EXHIBIT 2.13
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Asset Purchase Agreement
Among
DoveBid Management Services, Inc.,
DoveBid, Inc.
And
ZoneTrader, Inc.
February 27, 2002
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made as of February 27,
2002, by and among DoveBid, Inc., a Delaware corporation ("DoveBid"), DoveBid
Management Services, Inc., a Delaware corporation and wholly-owned subsidiary of
DoveBid ("Buyer"), and ZoneTrader, Inc., a Delaware corporation ("Seller").
R E C I T A L S
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A. Seller is engaged in the business of offering surplus asset management
services and an online marketplace for businesses buying and selling excess
inventory and idle assets (such business is hereinafter referred to as the
"Business").
B. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, substantially all of the assets of Seller and its Subsidiaries and
assume certain of the liabilities of Seller and its Subsidiaries, on the terms
and conditions set forth in this Agreement.
C. Prior to the execution and delivery of this Agreement, and as a
condition and inducement to DoveBid's and Buyer's willingness to enter into this
Agreement, Buyer and Seller entered into Assignment and Assumption Agreements
with respect to the agreements listed on Schedule C of the Seller Disclosure
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Letter (as defined in Article 5).
D. Concurrently with the execution and delivery of this Agreement, and as
a condition and inducement to DoveBid's and Buyer's willingness to enter into
this Agreement, each Seller Stockholder (as defined in Section 1.59) listed on
Exhibit A-1 is executing and delivering to DoveBid and Buyer a voting agreement
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in the form of Exhibit A-2 (the "Voting Agreement") and an investment
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representation letter in the form of Exhibit B-2 (the "Investment Representation
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Letter").
E. Buyer and Seller also intend for the purchase of assets under this
Agreement to be treated as a "reorganization" under Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the above recitals and the mutual
covenants hereinafter set forth, DoveBid, Buyer and Seller hereby agree as
follows:
1. DEFINITIONS. As used in this Agreement, the following terms have the
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following meanings; other definitions appear elsewhere in the Agreement.
1.1 "Acquisition Transaction" has the meaning given to such term in
Section 5.27.
1.2 "Affiliate" means any person that directly or indirectly controls, is
controlled by, or is under common control with another person.
1.3 "Applicable Legal Requirements" means, collectively, all foreign,
federal, state, local or other laws, statutes, constitutions, resolutions,
ordinances, codes, edicts, decrees, orders, writs, injunctions, awards,
judgments, rules, regulations, rulings or requirements issued, enacted,
adopted, promulgated, implemented or otherwise put into effect by or under
the authority of any Governmental Entity that is applicable to the subject
entity and its properties, assets and business.
1.4 "Capital Change" means any of the following events: (i) DoveBid
recapitalizes, either through (a) a subdivision or stock split of any of the
outstanding shares of DoveBid Capital Stock into a greater number of such shares
or (b) a combination or reverse stock split of any of the outstanding shares of
DoveBid Capital Stock into a lesser number of such shares; (ii) DoveBid
reorganizes, reclassifies or otherwise changes the outstanding shares of DoveBid
Capital Stock into the same or a different number of shares of other classes or
series of DoveBid stock (other than through a subdivision or combination of
shares provided for in the preceding clause (i)); or (iii) DoveBid declares a
dividend or other distribution on its outstanding shares payable in shares of
DoveBid Capital Stock, in shares or securities convertible into shares of
DoveBid Capital Stock and/or other DoveBid equity securities.
1.5 "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and the rules and regulations promulgated thereunder.
1.6 "Conversion Shares" means the shares of DoveBid Common Stock issuable
upon conversion of the DoveBid Series D-1 Preferred Stock, DoveBid Series C
Preferred Stock and DoveBid Series DD Preferred Stock issued pursuant to Article
3.
1.7 "Convertible Securities" means stock or other securities convertible
into or exchangeable for shares of common stock of the subject corporation,
whether or not such stock or other securities are currently convertible into or
exchangeable for shares of common stock of the subject corporation.
1.8 "Customer List Assets" means Seller's and its Subsidiaries' customer
lists (whether current or prior) and customer account histories and a list of
all assets currently offered for sale by each customer on any of the online
marketplaces of Seller and its Subsidiaries.
1.9 "Damages" means any and all claims, demands, suits, actions, causes of
actions, losses, reductions in value, costs, damages, liabilities and expenses,
including reasonable attorneys' fees, other professionals' and experts'
reasonable fees, and court or arbitration costs.
1.10 "DGCL" means the Delaware General Corporation Law.
1.11 "Dissolution" means the dissolution, liquidation and winding up of
Seller in accordance with the provisions of Seller's Certificate of
Incorporation and Applicable Legal Requirements, which dissolution, liquidation
and winding up shall occur after the Closing.
1.12 "Documentation" means, collectively, programmers' notes or logs,
source code annotations, user guides, manuals, instructions, software
architecture designs, layouts, any know-how, and any other designs, plans,
drawings, documentation, materials, supplier lists, net lists, photographs,
development tools, blueprints, media, memoranda and records that are related
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in any manner to any Seller Technology Assets that are in the actual or
constructive possession of Seller or any of its Subsidiaries.
1.13 "DoveBid Capital Stock" means DoveBid Common Stock and DoveBid
Preferred Stock.
1.14 "DoveBid Common Stock" means common stock of DoveBid, par value $0.001
per share.
1.15 "DoveBid Common Stock Equivalents" means, with regard to a share of
DoveBid Preferred Stock, the number of shares of DoveBid Common Stock issuable
upon conversion thereof at the referenced time pursuant to DoveBid's Certificate
of Incorporation and, with regard to a share of DoveBid Common Stock, such share
of DoveBid Common Stock.
1.16 "DoveBid Preferred Stock" means, collectively, DoveBid Series A
Preferred Stock, DoveBid Series B Preferred Stock, DoveBid Series C Preferred
Stock, DoveBid Series D-1 Preferred Stock and DoveBid Series DD Preferred Stock,
each par value $0.001 per share.
1.17 "DoveBid Series A Preferred Stock" means Series A Preferred Stock of
DoveBid, par value $0.001 per share.
1.18 "DoveBid Series B Preferred Stock" means Series B Preferred Stock of
DoveBid, par value $0.001 per share.
1.19 "DoveBid Series C Preferred Stock" means Series C Preferred Stock of
DoveBid, par value $0.001 per share.
1.20 "DoveBid Series D-1 Preferred Stock" means Series D-1 Preferred Stock
of DoveBid, par value $0.001 per share.
1.21 "DoveBid Series DD Preferred Stock" means Series DD Junior Preferred
Stock of DoveBid, par value $0.001 per share.
1.22 "DoveBid Stock Ledger" means the ledger that is maintained by DoveBid
and reflects all equity issuances and transfers relating to DoveBid.
1.23 "DoveBid's Website" means DoveBid's site on the World Wide Web located
at ▇▇▇.▇▇▇▇▇▇▇.▇▇▇.
1.24 "Employee Plans" means any pension, retirement, profit sharing,
deferred compensation agreements, severance benefits, workers' benefits,
vacation benefits, disability benefits, death benefits, hospitalization
benefits, retirement or pension benefits, stock, stock options, phantom stock,
stock appreciation, bonus or other incentive plans or other employee benefit
plans or arrangements maintained by Seller or any of its Subsidiaries for the
employees of Seller or any of its Subsidiaries, including all "Employee Benefit
Plans" as defined in Section 3(3) of ERISA.
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1.25 "Encumbrance" means any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, claim, option, collateral assignment,
conditional sale, right of first refusal, community property interest or
restriction of any nature (including any restriction on the transfer of any
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset), but
excluding liens for Taxes not yet due and payable.
1.26 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.27 "Existing Rights Agreement" means DoveBid's Third Amended and Restated
Investors' Rights Agreement dated as of August 28, 2001.
1.28 "Existing Stockholders' Agreement" means DoveBid's Third Amended and
Restated Stockholders' Agreement dated as of August 28, 2001.
1.29 "Final Holders" means the persons listed on the Final Schedule.
1.30 "Final Schedule" has the meaning given to such term in Section
7.16(h).
1.31 "First Applicable Revenue" has the meaning given to such term in
Exhibit C.
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1.32 "First Revenue Measurement Period" means the period from January 28,
2002 through April 30, 2002.
1.33 "Fourth Applicable Revenue" has the meaning given to such term in
Exhibit C.
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1.34 "Fourth Revenue Measurement Period" means the period from November 1,
2002 through January 31, 2003.
1.35 "GAAP" means U.S. generally accepted accounting principles.
1.36 "Governmental Entity" means any governmental department, bureau,
agency, public board, public or self-regulatory body or authority, court,
administrative agency or commission or other governmental authority or
instrumentality, foreign, federal, state or local.
1.37 "Insolvency Action" means, with respect to a person, any or all of the
following: (i) the filing, with respect to such person, of a voluntary or
involuntary petition for relief under any Insolvency Proceeding; (ii) such
person or any of its assets otherwise becoming the subject of an Insolvency
Proceeding; (iii) the formal or informal, voluntary or involuntary, dissolution,
liquidation or winding up of such person, or any efforts to initiate or carry
out such dissolution, liquidation or winding up; (iv) the appointment of (or
efforts or attempts to appoint) a receiver, liquidator, sequestrator, trustee,
custodian or other similar officer with respect to such person or any part of
its assets or properties; (v) any composition of the indebtedness of such person
or any general or special assignment for the benefit of such person's creditors;
and (vi) such person's ceasing to conduct business for any reason other than
such person's being merged or
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consolidated with another entity and other than, with regard to Seller,
following consummation of the transactions contemplated hereby.
1.38 "Insolvency Proceeding" means any or all of the following actions,
events or proceedings: (i) any voluntary or involuntary case under the United
States Bankruptcy Code, as amended, and any successor law or laws thereto; and
(ii) any case, action or other proceeding under any bankruptcy, insolvency, debt
reorganization or similar law (whether now or hereafter in effect) of any state,
country or other jurisdiction which seeks or provides for the relief of or
reorganization or delay of debts generally or the liquidation and distribution
of a person's assets in satisfaction of its debts.
1.39 "Intellectual Property Rights" means any or all of the following and
all rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know-how, methods, technology, technical data and customer, prospect and
supplier lists, and all documentation relating to any of the foregoing; (iii)
all copyrights, copyrights registrations and applications therefor, and all
other rights corresponding thereto throughout the world; (iv) all industrial
designs and any registrations and applications therefor throughout the world;
(v) all trade names, uniform resource locators, Internet domain names, logos,
common law trademarks and service marks, trademark and service ▇▇▇▇
registrations and applications therefor throughout the world; (vi) all databases
and data collections and all rights therein throughout the world; (vii) all
moral and economic rights of authors and inventors, however denominated,
throughout the world; and (viii) any similar or equivalent rights to any of the
foregoing anywhere in the world.
1.40 "Interim Holders" means, at any time after the Closing and before the
Dissolution, the persons listed on the most recently delivered Interim Schedule.
1.41 "Interim Schedule" has the meaning given to such term in Section
7.16(h).
1.42 "IRS" means the Internal Revenue Service.
1.43 "Knowledge" means, with respect to any fact, circumstance, event or
other matter in question, the knowledge of such fact, circumstance, event or
other matter of (a) an individual, if used in reference to an individual, or (b)
any officer or director of such party, if used in reference to a person that is
not an individual. Any such individual shall be deemed to have knowledge of a
particular fact, circumstance, event or other matter if such knowledge could be
obtained from reasonable inquiry by such individual.
1.44 "Liabilities" means debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or unmatured, determined or
determinable, known or unknown, including those arising under any law, action or
governmental order and those arising under any contract, agreement, arrangement,
commitment or undertaking.
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1.45 "Material Adverse Change" or "Material Adverse Effect," when used in
reference to (a) a person or group of related persons, means any change, event,
violation, inaccuracy, circumstance or effect (regardless of whether such events
or changes are inconsistent with the representations or warranties made by such
person in this Agreement) that is or is reasonably likely to be, individually or
in the aggregate, materially adverse to the condition (financial or otherwise),
business, prospects, properties, assets (including intangible assets),
employees, capitalization, operations or results of operations of such person
and its Subsidiaries, taken as a whole and (b) the Assets or the Business, means
a material diminution in the value, condition, status, ability to use and enjoy
or commercial viability of such Assets or Business.
1.46 "person" means any individual, corporation (including any nonprofit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization, entity or Governmental Entity.
1.47 "Pro Rata Share" means, (i) prior to the Dissolution and with respect
to each Interim Holder, such Interim Holder's pro rata share of the Total Shares
as set forth on the most recently delivered Interim Schedule and (ii) from and
after the Dissolution and with respect to each Final Holder, such Final Holder's
pro rata share of the Total Shares as set forth on the Final Schedule.
1.48 "Release Date" has the meaning given to such term in Section 3.3.
1.49 "Restated Certificate" means DoveBid's Restated Certificate of
Incorporation in the form of Exhibit D.
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1.50 "Returns" means all required foreign, federal, state and local
returns, estimates, information statements and reports relating to any and all
Taxes concerning or attributable to the subject person or its operations.
1.51 "Revenue Measurement Period" means each of the First Revenue
Measurement Period, the Second Revenue Measurement Period, the Third Revenue
Measurement Period and the Fourth Revenue Measurement Period.
1.52 "Rights" means warrants, options or other rights, whether or not
currently exercisable, to purchase or acquire shares of common stock of the
subject corporation or Convertible Securities of the subject corporation.
1.53 "Rights Agreement" means DoveBid's Fourth Amended and Restated
Investors' Rights Agreement substantially in the form of Exhibit E.
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1.54 "Second Applicable Revenue" has the meaning given to such term in
Exhibit C.
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1.55 "Second Revenue Measurement Period" means the period from May 1, 2002
through July 31, 2002.
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1.56 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
1.57 "Seller Option" means each outstanding option to purchase shares of
Seller Common Stock as set forth on Schedule 5.3(a)-2 of the Seller Disclosure
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Letter.
1.58 "Seller Receivables" means all accounts receivable, notes receivable
and other receivables, as well as unbilled work-in-progress, of Seller, its
Subsidiaries and the Business.
1.59 "Seller Stockholder" or "Seller Stockholders" means the record holders
of issued and outstanding shares of Seller Common Stock (as defined in Section
5.3(a)) and Seller Preferred Stock (as defined in Section 5.3(a)).
1.60 "Seller Stock Plans" means, collectively, the Workstations
International, Inc. 1999 Stock Option Plan, the Workstations International, Inc.
1996 Stock Option and Compensation Plan, and the ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. 2000
Director Stock Option Plan.
1.61 "Seller Technology Assets" means, collectively, all computer software
(including software programs, objects, modules, routines, algorithms and any
other software code) in both source code and object code form, copyrightable
works, inventions (whether or not patentable), trade secrets (including the
Customer List Assets), know-how, processes, designs, techniques, databases and
compilations of data, descriptions, flow-charts and other work product to
design, plan, develop or test any of the foregoing, technology supporting, and
the contents of, any Internet site, confidential business information (including
the Customer List Assets), all documentation relating to the foregoing and other
proprietary information and technologies owned by Seller or any of its
Subsidiaries or held by Seller or any of its Subsidiaries under any licenses or
sublicenses (or similar grants of rights).
1.62 "Seller's Website" means Seller's site on the World Wide Web located
at ▇▇▇.▇▇▇▇▇▇▇▇▇▇.▇▇▇.
1.63 "Solvent" means, with respect to any person on a particular date, that
on such date: (i) the fair value of the assets of such person is greater than
the total amount of liabilities, including contingent liabilities, of such
person; (ii) the total present fair saleable value of the assets of such person
on a going concern basis is not less than the amount that shall be required to
pay the liabilities (including contingent liabilities) of such person as they
become absolute and matured; and (iii) such person is generally paying such
person's debts (other than those subject to bona fide disputes) as they become
due and payable. The amount of contingent liabilities (such as litigation,
guarantees and pension plan liabilities) at any time shall be computed as the
amount that, in light of all the facts and circumstances existing at the time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
1.64 "Stockholders' Agreement" means DoveBid's Fourth Amended and Restated
Stockholders' Agreement substantially in the form of Exhibit F.
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1.65 "Subsidiary" of a specified person means any corporation, partnership,
limited liability company, joint venture or other legal entity of which the
specified entity (either alone or through or together with any other Subsidiary)
owns, directly or indirectly, 50% or more of the stock or other equity or
partnership interests the holders of which are generally entitled to vote for
the election of the Board of Directors or other governing body of such
corporation or other legal entity.
1.66 "Tax" or "Taxes" means any and all foreign, federal, state and local
taxes, assessments and other governmental charges, duties and impositions,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any Liability for taxes of a
predecessor entity.
1.67 "Taxing Authority" means any body, entity or group of persons with
jurisdiction over or responsibility for any matters relating to Taxes.
1.68 "Third Applicable Revenue" has the meaning given to such term in
Exhibit C.
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1.69 "Third Revenue Measurement Period" means the period from August 1,
2002 through October 31, 2002.
1.70 "Total DoveBid Equity" means, as of immediately after the Closing, the
sum of (i) all then outstanding shares of DoveBid Common Stock, plus (ii) all
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shares of DoveBid Common Stock issuable upon conversion of all then outstanding
shares of DoveBid Preferred Stock (excluding the TradeOut Shares) and upon the
full exercise and exchange into shares of DoveBid Common Stock of all then
outstanding Convertible Securities (excluding the Convertible Notes (as defined
in Section 6.3(b)) listed on Schedule 1.70 of the DoveBid Disclosure Letter),
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plus (iii) all shares of DoveBid Common Stock issuable upon the exercise of all
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then outstanding Rights assuming the full conversion or exchange into shares of
DoveBid Common Stock of all such outstanding Rights; provided, however, that,
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for purposes of determining the number of shares of DoveBid Common Stock
issuable upon the full exercise and exchange into shares of DoveBid Common Stock
of all then outstanding Convertible Notes whose conversion price is not fixed
therein, the conversion price shall be deemed to be $8.01 per share; provided,
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further, that, for purposes of determining the number of shares of DoveBid
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Common Stock issuable upon the full exercise and exchange into shares of DoveBid
Common Stock of all then outstanding Convertible Notes payable in Dutch
Guilders, the outstanding principal and accrued interest on such Convertible
Notes shall be converted into US dollars at the noon buying rate of the Federal
Reserve Bank of New York for the Euro on the second day prior to the Closing
Date, applying the standard conversion rate of 2.20371 Dutch Guilders per Euro.
1.71 "TradeOut" means TradeOut, Inc., a Delaware corporation.
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1.72 "TradeOut Shares" means the 843,691 shares of DoveBid Series C
Preferred Stock and 506,215 shares of DoveBid Series DD Preferred Stock issued
to TradeOut, which shares are being held in escrow by DoveBid pursuant to the
terms of the TradeOut Agreement.
1.73 "TradeOut Agreement" means that certain Asset Purchase Agreement dated
August 2, 2001 by and between DoveBid and TradeOut.
1.74 "WARN" means the Federal Worker Adjustment and Retraining Notification
Act, as amended.
2. PURCHASE AND SALE OF ASSETS.
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2.1 Agreement to Sell and Purchase Assets. Subject to the terms and
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conditions of this Agreement, and in reliance on the representations, warranties
and covenants set forth in this Agreement, Seller agrees to sell, assign,
transfer and convey to Buyer at the Closing (as defined in Section 3.7), and
Buyer agrees to purchase and acquire from Seller at the Closing, all of the
right, title and interest of Seller and its Subsidiaries in and to all of the
Assets (as defined in Section 2.2), subject to Section 2.4(c). The Assets shall
be sold, assigned, transferred and conveyed to Buyer on the Closing Date (as
defined in Section 3.7), free and clear of all Encumbrances.
2.2 Assets Defined. As used in this Agreement, "Assets" means all of the
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assets, properties, privileges, claims and rights of every kind and nature,
tangible and intangible, absolute or contingent, of Seller and its Subsidiaries,
including the following items and excluding only the Excluded Assets:
(a) all of the Seller Technology Assets, in intangible form;
(b) all of the Documentation, in intangible form;
(c) any and all copies in tangible medium and any and all other
tangible embodiments of all of the Seller Technology Assets and all of the
Documentation;
(d) all Intellectual Property Rights in and to the Seller Technology
Assets and the Documentation, including all marks listed in the ▇▇▇▇ Assignment
(as defined in Section 8.1(n)) and all domain names listed in the Domain Name
Assignment (as defined in Section 8.1(n));
(e) all net operating losses, refunds, rights of recovery and other
benefits relating to Taxes of Seller or any of its Subsidiaries;
(f) all books and records of Seller and its Subsidiaries not included
in clauses (b) and (c) of this Section 2.2 (other than the corporate minutes and
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stock books of account of Seller and its Subsidiaries which are Excluded
Assets);
(g) to the extent lawfully transferable, all Governmental Permits (as
defined in Section 5.14);
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(h) all right, title and interest of Seller and any Affiliate of
Seller in and to (i) those contracts, agreements, arrangements, commitments and
undertakings listed on Schedule 2.2(h) of the Seller Disclosure Letter, (ii) the
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agreements listed on Schedule C of the Seller Disclosure Letter, and (ii) all
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contracts or agreements between Seller or any of its Subsidiaries and any
employee or consultant of Seller or any of its Subsidiaries to the extent that
they relate to confidentiality, nondisclosure, assignment of proprietary rights
or noncompetition with respect to the Business (collectively, the "Assigned
Agreements");
(i) (i) all Seller Receivables outstanding at the Closing and (ii)
cash in an amount not less than $707,470;
(j) all prepaid expenses, deposits and similar prepaid items relating
to the Business, including ad valorem taxes, leases, rentals and maintenance
fees, at the Closing;
(k) all rights, claims, credits, causes of action or rights of setoff
of Seller and its Subsidiaries against third parties arising out of the Assets
or the Business, whether liquidated or unliquidated, fixed or contingent, and
all rights of Seller and its Subsidiaries under or pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers, contractors and
other third parties arising out of the Business, other than those related solely
to the Excluded Assets;
(l) all tangible assets used or held for use in connection with the
Business, including, (i) all furniture, fixtures (including leasehold
improvements), furnishings, office equipment, machinery, vehicles, equipment,
computers, servers, spare parts, documentation, technical materials, advertising
materials, promotional literature, sales or marketing-related materials and
other tangible assets owned by Seller or any of its Subsidiaries and used in the
Business and (ii) all other tangible assets (including workstations and personal
computers, the third-party software programs stored therein and the licenses
thereto, logbooks, notebooks, furniture, file cabinets, white boards, personal
office supplies and equipment) owned by Seller or any of its Subsidiaries that
at any time are or were held for use primarily by employees of Seller or any of
its Subsidiaries in the conduct of the Business;
(m) all policy rights and proceeds payable under any insurance policy
covering the Assets for damage to the Assets or other insurable or covered event
affecting the condition of the Assets occurring prior to the Closing; and
(n) all goodwill associated with the Assets and the Business,
together with the right to represent to third parties that Buyer is the
successor to the Business.
2.3 Excluded Assets Defined. As used in this Agreement, "Excluded Assets"
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means (i) all capital stock, options and other securities of Seller and its
Subsidiaries, (ii) all rights, interests and claims of Seller under this
Agreement, the Seller Ancillary Agreements (as defined in Section 5.2(a)) and
any other agreements between Seller or any of its Affiliates and Buyer or any of
its Affiliates, (iii) all corporate minutes and stock books of account of Seller
and its Subsidiaries, blank stock certificates, qualifications to conduct
business as a foreign corporation, arrangements with registered agents relating
to foreign qualifications, taxpayer and other
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identification numbers, seals and other documents relating to the organization,
maintenance and existence of Seller and its Subsidiaries as corporations, (iv)
all bank accounts of Seller and its Subsidiaries, (v) all cash and cash
equivalents of Seller and its Subsidiaries (other than the Seller Receivables,
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which are Assets, and the cash to be delivered by Seller to Buyer pursuant to
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Section 7.14(a)), certificates of deposit, bonds, debentures and shares of stock
or other equity interests in any Person, (vi) all contracts, agreements,
arrangements, commitments and undertakings to which Seller or any of its
Subsidiaries is a party or is bound or to which its assets are subject that are
not Assigned Agreements, and all rights, interests and claims thereunder and any
customer deposits, advances and credits related thereto, (vii) all assets or
rights that relate to the employee benefit plans of Seller and its Subsidiaries,
(viii) all books and records relating to the employees of Seller and its
Subsidiaries, and (ix) all nontransferable Governmental Permits.
2.4 Asset Transfer; Passage of Title; Delivery.
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(a) Title Passage. Upon the Closing, all of the right, title and
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interest of Seller and its Subsidiaries in and to all of the Assets shall pass
to Buyer, and Seller shall deliver to Buyer possession of all of the Assets and
shall further deliver to Buyer proper assignments, conveyances and bills of sale
sufficient to convey to Buyer good and marketable title to all of the Assets,
free and clear of all Encumbrances, as well as such other instruments of
conveyance as Buyer's legal counsel may reasonably deem necessary or desirable
(both at and after the Closing) to effect or evidence the transfers contemplated
hereby.
(b) Method of Delivery of Assets. At the Closing, Seller shall
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deliver or cause to be delivered to Buyer all of the Assets, which shall be
delivered to Buyer in the form and to the location to be determined by Buyer in
its reasonable discretion before the Closing Date at Seller's cost and expense;
provided, that Seller shall deliver all of the Assets through electronic
--------
delivery or in another manner reasonably calculated and legally permitted to
minimize or avoid the incurrence of transfer and sales Taxes if such method of
delivery does not adversely affect the condition, operability or usefulness of
any Asset. Neither Seller nor any of its Subsidiaries shall retain any copy of
any Asset following the Closing.
(c) Nontransferable Assets. Notwithstanding any other provision of
----------------------
this Agreement or any of the Seller Ancillary Agreements, to the extent that any
of the Assigned Agreements or any other assets constituting part of the Assets
are not assignable or otherwise transferable to Buyer without the consent,
approval or waiver of another party thereto or any third party (including any
Governmental Entity), or if such assignment or transfer would constitute a
breach thereof or a violation of any Applicable Legal Requirement or agreement
with any third party, then neither this Agreement nor such Seller Ancillary
Agreements shall constitute an assignment or transfer (or an attempted
assignment or transfer) thereof until such consent, approval or waiver of such
party or parties has been duly obtained. With respect to each Assigned Agreement
whose assignment or transfer to Buyer requires the consent, approval or waiver
of another party thereto or any third party, Seller shall use all commercially
reasonable efforts to obtain such consent, approval or waiver of such other
party or parties or such third party to such assignment or transfer as promptly
as practicable. To the extent that the consents, approvals and waivers referred
to in this Section 2.4(c), which consents, approvals and waivers are set forth
on Schedule 5.2(c) of the Seller Disclosure Letter, are not obtained by Seller,
---------------
Seller
-11-
shall use all commercially reasonable efforts to (a) provide to Buyer the
financial and business benefits of such Assigned Agreement and (b) enforce, for
the account of Buyer, any rights of Seller or a Subsidiary of Seller arising
from any such Assigned Agreement (including the right to elect to terminate such
Assigned Agreement in accordance with the terms thereof upon the advice of
Buyer). Buyer agrees to cooperate with Seller and supply relevant information to
such party or parties or such third party in order to assist Seller in its
obligations under this Section 2.4(c).
2.5 Tax Consequences. The parties intend that the purchase of Assets under
----------------
this Agreement shall constitute a "reorganization" under Section 368(a)(1)(C) of
the Code. However, neither DoveBid nor Buyer makes any representations or
warranties to Seller or to any Seller Stockholder regarding the tax treatment of
the purchase of assets, whether the purchase of Assets shall qualify as a
"reorganization" under Section 368(a)(1)(C) of the Code, or any of the tax
consequences to Seller or any Seller Stockholder of this Agreement, any of the
Seller Ancillary Agreements, the purchase of Assets or any of the other
transactions or agreements contemplated hereby and thereby, and Seller and the
Seller Stockholders acknowledge that Seller and the Seller Stockholders are
relying solely on their own tax advisors in connection with this Agreement, the
Seller Ancillary Agreements, the purchase of Assets and the other transactions
or agreements contemplated hereby and thereby Seller understands that it (and
not DoveBid or Buyer) shall be responsible for its own Tax Liabilities that may
arise as a result of the transactions contemplated by this Agreement and each of
the Seller Ancillary Agreements. Each of DoveBid and Buyer acknowledges that it
is relying solely on its own tax advisors in connection with this Agreement, the
Buyer Ancillary Agreements, the purchase of Assets and the other transactions or
agreements contemplated hereby and thereby. Each of DoveBid and Buyer
understands that it (and not Seller) shall be responsible for its own Tax
Liabilities that may arise as a result of the transactions contemplated by this
Agreement and each of the Buyer Ancillary Agreements.
