Exhibit 10.31
DOVEBID, INC.
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AMENDMENT TO CONVERTIBLE
SUBORDINATED PROMISSORY NOTE
This Amendment is entered into as of April 18, 2001, by and between
Xxxxxxx X. Xxxxxxx ("Payee") and DoveBid, Inc., a Delaware corporation (the
"Company"). This Amendment amends the terms and conditions of that certain
Convertible Subordinated Promissory Note issued by the Company to Payee on March
2, 2000 in the principal amount of $1,425,000 (the "Note").
Whereas, Payee and the Company desire to amend the Note on the terms
and conditions set forth below;
Now, therefore, in consideration of the foregoing and for other good
and valuable consideration (receipt and sufficiency of which is mutually
acknowledged), the parties agree as follows:
1. Extension of Term. The second sentence of the Note is hereby
amended to read as follows.
"The Optional Convertible Debt (as defined below) will be due and
payable in lawful money of the United States in full on March 2,
2004, unless the Optional Convertible Debt shall have been
previously paid by the Company or converted pursuant to Section 2
below, in which case the portion of the Optional Convertible Debt
that was converted 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. The principal and accrued
interest that does not constitute Optional Convertible Debt will
be due and payable as follows: principal in the amount of
$250,000 will be due and payable in lawful money of the United
States in full on March 2, 2003 and principal in the amount of
$462,500 and all accrued but unpaid interest will be due and
payable in lawful money of the United States in full on March 2,
2004 (the "Maturity Date") in each case unless such principal
and/or accrued interest shall have been previously paid by the
Company or converted pursuant to Section 2 below, in which case
the portion of the principal that was converted and all accrued
but unpaid 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. Notwithstanding the
foregoing, the Optional Convertible Debt shall be immediately due
and payable in lawful money of the United States in full upon the
sale, conveyance, lease, transfer or other disposition of
substantially all of the assets of the Company to an acquirer who
is not a reporting company
under Section 13 or 15 of the Securities Exchange Act of 1934, as
amended ("a Private Company"), or of a majority of the
outstanding voting securities of the Company to a Private
Company, in a single transaction or in a series of related
transactions which occurs after March 2, 2002."
2. Definitions.
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2.1 Definition of Mandatory Convertible Debt. A new definition
is hereby added to the Note as Section 1.7 to read as follows: " `Mandatory
Convertible Debt" shall mean all of the principal amount of this Note and all of
the accrued but unpaid interest on this Note, as reduced by (i) any prepayments
made by the Company as permitted in Section 4 hereof and (ii) any conversion
pursuant to Section 2.2 of this Note."
2.2 Definition of Optional Convertible Debt. A new definition
is hereby added to the Note as Section 1.8 to read as follows: " `Optional
Convertible Debt" shall mean $712,500 of the principal amount of this Note and
all of the accrued but unpaid interest on such principal, as reduced by any
prepayments made by the Company as permitted in Section 4 hereof."
2.3 Definition of Conversion Stock. Section 1.2 of the Note is
hereby amended to read as follows: " `Conversion Stock' shall mean shares of
Common Stock of the Company, with respect to conversion of the Optional
Convertible Debt, and shall mean Common Stock of the Company of the same class
of common stock that is registered by the Company pursuant to an Initial Public
Offering, with respect to conversion of the Mandatory Convertible Debt. With
respect to Optional Convertible Debt, if the outstanding Common Stock of the
Company shall hereafter be changed through a reorganization or recapitalization
into shares of a different series or class of the Company's capital stock, the
Conversion Stock shall thereafter mean the shares into which the Common Stock
was changed."
2.4 Definition of Conversion Price. Section 1.3 of the Note is
hereby amended to read as follows: " The `Conversion Price' for Optional
Convertible Debt shall mean $8.01 per share of Conversion Stock, as
appropriately adjusted to reflect the effect of stock splits and combinations,
stock dividends, recapitalizations and reorganizations of or on the Conversion
Stock after the date hereof. For Mandatory Convertible Debt, the `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, Form SB-2 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."
3. Conversion. Section 2 of the Note is hereby amended to read as
follows:
"2.1 Mandatory Conversion. This Note and all of the
outstanding Mandatory Convertible Debt shall be converted into
Conversion Stock at the Conversion Price immediately prior to the
first
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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 2.6 below shall apply to the Conversion
Stock. This Note shall not be convertible pursuant to this
Section 2.1 and shall not be converted into Conversion Stock
under this Section 2.1 if there is not an Initial Public Offering
on or before the Maturity Date.
2.2 Optional Conversion.
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2.2.1 If not previously converted pursuant to
Section 2.1 above, all of the outstanding Optional Convertible
Debt may be converted, at any time prior to the Maturity Date,
into Conversion Stock at the Conversion Price in the sole
discretion of the Company. To elect to convert the Optional
Convertible Debt, the Company shall send written notice of its
election to the Noteholder prior to the Maturity Date. Noteholder
will thereafter deliver the original Note to the Company at the
Company's principal office for reissuance to reflect the
conversion of the Optional Convertible Debt. Incident to any
conversion, the Conversion Stock will have those rights and
privileges, and be subject to those restrictions, of the shares
of Conversion 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
Conversion Stock, provided that the sale restriction specified in
Section 2.6 below shall apply to the Conversion Stock.
2.2.2 In the event of any conversion pursuant to
this Section 2.2 prior to March 2, 2004, the Company shall pay to
Noteholder,
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in cash, an amount equal to the lesser of (a) the United States
state and federal capital gains tax imposed on Noteholder as a
result of the receipt of such Conversion Stock or (b) an amount
equal to the outstanding principal and accrued but unpaid
interest then represented by this Note (the "Tax Payment"). The
amount paid by the Company shall be offset first against any
accrued but unpaid interest due hereunder and then against the
outstanding principal amount of this Note. Upon conversion of
this Note pursuant to this Section 2.2 and calculation of
Noteholder's capital gains tax therefor, Noteholder will give the
Company at least 30 days prior written notice thereof to permit
the Company to verify the capital gains calculation made by
Noteholder and will deliver such information to the Company as
may be necessary to conduct such verification. The Tax Payment
shall be made by the Company after the 30-day verification period
but need not be paid earlier than 10 days prior to the time
Noteholder's capital gains tax must be paid in connection with
conversion of this Note as provided in this Section 2.2 above.
2.2.3 If the Company fails to deliver the written
notice of conversion provided for in Section 2.2.1 prior to the
Maturity Date, the conversion right of the Company that is set
forth in this Section 2.2 shall terminate on the Maturity Date.
2.3 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.
2.4 Reservation of Stock. Prior to any conversion of
this Note pursuant to this Section 2 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.
2.5 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 Optional Convertible Debt or of the
Mandatory Convertible Debt, as the case may be, that is
outstanding as of the effective date of conversion 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
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federal and state securities laws without registration or other
qualification thereunder.
2.6 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.
2.7 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.
2.8 No Other Conversion. The conversion provisions set
forth in this Section 2 constitute the sole methods by which this
Note will convert."
4. Effect of Prepayments. There is hereby added an additional
sentence at the end of Section 4 of the Note to read as follows: "In the event
of any partial prepayment of the Note, the amount prepaid shall be credited
towards the Optional Convertible Debt and/or any portion of the Mandatory
Convertible Debt that does not constitute Optional Conversion Debt, as specified
at the time of such prepayment by the Company, in its sole discretion, until the
Note is repaid in full."
5. Effect of Amendment. This Amendment will be effective as of the
date first set forth above, upon execution of this Amendment by the Company and
Payee. This Amendment may be executed in any number of counterparts, each of
which shall be deemed an original and all of which, taken together, will
constitute one and the same Amendment. Except as expressly provided above, the
terms and conditions of the Note remain in full force and effect, unmodified, as
of the date hereof. None of the rights of Payee under the Note or this Amendment
shall be terminated, waived, or otherwise adversely affected by any termination
by Payee or the Company of Payee's employment with the Company.
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In Witness Whereof, Payee and the Company have executed this Amendment
to Convertible Subordinated Promissory Note, in the case of the Company by a
person duly authorized to do so.
THE COMPANY: DOVEBID, INC. PAYEE: XXXXXXX X. XXXXXXX
By: /s/ Xxxxxxx Xxxxxxxxxx /s/ Xxxxxxx X. Xxxxxxx
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(Signature of Payee)
Title: VP and General Counsel
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