EXHIBIT 10.34
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
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 THE ACT AND REGISTRATION OR OTHER
QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION OR OTHER QUALIFICATION
IS NOT REQUIRED.
THIS NOTE AND ALL SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF ARE
SUBJECT TO A MARKET STAND-OFF RESTRICTION AS SET FORTH IN A STOCK PURCHASE
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THIS NOTE, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. AS A RESULT OF
SUCH AGREEMENT, THIS NOTE AND ALL SECURITIES WHICH MAY BE ISSUED UPON CONVERSION
HEREOF MAY NOT BE TRADED PRIOR TO THE EXPIRATION OF SUCH STAND-OFF PERIOD AFTER
THE EFFECTIVE DATE OF THE INITIAL PUBLIC OFFERING OF THE COMMON STOCK OF THE
ISSUER HEREOF. SUCH RESTRICTION IS BINDING ON TRANSFEREES OF ANY SUCH
SECURITIES.
DOVEBID, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$700,000.00 July 3, 2000
DoveBid, Inc., a Delaware corporation (the "Company"), with offices at 0000
Xxxx Xxxxxxxxx Xxxx., Xxxxxx Xxxx, XX 00000, for value received, promises to pay
to the order of Xxxx Xxxxx ("Payee") at such address as Payee may designate,
Seven Hundred Thousand Dollars and No Cents ($700,000.00), plus 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
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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 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
(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.
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2. Conversion.
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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 ("SEC") 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
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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
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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
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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
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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 Rights or Liabilities as Shareholder. This Note does not by
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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.
2.6 No Other Conversion. The conversion described in this Section 2
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shall constitute the sole methods by which this Note will convert.
3. Subordination. This Note and the indebtedness evidence by this Note
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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.
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4. Prepayment. This Note may be prepaid, in its entirety (including the
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principal sum and interest accrued to the date of payment) without penalty or
premium at any time after
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September 1, 2000; provided that prepayment cannot take place after the Company
has filed with the SEC 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. Securities Matters; Restrictions on Transfers. The Noteholder
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acknowledges that this Note has been issued pursuant to that certain Stock
Purchase Agreement, dated as of [June __, 2000], by and among DoveBid, Champion
Computer Products, Inc., a Georgia corporation, Xxxxx Xxxxxxxx and Xxxxxxx Xxxxx
(the "Purchase Agreement") in reliance on, among other things, the
representations, warranties and covenants of the original Noteholder therein,
and that this Note is and the Conversion Stock upon their issuance will be
subject to restrictions on transfer in the Securities Act and state securities
laws, and under the Purchase Agreement, including without limitation, market-
standback restrictions therein. Such restrictions will be binding on any
permitted transferee of this Note and/or the Conversion Stock, and the Company
may place legends on any certificates representing this Note or the Conversion
Stock, and may impose stop-transfer instructions with respect to such
securities.
6. Usury Savings Clause. The Company and the Noteholder intend to comply
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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.
7. General Provisions.
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7.1 Notices. All notices and other communications required or
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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.
0000 Xxxx Xxxxxxxxx Xxxx.
Foster City, California 94404
Attn: Xxxx Xxxxx, Chief Financial Officer
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DoveBid, Inc.
0000 Xxxx Xxxxxxxxx Xxxx.
Foster City, California 94404
Attn: Xxxxxxx Xxxxxxxxxx, General Counsel
(ii) If mailed, delivered or faxed to the Payee, addressed or
faxed to him at the following address or fax number:
Mr. X. Xxxxxxx Xxxxx
0000 Xxxxxx Xxxx Xxxx, Xxxxx X
Xxxxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
with a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxx Xxxxx
Fax No.: (000) 000-0000
or to such other address as any party hereto shall specify in writing to the
other parties hereto pursuant to this Section 7.1 from time to time. Such notice
shall be effective only upon actual receipt.
7.2 Severability; Headings. In case any provision of this Note shall
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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 only for
convenience and shall not be used to construe or interpret this Note.
7.3 Assignment. Neither this Note nor any right or obligation
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hereunder may be assigned or delegated by Xxxxx 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.
7.4 Amendment; Waiver. Any provision of this Note may be amended or
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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.
7.5 Governing Law. This Note shall be construed and enforced in
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accordance with, and governed by, the internal laws of the State of California,
excluding that body of law applicable to conflicts of laws.
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IN WITNESS WHEREOF, each party has caused this Note to be executed as of the
date first set forth above.
DOVEBID, INC.
By: /s/ Xxxxxxx Xxxxxxxxxx
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Name: Xxxxxxx Xxxxxxxxxx
Title: Vice President and General Counsel
Acknowledged and Agreed to:
/s/ Xxxx Xxxxx
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Xxxx Xxxxx