2.6 Securities Law Issues. Based in part on the representations made by
---------------------
Seller in Sections 5.3(a) and 5.26 and by the Seller Stockholders in the
Investment Representation Letters, DoveBid shall issue the Purchased Shares (as
defined in Section 5.26(a)) pursuant to an exemption or exemptions from
registration under Section 4(2) of the Securities Act and/or Regulation D
promulgated under the Securities Act and the exemptions from qualification under
applicable state securities laws.
3. PURCHASE PRICE; PAYMENTS.
------------------------
3.1 Purchase Price. In consideration of the sale, assignment, transfer,
--------------
conveyance and delivery of all of the Assets to Buyer at the Closing, DoveBid
shall, subject to Sections 3.3, 3.4 and 7.16, issue and release to Seller, as of
the Closing, a number of shares of DoveBid Capital Stock, in the amount and kind
set forth in Section 3.2 (all shares issuable to Seller under this Section 3.1,
the "Purchase Price").
3.2 Calculation of Total Shares. The maximum number of shares that are
---------------------------
potentially issuable as the Purchase Price shall equal (on an as-converted to
DoveBid Common Stock basis), as of immediately after the Closing and taking into
account payment of such Purchase Price, 6% of the Total DoveBid Equity (such
aggregate number of shares on an
-12-
as-converted to DoveBid Common Stock basis, the "Total Shares"). The Total
Shares shall be comprised of the following:
(a) an amount of DoveBid Series D-1 Preferred Stock (the "Series D-1
Shares") equal to 6% of all then outstanding shares of DoveBid Series D-1
Preferred Stock, as of immediately after the Closing and taking into account
payment of the Series D-1 Shares issued hereunder;
(b) an amount of DoveBid Series C Preferred Stock (the "Series C
Shares") equal to 6% of all then outstanding shares of DoveBid Series A
Preferred Stock, DoveBid Series B Preferred Stock and DoveBid Series C Preferred
Stock, taken together, but excluding the TradeOut Shares, as of immediately
after the Closing and taking into account payment of the Series C Shares issued
hereunder;
(c) an amount of DoveBid Series DD Preferred Stock (the "Series DD
Shares") equal to 6% of all then outstanding shares of DoveBid Series DD
Preferred Stock, but excluding the TradeOut Shares, as of immediately after the
Closing and taking into account payment of the Series DD Shares issued
hereunder; and
(d) an amount of DoveBid Common Stock (the "Common Shares") equal to
6% of all then outstanding shares of DoveBid Common Stock, all shares of DoveBid
Common Stock issuable upon the full exercise and exchange into shares of DoveBid
Common Stock of all then outstanding Convertible Securities (excluding the
Convertible Notes listed on Schedule 1.70 of the DoveBid Disclosure Letter and
-------------
all then outstanding shares of DoveBid Preferred Stock) and all shares of
DoveBid Common Stock issuable upon the exercise of all then outstanding Rights
assuming the full conversion or exchange into shares of DoveBid Common Stock of
all such outstanding Rights, taken together, as of immediately after the Closing
and taking into account payment of the Common Shares issued hereunder.
If, as a result of the calculations in Sections 3.3 and 3.4, fractional
shares would otherwise be issuable, then such fractional shares shall be rounded
down to the nearest whole share in the case of the shares issuable to Seller at
the Closing and shall be rounded up to the nearest whole share in the case of
the Indemnification Shares (as defined in Section 3.3) and the Earnout Shares
(as defined in Section 3.4(a)). If, at any time after the date hereof and prior
to the Closing, a Capital Change occurs, then the numbers of DoveBid Capital
Stock set forth in this Agreement shall be appropriately and equitably adjusted
to reflect such Capital Change.
3.3 Indemnification Shares. At the Closing, a number of shares of DoveBid
----------------------
Series D-1 Preferred Stock, DoveBid Series C Preferred Stock, DoveBid Series DD
Preferred Stock and DoveBid Common Stock, of which a percentage equal to the
quotient obtained by dividing the Series D-1 Shares by the Total Shares shall be
DoveBid Series D-1 Preferred Stock, a percentage equal to the quotient obtained
by dividing the Series C Shares by the Total Shares shall be DoveBid Series C
Preferred Stock, a percentage equal to the quotient obtained by dividing the
Series DD Shares by the Total Shares shall be DoveBid Series DD Preferred Stock
and a percentage equal to the quotient obtained by dividing the Common Shares by
the Total Shares shall be DoveBid Common Stock (such percentages, the "Relative
Percentages"), representing
-13-
7.5% of the DoveBid Common Stock Equivalents represented by the Total Shares
(such shares, collectively, the "Indemnification Shares") shall be issued to
Seller but remain as uncertificated shares of DoveBid Capital Stock in the name
of Seller for the number and kind of shares of DoveBid Capital Stock set forth
in this Section 3.3 and held in escrow by DoveBid until such time as all or a
portion of such shares of DoveBid Capital Stock are released pursuant to and in
accordance with the provisions of Section 7.16 and Article 10. Any shares of
DoveBid Common Stock or other equity securities issued or distributed by DoveBid
(including shares issued upon a Capital Change) in respect of Indemnification
Shares (the "New Indemnification Shares") shall be issued to each Interim Holder
(or such Interim Holder's transferees) or, from and after the Dissolution, each
Final Holder (or such Final Holder's transferees) according to its Pro Rata
Share but remain as uncertificated shares of DoveBid Capital Stock in the name
of each Interim Holder (or such Interim Holder's transferees) or, from and after
the Dissolution, each Final Holder (or such Final Holder's transferees)
according to its Pro Rata Share and held in escrow by DoveBid until such time as
all or a portion of such shares of DoveBid Capital Stock are released pursuant
to and in accordance with the provisions of Section 7.16 and Article 10. The
Indemnification Shares and any New Indemnification Shares are collectively
referred to herein as the "Indemnification Fund." Cash dividends on the
Indemnification Fund shall not be added to the Indemnification Fund but shall be
distributed to the record holders of such Indemnification Fund. DoveBid shall
hold the Indemnification Fund in escrow as security for the Seller Indemnifying
Person's (as defined in Section 10.2) indemnification obligations for Damages
under Article 10. The Indemnification Fund shall be held in escrow by DoveBid,
subject to the terms and conditions of Article 10, until the day after the first
anniversary of the Closing (the "Release Date").
3.4 Earnout Shares.
--------------
(a) At the Closing, a number of shares of DoveBid Series D-1
Preferred Stock, DoveBid Series C Preferred Stock, DoveBid Series DD Preferred
Stock and DoveBid Common Stock, in the Relative Percentages, representing 66.67%
of the DoveBid Common Stock Equivalents represented by the Total Shares (such
shares, collectively, the "Earnout Shares") shall be issued to Seller but remain
as uncertificated shares of DoveBid Capital Stock in the name of Seller for the
number and kind of shares of DoveBid Capital Stock set forth in this Section
3.4(a) and held in escrow by DoveBid until such time as all or a portion of such
shares of DoveBid Capital Stock are released pursuant to and in accordance with
the provisions of this Section 3.4, Section 7.16 and Article 10. Any shares of
DoveBid Common Stock or other equity securities issued or distributed by DoveBid
(including shares issued upon a Capital Change) in respect of Earnout Shares
(the "New Earnout Shares") shall be issued to each Interim Holder (or such
Interim Holder's transferees) or, from and after the Dissolution, each Final
Holder (or such Final Holder's transferees) according to its Pro Rata Share but
remain as uncertificated shares of DoveBid Capital Stock in the name of each
Interim Holder (or such Interim Holder's transferees) or, from and after the
Dissolution, each Final Holder (or such Final Holder's transferees) according to
its Pro Rata Share and held in escrow by DoveBid until such time as all or a
portion of such shares of DoveBid Capital Stock are released pursuant to and in
accordance with the provisions of this Section 3.4, Section 7.16 and Article 10.
The Earnout Shares and any New Earnout Shares are collectively referred to
herein as the "Earnout Fund." Cash dividends on the
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Earnout Fund shall not be added to the Earnout Fund but shall be distributed to
the record holders of such Earnout Fund.
(b) DoveBid shall release the Earnout Fund to each Interim Holder (or
such Interim Holder's transferees) or, from and after the Dissolution, each
Final Holder (or such Final Holder's transferees) as follows:
(i) If, before the Closing, Seller obtains written commitments,
in form and substance reasonably satisfactory to Buyer, from each of Ford Motor
Company and Lucent Technologies and at least three other current customers of
Seller, which commitments identify Seller as each such customer's current
preferred vendor for asset management and disposition services and contain
agreements by each such customer to continue such relationship with Buyer from
the Closing through December 31, 2002, then DoveBid shall release to Seller, at
the Closing, an amount of Earnout Shares, in the Relative Percentages, equal to
16.67% of the DoveBid Common Stock Equivalents represented by the Total Shares;
provided, however, that any shares so released shall remain as uncertificated
-------- -------
shares of DoveBid Capital Stock in accordance with Section 7.16.
(ii) Subject to Section 3.4(c), if the First Applicable Revenue
is greater than or equal to $1,200,000 (the "First Target"), then DoveBid shall
release to each Interim Holder (or such Interim Holder's transferees) or, from
and after the Dissolution, each Final Holder (or such Final Holder's
transferees) according to its Pro Rata Share, pursuant to Section 3.4(e), an
amount of Earnout Shares, in the Relative Percentages, equal to 12.5% of the
DoveBid Common Stock Equivalents represented by the Total Shares and any New
Earnout Shares related thereto; provided, however, that any shares so released
-------- -------
shall remain as uncertificated shares of DoveBid Capital Stock in accordance
with Section 7.16. Any First Applicable Revenue in excess of the First Target
shall be carried forward and applied to the Second Applicable Revenue.
(iii) Subject to Section 3.4(c), if the Second Applicable Revenue
is greater than or equal to $1,400,000 (the "Second Target"), then DoveBid shall
release to each Interim Holder (or such Interim Holder's transferees) or, from
and after the Dissolution, each Final Holder (or such Final Holder's
transferees) according to its Pro Rata Share, pursuant to Section 3.4(e), an
amount of Earnout Shares, in the Relative Percentages, equal to 12.5% of the
DoveBid Common Stock Equivalents represented by the Total Shares and any New
Earnout Shares related thereto; provided, however, that any shares so released
-------- -------
shall remain as uncertificated shares of DoveBid Capital Stock in accordance
with Section 7.16. Any Second Applicable Revenue in excess of the Second Target
shall be carried forward and applied to the Third Applicable Revenue.
(iv) Subject to Section 3.4(c), if the Third Applicable Revenue
is greater than or equal to $2,100,000 (the "Third Target"), then DoveBid shall
release to each Interim Holder (or such Interim Holder's transferees) or, from
and after the Dissolution, each Final Holder (or such Final Holder's
transferees) according to its Pro Rata Share, pursuant to Section 3.4(e), an
amount of Earnout Shares, in the Relative Percentages, equal to 12.5% of the
DoveBid Common Stock Equivalents represented by the Total Shares (the "Third
Earnout
-15-
Shares") and any New Earnout Shares related thereto; provided, however, that any
-------- -------
shares so released shall remain as uncertificated shares of DoveBid Capital
Stock in accordance with Section 7.16. Any Third Applicable Revenue in excess of
the Third Target shall be carried forward and applied to the Fourth Applicable
Revenue. If the Third Applicable Revenue (including any revenue carried forward
pursuant to Section 3.4(b)(iii)) equals or exceeds 75% of the Third Target, but
is less than 100% of the Third Target, then DoveBid shall release to each
Interim Holder (or such Interim Holder's transferees) or, from and after the
Dissolution, each Final Holder (or such Final Holder's transferees) according to
its Pro Rata Share, pursuant to Section 3.4(e), a percentage of the Third
Earnout Shares, in the Relative Percentages, and any New Earnout Shares related
thereto, based on the following formula: (A) the percentage of the Third Target
(including any revenue carried forward pursuant to Section 3.4(b)(iii)) achieved
multiplied by (B) 80%; provided, however, that any shares so released shall
-------- -------
remain as uncertificated shares of DoveBid Capital Stock in accordance with
Section 7.16. By way of example, if 82% of the Third Target is achieved, then
DoveBid shall release to each Interim Holder (or such Interim Holder's
transferees) or, from and after the Dissolution, each Final Holder (or such
Final Holder's transferees) according to its Pro Rata Share, pursuant to Section
3.4(e), an amount of Earnout Shares, in the Relative Percentages, equal to 65.6%
of the Third Earnout Shares (82% x 80%) and any New Earnout Shares related
thereto.
(v) Subject to Section 3.4(c), if the Fourth Applicable Revenue
(A) is greater than or equal to $3,000,000 (the "Fourth Target") or (B) is at
least $2,100,000 (the "Alternate Fourth Target") and Seller, during the period
from January 28, 2002 through the Closing, and Buyer, during the period from the
Closing through January 31, 2003, together shall have signed, in connection with
the Business, at least ten long-term corporate marketplace contracts with new
clients, then DoveBid shall release to each Interim Holder (or such Interim
Holder's transferees) or, from and after the Dissolution, each Final Holder (or
such Final Holder's transferees) according to its Pro Rata Share, pursuant to
Section 3.4(e), an amount of Earnout Shares, in the Relative Percentages, equal
to 12.5% of the DoveBid Common Stock Equivalents represented by the Total Shares
(the "Fourth Earnout Shares") and any New Earnout Shares related thereto;
provided, however, that any shares so released shall remain as uncertificated
-------- -------
shares of DoveBid Capital Stock in accordance with Section 7.16. If (A) the
Fourth Applicable Revenue (including any revenue carried forward pursuant to
Section 3.4(b)(iv)) equals or exceeds 75% of the Fourth Target, but is less than
100% of the Fourth Target, or (B) the Fourth Applicable Revenue (including any
revenue carried forward pursuant to Section 3.4(b)(iv)) equals or exceeds 75% of
the Alternate Fourth Target, but is less than 100% of the Alternate Fourth
Target, and Seller, during the period from January 1, 2002 through the Closing,
and Buyer, during the period from the Closing through December 31, 2002,
together shall have signed, in connection with the Business, at least ten
long-term corporate marketplace contracts with new clients, then DoveBid shall
release to each Interim Holder (or such Interim Holder's transferees) or, from
and after the Dissolution, each Final Holder (or such Final Holder's
transferees) according to its Pro Rata Share, pursuant to Section 3.4(e), a
percentage of the Fourth Earnout Shares, in the Relative Percentages, and any
New Earnout Shares related thereto, based on the following formula: (A) the
percentage of the Fourth Target or the Alternate Fourth Target (including any
revenue carried forward pursuant to Section 3.4(b)(iv)), as applicable, achieved
multiplied by (B) 80%; provided, however, that any
-------- -------
-16-
shares so released shall remain as uncertificated shares of DoveBid Capital
Stock in accordance with Section 7.16. By way of example, if 82% of the Fourth
Target is achieved, then DoveBid shall release to each Interim Holder (or such
Interim Holder's transferees) or, from and after the Dissolution, each Final
Holder (or such Final Holder's transferees) according to its Pro Rata Share,
pursuant to Section 3.4(e), an amount of Earnout Shares, in the Relative
Percentages, equal to 65.6% of the Fourth Earnout Shares (82% x 80%) and any New
Earnout Shares related thereto. Similarly, if 82% of the Alternate Fourth Target
is achieved and Seller, during the period from January 1, 2002 through the
Closing, and Buyer, during the period from 1, 2002 through December 31, 2002,
together shall have signed, in connection with the Business, at least ten
long-term corporate marketplace contracts with new clients, then DoveBid shall
release to each Interim Holder (or such Interim Holder's transferees) or, from
and after the Dissolution, each Final Holder (or such Final Holder's
transferees) according to its Pro Rata Share, pursuant to Section 3.4(e), an
amount of Earnout Shares, in the Relative Percentages, equal to 65.6% of the
Fourth Earnout Shares (82% x 80%) and any New Earnout Shares related thereto.
For purposes of this clause (v), "long-term" means a period greater than two
years and "new client" means, with respect to any contract signed by Seller
during the period from January 28, 2002 through the Closing or Buyer during the
period from the Closing through January 31, 2003, a person which, as of the date
of signing of such contract (the "Signing Date"), was not a client, customer or
user during the three-year period prior to the Signing Date of the services of
any of DoveBid, Seller or any of their respective Subsidiaries. Notwithstanding
anything in this Section 3.4(b)(v), no contract executed prior to the Closing
shall be deemed to be a long-term corporate marketplace contract with a new
client unless such contract is an Assigned Agreement for which all necessary
consents required to be obtained or made by Seller to enable Seller to lawfully
assign such contract to Buyer have been obtained or made by Seller before
Closing.
Any Earnout Shares not released pursuant to clauses (i) through (v)
above shall be forfeited by Seller and shall be cancelled and retired by
DoveBid, and neither DoveBid nor Buyer shall be under any obligation to deliver
to Seller any consideration in exchange therefor.
(c) Notwithstanding anything to the contrary in this Section 3.4, if
(i) Buyer delivers a Notice of Claim (as defined in Section 10.5(b)) to the
Representative (as defined in Section 10.5(a)) as provided in Section 10.5 and
(ii) the shares in the Indemnification Fund remaining in escrow are insufficient
to satisfy the Claim (as defined in Section 10.5(b)) set forth in such Notice of
Claim, then the Buyer Indemnified Person (as defined in Section 10.2) shall have
recourse to any shares in the Earnout Fund remaining in escrow as of the date
such Notice of Claim is delivered to the Representative to satisfy any
indemnification obligation arising under such Notice of Claim (any such shares
in the Earnout Fund required to satisfy the potential indemnification
obligation, the "Additional Indemnification Shares"). In any such case, the
Additional Indemnification Shares shall be retained according to the Relative
Percentages and the Pro Rata Share of each Interim Holder (or such Interim
Holder's transferees) and, from and after the Dissolution, the Pro Rata Share of
each Final Holder (or such Final Holder's transferees). Upon resolution of the
Notice of Claim as provided in Section 10.5(e), DoveBid shall reduce, according
to the Relative Percentages and, from and after the Dissolution, the Pro Rata
Share of each Final Holder (or such Final Holder's transferees), the number of
shares in the Indemnification Fund remaining in escrow and, if such shares are
insufficient, the number of Additional Indemnification Shares by the amount of
Damages for which the Buyer Indemnified
-17-
Person is entitled and any Additional Indemnification Shares not reduced thereby
shall, as applicable, either be (i) released by DoveBid to each Interim Holder
(or such Interim Holder's transferees) or, from and after the Dissolution, each
Final Holder (or such Final Holder's transferees) according to its Pro Rata
Share as Earnout Shares which such person was entitled to receive pursuant to
Section 3.4(b)(i), 3.4(b)(ii), 3.4(b)(iii) or 3.4(b)(iv), as applicable, but did
not receive solely as a result of DoveBid's withholding of such shares in the
Earnout Fund as Additional Indemnification Shares at the applicable time of
release pursuant to Section 3.4(e) or (ii) returned to escrow as available
shares in the Earnout Fund; provided, however, that any shares released pursuant
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to clause (i) shall remain as uncertificated shares of DoveBid Capital Stock in
accordance with Section 7.16. For purposes of this Section 3.4(c), the value of
each share in the Indemnification Fund and each Additional Indemnification Share
shall be the fair market value, as of the date the Notice of Claim is delivered
to the Representative, as reasonably determined by DoveBid's Board of Directors
and specified in the Notice of Claim; provided, however, that the Representative
-------- -------
may object to any such determination of the fair market value of the shares in
the Indemnification Fund and the Additional Indemnification Shares by delivering
written notice of such objection to DoveBid and Buyer within 20 days of the
Representative's receipt of the Notice of Claim. DoveBid and the Representative
shall confer in good faith for a period of up to 30 days following the delivery
of any such objection to the determination of fair market value. If, after such
30-day period, DoveBid and the Representative cannot agree on the fair market
value, then DoveBid and the Representative shall, within ten days after the end
of such 30-day period, jointly retain an independent investment banking firm of
recognized national standing (the "Firm") to resolve any remaining disagreements
with respect to fair market value. If DoveBid and the Representative are unable
to agree upon a Firm within such ten-day period, then each of DoveBid and the
Representative shall select one such independent, nationally recognized
investment banking firm and, within five days after such selection, the two
firms shall select a third independent, nationally recognized investment banking
firm to act as the Firm. DoveBid and the Representative shall request that the
Firm render a determination of fair market value within 45 days after its
retention, and DoveBid and the Representative shall cooperate fully with the
Firm so as to enable it to make such determination as quickly and as accurately
as practicable. The Firm's determination as to fair market value (the "Appraised
Price") shall be in writing and shall be conclusive and binding upon DoveBid,
the Seller Indemnifying Person and the Representative. DoveBid and the
Representative initially shall bear the expense of deposits and advances
required by the Firm in equal proportions. If DoveBid's final determination of
fair market value is less than 87.5% of the Appraised Price then all fees and
expenses of the Firm shall be borne solely by Buyer. If DoveBid's final
determination of fair market value equals at least 87.5% of the Appraised Price
then all fees and expenses of the Firm shall be borne solely by the
Representative.
(d) Within 45 days of the end of each Revenue Measurement Period,
DoveBid shall prepare and deliver to the Representative a report, in
substantially the form of Exhibit G, of the First Applicable Revenue, Second
---------
Applicable Revenue, Third Applicable Revenue and Fourth Applicable Revenue, as
the case may be, according to GAAP and the requirements and procedures
identified on Exhibit C (each a "Quarterly Report"). If the Representative
---------
objects to the content of the Quarterly Report, it shall promptly notify DoveBid
in writing. DoveBid and the Representative shall confer in good faith for a
period of up to 30 days following the delivery
-18-
of any such objection to the Quarterly Report concerning the subject matter of
the objection in an attempt to resolve it. If, after such 30-day period, DoveBid
and the Representative cannot agree, then DoveBid and the Representative shall
resolve all disputes over First Applicable Revenue, Second Applicable Revenue,
Third Applicable Revenue and Fourth Applicable Revenue, as the case may be,
through binding arbitration in the same manner provided for resolution of
Contested Claims (as defined in Section 10.5(e)) under Section 10.5
(e) Promptly after delivery of each Quarterly Report, DoveBid shall
release to each Interim Holder (or such Interim Holder's transferees) or, from
and after the Dissolution, each Final Holder (or such Final Holder's
transferees) according to its Pro Rata Share a number (e) of Earnout Shares (and
any New Earnout Shares related thereto), if ny, according to the Relative
Percentages, which are to be released pursuant to Section 3.4(b)(ii),
3.4(b)(iii), 3.4(b)(iv) or 3.4(b)(v), as applicable, as modified by Section
3.4(c), and for which no objections have been raised pursuant to Section 3.4(c)
or 3.4(d); provided, however, that any shares so released shall remain as
-------- -------
uncertificated shares of DoveBid Capital Stock in accordance with Section 7.16.
Promptly after resolution of all objections, if any, raised pursuant to Section
3.4(c) or 3.4(d), DoveBid shall release to each Interim Holder (or such Interim
Holder's transferees) or, from and after the Dissolution, each Final Holder (or
such Final Holder's transferees) according to its Pro Rata Share a number of
Earnout Shares (and any New Earnout Shares related thereto), if any, according
to the Relative Percentages, which are to be released pursuant to Section
3.4(b)(ii), 3.4(b)(iii), 3.4(b)(iv) or 3.4(b)(v), as applicable, as modified by
Section 3.4(c), and which were not previously released pursuant to the foregoing
sentence; provided, however, that any shares so released shall remain as
-------- -------
uncertificated shares of DoveBid Capital Stock in accordance with Section 7.16.
3.5 Contingent Post-Closing Purchase Price Adjustment. If, pursuant to the
-------------------------------------------------
terms of the TradeOut Agreement, DoveBid releases any of the Holdback Amount (as
defined in the TradeOut Agreement) to TradeOut after the Closing, then DoveBid
shall recalculate Total DoveBid Equity as it would have been calculated as of
the Closing had the Holdback Amount (as defined in the TradeOut Agreement)
released by DoveBid been included therein and shall issue to each Interim Holder
(or such Interim Holder's transferees) or, from and after the Dissolution, each
Final Holder (or such Final Holder's transferees) according to its Pro Rata
Share any additional shares of DoveBid Series C Preferred Stock and DoveBid
Series DD Preferred Stock required by such recalculation as provided in this
Section 3.5 (such shares, the "Additional Shares"); provided, however, that the
-------- -------
Additional Shares shall be treated in the same manner as if such shares had been
issued to Seller on the Closing and shall remain as uncertificated shares of
DoveBid Capital Stock, in accordance with Section 7.16, in the name of each
Interim Holder (or such Interim Holder's transferees) or, from and after the
Dissolution, each Final Holder (or such Final Holder's transferees) according to
its Pro Rata Share and shall be held in escrow by DoveBid as Earnout Shares and
Indemnification Shares, as applicable, until such time as all or a portion of
such shares of DoveBid Capital Stock are released pursuant to and in accordance
with the provisions of Section 3.1, Section 3.4, Section 7.16 and Article 10.
For the avoidance of doubt, only that portion of the Additional Shares that
would not have been released by DoveBid (i) on the Closing pursuant to Section
3.1 or 3.4(b)(i), subject to Sections 3.3 and 3.4, or (ii) after the Closing
pursuant to Section 3.4(b)(ii), 3.4(b)(iii), 3.4(b)(iv) or 3.4(b)(v), as
applicable, as modified by Section 3.4(c), had the Additional Shares been issued
to Seller at the Closing, shall
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be held in escrow by DoveBid in accordance with the foregoing sentence.
3.6 Allocation of Purchase Price; Withholding. The Purchase Price shall be
-----------------------------------------
allocated to the Assets in the manner set forth on Exhibit H. Each party agrees
---------
not to take any position that varies from or is inconsistent with such
allocation in any Return or other filing made by such party with the IRS or with
any other Governmental Entity. Nothing contained herein shall impose on either
party the duty or obligation to contest any action which the IRS or any other
Taxing Authority may take or any adjustment or change in such allocation which
the IRS or any other Taxing Authority may make or propose.
3.7 Closing. The consummation of the purchase and sale of the Assets
-------
contemplated hereby shall take place at a closing to be held at the offices of
Buyer's legal counsel, Fenwick & West LLP, Two Palo Alto Square, Palo Alto,
California (the "Closing") within two business days following the satisfaction
or waiver of all conditions to Closing set forth in Article 8, or at such other
time or date, and at such other place, as may be agreed to by the parties hereto
(the date on which the Closing actually occurs, the "Closing Date").
4. LIABILITIES.
-----------
4.1 Liabilities Assumed. Buyer shall assume, as of the Closing, the
-------------------
Liabilities of Seller set forth on Schedule 4.1 of the Seller Disclosure Letter
------------
(the "Assumed Liabilities").
4.2 Liabilities Not Assumed. Other than the Assumed Liabilities, Buyer
-----------------------
shall not assume or become obligated in any way to pay any Liabilities of Seller
or any of its Affiliates or the Business, including any of the following: (a)
Liabilities now or hereafter arising from or with respect to the sale, license,
provision, performance or delivery by Seller or any of its Affiliates of any
products or services that occurred before the Closing; (b) Liabilities now or
hereafter arising from or with respect to any demand, claim, debt, suit, cause
of action, arbitration or other proceeding (including a warranty claim, a
product liability claim or any other claim) that is made or asserted by any
third person that relates to any product or service that was sold, licensed or
otherwise provided by Seller or any of its Affiliates to any customer before the
Closing; (c) Liabilities now or hereafter arising from or with respect to
noncompliance with any bulk sales, bulk transfer or similar laws applicable to
the transactions contemplated by this Agreement; (d) Liabilities now or
hereafter arising from or with respect to the employment or termination of any
current, former or future employee of Seller or any of its Affiliates, including
Liabilities for the payment of any and all severance pay, wages or accrued and
unused vacation time or for reimbursement of any expenses incurred by any such
employees (but excluding Liabilities for the payment of any and all severance
pay that Buyer or DoveBid may, in its sole and absolute discretion, agree to pay
to any Offeree (as defined in Section 8.1(g)) or any Transitional Employee (as
defined in Section 8.1(g)) upon the termination of such person's employment with
Buyer or DoveBid, as applicable); (e) Liabilities now or hereafter arising from
or with respect to any Employee Plans or other employee benefit plans of Seller
or any of its Affiliates; (f) Liabilities now or hereafter arising from or with
respect to any employee of Seller or any of its Affiliates, including
Liabilities under COBRA and WARN; (g) Liabilities now or hereafter arising from
or with respect to any breach, violation or default by Seller or any of its
Affiliates of any contract, agreement or commitment of Seller or any of its
Affiliates that
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occurred (or arose from facts occurring) on or before the Closing; (h) Taxes now
or hereafter due and payable by Seller or any Affiliate of Seller, including any
Taxes on, or arising from, Seller's sale, assignment, transfer, conveyance and
delivery to Buyer of any of the Assets pursuant to this Agreement; (i) Taxes
attributable or related to any of the Assets that relate in any manner to, or
first arose during, any time period or portion thereof ending on or prior to the
Closing Date, and any related Liabilities of Seller and its Affiliates; (j)
Liabilities now or hereafter arising from or with respect to any of the Excluded
Assets; (k) Liabilities now or hereafter arising from or with respect to the
violation (or alleged violation) by Seller or any of its Affiliates of any
statute, law, ordinance, regulation, order, judgment or decree of any
Governmental Entity or any jurisdiction (other than Assumed Liabilities); and
(l) Liabilities now or hereafter arising from or with respect to any breach,
violation or default by Seller or any of its Affiliates of, or any action of
Seller or any of its Affiliates pursuant to, any of the agreements listed on
Schedule C of the Seller Disclosure Letter that occurred (or arose from facts
----------
occurring) on or before the effective date of the applicable Assignment and
Assumption Agreement related thereto. All Liabilities of Seller and its
Subsidiaries not expressly assumed by Buyer under Section 4.1 are referred to as
the "Excluded Liabilities."
