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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GENERAL MAGIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0250147
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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420 NORTH MARY AVENUE
SUNNYVALE, CALIFORNIA 94086
(408) 774-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
STEVEN MARKMAN
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD OF DIRECTORS
GENERAL MAGIC, INC.
420 NORTH MARY AVENUE
SUNNYVALE, CALIFORNIA 94086
(408) 774-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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TIMOTHY MOORE, ESQ. MARY E. DOYLE, ESQ.
ERIC J. LOUMEAU, ESQ. GENERAL MAGIC, INC.
COOLEY GODWARD LLP 420 NORTH MARY AVENUE
FIVE PALO ALTO SQUARE SUNNYVALE, CALIFORNIA 94086
3000 EL CAMINO REAL (408) 774-4000
PALO ALTO, CALIFORNIA 94306-2155
(650) 843-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time as described in the Prospectus after the effective date of
this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE REGISTRATION FEE
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Common Stock ($0.001 par value)......... 1,576,316 shares(1) $3.4844(2) $5,492,515.47 $1,527
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Common Stock ($0.001 par value)......... 263,158 shares(3) $3.4844(4) $ 916,947.74 $ 255
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Total.......................... 1,839,474 shares $6,409,463.21 $1,782
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(1) Represents 100% of the shares of common stock issuable upon conversion of
all issued shares of the Company's Series E Convertible Preferred Stock (the
"Series E Preferred"). Pursuant to Rule 416 promulgated under the Securities
Act, this Registration Statement also covers such indeterminable number of
additional shares of common stock as may become issuable upon conversion of
Series E Preferred to prevent dilution resulting from stock splits, stock
dividends or similar transactions
(2) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(c) of the Securities Act and based on the average of the high
and low sales prices of the Common Stock of General Magic, Inc. reported on
the Nasdaq National Market on July 15, 1999.
(3) Represents 100% of the shares of common stock issuable upon conversion of
the Series E Preferred issuable upon exercise of a warrant to purchase
Series E Preferred. Pursuant to Rule 416 of the Securities Act, this
Registration Statement also covers such indeterminable additional shares of
common stock as may become issuable upon the exercise of the warrant to
prevent dilution as a result of any future stock splits, stock dividends or
similar transactions.
(4) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(g)(1) of the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED JULY 16, 1999
1,839,474 Shares
GENERAL MAGIC, INC.
Common Stock
The selling stockholder listed on page is offering up to 1,839,474 shares
of General Magic, Inc. common stock. We will not receive any proceeds from the
sale of common stock by the selling stockholder.
Our common stock is quoted on The Nasdaq National Market under the symbol
"GMGC." On July 15, 1999, the last sale price of the common stock as reported on
The Nasdaq National Market was $3.4375.
-------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------
The date of this prospectus is , 1999.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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TABLE OF CONTENTS
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PAGE
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About General Magic......................................... 2
Risk Factors................................................ 4
Special Note Regarding Forward-Looking Statements........... 13
Use of Proceeds............................................. 14
Selling Stockholder......................................... 14
Plan of Distribution........................................ 15
Legal Matters............................................... 17
Experts..................................................... 17
Where You Can Find More Information......................... 18
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ABOUT GENERAL MAGIC
We develop and market voice-enabled services that provide voice access over
the telephone to information that is stored in computer networks, including Web
sites. Our services are designed to make it easy and convenient for subscribers
to access and act on their personal and business information. Our primary
offerings are the Portico(TM) virtual assistant service, private-label versions
of the Portico service provided by telecommunication carriers to their
customers, the myTalk(TM) free email service, and services that provide voice
access to Web content over the phone. One of our core technology assets is the
magicTalk(TM) voice user interface, used in all of these offerings. We host
voice-enabled services in our network operations center, located in Sunnyvale,
California.
The Portico service provides many of the services of a human assistant on
an around-the-clock basis. Subscribers -- who today are principally mobile
professionals -- may access voice mail, email, calendar, address book, company
news and stock quotes from any telephone or, using a standard Web browser, from
any personal computer. When accessing the Portico service over the telephone,
subscribers interact with magicTalk, a personality-rich natural language voice
user interface. With magicTalk, the user doesn't need to remember special voice
commands or navigate lengthy push-button menus. The virtual assistant recognizes
a full range of conversational commands, from "Call John Smith" to "Would you
please call John Smith at home."
We distribute the Portico virtual assistant service through a nationwide
network of resellers, as well as direct to consumers through signup on the Web.
We are also working with telecommunication carriers to provide the service to
their customers. In May 1999, BellSouth Mobility, Inc. announced its intention
to begin a 3-4 month initial deployment of the Portico service in the Atlanta
area. Other telecommunications carriers are conducting trials of the Portico
service, and we expect to host customized, private-label versions of the service
for those additional carriers that elect to make the service commercially
available to their customers.
Voice enabling Web content is an emerging growth opportunity for us. The
Web offers a broad base of potential subscribers, including consumers who may
find voice to be an easy way to keep in touch with their favorite Web content
when away from home. In June 1999, we introduced myTalk, a free Internet email
service. myTalk is the first Internet service to feature a natural language
voice interface and allows users to access their email from any telephone and to
navigate and reply to messages using their own spoken words. The myTalk service
is also accessible through a standard Web browser.
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Users accessing myTalk will see banner ads during a myTalk Web site session and
will hear short audio ads periodically during a telephone session.
In June 1999, Excite@Home launched the Excite Voicemail service, a free,
advertising-supported service that allows Excite users to receive voicemail and
faxes in their Excite email accounts. It incorporates our magicTalk voice user
interface and operates in our network operations center. In 1998, we announced
an agreement with Intuit(R) Inc. to voice enable certain features of Intuit's
Quicken.com(TM) personal finance Web site.
General Magic was incorporated in California in May 1990 and was
reorganized as a Delaware corporation in February 1995. Our principal executive
offices are located at 420 North Mary Avenue, Sunnyvale, California 94086, and
our telephone number at that location is (408) 774-4000. In this prospectus,
"General Magic", "we" and "our" refer to General Magic, Inc., unless the context
otherwise requires.
You should rely only on the information provided or incorporated by
reference in this prospectus. We have authorized no one to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of the document.
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RISK FACTORS
An investment in the common stock offered pursuant to this prospectus
involves a high degree of risk and the common stock should not be purchased by
persons who cannot afford the loss of their entire investment. Purchasers should
carefully consider the following risk factors in conjunction with the other
information included and incorporated by reference in this prospectus before
purchasing or otherwise acquiring the common stock offered hereby.
WE MAY NEVER ACHIEVE AND SUSTAIN PROFITABILITY.
We may never achieve and sustain profitability. Since our inception, we
have generated only minimal revenues. We have incurred significant losses, and
we have substantial negative cash flow. As of March 31, 1999, we had an
accumulated deficit of $223.8 million, with a net loss of $13.7 million for the
three-month period ended March 31, 1999.
Historically, we have derived a large percentage of our total revenue from
license fees and customer support fees. As a consequence of our 1997 change in
business strategy, we expect to derive a significant portion of any future
revenues from sales of services and products by us and by our partners and not
from license fees. Although the Portico(TM) service was released on July 30,
1998, we expect to incur significant losses through the year 1999, and we may
never achieve or sustain significant revenues or become profitable.
OUR BUSINESS MODEL IS NEW AND UNPROVEN, AND WE MAY BE UNABLE TO IMPLEMENT IT
SUCCESSFULLY.
In early 1997, we changed our business strategy to focus on the marketing
and sale of voice-enabled services. Our new model for conducting business and
generating revenue is unproven, and we face many of the risks faced by new
businesses, especially companies in new and rapidly evolving markets. Our
business depends on our ability to generate revenue from multiple sources,
including:
- the Portico service;
- private-label versions of our virtual assistant services offered by
telecommunications carriers, device manufacturers and other companies;
- the myTalk service; and
- services based on our magicTalk(TM) voice user interface technology
offered by Internet companies.
If we fail to generate revenues from one or more of these sources,
development and sales of our products and services could be adversely affected.
Although the Portico service was released on July 30, 1998, revenues from
Portico subscriptions to date have not been significant. It is uncertain whether
we or our partners will be able to develop and maintain at reasonable cost a
significant subscriber base for virtual assistant services.
In addition, revenues from our Internet services depend on advertising and
sponsorship sales and upgrades to fee-based services, and such revenues may
never be sufficient to offset the costs of providing free services. See "--
Revenues from our Internet services depend on banner and audio advertising sales
and upgrades to fee-based services, and our
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inability to generate sufficient revenues from advertising sales and upgrades
would harm our business."
REVENUES FROM OUR INTERNET SERVICES DEPEND ON BANNER AND AUDIO ADVERTISING SALES
AND ON UPGRADES TO FEE-BASED SERVICES, AND OUR INABILITY TO GENERATE SUFFICIENT
REVENUES FROM ADVERTISING SALES AND UPGRADES WOULD HARM OUR BUSINESS.
Our business model depends on our ability to generate sufficient revenues
from banner and audio advertising sales and upgrades to fee-based services to
offset the costs of providing a free service. In order to generate revenues, we
and our partners will need to attract a large number of banner and audio
advertisers and advertising sponsors on an ongoing basis. In addition, a
sufficient number of users must upgrade to fee-based services. If we are not
able to attract or retain a sufficient number of advertisers and sponsors or a
sufficient number of users to the fee-based services, we may not be able to
generate the revenues necessary to operate.
To attract advertisers and sponsors, we and our partners will need to
attract a large number of users to our services. To do so, we must increase
awareness of the myTalk and General Magic brands and continually enhance and
improve the features and quality of our services. If we or our partners cannot
attract a sufficient number of users, we will not be able to attract a
sufficient number of advertisers and sponsors to generate revenues.
THE MARKET FOR OUR SERVICES MAY NOT DEVELOP, WHICH WOULD SUBSTANTIALLY IMPEDE
OUR ABILITY TO GENERATE REVENUES.
Our future financial performance depends in large part on growth in demand
for our voice-enabled services and products. If the market for voice-enabled
services does not develop or if we are unable to capture a significant portion
of that market either directly or through our partners, our revenues and our
results of operations will be adversely affected.
The market for voice-enabled services is still evolving. Currently, there
are only a limited number of products and applications in this industry.
Negative consumer perceptions regarding reliability, cost, ease-of-use and
quality of speech-based products affects consumer demand and may impact the
growth of the market. As a result, we cannot guarantee that the market for
voice-enabled services and products will grow or that consumers will accept any
of the services or products built on our magicTalk voice user interface
platform.
OUR LIMITED RESOURCES MAY RESTRICT OUR OPERATIONS AND OUR ABILITY TO IMPLEMENT
OUR NEW STRATEGY, AND THE AVAILABILITY OF ADDITIONAL RESOURCES IS UNCERTAIN.
Our new business model requires us to devote significant financial
resources to a number of complex services, including our Portico and myTalk
services and private-label services offered by third parties. If we are not able
to successfully manage our existing resources or to secure additional resources
in a timely manner, our ability to successfully introduce all of our services
and to generate sufficient revenues will be restricted.
Our limited financial resources constrain the size of our technical,
business development, sales, marketing and customer support staffs. Our existing
personnel may not be able to manage and successfully complete all of the tasks
necessary to support the various aspects of our business. Furthermore, Silicon
Valley remains a highly competitive job market. Our key management, technical,
business development, sales, marketing,
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administrative and customer support personnel may not remain with us, and we may
be unable to attract sufficient additional personnel to execute our business
plan.
In addition, we must conserve cash because we have generated minimal
revenues to date. We do not expect to generate significant revenues until the
second half of 1999, if at all. We are currently negotiating the terms of a
financing. However, we cannot guarantee that the transaction will be consummated
in a timely manner or that we will be able to obtain alternative funding. Even
if we consummate the transaction, we may require additional funding in the
future and we cannot guarantee that we will be able to obtain such funding. The
unavailability or timing of significant revenues and financing could prevent or
delay the continued development and marketing of our services and may require us
to curtail our operations. In addition, if we are not able to generate revenues
or obtain funding, we may be unable to meet The Nasdaq National Market's
continued listing requirements and our common stock could be delisted from that
market. See "-- Our common stock may be delisted from The Nasdaq National Market
if we are not able to demonstrate compliance with the continued listing
requirements."
OUR COMMON STOCK MAY BE DELISTED FROM THE NASDAQ NATIONAL MARKET IF WE ARE NOT
ABLE TO DEMONSTRATE COMPLIANCE WITH THE CONTINUED LISTING REQUIREMENTS.
We are subject to the continued listing requirements of The Nasdaq National
Market. On April 15, 1999, we received a letter from The Nasdaq National Market
advising us that we had failed to meet these requirements. The letter required
us to demonstrate compliance with the continued listing requirements by July 13,
1999. In response to the April 15th letter, we submitted a letter demonstrating
our compliance as of May 7, 1999 and providing our plan for continued compliance
through December 31, 1999, including the completion, by July 30, 1999, of a
financing transaction currently under negotiation. On July 1, 1999, the Nasdaq
National Market accepted our proposal, contingent on our ability to successfully
execute it. We cannot guarantee that we will be able to successfully execute our
plan in a timely manner. In the event that we are not able to maintain continued
compliance with The Nasdaq National Market listing requirements through December
31, 1999, we would be subject to a delisting process. In the event that we are
delisted, we will seek to list our common stock on other markets, including The
Nasdaq Small Cap Market and the American Stock Exchange.
