Exhibit 10.59
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 Original Issue Date: December 30, 1999
Reissue Date: August 26, 2002
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 XXXXXX ("Payee") at such address as Payee may designate,
Five Hundred Thousand Dollars and No Cents ($500,000.00), plus simple interest
thereon calculated from the original issue 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 predecessor of this Note was originally issued to Unidyne
International, Inc., now known as XXXXX.XXX, Inc. ("EZ"), as Xxxxx. On August
16, 2002, EZ assigned its interest in the original Note to Xxxx Xxxxx and Xxxx
Xxxxxx, as tenants in common, but instructed the Company to cancel the original
Note and to issue separate Notes to each of such persons, with each reissued
Note to represent the obligation to repay one-half the original principal amount
of the original Note, or $500,000 each. This Note has been issued pursuant to
EZ's instruction and represents a Note separate an apart from the Note issued to
Xxxx Xxxxx. Accordingly, the Company and Xxxxx agree that this Note is held as
the sole property of the Payee, that the Note held by Xxxx Xxxxx is his sole
property and that neither of such Notes is held as tenants in common.
1
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 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
2
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 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
3
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 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.
4
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. This Note may be assigned by Unidyne International,
Inc. to Xxxx Xxxxx and Xxxx Xxxxxx provided that Xxxx Xxxxx and Xxxx Xxxxxx at
the time of such assignment provide to the Company in writing the
representations and warranties set forth in Section 6.3 above.
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 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:
-------------------------------------------
Its:
-------------------------------------------
-------------------------------------------
XXXX XXXXXX
5
ANNEX A
SUBORDINATION AGREEMENT
This Subordination Agreement ("this Subordination Agreement") is made as of
December 30, 1999 by and between DoveBid, Inc. (the "Company") and Unidyne
International, Inc. ("Creditor"), for the benefit of all holders of Senior Debt
(as defined below).
A. The Company concurrently herewith is issuing to Creditor its
Convertible Subordinated Promissory Note dated as of the same date as this
Subordination Agreement (the "Note");
B. It is a term of the Note that any and all amounts owing to Creditor
(or any subsequent holder of the Note) under or pursuant to the Note be
subordinated in right of payment to the prior payment in full of any and all
Senior Debt of the Company (as defined below); and
C. This Subordination Agreement sets forth the particular terms of
such subordination, and this Agreement is incorporated into and constitutes a
part of the Note.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS
1. Subordination; Note Subordinated to Senior Debt. Notwithstanding
-----------------------------------------------
anything to the contrary contained in the Note or in this Annex A, the Company
covenants and agrees and each holder of the Note, by such holder's acceptance
thereof likewise covenants and agrees, that the Note shall be and is issued
subject to the provisions of this Subordination Agreement; and each person
holding the Note, whether upon original issue or upon transfer, assignment or
exchange thereof accepts and agrees that all payments of Subordinated
Obligations (all capitalized terms used in this Subordination Agreement that are
not defined above are used as defined in Section 9 below) by the Company shall,
to the extent and in the manner set forth in this Subordination Agreement, be
subordinated and junior in right of payment, to the prior payment in full in
cash or cash equivalents of all amounts payable on or under any and all Senior
Debt (including principal, interest, fees, commissions, expenses and indemnities
in respect thereof and any interest accruing subsequent to the commencement or
filing of any petition in any bankruptcy or insolvency proceeding at the rate
provided for in the documents governing such Senior Debt, whether or not such
interest is an allowed claim enforceable against the debtor in a bankruptcy case
under Title 11 of the United States Code).
To the extent any payment of Senior Debt (whether by or on behalf of the
Company, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to a trustee, receiver or other similar party under any bankruptcy,
insolvency, receivership, fraudulent conveyance or similar law, then if such
payment is recovered by, or paid over to, such trustee, receiver or other
similar party, the Senior Debt or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred. To the extent the obligation to repay any Senior Debt is
declared to be fraudulent, invalid or otherwise set aside under any bankruptcy,
6
insolvency, receivership, fraudulent conveyance or similar law, then the
obligations so declared fraudulent, invalid or otherwise set aside (and all
other amounts which would come due with respect thereto had such obligations not
been so affected) shall be deemed to be reinstated and outstanding as Senior
Debt for all purposes hereof as if such declaration, invalidity or setting aside
had not occurred.
2. No Payment on Securities in Certain Circumstances.
(a) No direct or indirect payment by or on behalf of the Company of
Subordinated Obligations, whether pursuant to the terms of the Note or upon
acceleration or otherwise shall be made if, at the time of such payment there
exists a default in the payment of all or any portion of the obligations on any
Senior Debt and such default shall not have been cured or waived or the benefits
of this sentence waived by or on behalf of the holder of such Senior Debt.