4.3 No Obligations to Third Parties. No provisions of this Agreement are
-------------------------------
intended, nor shall be interpreted, to provide or create any third-party
beneficiary rights or any other rights of any kind in any client, customer,
Affiliate, partner or employee of any party hereto or any other person, unless
specifically provided otherwise herein, and, except as so provided, all
provisions hereof shall be personal solely between the parties to this
Agreement. Notwithstanding the foregoing, Article 10 is intended to (a) benefit
the Indemnified Persons, (b) obligate the Seller Stockholders, from and after
the Dissolution, to indemnify and hold harmless the Buyer Indemnified Persons,
and (c) govern the rights and obligations of the Representative as provided
therein.
5. REPRESENTATIONS AND WARRANTIES OF SELLER.
----------------------------------------
Seller represents and warrants to DoveBid and Buyer that, except as set
forth in the letter from Seller addressed to DoveBid and Buyer and dated as of
the date hereof, whether or not the representation, warranty or statement
contained in this Article 5 explicitly calls for an exception, which letter has
been delivered by Seller to DoveBid and Buyer concurrently with the parties'
execution of this Agreement (the "Seller Disclosure Letter"), each of the
representations, warranties and statements contained in this Article 5 is true
and correct as of the date hereof and shall be true and correct on and as of the
Closing Date. For all purposes of this Agreement, the statements contained in
the Seller Disclosure Letter shall also be deemed to be representations and
warranties made and given by Seller under this Article 5.
5.1 Organization and Good Standing. Seller is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Seller has the corporate power and authority to own, operate and lease
its properties and to carry on its business as now conducted and as presently
proposed to be conducted, and is qualified to conduct business, and is in good
standing, in each jurisdiction in which the character of the properties owned,
leased or licensed by it or the nature of its activities makes such
qualification necessary,
-21-
except to the extent that the failure to so qualify would not have a Material
Adverse Effect on any of Seller, the Assets or the Business. Seller has
delivered to Buyer's legal counsel copies of its Certificate of Incorporation
and Bylaws, each as currently in effect. Seller is not in violation of its
Certificate of Incorporation or Bylaws, each as currently in effect.
5.2 Power, Authorization and Validity.
---------------------------------
(a) Power and Authority; Due Authorization. Seller has the right,
--------------------------------------
power, legal capacity and authority to enter into and perform its obligations
under this Agreement and each of the other agreements, certificates and
documents that it is to execute and deliver pursuant to this Agreement (the
"Seller Ancillary Agreements"). The execution, delivery and performance by
Seller of this Agreement and each of the Seller Ancillary Agreements have been
duly and validly approved and authorized by all necessary corporate action on
the part of Seller, subject only to the approval and adoption of this Agreement
and each of the Seller Ancillary Agreements, and the approval of the
transactions contemplated hereby and thereby, by the Seller Stockholders as set
forth in Section 5.2(b).
(b) Stockholder Consents. Under Seller's Certificate of Incorporation
--------------------
and Bylaws, each as currently in effect, and the DGCL, the vote of (i) a
majority of the holders of Seller Common Stock (including the holders of Seller
Preferred Stock on a fully converted to Seller Common Stock basis) and (ii) a
majority of the holders of the Seller Preferred Stock is necessary and
sufficient for the Seller Stockholders to approve and adopt this Agreement and
each of the Seller Ancillary Agreements and approve the transactions
contemplated hereby and thereby. Except as provided in the preceding sentence,
no other action or approval on the part of the holders of any of Seller's
securities is required in order to validly approve and adopt this Agreement and
each of the Seller Ancillary Agreements and approve the transactions
contemplated hereby and thereby.
(c) Other Consents. No consent, approval, permit, order or
--------------
authorization from, or registration, declaration or filing with, any
Governmental Entity or any other person, governmental or otherwise, is necessary
or required to be obtained or made by Seller to enable Seller to lawfully enter
into and perform its obligations under this Agreement and each of the Seller
Ancillary Agreements, including Seller's sale, assignment, transfer, conveyance
and delivery of the Assets and assignment of any Assigned Agreements to Buyer,
except for the approvals of the Seller Stockholders as set forth in Section
5.2(b) and the consents set forth on Schedule 5.2(c) of the Seller Disclosure
---------------
Letter.
(d) Enforceability. This Agreement has been duly executed and
--------------
delivered by Seller. This Agreement and each of the Seller Ancillary Agreements
are, or when duly executed and delivered by Seller shall be, valid and binding
obligations of Seller, enforceable against Seller in accordance with their
respective terms, subject only to the effect, if any, of (i) applicable
bankruptcy and other similar laws affecting the rights of creditors generally,
(ii) rules of law and equity governing specific performance, injunctive relief
and other equitable remedies, and (iii) the enforceability of provisions
requiring indemnification in connection with the offering, issuance or sale of
securities.
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5.3 Capitalization.
--------------
(a) Authorized and Outstanding Capital Stock of Seller. The
--------------------------------------------------
authorized capital stock of Seller consists entirely of: (i) 90,000,000 shares
of common stock, par value $0.01 per share ("Seller Common Stock"), of which a
total of 10,169,638 shares are issued and outstanding; and (ii) 40,500,000
shares of preferred stock, of which (A) 20,500,000 shares are designated Series
A Preferred Stock, par value $0.01 per share ("Seller Series A Preferred
Stock"), of which a total of 19,761,056 are issued and outstanding and each of
which is currently convertible into one share of Seller Common Stock, (B)
10,000,000 shares are designated Series A-1 Preferred Stock, par value $0.01 per
share ("Seller Series A-1 Preferred Stock"), of which a total of 9,730,823 are
issued and outstanding and each of which is currently convertible into one share
of Seller Common Stock, and (C) 10,106,868 shares are designated Series B
Preferred Stock, par value $0.01 per share ("Seller Series B Preferred Stock"
and together with the Seller Series A Preferred Stock and Seller Series A-1
Preferred Stock, the "Seller Preferred Stock"), of which a total of 10,106,868
are issued and outstanding and each of which is currently convertible into one
share of Seller Common Stock. The numbers of issued and outstanding shares of
Seller Common Stock and Seller Preferred Stock held by each Seller Stockholder
as of the date hereof are set forth on Schedule 5.3(a)-1 of the Seller
-----------------
Disclosure Letter. Except as expressly set forth on Schedule 5.3(a)-1 of the
-----------------
Seller Disclosure Letter, no shares of Seller Common Stock or Seller Preferred
Stock are issued or outstanding as of the date hereof, and no such shares shall
be issued or outstanding as of the Closing Date that are not set forth on
Schedule 5.3(a)-1 of the Seller Disclosure Letter except for shares of Seller
-----------------
Common Stock issued pursuant to the exercise of outstanding Seller Options, all
of which are listed on Schedule 5.3(a)-2 of the Seller Disclosure Letter, or
-----------------
outstanding warrants to purchase shares of Seller Common Stock, all of which are
listed on Schedule 5.3(a)-3 of the Seller Disclosure Letter. All issued and
-----------------
outstanding shares of Seller Common Stock and Seller Preferred Stock have been
duly authorized and validly issued, are fully paid and nonassessable, are not
subject to any right of rescission, right of first refusal or preemptive right,
and have been offered, issued, sold and delivered by Seller in compliance with
all Applicable Legal Requirements and all requirements set forth in applicable
agreements or instruments. Any and all accrued and unpaid dividends on each
share of Seller Common Stock and each share of Seller Preferred Stock, as of the
date hereof and as of the Closing Date, are specified on Schedule 5.3(a)-4 of
-----------------
the Seller Disclosure Letter. Schedule 5.3(a)-5 of the Seller Disclosure Letter
-----------------
sets forth, for each Seller Stockholder, such Seller Stockholder's pro rata
share of the Total Shares as of the date hereof and as if the Dissolution
occurred as of the Closing. To Seller's knowledge, each holder of Seller
Preferred Stock is an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act and has such knowledge and experience in
financial or business matters that he/she/it is capable of evaluating the merits
and risks of an investment in the Purchased Shares and/or the Conversion Shares
and protecting his/her/its own interests in connection with such an investment.
(b) Options, Warrants and Rights. Seller has reserved an aggregate of
----------------------------
10,595,945 shares of Seller Common Stock for issuance pursuant to the Seller
Stock Plans (including shares subject to outstanding Seller Options). A total of
6,190,839 shares of Seller Common Stock are subject to outstanding Seller
Options as of the date hereof and as of the Closing Date, except for Seller
Options that are exercised in accordance with their terms. Schedule 5.3(a)-2 of
-----------------
the Seller Disclosure Letter sets forth, for each Seller Option, (i) the name
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of the holder of such Seller Option, (ii) the exercise price per share of such
Seller Option, and (iii) the number of shares covered by such Seller Option.
True and correct copies of the Seller Stock Plans, the standard agreements under
the Seller Stock Plans and each agreement for each Seller Option that does not
conform to the standard agreements under the Seller Stock Plans have been
delivered by Seller to Buyer's legal counsel. All outstanding Seller Options
have been issued and granted in compliance with all Applicable Legal
Requirements and all requirements set forth in applicable agreements or
instruments. Except as set forth on Schedules 5.3(a)-2, 5.3(a)-3 and 5.3(b)-1 of
------------------ -------- --------
the Seller Disclosure Letter, there are no stock appreciation rights, options,
warrants, calls, rights, commitments, conversion privileges or preemptive or
other rights or agreements outstanding to purchase or otherwise acquire any
shares of Seller capital stock or any securities or debt convertible into or
exchangeable for Seller capital stock or obligating Seller to grant, extend or
enter into any such option, warrant, call, right, commitment, conversion
privilege or preemptive or other right or agreement. Except as set forth on
Schedule 5.3(b)-2 of the Seller Disclosure Letter, there are no voting
-----------------
agreements, registration rights, rights of first refusal, preemptive rights,
co-sale rights or other restrictions (other than normal restrictions on transfer
under applicable federal and state securities laws) applicable to any
outstanding securities of Seller.
5.4 Subsidiaries. Except as set forth on Schedule 5.4 of the Seller
------------ ------------
Disclosure Letter, Seller does not have any Subsidiaries or any equity or other
ownership interest, direct or indirect, in any corporation, partnership, joint
venture or other business entity. Seller is not obligated to make and is not
bound by any agreement or obligation to make any investment in or capital
contribution in or on behalf of any other entity. Schedule 5.4 of the Seller
------------
Disclosure Letter sets forth, with respect to each Subsidiary of Seller, (a) its
jurisdiction of incorporation or organization, (b) a correct and complete list
of all jurisdictions in which it is qualified to do business, (c) the number of
issued and outstanding shares of each class of its capital stock and the
identity of each holder thereof, and (d) the address of its principal executive
offices. Each Subsidiary of Seller is duly organized, validly existing and in
good standing (or appropriately recognized as legally in existence and active
under the laws of its jurisdiction) under the laws of the jurisdiction of
incorporation or organization identified on Schedule 5.4 of the Seller
------------
Disclosure Letter, and has the corporate power and authority to carry on its
business as now conducted. Each Subsidiary of Seller is qualified to conduct
business, and is in good standing, in each jurisdiction in which the character
of the properties owned, leased or licensed by it or the nature of its
activities make such qualification necessary, except to the extent that the
failure to so qualify would not have a Material Adverse Effect on any of Seller,
the Assets or the Business. Seller owns of record and beneficially all of the
issued and outstanding capital or other stock of each Subsidiary set forth on
Schedule 5.4 of the Seller Disclosure Letter free and clear of any Encumbrance.
------------
No corporate proceedings on the part of any Subsidiary of Seller are necessary
to authorize this Agreement, the Seller Ancillary Agreements and the
transactions contemplated hereby and thereby. Neither Seller, nor any Subsidiary
of Seller, is a general or limited partner of any general partnership, limited
partnership or other entity.
5.5 No Conflict. Neither the execution and delivery of this Agreement or
-----------
any of the Seller Ancillary Agreements by Seller, nor the consummation of the
transactions contemplated hereby or thereby, shall conflict with, or (with or
without notice or lapse of time, or both) result in a termination, breach,
default, impairment or violation of: (a) any provision of the Certificate
-24-
of Incorporation or Bylaws or similar charter documents of Seller or any of its
Subsidiaries, each as currently in effect; (b) any foreign, federal, state or
local judgment, injunction, writ, decree, determination, award, order, law,
statute, rule or regulation applicable to Seller, any of its Subsidiaries or any
of the Assets; (c) any note, bond, mortgage, indenture, lease, license, permit,
franchise, instrument, contract, agreement, arrangement, commitment,
undertaking, understanding, letter of intent or memorandum of understanding
(whether oral or in writing) to which Seller or any of its Subsidiaries is a
party or by which Seller, any of its Subsidiaries or any of the Assets are
bound, including any Assigned Agreement; or (d) any privacy policy of Seller or
any of its Subsidiaries, except in the cases of clauses (b) and (c) where such
conflict, termination, breach, default, impairment or violation would not have a
Material Adverse Effect on any of Seller, the Assets or the Business. Neither
Seller's entering into this Agreement or any of the Seller Ancillary Agreements,
nor the consummation of the transactions contemplated hereby or thereby, shall
result in the creation of any Encumbrance on any of the Assets or give rise to,
or trigger the application of, any rights of any third party that would come
into effect upon the consummation of the transactions contemplated hereby or
thereby.
5.6 Litigation. There is no action, suit, arbitration, mediation,
----------
proceeding, claim or investigation of any nature pending or, to the Knowledge of
Seller and its Subsidiaries, threatened against Seller or any of its
Subsidiaries (or against any officer, director, employee or agent of Seller or
any of its Subsidiaries in their capacity as such or relating to their
employment, services or relationship with Seller or any of its Subsidiaries)
before any Governmental Entity, arbitrator or mediator. There is no judgment,
decree, injunction, rule or order of any Governmental Entity, arbitrator or
mediator pending or binding against Seller, any of its Subsidiaries or any of
the Assets. To the Knowledge of Seller and its Subsidiaries, there is no
reasonable basis for any person to assert a claim against Buyer, Seller or any
of their respective Affiliates based upon: (a) Seller's entering into this
Agreement or any of the Seller Ancillary Agreements or consummating the
transactions contemplated hereby or thereby; (b) a claim of ownership or rights
to ownership of any shares or other ownership interest in Seller (other than the
claims inherent in ownership of the record holders of equity interests as set
forth on Schedules 5.3(a)-2, 5.3(a)-3 and 5.3(b)-1 of the Seller Disclosure
---------------------------- --------
Letter) or any of the Assets; (c) any rights as a Seller Stockholder, including
any option or preemptive rights or rights to notice or to vote; or (d) any
rights under any agreement among Seller and the Seller Stockholders. Seller has
not, nor does Seller intend to, initiate any action, suit, arbitration,
mediation, proceeding, claim or investigation that might affect the Assets or
the Business.
5.7 Taxes. Each of Seller and its Subsidiaries has timely and properly
-----
filed all Returns required to be filed by it, has paid all Taxes required to be
paid by it, has established an adequate accrual or reserve for the payment of
all Taxes payable in respect of the periods subsequent to the periods covered by
the most recent applicable Returns, has made all necessary estimated Tax
payments, and has no Liability for Taxes in excess of the amount so paid or
accruals or reserves so established. All such filed Returns are true, correct
and complete, and Seller has provided Buyer with true and correct copies of all
such Returns. Neither Seller nor any of its Subsidiaries is delinquent in the
payment of any Tax or in the filing of any Return, and no deficiencies for any
Tax have been threatened, claimed, proposed or assessed. Neither Seller nor any
of its Subsidiaries has received any notification from the IRS or any other
Taxing Authority regarding any material issues or audit that: (a) are currently
pending before the IRS or
-25-
any other Taxing Authority regarding Seller or any of its Subsidiaries; or (b)
have been raised by the IRS or any other Taxing Authority and not yet finally
resolved. No Return of Seller or any of its Subsidiaries is or has, within the
last five years, been under audit by the IRS or any other Taxing Authority.
There is not in effect any waiver by Seller or any of its Subsidiaries of any
statute of limitations with respect to any Taxes. Neither Seller nor any of its
Subsidiaries has consented to any extension of time for filing any Return that
has not been filed, and neither Seller nor any of its Subsidiaries has consented
to extend to a date later than the date hereof the period in which any Tax may
be assessed or collected by any Taxing Authority. Each of Seller and its
Subsidiaries has withheld all Taxes required to be withheld and has paid such
withheld amounts to the appropriate Taxing Authority within the time prescribed
by all Applicable Legal Requirements.
5.8 Seller Financial Statements. Seller has delivered to Buyer as Schedule
--------------------------- --------
5.8(a) of the Seller Disclosure Letter (i) Seller's audited balance sheet as of
------
December 31, 2000, (ii) Seller's audited income statement and statement of cash
flows for the year ended December 31, 2000, (iii) Seller's unaudited balance
sheet as of December 31, 2001, and (iv) Seller's unaudited income statement and
statement of cash flows for the year ended December 31, 2001 (collectively, the
"Seller Financial Statements"). The Seller Financial Statements: (a) are derived
from and are in accordance with Seller's books and records; (b) fairly present
Seller's financial condition at the dates therein indicated and results of
operations for the periods therein specified; and (c) have been prepared in
accordance with GAAP, applied on a basis consistent with prior periods. Seller
has delivered to Buyer as Schedule 5.8(b) of the Seller Disclosure Letter a
--------------
detailed list of each Liability of Seller and its Subsidiaries in excess of
$5,000 (the "Liabilities List") as of the date hereof, and neither Seller nor
any of its Subsidiaries has any material Liability except for those shown on the
Liabilities List. The Liabilities List contains a true, correct and complete
listing of each Liability of Seller and its Subsidiaries in excess of $5,000,
including the amount of each such Liability. Seller hereby agrees that, prior to
the Closing, Seller shall deliver to Buyer an updated Liabilities List as of the
Closing Date.
5.9 Title to and Condition of Assets; Sufficiency of Assets.
-------------------------------------------------------
(a) Each of Seller and its Subsidiaries has good and marketable title
to, or in the case of leased Assets, valid leasehold interests in, all of the
Assets, free and clear of all Encumbrances. None of Seller's Subsidiaries
conducts any business, owns or leases any of the assets used in connection with
the Business or is a party to any contract, agreement, arrangement, commitment
or undertaking listed on Schedule 2.2(h) of the Seller Disclosure Letter. All
---------------
tangible personal property included in the Assets is in good operating condition
and repair, normal wear and tear excepted, and all leases of real or personal
property to which Seller or any of its Subsidiaries is a party are fully
effective and afford Seller or such Subsidiary peaceful and undisturbed
possession of the subject matter of the lease. Title to all of the Assets is
freely transferable from Seller to Buyer free and clear of all Encumbrances
without obtaining the consent or approval of any person, except that the
consents set forth on Schedule 5.2(c) of the Seller Disclosure Letter are
---------------
required for Seller and its Affiliates to assign the Assigned Agreements to
Buyer.
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(b) The Assets constitute all of the assets, properties, rights and
Intellectual Property Rights that are necessary to enable Buyer, following the
Closing, to own, conduct, operate and continue the Business substantially as
historically conducted and to sell and otherwise enjoy full rights to commercial
exploitation of products and services that are provided in connection with the
Business without: (i) the need for Buyer to acquire or license any other
material asset, property or Intellectual Property Right; and (ii) the breach or
violation of any contract or commitment. None of the Assets is licensed or
leased from any third party, and no royalties, license fees or similar payments
are due or payable (or may become due or payable) to any third party under any
license, lease or other agreement of, to or affecting the Assets. None of the
Assets is licensed to any third party.
5.10 Absence of Certain Changes. Since December 31, 2001, each of Seller
--------------------------
and its Subsidiaries has operated its business in the ordinary course consistent
with past practice, and since such date there has not been with respect to
Seller or any of its Subsidiaries any:
(a) Material Adverse Change in the Assets or the Business;
(b) incurrence, creation or assumption of (i) any Encumbrance on any
of the Assets, (ii) any Liability for borrowed money, or (iii) any Liability as
a guarantor or surety with respect to the obligations of others;
(c) purchase, license, sale, assignment or other disposition or
transfer, or agreement or other arrangement for the purchase, license, sale,
assignment or other disposition or transfer, of any of the Assets other than in
the ordinary course of business consistent with past practice;
(d) damage, destruction or loss of any Asset, whether or not covered
by insurance;
(e) declaration, setting aside or payment of any dividend on, or
making of any other distribution in respect of, its capital stock;
(f) change in the compensation payable or to become payable to any of
its officers, directors or employees, or in any bonus, pension, severance,
retention, insurance or other benefit payment or arrangement made to or with any
of such officers, directors or employees, except changes in the ordinary course
of business consistent with past practice;
(g) amendment of, relinquishment or termination by it of any contract,
agreement, arrangement, commitment or undertaking relating to the employment of
any officer, employee, contractor or consultant of Seller or any of its
Subsidiaries or any other type of contract, agreement, arrangement, commitment
or undertaking with any officer, employee, contractor or consultant of Seller or
any of its Subsidiaries;
(h) amendment of, relinquishment, termination or nonrenewal by it of
any Assigned Agreement or a right or obligation set forth in any Assigned
Agreement;
-27-
(i) written or, to the Knowledge of Seller and its Subsidiaries, oral
indication or assertion by the other party thereto of any material problems with
Seller's or any of its Subsidiaries' services or performance under any Assigned
Agreement or such other party's desire to so amend, relinquish, terminate or not
renew any Assigned Agreement (or a right or obligation set forth therein);
(j) license, transfer or grant of a right under any Seller IP Rights
(as defined in Section 5.13(a)); or
(k) material change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by it or any material
revaluation by it of any of the Assets.
5.11 Contracts and Commitments/Licenses and Permits. Schedules 5.11(a)
---------------------------------------------- -----------------
through (n) of the Seller Disclosure Letter set forth a list of each of the
---
following written or oral executory contracts, agreements, arrangements,
commitments and undertakings, including leases, licenses, permits, assignments,
mortgages, transactions, obligations or other instruments, to which Seller or
any of its Subsidiaries is a party or which relates to any of the Assets or the
Business:
(a) any contract, agreement, arrangement, commitment or undertaking
providing for payments (whether fixed, contingent or otherwise) by or to it in
an aggregate amount of $10,000 or more;
(b) any dealer, distributor, OEM (original equipment manufacturer),
VAR (value added reseller), sales representative or similar contract, agreement,
arrangement, commitment or undertaking under which any third party is authorized
to sell, sublicense, lease, distribute, market or take orders for, any product,
service or technology of it which is included in the Assets or which relates to
the Business;
(c) any contract, agreement, arrangement, commitment or undertaking
providing for the development of any software, content (including textual
content and visual, photographic or graphics content), technology or
intellectual property for (or for the benefit or use of) it, or providing for
the purchase or license of any software, content (including textual content and
visual, photographic or graphics content), technology or intellectual property
to (or for the benefit or use of) it, which software, content, technology or
intellectual property is in any manner used or incorporated (or is presently
contemplated by it to be used or incorporated) in connection with any aspect or
element of any product, service or technology of it which is included in the
Assets or which relates to the Business (other than software generally available
to the public at a per copy license fee of less than $500 per copy);
(d) any joint venture or partnership contract, agreement, arrangement,
commitment or undertaking that involves or could involve a sharing of profits,
expenses or losses with any other party;
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(e) any contract, agreement, arrangement, commitment or undertaking
for or relating to the employment of any officer, employee, contractor or
consultant of Seller or any of its Subsidiaries or any other type of contract,
agreement, arrangement, commitment or undertaking with any officer, employee,
contractor or consultant of Seller or any of its Subsidiaries, including any
contract, agreement, arrangement, commitment or undertaking providing for any
bonus or severance payment (including all Existing Severance Payments (as
defined in Section 7.14(a))); or
(f) any contract, agreement, arrangement, commitment or undertaking
for the lease of real or personal property, except for any contract, agreement,
arrangement, commitment or undertaking for the lease of real or personal
property providing for annual payments by it in an aggregate amount of less than
$25,000;
(g) any contract, agreement, arrangement, commitment or undertaking
that grants any exclusive rights to any party;
(h) any contract, agreement, arrangement, commitment or undertaking
that restricts it from engaging in any aspect of the Business, from
participating or competing in any line of business or market, from freely
setting prices for its products, services or technologies (including most
favored customer pricing provisions), from engaging in any business in any
market or geographic area, or from soliciting potential employees, consultants,
contractors or other suppliers or customers;
(i) any Seller IP Rights Agreement (as defined in Section 5.13(b));
(j) any contract, agreement, arrangement, commitment or undertaking
with any labor union;
(k) any indenture, mortgage, trust deed, promissory note, loan
agreement, security agreement, guarantee or other contract, agreement,
arrangement, commitment or undertaking for the borrowing of money, for a line of
credit or for a leasing transaction of a type required to be capitalized in
accordance with Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board;
(l) any Governmental Permit;
(m) any contract, agreement, arrangement, commitment or undertaking
obligating it to indemnify any person, except for any licenses of commercial
off-the-shelf computer software under shrink-wrap agreements and standard form
agreements attached as Schedule 5.11(m) of the Seller Disclosure Letter; and
----------------
(n) any other agreement not specified above which is material to the
Assets or the Business.
A true and complete copy of each contract, agreement, arrangement,
commitment or undertaking (or, in the case of an oral contract, agreement,
arrangement, commitment or undertaking, a written summary of all of the material
terms thereof) required by these
-29-
subsections (a) through (n) of this Section 5.11 to be listed on Schedule 5.11
-------------
of the Seller Disclosure Letter (the "Seller Contracts") and each Governmental
Permit required by subsection (l) of this Section 5.11 to be listed on Schedule
--------
5.11 of the Seller Disclosure Letter has been delivered to Buyer's legal
----
counsel.
5.12 No Default; No Restrictions.
---------------------------
(a) Each Assigned Agreement, Seller Contract and Governmental Permit
is in full force and effect. Seller and its Subsidiaries are not, nor to the
Knowledge of Seller and its Subsidiaries is any other party, in material breach
or default under any Assigned Agreement or Seller Contract. No event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time, or both) shall, or to the Knowledge of Seller and its
Subsidiaries, would reasonably be expected to, (i) result in a material
violation or breach of any of the provisions of any Assigned Agreement, or (ii)
give any third party (A) the right to declare a default or exercise any remedy
under any Assigned Agreement, (B) the right to a rebate, chargeback, penalty or
change in delivery schedule under any Assigned Agreement, (C) the right to
accelerate the maturity or performance of any obligation of Seller or any of its
Subsidiaries under any Assigned Agreement, or (D) the right to cancel, terminate
or modify any Assigned Agreement. No violation, breach or default of any of the
provisions of any Seller Contract that is not an Assigned Agreement shall result
in any Liability to DoveBid, Buyer or any of their respective Subsidiaries.
Neither Seller nor any of its Subsidiaries has received any written or, to the
Knowledge of Seller and its Subsidiaries, oral notice or other communication
regarding any actual or possible violation or breach of, or default under, any
Assigned Agreement or Seller Contract. Neither Seller nor any of its
Subsidiaries has any material Liability for renegotiation of any government
contracts or subcontracts included in the Assigned Agreements or the Seller
Contracts.
(b) None of the Seller Contracts and none of the Assets is bound or
affected by any judgment, injunction, order, decree, covenant, contract,
agreement, arrangement, commitment or undertaking (noncompete or otherwise)
that, restricts or prohibits, or purports to restrict or prohibit, Seller or any
of its Subsidiaries or, following the Closing, DoveBid or any of its
Subsidiaries, from freely engaging in the Business or includes any grants by
Seller or any of its Subsidiaries of exclusive rights or licenses.
