement will terminate, and the Company
will deliver or caused to be delivered to Pledgor, such of the Pledged Stock
that has not been sold or otherwise disposed of pursuant to this Agreement.
13. Remedies. The rights and remedies provided herein are
--------
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided in other instruments and agreements between the Company and Pledgor, or
as provided by law.
15
14. Legend. As long as the shares are subject to this
------
Agreement, such shares shall bear the following legend:
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THAT CERTAIN STOCK
PLEDGE AGREEMENT, DATED JUNE 1, 2001 BY AND BETWEEN DAOU
SYSTEMS, INC. AND NEIL CASSIDY AND MAY NOT BE ASSIGNED, SOLD OR
TRANSFERRED EXCEPT AS PROVIDED THEREIN.
15. Successors and Assigns. This Agreement is binding upon and
----------------------
will inure to the benefit of the parties hereto, and their successors and
assigns.
16. Governing Law. This Agreement will be governed by and
-------------
construed in accordance with California law, without regards to the principles
of the conflict of laws.
17. Notices. All notices, consents, waivers, and other
-------
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by facsimile (with written confirmation of receipt), provided
that a copy is mailed by registered mail, return receipt requested or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
facsimile numbers set forth below (or to such other addresses and facsimile
numbers as a party may designate by notice to the other parties):
If to Company: DAOU Systems, Inc.
5120 Shoreham Place
San Diego, California 92122
Attention: James T. Roberto
Facsimile No.: (858) 452-1338
With a copy to: Baker & McKenzie
101 W. Broadway, 12th Floor
San Diego, California 92121-3890
Attention: Abby B. Silverman
Facsimile No.: (619) 236-0429
If to Pledgor: Neil Cassidy
Address on file with the Company
18. Entire Agreement. This Agreement and any other agreement
----------------
expressly referred to herein supersedes any and all other agreements, either
oral or in writing, among the parties hereto, with respect to the subject matter
hereof and contains all of the covenants and agreements among the parties with
respect to the subject matter hereof.
19. Waiver; Modification. No term or condition of this
--------------------
Agreement will be deemed to have been waived nor will there by any estoppel to
enforce any provision of this Agreement except by written instrument of the
party charged with such waiver or estoppel. No
16
amendment or modification of this Agreement will be deemed effective unless and
until executed in writing by all of the parties hereto.
20. Severability. All agreements and covenants contained
------------
herein are severable and in the event that any of them will be held to be
invalid by any court of competent jurisdiction, this Agreement will be
interpreted as if such invalid agreements or covenants were not contained
herein.
21. Delay; Time of Essence. No failure or delay by a party in
----------------------
exercising any right, power, or privilege hereunder will operate as a waiver
thereof, and no single or partial exercise thereof will preclude any other or
further exercise or the exercise of any other right, power, or privilege. Time
is of the essence of each and every provision of this Agreement of which time is
an element.
22. Attorneys' Fees. In any action or proceeding brought to
---------------
enforce or interpret any provision of this Agreement, the prevailing party will
be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
17
IN WITNESS WHEREOF, the parties have executed this Stock Pledge Agreement
effective as of the date first written above.
Pledgor:
By: _______________________________________________
Neil R. Cassidy
The Company
DAOU Systems, Inc.
By:__________________________________________________
Name: James T. Roberto
Its: President, Chief Executive Officer
Signature Page to Stock Pledge Agreement,
Executed August 28, 2001,
to be Effective as of the Date First Written Above
18
EXHIBIT 4 to RESTRICTED STOCK AGREEMENT
---------------------------------------
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of June 1, 2001, is among
DAOU Systems, Inc., a Delaware corporation (the "Company"), and Neil Cassidy
(the "Investor")."
RECITALS
WHEREAS, the Company and the Investor are parties to that certain
Restricted Stock Agreement, dated June 1, 2001 (the "Purchase Agreement"); and
WHEREAS, the Parties desire to enter into an agreement concerning the
registration of the shares of common stock, par value $.001 per share (the
"Common Stock"), to be issued pursuant to the Purchase Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
Article I_________
REGISTRATION RIGHTS
1.1. Definitions. For purposes of this Agreement:
(a) the term "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended
(the "Act"), and the declaration or ordering of effectiveness of such
registration statement or document;
(b) the term "Registrable Securities" means the Common Stock issued
pursuant to the Purchase Agreement, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which such
person's rights under this Article I are not assigned;
(c) the number of shares of "Registrable Securities then
outstanding" will be the number of shares of Common Stock outstanding
which are Registrable Securities;
(d) the term "Holder" means any person owning or having the right to
acquire Registrable Securities or any permitted assignee thereof; and
(e) the term "Form S-1" means such form under the Act as in effect
on the date of this Agreement or any registration form under the Act
subsequently adopted by the Securities and Exchange Commission ("SEC")
which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
19
1.2. Form S-1 Registration.
As soon as reasonably practicable after the written request of the
Holders of a majority of the Registrable Securities, the Company shall file with
the SEC one or more Registration Statements on Form S-1 (or other similar form)
covering the continuous sale of the Registrable Securities pursuant to Rule 415
under the Securities Act or any successor thereto (each, a "Shelf Registration
Statement"), in the manner specified therein. The Company shall use all
reasonable efforts to cause each Shelf Registration Statement to be declared
effective by the SEC as soon as reasonably practicable after its filing with the
SEC, and upon reasonable notice from a Holder (and in any event no less than ten
(10) days) that the Holder intends to sell pursuant to a Shelf Registration
Statement, the Company will file such amendments and supplements as necessary to
update the Shelf Registration Statement so that it will be effective for any
such sale of Registrable Securities until the earlier of (x) such time as all of
the Registrable Securities are sold pursuant to such Shelf Registration
Statement or (y) each Holder is able to sell within any ninety (90) day period
all Registrable Securities owned by such Holder pursuant to SEC Rules as then in
effect, including Rule 144 under the Securities Act, or any successor thereto
("SEC Rule 144") (the "Effective Period"); provided that in the event that
Company determines in good faith that, because it has under consideration a
significant (as defined under Regulation S-X of the SEC) acquisition or
disposition or other material transaction or corporate event that has not been
publicly disclosed or that it is in the process of preparing for filing with the
SEC an Annual Report on Form 10-K, a Quarterly Report on Form 10-Q or a Current
Report on Form 8-K or other form, a Shelf Registration Statement may contain a
material misstatement or omission, the Company may cause such Shelf Registration
Statement to not be used during the period in question. The Company agrees it
will use its best efforts to ensure that such deferral will be for the shortest
period of time reasonably required not exceeding, in the aggregate, ninety (90)
days in any twelve (12) month period.
1.3. Company Registration.
In the event that (i) the Company fails to satisfy its obligations
pursuant to Section 1.2 or (ii) for any period of not less than thirty (30)
consecutive days a Shelf Registration Statement may not be used for any reason,
and if (but without any obligation to do so) the Company proposes to register
(including for this purpose a registration effected by the Company for
shareholders other than the Holders) any of its stock or other securities under
the Act in connection with the public offering of such securities solely for
cash (other than a registration relating solely to the sale of securities to
participants in a Company stock plan, or a registration on any form which does
not include substantially the same information as would be required to be
included in a registration statement covering the sale of the Registrable
Securities), the Company will, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within twenty (20) days after mailing of such notice by the Company in
accordance with Section 2.5, the Company will cause to be registered under the
Act all of the Registrable Securities that each such Holder has requested to be
registered.
20
1.4. Obligations of the Company.
Except as otherwise expressly specified in this Agreement, whenever
required under this Article I to effect the registration of any Registrable
Securities, the Company will, as expeditiously as reasonably practicable:
(a) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
(b) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(c) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such jurisdictions as will be reasonably requested by the
Holders, provided that the Company will not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
1.5. Furnish Information.
It will be a condition precedent to the obligations of the Company to
take any action pursuant to this Article I with respect to the Registrable
Securities of any selling Holder that such Holder will furnish to the Company
such information regarding itself, the Registrable Securities held by it, the
intended method of disposition of such securities and all of the other pertinent
information as will be required to effect the registration of such Holder's
Registrable Securities.
1.6. Expenses of Registration.
Subject to restrictions under applicable state securities laws, all
expenses other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant to Sections
1.2 and 1.3, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, and fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one counsel
representing the Holders will be borne by the Company.
1.7. Indemnification. If any Registrable Securities are included in a
registration statement under this Article I:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, each of its directors and each of its officers,
any underwriter (as defined in the Act) for such Holder and each person,
if any, who controls such Holder or underwriter within the meaning of the
Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, or the Exchange
Act, insofar as such losses, claims, damages,
21
or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the Exchange
Act, or any rule or regulation promulgated under the Act, or the Exchange
Act; and the Company will pay to each such Holder, director, officer,
underwriter or controlling person, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Subsection 1.7(a) will not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company
(which consent will not be unreasonably withheld), nor will the Company be
liable in any such case for any such loss, claim, damage, liability, or
action to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any
such Holder, director, officer, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the Act, any other
Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the Act or the Exchange
Act insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each
such Holder will pay any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this Subsection 1.7(b),
in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity
agreement contained in this Subsection 1.7(b) will not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if
such settlement is effected without the consent of the Holder, which
consent will not be unreasonably withheld; provided, that, in no event
will any indemnity under this Subsection 1.7(b) exceed the proceeds from
the offering net of sales commission, if any, received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
1.7, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party will have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel satisfactory to the indemnified party (which
shall not unreasonably withhold its approval); provided, however, that an
indemnified party
22
(together with all other indemnified parties which may be represented
without conflict by one counsel) will have the right to retain one
separate counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party is inappropriate due to actual
or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if prejudicial to its ability to
defend such action, will relieve such indemnifying party of any liability
to the indemnified party under this Section 1.7, but the omission so to
deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than
under this Section 1.7.