(b) In the event of any other default with respect to any Senior Debt
pursuant to which the maturity thereof may be accelerated, upon the receipt by
the holder of the Note of written notice from a Designated Senior Creditor or
the Company, no payment of Subordinated Obligations may be made by or on behalf
of the Company for a period (a "Payment Blockage Period") commencing on the date
of receipt of such notice and ending 270 days thereafter (unless such Payment
Blockage Period shall be terminated by written notice to the holder from a
Designated Senior Creditor or all defaults with respect to Senior Debt shall
have been cured or waived). For purposes of this Section 2(b), after the
commencement of a Payment Blockage Period, no subsequent Payment Blockage Period
may be commenced unless a period of 30 consecutive days has passed since the
termination of the immediately preceding Payment Blockage Period. Subject to the
preceding sentence, successive Payment Blockage Periods may be commenced
hereunder.
(c) In the event that, notwithstanding the foregoing, any payment
shall be received by any holder when such payment is prohibited by Section 2(a)
or 2(b) of this Subordination Agreement, such payment shall be held for the
benefit of, and shall be paid over or delivered to, the holders of Senior Debt
or their respective representatives, or to the trustee or trustees under any
indenture pursuant to which any of such Senior Debt may have been issued, as
their respective interests may appear.
3. Payment Over of Proceeds Upon Dissolution, Etc.
(a) Upon any payment or distribution of assets or securities of the
Company, as the case may be, of any kind or character, whether in cash, property
or securities, upon any dissolution or winding-up or total or partial
liquidation or reorganization of the Company, whether voluntary or involuntary
or in bankruptcy, insolvency, receivership or other proceeding, all amounts due
or to become due upon all Senior Debt (including interest accruing subsequent to
the commencement or filing of any petition in any bankruptcy or insolvency
proceeding at the rate provided for in the documents governing such Senior Debt,
whether or not such interest is an allowed claim enforceable against the debtor
in a bankruptcy case under Title 11 of the United States Code) shall first be
indefeasibly paid in full in cash or cash equivalents, before the holder of the
Note shall be entitled to receive any payment on account of the Subordinated
Obligations,
7
or any payment to acquire the Note for cash, property or securities or any
distribution with respect to the Note of any cash, property or securities.
Before any payment may be made by or on behalf of the Company of the
Subordinated Obligations, upon any such dissolution, winding-up, liquidation or
reorganization, any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities, to
which the holder of the Note would be entitled, except for the provisions of
this Subordination Agreement, shall be made by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by the holder of the Note if received by it,
directly to the holders of Senior Debt (pro rata to such holders on the basis of
the respective amounts of Senior Debt held by such holders) or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Debt may have been issued, as their respective
interests may appear, to the extent necessary to pay all such Senior Debt
indefeasibly in full in cash or cash equivalents after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Debt.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Company of any kind or character, whether in cash, property
or securities, shall be received by the holder of the Note at a time when such
payment or distribution is prohibited by Section 3(a) of this Subordination
Agreement and before all obligations in respect of Senior Debt are indefeasibly
paid in full in cash or cash equivalents, such payment or distribution shall be
received and held for the benefit of, and shall be paid over or delivered to,
the holders of Senior Debt (pro rata to such holders on the basis of the
respective amount of Senior Debt held by such holders) or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of Senior Debt remaining
unpaid until all such Senior Debt has been indefeasibly paid in full in cash or
cash equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt.
(c) For purposes of this Subordination Agreement, the words "cash,
property or securities" shall not be deemed to include, so long as the effect of
this Section 3(c) is not to cause the Note to be treated in any case or
proceeding or similar event described in this Subordination Agreement as part of
the same class of claims as the Senior Debt or any class of claims on a parity
with or senior to the Senior Debt for any payment or distribution, securities of
the Company or any other corporation provided for by a plan of reorganization or
readjustment which are subordinated, to at least the same extent as the Note to
the payment of all Senior Debt then outstanding; provided that (i) if a new
corporation or entity results from such reorganization or readjustment, such
corporation or entity assumes the Senior Debt and (ii) the rights of the holders
of the Senior Debt are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Company with, or the
merger of the Company with or into, a corporation (or other entity) or the
liquidation or dissolution of the Company following the conveyance or transfer
of its property as an entirety, or substantially as an entirety, to another
corporation or entity upon the terms and conditions, if any, allowed by the
Senior Debt shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section if such other corporation shall,
as a part of such consolidation, merger, conveyance or transfer, comply with the
conditions stated in the Senior Debt.
8
4. Subrogation. Upon the indefeasible payment in full of all Senior Debt
-----------
in cash or cash equivalents, the holder of the Note shall be subrogated to the
rights of the holders of Senior Debt to receive payments or distributions of
cash, property or securities of the Company made on such Senior Debt until the
principal of, premium, if any, and interest on the Note shall be paid in full;
and, for the purposes of such subrogation, no payments or distributions to the
holders of the Senior Debt of any cash, property or securities to which the
holder of the Note would be entitled except for the provisions of this
Subordination Agreement and no payment over pursuant to the provisions of this
Subordination Agreement to the holders of Senior Debt by the holder of the Note
shall, as between the Company, its creditors other than holders of Senior Debt,
and the holder of the Note, be deemed to be a payment by the Company to or on
account of the Senior Debt. It is understood that the provisions of this
Subordination Agreement are and are intended solely for the purpose of defining
the relative rights of the holder of the Note, on the one hand, and the holders
of the Senior Debt, on the other hand.
5. Obligations of Company Unconditional. Nothing contained in this
------------------------------------
Subordination Agreement is intended to or shall impair, as among the Company and
the holder of the Note, the obligation of the Company, which is absolute and
unconditional, to pay to the holder of the Note the principal of, premium, if
any, and interest on the Note as and when the same shall become due and payable
in accordance with its terms, or is intended to or shall affect the relative
rights of the holder of the Note and creditors of the Company other than the
holders of the Senior Debt.
6. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon
--------------------------------------------------------------
any payment or distribution of assets or securities referred to in this
Subordination Agreement, the holder of the Note shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which
bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings
are pending, or upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution,
delivered to the holder of the Note for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the Senior Debt and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Subordination Agreement.
7. Subordination Rights Not Impaired by Acts or Omissions of the Company
---------------------------------------------------------------------
or Holders of Senior Debt. No right of any present or future holders of any
-------------------------
Senior Debt to enforce subordination as provided herein will at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act by any such holder, or by any
noncompliance by the Company with the terms of the Note, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
The provisions of this Subordination Agreement are intended to be for the
benefit of, and shall be enforceable directly by, the holders of Senior Debt.
8. No Waiver of Subordination Provisions. Without in any way limiting the
-------------------------------------
generality of Section 7, the holders of Senior Debt may, at any time and from
time to time, without the consent of or notice to the holder of the Note,
without incurring responsibility to the holder of the Note and without impairing
or releasing the subordination provided in this Subordination Agreement or the
obligations hereunder of the holder of the Note to the holders of Senior Debt,
do any one or more of the following: (a) change the manner, place or terms of
9
payment or extend the time of payment of, or renew or alter, Senior Debt or any
instrument evidencing the same or any agreement under which Senior Debt is
outstanding or secured; (b) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Debt; (c) release any
Person liable in any manner for the collection of Senior Debt and (d) exercise
or refrain from exercising any rights against the Company and any other Person.
9. Definitions. As used in this Subordination Agreement, the terms set
-----------
forth below shall have the respective meanings set forth opposite such terms
below:
"Designated Senior" means any holder of Senior Debt or any agent, trustee
-----------------
or other similar representative for such a holder.
"Note" shall mean the Convertible Subordinated Promissory Note to which
----
this Annex A is attached and all terms of this Annex A, which are incorporated
therein by reference.
"Person" means an individual, a corporation, a partnership, an association,
------
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Senior Debt" means all debt and other monetary obligations of the Company
-----------
(including, without limitation, under any note, credit agreement, mortgage,
indenture, instrument or contract of any type or nature), and the Company's
guarantee of any debt or monetary obligation of any subsidiary of the Company,
in each case whether now existing or hereafter arising, and in each case
including all principal, interest, fees and expenses owing on or in connection
with such debt or other monetary obligations, as the same may be modified,
amended, restated or supplemented from to time; provided that the term "Senior
Debt" shall not include (a) any debt or other monetary obligation that expressly
provides in writing that it is subordinate to or pari passu with the Note, (b)
any debt of the Company which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, was without recourse to
the Company, (c) any debt of the Company to a subsidiary of the Company, (d) any
debt for borrowed money to any employee or director of the Company, and (e) any
accounts payable to trade creditors created or assumed by the Company or any
subsidiary of the Company in the ordinary course of business in connection with
the obtaining of materials or services.
"Subordinated Obligations" means principal and interest payable under or in
------------------------
respect of the Note, any fees, expenses or rights of reimbursement under or in
respect of the Note, and all other claims, rights of rescission or other rights
of action under or in respect of the Note.
10. Suspension of Certain Remedies. Notwithstanding anything to the
------------------------------
contrary contained elsewhere in the Note, until all Senior Debt has been
indefeasibly repaid in full, no holder of the Note may commence or join with any
creditor in commencing, any bankruptcy, insolvency or similar proceeding with
respect to the Company or any of its subsidiaries.
11. Amendment, Supplement and Waiver. This Subordination Agreement may
--------------------------------
only be amended, modified or supplemented by a written instrument executed by
the Company, the holder of the Note, and each holder of Senior Debt affected
thereby.
10
12. Successors and Assigns. This Subordination Agreement shall be binding
----------------------
upon and inure to the benefit of the successors and assigns of the parties
hereto.
13. Attorney's Fees. If the holder of the Note files any claim to enforce
---------------
its rights under the Note, the holder shall be entitled to recover its
reasonable attorney's fees from the Company; provided that the Company shall not
be required to reimburse the holder for any attorney's fees incurred or actions
taken at a time when payments are not permitted to be made on the Note pursuant
to this Subordination Agreement or for any assertion of rights by the holder
under the Note to the extent the rights being asserted are not permitted to be
exercised by virtue of the provisions of this Subordination Agreement.
DOVEBID, INC.
By: /s/ Xxxxxxx Xxxxxxxxxx
---------------------------------------------
Its: Vice President, General Counsel and Secretary
---------------------------------------------
/s/ Xxxx Xxxxxx
--------------------------------------------------
XXXX XXXXXX
11