5.13 Intellectual Property.
---------------------
(a) Seller (i) owns or (ii) has the valid right or license to use,
possess, develop, sell, license, copy, distribute, market, advertise and/or
dispose of all Intellectual Property Rights used in the conduct of the Business
as presently conducted (such Intellectual Property Rights being hereinafter
collectively referred to as the "Seller IP Rights"). Such Seller IP Rights are
sufficient for such conduct of the Business. As used herein, the term
"Seller-Owned IP Rights" means Seller IP Rights that are owned or exclusively
licensed to Seller; and "Seller-Licensed IP Rights" means Seller IP Rights that
are not Seller-Owned IP Rights.
(b) Neither the execution, delivery and performance of this Agreement
and the Seller Ancillary Agreements, nor the consummation of the transactions
contemplated by this
-30-
Agreement and/or the Seller Ancillary Agreements shall, in accordance with their
terms: (i) constitute a material breach of or default under any contract,
agreement, arrangement, commitment or undertaking governing any Seller IP Right
to which Seller or any of its Subsidiaries is a party (collectively, the "Seller
IP Rights Agreements"); (ii) cause the forfeiture or termination of, or give
rise to a right of forfeiture or termination of, any Seller IP Right; or (iii)
materially impair the right of Seller or any of its Subsidiaries, and following
the Closing, DoveBid or any of its Subsidiaries, to use, possess, sell or
license any Seller IP Right or portion thereof. Except as set forth on Schedule
--------
5.13(b) of the Seller Disclosure Letter, there are no royalties, honoraria, fees
------
or other payments payable by Seller or any of its Subsidiaries to any third
person (other than salaries payable to employees and independent contractors not
contingent on or related to use of their work product) as a result of the
ownership, use, possession, license-in, sale, marketing, advertising or
disposition of any Seller IP Rights by Seller or any of its Subsidiaries to the
extent necessary for the conduct of the Business, and none shall become payable
as a result of the consummation of the transactions contemplated hereby.
(c) Neither the use, development, manufacture, marketing, license,
sale, furnishing or intended use of any product or service currently licensed,
utilized, sold, provided or furnished by Seller or any of its Subsidiaries or
currently under development by Seller or any of its Subsidiaries violates any
license, contract, agreement, arrangement, commitment or undertaking between
Seller or any of its Subsidiaries and any third party or infringes or
misappropriates any Intellectual Property Right of any other party. There is no
pending or, to the Knowledge of Seller and its Subsidiaries, threatened claim or
litigation contesting the validity, ownership or right of Seller or any of its
Subsidiaries to exercise any Seller IP Right, nor to the Knowledge of Seller and
its Subsidiaries, is there any legitimate basis for any such claim, nor has
Seller or any of its Subsidiaries received any notice asserting that any Seller
IP Right or the proposed use, sale, license or disposition thereof conflicts or
shall conflict with the rights of any other party, nor, to the Knowledge of
Seller and its Subsidiaries, is there any legitimate basis for any such
assertion.
(d) No current or former employee, consultant or independent
contractor of Seller or any of its Subsidiaries: (i) is in material violation of
any term or covenant of any employment contract, patent disclosure agreement,
invention assignment agreement, nondisclosure agreement, noncompetition
agreement or any other contract, agreement, arrangement, commitment or
undertaking with any other party by virtue of such employee's, consultant's or
independent contractor's being employed by, or performing services for, Seller
or using trade secrets or proprietary information of others without permission;
or (ii) has developed any technology, software or other copyrightable,
patentable or otherwise proprietary work for Seller or any of its Subsidiaries
that is subject to any agreement under which such employee, consultant or
independent contractor has assigned or otherwise granted to any third party any
rights (including Intellectual Property Rights) in or to such technology,
software or other copyrightable, patentable or otherwise proprietary work.
Neither the employment of any employee by Seller or any of its Subsidiaries, nor
the use by Seller or any of its Subsidiaries of the services of any consultant
or independent contractor, subjects Seller or any of its Subsidiaries to any
Liability to any third party for improperly soliciting such employee, consultant
or independent contractor to work for Seller or any of its Subsidiaries, whether
such Liability is based on contractual or other legal obligations to such third
party.
-31-
(e) Each of Seller and its Subsidiaries has taken all necessary and
appropriate steps to protect, preserve and maintain the secrecy and
confidentiality of the Seller IP Rights and to preserve and maintain all of the
interests and proprietary rights of Seller and its Subsidiaries in the Seller IP
Rights. All current and former officers, employees and consultants of Seller and
its Subsidiaries having access to proprietary information of Seller or any of
its Subsidiaries, their respective customers or business partners and inventions
owned by Seller or any of its Subsidiaries have executed and delivered to Seller
an agreement, in the form attached to Schedule 5.13(e) of the Seller Disclosure
---------------
Letter, regarding the protection of such proprietary information and the
assignment of inventions to Seller (in the case of proprietary information of
the customers and business partners of Seller and its Subsidiaries, to the
extent required by such customers and business partners); and copies of all such
agreements have been delivered to Buyer's legal counsel. Seller has secured
valid written assignments from all of the current and former consultants,
contractors and employees of Seller and its Subsidiaries who were involved in,
or who contributed to, the creation or development of any Seller-Owned IP
Rights, of the rights to such contributions that may be owned by such persons or
that Seller or any of its Subsidiaries do not already own by operation of law.
No current or former employee, officer, director, consultant or independent
contractor of Seller or any of its Subsidiaries has any right, license, claim or
interest whatsoever in or with respect to any Seller IP Rights.
(f) Schedule 5.13(f) of the Seller Disclosure Letter contains a true
----------------
and complete list of: (i) all registrations, made by or on behalf of Seller or
any of its Subsidiaries with any governmental or quasi-governmental authority
anywhere in the world, of any patents, copyrights, mask works, trademarks,
service marks, or rights in Internet or World Wide Web domain names or URLs or
addresses; and (ii) all applications for any such registrations. All registered
patents, copyrights, trademarks, service marks, or rights in Internet or World
Wide Web domain names or URLs or addresses held by Seller or any of its
Subsidiaries are valid, enforceable and subsisting.
(g) Seller owns all right, title and interest in and to all
Seller-Owned IP Rights free and clear of all Encumbrances and licenses (other
than licenses and rights listed on Schedule 5.13(h)(i) of the Seller Disclosure
------------------
Letter). The right, license and interest of Seller in and to all Seller-Licensed
IP Rights are free and clear of all Encumbrances and licenses (other than
licenses and rights listed on Schedule 5.13(h)(ii) of the Seller Disclosure
-------------------
Letter).
(h) Schedule 5.13(h) of the Seller Disclosure Letter contains a true
----------------
and complete list of: (i) all licenses, sublicenses and other contracts,
agreements, arrangements, commitments and undertakings as to which Seller or a
Subsidiary of Seller is a party and pursuant to which any person is authorized
to use any Seller IP Rights; and (ii) all licenses, sublicenses and contracts,
agreements, arrangements, commitments and undertakings as to which Seller or a
Subsidiary of Seller is a party and pursuant to which Seller or a Subsidiary of
Seller is authorized to use any third party Intellectual Property Rights.
(i) Neither Seller or any of its Subsidiaries nor any other party
acting on their behalf has disclosed or delivered to any party, or permitted the
disclosure or delivery to any escrow agent or other party of, any Seller Source
Code (as defined below). No event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time,
-32-
or both) shall, or would reasonably be expected to, nor shall the consummation
of the transactions contemplated hereby, result in the disclosure or delivery by
Seller or any of its Subsidiaries or any other party acting on its behalf to any
party (other than Buyer and DoveBid) of any Seller Source Code. Schedule 5.13(i)
----------------
of the Seller Disclosure Letter identifies each contract, agreement,
arrangement, commitment and undertaking (whether written or oral) pursuant to
which Seller or any of its Subsidiaries has deposited, or is or may be required
to deposit, with an escrow holder or any other party, any Seller Source Code and
further describes whether the execution of this Agreement or the consummation of
the transactions contemplated hereby, in and of themselves, would reasonably be
expected to result in the release from escrow of any Seller Source Code. "Seller
Source Code" means, collectively, any software source code, or any material
portion or aspect of such source code, or any material proprietary information
or algorithm contained in or relating to any such source code, of any
Seller-Owned IP Rights or any other product or service marketed or currently
proposed to be marketed by Seller or any of its Subsidiaries.
(j) To the Knowledge of Seller and its Subsidiaries, there is no
unauthorized use, disclosure, infringement or misappropriation of any Seller IP
Rights by any third party, including any employee or former employee of Seller
or any of its Subsidiaries. Neither Seller nor any of its Subsidiaries has
agreed to indemnify any person for any infringement of any Intellectual Property
Rights of any third party by any product or service that has been sold, licensed
to third parties, leased to third parties, supplied, marketed, distributed or
provided by Seller or any of its Subsidiaries.
(k) All software developed by Seller or any of its Subsidiaries and
licensed by Seller or any of its Subsidiaries to customers and all services
provided by or through Seller or any of its Subsidiaries to customers on or
before the Closing Date conform in all material respects (to the extent required
in contracts, agreements, arrangements, commitments and undertakings with such
customers) to applicable contractual commitments, express and implied
warranties, product specifications and product documentation and to any
representations provided to customers, and neither Seller nor any of its
Subsidiaries has any material Liability (and, to the Knowledge of Seller and its
Subsidiaries, there is no legitimate basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim or demand
against Seller or any of its Subsidiaries giving rise to any material Liability
relating to the foregoing contracts, agreements, arrangements, commitments and
undertakings) for replacement or repair thereof or other damages in connection
therewith in excess of any reserves therefor reflected on the Seller Financial
Statements. Seller has provided Buyer with all documentation and notes relating
to the testing of Seller's and its Subsidiaries' software products and plans and
specifications for software products currently under development by Seller or
any of its Subsidiaries.
(l) No government funding; facilities of a university, college, other
educational institution or research center; or funding from third parties (other
than funds received in consideration for Seller's capital stock) was used in the
development of the computer software programs or applications owned by Seller or
any of its Subsidiaries. No current or former employee, consultant or
independent contractor of Seller or any of its Subsidiaries, who was involved
in, or who contributed to, the creation or development of any Seller IP Rights,
has performed services for the government, university, college, or other
educational institution or
-33-
research center during a period of time during which such employee, consultant
or independent contractor was also performing services for Seller or any of its
Subsidiaries.
(m) No Public Software (as defined below) forms part of the Seller IP
Rights or was or is used in connection with the development of any Seller IP
Right, incorporated in whole or in part, or has been distributed, in whole or in
part, in conjunction with any Seller IP Right. "Public Software" means any
software that contains, or is derived in any manner (in whole or in part) from,
any software that is distributed as free software, open source software (e.g.,
Linux) or similar licensing or distribution models, including software licensed
or distributed under any of the following: (i) GNU's General Public License
(GPL) or Lesser/Library GPL (LGPL); (ii) the Artistic License (e.g., PERL);
(iii) the Mozilla Public License; (iv) the Netscape Public License; (v) the Sun
Community Source License (SCSL); (vi) the Sun Industry Standards License (SISL);
(vii) the BSD License; and (viii) the Apache License.
5.14 Compliance with Laws. Each of Seller and its Subsidiaries has complied
--------------------
with all Applicable Legal Requirements, except to the extent that the failure to
so comply would not have a Material Adverse Effect on any of Seller, the Assets
or the Business. Each of Seller and its Subsidiaries holds all material permits,
licenses and approvals from, and has made all material filings with,
Governmental Entities and quasi-Governmental Entities that are necessary for
Seller and its Subsidiaries to conduct the Business without any violation of any
Applicable Legal Requirement (collectively, "Governmental Permits"). Neither
Seller nor any of its Subsidiaries has received any written notice or, to the
Knowledge of Seller and its Subsidiaries, other communication from any
Governmental Entity regarding (i) any actual or possible violation of any
Applicable Legal Requirement, (ii) any actual or possible violation of any
Governmental Permit, or (iii) any actual or possible revocation, withdrawal,
suspension, cancellation, termination or modification of any Governmental
Permit.
5.15 Certain Transactions and Agreements. None of the officers and
-----------------------------------
directors of Seller or any of its Subsidiaries and, to the Knowledge of Seller
and its Subsidiaries, none of the employees or stockholders of Seller or any of
its Subsidiaries or any member of the immediate families of such officers,
directors, employees and stockholders has any direct or indirect ownership
interest in any firm or corporation that competes with, does business with or
has any contractual arrangement with the Business (except with respect to any
interest in less than 1% of the stock of any corporation whose stock is publicly
traded). None of said officers directors, employees, stockholders or family
members has any interest in any of the Assets or any property that is used in or
pertains to the Business.
5.16 Employee Matters.
----------------
(a) General. Each of Seller and its Subsidiaries has correctly
-------
classified its employees as exempt employees and nonexempt employees under the
Fair Labor Standards Act. Neither Seller nor any of its Subsidiaries has any
contract, agreement, arrangement, commitment or undertaking with employees or
consultants currently in effect that are not terminable at will (other than
agreements with the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions). All of the independent
contractors of Seller and its
-34-
Subsidiaries have been properly classified as independent contractors for the
purposes of all Applicable Legal Requirements. Each of the employees of Seller
and its Subsidiaries is legally permitted to be employed by Seller or such
Subsidiary in the jurisdiction in which such employee is employed.
(b) Employee Plans. Schedule 5.16(b) of the Seller Disclosure Letter
-------------- ----------------
contains a list of all employment and consulting agreements and Employee Plans.
Seller has delivered true and complete copies or descriptions of all of the
Employee Plans to Buyer's legal counsel. No Employee Plan is a "multiemployer
plan" within the meaning of Section 3(37) or ERISA, and no Employee Plan is
subject to Title IV of ERISA. Neither Seller nor any of its Affiliates has
incurred any Liability under Title IV of ERISA arising in connection with the
termination of any plan covered or previously covered by Title IV of ERISA that
could become, after the Closing Date, an obligation of Buyer or any of its
Affiliates. Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. No employee of Seller or any of its
Subsidiaries shall become entitled to any retirement, severance or similar
benefit or enhanced benefit solely as a result of the transactions contemplated
hereby. In addition, within the past five years, neither Seller nor any of its
Subsidiaries has never been a participant in any "prohibited transaction,"
within the meaning of Section 406 of ERISA with respect to any employee pension
benefit plan (as defined in Section 3(2) of ERISA) which it sponsors as employer
or in which it participates as an employer, which was not otherwise exempt
pursuant to Section 408 of ERISA (including any individual exemption granted
under Section 408(a) of ERISA), or which could result in an excise tax under the
Code.
(c) Immigration Law Compliance. None of the Selected Employees (as
--------------------------
defined in Section 7.14(a)) holds any visa from the United States government,
and neither Seller nor any of its Subsidiaries is sponsoring any of the Selected
Employees with respect to any visa or other authorization. All of the Selected
Employees were hired in compliance with all laws, statutes, regulations and
requirements for the lawful hiring of employees who are not citizens of the
United States of America.
(d) No Parachute Agreements. No benefit payable or that may become
-----------------------
payable by Seller or any of its Subsidiaries pursuant to any Employee Plan or as
a result of or arising under this Agreement shall constitute an "excess
parachute payment" (as defined in Section 280G(b)(1) of the Code) that is
subject to the imposition of an excise tax under Section 4999 of the Code or
which would not be deductible by reason of Section 280G of the Code. Neither
Seller nor any of its Affiliates is a party to any (i) agreement with any of its
executive officers or other key employees (A) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving Seller in the nature of any of the transactions
contemplated hereby, (B) providing any term of employment or compensation
guarantee, or (C) providing severance benefits or other benefits after the
termination of employment of such employee regardless of the reason for such
termination of employment, or (ii) agreement or plan, including any stock option
plan, stock appreciation rights plan or stock purchase plan, any of the benefits
of which shall be materially increased, or the vesting of benefits of which
shall be accelerated, by the occurrence of any of the transactions contemplated
hereby or the value of any of the benefits of which shall be calculated on the
basis of any of the transactions
-35-
contemplated hereby. Neither Seller nor any of its Subsidiaries has any
obligation to pay any amounts, or provide any benefits, to any former employees
or officers.
5.17 Seller Documents. Seller has made available to Buyer's legal counsel
----------------
for examination true and complete copies of all documents and information listed
in the Seller Disclosure Letter or other exhibits called for by this Agreement,
including the following: (a) records of all proceedings, consents, actions, and
meetings of stockholders, directors and any committees thereof of Seller and its
Subsidiaries; (b) journal reflecting all equity issuances and transfers relating
to Seller and its Subsidiaries; and (c) all Governmental Permits, orders, and
consents issued by any regulatory agency with respect to Seller and its
Subsidiaries, or any securities of Seller and its Subsidiaries, and all
applications for such Governmental Permits, orders, and consents.
5.18 No Brokers. Neither Seller nor any of its Affiliates is or shall be
----------
obligated for the payment of fees or expenses of any investment banker, broker,
finder or similar party in connection with the origin, negotiation or execution
of this Agreement and/or any of the Seller Ancillary Agreements or in connection
with any of the transactions contemplated hereby and thereby.
5.19 Books and Records. The books, records and accounts of Seller and its
-----------------
Subsidiaries (i) are in all material respects true, complete and correct, (ii)
have been maintained in accordance with good business practices on a basis
consistent with prior years, (iii) are stated in reasonable detail and
accurately and fairly reflect the transactions and dispositions of the assets of
Seller and its Subsidiaries, and (iv) accurately and fairly reflect the basis
for the Financial Statements.
5.20 Insurance. Each of Seller and its Subsidiaries has maintained, at all
---------
times during the prior five years, and now maintains, policies of insurance and
bonds of the type and in amounts reasonably and customarily carried by persons
conducting businesses or owing assets similar in type and size to those of
Seller or such Subsidiary, including all legally required workers' compensation
insurance and errors and omissions, casualty, fire and general liability
insurance. There is no claim pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds, and all such policies and bonds are in full force and
effect. All premiums due and payable under all such policies and bonds have been
timely paid, and Seller or such Subsidiary is otherwise in compliance with the
terms of such policies and bonds. Neither Seller nor any of its Subsidiaries has
any Knowledge of any threatened termination of, or material premium increase
with respect to, any of such policies and bonds. All policies of insurance and
bonds now held by Seller or any of its Subsidiaries are set forth on Schedule
--------
5.20 of the Seller Disclosure Letter, together with the name of the insurer
----
under each policy or bond, the type of policy or bond, the policy or bond
coverage amount, any applicable deductible and other applicable provisions, all
as of the date hereof.
-36-
5.21 No Fraudulent Transfer; Solvency.
--------------------------------
(a) Seller is not entering into this Agreement or any of the Seller
Ancillary Agreements, or the transactions contemplated hereby and thereby, with
the intent to defraud, delay or hinder any of its present or future creditors,
and the transfers contemplated hereby and thereby shall not have such effect.
(b) Each of Seller and its Subsidiaries is currently Solvent. After
the Closing, (i) each of Seller and its Subsidiaries shall be Solvent and
capable of paying its debts as they become due and (ii) neither Seller nor any
of its Subsidiaries shall be in any business or shall enter into any business
for which its remaining capital shall be unreasonably small. Neither Seller nor
any of its Subsidiaries nor any of their respective assets or properties is
subject to, or the subject of, any Insolvency Proceeding. Neither Seller nor any
of its Subsidiaries has initiated, taken or attempted to initiate or take, or
been the subject of, any Insolvency Action, and no assets or properties of
Seller or any of its Subsidiaries are subject to any Insolvency Proceeding or
Insolvency Action. No writ of attachment, execution or similar process has been
ordered, executed or filed against Seller, any of its Subsidiaries or any of
their respective assets or properties. Neither Seller nor any of its
Subsidiaries has any intention to file a voluntary petition for relief under the
United States Bankruptcy Code, as amended, or to seek relief on its debts under
or the protection of any other bankruptcy or insolvency law or Insolvency
Proceeding, and, to the Knowledge of Seller and its Subsidiaries, no creditor of
Seller or any of its Subsidiaries has threatened to file an involuntary petition
for relief under the United States Bankruptcy Code, as amended, or to institute
any other Insolvency Proceedings against Seller or any of its Subsidiaries.
5.22 Privacy. Neither Seller nor any of its Subsidiaries has collected any
-------
personally identifiable information from any third parties. Each of Seller and
its Subsidiaries has provided adequate notice of its privacy practices in its
privacy policy. The privacy policies of each of Seller and its Subsidiaries are
and have been available on Seller's Website since approximately June 1999. The
privacy policies of each of Seller and its Subsidiaries conform, and at all
times have conformed, in all material respects to all Applicable Legal
Requirements relating to the collection, storage and transfer of any personally
identifiable information collected by Seller, any of its Subsidiaries or third
parties having authorized access to Seller's Website or other records and with
all of the contractual commitments of Seller and its Subsidiaries to their
respective customers and the viewers of Seller's Website. The privacy practices
of each of Seller and its Subsidiaries conform, and at all times have conformed,
in all material respects to their respective privacy policies.
5.23 Customers. The Customer List Assets are accurate and complete in all
---------
material respects. Neither Seller nor any of its Subsidiaries has any
outstanding material disputes concerning its products and services with any
customer who, in the year ended December 31, 2001, was one of the ten largest
sources of revenues for Seller, based on amounts paid (each, a "Significant
Customer"), and neither Seller nor any of its Subsidiaries has any Knowledge of
any material dissatisfaction on the part of any Significant Customer. Neither
Seller nor any of its Subsidiaries has received any information from any
Significant Customer that such customer shall not continue as a customer of
Buyer after the Closing or that such customer intends to
-37-
terminate or materially modify existing contracts, agreements, arrangements,
commitments or undertakings with Seller or any of its Subsidiaries.
5.24 Accounts Receivable. All of the Seller Receivables as of the date
-------------------
hereof are set forth on Schedule 5.24 of the Seller Disclosure Letter (the
-------------
"Receivables List"). The Receivables List contains a true, correct and complete
aging list of all of the Seller Receivables, including the amount of each such
Seller Receivable. Seller hereby agrees that, prior to the Closing, Seller shall
deliver to Buyer an updated Receivables List as of the Closing Date. All of the
Seller Receivables represent sales actually made or services actually provided
by Seller or a Subsidiary of Seller in the ordinary course of business
consistent with past its practices, are current, valid and genuine, and are not
subject to any discounts, right of offset or defense against payment of any
amount thereof.
5.25 Environmental Matters. Each of Seller and its Subsidiaries is in
---------------------
compliance with all applicable Environmental Laws (as defined below), which
compliance includes the possession by each of Seller and its Subsidiaries of all
permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof.
Neither Seller nor any of its Subsidiaries has received any written notice or
other communication (in writing or otherwise), whether from a Governmental
Entity, citizens-group, employee or otherwise, that alleges that Seller or a
Subsidiary of Seller is not in compliance with any Environmental Law, and, to
the Knowledge of Seller and its Subsidiaries, there are no circumstances that
may prevent or interfere with the compliance by Seller or any of its
Subsidiaries with any current Environmental Law in the future. For purposes of
this Section 5.25: (i) "Environmental Law" means any foreign, federal, state or
local statute, law, regulation or other legal requirement relating to pollution
or protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata), including any statute,
law, regulation or other legal requirement relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern;
and (ii) "Materials of Environmental Concern" include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other substance that is currently regulated by an Environmental Law.
5.26 Investment Representations.
--------------------------
(a) Purchase for Own Account. The Total Shares issuable as the
------------------------
Purchase Price (collectively, the "Purchased Shares"), to be purchased by Seller
hereunder shall be acquired for investment for Seller's own account, not as a
nominee or agent, and not with a view to the public resale or distribution
thereof within the meaning of the Securities Act, and Seller has no intention of
selling, granting any participation in, or otherwise presently distributing the
same in violation of the Securities Act or any applicable federal or state
securities law and the rules and regulations thereunder.
(b) Disclosure of Information. At no time was Seller presented with
-------------------------
or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the
-38-
Purchased Shares. Seller has received or has had full access to all of the
information it considers necessary or appropriate to make an informed investment
decision with respect to the Purchased Shares to be purchased by Seller under
this Agreement. Seller further has had an opportunity to ask questions and
receive answers from Buyer and DoveBid regarding the terms and conditions of the
offering of the Purchased Shares and to obtain additional information (to the
extent Buyer or DoveBid possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify any information furnished to
Seller or to which Seller had access. The foregoing, however, does not in any
way limit or modify the representations and warranties made by Buyer in Article
6.
(c) Investment Experience. Seller understands that the purchase of
---------------------
the Purchased Shares involves substantial risk. Seller acknowledges that Seller
is able to fend for itself, Seller can bear the economic risk of Seller's
investment in the Purchased Shares and Seller's Board of Directors has such
knowledge and experience in financial or business matters that Seller is capable
of evaluating the merits and risks of this investment in the Purchased Shares
and protecting its own interests in connection with this investment.
(d) Accredited Investor Status. Seller is an "accredited investor"
--------------------------
within the meaning of Regulation D promulgated under the Securities Act. Seller
is a corporation, not formed for the purpose of acquiring the Purchased Shares,
with total assets in excess of $5,000,000.
(e) Restricted Securities. Seller understands that the Purchased
---------------------
Shares and the Conversion Shares are characterized as "restricted securities"
under the Securities Act inasmuch as they are being acquired in a transaction
not involving a public offering and that under the Securities Act such
securities may be resold without registration under the Securities Act only in
certain limited circumstances. In this connection, Seller represents that Seller
is familiar with Rule 144 of the Securities and Exchange Commission, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act. Seller understands that DoveBid is under no obligation to
register any of the Purchased Shares or the Conversion Shares except as provided
in the Rights Agreement. Seller understands that no public market now exists for
any of the Purchased Shares or the Conversion Shares and that it is uncertain
whether a public market shall ever exist for the Purchased Shares or the
Conversion Shares, and Seller acknowledges that no representations or warranties
to the contrary have been made to Seller.
(f) Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, Seller further agrees not to make any
disposition of all or any portion of the Purchased Shares or the Conversion
Shares unless and until:
(i) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) Seller shall have notified DoveBid of the proposed
disposition and shall have furnished DoveBid with a statement of the
circumstances surrounding the proposed disposition, and, at the expense of
Seller or its transferee, with an opinion of legal counsel,
-39-
satisfactory to DoveBid acting reasonably, that such disposition shall not
require registration of such securities under the Securities Act.
Notwithstanding the provisions of paragraphs (i) and (ii) above, no such
registration statement or opinion of legal counsel shall be required, unless
required by DoveBid's transfer agent in accordance with its customary policies
and procedures, (a) for any transfer of any portion of the Purchased Shares or
the Conversion Shares in compliance with Securities and Exchange Commission Rule
144, Rule 144A and Rule 145, (b) for any transfer, upon the Dissolution, of any
portion of the Purchased Shares or the Conversion Shares by Seller to the Seller
Stockholders without payment of consideration by the Seller Stockholders, (c)
for any transfer of any portion of the Purchased Shares or the Conversion Shares
by Seller to any Seller Stockholder listed on Exhibit B-1, or (d) for any
-----------
transfer of any portion of the Purchased Shares or the Conversion Shares by any
Seller Stockholder listed on Exhibit B-1 to another Seller Stockholder listed on
-----------
Exhibit B-1; provided, that in each of the foregoing cases the transferee agree
----------- --------
in writing to be subject to the terms of this Section 5.26 (other than the
second sentence of Section 5.26(d)) and the Stockholders' Agreement to the same
extent as if the transferee were Seller hereunder; provided, further, that if
-------- -------
Seller shall have delivered to DoveBid an executed representation letter
reasonably acceptable to DoveBid with respect to the proposed disposition, then
DoveBid or its counsel shall deliver to DoveBid's transfer agent the opinion of
legal counsel referenced in this sentence. Notwithstanding anything in this
Agreement to the contrary, Seller further agrees not to make any disposition of
any Purchased Shares or Conversion Shares unless and until such shares have been
released by DoveBid in accordance with the provisions of Articles 3 and 10.