WE MAY EXPERIENCE INTERRUPTIONS IN SERVICE DUE TO ERRORS OR INADEQUACIES IN OUR
SOFTWARE AND SYSTEM ARCHITECTURE, WHICH MAY RESULT IN SIGNIFICANT COSTS, A
DECREASE IN REVENUES AND A DECLINE IN OUR STOCK PRICE.
The ability to provide the Portico and myTalk services and the services of
our partners depends on the integrity of our software, computer hardware systems
and network infrastructure. We have encountered, and may encounter in the
future, errors in our software and our system design. These errors may be
expensive to correct, and may lead to substantial interruptions in our service.
Shortly after the launch of our myTalk service and the Excite Voicemail
service, we experienced interruptions in service due to a sudden increase in the
number of users. In the event that we experience other sudden increases in the
number of users to our services or we are successful in establishing other
relationships with partners with large existing customer bases, our network
operations center may not be capable of meeting the resulting increase in
demand. A sudden increase in demand could lead to slow-downs or failures in
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our services. Furthermore, we presently do not have redundant, multiple site
capacity in the event of a technical failure of our services or a natural
disaster.
Any damage to or failure of our systems could lead to interruptions in
service and/or the loss of customer information. Such interruptions or loss
could damage our reputation and ability to attract and retain subscribers and
partners, and we may experience negative publicity that could adversely affect
our stock price.
WE MUST ESTABLISH AND MAINTAIN DISTRIBUTION RELATIONSHIPS TO GENERATE REVENUES.
Our success in generating revenues from private-label versions of our
virtual assistant services and other services based on our magicTalk voice user
interface is dependent on our ability to establish relationships with
telecommunication carriers, device manufacturers and Internet and other
companies. Although we have entered into arrangements with Qwest Communication
Corporation, Intuit(R) Inc., Wireless Knowledge, BellSouth Mobility, Inc. and
Excite, Inc., we cannot guarantee that we will be able to maintain these
relationships or establish additional relationships. Competition for
relationships with telecommunications carriers, device manufacturers and
Internet companies is extremely intense. In addition, decisions by these third
parties, particularly telecommunications carriers, to enter into distribution
relationships can be a lengthy, expensive process, with no assurance of success.
It is uncertain whether any of the services contemplated by our current and
future partners will be commercially launched. Even if these services were
commercially launched, our current and future partners may not be able to
attract and retain a sufficient number of subscribers to attain profitability.
Our control over the marketing efforts of Qwest, Intuit, Wireless Knowledge,
BellSouth and Excite is limited under our arrangements. We cannot guarantee that
Qwest, Intuit, Wireless Knowledge, BellSouth, Excite or any future partner will
actively market the services incorporating our technology.
WE ARE DEPENDENT ON THE INTERNET, AND THE INTERNET MAY PROVE NOT TO BE VIABLE.
Our future success is in part dependent upon continued growth in the use of
the Internet. Internet use by consumers is in an early stage of development, and
market acceptance of the Internet as a medium for content, advertising and
electronic commerce is highly uncertain. If the Internet fails to be a viable
means of conducting commerce or communications, we may not be able to generate
revenues. A number of factors may inhibit the growth of Internet usage including
security concerns, inconsistent quality of service, limited availability of
cost-effective, high-speed access and inadequate network infrastructure. If the
Internet continues to experience significant growth in the number of users and
level of use, the Internet infrastructure may not be able to support the demands
placed on it by such growth.
In addition, the market for Internet advertising may not develop. The
adoption of Internet advertising, particularly by companies that have
historically relied on traditional channels to advertise or sell their products
and services, requires the acceptance of a new way of conducting business.
Potential advertisers may have negative perceptions of the Internet as an
effective means of advertising or selling their products or services. If the
market for Internet advertising does not develop, our business would be harmed.
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WE MAY EXPERIENCE DELAYS IN PRODUCT DEVELOPMENT, WHICH COULD ADVERSELY AFFECT
OUR REVENUES OR RESULTS OF OPERATIONS.
Any delays in product development or market launch could adversely affect
our revenues or results of operations. To be successful, we must develop
technology to enable us to provide, bill for and enhance our Portico service,
myTalk service, fee-based services for the myTalk and other Internet services
and other voice-enabled services, including those we agree to supply for third
parties. Software product development schedules are difficult to predict because
they involve creativity and the use of new development tools and learning
processes. Our software development efforts have been delayed in the past. In
addition to software development delays, we may also experience delays in other
aspects of product development. Any product development delays could delay or
prevent successful introduction or marketing of new or improved products or
services or the delivery of new versions of our products or services.
THE FAILURE OR UNAVAILABILITY OF THIRD-PARTY TECHNOLOGIES AND SERVICES COULD
LIMIT OUR ABILITY TO GENERATE REVENUES.
We have incorporated technology developed by third parties in the Portico
and myTalk services and the services to be provided to our partners, including
the following:
- email servers which process both emails and voicemails;
- the calendar and contact software;
- the voice recognition software;
- the text-to-speech software;
- the billing system; and
- the network operations center equipment.
We will continue to incorporate third-party technology in future products
and services. We have limited control over whether or when these third-party
technologies will be enhanced. In addition, our competitors may acquire
interests in these third parties or their technologies, which may render the
technology unavailable to us. If a third party fails or refuses to timely
develop, license or support technology necessary to our services, market
acceptance of our services could be adversely affected.
In addition, we rely and will continue to rely on services supplied by
third parties in connection with providing our services such as
telecommunications, Internet access and power. If these services fail to meet
industry standards for quality and reliability, market acceptance of our
services could be adversely affected.
INTENSE COMPETITION IN THE MARKET FOR VOICE-ENABLED SERVICES COULD PREVENT US
FROM ACHIEVING OR SUSTAINING PROFITABILITY.
The market for voice-enabled services is intensely competitive. We may be
unable to compete with existing companies or new companies entering the market.
Many of these companies have greater financial resources, name recognition,
research and development capabilities, sales and marketing staffs, and better
developed distribution channels than we do. The services that we offer may not
achieve sufficient quality, functionality or cost-effectiveness to compete with
existing or future alternatives. Furthermore, our competitors may succeed in
developing competing products or services which are more effective and
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cheaper or which render our services or technology obsolete. If we are unable to
compete effectively, our business would be adversely affected.
CONVERSION OF PREFERRED STOCK OR ISSUANCE OF OTHER SECURITIES WOULD DILUTE
CURRENT STOCKHOLDERS.
We have 50,000 shares of Series A preferred stock, 2,000 shares of Series D
preferred stock and 599 shares of Series E preferred stock outstanding, all of
which are convertible into common stock. In addition, we have a warrant to
purchase an additional 100 shares of Series E preferred stock and warrants to
purchase an aggregate of 780,000 shares of common stock outstanding. The holders
of common stock could experience substantial dilution to their investment upon
conversion of the preferred shares or exercise of the warrants. The number of
shares of common stock issuable upon the conversion of the Series D preferred
stock depends on the prices of the common stock as quoted on Nasdaq shortly
before the date of conversion. We cannot predict the price of the common stock
in the future. If the price of our common stock decreases over time, the number
of shares of common stock issuable upon conversion of the preferred stock will
increase and the holders of common stock would experience additional dilution of
their investment. Such dilution could cause the stock price of our common stock
to decrease further. A decrease in the stock price of our common stock could
cause our common stock to be delisted from The Nasdaq Stock Market.
Our board of directors has the authority to issue 432,301 additional shares
of preferred stock that are convertible into common stock without any action by
our stockholders. In addition, our board of directors may sell additional shares
of common stock or other equity securities that are convertible into common
stock without any action by our stockholders. The issuance and conversion of any
such preferred stock or equity securities would further dilute the percentage
ownership of our stockholders.
WE MAY BE REQUIRED TO REDEEM THE SERIES D PREFERRED STOCK AND SUCH REDEMPTION
COULD SIGNIFICANTLY DEPLETE OUR CASH RESERVES, WHICH WOULD MATERIALLY ADVERSELY
AFFECT OUR FINANCIAL CONDITION.
The holders of the Series D preferred stock have redemption rights if we
fail to meet the requirements of the documents governing the Series D preferred
stock. Assuming that all 2,000 shares of Series D preferred stock are
outstanding, the total redemption value would be approximately $20 million to
$26 million. Such payments would significantly deplete our cash reserves, which
would materially adversely affect our financial condition. In addition, such
decrease in our cash reserves may cause our common stock to be delisted from The
Nasdaq Stock Market. We cannot guarantee that we will be able to meet all of the
requirements necessary to avoid a redemption.
TECHNOLOGY CHANGES RAPIDLY IN OUR MARKET, AND OUR FUTURE SUCCESS WILL DEPEND ON
OUR ABILITY TO MEET THE NEEDS OF OUR CUSTOMERS.
The telecommunications services market is characterized by rapid
technological change, changing customer needs, frequent new product
introductions and evolving industry standards. The introduction of products or
services embodying new technologies and the emergence of new industry standards
could render our voice-enabled services obsolete and unmarketable.
Our success will depend upon our ability to timely develop and introduce
new products and services, as well as enhancements to our existing products and
services, to
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keep pace with technological developments and emerging industry standards and
address the changing needs of users. We may not be successful in developing and
marketing new products and services that respond to technological changes, or
evolving industry standards. We may experience difficulties that could delay or
prevent the successful development, introduction and marketing of new products
and services. In addition, our new products and services may not adequately meet
the requirements of the marketplace or achieve market acceptance.
OUR INVESTMENT IN AND OTHER COMMITMENTS TO DATAROVER MOBILE SYSTEMS, INC. MAY
RESULT IN A SIGNIFICANT LOSS TO US.
Effective October 1998, we divested our DataRover handheld communications
device division in a transaction with DataRover Mobile Systems, Inc. ("DSI"). In
connection with the transaction, we made an investment in DSI totaling
$3,361,000, and received non-voting, non-redeemable preferred stock and 49% of
the outstanding common stock of DSI. We accounted for our investment under the
modified equity method, and we will record 100% of the losses incurred by DSI up
to a total of $3,361,000, our initial investment. As of March 31, 1999, we had
recorded a decrease of $2,521,000 in the value of our investment to reflect 100%
of the losses incurred by DSI through that date. In the event that DSI incurs
further losses in any future period, we will be required to record a
corresponding decline in the value of our investment. In addition, if we
determine that the value of our investment in DSI has been impaired, we will be
required to write off our investment, in whole or in part.
In connection with this transaction, we also agreed to purchase DataRover
840 units for DSI from Oki Electric Industry Co., Ltd. under an existing letter
of credit. During March 1999, we purchased all units which we were obligated to
purchase from Oki Electric. As of March 31, 1999, DSI's obligation to us was
valued at $2,884,000. We are to be reimbursed by DSI the cost of such units upon
the earlier of five days following the sale of the units by DSI, or 120 days
following shipment by Oki Electric. DSI's obligation to reimburse us is secured
by all of its personal property. We cannot guarantee that DSI will be able to
reimburse us, or that our security interest in their personal property will be
adequate to satisfy their obligation to us. We will incur additional losses in
the event DSI is not able to reimburse us.
OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY COULD IMPAIR OUR COMPETITIVE
POSITION.
We believe that our success depends, in part, on our ability to protect our
intellectual property. In order to do that, we must take the following measures:
- obtain patent, copyright and trademark protection where appropriate;
- preserve our trade secrets;
- defend our patents, copyrights, trademarks and trade secrets against
infringement; and
- prevent unauthorized disclosure of confidential information through the
use of confidentiality agreements with employees, consultants and
partners.
We may be unable to accomplish these measures. In addition, we cannot be
certain that they will be adequate to protect our intellectual property. In
spite of our efforts, third parties may successfully copy our products or use
our confidential information.
10
<PAGE> 12
VARIOUS PARTIES MAY ACCUSE US OF INFRINGING THEIR INTELLECTUAL PROPERTY RIGHTS,
AND ANY RELATED LITIGATION COULD HARM OUR BUSINESS REGARDLESS OF ITS MERIT.
Third parties may assert claims against us from time to time alleging
infringement, misappropriation or other violations of proprietary rights,
whether or not such claims have merit. Such claims can be time consuming and
expensive to defend and could require us to cease the use and sale of allegedly
infringing products and services, incur significant litigation costs and
expenses, develop or acquire non-infringing technology or obtain licenses to the
alleged infringing technology. We may not be able to develop or acquire
alternative technologies or obtain such licenses on commercially reasonable
terms.
SECURITY PROBLEMS IN OUR SERVICES WOULD LIKELY RESULT IN SIGNIFICANT LIABILITY
AND REDUCED REVENUES.
Security vulnerabilities and weaknesses may be discovered in our services
or licensed technology incorporated into our services or in the media by which
subscribers access our services. Any security problems in our services or the
licensed technology incorporated in our services may require us to expend
significant capital and other resources to alleviate the problems. In addition,
these problems could result in the loss or misuse of personal information,
including credit card numbers, and limit the number of subscribers to our
Portico and myTalk services and to services of our partners. A decrease in the
number of subscribers could lead to decreased revenues and termination of our
relationships with advertisers, sponsors and partners. These problems may also
cause interruptions or delays in the development of enhancements to our services
and may result in lawsuits against us.
We will continue to incorporate authentication, encryption and other
security technologies in our services. However, such technologies may not be
adequate to prevent break-ins. In addition, weaknesses in the media by which
users access these services, including the Internet, land-line telephones,
cellular phones and other wireless devices, may compromise the security of the
electronic information accessed from the service. We intend to continue to limit
our liability to end users and to our partners, including liability arising from
failure of the authentication, encryption and other security technologies
incorporated into our services, through contractual provisions. However, such
limitations may not eliminate liability. We do not currently have liability
insurance to protect against risks associated with forced break-ins or
disruptions.
A PRODUCT LIABILITY CLAIM ASSERTED AGAINST US COULD MATERIALLY AND ADVERSELY
AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We may be subject to claims for damages related to system errors and other
defects in our services. Agreements with end users of our services typically
contain provisions designed to limit exposure to potential product liability
claims. However, these provisions may not be sufficient to protect us from
liability. We currently have liability insurance to protect against certain
risks associated with system errors and other defects in our services. However,
we cannot guarantee that such insurance will be sufficient.
OUR STOCK PRICE HAS BEEN EXTREMELY VOLATILE, AND EXTREME PRICE FLUCTUATIONS
COULD ADVERSELY AFFECT YOUR INVESTMENT.
The market price of our common stock has been extremely volatile. Since our
initial public offering in February 1995, the closing price of our common stock
has ranged from a high of $26.625 to a low of $0.938 per share.
11
<PAGE> 13
Publicized events and announcements may have a significant impact on the
market price of our common stock. For example, shortfalls in our revenue or net
income, conversions of preferred stock into common stock, delays in product
development, disruptions in our service, or announcements of partnerships,
technological innovations or new products or services by our competitors could
have the effect of temporarily or permanently driving down the price of our
common stock. In addition, the stock market from time to time experiences
extreme price and volume fluctuations which particularly affect the market
prices for emerging and technology companies, such as ours, and which are often
unrelated to the operating performance of the affected companies. These broad
market fluctuations may adversely affect your ability to sell your shares at a
price equal to or above the price you purchased them. In addition, a decrease in
the stock price of our common stock could cause our common stock to be delisted
from The Nasdaq National Market.
YEAR 2000 COMPLICATIONS MAY DISRUPT OUR OPERATIONS AND HARM OUR BUSINESS.
We face risks related to the inability of computer systems to accurately
identify and process dates beyond the year 1999. We are currently taking steps
to address these risks for all of our computer systems, including internal
systems and systems supplied to us by third parties. These systems include those
that are commonly thought of as information technology systems, such as our
billing, accounting and network systems. In addition, these systems include
those that are non-information technology systems, such as our building control
systems, building safety systems and communications systems. Based on currently
available information, we do not believe that year 2000 issues will have a
material adverse impact on our results of operations or financial condition.
However, we may fail to identify all critical year 2000 problems, may not
properly assess, remediate or test our systems, and may encounter unexpected
delays or costs associated with our year 2000 effort. In addition, we have not
completed our assessment of the year 2000 readiness of significant suppliers. We
believe that noncompliance of products and services supplied to us by third
parties presents the most significant year 2000 risk. We rely on third-party
suppliers for a significant number of systems related to our Portico service,
such as:
- email servers which process both emails and voicemails;
- the calendar and contact software;
- the voice recognition software;
- the text-to-speech software;
- the billing system; and
- the network operations center equipment.
In addition, we rely on third parties for key services, such as
telecommunications, Internet access and power. In the event that we, or any of
our third-party suppliers, are not year 2000 ready, we could experience
significant disruptions in our operations and service offerings. Such
interruptions could lead to lost sales, loss of relationships with partners,
advertisers and sponsors, and damage to our business reputation.
DELAWARE LAW AND CERTAIN PROVISIONS OF OUR CHARTER DOCUMENTS MAY INHIBIT
POTENTIAL ACQUISITION BIDS.
Delaware law and our charter may inhibit potential acquisition bids for
General Magic. We are subject to the antitakeover provisions of the Delaware
General Corporation
12
<PAGE> 14
Law, which could delay a merger, tender offer or proxy contest or make such a
transaction more difficult. In addition, provisions of our certificate of
incorporation and bylaws may have the effect of delaying or preventing a change
in control or in management, or may limit the price that certain investors may
be willing to pay in the future for shares of common stock. These provisions
include:
- issuance of "blank check" preferred stock, which is preferred stock that
can be issued by the board of directors without prior stockholder
approval, with rights senior to those of common stock;
- prohibition on stockholder action by written consent;
- requirement that a two-thirds vote of the stockholders is required to
amend the bylaws; and
- advance notice requirements for submitting nominations for election of
the board of directors and for proposing matters that can be acted upon
by stockholders at a meeting.
Furthermore, the Series D preferred stock provides holders rights to redemption
of their Series D preferred stock upon a change in control, which could make an
acquisition more difficult.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus and the documents incorporated by
reference are forward-looking statements. These forward-looking statements are
subject to certain risks and uncertainties, including, among others, those
listed under "Risk Factors" above and in the documents incorporated by
reference.
In some cases, you can identify forward-looking statements by words such as
"anticipates," "believes," "expects," "future," "intends," and similar
expressions.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, events, levels of
activity, performance, or achievements. You are cautioned not to place undue
reliance on these forward-looking statements. We do not intend to update any of
the forward-looking statements after the date of this prospectus to conform them
to actual results.
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<PAGE> 15
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares offered under
this prospectus by the selling stockholder and all proceeds will go to the
selling stockholder to be used for its own purposes.
SELLING STOCKHOLDER
The following table sets forth:
- the name of the selling stockholder,
- the number of shares of common stock underlying the preferred stock and
warrants held by it as of July 15, 1999,
- the number of shares which may be offered under this prospectus and
- the number of shares and percentage of class to be beneficially owned by
the selling stockholder after this offering.
<TABLE>
<CAPTION>
TOTAL SHARES OF COMMON STOCK
----------------------------------------
SHARES OF
SERIES E PREFERRED STOCK WARRANTS COMMON
------------------------ ---------------------- SHARES OF STOCK
SHARES OF SHARES OF SHARES OF SHARES OF COMMON SHARES OF BENEFICIALLY
UNDERLYING COMMON UNDERLYING COMMON STOCK COMMON OWNED
COMMON STOCK COMMON STOCK BENEFICIALLY STOCK AFTER THE
SELLING STOCKHOLDER STOCK OFFERED STOCK OFFERED OWNED OFFERED OFFERING
------------------- ----------- ---------- ---------- --------- ------------ --------- -------------
# %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Excite, Inc.......... 1,576,316 1,576,316 263,158 263,158 1,839,474 1,839,474 -- --
</TABLE>
This information is based upon information provided by Excite.
NOTES REGARDING NUMBER OF SHARES OWNED AFTER OFFERING
Because the selling stockholder may offer all, some or none of their common
stock, we cannot provide a definitive estimate of the number of shares that the
selling stockholder will hold after the offering.
NOTES REGARDING BENEFICIAL OWNERSHIP
The selling stockholder has sole voting and investment power with respect
to all shares of General Magic common stock shown as beneficially owned by it.
This information is based upon information provided by Excite.
RELATIONSHIPS BETWEEN THE SELLING STOCKHOLDER AND US
Excite, Inc. has not held any position or office or has had any other
material relationship with General Magic or any of our affiliates within the
past three years other than as a result of its ownership of shares of equity
securities and as described below. This information is based upon information
provided by Excite.
In June 1999, we issued to Excite 599 shares of our Series E Convertible
Preferred Stock and a warrant to purchase an additional 100 shares of the Series
E preferred stock pursuant to a preferred stock and warrant purchase agreement.
The warrant is exercisable for 100 Series E shares at a current exercise
price of $10,000 per share. It has a term of fifteen months. The exercise price
and the number of
14
<PAGE> 16
shares issuable upon exercise of the warrant will change in the event of a stock
split, stock dividend or similar transaction. The 100 Series E shares issuable
upon exercise of the warrant would be convertible into approximately 263,158
shares of common stock as of July 16, 1999.
The terms and conditions of the Series E shares are as follows:
Dividends. If and when the board of directors declares a dividend, each
Series E share will be entitled to receive dividends at a rate of 5% per annum.
We must pay dividends on Series E shares before we pay any dividends on the
common stock. Dividends on Series E shares are non-cumulative.
Conversion. Each Series E share is convertible, at the option of a Series E
holder, into that number of shares of common stock obtained by dividing $10,000
by $3.80. The number of shares of common stock issuable upon conversion of the
Series E shares is subject to adjustment for:
- dividends or other distributions payable in shares of common stock;
- a stock split or stock combination; or
- a capital reorganization.
The 599 Series E shares outstanding as of July 16, 1999, would be
convertible into approximately 1,576,316 shares of common stock.
Liquidation Preference. In the event that we liquidate, dissolve or unwind,
we must pay holders of the Series E shares an amount equal to $10,000 per share.
We must pay the holders of the Series E shares before we pay the holders of the
common stock.
Voting Rights. Except as required by law, the Series E shares have no other
voting rights.
The Series E shares and the warrant were issued in connection with an
unified messaging services agreement pursuant to which our magicTalk voice user
interface is incorporated into the Excite Voicemail service. The Excite
Voicemail service operates in our network operations center.
The summary set forth above is not intended to be a complete description of
all of the terms of the documents governing our relationship with Excite. Please
refer to the copies of the relevant documents which are filed as exhibits to
this registration statement on Form S-3.
PLAN OF DISTRIBUTION
The selling stockholder or its pledgees, donees, transferees or other
successors in interest may, from time to time, sell all or a portion of the
shares on The Nasdaq National Market or any other exchange or automated
quotation service on which the common stock is then listed, in privately
negotiated transactions or otherwise. Shares may be sold at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to market prices or at negotiated prices. The shares may be sold by the
selling stockholder by one or more of the following methods, without limitation:
- block trades in which the broker or dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
15
<PAGE> 17
- purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus;
- an exchange distribution in accordance with the rules of the exchange;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- privately negotiated transactions;
- short sales;
- through the writing of options on the shares;
- in one or more underwritten offerings on a firm commitment or best effort
basis; and
- a combination of any such methods of sale.
In effecting sales, brokers and dealers engaged by the selling stockholder
may arrange for other brokers or dealers to participate. Broker-dealers may
agree with the selling stockholder to sell a specified number of such shares at
a stipulated price per share. To the extent such broker-dealer is unable to do
so acting as agent for a selling stockholder, to purchase as principal any
unsold shares at the stipulated price. Broker-dealers who acquire shares as
principals may thereafter resell such shares from time to time in transactions
in The Nasdaq National Market at prices and on terms then prevailing at the time
of sale, at prices related to the then-current market price or in negotiated
transactions. Broker-dealers may use block transactions and sales to and through
broker-dealers, including transactions of the nature described above. The
selling stockholder may also sell the shares in accordance with Rule 144 under
the Securities Act rather than under this prospectus.
From time to time, the selling stockholder may pledge, hypothecate or grant
a security interest in some or all of the shares owned by it. The pledgees,
secured parties or persons to whom such securities have been hypothecated will,
upon foreclosure in the event of default, be deemed to be a selling stockholder.
The number of the selling stockholder's shares offered under this prospectus
will decrease as and when it takes those actions. The plan of distribution for
the selling stockholder's shares will otherwise remain unchanged. In addition,
the selling stockholder may, from time to time, sell short the common stock of
General Magic, and in these instances, this prospectus may be delivered in
connection with these short sales and the shares offered under this prospectus
may be used to cover such short sales.
To the extent required under the Securities Act, the aggregate amount of
the selling stockholder's shares of common stock being offered and the terms of
the offering, the names of any such agents, brokers, dealers or underwriters and
any applicable commission with respect to a particular offer will be set forth
in an accompanying prospectus supplement. Any underwriters, dealers, brokers or
agents participating in the distribution of the common stock may receive
compensation in the form of underwriting discounts, concessions, commissions or
fees from the selling stockholder and/or purchasers of the selling stockholder's
shares of common stock, for whom they may act (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
The selling stockholder and any broker-dealers or agents that participate
with the selling stockholder in sales of the shares may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended, in
connection with such sales. In this
16
<PAGE> 18
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be an
underwriting commission or discount under the Securities Act of 1933, as
amended.
The selling stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the common
stock in the course of hedging the positions they assume with the selling
stockholder, including, without limitation, in connection with distributions of
the common stock by these broker-dealers. The selling stockholder may enter into
option or other transactions with broker-dealers that involve the delivery of
the shares offered under this prospectus to the broker-dealers, who may then
resell or otherwise transfer these shares. The selling stockholder may also loan
or pledge the shares offered under this prospectus to a broker-dealer and the
broker-dealer may sell the shares offered under this prospectus so loaned or
upon a default may sell or otherwise transfer the pledged shares offered under
this prospectus.
The selling stockholder and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act and the rules and regulations under that act, which
provisions may limit the timing of purchases and sales of any of the shares by
the selling stockholder or any other such person. The foregoing may affect the
marketability of the shares.
We have agreed to indemnify in certain circumstances the selling
stockholder and the broker-dealers and agents who may be deemed to be
underwriters, if any, of the securities covered by the registration statement,
against certain liabilities, including liabilities under the Securities Act of
1933, as amended. The selling stockholder has agreed to indemnify in certain
circumstances General Magic against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
The shares of common stock were originally issued to the selling
stockholder pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended, provided by Section 4(2) thereof. We agreed
to register the common stock under the Securities Act of 1933, as amended. We
have agreed to pay all reasonable expenses, other than underwriter discounts and
commissions, and the reasonable fees and disbursements, not to exceed $10,000 in
the aggregate, of a single special counsel for the selling stockholder incident
to the filing of this registration statement.
LEGAL MATTERS
The legality of the shares of common stock offered hereby is being passed
upon by Cooley Godward LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements of General Magic, Inc. as of December
31, 1998 and December 31, 1997, and for each of the years in the three-year
period ended December 31, 1998 and for the period from May 1, 1990 (inception)
to December 31, 1998 have been incorporated herein by reference and in the
registration statement in reliance upon the report of KPMG LLP, independent
auditors, incorporated herein by reference and upon the authority of said firm
as experts in accounting and auditing.
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<PAGE> 19
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-3 to register
the common stock offered by this prospectus. However, this prospectus does not
contain all of the information contained in the registration statement and the
exhibits and schedules to the registration statement. We strongly encourage you
to carefully read the registration statement and the exhibits and schedules to
the registration statement.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, DC, New York, New York and Chicago,
Illinois. You can request copies of these documents by contacting the SEC and
paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from the SEC's website at www.sec.gov.
The SEC allows us to "incorporate by reference" the information contained
in documents that we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information in this prospectus supersedes information incorporated by reference
which we filed with the SEC prior to the date of this prospectus, while
information that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below:
1. Our Annual Report on Form 10-K for the year ended December 31, 1998,
filed with the Commission on March 31, 1999;
2. Our Report on Form 8-K filed with the Commission on April 2, 1999; and
3. Our Quarterly Report on Form 10-Q filed with the Commission on May 17,
1999.
4. The description of the common stock contained in our Registration
Statement on Form 8-A filed under the Securities Exchange Act of 1934,
as amended, including any amendment or report filed for the purpose of
updating such description.
In addition, we incorporate by reference any future filings we will make
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, as amended.
You may request a copy of these filings, at no cost to you, by writing or
telephoning us at:
General Magic, Inc.
Attention: Investor Relations
420 N. Mary Avenue
Sunnyvale, California 94086
Telephone: (408) 774-4000
18
<PAGE> 20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,839,474 Shares
GENERAL MAGIC, INC.
Common Stock
-------------------------
PROSPECTUS
-------------------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection with
the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fees and Nasdaq
filing fee.
<TABLE>
<CAPTION>
TO BE PAID
BY THE
REGISTRANT
----------
<S> <C>
SEC Registration Fee........................................ $ 1,782
Nasdaq filing fee........................................... $17,500
Accounting fees and expenses................................ $ 5,000
Legal fees and expenses..................................... $ 3,000
Printing expenses........................................... $ 2,000
Miscellaneous expenses...................................... $ 2,718
-------
Total............................................. $32,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents and in agreements with its directors and
officers provisions expanding the scope of indemnification beyond that
specifically provided by the Delaware law. The Registrant's Bylaws provide that
the Registrant shall indemnify to the full extent authorized by law any person
made or threatened to be made a party to an action or a proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that he
or she, his or her testator or intestate was or is a director, officer or
employee of the Registrant or any predecessor of the Registrant or serves or
served any other enterprise as a director, officer or employee at the request of
the Registrant or a predecessor of the Registrant. The Registrant's Bylaws also
provide that the Registrant may enter into one or more agreements with any
person which provides for indemnification greater or different than that
provided in such Bylaws. We have entered into such indemnification agreements
with our directors and officers.
The Registrant maintains insurance on behalf of any person who is a
director or officer against any loss arising from any claim asserted against him
or her and incurred by him or her in any such capacity, subject to certain
exclusions.
See also the undertakings set out in response to Item 17 herein.
II-1
<PAGE> 22
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
3.1 Certificate of Designations, Preferences and Rights of
Series E Convertible Preferred Stock filed with the Delaware
Secretary of State on June 17, 1999.
4.1 Series E Preferred Stock and Warrant Purchase Agreement by
and between the Registrant and Excite, Inc. dated June 18,
1998.
4.2 Form of Warrant for the purchase of shares of Series E
Convertible Preferred Stock
5.1 Opinion of Cooley Godward LLP
23.1 Consent of KPMG LLP, independent auditors.
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page contained
in Part II of the Registration Statement.
</TABLE>
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE> 23
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
E. The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Sunnyvale, State of California on July 16, 1999.
GENERAL MAGIC, INC.
By: /s/ STEVEN MARKMAN
-----------------------------------
Steven Markman
President, Chief Executive Officer
and Chairman of the Board of
Directors
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Steven Markman and James P. McCormick,
and each of them, as his or her true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
on Form S-3, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-facts and agents, or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ STEVEN MARKMAN President, Chief Executive July 16, 1999
- -------------------------------- Officer, Chairman of the Board,
Steven Markman Director (Principal Executive
Officer)
/s/ JAMES P. MCCORMICK Chief Operating Officer and July 16, 1999
- -------------------------------- Chief Financial Officer
James P. McCormick (Principal Financial and
Accounting Officer)
/s/ MICHAEL E. KALOGRIS Director July 16, 1999
- --------------------------------
Michael E. Kalogris
Director July , 1999
- --------------------------------
Philip D. Knell
</TABLE>
II-4
<PAGE> 25
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DENNIS F. STRIGL Director July 16, 1999
- --------------------------------
Dennis F. Strigl
/s/ SUSAN G. SWENSON Director July 16, 1999
- --------------------------------
Susan G. Swenson
/s/ ROEL PIEPER Director July 16, 1999
- --------------------------------
Roel Pieper
</TABLE>
II-5
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
3.1 Certificate of Designations, Preferences and Rights of
Series E Convertible Preferred Stock filed with the Delaware
Secretary of State on June 17, 1999.
4.1 Series E Preferred Stock and Warrant Purchase Agreement by
and between the Registrant and Excite, Inc. dated June 18,
1998.
4.2 Form of Warrant for the purchase of shares of Series E
Convertible Preferred Stock
5.1 Opinion of Cooley Godward LLP
23.1 Consent of KPMG LLP, independent auditors.
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page contained
in Part II of the Registration Statement.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES E CONVERTIBLE PREFERRED STOCK
OF GENERAL MAGIC, INC.
GENERAL MAGIC, INC. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the Board of Directors of the
Company by the Certificate of Incorporation, as amended, of the Company, and
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
the Board of Directors of the Company at a meeting duly held adopted resolutions
(i) authorizing a series of the Company's previously authorized preferred stock,
par value $0.001 per share, and (ii) providing for the designation, rights,
preferences and privileges of six hundred and ninety nine (699) shares of Series
E Convertible Preferred Stock of the Company, as follows:
RESOLVED, that the Company is authorized to issue six hundred
and ninety nine (699) shares of Series E Convertible Preferred Stock of
the Company (the "Series E Preferred"), par value $0.001 per share,
which shall have the following powers, rights, preferences and
privileges:
1. DIVIDEND RIGHTS.
a. Holders of Series E Preferred, in preference to the holders of the
Company's common stock, par value $.001 per share ("Common Stock") or any other
capital stock of the Company of any class junior in rank to the Series E
Preferred in respect of the preferences as to the distributions and payments on
the liquidation, dissolution or winding up of the Company ("Junior Stock") and
on a pari passu basis with the holders of the Company's Series A Convertible
Preferred Stock, the Series D Convertible Preferred Stock and any other classes
or series of preferred stock of the Company that are of equal rank to the Series
E Preferred in respect of the preferences as to the distributions and payments
on the liquidation, dissolution or winding up of the Company (the "Pari Passu
Stock"), shall be entitled to receive, when and as declared by the Board of
Directors, but only out of funds that are legally available therefor, cash
dividends at the rate of five percent (5%) of $10,000 per annum on each
outstanding share of Series E Preferred (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares). Such dividends shall be payable only when, as and if declared by the
Board of Directors and shall be non-cumulative.
b. So long as any shares of Series E Preferred shall be outstanding, no
dividend, whether in cash or property, shall be paid or declared, nor shall any
other distribution be made, on any Junior Stock, nor shall any shares of any
Junior Stock of the Company be purchased, redeemed, or otherwise acquired for
value by the Company (except for acquisitions of Common Stock by the Company
pursuant to a repurchase plan approved by the Board of Directors or pursuant to
agreements which permit the Company to repurchase such shares upon termination
of services to the Company or in exercise of the Company's right of first
refusal upon a proposed transfer) until all dividends (set forth in Section 1(a)
above) on the Series E Preferred shall have been paid or declared and set apart.
In the event dividends are paid on any share of Common Stock, an additional
dividend shall be paid with respect to all outstanding shares of Series E
Preferred in an amount equal per share (on an as-if-converted to Common Stock
basis) to the
<PAGE> 2
amount paid or set aside for each share of Common Stock. The provisions of this
Section 1(b) shall not, however, apply to (i) a dividend payable in Common
Stock, (ii) the acquisition of shares of any Junior Stock in exchange for shares
of any other Junior Stock, or (iii) any repurchase of any outstanding securities
of the Company that is unanimously approved by the Company's Board of Directors.
2. VOTING RIGHTS . Except as otherwise provided herein or as required by law,
the Series E Preferred shall have no voting rights.
3. LIQUIDATION RIGHTS.
a. Upon any liquidation, dissolution, or winding up of the Company,
whether voluntary or involuntary, the holders of Series E Preferred shall be
entitled to be paid out of the assets of the Company before any distribution or
payment shall be made to the holders of any Junior Stock and on a pari passu
basis with the Pari Passu Stock, an amount per share of Series E Preferred equal
to $10,000 (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) for each share of
Series E Preferred held by them. If, upon any such liquidation, distribution, or
winding up, the assets of the Company shall be insufficient to make payment in
full to all holders of Series E Preferred and the Pari Passu Stock of the
liquidation preference set forth in this Section 3(a), then such assets shall be
distributed among the holders of Series E Preferred and the Pari Passu Stock at
the time outstanding, ratably in proportion to the full amounts to which they
would otherwise be respectively entitled.
b. The following events shall be considered a liquidation under this
Section:
i. any consolidation or merger of the Company with or into any
other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately
prior to such consolidation, merger or reorganization, own less than
50% of the Company's voting power immediately after such consolidation,
merger or reorganization, or any transaction or series of related
transactions to which the Company is a party in which in excess of
fifty percent (50%) of the Company's voting power is transferred,
excluding any consolidation or merger effected exclusively to change
the domicile of the Company (an "Acquisition");
ii. a sale, lease or other disposition of all or substantially
all of the assets of the Company (an "Asset Transfer"); or
iii. tender offer (as that term is defined and interpreted
(including judicial and administrative interpretations) pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended) or
agreements to sell shares, as result of which the holders of the
Company's outstanding shares immediately before such tender offer do
not, immediately after such tender offer or such sales, retain stock
representing a majority of the voting power of the surviving
corporation resulting from such tender offer or such sale.
4. CONVERSION RIGHTS. The holders of the Series E Preferred shall have the
following rights with respect to the conversion of the Series E Preferred into
shares of Common Stock (the "Conversion Rights"):
a. OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 4, any shares of Series E Preferred may, at the
option of the holder, be converted at any
<PAGE> 3
time into fully-paid and nonassessable shares of Common Stock. The number of
shares of Common Stock to which a holder of Series E Preferred shall be entitled
upon conversion shall be the product obtained by multiplying the "Series E
Preferred Conversion Rate" then in effect (determined as provided in Section
4(b)) by the number of shares of Series E Preferred being converted.
b. SERIES E PREFERRED CONVERSION RATE. The conversion rate in effect at
any time for conversion of the Series E Preferred (the "Series E Preferred
Conversion Rate") shall be the quotient obtained by dividing $10,000 by the
"Series E Preferred Conversion Price," calculated as provided in Section 4(c).
c. SERIES E PREFERRED CONVERSION PRICE. The conversion price for the
Series E Preferred shall initially be $3.80 (the "Series E Preferred Conversion
Price"). Such initial Series E Preferred Conversion Price shall be adjusted from
time to time in accordance with this Section 4. All references to the Series E
Preferred Conversion Price herein shall mean the Series E Preferred Conversion
Price as so adjusted.
d. MECHANICS OF CONVERSION. Each holder of Series E Preferred who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Company or any transfer agent for the Series E Preferred, and
shall give written notice to the Company at such office that such holder elects
to convert the same. Such notice shall state the number of shares of Series E
Preferred being converted. Such conversion shall be deemed to have been made at
the close of business on the date of such surrender of the certificates
representing the shares of Series E Preferred to be converted, and the person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date.
e. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company shall
at any time or from time to time after the date that the first share of Series E
Preferred is issued (the "Original Issue Date") effect a subdivision of the
outstanding Common Stock without a corresponding subdivision of the Series E
Preferred, the Series E Preferred Conversion Price in effect immediately before
that subdivision shall be proportionately decreased. Conversely, if the Company
shall at any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock into a smaller number of shares without a
corresponding combination of the Series E Preferred, the Series E Preferred
Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 4(e) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
f. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the Original Issue Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, in each such event the Series E Preferred Conversion Price that is then
in effect shall be decreased as of the time of such issuance or, in the event
such record date is fixed, as of the close of business on such record date, by
multiplying the Series E Preferred Conversion Price then in effect by a fraction
(i) the numerator of which is the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of
<PAGE> 4
Common Stock issuable in payment of such dividend or distribution; provided,
however, that if such record date is fixed and such dividend is not fully paid
or if such distribution is not fully made on the date fixed therefor, the Series
E Preferred Conversion Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Series E Preferred Conversion
Price shall be adjusted pursuant to this Section 4(f) to reflect the actual
payment of such dividend or distribution.
g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at
any time or from time to time after the Original Issue Date, the Common Stock
issuable upon the conversion of the Series E Preferred is changed into the same
or a different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3(b) or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 4), in any such event each holder
of Series E Preferred shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series E
Preferred could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
h. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If at
any time or from time to time after the Original Issue Date, there is a capital
reorganization of the Common Stock (other than an Acquisition or Asset Transfer
as defined in Section 3(b) or a recapitalization, subdivision, combination,
reclassification, exchange or substitution of shares provided for elsewhere in
this Section 4), as a part of such capital reorganization, provision shall be
made so that the holders of the Series E Preferred shall thereafter be entitled
to receive upon conversion of the Series E Preferred the number of shares of
stock or other securities or property of the Company to which a holder of the
number of shares of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization, subject to adjustment in respect of
such stock or securities by the terms thereof. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of Series E Preferred after the
capital reorganization to the end that the provisions of this Section 4
(including adjustment of the Series E Preferred Conversion Price then in effect
and the number of shares issuable upon conversion of the Series E Preferred)
shall be applicable after that event and be as nearly equivalent as practicable.
i. CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series E Preferred Conversion Price for the number of shares
of Common Stock or other securities issuable upon conversion of the Series E
Preferred, if the Series E Preferred is then convertible pursuant to this
Section 4, the Company, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of Series E
Preferred at the holder's address as shown in the Company's books. The
certificate shall set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (i) such adjustment or readjustment, (ii) the Series E Preferred
Conversion Price at the time in effect and (iii) the type and amount, if any, of
other property which at the time would be received upon conversion of the Series
E Preferred.
<PAGE> 5
j. NOTICES OF RECORD DATE. Upon (i) any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or (ii) any Acquisition (as defined in Section 3(b)) or other
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company, any merger or consolidation of the Company
with or into any other corporation, or any Asset Transfer (as defined in Section
3(b)), or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to each holder of Series E Preferred at
least ten (10) days prior to the record date specified therein (or such shorter
period approved by a majority of the outstanding Series E Preferred), a notice
specifying (A) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (B) the date on which any such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up is expected to become effective, and (C) the date, if
any, that is to be fixed as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up.
k. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of Series E Preferred, and the number of shares of Common
Stock to be issued shall be rounded down to the nearest whole share. All shares
of Common Stock (including fractions thereof) issuable upon conversion of more
than one share of Series E Preferred by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance of
any fractional share.
l. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of the Series E Preferred, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series E Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series E Preferred, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
m. NOTICES. Any notice required by the provisions of this Section 4
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Company.
5. NO REISSUANCE OF SERIES E PREFERRED. No share or shares of Series E
Preferred acquired by the Company by reason of redemption, purchase, conversion
or otherwise shall be reissued.
<PAGE> 6
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations to be signed by Steven Markman, its President and Chief Executive
Officer, this 17th day of June, 1999.
GENERAL MAGIC, INC.
/s/ Steven Markman
----------------------------------------
Steven Markman
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 4.1
SERIES E PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
THIS SERIES E PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT is made as
of June 18, 1999, by and between GENERAL MAGIC, INC., a Delaware corporation
with its principal office at 420 N. Mary Avenue, Sunnyvale, California 94086
(the "Company"), and EXCITE, INC., a Delaware corporation, with a principal
address at 555 Broadway, Redwood City, California 94306 (the "Purchaser").
AGREEMENT
IN CONSIDERATION of the mutual covenants and agreements contained
herein, and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the Company and the Purchaser agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SECURITIES. Subject to the terms and
conditions of this Agreement, the Company has, or before the Closing (as defined
below) will have, authorized the sale and issuance of (a) up to 599 shares of
its Series E Convertible Preferred Stock (the "Series E Stock") having the terms
set forth in the Certificate of Designations, Preferences and Rights in
substantially the form attached as Exhibit A (the "Certificate of Designations")
and (b) a warrant, in substantially the form attached hereto as Exhibit B (the
"Warrant"), to purchase up to 100 additional shares of the Company's Series E
Stock. The Series E Stock and the Warrant are collectively referred to herein as
the "Securities."
1.2 SALE AND PURCHASE. Subject to the terms and conditions of
this Agreement, and in reliance on the representations and warranties contained
herein, at the Closing the Company agrees to issue and sell to the Purchaser,
and the Purchaser agrees to purchase from the Company for an aggregate purchase
price of $6,000,000: (a) 599 shares of Series E Stock at purchase price of
$10,000 per share, and (b) the Warrant at a purchase price of $10,000. The
shares of Series E Stock issuable upon exercise of the Warrant will be
hereinafter referred to as the "Warrant Shares." The shares of the Company's
Common Stock issuable upon conversion of the shares of Series E Stock purchased
and sold pursuant to this Agreement and the shares of Common Stock issuable upon
conversion of Series E Stock purchasable under the Warrant will be collectively
hereinafter referred to as the "Conversion Shares."
2. CLOSING AND DELIVERY.
2.1 CLOSING. Subject to the terms of Section 5, the closing of
the sale and purchase of the Series E Stock and the Warrant shall be held at
5:00 p.m. on the date hereof (the "Closing Date") at the offices of the Company,
or at such other time and place as the Company and Purchaser may agree.
1.
<PAGE> 2
2.2 DELIVERY. At the Closing, subject to the terms and
conditions hereof, the Company will issue and deliver to Purchaser (a) a stock
certificate, in the names designated by Purchaser, representing the shares of
Series E Stock deliverable at such Closing, dated as of the Closing, and (b) the
Warrant, in each case against payment of the purchase price therefor by wire
transfer, unless other means of payment shall have been agreed upon by Purchaser
and the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Subject to and except
as disclosed by the Company in the Schedule of Exceptions attached hereto as
Exhibit C, the Company hereby represents and warrants and covenants to Purchaser
as follows:
3.1 AUTHORIZATION. All corporate action necessary for the
authorization, execution and delivery of this Agreement has been taken. The
Company has the requisite corporate power to enter into this Agreement and carry
out and perform its obligations under the terms of this Agreement. At the
Closing, the Company will have the requisite corporate power to sell the shares
of Series E Stock and the Warrant to be sold at such Closing. This Agreement has
been duly authorized, executed and delivered by the Company and, upon due
execution and delivery by Purchaser, this Agreement will be a valid and binding
obligation of the Company, except as enforceability (i) may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by equitable principles and (ii) with respect to
Section 6.5 hereof, may be limited by applicable law.
3.2 NO CONFLICT WITH OTHER INSTRUMENTS. The execution,
delivery and performance by the Company of its obligations under this Agreement,
the Certificate of Designations and the Warrant and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the reservation for issuance and issuance of the Conversion Shares
and the Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the By-laws of the
Company; (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment or acceleration or cancellation of, any
material agreement, indenture or instrument to which the Company is a party; or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations of the principal market or exchange on which the Common
Stock is traded or listed) applicable to the Company or by which any property or
asset of the Company is bound or affected. The Company is not in violation of
any term of or in default under (x) its Certificate of Incorporation, any
Certificate of Designations, Preferences and Rights of any outstanding series of
preferred stock or By-laws, or (y) any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company, except for such violations which
have not had and, to the knowledge of the Company, will not have a material
adverse effect on the condition (financial or otherwise), business or results of
operations of the Company (a "Material Adverse Effect"). The business of the
Company is not being conducted in violation of any law, ordinance or regulation
of any governmental entity, except for any violations which individually or in
the aggregate will not have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the Securities Act of 1933,
as amended (the "Securities Act") or any state securities laws, the Company is
not
2.
<PAGE> 3
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement or the Certificate of
Designations in accordance with the terms hereof or thereof. Except as disclosed
in Schedule 3.2, all consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof. The Company complies
with and is not in violation of the listing requirements of the Nasdaq National
Market as in effect on the date hereof and the Closing Date and is not aware of
any facts which would reasonably lead to delisting or suspension of the Common
Stock by the Nasdaq National Market in the foreseeable future. Immediately after
the Closing, the Company shall meet the "net tangible assets" requirement
required under "Maintenance Standard 1" as set forth in Section 4450(1)(a)(3) of
the Marketplace Rule of The Nasdaq National Market.
3.3 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify or be in good
standing would have a Material Adverse Effect.
3.4 CAPITALIZATION.
(a) The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, of which 41,036,769 shares were
issued and outstanding as of June 15, 1999, and 50,000 shares of Series A
Preferred Stock, of which 50,000 shares are outstanding, 12,000 shares of Series
B Preferred Stock, no shares of which are outstanding, 3,000 shares of Series C
Preferred Stock, no shares of which are outstanding, 2,000 shares of Series D
Preferred Stock, of which 2,000 shares are outstanding, and 699 shares of Series
E Preferred Stock, no shares of which are outstanding immediately prior to the
Closing. All such issued and outstanding shares have been duly authorized and
validly issued, and are fully paid and nonassessable and such shares and all
outstanding options, warrants, convertible notes and other securities of the
Company have been issued in compliance with all applicable federal and state
securities laws.
(b) Except as described on Schedule 3.4(b), after
giving effect to the sale of the securities hereunder, there are no preemptive
or other outstanding rights, options, warrants, conversion rights or agreements
for the purchase or acquisition from the Company of any shares of its capital
stock or other securities of the Company. Except as described on Schedule
3.4(b), the Company has not granted or agreed to grant to any person or entity
any rights (including piggyback registration rights) to have any securities of
the Company registered with the United States Securities and Exchange Commission
("SEC") or any other governmental authority.
3.5 SUBSIDIARIES. Except as set forth on Schedule 3.5, the
Company does not presently own or control, directly or indirectly, and has no
stock or other interest as owner or
3.
<PAGE> 4
principal in, any other corporation or partnership, joint venture, association
or other business venture or entity.
3.6 VALID ISSUANCE OF STOCK.
(a) The shares of Series E Stock (the "Purchased
Shares") and the Warrant which will be purchased by Purchaser hereunder, when
issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly authorized and issued,
fully paid and nonassessable, will be delivered to Purchaser free and clear of
all liens, pledges, claims, encumbrances, security interests or other
restrictions, except for restrictions on transfer contemplated herein or imposed
to ensure compliance with the Securities Act, and, based in part upon the
representations of Purchaser in Section 4.3 of this Agreement, will be issued in
compliance with all applicable federal and state securities laws. The shares of
Series E Stock are not subject to preemptive rights or any other similar rights
of the stockholders of the Company.
(b) The Warrant Shares and Conversion Shares have
been duly and validly reserved for issuance, and upon issuance in accordance
with the terms of the Warrant and the Certificate of Designations, respectively,
will be duly and validly issued, fully paid and nonassessable, will be delivered
to Purchaser free and clear of all liens, pledges, claims, encumbrances,
security interests or other restrictions, except for restrictions on transfer
contemplated herein or imposed to ensure compliance with the Securities Act,
and, based in part upon the representations of Purchaser in Section 4.3 of this
Agreement, will be issued in compliance with all applicable federal and state
securities laws.
(c) The shares of Series E Stock and the Conversion
Shares are not subject to preemptive rights, rights of first refusal or any
other similar rights of the stockholders of the Company.
(d) Except as set forth on Schedule 3.6(d), the
issuance of the Securities will not require the Company to issue any additional
capital stock of the Company pursuant to any anti-dilution provision or
otherwise.
3.7 LITIGATION, ETC. There is no action, suit or proceeding
pending nor, to its knowledge, any action, suit, proceeding or investigation
currently threatened against the Company, nor, to its knowledge, is there any
basis therefor, which could have a Material Adverse Effect. The foregoing
includes, without limitation, any action, suit, proceeding or investigation,
pending or threatened, that questions the validity of this Agreement or the
right of the Company to enter into the Agreement.
3.8 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for notices required or
permitted to be filed with certain state and federal securities commissions,
which notices will be filed on a timely basis.
4.
<PAGE> 5
3.9 NO MATERIAL CHANGE. Since March 31, 1999, there has been
no material adverse change in the financial condition, business or results of
operations of the Company.
3.10 PROPRIETARY RIGHTS AND INFORMATION AGREEMENT. Each former
and current employee, officer, consultant and contractor of the Company has
entered into and executed a Proprietary Rights and Information Agreement in the
form attached to this Agreement as Exhibit D or an employment or consulting
agreement containing substantially similar terms.
3.11 INTELLECTUAL PROPERTY. The Company owns or possesses
adequate rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct its business as now conducted. Except as set forth
on Schedule 3.11, none of the Company's trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets or
other intellectual property rights have expired or terminated, or are expected
to expire or terminate within two (2) years from the date of this Agreement,
where the result of such expiration or termination would have, individually or
in the aggregate, a Material Adverse Effect. The Company does not have any
knowledge of any infringement by the Company of trademarks, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service mark registrations, trade secret or other similar rights of
others, or of any such development of similar or identical trade secret or
technical information by others which infringement could have a Material Adverse
Effect, and, except as set forth on Schedule 3.11, there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company regarding trademarks, trade name rights,
patents, patent rights, inventions, copyrights, licenses, service names, service
marks, service mark registrations, trade secrets or other infringement. The
Company have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of its intellectual properties.
3.12 COMPLIANCE. The Company has not been advised, and has no
reason to believe, that it is not conducting its business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, including, without limitation, all applicable local, state
and federal environmental laws and regulations; except where failure to be so in
compliance would not have a Material Adverse Effect.
3.13 SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has
filed in a timely manner all documents that it was required to file with the SEC
under Sections 13, 14(a) and 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), during the twelve (12) months preceding the date
of this Agreement. As of their respective filing dates (or, if amended prior to
the date of this Agreement, when amended), all documents filed by the Company
with the SEC (the "SEC Documents") complied in all material respects with the
requirements of the Exchange Act. None of the SEC Documents as of their
respective dates contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents (the "Financial Statements") comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC
5.
<PAGE> 6
with respect thereto. The Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
present the financial position of the Company at the dates thereof and the
results of its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal, recurring adjustments).
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby represents and warrants to the Company as follows:
4.1 LEGAL POWER. Purchaser has the requisite legal power to
enter into this Agreement, to carry out and perform its obligations under the
terms of this Agreement and, at the Closing, will have the requisite legal power
to purchase the Securities.
4.2 DUE EXECUTION. This Agreement has been duly authorized,
executed and delivered by Purchaser, and, upon due execution and delivery by the
Company, this Agreement will be a valid and binding obligation of Purchaser,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by equitable principles.
4.3 INVESTMENT REPRESENTATIONS. In connection with the
purchase of the Securities, the Purchaser makes the following representations:
(a) the Purchaser, taking into account the personnel
and resources it can practically bring to bear on the purchase of the Securities
contemplated hereby, is knowledgeable, sophisticated and experienced in making,
and is qualified to make, decisions with respect to investments in shares
representing an investment decision like that involved in the purchase of the
Securities, including investments in securities issued by the Company, and has
requested, received, reviewed and considered all information it deems relevant
in making an informed decision to purchase the Securities;
(b) the Purchaser is acquiring the Securities in the
ordinary course of its business and for its own account for investment only (as
defined for purposes of the Hart-Scott-Rodino Antitrust Improvement Act of 1976
and the regulations thereunder) and with no present intention of distributing
any such Securities or any arrangements or understanding with any other persons
regarding the distribution of such Securities;
(c) the Purchaser will not, directly or indirectly,
offer, sell, pledge, transfer, or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Securities or
capital stock of the Company issuable upon exercise or conversion thereof except
in compliance with the Securities Act of 1933, as amended, (the "Act") and the
rules and regulations of the Securities and Exchange Commission (the "SEC");
(d) the Purchaser has completed or caused to be
completed the Stock Certificate Questionnaire, attached hereto as Appendix I,
and the answers thereto are true and correct to the best knowledge of the
Purchaser as of the date hereof;
6.
<PAGE> 7
(e) the Purchaser has not, in connection with its
decision to purchase the Securities, relied upon representations and warranties
of the Company other than those contained herein;
(f) the Purchaser is an "accredited investor" within
the meaning of Rule 501 of Regulation D promulgated under the Act;
(g) the Purchaser understands that (i) the Securities
have not been registered under the Act by reason of a specific exemption
therefrom, that such Securities must be held by Purchaser, and that Purchaser
must, therefore, bear the economic risk of such investment, until a subsequent
disposition thereof is registered under the Act or is exempt from such
registration; (ii) the Securities will be endorsed with the following legends:
(1) 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 STATE. 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. THE ISSUER OF THESE SECURITIES
MAY REQUIRE AN OPINION OF 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.
(2) Any legend required to be placed thereon
by the Company's Bylaws or under applicable state securities laws; and
(iii) the Company will instruct any transfer agent not to register the transfer
of the shares of Securities purchased pursuant to this Agreement (or any portion
thereof) unless the conditions specified in the foregoing legends are satisfied,
until such time as a transfer is made, pursuant to the terms of this Agreement,
and in compliance with Rule 144 or pursuant to a registration statement or, if
the opinion of counsel referred to above is to the further effect that such
legend is not required in order to establish compliance with any provisions of
the Act or this Agreement; and
(h) the Purchaser has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Securities purchased hereunder.
4.4 NO BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based on arrangements made
by Purchaser.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO OBLIGATIONS OF PURCHASER AT CLOSING.
Purchaser's obligation to purchase the Series E Stock and Warrant at the Closing
is subject to the fulfillment
7.
<PAGE> 8
to Purchaser's satisfaction, on or prior to the Closing, of all of the following
conditions, any of which may be waived by Purchaser:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE
OF OBLIGATIONS. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material respects on the
Closing Date with the same force and effect as if they had been made on and as
of said date, and the Company shall have performed and complied with all
obligations and conditions herein required to be performed or complied with by
it on or prior to the Closing.
(b) PROCEEDINGS AND DOCUMENTS. All corporate and
other proceedings in connection with the transactions contemplated at the
Closing and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to counsel to the Purchaser, and
counsel to the Purchaser shall have received all such counterpart executed
originals or certified or other copies of such documents as they may reasonably
request, including, but not limited to, the Warrant.
(c) CERTIFICATE OF DESIGNATIONS. The Certificate of
Designations shall have been filed with the
Delaware Secretary of State.
(d) QUALIFICATIONS, LEGAL INVESTMENT. All
authorizations, approvals, or permits, if any, of any governmental authority or
regulatory body of the United States or of any state that are required in
connection with the lawful sale and issuance of the Securities shall have been
duly obtained and shall be effective on and as of the Closing. No stop order or
other order enjoining the sale of such Securities shall have been issued and no
proceedings for such purpose shall be pending or, to the knowledge of the
Company, threatened by the Securities and Exchange Commission, or any
commissioner of corporations or similar officer of any state having jurisdiction
over this transaction. At the time of the Closing, the sale and issuance of the
Securities shall be legally permitted by all laws and regulations to which the
Purchaser and the Company are subject.
(e) OPINION OF COMPANY COUNSEL. Purchaser shall have
received an opinion from Cooley Godward LLP, counsel for the Company, dated as
of the date of the Closing, in the form attached hereto as Exhibit E.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AT CLOSING. The
Company's obligation to issue and sell the Securities to be sold at the Closing
is subject to the fulfillment to the Company's satisfaction, on or prior to the
Closing of the following conditions, any of which may be waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by the Purchaser in Section 4 hereof shall
be true and correct in all material respects at the date of the Closing with the
same force and effect as if they had been made on and as of the date hereof.
8.
<PAGE> 9
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by it on or before the Closing.
(c) CERTIFICATE OF DESIGNATIONS. The Certificate of
Designations shall have been filed with the Delaware Secretary of State.
(d) QUALIFICATIONS, LEGAL INVESTMENT. All
authorizations, approvals, or permits, if any, of any governmental authority or
regulatory body of the United States or of any state that are required in
connection with the lawful sale and issuance of the Securities shall have been
duly obtained and shall be effective on and as of the Closing. No stop order or
other order enjoining the sale of such Securities shall have been issued and no
proceedings for such purpose shall be pending or, to the knowledge of the
Company, threatened by the SEC, or any commissioner of corporations or similar
officer of any state having jurisdiction over this transaction. At the time of
the Closing the sale and issuance of the Securities shall be legally permitted
by all laws and regulations to which the Purchaser and the Company are subject.
6. REGISTRATION OF THE SHARES.
6.1 REGISTRATION STATEMENT ON FORM S-3. Within 30 days of the
Closing, the Company will prepare and file with the SEC a registration statement
on Form S-3 (or such other form that the Company may be eligible to use)
relating to the sale of the Common Stock issuable upon conversion of the Series
E Stock (the "Shares") by Purchaser from time to time (the "Registration
Statement"), and use its best efforts, subject to receipt of necessary
information from Purchaser, to cause such Registration Statement to be declared
effective by the SEC as soon as practicable after the SEC has completed its
review process. The Company agrees to use its best efforts to keep such
Registration Statement effective until the date on which the Shares may be
resold by Purchaser without registration by reason of Rule 144(k) under the Act
of 1933 or any other rule of similar effect. The Company shall file all reports
required to be filed by the Company with the Securities and Exchange Commission
(the "SEC") in a timely manner and take all other necessary action so as to
maintain such eligibility for the use of Form S-3 (or its successor or
equivalent). Notwithstanding the foregoing, following the effectiveness of the
Registration Statement, the Company may, at any time, suspend the effectiveness
of the Registration Statement (a "Suspension Period"), by giving written notice
to the Purchaser, if the Company shall have determined that the Company may be
required to disclose any material corporate development. Purchaser agrees that,
upon receipt of any notice from the Company of a Suspension Period, Purchaser
will not sell any Shares pursuant to the Registration Statement until (i)
Purchaser is advised in writing by the Company that the use of the applicable
prospectus may be resumed, (ii) Purchaser has received copies of any additional
or supplemental or amended prospectus, if applicable, and (iii) Purchaser has
received copies of any additional or supplemental filings which are incorporated
or deemed to be incorporated by reference in such prospectus. The Company will
use its best efforts to ensure that the use of the Registration Statement may be
resumed as soon as practicable and, in the case of a material corporate
development in which consummation of a transaction is concerned, as soon, in
judgment of the Company, as disclosure of the material information relating to
such corporate development would not have a material adverse effect on the
Company's ability to consummate the
9.
<PAGE> 10
transaction, to which such transaction relates. Purchaser further covenants to
notify the Company promptly of the sale of all of its Shares.
6.2 DELIVERY OF PROSPECTUS. The Company shall furnish to
Purchaser promptly after the Registration Statement is prepared and publicly
distributed, filed with the SEC, or received by the Company, one copy of the
Registration Statement and any amendment thereto, each preliminary prospectus
and prospectus and each amendment or supplement thereto. The Company shall
furnish to Purchaser such number of copies of prospectuses and preliminary
prospectuses in conformity with the requirements of the Securities Act, in order
to facilitate the public sale or other disposition of all or any of the Shares
by Purchaser; provided, however, that the obligation of the Company to deliver
copies of prospectuses or preliminary prospectuses to the Purchaser shall be
subject to the receipt by the Company of reasonable assurances from the
Purchaser that the Purchaser will comply with the applicable provisions of the
Securities Act and of such other securities or blue sky laws as may be
applicable in connection with any use of such prospectuses or preliminary
prospectuses. The Company shall bear all expenses incurred by the Company in
connection with the registration of the Shares pursuant to the Registration
Statement (but excluding underwriters' and brokers' discounts and commissions),
and the reasonable fees and disbursements (not to exceed $10,000 in the
aggregate) of a single special counsel for the Purchaser.
6.3 INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 6.1 that
Purchaser shall complete and deliver the Registration Statement Questionnaire
attached hereto as Appendix II and to further provide information regarding the
intended method of disposition of the Shares and such other information as the
Company may reasonably request to timely effect the registration of the Shares.
6.4 LOCK-UP. Notwithstanding anything else to the contrary,
Purchaser agrees that Purchaser shall not sell or otherwise transfer or dispose
of any Shares covered by the Registration Statement, except in the following
manner:
(a) 50% of the Shares shall be released from the
restrictions of this Section 6.4 six (6) months after the Closing Date;
(b) an additional 25% of the Shares shall be released
from the restrictions of this Section 6.4 nine (9) months after the Closing
Date; and
(c) the remaining 25% of the Shares shall be released
from the restrictions of this Section 6.4 twelve (12) months after the Closing
Date.
6.5 INDEMNIFICATION. For the purpose of this Section 6.5, the
term "Registration Statement" shall include any final prospectus, exhibit,
supplement or amendment included in or relating to the Registration Statement
referred to in Section 6.1.
(a) The Company agrees to indemnify and hold harmless
Purchaser, each of its directors and officers, any underwriters (as defined in
the Securities Act) for the Purchaser and each person, if any, who controls
Purchaser within the meaning of the Securities Act, against any losses, claims,
damages, liabilities or expenses to which Purchaser or such
10.
<PAGE> 11
officer or director, underwriter or controlling person may become subject, under
the Securities Act, the Exchange Act, or any other federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, including the prospectus, financial
statements and schedules, and all other documents filed as a part thereof or
incorporated by reference therein, as amended at the time of effectiveness of
the Registration Statement, including any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A,
or pursuant to Rule 434, of the Rules and Regulations, or the prospectus, in the
form first filed with the Commission pursuant to Rule 424(b) of the Regulations,
or filed as part of the Registration Statement at the time of effectiveness if
no Rule 424(b) filing is required (the "Prospectus"), or any amendment or
supplement thereto, (ii) the omission or alleged omission to state in any of
them a material fact required to be stated therein or necessary to make the
statements in any of them not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act or any federal
or state securities law in connection with the offering covered by such
registration statement (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"), and will reimburse Purchaser and each such
officer or director, underwriter or controlling person for any legal and other
expenses as such expenses are reasonably incurred by Purchaser or such
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage, liability or expense arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in the Registration Statement, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company (i) by or on behalf of Purchaser expressly
for use therein or (ii) the failure of Purchaser to comply with the covenants
and agreements contained in this Agreement respecting the sale of the Shares,
the inaccuracy of any representations made by Purchaser herein or any statement
or omission in any Prospectus that is corrected in any subsequent Prospectus
that was delivered to Purchaser prior to the pertinent sale or sales by
Purchaser.
(b) Purchaser will indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act, against any losses, claims, damages, liabilities or
expenses to which the Company, each of its directors, each of its officers who
signed the Registration Statement or controlling person may become subject,
under the Securities Act, the Exchange Act, or any other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of Purchaser) insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or
are based upon any Violation, in each case to the extent, but only to the
extent, that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any Purchaser
expressly for use therein, and will reimburse the Company, each of its
directors, each of its officers who signed the Registration Statement or
controlling person for any legal and other expense reasonably incurred by the
Company, each of its directors, each of its officers who
11.
<PAGE> 12
signed the Registration Statement or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action.
(c) Promptly after receipt by an indemnified party
under this Section 6.5 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 6.5, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party for contribution or otherwise than under the indemnity
agreement contained in this Section 6.5 or to the extent it is not prejudiced as
a proximate result of such failure. In case any such action is brought against
any indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party; provided, however, if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be a conflict between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 6.5 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, approved by such
indemnifying party in the case of paragraph (a), representing the indemnified
parties who are parties to such action) or (ii) the indemnified party shall not
have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of action, in each of which cases the fees and expenses of counsel
shall be at the expense of the indemnifying party.
(d) The foregoing indemnity agreements of the Company
and Purchaser are subject to the condition that, insofar as they relate to the
bases for any losses, claims, damages, liabilities or expenses contemplated in
Section 6.5(a) arising out of the preparation and filing of the preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
SEC at the time the registration statement in question becomes effective or the
amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was furnished to the indemnified party
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
12.
<PAGE> 13
(e) If the indemnification provided for in this
Section 6.5 is required by its terms but is for any reason held to be
unavailable to or otherwise insufficient to hold harmless an indemnified party
under paragraphs (a), (b) or (c) of this Section 6.5 in respect to any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein in such proportion as is appropriate to reflect
the relative fault of the Company and Purchaser in connection with the
statements or omissions or inaccuracies in the representations and warranties in
this Agreement which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of the Company and Purchaser shall be determined by reference to, among
other things, whether the untrue or alleged statement of a material fact or the
omission or alleged omission to state a material fact or the inaccurate or the
alleged inaccurate representation and/or warranty relates to information
supplied by the Company or by Purchaser and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in paragraph (c) of this
Section 6.5 any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim. The
provisions set forth in paragraph (c) of this Section 6.5 with respect to notice
of commencement of any action shall apply if a claim for contribution is to be
made under this paragraph (d); provided, however, that no additional notice
shall be required with respect to any action for which notice has been give
under paragraph (c) for purposes of indemnification. The Company and Purchaser
agree that it would not be just and equitable if contribution pursuant to this
Section 6.5 were determined solely by pro rata allocation (even if Purchaser
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this paragraph. Notwithstanding the provisions of this Section 6.5, the
Purchaser shall not be required to contribute any amount in excess of the amount
by which the amount paid by Purchaser paid for the Shares that were sold
pursuant to the Registration Statement and the amount received by Purchaser from
such sale exceeds the amount of any damages that Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
7. MISCELLANEOUS.
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
each Purchaser herein and in the certificates for the securities delivered
pursuant hereto shall survive the execution of this Agreement, the delivery to
the Purchaser of the Securities being purchased and the payment therefor and
shall expire on the first anniversary of the date hereof.
7.2 GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the substantive laws of the State of California
and the United States of America, without regard to choice of law rules.
13.
<PAGE> 14
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, and permitted assigns of the parties hereto.
7.4 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto,
and the other documents delivered pursuant hereto, constitutes the full and
entire understanding and agreement among the parties with regard to the subjects
hereof and no party shall be liable or bound to any other party in any manner by
any representations, warranties, covenants, or agreements except as specifically
set forth herein or therein. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto and their
respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
7.5 SEVERABILITY. Whenever possible, each provision of the
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of the Agreement. In the event of such invalidity, the parties shall seek to
agree on an alternative enforceable provision that preserves the original
purpose of this Agreement.
7.6 AMENDMENT AND WAIVER. Except as otherwise provided herein,
any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely), with the written consent of the Company and Purchaser.
7.7 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
and received (a) upon personal delivery, (b) on the fifth day following mailing
by registered or certified mail, return receipt requested, postage prepaid,
addressed to the Company and Purchaser at their respective addresses first above
written, (c) upon transmission of telegram or facsimile (with telephonic
notice), or (d) upon confirmed delivery by overnight commercial courier service.
7.8 FEES AND EXPENSES. The Company and the Purchaser shall
bear their own expenses and legal fees incurred on their behalf with respect to
this Agreement and the transactions contemplated hereby.
7.9 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
7.10 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one instrument.
14.
<PAGE> 15
7.11 NASDAQ. The Company will promptly file a Notification of
Listing of Additional Shares with Nasdaq covering the Securities. The Company
agrees to take all action reasonable and necessary to maintain the listing of
its Common Stock on Nasdaq.
7.12 FURTHER ASSURANCES. From and after the date of this
Agreement, upon the request of any Purchaser or the Company, the Company and the
Purchaser shall execute and deliver such instruments, documents or other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
15.
<PAGE> 16
IN WITNESS WHEREOF, the foregoing Stock Purchase Agreement is hereby
executed as of the date first above written.
COMPANY:
GENERAL MAGIC, INC.
By: /s/ Steven Markman
-----------------------
Name: Steven Markman
-----------------------
Title: CEO
-----------------------
PURCHASER:
EXCITE, INC.
By: /s/ Mark C. Stevens
-----------------------
Name: Mark C. Stevens
-----------------------
Title: EVP
-----------------------
<PAGE> 17
APPENDIX II
GENERAL MAGIC, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement,
please provide us with the following information:
1. Pursuant to the "Selling Shareholder" section of the Registration Statement,
please state your or your organization's name exactly as it should appear in the
Registration Statement:
2. Please provide the number of shares of capital stock of the Company that you
or your organization will own as of ___________, including those shares
purchased by you or your organization pursuant to the Series E Preferred Stock
and Warrant Purchase Agreement, shares issuable upon exercise of the Warrant and
those shares purchased by you or your organization through other transactions:
3. Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates
other than as disclosed in the Prospectus included in the Registration
Statement?
__________ Yes __________ No
If yes, please indicate the nature of any such relationships below:
_______________________________________________________________________
_______________________________________________________________________
<PAGE> 18
APPENDIX I
GENERAL MAGIC, INC.
STOCK CERTIFICATE QUESTIONNAIRE
In connection with the Agreement, please provide us with the following
information:
1. The exact name that your shares ___________________________________
of Series E Stock are to be
registered in (this is the name
that will appear on your stock
certificate(s)). You may use a
nominee name if appropriate:
2. The relationship between the
Purchaser of the Series E Stock ___________________________________
and the Registered Holder
listed in response to item 1
above:
3. The mailing address of the
Registered Holder listed in ___________________________________
response to item 1 above: ___________________________________
___________________________________
___________________________________
4. The Social Security Number or
Tax Identification Number of ___________________________________
the Registered Holder listed in
response to item 1 above:
<PAGE> 19
SERIES E PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
BETWEEN
GENERAL MAGIC, INC.
AND
EXCITE, INC.
DATED JUNE 18, 1999
<PAGE> 1
EXHIBIT 4.2
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 STATE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF 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.
GENERAL MAGIC, INC.
WARRANT FOR THE PURCHASE OF SHARES OF SERIES E CONVERTIBLE PREFERRED STOCK
No. 01 up to 100 shares
FOR VALUE RECEIVED, GENERAL MAGIC, INC., a Delaware corporation (the "Company"),
with its principal office at 420 N. Mary Avenue, Sunnyvale, California 94086,
hereby certifies that EXCITE, INC. (the "Holder") is entitled, subject to the
provisions of this Warrant, to purchase from the Company, at any time before
5:00 p.m. (Pacific Time) on the date fifteen (15) months from the date hereof
(the "Expiration Date"), up to One Hundred (100) fully paid and nonassessable
shares of Series E Convertible Preferred Stock of the Company (the "Series E
Stock"), at an exercise price per share equal to Ten Thousand Dollars ($10,000)
(the "Exercise Price").
The number of shares of Series E Stock to be received upon the exercise
of this Warrant and the price to be paid for a share of Series E Stock are
subject to adjustment from time to time as hereinafter set forth. The shares of
Series E Stock deliverable upon such exercise, as adjusted from time to time,
together with the shares of common stock of the Company ("Common Stock")
issuable upon either (i) net issue exercise of this Warrant pursuant to Section
1(b) (the "Net Exercise Stock") or (ii) conversion of the Series E Stock
deliverable upon exercise of the Warrant, are hereinafter sometimes referred to
as "Warrant Shares."
SECTION 1. EXERCISE OF WARRANT; NET ISSUE EXERCISE.
(a) GENERAL. This Warrant may be exercised in whole or in part on any
business day prior to the Expiration Date by presentation and surrender to the
Company at its principal office at the address set forth in the initial
paragraph hereof (or at such other address as the Company may hereafter notify
the Holder in writing) with the Purchase Form annexed hereto duly executed and
accompanied by proper payment of the Exercise Price in lawful money of the
<PAGE> 2
United States of America in the form of a check, wire transfer of funds, notice
of election of net issue as provided in Section 1(b) below, or cancellation of
indebtedness of the Company to the Holder, subject to collection, for the number
of shares of Series E Stock specified in the Purchase Form. If this Warrant
should be exercised in part only, the Company shall, upon surrender of this
Warrant, execute and deliver a new Warrant evidencing the rights of the Holder
thereof to purchase the balance of the shares of Series E Stock purchasable
hereunder. Upon receipt by the Company of this Warrant and such Purchase Form,
together with proper payment of the Exercise Price, at such office, the Holder
shall be deemed to be the holder of record of such number of shares of Series E
Stock or Net Exercise Stock, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such Warrant
Shares shall not then be actually delivered to the Holder.
(b) NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of the share(s) of Common Stock into which a
share of Series E Stock is convertible is greater than the Exercise Price (at
the date of exercise), in lieu of exercising this Warrant for cash, the Holder
may elect to receive Common Stock into which the Series E Stock is convertible
equal to the value (as determined below) of this Warrant (or the portion thereof
being canceled) by surrender of this Warrant at the principal office of the
Company together with the properly endorsed Purchase Form and notice of such
election in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where
X = the number of shares of Common Stock to be issued
to the Holder
Y = the number of shares of Common Stock or other
capital stock into which the Series E Stock purchasable under the Warrant is
convertible (at the date of exercise) or, if only a portion of the Warrant is
being exercised, the portion of the Warrant being canceled (at the date of
exercise)
A = the fair market value of the share(s) of
Company's Common Stock into which one share of Series E Stock is convertible (at
the date of exercise)
B = Exercise Price (as adjusted to the date of
exercise)
For purposes of the above calculation, current fair market value of Common Stock
shall mean with respect to each share of Common Stock:
(i) if traded on a national securities exchange or the Nasdaq
National Market (or similar national quotation system), the
fair market value shall be deemed to be the closing price
(last reported sale) on the day the current fair market value
of the securities is being determined;
2
<PAGE> 3
(ii) if traded over-the-counter, the fair market value shall
be deemed to be the closing bid price quoted on the day the
current fair market value of the securities is being
determined; or
(iii) if at any time the Common Stock is not traded as
described in (i) or (ii) above, the current fair market value
shall be the highest price per share which the Company could
obtain from a willing buyer (not a current employee or
director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by
its Board of Directors, unless the Company shall become
subject to a merger, acquisition or other consolidation
pursuant to which the Company is not the surviving party, in
which case the fair market value shall be deemed to be the
value received by the holders of the Company's Common Stock on
a common equivalent basis pursuant to such merger or
acquisition.
SECTION 2. ISSUANCE OF NEW WARRANT.In the event of any exercise of the
rights represented by this Warrant, certificates for the Series E Stock or Net
Exercise Stock so purchased shall be delivered to the holder hereof as soon as
practicable (but not later than ten (10) business days after exercise) and,
unless this Warrant has been fully exercised or has expired, a new Warrant
representing the portion of the Series E Stock, if any, with respect to which
this Warrant shall not then have been exercised shall also be issued to the
holder hereof within a reasonable time (but not later than ten (10) business
days after exercise). Such exercise shall be deemed to have been made
immediately prior to the close of business on the date of surrender of this
Warrant.
SECTION 3. RESERVATION OF SHARES. The Company hereby agrees that at all
times there shall be reserved for issuance and delivery upon exercise of this
Warrant all shares of its Series E Stock or other shares of capital stock of the
Company from time to time issuable upon exercise of this Warrant. All such
shares shall be duly authorized and, when issued upon such exercise in
accordance with the terms of this Warrant, shall be validly issued, fully paid
and nonassessable.
SECTION 4. FRACTIONAL INTEREST. The Company will not issue a fractional
share of Series E Stock or Common Stock upon exercise of this Warrant. Instead,
the Company will deliver its check for the current fair market value of the
fractional share, as determined in good faith by the Board of Directors of the
Company.
SECTION 5. REPLACEMENT OF WARRANT. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of indemnification
satisfactory to the Company, and upon surrender and cancellation of this
Warrant, if mutilated, the Company shall execute and deliver a new Warrant of
like tenor and date.
SECTION 6. RIGHTS OF THE HOLDER. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed in this
Warrant. Nothing contained in this Warrant
3
<PAGE> 4
shall be construed as conferring upon the Holder hereof the right to vote or to
consent or to receive notice as a stockholder of the Company on any matters or
with respect to any rights whatsoever as a stockholder of the Company. No
dividends or interest shall be payable or accrued in respect of this Warrant or
the interest represented hereby or the Series E Stock purchasable hereunder
until, and only to the extent that, this Warrant shall have been exercised in
accordance with its terms.
SECTION 7. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The
number and kind of securities purchasable upon the exercise of the Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) RECLASSIFICATION OF OUTSTANDING SECURITIES. In case of any
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), the Company shall execute a new Warrant (in form and substance
reasonably satisfactory to the Holder of this Warrant) providing that the Holder
of this Warrant shall have the right to exercise such new Warrant and upon such
exercise to receive, in lieu of each share of Series E Stock theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification or
change by a holder of one share of Series E Stock. Such new Warrant shall
provide for adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 7. The provisions of this
subsection (a) shall similarly apply to successive reclassification or changes.
(b) SUBDIVISIONS OR COMBINATION OF SHARES. If the Company at
any time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Series E Stock, the Exercise Price and the number of Series E Stock
issuable upon exercise hereof shall be proportionately adjusted.
(c) STOCK DIVIDENDS. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend payable in shares of
Series E Stock (except any distribution specifically provided for in the
foregoing subsections (a) and (b)), then the Exercise Price shall be adjusted,
from and after the date of determination of stockholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such date of determination by a
fraction (a) the numerator of which shall be the total number of shares of
Series E Stock outstanding immediately prior to such dividend or distribution,
and (b) the denominator of which shall be the total number of shares of Series E
Stock outstanding immediately after such dividend or distribution and the number
of Series E Stock subject to this Warrant shall be proportionately adjusted.
(d) NOTICE OF RECORD DATE. In the event of any taking by the
Company of a record of its stockholders for the purpose of determining
stockholders who are entitled to receive payment of any dividend (other than a
cash dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining stockholders who
are entitled to vote in connection with any proposed merger or consolidation of
the Company with or into any other
4
<PAGE> 5
corporation, or any proposed sale, lease or conveyance of all or substantially
all of the assets of the Company, or any proposed liquidation, dissolution or
winding up of the Company, the Company shall mail to the Holder of this Warrant,
at least ten (10) days prior to the date specified therein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right.
(e) NO ADJUSTMENT UPON EXERCISE OF WARRANTS. No adjustments
shall be made under any Section herein in connection with the issuance of the
Series E Stock subsequent to exercise of the Warrant.
SECTION 8. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section 7, the Company shall deliver
an officer's certificate showing the adjusted Exercise Price determined as
herein provided, setting forth in reasonable detail the facts requiring such
adjustment and the manner of computing such adjustment. Each such officer's
certificate shall be signed by the chairman, chief executive officer, president
or chief financial officer of the Company.
SECTION 9. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of the Company with another entity, or the proposed sale
of all or substantially all of its assets to another person or entity, lawful
and adequate provision shall be made whereby the Holder of this Warrant shall
thereafter have the right to receive upon the basis and upon substantially the
terms and conditions specified herein, in lieu of the shares of the Series E
Stock of the Company immediately theretofore purchasable hereunder, such shares
of stock, securities or assets as may (by virtue of such consolidation, merger
or sale) be issued or payable with respect to or in exchange for the number of
shares of such Series E Stock purchasable hereunder immediately before such
consolidation, merger, or sale. In any case appropriate provision shall be made
with respect to the rights and interests of the Holder of this Warrant to the
end that the provisions hereof shall thereafter be applicable as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of this Warrant.
SECTION 10. TRANSFER RESTRICTIONS; REPRESENTATIONS OF HOLDER.
(a) This Warrant is transferable to the Holder's affiliates, without
the written consent of the Company, and to other persons, with the consent of
the Company; provided, however, that any transfer or assignment shall be subject
to the conditions set forth in Section 10(b), and such transferee shall confirm
in writing the representations set forth in Section 10(b) and shall agree to be
bound by the terms of this Warrant.
(b) This Warrant may not be exercised and neither this Warrant nor any
of the Warrant Shares, nor any interest in either, may be sold, assigned,
pledged, hypothecated, encumbered or in any other manner transferred or disposed
of, in whole or in part, except in compliance with applicable United States
federal and state securities or Blue Sky laws and the terms and conditions
hereof. Each Warrant shall bear a legend in substantially the same form as the
legend set forth on the first page of this Warrant. Each certificate for Warrant
Shares issued upon exercise of this Warrant shall bear a legend substantially in
the following form:
5
<PAGE> 6
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 STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE
ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
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.
Any certificate for any Warrant Shares issued at any time in exchange or
substitution for any certificate for any Warrant Shares bearing such legend
shall also bear such legend unless, in the opinion of counsel for the Company,
the Warrant Shares represented thereby need no longer be subject to the
restrictions contained herein. The provisions of this Section 10 shall be
binding upon all subsequent Holders of certificates for Warrant Shares bearing
the above legend and all subsequent Holders of this Warrant, if any. In
addition, in connection with the issuance of this Warrant, the Holder
specifically represents to the Company by acceptance of this Warrant as follows:
(a) The Holder is aware of the Company's business affairs and
financial condition, and has acquired information about the Company sufficient
to reach an informed and knowledgeable decision to acquire this Warrant. The
Holder is acquiring this Warrant (and the underlying Warrant Shares) for its own
account for investment purposes only and not with a view to, or for the resale
in connection with, any "distribution" thereof in violation of the Securities
Act of 1933, as amended (the "Act").
(b) The Holder understands that neither this Warrant nor the
Warrant Shares have been registered under the Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of the Holder's investment intent as expressed herein.
(c) The Holder further understands that this Warrant (and the
Warrant Shares) must be held indefinitely unless subsequently registered under
the Act and qualified under any applicable state securities laws, or unless
exemptions from registration and qualification are otherwise available.
Moreover, the Holder understands that the Company is under no obligation to
register and qualify this Warrant.
(d) The Holder is aware of the provisions of Rule 144
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: the
6
<PAGE> 7
availability of certain public information about the Company, the resale
occurring not less than one year after the party has purchased and paid for the
securities to be sold; and the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended).
(e) The Holder further understands that at the time Holder
wishes to sell the Warrant Shares there may be no public market upon which to
make such a sale, and that, except as set forth in the Series E Preferred Stock
and Warrant Purchase Agreement dated June 18, 1999 (the "Purchase Agreement")
the Company is under no obligation to register the Warrant Shares.
(f) The Holder further understands that in the event all of
the requirements of Rule 144 are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
staff of the Securities and Exchange Commission has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own risk.
SECTION 12. GOVERNING LAW. This Warrant is delivered in the State of
California and shall be construed in accordance with and governed by the laws of
that State, without regard to its conflicts of laws principles.
SECTION 13. MODIFICATION AND WAIVER. Neither this Warrant nor any term
hereof may be amended, waived, discharged or terminated other than by an
instrument in writing signed by the Company and by the Holder hereof.
SECTION 14. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified mail, confirmed facsimile or personal
delivery, to the Holder at the Holder's address as shown on the books of the
Company or to the Company at the address indicated therefor in the first
paragraph of this Warrant or such other address as the Company shall have
notified Holder.
SECTION 15. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant.
SECTION 16. ENTIRE AGREEMENT. This Warrant, together with the Purchase
Agreement and the documents delivered pursuant thereto, constitutes the entire
agreement between the parties pertaining to the subject matter herein and
supersedes all prior and contemporaneous agreements, representations and
undertakings of the parties.
7
<PAGE> 8
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be
signed by its duly authorized officer and to be dated as of June 18, 1999.
GENERAL MAGIC, INC.
By:________________________________
Name:______________________________
Title:_____________________________
8
<PAGE> 9
PURCHASE FORM
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _________________ (_________)(1) shares of Series E
Preferred Stock of GENERAL MAGIC, INC. and herewith [makes payment of
_________________________________ Dollars ($________) therefor] [elects a Net
Issue Exercise pursuant to the provision of Section 1 of the within Warrant for
_________ shares of Common Stock (as calculated in accordance with the terms
therewith)], and requests that the certificates for such shares be issued in the
name of, and delivered to, __________________________________________, whose
address is_____________________________________________________________________.
The undersigned represents that it is acquiring such shares for its own
account for investment and not with a view to or for sale in connection with any
distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within its control).
Dated: _______________
(Signature must conform in all
respects to name of Holder)
By:_____________________________________
Title:__________________________________
- --------
(1) Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the Warrant
is being exercise), in either case without making any adjustment for additional
Warrant Shares or any other stock or the adjustment provisions of the Warrant,
which may be deliverable upon exercise.
<PAGE> 1
Exhibit 5.1
[Cooley Godward LLP Letterhead]
July 16, 1999
General Magic, Inc.
420 North Mary Avenue
Sunnyvale, CA 94086
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by GENERAL MAGIC, Inc. (the "Company") of a Form S-3
Registration Statement (the "Registration Statement"), including a related
prospectus filed with the Registration Statement (the "Prospectus"), covering
the registration of an aggregate of 1,839,474 shares of the Company's Common
Stock, $.001 par value, of which (i) 1,576,316 (the "Shares") are issuable upon
conversion of the Company's outstanding Series E Convertible Preferred Stock
(the "Series E Preferred") and (ii) 263,158 (the "Warrant Shares") are issuable
upon the exercise of a warrant (the "Warrant") to purchase Series E Preferred
and the conversion of such underlying shares of Series E Preferred.
In connection with this opinion, we have examined the Registration Statement and
related Prospectus, your Amended and Restated Certificate of Incorporation and
Bylaws, the Certificate of Designations, Preferences and Rights of Series E
Convertible Preferred Stock (the "Certificate of Designations"), the Warrant and
such other documents, records, certificates, memoranda and other instruments as
we deem necessary as a basis for this opinion. We have assumed the genuineness
and authenticity of all documents submitted to us as originals, the conformity
to originals of all documents submitted to us as copies thereof and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that (i) the Shares, when issued upon conversion of the Series E Preferred as
provided for in the Certificate of Designations, will be validly issued, fully
paid and nonassessable and (ii) the Warrant Shares, when issued in accordance
with the terms of the Warrant and the Certificate of Designations, will be
validly issued, fully paid and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/ Eric J. Loumeau
------------------------
Eric J. Loumeau
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
General Magic, Inc.:
We consent to incorporation by reference in the registration statement to be
filed on or about July 16, 1999 on Form S-3 of General Magic, Inc. of our report
dated January 22, 1999, except as to note 17, which is as of March 30, 1999,
relating to the consolidated balance sheets of General Magic, Inc. and
subsidiary (a development stage enterprise) as of December 31, 1998 and 1997,
and the related consolidated statements of operations, stockholders equity
(deficit), and cash flows for each of the years in the three-year period ended
December 31, 1998, and for the period from May 1, 1990 (inception) to December
31, 1998, which report appears in the December 31, 1998 annual report on Form
10-K of General Magic, Inc. We also consent to the reference to our firm under
the heading "Experts" in the Prospectus.
/s/ KPMG
Mountain View, California
July 16, 1999
