Exhibit 10.54
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
DOVEBID, INC.
October 18, 1999
TABLE OF CONTENTS
Page
1. Purchase and Sale of Series B Preferred Stock............................. 1
1.1 Purchase and Sale.................................................. 1
1.2 Closing............................................................ 1
1.3 Closing Payment and Delivery....................................... 1
1.4 Use of Proceeds.................................................... 1
1.5 Issuance of Shares to Bain......................................... 2
2. Representations and Warranties of the Company............................. 2
2.1 Organization, Good Standing and Qualification...................... 2
2.2 Capitalization, Voting Rights and Valid Issuance................... 2
2.3 Subsidiaries....................................................... 3
2.4 Authorization...................................................... 3
2.5 Governmental Consents.............................................. 4
2.6 Customer Relations................................................. 4
2.7 Litigation......................................................... 4
2.8 Patents and Trademarks............................................. 4
2.9 Compliance with Other Instruments.................................. 5
2.10 Agreements, Action................................................. 6
2.11 Related Party Transactions......................................... 7
2.12 Permits............................................................ 7
2.13 Environmental and Safety Laws...................................... 7
2.14 Marketing Rights................................................... 8
2.15 Disclosure......................................................... 8
2.16 Registration Rights................................................ 8
2.17 Financial Statements............................................... 8
2.18 Changes............................................................ 9
2.19 Organizational Documents........................................... 10
2.20 Title to Property and Assets....................................... 10
2.21 Employee Benefit Plans............................................. 10
2.22 Tax Matters........................................................ 10
2.23 Insurance.......................................................... 11
2.24 Books and Records.................................................. 11
2.25 Labor Agreements and Actions....................................... 11
2.26 Assumptions or Guaranties of Indebtedness of Other Persons......... 12
2.27 Stockholder Agreements............................................. 12
2.28 Year 2000 Readiness................................................ 12
2.29 Market Stand-Off Agreements........................................ 13
2.30 Qualified Small Business........................................... 13
2.31 Small Business Company............................................. 13
3. Representations and Warranties of the Investors........................... 13
3.1 Binding Effect..................................................... 13
3.2 Purchase Entirely for Own Account.................................. 14
3.3 Disclosure of Information.......................................... 14
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TABLE OF CONTENTS
(continued)
Page
3.4 Investment Experience............................................. 14
3.5 Accredited Investor............................................... 14
3.6 Restricted Securities............................................. 14
3.7 Further Limitations on Disposition................................ 14
3.8 Legends........................................................... 15
3.9 Risks............................................................. 15
3.10 No Representations................................................ 15
4. Conditions to Closing.................................................... 16
4.1 Conditions to Investor's Obligations.............................. 16
4.2 Conditions to the Company's Obligations........................... 17
5. Miscellaneous............................................................ 17
5.1 Survival of Warranties............................................ 17
5.2 Successors and Assigns............................................ 17
5.3 Governing Law..................................................... 18
5.4 Titles and Subtitles.............................................. 18
5.5 Notices........................................................... 18
5.6 Finder's Fee...................................................... 18
5.7 Expenses.......................................................... 18
5.8 Amendments and Waivers............................................ 18
5.9 Severability...................................................... 18
5.10 Aggregation of Stock.............................................. 19
5.11 Entire Agreement.................................................. 19
5.12 Counterparts...................................................... 19
5.13 California Commissioner of Corporations........................... 19
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SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made as of October 18, 1999, by and among DoveBid, Inc., a Delaware corporation
(the "Company"), and the investors listed on Schedule 1.1 hereto, each of which
is referred to herein as an "Investor" and collectively, the "Investors."
BACKGROUND
A. The Company is authorized to issue up to 17,500,000 shares of Series
B Preferred Stock (the "Series B Preferred Stock") having the rights,
preferences, privileges and restrictions set forth in the Company's Restated
Certificate of Incorporation, a copy of which is attached hereto as Exhibit A
(the "Certificate of Incorporation").
B. The Company desires to issue and sell, and the Purchasers desire to
purchase, the shares of Series B Preferred Stock pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Series B Preferred Stock.
1.1 Purchase and Sale. Upon the terms and conditions of this Agreement,
each Investor agrees, severally, to purchase at the Closing, and the Company
agrees to sell and issue to each such Investor at the Closing, at a purchase
price of $0.77 per share, that number of shares of the at Series B Preferred
Stock set forth opposite each such Investor's name on Schedule 1.1 hereto for
the purchase price set forth therein (the "Shares").
1.2 Closing. The closing (the "Closing") of the purchase and sale of the
Shares shall be held at the offices of Howard, Rice, Nemerovski, Canady, ▇▇▇▇ &
Rabkin, A Professional Corporation, Three ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., on October 18, 1999, or at such other
time and place as the parties agree (which time and place are designated as the
"Closing Date").
1.3 Closing Payment and Delivery. At the Closing, the Company shall
deliver to each Investor a certificate representing the Shares which such
investor is purchasing at the Closing (as set forth on Schedule 1.1) against
delivery to the Company by such Investor of a check or wire transfer in the
amount of the purchase price therefor payable to the Company (except for Bain,
as set forth in Section 1.5 below).
1.4 Use of Proceeds. The net proceeds (after payment of transaction
expenses) from the sale of the Shares will be used by the Company primarily to
develop an internet auction business and shall not be used to repay existing
indebtedness of the Company and its subsidiaries or to invest in capital assets
held for resale. Pending utilization for such purposes, the Company shall invest
the net proceeds in short-term, interest-bearing government securities or
certificates of deposit or their equivalent issued by a bank or trust company
organized under the laws of the United States or any state thereof, having
capital, surplus and undivided profits aggregating at least $100,000,000.