(g) Legends. It is understood that the certificates evidencing the
-------
Purchased Shares and the Conversion Shares shall bear the legends set forth
below in addition to any other legends required by applicable law or by any
agreement between Buyer or DoveBid, on the one hand, and Seller, on the other
hand:
(i) The legend regarding the Securities Act in the following
form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY OTHER JURISDICTIONS. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF
THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
-40-
(ii) Any legend required by the laws of the State of California,
including, where applicable, any legend required by the California Department of
Corporations and Sections 417 and 418 of the California Corporations Code or any
other state securities laws, including, where applicable, a legend substantially
in the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE: (1) ARE CONVERTIBLE
INTO SHARES OF COMMON STOCK OF THE COMPANY AT THE OPTION OF THE
HOLDER AT ANY TIME PRIOR TO AUTOMATIC CONVERSION THEREOF; AND (2)
AUTOMATICALLY CONVERT INTO COMMON STOCK OF THE COMPANY IN THE
EVENT OF A PUBLIC OFFERING MEETING CERTAIN REQUIREMENTS OR UPON
CERTAIN CONSENTS OF THE HOLDERS OF THE COMPANY'S PREFERRED STOCK
ALL PURSUANT TO AND UPON THE TERMS AND CONDITIONS SPECIFIED IN
THE COMPANY'S CERTIFICATE OF INCORPORATION. A COPY OF SUCH
CERTIFICATE OF INCORPORATION MAY BE OBTAINED, WITHOUT CHARGE, AT
THE COMPANY'S PRINCIPAL OFFICE.
The first legend set forth in paragraph (i) above shall be removed by
DoveBid from any certificate evidencing Purchased Shares or Conversion Shares
upon such security's effective registration under the Securities Act or upon
delivery to DoveBid of an opinion by legal counsel, reasonably satisfactory to
DoveBid, if such an opinion is required pursuant to Section 5.26(f), that such
security can be freely transferred in a public sale without such a registration
statement being in effect and that such transfer shall not jeopardize the
exemption or exemptions from registration pursuant to which DoveBid issued the
Purchased Shares; provided, that if Seller shall have delivered to DoveBid an
--------
executed representation letter reasonably acceptable to DoveBid with respect to
the proposed transfer, then DoveBid or its counsel shall deliver an opinion to
DoveBid's transfer agent that the proposed transfer can be effected without such
a registration statement being in effect and that such transfer shall not
jeopardize the exemption or exemptions from registration pursuant to which
DoveBid issued the Purchased Shares.
(iii) The legend required by the Stockholders' Agreement in the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS' AGREEMENT, WHICH CONTAINS RESTRICTIONS ON TRANSFER,
RIGHTS OF FIRST REFUSAL, RIGHTS OF REPURCHASE, AND VOTING RIGHTS.
A COPY OF SAID STOCKHOLDERS' AGREEMENT MAY BE OBTAINED FROM THE
COMPANY BY THE HOLDER OF SUCH CERTIFICATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
BY THE HOLDER SOLELY FOR ITS OWN ACCOUNT FOR THE PURPOSE OF
INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH
ANY DISTRIBUTION THEREOF. THE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE ACT OR STATE SECURITIES LAWS AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE
ACT OR AN EXEMPTION THEREFROM.
-41-
5.27 No Other Negotiations. Since December 12, 2001, neither Seller nor any
---------------------
of its officers, directors, stockholders, employees, Affiliates, attorneys,
financial advisors or other agents or representatives has, directly or
indirectly, solicited, initiated, sought, entertained, encouraged, facilitated
or supported any inquiry, proposal or offer from, furnished any information to,
or participated in any discussions or negotiations with, any person (other than
Buyer or DoveBid) regarding (i) any acquisition of Seller or any of its
Subsidiaries, (ii) any merger or consolidation with or involving Seller or any
of its Subsidiaries, or (iii) any sale or acquisition of any material portion of
the stock or assets of Seller or any of its Subsidiaries, including the Assets
(each, an "Acquisition Transaction"). Neither Seller nor any of its Subsidiaries
is a party to any agreement (other than with Buyer or DoveBid) that restricts
Seller's or such Subsidiary's ability to solicit, initiate, seek, entertain,
encourage, facilitate or support any inquiry, proposal or offer from, furnish
any information to, or participate in any discussions or negotiations with, any
person regarding any Acquisition Transaction.
5.28 Seller Stockholder Information. None of the information to be
------------------------------
delivered to Seller's stockholders in connection with this Agreement (other than
information regarding DoveBid which was delivered by DoveBid or Buyer to Seller
in connection with this Agreement) contains an untrue statement of a material
fact or fails to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
6. REPRESENTATIONS AND WARRANTIES OF DOVEBID.
-----------------------------------------
DoveBid represents and warrants to Seller that, except as set forth in the
letter from DoveBid addressed to Seller and dated as of the date hereof, whether
or not the representation, warranty or statement contained in this Article 6
explicitly calls for an exception, which letter has been delivered by DoveBid to
Seller concurrently with the parties' execution of this Agreement (the "DoveBid
Disclosure Letter"), each of the representations, warranties and statements
contained in this Article 6 is true and correct as of the date hereof and,
except for the representations, warranties and statements contained in Sections
6.3(a)(ii) and 6.3(b), shall be true and correct on and as of the Closing Date.
For all purposes of this Agreement, the statements contained in the DoveBid
Disclosure Letter shall also be deemed to be representations and warranties made
and given by DoveBid under this Article 6.
6.1 Organization and Good Standing. Each of Buyer and DoveBid is a
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Buyer and DoveBid has the corporate power and
authority to own, operate and lease its properties and to carry on its business
as now conducted and as presently proposed to be conducted, and is qualified to
conduct business, and is in good standing, in each jurisdiction in which the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification necessary, except to the extent that the
failure to so qualify would not have a Material Adverse Effect on DoveBid. Buyer
has delivered to Seller's legal counsel copies of the Certificate of
Incorporation and Bylaws, each as currently in effect, of each of Buyer and
DoveBid. Neither Buyer nor DoveBid is in violation of its Certificate of
Incorporation or Bylaws, each as currently in effect.
-42-
6.2 Power, Authority and Validity.
-----------------------------
(a) Power and Authority; Due Authorization. Each of Buyer and DoveBid
--------------------------------------
has the right, power, legal capacity and authority to enter into and perform its
obligations under this Agreement and each of the other agreements, certificates
and documents that it is to execute and deliver pursuant to this Agreement (the
"Buyer Ancillary Agreements"). The execution, delivery and performance by Buyer
and DoveBid of this Agreement and each of the Buyer Ancillary Agreements to
which it is a party have been duly and validly approved and authorized by all
necessary corporate action on the part of Buyer and DoveBid.
(b) Consents. No consent, approval, permit, order or authorization
--------
from, or registration, declaration or filing with, any Governmental Entity or
any other person, governmental or otherwise, is necessary or required to be
obtained or made by Buyer or DoveBid to enable each of Buyer and DoveBid to
lawfully enter into and perform its obligations under this Agreement and each of
the Buyer Ancillary Agreements to which it is a party, except for (i) the filing
by DoveBid of the Restated Certificate with the Delaware Secretary of State,
(ii) the approvals set forth in Section 7.6(b), and (iii) such filings as may be
required to comply with federal and state securities laws and the securities
laws of any foreign country.
(c) Enforceability. This Agreement has been duly executed and
--------------
delivered by Buyer and DoveBid. This Agreement and each of the Buyer Ancillary
Agreements to which it is a party are, or when duly executed and delivered by
Buyer and/or DoveBid, as applicable, shall be, valid and binding obligations of
Buyer and/or DoveBid, as applicable, enforceable against Buyer and/or DoveBid,
as applicable, in accordance with their respective terms, subject only to the
effect, if any, of (i) applicable bankruptcy and other similar laws affecting
the rights of creditors generally, (ii) rules of law and equity governing
specific performance, injunctive relief and other equitable remedies, and (iii)
the enforceability of provisions requiring indemnification in connection with
the offering, issuance or sale of securities.
6.3 Capitalization.
--------------
(a) Authorized and Outstanding Capital Stock of Buyer and DoveBid.
-------------------------------------------------------------
(i) The authorized capital stock of Buyer consists entirely of
1,000 shares of Common Stock, par value $0.001 per share ("Buyer Common Stock"),
of which a total of 1,000 shares are issued and outstanding. Except as set forth
in the preceding sentence, no shares of Buyer Common Stock are issued or
outstanding as of the date hereof, and no such shares shall be issued or
outstanding as of the Closing Date.
(ii) The authorized capital stock of DoveBid consists entirely
of: (i) 59,650,936 shares of DoveBid Common Stock, of which a total of
11,078,392 shares are issued and outstanding; and (ii) 35,349,064 shares of
DoveBid Preferred Stock, of which (A) 4,400,000 shares are DoveBid Series A
Preferred Stock, of which a total of 4,160,156 shares are issued and outstanding
and each of which is currently convertible into one share of DoveBid Common
Stock, (B) 6,000,000 shares of DoveBid Series B Preferred Stock, of which a
total of 5,605,811 shares are issued and outstanding and each of which is
currently convertible into one
-43-
share of DoveBid Common Stock, (C) 22,500,000 shares of DoveBid Series C
Preferred Stock, of which a total of 19,507,356 shares are issued and
outstanding and each of which is currently convertible into one share of DoveBid
Common Stock, (D) 749,064 shares of DoveBid Series D-1 Preferred Stock, all of
which are issued and outstanding and each of which is currently convertible into
one share of DoveBid Common Stock, and (E) 1,500,000 shares of DoveBid Series DD
Preferred Stock, of which a total of 1,406,482 shares are issued and outstanding
and each of which is currently convertible into one share of DoveBid Common
Stock, and Schedule 6.3 of the DoveBid Disclosure Letter sets forth the record
------------
holder each such share of DoveBid Capital Stock. Except as set forth in the
preceding sentence and on Schedule 6.3 of the DoveBid Disclosure Letter, no
------------
shares of DoveBid Common Stock or DoveBid Preferred Stock are issued or
outstanding. Subject to necessary approval of the holders of DoveBid Capital
Stock, upon the filing of the Restated Certificate with the Delaware Secretary
of State, the authorized capital stock of DoveBid shall be as set forth in the
Restated Certificate.
(b) Options, Warrants and Rights of DoveBid. DoveBid has reserved an
---------------------------------------
aggregate of 4,166,666 shares of DoveBid Common Stock for issuance pursuant to
DoveBid's 1999 Stock Option Plan, of which options to purchase a total of
2,385,350 shares of DoveBid Common Stock are outstanding, and an aggregate of
16,464 shares of DoveBid Common Stock are reserved for issuance pursuant to
outstanding options outside of the 1999 Stock Option Plan. An aggregate of
468,333 shares of DoveBid Series C Preferred Stock are reserved for issuance
upon exercise of warrants outstanding to purchase such DoveBid Capital Stock. In
addition, there are outstanding as of the date hereof Convertible Subordinated
Promissory Notes (each, a "Convertible Note") in the aggregate original
principal amount set forth on Schedule 6.3 of the DoveBid Disclosure Letter;
------------
provided, however, that the amounts set forth on Schedule 6.3 of the DoveBid
-------- ------- ------------
Disclosure Letter are based on the assumptions set forth in the provisos of
Section 1.70, except that for purposes of determining the number of shares of
DoveBid Common Stock issuable upon the full exercise and exchange into shares of
DoveBid Common Stock of all then outstanding Convertible Notes payable in Dutch
Guilders, the outstanding principal and accrued interest on such Convertible
Notes were converted into US dollars at the noon buying rate of the Federal
Reserve Bank of New York for the Euro on February 14, 2002, applying the
standard conversion rate of 2.20371 Dutch Guilders per Euro. Except as set forth
in this Section 6.3 and on Schedule 6.3 of the DoveBid Disclosure Letter, there
------------
are no stock appreciation rights, options, warrants, calls, rights, commitments,
conversion privileges or preemptive or other rights or agreements outstanding to
purchase or otherwise acquire any shares of DoveBid Capital Stock or any
securities or debt convertible into or exchangeable for DoveBid Capital Stock or
obligating DoveBid to grant, extend or enter into any such option, warrant,
call, right, commitment, conversion privilege or preemptive or other right or
agreement. Except for DoveBid's Certificate of Incorporation, as currently in
effect, the Existing Rights Agreement and the Existing Stockholders' Agreement
and as set forth on Schedule 6.3 of the DoveBid Disclosure Letter, there are no
------------
voting agreements, registration rights, rights of first refusal, preemptive
rights, co-sale rights or other restrictions (other than normal restrictions on
transfer under applicable federal and state securities laws) applicable to any
outstanding securities of DoveBid.
-44-
6.4 Subsidiaries.
------------
(a) Buyer does not have any Subsidiaries or any equity or other
ownership interest, direct or indirect, in any corporation, partnership, joint
venture or other business entity. Buyer is not obligated to make and is not
bound by any agreement or obligation to make any investment in or capital
contribution in or on behalf of any other entity.
(b) Except as set forth on Schedule 6.4(b) of the DoveBid Disclosure
--------------
Letter, DoveBid does not have any Subsidiaries or any equity or other ownership
interest, direct or indirect, in any corporation, partnership, joint venture or
other business entity. Each such Subsidiary of DoveBid is duly organized,
validly existing and in good standing (or appropriately recognized as legally in
existence and active under the laws of its jurisdiction) under the laws of the
jurisdiction of its incorporation or organization and has the requisite power
and authority to conduct its business as it is presently being conducted, except
to the extent that the failure thereof would not have a Material Adverse Effect
on DoveBid.
6.5 No Conflict. Subject to compliance with the terms and conditions of
-----------
this Agreement, neither the execution and delivery of this Agreement or any of
the Buyer Ancillary Agreements by Buyer and DoveBid, nor the consummation of the
transactions contemplated hereby or thereby, shall conflict with, or (with or
without notice or lapse of time, or both) result in a termination, breach,
default, impairment or violation of, or give rise to, or trigger the application
of, any rights of any third party under: (a) any provision of the Certificate of
Incorporation or Bylaws of Buyer or DoveBid, each as currently in effect; (b)
any foreign, federal, state or local judgment, injunction, writ, decree,
determination, award, order, law, statute, rule or regulation applicable to
Buyer or DoveBid; or (c) any material note, bond, mortgage, indenture, lease,
license, permit, franchise, instrument, contract, agreement, arrangement,
commitment, undertaking, understanding, letter of intent or memorandum of
understanding (whether oral or in writing) to which Buyer or DoveBid is a party
or by which Buyer or DoveBid is bound, except in the cases of clauses (b) and
(c) where such conflict, termination, breach, default, impairment, violation or
rights of any third party would not have a Material Adverse Effect on DoveBid.
6.6 Litigation. There is no action, suit, arbitration, mediation,
----------
proceeding, claim or investigation of any nature pending or, to DoveBid's
Knowledge, threatened against DoveBid or any of its Subsidiaries (or against any
officer, director, employee or agent of DoveBid or any of its Subsidiaries in
their capacity as such or relating to their employment, services or relationship
with DoveBid or any of its Subsidiaries) before any Governmental Entity,
arbitrator or mediator that, if resolved adversely to DoveBid or such
Subsidiary, might reasonably be expected to: (a) have a Material Adverse Effect
on DoveBid; (b) materially impair the ability of Buyer or DoveBid to perform its
obligations under this Agreement or any of the Buyer Ancillary Agreements; or
(c) prevent, delay or make illegal the consummation of the transactions
contemplated by this Agreement. Neither DoveBid nor any of its Subsidiaries is a
party, nor to DoveBid's Knowledge, subject to any material judgment, decree,
injunction, rule or order of any Governmental Entity, arbitrator or mediator. To
DoveBid's Knowledge, there is no reasonable basis for any person to assert a
material claim against Buyer or Seller based upon: (a) Buyer's and DoveBid's
entering into this Agreement or any of the Buyer Ancillary Agreements or
-45-
consummating the transactions contemplated hereby or thereby; (b) any rights as
a stockholder of DoveBid, including any option or preemptive rights or rights to
notice or to vote; or (c) in connection with Buyer's and DoveBid's entering into
this Agreement or any of the Buyer Ancillary Agreements or consummating the
transactions contemplated hereby or thereby, any rights under any agreement
among DoveBid and its stockholders.
6.7 Taxes. Except as set forth on Schedule 6.7 of the DoveBid Disclosure
----- ------------
Letter or as would not have a Material Adverse Effect on DoveBid:
(a) each of Buyer and DoveBid has timely and properly filed all
Returns required to be filed by it, has paid all Taxes required to be paid by
it, and has established an adequate accrual or reserve for the payment of all
Taxes payable in respect of the periods subsequent to the periods covered by its
most recent applicable Returns;
(b) all such filed Returns are true, correct and complete;
(c) neither Buyer nor DoveBid is delinquent in the payment of any Tax
or in the filing of any Return, and no deficiencies for any Tax have been
threatened, claimed, proposed or assessed;
(d) neither Buyer nor DoveBid has received any notification from the
IRS or any other Taxing Authority regarding any material issues or audit that:
(a) are currently pending before the IRS or any other Taxing Authority regarding
Buyer or DoveBid; or (b) have been raised by the IRS or any other Taxing
Authority and not yet finally resolved regarding Buyer or DoveBid;
(e) there is not in effect any waiver by Buyer or DoveBid of any
statute of limitations with respect to any Taxes;
(f) neither Buyer nor DoveBid has consented to any extension of time
for filing any Return that has not been filed, and neither Buyer nor DoveBid has
consented to extend to a date later than the date hereof the period in which any
Tax may be assessed or collected by any Taxing Authority; and
(g) each of Buyer and DoveBid has withheld all Taxes required to be
withheld by it, and has paid such withheld amounts to the appropriate Taxing
Authority within the time prescribed by all Applicable Legal Requirements.
6.8 DoveBid Financial Statements. Buyer has delivered to Seller (i)
----------------------------
DoveBid's unaudited consolidated balance sheet as of December 31, 2001 and (ii)
DoveBid's unaudited consolidated income statement and statement of cash flows
for the year ended December 31, 2001 (collectively, the "DoveBid Financial
Statements"). The DoveBid Financial Statements: (a) are derived from and are in
accordance with DoveBid's and its Subsidiaries' books and records; (b) fairly
present DoveBid's and its Subsidiaries' financial condition at the dates therein
indicated and results of operations for the periods therein specified; and (c)
have been prepared in accordance with GAAP, applied on a basis consistent with
prior periods. Neither DoveBid nor any of its Subsidiaries has any material
Liability that is not reflected or reserved against in the
-46-
DoveBid Financial Statements, except for those that may have been incurred after
December 31, 2001 in the ordinary course of DoveBid's and its Subsidiaries'
businesses, taken as a whole, and those arising in connection with this
Agreement and the transactions contemplated hereby.
6.9 Title to Assets. DoveBid and its Subsidiaries each have good and
---------------
marketable title to, or in the case of leased assets, valid leasehold interests
in, all of its tangible assets, real, personal and mixed, used or held for use
in their businesses or otherwise reflected on the DoveBid Financial Statements,
except where any such failure would not have a Material Adverse Effect on
DoveBid. All such assets owned by DoveBid and its Subsidiaries are free of any
Encumbrances, except for any Encumbrances (i) which would not have a Material
Adverse Effect on DoveBid, (ii) which arise in the ordinary course of business
and do not materially impair the ownership or use of such assets by DoveBid or
its Subsidiaries, as applicable, and (iii) granted to third parties on assets
acquired by DoveBid or such Subsidiary (a) for resale in the ordinary course of
business or (b) 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 DoveBid or such Subsidiary other than the assets so acquired.
Except as would not have a Material Adverse Effect on DoveBid, (i) all owned
tangible personal property included in such assets is in good operating
condition and repair, normal wear and tear excepted, and (ii) all leases of real
or personal property to which DoveBid or any of its Subsidiaries is a party are
fully effective and afford DoveBid or such Subsidiary peaceful and undisturbed
possession of the subject matter of the lease.
6.10 Contracts and Commitments. Neither DoveBid nor any of its Subsidiaries
-------------------------
is in default under any material contract, agreement, arrangement, commitment or
undertaking to which it is a party, and no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time,
or both) shall, or to DoveBid's Knowledge, would reasonably be expected to,
result in a violation or breach of any such material contract, agreement,
arrangement, commitment or undertaking, except, in each case, where such
violation or breach would not have a Material Adverse Effect on DoveBid.
6.11 Intellectual Property. Except, in each case, as would not have a
---------------------
Material Adverse Effect on DoveBid:
(a) DoveBid and its Subsidiaries own, or have valid licenses in or
to, the Intellectual Property Rights used in or required for the conduct of the
business of DoveBid and its Subsidiaries as presently conducted (collectively,
the "DoveBid IP Rights").
(b) DoveBid has not received written notice from any third person
asserting that, and DoveBid and Buyer have no Knowledge that, the operation of
the business of DoveBid and its Subsidiaries as presently conducted or any act,
product or service of any of them, infringes or misappropriates the Intellectual
Property Rights of any third person, which allegation, if true, would have a
Material Adverse Effect on DoveBid. There is no pending or, to the Knowledge of
DoveBid and Buyer, threatened claim or litigation contesting the validity,
ownership or right of DoveBid or any of its Subsidiaries to exercise any DoveBid
IP Right, nor to the Knowledge of DoveBid and Buyer, is there any legitimate
basis for any such claim, nor has DoveBid or Buyer received any notice asserting
that any DoveBid IP Right or the proposed use,
-47-
sale, license or disposition thereof conflicts or shall conflict with the rights
of any other party, nor, to the Knowledge of DoveBid and Buyer, is there any
legitimate basis for any such assertion.
(c) To DoveBid's Knowledge, no person is infringing or
misappropriating any of the DoveBid IP Rights.
(d) DoveBid and its Subsidiaries have taken reasonable steps to
protect, preserve and maintain the secrecy and confidentiality of the DoveBid IP
Rights and to preserve and maintain all of their interests and proprietary
rights in the DoveBid IP Rights.
6.12 Compliance with Laws. DoveBid and its Subsidiaries have complied with
--------------------
all Applicable Legal Requirements, except to the extent that the failure to so
comply would not have a Material Adverse Effect on DoveBid's business. Neither
DoveBid nor any of its Subsidiaries has received any notice or other
communication from any Governmental Entity regarding (i) any actual or possible
violation of any Applicable Legal Requirement, (ii) any actual or possible
violation of any material permit, license or approval from, or material filing
with, any Governmental Entity and quasi-Governmental Entity that is necessary
for DoveBid and its Subsidiaries to conduct their business without any violation
of any Applicable Legal Requirement, or (iii) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any such
material permit, license, approval or filing.
6.13 No Brokers. Neither Buyer nor any of its Affiliates is or shall be
----------
obligated for the payment of fees or expenses of any investment banker, broker,
finder or similar party in connection with the origin, negotiation or execution
of this Agreement and/or any of the Buyer Ancillary Agreements or in connection
with any of the transactions contemplated hereby and thereby.
6.14 Insurance. DoveBid maintains insurance which provides coverage that is
---------
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its material properties that might be damaged or destroyed by fire or to
compensate DoveBid for any reasonably likely casualty loss except where the
failure to maintain such insurance would not, in the event of an uninsured loss,
have a Material Adverse Effect on DoveBid.
6.15 Valid Issuance of Stock. The Purchased Shares, when paid for and then
-----------------------
issued, as provided in this Agreement, shall be duly authorized and validly
issued, fully paid and nonassessable. The Conversion Shares have been duly and
validly reserved for issuance upon conversion thereof and, when issued upon such
conversion in accordance with the Restated Certificate (assuming no change in
the Restated Certificate or in any Applicable Legal Requirements), shall be duly
authorized and validly issued, fully paid and nonassessable.
6.16 Seller Stockholder Information. None of the information regarding
-------------------------------
DoveBid which was delivered by DoveBid or Buyer to Seller in connection with
this Agreement and is to be delivered to Seller's stockholders in connection
with this Agreement contains an untrue statement of a material fact or fails to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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7. COVENANTS.
---------
7.1 Advice of Changes. Seller covenants and agrees that, between the date
-----------------
hereof and the Closing, it shall promptly advise Buyer in writing of any
Material Adverse Change in the Assets or the Business. Each of Seller, on the
one hand, and Buyer and DoveBid, on the other hand, shall give prompt notice to
the other of: (i) any event occurring after the date hereof that would render
any representation or warranty of such party contained in this Agreement or any
of the Seller Ancillary Agreements or Buyer Ancillary Agreements, as the case
may be, if made on or as of the date of such event or the Closing, untrue or
inaccurate; (ii) any breach of any covenant or obligation of such party pursuant
to this Agreement or any of the Seller Ancillary Agreements or Buyer Ancillary
Agreements, as the case may be; (iii) any notice or other communication from any
person alleging that the consent of such person is or may be required in
connection with the transactions contemplated by this Agreement, any of the
Seller Ancillary Agreements or any of the Buyer Ancillary Agreements; (iv) any
notice or other communication from any Governmental Entity in connection with
the transactions contemplated by this Agreement, any of the Seller Ancillary
Agreements or any of the Buyer Ancillary Agreements; and (v) any litigation
relating to, involving or otherwise relating to the consummation of the
transactions contemplated by this Agreement, any of the Seller Ancillary
Agreements or any of the Buyer Ancillary Agreements.
7.2 Conduct of Seller's Business. Seller covenants and agrees that,
----------------------------
between the date hereof and the Closing, Seller shall continue to conduct the
Business and maintain its business relationships in the ordinary course of
business consistent with past practice, and neither Seller nor any of its
Subsidiaries shall, without Buyer's prior written consent:
(a) take any action that would be inconsistent with, or cause a
breach of, any representation or warranty of Seller set forth in this Agreement
or any of the Seller Ancillary Agreements;
(b) sell, transfer, assign, convey, lease, license, encumber, move,
relocate or otherwise dispose of any of the Assets;
(c) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person;
(d) enter into any material transaction or agreement or take any
other action not in the ordinary course of business consistent with past
practice;
(e) pay any bonus, increased salary, severance or special
remuneration to any officer, director, employee or consultant (except pursuant
to arrangements disclosed in Schedule 5.11(e) of the Seller Disclosure Letter)
----------------
or amend or enter into any employment agreement, consulting agreement or
severance agreement with any such officer, director, employee or consultant;
(f) change any of its accounting methods or policies or revalue,
write off or write up the value of any inventory, accounts receivable or other
assets;
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(g) declare, set aside or pay any cash or stock dividend or other
distribution in respect of its capital stock or other securities, redeem,
repurchase or otherwise acquire any of its capital stock or other securities
(except for the repurchase of stock from its employees, directors, consultants
or contractors in connection with the termination of their services at the
original purchase price of such stock or other securities), pay or distribute
any cash or property to any of its stockholders or security holders or make any
other cash payment to any of its stockholders or security holders;
(h) amend or terminate any contract, agreement, arrangement,
commitment or undertaking, including any license, to which it is a party;
(i) enter into any contract, agreement, arrangement, commitment or
undertaking with a customer on terms inconsistent with any current contract,
agreement, arrangement, commitment or undertaking with a current customer
entered into in the ordinary course of business consistent with past practice;
(j) waive or release any material right or claim;
(k) license any of its technology or Intellectual Property Rights, or
acquire any Intellectual Property Rights or any license thereto from any third
party, other than in the ordinary course of business consistent with past
practice;
(l) materially change any insurance coverage;
(m) agree to any audit assessment by any Taxing Authority, make any
Tax election or file any Return unless copies of such Returns have first been
delivered to Buyer for its review at a reasonable time prior to filing;
(n) fail to maintain its equipment and other assets in good working
condition and repair according to the standards it has maintained to the date
hereof, subject only to ordinary wear and tear;
(o) terminate the employment of any management, supervisory or other
key personnel, or terminate the employment of a material number of its
employees;
(p) make or agree to make any new capital expenditure or expenditures
which are outside the ordinary course of business or inconsistent with past
practice; or
(q) agree to do any of the things described in the preceding clauses
7.2(a) through 7.2(p).
7.3 Conduct of DoveBid's Business. DoveBid and Buyer covenant and agree
-----------------------------
that, between the date hereof and the Closing, neither DoveBid nor Buyer shall,
without Seller's prior written consent:
(a) take any action that would be inconsistent with, or cause a
breach of, any representation or warranty of DoveBid or Buyer set forth in this
Agreement or any of the Buyer
-50-
Ancillary Agreements; provided, however, that DoveBid may enter into or
-------- -------
consummate any business acquisition, whether by merger, consolidation, purchase
of assets, sale or exchange of stock or otherwise, or issue or grant any shares
of DoveBid Capital Stock, any Convertible Securities or any Rights; or
(b) declare, set aside or pay any cash or stock dividend or other
distribution in respect of its capital stock or other securities, redeem,
repurchase or otherwise acquire any of its capital stock or other securities
(except for the repurchase of stock from its employees, directors, consultants
or contractors in connection with the termination of their services at the
original purchase price of such stock or other securities), pay or distribute
any cash or property to any of its stockholders or security holders or make any
other cash payment to any of its stockholders or security holders.
7.4 Satisfaction of Conditions Precedent. Seller covenants and agrees
------------------------------------
that, between the date hereof and the Closing, it shall use its diligent efforts
to (i) satisfy or cause to be satisfied all of the conditions precedent set
forth in Section 8.1 and (ii) cause the transactions contemplated hereby to be
consummated in accordance with this Agreement. Each of DoveBid and Buyer
covenants and agrees that, between the date hereof and the Closing, it shall use
its diligent efforts to (i) satisfy or cause to be satisfied all of the
conditions precedent set forth in Section 8.2 and (ii) cause the transactions
contemplated hereby to be consummated in accordance with this Agreement.