(d) If the indemnification provided for in this Section 1.7 is held
by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying
such indemnified party to this Agreement, will contribute to the amount
paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand
and of the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and of the indemnified party
will be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or
by the indemnified party and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such
statement or omission.
(e) The obligations of the Company and Holders under this Section
1.7 will survive the completion of any offering of Registrable Securities
in a registration statement under this Article I, and otherwise.
1.8. Reports Under 1934 Act.
With a view to making available to the Holders the benefits of Rule 144
promulgated under the Act and any other rule or regulation of the SEC that may
at any time permit a Holder to sell securities of the Company to the public
without registration or pursuant to a registration on Form S-1, the Company
will:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC
Rule 144, the Act and the Exchange Act, or that it qualifies as
23
a registrant whose securities may be resold pursuant to Form S-3 (at any
time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so
filed by the Company, and (iii) such other information as may be
reasonably requested in availing any Holder of any rule or regulation of
the SEC which permits the selling of any such securities without
registration or pursuant to such form.
1.9. Rule 144 Availability.
Notwithstanding anything to the contrary above in this Article I, prior
to exercising any right provided for in this Article I each Holder will (i)
evaluate in good faith whether such Holder is otherwise permitted to sell the
entire amount of Registrable Securities it is then seeking to register within
the time period it desires to sell pursuant to Rule 144 of the Exchange Act, or
any successor regulation thereto and (ii) exercise such rights only in the case
that it determines in good faith that such rights are necessary to sell such
Registrable Securities in a timely manner.
Article II
MISCELLANEOUS
2.1. Successors and Assigns.
Except as otherwise provided in this Agreement, the terms and
conditions of this Agreement will inure to the benefit of and be binding upon
the respective successors and assigns of the parties (including transferees of
any shares of Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties to this
Agreement or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
2.2. Governing Law.
This Agreement will be governed by and construed under the laws of the
State of Delaware.
2.3. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same instrument.
2.4. Titles and Subtitles.
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
2.5. Notices.
Unless otherwise provided, any notice required or permitted under this
Agreement will be given in writing and will be deemed effectively given upon
personal delivery to the party to be notified, by telecopy upon the appropriate
answer-back, or upon deposit with the United States Post Office, by registered
or certified mail, postage prepaid and addressed to the party to be
24
notified at the address indicated for such party on Schedule 1 or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties.
2.6. Expenses.
If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party will be entitled to reasonable
attorneys' fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
2.7. Amendments and Waivers.
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this paragraph will be binding upon each Holder of any Registrable Securities
then outstanding, each future Holder of all such Registrable Securities, and the
Company.
2.8. Severability.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision will be excluded from this
Agreement and the balance of the Agreement will be interpreted as if such
provision were so excluded and will be enforceable in accordance with its terms.
2.9. Aggregation of Stock.
All shares of Registrable Securities held or acquired by affiliated
entities or persons will be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
2.10. Entire Agreement, Amendment, Waiver.
This Agreement (including the Schedules to this Agreement, if any)
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects of this Agreement and thereof.
2.11. Adjustments for Stock Splits.
Wherever in this Agreement there is a reference to a specific number of
shares of Common Stock of the Company of any class or series, or a reference to
any amount of dollars per any such share, then, upon the occurrence of any
subdivision, combination or stock dividend of such class or series of stock, the
specific number of shares or the specific dollar amount so referenced in this
Agreement will automatically be proportionately adjusted to reflect the effect
on the outstanding shares of such class of series of stock by such subdivision,
combination or stock dividend.
25
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
DAOU SYSTEMS, INC.
By:
----------------------------------------
Name: James T. Roberto
Title: President, Chief Executive Officer
THE INVESTOR:
- -------------------------------------------
Neil R. Cassidy
26
SCHEDULE 1
INVESTOR
---------
NAME AND ADDRESS
----------------
Neil R. Cassidy
Address on file with the Company
27
EXHIBIT D
Prior Stock Option Grants
Options, issued on December 1, 2000, exercisable for 150,000 shares of Common
Stock at an exercise price of $.50 per share.
28