<PAGE>
As filed with the Securities and Exchange Commission on March 28, 2000
Registration No. 333-32184
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
DOVEBID, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 7389 94-3331411
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
</TABLE>
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1241 E. Hillsdale Boulevard
Foster City, California 94404
(650) 571-7400
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
Ross Dove
Chief Executive Officer
1241 E. Hillsdale Boulevard
Foster City, California 94404
(650) 571-7400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
Gordon K. Davidson, Esq. William M. Kelly, Esq.
Daniel J. Winnike, Esq. Davis Polk & Wardwell
Fenwick & West LLP 1600 El Camino Real
Two Palo Alto Square Menlo Park, California 94025
Palo Alto, California 94306 (650) 752-2000
(650) 494-0600 ---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Maximum
Title of Each Class Aggregate Amount of
of Securities to be Registered Offering Price(1) Registration Fee(2)
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<S> <C> <C>
Common Stock, $0.001 par value per share $80,000,000 $21,120.00
</TABLE>
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(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
(2) Previously paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting offers to sell these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 28, 2000
Shares
DoveBid, Inc.
Common Stock
---------
Prior to this offering, there has been no public market for our common stock.
The initial public offering price is expected to be between $ and $
per share. We have applied to list our common stock on The Nasdaq National
Market under the symbol "DOVE."
The underwriters have an option to purchase a maximum of additional
shares to cover over-allotment of shares.
Investing in our common stock involves risks. See "Risk Factors" on page 6.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions DoveBid
------------- ------------- -------------
<S> <C> <C> <C>
Per Share............................. $ $ $
Total................................. $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about , 2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Credit Suisse First Boston
Thomas Weisel Partners LLC
U.S. Bancorp Piper Jaffray
The date of this prospectus is , 2000.
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements........................ 17
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Financial Data.................................................. 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 23
Business................................................................. 30
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management................................................................. 44
Certain Transactions....................................................... 53
Principal Stockholders..................................................... 56
Description of Capital Stock............................................... 59
Shares Eligible for Future Sale............................................ 62
Underwriting............................................................... 64
Notice to Canadian Residents............................................... 66
Legal Matters.............................................................. 66
Experts.................................................................... 67
Where You Can Find More Information........................................ 68
Index to Financial Statements.............................................. F-1
</TABLE>
------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may be used only where it is legal
to sell these securities. The information contained in this document may only
be accurate on the date of this document.
Dealer Prospectus Delivery Obligation
Until , (25 days after the commencement of this offering) all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and Financial Statements and Notes thereto appearing elsewhere in
this Prospectus.
DoveBid, Inc.
We have created an online global marketplace where sellers, buyers and
dealers participate in auctions of used capital assets and gain access to
value-added services through our strategic alliances and extensive referral
network. Our marketplace combines the efficiency, liquidity and global reach of
Internet-based commerce with our 62 years of experience as an auctioneer of
used capital assets. Our customers can conduct transactions through our Webcast
auctions, which broadcast live "open-outcry" auctions via the Internet, or
through our continuous 24x7 online auctions. Our online auctions enable the
sale of large groups of used capital assets, or aggregated assets, which become
available for sale as a result of significant events such as a plant closure or
bankruptcy, as well as unaggregated assets which become eligible for resale in
the ordinary course of business. We currently focus on the auction of inside-
the-building, used capital assets in 19 vertical markets, including the
semiconductor fabrication, electronic test and measurement, biotechnology,
medical and pharmaceutical, and metalworking and machine tool markets.
The Internet is rapidly emerging as an important medium for business-to-
business e-commerce and it presents new opportunities to increase the liquidity
in the market for used capital assets. However, because the expertise and
value-added services offered by auctioneers and dealers are frequently
necessary to facilitate the sale of used capital assets, a stand-alone
Internet-based marketplace is an incomplete solution. In order to succeed, an
Internet-based marketplace must offer the full range of services required to
accommodate the complexities of a used capital asset transaction.
Our objective is to become the leading global online marketplace for the
auction of inside-the-building, used capital assets. Our marketplace provides
sellers, buyers and dealers with the following features:
. Integrated Online Auctions--We offer live, Webcast open-outcry auctions
that eliminate the "latency" that historically compromised the
effectiveness of combining online bidders with on-site auction
participants. We also offer 24x7 online auctions. Together, these
auctions provide an integrated liquidation solution to sellers and
buyers of both aggregated and unaggregated assets. We are the first
provider of such integrated online auction services in the inside-the-
building, used capital asset market.
. Vertical Market Expertise--We possess expertise in a number of vertical
markets that attracts interested, qualified sellers and buyers to our
marketplace.
. Value-Added Services--We provide, or can arrange for, the value-added
services needed to facilitate the purchase and sale of a used capital
asset, including valuation, repair and refurbishment, calibration,
warehousing, escrow and digital photography.
. Relationships with Dealers--In addition to our relationships with
corporate sellers and buyers, we maintain relationships with and support
for dealers to promote their participation in our online marketplace.
. Industry Credibility--We leverage the reputation and experience that we
have established over our 62 years in the used capital asset market to
lend industry credibility to our new online marketplace.
We believe our marketplace will achieve network effects that will enable it
to become the primary forum for the sale and purchase of used capital assets.
We expect the expanded audience reached by our integrated online auctions to
attract sellers seeking to maximize the recoverable value of their used capital
assets. Network effects will be realized as the growing number of sellers in
our marketplace provide an increasing capital asset supply, thereby attracting
an increasing number of buyers and increasing the demand for these assets.
3
<PAGE>
Our strategic relationships with corporations, dealers and other sources of
used capital assets further position us to establish a leadership position in
our marketplace. We have alliances with Comdisco, Datastream and Sun
Microsystems that help to ensure a supply of assets to our marketplace. In
addition, we will continue to enter into alliances with Internet companies,
such as Yahoo!, to promote and drive customers to our online marketplace.
We incorporated in Delaware on June 4, 1999. From March 1995 through June
1999, we conducted our business through Dove Brothers, LLC. Prior to March
1995, we conducted our business as Ross-Dove Company, Inc., which was the
successor to Ross Mercantile Co., formed in 1937. Unless otherwise stated, the
terms "we," "us" or "our" used in this prospectus refer to DoveBid, Inc. Our
address is 1241 E. Hillsdale Boulevard, Foster City, California 94404, and our
telephone number is (650) 571-7400. Our World Wide Web address is
www.dovebid.com. Information contained on our web site is not a part of this
prospectus.
Since December 1999, we have completed the acquisition of eight businesses.
These acquisitions increase the supply of assets to our marketplace and extend
our vertical market expertise, value-added services, and relationships with
dealers and corporate customers. These acquisitions include Norman Levy
Associates, Inc., a 50-year-old appraiser and auctioneer based in Detroit,
Michigan. The Norman Levy acquisition, among other things, increases our
penetration of the metalworking and machine tool market and strengthens our
valuation services.
"DoveBid," "DoveBid.com" and our logo are trademarks of DoveBid. All other
trademarks or service marks appearing in this prospectus are trademarks of the
respective companies that use them.
Except as otherwise indicated, information in this prospectus is based on
the following assumptions:
. the conversion of all outstanding shares of preferred stock into
70,309,145 shares of common stock on a share-for-share basis upon the
consummation of this offering;
. no exercise of the underwriters' over-allotment option; and
. the filing of our amended and restated certificate of incorporation in
the state of Delaware after the completion of this offering.
4
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered by DoveBid............. shares
Common stock to be outstanding after this
offering................................... shares
Use of proceeds............................. For general corporate purposes, including
working capital and potential acquisitions.
See "Use of Proceeds."
Nasdaq National Market symbol .............. "DOVE"
</TABLE>
Summary Financial Data
<TABLE>
<CAPTION>
Year Ended
Years Ended December 31, December 31,
----------------------------------------- 1999
1995 1996 1997 1998 1999 Pro Forma
------- ------- ------- ------- ------- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $19,533 $16,786 $13,679 $10,801 $12,404 $46,934
Total operating
expenses............... 19,206 16,254 23,475 11,733 16,444 51,548
Net income (loss)
attributable to common
stockholders........... 369 581 (9,758) (867) (4,241) (5,897)
Basic and diluted net
income (loss) per
common share........... $ 0.02 $ 0.02 $ (0.34) $ (0.03) $ (0.15) $ (0.21)
Shares used to compute
basic and diluted net
income (loss) per
common share........... 23,199 28,999 28,988 28,618 28,403 28,403
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------
Pro Pro Forma
Actual Forma As Adjusted
------- -------- -----------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......................... $ 6,969 $ 80,733
Working capital................................... 7,371 93,997
Total assets...................................... 18,932 161,704
Long-term liabilities............................. 3,109 4,236
Total stockholders' equity (deficit).............. (7,158) 138,744
</TABLE>
See Note 2 of the Notes to our Financial Statements for a description of the
method that we used to compute the net loss per share amounts.
The pro forma statement of operations data for the year ended December 31,
1999 gives effect to the seven acquisitions (excluding two acquisitions deemed
to be insignificant) which occurred in December 1999 and February and March
2000 as if these acquisitions had occurred on January 1, 1999. The pro forma
balance sheet data gives effect to five acquisitions (excluding two
acquisitions which occurred in December 1999 and two acquisitions deemed
insignificant) and our sale of shares of Series C preferred stock in February
and March 2000 as if those transactions had occurred on December 31, 1999. The
basis for these presentations is described in our pro forma financial
information appearing elsewhere in this prospectus under Index to Financial
Statements. In addition, pro forma long-term liabilities and total
stockholders' equity reflects the automatic conversion into common stock, upon
completion of the offering, of all preferred stock and the conversion into
common stock of convertible subordinated notes that convert upon completion of
this offering or, in one case, on July 1, 2000, aggregating approximately
$19.6 million.
The pro forma as adjusted information gives effect to the application of the
net proceeds from the sale of shares of common stock in this offering
at the initial public offering price of $ per share, after deducting the
underwriting discount and estimated offering expenses.
5
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and all other information
contained in this prospectus before purchasing our common stock. Any of the
following risks could materially harm our business, operating results and
financial condition. Additional risks and uncertainties not currently known to
us or that we currently consider immaterial could also harm our business,
operating results and financial condition. You could lose all or part of your
investment as a result of these risks.
Risks Related To Our Business
We have experienced losses, anticipate incurring losses in the foreseeable
future and may never achieve profitability.
We expect to continue to incur substantial operating losses in the
foreseeable future. We have experienced losses from operations in each of the
last three years, including a net loss of $3.9 million for the year ended
December 31, 1999. As of December 31, 1999, we had an accumulated deficit of
$5.9 million. We have generated very limited revenue from online auctions. If
our revenue does not increase substantially or if our expenses increase more
rapidly than we expect, we may never become profitable.
We anticipate that our operating losses will increase in the future, as we
expect substantial increases in our costs and expenses in a number of areas,
including:
. marketing and promotion of our brand and marketplace;
. expanding our sales force and the number of vertical markets in which we
operate;
. expanding and enhancing our operating infrastructure, including hardware
and software systems and administrative personnel;
. enhancing the functionality of our online marketplace; and
. expanding our offering of value-added services.
Our revenues and operating results are volatile and difficult to predict, and
if we fail to meet the expectations of investors or securities analysts, the
market price of our common stock would likely decline significantly.
Our revenues and operating results are likely to fluctuate significantly
from quarter to quarter, due to a number of factors. These factors include:
. the amount and timing of acquisitions and payments to or from our
strategic partners;
. variability in the amount of used capital assets that we auction, and
the number of auctions we conduct in a given quarter;
. changes in the fees or commissions we charge our customers;
. completion of major liquidation contracts;
. fluctuations in the economic conditions in our vertical markets; and
. changes in general economic and market conditions.
As a result of these factors, the emerging nature of our market and the
evolving nature of our business model, we may be unable to accurately forecast
our revenues. We incur expenses based predominantly on operating plans and
estimates of future revenues. We may be unable to adjust our spending in a
timely manner to compensate for any unexpected revenue shortfalls. Accordingly,
a failure to meet our revenue projections
6
<PAGE>
would have an immediate and negative impact on profitability and cash flow.
Fluctuations in our operating results may cause us to fail to meet the
expectations of investors or securities analysts. If this were to happen, the
market price of our common stock would likely decline significantly.
Because we have only recently introduced our online auction services and
because we operate in a new and rapidly evolving market, you may have
difficulty assessing our business and our future prospects.
Although we have been involved, through our predecessors, in traditional
auctions of used capital assets for over 62 years, we only launched our online
marketplace in November 1999. Because this represents a new and untried line of
business for us, it may be difficult for you to evaluate our business and our
future prospects. Online auctions of used capital assets are new and rapidly
evolving, and it is difficult to predict whether the market will accept our
online auction services and the level of revenue we can expect to derive from
these services. Our business will be seriously harmed, and may fail entirely,
if we do not successfully execute our new online business strategy or if we do
not successfully address the risks we face. In addition, due to our limited
online operating history, we believe that period-to-period comparisons of our
revenues and results of operations are not meaningful.
If sellers and buyers of used capital assets do not accept our business model
of providing an online marketplace, demand for our services may not develop.
Our online marketplace, which aggregates a number of sellers and buyers of
used capital assets, is new and unproven and relies upon sellers and buyers in
this market adopting a new means of selling and purchasing. If sellers and
buyers of used capital assets do not accept our business model, increased
demand for our services may not develop and our growth will be impaired.
Sellers and buyers may prefer to use traditional methods of selling and buying
used capital assets, such as on-site auctions and interacting in person or by
phone. In addition, many of the buyers of used capital assets may not currently
have ready access to the Internet for commercial purposes and may be unwilling
to use the Internet to purchase used capital assets. Even if sellers and buyers
accept the Internet as a means of selling and buying used capital assets, they
may not accept our online marketplace for conducting this type of business.
Reluctance of sellers and buyers to use our services would seriously harm our
business.
If we cannot quickly build a "critical mass" of sellers and buyers of used
capital assets, we will not achieve network effects and our business may not
succeed.
Our strategy of building a competitive advantage through network effects
requires us to quickly build a critical mass of online sellers and buyers, as
network effects represent the enhanced value to all users of an increase in
size of our user community. If another competitor builds this critical mass
more quickly than we do, we will be at a competitive disadvantage. To encourage
sellers to list their products on our online marketplace, we need to increase
the number of buyers who use our marketplace by providing a broad range of used
capital assets from a large number of sellers. If we are unable to
substantially expand our customer base, we may not achieve market acceptance
with sellers and buyers of used capital assets.
We have limited experience with a number of the vertical markets in our
marketplace, and if we do not become recognized as a leading auctioneer in
these markets, our growth will be inhibited.
We believe that our success is dependent on our ability to offer used
capital assets across the range of vertical markets in our marketplace. If we
do not rapidly increase the range of our asset listings in a number of our
vertical markets, our growth will be impaired because we will not have achieved
our goal of being recognized as the sponsor of a broad based marketplace for
used capital assets. We have varying degrees of experience in our vertical
markets. For example, we have not been active in on-site auctions in many of
our vertical markets. We may never be recognized as a viable auction
alternative for the disposition of assets in those markets in which we have
historically had limited experience.
7
<PAGE>
We intend to continue to make acquisitions, which could harm our profitability,
put a strain on our resources, and cause dilution to our stockholders.
We have completed eight acquisitions of businesses or assets of businesses
within the last three months and we expect to continue to acquire the assets or
businesses of dealers, auctioneers and appraisers in order to expand our
business and the services we offer. Integrating newly acquired organizations
and technologies into our company could be expensive and time consuming and may
strain our resources. Moreover, we may face unforeseen liabilities related to
the businesses we acquire and we may have inadequate insurance coverage and
working capital to satisfy such liabilities. We may not be successful in
integrating any acquired businesses or technologies and may not achieve our
anticipated revenue and cost benefits. Future acquisitions could result in
potentially dilutive issuances of equity securities or the incurrence of debt,
contingent liabilities or amortization expenses related to goodwill and other
intangible assets, any of which could harm our business. For example, in
connection with our recent acquisitions, we will record approximately $50.9
million in goodwill and other intangible assets, which will be amortized over a
period of one to fifteen years.
Our recent growth has placed significant strains on our information systems and
management resources, and if we fail to successfully manage further growth we
may not be able to conduct our business efficiently and we may be unable to
execute our business plan.
If we are unable to successfully manage our business during a period of
rapid growth in the size of our company, our business could be seriously
harmed. We have grown rapidly and will need to continue growing in order to
execute our business strategy. Our growth has placed significant demands on
management as well as on our administrative, operational and financial
resources and internal controls. We expect our future growth to cause similar,
and perhaps increased, strains on our systems and internal controls. For
example, our rapid growth requires us to integrate and manage a large number of
new employees. In addition, we will need to substantially upgrade or replace
our information systems, including our accounting system. Any failure to
successfully upgrade our systems and internal controls could result in
inefficiencies in our business and could prevent us from executing our business
plan.
We may be unable to effect our growth strategy if we are unable to consummate
future business acquisitions.
Our growth is subject to the risk that we will be unable to identify
additional suitable acquisition candidates available for sale at reasonable
prices or on reasonable terms. Additionally, regardless of whether suitable
candidates are available, we may not be able to consummate future acquisitions
for other reasons, such as competition from other bidders. If we are unable to
consummate future acquisitions, our business, financial condition and operating
results could be adversely affected.
In the future we will be exposed to greater risks associated with ownership and
management of inventory, and we could incur losses from carrying and disposing
of our own inventory.
We have recently begun to acquire the businesses of dealers which include
capital asset inventories. Owning inventory subjects us to risks of loss both
from depreciation and obsolescence of this inventory while we are carrying it,
and from the disposition of this inventory for a price below our carrying
value. If we were to incur these losses, our operating results would be
adversely affected and our stock price could decline. As auctioneers, we
historically have not carried inventory and have generally sold the assets of
others without incurring a risk of loss. We have limited experience in managing
the carrying and disposition of inventory and may not be successful in doing
so.
We may incur losses as a result of guarantees of auction proceeds.
Occasionally, we guarantee a minimum amount of auction proceeds that a
corporate customer will receive from a sale of its assets through a Webcast
auction. In the event that actual auction proceeds do not equal or
8
<PAGE>
exceed a guaranteed amount, we are obligated to pay any such shortfall to the
seller, and this could adversely affect our operating results.
If we are unable to maintain our strategic alliances or enter into new
alliances, we may be unable to attract customers to our marketplace.
Our business strategy includes entering into strategic alliances to increase
our customer base, increase the number and variety of our asset listings and
provide additional value-added services to our customers. If any existing
alliance is terminated or is not renewed upon its expiration, or we are unable
to enter into new alliances, we may be unable to increase the attractiveness of
our online marketplace or provide satisfactory services to our customers.
Further, we may not achieve our objectives through these alliances. Many of our
strategic partners may have multiple relationships and may pursue relationships
with our competitors or develop or acquire services that compete with our
services. In addition, in many cases these companies may terminate these
relationships if we do not perform as contemplated by our agreements.
If sellers of used capital assets utilizing our online marketplace set
unreasonable prices for their assets, our revenues will be adversely affected
and our ability to grow may be limited.
If sellers utilizing our online marketplace establish unreasonable prices
for their assets, these assets will be unlikely to sell. Since our commissions
are based on asset sales, our revenues will be adversely affected if sales are
inhibited for this reason. In addition, our ability to develop a broad network
of buyers could be impaired if buyers do not perceive that the assets sellers
offer for sale through our marketplace are reasonably priced.
We depend heavily on the contacts of Ross and Kirk Dove in the market for used
capital assets and our business would be harmed if for any reason either or
both of them ceased to be active as our senior executives.
If Ross or Kirk Dove ceased to be committed to our business in the capacity
of senior executive officers, our business would be adversely affected. Each of
these two officers has substantial relationships and contacts in the market for
used capital assets, and we could lose important customers if either of them
were no longer active in our business. In addition, they have years of
experience in conducting auctions. The new executive officers that we have
employed within the last six months do not share this experience and likely
would not be as capable as the Doves in the auction business for a substantial
period of time, if ever. Ross and Kirk Dove are employed by us at-will, and we
cannot assure you that they will be employed by us for any period of time.
Many of our executives and other employees have recently joined our company,
and if they are unable to effectively work together we may not be able to
effectively manage our growth and operations.
Several of our executive officers and other key employees joined us only
recently and have had a limited time to work together. We cannot assure you
that they will be able to work effectively together to manage our growth and
continuing operations. Our chief financial officer, Cory M. Ravid, joined
DoveBid in October 1999; our president and chief operating officer, Jeffrey M.
Crowe, joined DoveBid in November 1999; our chief technical officer and vice
president of e-commerce, Francis M. Juliano, joined DoveBid in December 1999;
our vice president of marketing, Steven S. Pollock, joined DoveBid in December
1999; our vice president and general counsel, Anthony Capobianco, joined
DoveBid in December 1999; our vice president of operations, James Hume, joined
DoveBid in January 2000; and our vice president of finance, Dennis Polk, joined
DoveBid in February 2000. Also, our president of international auction
services, Robert Levy, joined DoveBid in March 2000; our president of valuation
services, Andy Gronik, joined DoveBid in March 2000; our executive vice
president of valuation services, David Levy, joined DoveBid in March 2000; our
vice president of business development, Timothy J. Reed, joined DoveBid in
March 2000; and our vice president of human resources, Lynn Corsiglia, joined
DoveBid in March 2000.
If we are unable to attract qualified personnel or retain our executive
officers and other key personnel, we may not be able to compete successfully in
our industry.
Should we fail to retain or attract qualified personnel, we may not be able
to compete successfully in our industry, and our business would be harmed. Our
success depends on our ability to attract and retain qualified,
9
<PAGE>
experienced employees. Our recent expansion into online auctions and our plans
for aggressively pursuing opportunities in this area have necessitated our
hiring of a number of new executives with expertise in areas such as finance,
marketing and technology where we do not have sufficient existing capabilities.
In addition to the hiring of these executives, we have also hired, and will
need to continue to hire, additional skilled employees in a number of
additional areas to support our growth. Competition for qualified, experienced
employees in the Internet industry, particularly in the San Francisco Bay Area,
where we are located, is intense, and we may not be able to compete effectively
to retain and attract employees. Our employees, including our executives, serve
at-will and may elect to pursue other opportunities at any time. Other than the
limited key person life insurance policies for Ross and Kirk Dove, we do not
maintain any key person life insurance.
If our online systems are unable to provide acceptable performance as the
traffic in our marketplace increases, we could lose customers and we would have
to spend capital to expand and adapt our network infrastructure, either of
which could harm our business and results of operations.
If our online systems do not continue to provide acceptable performance as
use of our services increases, our reputation may be damaged and we may lose
customers. We introduced our 24x7 online auctions in November 1999 and
conducted our first Webcast auction in January 2000. Accordingly, we have
processed a limited number and variety of transactions on our website. Our
systems may not be able to accommodate increased use while continuing to
provide acceptable overall performance. To date we have not experienced
unscheduled system interruptions of our online marketplace, although outages
may occur from time to time as system usage increases. We may be unable to
accurately predict the rate or timing of increases, if any, in the use of our
services or expand and upgrade our systems and infrastructure to accommodate
increased use of our marketplace. Any failure to expand or upgrade our systems
to keep pace with the growth in demand for capacity could cause our website to
become unstable and possibly cease to operate for indefinite periods of time.
Unscheduled downtime could negatively impact our business.
Our infrastructure and systems are susceptible to natural disasters and other
unexpected events, and if any of these events of a significant magnitude were
to occur, they could affect our ability to operate our business for a sustained
period.
The performance of our server and networking hardware and software
infrastructure are critical to our business and reputation and our ability to
process transactions, provide high quality customer service and attract and
retain users of our services. Currently, our infrastructure and systems are
located at one site in Cupertino, California, which is an area susceptible to
earthquakes. We depend on our single-site infrastructure, and any disruption to
this infrastructure resulting from a natural disaster or other event could
result in an interruption in our service, reduce the number of transactions we
are able to process and, if sustained or repeated, could impair our reputation
and the attractiveness of our services, or prevent us from providing our
services entirely.
Our systems and operations are susceptible to damage or interruption from
human error, natural disasters, power loss, telecommunications failures, break-
ins, sabotage, computer viruses, intentional acts of vandalism and similar
events. We rely on a third party for our hosting services and we do not have a
formal disaster recovery plan or alternative provider of hosting services. In
addition, we may not carry sufficient business interruption insurance to
compensate us for losses that we may sustain. Any failure on our part to expand
our system or Internet infrastructure to keep up with the demands of our users,
or any system failure that causes an interruption in service or a decrease in
responsiveness of our online services or website, could result in fewer
transactions and, if sustained or repeated, could damage our reputation and the
attractiveness of our services or prevent us from providing our services
entirely.
We face intense competition, and if we are unable to compete effectively we may
be unable to maintain or expand our customer base, and we may lose market share
or sustain revenue shortfalls.
The online market for used capital assets is new and rapidly evolving and we
expect it to be intensely competitive. Our competition includes traditional
auctioneers that have established online marketplaces for
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<PAGE>
used capital assets, as well as new online entrants who seek to utilize the
Internet to sell or auction used capital assets. We also face potential
competition from a number of other sources. Many Internet portals and
e-commerce providers have created, or are creating, websites and functions that
may serve the needs of our customers and compete with our services. In
addition, providers of online marketplaces and online auction services that
currently focus on other industries could expand the scope of their services to
include used capital assets. Sellers and buyers that we currently consider to
be customers may also establish competing online marketplaces, either on their
own or by partnering with other companies. Moreover, additional auctioneers
focusing on used capital assets may establish or partner with others to
establish online auction services.
Competition is likely to intensify as our market matures. As competitive
conditions intensify, competitors may:
. enter into strategic or commercial relationships with larger, more
established Internet companies;
. secure assets from sellers on more favorable terms; and
. secure exclusive or preferential arrangements with sellers or buyers
that limit sales through our marketplace.
Many of our existing and potential competitors have longer online operating
histories, greater name recognition, larger customer bases and greater
financial, technical and marketing resources than we do. As a result of these
factors, our current and potential competitors may be able to respond more
quickly to market forces, undertake more extensive marketing campaigns for
their brands and services and make more attractive offers to sellers, buyers,
potential employees and strategic partners. In addition, new technologies may
increase competitive pressures. We cannot be certain that we will maintain or
expand our customer base. We may be unable to compete successfully against
current and future competitors and competition could result in commission
reductions, reduced revenues, gross margins and operating margins and loss of
market share.
If we are unable to increase recognition of the DoveBid brand name, our ability
to attract customers to our online marketplace will be limited and our
operating results will suffer.
We believe that recognition and positive perception of the DoveBid brand
name in the online market for used capital assets are important to our success.
We intend to significantly expand our advertising and publicity efforts in the
near future, which will significantly increase our operating expenses. We may
not achieve our desired goal of increasing the awareness of the DoveBid brand
name to justify the incurrence of those expenses. Even if recognition of our
brand name increases, it may not lead to an increase in our customer base.
Our strategy to expand our services globally will require significant
management attention and financial resources, and if we are unable to execute
this strategy our growth will be limited and our operating results may be
harmed.
In order to increase the market awareness and the use of our online
marketplace by sellers and buyers of used capital assets, we intend to expand
our services globally. If we fail to execute this strategy, our growth will be
limited and our operating results may be harmed. We have limited experience
operating outside the U.S. and with marketing our services globally. Our entry
into global markets may require significant management attention and financial
resources which may adversely affect our ability to effectively manage our
existing business. Furthermore, entry into some global markets would require us
to develop additional foreign language versions of our services. We must also
develop the logistical support necessary to facilitate the delivery and receipt
of payment to and from, and delivery of products by and to offshore sellers and
buyers. There may also be cultural barriers to the acceptance of our services
internationally, particularly in regions that have not traditionally relied
upon auctions as a way to dispose of used capital assets. Competitors with
greater local market knowledge may exist or arise in these international
markets and impede our ability to successfully expand in these markets.
Accordingly, our planned global expansion may be unsuccessful.
11
<PAGE>
If we cannot meet our future capital requirements, we may be unable to develop
and enhance our products and services, take advantage of business opportunities
and respond to competitive pressures.
We currently anticipate that the net proceeds from this offering, together
with our existing working capital immediately prior to this offering, will be
sufficient to meet our anticipated working capital and capital expenditure
requirements through at least the next twelve months. The time period for which
we believe our capital is sufficient is an estimate; the actual time period may
differ materially as a result of a number of factors, risks and uncertainties.
We may need to raise additional funds in the future through public or private
debt or equity financings in order to:
. accelerate our expansion through acquisitions of dealers, auctioneers
and other businesses or technologies;
. develop new products or services; or
. respond to competitive pressures.
Additional financing we may need in the future may be unavailable on terms
favorable to us, if at all. If adequate funds are not available or are not
available on acceptable terms, we may be unable to take advantage of acquistion
opportunities, develop new products or services or otherwise respond to
unanticipated competitive pressures. In such cases, our business results and
financial condition could be harmed.
If we are unable to safeguard the security and privacy of a customer's
confidential information, customers may discontinue using our services.
A significant barrier to the widespread adoption of e-commerce is the secure
transmission of personally identifiable information of Internet users as well
as other confidential information over public networks. If any compromise or
breach of security were to occur, it could harm our reputation and expose us to
possible liability. Despite our efforts to protect customer information, a
party may be able to circumvent our security measures and could misappropriate
proprietary information or cause interruptions in our operations. We may be
required to make significant expenditures to protect against security breaches
or to alleviate problems caused by any breaches.
We may be subject to litigation for defects in used capital assets sold in our
marketplace and this type of litigation may be costly and time-consuming to
defend.
Because we facilitate the sale of used capital assets in our marketplace we
may become subject to legal proceedings arising from defects in such assets,
even though we generally do not take title to or provide a warranty with
respect to such assets. Although the terms and conditions of our service
expressly limit our liability in these situations, we may also become involved
in disputes regarding the terms of the sale through our marketplace, including
disputes arising from the failure of sellers to deliver assets or buyers to pay
for assets. Any claims, with or without merit, could:
. be time-consuming to defend;
. result in costly litigation; and
. divert management's attention and resources.
If we are unable to protect our intellectual property, third parties may gain
access to these rights and harm our business.
We regard our intellectual property as it relates to our ability to
broadcast and conduct live auctions as critical to our success. If we are
unable to protect these rights, we would lose a capability that we regard as a
key strategic advantage. We rely on trademark, copyright and trade secret laws
to protect these and our other proprietary rights. It is possible that by
virtue of using our intellectual property we could receive claims of
12
<PAGE>
infringement of other parties' proprietary rights or claims that our own
trademarks, patents or other intellectual property rights are invalid. Any
claims of this type, with or without merit, could be time consuming to defend,
result in costly litigation, divert management attention and resources or
require us to enter into royalty or license agreements. In addition, there has
been a recent increase in the number of patent applications related to the use
of the Internet to perform business processes. Enforcement of intellectual
property rights in the Internet sector will become a greater source of risk as
the number of business process patents increases.
We have applied for registration of several trademarks including the DoveBid
logo. Our trademark registration applications may not be approved or granted,
or, if granted, may be successfully challenged by others or invalidated through
administrative process or litigation.
We could encounter operational difficulties or delays in connection with the
upgrade of our 24x7 online auction technology, and, if so, we could lose
revenues and customers.
We intend to implement a new technology platform for our 24x7 online
auctions, employing online auction technology of a company that we acquired in
March 2000. Upgrades of this type may be subject to numerous difficulties,
including temporary compromises in online functionality. Additionally, we may
fail to complete the implementation of this technology in a timely manner. If
these difficulties or delays were to occur, we could lose revenues from lost
auctions, and lose customers as well as suffer damage to our reputation. In the
future, we expect to complete other technology and systems upgrades that may
similarly expose us to risks of unsuccessful or untimely completion.
We rely on third-party software and technology without which we may not be able
to operate our online marketplace.
We currently rely on software and technology that we have licensed from a
number of suppliers. These licenses may not continue to be available to us on
commercially reasonable terms, if at all. In addition, we may fail to
successfully integrate licensed technology into our services which could
similarly harm development and market acceptance of our services. For example,
we use licensed software to provide part of our website infrastructure and to
provide a substantial part of the functionality of our auction services, and we
use licensed information retrieval software to provide part of our search
capabilities. In addition, the licensors may not continue to support or enhance
the licensed software. In the future, we expect to license other third party
technologies to enhance our services, to meet evolving user needs or to adapt
to changing technology standards. Failure to license, or the loss of any
licenses of, necessary technologies could impair our ability to operate our
online marketplace until equivalent software is identified, licensed and
integrated or developed by us.
If we fail to adapt to the rapidly changing technologies of the Internet or if
the Internet cannot support the demands of our business, our business would be
harmed.
To succeed, we will need to adapt effectively to rapidly changing
technologies and continually improve the performance, features and reliability
of our services. We could incur substantial costs in modifying our products,
services or infrastructure to adapt to these changes, and we may also lose
customers and revenues if our services fail to utilize the latest Internet
technology. The success of our business relies on the Internet to provide a
convenient means of interaction and e-commerce.
Risks Related To Our Industry
The success of our business depends on the participants in the market for used
capital assets accepting the Internet as a means to purchase and sell used
capital assets.
Business-to-business e-commerce is currently not a significant sector of the
market for used capital assets. The Internet may not be adopted by buyers and
sellers in the marketplace for used capital assets for many reasons, including:
. comfort with existing purchasing habits, such as participating in live,
on-site auctions;
. reluctance by the industry to adopt the technology necessary to engage
in the online sale and purchase of used capital assets;
13
<PAGE>
. failure of the market to develop the necessary infrastructure for
Internet-based communications, such as widespread Internet access, high-
speed modems, high-speed communication lines and computer availability;
. concerns with security and confidentiality; and
. investment in existing purchasing and distribution methods and the costs
required to switch methods.
Should sellers and buyers choose not to utilize or accept the Internet as a
means of selling and buying used capital assets, our business model would not
be viable.
Regulation of the Internet is unsettled, and future regulations could inhibit
the growth of e-commerce and limit the market for our services.
Legislation or application of existing laws could expose companies involved
in e-commerce to increased liability, which could limit the growth of e-
commerce. A number of legislative and regulatory proposals under consideration
by federal, state, local and foreign governmental organizations may lead to
laws or regulations concerning various aspects of the Internet, such as user
privacy, taxation of goods and services provided over the Internet and the
pricing, content and quality of services. Legislation could dampen the growth
in Internet usage and decrease or limit its acceptance as a communications and
commercial medium. If enacted, these laws and regulations could limit the
market for our services and increase our cost of doing business. In addition,
existing laws could be applied to the Internet, including consumer privacy and
unfair competition laws. As a provider of auction services we may be subject to
the Federal Trade Commission's mail and telephone order rule, which requires
that at the time an order is solicited a seller must have a "reasonable basis"
to ship within a certain time and must provide reasonable notice of any
inability to ship within that time period.
If regulations with respect to how auctions may be conducted are imposed by
states, our business costs may increase, which would harm our results of
operations.
Numerous states, including California, where our headquarters are located,
have regulations regarding the conduct of auctions and the liability of
auctioneers. We are not aware that any legal determination has been made with
respect to the applicability of these regulations to our online business, and
little precedent exists in this area. One or more states may attempt to impose
these regulations upon us in the future, which could increase our cost of doing
business.
The imposition of additional state and local taxes on Internet-based
transactions would increase our cost of doing business and harm our ability to
become profitable.
We file state tax returns as required by law based on principles applicable
to traditional businesses. However, one or more states could seek to impose
additional income tax obligations or sales and use tax collection obligations
on out-of-state companies such as ours that engage in or facilitate Internet-
based commerce. A number of proposals have been made at state and local levels
that could impose taxes on the sale of products and services through the
Internet or the income derived from those sales. These proposals, if adopted,
could substantially impair the growth of Internet-based commerce and harm our
ability to become profitable.
United States federal law limits the ability of the states to impose taxes
on Internet-based transactions. Until October 21, 2001, state and local taxes
on Internet-based commerce that are discriminatory against Internet access are
prohibited, unless the taxes were generally imposed and actually enforced
before October 1, 1998. It is possible that this tax moratorium will not be
renewed by October 21, 2001 or at all. Failure to renew this legislation would
allow various states to impose taxes on Internet-based commerce. The imposition
of state and local taxes could harm our ability to become profitable.
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<PAGE>
Risks Related To This Offering
New investors in our common stock will experience immediate and substantial
dilution.
The initial public offering price will be substantially higher than the book
value per share of our common stock. Investors purchasing common stock in this
offering will, therefore, incur immediate dilution of $ per share of common
stock in net tangible book value, based on an assumed initial public offering
price of $ per share. In addition, we have issued options and warrants to
acquire common stock at prices significantly below the assumed initial public
offering price. To the extent outstanding options or warrants are ultimately
exercised, there will be further dilution to investors in this offering.
The price of our common stock may fluctuate significantly, which could lead to
losses for individual stockholders.
The trading prices of many stocks of Internet-related companies have
experienced extreme price and volume fluctuations. These fluctuations often
have been unrelated or disproportionate to the operating performance of these
companies. Because we are an Internet-related company, we expect our stock
price to be similarly volatile. These broad market fluctuations may continue
and could harm our stock price. Any negative change in the public's perception
of the prospects of Internet-related companies could also depress our stock
price, regardless of our results.
We could be subject to securities class action litigation if our stock price is
volatile, which could be costly and time-consuming to defend and could damage
our reputation.
In the past, there have been class action lawsuits filed against companies
after periods of fluctuations in the market price of their securities. If we
were subject to this type of litigation, it would be a strain on our personnel
and financial resources and divert management's attention from running our
company and could negatively affect our public image and reputation.
We have implemented anti-takeover provisions that could discourage or prevent a
takeover, even if an acquisition would be beneficial in the opinion of our
stockholders.
Provisions of our charter and bylaws could make it more difficult for a
third party to acquire us, even if doing so would be beneficial in the opinion
of our stockholders. These provisions include:
. authorizing the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of outstanding
shares and thwart a takeover attempt;
. establishing a classified board of directors, which could discourage a
takeover attempt;
. prohibiting cumulative voting in the election of directors, which would
limit the ability of less than a majority of stockholders to elect
director candidates;
. limiting the ability of stockholders to call special meetings of
stockholders;
. prohibiting stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders; and
. establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted upon
by stockholders at stockholder meetings.
In addition, section 203 of the Delaware General Corporation Law may
discourage, delay or prevent a change in control of DoveBid.
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<PAGE>
Our executive officers, directors and major stockholders will retain
significant control over our business after this offering.
After this offering, executive officers, directors and current holders of 5%
or more of our outstanding common stock will, in the aggregate, own
approximately % of our outstanding common stock. As a result, these
stockholders will be able to influence significantly all matters requiring
approval by our stockholders, including the election of directors and the
approval of significant corporate transactions. This concentration of ownership
may also delay, deter or prevent a change in control of our company and may
make some transactions more difficult or impossible without the support of
these stockholders.
We have broad discretion to use the offering proceeds, and our investment of
these proceeds may not yield a favorable, or any, return.
The net proceeds of this offering are not allocated for specific uses other
than working capital and general corporate purposes. Thus, our management has
broad discretion over how these proceeds are used and could spend the proceeds
in ways with which you may not agree. We cannot assure you that the proceeds
will be invested in a way that yields a favorable, or any, return for us.
Substantial sales of our common stock by our stockholders could depress our
stock price.
Sales of substantial amounts of our common stock in the public market after
this offering could reduce the prevailing market prices for our common stock.
Of the shares of common stock to be outstanding upon the closing of
this offering, the shares offered hereby will be freely tradable
without restriction or further registration, other than shares purchased by our
officers, directors or other "affiliates" within the meaning of Rule 144 under
the Securities Act of 1933, which will be restricted from sale until 180 days
after the date of this prospectus under the terms of agreements between these
affiliates and the underwriters. All of the remaining 109,795,256 shares of our
common stock held by existing stockholders upon the completion of this offering
are subject to stockholder agreements with the underwriters not to sell such
shares for a 180 day period after the date of this prospectus. Approximately
46,196,963 of these shares will be eligible for resale upon the expiration of
such 180 day period, 43,896,096 of which will be subject to sales volume
restrictions under Rule 144 under the Securities Act. The remaining shares will
become freely tradable at various times after the 181st day following the date
of this prospectus through March 2004 as repurchase restrictions and Rule 144
holding periods lapse. In addition the shares (based on an average
conversion rate of $ per share) of common stock that will be issued upon the
automatic conversion of $19.6 million of convertible subordinated notes issued
in connection with acquisitions completed between December 1999 and March 27,
2000 will become eligible for resale between December 2000 and March 27, 2001
pursuant to Rule 144.
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<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "anticipates,"
"believes," "continue," "could," "estimates," "expects," "intends," "may,"
"plans," "potential," "predicts," "should" or "will" or the negative of these
terms or other comparable terminology. These statements are only predictions
and involve known and unknown risks, uncertainties and other factors, including
the risks outlined under "Risk Factors," that may cause our, or our industry's,
actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance
or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform these statements to
actual results, unless required by law.
17
<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale of the shares of common stock
offered by us will be approximately $ , or approximately
$ if the underwriters' over-allotment option is exercised in
full, at an assumed initial public offering price of $ per share and after
deducting estimated underwriting discounts and commissions and offering
expenses.
We intend to use the net proceeds from this offering primarily for general
corporate purposes, including working capital. We also intend to use a portion
of the net proceeds from this offering to acquire or invest in assets,
services, technologies or businesses that are complementary to our business. We
are regularly involved in discussions regarding business combinations, but we
do not have any present commitments or understandings to proceed with any
transaction of this type.
The amounts that we actually expend for working capital purposes will vary
significantly depending on a number of factors, including future revenue
growth, if any, and the amount of cash we generate from operations. As a
result, we will retain broad discretion in the allocation and use of the net
proceeds of this offering. Pending the uses described above, we intend to
invest the net proceeds from this offering in short-term, interest-bearing,
investment-grade securities.
DIVIDEND POLICY
We have not paid any cash dividends on our capital stock since we
incorporated in June 1999. However, prior to our incorporation, we were a
limited liability company and made various cash and non-cash distributions to
our members. We intend to retain any future earnings to finance future growth
and do not anticipate paying any cash dividends in the future.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
. on an actual basis;
. on a pro forma basis to reflect the subsequent sale of 41,011,242 shares
of Series C preferred stock for gross proceeds of approximately $99.5
million in cash and $10.0 million in assets, the issuance of
$17.6 million of convertible subordinated notes in connection with
subsequent acquisitions and the automatic conversion into common stock,
upon completion of the offering, of all preferred stock and the
conversion of convertible subordinated notes that convert upon
completion of this offering or, in one case, July 1, 2000, aggregating
approximately $19.6 million;
. on a pro forma as adjusted basis to reflect the sale of shares
of common stock in this offering at an assumed initial public offering
price of $ per share, after deducting estimated underwriting
discounts and commissions and offering expenses.
The table does not reflect 4,256,500 shares issuable upon the exercise of
outstanding stock options at a weighted average exercise price of $0.47 per
share, as of December 31, 1999; and additional shares authorized for issuance
under our plans. It also does not include an immediately exercisable warrant
for 1,405,000 shares of Series C preferred stock at an exercise price of $2.67
per share.
This table should be read in conjunction with our Financial Statements and
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31, 1999
------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(in thousands, except share
and
per share data)
<S> <C> <C> <C>
Convertible subordinated notes.................. $ 2,000 $ $
Convertible preferred stock subject to
redemption, $0.001 par value; 30,000,000 shares
authorized, 29,297,902 shares issued and
outstanding, actual; 77,000,000 shares
authorized, 70,309,144 issued and outstanding,
pro forma and shares
authorized, none issued and outstanding pro
forma as adjusted.............................. 16,832
Stockholders' equity (deficit):
Common stock, $0.001 par value per share;
70,000,000 shares authorized, 33,877,705
shares issued and outstanding, actual;
150,000,000 shares authorized,
shares issued and outstanding, pro forma;
150,000,000 shares authorized,
shares issued and outstanding, pro forma as
adjusted...................................... 34
Additional paid-in capital..................... 2,966
Deferred stock-based compensation.............. (2,378)
Notes receivable from stockholders............. (1,856)
Accumulated deficit............................ (5,924)
------- -------- --------
Total shareholders' equity (deficit)........ (7,158)
------- -------- --------
Total capitalization...................... $11,674 $ $
======= ======== ========
</TABLE>
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<PAGE>
DILUTION
As of December 31, 1999, our pro forma net tangible book value was
approximately $ million, or $ per share of common stock. Pro forma net
tangible book value per share represents the amount of our total tangible
assets less total liabilities, divided by shares of common stock
outstanding after giving effect to:
. the sale of 41,011,242 shares of Series C preferred stock for
approximately $99.5 million in cash and $10.0 million in assets in
February and March 2000;
. the acquisition of businesses resulting in the issuance of $17.6 million
of convertible subordinated promissory notes in February and March 2000;
and
. the automatic conversion into common stock upon completion of this
offering of all preferred stock and the conversion of convertible
subordinated notes aggregating approximately $19.6 million that convert
upon completion of this offering, at an assumed conversion price of $
(the mid-point of the range set forth on the cover page of this
prospectus) or, in one case, on July 1, 2000 at $10.50 per share.
Dilution in net tangible book value per share represents the difference
between the amount per share paid by buyers of shares of our common stock in
this offering and the net tangible book value per share of our common stock
immediately following this offering.
After giving effect to the receipt of the net proceeds from the sale of the
shares of our common stock at an assumed initial public offering price of
$ per share and after deducting underwriting discounts and commissions and
the estimated offering expenses, our pro forma net tangible book value as of
December 31, 1999 would have been approximately $ million, or $ per share.
This represents an immediate increase in pro forma net tangible book value of
$ per share to existing stockholders and an immediate dilution of $ per
share to new investors purchasing shares at the initial public offering price.
The following table illustrates the per share dilution:
<TABLE>
<S> <C>
Assumed initial public offering price per share $
Pro forma net tangible book value per share as of December 31, 1999..... $
Increase per share attributable to new investors........................
-----
Pro forma net tangible book value per share after this offering...........
-----
Dilution per share to new investors....................................... $
=====
</TABLE>
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<PAGE>
The following table summarizes as of December 31, 1999, on the pro forma
basis described above, the number of shares of common stock purchased from us,
the total consideration paid to us and the average price per share paid by
existing stockholders and by new investors purchasing shares of common stock in
this offering, before deducting underwriting discounts and commissions and the
estimated offering expenses:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------- -------------------- Price
Number Percent Amount Percent Per Share
----------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ % $ % $
New Investors................ % %
----------- ----- ------------ -----
Total...................... % %
</TABLE>
If the underwriters' over-allotment option is exercised in full, the
following will occur:
. the number of shares of common stock held by existing stockholders will
decrease to approximately % of the total number of shares of our
common stock outstanding after this offering; and
. the number of shares held by new investors will be increased to ,
or approximately % of the total number of our shares of our common
stock outstanding after this offering.
The above discussion and tables assume no exercise of any stock options or
warrants for common stock outstanding as of December 31, 1999. As of December
31, 1999, there were outstanding options to purchase a total of 4,256,500
shares of common stock at a weighted average exercise price of $0.47 per share;
in addition, an immediately exercisable warrant to purchase 1,405,000 shares of
Series C preferred stock was issued in March 2000. If any of these options are
exercised, there will be further dilution to new public investors. Please see
"Capitalization," and "Management--Employee Benefit Plans."
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<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with,
and are qualified by reference to, our Financial Statements and Notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this prospectus. The statements of
operations for the years ended December 31, 1997, 1998 and 1999, and the
balance sheet data at December 31, 1998 and 1999, are derived from, and are
qualified by reference to, the financial statements that have been audited by
Ernst & Young LLP, independent auditors, which are included elsewhere in this
prospectus. The statements of operations data for the years ended December 31,
1995 and 1996 and the balance sheet data at December 31, 1995, 1996 and 1997
are derived from our unaudited financial statements not included in this
prospectus. The historical results presented below are not necessarily
indicative of future results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The pro forma financial information at December 31, 1999 and for the year
then ended are derived from, and are qualified by reference to, the pro forma
financial data appearing elsewhere in this prospectus. The pro forma statement
of operations data for the year ended December 31, 1999 gives effect to the
seven significant acquisitions (excluding two acquisitions deemed to be
insignificant) which occurred in December 1999 and February and March 2000 as
if those acquisitions had occurred on January 1, 1999. The pro forma balance
sheet data as of December 31, 1999 gives effect to the five acquisitions
(excluding two acquisitions which occurred in December 1999 and two
acquisitions deemed insignificant) and our sale of shares of Series C preferred
stock which occurred in February and March 2000 as if those transactions had
occurred on December 31, 1999.
<TABLE>
<CAPTION>
Year ended
Years Ended December 31, December 31,
---------------------------------------------------- 1999
1995 1996 1997 1998 1999 Pro Forma
----------- ----------- ----------- ------- ------- ------------
(unaudited) (unaudited) (unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $19,533 $16,786 $13,679 $10,801 $12,404 $ 46,934
Operating expenses:
Direct auction costs... 11,620 8,565 7,004 5,679 5,788 22,183
Sales and marketing.... 1,792 1,527 1,195 1,079 2,271 5,109
General and
administrative........ 5,373 5,327 5,321 4,787 8,196 19,641
Depreciation and
amortization.......... 421 835 204 188 138 4,564
Amortization of
deferred
compensation.......... -- -- -- -- 51 51
Impairment of
goodwill.............. -- -- 9,751 -- -- --
------- ------- ------- ------- ------- --------
Total operating
expenses............ 19,206 16,254 23,475 11,733 16,444 51,548
------- ------- ------- ------- ------- --------
Income (loss) from
operations............. 327 532 (9,796) (932) (4,040) (4,614)
Interest and other
income (expense), net.. 42 49 38 65 168 (914)
------- ------- ------- ------- ------- --------
Net income (loss)....... 369 581 (9,758) (867) (3,872) (5,528)
Preferred stock
accretion.............. -- -- -- -- (369) (369)
------- ------- ------- ------- ------- --------
Net income (loss)
attributable to common
stockholders........... $ 369 $ 581 $(9,758) $ (867) $(4,241) $ (5,897)
======= ======= ======= ======= ======= ========
Basic and diluted net
income (loss) per
common share........... $ 0.02 $ 0.02 $ (0.34) $ (0.03) $ (0.15) $ (0.21)
Weighted average common
shares used to compute
basic and diluted net
income (loss) per
common share........... 23,199 28,999 28,988 28,618 28,403 28,403
<CAPTION>
December 31, December 31,
---------------------------------------------------- 1999
1995 1996 1997 1998 1999 Pro Forma
----------- ----------- ----------- ------- ------- ------------
(unaudited) (unaudited) (unaudited) (unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 168 $ 4,545 $ 267 $ 229 $ 6,969 $ 80,733
Working capital
(deficit).............. (302) 775 (173) (1,407) 7,371 93,997
Total assets............ 21,905 21,545 8,054 4,351 18,932 161,704
Long-term liabilities... -- -- 461 235 3,109 23,836
Total stockholders'
equity (deficit)....... 10,369 10,950 (268) (1,435) (7,158) (7,158)
</TABLE>
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with "Selected Consolidated
Financial Data" and our consolidated financial statements and related notes.
Overview
We incorporated in June 1999 as the successor to Dove Brothers, LLC. From
March 1995 through June 1999, we conducted business as Dove Brothers, LLC.
Prior to March 1995, we conducted business as Ross-Dove Company, Inc., which
was the successor to Ross Mercantile Co., a sole proprietorship formed in 1937.
In the past ten years, we have conducted industry-specific auctions across
multiple vertical markets that have generated more than $3 billion in gross
asset sales on behalf of corporations, government agencies and financial
institutions.
We facilitate the sale of used capital assets over the Internet through
Webcast auctions and 24x7 online auctions. We began offering 24x7 online
auctions in November 1999, and commenced our Webcast auctions in January 2000.
Our Webcast auctions enable remote buyers using the Internet to bid in real
time together with onsite buyers for auctions of aggregated assets. Our 24x7
online auctions offer both aggregated and unaggregated assets for sale. We
generally do not take title to assets in our auctions or offer warranties on
the assets sold. As a result of our recent acquisitions of capital asset
dealers, we may buy assets for our own account and resell them through our
online auctions. In instances where we act as the principal seller in a
transaction, we may refurbish or repair assets prior to selling them and
provide a limited warranty. The cost of goods we sell as principal are included
in direct auction costs. Through fiscal 1999, revenues derived from principal
sales have not been significant.
Revenues are generated from commissions earned on asset auctions, principal
assets sales and fee-based services. The commissions we receive from buyers for
our Webcast auctions are variable, depending on the size and scale of the
auction, but we typically receive a 10% "buyer's premium" which is a commission
based on the asset's purchase price. Webcast auction buyers pay us the same
commission rate regardless of whether they purchase assets online or on-site.
Depending on the complexity of the auction we may also receive an additional
commission from the seller. Sellers in 24x7 online auctions typically pay us a
commission rate of 5% of the winning auction bid. These commissions could
change over time. Our commissions are due upon completion of Webcast and 24x7
online auctions. In addition, in our Webcast auctions, we collect the purchase
price from the buyer on behalf of the seller. On occasion we may guarantee the
minimum proceeds that a seller in a Webcast auction will receive from the
auction of specified assets.
Revenues for Webcast auctions are recognized upon the completion of the
auction. Revenues for our 24x7 online auctions are recognized when an auction
sale is completed, subject to a reserve for nonpayment. Principal sales
revenues are recognized when our assets are shipped and our fee-based revenues
are recognized when services are rendered.
In 1995 the Dove family joined with Koll Management Services, or KMS, to
form our predecessor, Dove Brothers, LLC to focus on the auction of real
estate. Goodwill of approximately $10.0 million was recorded at that time. In
1997 KMS withdrew from the business, as we determined to withdraw from the real
estate auction business. At that time the remaining carrying value of the
goodwill was written off.
Recent Events
Since December 1999, we have completed the acquisition of eight businesses.
These acquisitions increase the supply of assets to our marketplace and extend
our vertical market expertise, value-added services, and relationships with
dealers and corporate customers. These acquisitions include Norman Levy
Associates, Inc., a 50-year- old appraiser and auctioneer. The Norman Levy
acquisition, among other things, increases our penetration of the metalworking
and machine tool market and strengthens our valuation services. A brief
description of each of these acquisitions follows.
23
<PAGE>
On December 30, 1999, we acquired the businesses of two San Jose, California
based printed circuit board equipment dealers, B&B Custom Circuit Supplies,
Inc. (B&B) and Unidyne International, Inc. (Unidyne), for $3.25 million each.
The consideration paid in each transaction consisted of $1.75 million in cash,
$500,000 in retention obligation (as a reserve for seller warranties) and $1.0
million in convertible subordinated promissory notes. In connection with each
of these acquisitions, we recorded approximately $2.0 million of goodwill and
other intangible assets. For the year ended December 31, 1999, B&B and Unidyne
recorded revenues of $1.9 million and $1.3 million, respectively.
On February 29, 2000, we acquired all of the outstanding stock of a
Branford, Connecticut based auctioneer and appraiser of used capital assets,
Greenwich Industrial Services, LLC (Greenwich), for $6.25 million. The
consideration paid consisted of $3.25 million in cash, $2.0 million of
convertible subordinated promissory notes, and a $1.0 million cash earn-out. In
connection with this acquisition, we recorded approximately $4.4 million of
goodwill and other intangible assets. For the year ended December 31, 1999,
Greenwich recorded revenues of $7.8 million.
On March 3, 2000, we acquired all of the outstanding stock of two affiliated
Mequon, Wisconsin based companies, an appraiser, AccuVal Associates, Inc.
(AccuVal), and an auctioneer, Liquitec Industries, Incorporated (Liquitec), for
a total of $5.5 million. The consideration paid consisted of $1.65 million in
cash, $2.85 million in convertible subordinated promissory notes and $1.0
million in subordinated promissory notes. The subordinated promissory notes
have principal payments of $500,000 due March 3, 2001 and payments of $500,000
plus all accrued interest due March 3, 2002. In connection with the
acquisition, we recorded approximately $5.4 million of goodwill and other
intangible assets. For the year ended December 31, 1999, AccuVal and Liquitec
recorded revenues of $3.7 million.
On March 3, 2000, we acquired all of the outstanding stock of a Chicago,
Illinois based auctioneer and appraiser of used capital assets, Philip Pollack
& Company, Inc. (Pollack), for $4.3 million. The consideration paid consisted
of $1.1 million in cash, $442,000 in deferred cash (as a reserve for seller
warranties) and $2.75 million in convertible subordinated promissory notes. In
connection with the acquisition, we recorded approximately $4.3 million of
goodwill and other intangible assets. For the ten months ended December 31,
1999, Pollack recorded revenues of $1.7 million.
On March 3, 2000, we acquired all of the outstanding stock of a Mountain
View, California based semiconductor equipment dealer, Haltek Electronics dba
Test Lab Company (Test Lab), for $6.75 million in cash and $250,000 in deferred
cash (as a reserve for seller warranties). In connection with the acquisition,
we recorded approximately $4.3 million of goodwill and other intangible assets.
For the year ended December 31, 1999, Test Lab recorded revenues of $7.4
million.
On March 24, 2000, we acquired all of the outstanding stock of Norman Levy
Associates, Inc., a Detroit, Michigan based auctioneer and appraiser of used
capital assets, for $27.8 million. The consideration paid consisted of $17.55
million in cash, $250,000 in deferred cash and $10.0 million in convertible
subordinated promissory notes. In connection with the acquisition, we recorded
approximately $29.2 million of goodwill and other intangible assets. For the
year ended December 31, 1999, Norman Levy recorded revenues of $10.7 million.
Additionally, we plan to acquire a related entity for total consideration of
approximately $500,000.
On March 27, 2000, we acquired all of the outstanding stock of a Mountain
View, California based software development company, One Web Place, Inc. for an
aggregate of 833,333 shares of our common stock that will be issued in the
transaction or subject to options that we assume in the transaction. In
connection with the acquisition we recorded approximately $3.3 million of
goodwill and other intangible assets.
Each of the transactions described above has been accounted for as a
purchase. The convertible subordinated promissory notes issued in these
transactions convert into shares of our common stock automatically upon
consummation of an initial public offering, at a conversion rate equal to the
mid-point of
24
<PAGE>
the offering range set forth on the final registration statement, except for
the convertible subordinated promissory notes issued in connection with the
Norman Levy transaction, which convert at a price of $10.50 per share. The
convertible subordinated promissory notes issued in each of these transactions
bear interest at rates between 5.74% and 7.0%.
Please see "Index to Financial Statements" for pro forma financial
statements reflecting these acquisitions and for the historical financial
statements of each of the acquired businesses.
Results of Operations
Years Ended December 31, 1997, 1998 and 1999
Revenues
Revenues were $13.7 million in 1997, $10.8 million in 1998, and $12.4
million in 1999. The decrease in 1998 revenues compared to 1997 was attributed
primarily to a decline in our personal computer auctions as a result of fewer
computers being available for auction because of the increasing popularity of
build-to-order personal computer manufacturing and competing distribution
channels, including manufacturer-owned resale stores and Internet sales and
auctions. In addition, we dissolved our real estate auction business. Revenues
in 1999 increased compared to 1998 as a result of our expansion into the
textiles and biotechnology markets, and our increased revenues derived from
auctions in the printed circuit board, disk drive and semiconductor vertical
markets. In November 1999, we began offering 24x7 online auctions with the
launch of our online marketplace. Revenues from our 24x7 online auctions were
$371,000 in 1999. We launched our Webcast auctions in January 2000, and thus,
we recorded no revenues from Webcast auctions in 1999.
In 1998 and 1999, no single customer accounted for more than 10% of
revenues. In 1997, one customer accounted for approximately 10% of our
revenues.
Operating Costs
A. Direct Auction Costs. Direct auction costs include advertising and
promotion expenses, commissions, and outside labor and services incurred in
connection with on-site and Webcast auctions. Direct auction costs decreased
from $7.0 million in 1997 to $5.7 million in 1998, and increased to $5.8
million in 1999. Direct auction costs as a percentage of revenues increased
from 51% in 1997 to 53% in 1998, and decreased to 47% in 1999. The percentage
increase in 1998 compared to 1997 resulted primarily from incremental outside
labor and service costs which we incurred in connection with international on-
site auctions. The percentage decrease from 1998 to 1999 was primarily due to
our expansion into less labor-intensive vertical markets. Direct auction costs
as a percentage of revenue may decrease in future periods as we grow our online
business. However, this decrease may be offset by an increase in direct auction
costs associated with an increase in our sales as a principal.
B. Sales and Marketing. Sales and marketing expenses consist primarily of
advertising and promotional costs and salaries for sales and marketing
personnel. Sales and marketing expenses were $1.2 million in 1997, $1.1 million
in 1998 and increased to $2.3 million in 1999. Sales and marketing expenses as
a percentage of revenues increased from 9% in 1997 to 10% in 1998 and to 18% in
1999. The percentage increase in 1998 compared to 1997 resulted from
incremental business development costs associated with our efforts to expand
into additional vertical markets. The increase in absolute dollars and as a
percentage of revenues in 1999 compared to 1998 was primarily due to
advertising costs associated with our entry into the online auction market. We
expect that our sales and marketing expenses will increase substantially in
future periods as we continue to promote our brand and our marketplace. In
addition, we are contractually committed to make payments aggregating $10.0
million over a 12 month period for Internet marketing and promotion.
C. General and Administrative. General and administrative expenses consist
primarily of salaries and related expenses for executive, operational,
technical, finance and administrative personnel, professional service fees, and
general corporate expenses. General and administrative expenses decreased from
$5.3 million in 1997
25
<PAGE>
to $4.8 million in 1998, and increased to $8.2 million in 1999. General and
administrative expenses as a percentage of revenues increased from 39% in 1997
to 44% in 1998 and to 66% in 1999. The decrease in absolute dollars in 1998
compared to 1997 was primarily due to the downsizing of our real estate auction
operations. The increase in absolute dollars and as a percentage of revenues in
1999 compared to 1998 was primarily due to increased costs incurred in
connection with the development and implementation of our online marketplace.
We expect that general and administrative expenses will increase in future
periods as we continue to support the expansion of our business, and to a
lesser extent as we bear the increased costs associated with operating as a
public company.
D. Depreciation and Amortization. Depreciation expense is calculated on
property and equipment utilized in our business, including office furniture,
computers, vehicles and leasehold improvements. Depreciation expense is
recorded over the estimated useful lives of the respective asset or lease
terms, typically three to five years. Depreciation decreased from $204,000 in
1997 to $188,000 in 1998 and to $138,000 in 1999. Amortization expense is
calculated on intangible assets and goodwill recorded as a result of business
acquisitions. Intangible assets are amortized over a four year period, and
goodwill is amortized over a twelve-year period. We did not record any
amortization expense in 1999 since we did not consummate any business
acquisitions prior to the final week of 1999. We anticipate that depreciation
and amortization expense on property and equipment will increase as a result of
our recently completed acquisitions and as we continue to develop our
infrastructure and enhance our Internet auction software. Depreciation and
amortization expenses are also likely to increase if we acquire additional
businesses in the future.
E. Amortization of Deferred Stock Compensation. Deferred stock compensation
results from the grant of stock options to employees at exercise prices deemed
to be less than the fair value of the common stock on the grant date. We are
amortizing this amount ratably over the terms of the related agreements,
typically four years. We incurred total deferred stock compensation of $2.4
million in 1999 and amortized $51,000 of related expense in that period. We
expect to incur amortization expense of at least $607,000 in each of the years
2000, 2001 and 2002, and $556,000 in 2003.
F. Impairment of Goodwill. As a result of the withdrawal of KMS from our
predecessor in 1997, we determined that future cash flows from the real estate
asset line of business, if any, would not be sufficient to recover the carrying
value of the goodwill recorded in connection with the establishment of our
predecessor in 1995. The remaining goodwill was written off by a charge to
earnings of approximately $9.8 million in 1997.
G. Interest Income, net. Interest income, net, is derived from interest
earned on cash and cash equivalents offset by interest expense arising from
notes payable. Interest income increased from $86,000 in 1997 to $121,000 in
1998 and to $229,000 in 1999. The increases between the comparative periods
were primarily a result of higher average cash and cash equivalents balances.
The average cash balance increased in 1999 compared to 1998 primarily due to
the sale of our Series A and Series B preferred stock. We recorded interest
expense of $48,000 in 1997, $56,000 in 1998 and $61,000 in 1999.
H. Income Taxes. Prior to June 1999, we operated as a limited liability
company that was treated as a partnership for federal and state income tax
purposes. As a limited liability company, we were subject to minimal taxes and
fees in certain states; income or losses realized by the company were generally
passed through to the individual members of the limited liability company. We
incurred a net taxable loss in 1999 and therefore did not record a provision
for income taxes in that period.
As of December 31, 1999, we had $4.5 million of net operating loss
carryforwards for federal income tax reporting purposes available to offset
future taxable income. We may use these operating loss carryforwards to offset
future federal income taxes through 2013 and 2015. Utilization of these
operating loss carryforwards may be subject to a substantial annual limitation
due to the ownership change limitations provided by the Internal Revenue Code
of 1986 and similar state provisions. The annual limitation may result in
expiration of the operating loss carryforwards before full utilization.
26
<PAGE>
Liquidity and Capital Resources
We have historically satisfied our cash requirements primarily through a
combination of revenues from operations, private sales of convertible preferred
stock, and to a lesser extent, borrowings under lines of credit. Through
December 31, 1999, we have raised net proceeds of $16.8 million through the
sale of preferred stock.
Net cash provided by (used in) operating activities totaled $(44,000) in
1997, $249,000 in 1998 and $(4.9 million) in 1999. Operating cash flows
resulted primarily from net losses we experienced and year-end fluctuations in
revenues from our on-site auctions.
Net cash used in investing activities totaled $156,000 in 1997, $69,000 in
1998 and $4.2 million in 1999. In 1999, cash used in investing activities was
primarily attributable to our two business acquisitions, and the purchase of
computer hardware and software to support our online marketplace and growing
employee base. In the future, we anticipate a substantial increase in capital
expenditures and lease commitments consistent with anticipated growth in
operations and personnel.
Net cash provided by (used in) financing activities totaled $(4.1 million)
in 1997, $(218,000) in 1998 and $15.9 million in 1999. In 1997 and 1998, cash
used in financing consisted primarily of repayment of short-term obligations.
Cash provided in 1999 was principally generated from the net proceeds from the
issuance of preferred stock totaling $16.8 million.
At December 31, 1999, we had cash and cash equivalents of $7.0 million. In
addition, in February and March 2000 we raised $99.5 million in cash through
the sale of our Series C preferred stock. We expect to experience significant
growth in our operating costs for the foreseeable future in order to continue
our efforts to execute our business plan, particularly in the areas of
technology, sales and marketing and general and administrative. As a result, we
estimate that these operating costs will constitute a significant use of our
cash resources. In addition, we may use cash resources to fund acquisitions of
complementary businesses and technologies. Although, we are regularly involved
in discussions regarding business combinations, we do not have any present
commitments or understandings to proceed with any transactions of this type
regarding any acquisitions. We believe that the net proceeds of this offering,
together with cash generated from operations and our cash and cash equivalents,
will be sufficient to meet our working capital needs for at least the next 12
months. Thereafter, we may find it necessary to obtain additional equity or
debt financing. In the event that additional financing is required, we may not
be able to raise it on terms acceptable to us, if at all. If we are unable to
raise additional capital when required, our business, operations and results
will likely suffer.
In March 2000 we entered into a line of credit agreement with a dealer in
the computer equipment vertical market for our extension of up to $3.0 million
of advances for the dealer's acquisition of assets to be sold on our
marketplace. This secured line of credit expires in August 2000 or earlier if
we request.
27
<PAGE>
Quarterly Operating Results
The following table presents our statement of operations data for each of
the quarters in 1998 and 1999. This information has been derived from our
unaudited financial statements. The unaudited financial statements have been
prepared on substantially the same basis as the audited financial statements
included elsewhere in this prospectus and include all adjustments, consisting
only of normal recurring adjustments, that we consider necessary for a fair
presentation of this information. You should read this information in
conjunction with our audited financial statements and related notes included
elsewhere in this prospectus. We expect our quarterly operating results to vary
significantly from quarter to quarter and you should not draw any conclusions
about our future results from the results of operations for any quarter.
<TABLE>
<CAPTION>
Three Months Ended (unaudited)
------------------------------------------------------------------------
Dec.
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $2,977 $2,251 $2,842 $2,731 $2,531 $4,427 $2,669 $ 2,777
Operating expenses:
Direct auction costs.. 1,532 1,484 1,379 1,284 1,169 1,404 1,366 1,849
Sales and marketing... 241 278 288 272 226 220 205 1,620
General and
administrative....... 1,070 1,176 1,112 1,429 1,048 1,426 742 4,980
Depreciation and
amortization......... 23 23 27 115 31 30 27 50
Amortization of
deferred
compensation......... -- -- -- -- -- -- -- 51
------ ------ ------ ------ ------ ------ ------ -------
Total operating
expenses........... 2,866 2,961 2,806 3,100 2,474 3,080 2,340 8,550
------ ------ ------ ------ ------ ------ ------ -------
Income (loss) from
operations............. 111 (710) 36 (369) 57 1,347 329 (5,773)
Interest and other
income (expense), net.. (17) 73 32 (23) (5) 178 6 (11)
------ ------ ------ ------ ------ ------ ------ -------
Net income (loss)....... $ 94 $ (637) $ 68 $ (392) $ 52 $1,525 $ 335 $(5,784)
====== ====== ====== ====== ====== ====== ====== =======
</TABLE>
Our quarterly revenues and operating results may vary significantly as a
result of a variety of factors including, without limitation
. our ability to retain our current customers and attract new customers;
. the amount and timing of operating costs relating to the expansion of
our business;
. the announcement or introduction of new products or services by us or
our competitors;
. costs related to acquisitions of businesses or new technology; and
. changes in general economic and market conditions.
As a result of these factors, and our recent migration to an Internet-based
auction platform, we believe that period-to-period comparisons of our results
of operations are not necessarily meaningful and should not be relied upon as
indications of future performance.
28
<PAGE>
Qualitative and Quantitative Disclosures about Market Risk
Our exposure to market risk for changes in interest rates relates primarily
to increases or decreases in the amount of interest income we can earn on our
investment portfolio and on increases or decreases in the amount of interest
expense we must pay with respect to any outstanding debt instruments. We had no
debt instruments outstanding as of December 31, 1999. The risk associated with
fluctuating interest expense is limited, however, to those debt instruments and
credit facilities that are tied to market rates. We do not plan to use
derivative financial instruments in our investment portfolio. We plan to ensure
the safety and preservation of our invested principal funds by limiting default
risk, market risk and reinvestment risk. We plan to mitigate default risk by
investing in high-credit quality securities.
Year 2000 Impact
We have not experienced any problems with our computer systems relating to
their inability to recognize appropriate dates related to the year 2000. We are
also not aware of any material problems with our clients or vendors.
Accordingly, we do not anticipate incurring material expenses or experiencing
any material operational disruptions as a result of any year 2000 issues.
29
<PAGE>
BUSINESS
Overview
We have created an online global marketplace where sellers, buyers and
dealers participate in auctions of used capital assets and gain access to
value-added services through our strategic alliances and extensive referral
network. Our marketplace combines the efficiency, liquidity and global reach of
Internet-based commerce with our 62 years of experience as an auctioneer in the
market for used capital assets. Our customers can conduct transactions through
our Webcast auctions, which broadcast live open-outcry auctions via the
Internet, or through our 24x7 online auctions. We believe our marketplace will
achieve network effects that will enable it to become the primary forum for the
sale and purchase of used capital assets. We expect the expanded audience
reached by our integrated online auctions to attract sellers seeking to
maximize the recoverable value of their used capital assets. Network effects
will be realized as the growing number of sellers in our marketplace provide an
increasing capital asset supply, thereby attracting an increasing number of
buyers and increasing the demand for these assets.
Since December 1999, we have completed the acquisition of eight businesses
which complement our online marketplace. These acquisitions provide us with
additional corporate customers and dealer relationships, increase the supply of
assets to our marketplace, extend our vertical market expertise, and enhance
our value-added services. In particular, the acquisition of Norman Levy
Associates, Inc., a 50 year-old auctioneer and asset appraiser, increases our
depth in the metalworking and machine tool vertical market and strengthens our
valuation services and worldwide customer relationships.
Industry Background
Dynamics of the Market for Used Capital Assets
The market for used capital assets is currently fragmented and inefficient.
Used capital assets can be characterized as either inside-the-building assets
such as semiconductor fabrication, machine tools and food processing equipment,
or outside-the-building assets such as maritime, aviation and construction
equipment. According to Bain & Co., the global market for used capital assets
in 1998 was approximately $100 billion, and we believe that inside-the-building
assets represented approximately 60% of this total.
Capital assets that no longer fit the needs of their current owners often
have substantial value to another business. For example, the technology leaders
in many industries regularly replace productive assets prior to the expiration
of their useful lives. Used capital assets may also become available for sale
when factories are closed, businesses fail, or leased capital assets are
returned to their lessors. Buyers in the used capital asset market include
small businesses, corporations and dealers. In addition, as manufacturers
across the world seek to move production to the most efficient locales, assets
that cease to be utilized in one geographic region can be resold for use in
another.
Used capital assets have traditionally reached the market either in
"aggregated" form, large groups of capital assets from a single seller which
are usually prompted by an event such as bankruptcy or plant closure, or in
"unaggregated" form, in the ordinary course of business involving single lots
of equipment. Aggregated capital assets are frequently sold through on-site
open-outcry auctions, where buyers bid in person. These live auctions are
enhanced through the selling efforts and ability of an auctioneer, the forces
of competitive bidding and the time certainty of the auction event. However,
because live auctions are practical only for large sales that justify the
expense associated with preparing for, marketing and staging an event that will
attract a sufficiently large and broad group of buyers, sales at live auctions,
according to Bain & Co., represent a small percentage of the total used capital
asset market.
Unaggregated capital assets are rarely of sufficient value to justify the
cost of a live auction and, consequently, are usually sold through direct
selling efforts such as contacting equipment dealers or advertising in trade
journals. The inefficiency of the market for these assets frequently results in
depreciation and slow asset turnover. Unaggregated capital assets represent the
majority of the inside-the-building used capital assets not currently sold
through live auctions.
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<PAGE>
The Role of Dealers in the Used Capital Asset Market
Dealers buy and sell capital assets for their own accounts and play a very
significant role in facilitating the market for used capital asset sales. Most
dealers focus on a particular vertical market and often have repair,
refurbishment, warranty, and storage capabilities. As a result of their
specialized focus, dealers are knowledgeable about their product lines,
maintain relationships with sellers and buyers of these products and act as
market makers.
Market Inefficiency
The current market for used capital assets lacks an efficient means through
which to obtain information about sellers and buyers of, and the supply and
demand for, used capital assets. In addition, the current market lacks an
efficient manner through which to consummate transactions between the
geographically dispersed sellers and buyers of used capital assets. Dealers
contribute to the inefficient flow of information in the used capital asset
market because they are generally small, specialized businesses with limited
geographic reach. As a result of these inefficiencies, there are significant
barriers to the sale and purchase of used capital assets. For example, in any
given private sale or on-site auction, it is likely that there are numerous
potential buyers who are either unaware of the sale or unwilling to spend the
time and money to travel to the sale. Most corporate sellers face similar
barriers because they often do not have either the time, experience or
knowledge necessary to manage the sale of their capital assets.
Market Opportunity
The Internet is rapidly emerging as an important medium for business-to-
business e-commerce. Forrester Research projects that business-to-business e-
commerce will grow from $17 billion in 1998 to $2.7 trillion in 2004.
Electronic marketplaces are expected to fuel much of this growth. Approximately
53%, or $1.4 trillion, of annual business-to-business e-commerce is projected
by Forrester Research to flow through electronic marketplaces in 2004. While
this broad market data does not pertain directly to the used capital asset
market, it is indicative of the level of commercial acceptance of Internet-
based commerce.
DoveBid believes that there is a significant opportunity to create an online
marketplace which brings together the disjointed efforts of the numerous
participants currently facilitating the sale of used capital assets. The
Internet's ability to connect people in disparate locations and to allow
continuous widespread access to information makes it well suited to address the
inefficiencies of the existing used capital asset market. However, because of
the expertise and value-added services offered by auctioneers and dealers to
facilitate the sale of used capital assets, a stand-alone Internet-based
marketplace is an incomplete solution. In order to provide a highly liquid,
trusted marketplace for used capital assets, an Internet-based approach must:
. provide an integrated online auction alternative to sellers and buyers of
both aggregated and unaggregated assets;
. deliver the extensive vertical market expertise that will attract
participants into the market;
. leverage relationships with dealers to draw them and their extensive
supply and demand of assets into the marketplace;
. offer the logistical services necessary to complete the transaction, such
as valuation, inspection, rigging, shipping and settlement; and
. have credibility as an effective and fair business auctioneer to attract
the large global sellers and buyers that can help to provide a
substantial flow of assets through the marketplace.
The DoveBid Solution
Building on over 62 years of capital asset auction experience, we have
created an online auction marketplace for sellers, buyers and dealers that
combines the efficiency, liquidity and global reach of Internet-based commerce
with the experience of a leading auctioneer in the market for inside-the-
building, used capital assets. We believe that our unique combination of
experience, reputation, and technology positions us to
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overcome the historical limitations of the used capital asset market and become
the leading online auction marketplace for selling and buying these assets. Our
marketplace features:
. Integrated Online Auction Services--We offer both live, Webcast open-
outcry auctions and 24x7 online auctions which together provide an
integrated solution to sellers and buyers worldwide of aggregated and
unaggregated assets.
. Vertical Market Expertise--We possess the expertise in a number of
vertical markets to assist our clients in making informed decisions and
to attract interested, qualified sellers and buyers to our marketplace.
. Relationships with Dealers--We maintain relationships with and support
for dealers to promote their participation in our online marketplace.
. Value-Added Services--We provide or can assist our customers in securing
the value-added services needed to complete the auction transaction.
. Industry Credibility--We enhance the value of our marketplace as a result
of our reputation and experience built over our 62 years in the used
capital asset market.
We believe our integrated auction services offer the following benefits to
our key constituencies:
Sellers--Sellers can achieve better pricing, lower transaction costs,
and the time certainty that our online auctions offer. Further, our
ability to provide, directly or through our strategic alliances and our
extensive referral network, the value-added services needed to complete
the auction transaction will enable sellers to liquidate their assets in
an efficient manner.
Buyers--Buyers can benefit from access to a broad, deep, and
continuously replenishing market for the business assets, as well as
from the ability to participate in this marketplace. We believe that
buyers will also benefit from the asset pricing information derived from
the open bidding afforded by an active auction process.
Dealers--Dealers who actively participate as sellers in our market can
benefit from an expanded audience, which helps accelerate their
inventory turnover and improve their use of capital. Dealers will also
be able to access our marketplace for a more extensive supply of assets
for resale. By participating in our auctions, dealers will have the
opportunity to increase the scale of their operations and expand their
ability to sell value-added services to their customers.
The DoveBid Strategy
Our objective is to become the leading global online marketplace for the
auction of inside-the-building, used capital assets. Our strategy includes the
following elements:
Create Liquidity in Target Vertical Markets
We will focus on vertical markets that can benefit from the capabilities of
an online marketplace, and where we can establish a competitive advantage by
virtue of industry experience and market knowledge. We intend to utilize our
experience and our extensive database of sellers and buyers to drive customers
and assets to our marketplace. Augmenting our historical expertise in a number
of vertical markets, we intend to acquire or establish relationships with
dealers and auctioneers in additional vertical markets. By leveraging our
knowledge, experience and relationships with dealers, we will increase the
supply of assets for sale, thereby attracting more buyers and, consequently,
more sellers to our marketplace. We believe that this cycle will help create
network effects, where the value to each participant in the network increases
with the addition of each new participant, thereby increasing the overall value
of our online marketplace.
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Expand Value-Added Services
We believe that value-added services are an integral element of our
marketplace. We intend to expand our range of value-added support services for
both sellers and buyers through internal growth as well as through acquisitions
of dealers and service providers. We also plan to develop new strategic
relationships through alliances with third parties that can enhance our
services.
Build Strategic Relationships to Increase Asset Supply and Customer Traffic
We intend to continue to enter into strategic alliances with leading
Internet companies, such as our agreement with Yahoo!, to promote and drive
customers to our marketplace. We also will continue to seek alliances, such as
our agreements with Comdisco and Sun Microsystems, to establish a supply of
assets for sale on our marketplace, and our alliance with Datastream that will
drive both customers and assets to our marketplace.
Broaden Product Offerings
We plan to expand our range of product offerings for sellers, buyers and
dealers who utilize our marketplace. We have developed an extensive database of
sellers, buyers and asset values. By leveraging this database, we plan to offer
sellers, buyers and dealers e-commerce information products. For example, we
plan to make our database for pricing and valuation information available to
sellers and buyers on a fee basis. We also plan to offer asset life cycle
management services to our corporate customers. In addition, we plan to offer
virtual aggregation by staging Webcast auctions that aggregate assets from our
24x7 online auctions.
Expand Globally
We believe that the Internet is the best vehicle to address efficiently and
economically the worldwide market for used capital assets. We plan to
capitalize on this opportunity by devoting significant resources to penetrate
global markets by acquiring or partnering with overseas dealers and service
providers, providing our marketplace and auction services in additional
languages other than English and actively marketing and promoting our services
worldwide. We will focus on Europe, Asia and Latin America because of the
increased demand for used capital assets in these regions.
Leverage and Invest in Technology
Since the Internet is the vehicle through which we reach our customers,
maintaining and further developing our technological advantages is a key
element of our strategy. We plan to continue investing in technology to support
our future growth. Future investments in technology will include enhancements
to our website, and additional alliances with key technology providers to
deliver a superior online experience.
Products and Services
DoveBid has created an online marketplace that serves the needs of sellers,
buyers and dealers of used capital assets around the world by providing an
easy-to-use, comprehensive and integrated portfolio of auction and value-added
services.
Webcast Auctions
Our Webcast auctions are open-outcry auctions broadcast live via the
Internet. Using our advanced technology, Webcast auction participants can view
asset descriptions and photographs online, and enter bids in real time using
the telephone to bid against on-site bidders. Our auctions have eliminated the
"latency" effect of some interactive Internet auctions. By providing real time
responses, we enable remote bidders to effectively compete with on-site bidders
without having to be present physically. We conducted our first Webcast auction
in January 2000 and since then, we have completed nine Webcast auctions.
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Webcast auctions are critical to establishing an ongoing relationship with
corporate customers because they provide the unique benefits of a live auction
that many of our large corporate customers demand: immediacy, convenience, and
competition among interested buyers. In addition, Webcast auctions create an
event that draws buyers to our marketplace and allows us to direct them to our
24x7 online auctions and other services.
To participate in a Webcast auction, sellers and buyers can register over
the Internet and receive a registration confirmation via email. Registration
information is automatically passed on to our Customer Care systems where all
customer information is consolidated into one database. This database is then
available for our marketing and management purposes.
In addition to providing the Webcast auction, we provide related services to
help ensure the success of the auction such as:
. Valuation of assets to be sold;
. Marketing and promotion of the auction to create large audiences;
. Project management to reduce or eliminate the administrative or
logistical burdens on a seller;
. Settlement and logistical support to ensure rapid transmittal of proceeds
and removal of assets; and
. Complete financial reporting.
The commissions we collect from buyers in our Webcast auctions are variable,
depending on the size and scale of the auction, but we typically receive a
buyer's premium of 10% of the asset's purchase price. Depending on the
complexity of the auction in some cases we also receive an additional
commission from the seller.
24x7 Online Auctions
Our 24x7 online auctions enable customers to sell and buy used capital
assets, 24 hours a day, 7 days a week, using any Internet connection.
In order to buy assets through our 24x7 online auctions, a buyer must
register with us by completing a short online form. Once registered, buyers can
search within a vertical market, and then for a specific item. Having
identified an item, the buyer can "click through" to obtain detailed product
information and bid online for the item. Our 24x7 online auction technology
offers features such as: AutoBid, where the auction engine will automatically
update a buyer's bid until its threshold is reached; email notification when a
buyer's bid has been surpassed; and AuctionWatch, which provides the capability
to create a custom web page.
At closing of an auction, if a bid meets or exceeds a predetermined reserve
price set by the seller, DoveBid automatically notifies the seller and buyer
via email. The seller and buyer can then consummate the transaction
independently of DoveBid. At the time of the email notification, DoveBid
typically charges the seller a transaction fee equal to 5% of the asset's
purchase price. At no point in this process does DoveBid take possession of
either the item being sold, or the buyer's payment for the item. The seller and
buyer must arrange for the shipment of and payment for the item, and the buyer
typically pays for shipment.
Under the terms of our user agreement, if a seller receives one or more
bids, at or in excess of the asset reserve price, the seller is obligated to
consummate a transaction. However, DoveBid cannot compel the seller or winning
bidder to consummate the transaction, although we may suspend them from
participating in our marketplace. If the seller and buyer are unable to
consummate the transaction, DoveBid may waive the commission. Invoices for
transaction fees are sent regularly via email to sellers.
We have recently acquired the businesses of several used capital asset
dealers, including inventories of assets held for resale by these dealers. We
expect to continue to make additional business acquisitions in the
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future. As a result of these acquisitions, we may regularly acquire assets
that we will sell as a principal in our marketplace, subject to both the
benefits and risks of doing so.
Valuation Services
We have recently acquired Norman Levy Associates, Inc., a 50-year old
appraiser and auctioneer, and AccuVal, an established capital asset valuation
firm, both of which complement and significantly expand the scope of our
valuation capabilities and business. We intend to capitalize on the knowledge
of our experienced personnel, proprietary database, extensive resource library
and expert contacts to provide valuation services to our auction clients and,
independently, to third parties.
A valuation typically begins with a thorough review of published source
materials that may be available to help to identify the parameters of a
realistic value range. We maintain an extensive library of buyer's guides,
auction guides, new equipment price lists, trade publications, technical
journals, directories and specification manuals that helps to keep us informed
about new and used equipment. In addition, we have maintained and continually
update a database that tracks comparable sale information of capital assets
and inventory. Software programs have been designed and implemented to allow
for the instantaneous comparison of the assets being evaluated to similar
assets that have recently been sold thereby enabling us to offer efficient
valuation services.
Other Value-Added Services
Most participants in the market for used capital assets require additional
services to complete the auction transaction. We have in-house capabilities to
provide a number of these services directly. In addition, we have strategic
alliances and an extensive referral network that provide our customers with
access to additional services. We believe the ability to offer, or refer our
customers to experienced providers of, value-added services is a key
differentiating factor and an important element of our marketplace.
Currently we provide the following services:
. Repair and Refurbishment
. Calibration
. Warehousing
. Escrow (in partnership with i-Escrow)
. Digital Photography
We have entered into strategic alliances and have an extensive referral
network through which our customers have access to the following services:
. Inspection
. Insurance
. Logistics and Freight
. Financing
. Rigging
In the future we may provide these services directly or through a third
party under the DoveBid brand.
Future Products
We expect to offer online access to our asset valuation databases to
sellers and buyers. We plan to offer Webcasts of unaggregated assets by
compiling assets from our 24x7 online auctions. We also expect to offer asset
life cycle management services to corporate customers.
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Markets
Capital assets fall within specific vertical markets, some of which are
better suited for an online marketplace than others. We intend to participate
in vertical markets that have the following characteristics:
Technological Innovation--Vertical markets characterized by assets with
rapid technological innovation are attractive because these markets have a
continuous flow of assets from technologically advanced users to mainstream
users.
Long Useful Life--Assets with a long useful life are attractive because they
have a longer potential selling period in the market for used capital assets.
The functional longevity of such assets is likely to attract buyers who
otherwise would be limited to new asset purchases.
Ease of Asset Identification--Vertical markets comprised of assets that can
be clearly specified using a defined set of characteristics (e.g., model
number, serial number) are attractive because such assets are easier for buyers
to identify and verify.
Vertical Market Expertise--A vertical market that requires expertise to
facilitate a sale is attractive because we believe we can leverage our
experience to add value. Vertical market expertise requires a deep
understanding of customer needs, products, market dynamics, and unique
processes for conducting commerce within an industry. Our vertical market
expertise has been developed through direct experience serving customers over
long periods of time.
We have initially targeted the following used capital asset vertical
markets:
. Biotech / Medical / Pharmaceutical
. Computers / Peripherals and Data Processing
. Disk Drive / Media Manufacturing
. Electronic Commodities
. Electronic Test and Measurement
. Food and Chemical Processing
. Metalworking and Machine Tools
. Office Furnishings and Equipment
. Packaging and Converting
. Plant Support / Material Handling / Facility Equipment
. Plastics and Rubber
. Post Production / Audio / Video / Broadcast
. Power Production
. Printed Circuit Board Fabrication / Insertion and Assembly
. Printing
. Semiconductor Fabrication
. Telecommunications
. Textile and Apparel Manufacturing
. Woodworking / Mills
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Customers
We have conducted numerous on-site auctions for major corporations
throughout the course of our 62 year operating history. Our customers,
including those of Norman Levy, have included:
. Boeing . MEMC Electronic Materials
. DaimlerChrysler . Northrup Grumman
. General Dynamics . Packard Bell NEC
. Hughes . Quantum
. IBM . Raytheon
. KAO Day . Rockwell
. Lockheed Martin . Thiokol
In addition, we have conducted auctions as an auctioneer appointed by the
United States Bankruptcy Court for major bankruptcy cases including:
. Drexel Burnham Lambert
. Commercial Financial Services
. Micropolis
. Osborne Computer
To date we have conducted Webcast auctions for Columbia Sportswear, Northrup
Grumman, Packard Bell NEC, Philips Semiconductor, Raytheon, Teledyne and
Valtran, among others.
Our national account program targets large corporations that will provide us
with an ongoing stream of assets for auction. Current national contracts are in
place with the following corporations:
. Cordant Technologies (formerly Thiokol)
. Lockheed Martin
. Raytheon
. Rockwell
Generally under the terms of our national contracts, sellers agree that we
will represent them in connection with auctions or liquidations of capital
assets for a period of time, usually a three year term. During the term of the
contract the seller periodically identifies assets to be sold and we arrange
for the disposition and any value-added services. As part of the contract, the
seller represents that it has sufficient title to the assets and agrees to
indemnify us for any claims. The assets are usually sold on an "as is" basis.
We may receive a commission from the seller in addition to the customary
buyer's premium.
Case Study-Raytheon
The following case study illustrates how our integrated solution has helped
our customer, Raytheon, improve the effectiveness of its asset management
program. Raytheon is a large defense contractor whose business has been
affected by the significant reorganizations, acquisitions and changes in the
defense industry.
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Our relationship with Raytheon began in the 1980s when it became the first
major corporation to enter into a national contract with us. The auctions with
Raytheon were initially traditional walkaround auctions, soon followed by
theater-style auctions. Since that time we have conducted more than 40 public
auctions on behalf of Raytheon. In January 2000, Raytheon sold assets in one of
our first Webcast auctions, which enabled bidders from around the world to
participate and purchase assets in real time over the Internet. Equipment with
an aggregate sales price of $850,000 was sold during this auction. The auction
attracted online bidders from remote locations such as Germany. Raytheon is
committed to another Webcast auction, in March 2000.
Raytheon has also elected to conduct a 24x7 online auction of semiconductor
fabrication equipment on our website. This vertical market is particularly well
suited to the 24x7 online auction format due to the specialized nature of this
equipment and the unaggregated nature of assets being sold. Our ability to
provide both full-service Webcast auctions for large quantities of assets
encompassing multiple vertical markets as well as lower-cost 24x7 online
auctions for unaggregated assets has provided Raytheon with an efficient and
easy to manage approach to its capital asset dispositions.
Strategic Investors and Partners
We have formed strategic relationships with a number of business partners
who are also investors in our company. These relationships are aimed at making
assets available through our Webcast and 24x7 online auctions, at increasing
the traffic to our website and expanding the range of value-added services we
can offer sellers, buyers and dealers. Our strategic investors include the
following:
Comdisco. We have an alliance with Comdisco, a leasing and finance company,
through which our customers have access to a full-range of Comdisco's asset
management and leasing services for their capital assets. In addition, we have
specific rights to auction assets being sold by Comdisco that fall within two
of our vertical markets for an initial period of one year subject to our
satisfactory performance under the contract. We have purchased $13 million of
assets from Comdisco for a combination of our Series C preferred stock and
cash.
Datastream. We have a joint marketing and technology alliance with
Datastream Systems, a worldwide vendor of asset management software. We will
jointly market each other's services to one another's customers and plan to
install integrated links between our website and Datastream's websites and
product offerings. We and Datastream have mutual revenue sharing provisions for
revenue from referred customers.
Sun Microsystems. We have established an alliance with Sun Microsystems, a
leading provider of network computing products, in which we will auction
certain returned, excess and refurbished equipment for an initial term of two
years.
Yahoo!. We also have entered into an alliance with Yahoo! under which Yahoo!
will advertise and promote our services as a business-to-business auctioneer.
We will pay to Yahoo! marketing and promotional fees over a period of
approximately twelve months and we will also purchase additional advertising
with Yahoo! based on the amount of our auction commissions derived from
customers originated through Yahoo!.
Sales, Marketing and Customer Service
Marketing Programs
Our marketing programs include traditional and Internet-based marketing
initiatives. General awareness programs feature activities in our market,
public relations initiatives, participation in a variety of industry
conferences, and trade shows. We also promote our services through advertising
on the Internet, business periodicals, local and national newspapers, and
vertical industry trade publications. Our direct marketing initiatives include
email, fax and mail which leverage our extensive customer database.
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We intend to establish the DoveBid Dealer Alliance Program, a co-marketing
program for dealers that will provide a supply of assets to our marketplace in
exchange for Dovebid marketing considerations. These co-marketing
considerations will include credits for print advertising, fax marketing,
direct mail and Internet advertising.
Sales
We sell our integrated auction services through a direct sales force and
vertical market managers. Our direct sales force markets our services to large
corporations to sell their used capital assets through our auctions. Our direct
sales force also targets large dealers, both as buyers for auctioned assets as
well as sellers of assets on our marketplace. As of March 27, 2000, we had 31
direct sales personnel. In addition, as of March 27, 2000, we had 33 valuation
services sales personnel.
Our vertical market managers focus on small and medium sized resellers and
corporations within specific vertical markets. These managers market our
integrated auction services in their respective vertical markets and source
unaggregated assets. Our vertical market managers will also focus on attracting
dealers to our DoveBid Dealer Alliance Program. As of March 27, 2000, we had
seven vertical market managers and we intend to continue to add managers in our
targeted vertical markets.
We have implemented a market management team to support both our direct
sales force and vertical market managers in order to provide expertise in
marketing, merchandising, valuing and selling assets. This market management
team works to ensure adequate supplies of assets, maintain relationships with
dealers, and build and support communities of buyers.
Customer Service
We devote significant resources to providing personalized, timely customer
service and support. Customer support inquiries are handled via phone or email,
with customer email inquiries typically answered within 24 hours. The Help area
of our web site contains extensive information about buying and selling on
DoveBid, as well as information on and links to value-added services, including
logistics, escrow, inspection, appraisal, digital photography and financing.
Help buttons on every page of the site take customers to the specific customer
service topic they need. In addition, our Customer Care group provides
personalized assistance to help customers through the entire auction process,
including registration, listing of assets, bidding, navigation and usage of our
website, settlement and logistics. Part of our customer support includes an
asset loading service through which sellers can upload descriptions of assets
for auction from any location.
We use a customer relationship application for the management of all
customer service information and customer data. Our customer relationship
management and transaction processing systems include industry-standard
security features to protect the privacy and integrity of customer data.
Technology and Operations
To establish a secure and reliable marketplace for sellers and buyers of
used capital assets, our underlying infrastructure was built on industry
standard software and hardware from leading technology companies such as Sun
Microsystems and Oracle. This infrastructure enables us to continuously enhance
the features and functionality of our services to meet the evolving needs of
our users.
Functionality
Our systems are designed to replace the manual processes traditionally used
by sellers and buyers in the used capital asset market with automated processes
that integrate dynamic pricing with electronic commerce. We rely on technology
developed by third parties to implement our solution and to create the
functionality described below.
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Webcast Auctions. Our Webcast capability is based upon Mshow.com's patent
pending technology that allows users with varying levels of bandwidth and
firewall configurations to share a rich media experience through real-time
delivery of interactive web presentations. It also integrates telephone audio
bridges, online polling and voting and displays media that can be viewed via a
web browser. Such media include PowerPoint slides, images, animations, pre-
recorded audio/video, streaming audio/video and 3D graphics.
The interactive Webcast application enables two primary types of auction
participants. An active (bidding) participant launches the application from his
computer and dials into a traditional telephone conference call bridge. The
user listens to the auction over the telephone while the application triggers
the automatic advancement of the auction lot images and descriptions on the
screen. The interactive auction server is operated in concert with the
telephone's touch-tone system and communicates the bid by the phone touch-tone
pad. In the passive (non-bidding) mode, the user can listen to the auction over
the Internet.
We are working with a third-party vendor that provides the technology for
our Webcast auctions and we may to enter into a definitive agreement for their
services.
24x7 Online Auctions. Our online auction functionality is designed to meet
the needs of both sellers and buyers. At the core of our online auction system
is an Oracle database, which maintains all seller, buyer, and transaction
information. Both sellers and buyers register through the same basic process,
and provide us with demographic information as well as industry interests.
Our Website contains a complete set of functions specifically designed to
enable sellers to list and monitor assets. Sellers have password-based access
to administrative screens which allow them to list assets, individually or in
bulk uploads, as well as track all open auctions and revenue from those
auctions. This seller-based accounting information is also downloadable in a
standard format and can be imported into a variety of programs. Sellers are
also provided with notification emails regarding the status of their assets on
the site. Sellers can choose from a range of auction lengths, specify minimum
bids, bid increments, reserve prices and choose the auction ending type.
Sellers are also able to enter asset descriptors such as location, weight and
manufacturer and provide a description. Sellers may also upload an image of the
asset to be sold, and specify payment methods.
Buyers have access to a number of features to locate assets, track auctions,
and receive notification when certain assets are posted to the DoveBid website.
Three forms of searching are offered: category based browsing of assets in the
19 vertical markets, basic text search, and advanced text search. The advanced
search capability allows the buyer to search only selected areas of the
website. Our AuctionWatch feature allows users to create a customized page of
auctions so that they can easily track a number of auctions with assets of
interest. Any asset can be added to a user's AuctionWatch with a single click
while browsing the asset. The CategoryWatch feature allows buyers to determine
when certain assets are added to the DoveBid website. By specifying keywords,
the user sets the CategoryWatch feature to send a notification email when
certain assets are added. This notification email provides brief descriptions
and direct links back to such assets.
Buyers bid using the password established during registration on the DoveBid
website. A buyer may place a single bid, or use the DoveBid AutoBid feature.
This feature allows the buyer to specify the maximum price they are willing to
pay, and allows the DoveBid website to automatically manage the bidding
process. Bidders are automatically sent emails notifying them of successful
bids, or when another buyer has outbid them.
DoveBid supports two auction closing formats: fixed time closing and auto-
extension. The fixed time closing auction format stops bidding at a specific
time which is tracked by the server. The auto-extension format provides for
automatic extension of the closing time of the auction if there is bidding
activity in the final minutes prior to close. When an auction is closed, the
buyer and seller are both notified by email.
We have recently acquired a company that has developed a technology that we
intend to implement shortly to enhance the functionality of our 24x7 online
auctions.
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Living Brochures. We provide brochures that include video and in some cases
audio, descriptions of selected products. These living brochures are currently
available in several languages, such as English, Spanish and Mandarin. These
video streams play back on standard streaming format players.
Infrastructure
We have designed our website and supporting infrastructure to be highly
robust and to support new products and increased traffic. Our servers are
hosted in a physically and network-secure environment at Digex. The Digex data
center features redundant power sources and redundant high-speed network
connections. This network connectivity offers us high performance and immediate
scalability as our website traffic increases. In addition, our servers are
monitored twenty-four hours a day by software "agents" which immediately notify
DoveBid operations staff of any anomalies.
Our applications support multiple layers of security, including password
protected log-ins, encryption technology to safeguard information transmitted
in web sessions and firewalls to help prevent unauthorized access to our
network and servers. We devote significant efforts to ensure that our system is
protected from intrusion, but individuals, using rapidly evolving techniques
and technologies may be successful in gaining unauthorized entry to our system
or disrupting service. If we experience an attack from an individual or group,
our services could be disrupted indefinitely, during which time we may not be
able to conduct auctions or other business.
Our software is based on applications developed by third parties and
modified to fit our needs. Our database that tracks and maintains our
transaction data is based on Oracle database management software. We have
implemented software that will support future generations of web-based
technology, such as applications that utilize extensible mark-up language, or
XML, a language that facilitates the creation of large, secure cross-platform
applications and documents.
Competition
We believe that the principal competitive factors affecting our market
include the following:
. an integrated auction capability;
. vertical market expertise;
. a critical mass of sellers and buyers;
. relationships with capital asset dealers;
. customer service;
. a user-friendly technology interface; and
. an ability to implement an array of value-added services.
Although we believe that we compete favorably with respect to each of these
factors, the market for online auctions is relatively new and is evolving
rapidly. We may not be able to maintain our competitive position against
current or potential competitors, especially those with significantly greater
financial, marketing, service, support, technical and other resources.
A number of companies provide services or products to the capital asset
auction market, and existing and potential customers can, or will be able to,
choose from a variety of current and potential competitors' services.
Competition in this market is rapidly evolving and intense, and we expect
competition to intensify in the future.
We currently compete with a number of established companies engaged in
traditional on-site business-to-business auctions. We also compete with a
number of new online auction firms that are focusing on the same capital market
as we are. There are also providers of business-to-business online marketplaces
and online
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auction services that currently focus on other industries or specific vertical
markets that could expand the scope of their business to include used capital
assets. Other potential competitors include established business-to-consumer
auction sites such as Egghead or uBid, and consumer-to-consumer auction sites
such as Amazon.com or eBay. Many of these providers have significantly greater
installed customer bases, greater financial resources and have the opportunity
to offer additional products to those customers as additional components of
their respective application suites.
Many of our current and potential competitors have larger customer bases,
greater brand recognition and significantly greater financial, marketing and
other resources than we do and may enter into strategic or commercial
relationships with larger, more established companies. Some of our competitors
may be able to secure alliances with customers and affiliates on more favorable
terms, devote greater resources to marketing and promotional campaigns and
devote substantially more resources to systems development than we do. In
addition, new technologies and the expansion of existing technologies may
increase the competitive pressures on us. We cannot assure you that we will be
able to compete successfully against current or future competitors, and
competitive pressures faced by us could harm our business, operating results
and financial condition.
Intellectual Property
Our success is dependent upon our ability to develop and protect our
proprietary technology and intellectual proprietary rights, including our
database of buyers, sellers and transaction information and our internally
developed software. We rely primarily on a combination of contractual
provisions, confidentiality procedures, trade secrets, and copyright and
trademark laws to accomplish these goals.
In addition, we seek to avoid disclosure of our trade secrets by requiring
employees, customers and others with access to our proprietary information to
execute confidentiality agreements. We also seek to protect our software,
documentation and other written materials under trade secret and copyright
laws.
Despite our efforts to protect our proprietary rights, existing laws afford
only limited protection. Attempts may be made to copy or use information that
we regard as proprietary. Accordingly, there can be no assurance that we will
be able to protect our proprietary rights against unauthorized third party
copying or use. Use by others of our proprietary rights could materially harm
our business.
It is also possible that third parties will claim that we have infringed
their current or future products. Any claims, regardless of merit, could be
time-consuming, result in costly litigation, cause delays or require us to
enter into royalty or licensing agreements, any of which could harm our
business. Patent litigation in particular has complex technical issues and
inherent uncertainties. In the event an infringement claim against us was
successful and we could not obtain a license on acceptable terms or license a
substitute technology or redesign to avoid infringement, our business would be
harmed.
Regulation
As with many Internet-based businesses, we operate in an environment of
uncertainty as to potential government regulation. We believe that we are not
currently subject to direct regulation applicable to online commerce, other
than regulations applicable to businesses generally. However, the Internet has
rapidly emerged as a commercial medium, and governmental agencies have not yet
been able to adapt existing regulations to its use. Future laws, regulations
and court decisions may affect the Internet or other online services, covering
issues such as user pricing, user privacy, freedom of expression, access
charges, taxation, content and quality of products and services, advertising,
intellectual property rights and information security. In addition, because our
services are offered worldwide, and we facilitate sales of goods to clients
worldwide, foreign jurisdictions may claim that we are required to comply with
their laws. Any future regulation may have a negative impact on our business.
Because we are an Internet company, it is unclear in which jurisdictions we
are actually conducting business. Our failure to qualify to do business in a
jurisdiction that requires us to do so could subject us to fines and penalties
and could result in our inability to enforce agreements in that jurisdiction.
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Numerous states have laws and regulations regarding the conduct of auctions
and the liability of auctioneers. We and the auctioneers we employ are bonded
and regulated under the laws of the State of California and maintain licenses
or bonds as required in other jurisdictions where we conduct a substantial
number of auctions.
Employees
As of March 27, 2000, we had 258 employees. We believe that we have good
relationships with our employees. We have never had a significant work
stoppage, and none of our employees is represented under a collective
bargaining agreement.
Facilities
Our headquarters, including our principal administrative and marketing
facilities, are located in approximately 9486 square feet of space we have
leased in Foster City, California under a lease expiring November 30, 2000.
This facility is leased from Dove Holdings, Inc., an entity controlled by Ross
and Kirk Dove. See "Certain Transactions." In addition, we also lease office
and warehouse facilities in other locations throughout the United States. We
believe that our existing facilities are adequate to meet our requirements for
the foreseeable future. The table below summarizes the square footage of
premises leased by us as of March 27, 2000.
<TABLE>
<CAPTION>
Approximate
Location Square Footage
- -------- --------------
<S> <C>
Alameda, California.............................................. 2,200
Foster City, California.......................................... 9,486
Foster City, California.......................................... 10,000
Huntington Beach, California..................................... 1,000
Mountain View, California........................................ 23,750
San Jose, California............................................. 50,000
Branford, Connecticut............................................ 3,700
Kennesaw, Georgia................................................ 1,000
Chicago, Illinois................................................ 2,800
Northbrook, Illinois............................................. 1,404
Marblehead, Massachusetts........................................ 1,000
Worcester, Massachusetts......................................... 1,000
Southfield, Michigan............................................. 9,514
Santa Fe, New Mexico............................................. 6,500
Houston, Texas................................................... 1,232
Mequon, Wisconsin................................................ 10,800
Mississauga, Canada.............................................. 500
</TABLE>
Legal Proceedings
We are not currently subject to any legal proceedings that we expect will
have a material impact on us. We are subject to legal proceedings now, and
likely will be in the future, that arise in the course of our business, and we
cannot assure you that any such proceeding will not have a material adverse
effect on us.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth the name, age and position of each of our
executive officers and directors as of the date of this prospectus.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Ross Dove*.............. 47 Chairman of the Board, Chief Executive Officer
Jeffrey M. Crowe........ 43 President, Chief Operating Officer and Director
Kirk Dove*.............. 44 President of Auction Services, Chief Auctioneer and Director
Robert C. Levy**........ 42 President of International Auction Services
Cory M. Ravid........... 35 Chief Financial Officer and Secretary
Francis M. Juliano...... 33 Chief Technical Officer and Vice President of E-Commerce
James Hume.............. 46 Vice President of Operations
Steven S. Pollock....... 36 Vice President of Marketing
Dennis Polk............. 33 Vice President of Finance
Anthony Capobianco...... 34 Vice President and General Counsel
Timothy J. Reed......... 29 Vice President of Business Development
Lynn B. Corsiglia....... 41 Vice President of Human Resources
Andy Gronik............. 42 President of Valuation Services
David K. Levy**......... 38 Executive Vice President of Valuation Services
William Burnham......... 29 Director(1)
A. Grant Heidrich, III.. 47 Director(1)
David S. Pottruck....... 51 Director(2)
William Price........... 43 Director(1)
Todd Rulon-Miller....... 49 Director(2)
W. Blake Winchell....... 46 Director(2)
</TABLE>
- --------
* Ross Dove and Kirk Dove are brothers.
** Robert Levy and David Levy are brothers.
(1) Member of Audit Committee
(2) Member of Compensation Committee
Ross Dove has served as our chairman of the board and chief executive
officer since June 1999. Ross Dove served as the chairman of the board and
chief executive officer of our predecessors Ross-Dove Company and Dove
Brothers, LLC, from 1980 to 1999.
Jeffrey M. Crowe has served as our president and chief operating officer
since November 1999 and a director since December 1999. Prior to joining
DoveBid, Mr. Crowe was co-founder, president, chief executive officer and a
board member of Edify Corporation from May 1990 to November 1999.
Kirk Dove has served as our president of auction services and as chief
auctioneer and a director since June 1999. Kirk Dove served as president of our
predecessors Ross-Dove Company and Dove Brothers, LLC from 1984 to 1999.
Robert C. Levy has served as our president of international auction services
since March 2000 and has been nominated to our board of directors. Prior to
joining DoveBid, Mr. Levy was with Norman Levy Associates, Inc. from 1980 to
March 2000, serving most recently as president.
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Cory M. Ravid has served as our chief financial officer and secretary since
October 1999. From January 1997 to October 1999, Mr. Ravid served as chief
financial officer and partner at The Parkside Group, a private equity buyout
firm. In addition, Mr. Ravid was chief financial officer of MacGregor Golf from
August 1998 to August 1999. Mr. Ravid was first the corporate controller and
then the chief financial officer and general counsel at DuPont Flooring Systems
from February 1994 to December 1996.
Francis M. Juliano has served as our chief technical officer and vice
president of e-commerce since December 1999. Prior to joining DoveBid, Mr.
Juliano was the director of technology and product development for Office Depot
Online from March 1998 to December 1999. Previously, Mr. Juliano was vice-
president of technology and development of Cybernet International from March
1997 to March 1998. In addition, Mr. Juliano was the director of technology for
Scholastic New Media from July 1995 to March 1997. Prior to that he was the
director of technology for Ultra Media, Inc. and the co-founder and vice
president of Roundbook Publishing Group, Inc.
James Hume has served as our vice president of operations since January
2000. Prior to joining DoveBid, Mr. Hume was vice president of corporate
materials and supplier management with Sanmina Corporation from May 1997 to
January 2000. Prior to that, Mr. Hume was senior manager of enterprise services
at Sun Microsystems from July 1995 to May 1997.
Steven S. Pollock has served as our vice president of marketing since
December 1999. Prior to joining DoveBid. Mr. Pollock was vice president of
worldwide marketing at Edify Corporation from May 1998 to November 1999. He was
executive vice president of product marketing and operations for Portera
Systems/Netiva Software from May 1996 to November 1998. Prior to that, Mr.
Pollock was vice president of marketing at Claris Corporation.
Dennis Polk has served as our vice president of finance since February 2000.
Prior to joining DoveBid, Mr. Polk was first the controller and then the chief
financial officer at Savoir Technology Group, Inc. from December 1995 to
February 2000. Prior to December 1995 Mr. Polk was employed by Grant Thornton,
LLP.
Anthony Capobianco has served as our vice president and general counsel
since December 1999. Prior to joining DoveBid, Mr. Capobianco was first an
associate and then a partner with the law firm of Sonnenschein Nath & Rosenthal
from September 1992 to December 1999.
Timothy J. Reed has served as our vice president of business development
since March 2000. Prior to joining DoveBid, Mr. Reed was vice president of
marketing and business development at Engage Technologies from November 1998 to
March 2000. Prior to that he was the director of marketing and business
development of Internet Profiles Corporation, a wholly owned subsidiary of
Engage Technologies, from June 1996 to November 1998.
Lynn B. Corsiglia has served as our vice president of human resources since
March 2000. Prior to joining DoveBid, Ms. Corsiglia was vice president of human
resources for Calico Commerce, Inc. from March 1998 to March 2000. She was the
director of human resources for Netscape Communications, Inc. from November
1995 to March 1998. Prior to that she was a senior manager of human resources
for Sybase, Inc. from November 1992 to October 1995.
Andy Gronik has served as our president of valuation services since March
2000. Prior to joining DoveBid, Mr. Gronik was the founder and president of
both AccuVal Associates and LiquiTech Industries from June 1988 to March 2000.
David K. Levy has served as our executive vice president of valuation
services since March 2000. Prior to joining DoveBid, Mr. Levy was with Norman
Levy Associates, Inc. from 1981 to March 2000, serving most recently as
executive vice president.
William Burnham has served as a director of DoveBid since February 2000. Mr.
Burnham has been a general partner of Softbank Capital Partners since August
1999. Prior to Softbank Capital Partners, Mr. Burnham was a vice president and
senior research analyst for Credit Suisse First Boston's Technology
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Group from July 1998 to August 1999. Prior to that, Mr. Burnham was the senior
research analyst at Deutsche Morgan Grenfell from May 1998 to July 1998 and
Piper Jaffray Inc. from April 1997 to May 1998. Prior to Piper Jaffray, Mr.
Burnham was a senior associate at Booz, Allen & Hamilton. Mr. Burnham is also a
director of Buy.com Inc.
A. Grant Heidrich, III has served as a director of DoveBid since October
1999. Mr. Heidrich has been a general partner at the Mayfield Fund, a venture
capital firm, since 1982. Mr. Heidrich is a director of Millenium
Pharmaceuticals, Inc. and Tularik Inc.
David S. Pottruck has served as a director of DoveBid since December 1999.
Since June 1992 Mr. Pottruck has been the president, and since June 1997 the
co-chief executive officer, of The Charles Schwab Corporation, of which he is
also a director. Mr. Pottruck is also a director of McKesson HBOC, Inc., and
Intel Corporation.
William Price has served as a director of DoveBid since February 2000. Mr.
Price has been the managing director of Tarrant Partners since September 1992
and is a founding director of Texas Pacific Group. Mr. Price is also a director
of Aerfi Group plc, Beldin Blake Corporation, Beringer Wine Estates Holdings,
Inc., Continental Airlines, Inc., Del Monte Foods Company, Derbury Resources,
Inc., Favorite Brands International, Inc., Vivra Specialty Partners, Inc. and
Zilog, Inc.
Todd Rulon-Miller has served as a director of DoveBid since December 1999.
Mr. Rulon-Miller has been a partner of Apogee Venture Group since June 1998.
Prior to that Mr. Rulon-Miller was a vice president of sales at Netscape
Communications from October 1994 to October 1997. Mr. Rulon-Miller is also a
director of Active Software, Inc.
W. Blake Winchell has served as a director of DoveBid since June 1999. Mr.
Winchell has been a general partner of Fremont Ventures, a venture capital
firm, since December 1998. Prior to that Mr. Winchell was a managing director
with Generation Ventures from 1996 to 1999, and a managing director with the
Channel Investment Group from 1991 to 1996. Mr. Winchell is also a director of
Bay View Capital Corporation.
Board Committees
Our board has three committees, the audit committee, the compensation
committee and the executive committee. The audit committee consists of Messrs.
Burnham, Heidrich and Price. The compensation committee consists of Messrs.
Pottruck, Rulon-Miller and Winchell. The executive committee consists of
Messrs. Ross and Kirk Dove, Burnham, Crowe, Heidrich, Rulon-Miller and
Winchell. The audit committee reviews our financial statements and accounting
practices, makes recommendations to the board regarding the selection of
independent auditors and reviews the results and scope of the audit and other
services provided by our independent auditors. The compensation committee makes
recommendations to the board concerning salaries and incentive compensation for
our officers and employees and administers our employee benefit plans. The
executive committee is empowered to take all action of the board except actions
required by law to be taken by the full board.
Compensation Committee Interlocks and Insider Participation
Before December 17, 1999, our board of directors did not have a compensation
committee and all material compensation decisions were made by the full board
of directors. In December 1999 we formed a compensation committee consisting of
Messrs. Pottruck and Winchell. Mr. Rulon-Miller was appointed to the committee
in March 2000. No interlocking relationship exists between our board of
directors or compensation committee and the board of directors or compensation
committee of any other company, nor has an interlocking relationship existed in
the past.
Director Compensation
Our directors do not receive cash compensation for their services as
directors but are reimbursed for reasonable expenses in attending board and
board committee meetings. In December 1999, we granted to each of David S.
Pottruck and Todd Rulon-Miller options to purchase 200,000 shares of our common
stock at an exercise price of $0.77 per share. These options were granted under
our 1999 Stock Plan.
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<PAGE>
Members of the board who are not employees of DoveBid, or any parent,
subsidiary or affiliate of DoveBid, will be eligible to participate in the 2000
Equity Incentive Plan. The option grants under the plan are automatic and
nondiscretionary, and the exercise price of the options is the fair market
value of the common stock on the date of grant. Each non-employee director who
becomes a member of the board on or after the effective date of the
registration statement of which this prospectus forms a part, will be granted
an option to purchase 100,000 shares. Immediately following each annual meeting
of our stockholders, each eligible director will automatically be granted an
additional option to purchase 25,000 shares if the director has served
continuously as a member of the board since the date of the non-employee
director's last stock option grant. All options granted to non-employee
directors will vest over a four year period at a rate of 25% of the total
shares granted on the first one year anniversary of the date of grant, and
thereafter as to 6.25% of the total shares granted after each subsequent three
month period. All options granted to non-employee directors will be immediately
exercisable subject to a repurchase right by us for any unvested shares. In the
event of our dissolution or liquidation or a "change in control" transaction as
described below, options granted under the plan will become 100% vested and
exercisable in full.
Executive Compensation
The following table sets forth all compensation paid or accrued during 1999
to our Chief Executive Officer and our four most highly compensated executive
officers whose salary and bonus for 1999 were more than $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
----------------- -------------------------------
Restricted Securities
Name and Principal Positions Salary Bonus Stock Awards Underlying Options
- ---------------------------- -------- -------- ------------ ------------------
<S> <C> <C> <C> <C>
Ross Dove.................... $298,000 $400,000 -- --
Chairman of the Board and
Chief Executive Officer
Kirk Dove.................... $341,000 $400,000 -- --
President of Auction
Services, Chief Auctioneer
and Director
</TABLE>
See "Employment Contracts and Change of Control Arrangements" for
compensation information regarding other of our executive officers.
Option Grants and Restricted Stock Purchases in 1999
None of the persons listed in the Summary Compensation Table received grants
of stock options from us during 1999. See "Employment Contracts and Change of
Control Arrangements," for additional information regarding options granted to,
and shares of restricted stock sold to, others of our executive officers.
Employee Benefit Plans
1999 Stock Option Plan. As of March 24, 2000, options to purchase 9,446,999
shares of our common stock were outstanding under our 1999 Stock Option Plan
and 3,053,001 shares of our common stock remained available for issuance upon
the exercise of options that may be granted in the future. The options
outstanding as of March 24, 2000 had a weighted average exercise price of $1.55
per share. Our 2000 Equity Incentive Plan will be effective upon the
effectiveness of this offering. As a result, no options will be granted under
our 1999 Stock Option Plan after this offering. However, any outstanding
options under our 1999 Stock Option Plan will remain outstanding and subject to
our 1999 Stock Option Plan until exercise or until they terminate or expire by
their terms. Options granted under our 1999 Stock Option Plan are subject to
terms substantially similar to those described below with respect to options to
be granted under our 2000 Equity Incentive Plan.
2000 Equity Incentive Plan. Our 2000 Equity Incentive Plan will become
effective on the date of this prospectus and will serve as the successor to our
1999 Stock Option Plan. We have reserved 10,000,000 shares
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<PAGE>
of our common stock to be issued under our 2000 Equity Incentive Plan. In
addition, shares under the 1999 Stock Option Plan not issued or subject to
outstanding grants on the date of this prospectus and any shares issued under
this plan that are forfeited or repurchased by us or that are issuable upon
exercise of options that expire or become unexercisable for any reason without
having been exercised in full will be available for grant and issuance under
our 2000 Equity Incentive Plan.
On each January 1, the aggregate number of shares reserved for issuance
under our 2000 Equity Incentive Plan will increase automatically by a number of
shares equal to 5% of our outstanding shares on December 31 of the preceding
year. Our 2000 Equity Incentive Plan will terminate after 10 years from the
date our board of directors approved the plan, unless it is terminated earlier
by our board of directors. The plan will authorize the award of options,
restricted stock awards and stock bonuses.
Our 2000 Equity Incentive Plan will provide for the grant of both incentive
stock options that qualify under Section 422 of the Internal Revenue Code and
nonqualified stock options. Incentive stock options may be granted only to our
employees. All awards other than incentive stock options may be granted to our
employees, officers, directors, consultants, independent contractors and
advisors. The exercise price of incentive stock options must be at least equal
to the fair market value of our common stock on the date of grant. The exercise
price of incentive stock options granted to 10% stockholders must be at least
equal to 110% of that value. The exercise price of nonqualified stock options
must be at least equal to 85% of the fair market value of our common stock on
the date of grant.
Options may be exercisable only as they vest or may be immediately
exercisable with the shares issued subject to our right of repurchase. In
general, options will vest over a four-year period. The maximum term of options
granted under our 2000 Equity Incentive Plan is 10 years.
The purchase price for any restricted stock awarded under the 2000 Equity
Incentive Plan will be determined by our compensation committee. Stock bonuses
may be issued for past services or may be awarded upon the completion of
certain services or performance goals.
If we are dissolved or liquidated or have a "change in control" transaction,
the vesting of all outstanding awards may be assumed or substituted by the
successor company. However, if an optionee is terminated within one year from
the date of such "change in control" transaction, the vesting of such
optionee's outstanding awards will accelerate as to an additional 25% of the
shares that are unvested on the date of the "change in control" transaction. In
the discretion of the compensation committee the vesting of these awards may be
further accelerated upon one of these transactions.
2000 Employee Stock Purchase Plan. Our 2000 Employee Stock Purchase Plan
will become effective on the date of this prospectus. We have initially
reserved 1,000,000 shares of our common stock under this plan. On each January
1, the aggregate number of shares reserved for issuance under our 2000 Employee
Stock Purchase Plan will increase automatically by a number of shares equal to
1% of our outstanding shares on December 31 of the preceding year. Our board of
directors or compensation committee may reduce the amount of the increase in
any particular year. The aggregate number of shares reserved for issuance under
our 2000 Employee Stock Purchase Plan may not exceed 10,000,000 shares.
Our 2000 Employee Stock Purchase Plan will be administered by our
compensation committee. Our compensation committee will have the authority to
construe and interpret the plan, and its decisions will be final and binding.
Employees generally will be eligible to participate in our 2000 Employee Stock
Purchase Plan if they are employed before the beginning of the applicable
offering period and they are customarily employed by us for more than 20 hours
per week and more than five months in a calendar year and are not, and would
not become as a result of being granted an option under the plan, 5%
stockholders of us.
Under our 2000 Employee Stock Purchase Plan, eligible employees will be
permitted to acquire shares of our common stock through payroll deductions.
Eligible employees may select a rate of payroll deduction between 1% and 10% of
their compensation and are subject to maximum purchase limitations.
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<PAGE>
Except for the first offering period, each offering period under our 2000
Employee Stock Purchase Plan will be for two years and consist of four six-
month purchase periods. The first offering period is expected to begin on the
date of this prospectus. Offering periods and purchase periods will begin on
April 1 and October 1 of each year. However, because the first day on which
price quotations for our common stock will be available on the Nasdaq National
Market may not be April 1 or October 1, the length of the first offering period
may be more or less than two years, and the length of the first purchase period
may be more or less than six months.
The purchase price for our common stock purchased under the plan will be 85%
of the lesser of the fair market value of our common stock on the first day of
the applicable offering period or the last day of the applicable purchase
period. The compensation committee will have the power to change the offering
dates, purchase dates and duration of offering periods without stockholder
approval, if the change is announced prior to the beginning of the affected
date or offering period. Our 2000 Employee Stock Purchase Plan will provide
that, in the event of our proposed dissolution or liquidation, each offering
period that commenced prior to the closing of the proposed event will continue
for the duration of the offering period, provided that the compensation
committee may fix a different date for termination of the plan.
Our 2000 Employee Stock Purchase Plan is intended to qualify as an "employee
stock purchase plan" under Section 423 of the Internal Revenue Code. The plan
will terminate 10 years from the date the plan was adopted unless it is
terminated earlier under the terms of the plan. The board will have the
authority to amend, terminate or extend the term of the plan, except that no
action may adversely affect any outstanding options previously granted under
the plan.
Except for the automatic annual increase of shares described above,
stockholder approval will be required to increase the number of shares that may
be issued or to change the terms of eligibility under our 2000 Employee Stock
Purchase Plan. The board will be able to make amendments to the plan as it
determines to be advisable if the financial accounting treatment for the plan
is different from the financial accounting treatment in effect on the date the
plan was adopted by the board.
401(k) Plan
We sponsor a defined contribution plan intended to qualify under Section 401
of the Internal Revenue Code, or a 401(k) plan. Employees who are at least 21
years old and who have been employed with us for at least one year are
generally eligible to participate and may enter the plan on the first day of
the month following the date the employee meets the eligibility requirements.
Participants may make pre-tax contributions to the plan of up to 15% of their
eligible compensation, subject to a statutorily prescribed annual limit. Each
participant is full vested in his or her contributions and the investment
earnings. We make matching contributions to the 401(k) plan in an amount not to
exceed 100% of each participant's first 15% of compensation contributed as pre-
tax contributions to the plan for the plan year. Contributions by the
participants to the plan, and the income earned on these contributions, are
generally not taxable to the participants until withdrawn. Participant
contributions are held in trust as required by law. Individual participants may
direct the trustee to invest their accounts in authorized investment
alternatives.
Employment Contracts and Change of Control Arrangements
From time to time we have entered employment agreements with our executive
officers, including the executive officers listed in the "Summary Compensation
Table."