Notwithstanding anything in this Agreement to the contrary, neither Buyer nor
any of its Affiliates shall be under any obligation to make proposals, execute
or carry out agreements or submit to orders providing for the sale or other
disposition or holding separate (through the establishment of a trust or
otherwise) of any assets or categories of assets of Buyer or any of its
Affiliates or the holding separate of any of the Assets or imposing or seeking
to impose any limitation on the ability of Buyer or any of its Affiliates to
conduct their business or the Business or own the Assets upon and after the
Closing.
7.5 Necessary Consents. Each of Seller, DoveBid and Buyer covenants and
------------------
agrees that, between the date hereof and the Closing, it shall use its diligent
efforts to promptly obtain such written consents, waivers and approvals from
third parties and Governmental Entities necessary to effect the sale,
assignment, transfer, conveyance and delivery to Buyer of good and marketable
title to all of the Assets free and clear of all Encumbrances.
7.6 Stockholder Approvals.
---------------------
(a) Promptly after the date hereof, Seller shall take all action
necessary in accordance with the DGCL and its Certificate of Incorporation and
Bylaws, each as currently in effect, to (i) convene a special meeting of the
Seller Stockholders to be held as promptly as practicable for the purpose of
voting upon the approval and adoption of this Agreement and each of the Seller
Ancillary Agreements, the approval of the transactions contemplated hereby and
thereby and the waiver of all covenants by which Seller is bound pursuant to its
Amended and Restated Stockholders Agreement which covenants, if not waived,
would be breached by Seller as a result of the transactions contemplated by this
Agreement (the "Seller Stockholders' Meeting"), or (ii) obtain the written
consent of the Seller Stockholders for the approval and adoption of this
Agreement and each of the Seller Ancillary Agreements, the approval of the
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transactions contemplated hereby and thereby and the waiver of all covenants by
which Seller is bound pursuant to its Amended and Restated Stockholders
Agreement which covenants, if not waived, would be breached by Seller as a
result of the transactions contemplated by this Agreement (the "Seller
Stockholders' Consent"). If Seller elects to convene the Seller Stockholders'
Meeting in lieu of obtaining the Seller Stockholders' Consents, Seller shall
ensure that the Seller Stockholders' Meeting is called, noticed, convened, held
and conducted in compliance with the DGCL, its Certificate of Incorporation and
Bylaws, each as currently in effect, and all other Applicable Legal
Requirements. Seller's Board of Directors shall, at the Seller Stockholders'
Meeting or in connection with obtaining the Seller Stockholders Consent, as
applicable, recommend that the Seller Stockholders vote in favor of and approve
and adopt this Agreement and the Seller Ancillary Agreements, approve the
transactions contemplated hereby and thereby and waive all covenants by which
Seller is bound pursuant to its Amended and Restated Stockholders Agreement
which covenants, if not waived, would be breached by Seller as a result of the
transactions contemplated by this Agreement; Seller's Board of Directors shall
not withdraw, amend or modify, in a manner adverse to DoveBid or Buyer, its
recommendations as set forth in this sentence. Buyer shall cause the holders of
proxies under the Voting Agreements to vote Seller Common Stock to vote for or
consent to, as applicable, the approval and adoption of this Agreement and each
of the Seller Ancillary Agreements and the approval of the transactions
contemplated hereby and thereby.
(b) Promptly after the date hereof, DoveBid shall take all action
necessary in accordance with the DGCL, applicable California law, and its
Certificate of Incorporation and Bylaws, each as currently in effect, to obtain
the written consent of DoveBid's stockholders for: (i) the approval and adoption
of the Restated Certificate; (ii) the approval and adoption of the Rights
Agreement; and (iii) the approval and adoption of the Stockholders' Agreement.
DoveBid's Board of Directors shall recommend (A) that DoveBid's stockholders
vote in favor of and approve and adopt the Restated Certificate and (B) that the
parties to the Existing Rights Agreement and the Existing Stockholders'
Agreement approve and adopt the Rights Agreement and the Stockholders Agreement.
DoveBid's Board of Directors shall not withdraw, amend or modify, in a manner
adverse to Seller, its recommendations as set forth in the preceding sentence.
7.7 Confidential Information. Effective as of the Closing, the terms of
------------------------
that certain letter agreement dated as of December 20, 2001 by and between
DoveBid and Seller (the "Letter Agreement") shall be terminated and superseded
in whole by this Agreement. From and at all times after the Closing, all
confidential and/or proprietary information of Buyer and DoveBid disclosed to
Seller in the course of negotiating the transactions contemplated by this
Agreement and all confidential and/or proprietary information of Seller
disclosed to Buyer and DoveBid in the course of negotiating the transactions
contemplated by this Agreement shall be held in strict confidence by Seller and
shall not be disclosed by Seller or any of its employees, Affiliates or
stockholders.
7.8 Further Actions. From and after the Closing, Seller shall (i) file any
---------------
notice, statement or other communication, (ii) obtain and provide to Buyer (and
shall immediately prepare all filings and applications, requests and notices
preliminary to obtaining) all approvals and consents, (iii) execute and deliver
all such other and additional instruments, notices, releases, undertakings and
documents, and (iv) do all such other acts and things, all as may be reasonably
-52-
requested by Buyer as necessary to assure to DoveBid and Buyer all of the rights
and interests granted or intended to be granted under this Agreement. Seller
hereby appoints Buyer as its attorney-in-fact for the limited purpose of
executing such documents should Seller be unable or unwilling to do so. From and
after the Closing, Seller shall take or cause to be taken such other reasonable
actions as Buyer may require (a) more effectively to assign, transfer and convey
to, and vest in, Buyer, and put Buyer in possession of, the Assets as
contemplated by this Agreement and (b) to carry out Seller's obligations under
this Agreement and each of the Seller Ancillary Agreements and give effect to
the transactions contemplated hereby and thereby. From and after the Closing,
each of DoveBid and Buyer shall take or cause to be taken such other reasonable
actions as Seller may require to carry out its obligations under this Agreement
and each of the Buyer Ancillary Agreements and give effect to the transactions
contemplated hereby and thereby.
7.9 No Other Negotiations. Seller covenants and agrees that, between the
---------------------
date hereof and the earlier of (i) the termination of this Agreement in
accordance with its terms and (ii) the Closing, it shall not, and shall not
authorize, encourage or permit any of its officers, directors, stockholders,
employees, Affiliates, attorneys, financial advisors or other agents or
representatives to, directly or indirectly solicit, initiate, seek, entertain,
encourage, facilitate or support any inquiry, proposal or offer from, furnish
any information to, participate in any discussions or negotiations with, or
enter into any agreement, agreement in principle or letter of intent with any
person (other than Buyer or DoveBid) regarding any Acquisition Transaction.
7.10 Transition Page. Promptly after the date hereof, Seller shall replace
---------------
its home page with a home page which is in the form of Exhibit I. Promptly, but
---------
in no event more than 24 hours, after the Closing, Seller's Website shall
display a notice to visitors announcing that Buyer has acquired the Assets and
redirecting them to DoveBid's Website. Such redirection shall be effected via a
"click-through" link and shall occur automatically within 30 seconds after the
display of such notice, and Seller's Website shall have no other function or
purpose. Seller shall operate Seller's Website in this manner for the duration
of the 90-day period following the Closing. After the expiration of such 90-day
period, Buyer shall be responsible for causing visitors to Seller's Website to
be immediately, automatically redirected to DoveBid's Website, without notice
and without stopping at an intermediate web page or site.
7.11 Access to Information. Each of Seller, DoveBid and Buyer covenants and
---------------------
agrees that, between the date hereof and the Closing, it shall allow the other
party and its agents access at reasonable times to the files, books, records,
technology, contracts, personnel and offices of such party, subject to the terms
of this Agreement. If, after the Closing, in order properly to operate the
Assets or the Business or to prepare its financial statements or any document
required to be filed with a Governmental Entity (including any Taxing
Authority), it is necessary that DoveBid or Buyer be furnished with additional
information relating to Seller, the Assets or the Business, and such information
is in Seller's possession or control, Seller shall furnish or cause its
representatives to furnish such information to DoveBid, Buyer or their
representatives. If, after the Closing, in order properly to prepare its
financial statements or any document required to be filed with a Governmental
Entity (including any Taxing Authority), it is necessary that Seller be
furnished with additional information relating to DoveBid, Buyer, the Assets or
the Business, and such information is in Buyer's or DoveBid's possession or
control, Buyer shall furnish or cause its representatives to furnish such
information to Seller or its representatives. If,
-53-
after the Closing, Seller liquidates, dissolves or winds up its business, Seller
shall deliver to Buyer copies of all information, records and documents not
previously provided to Buyer or DoveBid which relate to the Assets, the Business
or Seller.
7.12 No Post-Closing Retention of Copies. Immediately after the Closing,
------------------
Seller shall deliver to Buyer or destroy copies of any Assets in Seller's
possession or control that are in addition to copies delivered to Buyer or
DoveBid as part of the transactions contemplated by this Agreement, whether such
copies are in paper form, on computer media or stored in another form.
7.13 Post-Closing Audits and Governmental Inquiries. Seller shall be
------------------
responsible for responding to any audits, compliance reviews or other government
inquiries or actions relating to the conduct of the Business before and through
the Closing Date.
7.14 Employment Matters.
------------------
(a) Selected Employees. Buyer and DoveBid, in their sole and absolute
------------------
discretion, shall determine the employees of Seller or any of its Subsidiaries,
if any, to whom Buyer or DoveBid shall offer employment (the "Selected
Employees") and the terms and conditions of any such offer. Notwithstanding the
foregoing, neither Buyer nor DoveBid shall have any obligation to employ any of
the employees of Seller or any of its Subsidiaries, including any Selected
Employee. Seller shall not take any action, before or after the Closing,
directly or indirectly, to prevent or discourage any Selected Employee from
being employed by Buyer or DoveBid. Any Liabilities to any of the employees of
Seller or any of its Subsidiaries for severance benefits (including all Existing
Severance Payments) or resulting from Buyer's or DoveBid's failure to offer
employment to any such employee shall be, and shall remain, Seller's sole
responsibility; provided, however, that Seller shall deliver to Buyer, at the
-------- -------
Closing, an amount in cash equal to the sum of all Existing Severance Payments;
provided, further, that Buyer shall, upon the termination of a Transitional
-------- -------
Employee's employment with Buyer or DoveBid, as applicable, release to such
Transitional Employee an amount in cash equal to such person's Existing
Severance Payment. For purposes of this Section 7.14(a), a Transitional
Employee's "Existing Severance Payment" includes only the severance pay that
Seller has agreed to provide to such Transitional Employee upon the termination
of such person's employment with Seller and does not include any severance pay
---
that Buyer or DoveBid may, in its sole and absolute discretion, agree to provide
to such Transitional Employee upon the termination of such person's employment
with Buyer or DoveBid, as applicable.
(b) No Third-Party Beneficiaries. Notwithstanding any possible
----------------------------
inferences to the contrary, DoveBid, Buyer and Seller do not intend for this
Section 7.14 to create any rights or obligations except as among DoveBid, Buyer
and Seller, and no past, present or future employee of DoveBid, Buyer or Seller
or any of their respective Affiliates shall be treated as a third-party
beneficiary of this Section 7.14.
(c) Waiver of Noncompetition Agreements. Seller hereby waives any
-------------------------------------
and all noncompetition agreements in Seller's or any of its Subsidiaries' favor
regarding any of the Selected Employees who become employees of Buyer or DoveBid
after the Closing.
-54-
(d) COBRA. Seller shall set aside an amount in cash which is adequate
-----
to satisfy any and all Liabilities now or hereafter arising under COBRA.
7.15 Restrictions on Transfer; Stop-Transfer Instructions; Refusal to
----------------------------------------------------------------
Transfer. Notwithstanding any other provision of this Agreement or any of the
--------
Seller Ancillary Agreements to the contrary, Seller agrees that it shall not
distribute, sell or transfer any shares of DoveBid Capital Stock to any Seller
Stockholder who has not executed and delivered an Investment Representation
Letter to DoveBid. In connection with any transfer of DoveBid Capital Stock in
violation of this Agreement, Seller agrees that DoveBid may issue appropriate
"stop-transfer" instructions to its transfer agent, if any, and if DoveBid
transfers its own securities, it may make appropriate notations to the same
effect in its own records. DoveBid shall not be required to (a) transfer on its
books any of the Purchased Shares or other securities that have been sold or
otherwise transferred in violation of any of the provisions of this Agreement,
or (b) treat as owner of any such Purchased Shares or other securities, or to
accord the right to vote or pay dividends, to any purchaser or other trustee to
whom such Purchased Shares or other securities have been transferred in
violation of any of the provisions of this Agreement.
7.16 Dissolution and Distribution.
----------------------------
(a) All shares of DoveBid Capital Stock to be issued and released by
DoveBid to Seller at the Closing pursuant to the provisions of Article 3 (the
"Closing Shares") shall be so issued and released by DoveBid but remain as
uncertificated shares of DoveBid Capital Stock in the name of Seller in
accordance with the provisions of this Section 7.16. All of the Indemnification
Shares and Earnout Shares to be to be issued by DoveBid to Seller at the Closing
pursuant to the provisions of Article 3 (the "Holdback Shares") shall be so
issued by DoveBid but remain as uncertificated shares of DoveBid Capital Stock
in the name of Seller in accordance with the provisions of this Section 7.16.
For purposes of this Section 7.16, upon the release of any of the Holdback
Shares (including any New Indemnification Shares and New Earnout Shares) to each
Interim Holder (or such Interim Holder's transferees) or, from and after the
Dissolution, each Final Holder (or such Final Holder's transferees) pursuant to
the provisions of Articles 3 and 10, such released Holdback Shares (including
any New Indemnification Shares and New Earnout Shares) shall no longer be
Holdback Shares but shall be "Released Shares."
(b) Prior to the Dissolution, all Holdback Shares (including any New
Indemnification Shares and New Earnout Shares) and Additional Shares, if any,
released by DoveBid in accordance with the provisions of Articles 3 and 10 shall
be so released by DoveBid but remain as uncertificated shares of DoveBid Capital
Stock in the name of each Interim Holder (or such Interim Holder's transferees)
in accordance with its Pro Rata Share. Promptly after any release of any
Holdback Shares (including any New Indemnification Shares and New Earnout
Shares) or Additional Shares, if any, described in the foregoing sentence,
DoveBid shall deliver to the Representative a written notice indicating the
number of Closing Shares, Released Shares, if any, Additional Shares, if any,
and Holdback Shares (including any New Indemnification Shares and New Earnout
Shares) that are then issued to each such Interim Holder (or such Interim
Holder's transferees) but remain as uncertificated shares of DoveBid Capital
Stock in accordance with the provisions of this Section 7.16; provided, however,
-------- -------
that, prior to any such
-55-
delivery by DoveBid, Seller shall have provided DoveBid with an Interim Schedule
in accordance with Section 7.16(h).
(c) Upon the Dissolution, the Representative shall provide DoveBid
with (i) written notice of the completion of such Dissolution and (ii) the Final
Schedule. Promptly after DoveBid's receipt of the materials set forth in the
preceding sentence, DoveBid shall update the DoveBid Stock Ledger to reflect
that, from and after the Dissolution, all of the Closing Shares, all of the
Released Shares, if any, all of the Additional Shares, if any, and all of the
Holdback Shares (including any New Indemnification Shares and New Earnout
Shares) that have not been cancelled and retired by DoveBid pursuant to Section
3.4(b) are no longer issued to the Interim Holders (or such Interim Holders'
transferees) but are issued to the Final Holders (or such Final Holders'
transferees) according to each such person's Pro Rata Share. Promptly after the
Dissolution, DoveBid shall deliver to each Final Holder (or such Final Holder's
transferees), a written notice indicating the number of Closing Shares, Released
Shares, if any, Additional Shares, if any, and Holdback Shares (including any
New Indemnification Shares and New Earnout Shares) that are then issued to each
such Final Holder (or such Final Holder's transferees) but remain as
uncertificated shares of DoveBid Capital Stock in accordance with the provisions
of this Section 7.16.
(d) From and after the Dissolution, all Holdback Shares (including
any New Indemnification Shares and New Earnout Shares) and Additional Shares, if
any, released by DoveBid in accordance with the provisions of Articles 3 and 10
shall be so released by DoveBid but remain as uncertificated shares of DoveBid
Capital Stock in the name of each Final Holder (or such Final Holder's
transferees) in accordance with its Pro Rata Share. Promptly after any release
of any Holdback Shares (including any New Indemnification Shares and New Earnout
Shares) or Additional Shares, if any, described in the foregoing sentence,
DoveBid shall deliver to each Final Holder (or such Final Holder's transferees)
a written notice indicating the number of Closing Shares, Released Shares, if
any, Additional Shares, if any, and Holdback Shares (including any New
Indemnification Shares and New Earnout Shares) that are then issued to each such
Final Holder (or such Final Holder's transferees) but remain as uncertificated
shares of DoveBid Capital Stock in accordance with the provisions of this
Section 7.16; provided, however, that Seller shall have provided DoveBid with
the Final Schedule in accordance with Section 7.16(h).
(e) Promptly following the later of (i) the date on which the Fourth
Earnout Shares, if any, are released pursuant to Section 3.4 to each Interim
Holder (or such Interim Holder's transferees) or, from and after the
Dissolution, each Final Holder (or such Final Holder's transferees) according to
its Pro Rata Share and (ii) the date on which all Claims by the Buyer
Indemnified Persons have been finally resolved pursuant to Article 10, DoveBid
shall deliver to each Interim Holder (or such Interim Holder's transferees) or,
from and after the Dissolution, each Final Holder (or such Final Holder's
transferees) according to its Pro Rata Share the Closing Shares, the Released
Shares, if any, the Additional Shares, if any, and the Holdback Shares
(including any New Indemnification Shares and New Earnout Shares), in
certificated form, which shares have been issued and released by DoveBid in
accordance with the provisions of Articles 3 and 10.
-56-
(f) Notwithstanding any provision of this Agreement to the contrary
but subject to Sections 7.15 and 7.16(h), any Interim Holder (or such Interim
Holder's transferees) or, from and after the Dissolution, any Final Holder (or
such Final Holder's transferees) shall be entitled to receive the Closing
Shares, the Released Shares, if any, the Additional Shares, if any, and the
Holdback Shares (including any New Indemnification Shares and New Earnout
Shares) issued to it, which shares have been released by DoveBid in accordance
with the provisions of Articles 3 and 10, in certificated form, upon (i) the
effective date of a Qualifying IPO (as defined in DoveBid's Certificate in
Incorporation, as it may be hereafter amended from time to time), (ii) any sale
of all or substantially all of the assets of DoveBid or any transfer of
DoveBid's capital stock in connection with a sale of DoveBid, whether such sale
is effected by merger, consolidation, sale of assets or sale or exchange of
stock representing more than 50% of the voting power of the DoveBid Capital
Stock, or (iii) the reasonable request of such person, made to DoveBid as
provided in Section 11.7, to transfer any such Closing Shares, Released Shares,
if any, Additional Shares, if any, and Holdback Shares (including any New
Indemnification Shares and New Earnout Shares); provided, however, that, in the
-------- -------
case of clause (iii), such transfer is in accordance with all restrictions set
forth in this Agreement, the Stockholders' Agreement and, if such person has
executed an Investment Representation Letter, such person's Investment
Representation Letter.
(g) It shall be the responsibility of each Interim Holder (and such
Interim Holder's transferees) and each Final Holder (and such Final Holder's
transferees) to notify DoveBid, as provided in Section 11.7, of any change in
the notice address of such person on record with DoveBid, and DoveBid may rely
absolutely at any time on the information so provided to DoveBid, as such
information may be updated from time to time as provided in Section 11.7. In
addition, DoveBid shall have no obligation under this Section 7.16 to any
transferee of Seller, any transferee of any Interim Holder or any transferee of
any Final Holder unless such transferee has acquired shares of Seller Preferred
Stock and/or shares of DoveBid Capital Stock in accordance with the provisions
of this Agreement, the Stockholders' Agreement and, if applicable, the
transferring person's Investment Representation Letter.
(h) Prior to the release of any Holdback Shares (including any New
Indemnification Shares and New Earnout Shares) or Additional Shares, if any,
described in the first sentence of Section 7.16(b), Seller shall deliver to
DoveBid as provided in Section 11.7 a schedule setting forth the names of all
holders of Closing Shares, Holdback Shares, Released Shares, if any, Additional
Shares, if any, and Holdback Shares (including any New Indemnification Shares
and New Earnout Shares) and each such holder's Pro Rata Share (each such
schedule, an "Interim Schedule"). Upon the Dissolution, Seller shall deliver to
DoveBid as provided in Section 11.7 a schedule certified by Seller's Board of
Directors and setting forth the names of all holders of Closing Shares, Holdback
Shares, Released Shares, if any, Additional Shares, if any, and Holdback Shares
(including any New Indemnification Shares and New Earnout Shares) and each such
holder's Pro Rata Share (the "Final Schedule"). Each Interim Schedule shall be
certified as true and correct by Seller's Board of Directors, and the Final
Schedule shall be certified as true and correct by the Representative. In
performing its obligations under this Section 7.16, DoveBid may rely absolutely
at any time on the information provided in the most recently delivered Interim
Schedule or the Final Schedule, as applicable. Notwithstanding any provision of
this Agreement to the contrary, DoveBid shall not be
-57-
responsible, and shall have no Liability to any person for any Damages directly
or indirectly incurred, resulting from or arising out of any inaccuracy,
misrepresentation or untruth in the most recently delivered Interim Schedule or
the Final Schedule, as applicable.
7.17 Post-Closing Activities of Seller.
---------------------------------
(a) Negative Covenants. After the Closing, Seller shall not (a)
------------------
issue, sell, create or authorize any shares of its capital stock of any class or
series or any other of its securities (other than pursuant to the exercise of
outstanding Seller Options, all of which are listed on Schedule 5.3(a)-2 of the
-----------------
Seller Disclosure Letter, or outstanding warrants to purchase shares of Seller
Common Stock, all of which are listed on Schedule 5.3(a)-3) of the Seller
-----------------
Disclosure Letter, or issue, grant or create any warrants, obligations,
subscriptions, options, convertible securities, or other commitments to issue
shares of its capital stock or any securities that are potentially exchangeable
for, or convertible into, shares of its capital stock, (b) amend Seller's
Certificate of Incorporation, or (c) conduct any business except to act as a
holding company whose only assets are the shares of DoveBid Capital Stock
issuable as the Purchase Price hereunder.
(b) Affirmative Covenants. Within two business days after the date
---------------------
hereof, Seller shall deliver an opt out notice in the form of Exhibit J (the
---------
"Opt Out Notice") to each registered user of Seller's Website whose user data
has been collected by Seller or its predecessors (each, a "User"). Upon the
expiration of the opt out period, which shall be 21 days after the date on which
Seller delivered the Opt Out Notice as provided in the preceding sentence (the
"Expiration Date"), Seller shall deliver to Buyer a written notice indicating
whether any User, pursuant to the Opt Out Notice, has elected to opt out of
having such User's user data transferred to Buyer. If any User has, pursuant to
the Opt Out Notice, elected to opt out of having such User's user data
transferred to Buyer, then Seller shall not transfer the user data of any such
User or Users to Buyer. None of the user data collected by Seller or its
predecessors shall be transferred to Buyer before the Expiration Date regardless
of whether the Closing has occurred. On the Closing or, if the Closing is
consummated before the Expiration Date, the Expiration Date, Seller shall
transfer to Buyer the user data of all Users who did not, pursuant to the Opt
Out Notice, elect to opt out of having their user data transferred to Buyer in
accordance with this Agreement. Promptly after the Closing, Seller shall (i)
pay, perform and satisfy all of the material Liabilities of Seller and its
Subsidiaries other than the Assumed Liabilities and Liabilities to DoveBid,
Buyer and the Buyer Indemnified Persons arising under this Agreement and, if
necessary, shall raise any funds necessary to accomplish the foregoing, (ii)
effect the Dissolution, and (iii) deliver written notices to all of Seller's
customers set forth on the Receivables List, updated as of the Closing Date,
notifying such customers of Buyer's purchase of the Seller Receivables and
directing such customers to make payment to Buyer rather than Seller. If Seller
receives any payment with respect to any of the Seller Receivables, Seller shall
promptly remit such payment to Buyer and shall not, directly or indirectly,
utilize any of such funds for its own purposes.
-58-
7.18 Taxes.
-----
(a) Each of Seller and its Subsidiaries shall, to the extent that
failure to do so could adversely affect or result in any Encumbrance on the
Assets or the Business or otherwise result in DoveBid or Buyer having any
Liability for payment of any amount, (i) continue to file within the time period
for filing all Returns, and such Returns shall be true, correct and complete in
all material respects, and (ii) pay when due any and all Taxes attributable to
or levied or imposed upon the Assets for periods (or portions thereof) through
and including the Closing Date whether or not such payment is required to be
paid after the Closing Date.
(b) Seller agrees to promptly pay all sales, use or other Taxes
imposed on the sale of the Assets to Buyer under this Agreement. The parties
shall cooperate with each other to the extent reasonably requested and legally
permitted to minimize any such Taxes. Except as otherwise set forth in this
Section 7.18(b), each of Seller and its Subsidiaries shall be responsible for
any Taxes imposed upon Seller or any of its Subsidiaries as a result of any of
the transactions contemplated by this Agreement or by any of the Seller
Ancillary Agreements and DoveBid and Buyer shall be responsible for any Taxes
imposed upon DoveBid or Buyer as a result of any of the transactions
contemplated by this Agreement or by any of the Buyer Ancillary Agreements.
7.19 Survival of Covenants. Except as otherwise specified in this Article
---------------------
7, each of the covenants set forth in this Article 7 shall survive the Closing.
8. CONDITIONS TO CLOSING.
---------------------
8.1 Conditions to Buyer's and DoveBid's Obligations. Buyer's and DoveBid's
-----------------------------------------------
obligations to consummate the purchase of the Assets from Seller and the other
transactions contemplated hereby shall be subject to the satisfaction and
fulfillment, on and as of the Closing, of each of the following conditions (any
of which may be waived by Buyer or DoveBid but only in a writing signed by Buyer
or DoveBid):
(a) Representations and Warranties. The representations and warranties
------------------------------
of Seller set forth in Article 5 (i) that are qualified as to materiality or
Material Adverse Effect shall be true and correct and (ii) that are not
qualified as to materiality or Material Adverse Effect shall be true and correct
in all material respects, in each case, as of immediately prior to the Closing
with the same force and effect as if they had been made on the Closing Date
(except for any such representations or warranties that, by their terms, speak
only as of a specific date or dates, in which case such representations and
warranties that are qualified as to materiality or Material Adverse Effect shall
be true and correct and such representations and warranties that are not
qualified as to materiality or Material Adverse Effect shall be true and correct
in all material respects in each case on and as of such specified date or
dates), and at the Closing Buyer shall have received a certificate to such
effect executed by Seller's Chief Executive Officer. The representations and
warranties of each Seller Stockholder set forth in such Seller Stockholder's
Investment Representation Letter shall be true and correct.
(b) Covenants. Seller shall have complied with and fully performed,
---------
in all material respects, all of its covenants and obligations pursuant to this
Agreement on or before the
-59-
Closing (to the extent that such covenants and obligations require compliance
with and performance by Seller on or before the Closing), and at the Closing
Buyer shall have received a certificate to such effect executed by Seller's
Chief Executive Officer.
(c) No Material Adverse Change. Since the date of this Agreement,
--------------------------
there shall have been no Material Adverse Change in the Assets or the Business,
and at the Closing Buyer shall have received a certificate to such effect
executed by Seller's Chief Executive Officer.
(d) No Restraints; No Litigation. There shall not be instituted or
----------------------------
pending any action or proceeding by any Governmental Entity seeking to compel
Buyer or any of its Affiliates to sell, dispose of or hold separate (through the
establishment of a trust or otherwise) any assets or categories of assets of
Buyer or any of its Affiliates or to hold separate any of the Assets or imposing
or seeking to impose any limitation on the ability of Buyer or any of its
Affiliates to conduct their business or the Business or own the Assets upon and
after the Closing. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the transactions
contemplated by this Agreement illegal or otherwise prohibiting consummation
thereof. No litigation or proceeding shall be threatened or pending that could
be reasonably expected to materially affect the Assets or the Business or
prevent the transactions contemplated by this Agreement.