1.5 Issuance of Shares to Bain. At the Closing, the Company will issue
to ▇▇▇▇ & Company, Inc. ("Bain") that number of Shares as set forth on Schedule
1.1 for services previously rendered to the Company pursuant to a letter
agreement dated August 4, 1999 (the "Bain Letter Agreement"). The parties
acknowledge that the Company may from time to time issue additional Shares to
Bain pursuant to the Bain Letter Agreement, but that the aggregate Shares to be
issued to Bain will not exceed 961,039 Shares, which represent the maximum
amount of $740,000 of professional fees to be paid by the issuance of Shares.
2. Representations and Warranties of the Company. Except as set forth in the
Certificate of Incorporation, the Amended and Restated Investors Rights
Agreement dated as of even date herewith (the "Investors' Rights Agreement"),
the Amended and Restated Stockholders' Agreement dated as of even date herewith
(the "Stockholders' Agreement', and the disclosure schedule provided b~ the
Company to the Investors prior to the execution of this Agreement (the
"Disclosure Schedule") and attached hereto as Schedule 2, the Company hereby
represents and warrants to each Investor as follows:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has all requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted. The Company has only
one direct subsidiary, Dove Brothers, LLC, a Delaware limited liability company
("Dove Brothers"). Dove Brothers, in turn, has only one subsidiary, Dovetech,
Inc., a California corporation ("Dovetech"). (Dove Brothers and Dovetech are
collectively referred to as the "Subsidiaries"). Each Subsidiary is duly
organized, validly existing and in good standing under the lows of its
jurisdiction of organization and has all requisite limited liability company or
corporate (as the case may be) power and authority to conduct its business as
now conducted and as proposed to be conducted. The Company has delivered to each
Investor complete and correct copies of the organizational documents of each of
the Company and its Subsidiaries. Each of the Company and its Subsidiaries is
duly qualified to transact business and is in good standing in each of the
jurisdictions specified in Section 2.1 of the Disclosure Schedule.
2.2 Capitalization, Voting Rights and Valid Issuance.
(a) The authorized capital stock of the Company consists of
70,000,000 shares of Common Stock and 30,000,000 shares .of Preferred Stock, of
which 12,090,909 shares have been designated Series A Preferred Stock and
17,500,000 shares have been designated Series B Preferred Stock.
(b) All of the outstanding shares of the Company are owned as of
the date hereof as set forth on Section 2.2 of the Disclosure Schedule. The
outstanding shares of the Company are all duly and validly authorized and
issued, fully paid and nonassessable and were issued in accordance with the
registration or qualification provisions of the Securities Act of 1933, as
amended (the "Securities Act"}, and any relevant state securities laws, or
pursuant to valid exemptions therefrom.
(c) The Disclosure Schedule sets forth all options, warrants,
rights (including conversion or preemptive rights) or agreements that are
presently outstanding for the purchase or
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acquisition from the Company of any shares of the Company. The Company is not a
party or subject to any agreement or understanding, and, to the Company's
knowledge, there is no agreement or understanding between any persons and/or
entities, which affects or relates to the voting or giving of written consents
with respect to any security or by a director of the Company.
(d) The Series B Preferred Stock which is being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and, based in part upon the representations
of the Investors in this Agreement, will be issued in compliance with all
applicable federal and state securities laws and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and the
Investors' Rights Agreement and under applicable state and federal securities
law. The Common Stock issuable upon conversion of the Series B Preferred Stock
purchased under this Agreement has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Certificate of
Incorporation, shall be duly and validly issued, fully paid and nonassessable,
and issued in compliance with all applicable securities laws and will be free of
restrictions on transfer other than restrictions on transfer under this
Agreement, the Investors' Rights Agreement and the Stockholders' Agreement and
under applicable state and federal securities law, as presently in effect, of
the United States and each of the states whose securities laws govern the
issuance of any of the Series B Preferred Stock hereunder.
2.3 Subsidiaries. As of the date hereof, the Subsidiaries are the only
subsidiaries of the Company. Section 2.3 of the Disclosure Schedule is a
complete and correct list setting forth for each Subsidiary (a) the number of
authorized equity securities, and (b) the number of issued and outstanding
equity securities, the names of the holders thereof, and the number of equity
securities held by each such holder as of the date hereof. All of the issued and
outstanding equity securities of each Subsidiary have been duly authorized and
are validly issued, fully paid and non-assessable. There are no preemptive or
similar rights on the part of any holder of any class of equity securities of
either Subsidiary, or options, warrants, conversion or other rights, agreements,
commitments of any kind obligating either Subsidiary, contingently or otherwise
to issue, sell or otherwise cause to become outstanding any of its equity
securities or any other securities convertible into or exchangeable for any such
equity securities. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting, dividend rights or disposition of any
equity security of either Subsidiary. Neither the Company nor either Subsidiary
controls directly or indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust or other entity (other than
the ownership of the Subsidiaries).
2.4 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the Investors' Rights Agreement and the
Stockholders' Agreement, the performance of all obligations of the Company
hereunder and thereunder, the authorization, issuance (or reservation for
issuance), sale and delivery of the Series B Preferred Stock being sold
hereunder and the Common Stock issuable upon conversion of the Series B
Preferred Stock has been taken or will be taken prior to the Closing, and this
Agreement, the Investors' Rights Agreement and the Stockholders' Agreement
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application
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affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relic!; or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Investors' Rights Agreement may be limited by applicable
federal or state securities laws.
2.5 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of the
Company or Subsidiaries is required in connection with the consummation of the
transactions contemplated by this Agreement.
2.6 Customer Relations. Since December 31, 1997, no significant customer
of the Company or Subsidiaries that has been a party to a master national
auction contract with the Company has terminated its relationship with the
Company or Subsidiaries or threatened to do so. Section 2.6 of the Disclosure
Schedule sets forth a complete and correct list of each such termination and the
reasons for such termination.
2.7 Litigation. There is no action, suit, claim, dispute, proceeding or
investigation pending or, to the knowledge of the Company, currently threatened
in writing or involving an amount in excess of $ 100,000 (whether or not in
writing) against the Company or Subsidiaries which questions the validity of
this Agreement or the right of the Company to enter into this Agreement, or to
consummate the transactions contemplated hereby or thereby, or which could
reasonably be expected to result, either individually or in the aggregate, in
any material adverse changes in the assets, condition, affairs or prospects of
the Company and its Subsidiaries taken as a whole, financially or otherwise, or
any change in the current equity ownership of the Company or Subsidiaries. The
foregoing includes, without limitation, actions pending or threatened in writing
or involving an amount in excess of $100,000 (whether or not in writing)
involving the prior employment of any of the Company or Subsidiaries' employees,
their use in connection with the Company or Subsidiaries' business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. There
is no action, suit, claim, dispute, proceeding or investigation pending or, to
the knowledge of the Company, currently threatened against the Company by any
stockholder of the Company, against any stockholder of the Company by the
Company or, to the Company's knowledge, between any of the stockholders of the
Company relating to the Company. There is no action, suit, claim, dispute,
proceeding or investigation pending or currently threatened against either
Subsidiary by any equityholder of either Subsidiary, against any equityholder of
either Subsidiary by either Subsidiary or to the Company or either Subsidiary's
knowledge, between any of the equityholders of either Subsidiary relating to
either Subsidiary. Neither the Company nor Subsidiaries is a party or subject to
the provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company or Subsidiaries currently pending or which the
Company or Subsidiaries intends to initiate.
2.8 Patents and Trademarks. The Company and each Subsidiary has
sufficient title and ownership of, or rights to use, all patents, trademarks,
service marks, trade names, copyrights, trade secrets and proprietary rights and
processes (collectively, "Intellectual Property Rights") necessary for its
business as now conducted and as proposed to be conducted, without, to the best
knowledge of Company and each Subsidiary, any conflict with or infringement of
the
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rights of others. The Company and each Subsidiary-owns or has currently
effective licenses to use all Intellectual Property Rights the absence of which
could materially impair the Company or Subsidiaries' ability to carry out its
strategic plans. Section 2.8 of the Disclosure Schedule is a correct and
complete list of all of the patents, trademarks, service marks, trade names and
copyrights of the Company and each Subsidiary and all royalties payable by the
Company or Subsidiaries in connection with its current or currently planned
products, processes and technologies identifying the payee, the royalty rate and
the product, process or technology to which the royalty relates. There are no
pending or threatened claims or disputes regarding royalties payable by the
Company or Subsidiaries under currently existing licenses or otherwise. There
are no outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is the Company or Subsidiaries bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, will not breach, violate or conflict with
any instrument or agreement governing any Intellectual Property Right of the
Company or Subsidiaries, will not cause any forfeiture or termination or give
rise to a right of forfeiture or termination of any Intellectual Property Right
of the Company or Subsidiaries or in any way impair the right of the Company or
Subsidiaries to use, sell, license or dispose of or bring any action for the
infringement of, any Intellectual Property Right of the Company or Subsidiaries
or portion thereof. There are no pending claims nor any claims threatened in
writing or otherwise known to management of the Company or Subsidiaries, or
litigation contesting the validity, ownership or right to use, sell, license or
dispose of any of the Company or Subsidiaries' Intellectual Property Rights, nor
is the Company or Subsidiaries aware of any reasonable basis for any such claim,
nor has the Company or Subsidiaries received any communications alleging that
the Company or Subsidiaries have violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity. Neither the Company nor either Subsidiary is aware that any of
its employees or consultants is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of his or her best efforts to promote the interests
of the Company or Subsidiaries or that would conflict with the Company or
Subsidiaries' business as conducted. Neither the execution nor delivery of this
Agreement nor the carrying on of the Company or Subsidiaries' business by the
employees or consultants of the Company or Subsidiaries, nor the conduct of the
Company or Subsidiaries' business as proposed, will, to the knowledge of the
Company, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees or consultants is now obligated.
Neither the Company nor Subsidiaries believe it is or will be necessary to
utilize any inventions of any of its employees (or people it currently intends
to hire) made prior to their employment by the Company or Subsidiaries.
2.9 Compliance with Other Instruments. The Company is not in violation
or default of any provisions of its Certificate of Incorporation or Bylaws or of
any judgment, order, writ or decree to which it is a party or by which it is
bound. The Company is not in violation or default of any instrument or contract
to which it is a party or by which it is bound or of any provision of any
federal or state statute, rule or regulation applicable to the Company, except
for violations or
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defaults of any contract that, individually or in the aggregate, could not
reasonably be expected to have a material adverse effect on the business,
financial condition or properties of the Company and its Subsidiaries taken as a
whole. Neither Subsidiary is in violation or default of any provisions of its
organizational documents or of any judgment, order, writ or decree to which it
is a party or by which it is bound. Neither Subsidiary is in violation or
default or of any instrument or, contract to which it is a party or by which it
is bound or of any provision of any federal or state statute, rule or regulation
applicable to Subsidiaries, except for violations or defaults of any contract
that, individually or in the aggregate, could not reasonably be expected to have
a material adverse effect on the business, financial condition or properties of
the Company and its Subsidiaries taken as a whole. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of notice, either
a default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company or Subsidiaries or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company or Subsidiaries,
their respective businesses or operations or any of their respective assets or
properties.
2.10 Agreements, Action.
(a) Except for agreements explicitly contemplated hereby, there are
no agreements, understandings or proposed transactions between the Company and
any of its stockholders, directors, officers, affiliates, or any affiliate
thereof, or between either Subsidiary and any of its members, stockholders,
directors, officers, affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company or Subsidiaries are a party or by which they are bound which may
involve (i) obligations (contingent or otherwise) of the Company or Subsidiaries
in excess of $25,000 (excluding net auction proceeds payable by the Company to
customers and maintained in the Company's trust account or auction or other sale
proceeds payable pursuant to the contracts set forth in Section 2.3(d) of the
Disclosure Schedule), or payments to the Company or Subsidiaries in excess of
$50,000 (excluding gross auction revenues payable to the Company in connection
with concluded auction sales), or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company or Subsidiaries
or (iii) provisions restricting or affecting the development, manufacture or
distribution of the Company or Subsidiaries' products or services, or (iv)
indemnification by the Company or Subsidiaries with respect to infringement of
proprietary rights.
(c) The Company has not, except as expressly contemplated by this
Agreement or disclosed in the financial statements delivered to the Investors or
set forth in Section 2.10 of the Disclosure Schedule, (i) since December 31,
1998, authorized or made any distribution upon or with respect to any class of
shares, (ii) incurred any outstanding indebtedness for money borrowed or any
other outstanding fixed, noncontingent liabilities, other than in the ordinary
course of business, individually in excess of $25,000 or, in the case of such
indebtedness and/or such liabilities individually less than $25,000, in excess
of $50,000 in the aggregate, (iii) made any outstanding loans or advances to any
person, other than ordinary
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advances for business-related expenses, or (iv) since December 31, 1998, sold,
exchanged or otherwise disposed of any of its assets or rights, other than in
the ordinary course of business.
(d) Neither Subsidiary has, except as disclosed in the financial
statements delivered to the Investors or set forth in Section 2.10 of the
Disclosure Schedule, (i) since December 31, 1998, declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its equity interests, in each case other than to the Company,
(ii) incurred any outstanding indebtedness for money borrowed or any other
outstanding fixed, non contingent liabilities individually in excess of $25,000
or, in the case of such indebtedness and/or such liabilities individually less
than $25,000, in excess of $50,000 in the aggregate, (iii) made any outstanding
loans or advances to any person, other than ordinary advances for business
related expenses, or (iv) since December 31, 1998, sold, exchanged or otherwise
disposed of any of its assets or rights, other than in the ordinary course of
business.
(e) For the purposes of subsections (b), (c) and (d) above, all
applicable indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company or Subsidiaries have reason to
believe are affiliated therewith) shall be aggregated for the purpose of meeting
the individual minimum dollar amounts of such subsections.
(f) Neither the Company nor either Subsidiary has engaged in the
past six months in any discussion regarding the liquidation, dissolution, or
winding up of the Company or such Subsidiary.
2.11 Related Party Transactions. No stockholder, director, officer or
employee of the Company or any Subsidiary or member of his or her immediate
family is indebted to the Company or any Subsidiary, nor is the Company or any
Subsidiary indebted (or committed to make loans or extend or guarantee credit)
to any of them. To the best of the Company's knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company or either Subsidiary is affiliated or with which the Company or
either Subsidiary has a business relationship; or any firm or corporation that
competes with the Company or either Subsidiary, except that such persons and
members of their immediate families may own stock in publicly traded companies
that may compete with the Company or either Subsidiary. No member of the
immediate family of any such person is directly or indirectly interested in any
material contract with the Company or either Subsidiary.
2.12 Permits. The Company and each Subsidiary have all franchises,
permits, licenses, and any similar authority necessary for the conduct of their
business as now being conducted by it, the lack of which could materially and
adversely affect the business, properties, prospects, or financial condition of
the Company and its Subsidiaries taken as a whole, and the Company believes it
or Subsidiaries can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. Neither
the Company nor Subsidiaries are in default in any material respect under any of
such franchises, permits, licenses, or other similar authority.
2.13 Environmental and Safety Laws. To the best of the Company's
knowledge, neither the Company nor Subsidiaries are in violation of any statute,
law or regulation relating to
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the environment or occupational health and safety, where such violation could
reasonably be expected to have a material adverse effect on the business,
financial condition or properties of the Company and its Subsidiaries taken as a
whole and to the best of the Company's knowledge, no material expenditures are
or will be required of the Company or Subsidiaries in order to comply with any
such existing statute, law or regulation, where the violation of, or
non-compliance with, such statute, law or regulation could reasonably be
expected to have a material adverse effect on the business, financial condition
or properties of the Company and its Subsidiaries taken as a whole.
2.14 Marketing Rights. Neither the Company nor Subsidiaries have granted
rights to license, market, or sell its services to any other person or is bound
by any agreement that affects the Company's or Subsidiaries' exclusive right to
develop, distribute, market, license or sell its services.
2.15 Disclosure. The representations and warranties of the Company and
its Subsidiaries contained in this Agreement and the written information
provided by the Company and its Subsidiaries to the Investors (including any
supplemental written information provided to the Investors prior to the
execution of this Agreement), taken as a whole, does not contain any untrue
statement of a material fact or omit to state a fact necessary in order to make
the statements contained therein not misleading as of the date made and in light
of the circumstances in which the same were made. As of the date hereof, there
are no facts known (or which should upon the reasonable exercise of diligence be
known) to the Company (other than matters of a general economic nature) that,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on the business, financial condition or properties of
the Company and its Subsidiaries taken as a whole and that have not been
provided to the Investors.
2.16 Registration Rights. Except as set forth in the Investors' Rights
Agreement, the Company has not granted or agreed to grant any registration or
other rights or any nature, including piggyback rights, to any person or entity.
2.17 Financial Statements. The Company has delivered to the Investors
unaudited financial statements (balance sheet, statement of operations,
statement of stockholders' equity and statement of cash flows, including notes
thereto) for Dove Brothers at December 31, 1996, 1997 and 1998 and for the three
years then ended which have been reviewed by ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇, unaudited
financial statements (balance sheet and statement of operations) for Dove
Brothers as at and for the period ended August 31, 1999, and an unaudited
sources and uses of cash statement for the Company as at and for the period
ended September 30, 1999 (each a "Financial Statement" and collectively the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied,
except that the Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements pertaining to
Dove Brothers fairly present the financial condition and operating results of
Dove Brothers as of the dates, and for the periods, indicated therein. The
Financial Statement pertaining to the Company fairly presents all sources and
disbursements of cash of the Company through September 30, 1999. Except as set
forth in the Financial Statements, neither of the Subsidiaries has any
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to December 31, 1998 and (ii) obligations
under contracts and commitments incurred in the
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ordinary course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, in both cases,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company and its Subsidiaries taken as a whole. Except
as disclosed in the Financial Statements, neither the Company nor Subsidiaries
are a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. The Company and Subsidiaries maintain and will continue to maintain
a standard system of accounting established and administered in accordance with
generally accepted accounting principles.
2.18 Changes. Since December 31, 1998 there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of Dove Brothers from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company and its
Subsidiaries taken as a whole (as such business is presently conducted and as it
is proposed to be conducted);
(c) any waiver by the Company or Subsidiaries of a valuable right
or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company or Subsidiaries, except in the
ordinary course of business and that is not material to the assets, properties,
financial condition, operating results or business of the Company and its
Subsidiaries taken as a whole (as such business is presently conducted and as it
is proposed to be conducted);
(e) any material change or amendment to a material contract or
material arrangement by which either Subsidiary or any of its respective assets
or properties is bound or subject other than in connection with the transactions
expressly contemplated hereby;
(f) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets of the Company or
Subsidiaries;
(g) any resignation or termination of employment of any key officer
of the Company or Subsidiaries; and the Company, to the best of its knowledge,
does not know of the impending resignation or termination of employment of any
such officer;
(h) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company or Subsidiaries, with respect to any of its
material properties or assets, except liens for taxes not yet due or payable;
(i) any declaration, setting aside or payment or other distribution
in respect of any of the Company's capital stock or Subsidiaries' equity
interests (other than to the Company), or any direct or indirect redemption,
purchase or other acquisition of any of such equity interest by the Company or
Subsidiaries;
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(j) to the best of the Company's knowledge, any other event or
condition of any character that could reasonably be expected to materially and
adversely affect the assets, properties, financial condition, operating results
or business of the Company and its Subsidiaries taken as a whole (as such
business is presently conducted and as it is proposed to be conducted); or
(k) any agreement or commitment by the Company or Subsidiaries to
do any of the things described in this Section 2.18, except in connection with
the transactions expressly contemplated hereby.
2.19 Organizational Documents. Except for amendments necessary to satisfy
representations and warranties or conditions contained herein (the form of which
amendments has been approved by the Investors), the organizational documents of
the Company and Subsidiaries are in the form previously provided to the
Investors.
2.20 Title to Property and Assets. The Company and Subsidiaries have good
and marketable title to their properties and assets and have good title to all
of their leasehold interests. The Company and Subsidiaries own their property
and assets free and clear of all mortgages, liens, loans and encumbrances of any
kind, except for (i) any liens arising by operation of law, and (ii) any
encumbrances and liens which arise in the ordinary course of business and do not
materially impair the Company's or Subsidiaries' ownership or use of such
property or assets including, without limitation, any liens granted to third
parties on assets acquired by the Company or either of its Subsidiaries (1) for
resale in the ordinary course of business or (2) pursuant to a lease or purchase
money financing for use in the ordinary course of business, provided that in
each case such liens do not relate to any assets of the Company or either of its
Subsidiaries other than the assets so acquired. With respect to the property and
assets it leases, the Company and Subsidiaries are in compliance with such
leases in all material respects and, to the best of the Company's knowledge,
hold a valid leasehold interest free of any liens, claims or encumbrances.
2.21 Employee Benefit Plans. Neither the Company nor Subsidiaries have
any Employee Benefit Plan as defined in the Employee Retirement Income Security
Act of 1974.
2.22 Tax Matters
(a) The Company and Subsidiaries have filed all Tax Returns as
required by law. All such Tax Returns are true, correct and complete in all
material respects. The Company and Subsidiaries have paid all Taxes and other
assessments due (whether or not shown on any Tax Return). The provisions for
Taxes of the Company and Subsidiaries as shown in the Financial Statements are
adequate for Taxes due or accrued as of the date thereof. Neither the Company
nor Subsidiaries currently are the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where either the Company or Subsidiaries does not file Tax Returns
that the Company or Subsidiaries are or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of the
Company or Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax.
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(b) The Company and Subsidiaries have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder, or other third
pay
(c) No director or officer (or employee responsible for Tax
matters) of the Company or Subsidiaries expects any authority to assess any
additional Taxes for any period for which Tax Returns have been filed. There is
no dispute or claim concerning any Taxes of any of the Company and Subsidiaries
either (1) claimed or raised by any authority in writing or (2) as to which any
of the directors and officers (and employees responsible for Tax matters) of the
Company or Subsidiaries have knowledge based upon personal contact with any
agent of such authority. The Company has delivered or made available to the
Investors correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by either the Company or Subsidiaries since December 31, 1994.
(d) Neither the Company nor Subsidiaries have waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency. Neither the Company nor Subsidiaries have
elected to be treated as a Subchapter S corporation or a collapsible corporation
pursuant to Section 1362(a) or Section 341(f) of the Code nor has it made any
other elections pursuant to the Code (other than elections which relate solely
to methods of accounting, depreciation, or amortization) which would have a
material effect on the Company, Subsidiaries, their respective financial
condition, their respective business as presently conducted or proposed td be
conducted or any of their respective properties or material assets. Subsidiaries
have not made any payments, are not obligated to make any payments, and are not
a party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code ss.280G. Neither the
Company nor Subsidiaries are party to any Tax allocation or sharing agreement.
Subsidiaries have not been a member of an affiliated group (within the meaning
of Section 1504 of the Code) filing a consolidated federal income Tax Return,
and neither the Company nor Subsidiary has any liability for the Taxes of any
person (other than the Company or Subsidiary) under Treasury Regulation
(S).1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
2.23 Insurance. The Company and Subsidiaries have in full force and
effect public liability insurance and fire and standard casualty insurance
policies (excluding earthquake and flood insurance), with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its properties that might be damaged or destroyed by fire or any covered
casualty.
2.24 Books and Records. The books and records of the Company and
Subsidiaries provided to Investors reflect all transactions referred to in such
books and records accurately in all material respects, and reflect all
transactions in the equity securities of the Company since their dates of
organization.
2.25 Labor Agreements and Actions. Neither the Company nor Subsidiaries
are bound by or subject to (and none of its assets or properties is bound by or
subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
knowledge of the Company, has sought to represent any of the
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employees, representatives or agents of the Company or Subsidiaries. There is no
strike or other labor dispute involving the Company or Subsidiaries pending, or
to the knowledge of the Company threatened, which could have a material adverse
effect on the assets, properties, financial condition, operating results, or
business of the Company or Subsidiaries (as such business is presently conducted
and as it is proposed to be conducted), nor is the Company aware of any labor
organization activity involving the employees of the Company or Subsidiaries.
The Company is not aware that any officer or key employee, or that any group of
key employees, intends to terminate their employment with the Company or
Subsidiaries, nor does the Company or Subsidiaries have a present intention to
terminate the employment of any of the foregoing. Subject to general principles
related to wrongful termination of employees, the employment of each officer and
employee of the Company and Subsidiaries is terminable at the will of the
Company or Subsidiary.
2.26 Assumptions or Guaranties of Indebtedness of Other Persons. Neither
the Company nor Subsidiaries are directly or contingently liable on (including,
without limitation liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest
in any person or otherwise to assure any creditor against loss) any indebtedness
of any other person.
2.27 Stockholder Agreements. Except for the Stockholders' Agreement,
there are no agreements or arrangements between the Company and any of the
Company's stockholders, or to the Company's knowledge, between or among any of
the Company's stockholders, which grant voting or other rights with respect to
any Company shares or which affect any stockholder's ability or right freely to
alienate or vote such interests. There are no agreements or arrangements between
Subsidiaries and any of their equityholders, or to the Company's knowledge,
between or among any of the equityholders of Subsidiaries, which grant voting or
other rights with respect to any equity interests of any Subsidiary or which
affect any equityholder's ability or right freely to alienate or vote such
equity interests.
2.28 Year 2000 Readiness. To the Company's best knowledge and belief, all
of its accounting software is, and has been represented by its vendor(s) to be,
Year 2000 compliant. The Company has updated its CUS auction software at the
▇▇▇▇▇▇ City headquarters and is in the process of updating the stand-alone
software on each of its laptop computers as each laptop computer becomes
available upon returning from auction sites or other off-site uses. All systems
are expected to be updated by the end of October 1999. In addition, a new update
to move the system from DOS-based to Windows-based is expected to be available
to the Company before the end of 1999. The Company does not believe that it has
any other hardware or software or electronically controlled system whose failure
to be Year 2000 compliant would have a material adverse effect on the business
of the Company and its Subsidiaries, taken as a whole. The Company has not
undertaken any testing or independent verification of the status of any of the
third party systems with which it interfaces or upon which it is otherwise
dependent. The Company will make appropriate inquiries of all such third parties
to the extent the failure of such third parties' systems to be Year 2000
compliant could reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries, taken as a whole, and the Company will develop
appropriate contingency plans to address such potential failures, which the
parties acknowledge could occur notwithstanding the assurances such third
parties may provide. The term "Year 2000 compliant", as used herein in reference
to any hardware, software, or other
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system, shall mean that such hardware, software, or system will (a) correctly
handle and process date information before, during and after January 1, 2000,
accepting date input, and performing calculations, including but not limited to
sorting and sequencing, on dates and portions of dates, function according to
the documentation during and after January 1, 2000, without changes in operation
resulting from the advent of the new century, (c) where appropriate respond to
two digit date input in a way that resolves any ambiguity as to the century in a
disclosed, defined and predetermined manner, (d) store and provide output of
date information in ways that are unambiguous as to the century, and (e)
properly manage the leap year occurring in the year 2000.
2.29 Market Stand-Off Agreements. The Company has obtained agreements
from each of its stockholders whereby such stockholder has agreed that, during
the period of duration (not to exceed 180 days) specified by the Company and an
underwriter of common stock or other securities of the Company, following the
effective date of a registration statement of the Company filed under the Act,
such stockholder will not, to the extent requested by the Company and the
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 such stockholder at any time during
such period except common stock, if any, included in such registration
statement.
2.30 Qualified Small Business. As of and immediately following the
Closing: (a) the Company will be a domestic C corporation, (b) the Company will
not have made any purchases of its own stock described in Section 1202(c)(3)(B)
of the Internal Revenue Code of 1986, as amended (the "Code") during the
one-year period preceding the Closing, (c) the Company's (and any predecessor's)
aggregate gross assets, as defined by Code Section 1202(d)(2), at no time from
the date of incorporation of the Company and through the Closing have exceeded
or will exceed $50 million, taking into account the assets of any corporations
required to be aggregated with the-Company in accordance with Code Section
1202(dx3), and (d) the Company is an eligible corporation, as defined by Code
Section 1202(e)(4).
2.31 Small Business Company. The Company with its "affiliates" (as that
term is defined in Section 121.401 of Title 13 of the Code of Federal
Regulations) is a "small business concern" within the meaning of the Small
Business Act and Section 121.802 of said Regulations. The information pertaining
to the Company to be set forth in Small Business Administration Forms 480, 652
and 1031 will be accurate and complete.
3. Representations and Warranties of the Investors. Each Investor hereby
severally represents and warrants to the Company that:
3.1 Binding Effect. This Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
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3.2 Purchase Entirely for Own Account. This Agreement is made with each
Investor in reliance upon such Investor's representation to the Company, which
such Investor hereby confirms, that the Series B Preferred Stock to be received
by such Investor and the Common Stock issuable upon conversion thereof
(collectively, the "Securities") will be acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. Each Investor further represents that such Investor does
not have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities. Each Investor represents that it has full
power and authority to enter into this Agreement.
3.3 Disclosure of Information. It believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Series B Preferred Stock. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series B Preferred
Stock. The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement or the right of the
Investors to rely thereon.
3.4 Investment Experience. Each Investor is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Series B Preferred Stock. If other
than an individual, Investor also represents it has not been organized for the
purpose of acquiring the Series B Preferred Stock.
3.5 Accredited Investor. Each Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission Rule 501 of Regulation
D, as presently in effect.
3.6 Restricted Securities. It understands that the shares of Series B
Preferred Stock it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Act, as amended, only in certain limited circumstances.
In this connection, each Investor represents that it is familiar with Rule 144,
as presently in effect, and understands the resale limitations imposed thereby
and by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, each Investor further agrees not to make any
disposition of all or any portion of the Series B Preferred Stock (or the Common
Stock issuable upon the conversion thereof) unless and until the transferee has
agreed in writing for the benefit of the Company to be bound by this Section
3.7, provided and to the extent such Section is then applicable, and by the
Investors' Rights Agreement and:
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(a) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such Registration Statement; or
(b) Such Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, such Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Act (it being
agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances).
Notwithstanding the provisions of paragraphs (a): and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by an Investor which is a partnership or limited liability company to a
partner or member thereof or a retired partner or member thereof who retires
after the date hereof, or to the estate of any such partner or member or retired
partner or member or the transfer by gift, will or intestate succession of any
partner or member to his spouse or to the siblings, lineal descendants or
ancestors of such partner or member or his spouse, if the transferee agrees in
writing to be subject to the terms hereof to the same extent as if he were an
original Investor hereunder.
3.8 Legends. It is understood that the certificates evidencing the
Series B Preferred Stock (and the Common Stock issuable upon conversion thereof)
may bear one or all of the following legends:
(a) "These securities have not been registered under the Securities
Act of 1933. They may not be sold, offered for sale, pledged or hypothecated in
the absence of a registration statement in effect with respect to the securities
under such Act or an opinion of counsel satisfactory to the Company that such
registration is not required or unless sold pursuant to Rule 144 of such Act."
(b) Any legend required by the laws of the State of California or
any other applicable state.
3.9 Risks. Each Investor acknowledges that (a) this investment involves
substantial risks; (b) the projections for the Company are based upon good faith
estimates and assumptions believed by the Company to be reasonable at the time
made, it being recognized by the Investors that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results; and (c) to succeed, the Company may need to attract additional capital
and additional personnel, and there can be no assurances that the Company will
be able to attract such capital or personnel.
3.10 No Representations. Each Investor acknowledges that there have been
no representations, guarantees or warranties made to it by the Company, its
agents or employees, or by any other person with respect to (a) the approximate
length of time that such Investor will be
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required to remain as the owner of the Series B Preferred Stock; or (b) the
percentage of profit or amount of profit to be realized, if any, as a result of
its investment.
4. Conditions to Closing.
4.1 Conditions to Investor's Obligations. The obligations of each
Investor under Section 1.1 of this Agreement are subject to the fulfillment on
or before the Closing of each of the following conditions, the waiver of which
shall not be effective against any Investor who does not consent thereto:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 2 of this Agreement shall be true
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date.
(b) Performance. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
(c) Compliance Certificates. The Chief Executive Officer of the
Company shall deliver to each of the Investors or their special counsel a
certificate certifying that the conditions specified in Sections 7.1 (a) and 7.1
(b) with respect to the Company have been fulfilled and stating that there shall
have been no adverse change in the business, affairs, operations, properties,
assets or condition of the Company or Subsidiaries since December 31, 1998.
(d) Qualifications. The Commissioner of Corporations of the State
of California shall have issued a permit qualifying the offer and sale of the
Series B Preferred Stock and the underlying Common Stock to the Investors
pursuant to this Agreement, or such offer and sales shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as amended.
Any other authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the securities
pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
(e) Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investors, and they shall have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request.
(f) Board of Directors. Concurrently with the Closing, the Board
Directors of the Company shall be increased to seven directors and the directors
the Company immediately after the Closing Date shall consist of the following
persons: ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇, and there shall be two vacancies on the Board of Directors.
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(g) Certificate of Incorporation. Investors shall have received a
certified copy of the Company's Certificate of Incorporation, substantially in
the form attached hereto as Exhibit A.
(h) Investors' Rights Agreement. The Company and each Investor
shall have entered into the Investors' Rights Agreement, substantially in the
form attached as Exhibit B.
(i) Stockholders' Agreement. The stockholders of the Company shall
have entered into the Stockholders' Agreement, substantially in the form of
Exhibit C hereto.
(j) Opinion of Company Counsel. The Investors shall have received
from Howard, Rice, Nemerovski, Canady, ▇▇▇▇ & ▇▇▇▇▇▇, A Professional Corporation
("▇▇▇▇▇▇ ▇▇▇▇"), counsel for the Company and Subsidiaries, an opinion dated as
of the Closing Date, substantially in the form of Exhibit D hereto.
(k) Management Rights Agreement. Each Investor that requests a
management rights agreement to maintain its status as a "venture capital
operating company" shall have received such an agreement from the Company that
is reasonably acceptable to such Investor.
4.2 Conditions to the Company's Obligations. The obligations of the
Company to each Investor under this Agreement are subject to the fulfillment on
or before the Closing Date of each of the following conditions by such party:
(a) Representations and Warranties. The representations and
warranties of the Investors contained in Section 3 of this Agreement shall be
true on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date.
(b) Payment of Purchase Price. The investors shall have delivered
the purchase price specified in Section 1.1.
5. Miscellaneous.
5.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
5.2 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 Series B Preferred Stock sold hereunder or any
Common Stock issued upon conversion thereof). 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.
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5.3 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California.
5.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
5.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
given for all purposes (a) upon personal delivery, (b) one day after being sent,
when sent by professional overnight courier service from and to locations within
the United States, (c) five days after posting when sent by registered or
certified mail, or (d) on the date of transmission when sent by facsimile and
when receipt has been confirmed, addressed (i) if to the Company at the address
set forth on the signature pages hereto; or (ii) if to the Investors at the
addresses set forth on the signature pages hereto. 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.
5.6 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this
transaction. Each party to this Agreement agrees to indemnify and to hold
harmless each other party to this Agreement from any liability for any
commission or compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
such party or any of its officers, partners, employees, members or
representatives is responsible.
5.7 Expenses. If the Closing is effected, the Company shall, at the
Closing, reimburse the reasonable fees and expenses of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel
for the lead Investor. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement or the Certificate of Incorporation,
the prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
5.8 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 holders of Series B Preferred Stock
then owning a majority of the Series B Preferred Stock and the Common Stock
issued upon conversion of the Series B Preferred Stock issued pursuant to this
Agreement. Any amendment or waiver effected in accordance with this Section
shall be binding upon each holder of any securities purchased under this
Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities, and the
Company.
5.9 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 this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
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5.10 Aggregation of Stock. All shares of the Series B Preferred Stock
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
5.11 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
5.12 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.
5.13 California Commissioner of Corporations. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMWISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement with
the intent and agreement that the same shall be effective as of the day and year
first above written
THE COMPANY:
DOVEBID, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇
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Its: President and CEO
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
INVESTORS:
MAYFMLD X, L.P.
By: ▇▇▇▇▇▇▇▇ X Management, L.L.C.
Its: General Partner
By: /s/ A. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
Its: Managing Director
▇▇▇▇▇▇▇▇ ASSOCIATES FUND V, L.P.
By: ▇▇▇▇▇▇▇▇ X Management, L.L.C.
Its: General Partner
By: /s/ A. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
Its: Managing Director
▇▇▇▇▇▇▇▇ PRINCIPALS FUND, L.L.C.
By: ▇▇▇▇▇▇▇▇ X Management, L.L.C.
Its: ▇▇▇▇▇▇▇▇ Principals Fund, L.L.C.,
Managing Member
By: /s/ A. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
Its: Managing Director
Address (for all three ▇▇▇▇▇▇▇▇ entities):
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-20-
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/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Its: Vice President
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ & COMPANY, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------
Its: Vice President
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
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SCHEDULE 1.1
Schedule of Investors
Shares of Series B
Investor Preferred Stock Purchase Price
-------- --------------- --------------
▇▇▇▇▇▇▇▇ X, L.P. 9,038,961 $ 6,959,999.97
▇▇▇▇▇▇▇▇ Principals Fund, L.L.C. 1,038,961 799,999.97
▇▇▇▇▇▇▇▇ Associates Fund V, L.P. 311,688 239,999.76
----------- --------------
▇▇▇▇▇▇▇▇ Subtotal 10,389,610 $ 7,999,999.70
Fremont Ventures I, L.P. 5,194,805 3,999,999.85
----------- --------------
Subtotal of Cash Proceeds 15,584,415 $11,999,999.55
--------------
▇▇▇▇ & Company, Inc./1/ 285,714 219,999.78
----------- --------------
Total at Closing 15,870,129 $12,219,999.33
=========== ==============
-------------------
/1/ As provided in Section 1.5, the Company is issuing Shares to Bain at
the Closing, and may issue additional Shares to Bain after the Closing, in
partial payment for services rendered to the Company.