Ross Dove. Ross Dove receives an annual salary of $300,000 and a minimum
annual bonus of $200,000. His employment with us is at will. In connection with
his employment, Ross Dove entered into a stock repurchase agreement with us and
The Dove Holdings Corporation. Under this agreement, in the event of any
termination of Mr. Dove's employment by us for "cause" or by Mr. Dove for other
than "good reason," Dove Bid shall have the right to repurchase up to 4,078,932
shares of our common stock held by Mr. Dove through The Dove Holdings
Corporation at a purchase price of $0.33 per share. The number of shares
subject to
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<PAGE>
repurchase decreases ratably over a period of 28 months commencing on February
25, 2000. Termination for "good reason" would involve changes in Mr. Dove's
role with us without his consent. The stock repurchase agreement terminates
upon a "change of control" or if Mr. Dove's employment is terminated without
cause or for good reason. A "change of control" includes:
. an acquisition of 50% of more of our outstanding stock by a person other
than a person related to DoveBid;
. a merger or consolidation of DoveBid after which our then-current
stockholders own less than a majority of the voting power of the
surviving corporation; or
. a sale of all or substantially all of our assets.
Kirk Dove. Kirk Dove receives an annual salary of $300,000 and a minimum
annual bonus of $200,000. His employment with us is at will. In connection with
his employment, Kirk Dove has entered into a stock repurchase agreement with us
and The Dove Holdings Corporation. Under the terms of this agreement, in the
event of any termination of Mr. Dove's employment by us for cause or by Mr.
Dove for other than good reason, DoveBid has a right to repurchase up to
4,078,932 shares of our common stock held by Mr. Dove through The Dove Holdings
Corporation on the same terms and conditions as in Ross Dove's stock repurchase
agreement with us.
Jeffrey M. Crowe. In November 1999, Jeffrey Crowe accepted our offer of
employment. His employment letter provides that Mr. Crowe is entitled to
receive an annual salary of $300,000 with annual target bonuses of up to
$100,000. His employment with us is on an at-will basis. In connection with his
employment, Mr. Crowe purchased 4,800,000 shares of our common stock at a
purchase price of $0.33 per share with a promissory note payable to DoveBid in
November 2004. These shares are subject to a right of repurchase that lapses as
to one-fourth of these shares in November, 2000, with the repurchase right
lapsing ratably monthly over 36 months after that. In addition, pursuant to the
terms of his employment letter, in January 2000 Mr. Crowe purchased 500,000
shares of our common stock from The Dove Holdings Corporation at a purchase
price of $1.50 per share.
We have the right to terminate Mr. Crowe's employment upon his disability or
for cause. Mr. Crowe has the right to terminate the arrangement for "good
reason," essentially consisting of changes in his role with us without his
consent. In the event of any termination of Mr. Crowe's employment by us
without cause or by Mr. Crowe for good reason, within one year of the date of
commencement of his employment with us, all of Mr. Crowe's shares purchased in
connection with his employment that would have otherwise vested through the
first anniversary of such commencement date and for such additional period as
any cash severance is paid to Mr. Crowe after such first anniversary, vest
immediately. If such termination occurs on or after the first anniversary of
the commencement date of Mr. Crowe's employment with us, Mr. Crowe will be
entitled to receive six months of accelerated vesting of any unvested options.
If termination of Mr. Crowe's employment by us without "cause" or by Mr.
Crowe for "good reason" occurs within 60 days prior to or one year following a
"change of control" that occurs within one year of the date of commencement of
employment with us, Mr. Crowe will be entitled to receive a cash severance
payment equal to one year's base salary plus his annual bonus, and two years of
accelerated vesting of the shares purchased in connection with his employment.
If such termination occurs within 60 days prior to or one year following a
change of control that occurs after the first anniversary of such commencement
date, Mr. Crowe will be entitled to receive a cash severance payment equal to
one year's base salary plus his annual bonus and immediate vesting of all
shares purchased in connection with his employment with us. A "change of
control" includes:
. an acquisition of 50% or more of our outstanding stock by a person other
than a person related to DoveBid;
. a merger or consolidation of DoveBid after which our then-current
stockholders own less than a majority of the voting power of the
surviving corporation;
50
<PAGE>
. a sale of all or substantially all of our assets; or
. the replacement of more than a majority of our incumbent directors.
Cory M. Ravid. In September 1999, Cory Ravid accepted our offer of
employment. His employment letter provides that Mr. Ravid is entitled to
receive an initial annual salary of $225,000 with annual bonuses of up to 40%
of his annual base salary. His employment with us is on an at-will basis. In
connection with his employment letter, Mr. Ravid purchased 700,000 shares of
our common stock at a purchase price of $0.33 per share with a promissory note
payable to DoveBid in November 2004. These shares are subject to a right of
repurchase that lapses as to one-fourth of these shares on October 15, 2000,
with the repurchase right lapsing ratably monthly over a 36 month period after
that. We have similar right to terminate Mr. Ravid's employment and he has the
right to terminate his employment with us for "good reason" on terms similar to
those of Mr. Crowe's arrangement with us. Similar provisions have also been
provided for termination in connection with a change of control.
Francis M. Juliano. In December 1999 Francis Juliano accepted our offer of
employment. His employment letter provides that Mr. Juliano is entitled to
receive an annual salary of $200,000 with annual bonuses of up to 30% of his
annual base salary. In connection with his employment, Mr. Juliano purchased
600,000 shares of our common stock at a purchase price of $0.77 per share,
which he purchased with a promissory note payable to DoveBid in January 2004.
In the event of any termination of Mr. Juliano's employment by us without
"cause," Mr. Juliano will receive a cash payment of $100,000. In March 2000,
Mr. Juliano was granted options to purchase an additional 100,000 shares of our
common stock at an exercise price of $2.50 per share.
Robert Levy. In March 2000 Robert Levy accepted our offer of employment. His
employment letter provides that Robert Levy is entitled to receive an annual
salary of $225,000 with an annual bonus of $100,000. In connection with his
employment, Mr. Levy was issued options for 200,000 shares of our common stock
with an exercise price of $4.00 per share. In the event of any termination of
Robert Levy's employment by us without "cause," Mr. Levy will receive a cash
payment of $112,000 and a pro rata portion of his annual bonus.
David Levy. In March 2000 David Levy accepted our offer of employment. His
employment letter provides that David Levy is entitled to receive an annual
salary of $225,000 with an annual bonus of $100,000. In connection with his
employment, Mr. Levy was issued options for 200,000 shares of our common stock
with an exercise price of $4.00 per share. In the event of any termination of
David Levy's employment by us without "cause," Mr. Levy will receive a cash
payment of $112,000 and a pro rata portion of his annual bonus.
Indemnification of Directors and Executive Officers and Limitation of Liability
Our certificate of incorporation includes a provision that eliminates the
personal liability of a director for monetary damages resulting from breach of
his fiduciary duty as a director, except for liability:
. for any breach of the director's duty of loyalty to DoveBid or its
stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
. for any transaction from which the director derived an improper personal
benefit.
Our bylaws provide that:
. we are required to indemnify our directors and officers to the fullest
extent permitted by the Delaware General Corporation Law, subject to very
limited exceptions;
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<PAGE>
. we may indemnify our other employees and agents to the extent that we
indemnify our officers and directors, unless otherwise required by law,
our certificate of incorporation, our bylaws or agreements;
. we are required to advance expenses, as incurred, to our directors and
executive officers in connection with a legal proceeding to the fullest
extent permitted by the Delaware General Corporation Law, subject to very
limited exceptions; and
. the rights conferred in the bylaws are not exclusive.
In addition to the indemnification required in our certificate of
incorporation and bylaws, before the completion of this offering, we intend to
enter into indemnity agreements with our current directors and officers. These
agreements provide for the indemnification of our officers and directors for
all expenses and liabilities incurred in connection with any action or
proceeding brought against them by reason of the fact that they are or were
agents of DoveBid. We have also obtained directors' and officers' insurance to
cover our directors, officers and some of our employees for certain
liabilities. We believe that these indemnification provisions and agreements
and this insurance are necessary to attract and retain qualified directors and
officers.
The limitation of liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. They
may also reduce the likelihood of derivative litigation against directors and
officers, even though an action, if successful, might benefit us and other
stockholders. Furthermore, a stockholder's investment may be adversely affected
to the extent we pay the costs of settlement and damage awards against
directors and officers as required by these indemnification provisions. At
present, there is no pending litigation or proceeding involving any of our
directors, officers or employees regarding which indemnification by us is
sought, nor are we aware of any threatened litigation that may result in claims
for indemnification.
52
<PAGE>
CERTAIN TRANSACTIONS
Sales of Our Common Stock and Preferred Stock
Common Stock
In October 1997 The Dove Holdings Corporation, Ross Dove and Kirk Dove
(collectively the "Dove Group") entered into an agreement with Koll Management
Services, Inc. ("Koll") for the Dove Group's purchase of Koll's membership
interests in Dove Brothers, LLC, which was then known as Koll-Dove Global
Disposition Services (the "Koll Buyout Agreement"). Under the terms of the Koll
Buyout Agreement, Koll also received, in addition to the purchase price paid by
the Dove Group, a limited partnership interest in a website known as RealBid
equivalent to 50% of any ownership interest in RealBid acquired by any member
of the Dove Group on or before September 30, 2000, 25% of the pre-tax income of
Dove Brothers, LLC and its subsidiaries for the calendar years 1998, 1999 and
2000, and 25% of the net proceeds of certain capital events of Dove Brothers,
LLC occurring on or before September 30, 2000. The Dove Holdings Corporation
and Ross Dove and Kirk Dove secured their obligations to Koll through a
security interest in their membership interests in Dove Brothers, LLC.
In June 1999, Dove Brothers, LLC distributed its 66-2/3% interest in
National Loan Exchange, Inc. ("NLEX"), a subsidiary of Dove Brothers, LLC, to
the members of Dove Brothers, LLC, which at that time were The Dove Holdings
Corporation, Ross Dove and Kirk Dove. Thereafter, The Dove Holdings
Corporation, Ross Dove and Kirk Dove transferred to Koll a portion of their
membership interests in Dove Brothers, LLC and a portion of their shares of the
common stock of NLEX, in partial satisfaction of the purchase price under the
Koll Buyout Agreement. In addition, Dove Brothers, LLC agreed to assume and pay
to Koll the remaining balance of the purchase price under the Koll Buyout
Agreement, which was $1.0 million, in one payment due in March 2000, and The
Dove Holdings Corporation, Ross Dove and Kirk Dove jointly and severally
guaranteed such payment by Dove Brothers, LLC. In exchange, Koll released The
Dove Holdings Corporation, Ross Dove and Kirk Dove from further obligations
under the Koll Buyout Agreement.
On June 4, 1999, in connection with the formation of DoveBid, Inc., we
issued, in exchange for the contribution of all of the membership interests in
Dove Brothers, LLC, a total of 28,212,121 shares of our common stock to the
following persons:
<TABLE>
<CAPTION>
Shares of
Buyer Common Stock
----- ------------
<S> <C>
The Dove Holdings Corporation................................ 25,688,135
Ross Dove.................................................... 254,417
Kirk Dove.................................................... 254,417
Koll Management Services, Inc................................ 2,015,152
</TABLE>
The Dove Holdings Corporation is beneficially owned by Ross and Kirk Dove.
Ross Dove is the chairman of our board of directors and is our chief executive
officer. Kirk Dove is one of our directors and is our president of auction
services and chief auctioneer.
In June 1999 we entered into a Stockholders' Agreement, which was amended on
October 1999 and in February 2000, with our largest stockholders. Among other
things the Stockholders' Agreement imposed limits on the ability of The Dove
Holdings Corporation, Ross Dove or Kirk Dove to transfer or encumber shares of
our common stock. This agreement expires upon completion of this offering. In
January 2000, The Dove Holdings Corporation sold 500,000 shares to Jeffrey
Crowe, 333,334 shares to Fremont Ventures, 666,667 shares to David Pottruck,
183,332 shares to Cory Ravid and 400,000 shares to Todd Rulon-Miller, each at a
per share price of $1.50.
Preferred Stock
The share numbers and per share prices are adjusted to reflect the
conversion of preferred stock into common stock, which will occur on the
effectiveness of this offering.
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<PAGE>
Series A preferred stock financing. On June 14, 1999, we sold 12,090,909
shares of our Series A preferred stock for $0.33 per share. Each share of
Series A preferred stock currently is convertible into one share of common
stock. The buyer of the Series A preferred stock was Fremont Ventures I, L.P. a
holder of more than 5% of our stock. W. Blake Winchell, one of our directors is
a partner of Fremont Ventures I, L.P.
In connection with its purchase of our Series A preferred stock on June 14,
1999, Fremont Ventures I, L.P. entered into a Put/Call Agreement with The Dove
Holdings Corporation whereby Fremont Ventures granted The Dove Holdings
Corporation the right, exercisable from February 15, 2000 to March 1, 2001, to
require Fremont Ventures to purchase up to 2,000,000 shares of our common stock
owned by The Dove Holdings Corporation at a purchase price of $0.77 per share.
In the same agreement The Dove Holdings Corporation granted Fremont Ventures
the right, exercisable at any time from February 15, 2000 to March 1, 2001, to
require The Dove Holdings Corporation the right to sell to Fremont Ventures up
to 2,000,000 shares of our common stock owned by The Dove Holdings Corporation
at a purchase price of $2.48 per share. The put/call rights granted under the
Put/Call Agreement will terminate upon the completion of this offering. In
February 2000 Fremont Ventures elected to purchase the shares under the
Put/Call Agreement.
Series B preferred stock financing. On October 18, 1999, we sold 15,870,129
shares of our Series B preferred stock at a price of $0.77 per share. Each
share of Series B preferred stock currently is convertible into one share of
common stock. The buyers of the Series B preferred stock included affiliated
funds of Mayfield Fund and Fremont Ventures. The Mayfield Fund entities hold
more than 5% of our stock and A. Grant Heidrich, III, one of our directors, is
a partner of the Mayfield Fund.
Series C preferred stock financing. Between February 25, 2000 and March 8,
2000, we sold 41,011,242 shares of our Series C preferred stock at a price of
$2.67 per share. Each share of Series C preferred stock is convertible into one
share of common stock. The buyers of the Series C preferred stock included,
among others, entities associated with Softbank, the Texas Pacific Group, the
Mayfield Fund and Fremont Ventures, each of which hold more than 5% of our
stock.
Stockholder and Other Agreements. In connection with our preferred stock
sales we and our largest stockholders entered into Stockholder Agreements by
which Messrs. Winchell, Heidrich, Burnham and Price were appointed to our
board. We also granted registration rights to the preferred stock investors.
These rights are further described under "Description of Capital Stock--
Registration Rights."
Loans to Executive Officers
Jeffrey M. Crowe. In November 1999, Jeffrey Crowe purchased 4,800,000 shares
of our common stock, with a $1,579,200 secured full recourse promissory note
with an annual interest rate equal to 5.92% compounded monthly. The note also
provides that we may accelerate payment of the amounts outstanding under the
loan in the event Mr. Crowe ceases to be an employee or consultant of ours.
Cory M. Ravid. In November 1999, Cory Ravid's purchased 700,000 shares of
our common stock, with a $230,300 secured full recourse promissory note with an
annual interest rate equal to 5.92% compounded monthly. The note also provides
that we may accelerate payment of the amounts outstanding under the loan in the
event Mr. Ravid ceases to be an employee or consultant of ours.
Steven S. Pollock. In January 2000, Steven Pollock purchased 700,000 shares
of our common stock, with a $230,300 secured full recourse promissory note with
an annual interest rate equal to 6.04% compounded monthly. The note also
provides that we may accelerate payment of the amounts outstanding under the
loan in the event Mr. Pollock ceases to be an employee or consultant of ours.
Francis Juliano. In January 2000, Francis Juliano purchased 600,000 shares
of our common stock, with a $461,400 secured full recourse promissory note with
an annual interest rate equal to 6.04% compounded
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<PAGE>
monthly. The note also provides that we may accelerate payment of the amounts
outstanding under the loan in the event Mr. Juliano ceases to be an employee or
consultant of ours.
James Hume. In January 2000, James Hume purchased 700,000 shares of our
common stock, with a $538,300 secured full recourse promissory note with an
annual interest rate equal to 6.04% compounded monthly. The note also provides
that we may also accelerate payment of the amounts outstanding under the loan
in the event Mr. Hume ceases to be an employee or consultant of ours.
Anthony Capobianco. In February 2000, Anthony Capobianco purchased 150,000
shares of our common stock, with a $115,350 secured full recourse promissory
note with an annual interest rate equal to 6.37% compounded monthly. In March
2000 Mr. Capobianco purchased an additional 50,000 shares of our common stock,
with a $124,950 secured full recourse promissory note with an annual interest
rate equal to 6.60% compounded monthly. Both notes also provide that we may
accelerate payment of amounts outstanding under the loans in the event Mr.
Capobianco ceases to be an employee or consultant of ours.
Dennis Polk. In February 2000, Dennis Polk purchased 200,000 shares of our
common stock, with a $299,800 secured full recourse promissory note with an
annual interest rate equal to 6.37% compounded monthly. In March 2000 Mr. Polk
purchased an additional 90,000 shares of our common stock, with a $224,910
secured recourse promissory note with an annual interest rate equal to 6.60%
compounded monthly. Both notes also provide that we may accelerate payment of
amounts outstanding under the loan in the event Mr. Polk ceases to be an
employee or consultant of ours.
Timothy J. Reed. In March 2000, Timothy Reed purchased 220,000 shares of our
common stock, with a $549,780.00 secured full recourse promissory note with an
annual interest rate equal to 6.60% compounded monthly. The note also provides
that we may accelerate payment of the amounts outstanding under the loan in the
event Mr. Reed ceases to be an employee or consultant of ours.
Lynn B. Corsiglia. In March 2000, Lynn Corsiglia purchased 220,000 shares of
our common stock, with a $549,780.00 secured full recourse promissory note with
an annual interest rate equal to 6.60% compounded monthly. The note also
provides that we may accelerate payment of the amounts outstanding under the
loan in the event Ms. Corsiglia ceases to be an employee or consultant of ours.
Real Property Lease
We lease our headquarters office space at 1241 E. Hillsdale Boulevard in
Foster City, California from a corporation in which some of our directors and
officers have an interest. The lessor under the lease is Dove Holdings, Inc.,
the shareholders of which are Ross Dove and Kirk Dove. The lease commenced on
December 1, 1997 and expires on November 30, 2000. The annual rent under the
lease is $295,963 and is adjusted based on increases in the Consumer Price
Index for the San Francisco-Oakland-San Jose metropolitan area.
Other Transactions
For a description of our employment agreements with Ross and Kirk Dove, Mr.
Crowe, Mr. Ravid, Mr. Juliano, Robert and David Levy, Mr. Reed and Ms.
Corsiglia please see "Management-Employment Contracts and Change of Control
Arrangements."
Stock Option Grants to Certain Directors
In December 1999, we granted to each of David S. Pottruck and Todd Rulon-
Miller options to purchase 200,000 shares of our common stock at an exercise
price $0.77 per share. These options were granted under our 1999 Stock Plan.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of March , 2000 and as adjusted to
reflect the sale of the common stock in this offering by:
. each stockholder known by us to be the beneficial owner of more than 5%
of our common stock;
. each of our directors;
. each executive officer listed in the Summary Compensation Table; and
. all executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Unless otherwise indicated below, to our
knowledge, the persons and entities named in the table have sole voting and
sole investment power with respect to all shares beneficially owned, subject to
community property laws where applicable. Shares of common stock subject to
options that are currently exercisable or exercisable within 60 days of March
, 2000 are deemed to be outstanding and to be beneficially owned by the person
holding the options for the purpose of computing the percentage ownership of
such person but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.
The number of shares of common stock outstanding after this offering
includes shares of common stock being offered and does not
include the shares which are subject to the underwriters' over-allotment
option. The percentage of common stock outstanding as of March , 2000 is based
on shares of common stock outstanding on that date, giving
effect to the automatic conversion into common stock on completion of this
offering of all outstanding preferred stock and of $19.6 million of convertible
subordinated promissory notes issued in connection with recent acquisitions
(based on an average conversion rate of $ per share). Unless otherwise
indicated, the address of each of the individuals and entities named below is
c/o DoveBid, Inc. 1241 E. Hillsdale Boulevard, Foster City, California 94404.
<TABLE>
<CAPTION>
Percentage of Outstanding
Shares Beneficially Owned
------------------------------
Number of Shares
Name of Beneficial Owner Beneficially Owned Before Offering After Offering
- ------------------------ ------------------ --------------- --------------
<S> <C> <C> <C>
The Dove Holdings
Corporation(1)............. 19,754,802
Kirk Dove(2)................ 20,009,219
Ross Dove(2)................ 20,009,219
Fremont Ventures I,
L.P(3)..................... 21,217,597
50 Fremont Street
San Francisco, California,
94105
Entities affiliated with
Mayfield(4)................ 15,221,450
2800 Sand Hill Road, Suite
250
Menlo Park, California
94025
Entities affiliated with
SOFTBANK Corp.(5).......... 14,981,274
24-1, Nihonbashi-
Hakozakicho
Chuo-ku, Tokyo 103-8501,
JAPAN
TPG Advisors III, Inc....... 6,501,630
201 Main Street, Suite 2420
Fort Worth, TX 76102(6)
Entities affiliated with
T/3/ Advisors, Inc. ....... 2,861,666
201 Main Street, Suite 2420
Fort Worth, TX 76102(7)
Jeffrey M. Crowe............ 5,189,000
William Burnham(5).......... 14,981,274
A. Grant Heidrich, III(4)... 15,221,450
David S. Pottruck........... 866,667
William Price(8)............ 9,363,296
Todd Rulon-Miller........... 600,000
W. Blake Winchell(3)........ 21,217,597
All 20 directors and
executive officers as a
group (9).................. 92,476,252
</TABLE>
56
<PAGE>
- --------
1 Ross Dove and Kirk Dove are the sole natural persons who exercise voting
and/or dispositive powers for the shares held by The Dove Holdings
Corporation.
2 Includes 19,754,802 shares of common stock owned by The Dove Holdings
Corporation, which is owned equally by Ross Dove and Kirk Dove.
3 Represents 21,217,597 shares held by Fremont Ventures I, L.P., which
includes 2,000,000 shares that Fremont Ventures I, L.P. has elected to
purchase from The Dove Holdings Corporation pursuant to the terms of the
Second Amended and Restated Put/Call Agreement, dated as of February 25,
2000 between Fremont Ventures I, L.P. and The Dove Holdings Corporation.
FV, L.P. is the general partner of Fremont Ventures I, L.P. Fremont
Resources, Inc. ("FRI") is the general partner and Fremont Sequoia
Holdings, L.P., an affiliate of FRI, W. Blake Winchell and M. Hannah
Sullivan are the limited partners of FV, L.P. The directors of Fremont
Resources, Inc. are Alan M. Dachs, Jon S. Higgins, Richard S. Kopf, S. D.
Bechtel, Jr., H. J. Haynes, C. W. Hull and Robert Jaunich II. All of the
individuals listed above may be deemed to have shared voting and
dispositive power over the shares with are, or may be deemed to be
beneficially owned by Fremont Ventures, L.P., but disclaim such beneficial
ownership.
4 Represents 13,264,327 shares held by Mayfield X, L.P., 1,505,479 shares
held by Mayfield Principals' Fund, L.L.C., and 451,644 shares held by
Mayfield Associates Fund V, L.P. Mayfield X Management L.L.C. is the
general partner of Mayfield X, L.P. and Mayfield Associates Fund V, L.P.
and the managing member of Mayfield Principals' Fund L.L.C. The managing
directors of Mayfield X Management L.L.C. are A. Grant Heidrich, III,
Michael Levinthal, William D. Unger, William G. Van Auken, III, Kevin A.
Fong, Yogen Dalal, Russell C. Hirsh, Warde S. Hutton, George A. Palor, Todd
A. Brooks, Robert T. Vasan and David J. Ladd. All of the individuals listed
above may be deemed to have shared voting and dispositive power over the
shares which are, or may be deemed to be beneficially owned by Mayfield X,
L.P., Mayfield Associates Fund V, L.P. and Mayfield Principals' Fund,
L/L/C., but disclaim such beneficial ownership.
5 Includes 14,767,042 shares held by SOFTBANK Capital Partners LP and 214,232
shares held by SOFTBANK Capital Advisors Fund LP. SOFTBANK Capital Partners
LLC is the sole general partner of both SOFTBANK Capital Partners LP and
SOFTBANK Capital Advisors Fund LP. As a result, securities beneficially
owned by SOFTBANK Capital Partners LP and SOFTBANK Capital Advisors Fund LP
may be deemed beneficially owned by SOFTBANK Capital Partners LLC. All
investment decisions on behalf of SOFTBANK Capital Partners LLC must be
approved by SOFTBANK Capital Partners Investment Inc. and by any of Mr.
Ronald D. Fisher, Mr. Charles R. Lax or Mr. William L. Burnham, all of whom
are members of SOFTBANK Capital Partners LLC. As a result, securities
beneficially owned by SOFTBANK Capital Partners LLC may be deemed
beneficially owned by SOFTBANK Capital Partners Investment Inc., Mr.
Fisher, Mr. Lax and Mr. Burnham. SOFTBANK Capital Partners Investment Inc.
is a wholly-owned subsidiary of SOFTBANK Holdings Inc. Accordingly,
securities owned by SOFTBANK Capital Partners Investment Inc. may be deemed
beneficially owned by SOFTBANK Holdings Inc. SOFTBANK Holdings Inc. is a
wholly-owned subsidiary of SOFTBANK Corp. Mr. Masayoshi Son, President and
Chief Executive Officer of SOFTBANK Corp., owns an approximately 38.27%
interest in SOFTBANK Corp. Accordingly, securities owned by SOFTBANK
Holdings Inc. may be deemed beneficially owned by SOFTBANK Corp. and Mr.
Son. SOFTBANK Capital Partners LP, SOFTBANK Capital Advisors Fund LP,
SOFTBANK Capital Partners LLC, SOFTBANK Capital Partners Investment Inc.,
Mr. Fisher, Mr. Lax, Mr. Burnham, SOFTBANK Holdings Inc., SOFTBANK Corp.
and Mr. Son disclaim beneficial ownership of shares owned directly by
SOFTBANK Capital Partners LP and SOFTBANK Capital Advisors Fund LP,
respectively, except to the extent of their respective pecuniary interests,
if any, therein.
6 TPG Advisors III, Inc. indirectly through TPG Genpar III, L.P. controls
each of TPG Partners III, L.P., TPG Parallel III, L.P., TPG Investors III,
L.P., FOF Partners III, L.P., FOF Partners III-B, L.P., and TPG Dutch
Parallel III, C.V. (collectively, the "TPG III Entities"), which directly
own the aggregate number of shares listed above. The directors and sole
shareholders of TPG Advisors III, Inc. are David Bonderman, James G.
Coulter and William S. Price, III, each of whom may be deemed to have
shared voting and dispositive power over such shares but disclaim such
beneficial ownership.
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<PAGE>
7 T/3/ Advisors, Inc. indirectly through T/3/ Genpar, L.P. controls each of
T/3/ Partners, L.P., T/3/ Parallel, L.P., T/3/ Investors, L.P., and T/3/
Dutch Parallel, C.V. (collectively, the "T/3/ Entities"), which directly
own the aggregate number of shares listed above. The directors and sole
shareholders of T/3/ Advisors, Inc. are David Bonderman, James G. Coulter
and William S. Price, III. All of the individuals listed above may be
deemed to have shared voting and dispositive power over the shares which
may be deemed to be beneficially owned by T/3/ Advisors, Inc. or the T/3/
Entities, but disclaim beneficial ownership.
8 Includes shares listed above as beneficially owned by TPG Advisors III,
Inc. and T/3/ Advisors, Inc., each of which may be deemed an affiliate of
Mr. Price. Mr. Price may be deemed to have shared voting and dispositive
power over these shares but disclaims beneficial ownership.
9 Includes 50,000 shares of common stock issuable under options held by
directors and executive officers that are presently exercisable within 60
days of March 8, 2000. Also includes 16,899,612 outstanding shares that are
subject to repurchase rights that lapse over time.
58
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering, our authorized capital
stock will consist of 150,000,000 shares of common stock, $0.001 par value per
share, and 77,000,000 shares of preferred stock, $0.001 par value per share. As
of March 24, 2000, giving effect to the automatic conversion of all outstanding
preferred stock into common stock upon the closing of this offering, there were
outstanding 109,795,256 shares of common stock held of record by approximately
100 stockholders. An additional shares of common stock will be issued on
the closing of this offering to the holders of convertible subordinated
promissory notes that convert into common stock upon closing of this offering.
Following the closing of this offering, we intend to amend and restate our
certificate of incorporation. Our amended and restated certificate of
incorporation, as we propose to file it, and bylaws, described below, are
included as exhibits to the registration statement of which this prospectus
forms a part.
Common Stock
Dividend Rights. Subject to preferences that may apply to shares of
preferred stock outstanding at the time, the holders of outstanding shares of
common stock are entitled to receive dividends out of assets legally available
at the times and in the amounts as the board of directors may from time to time
determine.
Voting Rights. Each holder of common stock is entitled to one vote for each
share of common stock held on all matters submitted to a vote of stockholders.
Cumulative voting for the election of directors is not provided for in our
certificate of incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election.
No preemptive or similar rights. The common stock is not entitled to
preemptive rights and is not subject to conversion or redemption.
Right to receive liquidation distributions. Upon a liquidation, dissolution
or winding-up of DoveBid, the assets legally available for distribution to
stockholders are distributable ratably among the holders of the common stock
and any preferred stock outstanding at that time after payment of liquidation
preferences, if any, on any outstanding preferred stock.
Preferred Stock
Upon the closing of this offering, each outstanding share of preferred stock
will be converted into shares of common stock.
Following the offering, we will be authorized, subject to limitations
prescribed by Delaware law, to issue preferred stock in one or more series, to
establish from time to time the number of shares to be included in each series,
to fix the rights, preferences and privileges of the shares of each wholly
unissued series and any of its qualifications, limitations or restrictions. The
board can also increase or decrease the number of shares of any series, but not
below the number of shares of such series then outstanding, without any further
vote or action by the stockholders. The board may authorize the issuance of
preferred stock with voting or conversion rights that could adversely affect
the voting power or other rights of the holders of the common stock. The
issuance of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
have the effect of delaying, deferring or preventing a change in control of
DoveBid and may adversely affect the market price of the common stock and the
voting and other rights of the holders of common stock. We have no current plan
to issue any shares of preferred stock.
Warrants
In connection with its purchase of shares of our Series C preferred stock,
we issued to Yahoo! a warrant exercisable to purchase a total of 1,405,000
shares of our Series C preferred stock at an exercise price, subject to certain
adjustments, of $2.67 per share. Following the closing of this offering, the
warrants will
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automatically become exercisable for the same number of shares of common stock
at the same exercise price per share. Yahoo! may exercise such warrant by means
of either a cash payment in an amount equal to the exercise price or a net
issue exercise whereby Yahoo! would receive shares equal to the value of the
warrant, as calculated pursuant to the terms set forth therein. The warrant
expires upon the earlier to occur of March 8, 2004 or the termination of our
advertising and promotion agreement with Yahoo! upon the occurrence of certain
events.
Registration Rights
As a result of investors' rights agreements entered into in connection with
the sales of our preferred stock, the holders of approximately 70,309,145
shares of common stock will be entitled to rights with respect to the
registration of these shares under the Securities Act of 1933, as described
below.
Demand Registration Rights. At any time beginning six months after the
completion of this offering, the holders of at least 20% of the shares of
common stock issued upon conversion of our preferred stock can request that we
register all or a portion of our shares. We will only be required to file two
registration statements in response to their demand registration rights. We may
postpone the filing of a registration statement for up to 120 days once in a 12
month period if we determine that the filing would be seriously detrimental to
us or our stockholders.
Piggyback Registration Rights. If we register any securities for public
sale, the holders of the shares of common stock issued upon conversion of our
preferred stock will have the right to include their shares in the registration
statement. However, this right does not apply to a registration relating to any
of our employee benefit plans or a corporate reorganization. The managing
underwriter of any underwritten offering will have the right to limit the
number of shares registered by these holders to 30% of the total shares covered
by the registration statement due to marketing reasons.
Form S-3 Registration Rights. The holders of the shares of common stock
issued upon conversion of our preferred stock can request that we register
their shares if we are eligible to file a registration statement on Form S-3
and if the aggregate price of the shares offered to the public is at least $1.0
million. The holders may only require us to file two registration statements on
Form S-3 per calendar year.
We will pay all expenses incurred in connection with the registrations
described above, except for underwriters' and brokers' discounts and
commissions, which will be paid by the selling stockholders.
The registration rights described above will expire with respect to a
particular stockholder if at such date he, she or it can sell all of its shares
in a three-month period under Rule 144 of the Securities Act of 1933 (the
"Securities Act"). In any event, the registration rights described above will
expire five years after this offering is completed.
All holders of these registration rights have signed agreements with the
underwriters prohibiting the exercise of these registration rights for 180 days
following the date of this prospectus.
Anti-Takeover Provisions
The provisions of Delaware law, our certificate of incorporation and bylaws
may have the effect of delaying, deferring or discouraging another person from
acquiring control of our company.
Delaware Law
We will be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents some
Delaware corporations from engaging, under some circumstances, in a "business
combination," which includes a merger or sale of more than 10% of the
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corporation's assets with any "interested stockholder," meaning a stockholder
who owns 15% or more of the corporation's outstanding voting stock, as well as
affiliates and associates of the stockholder, for three years following the
date that the stockholder became an "interested stockholder" unless:
. the transaction is approved by the board of directors prior to the date
the "interested stockholder" attained that status;
. upon consummation of the transaction that resulted in the stockholder's
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced; or
. on or subsequent to such date the "business combination" is approved by
the board and authorized at an annual or special meeting of stockholders
by at least two-thirds of the outstanding voting stock that is not owned
by the "interested stockholder."
A Delaware corporation may "opt out" of this provision with an express
provision in its original certificate of incorporation or an express provision
in its certificate or incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares. We
have not "opted out" of this provision. The statute could prohibit or delay
mergers or other takeover or change-in-control attempts and, accordingly, may
discourage attempts to acquire us.
Charter and Bylaw Provisions
Our certificate of incorporation and bylaws provide that:
. following the completion of this offering, no action shall be taken by
stockholders except at an annual or special meeting of the stockholders
called in accordance with our bylaws and that stockholders may not act
by written consent;
. following the completion of this offering, the approval of two-thirds of
the stockholders shall be required to adopt, amend or repeal our bylaws;
. stockholders may not call special meetings of the stockholders or fill
vacancies on the board;
. upon the completion of this offering , our board of directors will be
divided into three classes, each serving staggered three-year terms,
which means that only one class of directors will be elected at each
annual meeting of stockholders, with the other classes continuing for
the remainder of their respective terms; and
. we will indemnify officers and directors against losses that they may
incur in investigations and legal proceedings resulting from their
services to us, which may include services in connection with takeover
defense measures.
These provisions of our certificate of incorporation and bylaws may have the
effect of delaying, deferring or discouraging another person from acquiring
control of our company.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services LLC.
Listing
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the trading symbol "DOVE."
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SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of common stock, including shares issued upon
exercise of outstanding warrants or options, in the public market after this
offering could adversely affect market prices prevailing from time to time and
could impair our ability to raise capital through sale of equity securities.
Furthermore, as described below, no shares currently outstanding will be
available for sale immediately after this offering due to certain contractual
restrictions on resale. Sales of substantial amounts of our common stock in the
public market after these restrictions lapse could adversely affect the
prevailing market price and our ability to raise equity capital in the future.
All of the shares of common stock being sold in this offering will be freely
tradeable without restriction or further registration under the Securities Act,
except for shares held by our "affiliates," as defined in Rule 144 under the
Securities Act, which may generally only be sold in compliance with the
limitations of Rule 144, described below. The remaining 109,795,256 shares were
issued and sold by us in private transactions and are deemed restricted
securities under Rule 144. These shares may be sold in the public market only
if registered under the Securities Act or if exempt from registration under
Rules 144, 144(k) or 701 under the Securities Act, which rules are summarized
below. All of these remaining shares will be available for sale under Rules 144
and 701 upon the expiration of agreements between our stockholders and the
underwriters at varying dates beginning 180 days after the date of this
prospectus. Of these shares, approximately 46,196,963 will then be eligible for
immediate resale, although approximately 43,896,097 of these shares will be
subject to the volume limitations of Rule 144. The remaining shares will become
eligible for resale beginning after 180 days from the date of this prospectus
at various times as repurchase restrictions and Rule 144 holding periods lapse.
In addition, the shares of common stock that will be issued upon the
automatic conversion of $19.6 million of convertible subordinated notes issued
in connection with acquisitions completed between December 1999 and March 27,
2000, and additional shares issued in an acquisition, will become
eligible for resale between December 2000 and March 27, 2001 pursuant to Rule
144.
Lock-Up Agreements. All of our officers and directors and all of our
stockholders have signed lock-up agreements under which they agreed not to
sell, transfer or dispose of, directly or indirectly, any shares of common
stock or any securities convertible into or exercisable or exchangeable for
shares of common stock without the prior consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus.
Rule 144. In general, under Rule 144 as currently in effect, beginning 90
days after the date of this prospectus a person or persons whose shares are
aggregated, who has beneficially owned restricted shares of our common stock
for at least one year, including the holding period of any prior owner except
an affiliate of ours, would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:
. 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering; or
. the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale.
Sales under Rule 144 are also subject to manner-of-sale provisions and
notice requirements and to the availability of current public information about
us.
Rule 144(k). Under Rule 144(k), a person who has not been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner except an affiliate of ours, is
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
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Rule 701. In general, under Rule 701 of the Securities Act as currently in
effect, any of our employees, consultants or advisors, other than affiliates,
who purchased his or her shares from us under a written compensatory stock
purchase plan or option plan or other written agreement may be eligible to sell
their shares beginning 90 days after the date of this prospectus, subject to
the manner of sale provisions of Rule 144. Affiliates who purchase or receive
shares from us in connection with a compensatory stock purchase plan or option
plan or other written agreement will be eligible to sell their shares beginning
90 days after the date of this prospectus under Rule 701 without compliance
with the Rule 144 holding period requirements. However, all shares issued under
Rule 701 are subject to lock-up agreements and will only become eligible for
sale when the 180-day lock-up agreements expire.
Registration Rights. On the date 180 days after the date of this prospectus,
the holders of 70,309,145 shares of common stock, or their transferees, will be
entitled to certain rights with respect to the registration of those shares
under the Securities Act. See "Description of Capital Stock--Registration
Rights." After these shares are registered, they will be freely tradable
without restriction under the Securities Act.
Stock Options. Immediately after this offering, we intend to file a
registration statement under the Securities Act covering shares of common stock
reserved for issuance under our stock option and employee stock purchase plans.
As of March 24, 2000, options to purchase 9,446,999 shares of common stock were
issued and outstanding. Upon the expiration of the lock-up agreements described
above, at least 1,537,220 shares of common stock will be subject to vested
options, based on the number of options outstanding as of March 24, 2000. This
registration statement is expected to be filed and become effective as soon as
practicable after the effective date of this offering. Accordingly, shares
registered under this registration statement will, subject to vesting
provisions and Rule 144 volume limitations applicable to our affiliates, be
available for sale in the open market immediately after the 180-day lock up
agreements expire.
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Thomas Weisel
Partners LLC and U.S. Bancorp Piper Jaffray Inc. are acting as representatives,
the following respective number of shares of common stock:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation.............................
Thomas Weisel Partners LLC.........................................
U.S. Bancorp Piper Jaffray Inc.....................................
Total............................................................
=====
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in this offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or this
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares from us at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-Allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts
and Commissions
paid by us.............. $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except
issuances pursuant to the exercise of employee stock options outstanding on the
date hereof or pursuant to our dividend reinvestment plan.
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Our officers, directors, stockholders and option holders have agreed that
they will not offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares of our common
stock, enter into a transaction which would have the same effect, or enter into
any swap, hedge or other arrangement that transfers, in whole or in part, any
of the economic consequences of ownership of our common stock, whether any such
aforementioned transaction is to be settled by delivery of our common stock or
such other securities, in cash or otherwise, or publicly disclose the intention
to make any such offer, sale, pledge or disposition, or to enter into any such
transaction, swap, hedge or other arrangement, without, in each case, the prior
written consent of Credit Suisse First Boston Corporation for a period of 180
days after the date of this prospectus.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and
certain other persons associated with us who have expressed an interest in
purchasing common stock in this offering. The number of shares available for
sale to the general public in this offering will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased
will be offered by the underwriters to the general public on the same terms as
the other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act or contribute to payments which the underwriters may be required
to make in that respect.
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "DOVE."
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the underwriters. The principal factors that will be considered
in determining the public offering price include:
. the information set forth in this prospectus and otherwise available to
the underwriters;
. the history and the prospects for the industry in which we will compete;
. the ability of our management;
. the prospects for our future earnings;
. the present state of our development and our current financial
condition;
. the general condition of the securities markets at the time of this
offering; and
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
The representatives may engage in overallotment, stabilizing transactions,
syndicate covering transactions, penalty bids and passive market making in
accordance with Regulation M under the Securities Exchange Act of 1934 (the
"Exchange Act").
. Overallotment involves syndicate sales in excess of this offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions.
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. In "passive" market making, market makers in the common stock who are
underwriters or prospective underwriters may, subject to limitations,
make bids for or purchases of common stock until the time, if any, at
which a stabilizing bid is made.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners has been named as a lead or co-manager on
135 filed public offerings of equity securities, of which 101 have been
completed, and has acted as a syndicate member in an additional 73 public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with
us pursuant to the underwriting agreement entered into in connection with this
offering.
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.
LEGAL MATTERS
Fenwick & West LLP, Palo Alto, California, will pass upon the validity of
the issuance of the shares of common stock offered by this prospectus for
DoveBid. Davis Polk & Wardwell, Menlo Park, California, will pass upon certain
legal matters in connection with this offering for the underwriters. As of the
date of this prospectus F&W Investments 1999, an investment partnership
comprised of partners of Fenwick & West LLP, holds 187,266 shares of our common
stock.
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EXPERTS
The consolidated financial statements of DoveBid, Inc., and subsidiary at
December 31, 1998 and 1999, and for each of the three years in the period ended
December 31, 1999, appearing in this prospectus and registration statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
The statements of operations and cash flows of B&B Custom Circuit Supplies,
Inc. for each of the three years in the period ended June 30, 1999, appearing
in this prospectus and registration statement have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
The statements of operations and cash flows of Unidyne International Inc.
for the years ended December 31, 1997 and 1998 and for the period January 1,
1999 through December 30, 1999, appearing in this prospectus and registration
statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
The combined financial statements of AccuVal Associates, Incorporated and
LiquiTec Industries, Incorporated at December 31, 1998 and 1999, and for the
years then ended, appearing in this prospectus and registration statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
The financial statements of Greenwich Industrial Services, LLC at December
31, 1998 and 1999, and for the years then ended, appearing in this prospectus
and registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given on the authority of such firm
as experts in accounting and auditing.
The financial statements of Haltek Electronics dba Test Lab at June 30 1999
and December 31, 1999, and for the year ended June 30, 1999 and for the six
months ended December 31, 1999, appearing in this prospectus and registration
statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
The financial statements of Philip Pollack & Co., Inc. at February 28, 1998,
February 28, 1999 and December 31, 1999, and for each of the two years in the
period ended February 28, 1999 and for the ten months ended December 31, 1999,
appearing in this prospectus and registration statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Norman Levy Associates, Inc. and
subsidiaries at April 30, 1998 and 1999 and for each of the two years in the
period ended April 30, 1999, appearing in this prospectus and registration
statement have been audited by Grant Thornton LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act of 1933 with respect to the
shares of common stock offered under this prospectus. This prospectus, which
constitutes a part of the registration statement, does not contain all of the
information set forth in the registration statement, some items of which are
contained in exhibits to the registration statement as permitted by the rules
and regulations of the Commission. For further information with respect to
DoveBid, Inc. and the common stock we are offering, reference is made to the
registration statement, including the exhibits and the financial statements and
notes filed as a part of the registration statement. Statements contained in
this prospectus concerning the contents of any contract or any other document
referred to may be only summaries of these documents. The exhibits to this
registration statement should be referenced for the complete contents of these
contracts and documents. A copy of the registration statement, including the
exhibits and the financial statements and notes filed as a part of it, may be
inspected without charge at the public reference facilities maintained by the
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of all or any part of the registration statement may be obtained from
the Commission upon the payment of fees prescribed by it. You may call the
Commission at 1-800-SEC-0330 for more information on the operation of the
public reference facilities. The Commission maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding companies that file electronically with it.
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act and, in accordance with
this law, will file periodic reports, proxy statements and other information
with the Commission. These periodic reports, proxy statements and other
information will be available for inspection and copying at the Commission's
public room and the web site of the SEC referred to above.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Dovebid, Inc. Unaudited Pro Forma Consolidated Financial Information
Overview.............................................................. F-3
Unaudited Pro Forma Consolidated Balance Sheet........................ F-5
Unaudited Pro Forma Consolidated Statement of Operations ............. F-6
Notes to Unaudited Pro Forma Consolidated Financial Information....... F-7
DoveBid, Inc. Consolidated Financial Statements
Report of Independent Auditors........................................ F-8
Consolidated Balance Sheets........................................... F-9
Consolidated Statements of Operations................................. F-10
Consolidated Statements of Changes in Convertible Preferred Stock and
Changes in Shareholders' Equity (Deficit)............................ F-11
Consolidated Statements of Cash Flows................................. F-12
Notes to Consolidated Financial Statements............................ F-13
B&B Custom Circuit Supplies, Inc. Financial Statements
Report of Independent Auditors........................................ F-28
Statements of Operations.............................................. F-29
Statements of Cash Flows.............................................. F-30
Notes to Financial Statements......................................... F-31
Unidyne International, Inc. Financial Statements
Report of Independent Auditors........................................ F-32
Statements of Operations.............................................. F-33
Statements of Cash Flows.............................................. F-34
Notes to Financial Statements......................................... F-35
AccuVal Associates, Incorporated and LiquiTec Industries, Incorporated
Combined Financial Statements
Report of Independent Auditors........................................ F-36
Combined Balance Sheets............................................... F-37
Combined Statements of Income and Retained Earnings................... F-38
Combined Statements of Cash Flows..................................... F-39
Notes to Combined Financial Statements................................ F-40
Greenwich Industrial Services, LLC Financial Statements
Report of Independent Auditors........................................ F-43
Balance Sheets........................................................ F-44
Statements of Operations and Members' Equity.......................... F-45
Statements of Cash Flows.............................................. F-46
Notes to Financial Statements......................................... F-47
Haltek Electronics dba Test Lab Financial Statements
Report of Independent Auditors........................................ F-51
Balance Sheets........................................................ F-52
Statements of Operations.............................................. F-53
Statements of Shareholders' Equity.................................... F-54
Statements of Cash Flows.............................................. F-55
Notes to Financial Statements......................................... F-56
Philip Pollack & Co. Inc. Financial Statements
Report of Independent Auditors........................................ F-59
Balance Sheets........................................................ F-60
Statements of Income and Retained Earnings............................ F-61
Statements of Cash Flows.............................................. F-62
Notes to Financial Statements......................................... F-63
</TABLE>
F-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<S> <C>
Norman Levy Associates, Inc. Consolidated Financial Statements
Report of Independent Certified Public Accountants..................... F-66
Consolidated Balance Sheets............................................ F-67
Consolidated Statements of Operations and Retained Earnings............ F-68
Consolidated Statements of Cash Flows.................................. F-69
Notes to Consolidated Financial Statements............................. F-70
</TABLE>
F-2
<PAGE>
DOVEBID, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Overview
The following unaudited pro forma financial information has been prepared to
give effect to the business acquisitions described below. These transactions
were accounted for using the purchase method of accounting.
The unaudited pro forma consolidated balance sheet presents the Company's
consolidated balance sheet as of December 31, 1999 which reflects the
acquisition of B&B Custom Circuit Supplies, Inc. and Unidyne International,
Inc. because such transactions occurred on December 30, 1999. The unaudited pro
forma consolidated balance sheet also gives effect to the acquisitions of
AccuVal Accociates, Incorporated and LiquiTec Industries, Incorporated,
Greenwich Industrial Services, LLC, Haltek Electronics dba Test Lab, Philip
Pollack & Co. and Norman Levy Associates, Inc. as if such acquisitions occurred
on December 31, 1999. Intangibles and goodwill in these pro forma financial
statements are based on amounts as of December 31, 1999 which will differ from
amounts calculated as of the actual acquisition date.
The unaudited pro forma consolidated balance sheet also gives effect to the
sale of the Series C convertible preferred stock as if such sale occurred on
December 31, 1999.
The unaudited pro forma consolidated statement of operations presents the
Company's consolidated statement of operations for the year ended December 31,
1999 giving effect to the acquisitions described above as if such acquisitions
had occurred on January 1, 1999. The Company's statement of operations for the
year ended December 31, 1999 is combined with the results of operations of the
acquired companies for the same reporting period for all acquisitions except
B&B Custom Circuit Supplies, Inc. The statement of operations for B&B Custom
Circuit Supplies, Inc. reflects the twelve months ended June 30, 1999 because
it was impractical to adjust its operations to the year ended December 31,
1999.
On December 30, 1999, the Company acquired the businesses of two San Jose,
California based printed circuit board equipment dealers, B&B Custom Circuit
Supplies, Inc. ("B&B") and Unidyne International, Inc. (Unidyne), for $3.25
million each. The consideration paid in each transaction consisted of $1.75
million in cash, $500,000 in retained obligation (as a reserve for seller
warranties) and $1.0 million in convertible subordinated promissory notes. In
connection with each of these acquisitions, the Company recorded approximately
$2.0 million of goodwill and other intangible assets. For the year ended
December 31, 1999, B&B and Unidyne recorded revenues of $1.9 million and $1.3
million, respectively.
On February 29, 2000, the Company acquired all of the outstanding stock of a
Branford, Connecticut based auctioneer and appraiser of used capital assets,
Greenwich Industrial Services, LLC ("Greenwich"), for $6.25 million. The
consideration paid consisted of $3.25 million in cash, $2.0 million of
convertible subordinated promissory notes, and a $1.0 million cash earn-out. In
connection with this acquisition, the Company recorded approximately $3.5
million of goodwill and other intangible assets. For the year ended December
31, 1999, Greenwich recorded revenues of $7.8 million.
On March 3, 2000, the Company acquired all of the outstanding stock of two
affiliated Mequon, Wisconsin based companies, an appraiser, AccuVal Associates,
Inc. ("AccuVal"), and an auctioneer, Liquitec Industries, Incorporated
(Liquitec), for a total of $5.5 million. The consideration paid consisted of
$1.65 million in cash, $2.85 million in convertible subordinated promissory
notes and $1.0 million in subordinated promissory notes. The subordinated
promissory notes have principal payments of $500,000 due March 3, 2001 and
payments of $500,000 plus all accrued interest due March 3, 2002. In connection
with the acquisition, the Company recorded approximately $3.7 million of
goodwill and other intangible assets. For the year ended December 31, 1999,
AccuVal and Liquitec recorded revenues of $3.7 million.
F-3
<PAGE>
On March 3, 2000, the Company acquired all of the outstanding stock of a
Chicago, Illinois based auctioneer and appraiser of used capital assets, Philip
Pollack & Company, Inc. ("Pollack"), for $4.3 million. The consideration paid
consisted of $1.1 million in cash, $442,000 in deferred cash (as a reserve for
seller warranties) and $2.75 million in convertible subordinated promissory
notes. In connection with the acquisition, the Company recorded approximately
$3.7 million of goodwill and other intangible assets. For the ten months ended
December 31, 1999, Pollack recorded revenues of $1.7 million.
On March 3, 2000, the Company acquired all of the outstanding stock of a
Mountain View, California based electric test and measurement dealer, Haltek
Electronics dba Test Lab Company ("Test Lab"), for $6.75 million in cash and
$250,000 in deferred cash (as a reserve for seller warranties). In connection
with the acquisition, the Company recorded approximately $3.8 million of
goodwill and other intangible assets. For the year ended December 31, 1999,
Test Lab recorded revenues of $7.4 million.
On March 24, 2000, the Company acquired all of the outstanding stock of a
Detroit, Michigan based auctioneer and appraiser of assets, Norman Levy
Associates, Inc. ("Levy"), for $27.8 million. The consideration paid consisted
of $17.55 million in cash, $250,000 in deferred cash and $10.0 million in
convertible subordinated promissory notes. In connection with the acquisition,
the Company recorded approximately $24.5 million of goodwill and other
intangible assets. For the year ended December 31, 1999, Levy recorded revenues
of $10.7 million. Additionally, the Company plans to acquire a related entity
for total consideration of approximately $500,000. This related entity is
excluded from the pro forma financial information as it is insignificant.
On March 27, 2000, the Company acquired all of the outstanding stock of a
Mountain View, California based software development company, One Web Place,
Inc. ("OWP") for an aggregate of 833,333 shares of common stock that will be
issued in the transaction or subject to options the Company assumes in the
transaction. OWP is excluded from the pro forma financial information as it is
insignificant for the purpose of this presentation.
Each of the transactions described above has been accounted for as a
purchase. The convertible subordinated promissory notes issued in these
transactions convert into Company common stock automatically upon consummation
of an initial public offering at a conversion rate equal to the mid-point of
the offering range set forth on the final registration statement except for the
convertible subordinated promissory notes issued in connection with the Levy
transaction, which convert at $10.50.
The unaudited pro forma consolidated statement of operations is not
necessarily indicative of the operating results that would have been achieved
had the transactions been in effect as of the beginning of the period presented
and should not be construed as being representative of future operating
results.
The audited historical financial statements of the Company, B&B, Unidyne,
AccuVal, Greenwich, Test Lab, Pollack and Levy are included elsewhere in this
Prospectus and the unaudited pro forma financial information presented herein
should be read in conjunction with those financial statements and related
notes.
F-4
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Test Pro Forma Pro
DoveBid AccuVal Greenwich Lab Pollack Levy Adjustments Forma
------- ------- --------- ------ ------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........... $ 6,969 $ 667 $ 768 $ 449 $ 19 $ 2,661 $(30,300) (A) $ 80,733
99,500 (B)
Cash in trust.......... 2,563 -- 46 -- -- 3,935 -- 6,544
Accounts receivable,
net................... 1,110 373 307 1,427 169 920 -- 4,306
Inventory.............. 2,584 -- 139 2,762 -- -- 13,000 (B) 18,485
Prepaid expenses and
other current
assets................ 294 25 44 8 164 2,088 -- 2,623
------- ------ ------ ------ ---- ------- -------- --------
Total current
assets.............. 13,520 1,065 1,304 4,646 352 9,604 82,200 112,691
Property and Equipment,
net.................... 829 566 401 196 52 723 -- 2,767
Intangible assets
including goodwill,
net.................... 4,039 -- -- -- -- -- 41,311 (A) 44,996
(354) (C) --
Other assets............ 544 -- -- 52 563 56 -- 1,215
Deferred tax asset...... -- -- -- 35 -- -- -- 35
------- ------ ------ ------ ---- ------- -------- --------
Total assets......... $18,932 $1,631 $1,705 $4,929 $967 $10,383 $123,157 $161,704
======= ====== ====== ====== ==== ======= ======== ========
Liabilities and
stockholders' equity
(deficit)
Current liabilities:
Accounts payable and
accrued expenses...... $ 2,529 $ 346 $ 157 $1,287 $477 $ 1,908 $ 3,000 (B) $ 9,704
Trust account
liability............. 2,509 -- -- -- -- 3,935 -- 6,444
Current portion of
note payable.......... 111 -- 11 347 224 853 -- 1,546
Note payable to
stockholder........... 1,000 -- -- -- -- -- -- 1,000
------- ------ ------ ------ ---- ------- -------- --------
Total current
liabilities......... 6,149 346 168 1,634 701 6,696 3,000 18,694
Long-term liabilities:
Retention obligation... 1,000 -- -- -- -- -- 942 (A) 1,942
Notes payable, net of
current portion....... 109 -- 195 517 99 374 1,000 (A) 2,294
Convertible
subordinated notes.... 2,000 -- -- -- -- -- 17,600 (A) 19,600
Deficit with investee... -- -- -- -- -- 354 (354) (C) --
------- ------ ------ ------ ---- ------- -------- --------
Total long-term
liabilities......... 3,109 -- 195 517 99 728 19,188 23,836
------- ------ ------ ------ ---- ------- -------- --------
Total liabilities.... 9,258 346 363 2,151 800 7,424 22,188 42,530
Convertible preferred
stock subject to
redemption:
Series A............... 4,035 -- -- -- -- -- -- 4,035
Series B............... 12,797 -- -- -- -- -- -- 12,797
Series C............... -- -- -- -- -- -- 109,500 (B) 109,500
------- ------ ------ ------ ---- ------- -------- --------
Total convertible
preferred stock
subject to
redemption.......... 16,832 -- -- -- -- -- 109,500 126,332
Stockholders' equity
(deficit)
Common stock........... 34 20 1,342 40 1 1 (1,404) (A) 34
Additional paid in
capital............... 2,966 -- -- -- -- -- -- 2,966
Deferred stock
compensation.......... (2,378) -- -- -- -- -- -- (2,378)
Notes receivable from
stockholders.......... (1,856) -- -- -- -- -- -- (1,856)
Accumulated earnings
(deficit)............. (5,924) 1,265 -- 2,738 166 2,958 (7,127) (A) (5,924)
------- ------ ------ ------ ---- ------- -------- --------
Total stockholders'
equity (deficit).... (7,158) 1,285 1,342 2,778 167 2,959 (8,531) (A) (7,158)
------- ------ ------ ------ ---- ------- -------- --------
Total liabilities and
stockholders' equity
(deficit)........... $18,932 $1,631 $1,705 $4,929 $967 $10,383 $123,157 $161,704
======= ====== ====== ====== ==== ======= ======== ========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
DOVEBID, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1999
(in thousands, except share and per share amount)
<TABLE>
<CAPTION>
Pro Forma
DoveBid B&B Unidyne Accu Val Greenwich Test Lab Pollack Levy Adjustments Pro Forma
---------- ------ ------- -------- --------- -------- ------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............ $ 12,404 $1,920 $1,275 $3,668 $7,833 $7,400 $1,729 $10,705 $ -- $ 46,934
Operating expenses:
Direct auction
costs............ 5,788 654 533 590 5,876 4,827 563 3,352 -- 22,183
Sales and
marketing........ 2,271 -- -- -- -- 101 -- 2,737 -- 5,109
General and
administrative... 8,196 1,209 653 2,169 1,187 1,572 1,286 3,369 -- 19,641
Depreciation and
amortization..... 138 36 -- 203 25 20 13 236 3,893 (1) 4,564
Amortization of
deferred stock
compensation..... 51 -- -- -- -- -- -- -- -- 51
---------- ------ ------ ------ ------ ------ ------ ------- ------- ----------
Total operating
expenses........ 16,444 1,899 1,186 2,962 7,088 6,520 1,862 9,694 3,893 51,548
---------- ------ ------ ------ ------ ------ ------ ------- ------- ----------
Income (loss) from
operations......... (4,040) 21 89 706 745 880 (133) 1,011 (3,893) (4,614)
Interest and other
income, net........ 229 (6) -- 17 89 6 18 548 -- 901
Interest expense.... (61) -- -- -- (44) (89) (21) (239) (1,361)(2) (1,815)
---------- ------ ------ ------ ------ ------ ------ ------- ------- ----------
Net income (loss)
before income
taxes.............. (3,872) 15 89 723 790 797 (136) 1,320 (5,254) (5,528)
Income tax
provison........... -- -- -- -- -- (318) 41 -- 277 (3) --
---------- ------ ------ ------ ------ ------ ------ ------- ------- ----------
(3,872) 15 89 723 790 479 (95) 1,320 (4,977) (5,528)
Preferred stock
accretion.......... (369) -- -- -- -- -- -- -- -- (369)
---------- ------ ------ ------ ------ ------ ------ ------- ------- ----------
Net income (loss)
attributable to
common
stockholders....... $ (4,241) $ 15 $ 89 $ 723 $ 790 $ 479 $ (95) 1,320 $(4,977) $ (5,897)
========== ====== ====== ====== ====== ====== ====== ======= ======= ==========
Basic and diluted
net loss per share
applicable to
common
stockholders....... $ (0.15) $ (0.21)(4)
========== ==========
Weighted average
common shares used
in the calculation
of basic and
diluted net loss
per share
applicable to
common
stockholders....... 28,402,639 28,402,639 (4)
========== ==========
</TABLE>
See notes to financial statements
F-6
<PAGE>
DOVEBID, INC.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
Pro forma adjustments giving effect to the acquisitions of AccuVal,
Greenwich, Test Lab, Pollack and Levy in the unaudited pro forma consolidated
balance sheet at December 31, 1999, reflect the following:
(A) Reflects the acquisitions of AccuVal, Greenwich, Test Lab Pollack and
Levy at December 31, 1999 in aggregate, as follows (in thousands):
<TABLE>
<S> <C>
Consideration paid and obligations assumed:
Cash................................................................ $30,300
Retention........................................................... 942
Convertible subordinated notes issued............................... 17,600
Promissory notes issued............................................. 1,000
-------
Total purchase price................................................. $49,842
=======
</TABLE>
<TABLE>
<S> <C> <C>
Allocation of purchase price:
Total purchase price....................................... $49,842
Net assets at predecessor
basis carried over are:
Assets................................................... $19,615
Liabilities.............................................. 11,084 (8,531)
------- -------
Excess assumed to be allocated to intangibles and goodwill.. $41,311
=======
</TABLE>
Pro forma intangibles and goodwill are based on amounts which were
calculated as of December 31, 1999 which will differ from amounts calculated as
of the actual acquisition date.
(B) Reflects the sale of Series C convertible preferred stock as if such
sale occurred on December 31, 1999. The company sold 41,011,242 shares at $2.67
per share and received cash proceeds of $99,500,000 and inventory valued at
$10,000,000 in February and March 2000. As part of this transaction, the
Company also purchased $3,000,000 of inventory, for which payment is due prior
to March 31, 2000.
(C) Reflects the elimination of 50% investment interest in Levy/Latham
L.L.C., of $354,000 which was not acquired by the Company.
Pro forma adjustments giving effect to the acquisitions of B&B, Unidyne,
AccuVal, Greenwich, Test Lab, Pollack and Levy in the unaudited pro forma
consolidated statement of operations for the year ended December 31, 1999,
reflect the following:
(1) Amortization of goodwill and other intangible assets totaling
$3,893,000: B&B ($252,000), Unidyne ($252,000), AccuVal ($435,000),
Greenwich ($392,000), Test Lab ($424,000), Pollack ($415,000) and Levy
($1,723,000). Goodwill is being amortized over twelve to fifteen years
and intangible assets other than goodwill are being amortized over four
years.
(2) Increase in interest expense related to interest payable on convertible
subordinated notes issued totaling $19,600,000 and promissory notes
totaling $1,000,000 at annual rates from 5.74% to 7.0%; issued in
connection with the acquisitions of B&B ($1,000,000), Unidyne
($1,000,000), AccuVal ($3,850,000, which includes promissory notes of
$1,000,000), Greenwich ($2,000,000), Pollack ($2,750,000) and Levy
($10,000,000).
(3) Reduction in tax expense is a result of the net operating loss
carryforwards of the Company.
(4) The cash portion of the purchase price consideration relating to the
acquisitions of B&B, Unidyne, AccuVal, Greenwich, Test Lab, Pollack and
Levy is assumed to be derived from the sale of Series A, B and C
convertible preferred stock as of the beginning of the period
presented. As the shares relating to these offerings are antidilutive
at December 31, 1999, such shares are not included in the calculation
of pro forma basic and diluted net loss per share applicable to common
stockholders.
F-7
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
DoveBid, Inc.
We have audited the accompanying consolidated balance sheets of DoveBid,
Inc. and subsidiary as of December 31, 1998 and 1999, and the related
consolidated statements of operations, changes in convertible preferred stock
and changes in stockholders' equity (deficit), and cash flows for each of the
three years in the period ended December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of DoveBid,
Inc. and subsidiary at December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ ERNST & YOUNG LLP
January 28, 2000 except as to Note 11,
as to which the date is March 27, 2000
San Francisco, California
F-8
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Proforma
Liabilities and
Stockholders'
December 31, equity (deficit)
---------------- at December 31,
1998 1999 1999
------- ------- ----------------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents................. $ 229 $ 6,969
Cash in trust............................. 3,514 2,563
Accounts receivable, less allowance of $26
in 1998 and $43 in 1999.................. 285 1,110
Inventory................................. -- 2,584
Prepaid expenses.......................... 116 294
------- -------
Total current assets.................... 4,144 13,520
------- -------
Property and equipment, net................. 169 829
Intangible assets including goodwill, net... -- 4,039
Other assets................................ 38 544
------- -------
Total assets............................ $ 4,351 $18,932
======= =======
Liabilities and stockholders' equity
(deficit)
Current liabilities:
Accounts payable and accrued expenses..... $ 1,666 $ 2,529 $ 2,529
Trust account liability................... 3,506 2,509 2,509
Advances from affiliate................... 268 -- --
Current portion of note payable........... 111 111 111
Note payable to shareholder............... -- 1,000 1,000
------- ------- -------
Total current liabilities............... 5,551 6,149 6,149
Long-term liabilities:
Retention obligation...................... -- 1,000 1,000
Note payable, net of current portion...... 235 109 109
Convertible subordinated notes............ -- 2,000 --
------- ------- -------
Total long-term liabilities............. 235 3,109 1,109
------- ------- -------
Total liabilities....................... 5,786 9,258 7,258
Convertible preferred stock subject to
redemption:
Series A, $0.001 par value 12,500,000
shares authorized, 12,480,468 issued and
outstanding, aggregate liquidation
preference of $4,118,554 as of December
31, 1999................................. -- 4,035 --
Series B, $0.001 par value 17,500,000
shares authorized, 16,817,434 issued and
outstanding, aggregate liquidation
preference of $12,949,424 as of December
31, 1999................................. -- 12,797 --
------- ------- -------
Total convertible preferred stock
subject to redemption.................. -- 16,832 --
Stockholders' equity (deficit):
Members' equity (deficit)................. (1,435) -- --
Common stock, par value $0.001, 70,000,000
shares authorized, 33,877,705 issued and
outstanding at December 31, 1999;
63,607,359 proforma shares outstanding... -- 34 64
Additional paid-in capital................ -- 2,966 21,768
Deferred stock compensation............... -- (2,378) (2,378)
Notes receivable from stockholders........ -- (1,856) (1,856)
Accumulated deficit....................... -- (5,924) (5,924)
------- ------- -------
Total stockholders' equity (deficit).... (1,435) (7,158) 11,674
------- ------- -------
Total liabilities and stockholders'
equity (deficit)....................... $ 4,351 $18,932 $18,932
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenues............................... $ 13,679 $ 10,801 $ 12,404
Operating expenses:
Direct auction costs................. 7,004 5,679 5,788
Sales and marketing.................. 1,195 1,079 2,271
General and administrative........... 5,321 4,787 8,196
Depreciation and amortization........ 204 188 138
Amortization of deferred stock
compensation........................ -- -- 51
Impairment of goodwill............... 9,751 -- --
----------- ----------- -----------
Total operating expenses........... 23,475 11,733 16,444
----------- ----------- -----------
Loss from operations................... (9,796) (932) (4,040)
Interest and other income, net......... 86 121 229
Interest expense....................... (48) (56) (61)
----------- ----------- -----------
Net loss............................... (9,758) (867) (3,872)
Preferred stock accretion.............. -- -- (369)
----------- ----------- -----------
Net loss attributable to common
stockholders.......................... $ (9,758) $ (867) $ (4,241)
=========== =========== ===========
Basic and diluted net loss per common
share (Note 2) ....................... $ (0.34) $ (0.03) $ (0.15)
=========== =========== ===========
Weighted average common shares used in
net loss per common share calculation
(Note 2) ............................. 28,987,596 28,617,578 28,402,639
=========== =========== ===========
Pro forma basic and diluted net loss
per share
(unaudited, Note 2)................... $ (0.11)
===========
Weighted average common shares used in
computing pro forma basic and diluted
net loss per share (unaudited, Note
2).................................... 38,761,430
===========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND
CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(amounts in thousands)
<TABLE>
<CAPTION>
Convertible Stockholders' Equity (deficit)
Preferred Stock --------------------------------------------------------------------------------------
Subject to Notes Total
Redemption Members' Common Stock Additional Deferred Receivable Stockholders'
---------------- Equity ------------- Paid-in Stock from Accumulated Equity
Shares Amount (Deficit) Shares Amount Capital Compensation Shareholders Deficit (Deficit)
------- -------- --------- ------ ------ ---------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31,
1996............ -- $ -- $10,950 -- $-- $ -- $ -- $ -- $ -- $10,950
Assumption of
partner debt
accounted for as
noncash
distribution.... -- -- (1,200) -- -- -- -- -- -- (1,200)
Cash
distributions... -- -- (260) -- -- -- -- -- -- (260)
Net loss........ -- -- (9,758) -- -- -- -- -- -- (9,758)
------- -------- ------- ------ --- ------ ------- ------- ------- -------
Balances at
December 31,
1997............ -- -- (268) -- -- -- -- -- -- (268)
Cash
distributions... -- -- (300) -- -- -- -- -- -- (300)
Net Loss........ -- -- (867) -- -- -- -- -- -- (867)
------- -------- ------- ------ --- ------ ------- ------- ------- -------
Balances at
December 31,
1998............ -- -- (1,435) -- -- -- -- -- -- (1,435)
Cash
distributions... -- -- (550) -- -- -- -- -- -- (550)
Net Income
through June 14,
1999............ -- -- 1,683 -- -- -- -- -- -- 1,683
Assumption of
partner debt
accounted for as
noncash
distribution.... -- -- (1,015) -- -- -- -- -- -- (1,015)
------- -------- ------- ------ --- ------ ------- ------- ------- -------
Balances at June
14, 1999........ -- -- (1,317) -- -- -- -- -- -- (1,317)
Exchange of
common stock for
members'
equity.......... -- -- 1,317 28,212 28 (1,345) -- -- -- --
Issuances of
convertible
preferred stock
Series A, net of
issuance costs.. 12,481 3,870 -- -- -- -- -- -- -- --
Issuances of
convertible
preferred stock
Series B, net of
issuance costs.. 16,817 12,593 -- -- -- -- -- -- -- --
Issuances of
common stock
upon exercise of
stock options... -- -- -- 5,625 6 1,850 -- (1,856) -- --
Issuances of
common stock.... -- -- -- 41 -- 32 -- -- -- 32
Preferred stock
accretion....... -- 369 -- -- -- -- -- -- (369) (369)
Deferred stock
compensation.... -- -- -- -- -- 2,429 (2,429) -- -- --
Amortization of
deferred stock
compensation.... -- -- -- -- -- -- 51 -- -- 51
Net loss from
June 15, 1999... -- -- -- -- -- -- -- -- (5,555) (5,555)
------- -------- ------- ------ --- ------ ------- ------- ------- -------
Balances at
December 31,
1999............ 29,298 $ 16,832 $ -- 33,878 $34 $2,966 $(2,378) $(1,856) $(5,924) $(7,158)
======= ======== ======= ====== === ====== ======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
<TABLE>
<CAPTION>
Years ended
December 31,
------------------------
1997 1998 1999
------- ------ -------
<S> <C> <C> <C>
Operating activities
Net loss........................................... $(9,758) $ (867) $(4,241)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization expense............. 256 188 138
Provision for bad debts........................... (48) (17) 17
Impairment of goodwill............................ 9,751 -- --
Amortization of deferred stock compensation....... -- -- 51
Provision for inventory losses.................... -- -- 371
Changes in operating assets and liabilities:
Cash in trust................................... (1,320) 2,438 951
Accounts receivable............................. (722) 1,228 (842)
Prepaid expenses and other assets............... 142 (103) (684)
Inventory, excluding acquisitions............... 110 -- (558)
Accounts payable and accrued expenses........... 249 (214) 863
Trust account liability......................... 1,296 (2,404) (997)
------- ------ -------
Net cash (used in) provided by operating
activities........................................ (44) 249 (4,931)
------- ------ -------
Investing activities
Purchases of property and equipment, net of
acquisitions...................................... (183) (127) (819)
Proceeds from sales of property and equipment...... 27 58 70
Acquisition of businesses, net of obligations
payable........................................... -- -- (3,500)
------- ------ -------
Net cash used in investing activities.............. (156) (69) (4,249)
------- ------ -------
Financing activities
Payments on short-term debt........................ (4,000) -- --
Proceeds (payments) on advances from affiliates.... -- 268 (268)
Payments on line of credit......................... (350) -- --
Issuance of note payable........................... 532 -- --
Payments on note payable........................... -- (186) (126)
Net proceeds from issuance of preferred stock...... -- -- 16,832
Cash distributions to members...................... (260) (300) (550)
Issuance of common stock........................... -- -- 32
------- ------ -------
Net cash (used in) provided by financing
activities........................................ (4,078) (218) 15,920
------- ------ -------
Net (decrease) increase in cash.................... (4,278) (38) 6,740
Cash and cash equivalents at beginning of year..... 4,545 267 229
------- ------ -------
Cash and cash equivalents at end of year........... $ 267 $ 229 $ 6,969
======= ====== =======
Supplemental disclosure of cash flow information
Cash paid for interest............................. $ 48 $ 56 $ 61
Supplemental disclosure of non-cash transactions
Issuance of retention obligations and convertible
subordinated notes for acquisition of businesses.. $ -- $ -- $ 3,000
Assumption of partner debt accounted for as noncash
distribution...................................... 1,200 -- 1,015
Issuances of common stock for notes receivable..... -- -- (1,856)
</TABLE>
See notes to consolidated financial statements.
F-12
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
1. Business and Organization
Business
DoveBid, Inc. (the "Company" or "DoveBid") is a business-to-business online
auctioneer focusing on the used capital assets market. The Company's auction
activities are provided through DoveBid, Inc. The Company also provides
appraisal and other related services through its wholly owned subsidiary,
DoveTech, Inc.
DoveBid has experienced net losses for 1997, 1998 and 1999 and has an
accumulated deficit at December 31, 1999. Net losses are expected for at least
the next year. In addition, the Company's business plan contemplates the need
for additional financing to fund current and future initiatives.
Organization
DoveBid succeeded to a business formed in March 1995 named Koll-Dove Global
Disposition Services, LLC ("Koll-Dove"). Koll-Dove was owned 50.1% by Koll
Management Services ("KMS") and 49.9% directly and indirectly by members of the
Dove Family including Messrs. Ross and Kirk Dove (collectively referred to
herein as the "Dove Group"). In October 1997, the Dove Group acquired KMS's
interest. This acquisition was accounted for at the partner level, and part of
the consideration included a note payable. Koll-Dove was then renamed Dove
Brothers, LLC ("Dove Brothers").
In June 1999, KMS reacquired a minority interest in Dove Brothers from the
Dove Group, and the acquisition was accounted for at the partner level.
However, as part of this transaction, Dove Brothers assumed a $1.0 million note
payable owed by the Dove Group to KMS, which has been treated in these
financial statements as a liability of Dove Brothers and a corresponding
decrease in Dove Group's equity.
In a series of reorganizations which occurred in June 1999, DoveBid, Inc.
was formed and the members of Dove Brothers exchanged their interests in Dove
Brothers for shares of stock in DoveBid, Inc. Dove Brothers then became a
subsidiary of DoveBid, Inc. Accordingly, because of the common control, the
accounts of Dove Brothers carried over to those of DoveBid, Inc. and subsidiary
at Dove Brothers' net book value. In December 1999, Dove Brothers was merged
into DoveBid, Inc.
For convenience herein, the consolidated financial statements for all
periods are referred to as those of DoveBid or the Company.
In June 1999, DoveBid began issuing its preferred stock to new investors.
2. Summary of Significant Accounting Policies
Basis of Presentation and Use of Estimates
The consolidated financial statements include DoveBid, Inc. and its wholly
owned subsidiary, DoveTech, Inc. All significant intercompany transactions and
balances have been eliminated.
The preparation of the Company's financial statements in accordance with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and the accompanying notes. These estimates are based
on information
F-13
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
available as of the date of the financial statements; therefore, actual results
could differ from those estimates, although management does not believe that
any differences would materially affect the Company's financial position or
results of operations.
Cash, Cash Equivalents and Cash in Trust
The Company generally collects the gross proceeds from an onsite auction on
behalf of the selling parties and holds such proceeds in a trust account until
the final settlement date of the auction. These amounts are classified as cash
in trust in the accompanying balance sheets. Cash in trust is excluded from
cash for purposes of presentation in the statements of cash flows.
The portion of the proceeds that must be remitted to the owner of the asset
that was sold during an auction is reflected as a trust account liability in
the accompanying balance sheets, net of the Company's commissions and expense
reimbursements that have not been disbursed from the trust account.
Concentration of Credit Risk, Credit Evaluations and Significant Customers
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash, cash equivalents, cash in trust
and accounts receivable. Cash, cash equivalents and cash in trust are deposited
with creditworthy financial institutions. The Company's unsecured accounts
receivable are derived from revenue earned from customers located in the U.S.
and throughout the world and are denominated in U.S. dollars. The Company
maintains an allowance for doubtful accounts receivable based upon the expected
collectibility. As of December 31, 1998 and 1999, the Company had no
significant concentrations of credit risk.
In 1998 and 1999, no single customer accounted for more than 10% of
revenues. One customer in 1997 accounted for revenues, exclusive of
reimbursements, of approximately $1,378,000, representing 10% of revenues. No
other single customer accounted for more than 10% of revenues in 1997.
Inventory
Inventory, consisting of used capital assets, is stated at the lower of cost
or market as determined by the first-in first-out (FIFO) method. The Company
periodically evaluates its inventory to ensure inventory is recorded at net
realizable value. During 1999, the Company provided a $542,000 allowance for
obsolete or slow moving inventory.
Property and Equipment, and Software for Internal Use
Office equipment and leasehold improvements are carried at cost.
Depreciation and amortization are computed on a straight-line basis over the
estimated useful lives of the respective assets or lease term. These useful
lives range from three to five years for office equipment and the shorter of
six years, or the remaining lease term for leasehold improvements.
The Company follows the provisions of Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," which requires the capitalization of costs incurred in
connection with developing or obtaining software for internal use. These costs
are amortized over a period of three years on a straight line basis. Internet
related and website development costs are capitalized and amortized on a
straight line basis over two to five years.
Intangible Assets
Intangible assets consist principally of the cost in excess of assets
acquired resulting from acquisitions and are being amortized on a straight-line
basis over four years for intangibles relating to covenants not to compete and
customer lists, and over one to fifteen years for goodwill.
F-14
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company assesses the carrying value and future useful life of these
assets whenever events or changes in circumstances indicate that impairment may
have occurred or that the future life has diminished. The Company considers the
future undiscounted cash flows of the acquired companies in assessing the
recoverability of these assets. If an impairment is indicated through this
review, the carrying amount of the intangible assets will be reduced to their
respective estimated fair values as determined based upon the best information
available in the circumstances. Such information likely would include a review
of comparable market prices of similar assets or businesses, if available, or
an estimate of fair value based upon the present value of estimated expected
future cash flows. Any impairment is charged to expense in the period in which
the impairment is incurred.
Revenue Recognition
Revenues from commission income from third-party auctions, less estimates
for certain allowances, are recognized upon closing of the related auction and
after resolution of any significant uncertainties as to ultimate collection of
auction proceeds. This income consists of a fee based on the auction
transaction price and other fees associated with certain costs and services.
Revenues from auctions of the Company's own inventory are recognized upon sale
and shipment of the equipment. The cost of inventory is included in direct
auction costs. Revenues from appraisal and other services are recognized when
the services are performed.
Advertising Costs
The Company recognizes advertising expenses in accordance with SOP 93-7,
"Reporting on Advertising Costs." As such, the Company expenses the costs of
producing advertisements at the time production occurs, and expenses the cost
of communicating advertising in the period in which the advertising space or
airtime is used. The Company incurred $1,911,000, $1,498,000, and $1,869,000 in
advertising costs in 1997, 1998 and 1999, respectively.
Stock-based Compensation and Consideration
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees" (APB No. 25), and complies with
the disclosure provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). Under
APB No. 25, compensation expense is based on the difference, if any, on the
date of the grant, between the estimated fair value of the Company's stock and
the exercise price.
The Company accounts for stock issued to non-employees in accordance with
the provisions of SFAS No. 123 and the Emerging Issues Task Force Consensus in
Issue No. 96-18.
Income Tax Matters
Prior to June 15, 1999, the Company operated as a limited liability company
which was treated as a partnership for federal and state income tax purposes.
As a limited liability company, the Company was subject to minimal taxes and
fees in certain states; however, income taxes on income or losses realized by
the Company were generally the obligation of the members.
From June 15, 1999, the Company accounts for income taxes in accordance with
SFAS No. 109, "Accounting for Income Taxes" ("SFAS 109"), which requires the
use of the liability method of accounting for income taxes. Under SFAS 109,
deferred tax assets and liabilities are measured based on differences between
the financial reporting and tax bases of assets and liabilities using enacted
tax rate and laws that are expected to be in effect when the differences are
expected to reverse.
F-15
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Comprehensive Income (Loss)
The Company follows the requirements of SFAS No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). Under SFAS 130, the Company is required to
display comprehensive income (loss) and its components as part of the financial
statements. Comprehensive income (loss) includes certain changes in equity that
are excluded from net income (loss). Specifically, SFAS 130 requires unrealized
holding gains and losses on available-for-sale securities to be included in
accumulated comprehensive income (loss). The Company has no material components
of comprehensive income and, accordingly, the comprehensive loss is the same as
net loss for all periods presented.
Segment Information
The Financial Accounting Standards Board (the "FASB") issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information" ("SFAS
131"), which is effective for financial statements for periods beginning after
December 15, 1997. SFAS 131 establishes standards for the way that public
business enterprises report financial and descriptive information about
reportable operating segments in annual financial statements and interim
reporting to shareholders. In adopting the provisions of SFAS 131, the Company
has determined that it has only one operating and reportable segment;
therefore, separate segment disclosure has not been made.
Net Loss Per Common Share
Basic and diluted net loss per common share information for all periods is
presented in accordance with the requirements of SFAS No. 128, "Earnings per
Share" ("FAS 128"). Basic loss per common share has been computed using the
weighted-average number of shares of common stock outstanding during the
period, less shares subject to repurchase.
Shares associated with options and convertible securities have been excluded
from the computation of diluted earnings per share as their inclusion would be
anti-dilutive.
Prior to June 15, 1999, the Company operated as a limited liability company.
The calculation of the weighted-average number of shares of common stock
outstanding for 1997, 1998 and 1999 includes a pro forma adjustment to reflect
the number of shares that would have been outstanding as if the shares that
were issued on June 14, 1999 had been issued on January 1, 1997, as adjusted
for cash distributions for those periods.
Pro forma basic and diluted net loss per common share assuming conversion
has been computed as described above and also gives effect, under Securities
and Exchange Commission guidance, to the conversion of debt and preferred
shares not included above that would automatically convert to common shares if
the Company were to complete an initial public offering, using the if-converted
method, from the original date of issuance.
F-16
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The calculations of historical basic and diluted net loss per common share
(using the pro forma weighted average shares outstanding), and pro forma basic
and diluted net loss per common share assuming conversion are as follows (in
thousands, except share and per share amounts):
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net loss attributable to common
stockholders........................ $ (9,758) $ (867) $ (4,241)
=========== =========== ===========
Basic and diluted:
Weighted-average pro forma shares
of common stock outstanding....... 28,987,596 28,617,578 28,869,762
Less: Weighted-average common
shares subject to repurchase...... -- -- (467,123)
----------- ----------- -----------
Weighted-average shares used in
computing basic and diluted net
loss per common share............. 28,987,596 28,617,578 28,402,639
=========== =========== ===========
Basic and diluted net loss per
share............................... $ (0.34) $ (0.03) $ (0.15)
=========== =========== ===========
</TABLE>
<TABLE>
<S> <C>
Pro forma (see Note 11):
</TABLE>
<TABLE>
<S> <C>
Net loss.................................................... $ (4,241)
===========
Shares used above........................................... 28,402,639
Pro forma adjustment to reflect weighted effect of assumed
conversion of convertible preferred stock and convertible
subordinated debt (unaudited).............................. 10,358,791
-----------
Weighted average shares used in computing pro forma basic
and diluted net loss per common share (unaudited).......... 38,761,430
===========
Pro forma basic and diluted net loss per common share
(unaudited)................................................ $ (0.11)
===========
</TABLE>
The Company has excluded all convertible debt, convertible preferred stock,
outstanding stock options and shares subject to repurchase from the
calculations of diluted net loss per common share because their inclusion would
be anti-dilutive. The total number of shares excluded from the calculations of
diluted net loss per common share are 39,612,154 as of December 31, 1999. Such
securities, had they been dilutive, would have been included in the
computations of diluted net loss per share using the treasury stock method. In
February 2000, convertible preferred shares were split, as fully explained in
Note 11.
Recent Accounting Pronouncements
The staff of the Securities and Exchange Commission and the members of the
Emerging Issues Task Force of the Financial Accounting Standards Board, among
other accounting standard setters, are addressing accounting issues related to
companies doing business commonly referred to as "electronic commerce." Areas
of discussion include advertising barter transactions, website development,
exchange of equity investment for services, revenue recognition in complex
multiple element arrangements, arrangements with up front payments and revenue
recognition for auction sites. The ultimate resolutions to these issues and
other similar issues could have a material effect on the Company's accounting
policies used in the future.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements." SAB 101 provides specific
guidance, among other things, as to the recognition of revenue related to up-
front, non-refundable fees and services charges received in connection with a
contractual arrangement. We have applied the provisions of SAB 101 for the year
ended December 31, 1999.
F-17
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Acquisitions and Retention Obligations
On December 30, 1999, Dovebid, Inc. acquired two printed circuit board
businesses, B&B Custom Circuit Supplies, Inc. and Unidyne International, Inc.
for $3,250,000 each. Both of the acquisitions were accounted for using the
purchase method of accounting and are included in the results of operations of
the Company from the dates of acquisition. The purchase prices have been
allocated to tangible and intangible assets acquired based on estimates of
their respective fair values. The amortization periods for covenants not to
compete, customer lists and goodwill are four, four and twelve years,
respectively.
The purchase price allocations are as follows (in thousands):
<TABLE>
<S> <C>
Intangibles Assets:
Covenants not to compete........................................... $ 500
Customer lists..................................................... 500
Goodwill........................................................... 3,039
------
4,039
Inventory............................................................ 2,397
Office equipment..................................................... 64
------
$6,500
======
Consideration for the purchases was comprised of (in thousands):
Cash................................................................. $3,500
Convertible subordinated notes....................................... 2,000
Retention obligation................................................. 1,000
------
$6,500
======
</TABLE>
The convertible subordinated notes convert automatically into common stock
upon the occurrence of an initial public offering. The common stock conversion
rate is determined by dividing the mid-point of the common stock offering price
range set forth in the Company's final registration statement, into the
aggregate outstanding principal and accrued interest arising from the
convertible subordinated notes upon the conversion date. The convertible
subordinated notes bear interest at 5.74% and mature on December 30, 2002.
The retention obligations (a reserve for seller warrantees) are without
interest and represents consideration retained as collateral to support the
indemnification provided by the seller to the Company for any future claims for
damages for breach of any obligation, representations or warranties arising and
asserted before January 3, 2001. The amount is fully payable to the sellers,
adjusted for any claims that might arise.
The following summarized unaudited pro forma information assumes the
acquisitions of B&B Custom Circuit Supplies, Inc. and Unidyne International,
Inc. occurred as of January 1, 1998 (in thousands, except share and per share
amounts):
<TABLE>
<CAPTION>
Years ended December
31,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Revenues......................................... $ 15,337 $ 15,599
Net loss applicable to common stockholders....... (2,040) (4,756)
Net loss per share applicable to common
stockholders:
Basic and diluted.............................. (0.07) (0.17)
Weighted average shares........................ 28,617,578 28,402,639
</TABLE>
F-18
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------
1998 1999
----- ------
<S> <C> <C>
Office equipment............................................... $ 522 $1,005
Leasehold improvements......................................... 103 102
Software....................................................... -- 273
----- ------
625 1,380
Less accumulated depreciation and amortization................. 456 551
----- ------
$ 169 $ 829
===== ======
</TABLE>
5. Impairment of Goodwill
In connection with the formation and capitalization of Koll-Dove in 1995 as
discussed in Note 1, goodwill of $10,000,000 was recorded. This goodwill
related solely to the Company's line of business focused on the auction of real
estate assets.
During 1997, it was determined that the opportunities in this line of
business were not consistent with the future direction of the Company and, as
part of this decision, KMS withdrew as a member. Given the withdrawal of KMS as
a member of the Company, management determined that future cash flows from the
real estate line of business, if any, would not be sufficient to recover the
carrying value of goodwill and the entire remaining balance was written off in
1997 by a charge to earnings of $9,751,000.
6. Notes Payable
Unsecured notes payable consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------
1998 1999
----- ------
<S> <C> <C>
Note payable to shareholder, bearing interest at 8% per annum,
due April 2000................................................ $ -- $1,000
===== ======
Other notes payable:
Note payable, bearing interest at 8.5% per annum, principal
and interest of $34 due quarterly through October 2001...... $ 346 $ 220
Convertible subordinated notes, bearing interest at 5.74% per
annum, principal and interest due December 2002 (see Note
3).......................................................... 2,000
----- ------
$ 346 $2,220
===== ======
</TABLE>
The aggregate annual principal maturities of the long-term notes as of
December 31, 1999 are as follows: 2000--$111,000; 2001--$109,000; and 2002--
$2,000,000.
7. Commitments and Contingencies
Operating Leases
The Company leases its headquarters office space for approximately $25,000
per month from The Dove Holdings Company, Inc., a related party, through
November, 2000. The Company also has entered into
F-19
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
noncancelable operating leases for facilities and equipment with various
expiration dates through the year 2005. Future minimum payments under the
noncancelable operating leases as of December 31, 1999, are as follows (in
thousands):
<TABLE>
<S> <C>
2000.............................................................. $ 774
2001.............................................................. 484
2002.............................................................. 480
2003.............................................................. 480
2004.............................................................. 480
Thereafter........................................................ 480
------
$3,178
======
</TABLE>
Rent expense under all operating leases totaled approximately $439,000,
$369,000, and $368,000 during 1997, 1998 and 1999, respectively.
Litigation
The Company is involved in various legal claims and litigation in the normal
course of its business. In the opinion of management, based upon consultation
with legal counsel, the eventual outcome of such claims and litigation is not
expected to have a material adverse effect on the Company's consolidated
financial position or results of operations.
Off Balance Sheet Market Risk
From time to time, the Company guarantees the auction proceeds to its
clients for client owned assets. At December 31, 1999, the Company had provided
one such guarantee totaling approximately $2,000,000. The Company assesses
these guarantees for any potential losses for the difference between the
estimated auction value and the guarantee amount, and reserves for any such
probable losses. At December 31, 1999, the Company had accrued for
approximately $400,000 of such probable losses.
8. Stockholders' Equity and Stock Option Plan
The Company has two classes of authorized stock: common stock and
convertible preferred stock. In October 1999, the Company's stockholders
approved a decrease in the originally authorized number of shares of common
stock from 75,000,000 to 70,000,000, and an increase in authorized preferred
stock from 25,000,000 to 30,000,000.
Common Stock
The Company has issued 33,877,705 shares of common stock as of December 31,
1999. In June 1999, 28,212,121 shares were issued to the Dove Group in exchange
for their interest in Dove Partners, Inc. The holder of each share of common
stock is entitled to the right of one vote.
In October 1999, two employees of the Company were granted fully vested
options to purchase 125,000 shares of stock at $0.33 per share. These options
were exercised in October 1999 with notes payable as consideration. The notes
were paid off subsequent to year end.
In November 1999, the Company's Chief Operating Officer and Chief Financial
Officer exercised their options to purchase a total of 5,500,000 shares of
stock at $0.33 per share with notes payable to the Company
F-20
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
as consideration pursuant to restricted stock purchase agreements. The
agreements grant the Company the right to repurchase any of the unvested shares
at its discretion at a price equal to the grant price. The shares vest, and the
right to repurchase expires, 25% at the first anniversary of the grant date,
and 2.08% per month for the next thirty six months. The notes bear interest at
5.92% per annum and are due on or before the fifth anniversary of the grant
date of the options, November 30, 2004. The notes, which are classified as a
component of stockholders' equity, are full recourse and are collateralized by
shares of common stock owned by the officers. Shares subject to repurchase were
5,500,000 as of December 31, 1999.
The Company is required to reserve and keep available out of its authorized
but unissued shares of common stock such number of shares sufficient to effect
the conversion of all outstanding shares of convertible preferred stock plus
shares granted and available for grant under the Company's 1999 Stock Option
Plan (the Plan). At December 31, 1999, common stock was reserved for issuances
as follows:
<TABLE>
<S> <C>
Conversion of convertible preferred stock......................... 29,629,654
Conversion of convertible subordinated debt....................... 100,000
1999 Stock Option Plan............................................ 2,618,500
----------
32,348,154
==========
</TABLE>
Holders of common stock are entitled to receive $0.33 as a liquidation
preference for each share outstanding.
Convertible Preferred Stock Subject to Redemption
The Company is authorized to issue 30,000,000 shares of convertible
preferred stock in one or more series.
Convertible preferred stock issued and outstanding is as follows:
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------------------------
Shares Accumulated
Outstanding(1) Amount(2) Accretion Total
-------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Series A.................. 12,480,468 $ 3,869,915 $165,400 $ 4,035,315
Series B.................. 16,817,434 12,592,912 203,600 12,796,512
---------- ----------- -------- -----------
29,297,902 $16,462,827 $369,000 $16,831,827
========== =========== ======== ===========
</TABLE>
- --------
(1) The per share issuance price for Series A and Series B was $0.33, and
$0.77, respectively.
(2) Amount is net of issuance costs.
Holders of Series A and Series B convertible preferred stock are entitled to
receive annual cumulative dividends of $0.0264 and $0.0616 per share,
respectively. Holders of Series A and Series B Convertible Preferred Stock are
also entitled to receive a liquidation preference, for each outstanding share,
equal to the original issue price of $0.33 and $0.77, respectively.
After payment of the liquidation preference to Series A and Series B
Convertible Preferred Stock and common stock, holders of Series A and Series B
Convertible Preferred Stock are entitled to receive, prior and in preference to
any common stockholders, an amount equal to accumulated or declared but unpaid
dividends, if any, attributable to the Series A and B Convertible Preferred
Stock. Following the payment of such liquidation preference, the remaining
distributable assets, if any, will be available for distribution to holders of
F-21
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Series A and Series B Convertible Preferred Stock, on an as converted basis,
along with holders of common stock. If the distributable assets are
insufficient to permit payment of the preferential amounts, then the entire
amount of distributable assets, shall be distributed pro rata among the Series
A and B Preferred Stockholders and common stock stockholders in proportion to
their respected aggregate liquidation preference amounts.
Each share of Series A and Series B Convertible Preferred Stock carries
voting rights ("Voting Preferred"). Each holder of Voting Preferred is entitled
to the number of votes equal to the number of shares of common stock into which
such shares of Series A and Series B held could then be converted.
Each share of Voting Preferred is convertible, at the option of the holder,
into shares of common stock, determined by dividing the sum of the applicable
original issue price, as defined in the certificates of incorporation, of
Series A and B Convertible Preferred Stock, plus an amount equal to declared or
accumulated but unpaid dividends on such share, divided by the then effective
conversion price. The conversion price per share for shares of Series A and B
Convertible Preferred Stock equals the original issue price subject to
adjustments for stock splits, stock dividends, combinations, and
recapitalizations. At December 31, 1999, the Conversion Rate for each series of
Preferred Stock was one share of common stock for each share of preferred
stock.
In addition, each share of Convertible Preferred Stock is automatically
converted into shares of common stock at the then effective conversion price
for such share immediately upon the consummation of a firmly underwritten
public offering of common stock (other than a registration on Form S-8 or
comparable form).
At any time after June 7, 2002, holders of at least 51% of Series A and
Series B Preferred Stock are entitled to cause the Company to redeem all or
part of the then outstanding Series A and Series B preferred stock at a price
equal to the then fair market value of the Series A and Series B Convertible
Preferred Stock, as converted, and common stock, as more fully described in the
applicable stock agreements.
Stock Option Plan
Under the 1999 Stock Option Plan (the "Plan"), the Company offers options to
purchase shares of its common stock to employees, including officers and
directors of, and consultants to, the Company who are not also employees of the
Company. The Company reserved 12,500,000 shares of common stock for issuance
through the Plan. The Plan is administered by the Company's Board of Directors.
The Board of Directors may award a number of forms of stock-based compensation
to eligible participants including incentive and nonqualified stock options
which generally vest over a four year period, not to exceed ten years.
The following summarizes stock option activity and related information
during the year ended December 31, 1999:
<TABLE>
<CAPTION>
Exercise Weighted Average
Shares Price Exercise Price
---------- ------------- ----------------
<S> <C> <C> <C>
Outstanding at October, 8, 1999
(Plan inception)
Granted...................... 9,881,500 $0.33 - $0.77 $0.39
Exercised.................... (5,625,000) 0.33 0.33
Forfeited.................... -- -- --
---------- ------------- -----
Outstanding at December 31,
1999.......................... 4,256,500 $0.33 - $0.77 $0.47
========== ============= =====
Options exercisable at December
31, 1999...................... -- -- --
========== ============= =====
</TABLE>
F-22
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Exercise prices for stock options outstanding as of December 31, 1999 and
the weighted average remaining contractual life are as follows:
<TABLE>
<CAPTION>
Weighted Average
Exercise Price at Shares Remaining Number
December 31, 1999 Outstanding Contractual Life Exercisable
----------------- ----------- ---------------- -----------
<S> <C> <C> <C>
$0.33 2,960,500 9.49 --
$0.77 1,296,000 9.02 --
--------- ---
4,256,500 --
========= ===
</TABLE>
As discussed in Note 2, the Company follows APB No. 25 and related
interpretations in accounting for its employee and director stock-based awards
because, as discussed below, the alternative fair value accounting provided for
under SFAS 123 requires use of option valuation models that were not developed
for use in valuing employee stock-based awards. Under APB Opinion No. 25, the
Company does not recognize compensation expense with respect to such awards if
the exercise price equals or exceeds the fair value of the underlying security
on the date of grant and other terms are fixed.
The fair value for these awards for the purpose of the alternative fair
value disclosures required by SFAS 123 was estimated as of the date of grant
using the minimum value options pricing model. This model was developed for use
in estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions, including the expected life
of the options. Because the Company's stock-based awards have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock-based awards. For the purposes of
the Company's pro forma disclosures, the fair value of options granted during
the period ended December 31, 1999 was determined using the minimum value
method with a risk-free interest rate of approximately 5.5%, an expected life
of 5 years, and a dividend yield of zero.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The Company's
pro forma information follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
Year ended
December 31,
1999
------------
<S> <C>
Net Loss attributable to common stockholders:
As reported............................................... $(4,241)
Pro Forma................................................. (4,276)
Basic and diluted net loss per common share:
As reported............................................... $ (0.15)
Pro Forma................................................. (0.15)
</TABLE>
The compensation cost associated with the Company's stock-based compensation
plans determined using the minimum value method prescribed above did not result
in a material difference from the reported net income for the period from
October 8, 1999 (inception) to December 31, 1999. Future pro forma net income
results may be materially different from actual amounts reported.
Deferred Stock Compensation
Deferred compensation represents the aggregate difference, at the date of
grant, between the respective exercise price of stock options and the estimated
fair value of the underlying stock. Deferred stock-based
F-23
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
compensation is amortized over the vesting period of the underlying options
based on an accelerated vesting method, generally four years. Through December
31, 1999, the Company had recorded unearned stock-based compensation of
$2,480,000. For 1999, the Company recorded amortization of stock-based
compensation of $50,600.
9. Income Taxes
At December 31, 1999, the Company had net operating loss carryforwards of
$4,521,087 for federal income tax purposes that expire in years 2013 to 2015.
For financial reporting purposes, a valuation allowance has been recognized in
1999 to offset the deferred tax assets, which primarily related to those
carryforwards.
Due to the "change in ownership" provisions of the Internal Revenue Code,
utilization of the net operating loss carryforwards may be subject to an annual
limitation regarding their utilization against taxable income in future
periods.
Deferred income taxes reflected the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of December 31, 1999
are as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax liabilities........................................ $ --
Deferred tax assets:
Depreciation.................................................. 9
Contribution carryover........................................ 12
Net operating loss carryover.................................. 1,854
Provision for bad debts....................................... 13
Reserves...................................................... 452
-------
Total deferred tax assets....................................... 2,340
Valuation allowance for deferred tax assets..................... (2,340)
-------
Net deferred tax liabilities/assets............................. $ --
=======
</TABLE>
The federal statutory rate reconciles to the Company's effective tax rate as
follows for the year ended December 31, 1999:
<TABLE>
<S> <C>
Federal Statutory income tax rate................................ 35.00%
State tax provision, net of federal tax benefit.................. 6.51
Net operating loss carryforward.................................. (33.67)
Other............................................................ (7.84)
------
Effective tax rate............................................... 0.00%
======
</TABLE>
10. Fair Value of Financial Instruments
As of December 31, 1998 and 1999, the respective carrying values of the
Company's financial instruments, which include cash and cash equivalents, cash
in trust, accounts receivable, accounts payable and accrued expenses, and debt
approximated their fair values. Carrying values were estimated to approximate
fair values for these financial instruments as they are short-term in nature
and are receivable or payable on demand.
F-24
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Other Subsequent Events
Initial Public Offering ("IPO")
The Company filed a registration statement on March 10, 2000 with the
Securities and Exchange Commission relating to an IPO of shares of its unissued
common stock. If the IPO is consummated under the terms presently anticipated,
all of the preferred stock outstanding will automatically convert into common
stock. At December 31, 1999, on an unaudited pro forma basis, 29,629,654 shares
of common stock would be issued upon automatic conversion of preferred stock.
The pro forma effect on stockholders' equity and pro forma effect on basic and
diluted net loss per common share, as adjusted for the assumed conversion of
the preferred stock, is set forth on the accompanying balance sheet and
statement of operations, and in Note 2 under Net Loss per Common Share.
Series C Convertible Preferred Stock Financing
In February and March 2000, the Company sold 41,011,242 shares of Series C
preferred stock at a price of $2.67 per share. Each share of Series C preferred
stock is convertible into one share of common stock. All holders of Series C
shares have dividend, liquidation preferences and redemption rights
substantially the same as holders of Series A and Series B convertible
preferred stock.
Business Acquisitions
On February 29, 2000, the Company acquired all of the outstanding stock of a
Branford, Connecticut-based auctioneer and appraiser of used capital assets,
Greenwich Industrial Services, LLC (Greenwich), for $6.25 million. The
consideration paid consisted of $3.25 million in cash, $2.0 million of
convertible subordinated promissory notes, and a $1.0 million cash earn-out. In
connection with this acquisition, the Company recorded approximately $4.4
million (unaudited) of goodwill and other intangible assets. For the year ended
December 31, 1999, Greenwich recorded revenues of $7.8 million, in its separate
financial statements.
On March 3, 2000, the Company acquired all of the outstanding stock of two
affiliated Mequon, Wisconsin-based companies, an appraiser, AccuVal Associates,
Inc. (AccuVal), and an auctioneer, Liquitec Industries, Incorporated
(Liquitec), for a total of $5.5 million. The consideration paid consisted of
$1.65 million in cash, $2.85 million in convertible subordinated promissory
notes and $1.0 million in subordinated promissory notes. The subordinated
promissory notes have principal payments of $500,000 due March 3, 2001 and
payments of $500,000 plus all accrued interest due March 3, 2002. In connection
with the acquisition, the Company recorded approximately $5.4 million
(unaudited) of goodwill and other intangible assets. For the year ended
December 31, 1999, AccuVal and Liquitec recorded revenues of $3.7 million, in
their separate financial statements.
On March 3, 2000, the Company acquired all of the outstanding stock of a
Chicago, Illinois based auctioneer and appraiser of used capital assets, Philip
Pollack & Company, Inc. (Pollack), for $4.3 million. The
consideration paid consisted of $1.1 million in cash, $442,000 in deferred cash
(as a reserve for seller warranties) and $2.75 million in convertible
subordinated promissory notes. In connection with the acquisition, the Company
recorded approximately $4.3 million (unaudited) of goodwill and other
intangible assets. For the ten months ended December 31, 1999, Pollack recorded
revenues of $1.7 million, in its separate financial statements.
On March 3, 2000, the Company acquired all of the outstanding stock of a
Mountain View, California-based semiconductor equipment dealer, Haltek
Electronics dba Test Lab Company ("Test Lab"), for $6.75 million in cash and
$250,000 in deferred cash (as a reserve for seller warranties). The acquisition
has been accounted for using the purchase method. In connection with the
acquisition, the Company recorded
F-25
<PAGE>
DOVEBID, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
approximately $4.3 million (unaudited) of goodwill and other intangible
assets. For the year ended December 31, 1999, Test Lab recorded revenues of
$7.4 million (unaudited), in its separate financial statements.
On March 24, 2000, the Company acquired all of the outstanding stock of a
Detroit, Michigan based auctioneer and appraiser of assets, Norman Levy
Associates, Inc. ("Levy"), for $27.8 million. The consideration paid consisted
of $17.55 million in cash, $250,000 in deferred cash and $10.0 million in
convertible subordinated promissory notes. In connection with the acquisition,
the Company recorded approximately $29.2 million (unaudited) of goodwill and
other intangible assets. For the year ended December 31, 1999, Levy recorded
revenues of $10.7 million (unaudited). In addition, the Company plans to
acquire a related entity for total consideration of approximately $500,000.
On March 27, 2000, the Company acquired all of the outstanding stock of a
Mountain View, California based software development company, One Web Place,
Inc, for an aggregate of 833,333 shares of common stock that will be issued in
the transaction or subject to options the Company assumes in the transaction.
Each of the transactions described above has been accounted for as a
purchase. The convertible subordinated promissory notes issued in these
transactions convert into Company common stock automatically upon consummation
of an initial public offering at a conversion rate equal to the mid-point of
the offering range set forth on the final registration statement, except for
the Levy transaction which converts at $10.50.
Promotional agreement with Yahoo!
In March 2000, the Company entered into an alliance with Yahoo! under which
Yahoo! will advertise and promote the Company's services as a business-to-
business auctioneer. The Company will pay Yahoo! marketing and promotional fees
over a period of approximately twelve months and will also purchase additional
advertising with Yahoo! based on the amount of the Company's auction
commissions derived from customers originated through Yahoo!. In addition, the
Company issued an immediately exercisable warrant to Yahoo! to purchase
1,405,000 shares of Series C convertible preferred stock. The warrant expires
four years from the date of the agreement.
Stock Options Issued
Through March 27, 2000, the Company granted additional options to purchase
5,190,099 shares of common stock at exercise prices ranging from $0.77 to $4.00
per share.
Exercise of Stock Options
In January, February and March 2000, certain officers of the Company
exercised options to purchase 2,930,000 shares at prices ranging from $0.33 to
$2.50 per share. These options were exercised in the form of a note payable to
the Company as consideration pursuant to restricted stock purchase agreements.
The agreements grant the Company the right to repurchase any of the unvested
shares at its discretion at a price equal to the grant price. The shares vest,
and the repurchase right expires, 25% at the first anniversary of the grant
date and 6.25% per quarter thereafter. The notes bear interest at rates ranging
from 5.92% to 8.0% per annum and are due on or before the fifth anniversary of
the grant date of the options. The notes, which are classified as a component
of stockholders' equity, are full recourse and are collateralized by shares of
common stock owned by the officers.
F-26
<PAGE>
DOVEBID INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Preferred Stock Split
In February 2000, the Board of Directors effected a 1.03221917 to one stock
split in the form of a stock dividend on the outstanding shares of Series A
Convertible Preferred Stock and a 1.01643835 to one stock split on the
outstanding shares of Series B Convertible Preferred Stock. All share and per
share information included in these financial statements have been
retroactively adjusted to reflect this stock spilt.
Line of Credit to Dealer
In March 2000 the Company entered into a line of credit agreement with a
dealer for an extension of up to $3.0 million of advances for the dealer's
acquisition of assets to be sold on the Company's marketplace. This secured
line of credit expires in August 2000 or earlier if the Company requests.
Alliance with Comdisco
In March 2000 the Company signed an agreement with Comdisco, a leasing and
finance company, whereby the Company's customers have access to a full-range of
Comdisco's asset management and leasing services for their capital assets. In
addition, the Company has specific rights to auction assets being sold by
Comdisco that fall within two of the Company vertical markets for an initial
period of one year subject to the Company's satisfactory performance under the
contract. The Company has purchased $13.0 million of assets from Comdisco for a
combination of Series C Convertible preferred stock and cash. The cash portion
is due prior to March 31, 2000.
Commitments
In January 2000, the Company signed an agreement with Bain & Company, Inc.
to perform consulting services for six months through July 31, 2000. The total
commitment of approximately $2.1 million is payable monthly as the service is
rendered, one third in Series C convertible preferred stock and two thirds in
cash until the date the Company's IPO is effective. Thereafter, the payment for
services rendered will be payable in cash.
In connection with the acquisitions described above the Company assumed
certain long-term facilities leases.
12. Impact of the Year 2000 (Unaudited)
In late 1999, the Company completed its remediation and testing of systems.
As a result of those planning and implementation efforts, the Company
experienced no significant disruptions in mission critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. The Company is not aware
of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties.
The Company will continue to monitor its mission critical computer applications
and those of its suppliers and vendors throughout the year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.
F-27
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
B&B Custom Circuit Supplies, Inc.
We have audited the statements of operations and cash flows of B&B Custom
Circuit Supplies, Inc. (the Company) for each of the three years in the period
ended June 30, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of the Company's operations and the
Company's cash flows for each of the three years in the period ended June 30,
1999, in conformity with accounting principles generally accepted in the United
States.
/s/ ERNST & YOUNG LLP
February 29, 2000
San Francisco, California
F-28
<PAGE>
B&B CUSTOM CIRCUIT SUPPLIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended Year ended Year ended
June 30, June 30, June 30,
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Net revenues................................. $3,475,537 $2,876,833 $1,920,060
Cost of revenues............................. 1,943,116 1,631,138 654,167
---------- ---------- ----------
Gross profit............................. 1,532,421 1,245,695 1,265,893
---------- ---------- ----------
Operating expenses:
General and administrative................. 1,154,058 1,468,701 1,245,106
---------- ---------- ----------
Total operating expenses................. 1,154,058 1,468,701 1,245,106
---------- ---------- ----------
Income (loss) from operations................ 378,363 (223,006) 20,787
Interest expense............................. -- -- (6,368)
---------- ---------- ----------
Net income (loss)............................ $ 378,363 $ (223,006) $ 14,419
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
B&B CUSTOM CIRCUIT SUPPLIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended Year ended Year ended
June 30, June 30, June 30,
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss).......................... $ 378,363 $(223,006) $ 14,419
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization............ 30,945 35,564 35,973
Changes in operating assets and
liabilities:
Accounts receivable..................... (92,160) 315,471 48,623
Other assets............................ (13,253) 8,143 3,330
Inventory............................... (2,311) (64,116) (31,046)
Accounts payable........................ 47,628 67,880 88,206
--------- --------- ---------
Net cash provided by operating activities.. 349,212 139,936 159,505
--------- --------- ---------
Cash flows from investing activities
Purchases of property and equipment........ -- (202,694) (5,290)
--------- --------- ---------
Net cash used in investing activities...... -- (202,694) (5,290)
--------- --------- ---------
Cash flows from financing activities
(Payment to) and advances from
Shareholder............................... (308,191) 24,594 (114,364)
--------- --------- ---------
Net cash (used in) provided by financing
activities................................ (308,191) 24,594 (114,364)
--------- --------- ---------
Change in cash............................. 41,021 (38,164) 39,851
Cash, beginning of year.................... -- 41,021 2,857
--------- --------- ---------
Cash, end of year.......................... $ 41,021 $ 2,857 $ 42,708
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
B&B CUSTOM CIRCUIT SUPPLIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. The Company
B&B Custom Circuit Supplies, Inc. (the "Company") was incorporated in June
1998. The Company purchases used circuit board machinery for resale.
On December 30, 1999, Dovebid, Inc. acquired the assets of the Company,
primarily inventory, and hired the Company's executives and employees. The
Company's operations ceased on that date.
2. Summary of Significant Accounting Policies
Use of Estimates--The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from these estimates.
Revenue Recognition--The Company's revenues are derived principally from the
sale of new and refurbished circuit equipment. Revenues are recognized upon
shipment of goods.
Advertising Expense--Advertising costs are expensed as incurred and totaled
$26,179, $26,912 and $9,040 for the years ended June 30, 1997, 1998 and 1999,
respectively.
Concentration of Credit Risk--During the years ended June 30, 1997 and 1998
two customers accounted for approximately 20% and 26%, respectively, of
revenues, and one customer accounted for approximately 11% of revenues for the
year ended June 30, 1999. No other customers accounted for more than 10% of
revenues.
3. Related Party
The Company leases its building facilities from a related entity on a month
to month operating lease.
Total rental expense for operating leases was $112,000, $105,491 and $88,929
for the years ended June 30, 1997, 1998 and 1999, respectively.
4. Income Taxes
The Company is a Subchapter S corporation for federal and state income tax
purposes. In accordance with federal and state provisions, corporate earnings
flow through to the shareholders and are taxed at the shareholder level. Any
such shareholder tax obligations are not reflected herein.
F-31
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Unidyne International Inc.
We have audited the statements of operations and cash flows of Unidyne
International Inc. (the Company) for the years ended December 31, 1997 and 1998
and for the period January 1, 1999 through December 30, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of the Company's operations and the
Company's cash flows for the years ended December 31, 1997 and 1998 and for the
period January 1, 1999 through December 30, 1999, in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
February 29, 2000
San Francisco, California
F-32
<PAGE>
UNIDYNE INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period
January 1,
Year ended Year ended 1999 through
December 31, December 31, December 30,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net revenues............................. $2,615,105 $1,659,240 $1,274,626
Cost of revenues......................... 1,930,064 974,126 533,025
---------- ---------- ----------
Gross profit......................... 685,041 685,114 741,601
---------- ---------- ----------
Operating expenses:
General and administrative............. 879,980 1,016,576 652,732
---------- ---------- ----------
Total operating expenses............. 879,980 1,106,576 652,732
---------- ---------- ----------
Net (loss) income........................ $ (194,939) $ (331,462) $ 88,869
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
UNIDYNE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period
January 1,
Year ended Year ended 1999 through
December 31, December 31, December 30,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income..................... $(194,939) $(331,462) $ 88,869
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Changes in operating assets and
liabilities:
Accounts receivable................. (153,672) 106,364 43,904
Other assets........................ (23,084) (12,078) 28,400
Inventory........................... 489,000 337,500 --
Accounts payable.................... 6,167 20,517 (22,506)
Accrued liabilities................. 77,546 (77,546) 12,500
--------- --------- ----------
Net cash provided by operating
activities............................. 201,018 43,295 151,167
--------- --------- ----------
Cash flows from financing activities
Advances to shareholder................. (137,390) (141,000) (209,537)
--------- --------- ----------
Net cash used in financing activities... (137,390) (141,000) (209,537)
--------- --------- ----------
Change in cash.......................... 63,628 (97,705) (58,370)
Cash, beginning of period............... 187,665 251,293 153,588
--------- --------- ----------
Cash, end of period..................... $ 251,293 $ 153,588 $ 95,218
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
UNIDYNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
1. The Company
Unidyne International, Inc. (the Company) was incorporated in 1995. The
Company purchases used hand circuit board machinery for resale.
On December 30, 1999, Dovebid, Inc. acquired the assets of the Company,
primarily inventory, and hired the Company's executives and employees. The
Company's operations ceased on that date.
2. Summary of Significant Accounting Policies
Use of Estimates--The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from those estimates.
Revenue Recognition--The Company's revenues are derived principally from the
sale of new and refurbished circuit equipment. Revenues are recognized upon
shipment of goods.
Advertising Expense--Advertising costs are expensed as incurred and totalled
$34,457 and $31,757 during the years ended December 31, 1997 and 1998,
respectively, and $6,941 for the period January 1, 1999 through December 30,
1999.
Concentration of Credit Risk--During the years ended December 31, 1997 and
1998, two customer accounted for 21% and 26%, respectively, of revenues. During
the period January 1, 1999 through December 30, 1999, one customer accounted
for 11% of revenues. No other customers accounted for more than 10% of
revenues.
3. Related Party
The Company leases its building facilities from a related entity on a month
to month operating lease.
Total rental expense for operating leases was $104,124, $96,000 and $88,000
for the years ended December 31, 1997 and 1998, and the period January 1, 1999
through December 30, 1999, respectively.
4. Income Taxes
The Company is a Subchapter S corporation for federal and state income tax
purposes. In accordance with federal and state provisions, corporate earnings
flow through to the shareholders and are taxed at the shareholder level. Any
such shareholder tax obligations are not reflected herein.
F-35
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
AccuVal Associates, Incorporated and LiquiTec Industries, Incorporated
We have audited the accompanying combined balance sheets of AccuVal
Associates, Incorporated and LiquiTec Industries, Incorporated (collectively,
the "Company") as of December 31, 1998 and 1999, and the related combined
statements of income and retained earnings and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Company at December 31, 1998 and 1999, and the combined results of their
operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
March 3, 2000
Milwaukee, Wisconsin
F-36
<PAGE>
ACCUVAL ASSOCIATES, INCORPORATED AND LIQUITEC INDUSTRIES, INCORPORATED
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
---------------
1998 1999
------- -------
(in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................................... $ 353 $ 667
Accounts receivable.......................................... 195 373
Unbilled costs and expenses.................................. 55 6
Other current assets......................................... 35 19
------- -------
Total current assets....................................... 638 1,065
Software development costs, net................................ 193 303
Property and equipment, net.................................... 244 263
------- -------
Total assets............................................... $ 1,075 $ 1,631
======= =======
Liabilities and shareholders' equity
Current liabilities:
Accounts payable............................................. $ 56 $ 65
Accrued wages and payroll taxes.............................. 108 121
Accrued profit sharing....................................... 44 73
Accrued vacation............................................. 76 79
Deposits..................................................... 6 4
Due to related parties....................................... -- 4
------- -------
Total current liabilities.................................. 290 346
Commitments
Shareholders' equity:
Common stock................................................. 20 20
Retained earnings............................................ 765 1,265
------- -------
Total shareholders' equity................................. 785 1,285
------- -------
Total liabilities and shareholders' equity................. $ 1,075 $ 1,631
======= =======
</TABLE>
See accompanying notes.
F-37
<PAGE>
ACCUVAL ASSOCIATES, INCORPORATED AND LIQUITEC INDUSTRIES, INCORPORATED
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Year ended
December 31,
----------------
1998 1999
------- -------
(in thousands)
<S> <C> <C>
Revenues:
Appraisal services.......................................... $ 2,792 $ 3,382
Auction commissions......................................... 279 286
------- -------
3,071 3,668
Costs of revenues............................................. 488 590
------- -------
Gross profit.................................................. 2,583 3,078
General and administrative expense............................ 1,819 2,169
Depreciation and amortization................................. 137 203
------- -------
Income from operations........................................ 627 706
Other (expense) income:
Interest income............................................. 14 18
Other....................................................... 5 (1)
------- -------
19 17
------- -------
Net income.................................................... 646 723
Retained earnings--beginning of year.......................... 466 765
Distributions to shareholders................................. (347) (223)
------- -------
Retained earnings--end of year................................ $ 765 $ 1,265
======= =======
</TABLE>
See accompanying notes.
F-38
<PAGE>
ACCUVAL ASSOCIATES, INCORPORATED AND LIQUITEC INDUSTRIES, INCORPORATED
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
------------------------
1998 1999
----------- -----------
(in thousands)
<S> <C> <C>
Operating activities
Net income.......................................... $ 646 $ 723
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation...................................... 63 68
Amortization of software development costs........ 74 135
Gain on sale of equipment......................... (7) --
Changes in operating assets and liabilities:
Accounts receivable.............................. 102 (178)
Unbilled costs and expenses...................... (33) 49
Other current assets............................. (13) 16
Accounts payable................................. 6 9
Accrued liabilities and deposits................. (11) 43
Due to related parties........................... -- 4
----------- -----------
Total adjustments............................... 181 146
----------- -----------
Net cash provided by operating activities........... 827 869
Investing activities
Purchases of property and equipment................. (123) (87)
Proceeds from sale of equipment..................... 12 --
Payment of software development costs............... (163) (245)
----------- -----------
Net cash used in investing activities............... (274) (332)
Financing activities
Distributions to shareholders....................... (347) (223)
----------- -----------
Net cash used in financing activities............... (347) (223)
----------- -----------
Increase in cash and cash equivalents............... 206 314
Cash and cash equivalents at beginning of year...... 147 353
----------- -----------
Cash and cash equivalents at end of year............ $ 353 $ 667
=========== ===========
</TABLE>
See accompanying notes.
F-39
<PAGE>
ACCUVAL ASSOCIATES, INCORPORATED AND LIQUITEC INDUSTRIES, INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1999
1. Nature of Business and Significant Accounting Policies
Basis of Presentation and Nature of Operations
The accompanying financial statements represent the combined financial
statements of AccuVal Associates, Incorporated ("AccuVal") and LiquiTec
Industries, Incorporated ("LiquiTec") (collectively, the "Company"). AccuVal
and LiquiTec are both equally owned by two individual shareholders and are in
related lines of business. As such, management believes there is adequate
support for presenting combined financial statements. All significant
intercompany transactions have been eliminated in combination.
AccuVal performs appraisal and consulting services in a variety of
industries throughout North America and on a limited international basis. These
services are provided to companies, lenders and buyers seeking advice on the
value of businesses, inventory, tangible and intangible assets.
LiquiTec provides liquidation services to a variety of parties including
lenders, attorneys, bankruptcy courts and others seeking to dispose of tangible
personal and real property. These services include coordination, marketing,
preparation, conduction and accounting for the sale of assets. These services
are provided throughout North America and are typically provided on a
commission basis as a percentage of the liquidation sales proceeds.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
the accompanying notes. Actual results could differ from those estimates.
Revenue recognition
AccuVal recognizes revenue from appraisal fees as the revenue is earned
(measured by delivery of the appraisal report) utilizing the completed contract
method of accounting for these relatively short-term contracts. Deposits
received on appraisal projects are deferred until completion of the appraisal
report. Costs and expenses are recognized during the same period in which the
associated revenue is earned. Accordingly, costs and expenses that are directly
associated with projects in process are deferred as unbilled costs and expenses
in the accompanying combined balance sheets until the matching revenue is
earned. Costs and expenses projected to exceed revenues are immediately
expensed.
Auction commission revenue of LiquiTec is generally recognized upon closing
of the related auction less estimates for certain allowances and after
resolution of any significant uncertainties as to ultimate collection of
auction proceeds. Commission income consists of a fee based on the transaction
price plus revenues associated with other costs and services.
Advertising and Marketing Costs
The Company expenses all advertising and marketing costs as incurred which
totaled approximately $43,000 and $29,000 for the years ended December 31, 1998
and 1999, respectively.
Cash Equivalents
The Company considers all highly liquid investments purchased with a
maturity of three months or less at the date of purchase to be cash
equivalents. For such investments, cost approximates fair value.
F-40
<PAGE>
ACCUVAL ASSOCIATES, INCORPORATED AND LIQUITEC INDUSTRIES, INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Concentrations of Credit Risk
The Company's cash and cash equivalents include deposits and overnight
investments primarily in one financial institution and had a net balance that
exceeded FDIC insurance levels at December 31, 1998 and 1999, by approximately
$253,000 and $567,000, respectively.
The Company typically does not require collateral or other security of its
customers.
In 1998, sales to two customers amounted to approximately 23% of total
revenues. There were no sales to individual customers in excess of 10% of total
revenues in 1999.
Software Development Costs
The Company follows the provisions of Statement of Position (SOP) 98-1,
"Accounting For The Costs Of Computer Software Developed Or Obtained For
Internal Use," which requires the capitalization of costs incurred in
connection with developing or obtaining software for internal use. These costs
are amortized over a period of three years, the estimated useful life of the
software. Accumulated amortization of software development costs totaled
approximately $143,000 and $278,000 at December 31, 1998 and 1999,
respectively.
Property and Equipment
Properly and equipment are stated at cost. Depreciation for financial
statement purposes is provided on the straight-line method over the estimated
useful lives. The composition of property and equipment and related useful
lives are as follows:
<TABLE>
<CAPTION>
December 31,
Useful Lives in ----------------
Years 1998 1999
--------------- ------- -------
(in thousands)
<S> <C> <C> <C>
Computer equipment........................ 5 $ 138 $ 190
Computer software......................... 3 25 35
Business machines......................... 5 70 75
Office equipment.......................... 5 65 67
Furniture and fixtures.................... 7 119 128
Vehicles.................................. 7 107 107
Leasehold improvements.................... 7-15 19 28
------- -------
543 630
Less accumulated depreciation............. (299) (367)
------- -------
$ 244 $ 263
======= =======
</TABLE>
2. Income Taxes
AccuVal and LiquiTec are subject to the provisions of Subchapter S of the
Internal Revenue Code and the tax code of Wisconsin. Accordingly, these
financial statements reflect no provision or liability for federal or Wisconsin
income taxes because federal and Wisconsin taxes on the income of AccuVal and
LiquiTec are attributed directly to the individual shareholders.
3. Related-Party Transactions
AccuVal and LiquiTec have certain transactions in the ordinary course of
business with its shareholders and related companies. The Company leases its
corporate headquarters from the shareholders and paid rent of
F-41
<PAGE>
ACCUVAL ASSOCIATES, INCORPORATED AND LIQUITEC INDUSTRIES, INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
approximately $117,000 each for the years ended December 31, 1998 and 1999. The
Company also rented storage space from an affiliated company which is under
common ownership with AccuVal and LiquiTec. Total payments for this storage
space amounted to $6,500 and $5,500 for the years ended December 31, 1998 and
1999, respectively.
4. Financing
The Company maintained a $1,000,000 line of credit with a bank which was
canceled February 24, 2000. Interest was payable monthly at LIBOR plus 2.25%.
There were no borrowings outstanding under this line of credit as of December
31, 1998 and 1999. The note was secured by all of the Company's assets and the
personal guarantees of the shareholders.
5. Benefit Plan
AccuVal and LiquiTec sponsor a profit-sharing plan for substantially all
employees. The Company recorded profit sharing expense of approximately $79,000
and $105,000 for the years ended December 31, 1998 and 1999, respectively.
6. Commitments
As described in Note 3, the Company leases its corporate headquarters from
the shareholders. The lease term is for one year and is renewed annually on
December 31 of each year. Minimum rental payments for 2000 under this agreement
are $117,000 and the Company is required to pay the real estate taxes.
The Company also has a lease commitment to rent storage space from an
affiliated company which is under common ownership. This agreement is also
renewed annually on December 31 of each year. Minimum rental payments for 2000
under this agreement are $6,000.
7. Shareholders' Equity
AccuVal has the authority to issue 2,800 shares of no par value common
stock. As of December 31, 1998 and 1999, 200 shares are issued and outstanding.
Consideration for these shares totaled $10,000.
LiquiTec has the authority to issue 2,800 shares of no par value common
stock. As of December 31, 1998 and 1999, 200 shares are issued and outstanding.
Consideration for these shares totaled $10,000.
8. Sale of Company
On March 3, 2000, the Company sold all of the issued and outstanding shares
of stock of AccuVal and LiquiTec to DoveBid, Inc. for approximately $5.5
million. The total consideration consisted of $1.65 million in cash, $2.85
million in a convertible note and a $1 million holdback note payable in cash at
a later date.
F-42
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Members
Greenwich Industrial Services, LLC
We have audited the accompanying balance sheets of Greenwich Industrial
Services, LLC as of December 31, 1998 and 1999, and the related statements of
operations and members' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Greenwich Industrial
Services, LLC at December 31, 1998 and 1999, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
March 8, 2000
Stamford, Connecticut
F-43
<PAGE>
GREENWICH INDUSTRIAL SERVICES, LLC
(A LIMITED LIABILITY COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Assets
Current assets:
Cash................................................. $ 509,956 $ 767,982
Cash held in escrow.................................. 332,930 45,973
Accounts receivable.................................. 348,443 306,556
Accounts receivable, affiliate....................... -- 22,300
Due from members (Note 6)............................ 46,354 --
Equipment held for resale............................ 282,657 139,470
Prepaid expenses and deposits........................ -- 21,716
---------- ----------
Total current assets............................... 1,520,340 1,303,997
Property and equipment, net of accumulated depreciation
(Notes 3)............................................. 6,805 400,976
Organization costs, net of accumulated amortization
(1998-$9,240)......................................... 13,225 --
---------- ----------
Total assets....................................... $1,540,370 $1,704,973
========== ==========
Liabilities and Members' Equity
Current liabilities:
Current portion of long-term debt (Note 5)........... $ -- $ 10,625
Accounts payable and accrued expenses................ 133,473 143,286
Due to customers..................................... 494,149 --
Due to affiliate..................................... 96,159 --
Sales tax payable.................................... 96,524 14,117
---------- ----------
Total current liabilities.......................... 820,305 168,028
Long-term debt, net of current portion (Note 5)........ -- 194,792
Commitment (Note 7)
Members' equity........................................ 721,065 1,342,153
Less subscription receivable........................... (1,000) --
---------- ----------
Total members' equity.............................. 720,065 1,342,153
---------- ----------
Total liabilities and members' equity.............. $1,540,370 $1,704,973
========== ==========
</TABLE>
See accompanying notes.
F-44
<PAGE>
GREENWICH INDUSTRIAL SERVICES, LLC
(A LIMITED LIABILITY COMPANY)
STATEMENTS OF OPERATIONS AND MEMBERS' EQUITY
<TABLE>
<CAPTION>
Year ended December
31,
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Revenues:
Auction............................................... $9,055,411 $7,529,412
Appraisal............................................. 319,855 304,308
---------- ----------
Total revenues...................................... $9,375,266 7,833,720
Operating Expenses:
Direct auction costs.................................. 7,907,833 5,876,045
Selling, general and administrative................... 864,638 1,187,030
Depreciation and amortization......................... 11,120 25,078
---------- ----------
Total operating expenses............................ 8,783,591 7,088,153
---------- ----------
Income from operations.................................. 591,675 745,567
Other income (expense):
Interest expense...................................... (16,099) (44,366)
Interest income....................................... 37,531 53,539
Other................................................. 1,461 35,143
---------- ----------
22,893 44,316
Net income.............................................. 614,568 789,883
Members' equity, beginning of year...................... 280,497 720,065
Less distributions...................................... (175,000) (167,795)
---------- ----------
Members' equity, end of year............................ $ 720,065 $1,342,153
========== ==========
</TABLE>
See accompanying notes.
F-45
<PAGE>
GREENWICH INDUSTRIAL SERVICES, LLC
(A LIMITED LIABILITY COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended
December 31,
----------------------
1998 1999
----------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income............................................ $ 614,568 $ 789,883
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization....................... 11,120 25,078
Accounts receivable................................. (298,351) 41,887
Accounts receivable, affiliate...................... -- (22,300)
Equipment held for resale........................... (282,657) 143,187
Prepaid expenses and deposits....................... 290,456 (21,716)
Accounts payable and accrued expenses............... 3,754 9,813
Due to affiliate.................................... 96,159 (96,159)
Due to customers.................................... (978,213) (494,149)
Sales tax payable................................... (216,894) (82,407)
----------- ---------
Net cash provided by (used in) operating activities... (760,058) 293,117
Cash flows from investing activities
Advances (to) from members............................ (44,954) 46,354
Acquisition of furniture and equipment................ -- (406,024)
Organization costs.................................... (17,615) --
----------- ---------
Net cash used in investing activities................. (62,569) (359,670)
Cash flows from financing activities
Proceeds from borrowing............................... -- 212,500
Principal payments in note payable.................... -- (7,083)
Distributions to members.............................. (175,000) (167,795)
Repayments to member.................................. (32,726) --
----------- ---------
Net cash used in financing activities................. (207,726) 37,622
----------- ---------
Net decrease in cash.................................. (1,030,353) (28,931)
Cash, beginning of year............................... 1,873,239 842,886
----------- ---------
Cash, end of year..................................... $ 842,886 $ 813,955
=========== =========
Supplemental disclosures of cash flow information
Interest paid......................................... $ 16,099 $ 44,366
=========== =========
</TABLE>
See accompanying notes.
F-46
<PAGE>
GREENWICH INDUSTRIAL SERVICES, LLC
(A LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. Organization and Business
Greenwich Industrial Services, LLC (the "Company") was formed as a
Connecticut Limited Liability Company in April 1997 to perform appraisals,
auctions, asset recovery and liquidation of equipment owned by others
throughout the world.
The Company was 96% owned by Greenwich Financial Group, Inc., whose owner is
also the 100% owner of Avatar Alliance, L.P. (an affiliate) with the remaining
4% owned by its current members. During 1999, the current members purchased the
entire interest of Greenwich Financial Group, Inc.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of the Company's financial statements in accordance with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and the accompanying notes. Actual amounts could
differ from those estimates.
Income Taxes
The Company is not subject to federal income taxes and no provision for
federal income taxes is made in the financial statements. The Company's
operating results are included in the respective member's federal income tax
returns.
Cash Held in Escrow / Due To Customers
The Company generally collects the gross proceeds from an auction on behalf
of the selling parties and holds such proceeds in an escrow account until the
final settlement date of the auction. These amounts are classified as cash held
in escrow in the accompanying balance sheets. Cash held in escrow is excluded
from cash for purposes of the statements of cash flows.
The portion of the proceeds that must be remitted to the owner of the goods
that were sold during an auction is reflected as due to customers in the
accompanying balance sheets, net of the Company's commissions and expense
reimbursements that have not been disbursed from the escrow account.
Accounts Receivable, Affiliate / Due to Affiliate
Accounts receivable, affiliate at December 31, 1999 represents the Company's
share of proceeds related to the sale of airframe equipment due from Avatar
Alliance, L.P. Due to affiliate at December 31, 1998 represents funds due to
Avatar Alliance, L.P. for the Company's portion of the charges related to the
sharing of office space.
Equipment Held for Resale
Equipment held for resale represents equipment not sold at an initial
auction. The equipment is stated at the lower of cost or market based on a
specific identification method.
F-47
<PAGE>
GREENWICH INDUSTRIAL SERVICES, LLC
(A LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed on a
straight line basis over the estimated useful lives of the related assets. The
useful lives range from three years for computer equipment and furniture and
fixtures to thirty-nine years for the building.
Revenue Recognition
Commission income from auctions is recognized upon closing of the related
auction less estimates for certain allowances and after resolution of any
significant uncertainties as to ultimate collection of auction proceeds.
Commission income consists of a fee based on the transaction price plus
revenues associated with other costs and services.
Revenue and cost of sales from auctions of the Company's own inventory are
recognized upon sale and shipment of the equipment and after resolution of any
significant uncertainties as to ultimate collection of auction proceeds.
Revenues from appraisal and other services are recognized when the services
are performed. Costs related to appraisal services are included within general
and administrative expenses in the accompanying statements of operations and
member's equity.
Organization Costs
Organization costs were fully amortized in 1999. Prior to 1999 such costs
were being amortized on a straight-line basis over five years. Amortization
expense for the years ended December 31, 1998 and 1999 was $8,512 and $13,225,
respectively.
Employee Retirement Plan
The Company participates in a 401(k) Plan sponsored and administered by an
affiliate. The Plan covers substantially all employees who are allowed to
contribute a percentage of salary, based on certain parameters as defined in
the Plan. The Company does not match any contributions. No fees are charged to
the Company for Plan administration.
Advertising Costs
Advertising costs are expensed as incurred. Total advertising expenses were
$179,475 and $298,330 for the years ended December 31, 1998 and 1999,
respectively.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash, cash in escrow and accounts
receivable. Cash and cash in escrow are deposited with high credit, quality
financial institutions. As of December 31, 1998 and 1999, the Company has no
significant concentrations of credit risk. The Company's accounts receivable
are derived from revenue earned from customers located in the U.S. and are
denominated in U.S. dollars.
Fair Value of Financial Instruments
As of December 31, 1998 and 1999, the respective carrying values of the
Company's financial instruments approximated their fair values. These financial
instruments include cash, due from members, accounts payable,
F-48
<PAGE>
GREENWICH INDUSTRIAL SERVICES, LLC
(A LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS--(Continued)
accrued expenses, due to customers and debt. Carrying values were estimated to
approximate fair values for these financial instruments as they are short-term
in nature and are receivable or payable on demand.
3. Property and Equipment
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1999
------- --------
<S> <C> <C>
Building..................................................... $ -- $344,268
Office equipment............................................. 11,368 73,124
------- --------
11,368 417,392
Less accumulated depreciation................................ (4,563) (16,416)
------- --------
$ 6,805 $400,976
======= ========
</TABLE>
Depreciation expense for the years ended December 31, 1998 and 1999 was
$2,608 and $11,853, respectively.
4. Note Payable--Bank
In September 1998, the Company secured a line of credit with a bank for up
to $5 million. The agreement allows for borrowings against qualified asset
purchase and auction service transactions and allows the Company to issue
letters of credit against specified transactions. Interest is payable monthly
based on either the bank's prime rate plus .25% or LIBOR plus 2.5%. The
agreement expires in June 2001. Borrowings are secured by the underlying assets
acquired and are also personally guaranteed by the Company's members.
As of December 31, 1998 and 1999, there were no outstanding borrowings. In
1999, the Company had issued a letter of credit in the amount of $250,000 which
expired on January 7, 2000.
5. Long-Term Debt
<TABLE>
<S> <C>
The note payable is payable through monthly payments of $885 plus
interest calculated at either the bank's prime rate plus .25% or
LIBOR plus 2.5%. The interest rate at December 31, 1999 was
8.48%. Loan matures in April 2009 with a balloon payment for
remaining balance secured by the building and guarantee of the
Company's members............................................... $205,417
Less current portion............................................. (10,625)
--------
$194,792
========
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Year ending December 31:
2000........................................................... $ 10,625
2001........................................................... 10,625
2002........................................................... 10,625
2003........................................................... 10,625
2004........................................................... 10,625
Thereafter..................................................... 152,292
--------
$205,417
========
</TABLE>
F-49
<PAGE>
GREENWICH INDUSTRIAL SERVICES, LLC
(A LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Related Party Transactions
Due from Member
The Company advanced and borrowed funds on an as needed basis from its
affiliate during 1998. The advances has an interest rate at 9% and were payable
on demand. All advances have been repaid in 1999.
Expense Allocation
The Company shares office space with other companies affiliated through
common ownership. Allocated expenses to the Company totaled $90,223 and $23,316
in 1998 and 1999, respectively.
7. Commitments
Leases
During 1999, the Company leased certain equipment under noncancellable
operating leases expiring at various times through September 2000. Future
minimum lease payments totaled $9,158 and extend through September 30, 2000.
Rent expense was $14,760 in 1999, and related to charge for office
equipment. In 1998 rent expense was changed through the allocation from its
affiliate.
8. Limited Liability Company Agreement
Under the terms of the LLC Agreement (the "Agreement"), the proportionate
interest of the members in the Company's net profits, net losses, and other
items of net income, gain or loss is equal to their percentage interest in the
LLC. The Agreement expires March 31, 2027. The Agreement provides that no
member shall be liable for the liabilities of the Company. Any member may
assign all or any portion of his membership interest to any other member upon
prior written notice to the manager. Upon dissolution of the Company, the
property of the Company will be distributed as follows: (a) to creditors in
satisfaction of Company liabilities and (b) to the members in proportion to
their percentage interests.
9. Subsequent Event
Effective February 29, 2000, the Company was acquired by DoveBid, Inc.
F-50
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Haltek Electronics dba Test Lab
We have audited the accompanying balance sheets of Haltek Electronics dba
Test Lab ("the Company") as of June 30, 1999 and December 31, 1999, and the
related statements of operations, shareholders' equity, and cash flows for the
year ended June 30, 1999 and the six months ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Haltek Electronics at June
30, 1999 and December 31, 1999, and the results of its operations and its cash
flows for the year ended June 30, 1999 and the six months ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States.
/s/ ERNST & YOUNG LLP
March 2, 2000
San Francisco, California
F-51
<PAGE>
HALTEK ELECTRONICS DBA TEST LAB
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
----------------------- December 31,
1998 1999 1999
----------- ----------- ------------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents............... $ 281,312 $ 476,540 $ 448,612
Accounts receivable, net of allowance
for doubtful accounts of $5,000 at June
30, 1998 and $6,000 at June 30, 1999
and December 31, 1999.................. 627,902 673,167 1,427,094
Inventory............................... 2,777,095 2,461,212 2,762,260
Other assets............................ 83,384 9,211 7,732
----------- ----------- -----------
Total current assets.................. 3,769,693 3,620,130 4,645,698
Fixed assets, net......................... 208,334 197,572 195,988
Other assets.............................. 46,280 52,443 52,443
Deferred tax asset........................ -- 1,488 34,831
----------- ----------- -----------
Total assets.......................... $ 4,024,307 $ 3,871,633 $ 4,928,960
=========== =========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable........................ $ 418,767 $ 504,392 $ 701,064
Accrued expenses........................ 195,474 208,170 161,381
Bank line of credit..................... 461,500 -- --
Income taxes payable.................... -- -- 425,108
Current portion of notes payable--
shareholder............................ 115,075 427,359 347,128
----------- ----------- -----------
Total current liabilities............. 1,190,816 1,139,921 1,634,681
Notes payable--shareholder, less current
portion.................................. 707,768 584,763 516,799
Other liabilities......................... 10,000 10,000 --
Shareholders' equity:
Common stock, no par value: Authorized
shares--1,000,000 Issued and
outstanding shares--267,499 in 1998 and
1999................................... 40,365 40,365 40,365
Retained earnings....................... 2,075,358 2,096,584 2,737,115
----------- ----------- -----------
Total shareholders' equity............ 2,115,723 2,136,949 2,777,480
----------- ----------- -----------
Total liabilities and shareholders'
equity............................... $ 4,024,307 $ 3,871,633 $ 4,928,960
=========== =========== ===========
</TABLE>
See accompanying notes.
F-52
<PAGE>
HALTEK ELECTRONICS DBA TEST LAB
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six months Twelve months
Year ended June 30, ended ended
----------------------- December 31, December 31,
1998 1999 1999 1999
----------- ---------- ------------ -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues.................. $6,866,438 $5,942,365 $4,263,943 $7,399,729
Cost of revenues.......... 4,581,552 4,143,208 2,329,726 4,827,604
---------- ---------- ---------- ----------
Gross profit.............. 2,284,886 1,799,157 1,934,217 2,572,125
---------- ---------- ---------- ----------
Operating expenses:
Sales and marketing..... 106,104 86,265 65,300 100,709
General and
administrative......... 2,122,434 1,596,886 771,797 1,591,611
---------- ---------- ---------- ----------
Total operating
expenses............. 2,228,538 1,683,151 837,097 1,692,320
---------- ---------- ---------- ----------
Income from operations.... 56,348 116,006 1,097,120 879,805
Interest income........... 16,285 13,075 -- 6,833
Interest expense.......... (92,082) (100,787) (31,481) (89,153)
---------- ---------- ---------- ----------
Net (loss) income before
taxes on income.......... (19,449) 28,294 1,065,639 797,485
Taxes on income........... 4,744 (7,068) (425,108) (318,291)
---------- ---------- ---------- ----------
Net (loss) income ........ $ (14,705) $ 21,226 $ 640,531 $ 479,194
========== ========== ========== ==========
</TABLE>
See accompanying notes.
F-53
<PAGE>
HALTEK ELECTRONICS DBA TEST LAB
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Total
-------------- Paid In Retained Shareholders'
Shares Amount Capital Earnings Equity
------- ------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balances at June 30, 1997
(unaudited).............. 267,499 $ -- $40,365 $2,090,063 $2,130,428
Net loss (unaudited).... -- -- -- (14,705) (14,705)
------- ---- ------- ---------- ----------
Balances at June 30, 1998
(unaudited).............. 267,499 -- 40,365 2,075,358 2,115,723
Net income.............. -- -- -- 21,226 21,226
------- ---- ------- ---------- ----------
Balances at June 30,
1999..................... 267,499 -- 40,365 2,096,584 2,136,949
Net income.............. -- -- -- 640,531 640,531
------- ---- ------- ---------- ----------
Balances at December 31,
1999..................... 267,499 $ -- $40,365 $2,737,115 $2,777,480
======= ==== ======= ========== ==========
</TABLE>
See accompanying notes.
F-54
<PAGE>
HALTEK ELECTRONICS DBA TEST LAB
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months
Year ended June 30, ended
--------------------- December 31,
1998 1999 1999
----------- --------- ------------
(Unaudited)
<S> <C> <C> <C>
Operating activities
Net income (loss)......................... $ (14,705) $ 21,226 $ 640,531
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation............................ 15,763 20,466 5,040
Deferred tax asset...................... -- (1,488) (33,343)
Change in operating assets and
liabilities:
Accounts receivable..................... 477,295 (45,265) (753,927)
Inventory............................... (187,052) 315,883 (301,048)
Other assets............................ (83,384) 74,173 1,479
Accounts payable........................ (208,016) 85,625 196,672
Cash overdraft.......................... (205,507) -- --
Accrued expenses........................ (3,909) 12,696 (46,789)
Income taxes payable.................... -- -- 425,108
Other liabilities....................... -- -- (10,000)
--------- --------- ---------
Net cash (used in) provided by operating
activities............................... (209,515) 483,316 123,723
Investing activities
Purchases of property and equipment....... (3,159) (9,704) (3,456)
Increase in cash surrender value of
officers' life insurance................. (3,600) (6,163) --
--------- --------- ---------
Net cash used in investing activities..... (6,759) (15,867) (3,456)
Financing activities
Proceeds from notes payable to
shareholders............................. -- 392,284 --
Principal payments to shareholders........ (216,611) (203,005) (148,195)
Line of credit............................ 714,197 (461,500) --
--------- --------- ---------
Net cash provided by (used in) financing
activities............................... 497,586 (272,221) (148,195)
--------- --------- ---------
Net increase (decrease) in cash........... 281,312 195,228 (27,928)
Cash and cash equivalents at beginning of
year..................................... -- 281,312 476,540
--------- --------- ---------
Cash and cash equivalents at end of year.. $ 281,312 $ 476,540 $ 448,612
========= ========= =========
Supplemental disclosure of cash flows
information
Interest paid............................. $ 92,082 $ 100,787 $ 31,481
========= ========= =========
Supplemental disclosure--noncash
transactions
Write off fully depreciated fixed assets.. $ -- $ 3,159 $ 9,704
========= ========= =========
</TABLE>
See accompanying notes.
F-55
<PAGE>
HALTEK ELECTRONICS DBA TEST LAB
NOTES TO FINANCIAL STATEMENTS
1. The Company:
Haltek Electronics (the "Company") was incorporated in 1973. The Company
purchases used electronic test and measurement equipment and refurbishes it
for resale.
On February 29, 2000, Dovebid, Inc., acquired all of the Company's
outstanding shares of common stock, at which time the Company became a wholly
owned subsidiary of Dovebid, Inc.
2. Summary of Significant Accounting Policies:
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the reported amounts of revenues and expenses.
Actual results may differ from those estimates.
Concentrations of Credit Risk and Credit Evaluations--Financial instrument,
which subject the Company to concentrations of credit risk consists primarily
of trade accounts receivable. For years ended June 30, 1998 (unaudited) and
1999 and the six months ended December 31, 1999, no single customer accounted
for greater than 10% of net revenue.
Fixed Assets--Fixed assets are stated at cost less accumulated depreciation
and amortization. Depreciation is computed using accelerated methods (which
approximates the straight line method) over the estimated useful lives of the
related assets, which range from five to seven years.
Income Taxes--The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which requires the use of the liability method in
accounting for income taxes. Under SFAS 109, deferred tax assets and
liabilities are measured based on differences between the financial reporting
and tax bases of assets and liabilities using enacted tax rate and laws that
are expected to be in effect when the differences are expected to reverse.
Revenue Recognition--The Company's revenues are derived primarily from the
resale of used laboratory equipment. The Company recognizes revenues as
equipment is shipped.
The Company has incurred a nominal amount of warranty expense in past years
and management does not expect that warranty costs will be material in the
future.
Inventory--Inventory consists of used laboratory equipment that is
refurbished for resale. Inventory is stated at the lower of cost or market
value.
Recent Accounting Pronouncements -- In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivatives Financial Instruments and for Hedging Activities"
("SFAS 133"), which provides a comprehensive and consistent standard for the
recognition and measurement of derivatives and hedging activities. This
Statement is effective for fiscal years beginning after June 15, 1999. The
Company adopted SFAS 133 in 1999. The adoption of SFAS 133 did not have a
material impact on the Company's financial statements.
3. Bank Line of Credit:
As of June 30, 1999 and December 31, 1999, the Company had available an
unused line of credit with a bank. The line of credit provides that the
Company may borrow up to $700,000 until January 1, 2000, at the bank's prime
rate plus .50% (9.25% at December 31, 1999). As of June 30, 1998 (unaudited)
the line of credit was $500,000 and the Company had drawn $461,500.
The line of credit is secured by the Company's assets and is guaranteed by
one of the major shareholders.
F-56
<PAGE>
HALTEK ELECTRONICS DBA TEST LAB
NOTES TO FINANCIAL STATEMENTS--(Continued)
4. Notes Payable--Shareholder:
Notes payable--shareholder consisted of the following:
<TABLE>
<CAPTION>
June 30,
---------------------- December 31,
1998 1999 1999
----------- ---------- ------------
(unaudited)
<S> <C> <C> <C>
Note payable, shareholder, secured by the
assets of the Company, monthly
installments of $14,916, interest rate of
8% per annum, maturing April 1, 2004..... $ 822,843 $ 707,768 $643,927
Note payable, shareholder, secured by the
assets of the Company, monthly
installments paid from available cash,
accruing interest rate of 8% per annum,
principal and accrued interest are due on
demand................................... -- 304,354 220,000
--------- ---------- --------
822,843 1,012,122 863,927
Less current portion...................... 115,075 427,359 347,128
--------- ---------- --------
$ 707,768 $ 584,763 $516,799
========= ========== ========
</TABLE>
Maturities of notes payable--shareholder were as follows, for the year
ending December 31:
<TABLE>
<S> <C>
2000............................................................ $347,128
2001............................................................ 148,450
2002............................................................ 155,171
2003............................................................ 124,774
2004............................................................ 88,404
--------
$863,927
========
</TABLE>
5. Related Party Transactions:
The Company leases certain office space on a month to month operating lease
from a shareholder.
For the years ended June 30, 1998 (unaudited) and 1999 and the six months
ended December 31, 1999, the Company paid rent expense to the shareholder of
$72,250, $165,000 and $161,000, respectively and is included in general and
administrative expenses in the statement of operations.
6. Income Taxes:
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of the years ended June
30, 1998 (unaudited) and June 30, 1999 and the six months ended December 31,
1999 are as follows:
<TABLE>
<CAPTION>
June 30,
------------------ December 31,
1998 1999 1999
----------- ------ ------------
(unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Bad Debt Allowance......................... $ -- $1,192 $ 2,570
State Taxes................................ -- 296 32,261
----- ------ -------
Total Deferred tax assets................ -- 1,488 34,831
----- ------ -------
Net Deferred tax asset (liability)........... $ -- $1,488 $34,831
===== ====== =======
</TABLE>
F-57
<PAGE>
HALTEK ELECTRONICS DBA TEST LAB
NOTES TO FINANCIAL STATEMENTS--(Continued)
For financial reporting purposes, the provision for income taxes consists of
the following for the years ended June 30, 1998 (unaudited) and June 30, 1999
and for the six months ended December 31, 1999.
<TABLE>
<CAPTION>
June 30,
------------------ December 31,
1998 1999 1999
----------- ------ ------------
(unaudited)
<S> <C> <C> <C>
Current
Federal................................... $(10,522) $5,339 $363,370
State..................................... (546) 3,217 94,428
-------- ------ --------
Total Current........................... (11,068) 8,556 457,798
-------- ------ --------
Deferred
Federal................................... 6,324 (1,046) (32,601)
State..................................... -- (442) (88)
-------- ------ --------
Total Deferred.......................... 6,324 (1,488) (32,689)
-------- ------ --------
Total Tax Provision....................... $ (4,744) $7,068 $425,108
======== ====== ========
</TABLE>
The federal statutory rate reconciles to the Company's effective tax rate as
follows for the year ended June 30, 1998 (unaudited) and June 30, 1999 and for
the six months ended December 31, 1999.
<TABLE>
<CAPTION>
June 30, December 31,
1999 1999
-------- ------------
<S> <C> <C>
Federal Statutory income tax rate...................... 15.00% 34.00%
State tax provision, net of federal tax benefit........ 8.34 5.83
Other.................................................. 1.64 0.06
----- -----
Effective tax rate..................................... 24.98% 39.89%
===== =====
</TABLE>
7. Retirement Plan:
The Company has a retirement SEP/IRA plan for the employees of the Company.
Contributions by the Company to the plan are discretionary and no amounts are
contributed by the employees. There were no contributions to the plan for the
year ended December 31, 1999. Contribution expense and amounts accrued for the
years ended June 30, 1998 (unaudited) and 1999 and for the six months ended
December 31, 1999 were $120,000, $110,000 and $60,000, respectively.
The Company was purchased subsequent to February 29, 2000 and it is intended
that the plan will be dissolved with the funds being rolled over into new
plans.
8. Unaudited Information:
The statements of operations for the twelve months ended December 31, 1999
is unaudited but includes all adjustments (consisting only of normal recurring
adjustments) that the Company considers necessary for fair presentation of the
financial operations for that period.
F-58
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Philip Pollack & Co., Inc.
We have audited the accompanying balance sheets of Philip Pollack & Co.,
Inc. as of December 31, 1999, February 28, 1999, and February 28, 1998, and the
related statements of income and retained earnings and cash flows for the ten
month period ended December 31, 1999 and years ended February 28, 1999 and
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Philip Pollack & Co., Inc.
at December 31, 1999, February 28, 1999, and February 29, 1998, and the results
of its operations and its cash flows for the ten month period ended December
31, 1999 and the years ended February 28, 1999 and 1998, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
March 7, 2000
Chicago, Illinois
F-59
<PAGE>
PHILIP POLLACK & CO., INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
February 28,
December 31, -------------------
1999 1999 1998
------------ ---------- --------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents................... $ 18,558 $ 887,205 $185,257
Billed accounts receivable, net of allowance
for doubtful accounts of $34,070, $34,070,
and $20,313, respectively.................. 159,318 150,198 171,947
Unbilled accounts receivable................ 9,760 70,172 6,371
Deferred auction and appraisal costs........ 118,845 60,327 3,539
Prepaid expenses and other current assets... 44,653 167,993 23,905
-------- ---------- --------
Total current assets...................... 351,134 1,335,895 391,019
Other assets:
Deferred tax asset.......................... 26,816 34,974 79,707
Intangible asset, net....................... 18,000 27,000 36,000
Equipment held for sale..................... 77,931 21,593 --
Due from shareholders....................... 440,485 315,670 257,079
Total other assets............................ 563,232 399,237 372,786
Equipment and leasehold improvements, net..... 52,407 26,449 30,962
-------- ---------- --------
Total assets.............................. $966,773 $1,761,581 $794,767
======== ========== ========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable............................... $224,179 $ 224,702 $102,525
Accounts payable............................ 174,922 176,219 150,850
Accrued litigation expense.................. 217,192 -- --
Auction proceeds payable.................... 33,987 849,644 276,107
-------- ---------- --------
Total current liabilities................. 650,280 1,250,565 529,482
Deferred income tax........................... 51,231 100,211 36,931
Due to shareholders........................... 98,611 148,899 218,480
Shareholders' equity
Preferred stock, no par value 1,000 shares
authorized, none outstanding............... -- -- --
Common stock, no par value 10,000 shares
authorized, 1,000 issued and outstanding-at
stated value............................... 1,000 1,000 1,000
Retained earnings........................... 165,651 260,906 8,874
-------- ---------- --------
Total shareholders' equity................ 166,651 261,906 9,874
-------- ---------- --------
Total liabilities and shareholders' equity.. $966,773 $1,761,581 $794,767
======== ========== ========
</TABLE>
See accompanying notes to financial statements.
F-60
<PAGE>
PHILIP POLLACK & CO., INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Ten Month Year ended
Period Ended February 28,
December 31, --------------------
1999 1999 1998
------------ --------- ---------
<S> <C> <C> <C>
Revenues:
Auction income............................ $ 808,120 $ 576,356 $ 534,696
Appraisal income.......................... 920,592 1,473,230 979,550
--------- --------- ---------
Total revenues............................. 1,728,712 2,049,586 1,514,246
Operating expenses:
Direct auction costs...................... 442,620 369,611 336,904
Direct appraisal costs.................... 120,311 93,891 25,370
Selling, general and administrative
expenses................................. 1,081,794 1,248,455 1,062,905
Provision for litigation expense.......... 217,192 -- --
--------- --------- ---------
Total operating expenses................... 1,861,917 1,711,957 1,425,179
--------- --------- ---------
Income (loss) from operations.............. (133,205) 337,629 89,067
Other income............................... 18,167 50,777 11,311
Interest expense........................... (21,040) (28,360) (15,249)
--------- --------- ---------
Income (loss) before income taxes.......... (136,078) 360,046 85,129
Income taxes (credit)...................... (40,823) 108,014 25,539
--------- --------- ---------
Net income (loss).......................... (95,255) 252,032 59,590
Retained earnings (deficit) at beginning of
period.................................... 260,906 8,874 (50,716)
--------- --------- ---------
Retained earnings at end of period......... $ 165,651 $ 260,906 $ 8,874
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-61
<PAGE>
PHILIP POLLACK & CO., INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Ten Month
Period Ended Year ended February 28,
December 31, -------------------------
1999 1999 1998
------------ ------------ -----------
<S> <C> <C> <C>
Operating activities:
Net income (loss).................... $(95,255) $ 252,032 $ 59,590
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization...... 13,137 20,932 22,280
Deferred income taxes.............. (40,823) 108,014 25,539
Changes in operating assets and
liabilities:
Billed accounts receivable....... (9,120) 21,749 (58,597)
Unbilled accounts receivable..... 60,412 (63,801) (6,371)
Auction inventory................ (56,338) (21,593) 44,500
Deferred auction and appraisal
costs........................... (58,518) (56,788) 20,291
Prepaid expenses and other
current assets.................. 123,340 (144,088) 47,615
Accounts payable................. (1,297) 25,369 1,858
Accrued litigation expense....... 217,192 -- --
Auction proceeds payable......... (815,657) 573,537 (34,318)
-------- ------------ -----------
Net cash provided by (used in)
operating activities................ (662,927) 715,363 122,387
Investing activity:
Purchases of equipment and leasehold
improvements.......................... (30,094) (7,428) (57,767)
-------- ------------ -----------
Net cash used in investing activity.. (30,094) (7,428) (57,767)
Financing activities:
(Repayments ) borrowings under notes
payable, net........................ (523) 122,177 (104,000)
Due from shareholder, net............ (124,815) (58,591) (14,967)
Due to shareholder, net.............. (50,288) (69,581) (29,655)
-------- ------------ -----------
Net cash provided by (used in)
financing activities................ (175,626) (5,995) (148,622)
-------- ------------ -----------
Net increase in cash and cash
equivalents........................... (868,647) 701,940 (84,002)
Cash and cash equivalents at beginning
of period............................. 887,205 185,257 269,259
-------- ------------ -----------
Cash and cash equivalents at end of
period................................ $ 18,558 $ 887,205 $ 185,257
======== ============ ===========
Supplemental disclosure of cash flow
information:
Interest paid.......................... $ 21,040 $ 28,360 $ 15,249
======== ============ ===========
</TABLE>
See accompanying notes to financial statements.
F-62
<PAGE>
PHILIP POLLACK & CO., INC.
NOTES TO FINANCIAL STATEMENTS
Ten month period ended December 31, 1999 and
Years ended February 28, 1999 and 1998
1. Basis of Presentation and Description of Business
Philip Pollack & Co., Inc. ("the Company") is a business to business
auctioneer focusing on the used capital equipment market. The Company also
provides appraisal and other related services. The accompanying financial
statements have been prepared using historical cost basis. On February 7, 2000
the shareholders agreed to sell all of the common stock of the Company to
Dovebid, Inc., and the carrying values of assets and liabilities in the
accompanying financial statements have not been adjusted for any purchase
accounting adjustments. This transaction closed on March 2, 2000.
2. Summary of Significant Accounting Policies
Equipment and Leasehold Improvements
Equipment and leashold improvements are stated at cost. Depreciation and
amortization are computed using accelerated methods over the estimated useful
lives of the respective assets, ranging from five to seven years.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which requires the use of the liability method of accounting for income
taxes. Under SFAS 109, deferred tax assets and liabilities are measured based
on differences between the financial reporting and tax bases of assets and
liabilities using enacted tax rate and laws that are expected to be in effect
when the differences are expected to reverse.
The Company files income tax returns on a cash basis. Deferred income taxes
are provided on differences between accrual and cash basis.
Accounting Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires Company management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. The Company will, when determined
necessary, accrue for estimated liabilities when the financial effect is
probable and can be estimated by management. Actual results could differ from
those estimates.
Revenue Recognition
Buyer's premiums and direct auction expenses charged to customers are
recognized as auction income upon closing of the related auction less estimates
for certain allowances and after resolution of any significant uncertainties as
to the ultimate collection of auction proceeds. Buyer's premiums consists of a
fee based on the transaction price. Direct costs of auctions are deferred and
charged to expense upon closing of the related auction.
Income from appraisals are recognized as the services are performed.
Unbilled Accounts Receivable
Unbilled accounts receivable represent direct costs of appraisals incurred
and income recognized on appraisals in process. The amounts are typically
billed within the following month.
F-63
<PAGE>
PHILIP POLLACK & CO., INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Advertising Costs
The Company expenses advertising costs as incurred.
3. Equipment and leasehold improvements
Equipment and leasehold improvements consists of the following:
<TABLE>
<CAPTION>
February 28,
-------------------- December 31,
1998 1999 1999
--------- --------- ------------
<S> <C> <C> <C>
Furniture and fixtures....................... $ 124,394 $ 124,394 $ 124,394
Computers and software....................... 112,647 119,910 147,494
Office equipment............................. 8,398 8,563 11,074
--------- --------- ---------
245,439 252,867 282,962
Less Accumulated depreciation................ (214,477) (226,418) (230,555)
--------- --------- ---------
$ 30,962 $ 26,449 $ 52,407
========= ========= =========
</TABLE>
4. Accrued Litigation Expense
On August 4, 1999, a judgment in the amount of $217,192 was entered against
the Company in the State of Idaho as a result of litigation arising from
appraisal services and a provision for this judgment was recorded in the ten
month period ended December 31, 1999. Management intends to pursue, through
legal counsel, the non-enforceability of this judgement in the State of
Illinois.
5. Notes Payable
Notes payable are borrowings generally under six month notes to a bank which
bear interest (9.5% at December 31, 1999) at 1% over the bank's prime rate. The
notes are collateralized by inventory, chattel paper, accounts and general
intangibles of the Company and are personally guaranteed by a shareholder.
6. Related Party Transactions
During the ten months ended December 31, 1999, the Company and Dove Brothers
LLC, a subsidiary of Dove Bid Inc., jointly conducted an auction. The Company's
portion of buyer's premium and direct auction costs are reflected in the
statement of operations.
In addition, the Company engaged an advertising firm owned by the
shareholders to provide advertising services in the amount of $134,313,
$109,451 and $149,714 for the years ended February 28, 1998 and 1999 and in the
ten-month period ended December 31, 1999, respectively.
F-64
<PAGE>
PHILIP POLLACK & CO., INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. Commitments and Contingencies
Future minimum rental payments under non cancelable operating lease
agreements with terms in excess of one year are as follows:
<TABLE>
<S> <C>
2000............................................................. $21,233
2001............................................................. 21,933
2002............................................................. 22,633
2003............................................................. 23,333
2004............................................................. 23,700
Thereafter....................................................... 15,667
</TABLE>
Rent expense under all operating leases totaled $64,203, $73,734, $66,707
for the years ended February 28, 1998 and 1999 and the ten-month period ended
December 31, 1999, respectively.
8. Income Taxes
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
February 28,
---------------- December 31,
1998 1999 1999
------- -------- ------------
<S> <C> <C> <C>
Current:
Federal......................................... -- -- --
State........................................... -- -- --
------- -------- --------
Deferred (credit)................................. $25,539 $108,014 $(40,823)
------- -------- --------
$25,539 $108,014 $(40,823)
======= ======== ========
</TABLE>
At December 31, 1999, the Company had net operating losses carry forwards
(on a cash basis) for income tax purposes of approximately $89,000.
9. Impact of the Year 2000 (Unaudited)
The Company was not required to replace significant portions of its
software, and the Year 2000 issue did not cause operational problems for its
computer systems. Ultimately, any potential future impact of the Year 2000
issue will depend not only on corrective measures the Company undertook, but
also on the way in which the Year 2000 issue was addressed by businesses and
other entities whose financial condition or operational capability is important
to the company as vendors.
F-65
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Norman Levy Associates, Inc.
We have audited the accompanying consolidated balance sheets of Norman Levy
Associates, Inc. (a Michigan corporation) and subsidiaries as of April 30, 1999
and 1998, and the related consolidated statements of operations and retained
earnings, and cash flows for the years then ended. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Norman Levy
Associates, Inc. and subsidiaries as of April 30, 1999 and 1998, and the
consolidated results of their operations and their consolidated cash flows for
the years then ended, in conformity with accounting principles generally
accepted in the United States.
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
March 26, 2000
F-66
<PAGE>
NORMAN LEVY ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December April 30,
31, ---------------------
1999 1999 1998
----------- ---------- ----------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................. $ 2,661,246 $1,458,118 $1,381,942
Cash held for customers.................... 3,935,162 1,046,974 525,443
Accounts receivable, less allowance for
doubtful receivables of $204,000 and
$136,000 at April 30, 1999 and 1998....... 919,972 975,541 856,845
Receivable from stockholders............... 314,204 283,794 354,264
Advances to affiliates..................... 1,554,565 2,912,723 2,486,769
Unbilled costs and expenses................ -- 30,783 24,430
Prepaid expenses and other................. 219,350 173,967 116,948
----------- ---------- ----------
Total current assets................... 9,604,499 6,881,900 5,746,641
Property and equipment--at cost:
Furniture, fixtures and office equipment... 956,254 759,408 833,654
Leasehold improvements..................... 135,558 126,200 62,429
Vehicles................................... 168,949 168,949 129,572
----------- ---------- ----------
1,260,761 1,054,557 1,025,655
Less accumulated depreciation and
amortization.............................. 537,950 400,950 620,390
----------- ---------- ----------
722,811 653,607 405,265
Other assets................................. 56,112 125,270 168,770
----------- ---------- ----------
Total assets........................... $10,383,422 $7,660,777 $6,320,676
=========== ========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of notes payable........ $ 111,651 $ 111,648 $1,148,865
Line of credit............................. 742,387 2,141,794 1,395,515
Auction proceeds payable................... 3,935,162 1,046,974 525,443
Accounts payable........................... 629,655 363,985 345,525
Accrued expenses:
Salaries and wages....................... 925,742 873,135 579,837
Employees' profit sharing plan........... 330,719 187,368 179,380
Other current liabilities.................. 21,143 29,490 27,732
----------- ---------- ----------
Total current liabilities.............. 6,696,459 4,754,394 4,202,297
Deficit with investee........................ 354,177 657,849 --
Notes payable, less current maturities....... 373,598 437,305 --
Other long-term obligations.................. -- 111,954 128,958
Commitments and contingencies................ -- -- --
Stockholders' equity:
Common stock, $10 par value; 5,000 shares
authorized; 100 shares issued and
outstanding............................... 1,000 1,000 1,000
Retained earnings.......................... 2,958,188 1,698,275 1,988,421
----------- ---------- ----------
Total stockholders' equity............. 2,959,188 1,699,275 1,989,421
----------- ---------- ----------
Total liabilities and stockholders'
equity ............................... $10,383,422 $7,660,777 $6,320,676
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-67
<PAGE>
NORMAN LEVY ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Year ended Years ended April 30,
December 31, ----------------------
1999 1999 1998
------------ ---------- ----------
(Unaudited)
<S> <C> <C> <C>
Revenues:
Auction commissions...................... $ 3,632,171 $3,146,248 $3,020,054
Appraisal services....................... 7,073,307 6,473,436 3,972,065
----------- ---------- ----------
10,705,478 9,619,684 6,992,119
Costs and expenses:
Direct auction and appraisal costs....... 3,351,846 3,728,339 2,921,273
Sales and marketing...................... 2,736,501 3,005,119 2,037,290
General and administrative............... 3,369,245 2,419,167 2,227,680
Depreciation and amortization............ 235,595 190,971 140,129
----------- ---------- ----------
9,693,187 9,343,596 7,326,372
----------- ---------- ----------
Income (loss) from operations.............. 1,012,291 276,088 (334,253)
Other income (expense):
Income (loss) from investee.............. 26,671 (707,849) --
Interest expense......................... (239,770) (310,662) (369,291)
Interest income--related party........... 184,503 239,034 267,865
Interest income.......................... 336,628 213,243 279,163
----------- ---------- ----------
308,032 (566,234) 177,737
----------- ---------- ----------
Net earnings (loss) ....................... 1,320,323 (290,146) (156,516)
Beginning retained earnings................ 1,637,865 1,988,421 2,144,937
----------- ---------- ----------
Ending retained earnings................... $ 2,958,188 $1,698,275 $1,988,421
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-68
<PAGE>
NORMAN LEVY ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Twelve months
ended Years ended April 30,
December 31, -----------------------
1999 1999 1998
------------- ---------- -----------
(Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)................... $1,320,323 $ (290,146) $ (156,516)
Adjustments to reconcile net earnings
(loss) to net cash provided by (used
in) operating activities
Loss from investee.................. 404,178 657,849 --
Depreciation and amortization....... 235,595 190,971 140,129
Provision for bad debts............. 39,579 68,000 92,995
Loss on disposal of property and
equipment.......................... 58,946 31,625 14,612
Changes in operating assets and
liabilities:
Accounts receivable............... 192,958 (186,696) (533,194)
Unbilled costs and expenses....... -- (6,353) 821
Prepaid expenses and other........ 195,364 (57,019) 499,495
Other assets...................... -- 37,160 (124,251)
Auction proceeds payable.......... 490,385 521,531 (2,548,018)
Accounts payable.................. 353,165 18,460 91,179
Accrued expenses.................. 356,189 301,286 (413,771)
Other current liabilities......... -- 1,758 (348,230)
Dividends payable................. -- -- (416,136)
----------- ---------- -----------
Net cash provided by (used in)
operating activities........... 3,646,682 1,288,426 (3,700,885)
Cash flows from investing activities:
Purchases of property and equipment... -- (468,668) (223,286)
Proceeds from sales of property and
equipment............................ -- 4,070 13,200
Repayments from (advances to)
affiliates........................... 518,200 (425,954) (640,675)
Initial investment in investee........ -- -- (50,000)
----------- ---------- -----------
Net cash used in investing
activities..................... 518,200 (890,552) (900,761)
Cash flows from financing activities:
Proceeds from (repayments of) line of
credit, net.......................... (2,035,744) 746,279 (1,583,011)
Proceeds from notes payable........... -- -- 1,424,730
Repayments of notes payable........... (10,347) (599,912) (275,865)
Proceeds from (repayment of) other
long-term obligations................ -- (17,004) 92,716
Payments from stockholders............ 219,346 70,470 103,528
----------- ---------- -----------
Net cash provided by (used in)
financing activities........... (1,826,745) 199,833 (237,902)
----------- ---------- -----------
Net increase (decrease) in cash
and cash equivalents........... 2,338,137 597,707 (4,839,548)
Cash and cash equivalents at beginning
of year................................ 4,258,272 1,907,385 6,746,933
----------- ---------- -----------
Cash and cash equivalents at end of
year................................... 6,596,409 $2,505,092 1,907,385
=========== ========== ===========
Supplemental disclosure of cash flow
information:
Interest paid......................... $ 282,881 $ 308,202 $ 370,791
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-69
<PAGE>
NORMAN LEVY ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1999 and 1998
NOTE A--SUMMARY OF ACCOUNTING POLICIES
The company conducts auctions of industrial equipment for clients in various
industries. The company also performs appraisal services throughout the United
States for companies, lenders and buyers seeking advice on the value of
businesses, inventory and tangible and intangible assets. The company is
headquartered in Southfield, Michigan and has branch offices in Atlanta,
Boston, Chicago, Flagstaff and San Francisco.
The financial information as of December 31, 1999 and for the twelve months
ended December 31, 1999 is unaudited, but includes all adjustments (consisting
only of normal recurring adjustments) that the company considers necessary for
fair presentation of the financial position at such date and the results of
operations and cash flows for the period then ended.
A summary of the significant accounting policies consistently applied in the
presentation of the accompanying consolidated financial statements follows.
1. Principles of Consolidation
The consolidated financial statements include Norman Levy Associates, Inc.,
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
2. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. Cash and Cash Equivalents and Cash Held for Customers
Cash and cash equivalents include cash on hand, demand deposits and short-
term investments with original maturities of three months or less.
The company generally collects the gross proceeds from an onsite auction on
behalf of the selling parties and holds such proceeds until the final
settlement date of the auction. These amounts are classified as cash held for
customers in the accompanying balance sheets.
The portion of the proceeds that must be remitted to the owner of the assets
sold during an auction is reflected as a liability in the accompanying balance
sheets, net of the company's commissions and expense reimbursements that have
not been disbursed.
4. Fair Value of Financial Instruments
Due to their short-term nature, the carrying value of the company's current
financial assets and liabilities approximate their fair values. The fair value
of the company's borrowings, if determined based on current interest rates,
would not significantly differ from the recorded amounts.
5. Depreciation and Amortization
Office equipment, leasehold improvements and other property are recorded at
cost. Depreciation and amortization has been computed using both straight-line
and accelerated methods over the estimated useful
F-70
<PAGE>
NORMAN LEVY ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
lives of the respective assets or lease term. These useful lives range from
five to seven years for all property and equipment except for leasehold
improvements where the shorter of the useful life or lease term is used.
6. Revenue Recognition
The company recognizes revenue from appraisal fees as revenue when the
appraisal report is delivered, utilizing the completed contract method of
accounting for these relatively short-term contracts. Deposits received on
appraisal projects are deferred until completion of the appraisal report. Costs
and expenses are recognized during the same period in which the associated
revenue is earned. Accordingly, costs and expenses that are directly associated
with projects in process are deferred as unbilled costs and expenses in the
accompanying balance sheets until the matching revenue is earned. Costs and
expenses projected to exceed revenues are immediately expensed.
Auction commission revenue is recognized upon closing of the related auction
less allowances for uncertainties as to the collection of auction proceeds.
Commission income consists of a fee based on the transaction price plus
revenues associated with other costs and services.
NOTE B--CONCENTRATION OF CREDIT RISK
The company's cash and cash equivalents include deposits and overnight
investments primarily in one financial institution and had a net balance that
exceeded FDIC insurance levels at April 30, 1999 and 1998, by approximately
$1,905,092 and $1,207,385.
The company typically does not require collateral or other security of its
customers.
NOTE C--ADVERTISING COSTS
The company expenses advertising costs as incurred. During 1999 and 1998,
approximately $191,000 and $64,000 were expensed related to advertising.
NOTE D--INCOME TAXES
No provision for income taxes is reflected in the financial statements as
the company has elected under the Internal Revenue Service Code ("Code") to be
taxed as an S Corporation. There have been no distributions to stockholders for
the years ended April 30, 1999 and 1998 for the payment of taxes.
NOTE E--ADVANCES TO AFFILIATES
The advances to affiliates represent a revolving loan to an entity related
to the company through common control. The advance bears interest at 7.5% per
annum. Advances are funded by the company's foreign line of credit.
NOTE F--INVESTMENT IN (DEFICIT WITH) INVESTEE
The company owns a 50% interest in Levy/Latham, LLC ("Levy/Latham") whose
subsidiary, headquartered in Arizona, conducts auctions of equipment on behalf
of the U.S. Government. Operations commenced in July, 1998. The company
accounts for the investment in Levy/Latham on the equity method.
F-71
<PAGE>
NORMAN LEVY ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The investment in Levy/Latham consists of the following as of April 30:
<TABLE>
<CAPTION>
1999 1998
--------- -------
<S> <C> <C>
Initial capital contribution.......................... $ 50,000 $50,000
Loss from Levy/Latham for the period ended March 31,
1999 (707,849) --
--------- -------
Investment in (deficit with) investee............... $(657,849) $50,000
========= =======
</TABLE>
In July, 1998 Levy/Latham entered into a $7,000,000 bank line-of-credit
agreement. The company along with the other member of Levy/Latham, are
guarantors of the outstanding balance of $2,750,000 as of April 30, 1999.
NOTE G--LINE OF CREDIT
The company has an unsecured line of credit with a bank due September 30,
1999. The company owed $1,452,385 and $392,003 on a domestic line with interest
at 7.75% at April 30, 1999 and 8.5% at April 30, 1998. The company owed
$689,409 and $1,003,512 on a foreign line at interest rates of LIBOR plus 150
basis points (effective rates of 6.875% and 9.125% at April 30, 1999 and 1998).
As of April 30, 1999 and 1998, the company is in violation of a loan
agreement covenant requiring the company to maintain a minimum tangible net
worth of $2,783,000. The Company received a waiver related to this covenant
violation through December 31, 1999.
NOTE H--NOTE PAYABLE
The company has a note payable with a bank, collateralized by equipment with
monthly principal payments of $9,304 plus interest at 8%. Future maturities of
the long-term note payable are $112,000 in 2000, $112,000 in 2001, $112,000 in
2002, $112,000 in 2003 and $102,000 in 2004.
NOTE I--COMMITMENTS AND CONTINGENCIES
Auction Guarantee Agreements
The company periodically enters into agreements with auction clients under
which the company guarantees the clients a minimum payment. If the proceeds of
the auction sales are not adequate to fund the minimum payment, the company
funds the minimum payment and takes title to any remaining equipment. There
were no outstanding guarantees at April 30, 1999.
Bonus plan
The company has entered into agreements with certain employees to pay
additional compensation based on fixed amounts and a percentage the company's
profitability. The amounts due under these agreements were $267,000 and
$102,000 for the years ended April 30, 1999 and 1998.
F-72
<PAGE>
NORMAN LEVY ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Operating leases
The company is obligated under several operating lease agreements for office
space, equipment and vehicles expiring at various dates through 2003. The
future minimum lease payments under these operating leases as of April 30, 1999
are as follows:
<TABLE>
<S> <C>
Year ending April 30,
2000........................................................... $258,491
2001........................................................... 205,616
2002........................................................... 79,116
2003........................................................... 42,460
--------
Total future minimum lease payments.......................... $585,683
========
</TABLE>
Rental expense under the above operating leases totaled $241,484 and
$172,294 for the years ended April 30, 1999 and 1998.
Other long-term obligations
In September, 1997, the company purchased a trademark and other intangible
assets from an individual requiring the company to make monthly payments of
$1,300 for a term of 120 months. The trademark and other intangibles and
related liability were recorded based upon the present value of the monthly
stream of payments. The trademark and other intangibles are included in other
assets and are being amortized over their estimated useful lives on a straight-
line basis.
Profit sharing plan
The company maintains a defined contribution profit sharing plan for its
full-time employees. Employer contributions to the plan are at the discretion
of the Board of Directors. Contributions to the plan for the years ended April
30, 1999 and 1998 were $187,368 and $179,380.
Litigation
The company is involved in various legal claims and litigation in the normal
course of its business. In the opinion of management, based upon consultation
with legal counsel, the eventual outcome of such claims and litigation is not
expected to have a material adverse effect on the company's consolidated
financial position or results of operations.
NOTE K--SALE OF THE COMPANY (UNAUDITED)
On March 24, 2000, the company signed a Stock Purchase Agreement with
DoveBid, Inc. whereby the company sold all its issued and outstanding capital
stock for approximately $27.8 million. The total consideration consisted of
$17.8 million in cash and $10.0 million in convertible subordinated promissory
notes.
F-73
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses to be paid by DoveBid
in connection with the sale of the shares of common stock being registered
hereby. All amounts are estimates except for the SEC registration fee, the NASD
filing fee and the Nasdaq National Market filing fee.
<TABLE>
<S> <C>
SEC registration fee.............................................. $21,120
NASD filing fee................................................... 8,400
Nasdaq National Market initial filing fee......................... 1,000
Printing and engraving ........................................... *
Legal fees and expenses of the Registrant ........................ *
Accounting fees and expenses ..................................... *
Directors and officers liability insurance........................ *
Blue sky fees and expenses ....................................... *
Transfer agent and registrar fees and expenses.................... *
Miscellaneous..................................................... *
-------
Total........................................................... $ *
=======
</TABLE>
- --------
*To be filed by amendment
ITEM 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers under certain circumstances and subject to certain limitations.
The terms of Section 145 of the Delaware General Corporation Law are
sufficiently broad to permit indemnification under certain circumstances for
liabilities, including reimbursement of expenses incurred, arising under the
Securities Act of 1933.
As permitted by the Delaware General Corporation Law, the Registrant's
certificate of incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty as
a director, except for liability:
. for any breach of the director's duty of loyalty to the Registrant or
its stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
. for any transaction from which the director derived an improper personal
benefit.
As permitted by the Delaware General Corporation Law, the Registrant's
bylaws provide that:
. the Registrant is required to indemnify its directors and officers to
the fullest extent permitted by the Delaware General Corporation Law,
subject to certain very limited exceptions;
. the Registrant may indemnify its other employees and agents to the
extent that it indemnifies its officers and directors, unless otherwise
required by law, its certificate of incorporation, its bylaws or
agreements;
. the Registrant is required to advance expenses, as incurred, to its
directors and officers in connection with a legal proceeding to the
fullest extent permitted by the Delaware General Corporation Law,
subject to certain very limited exceptions; and
II-1
<PAGE>
. the rights conferred in the Bylaws are not exclusive.
In addition, the Registrant intends to enter into indemnity agreements with
each of its current directors and officers. These agreements provide for the
indemnification of officers and directors for all expenses and liabilities
incurred in connection with any action or proceeding brought against them by
reason of the fact that they are or were agents of the Registrant.
The Registrant currently carries liability insurance for its directors and
officers.
The Underwriting Agreement filed as Exhibit 1.01 to this Registration
Statement provides for indemnification by the underwriters of the Registrant
and its directors and officers for certain liabilities under the Securities Act
of 1933, or otherwise.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
Exhibit Document Number
---------------- ------
<S> <C>
Form of Underwriting Agreement..................................... 1.01
Registrant's Certificate of Incorporation.......................... 3.01
Form of Registrant's Amended and Restated Certificate of
Incorporation (to be filed following the closing of this
offering)......................................................... 3.02
Registrant's Bylaws................................................ 3.03
Form of Indemnity Agreement........................................ 10.14
</TABLE>
ITEM 15. Recent Sales of Unregistered Securities.
Since March 1997, the Registrant and its predecessor, Dove Brothers LLC,
issued and sold the following securities:
1. In June 1999, we issued, in exchange for the contribution of the
membership interests of Dove Brothers, LLC an aggregate of 28,212,121 shares of
our common stock to Ross Dove, Kirk Dove, The Dove Holdings Corporation and
Koll Management Services, Inc.
2. In June 1999, we issued and sold an aggregate of 12,090,909 shares of
Series A Preferred Stock to one investor for $0.33 per share or an aggregate of
$3,990,000.
3. In October 1999, we issued and sold an aggregate of 15,870,129 shares of
Series B Preferred Stock to three investors for $0.77 per share or an aggregate
of $12,219,999.
4 In December 1999 we issued and sold an aggregate of 675,325 shares of
Series B Preferred Stock to one investor for $0.77 per share or an aggregate of
$520,000.
5. In February 2000, we issued and sold an aggregate of 32,022,476 shares of
Series C Preferred Stock to six investors for $2.67 per share or an aggregate
of $80,500,011.
6. In March 2000, we issued and sold an aggregate of 8,988,766 shares of
Series C Preferred Stock to five investors for $2.67 per share or an aggregate
of $29,000,005.
7. In December 1999, we issued Convertible Notes to two individuals in the
aggregate principal amount of $2,000,000, which, upon or immediately prior to
the consummation of this offering, will convert into shares of common stock at
a conversion rate equal to the mid-point of the common stock offering price
range set forth in this registration statement.
8. In February 2000, we issued Convertible Notes to four individuals in the
aggregate principal amount of $2,000,000, which, upon or immediately prior to
the consummation of this offering, will convert into shares of common stock at
a conversion rate equal to the mid-point of the common stock offering price
range set forth in this registration statement upon.
II-2
<PAGE>
9. In March 2000, we issued four Convertible Notes to four individuals in
the aggregate principal amount of $5,600,000, which, upon or immediately prior
to the consummation of this offering, will convert into shares of common stock
at a conversion rate equal to the mid-point of the common stock offering price
range set forth in this registration statement.
10. In March 2000, we issued four Convertible Notes to three individuals and
a trust in the aggregate principal amount of $10,000,000, which will convert,
on July 1, 2000 into 952,381 shares of our common stock.
11. In March 2000 we issued an aggregate of 653,213 shares of our common
stock to 24 shareholders and options to purchase 180,120 shares of our common
stock to eight optionees of One Web Place, Inc.
12. Since November 1999, we have granted stock options under our 1999 Stock
Option Plan, covering an aggregate of 5,032,049 shares of common stock (net of
option exercises, expirations and cancellations) at exercise prices of $0.33 to
$4.00.
13. Since November 1999, options to purchase 4,405,000 of common stock under
our 1999 Stock Option Plan were exercised with a weighted average exercise
price of approximately $1.25 per share.
14. Since November 1999, we issued and sold an aggregate of 11,763,170
shares of our common stock to employees, consultants, directors and other
service providers at prices ranging from $0.33 to $4.00 per share.
15. On March 8, 2000, we issued a warrant to Yahoo! Inc. to purchase
1,405,000 shares of our Series C preferred stock at an exercise price of $2.67
per share.
The sales of the above securities were deemed to be exempt from registration
under the Securities Act in reliance upon Section 4(2) of the Securities Act or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b)
under the Securities Act as transactions by an issuer not involving any public
offering or pursuant to benefit plans and contracts relating to compensation as
provided under Rule 701. The recipients of such securities in each of these
transactions represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were placed upon the share
certificates issued in such transactions. All recipients had adequate access,
through their relationships with us, to information about DoveBid.
ITEM 16. Exhibits and Financial Statement Schedules.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Number Exhibit Title
------ -------------
<C> <S>
1.01 Form of Underwriting Agreement.*
2.01 Asset Purchase Agreement by and between the Registrant and Unidyne
International, Inc.**
2.02 Asset Purchase Agreement by and between the Registrant and B&B Custom
Circuit Supplies.**
2.03 Membership Interest Purchase Agreement by and between the Registrant,
Greenwich Industrial Services, LLC, William J. Gardner Jr., James F.
Gardner, Scott Lankert and Michael DiProspero.**
2.04 Stock Purchase Agreement by and between the Registrant, Philip Pollack
& Co., Inc., Ross Pollack and Philip Pollack.**
2.05 Stock Purchase Agreement by and between the Registrant, Haltek
Electronics d/b/a Test Lab Company, the Manford and Audrey Trees Living
Trust, Manford J. Trees, Audrey Trees, the Michael P. Megown and Darcy
E. Megown Trust, Michael Megown and Darcy Megown.**
2.06 Stock Purchase Agreement by and between the Registrant, DoveBid
Valuation Services, Accuval Associates Incorporated, Liquitec
Industries Incorporated, David S. Gronik, Jr. and Richard E. Schmitt.**
2.07 Stock Purchase Agreement by and between the Registrant, Norman Levy
Associates, Inc., Robert Levy, David Levy, and the Norman Levy
Qualified Terminable Interest Marital Trust.
3.01 Amended and Restated Certificate of Incorporation of the Registrant.**
3.02 Form of Amended and Restated Certificate of Incorporation of the
Registrant to be filed on the closing of the offering made hereby.*
3.03 Bylaws of the Registrant.**
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Number Exhibit Title
------ -------------
<C> <S>
3.04 Form of Bylaws of the Registrant to be filed on the closing of the
offering made hereby.*
4.01 Form of Registrant's Common Stock certificate.*
5.01 Opinion of Fenwick & West LLP regarding the legality of the securities
being registered.*
10.01 1999 Stock Option Plan.
10.02 2000 Equity Incentive Plan
10.03 2000 Employee Stock Purchase Plan.
10.04 Warrant to purchase 1,405,000 shares of Series C preferred stock of the
Registrant issued to Yahoo! Inc.
10.05 Commercial Lease between the Registrant and Dove Holdings, Inc.**
10.06 Stock Repurchase Agreement between the Registrant, Ross Dove and The
Dove Holdings Corporation.
10.07 Stock Repurchase Agreement between the Registrant, Kirk Dove and The
Dove Holdings Corporation.
10.08 Offer Letter to Jeffrey M. Crowe from the Registrant.
10.09 Offer Letter to Cory M. Ravid from the Registrant.
10.10 Offer Letter to Anthony Capobianco from the Registrant.
10.11 Offer Letter to Francis M. Juliano from the Registrant.
10.12 Offer Letter to James Hume from the Registrant.
10.13 Second Amended and Restated Investors' Rights Agreement by and between
the Registrant and certain investors of the Registrant dated February
25, 2000.
10.14 Form of Indemnity Agreement between the Registrant and each of its
directors and executive officers.*
10.15 Convertible Promissory Note dated December 30, 1999 issued by the
Registrant to Unidyne International, Inc.
10.16 Convertible Promissory Note dated December 30, 1999 issued by the
Registrant to B&B Custom Circuit Supplies.
10.17 Convertible Subordinated Promissory Note dated February 29, 2000 issued
by the Registrant to William J. Gardner Jr.
10.18 Convertible Subordinated Promissory Note dated February 29, 2000 issued
by the Registrant to James F. Gardner.
10.19 Convertible Subordinated Promissory Note dated February 29, 2000 issued
by the Registrant to Scott Lankert.
10.20 Convertible Subordinated Promissory Note dated February 29, 2000 issued
by the Registrant to Michael DiProspero.
10.21 Convertible Subordinated Promissory Note dated March 2, 2000 issued by
the Registrant to Phillip Pollack.
10.22 Convertible Subordinated Promissory Note dated March 2, 2000 issued by
the Registrant to Ross J. Pollack.
10.23 Convertible Subordinated Promissory Note dated March 2, 2000 issued by
the Registrant to David S. Gronik, Jr.
10.24 Convertible Subordinated Promissory Note dated March 2, 2000 issued by
the Registrant to Richard E. Schmitt.
10.25 Secured Promissory Note held by the Registrant for Jeffrey M. Crowe
dated November 30, 1999.
10.26 Secured Promissory Note held by the Registrant for Cory M. Ravid dated
November 30, 1999.
10.27 Secured Promissory Note held by the Registrant for Francis M. Juliano
dated January 14, 2000.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Number Exhibit Title
------ -------------
<C> <S>
10.28 Secured Promissory Note held by the Registrant for Steven S. Pollock
dated January 16, 2000.
10.29 Secured Promissory Note held by the Registrant for Anthony Capobianco
dated February 23, 2000.
10.30 Secured Promissory Note held by the Registrant for Dennis Polk dated
February 23, 2000.
10.31 Secured Promissory Note held by the Registrant for James Hume dated
January 14, 2000.
10.32 Advertising and Promotion Agreement between the Registrant and Yahoo!+
10.33 Asset Purchase and Co-Marketing Agreement between the Registrant and
Comdisco, Inc.+
10.34 Convertible Subordinated Promissory Note dated March 24, 2000 issued by
the Registrant to David Levy.
10.35 Convertible Subordinated Promissory Note dated March 24, 2000 issued by
the Registrant to Robert Levy.
10.36 Convertible Subordinated Promissory Note dated March 24, 2000 issued by
the Registrant to The Norman Levy Qualified Terminable Interest Marital
Trust.
10.37 Convertible Subordinated Promissory Note dated March 24, 2000 issued by
the Registrant to Richard Nucian.
10.38 Offer Letter to Robert Levy by Registrant.
10.39 Offer Letter to David Levy by Registrant.
10.40 Offer Letter to Timothy J. Reed from the Registrant.
10.41 Offer Letter to Lynn B. Corsiglia from the Registrant.
10.42 Secured Promissory Note held by the Registrant for Timothy J. Reed
dated March 7, 2000.
10.43 Secured Promissory Note held by the Registrant for Lynn B. Corsiglia
dated March 7, 2000.
21.01 List of Registrant's Subsidiaries.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 Consent of Ernst & Young LLP, independent auditors.
23.03 Consent of Grant Thornton LLP, independent auditors.
24.01 Power of Attorney. (Included on signature page. See page II-6)**
27.01 Financial Data Schedule.**
</TABLE>
- --------
* To be supplied by amendment.
** Previously filed.
+ Confidential treatment has been requested with regard to certain portions
of this document. Such portions were filed separately with the Securities
and Exchange Commission.
ITEM 17. Undertakings.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each buyer.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with
II-5
<PAGE>
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 1 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Foster
City, State of California, on this 28th day of March 2000.
DOVEBID, INC.
By:
/s/ Ross Dove
------------------------------------
Ross Dove
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
Principal Executive Officer:
/s/ Ross Dove Chief Executive March 28, 2000
______________________________________ Officer and Director
Ross Dove
Principal Financial Officer and
Principal Accounting Officer:
/s/ Cory M. Ravid Chief Financial Officer March 28, 2000
______________________________________
Cory M. Ravid
Additional Directors:
* Director March 28, 2000
______________________________________
William Burnham
* Director March 28, 2000
______________________________________
Jeffrey M. Crowe
* Director March 28, 2000
______________________________________
Kirk Dove
* Director March 28, 2000
______________________________________
A. Grant Heidrich, III
* Director March 28, 2000
______________________________________
David S. Pottruck
* Director March 28, 2000
______________________________________
William Price
* Director March 28, 2000
______________________________________
Todd Rulon-Miller
* Director March 28, 2000
______________________________________
W. Blake Winchell
/s/ Cory M. Ravid
*By: _________________________________
Cory M. Ravid
Attorney-in-fact
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Exhibit Title
------ -------------
<C> <S>
1.01 Form of Underwriting Agreement.*
2.01 Asset Purchase Agreement by and between the Registrant and Unidyne
International, Inc.**
2.02 Asset Purchase Agreement by and between the Registrant and B&B Custom
Circuit Supplies.**
2.03 Membership Interest Purchase Agreement by and between the registrant,
Greenwich Industrial Services, LLC, William J. Gardner Jr., James F.
Gardner, Scott Lankert and Michael DiProspero.**
2.04 Stock Purchase Agreement by and between the Registrant, Philip Pollack
& Co., Inc., Ross Pollack and Philip Pollack.**
2.05 Stock Purchase Agreement by and between the Registrant, Haltek
Electronics d/b/a Test Lab Company, the Manford and Audrey Trees Living
Trust, Manford J. Trees, Audrey Trees, the Michael P. Megown and Darcy
E. Megown Trust, Michael Megown and Darcy Megown.**
2.06 Stock Purchase Agreement by and between the Registrant, DoveBid
Valuation Services, Accuval Associates Incorporated, Liquitec
Industries Incorporated, David S. Gronik, Jr. and Richard E. Schmitt.**
2.07 Stock Purchase Agreement by and between the Registrant, Norman Levy
Associates, Inc., Robert Levy, David Levy and the Norman Levy Qualified
Terminable Interest Marital Trust.
3.01 Amended and Restated Certificate of Incorporation of the Registrant.**
3.02 Form of Amended and Restated Certificate of Incorporation of the
Registrant to be filed on the closing of the offering made hereby.*
3.03 Bylaws of the Registrant.**
3.04 Form of Bylaws of the Registrant to be filed on the closing of the
offering made hereby.*
4.01 Form of Registrant's Common Stock certificate.*
5.01 Opinion of Fenwick & West LLP regarding the legality of the securities
being registered.*
10.01 1999 Stock Option Plan.
10.02 2000 Equity Incentive Plan
10.03 2000 Employee Stock Purchase Plan.
10.04 Warrant to purchase 1,405,000 shares of Series C preferred stock of the
Registrant issued to Yahoo! Inc.
10.05 Commercial Lease between the Registrant and Dove Holdings, Inc.**
10.06 Stock Repurchase Agreement between the Registrant, Ross Dove and The
Dove Holdings Corporation.
10.07 Stock Repurchase Agreement between the Registrant, Kirk Dove and The
Dove Holdings Corporation.
10.08 Offer Letter to Jeffrey M. Crowe from the Registrant.
10.09 Offer Letter to Cory M. Ravid from the Registrant.
10.10 Offer Letter to Anthony Capobianco from the Registrant.
10.11 Offer Letter to Francis M. Juliano from the Registrant.
10.12 Offer Letter to James Hume from the Registrant.
10.13 Second Amended and Restated Investors' Rights Agreement by and between
the Registrant and certain investors of the Registrant dated February
25, 2000.
10.14 Form of Indemnity Agreement between the Registrant and each of its
directors and executive officers.*
10.15 Convertible Promissory Note dated December 30, 1999 issued by the
Registrant to Unidyne International, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Exhibit Title
------ -------------
<C> <S>
10.16 Convertible Promissory Note dated December 30, 1999 issued by the
Registrant to B&B Custom Circuit Supplies.
10.17 Convertible Subordinated Promissory Note dated February 29, 2000 issued
by the Registrant to William J. Gardner Jr.
10.18 Convertible Subordinated Promissory Note dated February 29, 2000 issued
by the Registrant to James F. Gardner.
10.19 Convertible Subordinated Promissory Note dated February 29, 2000 issued
by the Registrant to Scott Lankert.
10.20 Convertible Subordinated Promissory Note dated February 29, 2000 issued
by the Registrant to Michael DiProspero.
10.21 Convertible Subordinated Promissory Note dated March 2, 2000 issued by
the Registrant to Philip Pollack.
10.22 Convertible Subordinated Promissory Note dated March 2, 2000 issued by
the Registrant to Ross J. Pollack.
10.23 Convertible Subordinated Promissory Note dated March 2, 2000 issued by
the Registrant to David S. Gronik, Jr.
10.24 Convertible Subordinated Promissory Note dated March 2, 2000 issued by
the Registrant to Richard E. Schmitt.
10.25 Secured Promissory Note held by the Registrant for Jeffrey M. Crowe
dated November 30, 1999.
10.26 Secured Promissory Note held by the Registrant for Cory M. Ravid dated
November 30, 1999.
10.27 Secured Promissory Note held by the Registrant for Francis Juliano
dated January 14, 2000.
10.28 Secured Promissory Note held by the Registrant for Steven Pollock dated
January 16, 2000.
10.29 Secured Promissory Note held by the Registrant for Anthony Capobianco
dated February 13, 2000.
10.30 Secured Promissory Note held by the Registrant for Dennis Polk dated
February 23, 2000.
10.31 Secured Promissory Note held by the Registrant for James Hume dated
January 14, 2000.
10.32 Advertising and Promotion Agreement between the Registrant and Yahoo!+
10.33 Asset Purchase and Co-Marketing Agreement between the Registrant and
Comdisco, Inc.+
10.34 Convertible Subordinated Promissory Note dated March 24, 2000 issued by
the Registrant to David Levy.
10.35 Convertible Subordinated Promissory Note dated March 24, 2000 issued by
the Registrant to Robert Levy.
10.36 Convertible Subordinated Promissory Note dated March 24, 2000 issued by
the Registrant to The Norman Levy Qualified Terminable Interest Marital
Trust.
10.37 Convertible Subordinated Promissory Note dated March 24, 2000 issued by
the Registrant to Richard Nucian.
10.38 Offer Letter to Robert Levy by Registrant.
10.39 Offer Letter to David Levy by Registrant.
10.40 Offer Letter to Timothy J. Reed from the Registrant.
10.41 Offer Letter to Lynn B. Corsiglia from the Registrant.
10.42 Secured Promissory Note held by the Registrant for Timothy J. Reed
dated March 7, 2000.
10.43 Secured Promissory Note held by the Registrant for Lynn B. Corsiglia
dated March 7, 2000.
21.01 List of Registrant's Subsidiaries.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 Consent of Ernst & Young LLP, independent auditors.
23.03 Consent of Grant Thornton LLP, independent auditors.
24.01 Power of Attorney. (Included on signature page. See page II-6).**
27.01 Financial Data Schedule.**
</TABLE>
- --------
* To be supplied by amendment.
** Previously filed.
+ Confidential treatment has been requested with regard to certain portions
of this document. Such portions were filed separately with the Securities
and Exchange Commission.
<PAGE>
EXHIBIT 2.07
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made and entered into
as of March 24, 2000 by and among DoveBid, Inc., a Delaware corporation
("DoveBid"), Norman Levy Associates, Inc., a Michigan corporation, (the
"Company"), Robert Levy ("R.Levy"), David Levy ("D.Levy") (each of R.Levy and
D.Levy hereinafter individually referred to as a "Principal Shareholder" and
collectively referred to herein as the "Principal Shareholders"), and the Norman
Levy Qualified Terminable Interest Marital Trust, a trust formed under the laws
of Michigan (the "Levy Trust"). (The Principal Shareholders and the Levy Trust
are collectively referred herein to as the "Shareholders")
The Shareholders own beneficially and of record all of the issued and
outstanding capital stock of the Company, and R.Levy and D.Levy own all of the
outstanding and issued capital stock of Robert Carl Corporation, a Michigan
corporation ("Robert Carl").
DoveBid desires to purchase from the Shareholders, and each Shareholder
desires to sell to DoveBid, all shares of the capital stock of the Company owned
by the Shareholders (collectively, the "Shares") on the terms and conditions set
forth in this Agreement.
Now, therefore, the parties agree as follows:
ARTICLE I
STOCK SALE AND PURCHASE
1.1 Agreement to Sell and Purchase Stock. At the Closing, each
-------------------------------------
Shareholder shall sell, transfer and deliver to DoveBid, and DoveBid shall
purchase and accept from each Shareholder, all of the Shares owned by such
Shareholder, free and clear of all security interests, liens, pledges, charges,
escrows, options, rights of first refusal, mortgages, indentures, security
agreements or other claims, encumbrances, agreements, arrangements or
commitments of any kind or character (collectively, "Liens") in exchange for the
following aggregate consideration (the "Purchase Price"), which shall be subject
to reduction or increase in accordance with Section 1.2:
(i) cash in the amount of $17,550,207.85 (the "Closing Payment"), of
which (i) $8,336,348.73 shall be paid to D.Levy, (ii) $8,336,348.73 shall be
paid to R.Levy, and (iii) $877,510.39 shall be paid to the Levy Trust in each
case, subject to reduction or increase in accordance with Sections 1.2
(ii) three convertible subordinated promissory notes, made payable to
(i) D.Levy in the principal amount of $4,329,800.39, in the form attached hereto
as Exhibit A-1, (ii) R.Levy in the principal amount of $4,329,800.39, in the
-----------
form attached hereto as Exhibit A-2, and (iii) the Levy Trust in the principal
-----------
amount of $455,768.51, in the form attached hereto as Exhibit A-3 (each, a
-----------
"Convertible Subordinated Promissory Note").
(iii) cash in an aggregate amount of $250,000, to be paid to the
Shareholders or retained by DoveBid as provided in Section 1.2 below (the
"Deferred Payment"), which amount
<PAGE>
shall be held in an interest bearing account with a national bank or financial
institution reasonably approved by DoveBid and the Representatives, and
interest earned on such amount shall be added to and considered a part of the
Deferred Payment.
1.2 Purchase Price Adjustment.
-------------------------
(a) Original CWT. Within the earlier of (i) twenty (20) days after
------------
the closing of the Robert Carl Transaction (as defined in Section 9.11) or (ii)
thirty (30) days of the Closing, the Representatives of the Shareholders (as
defined in Section 8.6) shall deliver a balance sheet of the Company as of the
Closing Date and a balance sheet of Robert Carl as of the date of the closing of
the Robert Carl Transaction (the "Closing Balance Sheet"), in each case,
prepared in accordance with United States generally accepted accounting
principles ("GAAP"), consistently applied with prior periods, together with a
detailed list of all accrued expenses and liabilities of the Company as of the
Closing Date, and of all accrued expenses and liabilities of Robert Carl as of
the date of the closing of the Robert Carl Transaction (the "Closing Liabilities
Schedule"), which shall set forth (1) the aggregate book value of stockholders'
equity of the Company (excluding for the purpose of such calculation
$2,653,543.14 owed to Richard Nucian pursuant to the terms of the Nucian
Employment Release (defined in Section 4.13 below)) and Robert Carl (as of the
closing of the Robert Carl Transaction), determined in accordance with GAAP,
consistently applied with prior periods, set forth on the Closing Balance Sheet
(such amount, the "Closing Stockholders' Equity"), (2) the cash determined in
accordance with GAAP, consistently applied with prior periods, set forth on the
Closing Balance Sheet (such amount, the "Cash"), (3) all loans to the
Shareholders and related entities and persons, determined in accordance with
GAAP, consistently applied with prior periods, set forth on the Closing Balance
Sheet (such amount, the "Shareholder Loans"), and/or (4) debt owned to banks,
and other third party lending institutions (excluding from such calculation of
Third Party Debt (i) debt in an amount of up to $200,000 incurred as a result of
the Company's currently pending "Condor" transaction, and (ii) debt in an amount
of up to $580,000 incurred as a result of the Company's currently pending
"Custom" transaction (collectively, the "Pending Transactions"), determined in
accordance with GAAP, consistently applied with prior periods, set forth on the
Closing Balance Sheet (such amount, the "Third Party Debt") (collectively, the
"Original CWT"). All Cash in an amount greater than $800,000 held by the Company
during the period of time from the Closing up until the date of the Purchase
Price Adjustment (as defined in Section 1.2(c) below) shall be held during such
period of time in an interest bearing account with a national bank or lending
institution reasonably approved by DoveBid and the Representatives, and interest
earned on such amount shall be added to and considered a part of Cash. For
purposes of calculating Closing Stockholders' Equity, Cash, Shareholder Loans,
and Third Party Debt, figures reflected in the Original CWT and Revised CWT (as
defined below) shall assume the completion of the Robert Carl Transaction (based
on (i) the balance sheet of Robert Carl dated as of the date of the closing of
the Robert Carl Transaction which fairly reflects the financial condition of
Robert Carl, if the Robert Carl Transaction has closed, or (ii) the balance
sheet of Robert Carl dated as of the date of the closing of the Robert Carl
Transaction which fairly reflects the financial condition of Robert Carl
attached hereto as Schedule 1.2(a) (the "Preliminary Robert Carl Balance Sheet")
if the closing of the Robert Carl Transaction has not occurred).
(b) Revised CWT. On or prior to the thirtieth (30th) day following
-----------
receipt by DoveBid of the Original CWT, DoveBid shall provide the
Representatives with a certificate,
2
<PAGE>
signed by an authorized representative of DoveBid, stating whether Dove Bid
believes that the amount of Closing Stockholders' Equity, Cash, Shareholder
Loans and/or Third Party Debt set forth in the Original CWT was correct or
incorrect, and if incorrect, DoveBid's revised calculation of Closing
Stockholders' Equity, Cash, Shareholder Loans and/or Third Party Debt,
together with detailed calculations substantiating such revised calculation
("Revised CWT"). In the event that either (i) the calculations in the Revised
CWT and the Original CWT agree, or (ii) Dovebid fails to timely provide the
Representatives with the Revised CWT within the above thirty (30) day period
(in which case Dovebid shall be deemed to have agreed with the calculations in
the Original CWT), then DoveBid shall promptly (but no later than ten (10)
days after the expiration of the above thirty (30) day period in this Section
1.2(b)) remit to each of the Shareholders that portion of the Deferred Payment
(in proportion to their respective pro rata ownership of Company capital stock
as of immediately prior to the Closing) which has not been retained by DoveBid
as a Purchase Price Adjustment and any additional amounts required under
Section 1.2(c) as a Purchase Price Adjustment. In the event that the
calculation of Closing Stockholders' Equity, Cash, Shareholder Loans and/or
Third Party Debt set forth in the Revised CWT differs from such calculations
in the Original CWT, then within thirty (30) days of the Representatives'
receipt of the Revised CWT, Representatives shall either:
(i) agree with such revised calculations of Closing Stockholders'
Equity, Cash, Shareholder Loans and/or Third Party Debt set forth in the
Revised CWT by countersigning such Revised CWT and delivering a copy
thereof to DoveBid within such thirty (30) day period, whereupon DoveBid
shall (a) in the event of a reduction in the Purchase Price pursuant to
Section 1.2(c) below, retain an amount equal to the total Purchase Price
Adjustment based on the calculations set forth in the Revised CWT, as
follows (1) by retaining an appropriate amount of the Deferred Payment, and
(ii) if the Purchase Price Adjustment exceeds the Deferred Payment, then
within ten (10) days of notice by DoveBid to the Representatives of such
excess, then each Shareholder shall pay DoveBid cash in an aggregate amount
equal to such excess in proportion to their respective pro rata ownership
of Company capital stock as of immediately prior to the Closing (provided
that in the event that any Principal Shareholder fails to timely make such
payment DoveBid will have the right to retain Escrow Shares (valued for
such purpose at $10.50 per share) in an amount equal to such Principal
Shareholder's pro rata share of such excess), or (b) in the event of an
increase in the Purchase Price pursuant to Section 2.1 (c) below, make
payment to each Shareholder based on the calculations set forth in the
Revised CWT, by (1) first returning an appropriate amount of the Deferred
Payment to the Shareholders, and (2) if such increase in the Purchase Price
exceeds the Deferred Payment, by making payment directly to the
Shareholders in proportion to each Shareholder's respective pro rata
ownership of Company capital stock as of immediately prior to the
Closing; or
(ii) reject such revised calculations of Closing Stockholders' Equity,
Cash, Shareholder Loans and/or Third Party Debt set forth in the Revised
CWT by sending a notice of rejection setting forth basis for the
Representatives' rejection of some or all of the calculations in the
Revised CWT to DoveBid within such thirty (30) day period, whereupon
DoveBid and the Representatives shall confer in good faith for a period of
ten (10) days after DoveBid's receipt of the notice of rejection in an
effort to reach agreement on the calculations and the Purchase Price
Adjustment, and if after such ten (10) day period the parties have not
reached an agreement, then either party may submit such dispute to
arbitration as if it were a Contested Claim, as defined in Article VIII
hereof, in accordance with Section 8.9 hereof; provided that the
limitations set forth Section 8.3(a) and (b) shall be deemed not to apply
to such Claim. If the Representatives shall not have responded within the
thirty (30) day period after receipt of the Revised CWT, then the
Representatives shall be deemed to have agreed with calculations of Closing
Stockholders' Equity, Cash, Shareholder Loans and/or Third Party Debt set
forth
3
<PAGE>
in the Revised CWT and the payments set forth in Section 1.2(b)(i) above,
and each Shareholder hereby agrees to be bound by the Representatives'
failure to timely respond. DoveBid shall pay the balance of the Deferred
Payment (not distributed to DoveBid under Section 1.2(b)(i) above or
subject to arbitration under Section 1.2(b)(ii) above) to the
Representatives (for distribution by them to the Shareholders) or, in the
event that the Purchase Price is increased pursuant to Section 1.2(c)
below, any additional amounts as may be required.
(c) Purchase Price Adjustment. In the event and to the extent that
-------------------------
(i) the Closing Stockholders' Equity is less than $1,000,000, (ii) Cash is less
than $800,000, (iii) Shareholder Loans is greater than $0.00, and/or (iv) Third
Party Debt, is greater than $1,200,000, then at the Closing the initial
aggregate cash portion of the Purchase Price shall be reduced by one dollar for
each dollar that (i) the Closing Stockholders' Equity is less than $1,000,000;
(ii) Cash is less than $800,000; (iii) the Shareholder Loans are greater than
$0.00; and (iv) the Third Party Debt is greater than $1,200,000; provided that
if Cash is greater than $800,000, then the initial aggregate cash portion of the
Purchase Price shall be increased by one dollar for each dollar that Cash is
greater than $800,000 (the "Purchase Price Adjustment"). In the event of any
reduction or increase in the Purchase Price pursuant to this Section 1.2, the
respective Closing Payments to the Shareholders shall be proportionately reduced
or increased, and such reduced or increased aggregate consideration shall
constitute the "Purchase Price" for all purposes under this Agreement.
1.3 Closing. The purchase and sale of the Shares, and the consummation of
-------
the other transactions contemplated hereby (the "Closing"), will take place at
the offices of DoveBid at 1241 East Hillsdale Boulevard, Foster City, California
at 10:00 a.m. Pacific Time, on March 24, 2000 or, if all conditions to closing
have not been satisfied or waived by said date, at such other time and place as
DoveBid and Shareholders shall mutually agree upon. At the Closing, the
Shareholders will deliver to DoveBid certificates representing all of the
Shares, duly endorsed for transfer to DoveBid, against delivery to the
Shareholders by DoveBid of the Purchase Price. The date on which the Closing
occurs is referred to herein as the "Closing Date."
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS AND THE COMPANIES
Except as specifically set forth in the disclosure letter provided by the
Shareholders and the Company to DoveBid simultaneously with the signing of this
Agreement, dated as of the date of this Agreement (the "Company Disclosure
Letter"), the parts of which are numbered to correspond to the sections of this
Agreement, each of the Shareholders hereby jointly and severally represent and
warrant to DoveBid as follows:
2.1 Organization and Good Standing. The Company is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Michigan. The Company and each of its subsidiaries has the corporate power and
authority to own, operate and lease its properties and to carry on its business
as now conducted and as proposed to be conducted, and is qualified to conduct
business in each jurisdiction in which the character of the properties owned,
leased or licensed by it or the nature of such activities makes such
qualification necessary.
4
<PAGE>
Neither the Company nor any of its subsidiaries is in violation of its
Articles of Incorporation, Bylaws or other charter documents.
2.2 Power, Authorization and Validity.
---------------------------------
2.2.1 The Company and each Shareholder has the right, power, legal
capacity and authority to enter into and perform its obligations under this
Agreement, and all agreements to which the Company and each Shareholder is or
will be a party that are required to be executed pursuant to this Agreement (the
"Ancillary Agreements"). The execution, delivery and performance of this
Agreement and the Ancillary Agreements have been duly and validly approved and
authorized by the Company's Board of Directors. The execution, delivery and
performance of this Agreement and the Ancillary Agreements by the Levy Trust has
been duly and validly approved and authorized as required by law and its
governing trust instrument. No vote of the shareholders of the Company is
required by the Articles of Incorporation, bylaws, other governing documents of
the Company or applicable law with respect to the due authorization and approval
of this Agreement, the Ancillary Agreements or the transactions contemplated
hereby or thereby. Each Shareholder is an "accredited investor" as such term is
defined in Rule 501 promulgated under the Securities Act of 1933, as amended
(the "Securities Act").
2.2.2 No filing, authorization or approval, governmental or
otherwise, is necessary to enable the Company or the Shareholders to enter into,
and to perform their respective obligations under, this Agreement and the
Ancillary Agreements, except for such qualifications and filings as may be
required to comply with federal and state securities laws as may be required in
connection with the transactions contemplated by this Agreement. All such
qualifications and filings will, in the case of qualifications, be effective on
the Closing, and will, in the case of filings, be made within the time
prescribed by applicable law.
2.2.3 This Agreement and the Ancillary Agreements are, or when
executed by the Company and the Shareholders will be, valid and binding
obligations of the Company and the Shareholders enforceable against the Company
and the Shareholders in accordance with their respective terms, except as to the
effect, if any, of (a) applicable bankruptcy and other similar laws affecting
the rights of creditors generally, (b) rules of law governing specific
performance, injunctive relief and other equitable remedies and (c) the
enforceability of provisions requiring indemnification in connection with the
offering, issuance or sale of securities.
2.2.4 Trust Arrangements.
------------------
(a) Trust Instruments. The copy of that certain Declaration
-----------------
of Trust dated September 27, 1977 by Norman Levy, and that certain First
Amendment to Declaration of Trust Dated February 25, 1992, as amended through
the date hereof (the "Levy Trust Agreement") provided by the Company to
DoveBid is a true and complete copy of the currently effective operative trust
agreement for the Levy Trust and remains in full force and effect.
(b) Trustees. The authorized and acting trustee of the Levy
--------
Trust as of the date hereof are, and on the Closing Date will be Harvey L.
Kleiman, Milton Y. Zussman and Lillian Levy (the "Levy Trustees"). The Levy
Trustees are competent to act as trustees of the
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Levy Trust and the Levy Trustees are authorized to sign and deliver to DoveBid
this Agreement and all Ancillary Agreements.
(c) Trust Property. The Levy Trust has the power and authority to own
--------------
the Shares described in Section 2.3 as being owned by the Levy Trust. The
Shares constitute an asset of the Levy Trust (free and clear of any Liens) as of
the date hereof and will constitute an asset of the Levy Trust on the Closing
Date.
(d) No Default. The terms of the Levy Trust have not and will not
----------
change or be amended by virtue of execution of this Agreement, and the
consummation of the transactions contemplated hereby will not cause any change
in, modification to or acceleration of any of the terms of the Levy Trust
Agreement.
2.3 Capitalization. The authorized capital stock of the Company consists
--------------
entirely of 5,000 shares of Common Stock, $10.00 par value per share, of which a
total of 100 shares are issued and outstanding, and of which: (i) 47.5 shares
are owned beneficially and of record by R.Levy, (ii) 47.5 shares are owned
beneficially and of record by D.Levy, (iii) 5 shares are owned beneficially and
of record by the Levy Trust, and no other entity or individual owns either
beneficially or of record, any other equity interest of the Company or has any
right to purchase or otherwise receive any equity interest in the Company. On
the date of this Agreement each Shareholder has, and on the Closing Date each
Shareholder will have, good and marketable title to that number of shares of
capital stock of the Company set forth in this Section 2.3, free and clear of
any and all Liens, which shares do and shall constitute collectively all of the
outstanding shares of the Company's capital stock. On the date of this
Agreement, there are no, and on the Closing Date, there will be no, options,
warrants, calls, commitments, conversion privileges or preemptive or other
rights or agreements outstanding to purchase or otherwise acquire any of shares
of the Company's capital stock or any securities convertible into or
exchangeable for shares of the Company's capital stock or obligating the Company
to grant, extend, or enter into any such option, warrant, call, right,
commitment, conversion privilege or other right or agreement. Each share of the
Company's capital stock has been duly authorized and validly issued, is fully
paid and nonassessable, is not subject to any right of rescission, and has been
offered, issued, sold and delivered by the Company in compliance with all
registration or qualification requirements (or applicable exemptions therefrom)
of applicable federal and state securities laws, other laws and requirements set
forth in applicable agreements or instruments. There is no voting agreement,
right of first refusal or other restriction (other than normal restrictions on
transfer under applicable federal and state securities laws) applicable to any
of the Company's outstanding securities. The Company is not under any
obligation to register under the Securities Act, any of its presently
outstanding securities or any securities that may be subsequently issued.
2.4 Subsidiaries. Except as disclosed on the Company Disclosure Letter,
-------------
the Company does not have any subsidiaries or any equity or other ownership
interest, direct or indirect, in any corporation, partnership, joint venture or
other business entity. The Company owns all the issued and outstanding capital
stock of its subsidiaries, free and clear of all Liens. The Company is not
obligated to make and is not bound by any agreement or obligation to make any
investment in or capital contribution in or on behalf of any other entity.
6
<PAGE>
2.5 No Conflict. Neither the execution and delivery of this Agreement nor
-----------
any Ancillary Agreement, nor the consummation of the transactions contemplated
hereby, will conflict with, or (with or without notice or lapse of time, or
both) result in a termination, breach, default, impairment or violation of (a)
any provision of the Articles of Incorporation, bylaws or other governance
document of either of the Company or any of its subsidiaries, (b) any instrument
or contract to which the Company, any of its subsidiaries or any Shareholder is
a party or by which any of their respective assets or properties are bound or
affected, or (c) any federal, state, local or foreign judgment, writ, decree,
order, statute, rule or regulation applicable to either of the Company, any of
its subsidiaries or either Shareholder or their respective assets or properties,
except any termination, breach, default, impairment or violation which would not
individually or in the aggregate result in a Material Adverse Effect (as defined
in Section 10.7(c) below) on the Company. The consummation of the transactions
contemplated by this Agreement does not and will not require the consent,
waiver, release or approval of or notice to any third party.
2.6 Litigation. There is no action, proceeding, claim or investigation
-----------
pending against the Company or any of its subsidiaries before any court or
administrative agency, nor to the Knowledge (as defined in Section 10.7(b)) of
the Company or any Shareholder has any such action, proceeding, claim or
investigation been threatened. There is no reasonable basis for any shareholder
or former shareholder of the Company, or to the Knowledge of the Company or any
Shareholder, any other person, firm, corporation, or entity, to assert a claim
against the Company, any of its subsidiaries, any Shareholder or DoveBid based
upon: (a) ownership or rights to ownership of any shares or other ownership
interest in the Company, (b) any rights as a shareholder of the Company,
including any option or preemptive rights or rights to notice or to vote, or (c)
any rights under any agreement among the Company and its shareholders. There
are no outstanding orders, awards, judgments, injunctions, decrees or other
requirements of any court, arbitrator or governmental or regulatory body against
the Company or any of its subsidiaries, or their assets, properties or
securities.
2.7 Taxes. The Company has timely filed all federal, state, local and
-----
foreign tax returns required to be filed, have paid all taxes required to be
paid in respect of all periods for which returns have been filed, have
established an adequate accrual or reserve for the payment of all taxes payable
in respect of the periods subsequent to the periods covered by the most recent
applicable tax returns, have made all necessary estimated tax payments, and have
no liability for taxes in excess of the amount so paid or accruals or reserves
so established. All accruals or reserves for taxes on the Closing Balance
Sheets will be established in the ordinary course of business and will be
consistent with the Company's prior practices. The Company is not delinquent in
the payment of any tax or in the filing of any tax returns, and no deficiencies
for any tax have been threatened, claimed, proposed or assessed. The Company
has not received any written notification from the Internal Revenue Service or
any other taxing authority regarding any material issues or audit that: (a) are
currently pending before the Internal Revenue Service or any other taxing
authority (including but not limited to any sales or use tax authority)
regarding the Company or (b) have been raised by the Internal Revenue Service or
other taxing authority and not yet finally resolved. For any period covering
the last five fiscal years, no tax return of the Company has ever been audited
by the Internal Revenue Service or any state or other taxing agency or
authority. There is not in effect any waiver by the Company of any statute of
limitations with respect to any taxes; and the Company has not consented to
extend to a
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date later than the date hereof the period in which any tax may be assessed or
collected by any taxing authority. The Company is not a "personal holding
company" within the meaning of the Internal Revenue Code of 1986, as amended
(the "Code"). The Company has not filed any election under Section 341(f) of
the Code. The Company has withheld with respect to each of its employees and
independent contractors all taxes, including but not limited to federal and
state income taxes, FICA, Medicare, FUTA and other taxes, required to be
withheld, and has paid such withheld amounts to the appropriate tax authority
within the time prescribed by law.
Effective as of September 22, 1986, the Company made a valid election under
Section 1362 of the Code to be an S corporation within the meaning of Sections
1361 and 1362 of the Code effective for all taxable periods beginning on or
subsequent to May 1, 1987. Part 2.7 of the Company Disclosure Letter sets forth
each state and locality where the Company has made a valid election under the
applicable law of such jurisdiction to be an S corporation effective for all
taxable periods beginning on or subsequent to the date of such election, and the
date of such election. None of the Company nor Shareholders have taken any
action inconsistent with the requirements of Company' S corporation status, nor
has the Company nor any Shareholder failed to take any action required in order
to maintain the Company's S Corporation status, and the Company's S corporation
election has not been terminated (whether inadvertently or otherwise) since each
such effective date and is currently valid and in effect in each such
jurisdiction in which an election was made.
For the purposes of this Agreement, the terms "tax" and "taxes" include all
federal, state, local and foreign income, gains, franchise, excise, property,
sales, use, employment, withholding, license, payroll, occupation, recording,
value added or transfer taxes, governmental charges, fees, levies or assessments
(whether payable directly or by withholding), and, with respect to such taxes,
any estimated tax, interest and penalties or additions to tax and interest on
such penalties and additions to tax.
2.8 Financial Statements. The Company has delivered to DoveBid, attached
--------------------
hereto as Exhibit B, copies of: (a) the Company's compiled balance sheet as of
---------
April 30, 1999, and the Company's compiled balance sheets as of December 31,
1999 and February 29, 2000, respectively (the "Balance Sheets") and (b) the
Company's compiled income statement and statement of cash flows for the twelve
months ended April 30, 1999, and the Company's unaudited income statements and
statement of cash flows for the eight month period ended December 31, 1999 and
the ten month period ended February 29, 2000, respectively (together, with the
Balance Sheets and the Closing Balance Sheet, the "Financial Statements"). The
Financial Statements (a) are in accordance with the books and records of the
Company, (b) fairly present the financial condition of the Company and its
subsidiaries at the date therein indicated and the results of operations for the
period therein specified (except for the unaudited balance sheets dated as of
February 29, 2000, and December 31, 1999, and the unaudited income statements
and statement of cash flows for the eight month period ended December 31, 1999
and the ten month period ended February 29, 2000, which fairly present in all
material respects the financial condition of the Company and its subsidiaries at
the date therein indicated and the results of operations for the period therein
specified) and (c) have been prepared in accordance with GAAP, applied on a
consistent basis with prior periods. The Company (including its subsidiaries)
has no debt, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, that is not reflected
or reserved
8
<PAGE>
against in the Financial Statements and the Closing Liabilities Schedule,
other than such liabilities and obligations which (i) are not required to be
reflected on the Balance Sheet in accordance with this Section 2.8, (ii) were
incurred in the ordinary course of the Company's business consistent with past
practice, and (iii) are not material in amount to the Company or its financial
condition, assets or business.
2.9 Title to Assets and Properties. The Company has good and marketable
-------------------------------
title to all of its assets as shown on the Balance Sheets and Closing Balance
Sheet, free and clear of all Liens (other than for taxes not yet due and
payable). The Company owns or has the right to hold and use all assets which
are necessary to operate its business as presently conducted. All leases of real
or personal property to which the Company or any subsidiary of the Company is a
party are fully effective and afford the Company peaceful and undisturbed
possession of the subject matter of the lease. To the Knowledge of the Company
and the Shareholders, the Company and its subsidiaries are not in violation of
any zoning, building, safety or environmental ordinance, regulation or
requirement or other law or regulation applicable to the operation of owned or
leased properties, or has received any written notice of violation with which it
has not complied.
2.10 Absence of Certain Changes. Since February 29, 2000, there has not
--------------------------
been with respect to the Company (including its subsidiaries):
(a) any change in the financial condition, properties, assets,
liabilities, business or operations thereof which change by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business consistent with past practice, has had or will have a
Material Adverse Effect thereon;
(b) any contingent liability incurred thereby as guarantor or
otherwise with respect to the obligations of others;
(c) any mortgage, encumbrance or Lien placed on any of the properties
thereof;
(d) any material obligation or liability incurred thereby other than
obligations and liabilities incurred in the ordinary course of business
consistent with past practice in individual amounts less than $100,000;
(e) any purchase or sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of the
properties or assets thereof other than in the ordinary course of business
consistent with past practice in individual amounts less than $100,000;
(f) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
thereof;
(g) any declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, the capital stock thereof,
any split, combination or recapitalization of the capital stock thereof or any
direct or indirect redemption, purchase or other acquisition of the ownership
interests thereof (except for the Permitted Asset Transfers and
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<PAGE>
the R.Levy Share Transfer and the D.Levy Share Transfer (as such terms are
defined in Section 4.14 below));
(h) any labor dispute or claim of unfair labor practices, any change
in the compensation payable or to become payable to any of its officers,
managers, employees or agents, or any bonus payment or arrangement made to or
with any of such officers, managers, employees or agents (other than pursuant to
the Employment Agreements, as defined below);
(i) any change with respect to the management, supervisory or other
key personnel thereof;
(j) any payment or discharge of a Lien or liability thereof which Lien
was not either shown on the Balance Sheets or incurred in the ordinary course of
business consistent with past practice thereafter;
(k) any obligation or liability incurred thereby to any of its
officers, employees, directors or shareholders or any loans or advances made
thereby to any of its officers, employees, directors or shareholders except
normal compensation and expense allowances payable to officers and employees;
(l) any amendment or change in the Articles of Incorporation, bylaws
or other governing documents of the Company; or
(m) any change in the accounting policies or procedures of the
Company.
2.11 Contracts and Commitments. Section 2.11 of the Company Disclosure
-------------------------
Letter sets forth a list of each of the following oral or written contracts,
agreements, understandings and arrangements of the Company and its subsidiaries,
a true and complete copy of each (or, in the case of an oral agreement, a
written summary of all of the material terms of which) has been provided to
DoveBid:
(a) Contract, agreement or other understanding or arrangement
providing for payments by or to the Company or any of its subsidiaries in an
aggregate amount of $100,000 or more in any year;
(b) Company IP Rights Agreement (as defined in Section 2.12), and
contract, license, agreement or other understanding or arrangement as licensor
or licensee;
(c) Contract, lease, license, agreement or other understanding or
arrangement for the lease of real or personal property;
(d) Joint venture contract or arrangement or any other agreement that
involves or could involve a sharing of profits, expenses or losses with any
other party;
(e) Instrument evidencing or related in any way to indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, or otherwise, except for trade
indebtedness incurred in the ordinary
10
<PAGE>
course of business consistent with past practice and for no more than $100,000
in amount, and except as disclosed in the Financial Statements and the Closing
Balance Sheet;
(f) Contract, agreement or other understanding or arrangement
containing covenants purporting to limit the Company's or any of its
subsidiaries' freedom to compete in any line of business in any geographic area,
or which grants any exclusive rights or obligations;
(g) Contract, agreement or other understanding or arrangement for or
relating to the employment of any officer, employee, contractor, or consultant
of the Company or any subsidiary of the Company; or
(h) Any other agreement not specified above which is material to the
business, financial condition or prospects of the Company.
All agreements, contracts, plans, leases, instruments, arrangements,
licenses and commitments identified in this Section 2.11 are valid and in full
force and effect. The Company is not, nor, to the Knowledge of the Company, is
any other party thereto, in material breach or default under the terms of any
such agreement, contract, plan, lease, instrument, arrangement, license or
commitment.
2.12 Intellectual Property. The Company owns, or has a valid right to
---------------------
use, sell or license all Intellectual Property Rights (as defined below)
necessary or required for the conduct of business as presently conducted (such
Intellectual Property Rights being hereinafter collectively referred to as the
"Company IP Rights") and such rights to use, sell or license are sufficient for
the conduct of the Company's businesses as presently conducted. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not constitute a breach of any
instrument or agreement governing or affecting any Company IP Rights (the
"Company IP Rights Agreements"), do not and will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any Company
IP Right or impair the right of the Company to use, sell or license any Company
IP Right or portion thereof. There is no royalty, honoraria, fee or other
payment payable by the Company to any person by reason of the ownership, use,
license, sale or disposition of any Company IP Right (other than as set forth in
the Company IP Rights Agreements listed in Section 2.11 to the Company
Disclosure Letter). The provision of any service currently provided by the
Company or currently planned to be provided by the Company does not violate any
license or agreement between the Company and any third party or infringes any
Intellectual Property Right of any other person or entity; and there is no
pending or, to the Knowledge of the Company or any of the Shareholders,
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license or dispose of any Company IP Right, nor to the Knowledge of
the Company or any of the Shareholders, is there any basis for any such claim,
nor has the Company received any notice asserting that any Company IP Right or
the proposed use, sale, license or disposition thereof conflicts, or will
conflict, with the rights of any other person or entity. Each officer, employee
and consultant of the Company has executed and delivered to the Company an
agreement in the form provided to DoveBid regarding the protection of
proprietary information and the assignment to the Company of all Intellectual
Property Rights arising from the services performed for the Company by such
person. Section 2.12 to the
11
<PAGE>
Company Disclosure Letter contains a list of all applications, registrations,
filings and other formal actions made or taken pursuant to federal, state and
foreign laws by the Company to perfect or protect its interest in Company IP
Rights, including, without limitation, all patents, patent applications,
trademarks, trademark applications and service marks. As used herein, the term
"Intellectual Property Rights" shall mean all worldwide industrial or
intellectual property rights, including, without limitation, patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service mark applications, Internet domain names, Internet or
World Wide Web URLs or addresses, copyright, copyright applications,
franchises, licenses, inventories, know-how, trade secrets, customer lists,
proprietary processes and formulae, all source and object code, algorithms,
architecture, structure, display screens, layouts, inventions, development
tools and all documentation and media constituting, describing or relating to
the above, including, without limitation, manuals, memoranda and records (in
whatever media or format).
2.13 Compliance with Laws. The Company and its subsidiaries have
--------------------
complied, or prior to the Closing Date will have complied, and are or will be at
the Closing in full compliance with, all applicable laws, ordinances,
regulations, and rules, and all orders, writs, injunctions, awards, judgments,
and decrees applicable to them or to the assets, properties, and business
thereof (except for such non-compliance that would not result in a Company
Material Adverse Effect), including, without limitation: (a) all applicable
federal and state securities laws and regulations, (b) all applicable federal,
state, and local laws, ordinances, regulations, and all orders, writs,
injunctions, awards, judgments, and decrees pertaining to (i) the sale,
licensing, leasing, ownership, or management of its owned, leased or licensed
real or personal property, products and technical data, (ii) employment and
employment practices, terms and conditions of employment, and wages and hours
and (iii) safety, health, fire prevention, environmental protection, hazardous
materials, toxic waste disposal, building standards, zoning and other similar
matters (c) the Export Administration Act and regulations promulgated thereunder
and all other laws, regulations, rules, orders, writs, injunctions, judgments
and decrees applicable to the export or re-export of controlled commodities or
technical data and (d) the Immigration Reform and Control Act. The Company has
received all permits and approvals from, and has made all filings with, third
parties, including government agencies and authorities, that are necessary in
connection with its present business (except for such permits, approvals or
filings that would not result in a Company Material Adverse Effect). There are
no legal or administrative proceedings or investigations involving the Company
or any of its subsidiaries pending or threatened before any governmental entity.
2.14 Certain Transactions and Agreements. To the Knowledge of the Company
-----------------------------------
and the Shareholders, none of the directors or shareholders of the Company, nor
any member of their immediate families, has any direct or indirect ownership
interest in any firm or corporation that competes with the Company (except with
respect to any interest in less than one percent of the stock of any corporation
whose stock is publicly traded). None of said officers directors, shareholders
or employees, nor any member of their immediate families, is directly or
indirectly interested in any contract or informal arrangement with the Company,
except for normal compensation for services as an officer, director or
shareholder thereof. None of said officers, directors, shareholders or
employees nor any member of their immediate families has any interest in any
property, real or personal, tangible or intangible, including any Intellectual
12
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Property Rights, used in or pertaining to the business of the Company, except
for the normal rights of a shareholder of the Company.
2.15. Employees, ERISA and Other Compliance.
-------------------------------------
2.15.1 Neither the Company nor any subsidiary of the Company has any
employment contract or consulting agreement currently in effect that is not
terminable at will (other than agreements with the sole purpose of providing for
the confidentiality of proprietary information or assignment of inventions)
without liability to the Company or such subsidiary. All officers, directors,
employees and consultants of the Company having access to proprietary
information have executed and delivered to the Company an agreement regarding
the protection of such proprietary information and the assignment of inventions
to the Company; true and complete copies of the form of all such agreements have
been delivered to DoveBid.
2.15.2 Neither the Company nor any subsidiary of the Company (i) has
ever been or is now subject to a union organizing effort, (ii) is subject to any
collective bargaining agreement with respect to any of its employees, (iii) is
subject to any other contract, written or oral, with any trade or labor union,
employees' association or similar organization, or (iv) has any current labor
disputes. To the Knowledge of the Company or any Shareholder, there are no
facts indicating that the consummation of the transactions contemplated hereby
will have a Company Material Adverse Effect on such labor relations, and neither
the Company nor any Shareholder has any Knowledge that any of the Company's key
employees intends to leave its employ.
2.15.3 Section 2.15.1 to the Company Disclosure Letter identifies (i)
each "employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and (ii) all other
written or formal plans or agreements involving direct or indirect compensation
or benefits (including, but not limited to any employment, severance or other
similar contract, arrangement or policy and each plan or arrangement (written or
oral) providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, severance benefits,
disability benefits, death benefits, hospitalization benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses and all forms of
incentive compensation or post-retirement insurance, compensation or benefits
for employees, consultants or directors, but excluding workers' compensation,
unemployment compensation and other government-mandated programs) currently or
previously maintained, contributed to or entered into by the Company under which
the Company or any ERISA Affiliate (as defined below) thereof has any present or
future obligation or liability (collectively, the "Company Employee Plans").
For purposes of this Section 2.15, "ERISA Affiliate" shall mean any entity which
is a member of (A) a "controlled group of corporations," as defined in Section
414(b) of the Code, (B) a group of entities under "common control," as defined
in Section 414(c) of the Code, or (C) an "affiliated service group," as defined
in Section 414(m) of the Code, or treasury regulations promulgated under Section
414(o) of the Code, any of which includes the Company. Copies of all Company
Employee Plans (and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof (including summary plan
descriptions) have been delivered to DoveBid, together with the three most
recent annual reports (Form 5500, including, if applicable, Schedule B thereto)
prepared in connection with any such Company Employee Plan. All Company
Employee Plans
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<PAGE>
which individually or collectively would constitute an "employee pension
benefit plan," as defined in Section 3(2) of ERISA (collectively, the "Company
Pension Plans"), are identified as such in Section 2.15.3 to the Company
Disclosure Letter. All contributions due from the Company with respect to any
of the Company Employee Plans have been made as required under ERISA or have
been accrued on the Financial Statements. To the Knowledge of the Company and
the Shareholders, each Company Employee Plan has been maintained in compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, including, without limitation, ERISA and the
Code, which are applicable to such Company Employee Plans.
2.15.4 No Company Pension Plan constitutes, or has since the
enactment of ERISA constituted, a "multiemployer plan," as defined in Section
3(37) of ERISA. No Company Pension Plans are subject to Title IV of ERISA. No
"prohibited transaction," as defined in Section 406 of ERISA or Section 4975 of
the Code, has occurred with respect to any Company Employee Plan which is
covered by Title I of ERISA which would result in a liability to the Company,
excluding transactions effected pursuant to a statutory or administrative
exemption. Nothing done or omitted to be done and no transaction or holding of
any asset under or in connection with any Company Employee Plan has or will make
the Company or any officer or director of the Company subject to any liability
under Title I of ERISA or liable for any tax (as defined in Section 2.7 hereof)
or penalty pursuant to Sections 4972, 4975, 4976 or 4979 of the Code or Section
502 of ERISA.
2.15.5 Any Company Pension Plan which is intended to be qualified
under Section 401(a) of the Code (a "Company 401(a) Plan") is so qualified and
has been so qualified during the period from its adoption to date, and the trust
forming a part thereof is exempt from tax pursuant to Section 501(a) of the
Code. The Company has delivered to DoveBid a complete and correct copy of the
most recent Internal Revenue Service determination letter with respect to each
Company 401(a) Plan.
2.15.6 [Section Intentionally Omitted]
2.15.7 There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any subsidiary of the
Company relating to, or change in employee participation or coverage under, any
Company Employee Plan or Company Benefit Arrangement that would increase the
expense of maintaining such Company Employee Plan or Company Benefit Arrangement
above the level of the expense incurred in respect thereof since the date of the
February 29, 2000 Balance Sheet.
2.15.8 The Company has provided, or will have provided prior to the
Closing, to individuals entitled thereto all required notices and coverage
pursuant to Section 4980B of the Code and the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), with respect to any
"qualifying event" (as defined in Section 4980B(f)(3) of the Code) occurring
prior to and including the Closing Date, and no tax payable on account of
Section 4980B of the Code has been incurred with respect to any current or
former employees (or their beneficiaries) of the Company.
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2.15.9 No benefit payable or which may become payable by the Company
or any subsidiary of the Company pursuant to any Company Employee Plan or any
Company Benefit Arrangement or as a result of or arising under this Agreement
shall constitute an "excess parachute payment" (as defined in Section 280G(b)(1)
of the Code) which is subject to the imposition of an excise tax under Section
4999 of the Code or which would not be deductible by reason of Section 280G of
the Code.
2.15.10 The Company and each of its subsidiaries are in compliance
with all applicable laws, agreements and contracts relating to employment,
employment practices, wages, hours, and terms and conditions of employment,
including, but not limited to, employee compensation matters, but not including
ERISA.
2.15.11 To the Knowledge of the Company and each Shareholder, no
employee of the Company or any of its subsidiaries is in violation of any term
of any employment contract, patent disclosure agreement, noncompetition
agreement, or any other contract or agreement, or any restrictive covenant
relating to the right of any such employee to be employed thereby, or to use
trade secrets or proprietary information of others, and the employment of such
employees does not subject the Company or such subsidiaries to any liability.
2.15.12 A list of all employees, officers, directors and consultants
of the Company and each subsidiary of the Company and their current compensation
is set forth on Section 2.15.12 to the Company Disclosure Letter.
2.15.13 Neither the Company nor any subsidiary of the Company is a
party to any (a) agreement with any officer, director, shareholder or other
employee thereof (i) the benefits of which are contingent, or the terms of which
are altered, upon the occurrence of a transaction involving the Company or such
subsidiary in the nature of any of the transactions contemplated by this
Agreement, (ii) providing any term of employment or compensation guarantee, or
(iii) providing severance benefits or other benefits after the termination of
employment of such employee regardless of the reason for such termination of
employment, or (b) agreement or plan, any of the benefits of which will be
increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
2.16 Company Documents. The Company has made available to DoveBid for
-----------------
examination true and complete copies of all documents and information listed in
the Company Disclosure Letter or other exhibits called for by this Agreement
which has been requested by DoveBid and/or its legal counsel, including, without
limitation, the following: (a) copies of the Articles of Incorporation, bylaws
and other governance documents as currently in effect of the Company and each of
its subsidiaries; (b) all records of all proceedings, consents, actions, and
meetings of the shareholders, the board of directors and any committees thereof;
(c) its journal reflecting all equity issuances and transfers; and (d) all
permits, orders, and consents issued by any regulatory agency with respect to
the Company or its subsidiaries, or any securities of the Company, and all
applications for such permits, orders, and consents.
15
<PAGE>
2.17 Environmental Matters. To the Knowledge of the Company and the
---------------------
Shareholders, the Company and its subsidiaries are in compliance with all
applicable Environmental Laws (as defined below), which compliance includes the
possession by the Company and its subsidiaries of all permits and other
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof. Neither the Company nor any
of its subsidiaries has received any written notice or other communication (in
writing or otherwise), whether from a governmental body, citizens-group,
employee or otherwise, that alleges that the Company or any of its subsidiaries
is not in compliance with any Environmental Law, and, to the Company's and each
Shareholder's Knowledge, there are no circumstances that may prevent or
interfere with the compliance by the Company or any of its subsidiaries with any
current Environmental Law in the future. All governmental authorizations
currently held by the Company or any of its subsidiaries pursuant to any
Environmental Law (if any) are identified in Section 2.17 to the Company
Disclosure Letter. For purposes of this Section 2.17: (i) "Environmental Law"
means any federal, state, local or foreign statute, law regulation or other
legal requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern; and (ii) "Materials of Environmental Concern" include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is currently regulated by an
Environmental Law.
2.18 No Brokers. Neither the Company nor the Shareholders are or will be
----------
obligated for the payment of fees or expenses of any investment banker, broker
or finder in connection with the origin, negotiation or execution of this
Agreement or in connection with any transaction contemplated hereby.
2.19 Accounts Receivable. Subject to the reserves set forth on the
-------------------
Balance Sheets, if any, all accounts receivable of the Company set forth on the
Balance Sheets have arisen in the ordinary course of the Company's businesses
consistent with past practice, represent valid, enforceable and fully
collectible obligations due to the Company, and have been and are not subject to
any set-off, counterclaim or, to the Knowledge of the Company or each
Shareholder, future performance obligation on the part of the Company.
2.20 Books and Records.
-----------------
2.20.1 The books, records and accounts of the Company and each
subsidiary (a) are in true, complete and correct, (b) have been maintained in
accordance with good business practices on a basis consistent with prior years,
(c) accurately and fairly reflect the transactions and dispositions of the
assets of the Company and its subsidiaries, and (d) accurately and fairly
reflect the basis for the Financial Statements.
2.20.2 The Company has devised and maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (a)
transactions are executed in accordance with management's general or specific
authorization, (b) transactions are recorded as
16
<PAGE>
necessary (i) to permit preparation of financial statements in conformity with
generally accepted accounting principles or any other criteria applicable to
such statements, and (ii) to maintain accountability for assets, and (c) the
amount recorded for assets on the books and records of the Company is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
2.21 Insurance. The Company maintains and at all times during the prior
----------
three years has maintained all legally required workers' compensation insurance
and errors and omissions, casualty, fire and general liability insurance. There
is no claim pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
timely paid and the Company are otherwise in compliance with the terms of such
policies and bonds. The Company has no Knowledge of any threatened termination
of, or premium increase with respect to, any of such policies. Prior to the
Closing, the Company shall have obtained, and fully prepaid all premiums
associated with, "claims made" insurance for the Company for activities of the
Company prior to the Closing and effective immediately after the Closing, which
shall include directors and officers insurance, errors and omission insurance
and employment practices liability insurance, and which insurance shall be
assignable to DoveBid at the Closing, shall expire no earlier than the third
anniversary of the Closing and shall contain coverage that is customary for the
Company's industry and be reasonably acceptable to DoveBid. All policies of
insurance now held by the Company and each of its subsidiaries are set forth in
Section 2.21 of the Company Disclosure Letter, together with the name of the
insurer under each policy, the type of policy, the policy coverage amount and
any applicable deductible.
2.22 Disclosure. Neither the Company Disclosure Letter, this Agreement,
----------
its exhibits and schedules, nor any of the certificates or documents to be
delivered by the Company to DoveBid pursuant to this Agreement, taken together,
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which such
statements were made, not misleading in any material respect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DOVEBID
Except as specifically set forth in the disclosure letter provided by
DoveBid to the Company simultaneously with the signing of this Agreement, dated
as of the date of this Agreement (the "DoveBid Disclosure Letter"), the parts of
which are numbered to correspond to the sections of this Agreement, DoveBid
hereby represents and warrants to the Company as follows:
3.1 Organization and Good Standing. DoveBid is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the
17
<PAGE>
corporate power and authority to own, operate and lease its properties and to
carry on its business as now conducted and as proposed to be conducted.
3.2 Power, Authorization and Validity.
---------------------------------
3.2.1 DoveBid has the corporate right, power and authority to enter
into and perform its obligations under this Agreement, and all agreements to
which DoveBid is or will be a party that are required to be executed pursuant to
this Agreement (the "DoveBid Ancillary Agreements"). The execution, delivery
and performance of this Agreement and the DoveBid Ancillary Agreements have been
duly and validly approved and authorized by DoveBid's Board of Directors.
3.2.2 No filing, authorization or approval, governmental or
otherwise, is necessary to enable DoveBid to enter into, and to perform its
obligations under, this Agreement and the DoveBid Ancillary Agreements, except
for (a) the filing of appropriate documents with the relevant authorities of
California and Delaware and other states in which DoveBid is qualified to do
business, if any, and (b) such filings as may be required to comply with federal
and state securities laws (which filings will be accomplished within the time
required by law).
3.2.3 This Agreement and the DoveBid Ancillary Agreements are, or
when executed by DoveBid will be, valid and binding obligations of DoveBid
enforceable against DoveBid in accordance with their respective terms, except as
to the effect, if any, of (a) applicable bankruptcy and other similar laws
affecting the rights of creditors generally, (b) rules of law governing specific
performance, injunctive relief and other equitable remedies and (c) the
enforceability of provisions requiring indemnification in connection with the
offering, issuance or sale of securities.
3.3 No Conflict. Neither the execution and delivery of this Agreement nor
-----------
any DoveBid Ancillary Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with, or (with or without notice or lapse of
time, or both) result in a termination, breach, impairment or violation of (a)
any provision of the Articles of Incorporation or bylaws of DoveBid, as
currently in effect, (b) any instrument or contract to which DoveBid is a party
or by which DoveBid's assets or properties are bound or affected, or (c) any
federal, state, local or foreign judgment, writ, decree, order, statute, rule or
regulation applicable to DoveBid or its assets or properties, except any
termination, breach, default, impairment or violation which would not
individually or in the aggregate result in a Material Adverse Effect on DoveBid.
The consummation of the transactions contemplated by this Agreement does not and
will not require the consent, waiver, release or approval of or notice to any
third party.
3.4 Registration Statement. DoveBid has made available to the Shareholder
----------------------
its Registration Statement on Form S-1 as filed with the Securities and Exchange
Commission (the "SEC") on March 10, 2000 (the "Registration Statement"). To the
Knowledge of DoveBid at the time the Registration Statement was filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) and subject to portions and sections of the
Registration Statement which remain to be completed, the Registration Statement
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances
18
<PAGE>
under which they were made, not misleading in any material respect, except to
the extent corrected prior to the date of this Agreement by a subsequent
filing made by DoveBid. Since the filing of the Registration Statement with
the SEC on March 10, 2000, to the Knowledge of DoveBid there has not been a
Material Adverse Effect on DoveBid.
3.5 Hart-Scott-Rodino Compliance. The execution and delivery of this
----------------------------
Agreement and the consummation of the transactions contemplated thereby will not
require any consent, approval or filing pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act (the "HSR Act").
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Advice of Changes. During the period from the date of this Agreement
-----------------
until the earlier of the Closing or the termination of this Agreement, each
party will promptly advise the other party in writing (a) of any event occurring
subsequent to the date of this Agreement that would render any representation or
warranty of such party contained in this Agreement, if made on or as of the date
of such event or at the Closing untrue or inaccurate in any material respect and
(b) of any material adverse change in the such party's business, prospects,
customers, results of operations or financial condition. The Company on the one
hand and DoveBid on the other hand each agrees to cooperate with the other and
each of their respective auditors in order to book financial entries in
accordance with GAAP and in a manner acceptable to each such party and its
auditors.
4.2 Maintenance of Business. During the period from the date of this
-----------------------
Agreement until the earlier of the Closing or the termination of this Agreement,
the Company will use its best efforts to carry on and preserve its business and
its relationships with customers, suppliers, employees, business partners and
others in substantially the same manner as it has prior to the date hereof. If
the Company becomes aware of a material deterioration in the relationship with
any customer, supplier, business partner or key employee, it will promptly bring
such information to the attention of DoveBid in writing and, if requested by
DoveBid, will exert its best efforts to restore the relationship.
4.3 Conduct of Business. During the period from the date of this
-------------------
Agreement until the earlier of the Closing or the termination of this Agreement,
the Company will continue to conduct its business and maintain its business
relationships in the ordinary and usual course (consistent with past practice)
and will not, without the prior written consent of an officer of DoveBid:
(a) borrow any money, or otherwise incur any indebtedness in excess of
$100,000;
(b) enter into any transaction not in the ordinary course of business
consistent with past practice;
19
<PAGE>
(c) acquire or be obligated to acquire or take positions in assets
greater than $100,000 without DoveBid's prior written consent, not to be
unreasonably withheld;
(d) make any expenditure or sale of fixed or other non-current assets
in excess of $100,000 in the aggregate, outside the normal course of business;
(e) encumber or permit to be encumbered any of its assets except in
the ordinary course of its business consistent with past practice and to an
extent that is not material to its business;
(f) dispose of any of its assets except in the ordinary course of
business consistent with past practice (except for the Permitted Asset Transfers
(defined below));
(g) enter into any material lease or contract for the purchase or sale
of any property, real or personal, except in the ordinary course of business
consistent with past practice;
(h) fail to maintain its equipment and other assets in good working
condition and repair according to the standards it has maintained to the date of
this Agreement, subject only to ordinary wear and tear;
(i) fail to use its commercially reasonable efforts to maintain and
preserve its business organization intact, retain its present employees and
maintain its relationships and present agreements with suppliers, customers and
others having business relations with the Company, or fail to maintain its
current debt and lease instruments;
(j) pay any bonus, increased salary or special remuneration to any
officer, director, employee or consultant or enter into any new employment or
consulting agreement with any such person, except as set forth in Section 4.3(j)
of the Company Disclosure Letter;
(k) change accounting methods, policies or procedures;
(l) introduce any material new method of management or operations;
(m) declare, set aside or pay any cash or stock dividend or other
distribution in respect of any equity interest, or redeem or otherwise acquire
any of its equity interests (except for the Permitted Asset Transfers);
(n) amend or terminate any contract, agreement or license to which it
is a party, except those amended or terminated in the ordinary course of
business, consistent with past practice, and which are not material in amount or
effect;
(o) lend any amount to any person or entity, other than (i) advances
for travel and expenses which are incurred in the ordinary course of business
consistent with past practice, not material in amount and documented by receipts
for the claimed amounts or (ii) any loans pursuant to the Company 401(k) Plan;
20
<PAGE>
(p) guarantee or act as a surety for any obligation, except in the
ordinary course of business, consistent with past practice, which are not
material in amount and except as required under the Pending Transactions;
(q) waive or release any material right or claim except in the
ordinary course of business, consistent with past practice;
(r) issue or sell any shares of its capital stock or any other of its
securities, or issue or create any warrants, obligations, subscriptions,
options, convertible securities, or other commitments to issue any securities,
or accelerate the vesting of any outstanding option or other security;
(s) split or combine its outstanding securities or enter into any
recapitalization affecting the number of shares outstanding or affecting any
other of its securities;
(t) merge, consolidate or reorganize with, or acquire any entity;
(u) amend its Articles of Incorporation, bylaws or any other
governance document;
(v) license any of its technology or Intellectual Property Rights
except in the ordinary course of business consistent with past practice;
(w) agree to any audit assessment by any tax authority or file any
federal or state income or franchise tax return;
(x) change any insurance coverage; or
(y) agree to do any of the things described in the preceding clauses
4.3(a) through 4.3(x).
4.4 Satisfaction of Conditions Precedent. From the date of this Agreement
------------------------------------
until the earlier of termination of this Agreement or the Closing, the Company
will use its best efforts to satisfy or cause to be satisfied all the conditions
precedent that are set forth in Article VI, and the Company will use its best
efforts to cause the transactions contemplated by this Agreement to be
consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties that may be necessary or reasonably
required on its part in order to effect the transactions contemplated hereby.
From the date of this Agreement until the earlier of termination of this
Agreement or the Closing, DoveBid will use its best efforts to satisfy or cause
to be satisfied all the conditions precedent that are set forth in Article V.
4.5 Regulatory Approvals. DoveBid, the Company and each Shareholder will
--------------------
execute and file, or join in the execution and filing, of any application or
other document that may be necessary in order to obtain the authorization,
approval or consent of any governmental body, federal, state, local or foreign
that may be reasonably required (including, without limitation, any consent,
approval, order, authorization, registration, declaration or filing pursuant to
the HSR Act), or that DoveBid may reasonably request, in connection with the
consummation
21
<PAGE>
of the transactions contemplated by this Agreement. The Company, each
Principal Shareholder and DoveBid will use their respective best efforts to
obtain all such authorizations, approvals and consents.
4.6 Necessary Consents. The Company and each Shareholder will use their
------------------
best efforts to obtain such written consents and take such other actions as may
be necessary or appropriate in DoveBid's judgment to allow the consummation of
the transactions contemplated hereby and to allow DoveBid to carry on the
Company' business after the Closing.
4.7 Litigation. The Company will notify DoveBid in writing promptly after
----------
learning of any material actions, suits, proceedings or investigations by or
before any court, board or governmental agency, initiated by or against it, or
known by it to be threatened against it.
4.8 No Other Negotiations. From the date of this Agreement until the
---------------------
earlier of termination of this Agreement or the Closing, the Company and the
Shareholders will not, and will not authorize or permit any officer,
shareholder, director, employee, investment banker, attorney, agent,
representative or affiliate of the Company, or any other person or entity, on
its behalf to, directly or indirectly, solicit, initiate or encourage any offer
from any person or entity or consider any inquiries or proposals received from
any other person or entity, participate in any negotiations or discussions
regarding, furnish to any person or entity any information with respect to, or
enter into any agreement, commitment, letter of intent or understanding
concerning, the possible disposition of all or any portion of the Company's
business, assets or equity interests by merger, sale or any other means (other
than the transactions contemplated hereby with DoveBid); provided that R.Levy
and/or D.Levy may transfer equity to their family members and related entities
for tax and/or estate planning purposes. The Company will promptly and in any
event within 24 hours notify DoveBid orally and in writing of any such inquiry
or proposal, including the name of the persons making such proposal and all of
the terms thereof. Any violation of the restrictions set forth in this section
by any officer, director or employee of the Company or any investment banker,
attorney or other advisor or representative of the Company shall be deemed to be
a material breach of this Section 4.8 by the Company.
4.9 Access to Information. From the date of this Agreement until the
---------------------
earlier of termination of this Agreement or the Closing, the Company will allow
DoveBid and its agents reasonable access to the files, books, records and
offices of the Company, including, without limitation, any and all information
relating to the Company's taxes, commitments, contracts, customer lists, leases,
licenses, and real, personal and intangible property and financial condition.
The Company will cause its accountants to cooperate with DoveBid and its agents
in making available all financial information reasonably requested, including
without limitation the right to examine all working papers pertaining to all
financial statements prepared or audited by such accountants.
4.10 Blue Sky Laws. From the date of this Agreement until the earlier of
-------------
termination of this Agreement or the Closing, the Company shall use its best
efforts to assist DoveBid to the extent necessary to comply with the securities
and Blue Sky laws of all jurisdictions that are applicable in connection with
the transactions contemplated herein.
22
<PAGE>
4.11 Permitted Asset Transfers. Prior to the Closing the Company shall
-------------------------
have transferred to the Principal Shareholders or all of the Shareholders the
personal property and other assets listed on Schedule 4.11 (collectively, the
"Permitted Asset Transfers").
4.12 Termination of 401(k) Plan. Conditioned on and effective immediately
--------------------------
prior to the Closing the Company shall have validly terminated the Norman Levy
Associates, Inc. Salaried Employees Retirement Profit Sharing Plan.
4.13 Termination of Employment Agreement and Term Sheet; Release of
--------------------------------------------------------------
Claims. Conditioned on and effective immediately prior to the Closing the
Company, the Shareholders, Robert Carl and Richard Nucian shall have validly
terminated that certain Agreement of Employment dated as of April 15, 1991, by
and among the Company, Robert Carl and Richard Nucian, as amended (the "Nucian
Employment Agreement") and shall have obtained a full release from Richard
Nucian of any and all claims and liability against the Company and Robert Carl,
and their successors, in a form and substance of the Termination of Employment
Agreement and Release attached hereto as Schedule 4.13 (the "Nucian Employment
Release"); and (ii) the Company and James Sklar shall have validly terminated
that certain Employment Relationship and Term Sheet executed as of February 28,
2000, by and between the Company and James Sklar, as amended (the "Sklar
Employment Term Sheet") and shall have obtained a full release from James Sklar
of any and all claims and liability against the Company and its successor
relating to the Sklar Employment Term Sheet and his role as an employee of the
Company in a form and substance reasonably acceptable to DoveBid (the "Sklar
Employment Release").
4.14. Transfer of Trust Shares. Conditioned on and effective immediately
------------------------
prior to the Closing, R.Levy, D.Levy and the Company agree to use their best
efforts to cause (i) all Company capital stock held in the name of the Lillian
Levy Irrevocable Trust F/B/O Robert Levy U/A/D December 24, 1997 to be
transferred free and clear of all Liens to Robert Levy (the "R.Levy Share
Transfer"); and (ii) all Company capital stock held in the name of the Lillian
Levy Irrevocable Trust F/B/O David Levy U/A/D December 24, 1997 to be
transferred free and clear of all Liens to David Levy (the "D.Levy Share
Transfer").
4.15 Termination of Buy-Sell Agreement. Conditioned on and effective
---------------------------------
immediately prior to the Closing and the effectiveness of R.Levy Share Transfer
and the D.Levy Share Transfer, R.Levy, D.Levy and the Company agree to terminate
in its entirety that certain Buy-Sell Agreement for Corporate Stock of Norman
Levy Associates, Inc. executed as of December 23, 1997 by and among R.Levy,
D.Levy, Milton Zussman and the Company (the "Buy-Sell Agreement").
4.16 Further Assurances. The Company, the Shareholders and DoveBid shall
------------------
each deliver or cause to be delivered to the other, at such other times and
places as shall be reasonably agreed, such additional instruments, and take such
additional actions as can be taken without unreasonable expense, as any other
may reasonably request for the purpose of carrying out this Agreement and the
transactions contemplated hereby. The Shareholders and the Company will
cooperate and use their reasonable efforts to have the present officers,
directors and employees of the Company cooperate with DoveBid on and after
Closing in furnishing information, evidence, testimony and other assistance in
connection with any tax return filing obligations,
23
<PAGE>
actions, proceedings, arrangements or disputes of any nature with respect to
matters pertaining to all periods prior to Closing.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE SHAREHOLDERS AND THE COMPANIES
The obligations of the Shareholders and the Company with respect to actions
to be taken at Closing are subject to the satisfaction or waiver by the
Shareholders at or prior to Closing of all of the following conditions.
5.1 Representations and Warranties; Covenants. The representations and
-----------------------------------------
warranties of DoveBid set forth in this Agreement shall be true and correct in
all material respects at the Closing with the same effect as though such
representations and warranties had been made as of that time. The covenants set
forth in this Agreement to be performed by DoveBid at or before the Closing
shall have been duly performed. DoveBid shall have delivered to the Company a
certificate to such effect dated the Closing Date signed by an authorized
officer of DoveBid.
5.2 Satisfaction. All actions, proceedings, instruments and documents
------------
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been executed
by DoveBid and shall be acceptable to the Shareholders.
5.3 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated herein and no governmental agency or
body shall have taken any other action or made any request of the Company as a
result of which the management of the Company deems it materially detrimental to
the Company or its Shareholders to proceed with the transactions hereunder.
5.4 Consents and Approvals. All necessary consents of and filings with
----------------------
any governmental authority or agency relating to the consummation of the
transaction contemplated herein (including any consent or filing required under
the HSR Act) shall have been obtained and made and no action or proceeding shall
have been instituted or threatened to restrain or prohibit the transactions
contemplated herein.
5.5 Convertible Subordinated Promissory Note and Subordination Agreement.
---------------------------------------------------------------------
DoveBid shall have executed and delivered to each Shareholder their respective
Convertible Subordinated Promissory Note and the Subordination Agreement
attached as Annex A thereto.
5.6 No DoveBid Material Adverse Effect. No event or circumstance shall
----------------------------------
have occurred between the execution of this Agreement and the Closing which
would constitute DoveBid Material Adverse Effect.
5.7 Employment Agreements. DoveBid (or its subsidiary) shall have
---------------------
executed and delivered to R.Levy, D.Levy, R.Nucian, and James Sklar
respectively, the Employment
24
<PAGE>
Agreements in substantially the forms of Exhibit C-1, Exhibit C-2, Exhibit C-
----------- ----------- ----------
3 and Exhibit C-4, attached hereto ("Employment Agreements").
- - -----------
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF DOVEBID
The obligations of DoveBid with respect to actions to be taken at the
Closing are subject to the satisfaction or waiver by DoveBid at or prior to the
Closing of all of the following conditions.
6.1 Representations and Warranties; Covenants. The representations and
-----------------------------------------
warranties of the Shareholders and the Company set forth in this Agreement shall
be true and correct in all material respects at the Closing with the same effect
as though such representations and warranties had been made as of that time.
The covenants set forth in this Agreement to be performed by the Shareholders
and the Company on or before the Closing shall have been duly performed. The
Shareholders and the Company shall have delivered to DoveBid a certificate to
such effect dated the Closing Date signed by each of the Shareholders and the
President of the Company.
6.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated herein and no governmental agency or
body shall have taken any other action or made any request of DoveBid as a
result of which the management of DoveBid deems it inadvisable to proceed with
the transactions hereunder.
6.3 No Material Adverse Effect. No event or circumstance shall have
--------------------------
occurred between the execution of this Agreement and the Closing which would
constitute a Material Adverse Effect on the Company.
6.4 Satisfaction. All actions, proceedings, instruments and documents
------------
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been executed
by the Company and shall be acceptable to DoveBid.
6.5 Consents and Approvals. All necessary consents of and filings with
----------------------
any governmental authority or agency relating to the consummation of the
transactions contemplated herein (including any consent or filing required under
the HSR Act) shall have been obtained and made; the Company shall have obtained
and delivered to DoveBid such additional consents to the transactions
contemplated herein as DoveBid may reasonably request including, without
limitation, DoveBid's receipt on or prior to Closing of consents of third
parties listed in Section 2.5 of the Company Disclosure Letter; and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
transactions contemplated herein.
6.6 Good Standing Certificate. DoveBid shall have received evidence
-------------------------
reasonably satisfactory to it that the Company and each of its subsidiaries are
each validly existing, in good standing and authorized to do business and that
all state franchise and/or income tax returns and
25
<PAGE>
taxes due by the Company and such subsidiaries for all periods prior to the
Closing have been filed and paid. DoveBid's failure to require or receive such
evidence in no way vitiates or affects the Company's or the Shareholders'
representations and warranties regarding such matters and DoveBid's reliance
on such representations or warranties.
6.7 Convertible Subordinated Promissory Note and Subordination Agreement.
---------------------------------------------------------------------
Each Shareholder shall have executed and delivered to DoveBid their respective
Convertible Subordinated Promissory Note and Subordination Agreement attached as
Annex A thereto.
6.8 Employment Agreements. R.Levy, D.Levy, Richard Nucian and James
---------------------
Sklar, respectively, shall have executed and delivered to DoveBid their
respective Employment Agreement.
6.9 Release of Claims. DoveBid shall have received copies of a Release of
-----------------
Claims executed by R.Levy and D.Levy in substantially the forms of Exhibit D
---------
attached hereto.
6.10 Insurance Matters. The Company shall have obtained, and fully
-----------------
prepaid all premiums associated with, "claims made" insurance for the Company
for activities of the Company prior of the Closing that will be assigned to
DoveBid at the Closing, that expire no earlier than the third anniversary of the
Closing and that contain coverage that is customary for the Company' industry
and is reasonably acceptable to DoveBid.
6.11 Due Diligence. The results of DoveBid's due diligence review of the
-------------
Company's businesses, finances, practices and procedures shall be satisfactory
to DoveBid in its sole discretion.
6.12 Permitted Asset Transfers. The Shareholders and the Company have
--------------------------
completed to the satisfaction of DoveBid the Permitted Asset Transfers.
6.13 Termination of 401(k) Plan. The Company shall have validly
--------------------------
terminated the Norman Levy Associates, Inc. Salaried Employees Retirement Profit
Sharing Plan.
6.14 Termination of Employment Agreement and Term Sheet. The Nucian
--------------------------------------------------
Employment Agreement and the Sklar Employment Term Sheet shall have each been
validly terminated, and DoveBid shall have obtained the Nucian Employment
Release executed by the Company, Robert Carl and Richard Nucian and the Sklar
Employment Release executed by the Company and James Sklar.
6.15 Transfer of Trust Shares; Termination of the Buy-Sell Agreement. The
---------------------------------------------------------------
Buy-Sell Agreement shall have been validly terminated (prior to the R.Levy Share
Transfer and the D.Levy Share Transfer), and the R.Levy Share Transfer and the
D.Levy Share Transfer shall have been completed.
26
<PAGE>
ARTICLE VII
TERMINATION
7.1 Right to Terminate. This Agreement may be terminated and the
------------------
transactions contemplated herein abandoned at any time prior to the Closing: (i)
by the mutual written consent of the parties hereto (which, for purposes of this
Article, DoveBid shall be considered one party and both Company and the
Shareholders collectively shall be considered one party); (ii) by either party,
if such party is not in material breach of any representation, warranty,
covenant or agreement contained in this Agreement, and the other party is in
material breach of any representation, warranty, covenant or agreement contained
in this Agreement and such breaching party fails to cure such material breach
within fifteen (15) days after written notice of such material breach from the
non-breaching party; (iii) by either party, if there is a final nonappealable
order of a federal or state court in effect preventing consummation of the
transactions contemplated herein, or if any statute, rule, regulation or order
is enacted, promulgated or issued or deemed applicable to the transactions
contemplated herein by any governmental body that would make consummation of the
transactions contemplated herein illegal; or (iv) by either party if the
transactions contemplated herein have not occurred by March 24, 2000; provided
that DoveBid shall have the right in its discretion to extend this date to no
later than April 15, 2000.
7.2 Termination Procedures. If either party wishes to terminate this
----------------------
Agreement pursuant to Section 7.1, such party shall deliver to the other party a
written notice stating that such party is terminating this Agreement and setting
forth a brief description of the basis of such termination. Termination of this
Agreement will be effective upon the receipt of such notice.
7.3 Continuing Obligations. Following any termination of this Agreement
----------------------
pursuant to this Article VII, the parties to this Agreement will continue to be
liable for breaches of this Agreement prior to such termination and will
continue to perform their respective obligations under Article X. Except for
the continuing obligations set forth in the preceding sentence, upon termination
of this Agreement pursuant to this Article VII the parties to this Agreement
will be without any further obligation or liability upon any party in favor of
the other party.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES
8.1 Survival of Representations. The representations, warranties,
---------------------------
covenants and agreements of DoveBid contained in this Agreement will remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the parties to this Agreement, from the date of this Agreement
until the earlier of the termination of this Agreement or the one (1) year
anniversary of the Closing, (except for covenants that by their terms survive
for a longer period). All representations, warranties, covenants and agreements
of the Company and the Shareholders contained in this Agreement will remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the parties to this Agreement, from the date of this Agreement
until the earlier of the termination of this Agreement or the one (1) year
anniversary of the Closing, (except for covenants that by their terms survive
for a longer period, and for the representations and warranties set forth in
first four sentences of Section 2.3 and Section 2.7, which shall survive for the
statute of limitations period applicable to any claim which would constitute a
breach thereof).
27
<PAGE>
8.2 Agreement to Indemnify.
----------------------
(a) Indemnification by the Shareholders. Subject to the limitations
-----------------------------------
set forth in this Article VIII, each of the Principal Shareholders, jointly and
severally, hereby indemnify and hold harmless DoveBid and its subsidiaries,
affiliates, officers, directors, agents, representatives and employees, and each
person, if any, who controls or may control DoveBid within the meaning of the
Securities Act (individually, a "DoveBid Indemnitee" and collectively, "DoveBid
Indemnitees") from and against any and all claims, demands, actions, causes of
actions, losses, costs, damages, liabilities and expenses including, without
limitation, reasonable legal fees and expenses (reduced by any reduction in tax
payable by such party as a result thereof, such tax benefit being determined
after taking into account the effect of recovery under this Article VIII and
calculated at such party's incremental effective rate of tax) ("Damages"):
(i) arising out of any misrepresentation, or breach of, or
default in connection with, any of the representations or warranties,
covenants and agreements given or made by the Company or any Shareholder in
this Agreement or any certificate, document or instrument delivered by or
on behalf of the Company or the Shareholders pursuant to this Agreement;
(ii) resulting from any failure of any Shareholder to have good,
valid and marketable title to the issued and outstanding shares held by
such Shareholder, free and clear of Liens, or any claim by a current or
former shareholder, or any other person, firm, corporation or entity,
seeking to assert or based upon ownership or rights to ownership of equity
interest of the Company (or the Purchase Price), any rights of a
shareholder of the Company, including any options, or preemptive rights or
rights to notice or to vote, any rights under the Company' Articles of
Incorporation, bylaws or other charter documents, any right under any
agreement among the Company and the Shareholders or any claim that his or
her equity interests or other securities were wrongfully repurchased by the
Company;
(iii) in connection with a liability of the Company arising out
of any acts, events, omissions or transactions occurring prior to the
Closing Date, which liabilities were not disclosed to DoveBid in this
Agreement, the Financial Statements, the Company Disclosure Letter or the
Closing Balance Sheet and which the Shareholders had Knowledge of at the
time of the Closing; or
(iv) resulting from any claim by any investment banker, broker,
finder or other agent engaged by the Company or any Shareholder in
connection with the origin, negotiation or execution of this Agreement or
in connection with any transaction contemplated hereby.
(b) Indemnification by DoveBid. Subject to the limitations set forth
--------------------------
in this Article VIII, DoveBid hereby indemnifies and holds harmless the
Shareholders (individually, a "Shareholder Indemnitee" and collectively,
"Shareholder Indemnitees") from and against any and all Damages: (i) arising out
of any misrepresentation, or breach of, or default in connection with, any of
the representations or warranties, covenants and agreements given or made by the
DoveBid in this Agreement or any certificate, document or instrument delivered
by
28
<PAGE>
or on behalf of the DoveBid pursuant to this Agreement; or (ii) resulting from
any claim by any investment banker, broker, finder or other agent engaged by
DoveBid in connection with the origin, negotiation or execution of this
Agreement or in connection with any transaction contemplated hereby.
8.3 Limitations and Threshold; Escrow.
---------------------------------
(a) Except for fraud or intentional misrepresentation, the
indemnification provided for under Section 8.2(a) shall not apply unless and
until aggregate Damages for which the DoveBid Indemnitees would be otherwise
entitled to receive indemnification exceed $175,000 (the "Shareholder
Threshold"); provided, however, that once such aggregate Damages exceed the
Threshold, such DoveBid Indemnitees shall be entitled to indemnification for the
aggregate amount of all Damages without regard to the Threshold. Except for
fraud or intentional misrepresentation, the indemnification provided for under
Section 8.2(b) shall not apply unless and until aggregate Damages for which the
Shareholder Indemnitees would be otherwise entitled to receive indemnification
exceed $175,000 (the "DoveBid Threshold"); provided, however, that once such
aggregate Damages exceed the Threshold, such Shareholder Indemnitees shall be
entitled to indemnification for the aggregate amount of all Damages without
regard to the Threshold.
(b) Except for liability based on a claim of fraud or intentional
misrepresentation, the maximum liability of a party for Damages under this
Article VIII shall not exceed $10,000,000 (the "Liability Cap"). Following the
Closing, except for liability based on a claim of fraud or intentional
misrepresentation or any claim under Article IX of this Agreement, the remedies
provided in this Article VIII shall be the sole and exclusive remedy of a party
with respect to any breach, default or failure or perform by a party under this
Agreement. The Shareholder Threshold, the DoveBid Threshold and the Liability
Cap set forth in this Agreement shall apply in the aggregate to the
indemnification obligations of R.Levy, D.Levy and DoveBid set forth in the
proposed stock purchase agreement executed by the parties in connection with the
Robert Carl Transaction.
(c) DoveBid will withhold from the Conversion Stock (as defined in
each Convertible Subordinated Promissory Note) to be issued to Principal
Shareholders upon conversion of each such Convertible Subordinated Promissory
Note ten percent (10%) of such Conversion Stock and any shares of DoveBid
capital stock or other securities into which such Conversion Stock are converted
or exchanged (the "Escrow Shares"), and will hold the certificates representing
such Escrow Shares in escrow as security for the Principal Shareholders'
indemnification obligations for Damages under Article VIII hereof. The Escrow
Shares will be held by DoveBid pursuant to this Agreement, subject to the terms
and conditions of this Sections 8.3 and 8.4, and this Article VII, until the day
after the one year anniversary of the Closing Date (the "Survival Period"). To
the extent that any dividend or distribution made with respect to the Escrow
Shares prior to the end of the Survival Period or, in the case of Escrow Shares
in escrow after the end of the Survival Period pursuant to Section 8.4(b), the
date on which such Escrow Shares are released from escrow, results in a
liability for tax (as defined in Section 2.7 hereof), such tax liability shall
be solely that of the Principal Shareholders (in proportion to each such
shareholder's interest in the Escrow Shares). The escrow provided for in this
Section 8.3 shall be in addition to any escrow required under the terms of the
Convertible Subordinated Promissory
29
<PAGE>
Notes. To the extent that any dividend or distribution is made with respect to
Escrow Shares prior to the release to the Principal Shareholders or retention
by DoveBid of such shares under this Agreement, DoveBid agrees to distribute
the same as promptly as practicable to the Shareholders in accordance with
their pro rata ownership of Escrow Shares.
8.4 Satisfaction of Claims.
----------------------
(a) The Principal Shareholders and DoveBid agree that any Claim for
indemnification under Section 8.2(a) may at the election of DoveBid be satisfied
by either: (i) retaining Escrow Shares, subject to the right of the Principal
Shareholders to promptly satisfy such Claims by paying cash to DoveBid in the
full amount of such Claim within twenty (20) days of resolution of such Claim;
or (ii) through the payment of cash or other property or assets to DoveBid by
such Principal Shareholder. To the extent that DoveBid elects to satisfy any
Claim for indemnification under this Article VIII by retaining Escrow Shares and
the Principal Shareholders do not timely fully pay such Claim in cash, then such
shares shall be valued at a price of $10.50 per share (subject to proportional
adjustment for any stock splits, stock combinations, recapitalizations or like
events) for purposes of satisfying such Claim regardless of whether the actual
market price of DoveBid common stock is higher or lower, and in such event
DoveBid shall not have the right to recover any deficiency and the Principal
Shareholders will not have the right to recover any excess. Claims for
indemnification under Section 8.2(b) shall be satisfied by DoveBid by payment of
cash.
(b) Claims for indemnification by a party under this Article VIII must
be made in writing prior to the expiration of the Survival Period; provided that
if a Notice of Claim is asserted in writing before the expiration of the
Survival Period, then (notwithstanding the subsequent expiration of the Survival
Period) the obligation of the Principal Shareholders to indemnify the DoveBid
Indemnitees (on the one hand) and the obligation of DoveBid to Indemnify the
Shareholder Indemnitees (on the other hand) with respect to such Claim shall
continue until such Claim is finally resolved and satisfied in full in
accordance with this Agreement.
8.5 Third Person Claims.
-------------------
8.5.1 Promptly after either a DoveBid Indemnitee or the
Representatives (as the case may be) have received notice of or has knowledge of
any claim by a person not a party to this Agreement ("Third Person"), or the
commencement of any action or proceeding by a Third Person (such claim or
commencement of such action or proceeding being a "Third Person Claim") that
could give rise to a right of indemnification under this Article VIII, such
party shall, as a condition precedent to a claim with respect thereto, give to
the Principal Shareholders or DoveBid (as the case may be) written notice of
such Third Person Claim describing in reasonable detail the nature of such Third
Person Claim, a copy of all papers served with respect to that Third Person
Claim (if any), an estimate of the amount of Damages attributable to the Third
Person Claim to the extent feasible (which estimate shall not be conclusive of
the final amount of such claim) and the basis for the DoveBid Indemnitee's or
the Representatives' request for indemnification under this Article VIII;
provided, however, that the failure of a party to give timely notice hereunder
shall relieve the Principal Shareholders or DoveBid (as the case
30
<PAGE>
may be) of their indemnification obligations under this Article VIII to the
extent, but only to the extent that, such failure materially prejudices such
party's ability to defend such claim.
8.5.2 DoveBid shall defend any Third Person Claim, and the costs and
expenses incurred by DoveBid in connection with such defense (including but not
limited to reasonable attorneys' fees, other professionals' and experts' fees
and court or arbitration costs) shall be included in the Damages for which
DoveBid may seek indemnity pursuant to a Claim made by any DoveBid Indemnitee
hereunder; provided that the Representatives (on behalf of the Shareholders)
will have the right to participate in such defense at their sole cost and
expense. The Representatives shall have the right to receive copies of all
pleadings, notices and communications with respect to the Third Person Claim to
the extent that receipt of such documents by the Representatives does not affect
any privilege relating to the DoveBid Indemnitee, and may participate in
settlement negotiations with respect to the Third Person Claim. No DoveBid
Indemnitee shall enter into any settlement of a Third Person Claim without the
prior written consent of the Representatives (which consent shall not be
unreasonably withheld or delayed), provided, that if the Representatives shall
have consented in writing to any such settlement, then the Representatives shall
have no power or authority to object to any Claim by any DoveBid Indemnitee for
indemnity under Article VIII for the amount of such settlement and the Principal
Shareholders will remain responsible to indemnify the DoveBid Indemnitee for all
Damages they may incur arising out of, resulting from or caused by the Third-
Party Claim to the fullest extent provided in Article VIII (except if and only
to the extent that the Representatives shall have expressly reserved the
Principal Shareholders' right to object to such Third Person Claim as a
Contested Claim).
8.6 Representatives. Each of the Shareholders approves the designation of
---------------
and designates Robert Levy and David Levy, as the representatives of the
Principal Shareholders (the "Representatives") and as the attorney-in-fact and
agent for and on behalf of each Shareholder with respect to the delivery of the
Closing Balance Sheet and the Closing Liabilities Schedule under Section 1.2,
the resolution of Deferred Payment under Section 1.4 hereof and claims for
indemnification under this Article VIII and the taking by the Representatives of
any and all actions and the making of any decisions required or permitted to be
taken by the Representatives under this Agreement, including, without
limitation, the exercise of the power to: (a) agree to, negotiate, enter into
settlements and compromises of, demand arbitration of, and comply with orders of
courts and awards of arbitrators with respect to, such claims; (b) arbitrate,
resolve, settle or compromise any claim for indemnity made pursuant to Article
VIII; and (c) take all actions necessary in the judgment of the Representatives
for the accomplishment of the foregoing. The Representatives will have
authority and power to act on behalf of each Principal Shareholder with respect
to the disposition, settlement or other handling of all claims under Article
VIII and all rights or obligations arising under Article VIII. The Shareholders
will be bound by all actions taken and documents executed by the Representatives
in connection with Article VIII, and DoveBid will be entitled to rely on any
action or decision of either Representative. In performing the functions
specified in this Agreement, the Representatives will not be liable to any
Shareholder in the absence of gross negligence or willful misconduct on the part
of the Representatives. The Principal Shareholders shall severally indemnify
the Representatives and hold them harmless against any loss, liability or
expense incurred without gross negligence or willful misconduct on the part of
the Representatives and arising out of or in connection with the acceptance or
administration of his duties hereunder. Any out-of-pocket
31
<PAGE>
costs and expenses reasonably incurred by the Representatives in connection
with actions taken by the Representatives pursuant to the terms of Article
VIII (including without limitation the hiring of legal counsel and the
incurring of legal fees and costs) will be paid by the Principal Shareholders
to the Representatives pro rata in proportion to their respective percentage
equity interests in the Company immediately prior to the Closing.
8.7 Notice of Claim. As used herein, the term "Claim" means a claim for
---------------
indemnification for Damages under Article VIII. DoveBid or the Representatives
may give notice of a Claim under this Agreement prior to the end of the Survival
Period whether for its own Damages or for Damages incurred by any other DoveBid
Indemnitee or the Shareholder Indemnitees (as the case may be). DoveBid may
give written notice of a Claim under Section 8.2(a) executed by an authorized
representative of DoveBid to the Representatives, and the Shareholders may give
written notice of a Claim under Section 8.2(b) executed by the Representatives
(a "Notice of Claim") to DoveBid promptly after such notifying party becomes
aware of the existence of any potential claim for indemnity for Damages under
Article VIII, including in connection with any Third Person Claim.
8.8 Contents of Notice of Claim. Each Notice of Claim by DoveBid or the
---------------------------
Shareholders (acting through the Representatives) will contain the following
information:
(a) that DoveBid or the Shareholders (as the case may be) has
incurred, paid or properly accrued (in accordance with GAAP) or, in good faith,
believes it will have to incur, pay or accrue (in accordance with GAAP), Damages
in an aggregate stated amount arising from such Claim (which in the case of
DoveBid may be the amount of damages claimed by a third party in an action
brought against any DoveBid Indemnitee based on alleged facts, which if true,
would give rise to liability for Damages to such DoveBid Indemnitee under
Article VIII); and
(b) a brief description, in reasonable detail (to the extent
reasonably available to the party providing the Notice of Claim), of the facts,
circumstances or events giving rise to the alleged Damages based on such party's
good faith belief thereof, including, without limitation, the identity and
address of any third-party claimant (to the extent reasonably available) and
copies of any formal demand or complaint, the amount of Damages, the date each
such item was incurred, paid or properly accrued, or the basis for such
anticipated liability, and the specific nature of the breach to which such item
is related.
8.9 Resolution of Notice of Claim. Any Notice of Claim received by either
-----------------------------
the Representatives or DoveBid will be resolved as follows:
(a) Uncontested Claims. In the event that, within twenty (20) calendar
------------------
days after a Notice of Claim is received by either the Representatives or
DoveBid, such party does not contest such Notice of Claim in writing to the
other party sending the Notice of Claim (an "Uncontested Claim"), then such
party will be conclusively deemed to have consented (in the case of the
Representatives, on behalf of all Shareholders) to the recovery by the DoveBid
Indemnitees or the Shareholder Indemnitees (as the case may be) of the full
amount of Damages specified in the Notice of Claim in accordance with this
Article VIII.
32
<PAGE>
(b) Contested Claims. In the event that the either the
----------------
Representatives or DoveBid (as the case may be) gives the other party written
notice contesting all or any portion of a Notice of Claim (a "Contested Claim")
within the above twenty (20) day period, then: (i) such Contested Claim will be
resolved by either (A) a written settlement agreement executed by DoveBid and
the Representatives or (B) in the absence of such a written settlement
agreement, by binding arbitration between DoveBid and the Representatives in
accordance with the terms and provisions of Section 8.9(c).
(c) Arbitration of Contested Claims. Each of DoveBid, and the
-------------------------------
Shareholders agree that any Contested Claim will be submitted to mandatory,
final and binding arbitration pursuant to the United States Arbitration Act, 9
U.S.C., Section 1 et seq. Either DoveBid or the Representatives may commence
the arbitration process called for by this Agreement by sending a written demand
for arbitration to each of the other parties to this Agreement. The arbitration
will be conducted in accordance with United States Arbitration Act, 9 U.S.C.,
Section 1 et seq, subject to the provisions of this Section 8.9(c). The parties
will cooperate with each other in promptly selecting a single qualified
arbitrator with relevant experience in the commercial disputes and California
contract law, and in scheduling the arbitration proceedings in order to fulfill
the provisions, purposes and intent of this Agreement. The parties covenant
that they will participate in the arbitration in good faith, and that they will
share in its costs in accordance with subparagraph (i) below. A Contested Claim
finally resolved in favor of a party may be satisfied as if such Claim were an
Uncontested Claim pursuant to Section 8.9(a). The provisions of this Section
8.9(c) may be enforced by any court of competent jurisdiction, and the party
seeking enforcement will be entitled to an award of all costs, fees and
expenses, including attorneys' fees, to be paid by the party against whom
enforcement is ordered. Judgment upon the award rendered by the arbitrator may
be entered in any court having competent jurisdiction.
(i) Payment of Costs. DoveBid on the one hand, and the Principal
----------------
Shareholders (through the Representatives), on the other hand, will bear the
expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such amounts, subject to recovery as
an addition or offset to any award. The arbitrator shall determine the party
who is the Prevailing Party and the party who is the Non-Prevailing Party. The
Non-Prevailing Party shall pay all reasonable costs, fees and expenses related
to the arbitration, including reasonable fees and expenses of attorneys,
accountants and other professionals incurred by the prevailing party, the fees
of each arbitrator and the administrative fee of the arbitration proceedings.
If such an award would result in manifest injustice, however, the arbitrator may
apportion such costs, fees and expenses between the parties in such a manner as
the arbitrator deems just and equitable.
(ii) Burden of Proof. Except as may be otherwise expressly provided
---------------
herein, for any Contested Claim submitted to arbitration, the burden of proof
will be as it would be if the claim were litigated in a judicial proceeding
governed by California law exclusively.
(iii) Award. Upon the conclusion of any arbitration proceedings
-----
hereunder, the arbitrator will render findings of fact and conclusions of law
and a final written arbitration award setting forth the basis and reasons for
any decision reached (the "Final Award") and will deliver such documents to the
Representatives and DoveBid, together with a signed copy of the Final Award.
The Final Award will constitute a conclusive determination of
33
<PAGE>
all issues in question, binding upon the Shareholders, the Representatives and
DoveBid, and will include an affirmative statement to such effect.
(iv) Timing. The Representatives, DoveBid and the arbitrator will
------
conclude each arbitration pursuant to this Section 8.9 as promptly as possible
for the Contested Claim being arbitrated.
(v) Terms of Arbitration. The arbitrator chosen in accordance with
--------------------
these provisions will not have the power to alter, amend or otherwise affect the
terms of these arbitration provisions or the provisions of this Agreement.
ARTICLE IX
POST-CLOSING COVENANTS
9.1 Employee Matters. A reasonable period of time after the Closing
----------------
DoveBid will reserve an aggregate of 200,000 shares of its Common Stock (unless
the Principal Shareholders and DoveBid mutually agree to reserve a larger number
of shares) for issuance upon exercise of stock options granted under DoveBid's
1999 Stock Option Plan to certain employees of the Company who continue
employment with the Company or DoveBid after the Closing (not including shares
allocated to R.Levy, D.Levy, Richard Nucian and James Sklar) selected by the
mutual agreement of DoveBid (on the one hand) and R.Levy and D.Levy (on the
other hand). Continuous employment with the Company will be credited to
employees of the Company who continue employment with the Company or DoveBid
after the Closing for purposes of determining employee benefits such as accrued
vacation, sick leave, and eligibility and vesting under the Internal Revenue
Code Section 401(k) Plan sponsored by DoveBid, but not for purposes of
determining the vesting of stock options and other compensation benefits. As
soon as practicable after the execution of this Agreement, DoveBid and the
Principal Shareholders shall confer and work together in good faith to agree
upon mutually acceptable employee benefit and compensation arrangements for the
employees of Company following the Closing.
9.2 Norman Levy Associates Name. The Shareholders acknowledge and agree
---------------------------
that at the Closing the Company will own and have all right, title and interest
in and to names "Norman Levy" and "Norman Levy Associates" (the "Levy Marks")
and all related names and trademarks, service marks and all associated goodwill.
DoveBid agrees that in the event that it ceases to operate as a going concern in
the businesses of valuation services and asset sales and conducts a liquidation
of all of its assets related to such businesses, DoveBid will use its best
efforts to transfer to the Principal Shareholders (jointly) all of DoveBid's
right, title and interest to the Levy Marks.
9.3 Covenant Not to Compete. As a material inducement and consideration
-----------------------
for the Company, DoveBid and for each of R.Levy and D.Levy, respectively, to
enter into this Agreement and for the sale of R.Levy's and D.Levy's Shares to
DoveBid under the Agreement, each of R.Levy and D.Levy separately agree that for
the earlier of: (a) DoveBid failure to make payment when due of amounts due
under R.Levy's or D.Levy's respective Convertible Subordinated Promissory Note
after written notice of such failure and period of thirty days to
34
<PAGE>
make such payment; or (b) the later of (i) four (4) years from and after the
Closing Date, or (ii) one (1) year following the date of that R.Levy's or
D.Levy's respective employment with DoveBid is terminated for any reason (such
period of time being hereinafter called the "Restricted Period"), R.Levy and
D.Levy, respectively, will not, within the Restricted Area (as defined below)
carry on any business or activity, or own (in whole or in part), operate,
advise, assist or lend funds to or invest funds in, or license or perform
services for, any person, firm, partnership, business, corporation or other
entity in any manner that would aid or assist any person, firm, partnership,
business, corporation or other entity which competes or otherwise engage in any
activity which competes, directly or indirectly, with business of DoveBid or the
Company as currently conducted or any substantially similar business or activity
(the "Restricted Business"); provided that R.Levy and D.Levy may each (i) own
less than one percent (1%) of the public traded securities of a public company,
(ii) hold an ownership interest in Levy/Latham, LLC, a Delaware limited
liability company ("Levy Latham") and may have high level executive management
responsibilities to Levy Latham and attend high level executive management
meetings (so long as such responsibilities and activities do not interfere or
conflict with their respective duties as employees of DoveBid (or any subsidiary
of DoveBid) or compete with the current business of DoveBid; provided that if
DoveBid determines in its reasonable discretion that the business of Levy Latham
competes with DoveBid or the Company, then R.Levy and D.Levy each agrees to
divest their respective ownership interest in Levy Latham within a reasonable
time of such determination, and each further agrees that if such divestiture has
not been completed within 90 days of the determination then such party will
cease all management participation in Levy Latham, and (iii) hold that certain
Warrant to Purchase Common Stock originally issued to Norman Levy Associates,
Inc. under that certain Strategic Alliance Agreement dated as of February 28,
2000 by and between the Company and TradeOut.com, Inc. or any shares issued
thereunder. As used herein, the term "Restricted Area" means any city, country
or state of the United States of America or any geographic area within any other
country in which the Company or DoveBid or their respective subsidiaries,
affiliates, directly or indirectly carries on or engages in the Restricted
Business. During the Restricted Period, each of R.Levy and D.Levy separately
agree not to interfere with, disrupt or attempt to disrupt the relationship
between DoveBid and any third party, including without limitation any customer,
vendor, supplier, distributor, consultant or employee of DoveBid or any of its
subsidiaries, with respect to the Restricted Business and not to solicit any
employee or contractors of DoveBid or any of its subsidiaries. In the event of a
breach of any of the covenants set forth in this Section, DoveBid will be
entitled to an injunction against the breaching party restraining such breach in
addition to any other remedies provided by law or equity. In the event that any
covenant in this Section is held to be invalid, illegal or unenforceable by any
court of competent jurisdiction or any other governmental authority, it is
agreed and understood that such covenant will not be voided but rather will be
construed to impose limitations upon R.Levy's and/or D.Levy's activities (as the
case may be) no greater than allowable under then applicable law. The respective
agreements of R.Levy and D.Levy in this Section 9.3 are separate agreements of
each such party, and R.Levy or D.Levy shall have no liability with respect to a
breach by the other of his obligations under this Section 9.3.
9.4 TradeOut Termination; Indemnification.
-------------------------------------
(a) Termination and Indemnification. After the Closing, DoveBid
-------------------------------
agrees to immediately provide TradeOut.com, Inc. ("TradeOut") with written
notice to terminate that certain Strategic Alliance Agreement dated as of
February 28, 2000 by and between the Company and TradeOut (the "TradeOut
Agreement"). Each of the R.Levy and D.Levy, jointly and severally, hereby
indemnify, defend and hold harmless DoveBid and its subsidiaries,
35
<PAGE>
affiliates, officers, directors, agents, representatives and employees, and
each person, if any, who controls or may control DoveBid within the meaning of
the Securities Act ("DoveBid Persons"), from and against any and all claims,
demands, actions, causes of actions, losses, costs, damages, liabilities and
expenses including, without limitation, reasonable legal fees and expenses
("Losses") that arise out of or are in anyway related to the TradeOut
Agreement, that certain Warrant to Purchase Common Stock issued to the Company
covering up to 525,000 shares of the common stock of TradeOut (the "Warrant"),
the Right of First Refusal and Co-Sale Agreement dated as of October 18, 1999
referred to in the Warrant, and all agreements, exhibits and other instruments
referred therein or related thereto (the "TradeOut Agreements") and any
actions taken by or omissions of R.Levy, D.Levy or the Company under the
TradeOut Agreements and any violation, breach or conflict of the TradeOut
Agreements or for any breach or violation of a representation, warranty or
covenant of the Company or the Shareholders in this Agreement arising from or
related to the TradeOut Agreement or the termination of the TradeOut Agreement
(excluding liabilities of the Company owing to TradeOut in the amount of
$425,000 that is reflected on the Balance Sheet and claims resulting from acts
of DoveBid or employees of DoveBid other than R.Levy and D.Levy including in
their capacities as DoveBid officers). The obligations of R.Levy and D.Levy
under this Section 9.4 shall survive the termination or expiration of this
Agreement and the Closing.
(b) TradeOut Claim. Promptly after a DoveBid Person has received
--------------
notice of or has knowledge of any claim or the commencement of any action or
proceeding that could give rise to a right of indemnification under this
Section 9.4 (a "TradeOut Claim"), such DoveBid Person shall, as a condition
precedent to a claim with respect thereto, give to the Principal Shareholders
written notice of such TradeOut Claim describing in reasonable detail the
nature of such TradeOut Claim, a copy of all papers served with respect to
that TradeOut Claim (if any), an estimate of the amount of Losses attributable
to such TradeOut Claim to the extent feasible (which estimate shall not be
conclusive of the final amount of such claim) and the basis for the DoveBid
Persons' request for indemnification under this Section 9.4; provided,
however, that the failure of such DoveBid Person to give timely notice
hereunder shall relieve the Principal Shareholders of their indemnification
obligations under this Section 9.4 to the extent, but only to the extent that,
such failure materially prejudices such party's ability to defend such
TradeOut Claims. If such TradeOut Claim involves a claim by a third party
(including TradeOut), DoveBid and the Principal Shareholders shall jointly
defend such TradeOut Claim at their joint cost and expense (provided that any
costs and expenses incurred by DoveBid in connection with such defense
(including but not limited to reasonable attorneys' fees, other professionals'
and experts' fees and court or arbitration costs) shall be included in the
Loss for which a DoveBid Person may seek indemnity pursuant to a TradeOut
Claim made hereunder. Both DoveBid and the Principal Shareholders shall have
the right to receive copies of all pleadings, notices and communications with
respect to the TradeOut Claim, and each may participate in settlement
negotiations with respect to the TradeOut Claim. The Principal Shareholders
shall control the settlement of any TradeOut Claim involving a third party
(including TradeOut), but shall not enter into any settlement of a TradeOut
Claim which involves a future obligation of or prohibition or limitation on
DoveBid, or is reasonably likely to have an adverse impact on the reputation
or business of DoveBid, without the prior written consent of DoveBid (which
consent shall not be unreasonably withheld or delayed).
36
<PAGE>
(c) Any notice of a TradeOut Claim received by the Principal
Shareholders will be resolved as follows:
(i) Uncontested TradeOut Claims. If, within twenty (20) calendar days
---------------------------
after a notice of the TradeOut Claim is received by the Principal Shareholders,
the Principal Shareholders do not contest such TradeOut Claim in writing to the
DoveBid Persons giving such notice (an "Uncontested TradeOut Claim"), then such
the Principal Shareholders will be conclusively deemed to have consented to the
recovery by the DoveBid Persons of the full amount of Losses specified in the
notice of the TradeOut Claim in accordance with this Section 9.4.
(ii) Contested TradeOut Claims. In the event that the Principal
-------------------------
Shareholders give the DoveBid Persons written notice contesting all or any
portion of a notice of TradeOut Claim (a "Contested TradeOut Claim") within the
above twenty (20) day period, then: (i) such Contested TradeOut Claim will be
resolved by either (A) a written settlement agreement executed by such DoveBid
Persons and the Principal Shareholders, or (B) in the absence of such a written
settlement agreement, by binding arbitration between the DoveBid Persons and the
Principal Shareholders in accordance with the terms and provisions of Section
9.4(d).
(d) Arbitration of Contested TradeOut Claims. Each of DoveBid, and the
----------------------------------------
Principal Shareholders agree that any Contested TradeOut Claim will be
submitted to mandatory, final and binding arbitration pursuant to the United
States Arbitration Act, 9 U.S.C., Section 1 et seq. Either DoveBid or the
Principal Shareholders may commence the arbitration process called for by this
Section by sending a written demand for arbitration to the other party. The
arbitration will be conducted in accordance with United States Arbitration
Act, 9 U.S.C., Section 1 et seq, subject to the provisions of this 9.4(c). The
parties will cooperate with each other in promptly selecting a single
qualified arbitrator with relevant experience in the commercial disputes and
California contract law, and in scheduling the arbitration proceedings in
order to fulfill the provisions, purposes and intent of this Section 9.4. The
parties covenant that they will participate in the arbitration in good faith,
and that they will share in its costs in accordance with this Section 9.4(d).
A Contested TradeOut Claim finally resolved in favor of a party may be
satisfied as if such TradeOut Claim were an Uncontested TradeOut Claim
pursuant to Section 9.4(d)(i) above. The provisions of this Section 9.4 may be
enforced by any court of competent jurisdiction, and the party seeking
enforcement will be entitled to an award of all costs, fees and expenses,
including attorneys' fees, to be paid by the party against whom enforcement is
ordered. Judgment upon the award rendered by the arbitrator may be entered in
any court having competent jurisdiction. The non-prevailing party shall pay
all reasonable costs, fees and expenses related to the arbitration, including
reasonable fees and expenses of attorneys, accountants and other professionals
incurred by the prevailing party, the fees of each arbitrator and the
administrative fee of the arbitration proceedings. If such an award would
result in manifest injustice, however, the arbitrator may apportion such
costs, fees and expenses between the parties in such a manner as the
arbitrator deems just and equitable. Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a final written arbitration award setting forth the
basis and reasons for any decision reached and will deliver such documents to
the Principal Shareholders and the DoveBid Persons, together with a signed
copy of the final award. The final award will constitute a conclusive
determination of all issues in question, binding upon the Principal
Shareholders and the DoveBid
37
<PAGE>
Persons, and will include an affirmative statement to such effect. The
Principal Shareholders and the DoveBid Persons will conclude each arbitration
pursuant to this Section 9.4(d) as promptly as possible for the Contested
TradeOut Claim being arbitrated. The arbitrator chosen in accordance with
these provisions will not have the power to alter, amend or otherwise affect
the terms of these arbitration provisions or the provisions of this Section.
9.5 Nucian Payment. Promptly following the Closing, DoveBid will pay
--------------
Richard Nucian the cash consideration and issue the Convertible Subordinated
Promissory Note required under Section 2 of the Nucian Employment Release.
9.6 Termination or Transfer of Vehicle Leases. Promptly following the
-----------------------------------------
Closing, R.Levy, D.Levy and DoveBid agree to use their commercially reasonable
efforts to cause each of the vehicle leases set forth on Schedule 9.6 attached
hereto (the "Vehicle Leases") to either be terminated or transferred in their
entirety (without liability to the Company or DoveBid) by the employee using the
leased vehicle.
9.7 IRC Election. As soon as practicable after requested by DoveBid, if
------------
instructed by DoveBid the Shareholders shall deliver to DoveBid a properly
executed election under Section 338(h)(10) of the Internal Revenue Code (the
"IRC") and any corresponding state tax election reasonably requested by DoveBid
to treat the transaction contemplated by this Agreement as an asset sale (the
"IRC Election"); provided that DoveBid has agreed to reimburse the Shareholders
for taxes above the amount of tax liability which they would have incurred
without making the IRC Election ("Additional Tax"), including any taxes payable
as a result of such reimbursement. The amount of the Additional Taxes shall be
mutually agreed to by the parties at such time.
9.8 Transfer of Sub Shares. Promptly after the Closing, R.Levy and D.Levy
----------------------
agree to transfer all of the capital stock of Norman Levy Associates Mexico,
S.A. de C.V. held by R.Levy and D.Levy to DoveBid in the manner instructed by
DoveBid (the "Sub Share Transfer").
9.9 Termination of Oral Retainer Agreement. Promptly after the Closing,
--------------------------------------
the Company and the Shareholders agree to use their best efforts to cause that
certain Oral Retainer Agreement by and among the Company and Milton Y. Zussman
to be terminated without liability to the Company or DoveBid (except as
reflected on the Closing Balance Sheet).
9.10 Third Party Debt. As soon as practicable after the Closing, DoveBid
----------------
will pay in full all amounts (including principal and interest) constituting
Third Party Debt (as reflected on the Closing Balance Sheet).
9.11 Robert Carl Transaction. It is the intention of the parties as soon
-----------------------
as practicable after the Closing to negotiate and enter into a stock purchase
agreement in form and substance substantially similar to this Agreement (except
as to purchase price, purchase price adjustments, and indemnification
limitations) providing for the sale to DoveBid of all of the outstanding capital
stock of Robert Carl (held by R. Levy and D.Levy) for a cash purchase price to
be $430,874 based on the Preliminary Robert Carl Balance Sheet (the "Robert Carl
Transaction"). In the event that the Robert Carl Transaction has not been
consummated within a reasonable time following the Closing, then R.Levy and
D.Levy shall have the joint right to require that DoveBid purchase from them all
of the outstanding shares of Robert Carl capital stock for cash in an
38
<PAGE>
aggregate amount of $430,874 pursuant to a stock purchase agreement that
contains terms and provisions which are reasonable and customary for such
transactions (the "Put Right"); provided, that (i) R.Levy and D.Levy have in
good faith and through reasonable diligent efforts attempted to consummate the
Robert Carl Transaction, and (ii) R.Levy and D.Levy jointly continue to hold
all of the outstanding shares of Robert Carl capital stock on the date of the
closing of such sale of the shares. The Put Right shall terminate on the
earlier of: (i) on the mutual agreement of DoveBid, R.Levy and D.Levy, (ii)
the consummation of the Robert Carl Transaction, or (iii) the merger or
consolidation of Robert Carl, or the sale of all or substantially all of its
assets to a third party.
9.12 ERISA Fiduciary Insurance. From and after the Closing through the
-------------------------
date on which the assets of the Norman Levy Associates, Inc. Salaried Employees
Retirement Profit Sharing Plan are distributed to the participants and
beneficiaries thereof, DoveBid shall, or shall cause the Company to, maintain in
effect either the ERISA fiduciary insurance coverage in effect immediately prior
to the Closing or such other ERISA fiduciary insurance coverage that is
substantially similar to the coverage in effect immediately prior to the
Closing.
9.13 Further Assurances. The Company, the Shareholders and DoveBid shall
------------------
each deliver or cause to be delivered to the other, at such other times and
places as shall be reasonably agreed, such additional instruments, and take such
additional actions as can be taken without unreasonable expense, as any other
may reasonably request for the purpose of carrying out this Agreement and the
transactions contemplated hereby. The Shareholders agree to cooperate and
assist DoveBid in seeking or obtaining all consents, approvals, authorizations,
notices, terminations or amendments relating to any agreement or other
obligation of the Company which may be necessary or desirable in DoveBid's sole
judgment.
ARTICLE X
GENERAL
10.1 Confidentiality. The Company, the Shareholders and DoveBid each
---------------
recognize that they have received and will receive confidential information
concerning the other during the course of the negotiations and preparations of
this Agreement and the transactions contemplated herein. Accordingly, the
Company, the Shareholders and DoveBid each agree (a) to use their respective
best efforts to prevent the unauthorized disclosure of any confidential
information concerning the other that was or is disclosed during the course of
such negotiations and preparations, and is clearly designated in writing as
confidential at the time of disclosure, and (b) to not make use of or permit to
be used any such confidential information other than for the purpose of
effectuating the Closing and related transactions. The obligations of this
Section 10.1 will not apply to information that is required, in the opinion of
counsel to a party hereto, to be disclosed by statute, or governmental rule or
regulation, or, following the Closing, to the disclosure of information
regarding the Company by DoveBid. If this Agreement is terminated, all copies
of documents containing confidential information shall be returned by the
receiving party to the disclosing party. Because of the difficulty of measuring
economic losses as a result of the breach of the foregoing covenants in Section
10.1 and because of the immediate and irreparable damage that would be caused
for which they would have no other adequate remedy,
39
<PAGE>
the parties hereto agree that, in the event of a breach by any of them of the
foregoing covenants, the covenant may be enforced against the other parties by
injunctions and restraining orders.
10.2 Successors and Assigns. Neither the Company nor any Shareholder may
----------------------
assign any of its rights or obligations hereunder without the prior written
consent of DoveBid. DoveBid may not assign any of its rights or obligations
hereunder without the prior written consent of Shareholders holding not less
than a majority of the voting power in the Company, except that DoveBid may
assign its rights and obligations hereunder without the prior written consent of
any Shareholder in connection with a merger, consolidation or sale of all or
substantially all of DoveBid's assets or in connection with a reincorporation,
reorganization or other corporate recapitalization or reorganization, provided
that the acquiring or surviving corporation or entity agrees to assume all of
DoveBid's obligations under this Agreement. This provision does not govern the
assignment of the Convertible Subordinated Promissory Notes or stock issued
pursuant thereto, which shall be governed solely by the provisions thereof.
Except as provided in this Section, this Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
10.3 Entire Agreement; Amendments. This Agreement (including the
----------------------------
schedules and exhibits attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Shareholders,
the Company and DoveBid and supersede any prior agreement, understanding or
discussions relating to DoveBid or the transactions contemplated by this
Agreement. Except as otherwise stated herein, this Agreement and the exhibits
hereto may be modified or amended only by a written instrument executed by the
Shareholders, the Company and DoveBid, acting through their respective officers,
and duly authorized by each of their Board of Directors.
10.4 Counterparts. This Agreement may be executed simultaneously in two
------------
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same agreement.
10.5 Expenses; Taxes. DoveBid will pay the fees, expenses and
---------------
disbursements of DoveBid and its agents, representatives, accountants and
counsel incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the performance
and compliance with all conditions to be performed by DoveBid under this
Agreement. The Shareholders will pay their and the Company's respective fees,
expenses and disbursements of counsel and accountants incurred in connection
with the subject matter of this Agreement and any amendments thereto incurred
prior to the Closing (except as otherwise expressly provided in this Agreement
with respect to the costs and fees of the Representatives), including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by them under this Agreement. Any expenses of the Shareholders and
the Company not paid by the Shareholders at or prior to the Closing shall be
treated as Damages under Article VIII. The Shareholders and DoveBid shall
jointly pay all transfer, recording, stock transfer and other similar taxes and
fees ("Transfer Taxes") incurred in connection with the transactions
contemplated by this Agreement, it being acknowledged by the parties that the
Shareholders are solely responsible for all income, gains and other similar
taxes and fees incurred in connection with the transactions contemplated by this
Agreement. The Company shall file, and the Shareholders shall cause the Company
to file, all necessary
40
<PAGE>
documentation and tax returns with respect to such Transfer Taxes. In
addition, the Shareholders acknowledge that they, and not DoveBid or the
Company, will be solely responsible for and will pay all taxes due upon the
receipt by the Shareholders of each element of the Purchase Price pursuant to
this Agreement.
10.6 Notices. All notices and other communications required or permitted
-------
hereunder shall be effective upon receipt (or refusal of receipt) and shall be
in writing and delivered by depositing the same in United States mail or a
nationally recognized overnight courier service, addressed to the party to be
notified, postage prepaid and registered or certified with return receipt
requested, by delivering the same in person to such party or to an officer or
agent of such party, as follows:
(i) If mailed or delivered to DoveBid, to each of the following,
using two separate mailings or deliveries:
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Anthony Capobianco, Vice President and General
Counsel
(ii) If mailed or delivered to the Representatives, the Company
or the Shareholders, to:
Robert Levy
David Levy
c/o Norman Levy Associates, Inc.
21415 Civic Center Drive
Southfield, Michigan 48076
with a copy to:
Jaffe Raitt Heuer & Weiss, P.C.
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226-3418
Attention: Richard A. Zussman, Esq.
or to such other address as any party hereto shall specify in writing to the
other parties hereto pursuant to this Section 10.7 from time to time. Such
notice shall be effective only upon actual receipt.
41
<PAGE>
10.7 Interpretation, Defined Terms.
-----------------------------
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
(b) For purposes of this Agreement, the term ""Knowledge," when used
with reference to (i) an individual means the actual knowledge of such
individual, after due inquiry of Richard Nucian, James Sklar, R.Levy, D.Levy and
Greg Gallagher, with respect to a representation or warranty of such individual
contained in this Agreement, or any other certificate or agreement required to
be entered into or delivered at the Closing by such individual in connection
with the Agreement, or (ii) a person that is not an individual, means (x) in the
case of the Company the collective actual knowledge, after due inquiry, of
Richard Nucian, James Sklar, R.Levy, D.Levy and Greg Gallagher, and (y) in the
case of DoveBid means the collective actual knowledge, after due inquiry, of the
Ross Dove, Kirk Dove, Anthony Capobianco, Cory M. Ravid and Jeffrey M. Crowe.
(c) For purposes of this Agreement, the term "Material Adverse Effect"
when used in connection with an entity means any change, event, violation,
inaccuracy, circumstance or effect that is or is reasonably likely to be
materially adverse to the business, assets, capitalization, financial condition,
operations or results of operations of such entity taken as a whole with its
subsidiaries.
(d) For purposes of this Agreement, the term "person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
governmental agency, office, branch or entity.
(e) For purposes of this Agreement, "subsidiary" of a specified entity
will be any corporation, partnership, limited liability company, joint venture
or other legal entity of which the specified entity (either alone or through or
together with any other subsidiary) owns, directly or indirectly, 50% or more of
the stock or other equity or partnership interests the holders of which are
generally entitled to vote for the election of the Board of Directors or other
governing body of such corporation or other legal entity.
(f) Disclosure made with regard to a representation or warranty of a
party in a part of either the Company Disclosure Letter or DoveBid Disclosure
Letter shall also be deemed to be included within all other Sections of such
Disclosure Letter.
10.8 Governing Law; Forum. This Agreement shall be governed by and
--------------------
construed in accordance with the laws of the State of California, without giving
effect to laws concerning choice of law or conflicts of law.
42
<PAGE>
10.9 Exercise of Rights and Remedies. Except as otherwise provided
-------------------------------
herein, no delay of, or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power, or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
10.10 Time. Time is of the essence with respect to this Agreement.
----
10.11 Reformation and Severability. In case any provision of this
----------------------------
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
10.12 Remedies Cumulative. Except as provided in the second sentence of
-------------------
Section 8.3(b), no right, remedy or election given by any term of this Agreement
shall be deemed exclusive but each shall be cumulative with all other rights,
remedies and elections available at law, or in equity or by contract.
10.13 Construction. This Agreement has been negotiated among DoveBid, the
------------
Company, the Shareholders and their respective legal counsel, and legal or
equitable principles that might require the construction of this Agreement or
any provision of this Agreement against the party drafting this Agreement will
not apply in any construction or interpretation of this Agreement.
10.14 Absence of Third Party Beneficiary Rights. No provisions of this
-----------------------------------------
Agreement are intended, nor will be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, partner or employee of any party hereto or any other person
or entity, unless specifically provided otherwise herein, and, except as so
provided, all provisions hereof will be personal solely between the parties to
this Agreement.
[The Remainder Of This Page Intentionally Left Blank]
43
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be duly executed by the respective authorized representatives of
DoveBid and the Company and by each Shareholder as of the day and year first
above written.
DOVEBID, INC.
By:
---------------------------------------
Name: Anthony Capobianco
Title: Vice President and General Counsel
NORMAN LEVY ASSOCIATES, INC.
By:
---------------------------------------
Name: Robert Levy
Title: President
-------------------------------------------
David Levy
-------------------------------------------
Robert Levy
THE NORMAN LEVY QUALIFIED TERMINABLE INTEREST
MARTIAL TRUST
By:
----------------------------------------
Name: Milton Y. Zussman
Trustee
[Execution Page to Stock Purchase Agreement]
44
<PAGE>
EXHIBIT 10.01
DoveBid, Inc.
1999 Stock Option Plan
1. Adoption and Purpose of the Plan. This stock option plan (this
--------------------------------
"Plan") has been adopted by the Board of Directors of DoveBid, Inc. (the
"Company"), and is subject to the approval of its shareholders pursuant to
Section 7 below. The purpose of this Plan is to advance the interests of the
Company and its shareholders by enabling the Company to attract and retain
qualified directors, officers, employees, independent contractors, consultants
and advisers by providing them with an opportunity for investment in the
Company. The Options that may be granted pursuant to this Plan represent the
right to acquire Shares of the Company's common stock, subject to the terms and
conditions of this Plan and a written agreement between the Company and the
Optionee to evidence each Option (an "Option Agreement").
2. Certain Definitions. Capitalized terms not otherwise defined in
-------------------
this Plan will have the meanings set forth in Exhibit A to this Plan.
3. Eligibility. The Company may grant Options under this Plan only
-----------
to (a) persons who, at the time of such grant, are directors, officers or
employees of the Company or any Subsidiary, and (b) natural persons who, and
entities which, at the time of such grant, are independent contractors,
consultants or advisers of the Company or any Subsidiary and who perform bona
fide services on its behalf other than in connection with capital-raising
transactions (collectively, "Eligible Participants"). No person or entity will
be an Eligible Participant following his, her or its Termination of Eligibility
Status. Subject to Section 4 below, there is no limitation on the number of
Options that may be granted to an Eligible Participant.
4. Option Pool; Shares Reserved for Options. The Company will not
----------------------------------------
issue, in the aggregate, more than 12,500,000 Shares (the "Option Pool")
pursuant to the exercise of all Options granted under this Plan, exclusive of
those Option Shares that may be reacquired by the Company by repurchase or
otherwise; provided that in order to comply with the requirements of Section
260.140.45 of Title 10 of the California Code of Regulations (the "30% Rule"),
at no time will the total number of Shares that are issuable upon the exercise
of all outstanding Options granted under this Plan (or under any other
outstanding options or warrants issued by the Company, together with the total
number of Shares provided for under any stock bonus or similar plan of the
Company) in the aggregate exceed 30% of the total number of then issued and
outstanding Shares of the Company, unless approved by the holders of at least
two-thirds of the outstanding Shares of the Company, as calculated in accordance
with the conditions and exclusions of the 30% Rule. At all times while Options
granted under this Plan are outstanding, the Company will reserve for issuance a
sufficient number of authorized and unissued Shares to fully satisfy the
Company's obligations under all such outstanding Options.
5. Administration. This Plan will be administered and interpreted by
--------------
the Board, or by a committee consisting of two or more members of the Board,
appointed by the Board for such purpose (the Board, or such committee, is
referred to as the "Administrator"). Subject to the express terms and
conditions hereof, the Administrator is authorized to prescribe, amend and
rescind rules and regulations relating to this Plan, and to make all other
determinations necessary or advisable for its administration and interpretation.
Specifically, the Administrator will have full and final authority in its
discretion, subject to the specific limitations on that discretion as are set
forth herein and in the Certificate of Incorporation and Bylaws of the Company,
at any time:
<PAGE>
(a) To select and approve the Eligible Participants to whom
Options will be granted from time to time hereunder;
(b) To determine the Fair Market Value of the Shares as of the
Grant Date for any Option that is granted hereunder;
(c) With respect to each Option it decides to grant, to determine
the terms and conditions of that Option, to be set forth in an Option Agreement
evidencing that Option (the form of which also will be subject to approval by
the Administrator); except to the extent otherwise provided in this Plan, such
terms and conditions may vary from the general terms and conditions set forth in
Section 6 below, and may include, without limitation, the following:
(i) The total number of Option Shares that may be acquired
by the Optionee pursuant to the Option;
(ii) Whether the Option will be treated as an ISO;
(iii) The per share purchase price to be paid to the Company
by the Optionee to acquire the Option Shares issuable upon exercise of the
Option (the "Exercise Price"), provided that the Exercise Price will not be less
than 85% of the Fair Market Value of the Shares as of the Grant Date, unless the
Optionee is a 10% Shareholder, in which case the Exercise Price will not be less
than 110% of such Fair Market Value;
(iv) The maximum period during which the Option will be
exercisable (the "Option Term"), provided that in no event may the Option Term
be longer than ten years from the Grant Date;
(v) The maximum period following any Termination of
Eligibility Status, whether resulting from an Optionee's death, Disability or
any other reason, during which period (the "Grace Period") the Option will be
exercisable, subject to Vesting and to the expiration of the Option Term,
provided that in no event may the Administrator designate a Grace Period that is
shorter than six months after such Termination of Eligibility Status by reason
of the Optionee's death or Disability, or 30 days after such Termination of
Eligibility for any other reason, except in the event of a Termination for
Cause, in which case no Grace Period will be required (i.e., the Option will
terminate immediately);
(vi) Whether to accept a promissory note or other form of
legal consideration instead of cash as payment of all or a portion of the
Exercise Price or Tax Withholding Liability to be paid by the Optionee upon the
exercise of an Option;
(vii) The conditions (e.g., the passage of time or the
occurrence of events), if any, that must be satisfied prior to the vesting of
the right to exercise all or specified portions of an Option (such portions
being described as the number of Option Shares, or the percentage of the total
number of Option Shares, that may be acquired by the Optionee pursuant to the
Option; the vested portion being referred to as a "Vested Option" and the
unvested portion being referred to as an "Unvested Option"), provided that no
such condition (except an Optionee's Termination of Eligibility Status) may be
imposed which prevents an Optionee who is an employee, but who is neither an
officer or director, of the Company or any Subsidiary, from purchasing at least
20% of the Option Shares initially subject to the Option as of the first
anniversary of the Grant Date, and as of
2
<PAGE>
each anniversary thereafter, such that by the fifth anniversary of the Grant
Date (assuming no Termination of Eligibility Status) the entire Option would be
a Vested Option; and
(viii) In addition, or as an alternative, to imposing
conditions on the right to exercise an Option as provided in Section 5(c)(vii)
above, the Board may determine whether any portion of the Option Shares acquired
by an Optionee upon exercise of an Option will be subject to repurchase by the
Company or its assigns pursuant to Section 6.8(c) below at the Exercise Price
paid for such Shares or at some other price that may be less than the Fair
Market Value of such Shares (such Shares, if subject to repurchase at less than
Fair Market Value, being referred to as "Unvested Shares") following a
Termination of Eligibility Status or other designated event, and the conditions
(e.g., the passage of time or the occurrence of events), if any, that must be
satisfied for such Shares to be no longer subject to such right of repurchase at
less than Fair Market Value (such Shares being referred to as "Vested Shares");
provided that no such conditions (except an Optionee's Termination of
Eligibility Status) may be imposed which prevent Unvested Shares held by an
employee, who is neither an officer or director, of the Company or any
Subsidiary, from becoming Vested Shares at the rate of at least 20% per year
following the Grant Date, such that by the fifth anniversary of the Grant Date
(assuming no earlier Termination of Eligibility Status) all of the Shares would
be Vested Shares; and
(d) To delegate all or a portion of the Administrator's authority
under Sections 5(a), (b) and (c) above to one or more members of the Board who
also are executive officers of the Company, subject to such restrictions and
limitations as the Administrator may decide to impose on such delegation.
6. General Terms and Conditions of Options. Unless otherwise
---------------------------------------
expressly provided to the contrary in an Option Agreement based on the
Administrator's determination pursuant to Section 5(c) above, the following
terms and conditions will be deemed to apply to each Option as if expressly set
forth in the Option Agreement:
6.1 ISO. No Option will be treated as an ISO unless treatment as
---
an ISO is expressly provided for in an Option Agreement and such Option
satisfies the conditions of Section 422(b) of the Code.
6.2 Option Term. The Option Term will be for a period of ten years
-----------
beginning on the Grant Date.
6.3 Grace Periods. Following a Termination of Eligibility Status:
-------------
(a) The Grace Period will be 30 days, unless the Termination of
Eligibility Status is a result of a Termination for Cause or the death or
Disability of the Optionee;
(b) The Grace Period will be six months if the Termination of
Eligibility Status is a result of the death or Disability of the Optionee; and
(c) There will be no Grace Period, and the Option will
terminate, effective immediately as of the date and time of a Termination for
Cause of the Optionee, regardless of whether the Option is Vested or Unvested.
3
<PAGE>
6.4 Vesting. The Option initially will be deemed an entirely
-------
Unvested Option, but portions of the Option will become a Vested Option on the
following schedule, provided that the Optionee does not suffer a Termination of
Eligibility Status prior to any vesting date, and provided further that
additional vesting will be suspended during any period while the Optionee is on
a leave of absence from the Company or any Subsidiary, as determined by the
Administrator:
(a) 25% will become a Vested Option as of the first anniversary
of the "Vesting Start Date" specified in the Option Agreement (which may be
earlier but may not be later than the Grant Date specified therein); and
(b) An additional 6-1/4th% of the Option will become a Vested
Option as of the end of each three-month period thereafter, such that 100% of
the Option will be a Vested Option on the fourth anniversary of the Vesting
Start Date.
6.5 Exercise of the Option; Issuance of Share Certificate.
-----------------------------------------------------
(a) Notice and Payment. The Optionee may exercise the portion
------------------
of the Option that is a Vested Option by giving written notice to the Company,
on such form as may be specified by the Administrator, but in any event stating:
(i) the Optionee's intention to exercise the Option; (ii) the date of exercise;
(iii) the number of full Option Shares to be purchased; (iv) the amount and form
of payment of the Exercise Price; (v) and such assurances of the Optionee's
investment intent as the Company may require to ensure that the transaction
complies in all respects with the requirements of the 1933 Act and other
applicable securities laws. The notice of exercise must be signed by the person
exercising the Option. If the Option is exercised by a representative of the
Optionee, the notice will be accompanied by proof satisfactory to the Company of
the representative's right to exercise the Option. The notice of exercise will
be accompanied by full payment of the Exercise Price for the number of Option
Shares to be purchased, in United States dollars, in cash, by check made payable
to the Company, or by delivery of such other form of payment (if any) as
approved by the Administrator in the particular case.
(b) Tax Withholding Liability. To the extent required by
-------------------------
applicable federal, state, local or foreign law, and as a condition to the
Company's obligation to issue any Shares upon the exercise of the Option in full
or in part, the Optionee will make arrangements satisfactory to the Company for
the payment of any applicable Tax Withholding Liability that may arise by reason
of or in connection with such exercise. Such arrangements may include, in the
Administrator's sole discretion, that the Optionee tender to the Company the
amount of such Tax Withholding Liability, in cash, by check made payable to the
Company, or in the form of such other payment as may be approved by the
Administrator.
(c) Stock Certificate. After receiving a proper notice of
-----------------
exercise and payment of the applicable Exercise Price and Tax Withholding
Liability, the Company will cause to be issued a certificate or certificates for
the Option Shares, registered in the name of the person rightfully exercising
the Option, and the Company will cause such certificate or certificates to be
delivered to such person.
6.6 Compliance with Law. Notwithstanding any other provision of this
-------------------
Plan, Options may be granted pursuant to this Plan, and Option Shares may be
issued pursuant to the exercise of Options, only after and on the condition that
there has been compliance with all applicable federal and state securities laws.
The Company will not be required to list, register or
4
<PAGE>
qualify any Option Shares upon any securities exchange, under any applicable
state, federal or foreign law or regulation, or with the Securities and Exchange
Commission or any state agency, or secure the consent or approval of any
governmental regulatory authority.
6.7 Restrictions on Transfer.
------------------------
(a) Options Nontransferable. No Option will be transferable by an
-----------------------
Optionee otherwise than by will or the laws of descent and distribution. During
the lifetime of a natural person who is granted an Option under this Plan, the
Option will be exercisable only by such person.
(b) Prohibited Transfers. Prior to the Initial Public Offering,
--------------------
no Holder of any Option Shares may Transfer such Shares, or any interest
therein: (i) except as expressly provided in this Plan; and (ii) other than in
full compliance with all applicable securities laws and any applicable
restrictions on Transfer provided in the Company's Certificate of Incorporation
or Bylaws, which will be deemed incorporated by reference into this Plan. All
Transfers of Option Shares not complying with the specific limitations and
conditions set forth in this Section 6.7 and Section 6.8 below are expressly
prohibited. Any prohibited Transfer is void and of no effect, and no purported
transferee in connection therewith will be recognized as a Holder of Option
Shares for any purpose whatsoever. Should such a Transfer purport to occur, the
Company may refuse to carry out the Transfer on its books, attempt to set aside
the Transfer, enforce any undertakings or rights under this Plan, or exercise
any other legal or equitable remedy.
(c) Permitted Transfers. In the case of a Permitted Transfer,
-------------------
the conditions set forth in Section 6.7(d) will apply, but the rights of first
refusal and repurchase set forth in Section 6.8 below will not apply. For such
purposes, a "Permitted Transfer" means any of the following: (i) a Transfer by
will or under the laws of descent and distribution; (ii) a Transfer by a Holder
of Option Shares to his or her ancestors, descendants or spouse (other than
pursuant to a decree of divorce, dissolution or separate maintenance, a property
settlement, or a separation agreement or any similar agreement or arrangement
with a spouse, except for bona fide estate planning purposes), or to a trust,
partnership, limited liability company, custodianship or other fiduciary account
for the benefit of the Holder and/or such ancestors, descendants or spouse,
including any Transfer in the form of a distribution from any such trust,
partnership, limited liability company, custodianship or other fiduciary account
to any of the foregoing permitted beneficial owners or beneficiaries thereof; or
(iii) a Transfer of Option Shares approved in writing by the Administrator in
its sole discretion.
(d) Conditions to Transfer. It will be a condition to any
----------------------
Transfer of any Option Shares that:
(i) The Transferee of the Shares will execute such
documents as the Company may reasonably require to ensure that the Company's
rights under this Plan, and any applicable Option Agreement, are adequately
protected with respect to such Shares, including, without limitation, the
Transferee's agreement to be bound by all of the terms and conditions of this
Plan and such Agreement, as if the Transferee were the original Holder of such
Shares; and
(ii) The Company is satisfied that such Transfer complies in
all respects with the requirements imposed by applicable federal and state
securities laws and regulations.
5
<PAGE>
(e) Market Standoff. If in connection with any public offering
---------------
of securities of the Company (or any Successor Entity), the underwriter or
underwriters managing such offering so requests, then each Optionee and each
Holder of Option Shares will agree to not sell or otherwise Transfer any such
Shares (other than Shares included in such underwriting) without the prior
written consent of such underwriter, for such period of time as may be requested
by the underwriter.
6.8 Rights of First Refusal and Repurchase. The Company will have
--------------------------------------
the following rights of first refusal and repurchase with respect to Option
Shares:
(a) Right of First Refusal for Voluntary Transfer. If any Holder
---------------------------------------------
proposes to Transfer any Option Shares prior to the Initial Public Offering,
other than in the case of a Permitted Transfer pursuant to Section 6.7(c) above
or an Involuntary or Donative Transfer subject to Section 6.8(b) below, the
Company will have an assignable right of first refusal to purchase all or any
portion of such Shares on the terms and conditions set out in this Section
6.8(a). If the Company (or its assignee) elects to exercise such right, it will
do so with respect to any particular Transfer of Shares in the following manner:
(i) Before any such Transfer, the Holder proposing to
Transfer such Shares will deliver a notice of proposed Transfer (a "Proposed
Transfer Notice") to the Company stating: (A) the number of Option Shares that
the Holder proposes to Transfer; (B) the Holder's bona fide intention to
Transfer such Shares; (C) the names and addresses of the Holder and the proposed
Transferee (and subsequently such other information regarding such transferee as
the Company reasonably requests); (D) the manner and date of such proposed
Transfer; (E) the bona fide cash price and/or other consideration (and the fair
market value thereof) per share, if any, that such Transferee has offered to pay
the Holder for such Shares (the "Offered Price"); and (F) such other terms,
including payment terms, and conditions, if any, as were included in such offer
(the "Offered Terms").
(ii) The Company (or its assignee) may exercise its right of
first refusal under this Section 6.8(a) at any time not more than 20 days after
the Company has received the Proposed Transfer Notice with respect to such
Shares. If the Company (or its assignee) elects to exercise such right it will
do so by delivering to the Holder of such Shares a notice of such election and a
closing date that is no more than 30 days after receipt of the Proposed Transfer
Notice (or such later date as the Transferee may have offered or on which the
Transfer is otherwise scheduled to occur).
(iii) At the closing of the sale of the Shares to the Company
(or its assignee), to be held at its principal executive offices, the Company
(or its assignee) will pay the Holder of the Shares, in cash, the purchase price
equal to the Offered Price, subject to an appropriate adjustment to take into
account any deferred payment terms that were included in the Offered Terms;
provided that if the Offered Price includes any non-cash consideration, the
value thereof for purposes of this Section 6.8(a) will be determined in good
faith by the Board.
(iv) If the Company (including its assignees) fails or
refuses to exercise its rights under this Section 6.8(a) with respect to any
Shares that are the subject of any Proposed Transfer Notice, then the Holder
will have the right to Transfer such Shares to the Transferee named in such
Notice at the Offered Price and upon such Offered Terms as were set forth
6
<PAGE>
in such Notice; provided that such Transfer must be completed within 90 days
after the Company has received the Proposed Transfer Notice with respect to such
Shares.
(b) Right of First Refusal for Involuntary or Donative Transfer.
-----------------------------------------------------------
Following any Involuntary Transfer or Donative Transfer (other than a Permitted
Transfer) of Option Shares (the "Transferred Shares") prior to the Initial
Public Offering, the Company will have the assignable right to purchase from the
Transferee of the Transferred Shares all or a portion of such Shares for a
purchase price that is equal to the Fair Market Value of those Shares as of the
date of such Transfer, as determined in good faith by the Board. If the Company
(or its assignee) elects to exercise such right, it will do so in the following
manner:
(i) Promptly after such Transfer, the transferor of the
Transferred Shares will deliver, or will cause the Transferee to deliver, a
notice (a "Completed Transfer Notice") to the Company stating: (A) the number of
Transferred Shares; (B) the names and addresses of the transferor and the
Transferee (and subsequently such other information regarding the Transferee as
the Company reasonably requests); and (C) the manner, circumstances and date of
such Transfer.
(ii) The Company (or its assignee) may exercise its rights
under this Section 6.8(b) at any time not more than 90 days after the Company
has received the Completed Transfer Notice with respect to the Transferred
Shares. If the Company (or its assignee) elects to exercise such rights it will
do so by delivering to the Transferee a notice of such election, specifying the
number of Transferred Shares to be purchased and a closing date that is no more
than 60 days after the giving of such notice.
(iii) At such closing, to be held at the Company's principal
executive offices, the Company (or its assignee) will pay the Transferee the
purchase price in cash.
(c) Repurchase Following a Termination of Eligibility Status.
--------------------------------------------------------
Following any Termination of Eligibility Status of the original Holder of any
Option Shares, the Company will have the assignable right (but not the
obligation) to purchase from the current Holder of those Option Shares (except
to the extent that such Shares previously were transferred in a transaction as
to which Section 6.8(a) or (b) applied), all or a portion of such Shares for a
purchase price that is equal to (1) in the case of Unvested Shares pursuant to
Section 5(c)(viii) above, the Exercise Price paid for those Shares, and (2) in
the case of Vested Shares, or Option Shares that were never subject to Vesting
pursuant to Section 5(c)(viii) above, the greater of (A) the Exercise Price paid
for those Shares, or (B) the Fair Market Value of those Shares as of the date of
such Termination of Eligibility Status, provided that such right to purchase
Vested Shares shall terminate upon the Initial Public Offering. Such right will
be exercisable in the following manner:
(i) The Company (or its assignee) may exercise its right of
repurchase under this Section 6.8(c) at any time not more than 90 days after the
effective date of such Termination of Eligibility Status (or in the case of
Shares issued upon the exercise of Options after such Termination of Eligibility
Status, a period of 90 days after the date of the exercise). If the Company (or
its assignee) elects to exercise such purchase rights it will do so by
delivering to the Holder of such Shares a notice of such election, specifying
the number of Shares to be purchased and a closing date that is within such 90-
day period.
(ii) At such closing, the Company (or its assignee) will pay
the Holder of the Shares, the purchase price, as specified in this Section
6.8(c), in cash, or by cancellation of
7
<PAGE>
indebtedness to the Company, if any, incurred by the original Holder of the
Option Shares to purchase such Shares, or both, at a closing to be held at the
Company's principal executive offices on the date specified in such notice,
provided that if the Holder of the Shares is not an employee of the Company or
any of its Subsidiaries, or is an officer, director or affiliate thereof, the
purchase price may be paid, in whole or in part, with an unsecured promissory
note from the Company (or its assignee) with the following terms: term of two
years; interest at the prime rate, payable annually; 50% of principal balance
paid on first anniversary; balance paid on second anniversary.
(d) Escrow. For purposes of facilitating the enforcement of the
------
restrictions on Transfer set forth in this Plan or in any Option Agreement, the
Administrator may, at its discretion, require the Holder of Option Shares to
deliver the certificate(s) for such Shares with a stock power executed by the
Holder and the Holder's spouse (if required for Transfer), in blank, to the
Secretary of the Company, to hold said certificate(s) and stock power(s) in
escrow and to take all such actions and to effectuate all such Transfers and/or
releases as are in accordance with the terms of this Plan. The certificates may
be held in escrow so long as the Option Shares whose ownership they evidence are
subject to any right of first refusal or repurchase under this Plan or under an
Option Agreement, and will be released by the escrow holder to an Optionee (or
to any permitted transferee of the Optionee) when they are no longer subject to
any right of first refusal or repurchase under this Plan or under the Option
Agreement. Each Optionee, by exercising an Option, thereby acknowledges that
the Secretary of the Company is so appointed as the escrow holder with the
foregoing authorities as a material inducement to the grant of an Option under
this Plan, that the appointment is coupled with an interest, and that it
accordingly will be irrevocable. The escrow holder will not be liable to any
party to an Option Agreement (or to any other party) for any actions or
omissions unless the escrow holder is grossly negligent relative thereto. The
escrow holder may rely upon any letter, notice or other document executed by any
signature purported to be genuine.
6.9 Change of Control Transactions. In the event of a Change of
------------------------------
Control Transaction, the Company will attempt to cause the Successor Entity (or
its parent or its Subsidiary) either to assume all of the Options which have
been granted hereunder and which are outstanding as of the consummation of such
transaction ("Closing"), or to issue (or cause to be issued) in substitution
thereof comparable options of such Successor Entity (or of its parent or its
Subsidiary). If the Successor Entity is unwilling to either assume such Options
or grant comparable options in substitution for such Options, on terms that are
acceptable to the Company as determined by the Board in the exercise of its
discretion, then the Board may cancel all outstanding Options, and terminate
this Plan, effective as of the Closing, provided that it will notify all
Optionees of the proposed Change of Control Transaction a reasonable amount of
time prior to the Closing so that each Optionee will be given the opportunity to
exercise the Vested portion of his or her Option prior to the Closing. For
purposes of this Section 6.9, the term "Change of Control Transaction" means a
Business Combination in which less than 50% of the outstanding voting securities
of the Successor Entity immediately following the Closing of the Business
Combination transaction are beneficially held by those persons and entities in
the same proportion as such persons and entities beneficially held the voting
securities of the Company immediately prior to such transaction; the term
"Business Combination" means a transaction or series of transactions consummated
within any period of 90 days resulting in (A) the sale of all or substantially
all of the assets of the Company, (B) a merger or consolidation or other
reorganization of which the Company or a Subsidiary is a merging party, or (C)
the sale or other change of beneficial ownership of at least 50% of the
outstanding voting securities of the Company.
8
<PAGE>
6.10 Additional Restrictions on Transfer; Investment Intent. By
------------------------------------------------------
accepting an Option and/or Option Shares under this Plan, the Optionee will be
deemed to represent, warrant and agree that, unless a registration statement is
in effect with respect to the offer and sale of Option Shares: (a) neither the
Option nor any such Shares will be freely tradeable and must be held
indefinitely unless such Option and such Shares are either registered under the
1933 Act or an exemption from such registration is available; (b) the Company is
under no obligation to register the Option or any such Shares; (c) upon exercise
of the Option, the Optionee will purchase the Option Shares for his or her own
account and not with a view to distribution within the meaning of the 1933 Act,
other than as may be effected in compliance with the 1933 Act and the rules and
regulations promulgated thereunder; (d) no one else will have any beneficial
interest in the Option Shares; (e) the Optionee has no present intention of
disposing of the Option Shares at any particular time; and (f) neither the
Option nor the Shares have been qualified under the securities laws of any state
and may only be offered and sold pursuant to an exception from qualification
under applicable state securities laws.
6.11 Stock Certificates; Legends. Certificates representing Option
---------------------------
Shares will bear all legends required by law and necessary or appropriate in the
Administrator's discretion to effectuate the provisions of this Plan and of the
applicable Option Agreement. The Company may place a "stop transfer" order
against Option Shares until full compliance with all restrictions and conditions
set forth in this Plan, in any applicable Option Agreement and in the legends
referred to in this Section 6.11.
6.12 Notices. Any notice to be given to the Company under the terms
-------
of an Option Agreement will be addressed to the Company at its principal
executive office, Attention: Secretary, or at such other address as the Company
may designate in writing. Any notice to be given to an Optionee will be
addressed to him or her at the address provided to the Company by the Optionee.
Any such notice will be deemed to have been duly given if and when enclosed in a
properly sealed envelope, addressed as aforesaid, deposited, postage prepaid, in
a post office or branch post office regularly maintained by the local postal
authority.
6.13 Other Provisions. Each Option Agreement may contain such other
----------------
terms, provisions and conditions, including restrictions on the Transfer of
Option Shares, and rights of the Company to repurchase such Shares, not
inconsistent with this Plan and applicable law, as may be determined by the
Administrator in its sole discretion.
6.14 Specific Performance. Under those circumstances in which the
--------------------
Company chooses to timely exercise its rights to repurchase Option Shares as
provided herein or in any Option Agreement, the Company will be entitled to
receive such Shares in specie in order to have the same available for future
issuance without dilution of the holdings of other shareholders of the Company.
By accepting Option Shares, the Holder agrees that money damages will be
inadequate to compensate the Company and its shareholders if such a repurchase
is not completed as contemplated hereunder and that the Company will, in such
case, be entitled to a decree of specific performance of the terms hereof or to
an injunction restraining such holder (or such Holder's personal representative)
from violating this Plan or Option Agreement, in addition to any other remedies
that may be available to the Company at law or in equity.
7. Term of the Plan. This Plan will become effective on the date of its
----------------
adoption by the Board, provided that this Plan is approved by the shareholders
of the Company within 12 months before or after that date. If this Plan is not
so approved by the shareholders of the
9
<PAGE>
Company within that 12-month period of time, any Options granted under this Plan
will be rescinded and will be void. This Plan will expire on the tenth
anniversary of the date of its adoption by the Board or its approval by the
shareholders of the Company, whichever is earlier, unless it is terminated
earlier pursuant to Section 11 of this Plan, after which no more Options may be
granted under this Plan, although all outstanding Options granted prior to such
expiration or termination will remain subject to the provisions of this Plan. No
such expiration or termination of this Plan will result in the expiration or
termination of any such Option prior to the expiration or early termination of
the applicable Option Term.
8. Adjustments Upon Changes in Stock. In the event of any change in the
---------------------------------
outstanding Shares of the Company as a result of a stock split, reverse stock
split, stock bonus or distribution, recapitalization, combination or
reclassification, appropriate proportionate adjustments will be made in: (a) the
aggregate number of Shares that are reserved for issuance in the Option Pool
pursuant to Section 4 above, under outstanding Options or future Options granted
hereunder; (b) the Exercise Price and the number of Option Shares that may be
acquired under each outstanding Option granted hereunder; and (c) other rights
and matters determined on a per share basis under this Plan or any Option
Agreement evidencing an outstanding Option granted hereunder. Any such
adjustments will be made only by the Board, and when so made will be effective,
conclusive and binding for all purposes with respect to this Plan and all
Options then outstanding. No such adjustments will be required by reason of the
issuance or sale by the Company for cash or other consideration of additional
Shares or securities convertible into or exchangeable for Shares.
9. Modification, Extension and Renewal of Options. Subject to the terms
----------------------------------------------
and conditions and within the limitations of this Plan, the Administrator may
modify, extend or renew outstanding Options granted under this Plan, or accept
the surrender of outstanding Options (to the extent not theretofore exercised)
and authorize the granting of new Options in substitution therefor (to the
extent not theretofore exercised). Notwithstanding the foregoing, however, no
modification of any Option will, without the consent of the Optionee, alter or
impair any rights or obligations under any outstanding Option.
10. Governing Law; Venue. The internal laws of the State of California
--------------------
(irrespective of its choice of law principles) will govern the validity of this
Plan, the construction of its terms and the interpretation of the rights and
duties of the parties hereunder and under any Option Agreement. Any party may
seek to enforce its rights under this Plan or any Option Agreement entered into
under this Plan in any court of competent jurisdiction located within the
judicial district in which the Company has a regular place of business.
11. Amendment and Discontinuance. The Board may amend, suspend or
----------------------------
discontinue this Plan at any time or from time to time; provided that no action
of the Board will, without the approval of the shareholders of the Company,
materially increase (other than by reason of an adjustment pursuant to Section 8
hereof) the maximum aggregate number of Option Shares in the Option Pool,
materially increase the benefits accruing to Eligible Participants, or
materially modify the category of, or eligibility requirements for, persons who
are Eligible Participants. However, no such action may alter or impair any
Option previously granted under this Plan without the consent of the Optionee,
nor may the number of Option Shares in the Option Pool be reduced to a number
that is less than the aggregate number of Option Shares (a) that may be issued
pursuant to the exercise of all outstanding and unexpired Options granted
hereunder, and (b) that have been issued and are outstanding pursuant to the
exercise of Options granted hereunder.
10
<PAGE>
12. Information Provided by Company. Prior to the date on which the
-------------------------------
Company is required to file its annual financial statements with the Securities
and Exchange Commission under the Securities Exchange Act of 1934, the Company
annually will provide the Company's financial statements (which statements need
not be audited) to each Optionee, and each Optionee will, by virtue of entering
into an Option Agreement, be deemed to have agreed (and to cause any advisers to
whom the Optionee proposes to make such information available to agree) to keep
such information confidential and not to use, disclose or copy such information
for any purpose whatsoever other than determining whether to exercise an Option.
The Company deems such financial statements to be the valuable trade secrets of
the Company, and in the event of any wrongful use, disclosure or other breach of
the obligation to maintain the confidentiality of such financial information,
the Company may seek to enforce all of its available legal and equitable rights
and remedies, and may notify local law enforcement officials that a criminal
misappropriation of the Company's trade secrets has taken place.
13. No Shareholder Rights. No rights or privileges of a shareholder in
---------------------
the Company are conferred by reason of the granting of an Option. No Optionee
will become a shareholder in the Company with respect to any Option Shares
unless and until the Option has been properly exercised and the Exercise Price
fully paid as to the portion of the Option exercised.
Date Plan Adopted by Board of Directors: October _____, 1999
Date Plan Approved by the Shareholders: October _____, 1999
11
<PAGE>
DoveBid, Inc.
1999 Stock Option Plan
Exhibit A
Definitions
-----------
"Administrator" has the meaning set forth in Section 5 of the Plan.
"Board" means the Board of Directors of the Company.
"Business Combination" has the meaning set forth in Section 6.9 of the
Plan.
"Change of Control Transaction" has the meaning set forth in Section
6.9 of the Plan.
"Closing" has the meaning set forth in Section 6.9 of the Plan.
"Code" means the Internal Revenue Code of 1986, as amended (references
herein to Sections of the Code are intended to refer to Sections of the Code as
enacted at the time of the Plan's adoption by the Board and as subsequently
amended, or to any substantially similar successor provisions of the Code
resulting from recodification, renumbering or otherwise).
"Company" means DoveBid, Inc., a Delaware corporation.
"Completed Transfer Notice" has the meaning set forth in Section
6.8(b) of the Plan.
"Disability" means any physical or mental disability which results in
a Termination of Eligibility Status under applicable law, except that for
purposes of Section 6.1(c) of the Plan, the term "Disability" means permanent
and total disability within the meaning of Section 22(e)(3) of the Code.
"Donative Transfer" with respect to Option Shares means any voluntary
Transfer by a transferor other than for value or the payment of consideration to
the transferor.
"Eligible Participants" has the meaning set forth in Section 3 of the
Plan.
"Exercise Price" has the meaning set forth in Section 5(c)(iii) of the
Plan.
"Fair Market Value" means, with respect to the Shares and as of the
date that is relevant to such a determination (e.g., on the Grant Date), the
market price per share of such Shares determined by the Administrator,
consistent with the requirements of Section 422 of the Code (if applicable) and
to the extent consistent therewith, as follows: (a) if the Shares are traded on
a stock exchange on the date in question, then the Fair Market Value will be
equal to the closing price reported by the applicable composite-transactions
report for such date; (b) if the Shares are traded over-the-counter on the date
in question and are classified as a national market issue, then the Fair Market
Value will be equal to the last-transaction price quoted by the NASDAQ system
for such date; (c) if the Shares are traded over-the-counter on the date in
question but are not classified as a national market issue, then the Fair Market
Value will be equal to the mean between the last reported representative bid and
asked prices quoted by the NASDAQ system for such date; and (d) if none of the
foregoing provisions is applicable, then the Fair Market Value will be
determined by the
A-1
<PAGE>
Administrator in good faith on such basis as it deems appropriate, taking into
consideration the provisions of Section 260.140.50 of Title 10 of the California
Code of Regulations.
"Grace Period" has the meaning set forth in Section 5(c)(v) of the
Plan.
"Grant Date" means, with respect to an Option, the date on which the
Option Agreement evidencing that Option is entered into between the Company and
the Optionee, or such other date as may be set forth in that Option Agreement as
the "Grant Date" which will be the effective date of that Option Agreement.
"Holder" means the holder of any Option Shares.
"Initial Public Offering" means the closing of the first sale of
securities of the Company, or of any Successor Entity, to the public, through a
firm commitment underwriting, pursuant to an effective registration statement
filed with the Securities and Exchange Commission under the 1933 Act.
"Involuntary Transfer" with respect to Option Shares includes, without
limitation, any of the following: (a) an assignment of the Shares for the
benefit of creditors of the transferor; (b) a Transfer by operation of law; (c)
an execution of judgment against the Shares or the acquisition of record or
beneficial ownership of Shares by a lender or creditor; (d) a Transfer pursuant
to any decree of divorce, dissolution or separate maintenance, any property
settlement, any separation agreement or any other agreement with a spouse
(except for bona fide estate planning purposes) under which any Shares are
Transferred or awarded to the spouse of the transferor or are required to be
sold; or (e) a Transfer resulting from the filing by the transferor of a
petition for relief, or the filing of an involuntary petition against the
transferor, under the bankruptcy laws of the United States or of any other
nation.
"ISO" means an "incentive stock option" as defined in Section 422 of
the Code.
"1933 Act" means the Securities Act of 1933, as amended.
"Offered Price" has the meaning set forth in Section 6.8(a) of the
Plan.
"Offered Terms" has the meaning set forth in Section 6.8(a) of the
Plan.
"Option" means an Option granted pursuant to this Plan.
"Option Agreement" has the meaning set forth in Section 1 of the Plan.
"Option Pool" has the meaning set forth in Section 4 of the Plan.
"Option Shares" means Shares acquired pursuant to the exercise of an
Option, provided that for purposes of Section 6.7 and Section 6.8 of the Plan,
the term "Option Shares" includes all Shares issued by the Company to a Holder
(or his, her or its predecessor) by reason of such holdings, including any
securities which may be acquired as a result of a stock split, stock dividend,
and other distributions of Shares in the Company made upon, or in exchange for,
other securities of the Company.
"Option Term" has the meaning set forth in Section 5(c)(iv) of the
Plan.
A-2
<PAGE>
"Optionee" means the person to whom an Option is granted and any
permitted transferee.
"Permitted Transfer" has the meaning set forth in Section 6.7(c) of
the Plan.
"Plan" has the meaning set forth in Section 1 of the Plan.
"Proposed Transfer Notice" has the meaning set forth in Section 6.8(a)
of the Plan.
"Shares" has the meaning set forth in Section 1 of the Plan.
"Subsidiary" has the same meaning as "subsidiary corporation" as
defined in Section 424(f) of the Code.
"Successor Entity" means a corporation or other entity that acquires
all or substantially all of the assets of the Company, or which is the surviving
or parent entity resulting from a Business Combination, as that term is defined
in Section 6.9 of the Plan.
"Tax Withholding Liability" in connection with the exercise of any
Option means all federal and state income taxes, social security taxes, and any
other taxes applicable to the compensation income arising from the transaction,
required by applicable law to be withheld by the Company.
"10% Shareholder" means a person who owns, either directly or
indirectly by virtue of the ownership attribution provisions set forth in
Section 424(d) of the Code at the time he or she is granted an Option, stock
possessing more than 10% of the total combined voting power or value of all
classes of stock of the Company and/or of its Subsidiaries.
"Termination for Cause" means (a) in the case of an Optionee who is an
employee of the Company and/or any of its Subsidiaries, a termination by the
employer of the Optionee's employment for "cause" as defined by applicable law,
by any contract of employment or the Option Agreement, or pursuant to the "For
Cause Standard" set forth below, (b) in the case of an Optionee who is or which
is an advisor, consultant or independent contractor to the Company or any of its
Subsidiaries, a termination of the services relationship by the hiring party for
"cause" or breach of contract, as defined by applicable law, by any contract
between the parties or the Option Agreement, or pursuant to the "For Cause
Standard" set forth below, and (c) in the case of an Optionee who is a director
of the Company or any of its Subsidiaries, removal of such person from the board
of directors by action of the shareholders (or, if permitted by applicable law
and the articles, bylaws or other organic documents of the Company or the
Subsidiary, as the case may be, or pursuant to applicable law, by the other
directors). The "For Cause Standard" referred to above means the good faith
determination of the Board that the Optionee has engaged in any act which
breaches any fiduciary duty to the Company, any of its Subsidiaries or their
shareholders, or in any act involving dishonesty or moral turpitude, or in any
act that materially and adversely affects the business, affairs or reputation of
the Company or any of its Subsidiaries.
"Termination of Eligibility Status" means (a) in the case of any
employee of the Company or any of its Subsidiaries, a termination of his or her
employment, whether by the employee or employer, and whether voluntary or
involuntary, including without limitation as a result of the death or Disability
of the employee, (b) in the case of any advisor, consultant, or independent
A-3
<PAGE>
contractor of the Company or any of its Subsidiaries, the termination of the
services relationship pursuant to any contract between the parties or otherwise
under applicable law, and (c) in the case of any director of the Company or any
of its Subsidiaries, the death of or resignation by the director or his or her
removal from the board in the manner provided by the articles of incorporation,
bylaws or other organic documents of the Company or Subsidiary, or otherwise in
accordance with applicable law.
"Transfer" with respect to Option Shares, includes, without
limitation, a voluntary or involuntary sale, assignment, transfer, conveyance,
pledge, hypothecation, encumbrance, disposal, loan, gift, attachment or levy of
those Shares, including any Involuntary Transfer, Donative Transfer or transfer
by will or under the laws of descent and distribution.
"Transferee" means a person to whom Shares are transferred.
"Transferred Shares" has the meaning set forth in Section 6.8(b) of
the Plan.
"Unvested Option" has the meaning set forth in Section 5(c)(vii) of
the Plan.
"Unvested Shares" has the meaning set forth in Section 5(c)(viii) of
the Plan.
"Vested Option" has the meaning set forth in Section 5(c)(vii) of the
Plan.
"Vested Shares" has the meaning set forth in Section 5(c)(viii) of the
Plan.
A-4
<PAGE>
EXHIBIT 10.01
DOVEBID, INC.
STOCK OPTION AGREEMENT
This Agreement is entered into as of _______, 2000 (the "Grant Date"),
between DoveBid, Inc., a Delaware corporation (the "Company"), and ________
("Optionee").
The parties agree as follows:
1. Option Grant. Subject to all of the terms and conditions of this
--------------
Agreement and of the Company's 1999 Stock Option Plan (the "Option Plan"),
Optionee will have an option (the "Option") to purchase the number of shares of
the Company's common stock (the "Shares"), for an exercise price per share (the
"Exercise Price") as set forth below:
Number of Shares subject to the Option: ___
Exercise Price per Share: $ __
Vesting Start Date _____, 2000
This Option will have an Expiration Date of the tenth anniversary of the
Grant Date (subject to earlier termination as provided in the Option Plan).
This Option is intended to be treated as an Incentive Stock Option ("ISO")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
2. Vesting and Exercise.
--------------------
(a) Vesting. Initially, the entire Option will be "Unvested"
-------
within the meaning of the Option Plan; portions of the Option will become
"Vested" within the meaning of the Option Plan on the following schedule,
provided that Optionee does not suffer a Termination of Eligibility Status
prior to each such vesting date:
(i) 25% of the Shares will become Vested as of the first
anniversary of the Vesting Start Date; and
(ii) the remaining 75% of the Shares will become Vested in equal
increments of 6-1/4% for each subsequent three month period, such that 100% of
the Option will be a Vested Option on the fourth anniversary of the Vesting
Start Date.
(b) Notice of Exercise. Optionee or Optionee's representative may
exercise the Option by giving written notice to the Company pursuant to Section
6.5(a) of the Option Plan using the specified form of notice of exercise
attached to this Agreement as Exhibit A. The notice must be signed by the person
---------
exercising the Option. (If the Option is being exercised by the representative
of Optionee, the notice must be accompanied by proof reasonably satisfactory to
the Company of the representative's right to exercise the Option.) Payment of
the Exercise Price must accompany the notice and must be in any of the following
forms: (i) cash or a check
<PAGE>
made payable to the Company; or (ii) the delivery of such other form of payment
approved by the Administrator.
(c) Withholding Taxes. To the extent required by applicable
-----------------
federal, state, local or foreign law, and as a condition to the Company's
obligation to issue any Shares upon the exercise of the Option in full or in
part, Optionee will make arrangements reasonably satisfactory to the Company for
the payment of any withholding tax obligations that arise by reason of such
exercise.
(d) Issuance of Option Shares. Subject to the provisions of the
-------------------------
Option Plan, after receiving a proper notice of exercise and payment of the
applicable Exercise Price and withholding taxes, the Company will cause to be
issued a certificate or certificates for the Option Shares as to which the
Option has been exercised, registered in the name of the person rightfully
exercising the Option. The Company will cause such certificate or certificates
to be delivered to such person.
3. Representations and Warranties of Optionee. Optionee hereby
------------------------------------------
represents and warrants that: (a) Optionee is acquiring the Option granted
hereby, and will acquire any Shares obtained upon exercise of the Option, for
investment purposes only, for Optionee's own account, and with no view to the
distribution thereof; (b) Optionee understands that the Option and the Shares
that may be acquired by exercising the Option ("Option Shares") have not been
registered under the Securities Act of 1933, as amended (the "1933 Act") and
that the Option and the Option Shares are not freely tradeable and must be held
indefinitely, unless they are either registered under the 1933 Act or an
exemption from such registration is available; (c) Optionee understands that the
Company is under no obligation to register the Option or the Option Shares; and
(d) Optionee understands that the Option and the Option Shares have not been
qualified under the securities laws of any state and are to be offered and sold
pursuant to an exception from qualification under applicable state securities
laws.
4. No Employment Rights. This Agreement gives Optionee no right to be
--------------------
retained as an employee of the Company or its Subsidiaries.
5. Terms of the Option Plan. Optionee understands that the Option
-----------------------
Plan includes important terms and conditions that apply to the Option, including
the following: the right of Optionee to exercise the Option; important
restrictions on the ability of Optionee to transfer the Option or to transfer
any of the Option Shares received upon exercise of the Option; early termination
of the Option following the occurrence of certain events, including Optionee's
Termination of Eligibility Status with the Company or its Subsidiaries; and the
right of the Company to repurchase Option Shares pursuant to the terms set forth
in the Plan. Optionee acknowledges having read the Option Plan and agrees to be
bound by its terms. Optionee further acknowledges that the Company has given no
tax advice concerning the Option and has advised Optionee to consult with his or
her own tax or financial advisor about the tax treatment of the Option and its
exercise.
6. Miscellaneous. Capitalized terms not otherwise defined in this
-------------
Agreement will have the meanings set forth in the Option Plan. Neither this
Agreement nor the Option is assignable by either party, except as expressly
provided in this Agreement or in the Option Plan.
-2-
<PAGE>
All of the covenants and provisions of this Agreement by or for the benefit of
the Company or Optionee will bind and inure to the benefit of their respective
successors. This Agreement (including the Option Plan) constitutes the final and
complete expression of all of the terms of the understanding between the parties
hereto concerning the subject matter hereof. This Agreement may not be modified,
amended, altered or supplemented except by means of the execution and delivery
of a written instrument mutually executed by the Company and Optionee. This
Agreement will be construed and governed by the substantive laws of the State of
California.
The parties have entered into this Agreement as of the Grant Date.
DOVEBID, INC.
By:
-------------------------------
Title: Vice President and General Counsel
Optionee:
--------
----------------------------------
(Signature)
________
(Name)
Address:
-----------------------------------
-----------------------------------
Social Security No.:
--------------
Attachments: (1) Consent of Spouse
(2) 1999 Stock Option Plan
Exhibit A: Form of Notice of Exercise of Stock Option
-3-
<PAGE>
CONSENT OF SPOUSE
-----------------
I am the spouse of _________________, who has entered into the Stock
Option Agreement with DoveBid, Inc. (the "Company"). Capitalized terms not
defined herein will have the meanings set forth in such Agreement, or in the
Company's 1999 Stock Option Plan (the "Option Plan"), which forms a part of such
Agreement.
I have read and understand the Stock Option Agreement and the Option
Plan. I acknowledge that, by executing this Consent, I am bound by the Stock
Option Agreement and the Option Plan, as to any and all interests I may have in
the Option Shares. In particular, I understand and agree that the Option Shares
(including any interest that I may have therein) are subject to certain
repurchase rights by the Company and certain restrictions on transfer.
I also agree with my spouse and the Company that if my spouse and I ever
get divorced or enter into any marital property settlement agreement, or if my
spouse or I ever seek a decree of separate maintenance, to the extent my spouse
has or can obtain assets other than the Option Shares in amounts and of value
sufficient to settle or satisfy any marital property claims I may have in the
value of the Option Shares, I will accept such other assets in settlement of
those claims.
I agree that I will not do anything to try to prevent the operation of
any part of the Stock Option Agreement or the Option Plan. I acknowledge that I
have had an opportunity to obtain independent counsel to advise me concerning
the matters contained herein.
------------------------------
(Signature)
Name:
-------------------------
Date:
-------------------------
<PAGE>
Exhibit A
---------
DOVEBID, INC.
NOTICE OF EXERCISE OF STOCK OPTION
To the Secretary of DoveBid, Inc.
The undersigned holder of an Option to purchase shares of common stock
of DoveBid, Inc. (the "Company"), hereby irrevocably elects to exercise the
purchase rights represented by such Option, and to purchase _________ shares of
common stock of the Company. The undersigned makes payment of $_____________ in
the form of a check made payable to the Company, and requests that the
certificates for such shares be issued in the name of and delivered to the
undersigned at the address set forth below.
The undersigned acknowledges that the shares being purchased (the
"Option Shares") are subject to substantial restrictions on transfer set forth
in the Company's 1999 Stock Option Plan (the "Plan") and agrees to be bound by
the terms and conditions of said Plan and the Stock Option Agreement entered
into by and between the Company and the undersigned. The undersigned further
represents, warrants and acknowledges that, unless a registration statement is
in effect with respect to the sale of Option Shares: (i) those Option Shares
are not freely tradeable and must be held indefinitely unless or an exemption
from such registration is available; (ii) the Company is under no obligation to
register those Option Shares; (iii) the undersigned is purchasing the Option
Shares for his or her own account and not with a view to or for sale in
connection with any distribution within the meaning of the 1933 Act, other than
as may be effected in compliance with the 1933 Act and the rules and regulations
promulgated thereunder; (iv) no one else will have any beneficial interest in
the Option Shares; and (v) the undersigned has no present intention of disposing
of the Option Shares or any interest therein at any particular time.
Dated: _______________
------------------------------------------------
(Signature)
------------------------------------------------
Print name exactly as to be shown on certificate
Address:
---------------------------------------
---------------------------------------
<PAGE>
EXHIBIT 10.02
DOVEBID, INC.
2000 EQUITY INCENTIVE PLAN
As Adopted March 3, 2000
1. PURPOSE. The purpose of this Plan is to provide incentives to
-------
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
--------------------------
2.1 Number of Shares Available. Subject to Sections 2.2 and 18, the
--------------------------
total number of Shares reserved and available for grant and issuance pursuant to
this Plan will be 10,000,000 Shares plus Shares that are subject to: (a)
issuance upon exercise of an Option but cease to be subject to such Option for
any reason other than exercise of such Option; (b) an Award granted hereunder
but are forfeited or are repurchased by the Company at the original issue price;
and (c) an Award that otherwise terminates without Shares being issued. In
addition, any authorized shares not issued or subject to outstanding grants
under the Company's 1999 Stock Option Plan (the "Prior Plan") on the Effective
Date (as defined below) and any shares issued under the Prior Plan that are
forfeited or repurchased by the Company or that are issuable upon exercise of
options granted pursuant to the Prior Plan that expire or become unexercisable
for any reason without having been exercised in full, will no longer be
available for grant and issuance under the Prior Plan, but will be available for
grant and issuance under this Plan. In addition, on each January 1, the
aggregate number of Shares reserved and available for grant and issuance
pursuant to this Plan will be increased automatically by a number of Shares
equal to 5% of the total outstanding shares of the Company as of the immediately
preceding December 31, provided that no more than 50,000,000 shares shall be
issued as ISOs (as defined in Section 5 below). At all times the Company shall
reserve and keep available a sufficient number of Shares as shall be required to
satisfy the requirements of all outstanding Options granted under this Plan and
all other outstanding but unvested Awards granted under this Plan.
2.2 Adjustment of Shares. In the event that the number of
--------------------
outstanding shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
number of Shares that may be granted pursuant to Sections 3 and 9 below, (c) the
Exercise Prices of and number of Shares subject to outstanding Options, and (d)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however, that
-------- -------
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only
-----------
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of the Company or any Parent or Subsidiary of the Company; provided
--------
such consultants, contractors and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. No person will be eligible to receive more than 5,000,000 Shares
in any calendar year under this Plan pursuant to the grant of Awards hereunder,
other than new employees of the Company or of a Parent or Subsidiary of the
Company (including new employees who are also officers and directors of the
Company or any Parent or Subsidiary of the Company), who are eligible to receive
up to a maximum of 5,500,000 Shares in the calendar year in which they commence
their employment. A person may be granted more than one Award under this Plan.
<PAGE>
4. ADMINISTRATION.
--------------
4.1 Committee Authority. This Plan will be administered by the
-------------------
Committee or by the Board acting as the Committee. Except for automatic grants
to Outside Directors pursuant to Section 9 hereof, and subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Except
for automatic grants to Outside Directors pursuant to Section 9 hereof, the
Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any
other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to
this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to
Awards;
(f) determine whether Awards will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to,
other Awards under this Plan or any other incentive or
compensation plan of the Company or any Parent or Subsidiary of
the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Except for automatic grants to Outside
--------------------
Directors pursuant to Section 9 hereof, any determination made by the Committee
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this Plan
or Award, at any later time, and such determination will be final and binding on
the Company and on all persons having an interest in any Award under this Plan.
The Committee may delegate to one or more officers of the Company the authority
to grant an Award under this Plan to Participants who are not Insiders of the
Company.
5. OPTIONS. The Committee may grant Options to eligible persons and will
-------
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan will
--------------------
be evidenced by an Award Agreement which will expressly identify the Option as
an ISO or an NQSO ("Stock Option Agreement"), and, except as otherwise required
by the terms of Section 9 hereof, will be in such form and contain such
provisions (which need not be the same for each Participant) as the Committee
may from time to time approve, and which will comply with and be subject to the
terms and conditions of this Plan.
2
<PAGE>
5.2 Date of Grant. The date of grant of an Option will be the date
-------------
on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.3 Exercise Period. Options may be exercisable within the times or
---------------
upon the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option will be
-------- -------
exercisable after the expiration of ten (10) years from the date the Option is
granted; and provided further that no ISO granted to a person who directly or by
----------------
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any Parent or Subsidiary of the
Company ("Ten Percent Stockholder") will be exercisable after the expiration of
five (5) years from the date the ISO is granted. The Committee also may provide
for Options to become exercisable at one time or from time to time, periodically
or otherwise, in such number of Shares or percentage of Shares as the Committee
determines.
5.4 Exercise Price. The Exercise Price of an Option will be
--------------
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will be not less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. Options may be exercised only by delivery to
------------------
the Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 Termination. Notwithstanding the exercise periods set forth in
-----------
the Stock Option Agreement, exercise of an Option will always be subject to the
following:
(a) If the Participant is Terminated for any reason except death or
Disability, then the Participant may exercise such Participant's
Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than three (3)
months after the Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be determined by the
Committee, with any exercise beyond three (3) months after the
Termination Date deemed to be an NQSO), but in any event, no
later than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's death
or Disability (or the Participant dies within three (3) months
after a Termination other than for Cause or because of
Participant's Disability), then Participant's Options may be
exercised only to the extent that such Options would have been
exercisable by Participant on the Termination Date and must be
exercised by Participant (or Participant's legal representative
or authorized assignee) no later than twelve (12) months after
the Termination Date (or such shorter or longer time period not
exceeding five (5) years as may be determined by the Committee,
with any such exercise beyond (a) three (3) months after the
Termination Date when the Termination is for any reason other
than the Participant's death or Disability, or (b) twelve (12)
months after the Termination Date when the Termination is for
Participant's death or Disability, deemed to be an NQSO), but in
any event no later than the expiration date of the Options.
3
<PAGE>
(c) Notwithstanding the provisions in paragraph 5.6(a) above, if a
Participant is terminated for Cause, neither the Participant, the
Participant's estate nor such other person who may then hold the
Option shall be entitled to exercise any Option with respect to
any Shares whatsoever, after termination of service, whether or
not after termination of service the Participant may receive
payment from the Company or Subsidiary for vacation pay, for
services rendered prior to termination, for services rendered for
the day on which termination occurs, for salary in lieu of
notice, or for any other benefits. In making such determination,
the Board shall give the Participant an opportunity to present to
the Board evidence on his behalf. For the purpose of this
paragraph, termination of service shall be deemed to occur on the
date when the Company dispatches notice or advice to the
Participant that his service is terminated.
5.7 Limitations on Exercise. The Committee may specify a reasonable
-----------------------
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.
5.8 Limitations on ISO. The aggregate Fair Market Value (determined
------------------
as of the date of grant) of Shares with respect to which ISO are exercisable for
the first time by a Participant during any calendar year (under this Plan or
under any other incentive stock option plan of the Company, Parent or Subsidiary
of the Company) will not exceed $100,000. If the Fair Market Value of Shares on
the date of grant with respect to which ISO are exercisable for the first time
by a Participant during any calendar year exceeds $100,000, then the Options for
the first $100,000 worth of Shares to become exercisable in such calendar year
will be ISO and the Options for the amount in excess of $100,000 that become
exercisable in that calendar year will be NQSOs. In the event that the Code or
the regulations promulgated thereunder are amended after the Effective Date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISO, such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may modify,
----------------------------------
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
- -------- -------
Exercise Price that would be permitted under Section 5.4 of this Plan for
Options granted on the date the action is taken to reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in this
-------------------
Plan, no term of this Plan relating to ISO will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company
----------------
to sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a Restricted
------------------------------
Stock Award made pursuant to this Plan will be evidenced by an Award Agreement
("Restricted Stock Purchase Agreement") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. The offer of Restricted Stock will be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and full
payment for the Shares to the Company within thirty (30) days from the date the
Restricted Stock Purchase Agreement is
4
<PAGE>
delivered to the person. If such person does not execute and deliver the
Restricted Stock Purchase Agreement along with full payment for the Shares to
the Company within thirty (30) days, then the offer will terminate, unless
otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
--------------
Restricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case the Purchase Price will be 100% of the Fair Market
Value. Payment of the Purchase Price may be made in accordance with Section 8
of this Plan.
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards shall
--------------------------------
be subject to such restrictions as the Committee may impose. These restrictions
may be based upon completion of a specified number of years of service with the
Company or upon completion of the performance goals as set out in advance in the
Participant's individual Restricted Stock Purchase Agreement. Restricted Stock
Awards may vary from Participant to Participant and between groups of
Participants. Prior to the grant of a Restricted Stock Award, the Committee
shall: (a) determine the nature, length and starting date of any Performance
Period for the Restricted Stock Award; (b) select from among the Performance
Factors to be used to measure performance goals, if any; and (c) determine the
number of Shares that may be awarded to the Participant. Prior to the payment
of any Restricted Stock Award, the Committee shall determine the extent to which
such Restricted Stock Award has been earned. Performance Periods may overlap
and Participants may participate simultaneously with respect to Restricted Stock
Awards that are subject to different Performance Periods and having different
performance goals and other criteria.
6.4 Termination During Performance Period. If a Participant is
-------------------------------------
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement, unless
the Committee will determine otherwise.
7. STOCK BONUSES.
-------------
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares
-----------------------
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent or Subsidiary of the Company. A Stock Bonus may be awarded for past
services already rendered to the Company, or any Parent or Subsidiary of the
Company pursuant to an Award Agreement (the "Stock Bonus Agreement") that will
be in such form (which need not be the same for each Participant) as the
Committee will from time to time approve, and will comply with and be subject to
the terms and conditions of this Plan. A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in the
Participant's individual Award Agreement (the "Performance Stock Bonus
Agreement") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual performance factors or upon such other criteria as the Committee may
determine.
7.2 Terms of Stock Bonuses. The Committee will determine the number
----------------------
of Shares to be awarded to the Participant. If the Stock Bonus is being earned
upon the satisfaction of performance goals pursuant to a Performance Stock Bonus
Agreement, then the Committee will: (a) determine the nature, length and
starting date of any Performance Period for each Stock Bonus; (b) select from
among the Performance Factors to be used to measure the performance, if any; and
(c) determine the number of Shares that may be awarded to the Participant.
Prior to the payment of any Stock Bonus, the Committee shall determine the
extent to which such Stock Bonuses have been earned. Performance Periods may
overlap and Participants may participate simultaneously with respect to Stock
Bonuses that are subject to different Performance Periods and different
performance goals and other criteria. The number of Shares may be fixed or may
vary in accordance with such performance goals and criteria as may be determined
by the Committee. The Committee may adjust the performance goals applicable to
the Stock Bonuses to take into account changes in law and accounting or tax
rules and to make such adjustments as the
5
<PAGE>
Committee deems necessary or appropriate to reflect the impact of extraordinary
or unusual items, events or circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be paid
---------------
currently or on a deferred basis with such interest or dividend equivalent, if
any, as the Committee may determine. Payment may be made in the form of cash or
whole Shares or a combination thereof, either in a lump sum payment or in
installments, all as the Committee will determine.
8. PAYMENT FOR SHARE PURCHASES.
---------------------------
8.1 Payment. Payment for Shares purchased pursuant to this Plan may
-------
be made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for
within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such note
has been fully paid with respect to such shares); or (2) were
obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such terms as
may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and
1274 of the Code; provided, however, that Participants who are
-------- -------
not employees or directors of the Company will not be entitled to
purchase Shares with a promissory note unless the note is
adequately secured by collateral other than the Shares;
(d) by waiver of compensation due or accrued to the Participant for
services rendered;
(e) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the Participant
and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD Dealer") whereby
the Participant irrevocably elects to exercise the Option
and to sell a portion of the Shares so purchased to pay for
the Exercise Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the Exercise
Price directly to the Company; or
(2) through a "margin" commitment from the Participant and a
NASD Dealer whereby the Participant irrevocably elects to
exercise the Option and to pledge the Shares so purchased to
the NASD Dealer in a margin account as security for a loan
from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the Exercise Price directly to the
Company; or
(f) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant pay for
---------------
Shares purchased under this Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.
6
<PAGE>
9. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.
-------------------------------------
9.1 Types of Options and Shares. Options granted under this Plan and
---------------------------
subject to this Section 9 shall be NQSOs.
9.2 Eligibility. Options subject to this Section 9 shall be granted
-----------
only to Outside Directors.
9.3 Initial Grant. Each Outside Director who first becomes a member
-------------
of the Board on or after the Effective Date, will automatically be granted an
Option for 100,000 Shares (an "Initial Grant") on the date such Outside Director
first becomes a member of the Board, unless such Outside Director received a
grant of Options before the Effective Date.
9.4 Succeeding Grant. Immediately following each Annual Meeting of
----------------
stockholders, each Outside Director will automatically be granted an Option for
25,000 Shares (a "Succeeding Grant"), provided the Outside Director is a member
of the Board on such date and has served continuously as a member of the Board
for a period of at least one year since the date of such Outside Director's
Initial Grant. If an Outside Director did not receive an Initial Grant on or
after the Effective Date, such Outside Director will automatically be granted a
Succeeding Grant on the one (1) year anniversary of such Outside Director's last
option grant from the Company.
9.5 Vesting. The date an Outside Director receives an Initial Grant
-------
or a Succeeding Grant is referred to in this Plan as the "Start Date" for such
Option.
(a) Initial Grant. Each Initial Grant will vest as to 25% of the
-------------
Shares on the first one year anniversary of the Start Date for
such Initial Grant, and thereafter as to 6.25% of the Shares
after each subsequent 3 month period, so long as the Outside
Director continuously remains a director or a consultant of the
Company.
(b) Succeeding Grant. Each Succeeding Grant will vest as to 25% of
----------------
the Shares on the first one year anniversary of the Start Date
for such Succeeding Grant, and thereafter as to 6.25% of the
Shares after each subsequent 3 month period, so long as the
Outside Director continuously remains a director or a consultant
of the Company.
Notwithstanding any provision to the contrary, in the event of a Corporate
Transaction described in Section 18.1, the vesting of all options granted to
Outside Directors pursuant to this Section 9 will accelerate and such options
will become exercisable in full prior to the consummation of such event at such
times and on such conditions as the Committee determines, and must be exercised,
if at all, within three months of the consummation of said event. Any options
not exercised within such three-month period shall expire.
9.6 Exercise Price and Exercisability. The exercise price of an
---------------------------------
Option pursuant to an Initial Grant and Succeeding Grant shall be the Fair
Market Value of the Shares, at the time that the Option is granted. Initial
Grants and Succeeding Grants shall be immediately exercisable although the
Shares issued upon exercise of the Option will be subject to the restrictions on
transfer and the Company may reserve to itself and/or its assignee(s) in the
Award Agreement a right to repurchase a portion of or all Unvested Shares held
by an Outside Director following such Outside Director's termination as a
director or a consultant of the Company.
10. WITHHOLDING TAXES.
-----------------
10.1 Withholding Generally. Whenever Shares are to be issued in
---------------------
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan,
payments in satisfaction of Awards are to be made in cash, such payment will be
net of an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
7
<PAGE>
10.2 Stock Withholding. When, under applicable tax laws, a
-----------------
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee.
11. TRANSFERABILITY.
---------------
11.1 Except as otherwise provided in this Section 11, Awards granted
under this Plan, and any interest therein, will not be transferable or
assignable by Participant, and may not be made subject to execution, attachment
or similar process, otherwise than by will or by the laws of descent and
distribution or as determined by the Committee and set forth in the Award
Agreement with respect to Awards that are not ISOs.
11.2 All Awards other than NQSO's. All Awards other than NQSO's shall
----------------------------
be exercisable: (i) during the Participant's lifetime, only by (A) the
Participant, or (B) the Participant's guardian or legal representative; and (ii)
after Participant's death, by the legal representative of the Participant's
heirs or legatees.
11.3 NQSOs. Unless otherwise restricted by the Committee, an NQSO
-----
shall be exercisable: (i) during the Participant's lifetime only by (A) the
Participant, (B) the Participant's guardian or legal representative, (C) a
Family Member of the Participant who has acquired the NQSO by "permitted
transfer;" and (ii) after Participant's death, by the legal representative of
the Participant's heirs or legatees. "Permitted transfer" means, as authorized
by this Plan and the Committee in an NQSO, any transfer effected by the
Participant during the Participant's lifetime of an interest in such NQSO but
only such transfers which are by gift or domestic relations order. A permitted
transfer does not include any transfer for value and neither of the following
are transfers for value: (a) a transfer of under a domestic relations order in
settlement of marital property rights or (b) a transfer to an entity in which
more than fifty percent of the voting interests are owned by Family Members or
the Participant in exchange for an interest in that entity.
12. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.
-----------------------------------------------------
12.1 Voting and Dividends. No Participant will have any of the rights
--------------------
of a stockholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the Participant will
be a stockholder and have all the rights of a stockholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
--------
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
-------- -------
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 12.
12.2 Financial Statements. The Company will provide financial
--------------------
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
-------- -------
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
12.3 Restrictions on Shares. At the discretion of the Committee, the
----------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or
8
<PAGE>
cancellation of purchase money indebtedness, at the Participant's Exercise Price
or Purchase Price, as the case may be.
13. CERTIFICATES. All certificates for Shares or other securities
------------
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
------------------------
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
-------- -------
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from
-----------------------------
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be
----------------------------------------------
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to:
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and/or (b) completion of any registration
or other qualification of such Shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company will be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company will have no liability for any inability or failure to
do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
-----------------------
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
----------------------
18.1 Assumption or Replacement of Awards by Successor. Except for
------------------------------------------------
automatic grants to Outside Directors pursuant to Section 9 hereof, in the event
of (i) a dissolution or liquidation of the Company, (ii) a
9
<PAGE>
merger or consolidation in which the Company is not the surviving corporation
(other than a merger or consolidation with a wholly-owned subsidiary, a
reincorporation of the Company in a different jurisdiction, or other transaction
in which there is no substantial change in the stockholders of the Company or
their relative stock holdings and the Awards granted under this Plan are
assumed, converted or replaced by the successor corporation, which assumption
will be binding on all Participants), (iii) a merger in which the Company is the
surviving corporation but after which the stockholders of the Company
immediately prior to such merger (other than any stockholder that merges, or
which owns or controls another corporation that merges, with the Company in such
merger) cease to own their shares or other equity interest in the Company, (iv)
the sale of substantially all of the assets of the Company, or (v) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of the
Company by tender offer or similar transaction (each, a "Corporate
Transaction"), any or all outstanding Awards may be assumed, converted or
replaced by the successor corporation (if any), which assumption, conversion or
replacement will be binding on all Participants. However, in the event a
Participant is Terminated within one (1) year from the date of the Corporate
Transaction for any reason except for death, Disability or Cause, then the
vesting of all outstanding Awards for such Participant will accelerate as to an
additional 25% of the Shares that are unvested on the date of such Termination.
In the alternative, the successor or acquiring corporation may substitute
equivalent Awards or provide substantially similar consideration to Participants
as was provided to shareholders (after taking into account the existing
provisions of the Awards). The successor corporation may also issue, in place of
outstanding unvested Shares of the Company held by the Participants,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Participant. In the event such successor
corporation (if any) refuses to assume or substitute Awards, as provided above,
pursuant to a Corporate Transaction described in this Subsection 18.1, such
Awards will expire on such Corporate Transaction at such time and on such
conditions as the Committee will determine. Notwithstanding anything in this
Plan to the contrary, the Committee may, in its sole discretion, provide that
the vesting of any or all Awards granted pursuant to this Plan will accelerate
upon a Corporate Transaction described in this Section 18. If the Committee
exercises such discretion with respect to Options, such Options will become
exercisable in full prior to the consummation of such event at such time and on
such conditions as the Committee determines, and if such Options are not
exercised prior to the consummation of the Corporate Transaction, they shall
terminate at such time as determined by the Committee.
18.2 Other Treatment of Awards. Subject to any greater rights granted
-------------------------
to Participants under the foregoing provisions of this Section 18, in the event
of the occurrence of any Corporate Transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, or sale of assets.
18.3 Assumption of Awards by the Company. The Company, from time to
-----------------------------------
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
------
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective on
---------------------------------
the date on which the registration statement filed by the Company with the SEC
under the Securities Act registering the initial public offering of the
Company's Common Stock is declared effective by the SEC (the "Effective Date").
This Plan shall be approved by the stockholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
(12) months before or after the date this Plan is adopted by the Board. Upon
the Effective Date, the Committee may grant Awards pursuant to this Plan;
provided, however, that: (a) no Option may be exercised prior to initial
- -------- -------
stockholder approval of this Plan; (b) no Option granted pursuant to an increase
in the number of Shares subject to this Plan approved by the Board will be
exercised prior to the time such
10
<PAGE>
increase has been approved by the stockholders of the Company; (c) in the event
that initial stockholder approval is not obtained within the time period
provided herein, all Awards granted hereunder shall be cancelled, any Shares
issued pursuant to any Awards shall be cancelled and any purchase of Shares
issued hereunder shall be rescinded; and (d) in the event that stockholder
approval of such increase is not obtained within the time period provided
herein, all Awards granted pursuant to such increase will be cancelled, any
Shares issued pursuant to any Award granted pursuant to such increase will be
cancelled, and any purchase of Shares pursuant to such increase will be
rescinded.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
--------------------------
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of stockholder approval. This
Plan and all agreements thereunder shall be governed by and construed in
accordance with the laws of the State of California.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate
--------------------------------
or amend this Plan in any respect, including without limitation amendment of any
form of Award Agreement or instrument to be executed pursuant to this Plan;
provided, however, that the Board will not, without the approval of the
- -------- -------
stockholders of the Company, amend this Plan in any manner that requires such
stockholder approval.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the
--------------------------
Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in this Plan, the following terms will have the
-----------
following meanings:
"Award" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Cause" means the commission of an act of theft, embezzlement, fraud,
dishonesty or a breach of fiduciary duty to the Company or a Parent or
Subsidiary of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board.
"Company" means DoveBid, Inc. or any successor corporation.
"Disability" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:
11
<PAGE>
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the
date of determination as reported in The Wall Street Journal;
-----------------------
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of
determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
-----------------------
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the date of determination as reported in The Wall
--------
Street Journal;
--------------
(d) in the case of an Award made on the Effective Date, the price per
share at which shares of the Company's Common Stock are initially
offered for sale to the public by the Company's underwriters in
the initial public offering of the Company's Common Stock
pursuant to a registration statement filed with the SEC under the
Securities Act; or
(e) if none of the foregoing is applicable, by the Committee in good
faith.
"Family Member" includes any of the following:
(a) child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law of the Participant, including any such person with
such relationship to the Participant by adoption;
(b) any person (other than a tenant or employee) sharing the
Participant's household;
(c) a trust in which the persons in (a) and (b) have more than fifty
percent of the beneficial interest;
(d) a foundation in which the persons in (a) and (b) or the
Participant control the management of assets; or
(e) any other entity in which the persons in (a) and (b) or the
Participant own more than fifty percent of the voting interest.
"Insider" means an officer or director of the Company or any other
person whose transactions in the Company's Common Stock are subject to Section
16 of the Exchange Act.
"Option" means an award of an option to purchase Shares pursuant to
Section 5.
"Outside Director" means a member of the Board who is not an employee
of the Company or any Parent, Subsidiary or Affiliate of the Company.
"Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of such corporations other
than the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
"Participant" means a person who receives an Award under this Plan.
12
<PAGE>
"Performance Factors" means the factors selected by the Committee from
among the following measures to determine whether the performance goals
established by the Committee and applicable to Awards have been satisfied:
(a) Net revenue and/or net revenue growth;
(b) Earnings before income taxes and amortization and/or earnings
before income taxes and amortization growth;
(c) Operating income and/or operating income growth;
(d) Net income and/or net income growth;
(e) Earnings per share and/or earnings per share growth;
(f) Total stockholder return and/or total stockholder return growth;
(g) Return on equity;
(h) Operating cash flow return on income;
(i) Adjusted operating cash flow return on income;
(j) Economic value added; and
(k) Individual confidential business objectives.
"Performance Period" means the period of service determined by the
Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock Bonuses.
"Plan" means this DoveBid, Inc. 2000 Equity Incentive Plan, as amended
from time to time.
"Restricted Stock Award" means an award of Shares pursuant to Section
6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.
"Stock Bonus" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.
"Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"Termination" or "Terminated" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the Company.
An employee will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other
13
<PAGE>
leave of absence approved by the Committee, provided, that such leave is for a
period of not more than 90 days, unless reemployment upon the expiration of such
leave is guaranteed by contract or statute or unless provided otherwise pursuant
to formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Option agreement.
The Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "Termination Date").
"Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.
"Vested Shares" means "Vested Shares" as defined in the Award
Agreement.
14
<PAGE>
EXHIBIT 10.03
DOVEBID, Inc.
2000 EMPLOYEE STOCK PURCHASE PLAN
As Adopted March 3, 2000
1. Establishment of Plan. DoveBid, Inc. (the "Company") proposes to
grant options for purchase of the Company's Common Stock to eligible employees
of the Company and its Participating Subsidiaries (as hereinafter defined)
pursuant to this Employee Stock Purchase Plan (this "Plan"). For purposes of
this Plan, "Parent Corporation" and "Subsidiary" shall have the same meanings as
"parent corporation" and "subsidiary corporation" in Sections 424(e) and 424(f),
respectively, of the Internal Revenue Code of 1986, as amended (the "Code").
"Participating Subsidiaries" are Parent Corporations or Subsidiaries that the
Board of Directors of the Company (the "Board") designates from time to time as
corporations that shall participate in this Plan. The Company intends this Plan
to qualify as an "employee stock purchase plan" under Section 423 of the Code
(including any amendments to or replacements of such Section), and this Plan
shall be so construed. Any term not expressly defined in this Plan but defined
for purposes of Section 423 of the Code shall have the same definition herein.
A total of 1,000,000 shares of the Company's Common Stock is reserved for
issuance under this Plan. In addition, on each January 1, the aggregate number
of shares of the Company's Common Stock reserved for issuance under the Plan
shall be increased automatically by a number of shares equal to 1% of the total
number of outstanding shares of the Company Common Stock on the immediately
preceding December 31; provided, that the Board or the Committee may in its sole
---------
discretion reduce the amount of the increase in any particular year; and,
provided further, that the aggregate number of shares issued over the term of
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this Plan shall not exceed 10,000,000 shares. Such number shall be subject to
adjustments effected in accordance with Section 14 of this Plan.
2. Purpose. The purpose of this Plan is to provide eligible employees of
the Company and Participating Subsidiaries with a convenient means of acquiring
an equity interest in the Company through payroll deductions, to enhance such
employees' sense of participation in the affairs of the Company and
Participating Subsidiaries, and to provide an incentive for continued
employment.
3. Administration. This Plan shall be administered by the Compensation
Committee of the Board (the "Committee"). Subject to the provisions of this
Plan and the limitations of Section 423 of the Code or any successor provision
in the Code, all questions of interpretation or application of this Plan shall
be determined by the Committee and its decisions shall be final and binding upon
all participants. Members of the Committee shall receive no compensation for
their services in connection with the administration of this Plan, other than
standard fees as established from time to time by the Board for services
rendered by Board members serving on Board committees. All expenses incurred in
connection with the administration of this Plan shall be paid by the Company.
4. Eligibility. Any employee of the Company or the Participating
Subsidiaries is eligible to participate in an Offering Period (as hereinafter
defined) under this Plan except the following:
(a) employees who are not employed by the Company or a Participating
Subsidiary prior to the beginning of such Offering Period or prior to such other
time period as specified by the Committee, except that employees who are
employed on the Effective Date of the Registration Statement filed by the
Company with the Securities and Exchange Commission ("SEC") under the Securities
Act of 1933, as amended (the "Securities Act") registering the initial public
offering of the Company's Common Stock shall be eligible to participate in the
first Offering Period under the Plan;
(b) employees who are customarily employed for twenty (20) hours or
less per week;
(c) employees who are customarily employed for five (5) months or
less in a calendar year;
(d) employees who, together with any other person whose stock would
be attributed to such employee pursuant to Section 424(d) of the Code, own stock
or hold options to purchase stock possessing five
<PAGE>
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or any of its Participating Subsidiaries or who, as a
result of being granted an option under this Plan with respect to such Offering
Period, would own stock or hold options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or any of its Participating Subsidiaries; and
(e) individuals who provide services to the Company or any of its
Participating Subsidiaries as independent contractors who are reclassified as
common law employees for any reason except for federal income and employment tax
------ ---
purposes.
5. Offering Dates. The offering periods of this Plan (each, an "Offering
Period") shall be of twenty-four (24) months duration commencing on April 1 and
October 1 of each year and ending on March 31 and September 30 of each year;
provided, however, that notwithstanding the foregoing, the first such Offering
- -------- -------
Period shall commence on the first business day on which price quotations for
the Company's Common Stock are available on the Nasdaq National Market (the
"First Offering Date") and shall end on March 31, 2002. Except for the first
Offering Period, each Offering Period shall consist of four (4) six month
purchase periods (individually, a "Purchase Period") during which payroll
deductions of the participants are accumulated under this Plan. The first
Offering Period shall consist of no more than five and no fewer than three
Purchase Periods, any of which may be greater or less than six months as
determined by the Committee. The first business day of each Offering Period is
referred to as the "Offering Date". The last business day of each Purchase
Period is referred to as the "Purchase Date". The Committee shall have the
power to change the Offering Dates, the Purchase Dates and the duration of
Offering Periods or Purchase Periods without stockholder approval if such change
is announced prior to the relevant Offering Period, or prior to such other time
period as specified by the Committee.
6. Participation in this Plan. Eligible employees may become
participants in an Offering Period under this Plan on the first Offering Date
after satisfying the eligibility requirements by delivering a subscription
agreement to the Company prior to such Offering Date, or such other time period
as specified by the Committee. Notwithstanding the foregoing, the Committee may
set a later time for filing the subscription agreement authorizing payroll
deductions for all eligible employees with respect to a given Offering Period.
An eligible employee who does not deliver a subscription agreement to the
Company by such date after becoming eligible to participate in such Offering
Period shall not participate in that Offering Period or any subsequent Offering
Period unless such employee enrolls in this Plan by filing a subscription
agreement with the Company prior to such Offering Date, or such other time
period as specified by the Committee. Once an employee becomes a participant in
an Offering Period, such employee will automatically participate in the Offering
Period commencing immediately following the last day of the prior Offering
Period unless the employee withdraws or is deemed to withdraw from this Plan or
terminates further participation in the Offering Period as set forth in Section
11 below. Such participant is not required to file any additional subscription
agreement in order to continue participation in this Plan.
7. Grant of Option on Enrollment. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Purchase Period by (b) the lower of (i) eighty-
five percent (85%) of the fair market value of a share of the Company's Common
Stock on the Offering Date (but in no event less than the par value of a share
of the Company's Common Stock), or (ii) eighty-five percent (85%) of the fair
market value of a share of the Company's Common Stock on the Purchase Date (but
in no event less than the par value of a share of the Company's Common Stock),
provided, however, that the number of shares of the Company's Common Stock
- -----------------
subject to any option granted pursuant to this Plan shall not exceed the lesser
of (x) the maximum number of shares set by the Committee pursuant to Section
10(c) below with respect to the applicable Purchase Date, or (y) the maximum
number of shares which may be purchased pursuant to Section 10(b) below with
respect to the applicable Purchase Date. The fair market value of a share of
the Company's Common Stock shall be determined as provided in Section 8 below.
8. Purchase Price. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
2
<PAGE>
(a) The fair market value on the Offering Date; or
(b) The fair market value on the Purchase Date.
For purposes of this Plan, the term "Fair Market Value" means, as of
any date, the value of a share of the Company's Common Stock determined as
follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;
-----------------------
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of determination on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading as reported in The Wall Street Journal;
-----------------------
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on the date
of determination as reported in The Wall Street Journal; or
-----------------------
(d) if none of the foregoing is applicable, by the Board in good
faith, which in the case of the First Offering Date will be the price per share
at which shares of the Company's Common Stock are initially offered for sale to
the public by the Company's underwriters in the initial public offering of the
Company's Common Stock pursuant to a registration statement filed with the SEC
under the Securities Act.
9. Payment Of Purchase Price; Changes In Payroll Deductions; Issuance Of
Shares.
(a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Offering Period. The deductions are made as
a percentage of the participant's compensation in one percent (1%) increments
not less than one percent (1%), nor greater than ten percent (10%) or such lower
limit set by the Committee. Compensation shall mean all W-2 cash compensation,
including, but not limited to, base salary, wages, commissions, overtime, shift
premiums and bonuses, plus draws against commissions, provided, however, that
-------- -------
for purposes of determining a participant's compensation, any election by such
participant to reduce his or her regular cash remuneration under Sections 125 or
401(k) of the Code shall be treated as if the participant did not make such
election. Payroll deductions shall commence on the first payday of the Offering
Period and shall continue to the end of the Offering Period unless sooner
altered or terminated as provided in this Plan.
(b) A participant may increase or decrease the rate of payroll
deductions during an Offering Period by filing with the Company a new
authorization for payroll deductions, in which case the new rate shall become
effective for the next payroll period commencing after the Company's receipt of
the authorization and shall continue for the remainder of the Offering Period
unless changed as described below. Such change in the rate of payroll
deductions may be made at any time during an Offering Period, but not more than
one (1) change may be made effective during any Purchase Period. A participant
may increase or decrease the rate of payroll deductions for any subsequent
Offering Period by filing with the Company a new authorization for payroll
deductions prior to the beginning of such Offering Period, or prior to such
other time period as specified by the Committee.
(c) A participant may reduce his or her payroll deduction percentage
to zero during an Offering Period by filing with the Company a request for
cessation of payroll deductions. Such reduction shall be effective beginning
with the next payroll period after the Company's receipt of the request and no
further payroll deductions will be made for the duration of the Offering Period.
Payroll deductions credited to the participant's account prior to the effective
date of the request shall be used to purchase shares of Common Stock of the
Company in accordance with Section (e) below. A participant may not resume
making payroll deductions during the Offering Period in which he or she reduced
his or her payroll deductions to zero.
3
<PAGE>
(d) All payroll deductions made for a participant are credited to his
or her account under this Plan and are deposited with the general funds of the
Company. No interest accrues on the payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.
(e) On each Purchase Date, so long as this Plan remains in effect and
provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under this Plan and have all
payroll deductions accumulated in the account maintained on behalf of the
participant as of that date returned to the participant, the Company shall apply
the funds then in the participant's account to the purchase of whole shares of
Common Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on the
Purchase Date. The purchase price per share shall be as specified in Section 8
of this Plan. Any cash remaining in a participant's account after such purchase
of shares shall be refunded to such participant in cash, without interest;
provided, however that any amount remaining in such participant's account on a
Purchase Date which is less than the amount necessary to purchase a full share
of Common Stock of the Company shall be carried forward, without interest, into
the next Purchase Period or Offering Period, as the case may be. In the event
that this Plan has been oversubscribed, all funds not used to purchase shares on
the Purchase Date shall be returned to the participant, without interest. No
Common Stock shall be purchased on a Purchase Date on behalf of any employee
whose participation in this Plan has terminated prior to such Purchase Date.
(f) As promptly as practicable after the Purchase Date, the Company
shall issue shares for the participant's benefit representing the shares
purchased upon exercise of his or her option.
(g) During a participant's lifetime, his or her option to purchase
shares hereunder is exercisable only by him or her. The participant will have
no interest or voting right in shares covered by his or her option until such
option has been exercised.
10. Limitations on Shares to be Purchased.
(a) No participant shall be entitled to purchase stock under this
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in this Plan. The Company shall automatically suspend
the payroll deductions of any participant as necessary to enforce such limit
provided that when the Company automatically resumes such payroll deductions,
the Company must apply the rate in effect immediately prior to such suspension.
(b) No more than two hundred percent (200%) of the number of shares
determined by using eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date as the denominator may
be purchased by a participant on any single Purchase Date.
(c) No participant shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. Prior to
the commencement of any Offering Period or prior to such time period as
specified by the Committee, the Committee may, in its sole discretion, set a
maximum number of shares which may be purchased by any employee at any single
Purchase Date (hereinafter the "Maximum Share Amount"). Until otherwise
determined by the Committee, there shall be no Maximum Share Amount. In no
event shall the Maximum Share Amount exceed the amounts permitted under Section
10(b) above. If a new Maximum Share Amount is set, then all participants must
be notified of such Maximum Share Amount prior to the commencement of the next
Offering Period. The Maximum Share Amount shall continue to apply with respect
to all succeeding Purchase Dates and Offering Periods unless revised by the
Committee as set forth above.
(d) If the number of shares to be purchased on a Purchase Date by all
employees participating in this Plan exceeds the number of shares then available
for issuance under this Plan, then the Company will make a pro rata allocation
of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the
4
<PAGE>
Committee shall determine to be equitable. In such event, the Company shall give
written notice of such reduction of the number of shares to be purchased under a
participant's option to each participant affected.
(e) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of the
applicable Purchase Period, without interest.
11. Withdrawal.
(a) Each participant may withdraw from an Offering Period under this
Plan by signing and delivering to the Company a written notice to that effect on
a form provided for such purpose. Such withdrawal may be elected at any time
prior to the end of an Offering Period, or such other time period as specified
by the Committee.
(b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in this Plan shall terminate. In the event a participant
voluntarily elects to withdraw from this Plan, he or she may not resume his or
her participation in this Plan during the same Offering Period, but he or she
may participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth in Section 6 above for initial
participation in this Plan.
(c) If the Fair Market Value on the first day of the current Offering
Period in which a participant is enrolled is higher than the Fair Market Value
on the first day of any subsequent Offering Period, the Company will
automatically enroll such participant in the subsequent Offering Period. Any
funds accumulated in a participant's account prior to the first day of such
subsequent Offering Period will be applied to the purchase of shares on the
Purchase Date immediately prior to the first day of such subsequent Offering
Period, if any.
12. Termination of Employment. Termination of a participant's employment
for any reason, including retirement, death or the failure of a participant to
remain an eligible employee of the Company or of a Participating Subsidiary,
immediately terminates his or her participation in this Plan. In such event, the
payroll deductions credited to the participant's account will be returned to him
or her or, in the case of his or her death, to his or her legal representative,
without interest. For purposes of this Section 12, an employee will not be
deemed to have terminated employment or failed to remain in the continuous
employ of the Company or of a Participating Subsidiary in the case of sick
leave, military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than ninety (90) days or
- --------
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. Return of Payroll Deductions. In the event a participant's interest
in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall deliver to the participant all payroll deductions credited to such
participant's account. No interest shall accrue on the payroll deductions of a
participant in this Plan.
14. Capital Changes. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under this Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under this Plan but have
not yet been placed under option (collectively, the "Reserves"), as well as the
price per share of Common Stock covered by each option under this Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
consideration by the Company; provided, however, that conversion of any
-----------------
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the
Committee, whose determination shall be final, binding and conclusive. Except
as expressly provided herein, no issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no
5
<PAGE>
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. The Committee may, in the exercise of its sole discretion in such
instances, declare that this Plan shall terminate as of a date fixed by the
Committee and give each participant the right to purchase shares under this Plan
prior to such termination. In the event of (i) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the stockholders of the Company or their relative stock
holdings and the options under this Plan are assumed, converted or replaced by
the successor corporation, which assumption will be binding on all
participants), (ii) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (iii) the sale of all or
substantially all of the assets of the Company or (iv) the acquisition, sale, or
transfer of more than 50% of the outstanding shares of the Company by tender
offer or similar transaction, the Plan will continue with regard to Offering
Periods that commenced prior to the closing of the proposed transaction and
shares will be purchased based on the Fair Market Value of the surviving
corporation's stock on each Purchase Date, unless otherwise provided by the
Committee consistent with pooling of interests accounting treatment.
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event of the Company being consolidated with or merged into any
other corporation.
15. Nonassignability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 below) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.
16. Reports. Individual accounts will be maintained for each
participant in this Plan. Each participant shall receive promptly after the end
of each Purchase Period a report of his or her account setting forth the total
payroll deductions accumulated, the number of shares purchased, the per share
price thereof and the remaining cash balance, if any, carried forward to the
next Purchase Period or Offering Period, as the case may be.
17. Notice of Disposition. Each participant shall notify the Company in
writing if the participant disposes of any of the shares purchased in any
Offering Period pursuant to this Plan if such disposition occurs within two (2)
years from the Offering Date or within one (1) year from the Purchase Date on
which such shares were purchased (the "Notice Period"). The Company may, at any
time during the Notice Period, place a legend or legends on any certificate
representing shares acquired pursuant to this Plan requesting the Company's
transfer agent to notify the Company of any transfer of the shares. The
obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.
18. No Rights to Continued Employment. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Participating Subsidiary, or restrict the right of
the Company or any Participating Subsidiary to terminate such employee's
employment.
19. Equal Rights And Privileges. All eligible employees shall have
equal rights and privileges with respect to this Plan so that this Plan
qualifies as an "employee stock purchase plan" within the meaning of Section 423
or any successor provision of the Code and the related regulations. Any
provision of this Plan which is inconsistent with Section 423 or any successor
provision of the Code shall, without further act or amendment by the
6
<PAGE>
Company, the Committee or the Board, be reformed to comply with the requirements
of Section 423. This Section 19 shall take precedence over all other provisions
in this Plan.
20. Notices. All notices or other communications by a participant to
the Company under or in connection with this Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. Term; Stockholder Approval. After this Plan is adopted by the
Board, this Plan will become effective on the First Offering Date (as defined
above). This Plan shall be approved by the stockholders of the Company, in any
manner permitted by applicable corporate law, within twelve (12) months before
or after the date this Plan is adopted by the Board. No purchase of shares
pursuant to this Plan shall occur prior to such stockholder approval. This Plan
shall continue until the earlier to occur of (a) termination of this Plan by the
Board (which termination may be effected by the Board at any time), (b) issuance
of all of the shares of Common Stock reserved for issuance under this Plan, or
(c) ten (10) years from the adoption of this Plan by the Board.
22. Designation of Beneficiary.__
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
this Plan in the event of such participant's death subsequent to the end of an
Purchase Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under this Plan in the event
of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under this Plan who is living
at the time of such participant's death, the Company shall deliver such shares
or cash to the executor or administrator of the estate of the participant, or if
no such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such shares or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
23. Conditions Upon Issuance of Shares; Limitation on Sale of Shares.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange or automated quotation system upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
24. Applicable Law. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of California.
25. Amendment or Termination of this Plan. The Board may at any time
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant, nor may any amendment be made
without approval of the stockholders of the Company obtained in accordance with
Section 21 above within twelve (12) months of the adoption of such amendment (or
earlier if required by Section 21) if such amendment would:
(a) increase the number of shares that may be issued under this Plan;
or
(b) change the designation of the employees (or class of employees)
eligible for participation in this Plan.
Notwithstanding the foregoing, the Board may make such amendments to
the Plan as the Board determines to be advisable, if the continuation of the
Plan or any Offering Period would result in financial
7
<PAGE>
accounting treatment for the Plan that is different from the financial
accounting treatment in effect on the date this Plan is adopted by the Board.
8
<PAGE>
EXHIBIT 10.04
NEITHER THE WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NO
SALE, TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii)
AN OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL SHALL BE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED OR (iii)
RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION TO THE
EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
Date of Issuance: March 8, 2000 Warrant No.: Y-1
WARRANT TO PURCHASE UP TO 1,405,000
SHARES OF SERIES C PREFERRED STOCK OF DOVEBID,INC.
--------------------------------------------------
THIS CERTIFIES THAT Yahoo! Inc., a Delaware corporation (the "Holder"), is
entitled to purchase under this Warrant up to one million four hundred five
thousand (1,405,000) shares of Series C Preferred Stock of DoveBid, Inc., a
Delaware corporation (the "Company") at a per share price of $2.67 (the
"Exercise Price") subject to the provisions and upon the terms and conditions
hereinafter set forth. The shares of Series C Preferred Stock or Common Stock
or other securities for which this Warrant becomes exercisable pursuant to the
provisions hereof are hereinafter referred to as the "Shares."
1. Vesting and Term.
----------------
1.1 Vesting Date. This Warrant shall become exercisable with respect
------------
all of the Shares on the Date of Issuance.
1.2 Termination Date. This Warrant shall remain exercisable with
----------------
respect to the Shares until 5:00 p.m. California time on the earliest of (i) the
fourth annual anniversary of the Date of Issuance, (ii) the effective date of
termination by the Company of the Advertising and Promotion Agreement between
the Company and the Holder dated the Date of Issuance (the "Promotion
Agreement") pursuant to Section 5.7, 10.3 or 10.4 of the Promotion Agreement, or
(iii) one year after the effective termination by the Holder of the Promotion
Agreement pursuant to Section 5.6 or 10.4 of the Promotion Agreement provided
that, in the event of termination pursuant to this clause (iii), the Warrant
will expire no later than the thirtieth day after the closing of the initial
public offering by the Company of its Common Stock.
<PAGE>
2. Exercise or Conversion.
----------------------
2.1 Method of Exercise; Payment; Issuance of New Warrant. This
----------------------------------------------------
Warrant may be exercised by the Holder, in whole or in part and from time to
time, by the surrender of this Warrant (with a notice of exercise in the form
attached as Exhibit A and the investment representation certificate in the form
---------
attached as Exhibit B duly executed) at the principal office of the Company and
---------
by the payment to the Company by check or wire transfer, of an amount equal to
the then current Exercise Price per share multiplied by the number of Shares
then being purchased (the "Aggregate Exercise Price"). The person or persons in
whose name(s) any certificate(s) representing Shares shall be issuable upon
exercise of this Warrant shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of the Shares
represented thereby (and such Shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of this Warrant,
certificates for the Shares so purchased shall be delivered to the holder(s)
thereof as soon as possible and in any event within thirty (30) days of receipt
of such notice by the Company and, unless this Warrant has been fully exercised
or expired, a new Warrant representing the portion of the Shares, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Holder as soon as possible and in any event within such thirty-day
period.
2.2 Right to Convert Warrant into Stock; Net Issuance. In addition
-------------------------------------------------
to and without limiting the rights of the Holder under the terms of this
Warrant, the Holder may elect to convert this Warrant or any portion thereof
(the "Conversion Right"), but only to the extent that the Holder then has a
right to exercise this Warrant, into Shares, the aggregate value of which Shares
shall be equal to the "in-the-money" value of this Warrant or the portion
thereof being converted as set forth below. The Conversion Right may be
exercised by the rHolder by surrender of this Warrant at the principal office of
the Company together with notice of the Holder's intention to exercise the
Conversion Right, in which event the Company shall issue to the Holder a number
of Shares computed using the following formula:
X= Y(A-B)
------
A
Where:
X The number of Shares to be issued to the Holder.
Y The number of Shares representing the portion of this Warrant
that is being converted.
A The fair market value of one Share.
B The Exercise Price (as adjusted to the date of such
calculations).
2
<PAGE>
For purposes of this Section 2.2, the "fair market value" per Share shall mean
the Market Price on the last business day before the effective date of exercise
of the Conversion Right. If the Shares are traded on a national securities
exchange or admitted to unlisted trading privileges on such an exchange, or are
listed on the National Market (the "National Market") of the National
Association of Securities Dealers Automated Quotations System (the "Nasdaq"),
the Market Price as of a specified day shall be the last reported sale price of
the Shares on such exchange or on the National Market on such date or if no such
sale is made on such day, the mean of the closing bid and asked prices for such
day on such exchange or on the National Market. If the Shares are not so listed
or admitted to unlisted trading privileges, the Market Price as of a specified
day shall be the mean of the last bid and asked prices reported on such date (x)
by the Nasdaq or (y) if reports are unavailable under clause (x) above by the
National Quotation Bureau Incorporated. If the Shares are not so listed or
admitted to unlisted trading privileges and bid and ask prices are not reported,
the Market Price as of a specified day shall be determined in good faith by
written resolution of the Board of Directors of the Company.
2.3 Automatic Conversion. In the event of termination of this
--------------------
Warrant pursuant to Section 1 above, to the extent that this Warrant is then
exercisable and such conversion would result in the issuance of Shares to the
Holder, this Warrant shall be deemed automatically converted under Section 2.2
above immediately prior to the time at which it would otherwise expire.
2.4 HSR Compliance. Exercise or conversion of this Warrant is
--------------
subject to comliance by the Holder with all applicable filing requirements, and
expiration of all waiting periods, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). The Company will
cooperate with the Holder in making all applicable filings under the HSR Act,
provided, however, that the Holder shall pay all applicable filing fees.
3. Securities Fully Paid; Reservation of Shares; Capitalization
------------------------------------------------------------
Representations. All Shares that may be issued upon the exercise of the rights
- ---------------
represented by this Warrant, upon issuance, will be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by the
Warrant may be exercised, the Company will at all times have authorized and
reserved for the purpose of issuance upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of Shares to provide for the
exercise of the right represented by this Warrant. The Company represents to
the Holder that the capitalization of the Company is, in all material respects,
as set forth in Section 2.2 of that certain Series C Preferred Stock Purchase
Agreement executed by the Company and the Holder on the Date of Issuance, as
supplemented by the Disclosure Schedule to that Agreement.
4. Adjustment of Exercise Price and Number of Shares. The number and
-------------------------------------------------
kind of securities purchasable upon the exercise of the Warrant and the Exercise
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
4.1 Reclassification or Merger. In case of any reclassification,
--------------------------
change or conversion (including but not limited to the automatic conversion of
the Series C Preferred Stock
3
<PAGE>
into Common Stock upon the initial public offering of the Company) of securities
in the class issuable upon exercise of this Warrant (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or in case of any merger of the
Company with or into another corporation (other than a merger with another
corporation in which the Company is a continuing corporation and which does not
result in any reclassification or change of outstanding securities issuable upon
exercise of this Warrant), unless this Warrant shall have been exercised or
terminated in accordance with its terms, this Warrant shall thereafter be
exercisable solely for the kind and amount of consideration, including but not
limited to shares of stock, other securities, money and property, that the
Holder would have received upon such reclassification, change, conversion or
merger if the Holder had exercised this Warrant in full prior to such
reclassification, change, conversion or merger. The provisions of this
subparagraph shall similarly apply to successive reclassifications, changes,
conversions, mergers.
4.2 Subdivisions or Combination of Shares. If at any time while this
-------------------------------------
Warrant remains outstanding and unexpired the Company shall subdivide or combine
the Shares, the Exercise Price and the number of Shares issuable upon exercise
hereof shall be proportionately adjusted.
4.3 Stock Dividends. If at any time while this Warrant is
---------------
outstanding and unexpired the Company shall pay a dividend payable in Shares
(except any distribution specifically provided for in the foregoing
subparagraphs 4.1 and 4.2), then the Exercise Price shall be adjusted, from and
after the date of determination of shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Exercise
Price in effect immediately prior to such date of determination by a fraction
(a) the numerator of which shall be the total number of Shares outstanding
immediately prior to such dividend or distribution, and (b) the denominator of
which shall be the total number of Shares outstanding immediately after such
dividend or distribution and the number of Shares subject to this Warrant shall
be proportionately adjusted.
4.4 Notice of Adjustments. Whenever the Exercise Price shall be
---------------------
adjusted pursuant to the provisions hereof, the Company shall within thirty (30)
days of such adjustment deliver a certificate signed by its chief financial
officer to Holder setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the number of Shares subject to this Warrant and the
Exercise Price therefor, as applicable, after giving effect to such adjustment.
4
<PAGE>
5. Compliance with Securities Laws.
-------------------------------
5.1 Accredited Investor. This issuance of this Warrant is
-------------------
conditioned upon, and by its acceptance hereof the Holder hereby confirms, that
the Holder is an "accredited investor" as that term is defined under Regulation
D under the Securities Act of 1933, as amended (the "Securities Act").
5.2 Legend. Upon issuance, the Shares shall be imprinted with a
------
legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
together with any legend required under applicable state securities laws.
5.3 Compliance with Securities Laws on Transfer. This Warrant and
-------------------------------------------
the Shares issuable upon exercise of this Warrant may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws by the transferor and the transferee (including, without
limitation, the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company).
6. Fractional Shares. No fractional Shares will be issued in connection
-----------------
with any exercise hereunder, but in lieu of such fractional Shares the Company
shall make a cash payment therefor upon the basis of the Exercise Price then in
effect.
7. Registration Rights. The Shares will be treated as "Registrable
-------------------
Securities" within the meaning of the Second Amended Investors' Rights Agreement
dated as of the Date of Issuance and shall be entitled to the registration
rights set forth therein.
8. "Market Stand-Off" Agreement; Agreement to Furnish Information. The
--------------------------------------------------------------
Holder hereby agrees that the Holder shall not sell, transfer, make any short
sale of, grant any option for the purchase of, enter into any hedging or similar
transaction with the same economic effect as a sale, or otherwise dispose of,
any Shares (or other securities) of the Company held of record or beneficially
owned by Holder (other than those included in the registration) for a period
specified by the representative of the underwriters of Common Stock (or other
securities) of the Company not to exceed one hundred eighty (180) days following
the date of the final prospectus contained in a registration statement of the
Company filed under the Securities Act; provided that:
(i) such agreement shall apply only to the Company's initial
public offering; and
5
<PAGE>
(ii) all officers and directors of the Company who hold
capital stock of the Company and all holders of five percent (5%) or more of
the Company's capital stock enter into similar agreements.
The Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the representative of the underwriters
which are consistent with the foregoing or which are necessary to give further
effect thereto. In addition, if requested by the Company or the representative
of the underwriters of Common Stock (or other securities) of the Company, the
Holder shall provide, within ten (10) days of such request, such information as
may be required by the Company or such representative in connection with the
completion of any public offering of the Company's securities pursuant to a
registration statement filed under the Securities Act. The Company may impose
stop-transfer instructions with respect to the Shares (or other securities)
subject to the foregoing restriction until the end of said one hundred eighty
(180) day period.
9. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
10. Notices.
-------
10.1 Notice of Certain Events. The Company shall provide the Holder
------------------------
with at least twenty (20) days notice (or such greater amount of notice as
Delaware law requires to be given to shareholders having the right to vote at a
meeting on any Sale Event, as defined herein) prior to (i) a merger of the
Company with or into, the consolidation of the Company with, or the sale by the
Company of all or substantially all of its assets to, another person or entity
(other than such a transaction wherein the shareholders of the Company prior to
such transaction retain or obtain a majority of the voting capital stock of the
surviving, resulting or purchasing entity)(a "Sale Event"), (ii) any
liquidation, dissolution or winding up of the Company or (iii) the record date
for any cash dividend declared on the Shares or (iv) a firm commitment
underwritten public offering pursuant to a registration statement on Form S-1
under the Securities Act (each, a "Notice Event"). If the notice is provided
pursuant to subsection (i) or (ii) of the previous sentence, the notice will
indicate the expected date of the Notice Event.
10.2 Notice Procedure. Any notice required or permitted pursuant to
----------------
this Warrant shall be in writing and shall be deemed sufficient when either (a)
delivered personally, (b) sent by e-mail or fax with confirmation of receipt or
(c) deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, addressed as follows:
If to the Holder:
Yahoo! Inc.
3420 Central Expressway
Santa Clara, California 95051
6
<PAGE>
Attention: Senior Vice President Corporate Development
e-mail: [email protected]
fax: 408-328-7939
with a copy to:
Yahoo! Inc.
3420 Central Expressway
Santa Clara, California 95051
Attention: General Counsel
e-mail: [email protected]
Fax: (408) 731-3400
If to the Company:
Dovebid, Inc.
1241 E. Hillsdale Boulevard
Foster City, California 94494
Attention: Jeffrey Crowe, President
email: [email protected]
Fax: 650-571-0197
with a copy to:
Dovebid, Inc.
1241 E. Hillsdale Boulevard
Foster City, California 94494
Attention: Nino Capobianco, General Counsel
email: [email protected]
Fax: 650-571-0197
Each of the foregoing parties shall be entitled to specify a different
address by giving five (5) days advance written notice as aforesaid to the other
parties. All such notices and communications shall be deemed to have been
received (i) in the case of personal delivery or delivery be e-mail or fax, on
the date of such delivery (provided there is confirmation of such delivery) and
(ii) in the case of mailing, on the third business day following the date of
such mailing.
11. Lost Warrants or Stock Certificates. Upon receipt of evidence
-----------------------------------
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant or any stock certificate and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate, the Company will make and
7
<PAGE>
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
12. Restrictions on Transfer. This Warrant shall not be transferable by
------------------------
the Holder without the Company's prior written consent and any attempt to assign
or transfer this Warrant shall be void.
13. Non-Disclosure. Subject to the terms of this Section 13, neither the
--------------
Company nor the Holder shall make any pubic disclosure regarding the existence
of this Warrant or its terms without the other party's prior written approval
and consent, which will not be unreasonably withheld. If the Company or the
Holder desires to make a public disclosure regarding the existence of this
Warrant, it shall provide the other with a minimum of three (3) business days
notice of the intended disclosure. If the Company determines, after consulting
with its legal counsel or outside auditors, that this Warrant or any of its
terms must be filed or disclosed by the Company under any law, rule or
regulation including but not limited to filing or disclosing this Warrant or its
terms in connection with the Company's initial public offering, the Company
shall give written notice of the intended disclosure to the Holder at least one
business day in advance of the date of disclosure but the Company shall not be
required to seek confidential treatment for this Warrant or any of its terms.
14. No Impairment. The Company will not, through any reorganization,
-------------
recapitalization, transfer of assets, consolidation, merger, dissolution,
issuance or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all the provisions of this Warrant and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the holder of this Warrant against impairment.
15. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California, without regard to conflict of laws provisions thereof.
[Signature Page Follows]
8
<PAGE>
IN WITNESS WHEREOF, this Warrant to Purchase up to 1,405,000 Shares of
Series C Preferred Stock of DoveBid, Inc. has been executed as of the Date of
Issuance.
DoveBid, Inc.
By: /s/ Jeffrey Crowe
_____________________
Name: Jeffrey Crowe
___________________
Title: President
___________________
9
<PAGE>
EXHIBIT "A"
-----------
NOTICE OF EXERCISE FORM
-----------------------
(To be executed only upon partial or full
exercise of the within Warrant)
The undersigned registered Holder of the within Warrant hereby irrevocably
exercises the within Warrant for and purchases _________ shares of ___________
Stock of DoveBid, Inc. and herewith makes payment therefor in the amount of
$_______________, all at the price and on the terms and conditions specified in
the within Warrant and requests that a certificate (or ________________________
certificates in denominations of shares) for the shares hereby purchased be
issued in the name of and delivered to ________________________________________
whose address is ________________________________________________________ and,
if such shares of shall not include all the shares issuable as provided in the
within Warrant, that a new Warrant of like tenor for the number of shares not
being purchased hereunder be issued in the name of and delivered to the
undersigned, whose address is _________________________________________________
_____________________________________________________________________________.
Date: ______________________
Holder: Yahoo! Inc.
By:
___________________________________________
(Signature of Registered Holder)
Title:
________________________________________
NOTICE: The signature to this Notice of Exercise must correspond with the name
as written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.
10
<PAGE>
EXHIBIT "B"
-----------
INVESTMENT REPRESENTATION CERTIFICATE
-------------------------------------
Holder: Yahoo! Inc.
Company: DoveBid, Inc.
Security: Series C Preferred Stock
Amount:
Date:
In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Holder") represents to the Company as
---------- ------
follows:
The Holder is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. The Holder is
purchasing the Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
----------
Act");
- ---
The Holder understands that the Securities have not been registered under
the Securities Act in reliance upon a specific exemption therefor, which
exemption depends upon, among other things, the bona fide nature of the Holder's
investment intent as expressed herein. In this connection, the Holder
understands that, in the view of the Securities and Exchange Commission ("SEC"),
---
the statutory basis for such exemption may be unavailable if the Holder's
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under tax statutes,
for a deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one year or any other fixed period in the
future. The Holder is an "accredited investor" as that term is defined under
Regulation D promulgated by the Securities and Exchange Commission under the
Securities Act;
The Holder further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. In addition, the Holder
understands that the certificate evidencing the Securities will be imprinted
with the legend referred to in this Warrant under which the Securities are being
purchased;
The Holder is aware of the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: (i) the availability of certain public information about the Company;
(ii) the resale occurring not less than one (1) year after the party has
11
<PAGE>
purchased and paid for the securities to be sold; (iii) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934, as amended) and the amount of securities being sold during
any three-month period not exceeding the specified limitations stated therein;
The Holder further understands that at the time it wishes to sell the
Securities there may be no public market upon which to make such a sale, and
that, even if such a public market upon which to make such a sale then exists,
notwithstanding the Company's best efforts obligation to do so set forth in the
Warrant, the Company may not be satisfying the current public information
requirements of Rule 144, and that, in such event, the Holder may be precluded
from selling the Securities under Rule 144 even if the one-year minimum holding
period had been satisfied; and
The Holder further understands that in the event all of the requirements of
Rule 144 are not satisfied, registration under the Securities Act, compliance
with Regulation A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rule 144 is not exclusive, the staff of the
SEC has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
Date: ______________________
HOLDER:
_________________________________
12
<PAGE>
EXHIBIT 10.06
STOCK REPURCHASE AGREEMENT
This Stock Repurchase Agreement dated as of February 25, 2000 (this
"Agreement"), is made and entered into by and between DoveBid, Inc, a Delaware
corporation, (the "Corporation"), Ross Dove (the "Founder") and The Dove
Holdings Corporation, a California corporation ("Holdings"). Certain capitalized
terms used in this Agreement are defined in Section 13 below.
The parties hereto agree as follows:
Section 1. Repurchase Right.
----------------
(a) Of the 21,754,802 shares of Common Stock now owned by Holdings,
Holdings and the Founder agree that 19.444% of such shares of Common Stock or
4,230,004 shares held by Holdings (the "Vesting Shares") will be subject to the
following repurchase right exercisable by the Corporation.
(b) In the event that the Founder's employment with the Corporation
is terminated by a Voluntary Termination or for Cause, the Corporation shall
have the right (the "Repurchase Right"), but not the obligation, to repurchase a
number of Vesting Shares equal to the total number of all the Vesting Shares
multiplied by a fraction, (i) the numerator of which shall be 28 minus the
number of full calendar months between the Starting Date and the termination of
Founder's employment and (ii) the denominator of which shall be 28. The number
of Vesting Shares shall be appropriately adjusted to reflect all stock splits,
stock dividends and recapitalizations effected after the date hereof.
(c) The purchase price for any and all Vesting Shares repurchased by
the Corporation pursuant to this Agreement shall be $0.33 per share, as
appropriately adjusted to reflect all stock splits, stock dividends and
recapitalizations effected after the date hereof.
(d) If the Corporation elects to exercise the Repurchase Right, the
Corporation will have 90 days following such termination of Founder's employment
to notify Founder and Holdings and close the repurchase transaction. The
Corporation's notice to Founder and Holdings shall state the number of Vesting
Shares it elects to repurchase and the day and time for settlement and closing
of the transaction, which shall take place at the offices of the Corporation.
(e) Upon delivery of such notice and payment of the purchase price,
the Corporation shall become the legal and beneficial owner of the Vesting
Shares being repurchased and all rights and interest therein or related thereto,
and the Corporation shall have the right to transfer to its own name or the name
of its assignee the Vesting Shares being repurchased by the Corporation, without
further action by Founder.
(f) Notwithstanding the foregoing, the occurrence of any of the
following shall cancel the Repurchase Right:
1
<PAGE>
(i) the death of the Founder;
(ii) any disability of the Founder that renders impossible the
fulfillment of Founder's duties as an employee of the Corporation and
continues for a period greater than 6 months;
(iii) any breach of this Agreement by the Corporation;
(iv) the closing of an Acquisition; or
(v) if the Founder's employment with the Corporation is
terminated by the Corporation without Cause or by the Founder for Good
Reason.
(g) In the event of a conflict between the provisions of this
Agreement and that certain Amended and Restated Stockholders' Agreement of even
date herewith among the Corporation, Holder and certain of the Corporation's
stockholders, the provisions of the Stockholders' Agreement shall control.
Section 2. Escrow. Each of the Founder and Holdings shall escrow the
------
Founder Vesting Shares and the Holdings Vesting Shares, respectively, with the
Secretary or Assistant Secretary of the Corporation and shall deliver to the
Secretary or Assistant Secretary the fully executed Escrow Instructions in the
form of Exhibit A hereto (the "Escrow Instructions"), together with three
Assignments Separate from Certificate in the form of Exhibit B hereto, to be
executed in blank (pursuant to the Escrow Instructions), to permit a transfer of
Vesting Shares if the Corporation exercises its Repurchase Right.
Section 3. Adjustments. If from time to time, during the term of the
-----------
Repurchase Right, there is any change affecting the Corporation's outstanding
Common Stock as a class that is effected without receipt of consideration by the
Corporation (through merger, consolidation, reorganization, reincorporation,
stock dividend, dividend of property other than stock, stock split, reverse
split or other transaction), then any new, substituted or additional securities
or other property to which Founder or Holdings is entitled as a holder of the
Vesting Shares, which remain subject to the Repurchase Right, shall be added to
the escrow and subject to the same treatment as the Vesting Shares.
Section 4. Ownership Rights. Each of the Founder and Holdings shall be
----------------
deemed to be the record and beneficial owner of the Founder Vesting Shares and
the Holdings Vesting Shares, respectively, for all purposes, including the right
to vote such Vesting Shares, except to the extent any of such Vesting Shares are
repurchased by the Corporation pursuant to the Repurchase Right.
Section 5. Limitations on Transfer. In addition to any other limitation
-----------------------
on transfer created by applicable securities laws, the Corporation's bylaws or
other agreements, each of the Founder and Holdings shall not assign,
hypothecate, donate, pledge, encumber or otherwise dispose of any interest in
the Vesting Shares to the extent the Vesting Shares are subject to the
Repurchase Right.
2
<PAGE>
Section 6. Restrictive Legends. All certificates representing the Vesting
-------------------
Shares subject to the Repurchase Right shall have endorsed thereon a legend in
substantially the following form (in addition to any other legend which may be
required by law or by other agreements):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN OPTION SET FORTH IN A STOCK REPURCHASE AGREEMENT BETWEEN
THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS COMPANY. ANY TRANSFER OR ATTEMPTED
TRANSFER OF ANY SHARES SUBJECT TO SUCH OPTION IS VOID
WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE
CORPORATION."
Section 7. Refusal to Transfer. The Corporation shall not be required (a)
-------------------
to transfer on its books any shares of Vesting Shares of the Corporation which
shall have been transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares or to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
shall have been so transferred.
Section 8. No Employment Rights. This Agreement is not an employment
--------------------
contract and nothing in this Agreement shall affect in any manner whatsoever the
right or power of the Corporation (or a parent or subsidiary of the Corporation)
to terminate Founder's employment for any reason at any time, with or without
cause and with or without notice.
Section 9. Specific Performance. It is the intention of the parties that
--------------------
the Corporation, upon exercise of the Repurchase Right and payment of the
repurchase amount, pursuant to the terms of this Agreement, shall be entitled to
receive the Vesting Shares, in specie, in order to have such Vesting Shares
available for future issuance without dilution of the holdings of other
stockholders. Furthermore, it is expressly agreed among the parties hereto that
money damages are inadequate to compensate the Corporation for the Vesting
Shares and that the Corporation shall, upon proper exercise of the Repurchase
Right, be entitled to specific enforcement of its rights to purchase and receive
the portion of the Vesting Shares it has repurchased.
Section 10. Assignment. The Corporation may assign its rights under this
----------
Agreement to any stockholder of the Corporation upon notice to the Founder and
Holdings.
Section 11. Notices. All notices, requests, consents and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given for all purposes upon (i) personal delivery, (ii) one
day after being sent, when sent by professional overnight courier service from
and to locations within the United States, (iii) five days after posting when
sent by registered or certified mail, or (iv) on the date of transmission when
sent by facsimile and when receipt has been confirmed, addressed (A) if to
Company at the address or facsimile number, as applicable set forth on the
signature pages hereto; or (B) if to the Founder, addressed to the Founder at
his address or facsimile number, as applicable, as shown on the stock register
maintained by Company; or (B) if to Holdings, addressed to Holdings, at its
address or facsimile number, as
3
<PAGE>
applicable, as shown on the stock register maintained by Company.
Notwithstanding any provision hereof to the contrary, any notice to Holdings
shall be deemed a notice to the Founder and any notice to the Founder shall be
deemed a notice to Holdings. The addresses for the purposes of this Section 12
may be changed by giving written notice of such change in the manner provided
herein for giving notice. Unless and until such written notice is received, the
address provided herein shall be deemed to continue in effect for all purposes
hereunder.
Section 12. Miscellaneous. This is the entire agreement of the parties
-------------
regarding the subject matter of this Agreement. This Agreement may only be
modified or terminated by a written instrument duly authorized by the board of
directors of the Corporation and signed by Founder, Holdings and an authorized
representative of the Corporation. This Agreement shall be governed by
California law, without reference to its principles of conflict of laws.
Section 13. Definitions. As used herein the following capitalized terms
-----------
have the respective meanings assigned below.
An "Acquisition" means (i) the acquisition by any person or entity,
directly or indirectly, from the stockholders of the Corporation, beneficially
or of record, securities of the Corporation representing fifty (50%) percent of
the total voting power of all its then outstanding voting securities, (ii) a
merger or consolidation of the Corporation in which the Corporation's voting
securities immediately prior to the merger or consolidation do not represent, or
are not converted into securities that represent, a majority of the voting power
of all voting securities of the surviving entity immediately after the merger or
consolidation or (iii) a sale of substantially all of the assets of the
Corporation or a liquidation or dissolution of the Corporation.
"Cause" with respect to the Founder, means any of the following: (i) gross
negligence or willful misconduct in the performance of the Founder's duties to
the Corporation (other than as a result of death or a disability) that has
resulted or is likely to result in substantial and material damage to the
Corporation, after a written demand for substantial performance is delivered to
the Founder by the Board of Directors which specifically identifies the manner
in which the Board believes the Founder has not substantially performed the
Founder's duties and the Founder has been provided with a reasonable opportunity
to cure any alleged gross negligence or willful misconduct; (ii) repeated
failure to perform the Founder's duties to the Corporation as requested in
writing by the Board of Directors (other than as a result of death or a
disability); (iii) Founder's commission of any act of fraud with respect to the
Corporation; or (iv) Founder's conviction of a felony or a crime causing
material harm to the business and affairs of the Corporation. No act or failure
to act by the Founder shall be considered "willful" if done or omitted by the
Founder in good faith with reasonable belief that the Founder's action or
omission was in the best interests of the Corporation.
"Common Stock" means the common stock, par value $0.001 per share, of the
Corporation.
"Good Reason" means the occurrence of any of the following events without
the Founder's prior written consent: (i) a reduction in the Founder's base
salary; (ii) a material adverse change in the Founder's title; (iii) a material
adverse change in the Founder's responsibilities or authority; (iv) a material
reduction in the Founder's employee benefits other than a reduction in employee
benefits
4
<PAGE>
which applies to all the Corporation employees of comparable position and
experience; or (v) a relocation of the Founder's place of employment outside of
the seven (7) San Francisco Bay Area counties.
"Starting Date" means February 25, 2000.
"Voluntary Termination" means any termination of employment by Founder
other than for Good Reason.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
THE CORPORATION: DOVEBID, INC.
By: /s/ Jeffrey Crowe
-----------------------------------------
Jeffrey Crowe, President
Address: DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Facsimile No.: (650) 571-5980
Attention: Corporate Assistant Secretary
THE FOUNDER: /s/ Ross Dove
-----------------------------------------
ROSS DOVE
Address:
---------------------------------
-----------------------------------------
Facsimile No.:
-----------------------------
HOLDINGS: THE DOVE HOLDINGS CORPORATION
By: /s/ Ross Dove
-----------------------------------------
Ross Dove, President
Address:
---------------------------------
-----------------------------------------
Facsimile No.:
---------------------------
Attention:
-------------------------------
5
<PAGE>
EXHIBIT 10.07
STOCK REPURCHASE AGREEMENT
This Stock Repurchase Agreement dated as of February 25, 2000 (this
"Agreement"), is made and entered into by and between DoveBid, Inc, a Delaware
corporation, (the "Corporation"), Kirk Dove (the "Founder") and The Dove
Holdings Corporation, a California corporation ("Holdings"). Certain
capitalized terms used in this Agreement are defined in Section 13 below.
The parties hereto agree as follows:
Section 1. Repurchase Right.
----------------
(a) Of the 21,754,802 shares of Common Stock now owned by Holdings,
Holdings and the Founder agree that 19.444% of such shares of Common Stock or
4,230,004 shares held by Holdings (the "Vesting Shares") will be subject to the
following repurchase right exercisable by the Corporation.
(b) In the event that the Founder's employment with the Corporation
is terminated by a Voluntary Termination or for Cause, the Corporation shall
have the right (the "Repurchase Right"), but not the obligation, to repurchase a
number of Vesting Shares equal to the total number of all the Vesting Shares
multiplied by a fraction, (i) the numerator of which shall be 28 minus the
number of full calendar months between the Starting Date and the termination of
Founder's employment and (ii) the denominator of which shall be 28. The number
of Vesting Shares shall be appropriately adjusted to reflect all stock splits,
stock dividends and recapitalizations effected after the date hereof.
(c) The purchase price for any and all Vesting Shares repurchased
by the Corporation pursuant to this Agreement shall be $0.33 per share, as
appropriately adjusted to reflect all stock splits, stock dividends and
recapitalizations effected after the date hereof.
(d) If the Corporation elects to exercise the Repurchase Right, the
Corporation will have 90 days following such termination of Founder's employment
to notify Founder and Holdings and close the repurchase transaction. The
Corporation's notice to Founder and Holdings shall state the number of Vesting
Shares it elects to repurchase and the day and time for settlement and closing
of the transaction, which shall take place at the offices of the Corporation.
(e) Upon delivery of such notice and payment of the purchase price,
the Corporation shall become the legal and beneficial owner of the Vesting
Shares being repurchased and all rights and interest therein or related thereto,
and the Corporation shall have the right to transfer to its own name or the name
of its assignee the Vesting Shares being repurchased by the Corporation, without
further action by Founder.
(f) Notwithstanding the foregoing, the occurrence of any of the
following shall cancel the Repurchase Right:
<PAGE>
(i) the death of the Founder;
(ii) any disability of the Founder that renders impossible the
fulfillment of Founder's duties as an employee of the Corporation and
continues for a period greater than 6 months;
(iii) any breach of this Agreement by the Corporation;
(iv) the closing of an Acquisition; or
(v) if the Founder's employment with the Corporation is
terminated by the Corporation without Cause or by the Founder for
Good Reason.
(g) In the event of a conflict between the provisions of this
Agreement and that certain Amended and Restated Stockholders' Agreement of even
date herewith among the Corporation, Holder and certain of the Corporation's
stockholders, the provisions of the Stockholders' Agreement shall control.
Section 2. Escrow. Each of the Founder and Holdings shall escrow the
------
Founder Vesting Shares and the Holdings Vesting Shares, respectively, with the
Secretary or Assistant Secretary of the Corporation and shall deliver to the
Secretary or Assistant Secretary the fully executed Escrow Instructions in the
form of Exhibit A hereto (the "Escrow Instructions"), together with three
Assignments Separate from Certificate in the form of Exhibit B hereto, to be
executed in blank (pursuant to the Escrow Instructions), to permit a transfer of
Vesting Shares if the Corporation exercises its Repurchase Right.
Section 3. Adjustments. If from time to time, during the term of the
-----------
Repurchase Right, there is any change affecting the Corporation's outstanding
Common Stock as a class that is effected without receipt of consideration by the
Corporation (through merger, consolidation, reorganization, reincorporation,
stock dividend, dividend of property other than stock, stock split, reverse
split or other transaction), then any new, substituted or additional securities
or other property to which Founder or Holdings is entitled as a holder of the
Vesting Shares, which remain subject to the Repurchase Right, shall be added to
the escrow and subject to the same treatment as the Vesting Shares.
Section 4. Ownership Rights. Each of the Founder and Holdings shall be
----------------
deemed to be the record and beneficial owner of the Founder Vesting Shares and
the Holdings Vesting Shares, respectively, for all purposes, including the right
to vote such Vesting Shares, except to the extent any of such Vesting Shares are
repurchased by the Corporation pursuant to the Repurchase Right.
Section 5. Limitations on Transfer. In addition to any other limitation
-----------------------
on transfer created by applicable securities laws, the Corporation's bylaws or
other agreements, each of the Founder and Holdings shall not assign,
hypothecate, donate, pledge, encumber or otherwise
<PAGE>
dispose of any interest in the Vesting Shares to the extent the Vesting Shares
are subject to the Repurchase Right.
Section 6. Restrictive Legends. All certificates representing the Vesting
-------------------
Shares subject to the Repurchase Right shall have endorsed thereon a legend in
substantially the following form (in addition to any other legend which may be
required by law or by other agreements):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTION SET FORTH IN A STOCK REPURCHASE AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS COMPANY. ANY TRANSFER OR ATTEMPTED
TRANSFER OF ANY SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE
PRIOR EXPRESS WRITTEN CONSENT OF THE CORPORATION."
Section 7. Refusal to Transfer. The Corporation shall not be required (a)
-------------------
to transfer on its books any shares of Vesting Shares of the Corporation which
shall have been transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares or to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
shall have been so transferred.
Section 8. No Employment Rights. This Agreement is not an employment
--------------------
contract and nothing in this Agreement shall affect in any manner whatsoever the
right or power of the Corporation (or a parent or subsidiary of the Corporation)
to terminate Founder's employment for any reason at any time, with or without
cause and with or without notice.
Section 9. Specific Performance. It is the intention of the parties that
--------------------
the Corporation, upon exercise of the Repurchase Right and payment of the
repurchase amount, pursuant to the terms of this Agreement, shall be entitled to
receive the Vesting Shares, in specie, in order to have such Vesting Shares
available for future issuance without dilution of the holdings of other
stockholders. Furthermore, it is expressly agreed among the parties hereto that
money damages are inadequate to compensate the Corporation for the Vesting
Shares and that the Corporation shall, upon proper exercise of the Repurchase
Right, be entitled to specific enforcement of its rights to purchase and receive
the portion of the Vesting Shares it has repurchased.
Section 10. Assignment. The Corporation may assign its rights under this
----------
Agreement to any stockholder of the Corporation upon notice to the Founder and
Holdings.
Section 11. Notices. All notices, requests, consents and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given for all purposes upon (i) personal delivery, (ii) one
day after being sent, when sent by professional overnight courier service from
and to locations within the United States, (iii) five days after posting when
sent by registered or certified mail, or (iv) on the date of transmission when
sent by facsimile and when receipt has been confirmed, addressed (A) if to
Company at the address or facsimile number, as applicable set forth on the
signature pages hereto; or (B) if to the Founder,
<PAGE>
addressed to the Founder at his address or facsimile number, as applicable, as
shown on the stock register maintained by Company; or (B) if to Holdings,
addressed to Holdings, at its address or facsimile number, as applicable, as
shown on the stock register maintained by Company. Notwithstanding any provision
hereof to the contrary, any notice to Holdings shall be deemed a notice to the
Founder and any notice to the Founder shall be deemed a notice to Holdings. The
addresses for the purposes of this Section 12 may be changed by giving written
notice of such change in the manner provided herein for giving notice. Unless
and until such written notice is received, the address provided herein shall be
deemed to continue in effect for all purposes hereunder.
Section 12. Miscellaneous. This is the entire agreement of the parties
-------------
regarding the subject matter of this Agreement. This Agreement may only be
modified or terminated by a written instrument duly authorized by the board of
directors of the Corporation and signed by Founder, Holdings and an authorized
representative of the Corporation. This Agreement shall be governed by
California law, without reference to its principles of conflict of laws.
Section 13. Definitions. As used herein the following capitalized terms
-----------
have the respective meanings assigned below.
An "Acquisition" means (i) the acquisition by any person or entity,
directly or indirectly, from the stockholders of the Corporation, beneficially
or of record, securities of the Corporation representing fifty (50%) percent of
the total voting power of all its then outstanding voting securities, (ii) a
merger or consolidation of the Corporation in which the Corporation's voting
securities immediately prior to the merger or consolidation do not represent, or
are not converted into securities that represent, a majority of the voting power
of all voting securities of the surviving entity immediately after the merger or
consolidation or (iii) a sale of substantially all of the assets of the
Corporation or a liquidation or dissolution of the Corporation.
"Cause" with respect to the Founder, means any of the following: (i) gross
negligence or willful misconduct in the performance of the Founder's duties to
the Corporation (other than as a result of death or a disability) that has
resulted or is likely to result in substantial and material damage to the
Corporation, after a written demand for substantial performance is delivered to
the Founder by the Board of Directors which specifically identifies the manner
in which the Board believes the Founder has not substantially performed the
Founder's duties and the Founder has been provided with a reasonable opportunity
to cure any alleged gross negligence or willful misconduct; (ii) repeated
failure to perform the Founder's duties to the Corporation as requested in
writing by the Board of Directors (other than as a result of death or a
disability); (iii) Founder's commission of any act of fraud with respect to the
Corporation; or (iv) Founder's conviction of a felony or a crime causing
material harm to the business and affairs of the Corporation. No act or failure
to act by the Founder shall be considered "willful" if done or omitted by the
Founder in good faith with reasonable belief that the Founder's action or
omission was in the best interests of the Corporation.
"Common Stock" means the common stock, par value $0.001 per share, of the
Corporation.
<PAGE>
"Good Reason" means the occurrence of any of the following events without
the Founder's prior written consent: (i) a reduction in the Founder's base
salary; (ii) a material adverse change in the Founder's title; (iii) a material
adverse change in the Founder's responsibilities or authority; (iv) a material
reduction in the Founder's employee benefits other than a reduction in employee
benefits which applies to all the Corporation employees of comparable position
and experience; or (v) a relocation of the Founder's place of employment outside
of the seven (7) San Francisco Bay Area counties.
"Starting Date" means February 25, 2000.
"Voluntary Termination" means any termination of employment by Founder
other than for Good Reason.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
THE CORPORATION: DOVEBID, INC.
By: /s/ Jeffrey Crowe, President
-----------------------------------------
Jeffrey Crowe, President
Address: DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Facsimile No.: (650) 571-5980
Attention: Corporate Assistant Secretary
/s/ Kirk Dove
THE FOUNDER: -----------------------------------------
Kirk Dove
Address:
---------------------------------
-----------------------------------------
Facsimile No.:
---------------------------
HOLDINGS: THE DOVE HOLDINGS CORPORATION
By: /s/ Ross Dove
-----------------------------------------
Ross Dove, President
Address:
---------------------------------
-----------------------------------------
<PAGE>
Facsimile No.:____________________________
Attention:________________________________
<PAGE>
EXHIBIT 10.08
November 18, 1999
Mr. Jeffrey M. Crowe
98 Larch Drive
Atherton, California 94027
Dear Jeff:
On behalf of the Board of Directors of Dovebid Corporation
("Dovebid"), we would like to offer you the position of President and Chief
Operating Officer of Dovebid subject to the following terms and conditions:
1. Title; Salary. Effective November 29, 1999 (the "Commencement
-------------
Date"), you will be employed as President and Chief Operating Officer. You will
also be a member of the Board of Directors of Dovebid. You will report to the
Chief Executive Officer and the Chairman of the Board of Directors of Dovebid.
Your base salary will be $300,000 annually, subject to review by the Chief
Executive Officer and the Board of Directors on January 1, 2001. You will also
be entitled to an annual target bonus of $100,000 subject to satisfaction of the
performance criteria agreed to by you, the Chief Executive Officer and the Board
each year.
2. Benefits; Expenses. You will be eligible to participate in
------------------
Dovebid's employee benefit plans of general application, including, without
limitation, those plans covering incentive compensation and medical, disability
and life insurance in accordance with the rules established for individual
participation in any such plan and under applicable law. You will be eligible
for vacation and sick leave in accordance with the policies in effect during the
term of this agreement and you will be eligible to receive such other benefits
as Dovebid generally provides to its other employees of comparable position and
experience.
3. Indemnification. In the event you are made, or threatened to be
---------------
made, a party to any legal action or proceeding, whether civil or criminal, by
reason of the fact that you are or were an employee, director or officer of
Dovebid or serve or served any other corporation owned or controlled by Dovebid
in any capacity at Dovebid's request, you shall be indemnified by Dovebid, and
Dovebid shall pay your related expenses when and as incurred, all to the fullest
extent permitted by law.
<PAGE>
Page 2
4. Equity. (a) You will be granted a right to purchase 4,800,000
------
shares of Dovebid common stock (the "Shares"). Except as otherwise set forth in
this agreement, the Shares will become vested with respect to twenty-five
percent (25%) of the Shares one year from the Commencement Date, and thereafter
at the end of each full succeeding month an additional 2.08333% of the Shares
will become vested until the Shares are fully vested. The purchase price of the
Shares will be $.33 per share, which is the fair market value of Dovebid's
common stock on the Commencement Date. You may pay the entire purchase price
with a full recourse promissory note (the "Stock Purchase Note") which will be
secured by the Shares and will accrue interest monthly at the minimum rate
sufficient to avoid imputation of income under the Internal Revenue Code of
1986, as amended (the "Code"). There will be no prepayment penalty. Dovebid
shall have the right to repurchase any shares that have not vested pursuant to
either the preceding sentence or paragraph 7 below, or upon your termination of
employment for any reason.
(b) The Company will arrange for Messrs. Ross Dove and Kirk Dove
to sell you an aggregate of 500,000 additional shares of Common Stock at a
purchase price of $1.25 per share. These 500,000 shares will not be subject to
vesting restrictions and will be freely transferable.
5. At-Will Employment. Your employment with Dovebid will be at-will
------------------
and may be terminated by you or by Dovebid at any time for any reason as
follows:.
(a) You may terminate your employment upon written notice to the
Board of Directors at any time in your discretion ("Voluntary Termination");
(b) You may terminate your employment upon written notice to the
Board of Directors at any time for "Good Reason" as defined below ("Involuntary
Termination").
(c) Dovebid may terminate your employment upon written notice to
you at any time following a determination by the Board of Directors that there
is "Cause," as defined below, for such termination ("Termination for Cause");
(d) Dovebid may terminate your employment upon written notice to
you at any time in the sole discretion of the Board of Directors without a
determination that there is Cause for such termination ("Termination without
Cause");
(e) Your employment will automatically terminate upon your death
or upon your disability as determined by the Board of Directors ("Termination
for Death or Disability"); provided that "disability" shall mean your complete
inability to perform your job responsibilities for a period of 90 consecutive
days or 90 days in the aggregate in any 12-month period.
<PAGE>
Page 3
6. Definition. For purposes of this agreement, the following terms
----------
will have the following meanings:
(a) "Cause" means (i) gross negligence or willful misconduct in
the performance of your duties to Dovebid (other than as a result of a
disability) that has resulted or is likely to result in substantial and material
damage to Dovebid, after a written demand for substantial performance is
delivered to you by the Board of Directors which specifically identifies the
manner in which the Board believes you have not substantially performed your
duties and you have been provided with a reasonable opportunity to cure any
alleged gross negligence or willful misconduct; (ii) repeated failure to perform
your duties to Dovebid as requested in writing by the Board of Directors (other
than as a result of a disability); (iii) commission of any act of fraud with
respect to Dovebid; or (iv) conviction of a felony or a crime causing material
harm to the business and affairs of Dovebid. No act or failure to act by you
shall be considered "willful" if done or omitted by you in good faith with
reasonable belief that your action or omission was in the best interests of
Dovebid.
(b) "Change of Control" means (i) any person or entity becoming
the beneficial owner, directly or indirectly, of securities of Dovebid
representing fifty (50%) percent of the total voting power of all its then
outstanding voting securities, (ii) a merger or consolidation of Dovebid in
which its voting securities immediately prior to the merger or consolidation do
not represent, or are not converted into securities that represent, a majority
of the voting power of all voting securities of the surviving entity immediately
after the merger or consolidation, (iii) a sale of substantially all of the
assets of Dovebid or a liquidation or dissolution of Dovebid, or iv) individuals
who, as of the Commencement Date, constitute the Board of Directors (the
"Incumbent Board") cease for any reason to constitute at least a majority of
such Board; provided that any individual who becomes a director of Dovebid
subsequent to the Commencement Date, whose election, or nomination for election
by Dovebid stockholders, was approved by the vote of at least a majority of the
directors then in office shall be deemed a member of the Incumbent Board.
(c) "Good Reason" means the occurrence of any of the following
events without your prior written consent: (i) a reduction in your base salary;
(ii) a material adverse change in your title; (iii) a material adverse change in
your responsibilities or authority; (iv) a material reduction in your employee
benefits other than a reduction in employee benefits which applies to all
Dovebid employees of comparable position and experience; or (v) a relocation of
your place of employment outside of the seven (7) Bay Area counties.
7. Separation Benefits. Upon termination of your employment with
-------------------
Dovebid for any reason, you will receive payment for all salary and unpaid
vacation accrued to the date of your termination of employment. Your benefits
will be continued under Dovebid's then existing benefit plans and policies for
so long as provided under the terms of such plans and policies and as required
by applicable law. Under certain
<PAGE>
Page 4
circumstances, you will also be entitled to receive severance benefits as set
forth below, but you will not be entitled to any other compensation, award or
damages with respect to your employment or termination.
(a) In the event of your Voluntary Termination, Termination for Death
or Disability or Termination for Cause, you will not be entitled to any cash
severance benefits or additional vesting of shares of options.
(b) In the event of your Termination without Cause or Involuntary
Termination, you will be entitled to a cash severance payment equal to six
months of your base salary. If such Termination without Cause or Involuntary
Termination occurs within one year of the Commencement Date, you will be
entitled to accelerated vesting of the Shares and any other shares, whether or
not subject to options, subsequently granted to you that would otherwise have
vested through the first anniversary of the Commencement Date and for such
additional period as cash severance, if any, is paid to you after such first
anniversary. If such Termination without Cause or Involuntary Termination
occurs on or after the first anniversary of the Commencement Date, you will be
entitled to six months of accelerated vesting of the unvested Shares and any
other shares, whether or not subject to options, subsequently granted to you.
(c) In the event of your Termination without Cause or Involuntary
Termination within sixty days prior to or one year following a Change of Control
that occurs within one year of the Commencement Date, you will be entitled to a
cash severance payment equal to one year's base salary plus your annual bonus,
and two years of accelerated vesting of the unvested Shares and any additional
shares, whether or not subject to options, that are granted to you. In the
event of your Termination without Cause or Involuntary Termination within sixty
days prior to or one year following a Change of Control that occurs on or after
the first anniversary of the Commencement Date, you will be entitled to a cash
severance payment equal to one year's base salary plus your annual bonus, and
accelerated vesting of all of the unvested Shares and any additional shares,
whether or not subject to options, that are granted to you.
(d) In the event of a Change in Control, the Company agrees that it
will use its best efforts (including prior approval as stockholders by members
of the Board of Directors) to satisfy the shareholder approval requirements of
Section 280G of the Code such that payments made to you hereunder will not
constitute a "parachute payment" within the meaning of Section 280G of the Code.
If, due to the benefits provided under this letter agreement, you are subject to
any excise tax due to characterization of any amount payable hereunder as excess
parachute payments pursuant to Sections 280G and 4999 of the Code, the Company
will pay the amount of excise tax initially payable by you under Section 4999 of
the Code, but will not otherwise "gross-up" the amount payable to you such that
the net amount realizable by you is the same as if there were no such excise
tax.
<PAGE>
Page 5
(e) No payments due you hereunder shall be subject to mitigation
or offset.
8. Arbitration. The parties agree that any dispute regarding the
------------
interpretation or enforcement of this agreement shall be decided by
confidential, final and binding arbitration conducted by the American
Arbitration Association ("AAA") under the then existing AAA rules rather than by
litigation in court, trial by jury, administrative proceeding or in any other
forum.
9. Successors. This agreement is binding on and may be enforced by
----------
Dovebid and its successors and assigns and is binding on and may be enforced by
you and your heirs and legal representatives. Any successor to Dovebid or
substantially all of its business (whether by purchase, merger, consolidation or
otherwise) will in advance assume in writing and be bound by all of Dovebid's
obligations under this agreement.
10. Waiver. Neither party shall, by mere lapse of time, without
------
giving notice or taking other action hereunder, be deemed to have waived any
breach by the other party of any of the provisions of this agreement. Further,
the waiver by either party of a particular breach of this agreement by the other
shall neither be construed as, nor constitute a, continuing waiver of such
breach or of other breaches by the same or any other provision of this
agreement.
11. Entire Agreement. This agreement represents the entire agreement
----------------
between us concerning the subject matter of your employment by Dovebid and
supersedes any prior agreements.
12. Governing Law. This agreement will be governed by the laws of
-------------
the state of California without reference to conflict of laws provisions.
We look forward to your contributions as part of the Dovebid team.
Sincerely yours,
/s/ Blake Winchell
-------------------------
Blake Winchell
Board Member
By signing this letter, I am agreeing to the above.
Signature: /s/ Jeffrey Crowe Date: November 18, 1999
------------------------ -----------------------
<PAGE>
EXHIBIT 10.09
[LETTERHEAD OF DOVEBID]
September 22, 1999
Mr. Cory M. Ravid
320 Glendale Road
Hillsborough, CA 94010
Dear Mr. Ravid:
I am very pleased to offer you the opportunity to join DoveBid as Chief
Financial Officer, reporting to me.
Your base salary will be $18,750 per month, paid bi-monthly ($225,000 annually).
You will receive a minimum guaranteed salary increase of 10% of your base
salary after your first and second year of service.
In addition, you will be eligible to receive an annual performance bonus (based
on achievement of mutually agreed objectives) with a maximum pay-out opportunity
of 40% of your annual base salary. We will also provide you with a sign-on bonus
of $40,000.
You will also receive 550,000 shares of stock once granted by the board of
directors at their next regular meeting, vesting over 4 years at 25% per year.
The option price per share will be at the "Series A" price. The stock options
granted to you will be subject to the most favorable terms extended to all
executive officers as it pertains to vesting and change of control.
Cory, please be advised that the title of Chief Financial Officer is subject to
our officer approval process and this offer is contingent upon completion of
DoveBid's background and credit checks and your providing proof of right to work
in the United States acceptable to the Immigration and Naturalization Service
within three days of your date of hire.
Also, please note that if hired by DoveBid, your employment is at-will and that
employment may be terminable at any time with or without cause by either DoveBid
or yourself. Furthermore, although terms and conditions of employment with
DoveBid may change, such changes will not affect the at-will employment
relationship between yourself and DoveBid. This statement of the circumstances
under which employment can be terminated constitutes the complete understanding
between yourself and DoveBid. No other promises or statements are binding unless
in writing and signed by you and a Member of DoveBid's Board of Directors.
<PAGE>
Mr. Cory Ravid
September 22, 1999
Page 2
Notwithstanding your at-will employment relationship with DoveBid, the following
employment termination severance provisions will apply. If you are involuntarily
terminated for reasons other than cause as defined below or are constructively
terminated as defined below, DoveBid will provide you with a severance package
equal to six month's base salary.
"Cause" shall mean willful or gross neglect of the duties for which you were
employed (other than on account of a medically determined incapacity which
renders you unable to regularly perform your usual duties); committing fraud,
misappropriation or embezzlement in the performance of your duties; committing a
felony; disclosure of confidential information in violation of DoveBid's written
policies; or willfully engaging in conduct materially injurious to DoveBid.
"Constructive Termination" shall mean a material adverse change in your position
so as to be of materially less statute and materially less responsibility, or a
reduction of more than 20% of your base compensation. Under such circumstance
you may elect to treat such as a constructive termination by notifying DoveBid
in writing within 30 days thereafter that as a result you are terminating your
employment voluntarily.
In the event of your death, you and your estate will not be entitled to any
severance pay; however, you and your estate will receive those benefits normally
granted to DoveBid employees in the event of such occurrences.
You will be granted all standard benefits commensurate with your role as an
executive officer, which include but are not limited to medical, dental, vision
and other coverages, as well as reimbursement for all work related expenses
including cellular phone charges.
If you accept this offer of employment from DoveBid, please sign and return this
offer letter. We must receive this document before your start date, which shall
be on or before October 15, 1999.
We are looking forward to your joining DoveBid, and expect a most rewarding
mutual relationship in the years to come. All of us here are thrilled with the
chance to work side by side with you in building our great company. If you have
any questions regarding the terms of this offer, please feel free to contact me
at (650) 571-7400 ext.602.
Sincerely,
DoveBid, Inc.
/s/ Ross Dove
- ----------------------------------------
Ross Dove
Chairman and Chief Executive Officer
Agreed to and accepted:
/s/ Cory M. Ravid 9-24-99
- -----------------------------------------------------------
Cory M. Ravid date
<PAGE>
[LETTERHEAD OF DOVEBID]
November 8, 1999
Mr. Cory M. Ravid
320 Glendale Road
Hillsborough, CA 94010
Dear Cory:
This letter shall serve as a supplement to your Employment Offer Letter ("EOL")
dated September 22, 1999. To the extent, if any, the terms herein contradict any
terms or conditions set forth in the EOL, the terms deemed more favorable to
Ravid will be given full meaning and effect. The following terms are hereby
incorporated into the EOL:
1. Indemnification. In the event you are made, or threatened to be
---------------
made, a party to any legal action or proceeding, whether civil or criminal, by
reason of the fact that you are or were an employee, director or officer of
Dovebid or serve or served any other corporation owned or controlled by Dovebid
in any capacity at Dovebid's request, you shall be indemnified by Dovebid, and
Dovebid shall pay your related expenses when and as incurred, all to the fullest
extent permitted by law.
2. Equity. You have been granted 700,000 DoveBid stock options (the
------
"Shares"). You may pay the entire purchase price with a full recourse promissory
note (the "Stock Purchase Note") which will be secured by the Shares and will
accrue interest monthly at the minimum rate sufficient to avoid imputation of
income under the Internal Revenue Code of 1986, as amended (the "Code"). There
will be no prepayment penalty. Dovebid shall have the right to repurchase any
shares that have not vested pursuant to either the preceding sentence or
paragraph 7 below, or upon your termination of employment for any reason.
3. At-Will Employment. Your employment with Dovebid will be at-will and
------------------
may be terminated by you or by Dovebid at any time for any reason as follows:
(a) You may terminate your employment upon written notice to the
Board of Directors at any time in your discretion ("Voluntary Termination ");
(b) You may terminate your employment upon written notice to the
Board of Directors at any time for "Good Reason" as defined below ("Involuntary
Termination ").
(c) Dovebid may terminate your employment upon written notice to you
at any time following a determination by the Board of Directors that there is
"Cause," as defined below, for such termination ("Termination for Cause");
(d) Dovebid may terminate your employment upon written notice to you
at any time in the sole discretion of the Board of Directors without a
determination that there is Cause for such termination ("Termination without
Cause");
<PAGE>
[LETTERHEAD OF DOVEBID]
(e) our employment will automatically terminate upon your death or
upon your disability as determined by the Board of Directors ("Termination for
Death or Disability"); provided that "disability" shall mean your complete
inability to perform your job responsibilities for a period of 90 consecutive
days or 90 days in the aggregate in any 12-month period.
4. Definition. For purposes of this agreement, the following terms
----------
will have the following meanings:
(a) "Cause" means (i) gross negligence or willful misconduct in the
performance of your duties to Dovebid (other than as a result of a disability)
that has resulted or is likely to result in substantial and material damage to
Dovebid, after a written demand for substantial performance is delivered to you
by the Board of Directors which specifically identifies the manner in which the
Board believes you have not substantially performed your duties and you have
been provided with a reasonable opportunity to cure any alleged gross negligence
or willful misconduct; (ii) repeated failure to perform your duties to Dovebid
as requested in writing by the Board of Directors (other than as a result of a
disability); (iii) commission of any act of fraud with respect to Dovebid; or
(iv) conviction of a felony or a crime causing material harm to the business and
affairs of Dovebid. No act or failure to act by you shall be considered
"willful" if done or omitted by you in good faith with reasonable belief that
your action or omission was in the best interests of Dovebid.
(b) "Change of Control" means (i) any person or entity becoming the
beneficial owner, directly or indirectly, of securities of Dovebid representing
fifty (50%) percent of the total voting power of all its then outstanding voting
securities, (ii) a merger or consolidation of Dovebid in which its voting
securities immediately prior to the merger or consolidation do not represent, or
are not convened into securities that represent, a majority of the voting power
of all voting securities of the surviving entity immediately after the merger or
consolidation, (iii) a sale of substantially all of the assets of Dovebid or a
liquidation or dissolution of Dovebid, or (iv) individuals who, as of the
Commencement Date, constitute the Board of Directors (the "Incumbent Board")
cease for any reason to constitute at least a majority of such Board; provided
that any individual who becomes a director of Dovebid subsequent to the
Commencement Date, whose election, or nomination for election by Dovebid
stockholders, was approved by the vote of at least a majority of the directors
then in office shall be deemed a member of the Incumbent Board.
(c) "Good Reason" means the occurrence of any of the following
events without your prior written consent: (i) a reduction in your base salary;
(ii) a material adverse change in your title; (iii) a material adverse change in
your responsibilities or authority; (iv) a material reduction in your employee
benefits other than a reduction in employee benefits which applies to all
Dovebid employees of comparable position and experience; or (v) a relocation of
your place of employment outside of the seven (7) Bay Area counties.
5. Separation Benefits. Upon termination of your employment with
-------------------
Dovebid for any reason, you will receive payment for all salary and unpaid
vacation accrued to the date of your termination of employment. Your benefits
will be continued under Dovebid's then existing benefit plans and policies for
so long as provided under the terms of such plans and policies and as required
by applicable law. Under certain circumstances, you will also be entitled to
receive severance benefits as set forth below, but you will not be entitled to
any other compensation, award or damages with respect to your employment or
termination.
<PAGE>
[LETTERHEAD OF DOVEBID]
(a) In the event of your Voluntary Termination, Termination for
Death or Disability or Termination for Cause, you will not be entitled to any
cash severance benefits or additional vesting of shares of options.
(b) In the event of your Termination without Cause or Involuntary
Termination, you will be entitled to a cash severance payment equal to six
months of your base salary. If such Termination without Cause or Involuntary
Termination occurs within one year of the Commencement Date, you will be
entitled to accelerated vesting of the Shares and any other shares, whether or
not subject to options, subsequently granted to you that would otherwise have
vested through the first anniversary of the Commencement Date and for such
additional period as cash severance, if any, is paid to you after such first
anniversary. If such Termination without Cause or Involuntary Termination occurs
on or after the first anniversary of the Commencement Date, you will be entitled
to six months of accelerated vesting of the unvested Shares and any other
shares, whether or not subject to options, subsequently granted to you.
(c) In the event of your Termination without Cause or Involuntary
Termination within sixty days prior to or one year following a Change of Control
that occurs within one year of the Commencement Date, you will be entitled to a
cash severance payment equal to one year's base salary plus your annual bonus,
and two years of accelerated vesting of the unvested Shares and any additional
shares, whether or not subject to options, that are granted to you. In the event
of your Termination without Cause or Involuntary Termination within sixty days
prior to or one year following a Change of Control that occurs on or after the
first anniversary of the Commencement Date, you will be entitled to a cash
severance payment equal to one year's base salary plus your annual bonus, and
accelerated vesting of all of the unvested Shares and any additional shares,
whether or not subject to options, that are granted to you.
(d) In the event of a Change in Control, the Company agrees that it
will use its best efforts (including prior approval as stockholders by members
of the Board of Directors) to satisfy the shareholder approval requirements of
Section 280G of the Code such that payments made to you hereunder will not
constitute a "parachute payment" within the meaning of Section 280G of the Code.
If, due to the benefits provided under this letter agreement, you are subject to
any excise tax due to characterization of any amount payable hereunder as excess
parachute payments pursuant to Sections 280G and 4999 of the Code, the Company
will pay the amount of excise tax initially payable by you under Section 4999 of
the Code, but will not otherwise "gross-up" the amount payable to you such that
the net amount realizable by you is the same as if there were no such excise
tax.
(e) No payments due you hereunder shall be subject to mitigation
or offset.
6. Successors. This agreement is binding on and may be enforced by
----------
Dovebid and its successors and assigns and is binding on and may be enforced by
you and your heirs and legal representatives. Any successor to Dovebid or
substantially all of its business (whether by purchase, merger, consolidation or
otherwise) will in advance assume in writing and be bound by all of Dovebid's
obligations under this agreement.
7. Governing Law. This agreement will be governed by the laws of the
-------------
state of California without reference to conflict of laws provisions.
<PAGE>
[LETTERHEAD OF DOVEBID]
We look forward to your contributions as part of the Dovebid team.
Sincerely yours,
/s/ Ross Dove
------------------
Ross Dove, CEO
By signing this letter, I am agreeing to the above.
Signature: /s/ Cory Ravid Date: 11-8-99
----------------- -------
<PAGE>
EXHIBIT 10.10
November 29, 1999
Anthony Capobianco
1000 S. Wooster Street, No. 301
Los Angeles, CA 90035
Dear Nino:
On behalf of DoveBid, Inc. ("DoveBid"), I am pleased to offer you a full-time
position as General Counsel effective on December 14, 1999 on the following
terms and conditions:
Your annual salary will be $180,000 and will be paid in accordance with
DoveBid's normal payroll procedures. Also, you will be eligible for a year-end
bonus up to 33% of your base salary, determined by DoveBid in its discretion,
and payable on or about DoveBid's fiscal year-end. All payments to you will be
subject to legally required withholding(s). It is DoveBid's policy to review
salary and compensation levels periodically. Accordingly, your base salary and
any other compensation may be adjusted from time to time.
Your compensation package also will include an incentive stock option under the
terms of DoveBid's 1999 Stock Option Plan for 200,000 shares of common stock at
an exercise price of $0.33 per share. Your stock options will be subject to
the terms of DoveBid's 1999 Employee Stock Option Plan (the Plan includes
vesting restrictions, restrictions on exercise and restrictions on transfer of
shares) and will be conditioned on your execution of an Employee Stock Option
Agreement related to your options.
In addition to your base salary, you will be eligible to participate in the
employee benefits generally made available to our full-time employees, as may be
modified from time to time in DoveBid's discretion. At the present time, those
benefits include health insurance, life insurance, vacation and sick pay in
accordance with applicable benefit plans and DoveBid's written policies.
Also, in addition to your base salary, DoveBid will provide you with a cellular
phone at its sole cost. And, DoveBid will pay your reasonable relocation costs
from Los Angeles to Northern California, including two round trip airfares for
your spouse, and reasonable interim accommodations.
As a condition of your employment, you will be expected to comply with all
DoveBid's policies and procedures, as may be modified from time to time in
DoveBid's discretion (including our policies protecting other employees against
discrimination and sexual
<PAGE>
harassment). Please refer to DoveBid's Employee Handbook for details regarding
those policies and procedures. However, you should be aware that DoveBid
currently is revising its employee policies and procedures and you will be
expected to abide by the new policies, which will be issued shortly. Also, you
will execute DoveBid's Employee Confidentiality And Proprietary Information
Agreement.
Your employment with DoveBid will be "at will"; in other words, either you or
DoveBid will have the right to terminate your employment with DoveBid at any
time with or without cause. Notwithstanding DoveBid's right of termination,
DoveBid agrees that if it terminates you for any reason other than for "cause"
at any time within the next year, DoveBid will pay you severance equal to six
months salary. "Cause" means (i) gross negligence or willful misconduct in the
performance of your duties to DoveBid (other than as a result of a disability)
that has resulted or is likely to result in substantial and material damage to
DoveBid, after a written demand for substantial performance is delivered to you
by the Board of Directors which specifically identifies the manner in which the
Board believes you have not substantially performed your duties and you have
been provided with a reasonable opportunity to cure any alleged gross negligence
or willful misconduct; (ii) repeated failure to perform your duties to DoveBid
as requested in writing by the Board of Directors (other than as a result of
disability); (iii) commission of any act of fraud with respect to DoveBid; or
(iv) conviction of a felony or a crime causing material harm to the business and
affairs of DoveBid. No act or failure to act by you shall be considered
"willful" if done or omitted by you in good faith with a reasonable belief that
your action or omission was in the best interests of DoveBid.
We look forward to having you join our team! If this letter meets with your
understanding and expectations, please sign below and return a copy of this
letter to my attention. Thank you.
Sincerely,
Cory Ravid
Chief Financial Officer
I understand and agree to the above terms
/s/ Anthony Capobianco
- -----------------------------
Anthony Capobianco
<PAGE>
EXHIBIT 10.11
November 4, 1999
VIA ELECTRONIC MAIL ([email protected]) AND FEDEX
- ----------------------------------------------------
Mr. Francis Juliano
218 Via D'Este # 1302
Delray Beach, FL 33446
Dear Mr. Juliano:
On behalf of DoveBid, Inc. (the "Company"), I am pleased to offer you the
opportunity to join the company in the position of Chief Technology Officer.
This offer letter shall serve to present a general outline of the terms of
employment, and an employment contact will be issued upon acceptance of the
terms hereto.
1. Base Annual Salary: $200,000.
2. Performance Bonus: 0 - 30%, as defined by predetermined performance metrics.
3. Stock Options: 600,000 pursuant to the Company's ISO Plan, at a strike price
of $0.33/share.
Moreover, you will be eligible for additional stock option grants.
4. Relocation Expenses: You will be reimbursed for (a) normal and customary
moving expenses, (b) reasonable rent for a 2nd apartment (if necessary)
through June, 1999, (c) 2 house-hunting trips for your spouse (if necessary),
(d) 2 airfares per month to commute from Florida to the Bay Area until the
sooner of June, or such time as your family relocates, (e) a cash advance
against future performance bonuses, not to exceed $20,000, if necessary, (f)
an interest-free loan, not to exceed $75,000 to facilitate a down payment on
a residence in the Bay Area, if necessary, due and payable 24 months from
issuance, and secured by your stock options.
5. Reporting Structure: You will report directly to the President/COO.
6. Responsibilities: Your responsibilities shall include, without limitation,
building, maintaining and operating an e-commerce web site, as well as other
customary facing applications, internal business applications, desktop
services, and IT infrastructure.
7. Severance: Notwithstanding your prospective at-will employment at DoveBid,
you will receive a severance payment equal to $100,000 in the event you are
terminated without cause within the terms of your employment contract.
If you accept this offer of employment from the Company, please sign and return
this letter directly to me. This offer, and the terms herein, shall expire if
not accepted on or before November 8, 1999.
We are looking forward to your joining DoveBid, and expect a most rewarding
mutual relationship in the years to follow. If you have any questions regarding
the terms of this offer, please feel free to contact me at (650) 571-7400 ext.
647.
Regards, Accepted by:
DoveBid, Inc.
/s/ Cory Ravid
- ------------------
Cory Ravid /s/ Francis Juliano
Chief Financial Officer -------------------
Francis Juliano
<PAGE>
EXHIBIT 10.12
January 10, 2000
VIA FACSIMILE
- -------------
(650) 328-5234
James G. Hume
98 Deodora Drive
Atherton, CA 94027
Dear Jim:
As we discussed, and on behalf of DoveBid, Inc. ("DoveBid"), I am pleased to
offer you a full-time position as Vice President of Operations reporting to me,
effective as soon as you indicate your acceptance to this offer below.
Your annual base salary will be $175,000 and will be paid in accordance with
DoveBid's normal payroll procedures. Also, you will be eligible for a year-end
bonus up to 33% of your base salary, determined by DoveBid in its discretion,
and payable on or about DoveBid's fiscal year-end. All payments to you will be
subject to legally required withholding(s). It is DoveBid's policy to review
compensation levels periodically.
Your compensation package also will include an incentive stock option under the
terms of DoveBid's 1999 Stock Option Plan for 700,000 shares of common stock at
an exercise price equal to fair market value of the stock on your start date.
Currently, the fair market value of DoveBid's stock is $0.77 per share; however,
you must accept this offer and begin your employment prior to Thursday, January
13, 2000 in order to receive shares at an exercise price of $0.77 per share -
after that date, fair market value is expected to increase to $1.50 per share.
The Company will allow you to exercise those options immediately and to deliver
to the Company a note in the principal amount of $539,000 in order to purchase
those shares. Your stock options will be subject to the terms of DoveBid's 1999
Employee Stock Option Plan (the Plan includes vesting restrictions, restrictions
on exercise and restrictions on transfer of shares) and will be conditioned on
your execution of a Plan Agreement related to your options.
In addition to your base salary, you will be eligible to participate in the
employee benefits generally made available to our full-time employees, as may be
modified in DoveBid's discretion. At the present time, those benefits include a
"cafeteria" style benefits plan, health insurance, life insurance, vacation and
sick pay, and a 401k plan which you will become eligible for in accordance with
the applicable benefit plans and DoveBid's written policies.
<PAGE>
Your employment with DoveBid will be "at will"; in other words, either you or
DoveBid will have the right to terminate your employment with DoveBid at any
time with or without cause.
As a condition of your employment, you will be expected to comply with all
DoveBid's policies and procedures, as may be modified from time to time in
DoveBid's discretion (including our policies protecting other employees against
discrimination and sexual harassment). Please refer to DoveBid's Employee
Handbook for details regarding those policies and procedures. Also, you will
need to execute DoveBid's Employee Confidentiality And Proprietary Information
Agreement.
Please note that because of employer regulations adopted in the Immigration
Reform and Control Act of 1986, within three (3) business days of starting your
new position you will need to present documentation demonstrating that you have
authorization to work in the United States. If you have questions about this
requirement, which applies to U.S. citizens and non-U.S. citizens alike, you may
contact our personnel office.
This offer will remain open until January 14, 2000. If you decide to accept our
offer, and I hope you will, please sign the enclosed copy of this letter in the
space indicated and return it to me. Your signature will acknowledge that you
have read and understood and agreed to the terms and conditions of this offer
letter and the attached documents, if any. Should you have anything else that
you wish to discuss, please do not hesitate to call me.
We look forward to having you join our team!
Sincerely,
/s/ Jeff Crowe
- ---------------------------------------------
Jeff Crowe
President & Chief Operating Officer
I understand and agree to the above terms
/s/ James G. Hume
- ---------------------------------------------
James G. Hume
<PAGE>
EXHIBIT 10.13
SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
This Second Amended And Restated Investors' Rights Agreement is made
as of February 25, 2000, by and among DoveBid, Inc., a Delaware corporation (the
"Company"), and the investors listed on Schedule A hereto, each of which is
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herein referred to as an "Investor" and collectively as the "Investors."
BACKGROUND
A. The Company has issued 12,090,909 shares of the Company's Series A
Preferred Stock to one Investor pursuant to the Series A Preferred Stock
Purchase Agreement dated as of June 4, 1999 (the "Series A Purchase Agreement")
and has issued 16,830,635 shares of the Company's Series B Preferred Stock to
certain Investors pursuant to the Series B Preferred Stock Purchase Agreement
dated as of October 18, 1999 (the "Series B Purchase Agreement"). Such Investors
(the "Prior Investors") possesses certain rights pursuant to the Amended and
Restated Investors' Rights Agreement dated as of October 18, 1999 between the
Company and such Investor (the "Prior Agreement").
B. The Company and certain of the Investors (the "New Investors") are
parties to the Series C Preferred Stock Purchase Agreement of even date herewith
(the "Series C Purchase Agreement").
C. To induce the Company to enter into the Series C Purchase
Agreement and to induce the New Investors to invest funds in the Company
pursuant to the Series C Purchase Agreement, the Prior Investors and the Company
hereby agree that this Agreement shall govern the rights of all of the Investors
to cause the Company to register shares of Common Stock issuable to the
Investors and certain other matters as set forth herein and shall supercede the
Prior Agreement.
Now, therefore, the parties hereby agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
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1.1 Definitions. For purposes of this Agreement:
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(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Form S-3" means such form under the Act as in
effect on the date hereof 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.
(c) The term "Holder" means any person, including the
Investors, owning or having the right to acquire Registrable Securities or
any assignee thereof in accordance with Section 1.13 hereof.
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(d) The term "Initiating Holders" means Holders, who own at least
fifty percent (50%) of the Registrable Securities then outstanding.
(e) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(f) "Qualifying Acquisition" means any merger or consolidation of
the Company with or into another entity resulting in the stockholders of
the Company holding less than a majority of the voting power of the
surviving Company, or the sale by the Company's stockholders of more than
50% of the voting power of the Company in one transaction or series of
related transactions, other than (i) open market sales or (ii) any sale to
a person or entity who is an affiliate of the Company within the meaning of
the Act, that has not been approved by the Company's Board of Directors by
unanimous vote.
(g) A "Qualifying IPO" means the consummation of the sale of
securities pursuant to a closing of a bona fide, firm-commitment,
underwritten public offering of shares of Common Stock registered under the
Act, raising gross proceeds of at least $50,000,000 in the aggregate;
provided, that immediately after such closing the Company's Common Stock is
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listed on a national securities exchange or over-the-counter market.
(h) 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 Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(i) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of (A) the Series A Preferred Stock
issued pursuant to the Series A Purchase Agreement, (B) the Series B
Preferred Stock issued pursuant to the Series B Purchase Agreement, (C) the
Series C Preferred Stock issued pursuant to the Series C Purchase Agreement
or (D) the Series C Preferred Stock issued or issuable pursuant to the
Warrant issued under the Series C Purchase Agreement (the "Warrant"); and
(ii) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is
issued as) a split, dividend or other distribution with respect to, or in
exchange for or in replacement of, such Series A, B or C Preferred Stock or
Common Stock; excluding in all cases, however, any Registrable Securities
sold by a person in a transaction in which such person's rights under this
Section 1 are not assigned in accordance with this Agreement and any
Registrable Securities sold to the public in registered public offering or
sold in accordance with Rule 144 promulgated under the Securities Act.
(j) The number of shares of "Registrable Securities then
outstanding" shall mean the number of shares of Common Stock then
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are,
Registrable Securities.
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1.2 Request for Registration.
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(a) If the Company shall receive at any time after the earlier
of (i) November 30, 2001 or (ii) six (6) months after the effective date of the
first registration statement for a public offering of securities of the Company
(other than a registration statement relating to either the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction), a written request from the
Initiating Holders that the Company file a registration statement under the Act
covering the registration of at least twenty percent (20%) of the Registrable
Securities then outstanding (or a lesser percent if the anticipated aggregate
offering price, net of underwriting discounts and commissions, would exceed
$7,000,000), then the Company shall, within ten (10) days after the receipt
thereof, give written notice of such request to all Holders and shall, subject
to the limitations of subsection 1.2(b), use its best efforts to effect as soon
as practicable the registration under the Act of all Registrable Securities
which the Holders request to be registered within twenty (20) days after the
mailing of such notice by the Company in accordance with Section 3.5.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 1.2, and the Company shall include such information in the written
notice referred to in subsection 1.2(a). The underwriter will be selected by a
majority in interest of the Initiating Holders and shall be reasonably
acceptable to the Company. In such event, the right of any Holder to include
such Holder's Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company as provided in
subsection 1.4(e)) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 1.2.
(d) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of
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such registration statement, the Company shall have the right to defer taking
action with respect to such filing for a period of not more than one hundred
twenty (120) days after receipt of the request of the Initiating Holders;
provided, however, that the Company may not utilize this right more than once in
any twelve-month period.
(e) In addition, the Company shall not be obligated to effect,
or to take any action to effect, any registration pursuant to this Section 1.2:
(i) During the period starting with the date thirty (30)
days prior to the Company's good faith estimate of the date of filing of,
and ending on a date one hundred eighty (180) days after the effective date
of, a registration subject to Section 1.3 hereof, provided that the Company
is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(ii) If the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below.
1.3 Company Registration. If (but without any obligation to do so)
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the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities (other than a registration relating solely to the sale of
securities to participants in a Company stock plan, a SEC Rule 145 transaction
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 shall, 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 3.5, the Company shall,
subject to the provisions of Section 1.8, cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested to be
registered.
1.4 Obligations of the Company. Whenever required under this Section
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1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days or
until the distribution contemplated in the Registration Statement has been
completed; provided, however, that (i) such 120-day period shall be extended for
a period of time equal to the period the Holder refrains from selling any
securities included in such registration (A) at the request of an underwriter of
Common Stock (or other securities) of the Company or (B) when a prospectus must
be updated pursuant to Section 1.4(f) below; and (ii) in the case of any
registration of Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such 120-day period shall be extended,
if necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that
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Rule 415, or any successor rule under the Act, permits an offering on a
continuous or delayed basis, and provided further that applicable rules under
the Act governing the obligation to file a post-effective amendment permit, in
lieu of filing a post-effective amendment which (1) includes any prospectus
required by Section 10(a)(3) of the Act or (2) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the incorporation by reference of information
required to be included in (1) and (2) above to be contained in periodic reports
filed pursuant to Section 13 or 15(d) of the 1934 Act in the registration
statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered hereunder to be
listed on each securities exchange on which similar securities issued by the
Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration.
(i) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 1, on the date that such
Registrable Securities are
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delivered to the underwriters for sale in connection with a registration
pursuant to this Section 1, if such securities are being sold through
underwriters, or, if such securities are not being sold through underwriters, on
the date that the registration statement with respect to such securities becomes
effective, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
1.5 Furnish Information.
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(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section I with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b)(2), whichever is applicable.
1.6 Expenses of Demand Registration. All expenses other than
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underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case each Holder shall bear a pro rata portion of such
expenses, based on the ratio of the number of Registrable Securities to have
been included in such registration by such Holder compared to the total number
of Registrable Securities to have been included by all Holders), unless the
Holders of a majority of the Registrable Securities agree to forfeit their right
to one demand registration pursuant to Section 1.2; provided further, however,
that if at the time of such withdrawal, the Holders have learned of a material
adverse change in the condition, business, or prospects of the Company from that
known to the Holders at the time of their request and have withdrawn the request
with reasonable promptness following disclosure by the Company of such material
adverse change, then the Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to Section 1.2.
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1.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the company
registrations pursuant to Section 1.3 and the firsts two Form S-3 registrations
pursuant to Section 1.12 below, for each Holder, including (without limitation)
all registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto, but excluding underwriting discounts and
commissions relating to Registrable Securities. In addition, the Company shall
pay the reasonable fees and disbursements of one counsel for the selling
Holders.
1.8 Underwriting Requirements. In connection with any offering
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involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders) but in no event shall:
(i) the amount of securities of the selling Holders included in
the offering be reduced below thirty percent (30%) of the total amount of
securities included in such offering, unless such offering is the initial
public offering of the Company's securities in which case the selling
stockholders may be excluded if the underwriters make the determination
described above and no other stockholder's securities are included; or
(ii) notwithstanding (i) above, any shares being sold by a
stockholder exercising a demand registration right similar to that granted
in Section 1.2 above be excluded from such offering.
For purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners, members, retired
members and stockholders of such holder, or the estates and family members of
any such partners, retired partners, members, retired members and any trusts for
the benefit of any of the foregoing persons shall be deemed to be a single
"selling stockholder," and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
1.9 Delay of Registration. No Holder shall have any right to obtain
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or seek an injunction restraining or otherwise delaying any such registration
filed with and declared effec-
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tive by the SEC as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
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included in a registration statement under this Section 1the following shall
apply.
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers, directors, stockholders
and members of each Holder, 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 1934 Act, against any losses, claims, damages or
liabilities (joint or several) to which they may become subject under the Act,
or the 1934 Act, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein, or any
amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading, or
(iii) any violation or alleged violation by the Company of
the Act, the 1934 Act, any other federal or state law, or any rule or
regulation promulgated under the Act or the 1934 Act;
and the Company will pay to each such Holder, underwriter or controlling person
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
1.10(a) shall 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 shall not be unreasonably withheld), nor shall 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,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act or any other federal or state
law 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 con-
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formity with written information furnished by such Holder expressly for use in
connection with such registration; and each such Holder will pay any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 1.10(b), in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(b) shall 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 shall not be unreasonably withheld; provided, that, in no event
shall any indemnity under this subsection 1.10(b) exceed the net proceeds from
the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be 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, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall 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; provided that in no event shall any contribution by a Holder
under this Section 1.10(d) exceed the gross proceeds from the offering received
by such Holder. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in con-
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nection with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall control, provided
that the Company shall use its reasonable efforts to cause such provisions to
conform to those set forth herein.
(f) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports Under 1934 Act. With a view to making available to the
----------------------
Holders the benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after the
effective date of the first registration statement filed by the Company for
the offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 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 (at any time after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time
after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form
S-3 (at any time after it so qualifies), (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation of
the SEC which permits the selling of any such securities without
registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from a
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Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of
such Holder's or Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining such request as are specified in a
written request given within 15 days after receipt of such written notice
from the Com-
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pany; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this
Section 1.12: (i) if Form S-3 is not available for such offering by the
Holders; (ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any)
at an aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $1,000,000; (iii) if the Company shall furnish to
the Holders a certificate signed by the Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors
of the Company, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the
Form S-3 registration statement for a period of not more than 90 days after
receipt of the request of the Holder or Holders under this Section 1.12;
provided, however, that the Company shall not utilize this right (A) more
than once in any twelve month period or (B) if it has exercised the
deferral right in Section 1.2(d) in the previous twelve month period; (iv)
if the Company has, within the twelve (12) month period preceding the date
of such request, already effected two registrations on Form S-3 for the
Holders pursuant to this Section 1.12; or (v) in any particular
jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting
such registration, qualification or compliance.
Subject to the foregoing, the Company shall file a registration statement
covering the Registrable Securities and other securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Holders. All expenses incurred in connection with a registration requested
pursuant to Section 1.12, including (without limitation) all registration,
filing, qualification, printer's and accounting fees and the reasonable fees and
disbursements of one counsel for the selling Holder or Holders and counsel for
the Company, but excluding any underwriters' discounts or commissions associated
with Registrable Securities, shall for the first two such registrations be borne
by the Company and, thereafter shall be borne pro rata by the Holder or Holders
participating in the Form S-3 Registration. Registrations effected pursuant to
this Section 1.12 shall not be counted as demands for registration or
registrations effected pursuant to Sections 1.2 or 1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a wholly-owned
subsidiary of a corporate Holder or to a transferee or assignee of Registrable
Securities who, after such assignment or transfer, holds at least 10% of the
Registrable Securities (subject to appropriate adjustment for stock splits,
stock dividends, combinations and other recapitalizations), provided the Company
is, within a reasonable time after such transfer, furnished with written notice
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act. For the purposes of determining the number
of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees of a partnership or limited liability
company who are partners or members or retired partners or members of such
entity
11
<PAGE>
(including spouses and ancestors, lineal descendants and siblings of such
partners or members or spouses who acquire Registrable Securities by gift, will
or intestate succession) shall be aggregated together and with the partnership
or limited liability company; provided that all assignees and transferees who
would not qualify individually for assignment of registration rights shall have
a single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under this Section 1.
1.14 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to obtain
registration rights superior to or on parity with the rights contained in this
Agreement, (b) to include such securities in any registration filed under
Section 1.2 hereof, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of its securities will not reduce the amount of
the Registrable Securities of the Holders which is included or (c) to make a
demand registration which could result in such registration statement being
declared effective prior to the earlier of either of the dates set forth in
subsection 1.2(a) or within one hundred twenty (120) days of the effective date
of any registration effected pursuant to Section 1.2.
1.15 Market Stand-Off Agreement. Each Investor hereby agrees that,
--------------------------
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a Qualifying IPO, such Investor shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by it at any
time during such period except common stock included in such registration;
provided, however, that:
(a) Such agreement shall not exceed one hundred eighty (180)
days; and
(b) An Investor shall not be subject to such agreement unless
substantially all executive officers and directors of the Company enter
into similar agreements and all other Investors and holders of other
registration rights are subject to or obligated to enter into similar
agreements.
In order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to all securities of the Company held by each Investor
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
1.16 Termination of Registration Rights. No Holder shall be entitled
----------------------------------
to exercise any right provided for in this Section 1 after the earlier of (a)
five (5) years following a Qualifying IPO (b) after a Qualifying Acquisition or
(c) with respect to any Holder which then owns one percent (1%) or less of the
outstanding capital stock of the Company, such time as the Holder can sell all
such stock under Rule 144 (or any successor rule) without restriction (including
without being subject to any sales volume limitation).
12
<PAGE>
2. Covenants of the Company.
------------------------
2.1 Delivery of Financial Statements. The Company shall deliver to
--------------------------------
each Investor, for so long as such Investor continues to own at least five
percent (5%) of the Company's outstanding capital stock, on an as-converted
basis, and the Warrant, as if exercised and the shares acquired thereunder
converted, or, if less than five percent (5%) of such securities are purchased
by an Investor pursuant to the Series C Agreement but the Investor has purchased
at least 3,745,000 shares of Series C Preferred Stock thereunder, for so long as
such Investor continues to own all of the shares of Series C Preferred Stock
purchased thereunder or the Common Stock into which such shares may be
converted:
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, a statement of
operations for such fiscal year, a balance sheet of the Company and
statement of stockholder's equity as of the end of such year, and a cash
flow statement for such year, such year-end financial reports to be in
reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP"), and audited and certified by independent
public accountants of nationally recognized standing selected by the
Company;
(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the quarters of each fiscal year of the
Company, an unaudited statement of operations and cash flow statement, for
such fiscal quarter and setting forth year-to-date financial information,
and an unaudited balance sheet as of the end of such fiscal quarter;
(c) within twenty (20) days after the end of each month, an
unaudited statement of operations and cash flow statement for such month
and setting forth year-to-date financial information, and an unaudited
balance sheet as of the end of such month, all in reasonable detail;
(d) as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a financial budget and business plan
for the next fiscal year, prepared on a monthly and quarterly basis, in
form and substance reasonably acceptable to Investors;
(e) with respect to the financial statements called for in
subsection (b) and (c) of this Section 2.1, an instrument executed by the
Chief Financial Officer or Chief Executive Officer of the Company
certifying that such financials were prepared in accordance with GAAP
consistently applied with prior practice for earlier periods (with the
exception of footnotes that may be required by GAAP) and fairly present the
financial condition of the Company and its results of operations for the
period specified, subject to the year-end audit adjustment; and
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor may
from time to time reasonably request; provided, however that the Company
-------- -------
shall not be obligated pursuant to
13
<PAGE>
this Section 2.1(f) to provide access to any information which it
reasonably considers a trade secret or other proprietary intellectual
property information, unless the Investor has agreed to maintain such
information in confidence.
2.2 Inspection. The Company shall permit each Investor, at such
----------
Investor's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by the Investor; provided, however, that the Company shall not be obligated
-------- -------
pursuant to this Section 2.2 to provide access to any trade secret or other
proprietary intellectual property information, unless the Investor has agreed to
maintain such information in confidence.
2.3 Termination of Information and Inspection Covenants. The
---------------------------------------------------
covenants set forth in Sections 2.1 and 2.2 shall terminate and be of no further
force or effect upon the earlier of (A) immediately prior to the first closing
of a Qualifying IPO, (B) the Company first becoming subject to the periodic
reporting requirements of Sections 12(g) or 15(d) of the 1934 Act or (C) after a
Qualifying Acquisition.
2.4 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 2.4, the Company hereby grants to each Major Investor
(as hereinafter defined) a right of first offer with respect to future sales by
the Company of its Shares (as hereinafter defined). For purposes of this Section
2.4, a "Major Investor" means any Investor who holds at least 1,500,000 shares
of Series A or B Preferred Stock (or the Common Stock issued upon conversion
thereof) issued pursuant to the Series A or B Purchase Agreements or who holds
any number of shares of Series C Preferred Stock issued or issuable pursuant to
the Series C Purchase Agreement or the Warrant. For purposes of this Section
2.4, Investor includes any general or limited partners, members or affiliates of
an Investor, and the shares held by such general or limited partners, members or
affiliates shall be aggregated for purposes of determining whether the Investor
is a Major Investor. An Investor shall be entitled to apportion the right of
first offer hereby granted it among itself and its partners, members and
affiliates in such proportions as it deems appropriate. Each time the Company
proposes to offer any shares of, or securities convertible into or exercisable
for any shares of, any class of its capital stock ("Shares"), the Company shall
first make an offering of such Shares to each Major Investor in accordance with
the following provisions.
(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) Within 10 business days after receipt of the Notice, the
Major Investors may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of the Series A, B and C Preferred Stock then held, by
such Major Investor bears to the total number of shares of Common Stock of the
Company then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities outstanding) as of the date of the Notice.
14
<PAGE>
(c) If all Shares which the Major Investors are entitled to obtain
pursuant to Section 2.4(b) above are not elected to be obtained as provided
herein, the Company shall promptly following the expiration of the period
provided in such Section 2.4(b), deliver to each Major Investor who has elected
to purchase its full initial portion in accordance with Section 2.4(b) (a "Fully
Exercising Investor"), a written Notice of Unsubscribed Shares, which shall
specify the number of unsubscribed Shares remaining after application of Section
2.4(b). A Fully Exercising Investor may, during the ten calendar day period
after receipt of the Notice of Unsubscribed Shares, elect to purchase any such
unsubscribed Shares, up to each such Fully Exercising Investor's pro rata
portion, or such other proportion of all or any part of the unsubscribed Shares
as all Fully Exercising Investors may mutually agree upon. A Fully Exercising
Investor's pro rata portion shall be equal to (i) the proportion that the number
of shares of Common Stock issued, or issuable upon conversion of Series A, B and
C Preferred Stock or upon exercise of the Warrant and conversion of the shares
of Series C Preferred Stock purchasable thereunder, then held by such Fully
Exercising Investor bears to (ii) the total number of shares of such stock then
held by all Fully Exercising Investors who wish to purchase some of the
unsubscribed Shares.
(d) If all Shares referred to in the Notice are not elected to be
obtained as provided in subsections 2.4(b) and 2.4(c) hereof, the Company may,
during the 60-day period following the expiration of the period provided in
subsection 2.4(c) hereof, offer the remaining unsubscribed portion of such
Shares to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the Company does
not enter into an agreement for the sale of the Shares within such period, or if
such agreement is not consummated within 60 days of the execution thereof, the
right provided hereunder shall be deemed to be revived and such Shares shall not
be offered unless first reoffered to the Major Investors in accordance herewith.
(e) The right of first offer in this Section 2.4 shall not be
applicable (i) to the issuance or sale of Common Stock (or options therefor) to
employees, consultants or directors of the Company directly or pursuant to a
stock option plan, restricted stock plan or similar benefit program or agreement
approved by the Board of Directors of the Company or by the Compensation
Committee thereof, (ii) to or after a Qualifying IPO, (iii) upon the exercise of
warrants or options, or upon the conversion of convertible securities,
outstanding on the date hereof or as to which the Major Investors have been
previously offered the right to participate as contemplated by this Section 2.4,
(iv) to the issuance of securities in connection with a bona fide business
acquisition by the Company, whether by merger, consolidation, sale of assets,
sale or exchange of stock or otherwise, (v) to the issuance of stock, warrants
or other securities or rights to persons or entities with which the Company has
business relationships provided such issuances are for other than primarily
equity financing, (vi) to the issuance of capital stock (or warrants therefor)
to a lending or leasing institution in connection with a debt or lease
financing, (vii) in connection with a stock split or dividend, or a
recapitalization or reorganization of the Company, (ix) securities issued in a
transaction registered under the Act (x) to the shares of Series A, B or C
Preferred Stock purchased pursuant to the Series A Purchase Agreement, the
Series B Purchase Agreement or the Series C Purchase Agreement or to the shares
of capital stock of the Company into which such shares of Preferred Stock may be
converted or (xi) upon a Qualifying Acquisition.
15
<PAGE>
2.5 Proprietary Information Agreements. The Company agrees to use
----------------------------------
its best efforts to cause each officer and employee of the Company and its
subsidiaries to enter into, and maintain in effect, a proprietary information
and inventions agreement in a form that has been approved by the Investors.
2.6 Key Man Life Insurance. The Company shall maintain in full force
----------------------
and effect term life insurance in favor of the Company on the life of each of
Ross Dove and Kirk Dove in a coverage amount not less than $2 million in each
case, unless otherwise approved by the Company's Board of Directors.
2.7 SBA Requirements. The Company will promptly furnish to any
----------------
Investor, upon request from such Investor, all forms that may be required to be
filed with the Small Business Administration ("SBA") from time to time with
respect to the transactions contemplated by this Agreement and such Investor's
ownership of the Series A or B Preferred Stock, and will provide to such
Investor and the SBA such other information and forms as such Investor may
reasonably request or the SBA may from time to time request with respect to the
transactions contemplated by this Agreement and such Investor's ownership of
such shares. The Company has not and will not directly or indirectly use the
proceeds from the issuance and sale of the shares of Series A Preferred Stock
pursuant to the Series A Purchase Agreement or the Series B Preferred Stock
pursuant to the Series B Purchase Agreement for any purpose for which a small
business investment company is prohibited from providing funds under 13 C.F.R.
(S)107.901.
2.8 Termination of Certain Covenants. The covenants set forth in
--------------------------------
Sections 2.5 through 2.7 shall terminate and be of no further force or effect
immediately prior to the first closing of a Qualifying IPO or upon a Qualifying
Acquisition.
3. Miscellaneous.
-------------
3.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall 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
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
3.3 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.
3.4 Notices. All notices, requests, consents and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given for all purposes upon (i) personal delivery, (ii) one
day after being sent, when sent by professional
16
<PAGE>
overnight courier service from and to locations within the United States, (iii)
five days after posting when sent by registered or certified mail, or (iv) on
the date of transmission when sent by facsimile and when receipt has been
confirmed, addressed (A) if to the Company at the address or facsimile number,
as applicable, set forth on the signature pages hereto; or (B) if to any
Investor, at the address or facsimile number, as applicable, as shown on the
stock register maintained by the Company. Any party hereto may from time to time
by notice in writing to the other parties as provided herein, designate a
different mailing address or a different person to which such notices or demands
are thereafter to be addressed or delivered.
3.5 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.6 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 shall be binding on each
Holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
3.7 Severability. If one or more provisions of this Agreement are
------------
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.
3.8 Aggregation of Stock. All shares of Registrable Securities held
--------------------
or acquired by affiliated entities or persons, including, in each case, general
or limited partners or members of such person, shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.9 Entire Agreement. This Agreement (including the Exhibits hereto,
----------------
if any) constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof and supersedes all prior
agreements or understandings between or among any of the parties hereto with
respect to the subject matter hereof, including the Prior Agreement.
3.10 Counterparts. 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.
[Signature Pages Follow]
17
<PAGE>
In Witness Whereof, the parties have executed this Agreement as of the date
first above written.
DOVEBID, INC.
By: /s/ Jeff Crowe
----------------------------------------
Its: President
Address: 1241 East Hillsdale Blvd.
Foster City, CA 94404
Facsimile No.: (650) 571-5980
Attention: Chief Executive Officer
INVESTORS: BAIN & COMPANY, INC.
- ----------
By: /s/
----------------------------------------
Its: Vice President
COMDISCO, INC.
By: /s/
----------------------------------------
Title:
-------------------------------------
FREMONT VENTURES I, L.P.
a Delaware limited partnership
By: FV, L.P., its General Partner
By: Fremont Resources, Inc.
its General Partner
By: /s/
----------------------------------------
Its: Vice President
F&W INVESTMENTS 2000
By: /s/
----------------------------------------
It's: General Partner
18
<PAGE>
MAYFIELD X, L.P.
By: Mayfield X Management, L.L.C.
Its: General Partner
By: /s/ A. Grant Heidrich
------------------------------------
Its: Managing Director
MAYFIELD ASSOCIATES FUND V, L.P.
By: Mayfield X Management, L.L.C.
Its: General Partner
By: /s/ A. Grant Heidrich
------------------------------------
Its: Managing Director
MAYFIELD PRINCIPALS FUND, L.L.C.
By: Mayfield X Management, L.L.C.
------------------------------------
Its: Managing Member
By: /s/ A. Grant Heidrich
------------------------------------
Its: Managing Director
SOFTBANK CAPITAL PARTNERS LP
a Delaware limited partnership
By: SOFTBANK Capital Partners LLC
its General Partner
By: /s/
------------------------------------
Its: Admin. Member
SOFTBANK CAPITAL ADVISORS FUND LP
a Delaware limited partnership
By: SOFTBANK Capital Partners LLC
its General Partner
By: /s/
------------------------------------
Its: Admin. Member
SUN MICROSYSTEMS, INC.
By: /s/
------------------------------------
Its:
19
<PAGE>
TPG PARTNERS III, L.P.
By: TPG GenPar III, L.P.
By: TPG Advisors III, Inc.
By: /s/ Richard Ekleberry
------------------------------------
Title: Vice President
---------------------------------
TPG PARALLEL III, L.P.
By: TPG GenPar III, L.P.
By: TPG Advisors III, Inc.
By: /s/ Richard Ekleberry
------------------------------------
Title: Vice President
---------------------------------
TPG INVESTORS III, L.P.
By: TPG GenPar III, L.P.
By: TPG Advisors III, Inc.
By: /s/ Richard Ekleberry
------------------------------------
Title: Vice President
---------------------------------
T/3/ PARTNERS, L.P.
By: T/3/ GenPar, L.P.
By: T/3/ Advisors, Inc.
By: /s/ Richard Ekleberry
------------------------------------
Title: Vice President
---------------------------------
T/3/ PARALLEL, L.P.
By: T/3/ GenPar, L.P.
By: T/3/ Advisors, Inc.
By: /s/ Richard Ekleberry
------------------------------------
Title: Vice President
---------------------------------
20
<PAGE>
T/3/ INVESTORS, L.P.
By: T/3/ GenPar, L.P.
By: T/3/ Advisors, Inc.
By: /s/ Richard Ekleberry
------------------------------------
Title: Vice President
---------------------------------
FOF PARTNERS III, L.P.
By: TPG GenPar III, L.P.
By: TPG Advisors III, Inc.
By: /s/ Richard Ekleberry
------------------------------------
Title: Vice President
---------------------------------
FOF PARTNERS III-B, L.P.
By: TPG GenPar III, L.P.
By: TPG Advisors III, Inc.
By: /s/ Richard Ekleberry
------------------------------------
Title: Vice President
---------------------------------
TPG DUTCH PARALLEL III, C.V.
By: TPG GenPar III, L.P.
By: TPG Advisors III, Inc.
By: /s/ Richard Ekleberry
------------------------------------
Title: Vice President
---------------------------------
T/3/ DUTCH PARALLEL, C.V.
By: T/3/ GenPar, L.P.
By: T/3/ Advisors, Inc.
By: /s/ Richard Ekleberry
------------------------------------
Title: Vice President
---------------------------------
21
<PAGE>
T.H. eVENTURE PTE LTD
By: /s/
------------------------------------
Its:
YAHOO! INC.
By: /s/
------------------------------------
Its:
DATA STREAM SYSTEMS, INC.
By: /s/
------------------------------------
Its:
22
<PAGE>
SCHEDULE A
----------
INVESTORS
Bain & Company, Inc.
Comdisco, Inc.
Data Stream Systems, Inc.
Fremont Ventures I, L.P.
F&W Investments 2000
Mayfield Associates Fund V, L.P.
Mayfield X, L.P.
Mayfield Principals Fund, L.L.C.
SOFTBANK Capital Partners LP
SOFTBANK Capital Advisors Fund LP
Sun Microsystems, Inc.
TPG Partners III, L.P.
TPG Parallel III, L.P.
TPG Investors III, L.P.
T/3/ Partners, L.P.
T/3/ Parallel, L.P.
T/3/ Investors, L.P.
FOF Partners III, L.P.
FOF Partners III-B, L.P.
TPG Dutch Parallel III, C.V.
T/3/ Dutch Parallel, C.V.
T.H. eVenture PTE LTD
Yahoo! Inc.
23
<PAGE>
EXHIBIT 10.15
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON
CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW.
NEITHER THIS NOTE NOR ANY SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION
OR OTHER QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER
QUALIFICATION IS NOT REQUIRED.
DOVEBID, INC.
-------------
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
----------------------------------------
$1,000,000 December 30,1999
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at
1241 East Hillsdale Blvd., Foster City, CA 94404, for value received, promises
to pay to the order of Unidyne International, Inc. ("Payee") at such address as
Payee may designate, One Million Dollars and No Cents ($1,000,000.00), plus
simple interest thereon calculated from the date hereof until paid at the annual
rate of 5.74%, compounded annually. Principal and accrued interest will be due
and payable in lawful money of the United States in full on December 30, 2002
(the "Maturity Date"), unless this Note shall have been previously converted
pursuant to Section 2 below, in which case all outstanding principal under this
Note and all accrued interest thereon shall be satisfied in full by virtue of
such conversion and the issuance and delivery of fully paid and non-assessable
shares of Conversion Stock to the holder of this Note as set forth in Section 2
below. Payments by the Company shall be applied first to any and all accrued
interest through the payment date and second to the principal remaining due
hereunder.
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless
-----------
the context otherwise requires, have the following meanings:
1.1 "Company" includes any corporation or other entity which
-------
succeeds to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of the
----------------
Company.
<PAGE>
1.3 "Conversion Price" shall mean the price per share that is
----------------
the exact middle of the price range stated in the Company's final amended
registration statement on Form S-1, Form SB-1 or a similar successor form
pertaining to an Initial Public Offering that closes on before the Maturity
Date. No conversion shall occur and there is therefore no Conversion Price with
respect to an Initial Public Offering that closes after the Maturity Date.
1.4 "Noteholder," "holder," or similar terms, when the context
---------- ------
refers to a holder of this Note, shall mean any person who shall at the time be
the registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale
-----------------------
of Common Stock pursuant to a registration statement on Form S-1 or Form SB-1
(or similar successor form) under the Securities Act of 1933, as amended, for an
underwritten initial public offering.
1.6 "Subordination Agreement" shall mean the Subordination
-----------------------
Agreement attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. This Note and all of the outstanding
--------------------
principal and accrued and unpaid interest on and under this Note shall be
converted into Conversion Stock at the Conversion Price concurrent with the
closing of an Initial Public Offering before the Maturity Date. For
informational purposes, the Company shall provide the Noteholder with written
notice (at the most recent address for the Noteholder provided to the Company by
the Noteholder in writing) (i) within seven (7) days after it files with the
Securities and Exchange Commission any registration statement on Form S-1, SB-1
or a similar successor form for an Initial Public Offering, and (ii) reasonably
promptly following the closing of an Initial Public Offering. Conversion as
described in this Section 2.1 shall occur only upon the closing of an Initial
Public Offering, provided that (i) upon the closing of an Initial Public
Offering, the conversion shall be deemed to have occurred either immediately
prior to contemporaneously with the closing of such Initial Public Offering, and
(ii) as a condition precedent or condition subsequent to conversion (the
election between which type of condition shall be the Company's sole election in
the Company's sole discretion), the Noteholder must surrender this Note for
conversion at the principal office of the Company. Incident to any conversion,
the Conversion Stock will have those rights and privileges, and be subject to
those restrictions, of the shares of Common Stock as set forth in the Company's
Certificate of Incorporation, and the Noteholder will receive the rights and be
subject to the obligations applicable to the purchasers of Common Stock,
provided that the sale restriction specified in Section 2.5 below shall apply to
the Conversion Stock. This Note shall not be convertible and shall not be
converted into Conversion Stock if there is not an Initial Public Offering
before the Maturity Date.
2.2 No Fractional Shares. No fractional shares will be issued
--------------------
on conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of the applicable Conversion Price.
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government
<PAGE>
consents and approvals as may, in the reasonable opinion of its counsel, be
necessary to authorize the issuance of a sufficient number of shares of
Conversion Stock into which this Note is to convert pursuant to Section 2.1
above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion Stock
-------------------------------
issued upon the conversion of this Note shall be validly issued, fully paid and
non-assessable. The certificates representing the shares of Conversion Stock
issued upon conversion hereof shall be delivered to the holder against surrender
of this Note. The holder, by accepting this Note, undertakes and agrees to
accept such shares of Conversion Stock in full satisfaction of the outstanding
principal and accrued interest thereon in accordance with the terms of this
Note. Anything to the contrary in this Note notwithstanding, the Company's
obligation to issue shares of Conversion Stock to any holder of this Note is
expressly conditioned upon compliance of such issuance with applicable federal
and state securities laws without registration or other qualification
thereunder.
2.5 Restriction on Sale. Upon and following any conversion pursuant
-------------------
to this Section 2, no holder of any Conversion Stock shall effect any sale or
distribution of any of the Conversion Stock (which shall include any and all
voting securities received by such holder as or in connection with a stock
dividend, stock split or other recapitalization or similar distribution on or in
respect of the Conversion Stock) or any of the Company's other equity
securities, or of any securities convertible into or exchangeable for such
securities, during the period beginning on the closing of the Initial Public
Offering and ending 180 days after such closing. The certificate(s)
representing the shares of Conversion Stock issued upon the conversion of this
Note shall be legended to reflect such restriction on sale.
2.6 No Rights or Liabilities as Shareholder. This Note does not by
---------------------------------------
itself entitle the Noteholder to any voting rights or other rights as a
shareholder of the Company. In the absence of conversion of this Note, no
provisions of this Note, and no enumeration herein of the rights or privileges
of the holder shall cause such holder to be a shareholder of the Company for any
purpose by virtue hereof.
2.7 No Other Conversion. The conversion described in this Section 2
-------------------
shall constitute the sole methods by which this Note will convert into
Conversion Stock.
3. Subordination. This Note and the indebtedness evidence by this Note
-------------
are subordinated to the prior payment in full of all or substantially all
other indebtedness of the Company pursuant to the terms of a Subordination
Agreement in the form attached hereto as Annex A and incorporated herein by
-------
reference.
4. Prepayment. This Note may be prepaid, in its entirety (including the
----------
principal sum and interest accrued to the date of payment) without penalty or
premium; provided that (i) the Company must give the Noteholder at least ten
(10) days prior written notice of its intention to prepay, and (ii) prepayment
cannot take place (x) after the Company has filed with the Securities and
Exchange Commission a registration statement on Form S-1, SB-1 or a similar
successor form for an Initial Public Offering and for so long as any such
registration statement remains pending, or (y) during the 60 days prior to the
Company's filing of a registration
<PAGE>
statement with the Securities and Exchange Commission on Form S-1, SB-1 or a
similar successor form for an Initial Public Offering.
5. Usury Savings Clause. The Company and the Noteholder intend to comply
--------------------
at all times with applicable usury laws. If at any time such laws would render
usurious any amounts due under this Note under applicable law, then it is the
Company's and the Noteholder's express intention that the Company not be
required to pay interest on this Note at a rate in excess of the maximum lawful
rate, that the provisions of this Section 5 shall control over all other
provisions of this Note which may be in apparent conflict hereunder, that such
excess amount shall be immediately credited to the principal balance of this
Note (or, if this Note has been fully paid, refunded by the Noteholder to the
Company), and the provisions hereof shall immediately be reformed and the
amounts thereafter decreased, so as to comply with the then applicable usury
law, but so as to permit the recovery of the fullest amount otherwise due under
this Note.
6. General Provisions.
------------------
6.1 Notices. Any notice, request or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by certified mail return receipt
requested, postage prepaid, at the respective addresses of the parties. Notice
shall conclusively be deemed to have been given when personally delivered or
when deposited in the mail in the manner set forth above.
6.2 Severability; Headings. In case any provision of this Note shall
----------------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby, unless to do so would deprive the Noteholder or the Company of a
substantial part of its bargain. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
6.3 Noteholder Representations and Status. By accepting this Note,
-------------------------------------
the Payee and any other Noteholder each acknowledges, represents and warrants
that (i) this Note is being acquired for investment, solely for its own account
and not as a nominee for any other person or entity, and that it will not offer,
sell or otherwise dispose of this Note except as expressly permitted by this
Note and under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Securities Act"), and (ii) it is an
"accredited investor" with the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act.
6.4 Assignment. Except as provided in the next sentence, neither
----------
this Note nor any right hereunder may be assigned by the Noteholder without the
prior written consent of the Company, which may be granted or withheld in the
Company's sole discretion.
6.5 Entire Agreement; Changes. This Note, and the Subscription and
-------------------------
Loan Agreement executed by the holder in connection with the issuance of this
Note, contains the entire agreement between the parties hereto superseding and
replacing any prior agreement or understanding relating to the subject matter
hereof. Neither this Note nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed
<PAGE>
by the party against which enforcement of the change, waiver, discharge or
termination is sought.
6.6 Law Governing. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding that body of law applicable to conflicts of law.
IN WITNESS WHEREOF, each party has caused this Note to be executed as of
the date set forth above.
DOVEBID, INC.
By: /s/ Anthony Capobianco
-------------------------------------
Its General Counsel
-------------------------------------
UNIDYNE INTERNATIONAL, INC.
By: /s/ Jack L. Saggau
-------------------------------------
Its: Vice President
------------------------------------
<PAGE>
EXHIBIT 10.16
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON
CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW.
NEITHER THIS NOTE NOR ANY SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION
OR OTHER QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER
QUALIFICATION IS NOT REQUIRED.
DOVEBID, INC.
-------------
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
----------------------------------------
$1,000,000 December 30,1999
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at
1241 East Hillsdale Blvd., Foster City, CA 94404, for value received, promises
to pay to the order of B&B Custom Circuit Supplies ("Payee") at such address as
Payee may designate, One Million Dollars and No Cents ($1,000,000.00), plus
simple interest thereon calculated from the date hereof until paid at the annual
rate of 5.74%, compounded annually. Principal and accrued interest will be due
and payable in lawful money of the United States in full on December 30, 2002
(the "Maturity Date"), unless this Note shall have been previously converted
pursuant to Section 2 below, in which case all outstanding principal under this
Note and all accrued interest thereon shall be satisfied in full by virtue of
such conversion and the issuance and delivery of fully paid and non-assessable
shares of Conversion Stock to the holder of this Note as set forth in Section 2
below. Payments by the Company shall be applied first to any and all accrued
interest through the payment date and second to the principal remaining due
hereunder.
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless
-----------
the context otherwise requires, have the following meanings:
1.1 "Company" includes any corporation or other entity which succeeds
-------
to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of the
----------------
Company.
<PAGE>
1.3 "Conversion Price" shall mean the price per share that is the
----------------
exact middle of the price range stated in the Company's final amended
registration statement on Form S-1, Form SB-1 or a similar successor form
pertaining to an Initial Public Offering that closes on before the Maturity
Date. No conversion shall occur and there is therefore no Conversion Price with
respect to an Initial Public Offering that closes after the Maturity Date.
1.4 "Noteholder," "holder," or similar terms, when the context refers
---------- ------
to a holder of this Note, shall mean any person who shall at the time be the
registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale of
-----------------------
Common Stock pursuant to a registration statement on Form S-1 or Form SB-1 (or
similar successor form) under the Securities Act of 1933, as amended, for an
underwritten initial public offering.
1.6 "Subordination Agreement" shall mean the Subordination Agreement
-----------------------
attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. This Note and all of the outstanding
--------------------
principal and accrued and unpaid interest on and under this Note shall be
converted into Conversion Stock at the Conversion Price concurrent with the
closing of an Initial Public Offering before the Maturity Date. For
informational purposes, the Company shall provide the Noteholder with written
notice (at the most recent address for the Noteholder provided to the Company by
the Noteholder in writing) (i) within seven (7) days after it files with the
Securities and Exchange Commission any registration statement on Form S-1, SB-1
or a similar successor form for an Initial Public Offering, and (ii) reasonably
promptly following the closing of an Initial Public Offering. Conversion as
described in this Section 2.1 shall occur only upon the closing of an Initial
Public Offering, provided that (i) upon the closing of an Initial Public
Offering, the conversion shall be deemed to have occurred either immediately
prior to contemporaneously with the closing of such Initial Public Offering, and
(ii) as a condition precedent or condition subsequent to conversion (the
election between which type of condition shall be the Company's sole election in
the Company's sole discretion), the Noteholder must surrender this Note for
conversion at the principal office of the Company. Incident to any conversion,
the Conversion Stock will have those rights and privileges, and be subject to
those restrictions, of the shares of Common Stock as set forth in the Company's
Certificate of Incorporation, and the Noteholder will receive the rights and be
subject to the obligations applicable to the purchasers of Common Stock,
provided that the sale restriction specified in Section 2.5 below shall apply to
the Conversion Stock. This Note shall not be convertible and shall not be
converted into Conversion Stock if there is not an Initial Public Offering
before the Maturity Date.
2.2 No Fractional Shares. No fractional shares will be issued on
--------------------
conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of the applicable Conversion Price.
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government
-2-
<PAGE>
consents and approvals as may, in the reasonable opinion of its counsel, be
necessary to authorize the issuance of a sufficient number of shares of
Conversion Stock into which this Note is to convert pursuant to Section 2.1
above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion Stock
-------------------------------
issued upon the conversion of this Note shall be validly issued, fully paid and
non-assessable. The certificates representing the shares of Conversion Stock
issued upon conversion hereof shall be delivered to the holder against surrender
of this Note. The holder, by accepting this Note, undertakes and agrees to
accept such shares of Conversion Stock in full satisfaction of the outstanding
principal and accrued interest thereon in accordance with the terms of this
Note. Anything to the contrary in this Note notwithstanding, the Company's
obligation to issue shares of Conversion Stock to any holder of this Note is
expressly conditioned upon compliance of such issuance with applicable federal
and state securities laws without registration or other qualification
thereunder.
2.5 Restriction on Sale. Upon and following any conversion pursuant
-------------------
to this Section 2, no holder of any Conversion Stock shall effect any sale or
distribution of any of the Conversion Stock (which shall include any and all
voting securities received by such holder as or in connection with a stock
dividend, stock split or other recapitalization or similar distribution on or in
respect of the Conversion Stock) or any of the Company's other equity
securities, or of any securities convertible into or exchangeable for such
securities, during the period beginning on the closing of the Initial Public
Offering and ending 180 days after such closing. The certificate(s)
representing the shares of Conversion Stock issued upon the conversion of this
Note shall be legended to reflect such restriction on sale.
2.6 No Rights or Liabilities as Shareholder. This Note does not by
---------------------------------------
itself entitle the Noteholder to any voting rights or other rights as a
shareholder of the Company. In the absence of conversion of this Note, no
provisions of this Note, and no enumeration herein of the rights or privileges
of the holder shall cause such holder to be a shareholder of the Company for any
purpose by virtue hereof.
2.7 No Other Conversion. The conversion described in this Section 2
-------------------
shall constitute the sole methods by which this Note will convert into
Conversion Stock.
3. Subordination. This Note and the indebtedness evidence by this
-------------
Note are subordinated to the prior payment in full of all or substantially all
other indebtedness of the Company pursuant to the terms of a Subordination
Agreement in the form attached hereto as Annex A and incorporated herein by
-------
reference.
4. Prepayment. This Note may be prepaid, in its entirety (including
----------
the principal sum and interest accrued to the date of payment) without penalty
or premium; provided that (i) the Company must give the Noteholder at least ten
(10) days prior written notice of its intention to prepay, and (ii) prepayment
cannot take place (x) after the Company has filed with the Securities and
Exchange Commission a registration statement on Form S-1, SB-1 or a similar
successor form for an Initial Public Offering and for so long as any such
registration statement remains pending, or (y) during the 60 days prior to the
Company's filing of a registration
<PAGE>
statement with the Securities and Exchange Commission on Form S-1, SB-1 or a
similar successor form for an Initial Public Offering.
5. Usury Savings Clause. The Company and the Noteholder intend to
--------------------
comply at all times with applicable usury laws. If at any time such laws would
render usurious any amounts due under this Note under applicable law, then it is
the Company's and the Noteholder's express intention that the Company not be
required to pay interest on this Note at a rate in excess of the maximum lawful
rate, that the provisions of this Section 5 shall control over all other
provisions of this Note which may be in apparent conflict hereunder, that such
excess amount shall be immediately credited to the principal balance of this
Note (or, if this Note has been fully paid, refunded by the Noteholder to the
Company), and the provisions hereof shall immediately be reformed and the
amounts thereafter decreased, so as to comply with the then applicable usury
law, but so as to permit the recovery of the fullest amount otherwise due under
this Note.
6. General Provisions.
------------------
6.1 Notices. Any notice, request or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by certified mail return receipt
requested, postage prepaid, at the respective addresses of the parties. Notice
shall conclusively be deemed to have been given when personally delivered or
when deposited in the mail in the manner set forth above.
6.2 Severability; Headings. In case any provision of this Note shall
----------------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby, unless to do so would deprive the Noteholder or the Company of a
substantial part of its bargain. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
6.3 Noteholder Representations and Status. By accepting this Note,
-------------------------------------
the Payee and any other Noteholder each acknowledges, represents and warrants
that (i) this Note is being acquired for investment, solely for its own account
and not as a nominee for any other person or entity, and that it will not offer,
sell or otherwise dispose of this Note except as expressly permitted by this
Note and under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Securities Act"), and (ii) it is an
"accredited investor" with the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act.
6.4 Assignment. Except as provided in the next sentence, neither
----------
this Note nor any right hereunder may be assigned by the Noteholder without the
prior written consent of the Company, which may be granted or withheld in the
Company's sole discretion.
6.5 Entire Agreement; Changes. This Note, and the Subscription and
-------------------------
Loan Agreement executed by the holder in connection with the issuance of this
Note, contains the entire agreement between the parties hereto superseding and
replacing any prior agreement or understanding relating to the subject matter
hereof. Neither this Note nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed
<PAGE>
by the party against which enforcement of the change, waiver, discharge or
termination is sought.
6.6 Law Governing. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding that body of law applicable to conflicts of law.
IN WITNESS WHEREOF, each party has caused this Note to be executed as
of the date set forth above.
DOVEBID, INC.
By: /s/ Anthony Capobianco
-------------------------------------
Its General Counsel
-------------------------------------
B&B CUSTOM CIRCUIT SUPPLIES
By: /s/ Robert Allie
--------------------------------------
Its: President
-------------------------------------
<PAGE>
EXHIBIT 10.17
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR ANY
SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION OR OTHER QUALIFICATION
UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER QUALIFICATION IS NOT
REQUIRED.
DOVEBID, INC.
-------------
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
----------------------------------------
$880,000.00 February 29, 2000
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at
1241 East Hillsdale Blvd., Foster City, CA 94404, for value received, promises
to pay to the order of William J. Gardner, Jr. ("Payee") at such address as
Payee may designate, Eight Hundred and Eighty Thousand Dollars ($880,000.00),
plus simple interest thereon calculated from the date hereof until paid at the
annual rate of 7.0%, compounded annually. Principal and accrued interest will
be due and payable in lawful money of the United States in full on February 28,
2002 (the "Maturity Date"), unless this Note shall have been previously
converted pursuant to Section 2 below, in which case all outstanding principal
under this Note and all accrued interest thereon shall be satisfied in full by
virtue of such conversion and the issuance and delivery of fully paid and non-
assessable shares of Conversion Stock to the holder of this Note as set forth in
Section 2 below. Payments by the Company shall be applied first to any and all
accrued interest through the payment date and second to the principal remaining
due hereunder.
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless
-----------
the context otherwise requires, have the following meanings:
1.1 "Company" includes any corporation or other entity which
succeeds to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of the
Company.
1.3 "Conversion Price" shall mean the price per share that is
the exact middle of the price range stated in the Company's final amended
registration statement on Form
1
<PAGE>
S-1, Form SB-1 or a similar successor form pertaining to an Initial Public
Offering that closes on before the Maturity Date. No conversion shall occur and
there is therefore no Conversion Price with respect to an Initial Public
Offering that closes after the Maturity Date.
1.4 "Noteholder," "holder," or similar terms, when the context
refers to a holder of this Note, shall mean any person who shall at the time be
the registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale
of Common Stock pursuant to a registration statement on Form S-1, Form SB-1 or
SB-2 (or any similar or successor form) under the Securities Act of 1933, as
amended, for an underwritten initial public offering.
1.6 "Subordination Agreement" shall mean the Subordination
Agreement attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. Notwithstanding anything regarding
--------------------
the subordinated nature of this Note, this Note and all of the outstanding
principal and accrued and unpaid interest on and under this Note shall be
converted into Conversion Stock at the Conversion Price immediately prior to the
first closing of an Initial Public Offering before the Maturity Date. For
informational purposes, the Company shall provide the Noteholder with written
notice (at the most recent address for the Noteholder provided to the Company by
the Noteholder in writing) (i) within seven (7) days after it files with the
Securities and Exchange Commission any registration statement on Form S-1, Form
SB-1 or Form SB-2 (or any similar or successor form) for an Initial Public
Offering, and (ii) reasonably promptly following the closing of an Initial
Public Offering. Conversion as described in this Section 2.1 shall occur only
upon the closing of an Initial Public Offering, provided that (i) upon the
closing of an Initial Public Offering, the conversion shall be deemed to have
occurred immediately prior to the first closing of such Initial Public Offering,
and (ii) as a condition precedent or condition subsequent to conversion (the
election between which type of condition shall be the Company's sole election in
the Company's sole discretion), the Noteholder must surrender this Note for
conversion at the principal office of the Company. Incident to any conversion,
the Conversion Stock will have those rights and privileges, and be subject to
those restrictions, of the shares of Common Stock as set forth in the Company's
Certificate of Incorporation, and the Noteholder will receive the rights and be
subject to the obligations applicable to the purchasers of Common Stock,
provided that the sale restriction specified in Section 2.5 below shall apply to
the Conversion Stock. This Note shall not be convertible and shall not be
converted into Conversion Stock if there is not an Initial Public Offering on or
before the Maturity Date.
2.2 No Fractional Shares. No fractional shares will be issued
--------------------
on conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of the applicable Conversion Price.
2
<PAGE>
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government consents and approvals as may, in the reasonable opinion
of its counsel, be necessary to authorize the issuance of a sufficient number of
shares of Conversion Stock into which this Note is to convert pursuant to
Section 2.1 above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion
-------------------------------
Stock issued upon the conversion of this Note shall be validly issued, fully
paid and non-assessable. The certificates representing the shares of Conversion
Stock issued upon conversion hereof shall be delivered to the holder against
surrender of this Note. The holder, by accepting this Note, undertakes and
agrees to accept such shares of Conversion Stock in full satisfaction of the
outstanding principal and accrued interest thereon in accordance with the terms
of this Note. Anything to the contrary in this Note notwithstanding, the
Company's obligation to issue shares of Conversion Stock to any holder of this
Note is expressly conditioned upon compliance of such issuance with applicable
federal and state securities laws without registration or other qualification
thereunder.
2.5 Restriction on Sale. Upon and following any conversion
-------------------
pursuant to this Section 2, no holder of any Conversion Stock shall effect any
sale or distribution of any of the Conversion Stock (which shall include any and
all voting securities received by such holder as or in connection with a stock
dividend, stock split or other recapitalization or similar distribution on or in
respect of the Conversion Stock) or any of the Company's other equity
securities, or of any securities convertible into or exchangeable for such
securities, during the period beginning on the closing of the Initial Public
Offering and ending 180 days after such closing. The certificate(s)
representing the shares of Conversion Stock issued upon the conversion of this
Note shall be legended to reflect such restriction on sale.
2.6 No Rights or Liabilities as Shareholder. This Note does not
---------------------------------------
by itself entitle the Noteholder to any voting rights or other rights as a
shareholder of the Company. In the absence of conversion of this Note, no
provisions of this Note, and no enumeration herein of the rights or privileges
of the holder shall cause such holder to be a shareholder of the Company for any
purpose by virtue hereof.
2.7 No Other Conversion. The conversion described in this
-------------------
Section 2 shall constitute the sole methods by which this Note will convert.
3. Subordination. This Note and the indebtedness evidence by this
-------------
Note are subordinated to the prior payment in full of all or substantially all
other indebtedness of the Company pursuant to the terms of a Subordination
Agreement in the form attached hereto as Annex A and incorporated herein by
-------
reference.
4. Usury Savings Clause. The Company and the Noteholder intend to
--------------------
comply at all times with applicable usury laws. If at any time such laws would
render usurious any amounts due under this Note under applicable law, then it is
the Company's and the Noteholder's express intention that the Company not be
required to pay interest on this Note at a rate in excess of the maximum lawful
rate, that the provisions of this Section 5 shall control over all other
provisions of this Note which may be in apparent conflict hereunder, that such
excess
3
<PAGE>
amount shall be immediately credited to the principal balance of this Note (or,
if this Note has been fully paid, refunded by the Noteholder to the Company),
and the provisions hereof shall immediately be reformed and the amounts
thereafter decreased, so as to comply with the then applicable usury law, but so
as to permit the recovery of the fullest amount otherwise due under this Note.
5. General Provisions.
------------------
5.1 Notices. All notices and other communications required or
-------
permitted hereunder shall be effective upon receipt (or refusal of receipt) and
shall be in writing and delivered by a nationally-recognized overnight courier
service or by depositing the same in United States mail, addressed to the party
to be notified, postage prepaid and registered or certified with return receipt
requested, by delivering the same in person to such party or to an officer or
agent of such party, as follows:
(i) If mailed or delivered to the Company, to each of the
following, using two separate mailings or deliveries:
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Anthony Capobianco, General Counsel
(ii) If mailed or delivered to the Payee, addressed to him
at the following address:
16 Dogwood Road
Madison, CT 06443
or to such other address as any party hereto shall specify in
writing to the other parties hereto pursuant to this Section 5.1 from time to
time. Such notice shall be effective only upon actual receipt.
5.2 Severability; Headings. In case any provision of this Note
----------------------
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, unless to do so would deprive the Noteholder or the Company of
a substantial part of its bargain. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
5.3 Noteholder Representations and Status. By accepting this
-------------------------------------
Note, the Payee and any other Noteholder each acknowledges, represents and
warrants that the representations and warranties set forth in Section 2.21 of
that certain Membership Interest Purchase Agreement among the Company, Greenwich
Industrial Services LLC, a Connecticut
4
<PAGE>
limited liability company ("GIC"), Payee and each of the other members of GIC
are true and correct as of the date of this Note.
5.4 Assignment. Except as provided in the next two sentences,
----------
neither this Note nor any right hereunder may be assigned by the Noteholder
without the prior written consent of the Company, which may be granted or
withheld in the Company's sole discretion. Notwithstanding the immediately prior
sentence, Noteholder may assign the Note and the Subordination Agreement to any
trust, corporation, partnership or other entity in which Noteholder holds all of
the voting power and equity or due to death and in accordance with the laws of
wills, succession and intestacy (provided in each case that such transferee
executes an agreement pursuant to which such transferee agrees to be bound by
the terms of the Note and the Subordination Agreement, such agreement to be in
form and substance reasonably satisfactory to the Company). Notwithstanding the
first sentence of this Section 5.4, the Company may not assign any of its rights
or obligations hereunder, except that the Company may assign its rights and
obligations hereunder in connection with a merger, consolidation or sale of all
or substantially all of the Company's assets or in connection with a
reincorporation, reorganization or other corporate recapitalization, provided
that the acquiring or surviving corporation or entity agrees to assume all of
the Company's obligations under this Note and that such acquiring or surviving
corporation or entity has a market capitalization or net assets in excess of
$75.0 million at the time of such assignment. This Note will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
5.5 Entire Agreement; Changes. This Note, and the Agreement and
-------------------------
Plan of Merger executed by Payee in connection with the issuance of this Note,
contains the entire agreement between the parties hereto superseding and
replacing any prior agreement or understanding relating to the subject matter
hereof. Neither this Note nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
5
<PAGE>
5.6 Law Governing. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding that body of law applicable to conflicts of law.
IN WITNESS WHEREOF, each party has caused this Note to be executed as
of the date set forth above.
THE COMPANY:
DOVEBID, INC.
By: /s/ Anthony Copobianco
------------------------------------
Its: Vice President and General Counsel
-----------------------------------
Acknowledged and Agreed to:
PAYEE:
/s/ William J Gardner, Jr.
- --------------------------------
Name: William J. Gardner, Jr.
6
<PAGE>
EXHIBIT 10.18
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR ANY
SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION OR OTHER QUALIFICATION
UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER QUALIFICATION IS NOT
REQUIRED.
DOVEBID, INC.
-------------
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
----------------------------------------
$500,000.00 February 29, 2000
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at
1241 East Hillsdale Blvd., Foster City, CA 94404, for value received, promises
to pay to the order of James Gardner ("Payee") at such address as Payee may
designate, Five Hundred Thousand Dollars ($500,000.00), plus simple interest
thereon calculated from the date hereof until paid at the annual rate of 7.0%,
compounded annually. Principal and accrued interest will be due and payable in
lawful money of the United States in full on February 28, 2002 (the "Maturity
Date"), unless this Note shall have been previously converted pursuant to
Section 2 below, in which case all outstanding principal under this Note and all
accrued interest thereon shall be satisfied in full by virtue of such conversion
and the issuance and delivery of fully paid and non-assessable shares of
Conversion Stock to the holder of this Note as set forth in Section 2 below.
Payments by the Company shall be applied first to any and all accrued interest
through the payment date and second to the principal remaining due hereunder.
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless
-----------
the context otherwise requires, have the following meanings:
1.1 "Company" includes any corporation or other entity which
succeeds to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of the
Company.
1.3 "Conversion Price" shall mean the price per share that is the
exact middle of the price range stated in the Company's final amended
registration statement on Form
1
<PAGE>
S-1, Form SB-1 or a similar successor form pertaining to an Initial Public
Offering that closes on before the Maturity Date. No conversion shall occur and
there is therefore no Conversion Price with respect to an Initial Public
Offering that closes after the Maturity Date.
1.4 "Noteholder," "holder," or similar terms, when the context
refers to a holder of this Note, shall mean any person who shall at the time be
the registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale of
Common Stock pursuant to a registration statement on Form S-1, Form SB-1 or SB-2
(or any similar or successor form) under the Securities Act of 1933, as amended,
for an underwritten initial public offering.
1.6 "Subordination Agreement" shall mean the Subordination
Agreement attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. Notwithstanding anything regarding the
--------------------
subordinated nature of this Note, this Note and all of the outstanding principal
and accrued and unpaid interest on and under this Note shall be converted into
Conversion Stock at the Conversion Price immediately prior to the first closing
of an Initial Public Offering before the Maturity Date. For informational
purposes, the Company shall provide the Noteholder with written notice (at the
most recent address for the Noteholder provided to the Company by the Noteholder
in writing) (i) within seven (7) days after it files with the Securities and
Exchange Commission any registration statement on Form S-1, Form SB-1 or Form
SB-2 (or any similar or successor form) for an Initial Public Offering, and (ii)
reasonably promptly following the closing of an Initial Public Offering.
Conversion as described in this Section 2.1 shall occur only upon the closing of
an Initial Public Offering, provided that (i) upon the closing of an Initial
Public Offering, the conversion shall be deemed to have occurred immediately
prior to the first closing of such Initial Public Offering, and (ii) as a
condition precedent or condition subsequent to conversion (the election between
which type of condition shall be the Company's sole election in the Company's
sole discretion), the Noteholder must surrender this Note for conversion at the
principal office of the Company. Incident to any conversion, the Conversion
Stock will have those rights and privileges, and be subject to those
restrictions, of the shares of Common Stock as set forth in the Company's
Certificate of Incorporation, and the Noteholder will receive the rights and be
subject to the obligations applicable to the purchasers of Common Stock,
provided that the sale restriction specified in Section 2.5 below shall apply to
the Conversion Stock. This Note shall not be convertible and shall not be
converted into Conversion Stock if there is not an Initial Public Offering on or
before the Maturity Date.
2.2 No Fractional Shares. No fractional shares will be issued on
--------------------
conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of the applicable Conversion Price.
2
<PAGE>
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government consents and approvals as may, in the reasonable opinion
of its counsel, be necessary to authorize the issuance of a sufficient number of
shares of Conversion Stock into which this Note is to convert pursuant to
Section 2.1 above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion
-------------------------------
Stock issued upon the conversion of this Note shall be validly issued, fully
paid and non-assessable. The certificates representing the shares of Conversion
Stock issued upon conversion hereof shall be delivered to the holder against
surrender of this Note. The holder, by accepting this Note, undertakes and
agrees to accept such shares of Conversion Stock in full satisfaction of the
outstanding principal and accrued interest thereon in accordance with the terms
of this Note. Anything to the contrary in this Note notwithstanding, the
Company's obligation to issue shares of Conversion Stock to any holder of this
Note is expressly conditioned upon compliance of such issuance with applicable
federal and state securities laws without registration or other qualification
thereunder.
2.5 Restriction on Sale. Upon and following any conversion
-------------------
pursuant to this Section 2, no holder of any Conversion Stock shall effect any
sale or distribution of any of the Conversion Stock (which shall include any and
all voting securities received by such holder as or in connection with a stock
dividend, stock split or other recapitalization or similar distribution on or in
respect of the Conversion Stock) or any of the Company's other equity
securities, or of any securities convertible into or exchangeable for such
securities, during the period beginning on the closing of the Initial Public
Offering and ending 180 days after such closing. The certificate(s) representing
the shares of Conversion Stock issued upon the conversion of this Note shall be
legended to reflect such restriction on sale.
2.6 No Rights or Liabilities as Shareholder. This Note does not
---------------------------------------
by itself entitle the Noteholder to any voting rights or other rights as a
shareholder of the Company. In the absence of conversion of this Note, no
provisions of this Note, and no enumeration herein of the rights or privileges
of the holder shall cause such holder to be a shareholder of the Company for any
purpose by virtue hereof.
2.7 No Other Conversion. The conversion described in this Section
-------------------
2 shall constitute the sole methods by which this Note will convert.
3. Subordination. This Note and the indebtedness evidence by this
-------------
Note are subordinated to the prior payment in full of all or substantially all
other indebtedness of the Company pursuant to the terms of a Subordination
Agreement in the form attached hereto as Annex A and incorporated herein by
-------
reference.
4. Usury Savings Clause. The Company and the Noteholder intend to
--------------------
comply at all times with applicable usury laws. If at any time such laws would
render usurious any amounts due under this Note under applicable law, then it is
the Company's and the Noteholder's express intention that the Company not be
required to pay interest on this Note at a rate in excess of the maximum lawful
rate, that the provisions of this Section 5 shall control over all other
provisions of this Note which may be in apparent conflict hereunder, that such
excess
3
<PAGE>
amount shall be immediately credited to the principal balance of this
Note (or, if this Note has been fully paid, refunded by the Noteholder to the
Company), and the provisions hereof shall immediately be reformed and the
amounts thereafter decreased, so as to comply with the then applicable usury
law, but so as to permit the recovery of the fullest amount otherwise due under
this Note.
5. General Provisions.
------------------
5.1 Notices. All notices and other communications required or
-------
permitted hereunder shall be effective upon receipt (or refusal of receipt) and
shall be in writing and delivered by a nationally-recognized overnight courier
service or by depositing the same in United States mail, addressed to the party
to be notified, postage prepaid and registered or certified with return receipt
requested, by delivering the same in person to such party or to an officer or
agent of such party, as follows:
(i) If mailed or delivered to the Company, to each of the
following, using two separate mailings or deliveries:
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Anthony Capobianco, General Counsel
(ii) If mailed or delivered to the Payee, addressed to him
at the following address:
35 Wildcat Spring Drive
Madison, CT 06443
or to such other address as any party hereto shall specify in writing
to the other parties hereto pursuant to this Section 5.1 from time to time. Such
notice shall be effective only upon actual receipt.
5.2 Severability; Headings. In case any provision of this Note
----------------------
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, unless to do so would deprive the Noteholder or the Company of
a substantial part of its bargain. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
5.3 Noteholder Representations and Status. By accepting this
-------------------------------------
Note, the Payee and any other Noteholder each acknowledges, represents and
warrants that the representations and warranties set forth in Section 2.21 of
that certain Membership Interest Purchase Agreement among the Company, Greenwich
Industrial Services LLC, a Connecticut
4
<PAGE>
limited liability company ("GIC"), Payee and each of the other members of GIC
are true and correct as of the date of this Note.
5.4 Assignment. Except as provided in the next two sentences,
----------
neither this Note nor any right hereunder may be assigned by the Noteholder
without the prior written consent of the Company, which may be granted or
withheld in the Company's sole discretion. Notwithstanding the immediately prior
sentence, Noteholder may assign the Note and the Subordination Agreement to any
trust, corporation, partnership or other entity in which Noteholder holds all of
the voting power and equity or due to death and in accordance with the laws of
wills, succession and intestacy (provided in each case that such transferee
executes an agreement pursuant to which such transferee agrees to be bound by
the terms of the Note and the Subordination Agreement, such agreement to be in
form and substance reasonably satisfactory to the Company). Notwithstanding the
first sentence of this Section 5.4, the Company may not assign any of its rights
or obligations hereunder, except that the Company may assign its rights and
obligations hereunder in connection with a merger, consolidation or sale of all
or substantially all of the Company's assets or in connection with a
reincorporation, reorganization or other corporate recapitalization, provided
that the acquiring or surviving corporation or entity agrees to assume all of
the Company's obligations under this Note and that such acquiring or surviving
corporation or entity has a market capitalization or net assets in excess of
$75.0 million at the time of such assignment. This Note will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
5.5 Entire Agreement; Changes. This Note, and the Agreement and
-------------------------
Plan of Merger executed by Payee in connection with the issuance of this Note,
contains the entire agreement between the parties hereto superseding and
replacing any prior agreement or understanding relating to the subject matter
hereof. Neither this Note nor any term hereof may be changed, waived, discharged
or terminated orally but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
5
<PAGE>
5.6 Law Governing. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding that body of law applicable to conflicts of law.
IN WITNESS WHEREOF, each party has caused this Note to be executed as
of the date set forth above.
THE COMPANY:
DOVEBID, INC.
By: /s/ Anthony Capobianco
-----------------------------------
Its: Vice President and General Counsel
-----------------------------------
Acknowledged and Agreed to:
PAYEE:
/s/ James Gardner
- ----------------------------
Name: James Gardner
6
<PAGE>
EXHIBIT 10.19
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR ANY
SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION OR OTHER QUALIFICATION
UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER QUALIFICATION IS NOT
REQUIRED.
DOVEBID, INC.
-------------
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
----------------------------------------
$420,000.00 February 29, 2000
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at
1241 East Hillsdale Blvd., Foster City, CA 94404, for value received, promises
to pay to the order of Scott Lankert ("Payee") at such address as Payee may
designate, Four Hundred Twenty Thousand Dollars ($420,000.00), plus simple
interest thereon calculated from the date hereof until paid at the annual rate
of 7.0%, compounded annually. Principal and accrued interest will be due and
payable in lawful money of the United States in full on February 28, 2002 (the
"Maturity Date"), unless this Note shall have been previously converted pursuant
to Section 2 below, in which case all outstanding principal under this Note and
all accrued interest thereon shall be satisfied in full by virtue of such
conversion and the issuance and delivery of fully paid and non-assessable shares
of Conversion Stock to the holder of this Note as set forth in Section 2 below.
Payments by the Company shall be applied first to any and all accrued interest
through the payment date and second to the principal remaining due hereunder.
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless
-----------
the context otherwise requires, have the following meanings:
1.1 "Company" includes any corporation or other entity which
succeeds to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of the
Company.
1.3 "Conversion Price" shall mean the price per share that is
the exact middle of the price range stated in the Company's final amended
registration statement on Form
1
<PAGE>
S-1, Form SB-1 or a similar successor form pertaining to an Initial Public
Offering that closes on before the Maturity Date. No conversion shall occur and
there is therefore no Conversion Price with respect to an Initial Public
Offering that closes after the Maturity Date.
1.4 "Noteholder," "holder," or similar terms, when the context
refers to a holder of this Note, shall mean any person who shall at the time be
the registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale
of Common Stock pursuant to a registration statement on Form S-1, Form SB-1 or
SB-2 (or any similar or successor form) under the Securities Act of 1933, as
amended, for an underwritten initial public offering.
1.6 "Subordination Agreement" shall mean the Subordination
Agreement attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. Notwithstanding anything regarding
--------------------
the subordinated nature of this Note, this Note and all of the outstanding
principal and accrued and unpaid interest on and under this Note shall be
converted into Conversion Stock at the Conversion Price immediately prior to the
first closing of an Initial Public Offering before the Maturity Date. For
informational purposes, the Company shall provide the Noteholder with written
notice (at the most recent address for the Noteholder provided to the Company by
the Noteholder in writing) (i) within seven (7) days after it files with the
Securities and Exchange Commission any registration statement on Form S-1, Form
SB-1 or Form SB-2 (or any similar or successor form) for an Initial Public
Offering, and (ii) reasonably promptly following the closing of an Initial
Public Offering. Conversion as described in this Section 2.1 shall occur only
upon the closing of an Initial Public Offering, provided that (i) upon the
closing of an Initial Public Offering, the conversion shall be deemed to have
occurred immediately prior to the first closing of such Initial Public Offering,
and (ii) as a condition precedent or condition subsequent to conversion (the
election between which type of condition shall be the Company's sole election in
the Company's sole discretion), the Noteholder must surrender this Note for
conversion at the principal office of the Company. Incident to any conversion,
the Conversion Stock will have those rights and privileges, and be subject to
those restrictions, of the shares of Common Stock as set forth in the Company's
Certificate of Incorporation, and the Noteholder will receive the rights and be
subject to the obligations applicable to the purchasers of Common Stock,
provided that the sale restriction specified in Section 2.5 below shall apply to
the Conversion Stock. This Note shall not be convertible and shall not be
converted into Conversion Stock if there is not an Initial Public Offering on or
before the Maturity Date.
2.2 No Fractional Shares. No fractional shares will be issued
--------------------
on conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of the applicable Conversion Price.
2
<PAGE>
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government consents and approvals as may, in the reasonable opinion
of its counsel, be necessary to authorize the issuance of a sufficient number of
shares of Conversion Stock into which this Note is to convert pursuant to
Section 2.1 above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion
-------------------------------
Stock issued upon the conversion of this Note shall be validly issued, fully
paid and non-assessable. The certificates representing the shares of Conversion
Stock issued upon conversion hereof shall be delivered to the holder against
surrender of this Note. The holder, by accepting this Note, undertakes and
agrees to accept such shares of Conversion Stock in full satisfaction of the
outstanding principal and accrued interest thereon in accordance with the terms
of this Note. Anything to the contrary in this Note notwithstanding, the
Company's obligation to issue shares of Conversion Stock to any holder of this
Note is expressly conditioned upon compliance of such issuance with applicable
federal and state securities laws without registration or other qualification
thereunder.
2.5 Restriction on Sale. Upon and following any conversion
-------------------
pursuant to this Section 2, no holder of any Conversion Stock shall effect any
sale or distribution of any of the Conversion Stock (which shall include any and
all voting securities received by such holder as or in connection with a stock
dividend, stock split or other recapitalization or similar distribution on or in
respect of the Conversion Stock) or any of the Company's other equity
securities, or of any securities convertible into or exchangeable for such
securities, during the period beginning on the closing of the Initial Public
Offering and ending 180 days after such closing. The certificate(s) representing
the shares of Conversion Stock issued upon the conversion of this Note shall be
legended to reflect such restriction on sale.
2.6 No Rights or Liabilities as Shareholder. This Note does not
---------------------------------------
by itself entitle the Noteholder to any voting rights or other rights as a
shareholder of the Company. In the absence of conversion of this Note, no
provisions of this Note, and no enumeration herein of the rights or privileges
of the holder shall cause such holder to be a shareholder of the Company for any
purpose by virtue hereof.
2.7 No Other Conversion. The conversion described in this
-------------------
Section 2 shall constitute the sole methods by which this Note will convert.
3. Subordination. This Note and the indebtedness evidence by this
-------------
Note are subordinated to the prior payment in full of all or substantially all
other indebtedness of the Company pursuant to the terms of a Subordination
Agreement in the form attached hereto as Annex A and incorporated herein by
-------
reference.
4. Usury Savings Clause. The Company and the Noteholder intend to
--------------------
comply at all times with applicable usury laws. If at any time such laws would
render usurious any amounts due under this Note under applicable law, then it is
the Company's and the Noteholder's express intention that the Company not be
required to pay interest on this Note at a rate in excess of the maximum lawful
rate, that the provisions of this Section 5 shall control over all other
provisions of this Note which may be in apparent conflict hereunder, that such
excess
3
<PAGE>
amount shall be immediately credited to the principal balance of this Note (or,
if this Note has been fully paid, refunded by the Noteholder to the Company),
and the provisions hereof shall immediately be reformed and the amounts
thereafter decreased, so as to comply with the then applicable usury law, but so
as to permit the recovery of the fullest amount otherwise due under this Note.
5. General Provisions.
------------------
5.1 Notices. All notices and other communications required or
-------
permitted hereunder shall be effective upon receipt (or refusal of receipt) and
shall be in writing and delivered by a nationally-recognized overnight courier
service or by depositing the same in United States mail, addressed to the party
to be notified, postage prepaid and registered or certified with return receipt
requested, by delivering the same in person to such party or to an officer or
agent of such party, as follows:
(i) If mailed or delivered to the Company, to each of the
following, using two separate mailings or deliveries:
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Anthony Capobianco, General Counsel
(ii) If mailed or delivered to the Payee, addressed to him
at the following address:
41 Pine Orchard Road
Branford, CT 06405
or to such other address as any party hereto shall specify in
writing to the other parties hereto pursuant to this Section 5.1 from time to
time. Such notice shall be effective only upon actual receipt.
5.2 Severability; Headings. In case any provision of this Note
----------------------
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, unless to do so would deprive the Noteholder or the Company of
a substantial part of its bargain. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
5.3 Noteholder Representations and Status. By accepting this
-------------------------------------
Note, the Payee and any other Noteholder each acknowledges, represents and
warrants that the representations and warranties set forth in Section 2.21 of
that certain Membership Interest Purchase Agreement among the Company, Greenwich
Industrial Services LLC, a Connecticut
4
<PAGE>
limited liability company ("GIC"), Payee and each of the other members of GIC
are true and correct as of the date of this Note.
5.4 Assignment. Except as provided in the next two sentences,
----------
neither this Note nor any right hereunder may be assigned by the Noteholder
without the prior written consent of the Company, which may be granted or
withheld in the Company's sole discretion. Notwithstanding the immediately prior
sentence, Noteholder may assign the Note and the Subordination Agreement to any
trust, corporation, partnership or other entity in which Noteholder holds all of
the voting power and equity or due to death and in accordance with the laws of
wills, succession and intestacy (provided in each case that such transferee
executes an agreement pursuant to which such transferee agrees to be bound by
the terms of the Note and the Subordination Agreement, such agreement to be in
form and substance reasonably satisfactory to the Company). Notwithstanding the
first sentence of this Section 5.4, the Company may not assign any of its rights
or obligations hereunder, except that the Company may assign its rights and
obligations hereunder in connection with a merger, consolidation or sale of all
or substantially all of the Company's assets or in connection with a
reincorporation, reorganization or other corporate recapitalization, provided
that the acquiring or surviving corporation or entity agrees to assume all of
the Company's obligations under this Note and that such acquiring or surviving
corporation or entity has a market capitalization or net assets in excess of
$75.0 million at the time of such assignment. This Note will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
5.5 Entire Agreement; Changes. This Note, and the Agreement and
-------------------------
Plan of Merger executed by Payee in connection with the issuance of this Note,
contains the entire agreement between the parties hereto superseding and
replacing any prior agreement or understanding relating to the subject matter
hereof. Neither this Note nor any term hereof may be changed, waived, discharged
or terminated orally but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
5
<PAGE>
5.6 Law Governing. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding that body of law applicable to conflicts of law.
IN WITNESS WHEREOF, each party has caused this Note to be executed as
of the date set forth above.
THE COMPANY:
DOVEBID, INC.
By: /s/ Anthony Capobianco
------------------------------------
Its: Vice President and General Counsel
------------------------------------
Acknowledged and Agreed to:
PAYEE:
/s/ Scott Lankert
- ---------------------------
Name: Scott Lankert
6
<PAGE>
EXHIBIT 10.20
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR ANY
SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION OR OTHER QUALIFICATION
UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER QUALIFICATION IS NOT
REQUIRED.
DOVEBID, INC.
-------------
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
----------------------------------------
$200,000.00 February 29, 2000
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at
1241 East Hillsdale Blvd., Foster City, CA 94404, for value received, promises
to pay to the order of Michael DiProspero ("Payee") at such address as Payee may
designate, Two Hundred Thousand Dollars ($200,000.00), plus simple interest
thereon calculated from the date hereof until paid at the annual rate of 7.0%,
compounded annually. Principal and accrued interest will be due and payable in
lawful money of the United States in full on February 28, 2002 (the "Maturity
Date"), unless this Note shall have been previously converted pursuant to
Section 2 below, in which case all outstanding principal under this Note and all
accrued interest thereon shall be satisfied in full by virtue of such conversion
and the issuance and delivery of fully paid and non-assessable shares of
Conversion Stock to the holder of this Note as set forth in Section 2 below.
Payments by the Company shall be applied first to any and all accrued interest
through the payment date and second to the principal remaining due hereunder.
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless
-----------
the context otherwise requires, have the following meanings:
1.1 "Company" includes any corporation or other entity which
succeeds to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of the
Company.
1.3 "Conversion Price" shall mean the price per share that is
the exact middle of the price range stated in the Company's final amended
registration statement on Form
1
<PAGE>
S-1, Form SB-1 or a similar successor form pertaining to an Initial Public
Offering that closes on before the Maturity Date. No conversion shall occur and
there is therefore no Conversion Price with respect to an Initial Public
Offering that closes after the Maturity Date.
1.4 "Noteholder," "holder," or similar terms, when the context
refers to a holder of this Note, shall mean any person who shall at the time be
the registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale
of Common Stock pursuant to a registration statement on Form S-1, Form SB-1 or
SB-2 (or any similar or successor form) under the Securities Act of 1933, as
amended, for an underwritten initial public offering.
1.6 "Subordination Agreement" shall mean the Subordination
Agreement attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. Notwithstanding anything regarding
--------------------
the subordinated nature of this Note, this Note and all of the outstanding
principal and accrued and unpaid interest on and under this Note shall be
converted into Conversion Stock at the Conversion Price immediately prior to the
first closing of an Initial Public Offering before the Maturity Date. For
informational purposes, the Company shall provide the Noteholder with written
notice (at the most recent address for the Noteholder provided to the Company by
the Noteholder in writing) (i) within seven (7) days after it files with the
Securities and Exchange Commission any registration statement on Form S-1, Form
SB-1 or Form SB-2 (or any similar or successor form) for an Initial Public
Offering, and (ii) reasonably promptly following the closing of an Initial
Public Offering. Conversion as described in this Section 2.1 shall occur only
upon the closing of an Initial Public Offering, provided that (i) upon the
closing of an Initial Public Offering, the conversion shall be deemed to have
occurred immediately prior to the first closing of such Initial Public Offering,
and (ii) as a condition precedent or condition subsequent to conversion (the
election between which type of condition shall be the Company's sole election in
the Company's sole discretion), the Noteholder must surrender this Note for
conversion at the principal office of the Company. Incident to any conversion,
the Conversion Stock will have those rights and privileges, and be subject to
those restrictions, of the shares of Common Stock as set forth in the Company's
Certificate of Incorporation, and the Noteholder will receive the rights and be
subject to the obligations applicable to the purchasers of Common Stock,
provided that the sale restriction specified in Section 2.5 below shall apply to
the Conversion Stock. This Note shall not be convertible and shall not be
converted into Conversion Stock if there is not an Initial Public Offering on or
before the Maturity Date.
2.2 No Fractional Shares. No fractional shares will be issued
--------------------
on conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of the applicable Conversion Price.
2
<PAGE>
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government consents and approvals as may, in the reasonable opinion
of its counsel, be necessary to authorize the issuance of a sufficient number of
shares of Conversion Stock into which this Note is to convert pursuant to
Section 2.1 above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion
-------------------------------
Stock issued upon the conversion of this Note shall be validly issued, fully
paid and non-assessable. The certificates representing the shares of Conversion
Stock issued upon conversion hereof shall be delivered to the holder against
surrender of this Note. The holder, by accepting this Note, undertakes and
agrees to accept such shares of Conversion Stock in full satisfaction of the
outstanding principal and accrued interest thereon in accordance with the terms
of this Note. Anything to the contrary in this Note notwithstanding, the
Company's obligation to issue shares of Conversion Stock to any holder of this
Note is expressly conditioned upon compliance of such issuance with applicable
federal and state securities laws without registration or other qualification
thereunder.
2.5 Restriction on Sale. Upon and following any conversion
-------------------
pursuant to this Section 2, no holder of any Conversion Stock shall effect any
sale or distribution of any of the Conversion Stock (which shall include any and
all voting securities received by such holder as or in connection with a stock
dividend, stock split or other recapitalization or similar distribution on or in
respect of the Conversion Stock) or any of the Company's other equity
securities, or of any securities convertible into or exchangeable for such
securities, during the period beginning on the closing of the Initial Public
Offering and ending 180 days after such closing. The certificate(s) representing
the shares of Conversion Stock issued upon the conversion of this Note shall be
legended to reflect such restriction on sale.
2.6 No Rights or Liabilities as Shareholder. This Note does not
---------------------------------------
by itself entitle the Noteholder to any voting rights or other rights as a
shareholder of the Company. In the absence of conversion of this Note, no
provisions of this Note, and no enumeration herein of the rights or privileges
of the holder shall cause such holder to be a shareholder of the Company for any
purpose by virtue hereof.
2.7 No Other Conversion. The conversion described in this
-------------------
Section 2 shall constitute the sole methods by which this Note will convert.
3. Subordination. This Note and the indebtedness evidence by this
-------------
Note are subordinated to the prior payment in full of all or substantially all
other indebtedness of the Company pursuant to the terms of a Subordination
Agreement in the form attached hereto as Annex A and incorporated herein by
-------
reference.
4. Usury Savings Clause. The Company and the Noteholder intend to
--------------------
comply at all times with applicable usury laws. If at any time such laws would
render usurious any amounts due under this Note under applicable law, then it is
the Company's and the Noteholder's express intention that the Company not be
required to pay interest on this Note at a rate in excess of the maximum lawful
rate, that the provisions of this Section 5 shall control over all other
provisions of this Note which may be in apparent conflict hereunder, that such
excess
3
<PAGE>
amount shall be immediately credited to the principal balance of this Note (or,
if this Note has been fully paid, refunded by the Noteholder to the Company),
and the provisions hereof shall immediately be reformed and the amounts
thereafter decreased, so as to comply with the then applicable usury law, but so
as to permit the recovery of the fullest amount otherwise due under this Note.
5. General Provisions.
------------------
5.1 Notices. All notices and other communications required or
-------
permitted hereunder shall be effective upon receipt (or refusal of receipt) and
shall be in writing and delivered by a nationally-recognized overnight courier
service or by depositing the same in United States mail, addressed to the party
to be notified, postage prepaid and registered or certified with return receipt
requested, by delivering the same in person to such party or to an officer or
agent of such party, as follows:
(i) If mailed or delivered to the Company, to each of the
following, using two separate mailings or deliveries:
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Anthony Capobianco, General Counsel
(ii) If mailed or delivered to the Payee, addressed to him
at the following address:
6 Dewal Drive
Norwalk, CT 06851
or to such other address as any party hereto shall specify in
writing to the other parties hereto pursuant to this Section 5.1 from time to
time. Such notice shall be effective only upon actual receipt.
5.2 Severability; Headings. In case any provision of this Note
----------------------
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, unless to do so would deprive the Noteholder or the Company of
a substantial part of its bargain. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
5.3 Noteholder Representations and Status. By accepting this
-------------------------------------
Note, the Payee and any other Noteholder each acknowledges, represents and
warrants that the representations and warranties set forth in Section 2.21 of
that certain Membership Interest Purchase Agreement among the Company, Greenwich
Industrial Services LLC, a Connecticut
4
<PAGE>
limited liability company ("GIC"), Payee and each of the other members of GIC
are true and correct as of the date of this Note.
5.4 Assignment. Except as provided in the next two sentences,
----------
neither this Note nor any right hereunder may be assigned by the Noteholder
without the prior written consent of the Company, which may be granted or
withheld in the Company's sole discretion. Notwithstanding the immediately prior
sentence, Noteholder may assign the Note and the Subordination Agreement to any
trust, corporation, partnership or other entity in which Noteholder holds all of
the voting power and equity or due to death and in accordance with the laws of
wills, succession and intestacy (provided in each case that such transferee
executes an agreement pursuant to which such transferee agrees to be bound by
the terms of the Note and the Subordination Agreement, such agreement to be in
form and substance reasonably satisfactory to the Company). Notwithstanding the
first sentence of this Section 5.4, the Company may not assign any of its rights
or obligations hereunder, except that the Company may assign its rights and
obligations hereunder in connection with a merger, consolidation or sale of all
or substantially all of the Company's assets or in connection with a
reincorporation, reorganization or other corporate recapitalization, provided
that the acquiring or surviving corporation or entity agrees to assume all of
the Company's obligations under this Note and that such acquiring or surviving
corporation or entity has a market capitalization or net assets in excess of
$75.0 million at the time of such assignment. This Note will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
5.5 Entire Agreement; Changes. This Note, and the Agreement
-------------------------
and Plan of Merger executed by Payee in connection with the issuance of this
Note, contains the entire agreement between the parties hereto superseding and
replacing any prior agreement or understanding relating to the subject matter
hereof. Neither this Note nor any term hereof may be changed, waived, discharged
or terminated orally but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
5
<PAGE>
5.6 Law Governing. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding that body of law applicable to conflicts of law.
IN WITNESS WHEREOF, each party has caused this Note to be executed as
of the date set forth above.
THE COMPANY:
DOVEBID, INC.
By: /s/ Anthony Capobianco
------------------------------------
Its: Vice President and General Counsel
Acknowledged and Agreed to: ----------------------------------
PAYEE:
/s/ Michael DiProspero
- ------------------------------
Name: Michael DiProspero
6
<PAGE>
EXHIBIT 10.21
Form of Convertible Subordinated Promissory Note
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR
ANY SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION OR OTHER
QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER
QUALIFICATION IS NOT REQUIRED.
DOVEBID, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$1,375,500 March 2, 2000
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at
1241 East Hillsdale Blvd., Foster City, CA 94404, for value received, promises
to pay to the order of Philip Pollack ("Payee") at such address as Payee may
designate, One Million Three Hundred and Seventy Five Thousand Dollars and No
Cents ($1,375,000), plus simple interest thereon calculated from the date hereof
until paid at an annual rate equal to the minimum rate established pursuant to
Section 1274(d) of the Internal Revenue Code of 1986, as amended, as of the date
hereof, compounded annually. Principal and accrued interest will be due and
payable in lawful money of the United States in full on the three year
anniversary of the date of this Note (the "Maturity Date"), unless this Note
shall have been previously converted pursuant to Section 2 below, in which case
all outstanding principal under this Note and all accrued interest thereon shall
be satisfied in full by virtue of such conversion and the issuance and delivery
of fully paid and non-assessable shares of Conversion Stock to the holder of
this Note as set forth in Section 2 below. Payments by the Company shall be
applied first to any and all accrued interest through the payment date and
second to the principal remaining due hereunder.
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless
-----------
the context otherwise requires, have the following meanings:
<PAGE>
1.1 "Company" includes any corporation or other entity which succeeds
to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of the
Company of the same class of common stock that is registered by the Company
pursuant to an Initial Public Offering.
1.3 "Conversion Price" shall mean the price per share that is the
exact middle of the price range stated in the Company's final amended
registration statement on Form S-1, Form SB-1 or a similar successor form
pertaining to an Initial Public Offering that closes on before the Maturity
Date. No conversion shall occur and there is therefore no Conversion Price with
respect to an Initial Public Offering that closes after the Maturity Date.
1.4 "Noteholder," "holder," or similar terms, when the context refers
to a holder of this Note, shall mean any person who shall at the time be the
registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale of
Common Stock pursuant to a registration statement on Form S-1, Form SB-1 or SB-2
(or any similar or successor form) under the Securities Act of 1933, as amended,
for an underwritten initial public offering.
1.6 "Subordination Agreement" shall mean the Subordination Agreement
attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. This Note and all of the outstanding
--------------------
principal and accrued and unpaid interest on and under this Note shall be
converted into Conversion Stock at the Conversion Price immediately prior to the
first closing of an Initial Public Offering before the Maturity Date. For
informational purposes, the Company shall provide the Noteholder with written
notice (at the most recent address for the Noteholder provided to the Company by
the Noteholder in writing) (i) within seven days after it files with the
Securities and Exchange Commission any registration statement on Form S-1, Form
SB-1 or Form SB-2 (or any similar or successor form) for an Initial Public
Offering, and (ii) reasonably promptly following the closing of an Initial
Public Offering. Conversion as described in this Section 2.1 shall occur only
upon the closing of an Initial Public Offering, provided that (i) upon the
closing of an Initial Public Offering, the conversion shall be deemed to have
occurred immediately prior to the first closing of such Initial Public Offering,
and (ii) as a condition precedent or condition subsequent to conversion (the
election between which type of condition shall be the Company's sole election in
the Company's sole discretion), the Noteholder must surrender this Note for
conversion at the principal office of the Company. Incident to any conversion,
the Conversion Stock will have those rights and privileges, and be subject to
those restrictions, of the shares of Common Stock as set forth in the Company's
Certificate of Incorporation, and the Noteholder will receive the rights and be
subject to the obligations applicable to the purchasers of Common Stock,
provided that the sale restriction specified in Section 2.5 below shall apply to
the Conversion Stock. This
<PAGE>
Note shall not be convertible and shall not be converted into Conversion Stock
if there is not an Initial Public Offering on or before the Maturity Date.
2.2 No Fractional Shares. No fractional shares will be issued on
--------------------
conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of the applicable Conversion Price.
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government consents and approvals as may, in the reasonable opinion
of its counsel, be necessary to authorize the issuance of a sufficient number of
shares of Conversion Stock into which this Note is to convert pursuant to
Section 2.1 above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion Stock
-------------------------------
issued upon the conversion of this Note shall be validly issued, fully paid and
non-assessable. The certificates representing the shares of Conversion Stock
issued upon conversion hereof shall be delivered to the holder against surrender
of this Note. The holder, by accepting this Note, undertakes and agrees to
accept such shares of Conversion Stock in full satisfaction of the outstanding
principal and accrued interest thereon in accordance with the terms of this
Note. Anything to the contrary in this Note notwithstanding, the Company's
obligation to issue shares of Conversion Stock to any holder of this Note is
expressly conditioned upon compliance of such issuance with applicable federal
and state securities laws without registration or other qualification
thereunder.
2.5 Restriction on Sale. Upon and following any conversion pursuant
-------------------
to this Section 2, no holder of any Conversion Stock shall effect any sale or
distribution of any of the Conversion Stock (which shall include any and all
voting securities received by such holder as or in connection with a stock
dividend, stock split or other recapitalization or similar distribution on or in
respect of the Conversion Stock) or any of the Company's other equity
securities, or of any securities convertible into or exchangeable for such
securities, during the period beginning on the closing of the Initial Public
Offering and ending 180 days after such closing. [Ross Note only: Furthermore,
the Payee agrees that he shall not effect sales or distributions of the
Conversion Stock (which shall include any and all voting securities received by
such holder as or in connection with a stock dividend, stock split or other
recapitalization or similar distribution on or in respect of such Conversion
Stock) or the Company's other equity securities, or of any securities
convertible into or exchangeable for such securities, which sales or other
distributions would constitute: (a) more than 0% of the Conversion Stock or such
other securities prior to the six month anniversary of the issuance of the
Conversion Stock; (b) more than 25% of the Conversion Stock or such other
securities on or following the six month anniversary of the issuance of the
Conversion Stock but prior to the twelve month anniversary of the issuance of
the Conversion Stock; (c) more than 50% of the Conversion Stock or such other
securities on or following the twelve month anniversary of the issuance of the
Conversion Stock but prior to the 24 month anniversary of the issuance of the
Conversion Stock; and (d) more than 75% of the Conversion Stock or such other
securities on or following the 24 month anniversary of the issuance of the
Conversion Stock but prior to the 36 month anniversary of the issuance of the
Conversion Stock. On or following the 36 month anniversary of the issuance of
the Conversion Stock, such
<PAGE>
restrictions shall no longer apply.] The certificate(s) representing the shares
of Conversion Stock issued upon the conversion of this Note shall be legended to
reflect such restrictions on sale.
2.6 No Rights or Liabilities as Shareholder. This Note does not by
---------------------------------------
itself entitle the Noteholder to any voting rights or other rights as a
shareholder of the Company. In the absence of conversion of this Note, no
provisions of this Note, and no enumeration herein of the rights or privileges
of the holder shall cause such holder to be a shareholder of the Company for any
purpose by virtue hereof.
2.7 No Other Conversion. The conversion described in this Section 2
-------------------
shall constitute the sole methods by which this Note will convert.
3. Subordination. This Note and the indebtedness evidence by this
-------------
Note are subordinated to the prior payment in full of all or substantially all
other indebtedness of the Company pursuant to the terms of a Subordination
Agreement in the form attached hereto as Annex A and incorporated herein by
-------
reference.
4. Prepayment. This Note may be prepaid, in its entirety (including
----------
the principal sum and interest accrued to the date of payment) without penalty
or premium at any time after September 1, 2000; provided that prepayment cannot
take place after the Company has filed with the Securities and Exchange
Commission a registration statement on Form S-1, Form SB-1 or Form SB-2 (or any
similar or successor form) for an Initial Public Offering and for so long as any
such registration statement remains pending.
5. Usury Savings Clause. The Company and the Noteholder intend to
--------------------
comply at all times with applicable usury laws. If at any time such laws would
render usurious any amounts due under this Note under applicable law, then it is
the Company's and the Noteholder's express intention that the Company not be
required to pay interest on this Note at a rate in excess of the maximum lawful
rate, that the provisions of this Section 5 shall control over all other
provisions of this Note which may be in apparent conflict hereunder, that such
excess amount shall be immediately credited to the principal balance of this
Note (or, if this Note has been fully paid, refunded by the Noteholder to the
Company), and the provisions hereof shall immediately be reformed and the
amounts thereafter decreased, so as to comply with the then applicable usury
law, but so as to permit the recovery of the fullest amount otherwise due under
this Note.
6. General Provisions.
------------------
6.1 Notices. All notices and other communications required or
-------
permitted hereunder shall be effective upon receipt (or refusal of receipt) and
shall be in writing and delivered by depositing the same in United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, by delivering the same in person to
such party or to an officer or agent of such party (or in the case of the Payee
by facsimile), as follows:
(i) If mailed or delivered to the Company, to each of the
following, using two separate mailings or deliveries:
<PAGE>
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Anthony Capobianco, General Counsel
(ii) If mailed, delivered or faxed to the Payee, addressed or
faxed to him at the following address or fax number:
______________________________
______________________________
______________________________
Fax: __________________________
with a copy to:
Horwood Marcus & Berk Chartered
333 West Wacker Drive, Suite 2800
Chicago, IL 60606
Attn: Jeffrey A. Hechtman
Fax: (312) 606-3232
or to such other address (or in the case of the Payee, the fax number)
as any party hereto shall specify in writing to the other parties hereto
pursuant to this Section 6.1 from time to time. Such notice shall be effective
only upon actual receipt.
6.2 Severability; Headings. In case any provision of this Note shall be
----------------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
unless to do so would deprive the Noteholder or the Company of a substantial
part of its bargain. All headings used herein are used for convenience only and
shall not be used to construe or interpret this Note.
6.3 Noteholder Representations and Status. By accepting this Note, the
-------------------------------------
Payee and any other Noteholder each acknowledges, represents and warrants that
(i) this Note is being acquired for investment, solely for its own account and
not as a nominee for any other person or entity, and that it will not offer,
sell or otherwise dispose of this Note except as expressly permitted by this
Note and under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Securities Act"), and (ii) it is an
"accredited investor" with the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act.
6.4 Assignment. Neither this Note nor any right or obligation hereunder
----------
may be assigned or delegated by Payee without the prior written consent of
Company.
<PAGE>
Neither this Note nor any right or obligation hereunder may be assigned
or delegated by Company without the prior written consent of Payee, except
pursuant to a merger in which Company is a party, or pursuant to a sale or other
transfer of substantially all of the assets of Company. Any purported assignment
in violation of this paragraph shall be void.
6.5 Amendment; Waiver. Any provision of this Note may be amended or
-----------------
modified provision of this Note may be waived only by a writing signed by the
party against which enforcement of the change, waiver, discharge or termination
is sought.
6.6 Governing Law. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of
California, excluding that body of law applicable to conflicts of laws.
[The rest of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each party has caused this Note to be executed as
of the date first set forth above.
DOVEBID, INC.
By: /s/ Anthony Capobianco
------------------------------------
Name: Anthony Capobianco
Title: Vice President and General Counsel
Acknowledged and Agreed to:
/s/ Philip Pollack
- -----------------------------------
Philip Pollack
<PAGE>
EXHIBIT 10.22
Form of Convertible Subordinated Promissory Note
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR
ANY SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION OR OTHER
QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER
QUALIFICATION IS NOT REQUIRED.
DOVEBID, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$1,375,500 March 2, 2000
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at
1241 East Hillsdale Blvd., Foster City, CA 94404, for value received, promises
to pay to the order of Ross J. Pollack ("Payee") at such address as Payee may
designate, One Million Three Hundred and Seventy Five Thousand Dollars and No
Cents ($1,375,000), plus simple interest thereon calculated from the date hereof
until paid at an annual rate equal to the minimum rate established pursuant to
Section 1274(d) of the Internal Revenue Code of 1986, as amended, as of the date
hereof, compounded annually. Principal and accrued interest will be due and
payable in lawful money of the United States in full on the three year
anniversary of the date of this Note (the "Maturity Date"), unless this Note
shall have been previously converted pursuant to Section 2 below, in which case
all outstanding principal under this Note and all accrued interest thereon shall
be satisfied in full by virtue of such conversion and the issuance and delivery
of fully paid and non-assessable shares of Conversion Stock to the holder of
this Note as set forth in Section 2 below. Payments by the Company shall be
applied first to any and all accrued interest through the payment date and
second to the principal remaining due hereunder.
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless
-----------
the context otherwise requires, have the following meanings:
<PAGE>
1.1 "Company" includes any corporation or other entity which succeeds
to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of the
Company of the same class of common stock that is registered by the Company
pursuant to an Initial Public Offering.
1.3 "Conversion Price" shall mean the price per share that is the
exact middle of the price range stated in the Company's final amended
registration statement on Form S-1, Form SB-1 or a similar successor form
pertaining to an Initial Public Offering that closes on before the Maturity
Date. No conversion shall occur and there is therefore no Conversion Price with
respect to an Initial Public Offering that closes after the Maturity Date.
1.4 "Noteholder," "holder," or similar terms, when the context refers
to a holder of this Note, shall mean any person who shall at the time be the
registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale of
Common Stock pursuant to a registration statement on Form S-1, Form SB-1 or SB-2
(or any similar or successor form) under the Securities Act of 1933, as amended,
for an underwritten initial public offering.
1.6 "Subordination Agreement" shall mean the Subordination Agreement
attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. This Note and all of the outstanding
--------------------
principal and accrued and unpaid interest on and under this Note shall be
converted into Conversion Stock at the Conversion Price immediately prior to the
first closing of an Initial Public Offering before the Maturity Date. For
informational purposes, the Company shall provide the Noteholder with written
notice (at the most recent address for the Noteholder provided to the Company by
the Noteholder in writing) (i) within seven days after it files with the
Securities and Exchange Commission any registration statement on Form S-1, Form
SB-1 or Form SB-2 (or any similar or successor form) for an Initial Public
Offering, and (ii) reasonably promptly following the closing of an Initial
Public Offering. Conversion as described in this Section 2.1 shall occur only
upon the closing of an Initial Public Offering, provided that (i) upon the
closing of an Initial Public Offering, the conversion shall be deemed to have
occurred immediately prior to the first closing of such Initial Public Offering,
and (ii) as a condition precedent or condition subsequent to conversion (the
election between which type of condition shall be the Company's sole election in
the Company's sole discretion), the Noteholder must surrender this Note for
conversion at the principal office of the Company. Incident to any conversion,
the Conversion Stock will have those rights and privileges, and be subject to
those restrictions, of the shares of Common Stock as set forth in the Company's
Certificate of Incorporation, and the Noteholder will receive the rights and be
subject to the obligations applicable to the purchasers of Common Stock,
provided that the sale restriction specified in Section 2.5 below shall apply to
the Conversion Stock. This
<PAGE>
Note shall not be convertible and shall not be converted into Conversion Stock
if there is not an Initial Public Offering on or before the Maturity Date.
2.2 No Fractional Shares. No fractional shares will be issued on
--------------------
conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of the applicable Conversion Price.
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government consents and approvals as may, in the reasonable opinion
of its counsel, be necessary to authorize the issuance of a sufficient number of
shares of Conversion Stock into which this Note is to convert pursuant to
Section 2.1 above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion Stock
-------------------------------
issued upon the conversion of this Note shall be validly issued, fully paid and
non-assessable. The certificates representing the shares of Conversion Stock
issued upon conversion hereof shall be delivered to the holder against surrender
of this Note. The holder, by accepting this Note, undertakes and agrees to
accept such shares of Conversion Stock in full satisfaction of the outstanding
principal and accrued interest thereon in accordance with the terms of this
Note. Anything to the contrary in this Note notwithstanding, the Company's
obligation to issue shares of Conversion Stock to any holder of this Note is
expressly conditioned upon compliance of such issuance with applicable federal
and state securities laws without registration or other qualification
thereunder.
2.5 Restriction on Sale. Upon and following any conversion pursuant
-------------------
to this Section 2, no holder of any Conversion Stock shall effect any sale or
distribution of any of the Conversion Stock (which shall include any and all
voting securities received by such holder as or in connection with a stock
dividend, stock split or other recapitalization or similar distribution on or in
respect of the Conversion Stock) or any of the Company's other equity
securities, or of any securities convertible into or exchangeable for such
securities, during the period beginning on the closing of the Initial Public
Offering and ending 180 days after such closing. [Ross Note only: Furthermore,
the Payee agrees that he shall not effect sales or distributions of the
Conversion Stock (which shall include any and all voting securities received by
such holder as or in connection with a stock dividend, stock split or other
recapitalization or similar distribution on or in respect of such Conversion
Stock) or the Company's other equity securities, or of any securities
convertible into or exchangeable for such securities, which sales or other
distributions would constitute: (a) more than 0% of the Conversion Stock or such
other securities prior to the six month anniversary of the issuance of the
Conversion Stock; (b) more than 25% of the Conversion Stock or such other
securities on or following the six month anniversary of the issuance of the
Conversion Stock but prior to the twelve month anniversary of the issuance of
the Conversion Stock; (c) more than 50% of the Conversion Stock or such other
securities on or following the twelve month anniversary of the issuance of the
Conversion Stock but prior to the 24 month anniversary of the issuance of the
Conversion Stock; and (d) more than 75% of the Conversion Stock or such other
securities on or following the 24 month anniversary of the issuance of the
Conversion Stock but prior to the 36 month anniversary of the issuance of the
Conversion Stock. On or following the 36 month anniversary of the issuance of
the Conversion Stock, such
<PAGE>
restrictions shall no longer apply.] The certificate(s) representing the shares
of Conversion Stock issued upon the conversion of this Note shall be legended to
reflect such restrictions on sale.
2.6 No Rights or Liabilities as Shareholder. This Note does not by
---------------------------------------
itself entitle the Noteholder to any voting rights or other rights as a
shareholder of the Company. In the absence of conversion of this Note, no
provisions of this Note, and no enumeration herein of the rights or privileges
of the holder shall cause such holder to be a shareholder of the Company for any
purpose by virtue hereof.
2.7 No Other Conversion. The conversion described in this Section 2
-------------------
shall constitute the sole methods by which this Note will convert.
3. Subordination. This Note and the indebtedness evidence by this
-------------
Note are subordinated to the prior payment in full of all or substantially all
other indebtedness of the Company pursuant to the terms of a Subordination
Agreement in the form attached hereto as Annex A and incorporated herein by
-------
reference.
4. Prepayment. This Note may be prepaid, in its entirety (including
----------
the principal sum and interest accrued to the date of payment) without penalty
or premium at any time after September 1, 2000; provided that prepayment cannot
take place after the Company has filed with the Securities and Exchange
Commission a registration statement on Form S-1, Form SB-1 or Form SB-2 (or any
similar or successor form) for an Initial Public Offering and for so long as any
such registration statement remains pending.
5. Usury Savings Clause. The Company and the Noteholder intend to
--------------------
comply at all times with applicable usury laws. If at any time such laws would
render usurious any amounts due under this Note under applicable law, then it is
the Company's and the Noteholder's express intention that the Company not be
required to pay interest on this Note at a rate in excess of the maximum lawful
rate, that the provisions of this Section 5 shall control over all other
provisions of this Note which may be in apparent conflict hereunder, that such
excess amount shall be immediately credited to the principal balance of this
Note (or, if this Note has been fully paid, refunded by the Noteholder to the
Company), and the provisions hereof shall immediately be reformed and the
amounts thereafter decreased, so as to comply with the then applicable usury
law, but so as to permit the recovery of the fullest amount otherwise due under
this Note.
6. General Provisions.
------------------
6.1 Notices. All notices and other communications required or
-------
permitted hereunder shall be effective upon receipt (or refusal of receipt) and
shall be in writing and delivered by depositing the same in United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, by delivering the same in person to
such party or to an officer or agent of such party (or in the case of the Payee
by facsimile), as follows:
(i) If mailed or delivered to the Company, to each of the
following, using two separate mailings or deliveries:
<PAGE>
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Anthony Capobianco, General Counsel
(ii) If mailed, delivered or faxed to the Payee, addressed or
faxed to him at the following address or fax number:
______________________________
______________________________
______________________________
Fax: __________________________
with a copy to:
Horwood Marcus & Berk Chartered
333 West Wacker Drive, Suite 2800
Chicago, IL 60606
Attn: Jeffrey A. Hechtman
Fax: (312) 606-3232
or to such other address (or in the case of the Payee, the fax number)
as any party hereto shall specify in writing to the other parties hereto
pursuant to this Section 6.1 from time to time. Such notice shall be effective
only upon actual receipt.
6.2 Severability; Headings. In case any provision of this Note shall be
----------------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
unless to do so would deprive the Noteholder or the Company of a substantial
part of its bargain. All headings used herein are used for convenience only and
shall not be used to construe or interpret this Note.
6.3 Noteholder Representations and Status. By accepting this Note, the
-------------------------------------
Payee and any other Noteholder each acknowledges, represents and warrants that
(i) this Note is being acquired for investment, solely for its own account and
not as a nominee for any other person or entity, and that it will not offer,
sell or otherwise dispose of this Note except as expressly permitted by this
Note and under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Securities Act"), and (ii) it is an
"accredited investor" with the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act.
6.4 Assignment. Neither this Note nor any right or obligation hereunder
----------
may be assigned or delegated by Payee without the prior written consent of
Company.
<PAGE>
Neither this Note nor any right or obligation hereunder may be assigned
or delegated by Company without the prior written consent of Payee, except
pursuant to a merger in which Company is a party, or pursuant to a sale or other
transfer of substantially all of the assets of Company. Any purported assignment
in violation of this paragraph shall be void.
6.5 Amendment; Waiver. Any provision of this Note may be amended or
-----------------
modified provision of this Note may be waived only by a writing signed by the
party against which enforcement of the change, waiver, discharge or termination
is sought.
6.6 Governing Law. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of
California, excluding that body of law applicable to conflicts of laws.
[The rest of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each party has caused this Note to be executed as
of the date first set forth above.
DOVEBID, INC.
By: /s/ Anthony Capobianco
------------------------------------
Name: Anthony Capobianco
Title: Vice President and General Counsel
Acknowledged and Agreed to:
/s/ Ross J. Pollack
- -----------------------------------
Ross J. Pollack
<PAGE>
EXHIBIT 10.23
Form of Convertible Subordinated Promissory Note
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR
ANY SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION OR OTHER
QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER
QUALIFICATION IS NOT REQUIRED.
DOVEBID, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$1,425,000 March 2, 2000
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at
1241 East Hillsdale Blvd., Foster City, CA 94404, for value received, promises
to pay to the order of David S. Gronik, Jr. ("Payee") at such address as Payee
may designate, One Million Four Hundred Twenty-Five Thousand Dollars and No
Cents ($1,425,000), plus simple interest thereon calculated from the date hereof
until paid at an annual rate equal to the minimum rate established pursuant to
Section 1274(d) of the Internal Revenue Code of 1986, as amended, as of the date
hereof, compounded annually. Principal and accrued interest will be due and
payable in lawful money of the United States in full on the two year anniversary
of the date of this Note (the "Maturity Date"), unless this Note shall have been
previously converted pursuant to Section 2 below, in which case all outstanding
principal under this Note and all accrued interest thereon shall be satisfied in
full by virtue of such conversion and the issuance and delivery of fully paid
and non-assessable shares of Conversion Stock to the holder of this Note as set
forth in Section 2 below. Payments by the Company shall be applied first to any
and all accrued interest through the payment date and second to the principal
remaining due hereunder.
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless
-----------
the context otherwise requires, have the following meanings:
<PAGE>
1.1 "Company" includes any corporation or other entity which
succeeds to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of
the Company.
1.3 "Conversion Price" shall mean the price per share that is
the exact middle of the price range stated in the Company's final amended
registration statement on Form S-1, Form SB-1 or a similar successor form
pertaining to an Initial Public Offering that closes on or before the Maturity
Date. No conversion shall occur and there is therefore no Conversion Price with
respect to an Initial Public Offering that closes after the Maturity Date.
1.4 "Noteholder," "holder," or similar terms, when the context
refers to a holder of this Note, shall mean any person who shall at the time be
the registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale
of Common Stock pursuant to a registration statement on Form S-1, Form SB-1 or
SB-2 (or any similar or successor form) under the Securities Act of 1933, as
amended, for an underwritten initial public offering.
1.6 "Subordination Agreement" shall mean the Subordination
Agreement attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. This Note and all of the outstanding
--------------------
principal and accrued and unpaid interest on and under this Note shall be
converted into Conversion Stock at the Conversion Price immediately prior to the
first closing of an Initial Public Offering before the Maturity Date. For
informational purposes, the Company shall provide the Noteholder with written
notice (at the most recent address for the Noteholder provided to the Company by
the Noteholder in writing) (i) within seven days after it files with the
Securities and Exchange Commission any registration statement on Form S-1, Form
SB-1 or Form SB-2 (or any similar or successor form) for an Initial Public
Offering, and (ii) reasonably promptly following the closing of an Initial
Public Offering. Conversion as described in this Section 2.1 shall occur only
upon the closing of an Initial Public Offering, provided that (i) upon the
closing of an Initial Public Offering, the conversion shall be deemed to have
occurred immediately prior to the first closing of such Initial Public Offering,
and (ii) as a condition precedent or condition subsequent to conversion (the
election between which type of condition shall be the Company's sole election in
the Company's sole discretion), the Noteholder must surrender this Note for
conversion at the principal office of the Company. Incident to any conversion,
the Conversion Stock will have those rights and privileges, and be subject to
those restrictions, of the shares of Common Stock as set forth in the Company's
Certificate of Incorporation, and the Noteholder will receive the rights and be
subject to the obligations applicable to the purchasers of Common Stock,
provided that the sale restriction specified in Section 2.5 below shall apply to
the Conversion Stock. This Note shall not be convertible and shall not be
converted into Conversion Stock if there is not an Initial Public Offering on or
before the Maturity Date.
<PAGE>
2.2 No Fractional Shares. No fractional shares will be issued
--------------------
on conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of the applicable Conversion Price.
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government consents and approvals as may, in the reasonable opinion
of its counsel, be necessary to authorize the issuance of a sufficient number of
shares of Conversion Stock into which this Note is to convert pursuant to
Section 2.1 above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion
-------------------------------
Stock issued upon the conversion of this Note shall be validly issued, fully
paid and non-assessable. The certificates representing the shares of Conversion
Stock issued upon conversion hereof shall be delivered to the holder against
surrender of this Note. The holder, by accepting this Note, undertakes and
agrees to accept such shares of Conversion Stock in full satisfaction of the
outstanding principal and accrued interest thereon in accordance with the terms
of this Note. Anything to the contrary in this Note notwithstanding, the
Company's obligation to issue shares of Conversion Stock to any holder of this
Note is expressly conditioned upon compliance of such issuance with applicable
federal and state securities laws without registration or other qualification
thereunder.
2.5 Restriction on Sale. Upon and following any conversion
-------------------
pursuant to this Section 2, no holder of any Conversion Stock shall effect any
sale or distribution of any of the Conversion Stock (which shall include any and
all voting securities received by such holder as or in connection with a stock
dividend, stock split or other recapitalization or similar distribution on or in
respect of the Conversion Stock) or any of the Company's other equity
securities, or of any securities convertible into or exchangeable for such
securities, during the period beginning on the closing of the Initial Public
Offering and ending 180 days after such closing. The certificate(s) representing
the shares of Conversion Stock issued upon the conversion of this Note shall be
legended to reflect such restriction on sale.
2.6 No Rights or Liabilities as Shareholder. This Note does not
---------------------------------------
by itself entitle the Noteholder to any voting rights or other rights as a
shareholder of the Company. In the absence of conversion of this Note, no
provisions of this Note, and no enumeration herein of the rights or privileges
of the holder shall cause such holder to be a shareholder of the Company for any
purpose by virtue hereof.
2.7 No Other Conversion. The conversion described in this
-------------------
Section 2 shall constitute the sole methods by which this Note will convert.
3. Subordination. This Note and the indebtedness evidenced by
-------------
this Note are subordinated to all Senior Indebtedness of the Company pursuant to
the terms of a Subordination Agreement in the form attached hereto as Annex A
and incorporated herein by reference. -------
4. Prepayment. This Note may be prepaid, in its entirety
----------
(including the principal sum and interest accrued to the date of payment)
without penalty or premium at any time after September 1, 2000; provided that
prepayment cannot take place after the Company has
<PAGE>
filed with the Securities and Exchange Commission a registration statement on
Form S-1, Form SB-1 or Form SB-2 (or any similar or successor form) for an
Initial Public Offering and for so long as any such registration statement
remains pending.
5. Usury Savings Clause. The Company and the Noteholder intend to
--------------------
comply at all times with applicable usury laws. If at any time such laws would
render usurious any amounts due under this Note under applicable law, then it is
the Company's and the Noteholder's express intention that the Company not be
required to pay interest on this Note at a rate in excess of the maximum lawful
rate, that the provisions of this Section 5 shall control over all other
provisions of this Note which may be in apparent conflict hereunder, that such
excess amount shall be immediately credited to the principal balance of this
Note (or, if this Note has been fully paid, refunded by the Noteholder to the
Company), and the provisions hereof shall immediately be reformed and the
amounts thereafter decreased, so as to comply with the then applicable usury
law, but so as to permit the recovery of the fullest amount otherwise due under
this Note.
6. General Provisions.
------------------
6.1 Notices. All notices and other communications required or
-------
permitted hereunder shall be effective upon receipt (or refusal of receipt) and
shall be in writing and delivered by depositing the same in United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, by delivering the same in person to
such party or to an officer or agent of such party (or in the case of the Payee
by facsimile), as follows:
(i) If mailed or delivered to the Company, to each of the
following, using two separate mailings or deliveries:
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Anthony Capobianco, General Counsel
(ii) If mailed, delivered or faxed to the Payee, addressed or
faxed to him at the following address or fax number:
David S. Gronik, Jr.
7124 North Beach Drive
Fox Point, WI 53217
<PAGE>
Richard E. Schmitt
10111 North Range Line Road
Mequon, WI 53092
With a copy to:
O'Neil, Canon & Hollman, S.C.
111 East Wisconsin Avenue, Suite 1400
Milwaukee, WI 53202
Attn: James G. DeJong Fax No. (414) 276-6581
or to such other address (or in the case of the Payee, the fax number)
as any party hereto shall specify in writing to the other parties hereto
pursuant to this Section 6.1 from time to time. Such notice shall be effective
only upon actual receipt.
6.2 Severability; Headings. In case any provision of this Note
----------------------
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, unless to do so would deprive the Noteholder or the Company of
a substantial part of its bargain. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
6.3 Noteholder Representations and Status. By accepting this
-------------------------------------
Note, the Payee and any other Noteholder each acknowledges, represents and
warrants that (i) this Note is being acquired for investment, solely for its own
account and not as a nominee for any other person or entity, and that it will
not offer, sell or otherwise dispose of this Note except as expressly permitted
by this Note and under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Securities Act"), and (ii) he is an
"accredited investor" with the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act.
6.4 Assignment. Neither this Note nor any right or obligation
----------
hereunder may be assigned or delegated by Payee without the prior written
consent of Company. Neither this Note nor any right or obligation hereunder may
be assigned or delegated by Company without the prior written consent of Payee,
except pursuant to a merger in which Company is a party, or pursuant to a sale
or other transfer of substantially all of the assets of Company. Any purported
assignment in violation of this paragraph shall be void.
6.5 Amendment; Waiver. Any provision of this Note may be
-----------------
amended or modified only by a writing signed by both Company and Payee.
Compliance with any provision of this Note may be waived only by a writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
6.6 Governing Law. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding that body of law applicable to conflicts of laws.
[The rest of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each party has caused this Note to be executed as
of the date first set forth above.
DOVEBID, INC.
By: /s/ Anthony Capobianco
---------------------------------------
Name: Anthony Capobianco
Title: Vice President and General Counsel
Acknowledged and Agreed to:
/s/ David S. Gronik
- -----------------------------------------
David S. Gronik, Jr.
<PAGE>
EXHIBIT 10.24
Form of Convertible Subordinated Promissory Note
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR
ANY SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION OR OTHER
QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER
QUALIFICATION IS NOT REQUIRED.
DOVEBID, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$1,425,000 March 2, 2000
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at
1241 East Hillsdale Blvd., Foster City, CA 94404, for value received, promises
to pay to the order of Richard E. Schmitt ("Payee") at such address as Payee may
designate, One Million Four Hundred Twenty-Five Thousand Dollars and No Cents
($1,425,000), plus simple interest thereon calculated from the date hereof until
paid at an annual rate equal to the minimum rate established pursuant to Section
1274(d) of the Internal Revenue Code of 1986, as amended, as of the date hereof,
compounded annually. Principal and accrued interest will be due and payable in
lawful money of the United States in full on the two year anniversary of the
date of this Note (the "Maturity Date"), unless this Note shall have been
previously converted pursuant to Section 2 below, in which case all outstanding
principal under this Note and all accrued interest thereon shall be satisfied in
full by virtue of such conversion and the issuance and delivery of fully paid
and non-assessable shares of Conversion Stock to the holder of this Note as set
forth in Section 2 below. Payments by the Company shall be applied first to any
and all accrued interest through the payment date and second to the principal
remaining due hereunder.
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless
-----------
the context otherwise requires, have the following meanings:
<PAGE>
1.1 "Company" includes any corporation or other entity which
succeeds to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of
the Company.
1.3 "Conversion Price" shall mean the price per share that is
the exact middle of the price range stated in the Company's final amended
registration statement on Form S-1, Form SB-1 or a similar successor form
pertaining to an Initial Public Offering that closes on or before the Maturity
Date. No conversion shall occur and there is therefore no Conversion Price with
respect to an Initial Public Offering that closes after the Maturity Date.
1.4 "Noteholder," "holder," or similar terms, when the context
refers to a holder of this Note, shall mean any person who shall at the time be
the registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale
of Common Stock pursuant to a registration statement on Form S-1, Form SB-1 or
SB-2 (or any similar or successor form) under the Securities Act of 1933, as
amended, for an underwritten initial public offering.
1.6 "Subordination Agreement" shall mean the Subordination
Agreement attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. This Note and all of the outstanding
--------------------
principal and accrued and unpaid interest on and under this Note shall be
converted into Conversion Stock at the Conversion Price immediately prior to the
first closing of an Initial Public Offering before the Maturity Date. For
informational purposes, the Company shall provide the Noteholder with written
notice (at the most recent address for the Noteholder provided to the Company by
the Noteholder in writing) (i) within seven days after it files with the
Securities and Exchange Commission any registration statement on Form S-1, Form
SB-1 or Form SB-2 (or any similar or successor form) for an Initial Public
Offering, and (ii) reasonably promptly following the closing of an Initial
Public Offering. Conversion as described in this Section 2.1 shall occur only
upon the closing of an Initial Public Offering, provided that (i) upon the
closing of an Initial Public Offering, the conversion shall be deemed to have
occurred immediately prior to the first closing of such Initial Public Offering,
and (ii) as a condition precedent or condition subsequent to conversion (the
election between which type of condition shall be the Company's sole election in
the Company's sole discretion), the Noteholder must surrender this Note for
conversion at the principal office of the Company. Incident to any conversion,
the Conversion Stock will have those rights and privileges, and be subject to
those restrictions, of the shares of Common Stock as set forth in the Company's
Certificate of Incorporation, and the Noteholder will receive the rights and be
subject to the obligations applicable to the purchasers of Common Stock,
provided that the sale restriction specified in Section 2.5 below shall apply to
the Conversion Stock. This Note shall not be convertible and shall not be
converted into Conversion Stock if there is not an Initial Public Offering on or
before the Maturity Date.
<PAGE>
2.2 No Fractional Shares. No fractional shares will be issued
--------------------
on conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of the applicable Conversion Price.
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government consents and approvals as may, in the reasonable opinion
of its counsel, be necessary to authorize the issuance of a sufficient number of
shares of Conversion Stock into which this Note is to convert pursuant to
Section 2.1 above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion
-------------------------------
Stock issued upon the conversion of this Note shall be validly issued, fully
paid and non-assessable. The certificates representing the shares of Conversion
Stock issued upon conversion hereof shall be delivered to the holder against
surrender of this Note. The holder, by accepting this Note, undertakes and
agrees to accept such shares of Conversion Stock in full satisfaction of the
outstanding principal and accrued interest thereon in accordance with the terms
of this Note. Anything to the contrary in this Note notwithstanding, the
Company's obligation to issue shares of Conversion Stock to any holder of this
Note is expressly conditioned upon compliance of such issuance with applicable
federal and state securities laws without registration or other qualification
thereunder.
2.5 Restriction on Sale. Upon and following any conversion
-------------------
pursuant to this Section 2, no holder of any Conversion Stock shall effect any
sale or distribution of any of the Conversion Stock (which shall include any and
all voting securities received by such holder as or in connection with a stock
dividend, stock split or other recapitalization or similar distribution on or in
respect of the Conversion Stock) or any of the Company's other equity
securities, or of any securities convertible into or exchangeable for such
securities, during the period beginning on the closing of the Initial Public
Offering and ending 180 days after such closing. The certificate(s) representing
the shares of Conversion Stock issued upon the conversion of this Note shall be
legended to reflect such restriction on sale.
2.6 No Rights or Liabilities as Shareholder. This Note does not
---------------------------------------
by itself entitle the Noteholder to any voting rights or other rights as a
shareholder of the Company. In the absence of conversion of this Note, no
provisions of this Note, and no enumeration herein of the rights or privileges
of the holder shall cause such holder to be a shareholder of the Company for any
purpose by virtue hereof.
2.7 No Other Conversion. The conversion described in this
-------------------
Section 2 shall constitute the sole methods by which this Note will convert.
3. Subordination. This Note and the indebtedness evidenced by
-------------
this Note are subordinated to all Senior Indebtedness of the Company pursuant to
the terms of a Subordination Agreement in the form attached hereto as Annex A
and incorporated herein by reference. -------
4. Prepayment. This Note may be prepaid, in its entirety
----------
(including the principal sum and interest accrued to the date of payment)
without penalty or premium at any time after September 1, 2000; provided that
prepayment cannot take place after the Company has
<PAGE>
filed with the Securities and Exchange Commission a registration statement on
Form S-1, Form SB-1 or Form SB-2 (or any similar or successor form) for an
Initial Public Offering and for so long as any such registration statement
remains pending.
5. Usury Savings Clause. The Company and the Noteholder intend to
--------------------
comply at all times with applicable usury laws. If at any time such laws would
render usurious any amounts due under this Note under applicable law, then it is
the Company's and the Noteholder's express intention that the Company not be
required to pay interest on this Note at a rate in excess of the maximum lawful
rate, that the provisions of this Section 5 shall control over all other
provisions of this Note which may be in apparent conflict hereunder, that such
excess amount shall be immediately credited to the principal balance of this
Note (or, if this Note has been fully paid, refunded by the Noteholder to the
Company), and the provisions hereof shall immediately be reformed and the
amounts thereafter decreased, so as to comply with the then applicable usury
law, but so as to permit the recovery of the fullest amount otherwise due under
this Note.
6. General Provisions.
------------------
6.1 Notices. All notices and other communications required or
-------
permitted hereunder shall be effective upon receipt (or refusal of receipt) and
shall be in writing and delivered by depositing the same in United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, by delivering the same in person to
such party or to an officer or agent of such party (or in the case of the Payee
by facsimile), as follows:
(i) If mailed or delivered to the Company, to each of the
following, using two separate mailings or deliveries:
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Anthony Capobianco, General Counsel
(ii) If mailed, delivered or faxed to the Payee, addressed or
faxed to him at the following address or fax number:
David S. Gronik, Jr.
7124 North Beach Drive
Fox Point, WI 53217
<PAGE>
Richard E. Schmitt
10111 North Range Line Road
Mequon, WI 53092
With a copy to:
O'Neil, Canon & Hollman, S.C.
111 East Wisconsin Avenue, Suite 1400
Milwaukee, WI 53202
Attn: James G. DeJong Fax No. (414) 276-6581
or to such other address (or in the case of the Payee, the fax number)
as any party hereto shall specify in writing to the other parties hereto
pursuant to this Section 6.1 from time to time. Such notice shall be effective
only upon actual receipt.
6.2 Severability; Headings. In case any provision of this Note
----------------------
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, unless to do so would deprive the Noteholder or the Company of
a substantial part of its bargain. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
6.3 Noteholder Representations and Status. By accepting this
-------------------------------------
Note, the Payee and any other Noteholder each acknowledges, represents and
warrants that (i) this Note is being acquired for investment, solely for its own
account and not as a nominee for any other person or entity, and that it will
not offer, sell or otherwise dispose of this Note except as expressly permitted
by this Note and under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Securities Act"), and (ii) he is an
"accredited investor" with the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act.
6.4 Assignment. Neither this Note nor any right or obligation
----------
hereunder may be assigned or delegated by Payee without the prior written
consent of Company. Neither this Note nor any right or obligation hereunder may
be assigned or delegated by Company without the prior written consent of Payee,
except pursuant to a merger in which Company is a party, or pursuant to a sale
or other transfer of substantially all of the assets of Company. Any purported
assignment in violation of this paragraph shall be void.
6.5 Amendment; Waiver. Any provision of this Note may be
-----------------
amended or modified only by a writing signed by both Company and Payee.
Compliance with any provision of this Note may be waived only by a writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
6.6 Governing Law. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding that body of law applicable to conflicts of laws.
[The rest of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each party has caused this Note to be executed as
of the date first set forth above.
DOVEBID, INC.
By: /s/ Anthony Capobianco
---------------------------------------
Name: Anthony Capobianco
Title: Vice President and General Counsel
Acknowledged and Agreed to:
/s/ David S. Gronik Jr.
- -----------------------------------------
David S. Gronik Jr.
<PAGE>
EXHIBIT 10.25
Secured Full Recourse Promissory Note
-------------------------------------
Foster City, California
$1,579,200.00 November 30, 1999
- -------------
Reference is made to that certain Restricted Stock Purchase Agreement (the
"Purchase Agreement") of even date herewith, by and between the undersigned (the
"Purchaser") and Dovebid, Inc., a Delaware corporation (the "Company"), issued
to Purchaser. This Secured Full Recourse Promissory Note (the "Note") is being
tendered by Purchaser to the Company as part of the total purchase price of the
Shares (as defined below) pursuant to the Purchase Agreement.
1. Obligation. In exchange for the issuance to the Purchaser pursuant
----------
to the Purchase Agreement of 4,800,000 shares of the Company's Common Stock (the
"Shares"), receipt of which is hereby acknowledged, Purchaser hereby promises to
pay to the order of the Company on or before the fifth anniversary of the date
set forth above at the Company's principal place of business located at 1241 E.
Hillsdale Blvd., Foster City, California 94404, or at such other place as the
Company may direct, the principal sum of one million five hundred and seventy
nine thousand two hundred dollars ($1,579,200.00) together with interest
compounded monthly on the unpaid principal at the rate of 5.92%, which rate is
not less than the minimum rate established pursuant to Section 1274(d) of the
Internal Revenue Code of 1986, as amended, on the earliest date on which there
was a binding contract in writing for the purchase of the Shares; provided,
--------
however, that the rate at which interest will accrue on unpaid principal under
- -------
this Note will not exceed the highest rate permitted by applicable law. All
payments hereunder shall be made in lawful tender of the United States.
2. Security. Performance of Purchaser's obligations under this Note
--------
is secured by a security interest in the Shares granted to the Company by
Purchaser under a Stock Pledge Agreement dated of even date herewith between the
Company and Purchaser (the "Pledge Agreement")
3. Events of Default. Purchaser will be deemed to be in default under
-----------------
this Note upon the occurrence of any of the following events (each an "Event of
Default"): (i) upon Purchaser's failure to make any payment when due under this
Note; (iii) the failure of any representation or warranty in the Pledge
Agreement to have been true, the failure of Purchaser to perform any obligation
under the Pledge, or upon any other breach by the Purchaser of the Pledge
Agreement; (iv) any voluntary or involuntary transfer of any of the Shares or
any interest therein (except a transfer to the Company) without the Company's
consent; (v) upon the filing regarding the Purchaser of any voluntary or
involuntary petition for relief under the United States Bankruptcy Code or the
initiation of any proceeding under federal law or law of any other jurisdiction
for the general relief of debtors; or (vi) upon the execution by Purchaser of an
assignment for the benefit of creditors or the appointment of a receiver,
custodian, trustee or similar party to take possession of Purchaser's assets or
property.
4. Acceleration; Remedies On Default. Upon the occurrence of any
---------------------------------
Event of Default, at the option of the Company, all principal and other amounts
owed under this Note shall become immediately due and payable without notice or
demand on the part of the
<PAGE>
Company, and the Company will have, in addition to its rights and remedies under
this Note, the Pledge Agreement, full recourse against any real, personal,
tangible or intangible assets of Purchaser, and may pursue any legal or
equitable remedies that are available to it.
5. Rule 144 Holding Period. PURCHASER UNDERSTANDS THAT THE HOLDING
-----------------------
PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION
WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL
EITHER (i) THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY OTHER
PROPERTY ACCEPTED BY THE COMPANY, OR (ii) THIS NOTE IS SECURED BY COLLATERAL,
OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH, HAVING A FAIR
MARKET VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN OUTSTANDING
OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).
6. Prepayment. Prepayment of principal and/or other amounts owed
----------
under this Note may be made at any time without penalty. Unless otherwise agreed
in writing by the Company, each payment will be applied to the extent of
available funds from such payment in the following order: (i) first to the
accrued but unpaid interest, and (ii)then to the outstanding principal.
7. Governing Law; Waiver. The validity, construction and performance
---------------------
of this Note will be governed by the internal laws of the State of California,
excluding that body of law pertaining to conflicts of law. Purchaser hereby
waives presentment, notice of non-payment, notice of dishonor, protest, demand
and diligence.
8. Attorneys' Fees. If suit is brought for collection of this Note,
---------------
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date
and year first above written.
/s/ Jeffrey M. Crowe /s/ Jeffrey Crowe
- -------------------------------- ------------------------------------
Jeffrey M. Crowe Purchaser's Signature
[Signature page to Dovebid, Inc. Secured Full Recourse Promissory Note]
<PAGE>
EXHIBIT 10.26
Secured Full Recourse Promissory Note
-------------------------------------
Foster City, California
$ 230,300.00 November 30, 1999
- ------------
Reference is made to that certain Restricted Stock Purchase Agreement (the
"Purchase Agreement") of even date herewith, by and between the undersigned (the
"Purchaser") and Dovebid Inc., a Delaware corporation (the "Company"), issued to
Purchaser. This Secured Full Recourse Promissory Note (the "Note") is being
tendered by Purchaser to the Company as part of the total purchase price of the
Shares (as defined below) pursuant to the Purchase Agreement.
1. Obligation. In exchange for the issuance to the Purchaser
----------
pursuant to the Purchase Agreement of 700,000 shares of the Company's Common
Stock (the "Shares"), receipt of which is hereby acknowledged, Purchaser hereby
promises to pay to the order of the Company on or before the fifth anniversary
of the date set forth above at the Company's principal place of business located
at 1241 E. Hillsdale Blvd., Foster City, California 94404, or at such other
place as the Company may direct, the principal sum of two hundred and thirty
thousand three hundred dollars ($230,300.00) together with interest compounded
monthly on the unpaid principal at the rate of 5.92%, which rate is not less
than the minimum rate established pursuant to Section 1274(d) of the Internal
Revenue Code of 1986, as amended, on the earliest date on which there was a
binding contract in writing for the purchase of the Shares; provided, however,
-------- -------
that the rate at which interest will accrue on unpaid principal under this Note
will not exceed the highest rate permitted by applicable law. All payments
hereunder shall be made in lawful tender of the United States.
2. Security. Performance of Purchaser's obligations under this Note
--------
is secured by a security interest in the Shares granted to the Company by
Purchaser under a Stock Pledge Agreement dated of even date herewith between the
Company and Purchaser (the "Pledge Agreement")
3. Events of Default. Purchaser will be deemed to be in default
-----------------
under this Note upon the occurrence of any of the following events (each an
"Event of Default"): (i) upon Purchaser's failure to make any payment when due
under this Note; (iii) the failure of any representation or warranty in the
Pledge Agreement to have been true, the failure of Purchaser to perform any
obligation under the Pledge, or upon any other breach by the Purchaser of the
Pledge Agreement; (iv) any voluntary or involuntary transfer of any of the
Shares or any interest therein (except a transfer to the Company) without the
Company's consent; (v) upon the filing regarding the Purchaser of any voluntary
or involuntary petition for relief under the United States Bankruptcy Code or
the initiation of any proceeding under federal law or law of any other
jurisdiction for the general relief of debtors; or (vi) upon the execution by
Purchaser of an assignment for the
<PAGE>
benefit of creditors or the appointment of a receiver, custodian, trustee or
similar party to take possession of Purchaser's assets or property.
4. Acceleration; Remedies On Default. Upon the occurrence of any
---------------------------------
Event of Default, at the option of the Company, all principal and other amounts
owed under this Note shall become immediately due and payable without notice or
demand on the part of the Company, and the Company will have, in addition to its
rights and remedies under this Note, the Pledge Agreement, full recourse against
any real, personal, tangible or intangible assets of Purchaser, and may pursue
any legal or equitable remedies that are available to it.
5. Rule 144 Holding Period. PURCHASER UNDERSTANDS THAT THE HOLDING
-----------------------
PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION
WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL
EITHER (i) THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY OTHER
PROPERTY ACCEPTED BY THE COMPANY, OR (ii) THIS NOTE IS SECURED BY COLLATERAL,
OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH, HAVING A FAIR
MARKET VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN OUTSTANDING
OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).
6. Prepayment. Prepayment of principal and/or other amounts owed
----------
under this Note may be made at any time without penalty. Unless otherwise
agreed in writing by the Company, each payment will be applied to the extent of
available funds from such payment in the following order: (i) first to the
accrued but unpaid interest, and (ii) then to the outstanding principal.
7. Governing Law; Waiver. The validity, construction and
---------------------
performance of this Note will be governed by the internal laws of the State of
California, excluding that body of law pertaining to conflicts of law.
Purchaser hereby waives presentment, notice of non-payment, notice of dishonor,
protest, demand and diligence.
8. Attorneys' Fees. If suit is brought for collection of this Note,
---------------
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date
and year first above written.
/s/ Cory M. Ravid /s/ Cory M. Ravid
- ----------------------- --------------------------
Cory M. Ravid Purchaser's Signature
<PAGE>
[Signature page to Dovebid, Inc. Secured Full Recourse Promissory Note]
<PAGE>
EXHIBIT 10.27
SECURED FULL RECOURSE PROMISSORY NOTE
-------------------------------------
Foster City, California
$ 461,400.00 January 14, 2000
- ------------
Reference is made to that certain Notice of Exercise of Stock Option (the
"PURCHASE AGREEMENT" ) of even date herewith, by and between the undersigned
(the "PURCHASER" ) and Dovebid, Inc., a Delaware corporation (the "COMPANY"),
issued to Purchaser under the Company's 1999 Stock Option Plan. This Secured
Full Recourse Promissory Note (the "Note") is being tendered by Purchaser to the
Company as part of the total purchase price of the Shares (as defined below)
pursuant to the Purchase Agreement.
1. OBLIGATION. In exchange for the issuance to the Purchaser pursuant to
the Purchase Agreement of 600,000 shares of the Company's Common Stock (the
"SHARES"), receipt of which is hereby acknowledged, Purchaser hereby promises to
pay to the order of the Company on or before the fifth anniversary of the date
set forth above at the Company's principal place of business located at 1241 E.
Hillsdale Blvd., Foster City, California 94404, or at such other place as the
Company may direct, the principal sum of four hundred and sixty-one thousand
four hundred dollars ($461,400) together with interest compounded monthly on the
unpaid principal at the rate of 6.04%, which rate is not less than the minimum
rate established pursuant to Section 1274(d) of the Internal Revenue Code of
1986, as amended, on the earliest date on which there was a binding contract in
writing for the purchase of the Shares; provided, however, that the rate at
-------- -------
which interest will accrue on unpaid principal under this Note
will not exceed the highest rate permitted by applicable law. All payments
hereunder shall be made in lawful tender of the United States.
2. SECURITY. Performance of Purchaser's obligations under this Note is
secured by a security interest in the Shares granted to the Company by Purchaser
under a Stock Pledge Agreement dated of even date herewith between the Company
and Purchaser (the "PLEDGE AGREEMENT")
3. EVENTS' OF DEFAULT. Purchaser will be deemed to be in default under this
Note upon the occurrence of any of the following events (each an "EVENT OF
DEFAULT"): (i) upon Purchaser's failure to make any payment when due under this
Note; (iii) the failure of any representation or warranty in the Pledge
Agreement to have been true, the failure of Purchaser to perform any obligation
under the Pledge, or upon any other breach by the Purchaser of the Pledge
Agreement; (iv) any voluntary or involuntary transfer of any of the Shares or
any interest therein (except a transfer to the Company) without the Company's
consent; (v) upon the filing regarding the Purchaser of any voluntary or
involuntary petition for relief under the United States Bankruptcy Code or the
initiation of any proceeding under federal law or law of any other jurisdiction
for the general relief of debtors; or (vi) upon the execution by Purchaser of an
assignment for the benefit of creditors or the appointment of a receiver,
custodian, trustee or similar party to take possession of Purchaser's assets or
property.
<PAGE>
4. ACCELERATION REMEDIES ON DEFAULT. Upon the occurrence of any Event of
Default, at the option of the Company, all principal and other amounts owed
under this Note shall become immediately due and payable without notice or
demand on the part of the Company, and the Company will have, in addition to its
rights and remedies under this Note, the Pledge Agreement, full recourse against
any real, personal, tangible or intangible assets of Purchaser, and may pursue
any legal or equitable remedies that are available to it.
5. RULE 144 HOLDING PERIOD. PURCHASER UNDERSTANDS THAT THE HOLDING PERIOD
SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION WILL NOT
BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL EITHER (i)
THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY OTHER PROPERTY
ACCEPTED BY THE COMPANY, OR (ii) THIS NOTE IS SECURED BY COLLATERAL, OTHER THAN
THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH, HAVING A FAIR MARKET VALUE
AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN OUTSTANDING OBLIGATION UNDER
THIS NOTE (INCLUDING ACCRUED INTEREST).
6. PREPAYMENT. Prepayment of principal and/or other amounts owed under this
Note may be made at any time without penalty. Unless otherwise agreed in writing
by the Company, each payment will be applied to the extent of available funds
from such payment in the following order: (i) first to the accrued and unpaid
costs and expenses under the Note or the Pledge Agreement; (ii) then to the
accrued but unpaid interest, and (iii) lastly to the outstanding principal.
7. GOVERNING LAW; WAIVER. The validity, construction and performance of
this Note will be governed by the internal laws of the State of California,
excluding that body of law pertaining to conflicts of law. Purchaser hereby
waives presentment, notice of non-payment, notice of dishonor, protest, demand
and diligence.
8. ATTORNEYS' FEES. If suit is brought for collection of this Note,
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date and
year first above written.
By: /s/ Francis Juliano
-------------------
Francis Juliano
<PAGE>
EXHIBIT 10.28
SECURED FULL RECOURSE PROMISSORY NOTE
Foster City, California
$230,300.00 January 16, 2000
Reference is made to that certain Notice of Exercise of Stock Option (the
"PURCHASE AGREEMENT") of even date herewith, by and between the undersigned (the
"PURCHASER") and DoveBid, Inc., a Delaware corporation (the "COMPANY"), issued
to Purchaser under the Company's 1999 Stock Option Plan. This Secured Full
Recourse Promissory Note (the "NOTE") is being tendered by Purchaser to the
Company as part of the total purchase price of the Shares (as defined below)
pursuant to the Purchase Agreement.
1. OBLIGATION. In exchange for the issuance to the Purchaser pursuant to
the Purchase Agreement of 700,000 shares of the Company's Common Stock (the
"SHARES"), receipt of which is hereby acknowledged, Purchaser hereby promises to
pay to the order of the Company on or before the fifth anniversary of the date
set forth above at the Company's principal place of business located at 1241 E.
Hillsdale Blvd., Foster City, California 94404, or at such other place as the
Company may direct, the principal sum of two hundred and thirty thousand three
hundred dollars ($230,300) together with interest compounded monthly on the
unpaid principal at the rate of 6.04%, which rate is not less than the minimum
rate established pursuant to Section 1274(d) of the Internal Revenue Code of
1986, as amended, on the earliest date on which there was a binding contract in
writing for the purchase of the Shares; provided, however, that the rate at
which interest will accrue on unpaid principal under this Note will not exceed
the highest rate permitted by applicable law. All payments hereunder shall be
made in lawful tender of the United States.
2. SECURITY. Performance of Purchaser's obligations under this Note is
secured by a security interest in the Shares granted to the Company by
Purchaser under a Stock Pledge Agreement dated of even date herewith between the
Company and Purchaser (the "PLEDGE AGREEMENT")
3. EVENTS OF DEFAULT. Purchaser will be deemed to be in default under this
Note upon the occurrence of any of the following events (each an "EVENT OF
DEFAULT" ): (i) upon Purchaser's failure to make any payment when due under this
Note; (iii) the failure of any representation or warranty in the Pledge
Agreement to have been true, the failure of Purchaser to perform any obligation
under the Pledge, or upon any other breach by the Purchaser of the Pledge
Agreement; (iv) any voluntary or involuntary transfer of any of the Shares or
any interest therein (except a transfer to the Company) without the Company's
consent; (v) upon the filing regarding the Purchaser of any voluntary or
involuntary petition for relief under the United States Bankruptcy Code or the
initiation of any proceeding under federal law or law of any other jurisdiction
for the general relief of debtors; or (vi) upon the execution by Purchaser of an
assignment for the benefit of creditors or the appointment of a receiver,
custodian, trustee or similar party to take possession of Purchaser's assets or
property.
<PAGE>
4. ACCELERATION; REMEDIES ON DEFAULT. Upon the occurrence of any Event of
Default, at the option of the Company, all principal and other amounts owed
under this Note shall become immediately due and payable without notice or
demand on the part of the Company, and the Company will have, in addition to its
rights and remedies under this Note, the Pledge Agreement, full recourse against
any real, personal, tangible or intangible assets of Purchaser, and may pursue
any legal or equitable remedies that are available to it.
5. RULE 144 HOLDING PERIOD. PURCHASER UNDERSTANDS THAT THE HOLDING PERIOD
SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION WILL NOT
BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL EITHER (i)
THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY OTHER PROPERTY
ACCEPTED BY THE COMPANY, OR (ii) THIS NOTE IS SECURED BY COLLATERAL, OTHER THAN
THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH, HAVING A FAIR MARKET VALUE
AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN OUTSTANDING OBLIGATION UNDER
THIS NOTE (INCLUDING ACCRUED INTEREST).
6. PREPAYMENT. Prepayment of principal and/or other amounts owed under this
Note may be made at any time without penalty. Unless otherwise agreed in writing
by the Company, each payment will be applied to the extent of available funds
from such payment in the following order: (i) first to the accrued and unpaid
costs and expenses under the Note or the Pledge Agreement; (ii) then to the
accrued but unpaid interest, and (iii) lastly to the outstanding principal.
7. GOVERNING LAW WAIVER. The validity, construction and performance of this
Note will be governed by the internal laws of the State of California, excluding
that body of law pertaining to conflicts of law. Purchaser hereby waives
presentment, notice of non-payment, notice of dishonor, protest, demand and
diligence.
8. ATTORNEYS' FEES. If suit is brought for collection of this Note,
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date and
year first above written.
By: Steven Pollock By: /s/ Steven Pollock
------------------------------ --------------------------------
Steven Pollock Purchaser's Signature
<PAGE>
EXHIBIT 10.29
Secured Full Recourse Promissory Note
-------------------------------------
Foster City, California
$115,350.00 February 18, 2000
- -----------
Reference is made to that certain Notice of Exercise of Stock Option (the
"Purchase Agreement") of even date herewith, by and between the undersigned (the
"Purchaser") and DoveBid, Inc., a Delaware corporation (the "Company"), issued
to Purchaser under the Company's 1999 Stock Option Plan. This Secured Full
Recourse Promissory Note (the "Note") is being tendered by Purchaser to the
Company as part of the total purchase price of the Shares (as defined below)
pursuant to the Purchase Agreement.
1. Obligation. In exchange for the issuance to the Purchaser
----------
pursuant to the Purchase Agreement of 150,000 shares of the Company's Common
Stock (the "Shares"), receipt of which is hereby acknowledged, Purchaser hereby
promises to pay to the order of the Company on or before the fifth anniversary
of the date set forth above at the Company's principal place of business located
at 1241 E. Hillsdale Blvd., Foster City, California 94404, or at such other
place as the Company may direct, the principal sum of one hundred and fifteen
thousand three hundred fifty dollars ($115,350.00) together with interest
compounded monthly on the unpaid principal at the rate of 6.37%, which rate is
not less than the minimum rate established pursuant to Section 1274(d) of the
Internal Revenue Code of 1986, as amended, on the earliest date on which there
was a binding contract in writing for the purchase of the Shares; provided,
--------
however, that the rate at which interest will accrue on unpaid principal under
- ---------
this Note will not exceed the highest rate permitted by applicable law. All
payments hereunder shall be made in lawful tender of the United States.
2. Security. Performance of Purchaser's obligations under this Note
--------
is secured by a security interest in the Shares granted to the Company by
Purchaser under a Stock Pledge Agreement dated of even date herewith between the
Company and Purchaser (the "Pledge Agreement")
3. Events of Default. Purchaser will be deemed to be in default
-----------------
under this Note upon the occurrence of any of the following events (each an
"Event of Default"): (i) upon Purchaser's failure to make any payment when due
under this Note; (iii) the failure of any representation or warranty in the
Pledge Agreement to have been true, the failure of Purchaser to perform any
obligation under the Pledge, or upon any other breach by the Purchaser of the
Pledge Agreement; (iv) any voluntary or involuntary transfer of any of the
Shares or any interest therein (except a transfer to the Company) without the
Company's consent; (v) upon the filing regarding the Purchaser of any voluntary
or involuntary petition for relief under the United States Bankruptcy Code or
the initiation of any proceeding under federal law or law of any other
jurisdiction for the general relief of debtors; or (vi) upon the execution by
Purchaser of an assignment for the benefit of creditors or the appointment of a
receiver, custodian, trustee or similar party to take possession of Purchaser's
assets or property.
<PAGE>
4. Acceleration; Remedies On Default. Upon the occurrence of any
---------------------------------
Event of Default, at the option of the Company, all principal and other amounts
owed under this Note shall become immediately due and payable without notice or
demand on the part of the Company, and the Company will have, in addition to its
rights and remedies under this Note, the Pledge Agreement, full recourse against
any real, personal, tangible or intangible assets of Purchaser, and may pursue
any legal or equitable remedies that are available to it.
5. Rule 144 Holding Period. PURCHASER UNDERSTANDS THAT THE HOLDING
-----------------------
PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION
WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL
EITHER (i) THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY OTHER
PROPERTY ACCEPTED BY THE COMPANY, OR (ii) THIS NOTE IS SECURED BY COLLATERAL,
OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH, HAVING A FAIR
MARKET VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN OUTSTANDING
OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).
6. Prepayment. Prepayment of principal and/or other amounts owed
----------
under this Note may be made at any time without penalty. Unless otherwise agreed
in writing by the Company, each payment will be applied to the extent of
available funds from such payment in the following order: (i) first to the
accrued and unpaid costs and expenses under the Note or the Pledge Agreement;
(ii) then to the accrued but unpaid interest, and (iii) lastly to the
outstanding principal.
7. Governing Law; Waiver. The validity, construction and performance
---------------------
of this Note will be governed by the internal laws of the State of California,
excluding that body of law pertaining to conflicts of law. Purchaser hereby
waives presentment, notice of non-payment, notice of dishonor, protest, demand
and diligence.
8. Attorneys' Fees. If suit is brought for collection of this Note,
---------------
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date
and year first above written.
/s/ Anthony Capobianco /s/ Anthony Capobianco
- ------------------------------ ---------------------------------
Anthony Capobianco Purchaser's Signature
<PAGE>
EXHIBIT 10.30
Secured Full Recourse Promissory Note
-------------------------------------
Foster City, California
$299,800.00 February 23, 2000
- -----------
Reference is made to that certain Notice of Exercise of Stock Option (the
"Purchase Agreement") of even date herewith, by and between the undersigned (the
"Purchaser") and Dovebid, Inc., a Delaware corporation (the "Company"), issued
to Purchaser under the Company's 1999 Stock Option Plan. This Secured Full
Recource Promissory Note (the "Note") is being tendered by Purchaser to the
Company as part of the total purchase price of the Shares (as defined below)
pursuant to the Purchase Agreement.
1. Obligation. In exchange for the issuance to the Purchaser
----------
pursuant to the Purchase Agreement of 200,000 shares of the Company's Common
Stock (the "Shares"), receipt of which is hereby acknowledged, Purchaser hereby
promises to pay to the order of the Company on or before the fifth anniversary
of the date set forth above at the Company's principal place of
business located at 1241 E. Hillsdale Blvd., Foster City, California 94404, or
at such other place as the Company may direct, the principal sum of two hundred
ninety-nine thousand eight hundred dollars ($299,800.00) together with interest
compounded monthly on the unpaid principal at the rate of 6.73%, which rate is
not less than the minimum rate established pursuant to Section 1274(d) of the
Internal Revenue Code of 1986, as amended, on the earliest date on which there
was a binding contract in writing for the purchase of the Shares; provided,
--------
however, that the rate at which interest will accrue on unpaid principal under
- -------
this Note will not exceed the highest rate permitted by applicable law. All
payments hereunder shall be made in lawful tender of the United States.
2. Security. Performance of Purchaser's obligations under this Note
--------
is secured by a security interest in the Shares granted to the Company by
Purchaser under a Stock Pledge Agreement dated of even date herewith between the
Company and Purchaser (the "Pledge Agreement").
3. Events of Default. Purchaser will be deemed to be in default
-----------------
under this Note upon the occurrence of any of the following events (each an
"Event of Default"): (i) upon Purchaser's failure to make any payment when due
under this Note; (iii) the failure of any representation or warranty in the
Pledge Agreement to have been true, the failure of Purchaser to perform any
obligation under the Pledge, or upon any other breach by the Purchaser of the
Pledge Agreement; (iv) any voluntary or involuntary transfer of any of the
Shares or any interest therein (except a transfer to the Company) without the
Company's consent; (v) upon the filing regarding the Purchaser of any voluntary
or involuntary petition for relief under the United States Bankruptcy Code or
the initiation of any proceeding under federal law or law of any other
jurisdiction for the general relief of debtors; or (vi) upon the execution by
Purchaser of an assignment for the benefit of creditors or the appointment of a
receiver, custodian, trustee or similar party to take possession of Purchaser's
assets or property.
<PAGE>
4. Acceleration; Remedies on Default. Upon the occurrence of any
---------------------------------
Event of Default, at the option of the Company, all principal and other amounts
owed under this Note shall become immediately due and payable without notice or
demand on the part of the Company, and the Company will have, in addition to its
rights and remedies under this Note, the Pledge Agreement, full recourse against
any real, personal, tangible or intangible assets of Purchaser, and may pursue
any legal or equitable remedies that are available to it.
5. Rule 144 Holding Period. PURCHASER UNDERSTANDS THAT THE HOLDING
-----------------------
PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION
WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL
EITHER (i) THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY OTHER
PROPERTY ACCEPTED BY THE COMPANY, OR (ii) THIS NOTE IS SECURED BY COLLATERAL,
OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH, HAVING A FAIR
MARKET VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN OUTSTANDING
OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).
6. Prepayment. Prepayment of principal and/or other amounts owed
----------
under this Note may be made at any time without penalty. Unless otherwise agreed
in writing by the Company, each payment will be applied to the extent of
available funds from such payment in the following order: (i) first to the
accrued and unpaid costs and expenses under the Note or the Pledge Agreement;
(ii) then to the accrued but unpaid interest, and (iii) lastly to the
outstanding principal.
7. Governing Law; Waiver. The validity, construction and
---------------------
performance of this Note will be governed by the internal laws of the State of
California, excluding that body of law pertaining to conflicts of law. Purchaser
hereby waives presentment, notice of non-payment, notice of dishonor, protest,
demand and diligence.
8. Attorney's Fees. If suit is brought for collection of this Note,
---------------
Purchaser agrees to pay all reasonable expenses, including attorney's fees,
incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date
and year first above written.
Dennis Polk By: /s/ Dennis Polk
- ------------------------------- ----------------------------------
Dennis Polk Purchaser's Signature
<PAGE>
Exhibit 10.31
SECURED FULL RECOURSE PROMISSORY NOTE
Foster City, California
$ 538,300.00 January 14, 2000
Reference is made to that certain Notice of Exercise of Stock Option (the
"PURCHASE AGREEMENT") of even date herewith, by and between the undersigned (the
"PURCHASER") and Dovebid, Inc., a Delaware corporation (the "Company"), issued
to Purchaser under the Company's 1999 Stock Option Plan. This Secured Full
Recourse Promissory Note (the "Note") is being tendered by Purchaser to the
Company as part of the total purchase price of the Shares (as defined below)
pursuant to the Purchase Agreement.
1. OBLIGATION. In exchange for the issuance to the Purchaser pursuant to
the Purchase Agreement of 700,000 shares of the Company's Common Stock (the
"SHARES"), receipt of which is hereby acknowledged, Purchaser hereby promises to
pay to the order of the Company on or before the fifth anniversary of the date
set forth above at the Company's principal place of business located at 1241 E.
Hillsdale Blvd., Foster City, California 94404, or at such other place as the
Company may direct, the principal sum of five hundred and thirty-eight, thousand
three hundred dollars ($538,300) together with interest compounded monthly on
the unpaid principal at the rate of 6.04%, which rate is not less than the
minimum rate established pursuant to Section 1274(d) of the Internal Revenue
Code of 1986. as amended, on the earliest date on which there was a binding
contract in writing for the purchase of the Shares; provided, however, that the
rate at which interest will accrue on unpaid principal under this Note will not
exceed the highest rate permitted by applicable law. All payments hereunder
shall be made in lawful tender of the United States.
2. SECURITY. Performance of Purchaser's obligations under this Note is
secured by a security interest in the Shares granted to the Company by
Purchaser under a Stock Pledge Agreement dated of even date herewith between the
Company and Purchaser (the "PLEDGE AGREEMENT")
3. EVENTS OF DEFAULT. Purchaser will be deemed to be in default under this
Note upon the occurrence of any of the following events (each an "EVENT OF
DEFAULT"): (i) upon Purchaser's failure to make any payment when due under this
Note; (iii) the failure of any representation or warranty in the Pledge
Agreement to have been true, the failure of Purchaser to perform any obligation
under the Pledge, or upon any other breach by the Purchaser of the Pledge
Agreement; (iv) any voluntary or involuntary transfer of any of the Shares or
any interest therein (except a transfer to the Company) without the Company's
consent; (v) upon the filing regarding the Purchaser of any voluntary or
involuntary petition for relief under the United States Bankruptcy Code or the
initiation of any proceeding under federal law or law of any other jurisdiction
for the general relief of debtors; or (vi) upon the execution by Purchaser of an
assignment for the benefit of creditors or the appointment of a receiver,
custodian, trustee or similar party to take possession of Purchaser's assets or
property.
<PAGE>
4. ACCELERATION: REMEDIES ON DEFAULT. Upon the occurrence of any Event of
Default, at the option of the Company, all principal and other amounts owed
under this Note shall become immediately due and payable without notice or
demand on the part of the Company, and the Company will have, in addition to its
rights and remedies under this Note, the Pledge Agreement, full recourse against
any real, personal, tangible or intangible assets of Purchaser, and may pursue
any legal or equitable remedies that are available to it.
5. RULE 144 HOLDING PERIOD. PURCHASER UNDERSTANDS THAT THE HOLDING PERIOD
SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION WILL NOT
BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL EITHER (i)
THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY OTHER PROPERTY
ACCEPTED BY THE COMPANY, OR (ii) THIS NOTE IS SECURED BY COLLATERAL, OTHER THAN
THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH, HAVING A FAIR MARKET VALUE
AT LEAST EQUAL TO THE AMOUNT OF PURCHASERS THEN OUTSTANDING OBLIGATION UNDER
THIS NOTE (INCLUDING ACCRUED INTEREST).
6. PREPAYMENT. Prepayment of principal and/or other amounts owed under this
Note may be made at any time without penalty. Unless otherwise agreed in writing
by the Company, each payment will be applied to the extent of available funds
from such payment in the following order: (i) first to the accrued and unpaid
costs and expenses under the Note or the Pledge Agreement; (ii) then to the
accrued but unpaid interest, and (iii) lastly to the outstanding principal.
7. GOVERNING LAW; WAIVER. The validity, construction and performance of
this Note will be governed by the internal laws of the State of California,
excluding that body of law pertaining to conflicts of law. Purchaser hereby
waives presentment, notice of non-payment, notice of dishonor, protest, demand
and diligence.
8. ATTORNEYS' FEES. If suit is brought for collection of this Note,
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date and
year first above written.
By: James Hume By: /s/ James Hume
---------------------------------- ----------------------------------
James Hume Purchaser's Signature
<PAGE>
*Confidential treatment has been requested with respect to certain information
contained in this document. Confidential portions have been omitted from the
public filing and have been filed separately with the Securities and Exchange
Commission.
EXHIBIT 10.32
ADVERTISING AND PROMOTION AGREEMENT
This Advertising and Promotion Agreement (the "Agreement") is entered into as of
March 8, 2000 (the "Effective Date") between Yahoo! Inc. ("Yahoo"), a Delaware
corporation with offices at 3420 Central Expressway, Santa Clara, CA 95051, and
DoveBid Incorporated ("DoveBid") a Delaware corporation with offices at 1241
East Hillsdale Blvd., Foster City, California 94404.
In consideration of the mutual promises contained in this Agreement, Yahoo
and DoveBid hereby agree as follows:
1. Definitions.
-----------
The following terms are used in this Agreement with the respective
meanings set forth below:
"Affiliate" shall mean any company or any other entity world-wide in which
---------
Yahoo owns at least a twenty percent ownership, equity, or financial interest,
including, without limitation, corporations, partnerships, joint ventures, and
limited liability companies.
"Anchor Tenant Module" means an advertising unit that conforms to the
--------------------
specifications of the DoveBid Anchor Tenant Module.
"Business to Business Merchant" means a company or other entity that
-----------------------------
derives at least 50% of its revenue from the on-line sale of
industrial/commercial equipment to other businesses.
"Co-Branded Banner" means an advertising unit designed and created by
-----------------
Yahoo, that (a) promotes the Yahoo B2B Site; (b) contains DoveBid Brand Features
and Yahoo Brand Features and other content all subject to DoveBid's approval not
to be unreasonably withheld; (c) has dimensions no larger than 468 pixels wide
by 60 pixels high; (d) does not contain animation longer than 6 seconds; (e)
does not contain "looped" animation; (f) has a file size no greater than 15K;
and (g) permits users to navigate directly to the Yahoo B2B Site.
"Co-Branded Button" means an advertising unit designed and created by
-----------------
Yahoo, that (a) promotes the Yahoo B2B Site; (b) contains DoveBid Brand Features
and Yahoo Brand Features and other content all subject to DoveBid's approval not
to be unreasonably withheld; (c) has dimensions no larger than 88 pixels wide by
31 pixels high; (d) contains three lines of text each line that is no more than
16 characters in length, including spaces; (e) does not contain
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
<PAGE>
animation; (f) has a file size no greater than 4K; and (g) permits users to
navigate directly to the Yahoo B2B Site.
"DoveBid Anchor Tenant Module" means an advertising unit substantially
----------------------------
similar in form to the example set forth in Exhibit A that (a) promotes
---------
DoveBid's business to business on-line auction service; (b) contains DoveBid
Brand Features; (c) contains an image in .GIF or .JPG format that is no larger
than 170 pixels wide by 35 pixels high and has no more than 125 characters,
including spaces; (e) contains 3 bullet points then text where each line is no
more than 28 characters, including spaces; (g) does not contain animation; (h)
has a file size no greater than 4K; and (i) permits users to navigate directly
to a Page on the DoveBid Site primarily related to the on-line purchase of the
industrial/commerical equipment promoted in the DoveBid Anchor Tenant Module.
"DoveBid Banner" means an advertising unit designed and created by DoveBid,
--------------
subject to Yahoo's approval not to be unreasonably withheld, that (a) promotes
the on-line sale of industrial/commercial equipment by DoveBid; (b) contains
DoveBid Brand Features; (c) has dimensions no larger than 468 pixels wide by 60
pixels high; (d) does not contain animation longer than 6 seconds; (e) does not
contain "looped" animation; (f) has a file size no greater than 15K; and (g)
permits users to navigate directly to a Page on the DoveBid Site or a DoveBid
Subsidiary Site dedicated to on-line sale of industrial/commercial equipment.
For example, the keyword "agricultural machinery" must link to a Page on the
DoveBid Site or a DoveBid Subsidiary Site that will be dedicated to the online
purchase "agricultural machinery".
"DoveBid Banner Category Pages" means those Pages identified on Exhibit B
----------------------------- ---------
provided that, Yahoo may substitute any Pages for comparable placement due to
changes in the directory or applicable Yahoo Property. Upon written notice to
DoveBid of such changes, Exhibit B will be deemed to be so amended.
---------
"DoveBid Banner Keywords" means those keywords identified on Exhibit C of
----------------------- ----------
this Agreement; provided that, Yahoo may substitute any such keyword for a
comparable keyword that is reasonably approved by DoveBid.
"DoveBid Banner Search Results Pages" means those pages displayed upon a
-----------------------------------
user's search request on the Yahoo Main Site for a DoveBid Banner Keyword. For
clarity, a search conducted within other Yahoo Properties that include special
subject matter based search engines (e.g., Yahoo Auctions, Yahoo Classifieds,
Yahoo Clubs, Yahoo News, Yahoo Shopping, Yahoo Yellow Pages) will not be
considered a search of the Yahoo Main Site for purposes of this definition.
"DoveBid Banner Pages" means (a) the DoveBid Banner Category Pages and (b)
--------------------
the DoveBid Banner Search Results Pages.
"DoveBid Brand Features" means all trademarks, service marks, logos and
----------------------
other distinctive brand features of DoveBid that are used in or relate to its
business.
"DoveBid Button" means an advertising unit designed and created by DoveBid,
--------------
subject to Yahoo's approval not to be unreasonably withheld, that (a) contains
DoveBid Brand Features; (b) has dimensions no larger than 88 pixels wide by 31
pixels high;
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
2
<PAGE>
(c) contains three lines of text each line that is no more than 16 characters in
length, including spaces; (d) does not contain animation; (e) has a file size no
greater than 4K; and (f) permits users to navigate directly to a Page on the
DoveBid Site or on a DoveBid Subsidiary dedicated to the on-line sale of
industrial/ commercial equipment. For example, the keyword "agricultural
machinery" must link to a page on DoveBid's Site or a DoveBid Subsidiary Site
that will be dedicated to the online purchase "agricultural machinery".
"DoveBid Button Category Pages" means those Pages identified on Exhibit B
----------------------------- ---------
provided that, Yahoo may substitute any Pages for comparable placement due to
changes in the directory or applicable Yahoo Property. Upon written notice to
DoveBid of such changes, Exhibit B will be deemed to be so amended.
---------
"DoveBid Button Keywords" means those keywords identified on Exhibit D of
----------------------- ----------
this Agreement; provided that, Yahoo may substitute any such keyword for a
comparable keyword that is reasonably approved by DoveBid.
"DoveBid Button Pages" means (a) the DoveBid Button Category Pages and (b)
--------------------
the DoveBid Button Search Results Pages.
"DoveBid Button Search Results Pages" means those pages displayed upon a
-----------------------------------
user's search request on the Yahoo Main Site for a DoveBid Button Keyword. For
clarity, a search conducted within other Yahoo Properties that include special
subject matter based search engines (e.g., Yahoo Auctions, Yahoo Classifieds,
Yahoo Clubs, Yahoo News, Yahoo Shopping, Yahoo Yellow Pages) will not be
considered a search of the Yahoo Main Site for purposes of this definition.
"DoveBid Content" means all listings data included on the DoveBid Site or
---------------
any DoveBid Subsidiary Site, including, without limitation, product names,
product descriptions, quantity, shipping information, images, manufacturer
and/or distributor names, price information, and URLs.
"DoveBid E-Mail Message" means an electronic mail message that (a) promotes
----------------------
the on-line sale of industrial/commercial equipment by DoveBid; (b) conforms to
Yahoo Delivers' then current guidelines; (c) is a single HTML message that does
not exceed 425 pixels in width, which Yahoo will enclose within a table and
place between the required header and footer information; (d) contains no more
than 28 lines of text with no more than 68 characters per line and a maximum of
6 URLs, (e) consists of HTML code that is free of errors and passes the weblint
validation checker or a similar validation process; (f) has a total file size,
including HTML code and graphics, no larger than 30K; (g) does not contain more
than six images, (h) does not contain animation longer than 6 seconds; (i) does
not contain "looped" animation; (i) does not contain Java, JavaScript, frames,
ActiveX or dynamic HTML; (j) does not have body background image or color,
except that colored tables may be used to simulate a background color; (k)
addresses users as Yahoo Delivers members (e.g., "An exclusive offer for Yahoo!
Delivers members."); (l) has a subject line that contains no more than 45
characters, including spaces, and substantially conforms to the following
format: "Yahoo! Delivers: A Special Offer from DoveBid."; and (m) permits users
to navigate directly to a Page on the DoveBid Site or
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
3
<PAGE>
DoveBid Subsidiary Site dedicated to the on-line purchase of
industrial/commercial equipment promoted in the DoveBid E-Mail Message.
"DoveBid Link" means any Link placed by Yahoo under this Agreement,
------------
including but not limited to the DoveBid Banner, the DoveBid Button, the DoveBid
E-Mail Message, Yahoo Mail Logout Button, Yahoo Mail Welcome Button and the
DoveBid Anchor Tenant Module.
"DoveBid Site" means the Web site owned or operated on behalf of DoveBid
------------
dedicated to business to business on-line auction service and is currently
located at http://www.dovebid.com.
"DoveBid Subsidiary" means an entity wholly owned by DoveBid dedicated to
------------------
business to business on-line auction services.
"DoveBid Subsidiary Site" means the Web site owned or operated on behalf of
-----------------------
a DoveBid Subsidiary to which a user is directed from a DoveBid Link and that is
dedicated to business to business on-line auction services.
"Front Page Promotion" means a link that (i) has dimensions no greater than
--------------------
230 pixels wide by 33 pixels tall, (ii) does not contain "looped" animation,
(iii) does not have any animation longer than 6 seconds, (iv) promotes DoveBid's
business to business auction services, (v) has a file size no greater than 3K,
(vi) contains DoveBid Brand Features on banners and jump page, and (vii) links
directly to a jump page on Yahoo or the DoveBid Site [or DoveBid Subsidiary
Site mutually approved by the parties, where a prominent, above the fold image
relevant to the promotion, measuring no less than 280,080 pixels, is displayed
and (viii) contains a sweepstakes with a price value of $10,000 or more.
"FTC Order" means that certain "Decision and Consent Order" issued by the
---------
U.S. Federal Trade Commission on February 5, 1999 against GeoCities, Inc., a
California corporation acquired by Yahoo, attached hereto as Exhibit G and any
---------
and all subsequent or related official materials, regulations, laws, judgments
or orders.
"Launch Date" means the date that the Yahoo B2B Site is publicly available
-----------
and the DoveBid Anchor Tenant Module is placed on the front Page of the Yahoo
B2B Site in accordance with the terms of this Agreement, except that in the
event of any failure or delay on the part of DoveBid, the Launch Date will be
deemed the date that the Yahoo B2B Site is otherwise functional and available to
the public.
"Link" or "link" means a visible graphic or textual indicator located
---- ----
within a Page that permits a user to navigate the World Wide Web; when selected
by a user, this indicator directs the user's internet browser connection onward
to a specified Page on the same or any other Web site via a URL (whether
perceptible or not) and establishes a direct connection between the browser and
the new Page.
"Page" means any World Wide Web page (or, for on-line media other than Web
----
sites, the equivalent unit of the relevant protocol).
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
4
<PAGE>
"Page View" means a user's request for a Page as measured by Yahoo's
---------
advertising reporting system.
"Run of Network" means banner placements in the north banner position
--------------
across the Yahoo Properties.
"Second Payment Date" means the date described in Section 4.2.
-------------------
"Term" means the period beginning on the Effective Date and continuing for
----
[*] from the Launch Date, unless either party terminates this Agreement in
accordance with Sections 5.6, 5.7 or 10.
"Yahoo B2B Site" means that U.S. targeted Yahoo Property that Yahoo intends
--------------
to develop (currently intended to be named Yahoo Marketplace) that is dedicated
to business to business commerce (currently intended to be located at
http://[email protected]).
"Yahoo Brand Features" means all trademarks, service marks, logos and other
--------------------
distinctive brand features of Yahoo that are used in or relate to its business.
"Yahoo Competitors" means [*] and their successors in interest, wholly-
-----------------
owned subsidiaries, acquisitions and acquirers.
"Yahoo Delivers" means Yahoo's U.S. targeted direct marketing program
--------------
conducted via Yahoo Mail.
"Yahoo Mail" means Yahoo's U.S. targeted electronic mail property,
----------
currently located at http://mail.yahoo.com.
"Yahoo Mail Logout Button" means a link that contains (a) a DoveBid logo
------------------------
with dimensions no larger than 88 pixels wide by 31 pixels high, (b) has a file
size of no greater than 2K, (c) contains a pull down menu with a file size of no
more than 1.35K and no more than 5 options, (d) a maximum of twenty five
characters per line (including spaces), and (e) each character url may not
exceed 200 characters in each redirect url.
"Yahoo Mail Welcome Button" means a link that contains (a) a DoveBid logo
-------------------------
with dimensions no larger than 88 pixels wide by 31 pixels high, (b) has a file
size of no greater than 2K, (c) contains two lines of text; (d) each line of
text containing no more than twenty five characters (including spaces), and (e)
does not contain any animation.
"Yahoo Main Site" means Yahoo's principal U.S. targeted directory to the
---------------
World Wide Web currently located at http://www.yahoo.com.
"Yahoo Properties" means any Yahoo branded or co-branded media properties,
----------------
including but not limited to Internet guides, that are developed in whole or in
part by Yahoo or its Affiliates.
2. DoveBid Banners, Buttons and Modules.
------------------------------------
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
5
<PAGE>
2.1 Yahoo will provide the DoveBid Banner on the DoveBid Banner
Pages, on a rotating basis until its Page View obligation under
Section 8.1 is met.
2.2 Yahoo will provide the DoveBid Button on the DoveBid Button
Pages, the Yahoo Mail Logout Button on the logout page of Yahoo
Mail, and the Yahoo Mail Welcome Button on the welcome Page of
Yahoo Mail, all on a rotating basis until its Page View
obligation under Section 8.1 is met.
2.3 Yahoo will provide the DoveBid Anchor Tenant Module on the front
Page of the Yahoo B2B Site on an [*] rotation with the [*] other
Anchor Tenant Modules. Yahoo will also provide the DoveBid Anchor
Tenant Module on a rotating basis on those category Pages and
subcategory Pages of the Yahoo B2B Site set forth in Exhibit E.
---------
The DoveBid Anchor Tenant Module will be placed on [*] of the
aggregate category Pages and subcategory Pages of the Yahoo B2B
Site. Subject to the limitations set forth in Section 8.1,
DoveBid will have the opportunity to substitute or to request
additional category Pages and subcategory Pages in the Yahoo B2B
Site to maximize DoveBid's placement within those areas of the
Yahoo B2B Site that correspond to listings that appear on
DoveBid's online auction services business; provided that (a) the
distribution will be fairly equivalent over every calendar
quarter during the Term (e.g., DoveBid may not request a
substitution or reallocation that results in moving the [*] of
the total category and subcategory Pages to be delivered entirely
in a future calendar quarter), and (b) all substitutions or
additions are subject to availability and Yahoo's approval(not to
be unreasonably withheld).
3. DoveBid E-Mail Message.
----------------------
3.1 Yahoo will deliver [*] DoveBid E-Mail Messages to those
registered Yahoo Mail users who have indicated in their Yahoo
Mail preferences a willingness to receive promotional offers via
Yahoo Delivers. Yahoo will deliver the DoveBid E-Mail Message in
accordance with Yahoo's privacy policy.
3.2 DoveBid will provide to Yahoo all text of the DoveBid E-Mail
Message and any other materials necessary for DoveBid to
participate in Yahoo Delivers. Such materials will be (a) subject
to Yahoo's approval, which will not be unreasonably withheld, and
(b) consistent with Yahoo's policies and guidelines for such
messages and for Yahoo Delivers generally.
4. Promotion of the Yahoo B2B Site.
-------------------------------
4.1 Yahoo shall promote the Yahoo B2B Site by placing advertising
placements created by Yahoo on certain Yahoo Properties as
determined in Yahoo's sole discretion. Such Yahoo Properties may
include but are not limited to the following: [*]
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
6
<PAGE>
The type, timing and placement of these advertising placements
shall be at Yahoo's reasonable discretion.
4.2 Yahoo agrees to provide advertising placements promoting the
Yahoo B2B Site on the front Page of Yahoo! Auctions and the front
Page of Yahoo! Small Business. DoveBid's second payment under
Section 9.1 will be due on the date that Yahoo places such
promotions on those Yahoo Properties. Such date is referred to as
the "Second Payment Date."
4.3 Yahoo will provide Co-Branded Banners and Co-Branded Buttons on a
rotating basis across the Yahoo Properties. The number of Page
Views of such Co-Branded Banners and Co-Branded Buttons will be
mutually determined by the parties but will be equivalent to [*]
in advertising value. The manner, timing and placement of such
Co-Branded Banners and Co-Branded Buttons shall be determined by
Yahoo and reasonably approved by DoveBid.
4.4 Yahoo will provide Front Page Promotion to be scheduled on dates
mutually agreed to by the parties. All Front Page Promotions are
subject to availability and Yahoo standard terms for Front Page
Promotions.
5. Implementation of DoveBid Links.
-------------------------------
5.1 Yahoo will be solely responsible for the user interface and
placement of the DoveBid Links on the Yahoo Properties, except
that Yahoo agrees that the DoveBid Banner and DoveBid Button will
appear in a manner substantially similar to the examples set
forth in Exhibit J. DoveBid will be solely responsible for and
---------
will provide Yahoo with all text, artwork and design elements of
the DoveBid Links.
5.2 Yahoo reserves the right, at any time, to redesign or modify: (i)
the organization, structure, specifications, "look and feel,"
navigation, guidelines and other elements of the Yahoo Properties
on which a DoveBid Link is placed; or (ii) the Yahoo B2B Site and
the layout of the DoveBid Content. If any such redesign or
modification materially and adversely affects in any manner the
nature of the distribution, promotions, and/or placements
required under this Agreement (including without limitation any
DoveBid Link or DoveBid Content), Yahoo will notify DoveBid and
will work with DoveBid in good faith to provide DoveBid, as its
sole remedy, with comparable distribution, promotions and/or
placements on the Yahoo Properties which will be subject to
DoveBid's reasonable approval.
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
7
<PAGE>
5.3 DoveBid will provide to Yahoo all URLs, URL formats (as
applicable), content and other materials necessary for Yahoo to
provide the DoveBid Links in accordance with the specifications
set forth in this Agreement and Yahoo's standard advertising
guidelines, currently located at
http://docs.yahoo.com/docs/advertising/ (the "DoveBid
-------
Deliverables"). All content and material contained in the DoveBid
------------
Links are subject to Yahoo's approval (which shall not be
unreasonably withheld) and must comply with all applicable
federal, state and local laws, rules and regulations, including
but not limited to consumer protection laws and rules and
regulations governing product claims, truth in labeling and false
advertising.
5.4 In no event will the first Page on the DoveBid Site or on a
DoveBid Subsidiary Site contain graphic or text links,
advertisements or promotions of any Yahoo Competitors. This
restriction does not apply to (a) Yahoo Competitors that may
appear as [*] the [*] by [*] or (b) any [*], [*] and [*] made
available by Yahoo Competitors that are [*] as a [*] in the [*].
5.5 DoveBid will place a Yahoo graphic link on those Pages of the
DoveBid Site or the DoveBid Subsidiary Site to which Yahoo users
click through directly from any DoveBid Anchor Tenant Module,
DoveBid Button, Yahoo Welcome or Yahoo Logout Button. DoveBid
will also use its best efforts to include a Yahoo graphic link on
any page to which users click through directly from any other
DoveBid Link placed by Yahoo under this Agreement. The Yahoo
graphic link will (a) be placed in a manner approved by Yahoo (b)
contain the Yahoo name and logo as provided by Yahoo and (c)
directly link the user back to a page designated by Yahoo.
5.6 DoveBid will design and operate the DoveBid Site and each DoveBid
Subsidiary Site to (a) handle [*] simultaneous requests; (b) have
a minimum [*] uptime and maximum [*] downtime per calendar
quarter of the Term (except for planned downtime that may be
required for system enhancements, upgrades or preventative
maintenance); and (c) ensure that data transfers from the DoveBid
Site to the Yahoo Properties initiate within less than [*], on
average, of request. DoveBid will provide customer service
support for all inquiries regarding the services offered on the
DoveBid Site. DoveBid will provide the following customer service
information on the DoveBid Site in a manner mutually agreed to by
the parties: (i) an email address and other contact information,
and (ii) information/guidelines on DoveBid's policy regarding
disputes. DoveBid agrees that: [*] of all customer care requests
will receive responses within [*] hours. The criteria set forth
in the preceding three sentences will be referred to hereinafter
as the "DoveBid Performance Criteria".) Without limitation, if
----------------------------
DoveBid fails to meet any of the DoveBid Performance Criteria in
any material respect, Yahoo will have the right to terminate the
Agreement if DoveBid does not cure such failure
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
8
<PAGE>
within [*] days following written notice thereof to DoveBid. In
the event of such termination, DoveBid will not be required to
make any further payments to Yahoo (other than to make any
payments accrued and not paid (including revenue share payments)
through the date of termination).
5.7 Yahoo will design and operate the Yahoo B2B Site to (a) handle
[*] simultaneous requests; (b) have a minimum [*] uptime and
maximum [*] downtime per calendar quarter of the Term (except for
planned downtime that may be required for system enhancements,
upgrades or preventative maintenance); and (c) ensure that data
transfers from the Yahoo B2B Site to the DoveBid Site or any
DoveBid Subsidiary Site initiate within less than [*], on
average, of request. Without limitation, if Yahoo fails to meet
any of the above criteria in any material respect, DoveBid will
have the right to terminate the Agreement if Yahoo does not cure
such failure within [*] days following written notice thereof to
Yahoo. In the event of such termination, DoveBid will not be
required to make any further payments to Yahoo (other than to
make any payments accrued and not paid (including revenue share
payments) through the date of termination).
6. Licenses; Display of DoveBid Content; Ownership
-----------------------------------------------
6.1 By DoveBid.
----------
(a) DoveBid Content.
---------------
DoveBid hereby grants to Yahoo a non-exclusive, worldwide,
royalty-free license to use, reproduce, distribute, display,
modify and transmit the DoveBid Content via the Internet and
third party networks (including, without limitation,
telephone and wireless networks) in connection with the
Yahoo B2B Site and other Yahoo Properties and to permit
users to download and print such DoveBid Content. Yahoo may
modify the DoveBid Content only to the extent necessary to
fit the format and look and feel of the Yahoo Properties
(which may include displaying a subset of DoveBid Content on
a Yahoo Property as "teaser content") but shall not modify
the content of any listings data. Yahoo shall be entitled to
sublicense the rights set forth in this Section 6.1 only (i)
to Affiliates only for inclusion in Yahoo Properties, and
(ii) in connection with distribution arrangements of a Yahoo
Property (e.g., a co-branded My Yahoo property).
(b) DoveBid Links. During the Term, DoveBid hereby
-------------
grants to Yahoo a non-exclusive, worldwide, royalty-
free license to use, reproduce, distribute, and display
the DoveBid Brand Features (1) to indicate the location
of the DoveBid Links as set forth herein and (2) in
connection with the marketing and promotion of DoveBid
in the Yahoo Properties; provided, in all cases, that
such use is in accordance with
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
9
<PAGE>
DoveBid's then-current standard trademark usage
guidelines set forth in Exhibit K. Yahoo shall not
---------
modify the DoveBid Brand Features without DoveBid's
prior written approval. Yahoo hereby assigns to DoveBid
all right, title and interest in the DoveBid Brand
Features, together with the goodwill attaching thereto,
that may inure to it in connection with this Agreement
or from its use of the DoveBid Brand Features
hereunder.
6.2 By Yahoo. During the Term, Yahoo hereby grants to DoveBid a
--------
non-exclusive, worldwide, fully paid license to use, reproduce
and display the Yahoo Brand Features as described in Section 5.5
above; provided, in all cases, that such use is in accordance
with Yahoo's then-current standard trademark usage guidelines set
forth in Exhibit K. DoveBid shall not modify the Yahoo Brand
Features without Yahoo's prior written approval. DoveBid hereby
assigns to Yahoo all right, title and interest in the Yahoo Brand
Features, together with the goodwill attaching thereto, that may
inure to it in connection with this Agreement or from its use of
the Yahoo Brand Features hereunder.
6.3 Display of DoveBid Content. DoveBid shall provide a feed to
--------------------------
Yahoo of the DoveBid Content in accordance with the
specifications to be mutually agreed upon by the parties. Yahoo
will display the DoveBid Content on the Yahoo B2B Site in a
manner substantially similar to the example set forth on Exhibit
J. Notwithstanding the foregoing, Yahoo may, at any time and in
its sole discretion remove or not display any DoveBid Content (a)
for technical or service related issues, (b) if Yahoo reasonably
believes that the DoveBid Content violates any of Yahoo's
standards for acceptable listings (which for purposes of this
Agreement will be deemed to be the "Sellers Rules" for listings
on Yahoo Auctions currently located at
http://help.yahoo.com/help/us/auct/asell/asell-21.html), (c) is
reasonably believed by Yahoo to be, the subject of any claim or
lawsuit of any kind, including without limitation any claim or
allegation that any DoveBid Content violates, infringes, or
otherwise misappropriates the rights of any third party, or (d)
that Yahoo is requested or required to remove by any government
agency, order of a court or administrative body of competent
jurisdiction. Yahoo will use reasonable commercial efforts to
notify DoveBid in writing in the event that it exercises its
rights not to display or remove any DoveBid Content.
6.4 As between DoveBid and Yahoo, DoveBid will retain all right,
title and interest in and to the DoveBid Site and the DoveBid
Subsidiary Sites, and related DoveBid technology, the DoveBid
Content and DoveBid Brand Features including but not limited to
all intellectual property rights therein. As between Yahoo and
DoveBid, Yahoo will retain all right, title and interest in and
to the Yahoo Properties and related technology, and Yahoo Brand
Features, including but not limited to all intellectual property
rights therein.
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
10
<PAGE>
7. Limited Exclusivity.
-------------------
7.1 During the Term, Yahoo will place no more than [*] Anchor Tenant
Modules promoting Business to Business Merchants on the front
Page of the Yahoo B2B Site. Yahoo reserves the right to divide
one of the Anchor Tenant Module positions on the front Page of
the Yahoo B2B Site among up to [*] other merchants. In addition,
in accordance with Section 2.3 hereof, Yahoo will place the
DoveBid Anchor Tenant Module on a non-exclusive basis on [*] of
the category and subcategory Pages of the Yahoo B2B Site.
7.2 DoveBid acknowledges and agrees that, except for the limited
exclusivity provision of Section 7.1, Yahoo may place any
advertising units for or otherwise promote any entity, including
but not limited to other Business to Business Merchants, on any
Page within the Yahoo Properties. Yahoo shall also not be
restricted in any manner from incorporating editorial content
from any entity, including but not limited to, other Business to
Business Merchants.
7.3 During the Term, Yahoo will not make an [*] in [*] or [*] or
place any banner advertisements or buttons on the Yahoo
Properties that are [*] with the Yahoo Brand Features and the
brand features of [*] or [*]. The foregoing restriction will not
apply to additional sites acquired by Yahoo and added to the
Yahoo Properties to the extent that such additional sites had a
preexisting [*] or co-branded banner or button relationship with
[*] or [*].
8. Page Views.
----------
8.1 Yahoo expressly acknowledges its obligation under this Agreement
to furnish DoveBid with advertising and other promotions valued
in the aggregate at [*] based on a discount of [*] off of Yahoo's
year 2000 advertising rate card. The parties acknowledge that
based on the amount of such consideration to be paid by DoveBid,
Yahoo will deliver a minimum of [*] Page Views with a preliminary
target distribution of such Page Views as set forth below (the
"Preliminary Targets"). Yahoo will use commercially reasonable
-------------------
efforts to deliver these Page Views as set forth below, but
Yahoo's Page View obligation is with respect to the program as a
whole. Yahoo will not be in breach of this Agreement for failure
to deliver the specific number of Page Views in any of the
following areas.
. [*] DoveBid Banner Pages
. [*] DoveBid Button Pages
. [*] DoveBid Email Messages
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
11
<PAGE>
. [*] Page Views of Front Page Promotions
. [*] DoveBid Banner Advertisements placed on Run of Network
Notwithstanding the foregoing, Yahoo expressly acknowledges that it is the
intent and desire of the parties to mutually track the efficacy of the
advertising and promotions to be provided by Yahoo hereunder and to make
adjustments to the Preliminary Targets for the distribution and types of
promotions in a manner consistent with the parties' overall business goals
for this Agreement. Accordingly, DoveBid will have the right, once each
calendar month during the Term to request adjustments to the Preliminary
Targets; provided that all adjusted "Preliminary Targets" (a) will be
valued at [*] rates in [*] to the [*] available on [*]; (b) will not exceed
a total value of [*]; (c) will be placed subject to availability and
Yahoo's prior approval and on a schedule to be mutually agreed upon by the
parties; and (d) are subject to the "make good" provisions set forth in
Section 8.2 below.
8.2 In the event that Yahoo fails to deliver the number of Page Views
or emails set forth in Section 8.1 (as reduced by any proration
under Section 8.3) before the expiration of the Term, Yahoo will
"make good" the shortfall by extending its obligations under
Sections 2 and 3 in the areas set forth therein (or similar
inventory mutually agreed upon by the parties) beyond the end of
the Term until such Page View obligation is satisfied. Yahoo will
use commercially reasonable efforts to make good any undelivered
Page Views or emails within three months (but in any event will
"make good" the shortfall within six months) from the end of the
Term. The provisions of this Section 8.2 set forth the entire
liability of Yahoo, and DoveBid's sole remedy, for Yahoo's
failure to meet its Page View obligation set forth in Section
8.1.
8.3 In the event that DoveBid fails to (a) provide Yahoo, at least
[*] business day prior to the scheduled activation date of any
DoveBid Link with the DoveBid Deliverables necessary for Yahoo to
activate such DoveBid Link; or (b) design and operate the DoveBid
Site or a DoveBid Subsidiary Site in accordance with Section 5.6,
then (1) the number of Page Views set forth in Section 8.1 will
be prorated on a daily basis until DoveBid remedies such failure
(e.g., if Yahoo committed to deliver [*] Page Views over a one
(1) year period and DoveBid provided Yahoo with the DoveBid
Deliverables 15 days after the DoveBid Deliverables Due Date,
then Yahoo's Page View obligation would be reduced by [*] Page
Views) and (2) all payments made or due hereunder will be
converted to a non-refundable, non-creditable holding fee for
making the advertising inventory available to DoveBid.
8.4 Yahoo will provide DoveBid with access to an electronic database,
the accuracy of which is periodically reviewed and certified by
Ernst & Young, LLP or a similarly reputable and independent
entity, that describes Yahoo's calculation of the Page Views
delivered during the Term.
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
12
<PAGE>
9. Compensation.
------------
9.1 Slotting Fee. In consideration of Yahoo's performance and
------------
obligations as set forth herein, DoveBid will pay to Yahoo a non-
refundable (except as expressly set forth in Section 10.3) non-
creditable slotting fee equal to [*]. DoveBid will pay such fee
to Yahoo on or before the dates set forth below, with the first
payment of [*] designated as a set up fee for the design,
consultation, development and implementation of the DoveBid
Links.
Payment Date
------- ----
[*] upon execution of the Agreement, which shall be designated
as a set-up fee for the design, consultation, development
and implementation of the DoveBid Links;
[*] on the Second Payment Date; and
[*] for three quarterly payments payable in 90 day intervals;
with the first payment due 90 days after the Second Payment
Date.
9.2 Revenue Share: In addition to the compensation described above,
--------------
DoveBid will, each calendar quarter during the Term, purchase an
additional amount of advertising in the form of Co-Branded
Banners or Co-Branded Buttons in an amount equal to [*] of the
Gross Commissions earned by DoveBid on all sales that originate
from users that click-through from any DoveBid Link. "Gross
Commissions" means the transaction fee amount that is collected
by DoveBid or a DoveBid Subsidiary on auction or retail sales on
the DoveBid Site or any DoveBid Subsidiary Site. If DoveBid owns
the asset, then "Gross Commissions" means the imputed transaction
fee that would have been collected by DoveBid if DoveBid had
charged its standard commission rate on the value of the asset
sold. Payments will be made quarterly by DoveBid to Yahoo within
[*] days following the last day of each calendar quarter. DoveBid
will provide to Yahoo quarterly reports certified by an officer
of DoveBid that describes in sufficient detail the number of
transactions completed, the gross revenue resulting from those
transactions, and the calculation of the Gross Commission. Yahoo
will provide Page Views of Co-Branded Buttons or Co-Branded
Banners in accordance with Yahoo's standard advertising rates in
effect at the time.
9.3 Audit Rights. DoveBid will maintain materially complete and
------------
accurate records in accordance with generally accepted methods of
accounting for revenue share transactions described in Section
9.2 above and will allow Yahoo, at its own expense, to direct an
independent certified public
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
13
<PAGE>
accounting firm to inspect and audit such records during normal
business hours with written notice to DoveBid. Such inspections
and audits will be limited to one time in any twelve (12) month
period and all of DoveBid's records (and any other information
disclosed by DoveBid in connection with such audit) will be
deemed to be DoveBid Confidential Information, subject to the
terms and conditions of Section 11.3 hereof. In the event that
any audit reveals an underpayment of more than ten percent (10%),
DoveBid will pay the reasonable cost of such audit.
9.4 Payment Information. Except as otherwise expressly set forth
-------------------
in this Agreement, all payments herein are non-refundable and
non-creditable and will be made by DoveBid via wire transfer into
Yahoo's main account according to the wire transfer instructions
set forth in Exhibit F.
---------
9.5 Late Payments. Any portion of the above payments that has not
-------------
been paid to Yahoo on the dates set forth above will bear
interest at the greater of (a) 1% per month or (b) the maximum
amount allowed by law. Notwithstanding the foregoing, any failure
by DoveBid to make the payments specified in Sections 9.1 and 9.2
on the dates set forth therein constitutes a material breach of
this Agreement.
9.6 Warrant. DoveBid will issue to Yahoo a Warrant in the form
-------
attached hereto as Exhibit I on the Effective Date of this
---------
Agreement.
10. Term and Termination.
--------------------
10.1 Term. This Agreement will commence upon the Effective Date and,
----
unless terminated as provided herein, will remain in effect for
the Term.
10.2 Right of [*]. In the event that Yahoo, in its sole discretion,
------------
elects to [*] advertising and promotion program described in this
Agreement [*], Yahoo will provide written notice to DoveBid at
least [*] days [*] to the [*]. Yahoo will describe its reasonable
[*] for such [*] in its written notice to DoveBid. If DoveBid
declines to commence [*] with Yahoo regarding such [*] within [*]
days after receiving such written notice from Yahoo, or if the
parties fail to reach agreement within [*] days following the
commencement of [*], or such later date as is agreed by the
parties, Yahoo may [*] to [*]
10.3 Termination by DoveBid. If the Yahoo B2B Site does not launch
----------------------
by [*], then DoveBid will have the right to terminate the
Agreement with thirty (30) days written notice to Yahoo (unless
the Yahoo B2B Site launches within the thirty (30) day notice
period). In the event of such termination by DoveBid, DoveBid
will receive a pro-rata refund of the initial [*] payment less
the value of the advertising placed by Yahoo promoting the
DoveBid Site (or a DoveBid Subsidiary Site) delivered prior to
the date of termination. The value of the advertising will be
determined by Yahoo's
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
14
<PAGE>
current advertising rate card. Upon the effective date of such a
termination by DoveBid, the Warrant described in Section 9.6 will
be cancelled if it has not already been exercised by Yahoo.
DoveBid agrees that except for the foregoing right to terminate
and obtain a pro-rata refund, Yahoo will not be liable for any
failure or delay to launch the Yahoo B2B Site. Notwithstanding
the foregoing, DoveBid will not have the right to terminate or
receive a pro-rata refund of any amounts paid if the Launch Date
is delayed by any failure of DoveBid including, without
limitation, any failure or delay in providing Yahoo with any of
the DoveBid Deliverables. In the event of any failure or delay on
the part of DoveBid, the Launch Date will be deemed to be the
date that the Yahoo B2B Site is otherwise functional and
available to the public.
In addition, in the event that the Launch Date does not occur by
[*] and DoveBid does not exercise its right to terminate the
Agreement as described in Section 10.3 above, then the parties
will discuss and mutually agree upon a revised compensation
schedule to include payment to Yahoo for the advertising
placements. If the parties cannot mutually agree upon a revised
compensation schedule, then Yahoo will have the right to
terminate the Agreement without further obligation or liability
to DoveBid.
10.4 Termination by Either Party with Cause. This Agreement may be
--------------------------------------
terminated at any time by either party (a) immediately upon
written notice if the other party (1) becomes insolvent; (2)
files a petition in bankruptcy; or (3) makes an assignment for
the benefit of its creditors; or (b) 30 days after written notice
to the other party of such other party's breach of any of its
obligations under this Agreement in any material respect (10 days
in the case of a failure to pay), which breach is not remedied
within such notice period.
10.5 Survival. The provisions of Sections 1, 6.4, 8.2, 11, 12, 13,
--------
15 and this 10.5 will survive expiration or termination of this
Agreement, except that DoveBid's payment obligations set forth in
Section 9 will not survive a proper termination of this Agreement
by DoveBid in accordance with Sections 10.3 or 10.4.
11. Confidential Information and Publicity.
--------------------------------------
11.1 Terms and Conditions. The terms and conditions of this
--------------------
Agreement will be considered confidential and will not be
disclosed to any third parties except to such party's
accountants, attorneys or except as otherwise required by law.
Neither party will make any public announcement regarding the
existence of this Agreement without the other party's prior
written approval and consent. If this Agreement or any of its
terms must be disclosed under any law, rule or regulation (e.g.,
as part of a filing with the United States Securities and
Exchange Commission), excluding an order or other discovery
request issued by a court of competent
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
15
<PAGE>
jurisdiction, the disclosing party will (a) give written notice
of the intended disclosure to the other party at least 5 days in
advance of the date of disclosure; (b) redact portions of this
Agreement to the fullest extent permitted under any applicable
laws, rules and regulations; and (c) submit a request, to be
agreed upon by the other party, that such portions and other
provisions of this Agreement requested by the other party receive
confidential treatment under the laws, rules and regulations of
the body or tribunal to which disclosure is being made or
otherwise be held in the strictest confidence to the fullest
extent permitted under the laws, rules or regulations of any
other applicable governing body. Upon execution of this
Agreement, DoveBid will provide Yahoo with its proposed
redactions of this Agreement to be disclosed as part of its S-1
filing. Notwithstanding the provisions of subsection (a) above,
Yahoo will have 3 days prior to the date of the disclosure of the
S-1.
11.2 Publicity. Any and all publicity relating to this Agreement and
---------
subsequent transactions between Yahoo and DoveBid and the method
of its release will be approved in advance of the release, in
writing, by both Yahoo and DoveBid.
11.3 Nondisclosure Agreement. Yahoo and DoveBid acknowledge and
-----------------------
agree that the terms of the Mutual Nondisclosure Agreement
attached hereto as Exhibit H will be incorporated by reference
---------
and made a part of this Agreement, and will govern the use and
disclosure of confidential information and all discussions
pertaining to or leading to this Agreement.
11.4 User Data. All information and data provided to Yahoo by users
---------
of the Yahoo Properties or otherwise collected by Yahoo relating
to user activity on the Yahoo Properties will be retained by and
owned solely by Yahoo. All information and data provided to
DoveBid on the DoveBid Site or DoveBid Subsidiary Site otherwise
collected by DoveBid relating to user activity on the DoveBid
Site or DoveBid Subsidiary Site will be retained by and owned
solely by DoveBid. Each party agrees to use information and data
provided to it by a user only as disclosed to and authorized by
that user and will not disclose, sell, license or otherwise
transfer this information to any third party or use this
information for the transmission of "junk mail," "spam" or any
other unsolicited mass distribution of information.
11.5 Privacy of User Information. DoveBid will (a) ensure that all
---------------------------
information provided by users of the DoveBid Site is maintained,
accessed and transmitted in a secure environment and in
compliance with industry standard security specifications; and
(b) provide a link to its privacy policy regarding the protection
of user data on those Pages of the DoveBid Site where the user is
requested to provide personal or financial information. Further,
DoveBid represents and warrants that it has reviewed the FTC
Order and will not engage in any conduct that would cause Yahoo
to violate the FTC Order. DoveBid agrees to follow and comply
with all
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
16
<PAGE>
reasonable instructions and directions of Yahoo to ensure Yahoo's
compliance with the FTC Order.
12. Indemnification.
---------------
12.1 By DoveBid. DoveBid, at its own expense, will indemnify,
----------
defend and hold harmless Yahoo and its employees,
representatives, agents and affiliates from and against any
claim, demand, action or other proceeding brought by any third
party against Yahoo to the extent that such claim, demand, action
or other proceeding is based on, or arises out of a claim that
any DoveBid Content, DoveBid Brand Feature, any material, product
or service produced, distributed, offered or sold by DoveBid, or
any material presented on the DoveBid Site or a DoveBid
Subsidiary Site (1) infringes in any manner any copyright,
patent, trademark, trade secret or any other intellectual
property right of any third party; (2) is or contains any
material or information that is obscene, defamatory, libelous,
slanderous or that violates any law or regulation; (3) violates
any rights of any person or entity, including but not limited to
rights of publicity, privacy or personality; (4) has resulted in
any consumer fraud, product liability, tort, breach of contract,
injury, damage or harm of any kind to any third party; or (5) is
subject to any fees, royalties, licenses or any other payments to
any third party; provided, however, that in any such case (A)
Yahoo provides DoveBid with prompt notice of any such claim; (B)
Yahoo permits DoveBid to assume and control the defense of such
action upon DoveBid's written notice to Yahoo of its intention to
indemnify; and (C) upon DoveBid's written request, and at no
expense to Yahoo, Yahoo will provide to DoveBid all available
information and assistance reasonably necessary for DoveBid to
defend such claim. DoveBid will not enter into any settlement or
compromise of any such claim, which settlement or compromise
would result in any liability to Yahoo, without Yahoo's prior
written consent, which will not unreasonably be withheld. DoveBid
will pay any and all costs, damages, and expenses, including, but
not limited to, reasonable attorneys' fees and costs awarded
against or otherwise incurred by Yahoo in connection with or
arising from any such claim, suit, action or proceeding.
12.2 By Yahoo. Yahoo, at its own expense, will indemnify, defend and
--------
hold harmless DoveBid and its employees, representatives, agents
and affiliates from and against any claim, demand, action or
other proceeding brought by any third party against DoveBid to
the extent that such claim, demand, action or other proceeding is
based on, or arises out of, a claim that any Yahoo Brand Feature
(1) infringes in any manner any copyright, patent, trademark,
trade secret or any other intellectual property right of any
third party or (2) is subject to any fees, royalties, licenses or
any other payments to any third party; provided, however, that in
any such case (1) DoveBid provides Yahoo with prompt written
notice of any such claim; (2) DoveBid permits Yahoo to assume and
control the defense of such
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
17
<PAGE>
action or proceeding upon Yahoo's written notice to DoveBid of
its intention to indemnify; and (3) upon Yahoo's written request,
and at no expense to DoveBid, DoveBid will provide Yahoo with all
available information and assistance reasonably necessary for
Yahoo to defend such claim. Yahoo will not enter into any
settlement or compromise of any such claim, which settlement or
compromise would result in any liability to DoveBid, without
DoveBid's prior written consent, which will not be unreasonably
withheld. Yahoo will pay any and all costs, damages and expenses,
including but not limited to reasonable attorneys' fees and costs
awarded against or otherwise incurred by DoveBid in connection
with or arising from any such claim, demand, action or other
proceeding.
13. Limitation of Liability.
-----------------------
EXCEPT AS PROVIDED IN SECTION 12, UNDER NO CIRCUMSTANCES WILL DOVEBID,
YAHOO OR ANY AFFILIATE OF EITHER PARTY BE LIABLE TO THE OTHER PARTY
FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES
ARISING FROM THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO LOSS OF
REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS, EVEN IF THAT PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
14. Insurance.
---------
14.1 General Commercial Liability. DoveBid will maintain insurance
----------------------------
during the Term with a carrier that is reasonably acceptable to
Yahoo and with coverage for commercial general liability and
errors and omissions of at least [*] dollars per occurrence.
DoveBid will name Yahoo as an additional insured on such
insurance and will provide evidence of such insurance to Yahoo
within 10 days after the Effective Date. Such insurance policy
will not be cancelled or modified in a manner inconsistent with
this provision without Yahoo's prior written consent. Yahoo will
maintain insurance during the Term with a carrier that is
reasonably acceptable to DoveBid and with coverage for commercial
general liability and errors and omissions of at least $1 million
dollars per occurrence.
15. General Provisions.
------------------
15.1 Independent Contractors. It is the intention of Yahoo and
-----------------------
DoveBid that Yahoo and DoveBid are, and will be deemed to be,
independent contractors with respect to the subject matter of
this Agreement, and nothing contained in this Agreement will be
deemed or construed in any manner whatsoever as creating any
partnership, joint venture, employment, agency, fiduciary or
other similar relationship between Yahoo and DoveBid.
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
18
<PAGE>
15.2 Entire Agreement. This Agreement, together with all Exhibits
----------------
hereto, represents the entire agreement between Yahoo and DoveBid
with respect to the subject matter hereof and thereof and will
supersede all prior agreements and communications of the parties,
oral or written, including without limitation the Letter of
Intent executed on or about February 22, 2000 between Yahoo and
DoveBid.
15.3 Amendment and Waiver. No amendment to, or waiver of, any
--------------------
provision of this Agreement will be effective unless in writing
and signed by both parties. The waiver by any party of any breach
or default will not constitute a waiver of any different or
subsequent breach or default.
15.4 Governing Law. This Agreement will be governed by and
-------------
interpreted in accordance with the laws of the State of
California without regard to the conflicts of laws principles
thereof.
15.5 Successors and Assigns. Neither party will assign its rights or
----------------------
obligations under this Agreement without the prior written
consent of the other party, which will not unreasonably be
withheld or delayed. Notwithstanding the foregoing, either party
may assign this Agreement to an entity that acquires
substantially all of the stock or assets of a party to this
Agreement, except that consent will be required in the event that
the non-assigning party reasonably determines that the assignee
will not have sufficient capital or assets to perform its
obligations hereunder, or that the assignee is a direct
competitor of the non-assigning party. All terms and provisions
of this Agreement will be binding upon and inure to the benefit
of the parties hereto and their respective permitted transferees,
successors and assigns.
15.6 Force Majeure. Neither party will be liable for failure to
-------------
perform or delay in performing any obligation (other than the
payment of money) under this Agreement if such failure or delay
is due to fire, flood, earthquake, strike, war (declared or
undeclared), embargo, blockade, legal prohibition, governmental
action, riot, insurrection, damage, destruction or any other
similar cause beyond the control of such party. If such event
continues for more than 30 days, the other party may terminate
this Agreement without further obligation.
15.7 Notices. All notices, requests and other communications called
-------
for by this agreement will be deemed to have been given
immediately if made by facsimile or electronic mail (confirmed by
concurrent written notice sent via overnight courier for delivery
by the next business day), if to Yahoo at 3420 Central
Expressway, Santa Clara, CA 95051, Fax: (408) 731-3301 Attention:
Senior Director, Business Development (e-mail: sfigler@yahoo-
inc.com), with a copy to its General Counsel (e-mail:
[email protected]), and if to DoveBid at the physical or
electronic mail address set forth on the signature page of this
Agreement, or to such other addresses as either party specifies
to the other. Notice by any other
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
19
<PAGE>
means will be deemed made when actually received by the party
to which notice is provided.
15.8 Severability. If any provision of this Agreement is held to be
------------
invalid, illegal or unenforceable for any reason, such
invalidity, illegality or unenforceability will not effect any
other provisions of this Agreement, and this Agreement will be
construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
15.9 Sole Responsibility. DoveBid will remain solely responsible
-------------------
for operation of the DoveBid Site, and Yahoo and its Affiliates
will remain solely responsible for the operation of the Yahoo
Properties. Each party (a) acknowledges that the DoveBid Site
and the Yahoo Properties may be subject to temporary shutdowns
due to causes beyond the operating party's reasonable control;
and (b) subject to the terms of this Agreement, retains sole
right and control over the programming, content and conduct of
transactions over its respective Internet-based service.
15.10 Counterparts. This Agreement may be executed in two
------------
counterparts, both of which taken together will constitute a
single instrument. Execution and delivery of this Agreement may
be evidenced by facsimile transmission.
15.11 Authority. Each of Yahoo and DoveBid represents and warrants
---------
negotiation and entry of this Agreement will not violate,
conflict with, interfere with, result in a breach of, or
constitute a default under any other agreement to which they
are a party.
15.12 Attorneys Fees. The prevailing party in any action to
--------------
enforce this Agreement will be entitled to reimbursement of its
expenses, including reasonable attorneys' fees.
[Signature page follows]
20
<PAGE>
This Advertising and Promotion Agreement has been executed by the duly
authorized representatives of the parties, effective as of the Effective Date.
YAHOO! INC. DOVEBID, INC.
By: __________________________________ By: __________________________________
Name: ________________________________ Name: ________________________________
Title: _______________________________ Title: _______________________________
Attn:
________________________________
________________________________
________________________________
Tel: _________________________________
Fax: _________________________________
email: _______________________________
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
21
<PAGE>
EXHIBIT A
Anchor Tenant Module
[GRAPHIC APPEARS HERE]
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
<PAGE>
EXHIBIT B
DoveBid Banner Category Pages
-----------------------------
[*]
DoveBid Button Category Pages
-----------------------------
[*]
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
<PAGE>
EXHIBIT C
DoveBid Banner Keywords
-----------------------
[*]
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
<PAGE>
<PAGE>
EXHIBIT D
DoveBid Button Keywords
-----------------------
[*]
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
<PAGE>
EXHIBIT E
Auction Module Category Pages
[*]
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
<PAGE>
EXHIBIT F
Wire Transfer Instructions
Yahoo's Bank Information:
Institution Name: Imperial Bank
Institution Address: Inglewood, CA
ABA: 122 201 444
Beneficiary Name: Yahoo! Inc.
Beneficiary Account Number: [*]
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
<PAGE>
EXHIBIT G
FTC DECISION AND ORDER
9823015
B251544
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
COMMISSIONERS:
Robert Pitofsky, Chairman
Sheila F. Anthony
Mozelle W. Thompson
Orson Swindle
In the Matter of
GEOCITIES, a corporation.
DOCKET NO. C-3850
DECISION AND ORDER
The Federal Trade Commission having initiated an investigation of certain acts
and practices of the respondent named in the caption hereof, and the respondent
having been furnished thereafter with a copy of a draft of complaint which the
Bureau of Consumer Protection proposed to present to the Commission for its
consideration and which, if issued by the Commission, would charge respondent
with violation of the Federal Trade Commission Act; and
The respondent, its attorneys, and counsel for Federal Trade Commission having
thereafter executed an agreement containing a consent order, an admission by the
respondent of all the jurisdictional facts set forth in the aforesaid draft of
complaint, a statement that the signing of said agreement is for settlement
purposes only and does not constitute an admission by respondent that the law
has been violated as alleged in such complaint, or that the facts as alleged in
such complaint, other than jurisdictional facts, are true and waivers and other
provisions as required by the Commission's Rules; and
The Commission having considered the matter and having determined that it had
reason to believe that the respondent has violated the said Act, and that
complaint should issue stating its charges in that respect, and having thereupon
accepted the executed consent agreement and placed such agreement on the public
record for a period of sixty (60) days, and having duly considered the comments
filed thereafter by interested persons pursuant to (S) 2.34 of its Rules, now in
further conformity with the procedure prescribed in (S) 2.34 of its Rules, the
Commission hereby issues its complaint, makes the following jurisdictional
findings and enters the following order:
1. Respondent GeoCities, is a corporation organized, existing, and doing
business under and by virtue of the laws of the State of California, with
its office or principal place of business located at 1918 Main Street,
Suite 300, Santa Monica, California 90405.
2. The Federal Trade Commission has jurisdiction of the subject matter of
this proceeding and of the respondent, and the proceeding is in the
proceeding is in the public interest.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
<PAGE>
ORDER
DEFINITIONS
For purposes of this order, the following definitions shall apply:
1. "Child" or "children" shall mean a person of age twelve (12) or under.
2. "Parents" or "parental" shall mean a legal guardian, including, but not
limited to, a biological or adoptive parent.
3. "Personal identifying information" shall include, but is not limited to,
first and last name, home or other physical address (e.g., school), e-mail
address, telephone number, or any information that identifies a specific
individual, or any information which when tied to the above becomes
identifiable to a specific individual.
4. "Disclosure" or "disclosed to third party(ies)" shall mean (a) the
release of information in personally identifiable form to any other
individual, firm, or organization for any purpose or (b) making publicly
available such information by any means including, but not limited to,
public posting on or through home pages, pen pal services, e-mail services,
message boards, or chat rooms.
5. "Clear(ly) and prominent(ly)" shall mean in a type size and location
that are not obscured by any distracting elements and are sufficiently
noticeable for an ordinary consumer to read and comprehend, and in a
typeface that contrasts with the background against which it appears.
6. "Archived" database shall mean respondent's off-site "back-up" computer
tapes containing member profile information and GeoCities Web site
information.
7. "Electronically verifiable signature" shall mean a digital signature or
other electronic means that ensures a valid consent by requiring: (1)
authentication (guarantee that the message has come from the person who
claims to have sent it); (2) integrity (proof that the message contents
have not been altered, deliberately or accidentally, during transmission);
and (3) non-repudiation (certainty that the sender of the message cannot
later deny sending it).
8. "Express parental consent" shall mean a parent's affirmative agreement
that is obtained by any of the following means: (1) a signed statement
transmitted by postal mail or facsimile; (2) authorizing a charge to a
credit card via a secure server; (3) e-mail accompanied by an
electronically verifiable signature; (4) a procedure that is specifically
authorized by statute, regulation, or guideline issued by the Commission;
or (5) such other procedure that ensures verified parental consent and
ensures the identity of the parent, such as the use of a reliable
certifying authority.
9. Unless otherwise specified, "respondent" shall mean GeoCities, its
successors and assigns and its officers, agents, representatives, and
employees.
10. "Commerce" shall mean as defined in Section 4 of the Federal Trade
Commission Act, 15 U.S.C. (S) 44.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
ii
<PAGE>
I.
IT IS ORDERED that respondent, directly or through any corporation, subsidiary,
division, or other device, in connection with any online collection of personal
identifying information from consumers, in or affecting commerce, shall not make
any misrepresentation, in any manner, expressly or by implication, about its
collection or use of such information from or about consumers, including, but
not limited to, what information will be disclosed to third parties and how the
information will be used.
II.
IT IS FURTHER ORDERED that respondent, directly or through any corporation,
subsidiary, division, or other device, in connection with any online collection
of personal identifying information from consumers, in or affecting commerce,
shall not misrepresent, in any manner, expressly or by implication, the identity
of the party collecting any such information or the sponsorship of any activity
on its Web site.
III.
IT IS FURTHER ORDERED that respondent, directly or through any corporation,
subsidiary, division, or other device, in connection with the online collection
of personal identifying information from children, in or affecting commerce,
shall not collect personal identifying information from any child if respondent
has actual knowledge that such child does not have his or her parent's
permission to provide the information to respondent. Respondent shall not be
deemed to have actual knowledge if the child has falsely represented that (s)he
is not a child and respondent does not knowingly possess information that such
representation is false.
IV.
IT IS FURTHER ORDERED that respondent, directly or through any corporation,
subsidiary, division, or other device, in connection with the online collection
of personal identifying information, in or affecting commerce, shall provide
clear and prominent notice to consumers, including the parents of children, with
respect to respondent's practices with regard to its collection and use of
personal identifying information. Such notice shall include, but is not limited
to, disclosure of:
A. what information is being collected (e.g., "name," "home address," "e-
mail address," "age," "interests");
B. its intended use(s);
C. the third parties to whom it will be disclosed (e.g., "advertisers of
consumer products," mailing list companies," "the general public");
D. the consumer's ability to obtain access to or directly access such
information and the means by which (s)he may do so;
E. the consumer's ability to remove directly or have the information
removed from respondent's databases and the means by which (s)he may do so;
and
F. the procedures to delete personal identifying information from
respondent's databases and any limitations related to such deletion.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
iii
<PAGE>
Such notice shall appear on the home page of respondent's Web site(s) and
at each location on the site(s) at which such information is collected.
Provided that, respondent shall not be required to include the notice at the
- --------------
locations at which information is collected if such information is limited to
tracking information and the collection of such information is described in the
notice required by this Part.
Provided further that, for purposes of this Part, compliance with all of the
- ---------------------
following shall be deemed adequate notice: (a) placement of a clear and
prominent hyperlink or button labeled PRIVACY NOTICE on the home page(s), which
directly links to the privacy notice screen(s); (b) placement of the information
required in this Part clearly and prominently on the privacy notice screen(s),
followed on the same screen(s) with a button that must be clicked on to make it
disappear; and (c) at each location on the site at which any personal
identifying information is collected, placement of a clear and prominent
hyperlink on the initial screen on which the collection takes place, which links
directly to the privacy notice and which is accompanied by the following
statement in bold typeface:
NOTICE: We collect personal information on this site. To learn more about how we
use your information click here.
V.
IT IS FURTHER ORDERED that respondent, directly or through any corporation,
subsidiary, division, or other device, in connection with the online collection
of personal identifying information from children, in or affecting commerce,
shall maintain a procedure by which it obtains express parental consent prior to
collecting and using such information.
Provided that, respondent may implement the following screening procedure that
- -------------
shall be deemed to be in compliance with this Part. Respondent shall collect and
retain certain personal identifying information from a child, including birth
date and the child's and parent's e-mail addresses (hereafter "screening
information"), enabling respondent to identify the site visitor as a child and
to block the child's attempt to register with respondent without express
parental consent. If respondent elects to have the child register with it,
respondent shall: (1) give notice to the child to have his/her parent provide
express parental consent to register; and/or (2) send a notice to the parent's
e-mail address for the purpose of obtaining express parental consent. The notice
to the child or parent shall provide instructions for the parent to: (1) go to a
specific URL on the Web site to receive information on respondent's practices
regarding its collection and use of personal identifying information from
children and (2) provide express parental consent for the collection and use of
such information. Respondent's collection of screening information shall be by a
manner that discourages children from providing personal identifying information
in addition to the screening information. All personal identifying information
collected from a child shall be held by respondent in a secure manner and shall
not be used in any manner other than to effectuate the notice to the child or
parent, or to block the child from further attempts to register or otherwise
provide personal identifying information to respondent without express parental
consent. The personal identifying information collected shall not be disclosed
to any third party prior to the receipt of express parental consent. If express
parental consent is not received by twenty (20) days after respondent's
collection of the information from the child, respondent shall remove all such
personal identifying information from its databases, except such screening
information necessary to block the child from further attempts to register or
otherwise provide personal identifying information to respondent without express
parental consent.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
iv
<PAGE>
VI.
Nothing in this order shall prohibit respondent from collecting personal
identifying information from children or from using such information, as
specifically permitted in the Children's Online Privacy Protection Act of 1998
(without regard to the effective date of the Act) or as such Act may hereafter
be amended; regulations or guides promulgated by the Commission; or self-
regulatory guidelines approved by the Commission pursuant to the Act.
VII.
IT IS FURTHER ORDERED that respondent GeoCities, and its successors and assigns,
shall provide a reasonable means for consumers, including the parents of
children, to obtain removal of their or their children's personal identifying
information collected and retained by respondent and/or disclosed to third
parties, prior to the date of service of this order, as follows:
A. Respondent shall provide a clear and prominent notice to each consumer
over the age of twelve (12) from whom it collected personal identifying
information and disclosed that information to CMG Information Services,
Inc., describing such consumer's options as stated in Part VI.C and the
manner in which (s)he may exercise them.
B. Respondent shall provide a clear and prominent notice to the parent of
each child from whom it collected personal identifying information prior to
May 20, 1998, describing the parent's options as stated in Part VI.C and
the manner in which (s)he may exercise them.
C. Respondent shall provide the notice within thirty (30) days after the
date of service of this order by e-mail, postal mail, or facsimile. Notice
to the parent of a child may be to the e-mail address of the parent and, if
not known by respondent, to the e-mail address of the child. The notice
shall include the following information:
1. the information that was collected (e.g., "name," "home address,"
"e-mail address," "age," "interests"); its use(s) and/or intended
use(s); and the third parties to whom it was or will be disclosed
(e.g., "advertisers of consumer products," "mailing list companies,"
"the general public") and with respect to children, that the child's
personal identifying information may have been made public through
various means, such as by publicly posting on the child's personal
home page or disclosure by the child through the use of an e-mail
account;
2. the consumer's and childs parents right to obtain access to such
information and the means by which (s)he may do so;
3. the consumer's and childs parent's right to have the information
removed from respondent's or a third party's databases and the means
by which (s)he may do so;
4. a statement that childrens information will not be disclosed to
third parties, including public posting, without express parental
consent to the disclosure or public posting;
5. the means by which express parental consent may be communicated to
the respondent permitting disclosure to third parties of a child's
information; and
6. a statement that the failure of a consumer over the age of twelve
(12) to request removal of the information from respondent's databases
will be deemed as
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
v
<PAGE>
approval to its continued retention and/or disclosure to third parties
by respondent.
D. Respondent shall provide to consumers, including the parents of
children, a reasonable and secure means to request access to or directly
access their or their childrens personal identifying information. Such
means may include direct access through password protected personal
profile, return e-mail bearing an electronically verifiable signature,
postal mail, or facsimile.
E. Respondent shall provide to consumers, including the parents of
children, a reasonable means to request removal of their or their childrens
personal identifying information from respondent's and/or the applicable
third party's databases or an assurance that such information has been
removed. Such means may include e-mail, postal mail, or facsimile.
F. The failure of a consumer over the age of twelve (12) to request the
actions specified above within twenty (20) days after his/her receipt of
the notice required in Part VI.A shall be deemed to be consent to the
information's continued retention and use by respondent and any third
party.
G. Respondent shall provide to the parent of a child a reasonable means to
communicate express parental consent to the retention and/or disclosure to
third parties of his/her child's personal identifying information.
Respondent shall not use any such information or disclose it to any third
party unless and until it receives express parental consent.
H. If, in response to the notice required in Part VI.A, respondent has
received a request by a consumer over the age of twelve (12) that
respondent should remove from its databases the consumer's personal
identifying information or has not received the express consent of a parent
of a child to the continued retention and/or disclosure to third parties of
a child's personal identifying information by respondent within twenty (20)
days after the parent's receipt of the notice required in Part VI.B,
respondent shall within ten (10) days:
1. Discontinue its retention and/or disclosure to third parties of
such information, including but not limited to (a) removing from its
databases all such information, (b) removing all personal home pages
created by the child, and (c) terminating all e-mail accounts for the
child; and
2. Contact all third parties to whom respondent has disclosed the
information, requesting that they discontinue using or disclosing that
information to other third parties, and remove the information from
their databases.
With respect to any consumer over the age of twelve (12) or any parent
of a child who has consented to respondent's continued retention and
use of personal identifying information pursuant to this Part, such
consumer's or parent's continuing right to obtain access to his/her or
a child's personal identifying information or removal of such
information from respondent's databases shall be as specified in the
notice required by Part IV of this order.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
vi
<PAGE>
I. Within thirty (30) days after the date of service of this order,
respondent shall obtain from a responsible official of each third party to
whom it has disclosed personal identifying information and from each
GeoCities Community Leader a statement stating that (s)he has been advised
of the terms of this order and of respondent's obligations under this Part,
and that (s)he agrees, upon notification from respondent, to discontinue
using or disclosing a consumer's or child's personal identifying
information to other third parties and to remove any such information from
its databases.
J. As may be permitted by law, respondent shall cease to do business with
any third party that fails within thirty (30) days of the date of service
of this order to provide the statement set forth in Part VI.I or whom
respondent knows or has reason to know has failed at any time to (a)
discontinue using or disclosing a child's personal identifying information
to other third parties, or (b) remove any such information from their
databases. With respect to any GeoCities Community Leader, the respondent
shall cease the Community Leader status of any person who fails to provide
the statement set forth in Part VI.I or whom respondent knows or has reason
to know has failed at any time to (a) discontinue using or disclosing a
child's personal identifying information to other third parties, or (b)
remove any such information from their databases.
For purposes of this Part: "third party(ies)" shall mean each GeoCities
- --------------------------
Community Leader, CMG Information Services, Inc., Surplus Software, Inc.
(Surplus Direct/Egghead Computer), Sage Enterprises, Inc. (GeoPlanet/Planetall),
Netopia, Inc. (Netopia), and InfoBeat/Mercury Mail (InfoBeat).
VIII.
IT IS FURTHER ORDERED that for the purposes of this order, respondent shall not
be required to remove personal identifying information from its archived
database if such information is retained solely for the purposes of Web site
system maintenance, computer file back-up, to block a child's attempt to
register with or otherwise provide personal identifying information to
respondent without express parental consent, or to respond to requests for such
information from law enforcement agencies or pursuant to judicial process.
Except as necessary to respond to requests from law enforcement agencies or
pursuant to judicial process, respondent shall not disclose to any third party
any information retained in its archived database. In any notice required by
this order, respondent shall include information, clearly and prominently, about
its policies for retaining information in its archived database.
IX.
IT IS FURTHER ORDERED that for five (5) years after the date of this order,
respondent GeoCities, and its successors and assigns, shall place a clear and
prominent hyperlink within its privacy statement which states as follows in bold
typeface:
NOTICE: Click here for important information about safe surfing from the Federal
Trade Commission.
The hyperlink shall directly link to a hyperlink/URL to be provided to
respondent by the Commission. The Commission may change the hyperlink/URL upon
thirty (30) days prior written notice to respondent.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
vii
<PAGE>
X.
IT IS FURTHER ORDERED that respondent GeoCities, and its successors and assigns,
shall maintain and upon request make available to the Federal Trade Commission
for inspection and copying the following:
A. For five (5) years after the last date of dissemination of a notice
required by this order, a print or electronic copy in HTML format of all
documents relating to compliance with Parts IV through VIII of this order,
including, but not limited to, a sample copy of every information
collection form, Web page, screen, or document containing any
representation regarding respondent's information collection and use
practices, the notice required by Parts IV through VI, any communication to
third parties required by Part VI, and every Web page or screen linking to
the Federal Trade Commission Web site. Each Web page copy shall be
accompanied by the URL of the Web page where the material was posted
online. Electronic copies shall include all text and graphics files, audio
scripts, and other computer files used in presenting information on the
World Wide Web; and
Provided that, after creation of any Web page or screen in compliance with this
- -------------
order, respondent shall not be required to retain a print or electronic copy of
any amended Web page or screen to the extent that the amendment does not affect
respondent's compliance obligations under this order.
B. For five (5) years after the last collection of personal identifying
information from a child, all materials evidencing the express parental
consent given to respondent.
XI.
IT IS FURTHER ORDERED that respondent GeoCities, and its successors and assigns,
shall deliver a copy of this order to all current and future principals,
officers, directors, and managers, and to all current and future employees,
agents, and representatives having responsibilities with respect to the subject
matter of this order. Respondent shall deliver this order to current personnel
within thirty (30) days after the date of service of this order, and to future
personnel within thirty (30) days after the person assumes such position or
responsibilities.
XII.
IT IS FURTHER ORDERED that respondent GeoCities, and its successors and assigns,
shall establish an "information practices training program" for any employee or
GeoCities Community Leader engaged in the collection or disclosure to third
parties of consumers' personal identifying information. The program shall
include training about respondent's privacy policies, information security
procedures, and disciplinary procedures for violations of its privacy policies.
Respondent shall provide each such current employee and GeoCities Community
Leader with information practices training materials within thirty (30) days
after the date of service of this order, and each such future employee or
GeoCities Community Leader such materials and training within thirty (30) days
after (s)he assumes his/her position or responsibilities.
XIII.
IT IS FURTHER ORDERED that respondent GeoCities, and its successors and assigns,
shall notify the Commission at least thirty (30) days prior to any change in the
corporation that may affect compliance obligations arising under this order,
including, but not limited to, a dissolution,
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
viii
<PAGE>
assignment, sale, merger, or other action that would result in the emergence of
a successor corporation; the creation or dissolution of a subsidiary, parent, or
affiliate that engages in any acts or practices subject to this order; the
proposed filing of a bankruptcy petition; or a change in the corporate name or
address. Provided, however, that, with respect to any proposed change in the
-------- -------
corporation about which respondent learns less than thirty (30) days prior to
the date such action is to take place, respondent shall notify the Commission as
soon as is practicable after obtaining such knowledge. All notices required by
this Part shall be sent by certified mail to the Associate Director, Division of
Enforcement, Bureau of Consumer Protection, Federal Trade Commission,
Washington, D.C. 20580.
XIV.
IT IS FURTHER ORDERED that respondent GeoCities, and its successors and assigns,
shall, within sixty (60) days after service of this order, and at such other
times as the Federal Trade Commission may require, file with the Commission a
report, in writing, setting forth in detail the manner and form in which they
have complied with this order.
XV.
This order will terminate on February 5, 2019, or twenty (20) years from the
most recent date that the United States or the Federal Trade Commission files a
complaint (with or without an accompanying consent decree) in federal court
alleging any violation of the order, whichever comes later; provided, however,
-----------------
that the filing of such a complaint will not affect the duration of:
A. Any Part in this order that terminates in less than twenty (20) years;
B. This order's application to any respondent that is not named as a
defendant in such complaint; and
C. This order if such complaint is filed after the order has terminated
pursuant to this Part.
Provided, further, that if such complaint is dismissed or a federal court rules
- -----------------
that the respondent did not violate any provision of the order, and the
dismissal or ruling is either not appealed or upheld on appeal, then the order
will terminate according to this Part as though the complaint had never been
filed, except that the order will not terminate between the date such complaint
is filed and the later of the deadline for appealing such dismissal or ruling
and the date such dismissal or ruling is upheld on appeal.
By the Commission.
Donald S. Clark
Secretary
ISSUED: February 5, 1999
SEAL
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
ix
<PAGE>
EXHIBIT H
MUTUAL NON-DISCLOSURE AGREEMENT
1. "Confidential Information" is that confidential, proprietary, and trade
secret information being disclosed by the disclosing party pursuant to this
Agreement.
2. Except as set forth in this Section 2, all Confidential Information shall
be in tangible form and shall be marked as Confidential or proprietary
information of the disclosing party. If the Confidential Information is
disclosed orally or visually, it shall be identified as such at the time of
disclosure and confirmed in a writing to the recipient within thirty (30)
days of such disclosure.
3. Each of the parties agrees that it will not make use of, disseminate, or in
any way disclose any Confidential Information of the other party to any
person, firm or business, except to the extent necessary for negotiations,
discussions, and consultations with personnel or authorized representatives
of the other party and any purpose the other party may hereafter authorize
in writing. Each of the parties agrees that it shall disclose Confidential
Information of the other party only to those of its employees, consultants,
advisors and investors who need to know such information and who have
previously agreed, either as a condition to employment or in order to
obtain the Confidential Information, to be bound by terms and conditions
substantially similar to those of this Agreement.
4. There shall be no liability for disclosure or use of Confidential
Information which is (a) in the public domain through no fault of the
receiving party (b) rightfully received from a third party without any
obligation of confidentiality, (c) rightfully known to the receiving party
without any limitation on use or disclosure prior to its receipt from the
disclosing party, (d) independently developed by the receiving party
without use of any Confidential Information and by persons who have not had
access to any Confidential Information (e) generally made available to
third parties without any restriction on disclosure, or (f) communicated in
response to a valid order by a court or other governmental body, as
otherwise required by law, or as necessary to establish the rights of
either party under this Agreement (provided that the party so disclosing
has provided the other party with a reasonable opportunity to seek
protective legal treatment for such Confidential Information).
5. Each of the parties agrees that it shall treat all Confidential Information
of the other party with the same degree of care as it accords to its own
Confidential Information, and each of the parties represents that it
exercises reasonable care to protect its own Confidential Information.
6. Each of the parties agrees that it will not modify, reverse engineer,
decompile, create other works from, or disassemble any software programs
contained in the Confidential Information of the other party unless
otherwise specified in writing by the disclosing party.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
<PAGE>
7. All materials (including, without limitation, documents, drawings, models,
apparatus, sketches, designs and lists) furnished to one party by the
other, and which are designated in writing to be the property of such
party, shall remain the property of such party and shall be returned to it
promptly at its request, together with any copies thereof.
8. This Agreement shall govern all communications between the parties that are
made during the period from the effective date of this Agreement to the
date on which either party receives from the other written notice that
subsequent communications shall not be so governed, provided, however, that
each party's obligations under Sections 2 and 3 with respect to
Confidential Information of the other party which it has previously
received shall continue unless and until such Confidential Information
falls within Section 4. Neither party shall communicate any information to
the other in violation of the proprietary rights of any third party.
Neither party acquires any licenses under any intellectual property rights
of the other party under this Agreement.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
ii
<PAGE>
EXHIBIT I
Warrant
See Exhibit 10.04 DoveBid's Registration Statement on Form S-1.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
<PAGE>
EXHIBIT J - Sample Pages
DoveBid Content:
[LOGO]
C:\PROGRAM FILES\QUALCOMM\EUDORA MAIL\Attach\category.gifcategory.gif
- ----------------------------------------------------------------------
DoveBid Banner and DoveBid Button sample:
http://dir.yahoo.com/Business_and_Economy/Small_Business_Information/
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
<PAGE>
EXHIBIT K
Trademark Guidelines
Trademark Guidelines
--------------------
Yahoo Trademark Guidelines:
- --------------------------
1. General. All Yahoo Brand Features will be used only as explicitly
--------
licensed by Yahoo, and only under the terms and conditions and for the purposes
described in such license. The other party to such license shall herein be
referred to as the "Licensee". All such uses shall be in a manner consistent
with the following guidelines.
2. Appearance of Logos. The Licensee shall ensure that the presentation
--------------------
of the Yahoo Brand Features shall be consistent with Yahoo's own use of the
Yahoo Brand Features in comparable media.
3. Notices. All trademarks and service marks included in the Yahoo Brand
--------
Features shall be designated with "SM", "TM" or "(R)", in the manner directed by
Yahoo.
4. Appearance. From time to time during the term of the license, Yahoo
-----------
may provide the Licensee with guidelines for the size, typeface, colors and
other graphic characteristics of the Yahoo Brand Features, which upon delivery
to the Licensee shall be deemed to be incorporated into these "Yahoo Trademark
Usage Guidelines".
5. Restrictions Upon Use. The Yahoo Brand Features shall not be
----------------------
presented or used:
A. in a manner that could be reasonably interpreted to suggest
editorial content has been authored by, or represents the views or opinions of,
Yahoo or any Yahoo personnel;
B. in a manner that is misleading, defamatory, libelous, obscene or
otherwise objectionable, in Yahoo's reasonable opinion;
C. in a way that infringes, derogates, dilutes or impairs the rights
of Yahoo in the Yahoo Brand Features;
D. as part of a name of a product or service of a company other than
Yahoo, except as expressly provided in a written agreement by Yahoo.
6. Nonexclusive Remedy. The Licensee will make any changes to its use of
--------------------
the Yahoo Brand Features as requested by Yahoo. The foregoing remedy shall be
in addition to any other legal and equitable rights that Yahoo may possess
relating to Licensee's use of the Yahoo Brand Features.
7. Revisions. These Guidelines may be modified at any time by Yahoo upon
---------
written notice to the Licensee.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
<PAGE>
*Confidential treatment has been requested with respect to certain information
contained in this document. Confidential portions have been omitted from the
public filing and have been filed separately with the Securities and Exchange
Commission.
EXHIBIT 10.33
ASSET PURCHASE AND CO-MARKETING AGREEMENT
THIS ASSET PURCHASE AND CO-MARKETING AGREEMENT (this "Agreement") is made
as of March 7, 2000 (the "Effective Date"), by and between DoveBid, Inc., a
Delaware corporation with offices at 1241 East Hillsdale Blvd. Foster City,
California 94404 ("DoveBid"), and Comdisco, Inc., a Delaware corporation with
offices at 6111 North River Road, Rosemont, IL 60018 ("Comdisco").
RECITALS
A. DoveBid and certain investors, including Comdisco, entered into that
certain Series C Preferred Stock Purchase Agreement dated February 25, 2000 (the
"Stock Purchase Agreement"), pursuant to which DoveBid agreed to sell to
Comdisco and Comdisco agreed to purchase from DoveBid a specified number of
shares of DoveBid's Series C Preferred Stock.
B. Under the Stock Purchase Agreement, DoveBid's obligation to sell
shares of its Series C Preferred Stock to Comdisco is subject to DoveBid and
Comdisco entering into this Agreement, pursuant to which Comdisco will sell to
DoveBid certain of the specified assets as consideration for such stock.
C. Comdisco has leased certain of the specified assets to [*] and
Comdisco is free to sell the assets subject to the terms of the [*].
D. DoveBid desires to purchase certain of the specified assets for cash
consideration.
E. DoveBid and Comdisco also desire to enter into this Agreement to
establish the terms of a co-marketing relationship between the parties.
NOW, THEREFORE, in consideration of the above recitals and the mutual
covenants hereinafter set forth, DoveBid and Comdisco hereby agree as follows:
1. CERTAIN DEFINITIONS
-------------------
The following terms shall have the following meanings in this Agreement:
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
<PAGE>
"Applicable Law" means all applicable provisions of all statutes, laws
(including the common law), rules, regulations, ordinances, codes of any
Governmental Authority, and all orders, decisions, injunctions, judgments,
findings, awards and decrees of or agreements with any Governmental Authority.
"Cash Consideration" means the amount equal to [*], payable by DoveBid to
Comdisco pursuant to Section 3.1.
"Comdisco Affiliate" means any company in which Comdisco holds: (i) a
majority ownership; or (ii) an ownership interest equal to or in excess of
twenty percent (20%) combined with either: (A) voting control or (B) two (2) or
more board of directors' seats.
"Encumbrances" means all mortgages, pledges, liens, licenses, rights of
possession, security interests, restrictions, encumbrances, charges, title
retention, conditional sale or other security arrangements and all claims,
restrictions, or agreements of any nature whatsoever.
"Governmental Authority" means any national government, federal, state
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, any government authority, agency,
department, board, commission, court or instrumentality of the United states,
any state of the United States or any political subdivision thereof, and any
tribunal or arbitrator'(s) of competent jurisdiction.
"Intellectual Property Rights" means and includes all worldwide
intellectual and other proprietary rights, including without limitation: (i)
copyrights, trademarks and service marks (and all applications and registrations
related thereto), (ii) all design rights, patents, patent applications, and
patent rights, (iii) all trade secret rights, know-how, contract rights,
proprietary information rights, rights of priority, rights of publicity, moral
rights, (iv) all rights to secure renewals, reissuances and extensions of the
above, (vi) all claims and/or causes of action of any kind for any past or
future infringements upon, or other misappropriations or violations of any of
the foregoing, and (vii) any other similar rights existing under judicial or
statutory law of any country in the world or under any treaty.
"Purchased Assets" means those Comdisco assets identified on Exhibit A.
---------
"Purchased Assets Value" means the corresponding agreed upon resale value
for the Purchased Assets, as specified on Exhibit A.
---------
2. PURCHASE AND SALE OF ASSETS
---------------------------
2.1 Agreement to Sell and Purchase Assets. Subject to the terms and
-------------------------------------
conditions of this Agreement, Comdisco agrees to sell, assign, transfer and
convey to DoveBid at the Closing (as defined in Section 3.3), and DoveBid agrees
to purchase and acquire from Comdisco at the Closing, all of Comdisco's right,
title and interest in and to all of the Purchased Assets. The Purchased Assets
will be sold, assigned, transferred and conveyed to DoveBid (as provided in
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
2
<PAGE>
Section 2.2) on the Closing Date (as defined in Section 3.3), free and clear of
all Encumbrances, other than the purchase money security interest of Comdisco
with respect to the [*] equipment as described on Exhibit A hereto (hereinafter
---------
"[*] Equipment") until payment in full of the Cash Consideration.
2.2 Passage of Title; Delivery; Inspection.
--------------------------------------
(a) Title Passage. Except as otherwise provided in this Section 2,
-------------
upon the Closing, all right, title and interest in and to all of the Purchased
Assets shall pass to DoveBid, and Comdisco shall deliver to DoveBid possession
of all of the Purchased Assets subject to the provisions of Section 2.2(c)
hereof. Comdisco agrees to also deliver to DoveBid a Bill of Sale substantially
in the form attached as Exhibit B ("Bill of Sale") and such other instruments
---------
and conveyances that DoveBid may reasonably deem necessary or desirable (both at
and after the Closing) sufficient to convey to DoveBid good and marketable title
to all of the Purchased Assets, free and clear of all Encumbrances other than
the purchase money security interest of Comdisco in the [*] Equipment until
payment in full of the Cash Consideration. Comdisco acknowledges and agrees
that DoveBid will retain any and all proceeds from DoveBid's resale of any of
the Purchased Assets.
(b) Software Licenses. To the extent that the Purchased Assets
-----------------
include any software and Comdisco is the licensee and has the right to assign
such license rights, Comdisco hereby agrees, upon request of DoveBid, at
DoveBid's sole expense, to assign such license rights and agrees to undertake
whatever action that DoveBid may reasonably deem necessary or desirable,
including the execution of documents (both at and after the Closing) in
furtherance thereof.
(c) Delivery of Purchased Assets. DoveBid has requested and Comdisco
----------------------------
has agreed to store the Purchased Assets, other than as set forth below, at
Comdisco's facilities in Massachusetts and California for a period not to exceed
thirty (30) days from the Closing Date (the "Purchased Assets Storage Period").
On or prior to the expiration of the Purchased Assets Storage Period, DoveBid
and Comdisco shall enter into an agreement with regard to services to be
provided by Comdisco in connection with the storage, packaging, refurbishing and
such other services as shall be agreed upon between the parties and the related
fees for such services. In the event the parties do not enter into an agreement
within such period, DoveBid will pick up, at its expense, the Purchased Assets
from Comdisco's facilities within fifteen (15) business days thereof and for
each day thereafter, DoveBid shall pay Comdisco as liquidated damages, an amount
of $5000 per day. DoveBid acknowledges that certain of the Purchased Assets, as
specified on Exhibit A as "[*]", are located [*] and DoveBid's possession
---------
thereof is subject to [*]. Comdisco shall have risk of loss for the Purchased
Assets remaining at Comdisco's facilities for the period specified above. Risk
of loss for the Purchased Assets located [*] shall transfer to DoveBid on the
Closing Date.
(d) Inspection of Purchased Assets. Within fifteen (15) business days
------------------------------
following the Closing, DoveBid will conduct an inspection of the Purchased
Assets, other than the Purchased Assets located [*], to verify that such assets
correspond to the list thereof as set
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
3
<PAGE>
forth in Exhibit A and to document the condition of such assets. The result of
---------
DoveBid's inspection will be set forth in a written report (the "Purchased
Assets Inspection Report"), which DoveBid will promptly furnish to Comdisco. If
such an inspection reveals that any of the Purchased Assets are missing,
Comdisco will promptly pay DoveBid the Purchased Asset Values (as set forth in
Exhibit A) for such missing Purchased Assets or provide DoveBid a like-kind
- ---------
replacement with a comparable Purchased Assets Value. If Comdisco provides
DoveBid with a like-kind replacement of any of the Purchased Assets, DoveBid
will amend the Purchased Assets Inspection Report as appropriate. At the end of
the earlier of (i) the expiration of the Purchased Assets Storage Period (or any
mutually agreed-upon extension thereof); and (ii) the date on which DoveBid
removes the Purchased Assets from Comdisco's facilities, DoveBid will conduct a
second inspection of the Purchased Assets, other than the Purchased Assets
located [*], to verify that such assets correspond to the Purchased Assets
Inspection Report (as amended, if applicable). If the second inspection reveals
that any of the Purchased Assets are missing or are damaged, based on the
information contained in the Purchased Assets Inspection Report (as amended, if
applicable), Comdisco will promptly pay DoveBid the Purchased Asset Value (as
set forth in Exhibit A) for such missing Purchased Assets or provide DoveBid a
---------
like-kind replacement with a comparable Purchased Assets Value.
2.3 Repurchase of Purchased Assets. Subsequent to the Closing, Comdisco
------------------------------
will have the right to request DoveBid to sell to Comdisco any of the Purchased
Assets. Upon such request, DoveBid will sell such Purchased Assets to Comdisco
at prices equal to the applicable Purchased Assets Value, and subject DoveBid's
standard auction terms.
3. PURCHASE PRICE; PAYMENTS
------------------------
3.1 Purchase Price. In consideration of the sale, assignment, transfer and
--------------
conveyance of all the Purchased Assets to DoveBid at the Closing free and clear
of all Encumbrances, other than a purchase money security interest in favor of
Comdisco, DoveBid shall (i) pay to Comdisco on or after the Closing, but in no
event later than March 31, 2000, by wire transfer the Cash Consideration, and
(ii) issue to Comdisco [*] shares of DoveBid's Series C Preferred Stock in the
form of a stock certificate, in accordance with the terms and conditions
specified in the Stock Purchase Agreement.
3.2 Expenses and Taxes. Each party will bear its own attorneys,
------------------
accountants, financial advisors and other fees and costs related to this
transaction, including preparation of this Agreement. DoveBid will either pay
all sales, transfer, bulk sales and use tax associated with the transaction
hereby contemplated and the transfer of the Purchased Assets or will provide
resale certificates to Comdisco in connection therewith and will indemnify
Comdisco and its shareholders, officers, directors, employees and agents, from
all loss, liability, damage, claim, risk and expense (including reasonable
attorneys' fees) occasioned by DoveBid's failure to pay such taxes in the
absence of an exemption therefrom.
3.3 Closing. The consummation of the transaction contemplated hereby
-------
will take place at a closing to be held at the offices of Fenwick & West LLP
located at Palo Alto Square, Palo Alto, California (the "Closing") at 10:00 am
on March 7, 2000, or at such other time or
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
4
<PAGE>
date, and at such place, or by such other means of exchanging documents, as may
be agreed to by the parties hereto. The date on which the Closing activity
occurs will be referred to as the "Closing Date".
4. CO-MARKETING RELATIONSHIP.
-------------------------
4.1 Right of First Refusal. Comdisco hereby grants to DoveBid the right
----------------------
of first refusal (the "Right of First Refusal") to act as the exclusive provider
of third-party auction services for the sale of all Comdisco [*] manufacturing
equipment and [*] and [*] and [*] equipment (collectively, "Designated Comdisco
Equipment"), subject to the following terms:
(a) The Right of First Refusal will apply to the sale of all
Designated Comdisco Equipment that Comdisco elects to dispose of by auction
through a third party ("Designated Assets"). The Right of First Refusal will not
apply to any sale of assets by Comdisco or a Comdisco Affiliate through its own
channels, which shall include, but not be limited to, direct sales, Web sales,
auctions, or any other form of remarketing by Comdisco or a Comdisco Affiliate.
Comdisco may, but is not obligated to, offer DoveBid assets for auction other
than the Designated Comdisco Equipment. Any such assets offered to DoveBid shall
be considered Designated Assets for the purposes of Sections 4.1(c) and (d).
(b) During the Co-Marketing Term (as defined in Section 4.6),
Comdisco's [*] division will list a minimum of [*] of [*] assets on DoveBid's
24x7 Web site. All such assets shall be considered Designated Assets for the
purposes of Sections 4.1(c) and (d). DoveBid will charge Comdisco its standard
five percent (5%) commission rate for the sale of such assets on DoveBid's 24x7
Web site, for a total anticipated commission with respect to such assets of [*]
(the "Minimum Commissions"). If, as of the end of the Co-Marketing Term,
DoveBid has received less than the Minimum Commissions, then Comdisco will
promptly pay DoveBid an amount equal to the Minimum Commissions less any
commissions actually received by DoveBid for the sale of such assets.
(c) Prior to putting any Designated Assets up for auction, Comdisco
will provide DoveBid with a list of such assets containing Comdisco's reserve
price for each asset (a "Designated Assets List"). DoveBid will have a period
of [*] days from the date of receipt of Comdisco's Designated Asset List to
accept or reject the Designated Assets for auction on such reserve price terms.
In the event DoveBid elects to reject the Designated Assets for auction,
Comdisco may enter into agreements with any third party for the disposal of such
assets so long as the reserve prices for the assets are not less than those
identified in Comdisco's Designated Asset List. If DoveBid accepts the
Designated Assets for auction, DoveBid will have the exclusive right to sell
such assets for a reasonable period of time, of not less than [*] days, as shall
be agreed upon by the parties (each, an "Auction Duration"), and upon auction
terms and conditions substantially in the form attached hereto as Exhibit C (the
---------
"Auction Terms"), as negotiated at the time such assets are presented by DoveBid
for auction, including the fee-sharing arrangement between DoveBid and Comdisco
in connection therewith. Comdisco and DoveBid will enter into a Schedule
substantially in the form attached hereto as Exhibit D for any auctions of
---------
Designated Assets accepted by DoveBid under this Section 4.1. Comdisco will
retain
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
5
<PAGE>
title to Designated Assets that DoveBid accepts for auction, but DoveBid may
warehouse such assets, as mutually agreed by the parties.
(d) In the event that DoveBid does not sell such Designated Assets in
accordance with the applicable Auction Terms, Comdisco will have the right to
rescind DoveBid's right to sell such assets, DoveBid will remove such assets
from DoveBid's auction and, to the extent applicable, return such assets to
Comdisco, within five (5) business days of receipt of written notice thereof
from Comdisco, and Comdisco shall have the right to sell such Designated Assets
through its own channels or via any third party. In addition, Comdisco shall
have the right to review DoveBid's performance hereunder at the expiration of
the fifth (5/th/) month after the Closing Date. If, as a result of such a
review, Comdisco determines that DoveBid has failed to auction, within the
applicable Auction Durations, a percentage of Designated Assets equal to or in
excess of [*] of the aggregate Designated Assets allocated to DoveBid for
auction during such Auction Durations, as measured by dollar amount of assets
based upon reserve prices, DoveBid's Right of First Refusal shall be terminated
upon receipt of written notice thereof from Comdisco.
4.2 Exclusivity. As long as the Right of First Refusal (as defined
-----------
in Section 4.1) remains in effect, DoveBid agrees not to enter into a co-
marketing relationship with a company that provides services similar to Comdisco
for the auction of [*] or [*] equipment, subject to the following terms:
(a) DoveBid will not [*] auction services for the sale of types of
equipment substantially similar to the Designated Comdisco Equipment of any
other company that provides equipment financing and asset management services
for third parties in the [*] or [*] sectors [*].
(b) Nothing will restrict DoveBid from auctioning equipment used by a
[*] for its own internal needs [*].
(c) Nothing will restrict DoveBid from auctioning equipment used by
any company for its internal needs regardless of the source of lease or capital
financing used by the company [*].
(d) Nothing will restrict third parties (including, without
limitation, [*]) from [*] assets for auction on DoveBid's Web site.
(e) Prior to selling aggregated assets in the [*] or [*] sectors for
auction on DoveBid's Web site, DoveBid will seek to identify with Comdisco
opportunities to refurbish certain "big ticket" assets for resale through
Comdisco's channels. The terms of any such transaction would be mutually agreed
by DoveBid and Comdisco.
(f) DoveBid will allow Comdisco [*] to the [*] in [*] for the
Designated Comdisco Equipment sectors ("[*]") solely for Comdisco's internal use
only. Comdisco will not have the right to [*] any of [*] or permit its use by
any third party.
*Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
6
<PAGE>
4.3 Marketing Branding. The parties will enter into joint marketing
------------------
programs to promote the parties' co-marketing relationship subject to the
following terms:
(a) Any use by DoveBid of the Comdisco name or any Comdisco trademark
shall be subject to Comdisco's prior (i) review of the proposed marketing
materials, press releases, announcements or similar documentation and (ii)
written consent. Any such use by DoveBid of Comdisco's name or any Comdisco
trademark must be in compliance with Comdisco's standard trademark usage
guidelines.
(b) Any use by Comdisco of the DoveBid name or any DoveBid trademark
shall be subject to DoveBid's prior (i) review of proposed marketing materials,
press releases, announcements or similar documentation and (ii) written consent.
Any such use by Comdisco of DoveBid's name or any DoveBid trademark must be in
compliance with DoveBid's standard trademark usage guidelines.
4.4 Further Collaboration. DoveBid and Comdisco may extend the terms of
---------------------
the [*] and [*] as provided [*], respectively, by mutual written agreement. In
addition, the parties will work together to identify other areas in which they
can collaborate, including the auction of assets other than the Designated
Comdisco Equipment, such as [*], [*] and [*].
4.5 Non-Solicitation. DoveBid and Comdisco will not solicit for hire any
----------------
employee of the other during the term of this Agreement or for one (1) year
thereafter.
4.6 Term of Co-Marketing Relationship. Unless terminated earlier in
---------------------------------
accordance with the terms hereof, the parties' co-marketing relationship, as set
forth in Sections 4.1 through 4.5, will be in force for a term of one (1) year
from the Closing Date, unless otherwise mutually agreed between the parties (the
"Co-Marketing Term"). Either party may terminate the Co-Marketing Term upon
notice to the other party if the other party commits a material breach of any
representation, warranty, term or condition thereof and fails to cure such
breach within thirty (30) days following receipt of written notice thereof.
5. OBLIGATIONS AND LIABILITIES NOT ASSUMED
---------------------------------------
5.1 Liabilities and Obligations Not Assumed. Except for the obligations
---------------------------------------
arising following the Closing under any software licenses assigned by Comdisco
to DoveBid pursuant to Section 2.2 (b) hereof and any obligations arising in
connection with Comdisco's assignment to DoveBid of Comdisco's rights and
interests under [*], DoveBid has not and will not, by the execution, delivery or
performance of this Agreement, or otherwise, assume or otherwise become
responsible for any liability or obligation of any nature of Comdisco, including
without limitation any tax liabilities related to the Purchased Assets arising
prior to the Closing ("Pre-Closing Risks"). Comdisco hereby agrees to indemnify,
defend and hold DoveBid and its shareholders, officers, directors, employees and
agents, harmless from and against all loss, liability, claims and expenses
(including reasonable attorneys' fees) related to such Pre-Closing Risks.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
7
<PAGE>
5.2 No Obligations to Third Parties. The execution and delivery of this
-------------------------------
Agreement shall not be deemed to confer any rights upon any person or entity
other than the parties hereto, or to make any person or entity a third-party
beneficiary of this Agreement, or to obligate the parties to any person or
entity other than the parties to this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF DOVEBID
-----------------------------------------
DoveBid represents and warrants to Comdisco that all of the following
statements are true, accurate and correct:
6.1 Corporate Organization. DoveBid is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of Delaware.
DoveBid has all necessary corporate power and authority to enter into this
Agreement and all other documents that DoveBid may be required to enter into in
connection with this Agreement.
6.2 Authorization for this Agreement. The execution and delivery of this
--------------------------------
Agreement and each other agreement or instrument referenced herein by DoveBid,
and the performance by DoveBid of its obligations hereunder and thereunder have
been duly authorized by the Board of Directors of DoveBid, and, if required by
law or agreement, its shareholders, and no further corporate or other action or
approval is required in order to constitute such agreements as binding and
enforceable.
6.3 No Conflicts. The execution, delivery and performance by DoveBid of
------------
this Agreement and each other agreement or instrument referenced herein by
DoveBid, and the consummation of the transactions contemplated thereby, do not
and will not conflict with or result in a violation of or a default under (with
or without the giving of notice or the lapse of time or both) (a) DoveBid's
articles of incorporation or by-laws or other organizational documents, (b) any
Applicable Law applicable to DoveBid, or (c) any contract, agreement or other
instrument to which DoveBid is a party or by which DoveBid may be bound or
affected. No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental
Authority on the part of DoveBid is required in connection with the execution,
delivery and performance of the Agreement by DoveBid or the consummation of the
transactions contemplated thereby, except those as shall have been obtained or
made prior to Closing.
6.4 Brokerage and Finder's Fees. Neither DoveBid nor any of its
---------------------------
affiliates has employed any broker, finder or agent, or agreed to pay or incur
any brokerage fee, finder's fee or commission with respect to the transactions
contemplated by this Agreement, or dealt with anyone purporting to act in the
capacity of a broker, finder or agent with respect thereto as a result of which
any claim for a fee can be asserted against Comdisco.
6.5 Full Disclosure. No representation or warranty by DoveBid in this
---------------
Agreement, contains any untrue statement of a material fact or omits to state a
material fact or circumstance required to be stated therein or necessary in
order to make such statements, in light of the circumstances under which they
were made, not misleading. The copies of all documents
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
8
<PAGE>
furnished by DoveBid to Comdisco, its affiliates and agents pursuant to or in
connection with this Agreement and the transactions contemplated hereby are
complete and accurate.
7. REPRESENTATIONS AND WARRANTIES OF COMDISCO
------------------------------------------
Comdisco represents and warrants to DoveBid that all of the following
statements are true, accurate and correct:
7.1 Corporate Organization. Comdisco is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of Delaware,
and has all necessary corporate power and authority and the legal right to own
the Purchased Assets. Comdisco has all necessary corporate power and authority
to enter into this Agreement and all of the other agreements and instruments
required to be executed or delivered by Comdisco hereunder collectively
"Collateral Agreements").
7.2 Authorization for this Agreement. The execution and delivery of this
--------------------------------
Agreement and each of the Collateral Agreements herein by Comdisco and the
performance by Comdisco of its obligations hereunder and thereunder have been
duly authorized by the Board of Directors of Comdisco and, if required by law or
agreement, its shareholders, and no further corporate or other action or
approval is required in order to constitute such agreements as binding and
enforceable.
7.3 No Conflicts. The execution, delivery and performance by Comdisco of
------------
this Agreement and each of the Collateral Agreements to which it is a party, and
the consummation of the transactions contemplated thereby, do not and will not
conflict with or result in a violation of or a default under (with or without
the giving of notice or the lapse of time or both) (a) Comdisco's articles of
incorporation or by-laws or other organizational documents, (b) any Applicable
Law applicable to Comdisco, or any of the Purchased Assets, or (c) any contract,
agreement or other instrument to which Comdisco is a party or by which Comdisco
or any of the Purchased Assets, may be bound or affected, except as provided in
[*]. No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental
Authority on the part of Comdisco is required in connection with the execution,
delivery and performance of the Agreement and the Collateral Agreements by
Comdisco or the consummation of the transactions contemplated thereby, except
those as shall have been obtained or made prior to Closing.
7.4 Brokerage and Finder's Fees. Neither Comdisco nor any Comdisco
---------------------------
Affiliate has employed any broker, finder or agent, or agreed to pay or incur
any brokerage fee, finder's fee or commission with respect to the transactions
contemplated by this Agreement, or dealt with anyone purporting to act in the
capacity of a broker, finder or agent with respect thereto as a result of which
any claim for a fee can be asserted against DoveBid.
7.5 Title. Comdisco owns and has good and marketable title to all of the
-----
Purchased Assets, free and clear of all Encumbrances. Title to all the Purchased
Assets is freely
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
9
<PAGE>
transferable from Comdisco to DoveBid without obtaining the consent or approval
of or delivering notice to any person or party.
7.6 Condition of Purchased Assets. The Purchased Assets are being sold
-----------------------------
"as is". COMDISCO MAKES NO OTHER WARRANTEIS OTHER THAN THOSE SPECIFICALLY SET
OUT IN THIS AGREEMENT (IF ANY), AND SPECIFICALLY DISCLAIMS THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7.7 Litigation. There are no actions, suits, investigations or
----------
proceedings pending, or, to the knowledge of Comdisco, threatened (i) against
Comdisco, the Purchased Assets or any properties or rights of Comdisco which
arose out of or are based upon the ownership or use of the Purchased Assets
before any Governmental Authority, (ii) challenging the ownership or use, in any
respect, of the Purchased Assets, or (iii) asserting the invalidity of this
Agreement or seeking to prevent any of the transactions contemplated hereby.
7.8 Compliance with Laws. In the operation of its business as it
--------------------
relates to the Purchased Assets, Comdisco has duly complied with all Applicable
Laws, including without limitation, all laws, regulations and rules relating to
environmental, export controls, immigration, labor and employment benefits
matters.
7.9 Taxes. At the Closing there will be no federal, state or local tax
-----
liens (whether recorded, unrecorded or arising by operation of law) against any
of the Purchased Assets to be transferred to DoveBid hereunder. Comdisco has
paid or will pay, when due, any federal, state or local taxes attributable to
periods prior to the Closing Date with respect to the Purchased Assets which, if
unpaid, may result in a lien against any of the Purchased Assets.
7.10 Records. On or before the Effective Date and the Closing, Comdisco
-------
has made available to DoveBid access to all documents, books, files and records
of Comdisco pertaining to the Purchased Assets.
7.11 Undisclosed Liabilities. To Comdisco's knowledge, Comdisco has no
-----------------------
obligations or liabilities related to the Purchased Assets, including but not
limited to, employees or consultants, whether absolute, accrued, contingent or
otherwise, except and to the extent disclosed in this Agreement.
7.12 Intellectual Property. As between the parties, Comdisco owns,
---------------------
possesses and has the exclusive rights to own the Purchased Assets, and Comdisco
has not granted any third party any outstanding licenses or other rights in or
to any of its Purchased Assets. Comdisco is not liable, nor has it made any
contract, commitment or arrangement whereby it may become liable, to any person
for any royalty, fee or other compensation for any of the Purchased Assets. To
Comdisco's knowledge, no third party has asserted or threatened to assert
against Comdisco that any of the Purchased Assets infringe upon, misappropriate
or otherwise conflict with, any Intellectual Property Rights of any third party.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
10
<PAGE>
7.13 Decontamination Processes. Comdisco has complied with its normal
-------------------------
and customary decontamination processes with respect to the Purchased Assets,
other than the "[*]" located on [*].
7.14 Full Disclosure. No representation or warranty by Comdisco in this
---------------
Agreement or in any Collateral Agreement when taken together, contains any
untrue statement of a material fact or omits to state a material fact or
circumstance required to be stated therein or necessary in order to make such
statements, in light of the circumstances under which they were made, not
misleading. The copies of all documents furnished by Comdisco to DoveBid, its
affiliates and agents pursuant to or in connection with this Agreement and the
transactions contemplated hereby are complete and accurate.
8. COVENANTS OF COMDISCO
---------------------
8.1 Pre-Closing Covenants. Until the Closing: (a) Comdisco shall conduct
---------------------
its business with respect to the Purchased Assets only in the ordinary course,
(b) Comdisco shall reasonably cooperate with DoveBid in the orderly transfer of
the Purchased Assets to DoveBid's control by the Closing, (c) Comdisco shall use
commercially diligent efforts to preserve for DoveBid the Purchased Assets, and
shall completely refrain from negotiating any license, right or other form of
Encumbrance upon any portion of the Purchased Assets with any third party;
provided, that the foregoing shall not be deemed to prohibit Comdisco, prior to
the Closing, from selling any of the Purchased Assets to a third party in the
ordinary course.
8.2 Access. Comdisco will provide DoveBid and its representatives, during
------
normal business hours, with complete access to all of the Purchased Assets,
other than those assets located at [*], access to which shall be subject to
compliance with the terms and conditions of [*], and any related documents,
books, files and records, to afford DoveBid a reasonable opportunity to make
such a full investigation of the Purchased Assets prior to the Closing as
DoveBid may reasonably desire, and Comdisco will cause Comdisco's
representatives to cooperate fully with DoveBid and DoveBid's representatives in
connection therewith.
8.3 Required Consents and Notices.
-----------------------------
On or prior to the Closing, Comdisco will obtain all consents, waivers and
authorizations required or appropriate to validly and timely assign and transfer
all of the Purchased Assets to DoveBid at the Closing free and clear of all
Encumbrances, other than the purchase money security interest of Comdisco with
respect to the [*] Equipment, and to permit DoveBid following the Closing to
resell the Purchased Assets to third parties, subject to payment in full to
Comdisco by DoveBid of the Cash Consideration.
8.4 Bill of Sale. At the Closing, Comdisco will execute and deliver to
------------
DoveBid the Bill of Sale.
8.5 Further Assurances. From and after the Closing Date, Comdisco will
------------------
promptly execute and deliver to DoveBid any and all such further assignments,
endorsements, records,
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
11
<PAGE>
information and other documents and instruments as DoveBid may reasonably
request for the purpose of effecting the transfer of Comdisco's title to the
Purchased Assets to DoveBid and/or carrying out the provisions of this
Agreement.
8.6 Notice of Certain Matters. Comdisco shall give prompt notice to
-------------------------
DoveBid of the occurrence, or failure to occur, of any event, which occurrence
or failure to occur, if uncured, could cause (a) any inaccuracy or breach of any
representation or warranty or violation of a covenant of Comdisco in this
Agreement; or (b) the failure of any of the conditions set forth in Section 10
of this Agreement.
9. COVENANTS OF DOVEBID
--------------------
9.1 Compliance. DoveBid agrees that before and after the Closing Date,
----------
Comdisco shall have no responsibility for DoveBid's compliance or non-compliance
with any [*] order with respect to [*] or with any [*] statute or regulations
governing the conduct of [*] or auctions and DoveBid shall hold Comdisco
harmless from any such compliance or non-compliance by DoveBid.
9.2 Taxes. DoveBid agrees to promptly pay all sales, use, transfer, bulk
-----
sales or other taxes imposed on the sale or transfer of the Purchased Assets to
DoveBid under this Agreement or in connection with any subsequent sales thereof
by DoveBid and to indemnify and hold Comdisco and its officers, directors,
shareholders, employees and agents, harmless from and against any such taxes or
claims for payment thereof by any tax authority.
9.3 Required Consents and Notices. Prior to the Closing, DoveBid will
-----------------------------
obtain all consents, waivers and authorizations and provide all notices required
or appropriate to consummate the transactions contemplated by this Agreement.
9.4 Notice of Certain Matters. DoveBid shall give prompt notice to
-------------------------
Comdisco of the occurrence, or failure to occur, of any event, which occurrence
of failure to occur, if uncured, could cause (a) any inaccuracy or breach of any
representation or warranty or violation of a convenant of DoveBid in this
Agreement, or (b) the failure of any of the conditions set forth in Section 10
of this Agreement.
9.5 Further Assurances. From and after the Closing Date, DoveBid will
------------------
promptly execute and deliver to Comdisco any and all such further records,
documents, information, and instruments as Comdisco may reasonably request for
the purpose of carrying out the provisions of this Agreement.
10. CONDITIONS TO CLOSING
---------------------
10.1 Conditions to DoveBid's Obligations. The obligations of DoveBid
-----------------------------------
hereunder shall be subject to the satisfaction and fulfillment of each of the
following conditions, except as DoveBid may expressly waive the same in writing:
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
12
<PAGE>
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties made herein by Comdisco in Section 7 shall be true and correct in
all material respects, and shall not be misleading in any material respect, on
and as of the date given, and on and as of the Closing Date with the same force
and effect as though such representations and warranties were made on and as of
the Closing Date.
(b) Compliance. As of the Closing Date, Comdisco shall have complied
----------
in all material respects with, and shall have fully performed, in all material
respects, all conditions, covenants and obligations in this Agreement imposed on
Comdisco, required to be performed or complied with by Comdisco at, or prior to,
the Closing Date.
(c) Delivery of Amended List of Purchased Assets. Comdisco shall have
--------------------------------------------
delivered, and DoveBid shall have received an amended Exhibit A from which
---------
assets sold by Comdisco prior to Closing, and their corresponding agreed upon
value, shall have been removed.
(d) Delivery of Purchased Assets. Comdisco shall have delivered,
----------------------------
subject to the terms of Section 2.2 (c) hereof, and DoveBid shall have received
all the Purchased Assets free and clear of all Encumbrances, other than the
purchase money security interest in favor of Comdisco with respect to the [*]
Equipment.
(e) Bill of Sale. Comdisco shall have duly executed and delivered to
------------
DoveBid the Bill of Sale.
(f) No Litigation; Legality. There shall not be pending or threatened
-----------------------
any litigation with respect to the Purchased Assets or the transfer thereof by
Comdisco. There shall not be in effect or pending any Applicable Law which
makes it illegal for Comdisco to consummate the transactions contemplated by
this Agreement, or any order, decree or judgment enjoining any party to this
Agreement from consummating the transactions contemplated by this Agreement or
requiring any part of the Purchased Assets to be divested or subject to an
Encumbrance.
10.2 Conditions to Comdisco's Obligations. The obligations of Comdisco
------------------------------------
hereunder shall be subject to the satisfaction and fulfillment of each of the
following conditions, except as Comdisco may expressly waive the same in
writing:
(a) Accuracy of Representations and Warranties on Closing Date. The
----------------------------------------------------------
representations and warranties made herein by DoveBid in Section 6 hereof shall
be true and correct in all material respects, and shall not be misleading in any
material respect, on and as of the date given, and on and as of the Closing Date
with the same force and effect as though such representations and warranties
were made on and as of the Closing Date.
(b) Compliance. DoveBid shall have complied in all material respects
----------
with, and shall have fully performed, in all material respects, all terms,
conditions, covenants and obligations in this Agreement imposed on DoveBid and
required to be performed or complied with by DoveBid at, or prior to, the
Closing Date.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
13
<PAGE>
(c) Stock. Comdisco shall have received a stock certificate
-----
evidencing the DoveBid Series C Preferred Stock issued to Comdisco under the
Stock Purchase Agreement.
(d) Cash Consideration. DoveBid shall pay to Comdisco on or after the
------------------
Closing Date, but in no event later than March 31, 2000, the Cash Consideration.
(e) No Litigation; Legality. There shall not be in effect or pending
-----------------------
any Applicable Law which makes it illegal for DoveBid to consummate the
transactions contemplated by this Agreement, or any order, decree or judgment
enjoining any party to this Agreement from consummating the transactions
contemplated by this Agreement.
(f) [*]. DoveBid shall execute and deliver the Assignment of
Comdisco's rights and interests under the [*] in the form attached hereto as
Exhibit F.
- ---------
11. CONFIDENTIALITY.
---------------
11.1 Confidentiality Obligation. Comdisco hereby expressly acknowledges
--------------------------
and agrees that [*] (as defined in [*] constitutes "Confidential Information" as
defined in the Confidentiality Agreement entered into between the parties dated
October 5, 1999, a copy of which is attached hereto and made a part hereof as
Exhibit G (the "Confidentiality Agreement").
- ----------
11.2 Permitted Disclosure. The terms and conditions of this Agreement will
--------------------
be considered confidential and will not be disclosed to any third parties except
to such party's accountants, attorneys or except as otherwise required by law.
Notwithstanding the foregoing, Comdisco will have the right to disclose this
Agreement to the extent necessary in connection with [*]. Neither party will
make any public announcement regarding the existence of this Agreement without
the other party's prior written approval and consent. If this Agreement or any
of its terms must be disclosed under any law, rule or regulation (e.g., as part
of a filing with the United States Securities and Exchange Commission),
excluding an order or other discovery request issued by a court of competent
jurisdiction, the disclosing party will (a) use reasonable efforts to give
written notice of the intended disclosure to the other party at least five (5)
days in advance of the date of disclosure; (b) redact portions of this Agreement
to the fullest extent permitted under any applicable laws, rules and
regulations; and (c) submit a request, to be agreed upon by the other party,
that such portions and other provisions of this Agreement requested by the other
party receive confidential treatment under the laws, rules and regulations of
the body or tribunal to which disclosure is being made or otherwise be held in
the strictest confidence to the fullest extent permitted under the laws, rules
or regulations of any other applicable governing body.
12. SURVIVAL OF WARRANTIES; INDEMNIFICATION; LIMITATION OF LIABILITY
----------------------------------------------------------------
12.1 Survival of Warranties. All representations and warranties made
----------------------
by Comdisco or DoveBid herein, or in any certificate, schedule or exhibit
delivered pursuant hereto, shall survive the Closing.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities Exchange Commission.
14
<PAGE>
12.2 Indemnified Losses. For the purpose of this Section 12, "Loss" shall
------------------
mean and include any and all liability, loss, damage, claim, expense, cost,
fine, fee, penalty, obligation or injury including, without limitation, those
resulting from any and all actions, suits, proceedings, demands, assessments,
judgments, award or arbitration, together with reasonable costs and expenses
including the reasonable attorneys' and expert's fees and other legal costs and
expenses relating thereto plus interest on the foregoing at the rate of 10% per
annum.
12.3 Indemnification by Comdisco. Subject to the provisions and
---------------------------
limitations set forth in this Section 12, Comdisco agrees to defend, indemnify
and hold harmless DoveBid, any parent, subsidiary or affiliate of DoveBid and
any director, officer, employee, stockholder, agent or attorney of DoveBid or of
any parent, subsidiary or affiliate of DoveBid (collectively, the "DoveBid
Indemnified Parties") from and against any Loss which arises out of any breach
or violation of any covenant of Comdisco, or the material inaccuracy or untruth
of any representation or warranty of Comdisco made herein.
12.4 Indemnification by DoveBid. Subject to the provisions and limitations
--------------------------
set forth in this Section 12, DoveBid agrees to defend, indemnify and hold
harmless Comdisco, any parent, subsidiary or affiliate of Comdisco and any
director, officer, employee, stockholder, agent or attorney of Comdisco or of
any parent, subsidiary or affiliate of Comdisco (collectively, the "Comdisco
Indemnified Parties") from and against any Loss which arises out of (i) any
breach or violation of any covenant of DoveBid, or the material inaccuracy or
untruth or any representation or warranty by DoveBid made herein, or (ii) any
third party claims for death, bodily injury or tangible property damage incurred
while on Comdisco's premises on or after the Closing Date in connection with the
Purchased Assets (a "Comdisco Premises Claim").
12.5 Procedures for Indemnification. If any action, suit or proceeding
------------------------------
shall be commenced against, or any claim or demand be asserted against DoveBid
or Comdisco or any other party indemnified under Section 12.3 or 12.4 in respect
of which DoveBid or Comdisco is entitled to demand indemnification under this
Section 12, then, the indemnified party shall notify the indemnitor in writing
generally describing such action, suit, proceeding, claim or demand with
reasonable particularity. The indemnified party will not compromise or settle
any such action, suit, proceeding, claim or demand without the prior written
consent of the indemnitor. So long as the indemnitor is diligently defending, at
its sole expense and in good faith, any such action, suit, proceeding, claim or
demand asserted by a third party against the indemnified party, the indemnified
party shall not settle or compromise such action, suit, proceeding, claim or
demand without the prior written consent of the indemnitor, which consent will
not be unreasonably withheld or delayed. If the indemnitor fails to promptly and
adequately defend any such action, suit, proceeding, claim or demand, then the
indemnified party may defend, through counsel of its own choosing, such action,
suit, proceeding, claim or demand and (so long the indemnified party gives the
indemnitor at least ten (10) days' notice of the terms of the proposed
settlement thereof and permits the indemnitor to then undertake the defense
thereof at its sole expense if the indemnitor reasonably objects to the proposed
settlement) to settle such action, suit, proceeding, claim or demand and to
recover from the indemnitor the amount of such Losses.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
15
<PAGE>
12.6 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY TO THIS
-----------------------
AGREEMENT BE RESPONSIBLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES. Each
parties' liability hereunder shall be further limited to the Purchase Price for
the Purchased Asset giving rise to claim hereunder. The foregoing limitation
will not restrict Comdisco's liability for: (i) any breach by Comdisco of the
Confidentiality Agreement with respect to [*]; or (ii) any Loss for which
Comdisco is required to indemnify any DoveBid Indemnified Party arising out of
any breach by Comdisco of its representation and warranty as set forth in
Section 7.13. The foregoing limitation will not restrict DoveBid's liability
for any Loss for which DoveBid is required to indemnify any Comdisco Indemnified
Party arising out of: (i) any breach by DoveBid of its covenants under Sections
9.1 or 9.2; or (ii) any Comdisco Premises Claim.
13. MISCELLANEOUS
-------------
13.1 Expenses. Each of the parties hereto shall bear its own expenses
--------
(including without limitation attorneys' fees) in connection with the
negotiation and consummation of the transaction contemplated hereby.
13.2 Notices. Any notice required or permitted to be given under this
-------
Agreement shall be in writing and shall be personally delivered or sent by
certified or registered United States mail, postage prepaid, or sent by
nationally recognized overnight express courier and shall be deemed given or
delivered upon the earlier or (i) the first business day after hand delivery or
deposit with overnight express courier, or (ii) three (3) calendar days after
mailed, and shall be addressed as follows:
(a) If to Comdisco:
Comdisco, Inc.
6111 North River Road
Rosemont, IL 60018
Attn.: Frank Cirone
Phone: (847)518-7773
Fax: (847)518-
Attn: General Counsel
Phone: (847) 518-5075
Fax: (847) 518-5088
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
16
<PAGE>
(b) If to DoveBid:
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
Attn: Anthony Capobianco, General Counsel
Phone: (650) 571-7400
Fax: (650) 571-1502
13.3 Entire Agreement. This Agreement, the Exhibits hereto (which are
----------------
incorporated herein by reference) and the agreements to be executed and
delivered in connection herewith, together constitute the entire agreement and
understanding between the parties and there are no agreements or commitments
with respect to the transactions contemplated herein except as set forth in this
Agreement. The captions in this Agreement are for convenience only and shall not
be considered a part of or affect the construction or interpretation of any
provision of this Agreement.
13.4 Amendment; Waiver. Any term or provision of this Agreement may be
-----------------
amended only by a writing signed by Comdisco and DoveBid. The observance of any
term or provision of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only by a writing
signed by the party to be bound by such waiver. No waiver by a party of any
breach of this Agreement will be deemed to constitute a waiver of any other
breach or any succeeding breach.
13.5 Execution in Counterparts. For the convenience of the parties, this
-------------------------
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.
13.6 Assignment. This Agreement may not be assigned by any party hereto
----------
without the prior written consent of each other party; except that either party
may assign this Agreement (and all related agreements) by operation of law or in
connection with any merger, consolidation or sale of all or substantially all
such party's assets or in connection with any similar transaction or to any
subsidiary, affiliate or parent of such party. This Agreement shall be binding
upon, shall inure to the benefit of, and be enforceable by and against, the
parties hereto and their respective successors and permitted assigns.
13.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws of the State of California (excluding
application of any conflicts of law doctrines that would make applicable the law
of any other state or jurisdiction) and, where appropriate, applicable federal
law.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
17
<PAGE>
13.8 Severability. If any provision of this Agreement is for any reason
------------
and to any extent deemed to be invalid or unenforceable, then such provision
shall not be voided but rather shall be enforced to the maximum extent then
permissible under then applicable law and so as to reasonably effect the intent
of the parties hereto, and the remainder of this Agreement will remain in full
force and effect.
[Signature page follows]
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement by their duly authorized representatives as of the Effective Date.
COMDISCO, INC. DOVEBID, INC.
____________________________________ ______________________________________
By: By:
____________________________________ ______________________________________
Name: Name:
Exhibits
- --------
Exhibit A - Purchased Assets
Exhibit B - Bill of Sale
Exhibit C - Auction Terms
Exhibit D - Auction Schedule
Exhibit E - [*]
Exhibit F - Assignment Agreement
Exhibit G - Confidentiality Agreement
Exhibit A
Purchased Assets
[*]
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
19
<PAGE>
EXHIBIT A
---------
PURCHASED ASSETS
[*]
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
<PAGE>
EXHIBIT B
---------
BILL OF SALE
This Bill of Sale dated as of March 7, 2000 (this "Bill of Sale") is made
between DoveBid, Inc., a California corporation (hereinafter "Purchaser"), and
Comdisco, Inc., a Delaware corporation (hereinafter, "Seller"). Purchaser and
Seller are parties to a certain Asset Purchase and Co-Marketing Agreement dated
as of March 7, 2000 (the "Purchase Agreement"). Capitalized terms used without
definitions herein will have the meanings ascribed to such terms in the Purchase
Agreement.
Seller hereby sells and transfers its rights, title and interest in the
Purchased Assets as described on Exhibit A attached to the Purchase Agreement
---------
and made a part hereof in accordance with the terms of the Purchase Agreement.
Seller hereby represents and warrants to Purchaser that Seller is the absolute
owner of said Purchased Assets, that said Purchased Assets are free and clear of
all liens, charges and encumbrances, other than the purchase money security
interest of Seller pending receipt of the Cash Consideration, and that Seller
has full right, power and authority to sell said Purchased Assets and execute
this Bill of Sale. SELLER MAKES NO OTHER WARRANTIES OTHER THAN THOSE
SPECIFICALLY SET FORTH IN THIS BILL OF SALE AND THE PURCHASE AGREEMENT, IF ANY,
AND SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE. THE PURCHASED ASSETS ARE SOLD "AS IS".
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed on
the date first written above.
COMDISCO, INC.
_________________________________
By:
_________________________________
Name:
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
<PAGE>
EXHIBIT C
---------
AUCTION TERMS
Welcome to the DoveBid.com Web site (the "Web Site"), the premiere web site for
the business-to-business sale of industrial machinery, equipment, and surplus
capital assets. The services provided by DoveBid, Inc. ("DoveBid") through the
Web Site ("Service" or "Services") and the use of the Web Site are governed by
these Terms and Conditions (the "Terms and Conditions"). By accessing or using
the Services or the Web Site or by registering as either a buyer or seller
("Buyer", "Seller" or "User"), you agree that (1) you have read and familiarized
yourself with the Terms and Conditions, (2) you understand the Terms and
Conditions, and (3) your use of the Services and the Web Site will be in
accordance with the Terms and Conditions. If you do not agree to the Terms and
Conditions, you may not access or use the Services or the Web Site. The Terms
and Conditions together with any additional terms and conditions specific to a
particular auction (incorporated herein by reference) constitute the entire
agreement (the "Agreement") between DoveBid and User regarding its subject
matter and supersede and replace any and all prior or contemporaneous agreements
between the parties regarding such subject matter
Amendment of Terms and Conditions. DoveBid may amend any or all of the Terms and
Conditions (including fees and transaction rules) at any time, at DoveBid's sole
discretion, without notice. Any amendment of the Terms and Conditions will be
reflected on the Web Site. User is encouraged to periodically review the Terms
and Conditions posted on the Web Site. Use of the Services and the Web Site
constitutes acceptance of the Terms and Conditions including any amendments
thereto. The Terms and Conditions were last revised on February 17, 2000.
Role of DoveBid. DoveBid provides the Services and the Web Site solely as a
forum or venue in which Sellers may offer assets for sale and Buyers may place
offers to purchase these assets. As such, DoveBid is neither a principal
interested in the transactions, nor an agent of Buyer or Seller. Because DoveBid
is not a party to any transaction, DoveBid does not make, and should not be
construed as having made, any representation or warranty of any kind concerning
any of the offered assets or offerings, including without limitation any
representation or warranty regarding the quality, safety or legality of the
offered assets, or the truth or accuracy of any offerings. Additionally, DoveBid
makes no representation or warranty of any kind as to the ability of either
Buyer or Seller to complete a sale in accordance with these Terms and Conditions
or otherwise, and in accordance with any additional terms and conditions
specific to a particular auction. DoveBid does not have the power to transfer
title to any assets offered by Sellers. DoveBid retains sole discretion to
remove any User who does not comply with the Terms and Conditions. However,
Buyers and Sellers are solely responsible for independently verifying the
background of those Users with whom they enter into, or with whom they
prospectively will enter into, a transaction. In the event of any dispute
regarding any transaction conducted through use of the Services or the Web Site
(a "Dispute"), User hereby releases DoveBid, its affiliates and subsidiaries,
and their respective directors, officers, employees, agents, shareholders, co-
branders, partners, successors and assigns (the "Released Parties"), and each of
the foregoing, from any and all manner of action, claim or cause of action or
suit, at law or in equity, and from any and all losses, damages, costs or
expenses,
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
<PAGE>
including without limitation court costs and attorneys' fees, which User may
have against the Released Parties, or any of them, known or unknown, disclosed
or undisclosed, which arise out of or relate in any way to a Dispute. If User is
a California resident, User waives California Civil Code (S)1542 which states:
"A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor."
Changes to Services and/or Web Site. User acknowledges and agrees that DoveBid
may change, modify, amend, suspend or discontinue any aspect of the Services or
the Web Site, at any time, without notice and without liability to User or to
any third party. DoveBid reserves the right to impose limits on certain features
of the Services or the Web Site, at any time, without notice and without
liability to User or to any third party.
Registration. The Services and the Web Site are only available to persons with
the legal capacity to enter into this Agreement. DoveBid may, at its sole and
absolute discretion, refuse to accept a person's (or entity's) registration, and
may, at any time after accepting registration, refuse to permit a person's (or
entity's) continuing use of the Services and the Web Site.
Password and Security. User is solely responsible for maintaining the
confidentiality of its User name and User password. User is obligated to
complete those transactions that occur using its User name and User password,
whether such transactions are authorized or unauthorized. User agrees that it
shall immediately notify DoveBid in writing or by electronic mail of any
unauthorized use of its User name or User password.
User Information. User will provide information to DoveBid during the
registration process and to DoveBid and other Users during the course of the use
of the Services and the Web Site (the "User Information"). User agrees and
warrants: (1) that all User Information is accurate and complete at the time of
registration, and (2) that User information will be continuously updated such
that the User Information shall at all times be current, accurate, and complete.
User grants to DoveBid a non-exclusive, worldwide, perpetual, royalty-free and
irrevocable license to use the User Information, including any associated
copyrights, trademarks, or other intellectual property or proprietary rights
User may have in the User information, for any purposes in connection with the
Services or the Web Site, subject to the terms of the DoveBid Privacy Policy.
--------------
Privacy Policy. The terms of the DoveBid Privacy Policy are incorporated by
reference into these Terms and Conditions. User is encouraged to periodically
review the DoveBid Privacy Policy posted on the Web Site at
www.dovebid.com/os/privacy.stm posted on the Web Site.
- ------------------------------
User Content. DoveBid is not responsible for the quality, accuracy,
reliability, legality or completeness of any User-provided content, including
any User Information. User is solely responsible for verifying the quality,
accuracy, reliability, legality and competitiveness of all User-provided
content, including any User Information. User acknowledges and agrees that
DoveBid has the right, but not the obligation, to monitor User-provided content,
including User Information, and to edit, correct or remove any such content that
DoveBid, in its sole discretion, deems objectionable or in violation of this
Agreement.
User Conduct. User represents, warrants and covenants that its use of the
Services and the Web Site shall not:
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
2
<PAGE>
(a) violate any applicable local, state, national or international law,
statute, ordinance, rule or regulation. Without limiting the foregoing, User
represents, warrants and covenants that it will not sell or buy any assets that
may not be lawfully offered for sale or purchase in the United States and that
User will not export from the United States any asset in violation of U.S. law;
(b) impersonate any other person or entity, or make any misrepresentation
as to User's employment by or affiliation with any other person or entity;
(c) forge headers or in any manner manipulate identifiers in order to
disguise the origin of any User Information;
(d) upload, post, transmit, publish, or distribute any material or
information for which User does not have all necessary rights and licenses;
(e) upload, post, transmit, publish, or distribute any material which
infringes, violates, beaches or otherwise contravenes the rights of any third
party, including any copyright, trademark, patent, rights of privacy or
publicity or any other proprietary right;
(f) interfere with or disrupt the use of the Services or the Web Site by
any other User, nor "stalk", threaten, or in any manner harass another User;
(g) upload, post, transmit, publish, or distribute any unauthorized or
unsolicited advertising, solicitations, offers for the sale of services,
unsolicited communications, or offers for any "investment opportunities" (except
as may be permitted by the use of the Services or the Web Site as provided for
herein);
(h) upload, post, transmit, publish, or distribute any material or
information which contains a computer virus, or other code, files or programs
intending in any manner to disrupt or interfere with the functioning of the
Services, the Web Site, or that of other computer systems;
(i) use the Services or the Web Site in such a manner as to gain
unauthorized entry or access to the computer systems of others;
(j) upload, post, transmit, publish or distribute any material or
information which constitutes or encourages conduct that would constitute a
criminal offense, give rise to other liability, or otherwise violate applicable
law;
(k) upload, post, transmit, publish, or distribute any material or
information that is unlawful, or which may potentially be perceived as being
harmful, threatening, abusive, harassing, defamatory, libelous, vulgar, obscene,
or racially, ethnically, or otherwise objectionable; or
(l) reproduce, copy, modify, sell, distribute or otherwise exploit for any
commercial purposes the Services or the Web Site, or any component thereof
(including, but not limited to any materials or information accessible through
the Web Site).
Seller Conduct. In addition to those other obligations set forth herein, Seller
agrees to be bound by the following:
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
3
<PAGE>
(a) Placing an asset for sale requires that Seller provide complete and
accurate information regarding the asset offered (the "Listing Information"). It
is the Seller's responsibility to review the Listing Information prior to its
posting on the Web Site and to immediately notify DoveBid of any changes
necessary to make the Listing Information complete and accurate at the time of
its submission, without any misrepresentation of any kind. Seller represents,
warrants and covenants that the Listing Information is complete and accurate and
actually reflects the quantity, quality, and condition of the offered assets.
Seller is obligated to update Listing Information to ensure that it is at all
times complete and accurate. Additionally, Seller represents, warrants and
covenants (1) that it has good and marketable legal title to the offered assets,
free and clear of any lien, security interest, leasehold interest, co-ownership
interest, or any other type of encumbrance or interest of any other person or
entity, (2) that it has authority to list the offered assets for sale and to
sell the offered assets, (3) no asset provided for sale on the Web Site shall be
fraudulent or counterfeit, (4) the offering by Seller of any asset on the Web
Site and the payment by Seller of any fees to DoveBid as specified in these
Terms and Conditions will not cause DoveBid to violate any applicable law,
statute, ordinance or regulation; (5) that each asset listed for sale is a
"capital asset" as those terms are understood in accordance with generally
accepted accounting principles (i.e., industrial machinery, equipment and
surplus assets), (6) that no listed asset infringes or violates (or contains any
parts or components which infringe or violate) any third party's copyright,
patent, trademark, trade secret or other intellectual property or propriety
rights, and (7) that no listed asset contains any Hazardous Substance.
Notwithstanding the foregoing, Users agree that DoveBid shall have no duty or
obligation to investigate the presence of any Hazardous Substances in or
integral to the assets. For purposes of this subparagraph, the term "Hazardous
Substances" shall mean, either individually or collectively, any chemical,
solid, liquid, gas, or other substance having the characteristics identified in,
listed under, or designated pursuant to (i) the Comprehensive Environmental
---------------------------
Response, Compensation and Liability Act of 1980 (CERCLA) as amended, 42 USCA
- ---------------------------------------------------------
Section 9601(4), as a "hazardous substance", (ii) the Resource, Conservation and
--------------------------
Recovery Act, 42 USCA Sections 6903(5) and 6921, as a "hazardous waste", or
- ------------
(iii) any other laws, statutes, or regulations of a government or political
subdivision or agency thereof, as presenting an imminent and substantial danger
to the public health or welfare or to the environment, or as otherwise requiring
special handling, collection, storage, treatment, disposal, or transportation;
(b) Seller agrees to pay to DoveBid a listing fee (the "Listing Fee") in
the amount of $10.00 per lot (or group of listed assets), which Listing Fee is
non-refundable. Additionally, Seller agrees to pay to DoveBid a fee (the "Sale
Fee") of five percent (5%) of the high bid for each successful sale such five
percent (5%) to be calculated based upon the gross sales price;
(c) Seller agrees not to contact Users with respect to the sale of assets
other than those listed through the Services;
(d) Seller agrees to pay the Sale Fee to DoveBid if a successful sale is
made to a User, without regard for such User's ability to perform.
Buyer Conduct. In addition to those other obligations set forth herein, Buyer
acknowledges and agrees that by placing a bid on an asset, Buyer represents,
warrants and covenants (1) that it shall not misrepresent its ability to close
the transaction pursuant to the terms and conditions of sale, and in accordance
with these Terms and Conditions, (2) that it has the capacity to close the
transaction,
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
4
<PAGE>
and (3) that it has actual authority to enter a bid, and to enter into an
agreement to purchase the asset.
Webcast Auctions. A "webcast" auction is an on-site auction conducted by
DoveBid that is simultaneously broadcast live over the Web Site. In connection
with a webcast auction, DoveBid may charge each Buyer a Buyer's Premium of up to
ten percent (10.0%) of the winning bid price ("Buyer's Premium") upon the
completion of a successful transaction, or some other amount is DoveBid's sole
discretion. For more details regarding whether a Buyer's Premium applies to a
particular webcast auction and to what extent, including the amount of such
Buyer's Premium, please view the appropriate auction brochure on the Web Site.
Any purchase offer that you make on the Web Site indicates your express
agreement to pay all amounts due, including any applicable Buyer's Premium.
Withdrawal of Auction/Auction Assets. User acknowledges and agrees that assets
in an auction may be withdrawn or sold prior to the end of the designated
auction period, and/or that the auction may be discontinued, either temporarily
or permanently, all without notice to User.
Termination. DoveBid expressly reserves the right to terminate the use of, or
to refuse to permit the use of, the Services and the Web Site by any person or
entity, at the sole and absolute discretion of DoveBid, for any reason or for no
reason.
Price Manipulation/ Bid Rigging. Collusion between Users or any form of price
manipulation or bid rigging is strictly prohibited.
Taxes. User acknowledges and agrees that DoveBid does not collect, and shall
not be held responsible for the collection of, any sales tax, use tax, transfer
tax, or any other tax or fee which may be assessed by any jurisdiction having
taxing authority over any transaction conducted through the Services or the Web
Site. Additionally, DoveBid is not responsible for the calculation of any taxes
or the reporting or remittance of any taxes to any taxing authority. User
expressly agrees and warrants that it shall comply with any and all applicable
laws and regulations, including without limitation, those with respect to taxes.
Users agree to defend, indemnify, and hold harmless DoveBid from and against any
and all damages, penalties, costs and expenses incurred by or imposed upon
DoveBid resulting from any failure by User to comply with applicable tax laws.
No Relationship. User and DoveBid are independent contractors. Neither party is
an agent, representative, broker, employee, or partner of the other party. This
Agreement shall not be interpreted or construed to create an association, joint
venture, agency, franchise or partnership between the parties or to impose any
partnership obligation or liability upon either party.
Links to Third Parties. The Services and the Web Site may provide links to the
web sites or services of others ("Third-Party Sites"). Links to such Third-Party
Sites do not constitute an endorsement by DoveBid of such Sites, or the
products, content, materials or information presented or made available by such
Sites. User acknowledges and agrees that DoveBid is not responsible for any
damages or losses caused or alleged to have been caused by the use of any Third-
Party Sites, or from the products, content, material or information presented by
or available through such Sites.
Downloading Information/Material. User hereby releases DoveBid, its affiliates
and subsidiaries, and their respective directors, officers, employees, agents,
shareholders, co-branders, partners,
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
5
<PAGE>
successors and assigns from any and all actual or alleged damages which may
result from User downloading any information or materials from the Web Site.
Choice of Law. This Agreement, and all questions with respect to the
interpretation of this Agreement, shall be governed by and construed in
accordance with the internal laws of the State of California and without regard
for conflict of laws provisions. User expressly consents to personal and
exclusive jurisdiction in the courts of the State of California located in San
Mateo County.
Indemnification. User will defend, indemnify and hold harmless DoveBid, its
affiliates and subsidiaries, and their respective directors, officers,
employees, agents, shareholders, co-branders, partners, successors and assigns
(collectively, "Indemnified Parties"), from and against any claim, loss, damage,
liabilities, judgments, fees and expenses related thereto (including, without
limitation, reasonable attorney's fees) incurred by any of the Indemnified
Parties arising from or related to: (i) the use of the Services or the Web Site
by User or (2) any breach or violation of these Terms and Conditions by User and
(3) any breach of any of User's representations, warranties and covenants.
Dispute Resolution. Any controversy involving DoveBid arising from or in any way
related to this Agreement or User's use of the Services or the Web Site shall be
submitted to binding arbitration to be conducted in accordance with the Rules of
Commercial Arbitration of the American Arbitration Association ("AAA"). A single
arbitrator with knowledge of the auction business shall conduct the arbitration
in San Mateo County, California, United States of America. The parties shall
mutually agree upon such arbitrator. In the event that the parties have not
agreed to a mutually acceptable arbitrator within thirty (30) days of the date
of the notice of intention to arbitrate, the arbitrator shall be selected by the
AAA from its regularly maintained list of commercial arbitrators. Within sixty
(60) days after the arbitrator has been selected, the arbitrator shall conduct a
single hearing no longer than one (1) day in duration for the purpose of
receiving evidence and shall render a decision within ten (10) days after the
conclusion of the hearing. The Federal Rules of Evidence and the Federal Rules
of Civil Procedure shall apply to any arbitration hearing, and aggregate
deposition discovery conducted in connection with any such hearing shall not
exceed ten (10) hours for each party. The decision of the arbitrator shall be
binding and final, and the arbitration award may be filed in a court of
competent jurisdiction. In the event that a civil or administrative proceeding
with respect to any disputes subject to arbitration under this provision is
commenced, any other party to such proceeding shall be entitled to demand
arbitration with respect to that dispute and shall be entitled to a permanent
stay and injunction against any such civil or administrative proceeding. In the
event that a party asserts multiple claims or causes of action, some but not all
of which are subject to arbitration under law, any and all claims subject to
arbitration shall be submitted to arbitration in accordance with this provision.
Disclaimer of Warranties. THE SERVICES AND THE WEB SITE, INCLUDING ALL CONTENT,
FUNCTIONS, MATERIALS AND INFORMATION MADE AVAILABLE ON OR ACCESSED THROUGH THE
SERVICES OR THE WEB SITE, ARE PROVIDED ON AN "AS IS", "WHERE IS", "AS AVAILABLE"
BASIS WITHOUT REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION, NON-INFRINGEMENT, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. DOVEBID DOES NOT WARRANT THAT THE SERVICES OR
THE FUNCTIONS, FEATURES OR CONTENT CONTAINED THEREIN OR IN THE WEB SITE,
INCLUDING WITHOUT LIMITATION ANY THIRD-PARTY SOFTWARE, PRODUCTS OR OTHER
MATERIALS USED IN CONNECTION WITH THE SERVICES OR THE WEB SITE, WILL BE TIMELY,
SECURE, UNINTERRUPTED OR ERROR FREE, OR THAT DEFECTS WILL BE CORRECTED. DOVEBID
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
6
<PAGE>
MAKES NO WARRANTY THAT THE WEB SITE OR THE SERVICES WILL MEET USERS'
REQUIREMENTS, AND EXPRESSLY DISCLAIMS ANY REPRESENTATIONS, WARRANTIES OR
GUARANTEES THAT BY POSTING AN ASSET ON THE SERVICES OR THE WEB SITE, THE POSTED
ASSET WILL BE SOLD. IF USER IS DISSATISFIED WITH THE SERVICES OF THE WEB SITE,
USER'S SOLE REMEDY IS TO DISCONTINUE USING THE SERVICES OF THE WEB SITE. DOVEBID
MAKES NO REPRESENTATIONS OR WARRANTIES REGARDING ANY GOODS OR SERVICES PURCHASED
OR OBTAINED THROUGH THE SERVICES OR THE WEB SITE OR ANY TRANSACTIONS ENTERED
INTO THROUGH THE SERVICES OF THE WEB SITE. NO ADVICE OR INFORMATION, WHETHER
ORAL OR WRITTEN, OBTAINED BY USER FROM DOVEBID OR THROUGH THE SERVICES OF THE
WEB SITE SHALL CREATE ANY WARRANTY NOT EXPRESSLY MADE HEREIN. DOVEBID EXPRESSLY
DISCLAIMS ANY RESPONSIBILITY FOR ANY MISREPRESENTATIONS OR BREACHES COMMITTED BY
ANY USER
Limitation of Liability. IN NO EVENT SHALL DOVEBID BE LIABLE FOR ANY DAMAGES
THAT ARE DIRECTLY OR INDIRECTLY RELATED TO THE USE OF, OR THE INABILITY TO USE,
THE SERVICES, THE WEB SITE OR THE CONTENT, MATERIALS AND FUNCTIONS RELATED
THERETO, INCLUDING WITHOUT LIMITATION, SPECIAL, INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES, LOSS OF REVENUE OR ANTICIPATED PROFITS OR
LOST BUSINESS, LOST GOODWILL, OR LOST SALES. IN NO EVENT SHALL THE TOTAL
LIABILITY OF DOVEBID TO A USER FOR ALL DAMAGES, LOSSES, CLAIMS AND CAUSES OF
ACTION (WHETHER IN CONTRACT OR TORT, INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE
OR OTHERWISE) ARISING FROM THIS AGREEMENT OR THE USE OF THE SERVICES OR THE WEB
SITE EXCEED, IN THE AGGREGATE, ONE HUNDRED DOLLARS ($100.00).
THE FOREGOING LIMITATION SHALL APPLY AND SURVIVE NOTWITHSTANDING ANY FAILURE OF
ESSENTIAL PURPOSE OF ANY REMEDY.
Notices.
Notices shall be given:
To DoveBid: By email [email protected] and by certified mail, return receipt
---
requested, to
DoveBid, Inc., Attention Legal Department, 1241 East Hillsdale
Boulevard, Foster City, California, 94404 or to such other address as may be
designated from time to time.
To User: By email at the email address as reflected in User's registration
information.
Notices to User shall be deemed to have been received twenty-four (24) hours
after the email is sent. Notices to DoveBid shall be deemed to have been given
three (3) days after the date of mailing by certified mail.
Severability. If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid or unenforceable, then such provision shall
be enforced to the maximum extent permissible so as to effect the intent of this
Agreement, and the remainder of this Agreement shall continue in full force and
effect.
Waiver. The failure of DoveBid to exercise or enforce any right or provision of
this Agreement will not deemed a waiver of such right or provision
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
7
<PAGE>
Trademarks. DoveBid, DoveBid.com, and the logos thereof are trademarks or
service marks of DoveBid, Inc. No display or use of such marks may be made
without the express written permission of DoveBid, Inc.
(C) 2000 DoveBid, Inc. All rights reserved.
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
8
<PAGE>
EXHIBIT D
---------
AUCTION SCHEDULE
This Auction Schedule dated as of ___________, 2000 is entered into between
DoveBid, Inc. ("DoveBid") and Comdisco, Inc. ("Seller") and incorporates the
"Terms and Conditions" specified on the DoveBid.com Web site, other than as
specifically amended hereby, and shall be subject to the terms and conditions
agreed between the parties under the Asset Purchase and Co-Marketing Agreement
dated as of __________, 2000 (the "Asset Purchase Agreement").
1. Duration. DoveBid and Seller hereby agree that the assets of Seller being
offered and accepted for auction by DoveBid as described on Schedule I
hereto (the "Assets") at the reserve prices specified therein shall be
subject to auction by DoveBid for a period of time commencing
_______________and expiring _________________.
2. Fee. DoveBid and Seller hereby agree that the fee structure associated
with DoveBid's auction of the Assets shall be as follows:
Except as amended hereby, all of the Terms and Conditions referenced above
shall remain in full force and effect.
DOVEBID, INC. COMDISCO, INC.
By:________________________________ By:____________________________
Title:_____________________________ Title:_________________________
Date:______________________________ Date:__________________________
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
<PAGE>
EXHIBIT E
---------
[*]
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
2
<PAGE>
EXHIBIT F
---------
ASSIGNMENT AGREEMENT
This Assignment Agreement dated as of March 7, 2000 is entered into between
DoveBid, Inc., as Assignee and Comdisco, Inc., as Assignor in connection with
the sale of Purchased Assets pursuant to the Asset Purchase and Co-Marketing
Agreement of even date herewith ("Asset Purchase Agreement"). All terms not
otherwise defined herein shall have the meaning ascribed to them in the Asset
Purchase Agreement.
Comdisco, Inc. hereby assigns to DoveBid, Inc. and DoveBid, Inc. hereby
accepts the assignment, of all of Comdisco, Inc.'s rights and interests under
the [*] attached to the Asset Purchase Agreement as Exhibit E and made a part
hereof, entered into in connection with [*].
DOVEBID, INC. COMDISCO, INC.
By:________________________________ By:____________________________
Title:_____________________________ Title:_________________________
Date:______________________________ Date:__________________________
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
3
<PAGE>
EXHIBIT G
---------
CONFIDENTIALITY AGREEMENT
* Confidential portions have been omitted from this public filing and have been
filed separately with the Securities and Exchange Commission.
4
<PAGE>
EXHIBIT G
---------
CONFIDENTIALITY AGREEMENT
CONFIDENTIALITY AGREEMENT, dated as of October 5, 1999, between DoveBid,
Inc., a Delaware corporation having a place of business at 1241 East Hillsdale
Boulevard, Foster City, CA 94404, and COMDISCO, INC., a Delaware corporation
having its principal place of business at 6111 N. River Road, Rosemont, IL 60018
("COMDISCO").
WHEREAS, the parties to this Confidentiality Agreement have determined to
establish terms governing the confidentiality of certain information one party
("Owner") may disclose to the other party ("Recipient"), for the purpose of
establishing a business relationship;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
1. For purposes of this Confidentiality Agreement, "Confidential
Information" means all information or data in whatever form
transmitted relating to the past, present or future business affairs,
including without limitation, (i) technology lease and services
information, methodology and procedures; plus (ii) research,
technology, product development, or business plans, operations or
systems, of Owner or another party whose information Owner has in its
possession under obligations of confidentiality, which (a) is
disclosed by Owner or its affiliates to Recipient or its affiliates,
bearing an appropriate legend indicating its confidential or
proprietary nature or if oral or visual is identified as confidential
or proprietary at the time of disclosure or as otherwise disclosed in
a manner consistent with its confidential or proprietary nature, or
(b) is produced or developed during the working relationship between
the parties and which would, if disclosed to competitors of either
party, give or increase such competitors' advantage over that party or
diminish that party's advantage over its competitors.
Confidential Information shall not include any information of an Owner
that: (a) is already known to Recipient at time of its disclosure;
(b) is or becomes publicly known through no wrongful act of Recipient;
(c) is received from a third party free to disclose it to Recipient;
(d) is independently developed by Recipient; (e) is communicated to a
third party by recipient with the express written consent of the
Owner, or (f) is lawfully required to be disclosed to any governmental
agency or is otherwise required to be disclosed by law, provided that
before making such disclosure the Recipient shall give the Owner an
adequate opportunity to interpose an objection or take action to
assure confidential handling of such information.
2. For a period of two (2) years from the date of disclosure to
Recipient, Recipient shall not disclose any Confidential Information
it receives from Owner to any person or entity except employees of
Recipient and its affiliates who have a need to know and who have been
informed of Recipient's obligations under this Confidentiality
Agreement. Recipient shall use not less than the same degree of
<PAGE>
care to avoid disclosure of such Confidential Information as Recipient
uses for its own confidential information of like importance.
Recipient shall use Confidential Information of the Owner only for
purposes consented to by Owner.
3. All Confidential Information disclosed by Owner to Recipient under
this Confidentiality Agreement in tangible form (including, without
limitation, information incorporated in computer software or held in
electronic storage media) shall be and remain property of Owner. All
such Confidential Information shall be returned to Owner promptly upon
written request and shall not thereafter be retained in any form by
Recipient. The rights and obligations of the parties under this
Confidentiality Agreement shall survive any such return of
Confidential Information.
4. Owner shall not have any liability or responsibility for errors or
omissions in, or any business decisions made by Recipient in reliance
on, any Confidential Information disclosed under this Confidentiality
Agreement.
5. The parties agree that, in the event of a breach or threatened breach
of the terms of this Confidentiality Agreement, Owner shall be
entitled to an injunction prohibiting any such breach. Any such
relief shall be in addition to and not in lieu of any appropriate
relief in the way of money damages. The parties acknowledge that
Confidential Information is valuable and unique and that disclosure in
breach of this Confidentiality Agreement will result in irreparable
injury to Owner.
6. Either party may terminate this Confidentiality Agreement by written
notice to the other. Notwithstanding any such termination, all rights
and obligations hereunder shall survive with respect to Confidential
Information disclosed prior to such termination.
7. Neither party hereto shall in any way or in any form disclose,
publicize or advertise in any manner the discussions that give rise to
this Confidentiality Agreement or the discussions or negotiations
covered by this Confidentiality Agreement without the prior written
consent of the other party.
8. The term "affiliate" shall mean any person or entity controlling,
controlled by or under common control with a party.
9. This Confidentiality Agreement: (a) is the complete agreement of the
parties concerning the subject matter hereof and supersedes any prior
such agreements; (b) may not be amended or in any manner modified
except in writing signed by the parties; and (c) shall be governed by
and construed in accordance with the laws of California without regard
to its choice of law provisions. If any provision of this
Confidentiality Agreement is found to be unenforceable, the remainder
shall be enforced as fully as possible and the unenforceable provision
shall be deemed modified to the limited extent required to permit its
enforcement in a manner most closely approximating the intention of
the parties as expressed herein.
2
<PAGE>
10. The parties warrant that each has the right to disclose to the other
all information which shall be disclosed and indemnifies and holds the
other harmless against all claims, damages and expenses, including
reasonable legal fees, resulting from an alleged wrongful disclosure
which would breach such warranty.
11. It is understood that neither party hereby grants to the other any
rights under existing or future patents, trade secrets, copyrights or
other proprietary information.
12. It is understood that there is no obligation on the part of either
party to enter into an agreement with the other party.
IN WITNESS WHEREOF, the parties have executed this Confidentiality
Agreement by their duly authorized representatives as of the date first above
written.
DOVEBID, INC. COMDISCO, INC.
By: By:
------------------------------- ------------------------------
NAME: NAME:
----------------------------- ----------------------------
TITLE: TITLE:
---------------------------- ---------------------------
3
<PAGE>
Exhibit 10.34
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT Network UserFinancial Printing
GroupNEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
REGISTERED OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW. NEITHER THIS
NOTE NOR ANY SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION OR OTHER
QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER
QUALIFICATION IS NOT REQUIRED.
DOVEBID, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$4,329,800.81 March 24, 2000
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at 1241
East Hillsdale Blvd., Foster City, CA 94404, for value received, promises to pay
to the order of David Levy ("Payee") at such address as Payee may designate,
Four Million Three Hundred Twenty-Nine Thousand Eight Hundred Dollars and
Eighty-One Cents ($4,329,800.81) plus simple interest thereon calculated from
the date hereof until paid at an annual rate equal to the minimum rate
established pursuant to Section 1274(d) of the Internal Revenue Code of 1986, as
amended, as of the date hereof, compounded annually; provided that if this Note
shall not have converted into Conversion Stock (as defined below) by July 1,
2000, then on and after such date the interest payable per annum with respect to
principal outstanding under this Note shall be equal to the prime lending rate
in effect on July 2, 2000 as announced by Chase Manhattan Bank, and thereafter
accrued interest shall be payable at the end of each three month period
thereafter. Except as otherwise provided in the preceding sentence, principal
and accrued interest will be due and payable in lawful money of the United
States in full on earlier of (i) the three year anniversary of the date of this
Note, or (ii) upon an Event of Default (the "Maturity Date"), unless this Note
shall have been previously paid by the Company or converted pursuant to Section
2 below, in which case all outstanding principal under this Note and all accrued
interest thereon shall be satisfied in full by virtue of conversion as set forth
in Section 2 below. Payments by the Company shall be applied first to any and
all accrued interest through the payment date and second to the principal
remaining due hereunder.
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
<PAGE>
1. Definitions. As used in this Note, the following terms, unless the
-----------
context otherwise requires, have the following meanings:
1.1 "Company" includes any corporation or other entity which succeeds
to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of the
Company issued upon conversion of this Note.
1.3 "Event of Default" shall mean (a) the Company's failure to pay of
amounts due under this Note after receipt of written notice of such failure and
period of thirty days to make such payment; or (b) the filing by or against the
Company of any voluntary or involuntary petition in bankruptcy or any petition
for relief under the federal bankruptcy code or any other state or federal law
for the relief of debtors (which is not dismissed within 60 days); or (c) the
execution by the Company of an assignment for the benefit of creditors or the
appointment of a receiver, custodian, trustee or similar party to take
possession of Company's material assets or property.
1.4 "Noteholder," "holder," or similar terms, when the context refers
to a holder of this Note, shall mean any person who shall at the time be the
registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale of the
Company's Common Stock pursuant to a registration statement on Form S-1, Form
SB-1 or SB-2 (or any similar or successor form) under the Securities Act of
1933, as amended (the "Securities Act"), for an underwritten initial public
offering.
1.6 "Subordination Agreement" shall mean the Subordination Agreement
attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. This Note and all of the outstanding
--------------------
principal and accrued and unpaid interest on and under this Note shall
automatically convert before the Maturity Date into Conversion Stock as follows:
(i) if the Initial Public Offering shall have occurred prior to or on July 1,
2000, then this Note and all of the outstanding principal and accrued and unpaid
interest on and under this Note will automatically convert into 412,361 shares
of Conversion Stock on July 1, 2000; and (ii) if the Initial Public Offering
shall not have occurred on or prior to July 1, 2000, then this Note and all of
the outstanding principal and accrued and unpaid interest on and under this Note
will automatically will convert into 412,361 shares of Conversion Stock on the
first day following the end of the calendar month in which the Initial Public
Offering occurs; provided that in the event that this Note converts after July
1, 2000 pursuant to subsection 2.1(ii) above then in connection with such
conversion the Company shall also pay the Noteholder all interest accrued under
the Note through the date of such conversion. In the event that Note converts
pursuant to this Section 2.1 above then all outstanding principal under this
Note and all accrued interest thereon shall be satisfied in full by virtue of
such conversion (and the payment of accrued interest in the case of
<PAGE>
conversion under Section 2.1(ii) as the case may be) and the issuance and
delivery of the shares of Conversion Stock to the holder.
For informational purposes, the Company shall provide the Noteholder
with written notice (at the most recent address for the Noteholder provided to
the Company by the Noteholder in writing) reasonably promptly following the
closing of its Initial Public Offering. Conversion as described in this Section
2.1 shall occur only if the Company shall have conducted its Initial Public
Offering, provided that as a condition precedent or condition subsequent to
conversion (the election between which type of condition shall be the Company's
sole election in the Company's sole discretion), the Noteholder must surrender
this Note for conversion at the principal office of the Company. Incident to any
conversion, the Conversion Stock will have those rights and privileges, and be
subject to those restrictions, of the shares of Common Stock as set forth in the
Company's Certificate of Incorporation and Bylaws and this Note (including the
restrictions on transfer of Conversion Stock set forth in Section 5 of this
Note), and the Noteholder will receive the rights and be subject to the
obligations applicable to the purchasers of Common Stock. This Note shall not be
convertible and shall not be converted into Conversion Stock if there is not an
Initial Public Offering on or before the Maturity Date.
2.2 No Fractional Shares. No fractional shares will be issued on
--------------------
conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of a per share price of $10.50 per share (as
proportionally adjusted for stock splits, stock combinations, recapitalizations
and like events).
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government consents and approvals as may, in the reasonable opinion
of its counsel, be necessary to authorize the issuance of a sufficient number of
shares of Conversion Stock into which this Note is to convert pursuant to
Section 2.1 above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion Stock
-------------------------------
issued upon the conversion of this Note shall be validly issued, fully paid and
non-assessable. The holder, by accepting this Note, undertakes and agrees to
accept such shares of Conversion Stock in full satisfaction of the outstanding
principal and accrued interest thereon in accordance with the terms of this
Note. Anything to the contrary in this Note notwithstanding, the Company's
obligation to issue shares of Conversion Stock to any holder of this Note is
expressly conditioned upon compliance of such issuance with applicable federal
and state securities laws without registration or other qualification
thereunder.
<PAGE>
2.5 No Other Conversion. The conversion described in this Section 2
-------------------
shall constitute the sole methods by which this Note will convert.
2.6. Subordination. This Note and the indebtedness evidence by this
-------------
Note are subordinated to the prior payment in full of all or substantially all
other indebtedness of the Company pursuant to the terms of a Subordination
Agreement in the form attached hereto as Annex A and incorporated herein by
-------
reference.
3. No Rights or Liabilities as Shareholder. This Note does not by itself
---------------------------------------
entitle the Noteholder to any voting rights or other rights as a shareholder of
the Company. In the absence of conversion of this Note, no provisions of this
Note, and no enumeration herein of the rights or privileges of the holder shall
cause such holder to be a shareholder of the Company for any purpose by virtue
hereof. Subject to the terms and conditions of this Note, Noteholder will have
all of the rights of a shareholder of the Company with respect to the Conversion
Stock from and after the Conversion Date until such time as Noteholder disposes
of the Conversion Stock.
4. Spousal Consent. Payee agrees that upon conversion of this Note the
---------------
stock certificate(s) evidencing the Conversion Stock, shall be delivered,
together with two (2) copies of a Consent of Spouse in the form of Annex B
-------
attached hereto (the "Spouse Consent") executed by Payee's spouse, if any.
5. Restrictions on Transfers.
-------------------------
5.1 No Transfers Unless Registered or Exempt. Noteholder understands
----------------------------------------
that Noteholder may not transfer any shares of Conversion Stock unless such
shares are registered under the Securities Act and qualified under applicable
state securities laws or unless, in the opinion of counsel to the Company,
exemptions from such registration and qualification requirements are available.
Noteholder understands that only the Company may file a registration statement
with the Securities and Exchange Commission (the "SEC") and that the Company is
under no obligation to do so with respect to the Conversion Stock. Noteholder
has also been advised that exemptions from registration and qualification may
not be available or may not permit Noteholder to transfer all or any of the
Conversion Stock in the amounts or at the times proposed by Noteholder.
5.2 Rule 144. In addition, Noteholder has been advised that SEC Rule
--------
144 promulgated under the Securities Act, which permits certain limited sales of
unregistered securities, is not presently available with respect to the
Conversion Stock and, in any event, requires that the Conversion Stock be held
for a minimum of one (1) year, and in certain cases two (2) years, after they
have been purchased and paid for (within the meaning of Rule 144), before they
------------
may be resold under Rule 144. Noteholder understands that Rule 144 may
indefinitely restrict transfer of the Conversion Stock so long as Noteholder
remains an "affiliate" of the Company or if "current public information" about
the Company (as defined in Rule 144) is not publicly available.
<PAGE>
5.3 Disposition of Conversion Stock. Noteholder hereby agrees that
-------------------------------
Noteholder will make no disposition of the Conversion Stock (other than as
permitted by this Agreement) unless and until: (a) Noteholder has notified the
Company of the proposed disposition and provided a written summary of the terms
and conditions of the proposed disposition; (b) Noteholder has complied with all
requirements of this Note applicable to the disposition of the Conversion Stock
(including the restrictions on transfer); and (c) Noteholder has provided the
Company with written assurances, in form and substance satisfactory to counsel
for the Company, that (i) the proposed disposition does not require registration
of the Conversion Stock under the Securities Act or applicable state securities
laws, or (ii) all appropriate actions necessary for compliance with the
registration requirements of the Securities Act or of any exemption from
registration available under the Securities Act (including Rule 144) and
applicable state securities laws has been taken.
5.4 Restriction on Transfer and Sale. Noteholder shall not transfer,
--------------------------------
assign, grant a lien or security interest in, pledge, hypothecate, encumber or
otherwise dispose of any of the Conversion Stock, except as permitted by this
Agreement. Upon and following any conversion of this Note, no holder of any
Conversion Stock shall effect any sale or distribution of any of the Conversion
Stock (which shall include any and all voting securities received by such holder
as or in connection with a stock dividend, stock split or other recapitalization
or similar distribution on or in respect of the Conversion Stock) or any of the
Company's other equity securities, or of any securities convertible into or
exchangeable for such securities, during the period beginning on the closing of
the Initial Public Offering and ending 180 days after such closing.
5.5 Legends. Noteholder understands and agrees that the Company will
-------
place appropriate legends on any stock certificate(s) evidencing the Conversion
Stock that may be required by state or federal securities laws, the Company's of
Incorporation or Bylaws, this Note any other agreement. Noteholder agrees that,
to ensure compliance with the restrictions imposed by this Note, the Company may
issue appropriate "stop-transfer" instructions to its transfer agent, if any,
and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records. The Company will not be
required (i) to transfer on its books any Conversion Stock that have been sold
or otherwise transferred in violation of any of the provisions of this Note, or
(ii) to treat as owner of such Conversion Stock, or to accord the right to vote
or pay dividends to any purchaser or other transferee to whom such Conversion
Stock have been so transferred.
5.6 Disclosure. The Company agrees, for a period of two years following the
----------
date of this Agreement, to use reasonable commercial efforts to:
(a) make and keep material public information available within
the meaning of Rule 144(c) of the Securities Act at all times after ninety (90)
days after the closing of the Initial Public Offering; and
<PAGE>
(b) file with the SEC in a timely manner all reports and other
material documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
6. Prepayment. This Note may be prepaid, in its entirety (including the
----------
principal sum and interest accrued to the date of payment) without penalty or
premium; provided that prepayment cannot take place after the Company has filed
with the Securities and Exchange Commission a registration statement on Form S-
1, Form SB-1 or Form SB-2 (or any similar or successor form) for an Initial
Public Offering and for so long as any such registration statement remains
pending.
7. Usury Savings Clause. The Company and the Noteholder intend to comply
--------------------
at all times with applicable usury laws. If at any time such laws would render
usurious any amounts due under this Note under applicable law, then it is the
Company's and the Noteholder's express intention that the Company not be
required to pay interest on this Note at a rate in excess of the maximum lawful
rate, that the provisions of this Section 7 shall control over all other
provisions of this Note which may be in apparent conflict hereunder, that such
excess amount shall be immediately credited to the principal balance of this
Note (or, if this Note has been fully paid, refunded by the Noteholder to the
Company), and the provisions hereof shall immediately be reformed and the
amounts thereafter decreased, so as to comply with the then applicable usury
law, but so as to permit the recovery of the fullest amount otherwise due under
this Note.
8. General Provisions.
------------------
8.1 Notices. All notices and other communications required or
-------
permitted hereunder shall be effective upon receipt (or refusal of receipt) and
shall be in writing and delivered by depositing the same in United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, by delivering the same in person to
such party or to an officer or agent of such party, as follows:
(i) If mailed or delivered to the Company, to each of the
following, using two separate mailings or deliveries:
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Anthony Capobianco, Vice President and General
Counsel
<PAGE>
(ii) If mailed or delivered to the Payee, addressed to him at the
following address:
David Levy
c/o Norman Levy Associates, Inc.
21415 Civic Center Drive
Southfield, Michigan 48076
or to such other address as any party hereto shall specify in writing to the
other parties hereto pursuant to this Section 8.1 from time to time. Such notice
shall be effective only upon actual receipt.
8.2 Severability; Headings. In case any provision of this Note shall
----------------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby, unless to do so would deprive the Noteholder or the Company of a
substantial part of its bargain. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
8.3 Noteholder Representations and Status. By accepting this Note,
-------------------------------------
the Payee and any other Noteholder each acknowledges, represents and warrants
that (i) this Note and Conversion Stock issued hereunder are being acquired for
investment, solely for its own account and not as a nominee for any other person
or entity, and that it will not offer, sell or otherwise dispose of this Note or
any Conversion Stock except as expressly permitted by this Note and under
circumstances which will not result in a violation of the Securities Act or
applicable state securities laws, and (ii) it is an "accredited investor" with
the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act.
8.4 Assignment. Neither this Note nor any right or obligation
----------
hereunder may be assigned or delegated by Payee without the prior written
consent of Company. Neither this Note nor any right or obligation hereunder may
be assigned or delegated by Company without the prior written consent of Payee,
except pursuant to a merger in which Company is a party, or pursuant to a sale
or other transfer of substantially all of the assets of Company. Any purported
assignment in violation of this paragraph shall be void.
8.5 Amendment; Waiver. Any provision of this Note may be amended or
-----------------
modified only by a writing signed by both Company and Payee. Compliance with
any provision of this Note may be waived only by a writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
8.6 Governing Law. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding that body of law applicable to conflicts of laws.
[The rest of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each party has caused this Note to be executed as of
the date first set forth above.
DOVEBID, INC.
By: /s/ Anthony Capobianco
-------------------------------------
Name: Anthony Capobianco
Title: Vice President and General Counsel
Acknowledged and Agreed to:
/s/ David Levy
- ---------------------------
David Levy
[Execution Page to Convertible Subordinated Promissory Note]
<PAGE>
Exhibit 10.35
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT Network UserFinancial Printing
GroupNEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
REGISTERED OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW. NEITHER THIS
NOTE NOR ANY SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION OR OTHER
QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER
QUALIFICATION IS NOT REQUIRED.
DOVEBID, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$4,329,800.81 March 24, 2000
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at 1241
East Hillsdale Blvd., Foster City, CA 94404, for value received, promises to pay
to the order of Robert Levy ("Payee") at such address as Payee may designate,
Four Million Three Hundred Twenty-Nine Thousand Eight Hundred Dollars and
Eighty-One Cents ($4,329,800.81) plus simple interest thereon calculated from
the date hereof until paid at an annual rate equal to the minimum rate
established pursuant to Section 1274(d) of the Internal Revenue Code of 1986, as
amended, as of the date hereof, compounded annually; provided that if this Note
shall not have converted into Conversion Stock (as defined below) by July 1,
2000, then on and after such date the interest payable per annum with respect to
principal outstanding under this Note shall be equal to the prime lending rate
in effect on July 2, 2000 as announced by Chase Manhattan Bank, and thereafter
accrued interest shall be payable at the end of each three month period
thereafter. Except as otherwise provided in the preceding sentence, principal
and accrued interest will be due and payable in lawful money of the United
States in full on earlier of (i) the three year anniversary of the date of this
Note, or (ii) upon an Event of Default (the "Maturity Date"), unless this Note
shall have been previously paid by the Company or converted pursuant to Section
2 below, in which case all outstanding principal under this Note and all accrued
interest thereon shall be satisfied in full by virtue of conversion as set forth
in Section 2 below. Payments by the Company shall be applied first to any and
all accrued interest through the payment date and second to the principal
remaining due hereunder.
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
<PAGE>
1. Definitions. As used in this Note, the following terms, unless the
-----------
context otherwise requires, have the following meanings:
1.1 "Company" includes any corporation or other entity which succeeds
to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of the
Company issued upon conversion of this Note.
1.3 "Event of Default" shall mean (a) the Company's failure to pay of
amounts due under this Note after receipt of written notice of such failure and
period of thirty days to make such payment; or (b) the filing by or against the
Company of any voluntary or involuntary petition in bankruptcy or any petition
for relief under the federal bankruptcy code or any other state or federal law
for the relief of debtors (which is not dismissed within 60 days); or (c) the
execution by the Company of an assignment for the benefit of creditors or the
appointment of a receiver, custodian, trustee or similar party to take
possession of Company's material assets or property.
1.4 "Noteholder," "holder," or similar terms, when the context refers
to a holder of this Note, shall mean any person who shall at the time be the
registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale of the
Company's Common Stock pursuant to a registration statement on Form S-1, Form
SB-1 or SB-2 (or any similar or successor form) under the Securities Act of
1933, as amended (the "Securities Act"), for an underwritten initial public
offering.
1.6 "Subordination Agreement" shall mean the Subordination Agreement
attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. This Note and all of the outstanding
--------------------
principal and accrued and unpaid interest on and under this Note shall
automatically convert before the Maturity Date into Conversion Stock as follows:
(i) if the Initial Public Offering shall have occurred prior to or on July 1,
2000, then this Note and all of the outstanding principal and accrued and unpaid
interest on and under this Note will automatically convert into 412,361 shares
of Conversion Stock on July 1, 2000; and (ii) if the Initial Public Offering
shall not have occurred on or prior to July 1, 2000, then this Note and all of
the outstanding principal and accrued and unpaid interest on and under this Note
will automatically will convert into 412,361 shares of Conversion Stock on the
first day following the end of the calendar month in which the Initial Public
Offering occurs; provided that in the event that this Note converts after July
1, 2000 pursuant to subsection 2.1(ii) above then in connection with such
conversion the Company shall also pay the Noteholder all interest accrued under
the Note through the date of such conversion. In the event that Note converts
pursuant to this Section 2.1 above then all outstanding principal under this
Note and all accrued interest thereon shall be satisfied in full by virtue of
such conversion (and the payment of accrued interest in the case of
<PAGE>
conversion under Section 2.1(ii) as the case may be) and the issuance and
delivery of the shares of Conversion Stock to the holder.
For informational purposes, the Company shall provide the Noteholder
with written notice (at the most recent address for the Noteholder provided to
the Company by the Noteholder in writing) reasonably promptly following the
closing of its Initial Public Offering. Conversion as described in this Section
2.1 shall occur only if the Company shall have conducted its Initial Public
Offering, provided that as a condition precedent or condition subsequent to
conversion (the election between which type of condition shall be the Company's
sole election in the Company's sole discretion), the Noteholder must surrender
this Note for conversion at the principal office of the Company. Incident to any
conversion, the Conversion Stock will have those rights and privileges, and be
subject to those restrictions, of the shares of Common Stock as set forth in the
Company's Certificate of Incorporation and Bylaws and this Note (including the
restrictions on transfer of Conversion Stock set forth in Section 5 of this
Note), and the Noteholder will receive the rights and be subject to the
obligations applicable to the purchasers of Common Stock. This Note shall not be
convertible and shall not be converted into Conversion Stock if there is not an
Initial Public Offering on or before the Maturity Date.
2.2 No Fractional Shares. No fractional shares will be issued on
--------------------
conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of a per share price of $10.50 per share (as
proportionally adjusted for stock splits, stock combinations, recapitalizations
and like events).
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government consents and approvals as may, in the reasonable opinion
of its counsel, be necessary to authorize the issuance of a sufficient number of
shares of Conversion Stock into which this Note is to convert pursuant to
Section 2.1 above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion Stock
-------------------------------
issued upon the conversion of this Note shall be validly issued, fully paid and
non-assessable. The holder, by accepting this Note, undertakes and agrees to
accept such shares of Conversion Stock in full satisfaction of the outstanding
principal and accrued interest thereon in accordance with the terms of this
Note. Anything to the contrary in this Note notwithstanding, the Company's
obligation to issue shares of Conversion Stock to any holder of this Note is
expressly conditioned upon compliance of such issuance with applicable federal
and state securities laws without registration or other qualification
thereunder.
<PAGE>
2.5 No Other Conversion. The conversion described in this Section 2
-------------------
shall constitute the sole methods by which this Note will convert.
2.6. Subordination. This Note and the indebtedness evidence by this
-------------
Note are subordinated to the prior payment in full of all or substantially all
other indebtedness of the Company pursuant to the terms of a Subordination
Agreement in the form attached hereto as Annex A and incorporated herein by
-------
reference.
3. No Rights or Liabilities as Shareholder. This Note does not by itself
---------------------------------------
entitle the Noteholder to any voting rights or other rights as a shareholder of
the Company. In the absence of conversion of this Note, no provisions of this
Note, and no enumeration herein of the rights or privileges of the holder shall
cause such holder to be a shareholder of the Company for any purpose by virtue
hereof. Subject to the terms and conditions of this Note, Noteholder will have
all of the rights of a shareholder of the Company with respect to the Conversion
Stock from and after the Conversion Date until such time as Noteholder disposes
of the Conversion Stock.
4. Spousal Consent. Payee agrees that upon conversion of this Note the
---------------
stock certificate(s) evidencing the Conversion Stock, shall be delivered,
together with two (2) copies of a Consent of Spouse in the form of Annex B
-------
attached hereto (the "Spouse Consent") executed by Payee's spouse, if any.
5. Restrictions on Transfers.
-------------------------
5.1 No Transfers Unless Registered or Exempt. Noteholder understands
----------------------------------------
that Noteholder may not transfer any shares of Conversion Stock unless such
shares are registered under the Securities Act and qualified under applicable
state securities laws or unless, in the opinion of counsel to the Company,
exemptions from such registration and qualification requirements are available.
Noteholder understands that only the Company may file a registration statement
with the Securities and Exchange Commission (the "SEC") and that the Company is
under no obligation to do so with respect to the Conversion Stock. Noteholder
has also been advised that exemptions from registration and qualification may
not be available or may not permit Noteholder to transfer all or any of the
Conversion Stock in the amounts or at the times proposed by Noteholder.
5.2 Rule 144. In addition, Noteholder has been advised that SEC Rule
--------
144 promulgated under the Securities Act, which permits certain limited sales of
unregistered securities, is not presently available with respect to the
Conversion Stock and, in any event, requires that the Conversion Stock be held
for a minimum of one (1) year, and in certain cases two (2) years, after they
have been purchased and paid for (within the meaning of Rule 144), before they
------------
may be resold under Rule 144. Noteholder understands that Rule 144 may
indefinitely restrict transfer of the Conversion Stock so long as Noteholder
remains an "affiliate" of the Company or if "current public information" about
the Company (as defined in Rule 144) is not publicly available.
<PAGE>
5.3 Disposition of Conversion Stock. Noteholder hereby agrees that
-------------------------------
Noteholder will make no disposition of the Conversion Stock (other than as
permitted by this Agreement) unless and until: (a) Noteholder has notified the
Company of the proposed disposition and provided a written summary of the terms
and conditions of the proposed disposition; (b) Noteholder has complied with all
requirements of this Note applicable to the disposition of the Conversion Stock
(including the restrictions on transfer); and (c) Noteholder has provided the
Company with written assurances, in form and substance satisfactory to counsel
for the Company, that (i) the proposed disposition does not require registration
of the Conversion Stock under the Securities Act or applicable state securities
laws, or (ii) all appropriate actions necessary for compliance with the
registration requirements of the Securities Act or of any exemption from
registration available under the Securities Act (including Rule 144) and
applicable state securities laws has been taken.
5.4 Restriction on Transfer and Sale. Noteholder shall not transfer,
--------------------------------
assign, grant a lien or security interest in, pledge, hypothecate, encumber or
otherwise dispose of any of the Conversion Stock, except as permitted by this
Agreement. Upon and following any conversion of this Note, no holder of any
Conversion Stock shall effect any sale or distribution of any of the Conversion
Stock (which shall include any and all voting securities received by such holder
as or in connection with a stock dividend, stock split or other recapitalization
or similar distribution on or in respect of the Conversion Stock) or any of the
Company's other equity securities, or of any securities convertible into or
exchangeable for such securities, during the period beginning on the closing of
the Initial Public Offering and ending 180 days after such closing.
5.5 Legends. Noteholder understands and agrees that the Company will
-------
place appropriate legends on any stock certificate(s) evidencing the Conversion
Stock that may be required by state or federal securities laws, the Company's of
Incorporation or Bylaws, this Note any other agreement. Noteholder agrees that,
to ensure compliance with the restrictions imposed by this Note, the Company may
issue appropriate "stop-transfer" instructions to its transfer agent, if any,
and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records. The Company will not be
required (i) to transfer on its books any Conversion Stock that have been sold
or otherwise transferred in violation of any of the provisions of this Note, or
(ii) to treat as owner of such Conversion Stock, or to accord the right to vote
or pay dividends to any purchaser or other transferee to whom such Conversion
Stock have been so transferred.
5.6 Disclosure. The Company agrees, for a period of two years
----------
following the date of this Agreement, to use reasonable commercial efforts to:
(a) make and keep material public information available within
the meaning of Rule 144(c) of the Securities Act at all times after ninety (90)
days after the closing of the Initial Public Offering; and
<PAGE>
(b) file with the SEC in a timely manner all reports and other
material documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
6. Prepayment. This Note may be prepaid, in its entirety (including the
----------
principal sum and interest accrued to the date of payment) without penalty or
premium; provided that prepayment cannot take place after the Company has filed
with the Securities and Exchange Commission a registration statement on Form S-
1, Form SB-1 or Form SB-2 (or any similar or successor form) for an Initial
Public Offering and for so long as any such registration statement remains
pending.
7. Usury Savings Clause. The Company and the Noteholder intend to comply
--------------------
at all times with applicable usury laws. If at any time such laws would render
usurious any amounts due under this Note under applicable law, then it is the
Company's and the Noteholder's express intention that the Company not be
required to pay interest on this Note at a rate in excess of the maximum lawful
rate, that the provisions of this Section 7 shall control over all other
provisions of this Note which may be in apparent conflict hereunder, that such
excess amount shall be immediately credited to the principal balance of this
Note (or, if this Note has been fully paid, refunded by the Noteholder to the
Company), and the provisions hereof shall immediately be reformed and the
amounts thereafter decreased, so as to comply with the then applicable usury
law, but so as to permit the recovery of the fullest amount otherwise due under
this Note.
8. General Provisions.
------------------
8.1 Notices. All notices and other communications required or
-------
permitted hereunder shall be effective upon receipt (or refusal of receipt) and
shall be in writing and delivered by depositing the same in United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, by delivering the same in person to
such party or to an officer or agent of such party, as follows:
(i) If mailed or delivered to the Company, to each of the
following, using two separate mailings or deliveries:
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Anthony Capobianco, Vice President and General
Counsel
<PAGE>
(ii) If mailed or delivered to the Payee, addressed to him at the
following address:
Robert Levy
c/o Norman Levy Associates, Inc.
21415 Civic Center Drive
Southfield, Michigan 48076
or to such other address as any party hereto shall specify in writing to the
other parties hereto pursuant to this Section 8.1 from time to time. Such notice
shall be effective only upon actual receipt.
8.2 Severability; Headings. In case any provision of this Note shall
----------------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby, unless to do so would deprive the Noteholder or the Company of a
substantial part of its bargain. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
8.3 Noteholder Representations and Status. By accepting this Note,
-------------------------------------
the Payee and any other Noteholder each acknowledges, represents and warrants
that (i) this Note and Conversion Stock issued hereunder are being acquired for
investment, solely for its own account and not as a nominee for any other person
or entity, and that it will not offer, sell or otherwise dispose of this Note or
any Conversion Stock except as expressly permitted by this Note and under
circumstances which will not result in a violation of the Securities Act or
applicable state securities laws, and (ii) it is an "accredited investor" with
the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act.
8.4 Assignment. Neither this Note nor any right or obligation
----------
hereunder may be assigned or delegated by Payee without the prior written
consent of Company. Neither this Note nor any right or obligation hereunder may
be assigned or delegated by Company without the prior written consent of Payee,
except pursuant to a merger in which Company is a party, or pursuant to a sale
or other transfer of substantially all of the assets of Company. Any purported
assignment in violation of this paragraph shall be void.
8.5 Amendment; Waiver. Any provision of this Note may be amended or
-----------------
modified only by a writing signed by both Company and Payee. Compliance with
any provision of this Note may be waived only by a writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
8.6 Governing Law. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding that body of law applicable to conflicts of laws.
[The rest of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each party has caused this Note to be executed as of
the date first set forth above.
DOVEBID, INC.
By: /s/ Anthony Capobianco
--------------------------------------
Name: Anthony Capobianco
Title: Vice President and General Counsel
Acknowledged and Agreed to:
/s/ Robert Levy
- --------------------------
Robert Levy
[Execution Page to Convertible Subordinated Promissory Note]
<PAGE>
Exhibit 10.36
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR ANY
SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION OR OTHER QUALIFICATION
UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER QUALIFICATION IS NOT
REQUIRED.
DOVEBID, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$455,768.51 March 24, 2000
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at 1241
East Hillsdale Blvd., Foster City, CA 94404, for value received, promises to pay
to the order of The Norman Levy Qualified Terminable Interest Martial Trust, a
trust formed under the laws of Michigan ("Payee") at such address as Payee may
designate, Four Hundred Fifty-Five Thousand Seven Hundred Sixty-Eight Dollars
and Fifty-One Cents ($455,768.51) plus simple interest thereon calculated from
the date hereof until paid at an annual rate equal to the minimum rate
established pursuant to Section 1274(d) of the Internal Revenue Code of 1986, as
amended, as of the date hereof, compounded annually; provided that if this Note
shall not have converted into Conversion Stock (as defined below) by July 1,
2000, then on and after such date the interest payable per annum with respect to
principal outstanding under this Note shall be equal to the prime lending rate
in effect on July 2, 2000 as announced by Chase Manhattan Bank, and thereafter
accrued interest shall be payable at the end of each three month period
thereafter. Except as otherwise provided in the preceding sentence, principal
and accrued interest will be due and payable in lawful money of the United
States in full on the earlier of (i) three year anniversary of the date of this
Note, or (ii) upon an Event of Default (the "Maturity Date"), unless this Note
shall have been previously paid by the Company or converted pursuant to Section
2 below, in which case all outstanding principal under this Note and all accrued
interest thereon shall be satisfied in full by virtue of conversion as set forth
in Section 2 below. Payments by the Company shall be applied first to any and
all accrued interest through the payment date and second to the principal
remaining due hereunder.
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
<PAGE>
1. Definitions. As used in this Note, the following terms, unless the
-----------
context otherwise requires, have the following meanings:
1.1 "Company" includes any corporation or other entity which succeeds
to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of the
Company issued upon conversion of this Note.
1.3 "Event of Default" shall mean (a) the Company's failure to pay of
amounts due under this Note after receipt of written notice of such failure and
period of thirty days to make such payment; or (b) the filing by or against the
Company of any voluntary or involuntary petition in bankruptcy or any petition
for relief under the federal bankruptcy code or any other state or federal law
for the relief of debtors (which is not dismissed within 60 days); or (c) the
execution by the Company of an assignment for the benefit of creditors or the
appointment of a receiver, custodian, trustee or similar party to take
possession of Company's material assets or property.
1.4 "Noteholder," "holder," or similar terms, when the context refers
to a holder of this Note, shall mean any person who shall at the time be the
registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale of the
Company's Common Stock pursuant to a registration statement on Form S-1, Form
SB-1 or SB-2 (or any similar or successor form) under the Securities Act of
1933, as amended (the "Securities Act"), for an underwritten initial public
offering.
1.6 "Subordination Agreement" shall mean the Subordination Agreement
attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. This Note and all of the outstanding
--------------------
principal and accrued and unpaid interest on and under this Note shall
automatically convert before the Maturity Date into Conversion Stock as follows:
(i) if the Company shall have conducted its Initial Public Offering prior to or
on July 1, 2000, then this Note and all of the outstanding principal and accrued
and unpaid interest on and under this Note will automatically convert into
43,406 shares of Conversion Stock on July 1, 2000; and (ii) if the Company shall
not have conducted its Initial Public Offering as of July 1, 2000, then this
Note and all of the outstanding principal and accrued and unpaid interest on and
under this Note will automatically will convert into 43,406 shares of Conversion
Stock on the first day following the end of the calendar month in which the
Company has conducted its Initial Public Offering; provided that in the event
that this Note converts after July 1, 2000 pursuant to subsection 2.1(ii) above
then in connection with such conversion the Company shall also pay the
Noteholder all interest accrued under the Note through the date of such
conversion. In the event that Note converts pursuant to this Section 2.1 above
then all outstanding principal under this Note and all accrued interest thereon
shall be satisfied in full by virtue of such conversion (and the payment of
accrued
<PAGE>
interest in the case of conversion under Section 2.1(ii) as the case may be) and
the issuance and delivery of the shares of Conversion Stock to the holder.
For informational purposes, the Company shall provide the Noteholder
with written notice (at the most recent address for the Noteholder provided to
the Company by the Noteholder in writing) reasonably promptly following the
closing of its Initial Public Offering. Conversion as described in this Section
2.1 shall occur only if the Company shall have conducted its Initial Public
Offering, provided that as a condition precedent or condition subsequent to
conversion (the election between which type of condition shall be the Company's
sole election in the Company's sole discretion), the Noteholder must surrender
this Note for conversion at the principal office of the Company. Incident to any
conversion, the Conversion Stock will have those rights and privileges, and be
subject to those restrictions, of the shares of Common Stock as set forth in the
Company's Certificate of Incorporation and Bylaws and this Note (including the
restrictions on transfer of Conversion Stock set forth in this Note), and the
Noteholder will receive the rights and be subject to the obligations applicable
to the purchasers of Common Stock. This Note shall not be convertible and shall
not be converted into Conversion Stock if there is not an Initial Public
Offering on or before the Maturity Date.
2.2 No Fractional Shares. No fractional shares will be issued on
--------------------
conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of a per share price of $10.50 per share (as
proportionally adjusted for stock splits, stock combinations, recapitalizations
and like events).
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government consents and approvals as may, in the reasonable opinion
of its counsel, be necessary to authorize the issuance of a sufficient number of
shares of Conversion Stock into which this Note is to convert pursuant to
Section 2.1 above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion Stock
-------------------------------
issued upon the conversion of this Note shall be validly issued, fully paid and
non-assessable. The certificates representing the shares of Conversion Stock
issued upon conversion hereof shall be delivered to the holder against surrender
of this Note. The holder, by accepting this Note, undertakes and agrees to
accept such shares of Conversion Stock in full satisfaction of the outstanding
principal and accrued interest thereon in accordance with the terms of this
Note. Anything to the contrary in this Note notwithstanding, the Company's
obligation to issue shares of Conversion Stock to any holder of this Note is
expressly conditioned upon compliance of such issuance with applicable federal
and state securities laws without registration or other qualification
thereunder.
2.5 No Other Conversion. The conversion described in this Section 2
-------------------
shall constitute the sole methods by which this Note will convert.
<PAGE>
2.6. Subordination. This Note and the indebtedness evidence by this
-------------
Note are subordinated to the prior payment in full of all or substantially all
other indebtedness of the Company pursuant to the terms of a Subordination
Agreement in the form attached hereto as Annex A and incorporated herein by
-------
reference.
3. No Rights or Liabilities as Shareholder. This Note does not by itself
---------------------------------------
entitle the Noteholder to any voting rights or other rights as a shareholder of
the Company. In the absence of conversion of this Note, no provisions of this
Note, and no enumeration herein of the rights or privileges of the holder shall
cause such holder to be a shareholder of the Company for any purpose by virtue
hereof. Subject to the terms and conditions of this Note, Noteholder will have
all of the rights of a shareholder of the Company with respect to the Conversion
Stock from and after the Conversion Date until such time as Noteholder disposes
of the Conversion Stock.
4. Restrictions on Transfers.
-------------------------
4.1 No Transfers Unless Registered or Exempt. Noteholder understands
----------------------------------------
that Noteholder may not transfer any shares of Conversion Stock unless such
shares are registered under the Securities Act and qualified under applicable
state securities laws or unless, in the opinion of counsel to the Company,
exemptions from such registration and qualification requirements are available.
Noteholder understands that only the Company may file a registration statement
with the Securities and Exchange Commission (the "SEC") and that the Company is
under no obligation to do so with respect to the Conversion Stock. Noteholder
has also been advised that exemptions from registration and qualification may
not be available or may not permit Noteholder to transfer all or any of the
Conversion Stock in the amounts or at the times proposed by Noteholder.
4.2 Rule 144. In addition, Noteholder has been advised that SEC Rule
--------
144 promulgated under the Securities Act, which permits certain limited sales of
unregistered securities, is not presently available with respect to the
Conversion Stock and, in any event, requires that the Conversion Stock be held
for a minimum of one (1) year, and in certain cases two (2) years, after they
have been purchased and paid for (within the meaning of Rule 144), before they
------------
may be resold under Rule 144. Noteholder understands that Rule 144 may
indefinitely restrict transfer of the Conversion Stock so long as Noteholder
remains an "affiliate" of the Company or if "current public information" about
the Company (as defined in Rule 144) is not publicly available.
4.3 Disposition of Conversion Stock. Noteholder hereby agrees that
-------------------------------
Noteholder will make no disposition of the Conversion Stock (other than as
permitted by this Agreement) unless and until: (a) Noteholder has notified the
Company of the proposed disposition and provided a written summary of the terms
and conditions of the proposed disposition; (b) Noteholder has complied with all
requirements of this Note applicable to the disposition of the Conversion Stock
(including the restrictions on transfer); and (c) Noteholder has provided the
Company with written assurances, in form and substance satisfactory to counsel
for the Company, that (i) the proposed disposition does not require registration
of the Conversion Stock under the Securities Act or
<PAGE>
applicable state securities laws, or (ii) all appropriate actions necessary for
compliance with the registration requirements of the Securities Act or of any
exemption from registration available under the Securities Act (including Rule
144) and applicable state securities laws has been taken.
4.4 Restriction on Transfer and Sale. Upon and following any
--------------------------------
conversion of this Note, no holder of any Conversion Stock shall effect any sale
or distribution of any of the Conversion Stock (which shall include any and all
voting securities received by such holder as or in connection with a stock
dividend, stock split or other recapitalization or similar distribution on or in
respect of the Conversion Stock) or any of the Company's other equity
securities, or of any securities convertible into or exchangeable for such
securities, during the period beginning on the closing of the Initial Public
Offering and ending 180 days after such closing.
4.5 Legends. Noteholder understands and agrees that the Company will
-------
place appropriate legends on any stock certificate(s) evidencing the Conversion
Stock that may be required by state or federal securities laws, the Company's of
Incorporation or Bylaws, this Note any other agreement. Noteholder agrees that,
to ensure compliance with the restrictions imposed by this Note, the Company may
issue appropriate "stop-transfer" instructions to its transfer agent, if any,
and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records. The Company will not be
required (i) to transfer on its books any Conversion Stock that have been sold
or otherwise transferred in violation of any of the provisions of this Note, or
(ii) to treat as owner of such Conversion Stock, or to accord the right to vote
or pay dividends to any purchaser or other transferee to whom such Conversion
Stock have been so transferred.
5. Prepayment. This Note may be prepaid, in its entirety (including the
----------
principal sum and interest accrued to the date of payment) without penalty or
premium; provided that prepayment cannot take place after the Company has filed
with the Securities and Exchange Commission a registration statement on Form S-
1, Form SB-1 or Form SB-2 (or any similar or successor form) for an Initial
Public Offering and for so long as any such registration statement remains
pending.
6. Usury Savings Clause. The Company and the Noteholder intend to comply
--------------------
at all times with applicable usury laws. If at any time such laws would render
usurious any amounts due under this Note under applicable law, then it is the
Company's and the Noteholder's express intention that the Company not be
required to pay interest on this Note at a rate in excess of the maximum lawful
rate, that the provisions of this Section 6 shall control over all other
provisions of this Note which may be in apparent conflict hereunder, that such
excess amount shall be immediately credited to the principal balance of this
Note (or, if this Note has been fully paid, refunded by the Noteholder to the
Company), and the provisions hereof shall immediately be reformed and the
amounts thereafter decreased, so as to comply with the then applicable usury
law, but so as to permit the recovery of the fullest amount otherwise due under
this Note.
<PAGE>
7. Disclosure. The Company agrees, for a period of two years following
----------
the date of this Agreement, to use reasonable commercial efforts to:
(a) make and keep material public information available within the
meaning of Rule 144(c) of the Securities Act at all times after ninety (90) days
after the closing of the Initial Public Offering; and
(b) file with the SEC in a timely manner all reports and other
material documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
8. General Provisions.
------------------
8.1 Notices. All notices and other communications required or
-------
permitted hereunder shall be effective upon receipt (or refusal of receipt) and
shall be in writing and delivered by depositing the same in United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, by delivering the same in person to
such party or to an officer or agent of such party, as follows:
(i) If mailed or delivered to the Company, to each of the
following, using two separate mailings or deliveries:
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Anthony Capobianco, Vice President and General
Counsel
(ii) If mailed or delivered to the Payee, addressed to him at the
following address or fax number:
the Norman Levy Qualified Terminable Interest Marital
Trust
c/o Milton Zussman
300 Park Street, Suite 285
Birmingham, Michigan 48009
or to such other address as any party hereto shall specify in writing to the
other parties hereto pursuant to this Section 8.1 from time to time. Such notice
shall be effective only upon actual receipt.
<PAGE>
8.2 Severability; Headings. In case any provision of this Note shall
----------------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby, unless to do so would deprive the Noteholder or the Company of a
substantial part of its bargain. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
8.3 Noteholder Representations and Status. By accepting this Note,
-------------------------------------
the Payee and any other Noteholder each acknowledges, represents and warrants
that (i) this Note and Conversion Stock issued hereunder are being acquired for
investment, solely for its own account and not as a nominee for any other person
or entity, and that it will not offer, sell or otherwise dispose of this Note or
any Conversion Stock except as expressly permitted by this Note and under
circumstances which will not result in a violation of the Securities Act or
applicable state securities laws, and (ii) it is an "accredited investor" with
the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act.
8.4 Assignment. Neither this Note nor any right or obligation
----------
hereunder may be assigned or delegated by Payee without the prior written
consent of Company. Neither this Note nor any right or obligation hereunder may
be assigned or delegated by Company without the prior written consent of Payee,
except pursuant to a merger in which Company is a party, or pursuant to a sale
or other transfer of substantially all of the assets of Company. Any purported
assignment in violation of this paragraph shall be void.
8.5 Amendment; Waiver. Any provision of this Note may be amended or
-----------------
modified only by a writing signed by both Company and Payee. Compliance with
any provision of this Note may be waived only by a writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
8.6 Governing Law. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding that body of law applicable to conflicts of laws.
[The rest of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each party has caused this Note to be executed as of
the date first set forth above.
DOVEBID, INC.
By: /s/ Anthony Capobianco
--------------------------------------
Name: Anthony Capobianco
Title: Vice President and General Counsel
Acknowledged and Agreed to:
THE NORMAN LEVY QUALIFIED TERMINABLE INTEREST MARTIAL TRUST
By: /s/ Milton Y. Zussman
----------------------
Name: Milton Y. Zussman
Trustee
[Execution Page to Convertible Subordinated Promissory Note]
<PAGE>
Exhibit 10.37
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR ANY
SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION OR OTHER QUALIFICATION
UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER QUALIFICATION IS NOT
REQUIRED.
DOVEBID, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$884,629.87 March 24, 2000
For value received under that certain Termination of Employment Agreement
and Release dated as of March 24, 200 (the "Agreement") by and among Richard
Nucian, an individual residing in the state of Michigan ("Payee"), Norman Levy
Associates, Inc. a Michigan corporation and a wholly owned subsidiary of
DoveBid, Inc., a Delaware corporation, with offices at 1241 East Hillsdale
Blvd., Foster City, CA 94404 (the "Company"), Robert Carl Corporation, a
Michigan corporation, Robert Levy and David Levy, the Company promises to pay to
the order of Payee at such address as Payee may designate, Eight Hundred Eighty-
Four Thousand Six Hundred Twenty-Nine Dollars and Eight-Seven Cents
($884,629.87) plus simple interest thereon calculated from the date hereof until
paid at an annual rate equal to the minimum rate established pursuant to Section
1274(d) of the Internal Revenue Code of 1986, as amended, as of the date hereof,
compounded annually; provided that if this Note shall not have converted into
Conversion Stock (as defined below) by July 1, 2000, then on and after such date
the interest payable per annum with respect to principal outstanding under this
Note shall be equal to the prime lending rate in effect on July 2, 2000 as
announced by Chase Manhattan Bank, and thereafter accrued interest shall be
payable at the end of each three month period thereafter. Except as otherwise
provided in the preceding sentence, principal and accrued interest will be due
and payable in lawful money of the United States in full on the earlier of (i)
three year anniversary of the date of this Note, or (ii) upon an Event of
Default (the "Maturity Date"), unless this Note shall have been previously paid
by the Company or converted pursuant to Section 2 below, in which case all
outstanding principal under this Note and all accrued interest thereon shall be
satisfied in full by virtue of conversion as set forth in Section 2 below.
Payments by the Company shall be applied first to any and all accrued interest
through the payment date and second to the principal remaining due hereunder.
<PAGE>
The following is a statement of the rights of the holder of this Note
and the conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless the
-----------
context otherwise requires, have the following meanings:
1.1 "Company" includes any corporation or other entity which succeeds
to or assume the obligations of the Company under this Note.
1.2 "Conversion Stock" shall mean shares of Common Stock of the
Company issued upon conversion of this Note.
1.3 "Event of Default" shall mean (a) the Company's failure to pay of
amounts due under this Note after receipt of written notice of such failure and
period of thirty days to make such payment; or (b) the filing by or against the
Company of any voluntary or involuntary petition in bankruptcy or any petition
for relief under the federal bankruptcy code or any other state or federal law
for the relief of debtors (which is not dismissed within 60 days); or (c) the
execution by the Company of an assignment for the benefit of creditors or the
appointment of a receiver, custodian, trustee or similar party to take
possession of Company's material assets or property.
1.4 "Noteholder," "holder," or similar terms, when the context refers
to a holder of this Note, shall mean any person who shall at the time be the
registered holder of this Note.
1.5 "Initial Public Offering" shall mean the closing of a sale of the
Company's Common Stock pursuant to a registration statement on Form S-1, Form
SB-1 or SB-2 (or any similar or successor form) under the Securities Act of
1933, as amended (the "Securities Act"), for an underwritten initial public
offering.
1.6 "Subordination Agreement" shall mean the Subordination Agreement
attached hereto as Annex A and incorporated by reference herein.
-------
2. Conversion.
----------
2.1 Mandatory Conversion. This Note and all of the outstanding
--------------------
principal and accrued and unpaid interest on and under this Note shall
automatically convert before the Maturity Date into Conversion Stock as follows:
(i) if the Company shall have conducted its Initial Public Offering prior to or
on July 1, 2000, then this Note and all of the outstanding principal and accrued
and unpaid interest on and under this Note will automatically convert into
84,250 shares of Conversion Stock on July 1, 2000; and (ii) if the Company shall
not have conducted its Initial Public Offering as of July 1, 2000, then this
Note and all of the outstanding principal and accrued and unpaid interest on and
under this Note will automatically will convert into 84,250 shares of Conversion
Stock on the first day following the end of the calendar month in which the
Company has conducted its Initial Public Offering; provided that in the event
that this Note converts after July 1, 2000 pursuant to subsection 2.1(ii) above
then in connection with such
<PAGE>
conversion the Company shall also pay the Noteholder all interest accrued under
the Note through the date of such conversion. In the event that Note converts
pursuant to this Section 2.1 above then all outstanding principal under this
Note and all accrued interest thereon shall be satisfied in full by virtue of
such conversion (and the payment of accrued interest in the case of conversion
under Section 2.1(ii) as the case may be) and the issuance and delivery of the
shares of Conversion Stock to the holder.
For informational purposes, the Company shall provide the Noteholder with
written notice (at the most recent address for the Noteholder provided to the
Company by the Noteholder in writing) reasonably promptly following the closing
of its Initial Public Offering. Conversion as described in this Section 2.1
shall occur only if the Company shall have conducted its Initial Public
Offering, provided that as a condition precedent or condition subsequent to
conversion (the election between which type of condition shall be the Company's
sole election in the Company's sole discretion), the Noteholder must surrender
this Note for conversion at the principal office of the Company. Incident to any
conversion, the Conversion Stock will have those rights and privileges, and be
subject to those restrictions, of the shares of Common Stock as set forth in the
Company's Certificate of Incorporation and Bylaws and this Note (including the
restrictions on transfer of Conversion Stock set forth in this Note), and the
Noteholder will receive the rights and be subject to the obligations applicable
to the purchasers of Common Stock. This Note shall not be convertible and shall
not be converted into Conversion Stock if there is not an Initial Public
Offering on or before the Maturity Date.
2.2 No Fractional Shares. No fractional shares will be issued on
--------------------
conversion of this Note. If on any conversion of this Note a fraction of a
share results, the Company will pay the cash value of that fractional share,
calculated on the basis of a per share price of $10.50 per share (as
proportionally adjusted for stock splits, stock combinations, recapitalizations
and like events).
2.3 Reservation of Stock. Prior to any conversion of this Note
--------------------
pursuant to Section 2.1 above, the Company will take such corporate action and
obtain such government consents and approvals as may, in the reasonable opinion
of its counsel, be necessary to authorize the issuance of a sufficient number of
shares of Conversion Stock into which this Note is to convert pursuant to
Section 2.1 above.
2.4 Fully Paid Shares; Certificates. All shares of Conversion Stock
-------------------------------
issued upon the conversion of this Note shall be validly issued, fully paid and
non-assessable. The certificates representing the shares of Conversion Stock
issued upon conversion hereof shall be delivered to the holder against surrender
of this Note. The holder, by accepting this Note, undertakes and agrees to
accept such shares of Conversion Stock in full satisfaction of the outstanding
principal and accrued interest thereon in accordance with the terms of this
Note. Anything to the contrary in this Note notwithstanding, the Company's
obligation to issue shares of Conversion Stock to any holder of this Note is
expressly conditioned upon compliance of such issuance with applicable federal
and state securities laws without registration or other qualification
thereunder.
<PAGE>
2.5 No Other Conversion. The conversion described in this Section 2
-------------------
shall constitute the sole methods by which this Note will convert.
2.6. Subordination. This Note and the indebtedness evidence by this
-------------
Note are subordinated to the prior payment in full of all or substantially all
other indebtedness of the Company pursuant to the terms of a Subordination
Agreement in the form attached hereto as Annex A and incorporated herein by
-------
reference.
3. No Rights or Liabilities as Shareholder. This Note does not by itself
---------------------------------------
entitle the Noteholder to any voting rights or other rights as a shareholder of
the Company. In the absence of conversion of this Note, no provisions of this
Note, and no enumeration herein of the rights or privileges of the holder shall
cause such holder to be a shareholder of the Company for any purpose by virtue
hereof. Subject to the terms and conditions of this Note, Noteholder will have
all of the rights of a shareholder of the Company with respect to the Conversion
Stock from and after the Conversion Date until such time as Noteholder disposes
of the Conversion Stock.
4. Spousal Consent. Payee agrees that upon conversion of this Note the
---------------
stock certificate(s) evidencing the Conversion Stock, shall be delivered,
together with two (2) copies of a Consent of Spouse in the form of Annex B
-------
attached hereto (the "Spouse Consent") executed by Payee's spouse, if any.
5. Restrictions on Transfers.
-------------------------
5.1 No Transfers Unless Registered or Exempt. Noteholder understands
----------------------------------------
that Noteholder may not transfer any shares of Conversion Stock unless such
shares are registered under the Securities Act and qualified under applicable
state securities laws or unless, in the opinion of counsel to the Company,
exemptions from such registration and qualification requirements are available.
Noteholder understands that only the Company may file a registration statement
with the Securities and Exchange Commission (the "SEC") and that the Company is
under no obligation to do so with respect to the Conversion Stock. Noteholder
has also been advised that exemptions from registration and qualification may
not be available or may not permit Noteholder to transfer all or any of the
Conversion Stock in the amounts or at the times proposed by Noteholder.
5.2 Rule 144. In addition, Noteholder has been advised that SEC Rule
--------
144 promulgated under the Securities Act, which permits certain limited sales of
unregistered securities, is not presently available with respect to the
Conversion Stock and, in any event, requires that the Conversion Stock be held
for a minimum of one (1) year, and in certain cases two (2) years, after they
have been purchased and paid for (within the meaning of Rule 144), before they
------------
may be resold under Rule 144. Noteholder understands that Rule 144 may
indefinitely restrict transfer of the Conversion Stock so long as Noteholder
remains an "affiliate" of the Company or if "current public information" about
the Company (as defined in Rule 144) is not publicly available.
<PAGE>
5.3 Disposition of Conversion Stock. Noteholder hereby agrees that
-------------------------------
Noteholder will make no disposition of the Conversion Stock (other than as
permitted by this Agreement) unless and until: (a) Noteholder has notified the
Company of the proposed disposition and provided a written summary of the terms
and conditions of the proposed disposition; (b) Noteholder has complied with all
requirements of this Note applicable to the disposition of the Conversion Stock
(including the restrictions on transfer); and (c) Noteholder has provided the
Company with written assurances, in form and substance satisfactory to counsel
for the Company, that (i) the proposed disposition does not require registration
of the Conversion Stock under the Securities Act or applicable state securities
laws, or (ii) all appropriate actions necessary for compliance with the
registration requirements of the Securities Act or of any exemption from
registration available under the Securities Act (including Rule 144) and
applicable state securities laws has been taken.
5.4 Restriction on Transfer and Sale. Noteholder shall not transfer,
--------------------------------
assign, grant a lien or security interest in, pledge, hypothecate, encumber or
otherwise dispose of any of the Conversion Stock, except as permitted by this
Agreement .Upon and following any conversion of this Note, no holder of any
Conversion Stock shall effect any sale or distribution of any of the Conversion
Stock (which shall include any and all voting securities received by such holder
as or in connection with a stock dividend, stock split or other recapitalization
or similar distribution on or in respect of the Conversion Stock) or any of the
Company's other equity securities, or of any securities convertible into or
exchangeable for such securities, during the period beginning on the closing of
the Initial Public Offering and ending 180 days after such closing.
5.5 Legends. Noteholder understands and agrees that the Company will
-------
place appropriate legends on any stock certificate(s) evidencing the Conversion
Stock that may be required by state or federal securities laws, the Company's of
Incorporation or Bylaws, this Note any other agreement. Noteholder agrees that,
to ensure compliance with the restrictions imposed by this Note, the Company may
issue appropriate "stop-transfer" instructions to its transfer agent, if any,
and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records. The Company will not be
required (i) to transfer on its books any Conversion Stock that have been sold
or otherwise transferred in violation of any of the provisions of this Note, or
(ii) to treat as owner of such Conversion Stock, or to accord the right to vote
or pay dividends to any purchaser or other transferee to whom such Conversion
Stock have been so transferred.
6. Prepayment. This Note may be prepaid, in its entirety (including the
----------
principal sum and interest accrued to the date of payment) without penalty or
premium; provided that prepayment cannot take place after the Company has filed
with the Securities and Exchange Commission a registration statement on Form S-
1, Form SB-1 or Form SB-2 (or any similar or successor form) for an Initial
Public Offering and for so long as any such registration statement remains
pending.
7. Usury Savings Clause. The Company and the Noteholder intend to comply
--------------------
at all times with applicable usury laws. If at any time such laws would render
usurious any amounts due under this Note under applicable law, then it is the
Company's and the Noteholder's express intention that the Company not be
required to pay interest
<PAGE>
on this Note at a rate in excess of the maximum lawful rate, that the provisions
of this Section 7 shall control over all other provisions of this Note which may
be in apparent conflict hereunder, that such excess amount shall be immediately
credited to the principal balance of this Note (or, if this Note has been fully
paid, refunded by the Noteholder to the Company), and the provisions hereof
shall immediately be reformed and the amounts thereafter decreased, so as to
comply with the then applicable usury law, but so as to permit the recovery of
the fullest amount otherwise due under this Note.
8. Disclosure. The Company agrees, for a period of two years following
----------
the date of this Agreement, to use reasonable commercial efforts to:
(a) make and keep material public information available within the
meaning of Rule 144(c) of the Securities Act at all times after ninety (90) days
after the closing of the Initial Public Offering; and
(b) file with the SEC in a timely manner all reports and other
material documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
9. General Provisions.
------------------
9.1 Notices. All notices and other communications required or
-------
permitted hereunder shall be effective upon receipt (or refusal of receipt) and
shall be in writing and delivered by depositing the same in United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, by delivering the same in person to
such party or to an officer or agent of such party, as follows:
(i) If mailed or delivered to the Company, to each of the
following, using two separate mailings or deliveries:
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Cory Ravid, Chief Financial Officer
DoveBid, Inc.
1241 East Hillsdale Blvd.
Foster City, CA 94404
Attn: Anthony Capobianco, Vice President and General
Counsel
(ii) If mailed or delivered to the Payee, addressed to him at the
following address:
Richard Nucian
30002 Mayfair Street
<PAGE>
Farmingham Hills, Michigan 48331
or to such other address as any party hereto shall specify in writing to the
other parties hereto pursuant to this Section 9.1 from time to time. Such notice
shall be effective only upon actual receipt.
9.2 Severability; Headings. In case any provision of this Note shall
----------------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby, unless to do so would deprive the Noteholder or the Company of a
substantial part of its bargain. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
9.3 Noteholder Representations and Status. By accepting this Note,
-------------------------------------
the Payee and any other Noteholder each acknowledges, represents and warrants
that (i) this Note and Conversion Stock issued hereunder are being acquired for
investment, solely for its own account and not as a nominee for any other person
or entity, and that it will not offer, sell or otherwise dispose of this Note or
any Conversion Stock except as expressly permitted by this Note and under
circumstances which will not result in a violation of the Securities Act or
applicable state securities laws, and (ii) it is an "accredited investor" with
the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act.
9.4 Assignment. Neither this Note nor any right or obligation
----------
hereunder may be assigned or delegated by Payee without the prior written
consent of Company. Neither this Note nor any right or obligation hereunder may
be assigned or delegated by Company without the prior written consent of Payee,
except pursuant to a merger in which Company is a party, or pursuant to a sale
or other transfer of substantially all of the assets of Company. Any purported
assignment in violation of this paragraph shall be void.
9.5 Amendment; Waiver. Any provision of this Note may be amended or
-----------------
modified only by a writing signed by both Company and Payee. Compliance with
any provision of this Note may be waived only by a writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
9.6 Governing Law. This Note shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding that body of law applicable to conflicts of laws.
[The rest of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each party has caused this Note to be executed as of
the date first set forth above.
DOVEBID, INC.
By: /s/ Anthony Capobianco
--------------------------------------
Name: Anthony Capobianco
Title: Vice President and General Counsel
Acknowledged and Agreed to:
/s/ Richard Nucian
- ----------------------
Name: Richard Nucian
[Execution Page to Convertible Subordinated Promissory Note]
<PAGE>
EXHIBIT 10.38
DOVEBID, INC.
1241 E. Hillsdale Blvd.
Foster City, CA 94404
(650) 571-7400
March 24, 2000
Robert Levy
21415 Civic Center Drive
Southfield, Michigan 48076
Re: Employment Agreement
--------------------
Dear Robert:
On behalf of DoveBid, Inc. ("DoveBid"), I am pleased and delighted to
confirm the terms of our agreement for you to become a full-time DoveBid
employee (this "Agreement").
Your title and position with DoveBid initially will be President of the
International Division of DoveBid's Auction Services Business. Your duties will
be as assigned by DoveBid's President and Chief Executive Officer, or his or her
designee. Your employment will commence on March 24, 2000.
So long as you remain employed by DoveBid, you will be provided with
notices of, and be entitled to attend, as an observer, all meetings of DoveBid's
Board of Directors and the Executive Committee of DoveBid (the "Board");
provided, however, that DoveBid reserves the right to exclude you from any Board
meeting or portion thereof, and/or deny you access to any material, if the Board
determines in good faith that your attendance at such meeting or access to such
material could adversely affect DoveBid whether by way of adversely affecting
the attorney-client privilege between DoveBid and its counsel, compromising the
disclosure of confidential information of DoveBid or otherwise. You agree to
keep all materials and information learned as a result of your attendance at any
Board meeting strictly confidential regardless of whether you are employed by
DoveBid. On your execution of this letter, DoveBid's Chief Executive Officer
will recommend to DoveBid's shareholders that you be appointed to serve as a
director of DoveBid.
Your initial salary will be $225,000 per year, which will be paid in
accordance with DoveBid's normal payroll procedures. All payments to you will
be subject to legally required withholding. It is DoveBid's policy to review
and adjust compensation levels periodically.
You will also be eligible for a year-end guaranteed bonus of $100,000. In
addition to your salary, you will be eligible to participate in the employee
benefits generally made available to our full-time employees from time to time.
At the present time, those benefits include health and dental insurance, life
insurance, vacation and sick pay in accordance with applicable benefit plans and
DoveBid's written policies, as they may be amended from time to time in
DoveBid's discretion.
<PAGE>
Subject to approval by the Board of Directors of DoveBid, Inc., we are also
pleased to confirm that your compensation package will include a stock option
for 200,000 shares of DoveBid, Inc.'s common stock with an exercise price per
share equal to a share's fair market value on the date of grant, which will be
an incentive stock option to the extent permitted by law. Your stock options
will be subject to the terms of DoveBid, Inc.'s 1999 Stock Option Plan (the Plan
includes vesting restrictions, restrictions on exercise and restrictions on
transfer of shares) and will be conditioned on your execution of a Stock Option
Agreement related to your options.
As a condition of your employment, you will be expected to comply with all
of DoveBid's policies and procedures, as may be modified from time to time in
DoveBid's discretion (including our policies protecting other employees against
discrimination and sexual harassment). Please refer to DoveBid's Employee
Handbook for details regarding those policies and procedures. Also, you will
execute DoveBid's Employee Confidentiality and Proprietary Information
Agreement, a copy of which is attached.
You will devote your best efforts to the performance of your job for
DoveBid. During the term of your employment by DoveBid, you will devote your
full time and attention to the business of DoveBid, as directed by DoveBid, and
will not, without DoveBid's prior written consent, engage in any other business
activity that would interfere with the performance of your job with DoveBid
(except that you may (i) hold an ownership interest in Levy/Latham, LLC, a
Delaware limited liability company ("Levy Latham") and may have high level
executive management responsibilities to Levy Latham and attend high level
executive management meetings (so long as such responsibilities and activities
do not interfere or conflict with your duties as an employee of DoveBid (or any
subsidiary of DoveBid) or compete with the current business of DoveBid; provided
that if DoveBid determines in its reasonable discretion that the business of
Levy Latham competes with DoveBid, then you agree to divest your ownership
interest in Levy Latham within a reasonable time of such determination, and you
further agree that if such divestiture has not been completed within 90 days of
the determination then you will cease all management participation in Levy
Latham, (ii) hold that certain Warrant to Purchase Common Stock originally
issued to Norman Levy Associates, Inc. under that certain Strategic Alliance
Agreement dated as of February 28, 2000 by and between the Company and
TradeOut.com, Inc. or any shares issued thereunder, and (iii) own less than one
percent (1%) of the publicly traded securities of a public company). In
particular and except as provided in the preceding sentence, during the term of
your employment by DoveBid, you will not engage in any business competing with
that of DoveBid, nor support (by way of investment or otherwise) any activity
that is competitive with DoveBid's business or poses a conflict of interest with
DoveBid's business. You will disclose to the Company in writing any other
employment, business or activity that you are currently associated with or
participate in that competes with the Company. You will not assist any other
person or organization in competing with the Company or in preparing to engage
in competition with the business or proposed business of the Company.
This Agreement will have a four year term. Upon termination of your
employment by you or DoveBid at any time and for any reason, you will be
entitled to receive the salary and other benefits set forth in this letter
through the date of such termination of employment. If your employment is
terminated by DoveBid without Cause (as defined below), or if you terminate your
employment for Good Reason (as defined below), during the term of this
Agreement, you
<PAGE>
will also be entitled to receive severance compensation equal to six months of
base salary and a pro rata portion of your guaranteed bonus (based on the number
of months you were employed during the year of such termination) payable upon
such termination of employment. Other than as provided in this paragraph and by
law, on termination of employment you will not be entitled to receive any other
payment, compensation or other benefits.
For purposes of this Agreement, "Cause" means: (a) your material breach of
this Agreement (except for breaches concerning the performance of Employee's
duties of his employment, which are covered by clause (b) below) or your
Employee Confidentiality and Proprietary Information Agreement, or your failure
or refusal to comply in any material respect with DoveBid's material policies
and procedures, (b) your gross negligence in the performance of, or your willful
failure or refusal to perform, the material duties of your employment, if,
within ten (10) business days following notice to you from DoveBid describing
such gross negligence, failure or refusal, you fail to correct such behavior,
provided it reasonably can be corrected within such time, or (c) your commission
of a felony (other than a felony involving the operation of an automobile), or
any fraudulent or unlawful act which is detrimental to the reputation of
DoveBid, or any act or attempt to intentionally injure DoveBid, including your
theft or embezzlement of DoveBid's assets or proprietary information; provided
that in the case of clause (c), if you are ultimately exonerated of the act
which gave rise to such termination, you shall be reinstated in your position of
employment. For purposes of this Agreement, "Good Reason" means: (a) a
reduction in your base salary or guaranteed bonus, without your prior consent,
other than reductions in salary of up to 5% which occur on a company-wide basis
and which do not adversely affect you materially more than DoveBid's other
employees generally, or (b) a requirement by DoveBid that you relocate your
principal location of employment more than 30 miles from its current location,
without your prior consent, or (c) David Levy's employment with the Company is
terminated by the Company without "Cause" or by David Levy for "Good Reason."
In the event of a dispute between DoveBid and you arising out of your
employment or the termination of your employment, we each agree to submit our
dispute to binding arbitration in accordance with the Employment Dispute
Resolutions Rules of the American Arbitration Association. This means that
there will be no court or jury trial of disputes between us concerning your
employment or the termination of your employment to the fullest extent permitted
by law. While this Agreement to arbitrate is intended to be broad (and covers,
for example, claims under state and federal laws prohibiting discrimination on
the basis of race, sex, age, disability, family leave, etc.) to the fullest
extent permitted by law, it is not applicable to your rights under the
California Workers' Compensation Law, which are governed under the special
provisions of that law, or to enforcement of the attached agreement concerning
confidential information and ownership of inventions. This Agreement shall be
governed by California law, without regard to conflicts of law principles.
[The rest of this page is intentionally left blank.]
<PAGE>
We are very excited about your joining us. Please sign and return a copy
of this letter and the attached Employee Confidentiality and Proprietary
Information Agreement, keeping a copy of each for your records. The terms set
forth in this Agreement are intended to supersede all prior agreements,
undertakings and representations concerning the subject matter of this letter.
We look forward to you becoming a member of our team!
Sincerely,
DoveBid, Inc.
/s/ Anthony Capobianco
----------------------------------
Anthony Capobianco
Vice President and General Counsel
I understand and agree to the above terms.
/s/ Robert Levy
- ------------------------------------------------
Robert Levy
<PAGE>
Exhibit 10.39
DOVEBID VALUATION SERVICES, INC.
1241 E. Hillsdale Blvd.
Foster City, CA 94404
(650) 571-7400
March 24, 2000
David Levy
21415 Civic Center Drive
Southfield, Michigan 48076
Re: Employment Agreement
--------------------
Dear David:
On behalf of DoveBid Valuation Services, Inc. ("DoveBid"), I am pleased and
delighted to confirm the terms of our agreement for you to become a full-time
DoveBid employee (this "Agreement"). DoveBid, Inc., a Delaware corporation
("Parent") irrevocably and unconditionally guarantees the obligations of DoveBid
under this letter.
Your title and position with DoveBid initially will be Executive Vice
President of DoveBid's Appraisal Services business and you will serve as the Co-
Chair of the Valuation Committee. Your duties will be as assigned by DoveBid's
President, or his or her designee. Your employment will commence on March 24,
2000.
So long as you remain employed by DoveBid, you will be provided with
notices of, and be entitled to attend as an observer, all meetings of Parent's
Board of Directors and the Executive Committee of Parent (the "Board");
provided, however, that Parent reserves the right to exclude you from any Board
meeting or portion thereof, and/or deny you access to any material, if the Board
determines in good faith that your attendance at such meeting or access to such
material could adversely affect either DoveBid or Parent whether by way of
adversely affecting the attorney-client privilege between Parent or DoveBid and
its counsel, compromising the disclosure of confidential information of either
DoveBid or Parent or otherwise. You agree to keep all materials and information
learned as a result of your attendance at any Board meeting strictly
confidential regardless of whether you are employed by DoveBid.
Your initial salary will be $225,000 per year, which will be paid in
accordance with DoveBid's normal payroll procedures. All payments to you will
be subject to legally required withholding. It is DoveBid's policy to review
and adjust compensation levels periodically.
You will also be eligible for a guaranteed year-end bonus of $100,000. In
addition to your salary, you will be eligible to participate in the employee
benefits generally made available to our full-time employees from time to time.
At the present time, those benefits include health and dental insurance, life
insurance, vacation and sick pay in accordance with applicable benefit plans and
DoveBid's written policies, as they may be amended from time to time in
DoveBid's discretion.
Subject to approval by the Board of Directors of DoveBid, Inc., we are also
pleased to
<PAGE>
confirm that your compensation package will include a stock option for 200,000
shares of DoveBid, Inc.'s common stock with an exercise price per share equal to
a share's fair market value on the date of grant, which will be an incentive
stock option to the extent permitted by law. Your stock options will be subject
to the terms of DoveBid, Inc.'s 1999 Stock Option Plan (the Plan includes
vesting restrictions, restrictions on exercise and restrictions on transfer of
shares) and will be conditioned on your execution of a Stock Option Agreement
related to your options.
As a condition of your employment, you will be expected to comply with all
of DoveBid's policies and procedures, as may be modified from time to time in
DoveBid's discretion (including our policies protecting other employees against
discrimination and sexual harassment). Please refer to DoveBid's Employee
Handbook for details regarding those policies and procedures. Also, you will
execute DoveBid's Employee Confidentiality and Proprietary Information
Agreement, a copy of which is attached.
You will devote your best efforts to the performance of your job for
DoveBid. During the term of your employment by DoveBid, you will devote your
full time and attention to the business of DoveBid, as directed by DoveBid, and
will not, without DoveBid's prior written consent, engage in any other business
activity that would interfere with the performance of your job with DoveBid
(except that you may (i) hold an ownership interest in Levy/Latham, LLC, a
Delaware limited liability company ("Levy Latham") and may have high level
executive management responsibilities to Levy Latham and attend high level
executive management meetings (so long as such responsibilities and activities
do not interfere or conflict with your duties as an employee of DoveBid (or any
subsidiary of DoveBid) or compete with the current business of DoveBid; provided
that if DoveBid determines in its reasonable discretion that the business of
Levy Latham competes with DoveBid, then you agree to divest your ownership
interest in Levy Latham within a reasonable time of such determination, and you
further agree that if such divestiture has not been completed within 90 days of
the determination then you will cease all management participation in Levy
Latham, (ii) hold that certain Warrant to Purchase Common Stock originally
issued to Norman Levy Associates, Inc. under that certain Strategic Alliance
Agreement dated as of February 28, 2000 by and between the Company and
TradeOut.com, Inc. or any shares issued thereunder, and (iii) own less than one
percent (1%) of the publicly traded securities of a public company). In
particular and except as provided in the preceding sentence, during the term of
your employment by DoveBid, you will not engage in any business competing with
that of DoveBid, nor support (by way of investment or otherwise) any activity
that is competitive with DoveBid's business or poses a conflict of interest with
DoveBid's business. You will disclose to the Company in writing any other
employment, business or activity that you are currently associated with or
participate in that competes with the Company. You will not assist any other
person or organization in competing with the Company or in preparing to engage
in competition with the business or proposed business of the Company.
This Agreement will have a four year term. Upon termination of your
employment by you or DoveBid at any time and for any reason, you will be
entitled to receive the salary and other benefits set forth in this letter
through the date of such termination of employment. If your employment is
terminated by DoveBid without Cause (as defined below), or if you terminate your
employment for Good Reason (as defined below), during the term of this
Agreement, you will also be entitled to receive severance compensation equal to
six months of base salary and a pro rata portion of your guaranteed bonus (based
on the number of months you were employed
<PAGE>
during the year of such termination) payable upon such termination of
employment. Other than as provided in this paragraph and by law, on termination
of employment you will not be entitled to receive any other payment,
compensation or other benefits.
For purposes of this Agreement, "Cause" means: (a) your material breach of
this Agreement (except for breaches concerning the performance of Employee's
duties of his employment, which are covered by clause (b) below) or your
Employee Confidentiality and Proprietary Information Agreement, or your failure
or refusal to comply in any material respect with DoveBid's material policies
and procedures, (b) your gross negligence in the performance of, or your willful
failure or refusal to perform, the material duties of your employment, if,
within ten (10) business days following notice to you from DoveBid describing
such gross negligence, failure or refusal, you fail to correct such behavior,
provided it reasonably can be corrected within such time, or (c) your commission
of a felony (other than a felony involving the operation of an automobile), or
any fraudulent or unlawful act which is detrimental to the reputation of
DoveBid, or any act or attempt to intentionally injure DoveBid, including your
theft or embezzlement of DoveBid's assets or proprietary information; provided
that in the case of clause (c), if you are ultimately exonerated of the act
which gave rise to such termination, you shall be reinstated in your position of
employment. For purposes of this Agreement, "Good Reason" means: (a) a
reduction in your base salary or guaranteed bonus, without your prior consent,
other than reductions in salary of up to 5% which occur on a company-wide basis
and which do not adversely affect you materially more than DoveBid's other
employees generally, or (b) a requirement by DoveBid that you relocate your
principal location of employment more than 30 miles from its current location,
without your prior consent, or (c) Robert Levy's employment with the Company is
terminated by the Company without "Cause" or by Robert Levy for "Good Reason."
In the event of a dispute between DoveBid and you arising out of your
employment or the termination of your employment, we each agree to submit our
dispute to binding arbitration in accordance with the Employment Dispute
Resolutions Rules of the American Arbitration Association. This means that
there will be no court or jury trial of disputes between us concerning your
employment or the termination of your employment to the fullest extent permitted
by law. While this Agreement to arbitrate is intended to be broad (and covers,
for example, claims under state and federal laws prohibiting discrimination on
the basis of race, sex, age, disability, family leave, etc.) to the fullest
extent permitted by law, it is not applicable to your rights under the
California Workers' Compensation Law, which are governed under the special
provisions of that law, or to enforcement of the attached agreement concerning
confidential information and ownership of inventions. This Agreement shall be
governed by California law, without regard to conflicts of law principles.
[The rest of this page is intentionally left blank.]
<PAGE>
We are very excited about your joining us. Please sign and return a copy
of this letter and the attached Employee Confidentiality and Proprietary
Information Agreement, keeping a copy of each for your records. The terms set
forth in this Agreement are intended to supersede all prior agreements,
undertakings and representations concerning the subject matter of this letter.
We look forward to you becoming a member of our team!
Sincerely,
DoveBid Valuation Services, Inc.
/s/ Anthony Capobianco
----------------------------------
Anthony Capobianco
Vice President and General Counsel
I understand and agree to the above terms.
/s/ David Levy
- ----------------------------------------
David Levy
Acknowledged and Agreed:
DoveBid, Inc.
By: /s/ Anthony Capobianco
--------------------------------------
Name: Anthony Capobianco
Title: Vice President and General Counsel
<PAGE>
EXHIBIT 10.40
[LOGO OF DOVEBID]
February 8, 2000
Timothy J. Reed
38 Clipper Street
San Francisco, CA 94114
Dear Tim:
On behalf of DoveBid, Inc. ("DoveBid"), I am pleased to offer you a full-
time position as Vice President of Business Development reporting to me,
effective on March 7, 2000. In this position, you will be responsible for
DoveBid's alliances, partnerships and mergers and acquisitions (with
exception of acquisitions of capital asset dealers and auction houses).
Your annual salary will be $180,000 and will be paid in accordance with
DoveBid's normal payroll procedures. Also, you will be eligible for a year-
end bonus up to 33% of your base salary, determined by DoveBid in its
discretion in January, and payable in or about February. All payments to
you will be subject to legally required withholding(s). It is DoveBid's
policy to review compensation levels periodically.
Subject to approval by the Board of Directors of the Company, your
compensation package also will include an incentive stock option under the
terms of DoveBid's 1999 Stock Option Plan for 700,000 shares of common
stock at the fair market value of the Company's Common Stock, as determined
by the Board of Directors on the date the Board approves such grant. Your
stock options will be subject to the terms of DoveBid's 1999 Stock Option
Plan (the Plan includes vesting restrictions, restrictions on exercise and
restrictions on transfer of shares) and will be conditioned on your
execution of a Plan Agreement related to your options.
In addition to your base salary, you will be eligible to participate in the
employee benefits generally made available to our full-time employees, as
may be modified in DoveBid's discretion. At the present time, those
benefits include a "cafeteria" style benefits plan, health and dental
insurance, life insurance, vacation and sick pay, and a 401k plan which you
will become eligible for in accordance with the applicable benefit plans
and DoveBid's written policies.
Your employment with DoveBid will be "at will"; in other words, either you
or DoveBid will have the right to terminate your employment with DoveBid at
any time with or without cause.
<PAGE>
As a condition of your employment, you will be expected to comply with all
DoveBid's policies and procedure, as may be modified from time to time in
DoveBid's discretion (including our policies protecting other employees
against discrimination and sexual harassment). Please refer to DoveBid's
Employee Handbook for details regarding those policies and procedures.
Also, you will need to execute DoveBid's Employee Confidentiality And
Proprietary Information Agreement.
Please note that because of employer regulations adopted in the Immigration
Reform and Control Act of 1986, within three (3) business days of starting
your new position you will need to present documentation demonstrating that
you have authorization to work in the United States. If you have question,
about this requirement, which applies to U.S. citizens and non-U.S.
citizens alike, you may contact our personnel office.
This offer will remain open until February 14, 2000. If you decide to
accept our offer, and I hope you will, please sign the enclosed copy of
this letter in the space indicated and return it to me. Your signature will
acknowledge that you have read and understood and agreed to the terms and
conditions of this offer letter and the attached documents, if any. Should
you have anything else that you wish to discuss, please do not hesitate to
call me.
We look forward to having you join our team!
Sincerely,
/s/ Jeff Crowe
--------------
Jeff Crowe
President & COO
I understand and agree to the above terms.
/s/ Timothy J. Reed
-------------------
Timothy J. Reed
<PAGE>
EXHIBIT 10.41
DoveBid, Inc.
March 7, 2000
Lynn Corsiglia
Address
Address
Dear Lynn:
On behalf of DoveBid, Inc. ("DoveBid"), I am pleased to offer you a full-time
position as Vice President of Human Resources reporting to DoveBid's President
and Chief Operating Officer, effective on March 7, 2000. In this position, you
will be responsible for all human resources related functions on behalf of
DoveBid.
Your annual salary will be $180,000 and will be paid in accordance with
DoveBid's normal payroll procedures. Also, you will be eligible for a year-end
bonus up to 33% of your base salary, determined by DoveBid in its discretion in
January, and payable in or about February. All payments to you will be subject
to legally required withholding(s). It is DoveBid's policy to review
compensation levels periodically.
Subject to approval by the Board of Directors of the Company, your compensation
package also will include an incentive stock option under the terms of DoveBid's
1999 Stock Option Plan for 550,000 shares of common stock at the fair market
value of the Company's Common Stock, as determined by the Board of Directors on
the date the Board approves such grant. Your stock options will be subject to
the terms of DoveBid's 1999 Stock Option Plan (the Plan includes vesting
restrictions, restrictions on exercise and restrictions on transfer of shares)
and will be conditioned on your execution of a Stock Option Agreement related to
your options.
In addition to your base salary, you will be eligible to participate in the
employee benefits generally made available to our full-time employees, as may be
modified in DoveBid's discretion. At the present time, those benefits include a
"cafeteria" style benefits plan, health and dental insurance, life insurance,
vacation and sick pay, and a 401k plan which you will become eligible for in
accordance with the applicable benefit plans and DoveBid's written policies.
Your employment with DoveBid will be "at will"; in other words, either you or
DoveBid will have the right to terminate your employment with DoveBid at any
time with or without cause.
As a condition of your employment, you will be expected to comply with all
DoveBid's policies and procedures, as may be modified from time to time in
DoveBid's discretion
<PAGE>
(including our policies protecting other employees against discrimination and
sexual harassment). Please refer to DoveBid's Employee Handbook for details
regarding those policies and procedures. Also, you will need to execute
DoveBid's Employee Confidentiality And Proprietary Information Agreement.
Please note that because of employer regulations adopted in the Immigration
Reform and Control Act of 1986, within three (3) business days of starting your
new position you will need to present documentation demonstrating that you have
authorization to work in the United States. If you have questions about this
requirement, which applies to U.S. citizens and non-U.S. citizens alike, you may
contact our personnel office.
This offer will remain open until March 8, 2000. If you decide to accept our
offer, and I hope you will, please sign the enclosed copy of this letter in the
space indicated and return it to me. Your signature will acknowledge that you
have read and understood and agreed to the terms and conditions of this offer
letter and the attached documents, if any. Should you have anything else that
you wish to discuss, please do not hesitate to call me.
We look forward to having you join our team!
Sincerely,
/s/ Jeff Crowe
- --------------
Jeff Crowe
President and Chief Operating Officer
I understand and agree to the above terms
/s/ Lynn Butler Corsiglia
- --------------------------
Lynn Corsiglia
<PAGE>
EXHIBIT 10.42
Secured Full Recourse Promissory Note
-------------------------------------
Foster City. California
$549,780.00 March 7, 2000
- -----------
Reference is made to that certain Notice of Exercise of Stock. Option (the
"Purchase Agreement") of even date herewith, by and between the undersigned (the
"Purchaser") and DoveBid, Inc., a Delaware corporation (the "Company"), issued
to Purchaser under the Company's 1999 Stock Option Plan. This Secured Full
Recourse Promissory Note (the "Note") is being tendered by Purchaser to the
Company as part of the meal purchase price of the Shares (as defined below)
pursuant to the Purchase Agreement.
1. Obligation. In exchange for the issuance to the Purchaser
----------
pursuant to the Purchase Agreement of 220,000 shares of the Company's Common
Stock (the "Shares"). receipt of which is hereby acknowledged, Purchaser hereby
promises to pay to the order of the Company on or before the fifth anniversary
of the date act forth above at the Company's principal place of business located
ax 1241 E. Hillsdale Blvd., Foster City, California 94404, or at such other
place as the Company may direct, the principal sum of five hundred and forty-
nine thousand seven hundred eight dollars ($549,780.00) together with interest
compounded monthly on the unpaid principal at the rate of 6.60%, which rate is
not less than the minimum rate established pursuant to Section 1274(d) of the
Internal Revenue Code of 1986, as amended, on the earliest date on which there
was a binding contract in writing for the purchase of the Shares; provided,
--------
however that the rate at which interest will accrue on unpaid principal under
- -------
this Note will not exceed the highest rate permitted by applicable law. All
payments hereunder shall be made in lawful tender of the United States.
2. Security. Performance of Purchaser's obligations under this Note
--------
is secured by a security interest in the Shares granted to the Company by
Purchaser under a Stock Pledge Agreement dated of even date herewith between the
Company and Purchaser (the "Pledge Agreement")
3. Events of Default. Purchaser will be deemed to be in default
-----------------
under this Note upon the occurrence of any of the following events (each an
"Event of Default"): (i) upon Purchaser's failure to make any payment when due
under this Note; (iii) the failure of any representation or warranty in the
Pledge Agreement to have been true, the failure of Purchaser to perform any
obligation under the Pledge, or upon any other breach by the Purchaser of the
Pledge Agreement, (iv) any voluntary or involuntary transfer of any of the
Shares or any interest therein except to transfer to the Company) without the
Company's consent; (v) upon the filing regarding the Purchaser of any voluntary
or involuntary petition for relief under the United States Bankruptcy Code or
the initiation of any proceeding under federal law or law of any other
jurisdiction for the general relief of debtors; or (vi) upon the execution by
Purchaser of an assignment for the benefit of creditors or the appointment of a
receiver, custodian, trustee or similar party to take possession of Purchaser's
assets or property.
-6-
<PAGE>
4. Acceleration: Remedies On Default. Upon the occurrence of any
---------------------------------
Event of Default, at the option of the Company, all principal and other amounts
owed under this Note shall become immediately due and payable without notice or
demand on the part of the Company, and the Company will have, in addition to
it's rights and remedies under this Note, the Pledge Agreement, full recourse
against any real, personal, tangible or intangible assets of Purchaser and may
pursue any legal or equitable remedies that are available to it.
5. Rule 144 Holding Period. PURCHASER UNDERSTANDS THAT THE HOLDING
-----------------------
PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION
WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL
EITHER (i) THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR. BY
OTHER PROPERTY ACCEPTED BY THE COMPANY OR (ii) THIS NOTE IS SECURED BY
COLLATERAL, OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH,
HAVING A FAIR MARKET VALUE AT LEAST EQUAL TO The AMOUNT OF PURCHASER'S THEN
OUTSTANDING OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).
6. Prepayment. Prepayment of principal and/or other amount owed
----------
under this Note may be made at any time without penalty. Unless otherwise agreed
in writing by the Company, each payment will be applied to the extent of
available funds from such payment in the following order; (i) first to the
accrued and unpaid costs and expenses under the Note or the Pledge Agreement;
(ii) then to the accrued but unpaid interest and (iii) lastly to the outstanding
principal.
7. Governing Law; Waiver. The validity, construction and performance
---------------------
of this Note will be governed by the internal laws of the State of California,
excluding that body of law pertaining to conflicts of law. Purchaser hereby
waives presentment, notice of non-payment, notice of dishonor, protest, demand
and diligence.
8. Attorneys' Fees. If suit is brought for collection of this Note,
---------------
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection herewith whether or not such suit is
prosecuted to judgment.
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date
and year first above written.
/s/ Timothy Reed
__________________________ -------------------------
Timothy Reed Purchaser's Signature
-7-
<PAGE>
EXHIBIT 10.43
Secured Full Recourse Promissory Note
-------------------------------------
Foster City, California
$549,780.00 March 7, 2000
- -----------
Reference is made to that certain Notice of Exercise of Stock Option. (the
"Purchase Agreement") of even date herewith, by and between the undersigned (the
"Purchaser") issued to DoveBid, Inc., a Delaware corporation (the "Company"),
issued to purchaser under the Company's 1999 Stock Option Plan. This Secured
Full Recourse Promissory Note (the "Note") is being tendered by Purchaser to the
Company as part of the total purchase price of the Shares (as defined below)
pursuant to the Purchase Agreement.
1. Obligation. In exchange for the issuance to the Purchaser pursuant
----------
to the Purchase Agreement of 220,000 shares of the Company's common Stock (the
"Shares") receipt of which is hereby acknowledged, Purchaser hereby promises to
pay to the order of the Company on or before the fifth anniversary of the date
set forth above at the Company's principal place of business located at 1241 E.
Hillsdale Blvd., Foster City, California 94404, or at such other place as the
Company may direct the principal sum of five hundred and forty-nine thousand
seven hundred eighty dollars ($549,780.00) together with interest compounded
monthly on the unpaid principal at the rate of 6.60%, which rate is not less
than the minimum rate established pursuant to Section 1274(d) of the Internal
Revenue Code of 1986, as amended, on the earliest date on which there was a
binding contract in writing for thc purchase of the Shares; provided, however,
-------- -------
that the rate at which interest will accrue on unpaid principal under this Note
will not exceed the highest rate permitted by applicable law. All payments
hereunder shall be made in lawful tender of the United States.
2. Security. Performance of Purchaser' obligations under this Note is
--------
secured by a security interest in the Shares granted to the Company by Purchaser
under a Stock Pledge Agreement dated of even date herewith between the Company
and Purchaser (the "Pledge Agreement")
3. Events of Default. Purchaser will be deemed to be in default under
-----------------
this Note upon the occurrence of any of the following events (each an "Event of
Default"): (i) upon Purchaser's failure to make any payment when due under
this Not; (iii) the failure of any representation or warranty in the Pledge
Agreement to have been true, the failure of Purchaser to perform any obligation
under the Pledge, or upon any other breach by Purchaser of the Pledge Agreement;
(iv) any voluntary or involuntary transfer of any of the Shares or any interest
therein (except a transfer to the Company) without the Company's consent (v)
upon the filing regarding the Purchaser of any voluntary or involuntary position
for relief under the United States Bankruptcy Code or the initiation of any
proceeding under federal law or law of any other jurisdiction for the general
relief of debtors, or (vi) upon the execution by Purchaser of an assignment for
the benefits of creditors or the appointment of a receiver, custodian, trustee
or similar party to take possession of Purchaser's assets or property.
-6-
<PAGE>
4. Acceleration; Remedies On Default. Upon the occurrence of Event of
---------------------------------
Default, at the option of the Company, all principal and other amounts owed
under this Note shall become immediately due and payable without notice or
demand on the part of the Company, and the Company will have, in addition to its
rights and remedies under this Note, the Pledge Agreement, full recourse against
any real, personal, tangible or intangible assets of Purchaser, and may pursue
any legal or equitable remedies that are available to it.
5. Rule 144 Holding Period. PURCHASER UNDERSTANDS THAT THE HOLDING
-----------------------
PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION
WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL
EITHER (i) THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR. BY
OTHER PROPERTY ACCEPTED BY THE COMPANY OR (ii) THIS NOTE IS SECURED BY
COLLATERAL, OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH,
HAVING A FAIR MARKET VALUE AT LEAST EQUAL TO The AMOUNT OF PURCHASER'S THEN
OUTSTANDING OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).
6. Prepayment. Prepayment of principal and/or other amount owed under
----------
this Note may be made at any time without penalty. Unless otherwise agreed in
writing by the Company, each payment will be applied to the extent of available
funds from such payment in the following order; (i) first to the accrued
and unpaid costs and expenses under the Note or the Pledge Agreement; (ii) then
to the accrued but unpaid interest and (iii) lastly to the outstanding
principal.
7. Governing Law; Waiver. The validity, construction and performance
---------------------
of this Note will be governed by the internal laws of the State of California,
excluding that body of law pertaining to conflicts of law. Purchaser hereby
waives presentment, notice of non-payment, notice of dishonor, protest, demand
and diligence.
8. Attorneys' Fees. If suit is brought for collection of this Note,
---------------
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection herewith whether or not such suit is
prosecuted to judgment.
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date
and year first above written.
/s/ Lynn B. Corsiglia /s/ Lynn B. Corsiglia
- --------------------- ---------------------
Lynn Butler Corsiglia Purchaser's Signature
-7-
<PAGE>
EXHIBIT 21.01
Subsidiaries
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DoveBid Valuation Services, Inc.
Norman Levy Associates, Inc.
One Web Place, Inc.
<PAGE>
EXHIBIT 23.02
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Experts" and
"Selected Financial Data" and to the use of our reports dated:
January 28, 2000, except as to Note 11, as to which the date is March 27,
2000, with respect to DoveBid, Inc.
February 29, 2000, with respect to B&B Custom Circuit Supplies, Inc.
February 29, 2000, with respect to Unidyne International Inc.
March 3, 2000, with respect to AccuVal Associates, Incorporated and
LiquiTec Industries, Incorporated
March 8, 2000, with respect to Greenwich Industrial Services, LLC
March 2, 2000, with respect to Haltek Electronics dba Test Lab
March 7, 2000, with respect to Philip Pollack & Co., Inc.
all in the Registration Statement (Form S-1, No. 333-32184) and related
Prospectus of DoveBid, Inc. for the registration of shares of its common stock.
/s/ Ernst & Young LLP
March 27, 2000
San Francisco, CA
<PAGE>
Exhibit 23.03
Consent of Independent Auditors
We have issued our report dated March 26, 2000, accompanying the financial
statements of Norman Levy Associates, Inc. and subsidiaries, as of April 30,
1999 and 1998 and for the years then ended, contained in the Registration
Statement and Prospectus of DoveBid, Inc. We consent to the use of the
aforementioned reports in the Registration Statement and prospectus, and to the
use of our name as it appears under the caption "Experts."
/s/ Grant Thornton LLP
Minneapolis, Minnesota
March 27, 2000