(e) Requisite Approvals. This Agreement and each of the Seller
-------------------
Ancillary Agreements shall have been approved and adopted, and the transactions
contemplated hereby and thereby shall have been approved, by the requisite vote
of Seller's Board of Directors and the Seller Stockholders in accordance with
Seller's Certificate of Incorporation and Bylaws, each as currently in effect,
and all Applicable Legal Requirements. All covenants by which Seller is bound
pursuant to its Amended and Restated Stockholders Agreement which covenants, if
not waived, would be breached by Seller as a result of the transactions
contemplated by this Agreement shall have been waived pursuant to the provisions
of Section 17 thereof.
(f) Securities Exemptions. Buyer shall be reasonably satisfied that
---------------------
the offer and sale of the Purchased Shares to Seller pursuant to this Agreement
shall be exempt from the registration requirements of the Securities Act, the
qualification requirements of the California Corporate Securities Law of 1968,
as amended, and the registration or qualification requirements of all other
applicable state securities laws.
(g) Employment. Each of the persons listed on Exhibit K-1 (the
---------- -----------
"Offerees") and each of the persons listed on Exhibit K-2 (the "Transitional
-----------
Employees") shall have accepted Buyer's or DoveBid's offer of employment by
delivering to Buyer or DoveBid, as applicable, an executed counterpart of the
offer letter from Buyer or DoveBid, as applicable, and none of such Offerees or
Transitional Employees shall have rescinded their acceptance of Buyer's or
DoveBid's offer of employment.
-60-
(h) Seller's Financial Condition. Seller's financial condition shall
----------------------------
be substantially as set forth in the Seller Financial Statements. Seller's rate
of cash expenditure ("burn rate") during the period between December 12, 2001
and the Closing, shall have been materially consistent with Seller's historical
burn rate as previously reported by Seller to DoveBid. Seller shall have
delivered to Buyer an updated Liabilities List containing a true, correct and
complete listing of all of the Liabilities of Seller and its Subsidiaries,
including the amount of each such Liability, as of the Closing Date. Neither
Seller nor any of its Subsidiaries shall have any material Liability except for
the Assumed Liabilities and Liabilities to DoveBid, Buyer and the Buyer
Indemnified Persons arising under this Agreement. Seller shall have delivered to
Buyer an updated Receivables List containing a true, correct and complete aging
list of all of the Seller Receivables, including the amount of each such Seller
Receivable as of the Closing Date.
(i) Termination of 401(k) Plan. Seller shall have terminated its
--------------------------
401(k) plan in compliance with all Applicable Legal Requirements.
(j) Investment Representation Letters. DoveBid and Buyer shall have
---------------------------------
received an executed counterpart of the Investment Representation Letter
executed by each Seller Stockholder listed on Exhibit B-1.
(k) Amendment of Certain DoveBid Documents. The Restated Certificate
--------------------------------------
shall have been approved and adopted by each required vote of the holders of
DoveBid Capital Stock under DoveBid's Certificate of Incorporation, as currently
in effect, and shall have been filed with the Delaware Secretary of State and
have become effective. The Existing Rights Agreement shall have been amended by
the consent of DoveBid and the holders of a majority of "Registrable Securities"
then outstanding (as defined in the Existing Rights Agreement), and such
amendment shall contain provisions in the form of Exhibit E. The Existing
---------
Stockholders' Agreement shall have been amended by the consent of the
"Stockholders" (as defined in the Existing Stockholders' Agreement) holding (i)
at least 66.7% of the then outstanding shares of DoveBid Series A Preferred
Stock, DoveBid Series B Preferred Stock, DoveBid Series C Preferred Stock,
DoveBid Series D-1 Preferred Stock and DoveBid Series DD Preferred Stock, voting
together as a single class on an as-converted to DoveBid Common Stock basis and
(ii) a majority of the then outstanding shares of DoveBid Common Stock, and such
amendment shall contain provisions in the form of Exhibit F.
---------
(l) Amendment of Certain Seller Documents. Seller's Second Amended and
-------------------------------------
Restated Stockholders Agreement shall have been approved and adopted by each
required vote of the Seller Stockholders under the DGCL, Seller's Certificate of
Incorporation, as currently in effect, and Seller's Amended and Restated
Stockholders Agreement.
(m) Acknowledgements and Waivers by Indemnitees. Each of the
-------------------------------------------
Indemnitees under those certain Indemnification Agreements by and between Seller
(as successor-in-interest to Workstations International, Inc., a Minnesota
corporation) and each of the Indemnitees specified therein (collectively, the
"Indemnification Agreements"), which agreements are listed on Schedule 5.11(m)
----------------
of the Seller Disclosure Letter, shall have executed and delivered to Buyer an
acknowledgement and waiver, in the form of Exhibit L.
---------
-61-
(n) Delivery of Seller Ancillary Agreements. At the Closing, against
---------------------------------------
delivery to Seller of the items, payments, documents and certificates to be
delivered to Seller by Buyer at the Closing pursuant to Section 8.2(h), Seller
shall have delivered to Buyer the following items, documents and certificates:
(i) a counterpart of the ▇▇▇▇ of Sale in the form of Exhibit M
---------
executed on Seller's behalf by Seller's Chief Executive Officer and Secretary;
(ii) the Assets, which shall be delivered in accordance with
the provisions of Section 2.4, and which shall be free and clear of any and all
Encumbrances;
(iii) an assignment from Seller to Buyer of all registered and
unregistered copyrights, trademarks, service marks and domain names included in
the Assets and all pending applications for registration or recordation of any
copyrights, trademarks, service marks and domain names included in the Assets,
duly executed on behalf of Seller by the Chief Executive Officer of Seller and
notarized, in a form acceptable for recording with the United States Copyright
Office, the United States Patent and Trademark Office or InterNIC Registration
Services (or other applicable registrar), as applicable, and in the form of
Exhibit N (the "Copyright Assignment"), Exhibit O (the "▇▇▇▇ Assignment") or
--------- ---------
Exhibit P (the "Domain Name Assignment"), as applicable;
---------
(iv) copies of resolutions of Seller's Board of Directors and
the Seller Stockholders authorizing the execution, delivery and performance by
Seller of this Agreement, each of the Seller Ancillary Agreements, and the
consummation of the sale, assignment, transfer, conveyance and delivery of the
Assets hereunder and all other transactions contemplated hereby and thereby,
certified as true and correct on the Closing Date by Seller's Secretary;
(v) a certificate from the Delaware Secretary of State, dated
as of a date that is no more than three business days before the Closing Date,
regarding the corporate good standing of Seller with that agency as of such
date;
(vi) evidence of Seller's receipt of all consents, waivers and
approvals from third parties and Governmental Entities necessary to effect the
transactions contemplated by this Agreement (including the sale, assignment,
transfer, conveyance and delivery to Buyer of good and marketable title to all
of the Assets free and clear of all Encumbrances), including the consents listed
on Schedule 5.2(c) of the Seller Disclosure Letter);
---------------
(vii) an amount in cash equal to the sum of all severance
payments that are payable to the Offerees and the Transitional Employees as set
forth in the offer letters from Buyer or DoveBid, as applicable, to such
Offerees and Transitional Employees; and
(viii) an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Brand, LLP, legal
counsel for Seller, dated the Closing Date, substantially in the form of Exhibit
-------
Q.
-
8.2 Conditions to Seller's Obligations. Seller's obligations to consummate
----------------------------------
the sale, assignment, transfer, conveyance and delivery of the Assets to Buyer
and the other transactions contemplated hereby shall be subject to the
satisfaction and fulfillment, on and as of the Closing,
-62-
of each of the following conditions (any of which may be waived by Seller but
only in a writing signed by Seller):
(a) Representations and Warranties. The representations and warranties
------------------------------
of DoveBid set forth in Article 6 (except for the representations and warranties
of DoveBid set forth in Sections 6.3(a)(ii) and 6.3(b)) (i) that are qualified
as to materiality or Material Adverse Effect shall be true and correct and (ii)
that are not qualified as to materiality or Material Adverse Effect shall be
true and correct in all material respects, in each case, as of immediately prior
to the Closing with the same force and effect as if they had been made on the
Closing Date (except for any such representations or warranties that, by their
terms, speak only as of a specific date or dates, in which case such
representations and warranties that are qualified as to materiality or Material
Adverse Effect shall be true and correct and such representations and warranties
that are not qualified as to materiality or Material Adverse Effect shall be
true and correct in all material respects in each case on and as of such
specified date or dates), and at the Closing Seller shall have received a
certificate to such effect executed by a duly authorized representative of
DoveBid. The certificate referred to in the preceding sentence shall set forth
any changes to the representations and warranties in Sections 6.3(a)(ii) and
6.3(b), which changes occur between the date hereof and the Closing, and in such
certificate DoveBid shall certify that the representations and warranties in
Sections 6.3(a)(ii) and 6.3(b), with such changes, are true and correct in all
material respects as of the Closing.
(b) Covenants. Each of DoveBid and Buyer shall have complied with and
---------
fully performed, in all material respects, all of its covenants and obligations
pursuant to this Agreement on or before the Closing (to the extent that such
covenants and obligations require compliance with and performance by DoveBid or
Buyer on or before the Closing), and at the Closing Seller shall have received a
certificate to such effect executed by a duly authorized representative of
DoveBid.
(c) No Material Adverse Change. Since the date of this Agreement,
--------------------------
there shall have been no Material Adverse Change in DoveBid, and at the Closing
Seller shall have received a certificate to such effect executed by a duly
authorized representative of DoveBid.
(d) No Restraints. No Governmental Entity shall have enacted, issued,
-------------
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the transactions
contemplated by this Agreement illegal or otherwise prohibiting consummation
thereof. No litigation or proceeding shall be threatened or pending that could
be reasonably expected to prevent the transactions contemplated by this
Agreement.
(e) Requisite Approvals. This Agreement and each of the Buyer
-------------------
Ancillary Agreements shall have been approved and adopted, and the transactions
contemplated hereby and thereby shall have been approved, by the requisite vote
of Buyer's and DoveBid's respective Boards of Directors in accordance with
Buyer's and DoveBid's respective Certificates of Incorporation and Bylaws, each
as currently in effect, and all Applicable Legal Requirements.
-63-
(f) Amendment of Certain DoveBid Documents. The Restated Certificate
--------------------------------------
shall have been approved and adopted by each required vote of the holders of
DoveBid Capital Stock under DoveBid's Certificate of Incorporation, as currently
in effect, and shall have been filed with the Delaware Secretary of State and
have become effective. The Existing Rights Agreement shall have been amended by
the consent of DoveBid and the holders of a majority of "Registrable Securities"
then outstanding (as defined in the Existing Rights Agreement), and such
amendment shall contain provisions in the form of Exhibit E. The Existing
---------
Stockholders' Agreement shall have been amended by the consent of the
"Stockholders" (as defined in the Existing Stockholders' Agreement) holding (i)
at least 66.7% of the then outstanding shares of DoveBid Series A Preferred
Stock, DoveBid Series B Preferred Stock, DoveBid Series C Preferred Stock,
DoveBid Series D-1 Preferred Stock and DoveBid Series DD Preferred Stock, voting
together as a single class on an as-converted to DoveBid Common Stock basis and
(ii) a majority of the then outstanding shares of DoveBid Common Stock, and such
amendment shall contain provisions in the form of Exhibit F.
---------
(g) Debt. Immediately prior to the Closing, DoveBid shall have paid to
----
Comdisco, Inc. ("Comdisco") the Due Amount (as defined in that certain letter
agreement dated February 27, 2002 by and between DoveBid and Comdisco attached
hereto as Exhibit R).
---------
(h) Delivery of Buyer Ancillary Agreements. At the Closing, against
--------------------------------------
delivery to Buyer of the items, payments, documents and certificates to be
delivered to Buyer by Seller at the Closing pursuant to Section 8.1(n), Buyer
shall have delivered to Seller the following items, documents and certificates:
(i) copies of resolutions of Buyer's and DoveBid's Boards of
Directors authorizing the execution, delivery and performance by Buyer and
DoveBid of this Agreement and each of the Buyer Ancillary Agreements to which it
is a party, certified as true and correct on the Closing Date by Buyer's and
DoveBid's respective Secretaries;
(ii) subject to Sections 3.3 and 3.4, a number of shares of
DoveBid Capital Stock, in the amount and kind set forth in Section 3.2;
(iii) a certificate from the Delaware Secretary of State, dated as
of a date that is no more than three business days before the Closing Date,
regarding the corporate good standing of Buyer with that agency as of such date;
and
(iv) an opinion of Fenwick & West, LLP, legal counsel for Buyer,
dated the Closing Date, substantially in the form of Exhibit S.
---------
9. Termination, Amendment and Waiver.
---------------------------------
9.1 Termination. This Agreement may be terminated at any time before the
-----------
Closing, whether before or after the requisite approvals of the Seller
Stockholders:
(a) by mutual written consent duly authorized by the Boards of
Directors of DoveBid and Seller;
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(b) by either Seller or DoveBid, if the Closing shall not have been
effected by March 31, 2002 for any reason; provided, however, that the right to
-------- -------
terminate this Agreement under this Section 9.1(b) shall not be available to any
party if the action or failure to act of such party or any of its Subsidiaries
has been a principal cause of or resulted in the failure of the Closing to occur
on or before such date and such action or failure to act constitutes a breach of
this Agreement;
(c) by either Seller or DoveBid, if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, which order, decree, ruling or
other action is final and nonappealable;
(d) by Seller, (i) upon a breach of any representation, warranty,
covenant or agreement on the part of Buyer or DoveBid set forth in this
Agreement or any Buyer Ancillary Agreement, or if any representation or warranty
of Buyer or DoveBid shall have become untrue, in either case such that the
conditions set forth in Section 8.2(a) or 8.2(b) would not be satisfied as of
the time of such breach or as of the time such representation or warranty shall
have become untrue or (ii) if the condition in Section 8.2(c) would not be
satisfied at any time before the Closing, provided that if such inaccuracy in
Buyer's or DoveBid's representations and warranties or breach by Buyer or
DoveBid or the Material Adverse Change to DoveBid is curable by Buyer or
DoveBid, then Seller may not terminate this Agreement under this Section 9.1(d)
for 15 days after delivery of written notice from Seller to DoveBid of such
breach or Material Adverse Change to DoveBid, provided DoveBid continues to
exercise reasonable efforts to cure such breach or Material Adverse Change to
DoveBid (it being understood that Seller may not terminate this Agreement
pursuant to this Section 9.1(d) if such breach by Buyer or DoveBid or Material
Adverse Change to DoveBid is cured during such 15-day period, or if Seller shall
have materially breached this Agreement); or
(e) by DoveBid, (i) upon a breach of any representation, warranty,
covenant or agreement on the part of Seller set forth in this Agreement or any
Seller Ancillary Agreement, or if any representation or warranty of Seller shall
have become untrue, in either case such that the conditions set forth in Section
8.1(a) or 8.1(b) would not be satisfied as of the time of such breach or as of
the time such representation or warranty shall have become untrue or (ii) if the
condition in Section 8.1(c) would not be satisfied at any time before the
Closing, provided that if such inaccuracy in Seller's representations and
warranties or breach by Seller or the Material Adverse Change to any of Seller,
the Assets or the Business is curable by Seller, then DoveBid may not terminate
this Agreement under this Section 9.1(e) for 15 days after delivery of written
notice from DoveBid to Seller of such breach or Material Adverse Change to any
of Seller, the Assets or the Business, provided Seller continues to exercise
reasonable efforts to cure such breach or Material Adverse Change to any of
Seller, the Assets or the Business (it being understood that DoveBid may not
terminate this Agreement pursuant to this Section 9.1(e) if such breach by
Seller or Material Adverse Change to any of Seller, the Assets or the Business
is cured during such 15-day period, or if Buyer or DoveBid shall have materially
breached this Agreement).
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9.2 Notice of Termination; Effect of Termination. Any proper termination
--------------------------------------------
of this Agreement under Section 9.1 shall be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto
(or, if all of the conditions therefor are satisfied, upon the expiration of any
relevant cure period provided for in the relevant paragraphs of Section 9.1). In
the event of the termination of this Agreement as provided in Section 9.1, this
Agreement shall be of no further force or effect, except (i) as set forth in
this Section 9.2 and Article 11, each of which shall survive the termination of
this Agreement and (ii) nothing herein shall relieve any party from Liability
for any willful breach of any covenant of this Agreement or for any intentional
or willful act or omission by a party which renders any representations or
warranties of such party untrue.
9.3 Amendment. This Agreement may not be amended by the parties hereto
---------
except by execution of an instrument in writing signed on behalf of each of the
parties hereto.
9.4 Extension; Waiver. At any time before the Closing, any party hereto
-----------------
may, to the extent legally allowed, take any or all of the following actions:
(i) extend the time for the performance of any of the obligations or other acts
of the other parties hereto; (ii) waive any inaccuracies in the representations
and warranties made to such party contained herein or in any document delivered
pursuant hereto; or (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party. Except as
otherwise provided herein, no delay of, or omission in, the exercise of any
right, power or remedy under this Agreement shall constitute a waiver of such
right. No waiver of any single breach or default shall be deemed a waiver of any
other breach or default occurring before or after that waiver.
10. INDEMNIFICATION.
---------------
10.1 Survival of Representations and Warranties and Covenants. All
--------------------------------------------------------
representations and warranties of Seller contained in this Agreement and the
Seller Ancillary Agreements and of DoveBid and Buyer contained in this Agreement
and the Buyer Ancillary Agreements shall remain operative and in full force and
effect, regardless of any investigation or disclosure made by or on behalf of
any of the parties to this Agreement, until the earlier of (a) the termination
of this Agreement in accordance with its terms and (b) the Release Date. All
covenants of the parties shall survive according to their respective terms.
Notwithstanding anything contained herein to the contrary, each party shall be
entitled to seek recovery of Damages for fraud, willful misrepresentation or
willful misconduct until the expiration of the applicable statute of limitations
for any such claim.
10.2 Seller Indemnification Obligations. Subject to the provisions and
----------------------------------
limitations set forth in Section 10.4, Seller and, from and after the
Dissolution, each Final Holder (individually according to its Pro Rata Share,
and not jointly and severally) (each, a "Seller Indemnifying Person"), agrees to
defend, indemnify and hold harmless Buyer, DoveBid and their respective
Affiliates, officers, directors, agents, representatives, stockholders and
employees (collectively, the "Buyer Indemnified Persons" and each individually,
a "Buyer Indemnified Person") from and against any Damages directly or
indirectly incurred, resulting from or arising out of:
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(a) any inaccuracy, misrepresentation or untruth in any
representation or warranty of Seller contained in this Agreement and the Seller
Ancillary Agreements;
(b) any inaccuracy, misrepresentation or untruth in any
representation or warranty of any Seller Stockholder contained such Seller
Stockholder's Investment Representation Letter; provided, however, that, in the
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case of any such inaccuracy, misrepresentation or untruth, the Seller
Indemnifying Person shall be only the Seller Stockholder whose Investment
Representation Letter contained the inaccuracy, misrepresentation or untruth;
(c) any breach of, or default in, any covenant of Seller contained
in this Agreement and the Seller Ancillary Agreements;
(d) any of the Excluded Liabilities;
(e) any noncompliance with any bulk sales, bulk transfer or similar
laws applicable to the transactions contemplated hereby;
(f) any claim asserting that the sale of the Assets to Buyer under
this Agreement was a fraudulent, preferential, or otherwise avoidable transfer
or conveyance;
(g) any Taxes, assessments and other governmental charges of any
kind or nature whatsoever, including any withholding, social security or
unemployment levies, arising out of the Business through the Closing or payable
with respect to Seller or the transactions contemplated hereby;
(h) any demand, claim, debt, suit, cause of action, arbitration or
other proceeding (including a warranty claim, a product liability claim or any
other claim) that is made or asserted by any third party that relates to the
operation of the Business and arises from any act or omission of Seller;
(i) any demand, claim, debt, suit, cause of action, arbitration or
other proceeding (including a warranty claim, a product liability claim or any
other claim) that is made or asserted by any third party that relates to the
Assets and arises from any act or omission of Seller; and
(j) any demand, claim, debt, suit, cause of action, arbitration or
other proceeding that is made or asserted against Seller, including any such
action that is made or asserted against Seller by any Seller Stockholder,
whether arising before or after the Closing.
10.3 DoveBid Indemnification Obligations. Subject to the provisions and
-----------------------------------
limitations set forth in Section 10.4 and the last sentence of Section 7.16(h),
DoveBid (the "Buyer Indemnifying Person") agrees to defend, indemnify and hold
harmless Seller and its Affiliates, officers, directors, agents,
representatives, stockholders and employees (collectively, the "Seller
Indemnified Persons" and each individually, a "Seller Indemnified Person") from
and against any Damages directly or indirectly incurred, resulting from or
arising out of:
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(a) any inaccuracy, misrepresentation or untruth in any representation
or warranty of DoveBid or Buyer contained in this Agreement and the Buyer
Ancillary Agreements;
(b) any breach of, or default in, any covenant of DoveBid or Buyer
contained in this Agreement and the Buyer Ancillary Agreements;
(c) any of the Assumed Liabilities;
(d) any Taxes, assessments and other governmental charges of any kind
or nature whatsoever, including any withholding, social security or unemployment
levies, arising out of the Business after the Closing or payable with respect to
DoveBid or Buyer; and
(e) any demand, claim, debt, suit, cause of action, arbitration or
other proceeding (including a warranty claim, a product liability claim or any
other claim) that is made or asserted by any third party that relates to the
Assets and arises from any act or omission of DoveBid or Buyer.
10.4 Limitations on Indemnification Obligations. From and after the
------------------------------------------
Closing, the sole and exclusive remedy of the Buyer Indemnified Persons against
the Seller Indemnifying Person for any Damages directly or indirectly incurred,
resulting from or arising out of this Agreement, any of the Buyer Ancillary
Agreements or any of the Seller Ancillary Agreements is set forth in this
Article 10 and shall, except as provided in Section 10.5(d)(i), be limited to
recourse to the shares in the Indemnification Fund and, as provided in Section
3.4(c), the Additional Indemnification Shares (collectively, the "Fund"). From
and after the Closing, the sole and exclusive remedy of the Seller Indemnified
Persons against the Buyer Indemnifying Person for any Damages directly or
indirectly incurred, resulting from or arising out of this Agreement, any of the
Buyer Ancillary Agreements or any of the Seller Ancillary Agreements is set
forth in this Article 10 and shall, except as provided in Section 10.5(d)(i) or
as provided in Section 10.5(f) with respect to a Capitalization Claim (as
defined in Section 10.5(f)), be limited to recourse to, at DoveBid's option,
either (i) DoveBid's issuance of shares of DoveBid Capital Stock, in the
Relative Percentages, having a maximum value equal to the value of the shares in
the Fund remaining in escrow as of the date the related Notice of Claim is
delivered to Buyer, with each share in the Fund being valued in the manner set
forth in Section 3.4(c) as of the date the related Notice of Claim is delivered
to Buyer, or (ii) cash in an amount up to the value of the shares in the Fund
remaining in escrow as of the date the related Notice of Claim is delivered to
Buyer, with each share in the Fund being valued in the manner set forth in
Section 3.4(c) as of the date the related Notice of Claim is delivered to Buyer;
provided, however, that no share in the Fund shall be counted more than once in
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calculating the number of shares of DoveBid Capital Stock issuable or the amount
of cash payable, as applicable, in accordance with Section 10.7. Notwithstanding
any provision in this Agreement to the contrary, (a) in seeking indemnification
for Damages under this Article 10, the Buyer Indemnified Persons shall make no
claim for Damages unless and until such Damages aggregate at least $50,000,
inclusive of legal fees (the "Seller Basket"), in which event such Buyer
Indemnified Persons may make claims for all Damages in excess of the first
$50,000 thereof; provided, however, that the Seller Basket shall not apply to
-------- -------
any indemnification claim by any Buyer Indemnified Person that arises from or as
a result of fraud, willful misrepresentation or willful misconduct on the part
of Seller or any Seller
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Stockholder and (b) in seeking indemnification for Damages under this Article
10, the Seller Indemnified Persons shall make no claim for Damages unless and
until such Damages aggregate at least $50,000, inclusive of legal fees (the
"Buyer Basket"), in which event such Seller Indemnified Persons may make claims
for all Damages in excess of the first $50,000 thereof; provided, however, that
-------- -------
the Buyer Basket shall not apply to any indemnification claim by any Seller
Indemnified Person that arises from or as a result of fraud, willful
misrepresentation or willful misconduct on the part of Buyer or DoveBid or to a
Capitalization Claim.
10.5 Indemnification Procedures.
--------------------------
(a) Representative. Trident Capital Fund-IV, L.P. shall act as the
--------------
representative (the "Representative") of Seller and the Seller Stockholders and
as the attorney-in-fact and agent for and on behalf of each of them with respect
to all claims for indemnification made under this Article 10 and with respect to
the matters set forth in Sections 3.4(c) and 3.4(d). The Representative shall
take any and all actions and make any decisions required or permitted to be
taken by the Representative under this Agreement, including the power to: (i)
make any claim for indemnification under this Article 10 on behalf of any Seller
Indemnified Person; (ii) agree to, negotiate, enter into settlements and
compromises of, demand arbitration of, and comply with orders of courts and
awards of arbitrators with respect to, any claim for indemnification made under
this Article 10; (iii) arbitrate, resolve, settle or compromise any claim for
indemnification made under this Article 10; and (iv) take all actions necessary
in the judgment of the Representative for the accomplishment of the foregoing.
The Representative shall have the authority and power to act on behalf of Seller
and each Seller Stockholder with respect to the disposition, settlement or other
handling of all claims for indemnification made under this Article 10 and all
rights or obligations arising under this Article 10. Seller and each of the
Seller Stockholders shall be bound by all actions taken and documents executed
by the Representative in connection with this Article 10 and Sections 3.4(c) and
3.4(d), and the Buyer Indemnified Persons shall be entitled to rely on any
action or decision of the Representative. The Representative may select any
substitute or successor Representative upon written notice to Buyer and the
consent of the holders of a majority of the outstanding shares of Seller
Preferred Stock. At any time, Seller Stockholders holding a majority of the
outstanding shares of Seller Preferred Stock shall have the power to substitute
any Seller Stockholder (with such Seller Stockholder's consent and upon written
notice to Buyer) as a successor Representative hereunder. It shall be the
responsibility of the Representative to keep the contact information set forth
in Section 11.7(c) current at all times. The Buyer Indemnified Persons may rely
absolutely at any time on the information set forth in Section 11.7(c), as such
information may be updated from time to time by Seller or the Seller
Stockholders, as the case may be, as provided in Section 11.7, for contact of
the Representative pursuant to the terms of this Agreement, and any notice for
the Representative sent in reliance on such information shall be effective, if
sent pursuant to the terms of this Agreement, even if such information shall no
longer be current. The Representative shall act for the Seller Stockholders on
all matters set forth herein in a manner the Representative believes to be in
the best interests of the Seller Stockholders and consistent with his
obligations hereunder, but the Representative shall not be responsible to the
Seller Stockholders for any loss or damage the Seller Stockholders may suffer by
reason of the Representative's performance of his duties hereunder, other than
loss or damage arising from willful violation of the law or gross negligence in
the performance of his duties
-69-
hereunder. The Seller Stockholders agree, jointly and severally, to indemnify
and hold harmless the Representative for any loss or damage arising from the
performance of his duties as Representative hereunder, including the cost of any
accounting firm or legal counsel retained by the Representative on behalf of the
Seller Stockholders, but excluding any loss or damage arising from willful
violation of the law or gross negligence in the performance of his duties
hereunder.
(b) Notice of Claim. As used herein, "Claim" means a claim for
---------------
indemnification of any Buyer Indemnified Person or Seller Indemnified Person, as
applicable (each, an "Indemnified Person") for Damages under this Article 10.
Buyer or the Representative, as applicable, shall give a written notice of a
Claim executed by an officer of Buyer or by the Representative, as applicable (a
"Notice of Claim"), whether for its own Damages or for Damages incurred by any
other Indemnified Person. Buyer or the Representative, as applicable, may
deliver a Notice of Claim based on, arising from, relating to or caused by: (i)
the items specified in Section 10.2 or 10.3, as applicable; or (ii) the
assertion, whether orally or in writing, against any Indemnified Person of a
claim, demand, suit, action, cause of action, dispute, arbitration,
investigation, inquiry or proceeding brought by a third party against such
Indemnified Person that is based on, arises out of or relates to any item
specified in Section 10.2 or 10.3, as applicable (in each such case, a
"Third-Party Claim"). No delay on the part of Buyer or the Representative, as
applicable, in giving the Representative or Buyer, respectively, a Notice of
Claim shall relieve the Representative or any Indemnifying Person from any of
their respective obligations under this Article 10 unless (and then only to the
extent) that the Representative or the Indemnifying Person, as applicable, is
materially prejudiced thereby. Each Notice of Claim shall be delivered no later
than the Release Date, and if delivered by such date, such Claim shall survive
the Release Date until final resolution thereof.
(c) Contents of Notice of Claim. Each Notice of Claim by Buyer or the
---------------------------
Representative, as applicable, given pursuant to Section 10.5(b) shall contain
the following information:
(i) that the Indemnified Person has incurred, paid or accrued
(in accordance with GAAP) or, in good faith, believes it shall have to incur,
pay or accrue (in accordance with GAAP), Damages in an aggregate stated amount
arising from such Claim (which amount may be the amount of damages claimed by a
third party in a Third-Party Claim); and
(ii) a brief description, in reasonable detail (to the extent
reasonably available to the Indemnified Person), of the facts, circumstances or
events giving rise to the alleged Damages based on the Indemnified Person's good
faith belief thereof, including the identity and address of any third-party
claimant (to the extent reasonably available to the Indemnified Person) and
copies of any formal demand or complaint, the amount of Damages, the date each
such item was incurred, paid or accrued, or the basis for such anticipated
Liability, and the specific nature of the breach to which such item is related.
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(d) Defense of Third-Party Claims.
-----------------------------
(i) The Buyer Indemnifying Person or the Seller Indemnifying
Person (each, an "Indemnifying Person"), as applicable, shall be entitled, at
its expense, to participate in the defense of any Third-Party Claim and to
receive copies of all pleadings, notices and communications with respect to any
Third-Party Claim (to the extent that such participation and receipt of
documents by the Indemnifying Person does not affect any privilege relating to
the Indemnified Person) and, at its option (subject to the limitations set forth
in this Section 10.5(d)), shall be entitled to assume control of such defense;
provided, however, that, as a condition precedent to the Indemnifying Person's
-------- -------
right to assume control of such defense, it must first (A) enter into an
agreement with the Indemnified Person (in form and substance reasonably
satisfactory to the Indemnified Person) pursuant to which the Indemnifying
Person agrees to be fully responsible (with no reservation of rights) for all
Damages relating to such Third-Party Claim and provide full indemnification
(whether or not otherwise required hereunder) to the Indemnified Person for all
Damages relating to such Third-Party Claim, (B) unconditionally guarantee the
payment and performance of any and all Liabilities which may arise with respect
to such Third-Party Claim or the facts giving rise to such Third-Party Claim
(without regard to the Seller Basket or the Buyer Basket, as applicable, or the
limitations set forth in Section 10.4), and (C) furnish the Indemnified Person
with reasonable evidence that the Indemnifying Person is and will be able to
satisfy any and all such Liabilities.
(ii) Notwithstanding the foregoing, the Indemnifying Person
shall not have the right to assume control (or the Indemnified Person shall have
the right to take back control, as the case may be) of such defense and shall
pay the fees and expenses of counsel retained by the Indemnified Person if the
Third-Party Claim which the Indemnifying Person seeks to assume control (A)
seeks non-monetary relief, (B) involves criminal or quasi-criminal allegations,
(C) involves a claim to which the Indemnified Person reasonably believes an
adverse determination would be detrimental or injurious to the Indemnified
Person's reputation or future business prospects, or (D) involves a claim that,
as determined by arbitration in accordance with the terms and provisions of
Section 10.8, the Indemnifying Person failed or is failing to vigorously
prosecute or defend.
(iii) If, pursuant to the terms of this Section 10.5(d), the
Indemnifying Person is permitted to assume control of the defense of a
Third-Party Claim and elects to do so, the Indemnified Person shall be entitled
to receive copies of all pleadings, notices and communications with respect
thereto (to the extent that such participation and receipt of documents by the
Indemnified Person does not affect any privilege relating to the Indemnifying
Person) and shall have the right to employ counsel separate from counsel
employed by the Indemnifying Person in any such action and to participate in the
defense thereof, but the fees and expenses of counsel employed by the
Indemnified Person shall be at the expense of the Indemnified Person unless (A)
the employment and payment of the Indemnified Person's counsel has been
specifically authorized by the Indemnifying Person in writing or (B) the
Indemnified Person has been advised by its counsel that a reasonable likelihood
exists of a conflict of interest between the Indemnified Person and the
Indemnifying Person. If the Indemnifying Person controls the defense of a
Third-Party Claim in accordance with the provisions of Sections 10.4(d)(i) and
10.4(d)(ii), then the Indemnifying Person shall not enter into any
-71-
settlement of such Third-Party Claim or cease to defend such Third-Party Claim
without obtaining the prior written consent of the Indemnified Person if,
pursuant to or as a result of such settlement or cessation, (A) any injunction
or other equitable relief shall be imposed against the Indemnified Person or (B)
the Indemnified Person shall not be expressly and unconditionally released, with
prejudice, from any and all Liabilities with respect to such Third-Party Claim
and all other claims arising out of the same or similar facts and circumstances.
(iv) If, pursuant to this Section 10.5(d), the Indemnifying
Person is not permitted to assume control of the defense of a Third-Party Claim
or does not elect to do so, then the Indemnified Person shall control such
defense and the costs and expenses incurred by the Indemnified Person in
connection with such defense (including reasonable attorney's fees, other
professionals' and experts' fees and court or arbitration costs) shall be
included in the Damages for which the Indemnified Person may seek
indemnification pursuant to a Claim made by such Indemnified Person hereunder.
No Indemnified Person shall enter into any settlement of a Third-Party Claim
without the prior written consent of the Indemnifying Person (which consent
shall not be unreasonably withheld); provided, however, that if the Indemnifying
-------- -------
Person shall have consented in writing to any such settlement (or a portion
thereof if such settlement also relates to a matter or matters for which
indemnification is not provided hereunder) then the Indemnifying Person shall
have no power or authority to object to any Claim by any Indemnified Person for
indemnification under Section 10.2 for the amount of such settlement and the
Indemnifying Person shall remain responsible for indemnifying the Indemnified
Persons for all Damages incurred, resulting from, arising out of or caused by
the Third-Party Claim to the fullest extent provided in this Article 10.
(v) Notwithstanding anything in this Section 10.5(d) to the
contrary, if the Indemnifying Person risks material exposure (whether pursuant
to its indemnification obligations under this Article 10 or otherwise) as a
reasonably foreseeable result of the outcome of the Third-Party Claim giving
rise to the Indemnified Person's Claim compared to the exposure risked by the
Indemnified Person as a reasonably foreseeable result of the same, then the
Indemnifying Person shall have to right to elect to cause the defense of such
Third-Party Claim to be conducted jointly. In any such event, each of the
Indemnified Person and the Indemnifying Person (without having to meet the
conditions set forth in clauses (A), (B) and (C) of Section 10.5(d)(i)) shall
have the right to employ separate counsel in such action and to participate
jointly (as further set forth below) in the defense thereof.
(vi) In conducting any joint defense as provided in this Section
10.5, whichever of the Indemnified Person and the Indemnifying Person risks
greater exposure as a reasonably foreseeable result of the outcome of the
Third-Party Claim giving rise to the Indemnified Person's Claim shall be
entitled to appoint its counsel as lead counsel of such defense so long as such
counsel is reputable, nationally recognized and reasonably acceptable to the
other party (the "Lead Counsel"). If the Indemnified Person, the Indemnifying
Person and their respective counsel cannot agree on which party faces greater
exposure as set forth above, then the Indemnified Person's counsel and the
Indemnifying Person's counsel shall subject such dispute to a third counsel that
is reputable, nationally recognized and selected jointly by the Indemnified
Person's counsel and the Indemnifying Person's counsel, which third counsel
shall make a final determination as to whether the Indemnified Person or the
Indemnifying Person
-72-
risks greater exposure. The fees and expenses of any such third counsel shall
initially be borne equally by the Indemnified Person and the Indemnifying
Person; provided, however, that all fees and expenses incurred by the
-------- -------
Indemnified Person for the Lead Counsel, the Participating Counsel (as defined
in Section 10.5(d)(vii)) and such third counsel shall be included in the Damages
for which the Indemnified Person may seek indemnification pursuant to a Claim
made by such Indemnified Person hereunder. For purposes of this Agreement and
notwithstanding anything herein to the contrary, if the Indemnified Person is
Buyer, DoveBid or any of their respective Affiliates and the outcome of the
Third-Party Claim giving rise to the Indemnified Person's Claim can reasonably
be expected to not insignificantly adversely impact the business, reputation or
prospects of such Indemnified Person then the Indemnified Person shall be deemed
to risk greater exposure as a reasonably foreseeable result of the outcome of
the Third-Party Claim giving rise to the Indemnified Person's Claim and shall be
entitled to appoint its counsel as the Lead Counsel.
(vii) The Lead Counsel and the other party's counsel (which
counsel shall be reputable, nationally recognized and reasonably acceptable to
the other party) (the "Participating Counsel") shall jointly develop and
implement a defense strategy. In furtherance of the foregoing, all significant
decisions of the Lead Counsel shall be subject to the consent (not to be
unreasonably withheld or delayed) of the Participating Counsel, including
whether to (A) raise certain defenses, (B) bring certain counter-claims, (C)
file any particular motion, (D) make any particular offer for settlement, (E)
enter into any settlement, and (F) appeal. All decisions regarding which counsel
shall handle particular matters (including conducting discovery, arguing
motions, conducting trial and drafting court filings and briefs) shall be
subject to the approval (not to be unreasonably withheld or delayed) of the
Participating Counsel, and the Lead Counsel shall endeavor, to the extent
practical, to permit the active participation of the Participating Counsel
(including by way of assuming primary responsibility for certain matters) in all
such matters as co-counsel. All filings with the court and correspondence with
opposing counsel shall be subject to the reasonable review and comment (not to
be unreasonably delayed) of the counsel not responsible for drafting such filing
or correspondence.
(e) Resolution of Notice of Claim. Any Notice of Claim delivered by
-----------------------------
Buyer or the Representative, as applicable, shall be resolved as follows:
(i) Uncontested Claims. If, within 20 days after a Notice of
------------------
Claim is received, Buyer or the Representative, as applicable, does not contest
such Notice of Claim in writing to the Representative or Buyer, respectively,
then Buyer or the Representative, as applicable, shall be conclusively deemed to
have consented, on behalf of the Buyer Indemnifying Person or the Seller
Indemnifying Person, as applicable, to the recovery by the Seller Indemnified
Person or the Buyer Indemnified Person, as applicable, of the full amount of the
Claim specified in the Notice of Claim, including, in the case of a Claim made
by a Buyer Indemnified Person, the forfeiture of the amount of Damages from the
Fund and, without further notice, to have stipulated to the entry of a final
judgment for damages against the Buyer Indemnifying Person or the Seller
Indemnifying Person, as applicable, for such amount in any court having
jurisdiction over the matter where venue is proper.
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(ii) Contested Claims. If, within 20 days after a Notice of
----------------
Claim is received, Buyer or the Representative, as applicable, contests such
Notice of Claim in writing to the Representative or Buyer, respectively (a
"Contested Claim"), then such Contested Claim shall be resolved by either (A) a
written settlement agreement executed by Buyer and the Representative or (B) in
the absence of such a written settlement agreement, by binding arbitration
between Buyer and the Representative in accordance with the terms and provisions
of Section 10.8.
(f) Capitalization Claim. Notwithstanding any provision of this
--------------------
Article 10 to the contrary, the Buyer Indemnifying Person, upon DoveBid's
consent, shall satisfy any Claim made by a Seller Indemnified Person pursuant to
this Article 10 for Damages resulting from the breach of DoveBid's
representation contained in Section 6.3 (as updated in the certificate delivered
pursuant to Section 8.2(a)) which results in the issuance to Seller at Closing
of a number of shares of DoveBid Capital Stock that is less than the number of
shares of DoveBid Capital Stock set forth in Section 3.2 (a "Capitalization
Claim"), by issuing to each Interim Holder (or such Interim Holder's
transferees) or, from and after the Dissolution, each Final Holder (or such
Final Holder's transferees) according to its Pro Rata Share that number of
Series D-1 Shares, Series C Shares, Series D Shares and Common Shares, as
applicable, equal to the difference between (i) the number of such shares that
would have been issued to Seller at the Closing if DoveBid's representation
contained in Section 6.3 (as updated in the certificate delivered pursuant to
Section 8.2(a)) had been true and correct as of the Closing, appropriately and
equitably adjusted to reflect any Capital Change after the Closing, and (ii) the
number of such shares issued to Seller at the Closing, appropriately and
equitably adjusted to reflect any Capital Change after the Closing (such
difference, the "Cure Shares"). If Buyer does not satisfy a Capitalization
Claim, as provided in the preceding sentence, within 20 days of receiving the
applicable Notice of Claim, then such Capitalization Claim shall be treated as a
Contested Claim pursuant to Section 10.5(e)(ii); provided, however, that, in any
-------- -------
arbitration in accordance with the terms and provisions of Section 10.8, the
arbitrator shall not be empowered to provide any remedy to the Seller
Indemnified Person other than the right to be issued its Cure Shares.
10.6 Satisfaction of Claims by Buyer Indemnified Persons; Distribution
-----------------------------------------------------------------
Following Release Date.
----------------------
(a) Any Damages for which a Buyer Indemnified Person shall be
entitled to indemnification pursuant to Section 10.2 from the Seller
Indemnifying Person shall be immediately payable after resolution thereof in
accordance with Section 10.5(e) to such Buyer Indemnified Person by the
reduction and retention by DoveBid of the Indemnification Shares (and, as
provided in Section 3.4(c), the Additional Indemnification Shares) according to
the Relative Percentages and the Pro Rata Share of each Interim Holder (or such
Interim Holder's transferees) and, from and after the Dissolution, according to
the Pro Rata Share of each Final Holder (or such Final Holder's transferees) to
the extent that the amount of such Damages does not exceed the value of the
shares in the Fund available for such reduction (after giving effect to any
previous reductions thereto). With respect to any Claim which the Representative
shall, on the Release Date, be disputing pursuant to Section 10.5(d), DoveBid
shall withhold from the shares in the Fund to be released to each Interim Holder
(or such Interim Holder's transferees) or, from and after the Dissolution, each
Final Holder (or such Final Holder's transferees) according
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to its Pro Rata Share that number of shares in the Fund equal to the sum of (i)
the quotient obtained by dividing (A) the product of the Estimated Claim Amount
(as defined below) multiplied by the Relative Percentage of Series D-1 Shares in
the Fund by (B) the value of each Series D-1 Share, plus (ii) the quotient
----
obtained by dividing (A) the product of the Estimated Claim Amount multiplied by
the Relative Percentage of Series C Shares in the Fund by (B) the value of each
Series C Share, plus (iii) the quotient obtained by dividing (A) the product of
----
the Estimated Claim Amount multiplied by the Relative Percentage of Series DD
Shares in the Fund by (B) the value of each Series DD Share, plus (iv) the
----
quotient obtained by dividing (A) the product of the Estimated Claim Amount
multiplied by the Relative Percentage of Common Shares in the Fund by (B) the
value of each Common Share. To the extent the amount of any Damages exceeds the
value of the shares in the Fund available for reduction therefor, the shares in
the Fund shall not be released to each Interim Holder (or such Interim Holder's
transferees) or, from and after the Dissolution, each Final Holder (or such
Final Holder's transferees) according to its Pro Rata Share. The term "Estimated
Claim Amount" means Buyer's good faith estimate of the Damages claimed under any
disputed Claim unresolved as of the Release Date. For purposes of this Section
10.6(a), each share in the Fund shall be valued in the manner set forth in
Section 3.4(c) as of the date the related Notice of Claim is delivered to the
Representative.
(b) An Buyer Indemnified Person may institute Claims against the
shares in the Fund, and in satisfaction thereof may reduce the shares in the
Fund, in accordance with the terms of this Agreement, without first making any
other Claims directly against Seller or the Seller Stockholders, without
rescinding or attempting to rescind any transaction consummated by this
Agreement and without first exhausting any other remedies that may be available
to it with respect to the subject matter of any Claim, and such Buyer
Indemnified Person shall proceed directly in accordance with the provisions of
this Agreement. The assertion of any single Claim for indemnification hereunder
shall not bar a Buyer Indemnified Person from asserting any other Claim or
Claims hereunder.
(c) As soon as reasonably practicable following the Release Date,
DoveBid shall release to each Interim Holder (or such Interim Holder's
transferees) or, from and after the Dissolution, each Final Holder (or such
Final Holder's transferees) according to its Pro Rata Share the portion of the
shares in the Indemnification Fund, in the Relative Percentages, in excess of
any amount necessary to satisfy any unsatisfied or disputed claims for Damages
specified in any Notice of Claim delivered to the Representative; provided,
--------
however, that any shares so released shall remain as uncertificated shares of
-------
DoveBid Capital Stock in accordance with Section 7.16. As soon as all such
Claims have been resolved, DoveBid shall release to each Interim Holder (or such
Interim Holder's transferees) or, from and after the Dissolution, each Final
Holder (or such Final Holder's transferees) according to its Pro Rata Share any
portion of the remaining shares in the Indemnification Fund not required to
satisfy such Claims; provided, however, that any shares so released shall remain
-------- -------
as uncertificated shares of DoveBid Capital Stock in accordance with Section
7.16.
10.7 Satisfaction of Claims by Seller Indemnified Persons.
----------------------------------------------------
(a) Any Damages for which a Seller Indemnified Person shall be
entitled to indemnification pursuant to Section 10.3 from the Buyer Indemnifying
Person shall, subject to
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the procedures and limitations set forth in Section 10.4, be immediately payable
after resolution thereof in accordance with Section 10.5(e) to such Seller
Indemnified Person, by, at DoveBid's option, either (i) the issuance of that
number of shares of DoveBid Capital Stock, in the Relative Percentages, having a
value (determined in accordance with Section 3.4(c)) equal to the Damages or
(ii) the payment of cash in an amount equal to the Damages.
(b) The assertion of any single Claim for indemnification hereunder
shall not bar a Seller Indemnified Person from asserting any other Claim or
Claims hereunder.
10.8 Arbitration of Contested Claims. Any Contested Claim shall be
-------------------------------
submitted to mandatory, final and binding arbitration before a single arbitrator
in San Francisco County, California under the Commercial Arbitration Rules (the
"AAA Rules") of the American Arbitration Association or its successor ("AAA")
then in effect except as otherwise provided in this Agreement. If AAA ceases to
provide arbitration services, then the term "AAA" shall thereafter mean and
refer to J.A.M.S./ENDISPUTE ("J.A.M.S."), and the arbitration shall be conducted
in accordance with the provisions of J.A.M.S.' Streamlined Arbitration Rules and
Procedures (with the term "AAA Rules" thereafter meaning and referring to
J.A.M.S.' Streamlined Arbitration Rules and Procedures). However, in all events,
the arbitration provisions of this Section 10.8 shall govern over any
conflicting rules that may now or hereafter be contained in the AAA Rules. The
parties shall participate in the arbitration in good faith and share in the
costs of arbitration in accordance with Section 10.8(c). The provisions of this
Section 10.8 may be enforced by any court of competent jurisdiction, and the
party seeking enforcement shall be entitled to an award of all costs, fees and
expenses, including attorneys' fees, to be paid by the party against whom
enforcement is ordered. Judgment upon the award rendered by the arbitrator may
be entered in any court having competent jurisdiction. The arbitrator shall have
the authority to grant any equitable and legal remedies, except punitive
damages, that would be available in any judicial proceeding instituted to
resolve a Contested Claim.
(a) Compensation of Arbitrator. Any such arbitration shall be
--------------------------
conducted before a single arbitrator who shall be compensated for his or her
services at a rate to be determined by the parties or by the AAA, but based upon
reasonable hourly or daily consulting rates for the arbitrator if the parties
are not able to agree upon his or her rate of compensation.
(b) Selection of Arbitrator. The AAA shall have the authority to
-----------------------
select an arbitrator from a list of arbitrators who are lawyers familiar with
California contract law; provided, however, that (i) such lawyers cannot work
-------- -------
for a firm then performing services for either party, (ii) each party shall have
the opportunity to make such reasonable objection to any of the arbitrators
listed as such party may wish, and (iii) the AAA shall select the arbitrator
from the list of arbitrators as to whom neither party makes any such objection.
(c) Payment of Costs. The parties shall bear the expense of deposits
----------------
and advances required by the arbitrator in equal proportions, but either party
may advance such amounts, subject to recovery as an addition or offset to any
award. The arbitrator shall award to the prevailing party, as determined by the
arbitrator, all costs, fees and expenses related to the
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arbitration, including reasonable fees and expenses of attorneys, accountants
and other professionals incurred by the prevailing party.
(d) Burden of Proof. Except as may be otherwise expressly provided
---------------
herein, for any Contested Claim submitted to arbitration, the burden of proof
shall be as it would be if the claim were litigated in a judicial proceeding
governed exclusively by California law.
(e) Award. Upon the conclusion of any arbitration proceedings
-----
hereunder, the arbitrator shall render findings of fact and conclusions of law
and a final written arbitration award setting forth the basis and reasons for
any decision reached (the "Final Award") and shall deliver such documents to
Buyer and the Representative, together with a signed copy of the Final Award.
The Final Award shall constitute a conclusive determination of all issues in
question, binding upon the Indemnified Persons, the Indemnifying Persons and the
Representative, and shall include an affirmative statement to such effect. To
the extent that the Final Award determines that an Indemnified Person has
actually incurred Damages in connection with the Contested Claim through the
date of the Final Award ("Incurred Damages"), the Final Award shall set forth
and award to the Indemnified Person the amount of such Incurred Damages. Awards
of Damages shall be subject to the provisions of Section 10.4.
(f) Timing. Buyer, the Representative and the arbitrator shall
------
conclude each arbitration pursuant to this Section 10.8 as promptly as possible
for the Contested Claim being arbitrated.
(g) Terms of Arbitration. The arbitrator chosen in accordance with
--------------------
the provisions of this Section 10.8 shall not have the power to alter, amend or
otherwise affect the provisions of this Agreement, including the terms of these
arbitration provisions.
(h) Treatment of Loss. Upon issuance and delivery of the Final Award
-----------------
as provided in Section 10.8(f) above, the Indemnified Person shall immediately
be entitled to recover the amount of any Incurred Damages determined and awarded
under such Final Award and such Incurred Damages shall be deemed to be owed to
the Indemnified Person for purposes of this Agreement. The Incurred Damages owed
to the Indemnified Person are deemed to be Damages for purposes of this
Agreement.
11. MISCELLANEOUS.
-------------
11.1 Press Release. Buyer and Seller shall cooperate with one another after
-------------
the date hereof to draft a mutually acceptable press release, to be issued after
the date hereof, announcing the acquisition by Buyer of the Assets and the
Business.
11.2 Specific Performance. DoveBid, Buyer and Seller each acknowledge that,
--------------------
in view of the uniqueness of the Assets, the Business and the transactions
contemplated by this Agreement and the Seller Ancillary Agreements, a party
would not have an adequate remedy at law for money damages if this Agreement or
any Seller Ancillary Agreement is not performed in accordance with its
respective terms. Each party to this Agreement therefore agrees that the other
party hereto shall be entitled to specific enforcement of the terms of this
Agreement and
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any Seller Ancillary Agreement in addition to any other remedy to which it may
be entitled, at law or in equity.
11.3 Successors and Assigns. None of the parties hereto may assign any of
----------------------
its or his rights or obligations hereunder without the prior written consent of
the other parties hereto, except that DoveBid and Buyer may assign this
Agreement (and all related agreements) by operation of law or in connection with
any merger, consolidation or sale of all or substantially all DoveBid's or
Buyer's assets or in connection with any similar transaction. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Any purported assignment in
violation of this Section 11.3 shall be void.
11.4 Entire Agreement. This Agreement (including the schedules and exhibits
----------------
attached hereto), the Seller Ancillary Agreements, the Buyer Ancillary
Agreements and, prior to the Closing, the Letter Agreement together constitute
the entire agreement and understanding of the parties hereto with respect to the
subject matter hereof and supersede all prior agreements, understandings and
discussions relating to the transactions contemplated by this Agreement, both
written and oral. The express terms of this Agreement control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof.
11.5 Counterparts. This Agreement may be executed in counterparts
------------
(including by means of facsimile), each of which when executed shall be deemed
an original but all of which together shall constitute one and the same
agreement.
11.6 Expenses. Except as provided in Section 10.8 with regard to fees
--------
awarded with regard to certain matters set forth therein, each of DoveBid, Buyer
and Seller shall pay its own fees, expenses and disbursements incurred in
connection with the subject matter of this Agreement and any amendments thereto,
including all costs and expenses incurred in the performance and compliance with
all conditions to be performed by such party and neither party shall be
responsible for such fees, expenses and disbursements of the other party.
11.7 Notices. All notices and other communications required or permitted
-------
hereunder shall be either delivered personally, sent by facsimile, sent by
certified or registered first-class mail, postage pre-paid, or sent by
nationally recognized express courier service. Such notices and other
communications shall be effective upon receipt if delivered personally or sent
by facsimile, five days after mailing if sent by mail, and one day after
dispatch if sent by express courier, to the following addresses or facsimile
numbers (or such other addresses or facsimile numbers for a party as shall be
specified by like notice):
(a) If to Seller:
------------
ZoneTrader, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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With copies to:
--------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Brand, LLP
3300 ▇▇▇▇▇ Fargo Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to DoveBid or Buyer, to each of the following, using two
-----------------------------------------------------------
separate deliveries for each:
----------------------------
DoveBid Management Services, Inc.
c/o DoveBid, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
DoveBid Management Services, Inc.
c/o DoveBid, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
------------
Fenwick & West, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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(c) If to the Representative:
------------------------
Trident Capital Fund-IV, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Or such successor Representative as shall be
designated in writing pursuant to this
Agreement
11.8 Governing Law; Forum. This Agreement shall be governed by and
--------------------
construed in accordance with the laws of the State of California, without giving
effect to laws concerning choice of law or conflicts of law. Subject to the
provisions of Section 10.8, all disputes arising out of this Agreement or the
obligations of the parties hereunder, including disputes that may arise
following termination of this Agreement, shall be subject to the exclusive
jurisdiction and venue of the California State courts of San Mateo County,
California (or, if there is federal jurisdiction, then the exclusive
jurisdiction of the United States District Court for the Northern District of
California with venue in the division thereof in which San Mateo County is
located). EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO THE
PERSONAL AND EXCLUSIVE JURISDICTION AND VENUE OF SAID COURTS AND WAIVES TRIAL BY
JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING
WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME.
11.9 Interpretation. When a reference is made in this Agreement to
--------------
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. When a reference is made in this Agreement to Articles,
such reference shall be to an Article of this Agreement unless otherwise
indicated. When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." The headings
contained in this Agreement are only for reference purposes and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" a person, such reference shall be deemed to
include the business of all direct and indirect Subsidiaries of such person.
Reference to the Subsidiaries of an entity shall be deemed to include all direct
and indirect Subsidiaries of such entity. Reference herein to a law, statute,
regulation, document or agreement is deemed in each case to include all
amendments thereto.
11.10 Disclosure Generally. No reference to or disclosure of any item or
--------------------
other matter in the Seller Disclosure Letter or the DoveBid Disclosure Letter
shall be construed as an admission or indication that such item or other matter
is material or that such item or other matter is required to be referred to or
disclosed in the Seller Disclosure Letter or the DoveBid Disclosure Letter, as
applicable. No disclosure in the Seller Disclosure Letter or the DoveBid
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Disclosure Letter relating to any possible breach or violation of any agreement,
law or regulation shall be construed as an admission or indication that any such
breach or violation exists or has actually occurred. The section numbers
referenced in the Seller Disclosure Letter and the DoveBid Disclosure Letter
refer to corresponding sections of this Agreement. Any information disclosed
under the heading of one section of the Seller Disclosure Letter or the DoveBid
Disclosure Letter may relate to and qualify disclosures made under one or more
other sections but only where the relevance of such disclosure to such other
section is readily apparent from the actual text of such disclosure.
11.11 Severability. If any provision of this Agreement shall be invalid,
------------
illegal or unenforceable, it shall, to the extent possible, be modified in such
manner as to be valid, legal and enforceable but so as to most nearly retain the
intent of the parties, and if such modification is not possible, such provision
shall be severed from this Agreement, and in either case the validity, legality
and enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
11.12 Construction. This Agreement has been negotiated by DoveBid, Buyer
------------
and Seller and their respective legal counsel, and the language hereof shall not
construed for or against either party.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, DoveBid, Buyer and Seller executed and delivered
this Agreement by their duly authorized representatives as of the Effective
Date.
SELLER: BUYER:
ZONETRADER, INC. DOVEBID MANAGEMENT SERVICES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
----------------------------- ---------------------------------
Its: CEO Its: Vice President
--------------------------- -------------------------------
DOVEBID:
DOVEBID, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇
---------------------------------
Its: CEO
--------------------------------
SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT