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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 9, 1999
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GENERAL MAGIC, INC.
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(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 77-0250147
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
</TABLE>
420 NORTH MARY AVENUE SUNNYVALE, CALIFORNIA 94086
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 774-4000
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Not applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On September 9, 1999, General Magic, Inc. entered into an Exchange
Agreement with the holders of our Series D Convertible Preferred Stock. Pursuant
to the Exchange Agreement, the holders of the Series D preferred stock exchanged
an aggregate of $10,000,000 of the $20,000,000 of Series D preferred stock
originally issued by us for $10,000,000 of a newly created Series F Convertible
Preferred Stock. As further described below, the Series F preferred stock
provides for redemption provisions which will allow us to treat it as "equity"
for accounting purposes.
On April 15, 1999, we received a letter from The Nasdaq National Market
advising us that we had failed to meet the "net tangible assets" requirement for
continued listing on that market. The letter required us to demonstrate
compliance with this requirement 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. Our
plan was accepted by The Nasdaq National Market on July 1, 1999, contingent on
our ability to complete a financing transaction by July 30, 1999, and to
demonstrate compliance with the "net tangible assets" requirement through the
remainder of the year. As of July 30, 1999, we entered into an agreement
providing for an equity line of credit arrangement. See the Current Report on
Form 8-K filed by us on August 3, 1999 for a discussion of the terms of the
equity line of credit and circumstances under which it may not be available to
us. The reclassification of $10,000,000 of the Series D preferred stock as
"equity" for accounting purposes through the exchange of such stock for the
Series F preferred stock will further our ability to meet the "net tangible
assets" requirements for continued listing on the Nasdaq National Market through
the balance of the year. However, in the event that we are not able to maintain
continued compliance with The Nasdaq National Market "net tangible assets"
requirement or any other of its listing requirements through December 31, 1999,
and thereafter, 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, Inc. We cannot
guarantee that we will be able to meet the listing requirements of these or any
other markets. In the event that we are delisted from The Nasdaq National Market
or are not able to list on any other market, the ability to sell shares of our
common stock will be adversely affected.
Except as described below, the terms of the Series F preferred stock are
substantially the same as the terms of the Series D preferred stock as described
in our Amendment #4 to Registration Statement on Form S-3, filed on August 18,
1999.
The changes in the redemption provisions are as follows:
Redemption Rights upon Covenant Breaches. With respect to the Series D
shares, unless we elect to redeem the Series D shares at a price per share equal
to the greater of 130% of the liquidation value and the market price, upon the
occurrence of any of the following covenant breaches or events:
o our failure to maintain the registration statement for the resale of
the common stock issuable upon conversion or exercise of the Series D
shares and warrants;
o our failure to maintain listing of the common stock on Nasdaq, AMEX or
NYSE; or
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o a purchase, tender or exchange offer accepted by holders of more than
50% of our common stock which is not approved or recommended by the
board of directors,
the Series D holders are entitled to require us to either:
o redeem some or all of their shares at a per share price equal to the
liquidation value; or
o pay 1% of the liquidation value for each day that any of such
breaches or events continues for up to 20 days in any 365 day period
and/or have the Series D conversion price substantially reduced.
With respect to the Series F shares, unless we elect to redeem the Series F
shares at a price per share equal to the greater of 130% of the liquidation
value and the market price, upon the occurrence of the covenant breaches or
events specified above, the Series F holders are entitled to require us to:
o pay 1% of the liquidation value for each day that any of such breaches
or events continues for up to 20 days in any 365 day period and have
the Series F conversion price substantially reduced (on the same
terms as the Series D conversion price is reduced).
As consideration for the new redemption provisions, the following
provisions were changed for the Series F preferred stock:
Initial Conversion Price. Each Series D share and Series F share is
convertible, at the option of a Series D holder or Series F holder, as the case
may be, into that number of shares of common stock obtained by dividing the
liquidation preference by the conversion price. The liquidation preference of a
Series D share and a Series F share equals $10,000 plus any accrued and unpaid
dividends and any unpaid default interest on cash dividends. The initial
conversion price of a Series D share is $3.93. The initial conversion price of a
Series F share is $2.0531.
Resets of Conversion Price. The conversion price of each Series D share
will be reset following the last day of each September and March and on December
31, 1999 and June 30, 2000. The conversion price of each Series F share will be
reset following the last day of each September, December, March and June.
The reset price of a Series D share is equal to 110% of the average of the
closing bid prices of the common stock during the ten trading days immediately
after each reset date. The reset price of a Series F share will be equal to 90%
of the average of the closing bid prices of the common stock during the ten
trading days immediately after each reset date.
The conversion price of each Series D share and Series F share will only be
reset if the reset price is less than the then-effective conversion price.
The foregoing description is qualified in its entirety by the Exchange
Agreement, dated as of September 9, 1999, and the other agreements and
instruments executed in connection therewith, copies of which are attached as
exhibits to this Current Report on Form 8-K and the Securities Purchase
Agreement, dated as of March 30, 1999, and the other agreements and instruments
executed in connection therewith, copies of which are attached as exhibits to
this Current Report on Form 8-K and were attached as exhibits to the Current
Report on Form 8-K filed on April 2, 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION. Not applicable.
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(c) EXHIBITS.
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Exhibit No. Description
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3.1 Certificate of Designations, Preferences and Rights of
Series F Convertible Preferred Stock of the Registrant,
filed with the Secretary of State of Delaware on
September 9, 1999.
3.2 Certificate of Designations, Preferences and Rights of
Series D Convertible Preferred Stock of the Registrant,
filed with the Secretary of State of Delaware on March 30,
1999 is incorporated by reference to Exhibit 3.1 to the
Registrant's Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 2, 1999.
4.1 Exchange Agreement, dated as of September 9, 1999, by and
among Registrant and the investors listed on the Schedule
of Investors thereto.
4.2 Securities Purchase Agreement, dated as of March 30, 1999,
by and among Registrant and the buyers listed on the
Schedule of Buyers thereto is incorporated by reference to
Exhibit 3.1 to the Registrant's Current Report on Form 8-K
filed with the Securities and Exchange Commission on April
2, 1999.
4.3 Registration Rights Agreement, dated as of September 9,
1999, by and among Registrant and holders listed on the
Schedule of Holders thereto.
4.4 Registration Rights Agreement, dated as of March 30, 1999,
by and among Registrant and holders of the Series D
Convertible Preferred Stock is incorporated by reference to
Exhibit 3.1 to the Registrant's Current Report on Form 8-K
filed with the Securities and Exchange Commission on April
2, 1999.
4.5 Amendment #1 to Registration Rights Agreement, dated as of
June 25, 1999, by and among Registrant and holders of the
Series D Convertible Preferred Stock.
4.6 Amendment #2 to Registration Rights Agreement, dated as of
July 9, 1999, by and among Registrant and holders of the
Series D Convertible Preferred Stock.
4.7 Amendment #3 to Registration Rights Agreement, dated as of
July 23, 1999, by and among Registrant and holders of the
Series D Convertible Preferred Stock.
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<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
4.8 Amendment #4 to Registration Rights Agreement, dated as of
August 6, 1999, by and among Registrant and holders of the
Series D Convertible Preferred Stock.
4.9 Waiver Agreement, dated as of September 9, 1999, by and
among Registrant and the stockholders listed on the Schedule
of Stockholders thereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
General Magic, Inc.
By: /s/ Mary E. Doyle
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September 10, 1999 Mary E. Doyle
General Counsel and Secretary
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EXHIBIT INDEX
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Exhibit No. Description
<S> <C>
3.1 Certificate of Designations, Preferences and Rights of Series F
Convertible Preferred Stock of the Registrant, filed with the
Secretary of State of Delaware on September 9, 1999.
3.2 Certificate of Designations, Preferences and Rights of Series D
Convertible Preferred Stock of the Registrant, filed with the
Secretary of State of Delaware on March 30, 1999 is incorporated by
reference to Exhibit 3.1 to the Registrant's Current Report on Form
8-K filed with the Securities and Exchange Commission on April 2,
1999.
4.1 Exchange Agreement, dated as of September 9, 1999, by and among
Registrant and the investors listed on the Schedule of Investors
thereto.
4.2 Securities Purchase Agreement, dated as of March 30, 1999, by and
among Registrant and the buyers listed on the Schedule of Buyers
thereto is incorporated by reference to Exhibit 3.1 to the
Registrant's Current Report on Form 8-K filed with the Securities and
Exchange Commission on April 2, 1999.
4.3 Registration Rights Agreement, dated as of September 9, 1999, by and
among Registrant and holders listed on the Schedule of Holders
thereto.
4.4 Registration Rights Agreement, dated as of March 30, 1999, by and
among Registrant and holders of the Series D Convertible Preferred
Stock is incorporated by reference to Exhibit 3.1 to the Registrant's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on April 2, 1999.
4.5 Amendment #1 to Registration Rights Agreement, dated as of June 25,
1999, by and among Registrant and holders of the Series D Convertible
Preferred Stock.
4.6 Amendment #2 to Registration Rights Agreement, dated as of July 9,
1999, by and among Registrant and holders of the Series D Convertible
Preferred Stock.
4.7 Amendment #3 to Registration Rights Agreement, dated as of July 23,
1999, by and among Registrant and holders of the Series D Convertible
Preferred Stock.
4.8 Amendment #4 to Registration Rights Agreement, dated as of August 6,
1999, by and among Registrant and holders of the Series D Convertible
Preferred Stock.
4.9 Waiver Agreement, dated as of September 9, 1999, by and among
Registrant and the stockholders listed on the Schedule of Stockholders
thereto.
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EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES F 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 $.001 per share, and (ii) providing for the designations, preferences
and relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, of One Thousand (1,000) shares of Series F
Convertible Preferred Stock of the Company, as follows:
RESOLVED, that the Company is authorized to issue 1,000 shares
of Series F Convertible Preferred Stock (the "PREFERRED SHARES"), par
value $.001 per share, which shall have the following powers,
designations, preferences and other special rights:
(1) Dividends. The Preferred Shares shall bear dividends
("DIVIDENDS") at a rate of 5.0% of the Stated Value (as defined below) per
annum, which shall be cumulative and accrue daily from the Effective Date (as
defined below). Dividends shall be payable in cash on the last day of each
Calendar Quarter (as defined below) beginning on the last day of the Calender
Quarter on September 30, 1999 (each a "DIVIDEND DATE"), provided that the
Company provides written notice ("DIVIDEND ELECTION NOTICE") to each holder of
Preferred Shares at least 30 calendar days prior to the Dividend Date. If the
Company timely gives a Dividend Election Notice, then all accrued and unpaid
Dividends shall be payable on the applicable Dividend Date. If a Dividend Date
is not a Business Day (as defined below), then the Dividend shall be due and
payable on the Business Day immediately following the Dividend Date. Dividends
which are not paid on a Dividend Date shall be payable upon the earlier of
conversion or redemption by the inclusion thereof in the Additional Amount (as
defined below). Any accrued and unpaid dividends with respect to which a
Dividend Election Notice was given and which are not paid within five (5)
Business Days of such accrued and unpaid Dividends' Dividend Date shall bear
interest at the rate of 1.5% per month (pro rated for partial months) from such
Dividend Date until the same is paid (the "DEFAULT INTEREST").
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(2) Holder's Conversion of Preferred Shares. A holder of Preferred
Shares shall have the right, at such holder's option, to convert the Preferred
Shares into shares of the Company's common stock, par value $.001 per share,
including any related purchase rights (the "COMMON STOCK"), on the following
terms and conditions:
(a) Conversion Right. At any time or times on or after the
Issuance Date, any holder of Preferred Shares shall be entitled to
convert any whole number of Preferred Shares into fully paid and
nonassessable shares (rounded to the nearest number of whole shares
in accordance with Section 2(h)) of Common Stock, at the Conversion
Rate (as defined below); provided, however, that in no event shall
any holder be entitled to convert Preferred Shares in excess of that
number of Preferred Shares which, upon giving effect to such
conversion, would cause the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates to exceed
4.99% of the outstanding shares of Common Stock following such
conversion. For purposes of the foregoing proviso, the aggregate
number of shares of Common Stock beneficially owned by the holder
and its affiliates shall include the number of shares of Common
Stock issuable upon conversion of the Preferred Shares with respect
to which the determination of such proviso is being made, but shall
exclude the number of shares of Common Stock which would be issuable
upon (i) conversion of the remaining, nonconverted Preferred Shares
beneficially owned by the holder and its affiliates, and (ii)
exercise or conversion of the unexercised or unconverted portion of
any other securities of the Company (including, without limitation,
any warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by
the holder and its affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2(a), beneficial ownership
shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. For the purposes of
this Section 2(a), in determining the number of outstanding shares
of Common Stock a holder may rely on the number of outstanding
shares of Common Stock as reflected in (1) the Company's most recent
Form 10-Q or Form 10-K, as the case may be, (2) a more recent public
announcement by the Company or (3) any other notice by the Company
or its transfer agent setting forth the number of shares of Common
Stock outstanding. For any reason at any time, upon the written or
oral request of any holder, the Company shall within one (1)
Business Day confirm orally and in writing to any such holder the
number of shares of Common Stock outstanding as of the date of such
request. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to conversions of
Preferred Shares by such holder since the date as of which such
number of outstanding shares of Common Stock was reported.
(b) Conversion Rate and Other Definitions. The number of
shares of Common Stock issuable upon conversion of each of the Preferred
Shares pursuant to Sections (2)(a) and 2(g) and Section 5 shall be
determined according to the following formula (the "CONVERSION RATE"):
Conversion Amount
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Conversion Price
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For purposes of this Certificate of Designations, the following terms
shall have the following meanings:
(i) "CALENDAR QUARTER" means each of the period
beginning on and including January 1 and ending on and including March 31, the
period beginning on and including April 1 and ending on and including June 30,
the period beginning on and including July 1 and ending on and including
September 30, and the period beginning on and including October 1 and ending on
and including December 31;
(ii) "CONVERSION PRICE" means, (A) as of any
Conversion Date (as defined below) or other date of determination (other than
the Maturity Date (as defined in Section 2(g)), the Fixed Conversion Price,
subject to adjustment as provided herein (including, without limitation,
pursuant to Section 2(c)), and (B) on the Maturity Date, the Closing Bid Price
as of such date;
(iii) "FIXED CONVERSION PRICE" means 90% of the
product of (A) the Conversion Percentage and (B) the lesser of (I) the average
of the Closing Bid Prices of the Common Stock for the five (5) consecutive
trading days ending on and including the Issuance Date (as defined below) and
(II) the average of the Closing Bid Prices of the Common Stock for the five (5)
consecutive trading days ending on and including September 2, 1999, subject to
adjustment as provided herein (including, without limitation, pursuant to
Section 2(c));
(iv) "CONVERSION PERCENTAGE" means 100%, subject to
adjustment as provided herein;
(v) "CONVERSION AMOUNT" means the sum of (A) the
Additional Amount and (B) $10,000;
(vi) "ADDITIONAL AMOUNT" means, on a per share basis,
the sum of (A) unpaid Default Interest through the date of determination plus
(B) the result of the following formula: (.050)(N/365)($10,000);
(vii) "CLOSING BID PRICE" means, for any security as
of any date, the last closing bid price for such security on The Nasdaq National
Market as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if The
Nasdaq National Market is not the principal trading market for such security,
the last closing bid price of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price is reported
for such security by Bloomberg, the last closing trade price of such security as
reported by Bloomberg, or, if no last closing trade price is reported for such
security by Bloomberg, the average of the bid prices of any market makers for
such security as reported in the "pink sheets" by the National Quotation Bureau,
Inc. If the Closing Bid Price cannot be calculated for such security on such
date on any of the foregoing bases, the Closing Bid Price of such security on
such date shall be the fair market value as mutually determined by the Company
and the holders of a majority of the outstanding Preferred Shares (including for
purposes of this determination any Preferred Shares with respect to which the
Closing Bid Price is being determined). If the Company
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and the holders of Preferred Shares are unable to agree upon the fair market
value of the Common Stock, then such dispute shall be resolved pursuant to
Section 2(f)(iii). All such determinations shall be appropriately adjusted for
any stock dividend, stock split or other similar transaction during any period
for which the Closing Bid Price is being determined.
(viii) "N" means the number of days from, but
excluding, the last Dividend Date with respect to which dividends, along with
any Default Interest, has been paid by the Company on the applicable Preferred
Share through and including the Conversion Date or the Maturity Date for the
Preferred Shares for which conversion and/or redemption is being elected, as the
case may be, or if the Company has not previously paid dividends, then the
number of days from, but excluding, the Effective Date through and including the
Conversion Date or the Maturity Date for the Preferred Shares for which
conversion and/or redemption is being elected, as the case may be;
(ix) "ISSUANCE DATE" means, with respect to each
Preferred Share, the date of issuance of the Preferred Shares;
(x) "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law to remain closed;
(xi) "EFFECTIVE DATE" means March 30, 1999;
(xi) "RESET DATE" means, during the period beginning
on the Issuance Date and ending on the Maturity Date, the last day of each
Calendar Quarter.
(xii) "EXCHANGE AGREEMENT" means that certain
exchange agreement between the Company and the initial holders of the Preferred
Shares;
(xiii) "STATED VALUE" means $10,000;
(xiv) "REGISTRATION RIGHTS AGREEMENT" means that
certain registration rights agreement between the Company and the initial
holders of the Preferred Shares;
(xv) "CONVERSION SHARES" means shares of Common Stock
issuable upon conversion of Preferred Shares and any shares of Common Stock
issuable as payment of Dividends or Registration Delay Payments (as defined in
the Registration Rights Agreement).
(c) Adjustment to Fixed Conversion Price -- Market Price
of Common Stock. In addition to any other adjustment to the Fixed Conversion
Price provided for in this Certificate of Designations, in the event that 90% of
the average of the Closing Bid Prices of the Common Stock on the ten (10)
consecutive trading days immediately following a Reset Date (a "PRICING PERIOD")
is less than the Fixed Conversion Price in effect immediately prior to such 10th
trading day following such Reset Date, then after such 10th trading day
following such Reset Date the Fixed Conversion Price shall be equal to the
product of (A) the Conversion Percentage and (B) 90% of the average of the
Closing Bid Prices of the Common Stock on each trading day during such
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Pricing Period; subject to further adjustment as provided in this Section 2(c)
and elsewhere in this Certificate of Designations.
(d) Adjustment to Conversion Price -- Dilution and Other Events.
In order to prevent dilution of the rights granted under this Certificate of
Designations, the Conversion Price will be subject to adjustment from time to
time as provided in this Section 2(d).
(i) Adjustment of Fixed Conversion Price upon Issuance of
Common Stock. If and whenever on or after the Effective Date, the Company issues
or sells, or is deemed to have issued or sold, any shares of Common Stock (other
than the Conversion Shares, the shares of Common Stock issuable upon conversion
or exercise, as the case may be, of the Series D Convertible Preferred Stock of
the Company or the related warrants, the Discretionary Shares (as defined below)
and shares of Common Stock deemed to have been issued by the Company in
connection with (1) an Approved Stock Plan (as defined below) or (2) options,
warrants or convertible securities outstanding as of the Effective Date), except
to the extent that the terms of such instruments are amended or changed on or
after the Effective Date, for a consideration per share less than a price (the
"APPLICABLE PRICE") equal to the Fixed Conversion Price in effect immediately
prior to such issuance or sale, then immediately after such issue or sale, the
Fixed Conversion Price, if any, then in effect shall be reduced to an amount (A)
in the event such issue or sale occurs on or prior to the date (the "RATCHET
DATE") which is the earlier of (I) the date on which an aggregate of at least
600 Preferred Shares have been converted pursuant to Section 2 and (II) the date
which is one year after the date the Registration Statement (as defined in the
Registration Rights Agreement) is declared effective by the SEC, then equal to
the consideration per share which the Company issued or sold, or was deemed to
have issued or sold, for one share of Common Stock pursuant to such issuance or
sale or (B) in the event such issue or sale occurs after the Ratchet Date, then
equal to the product of (x) the Fixed Conversion Price in effect immediately
prior to such issue or sale and (y) the quotient determined by dividing (1) the
sum of (I) the product of the Applicable Price and the number of shares of
Common Stock Deemed Outstanding (as defined below) immediately prior to such
issue or sale, and (II) the consideration, if any, received by the Company upon
such issue or sale, by (2) the product of (I) the Applicable Price and (II) the
number of shares of Common Stock Deemed Outstanding immediately after such issue
or sale. For purposes of determining the adjusted Fixed Conversion Price under
this Section 2(d)(i), the following shall be applicable:
(A) Issuance of Options. If on or after the Effective Date
the Company in any manner grants any rights or options to subscribe for
or to purchase Common Stock (other than pursuant to an Approved Stock
Plan or upon conversion of the Preferred Shares) or any stock or other
securities convertible into or exchangeable for Common Stock (such
rights or options being herein called "OPTIONS" and such convertible or
exchangeable stock or securities being herein called "CONVERTIBLE
SECURITIES") and the price per share for which Common Stock is issuable
upon the exercise of such Options or upon conversion or exchange of such
Convertible Securities is less than the Applicable Price, then the total
maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total maximum amount
of such Convertible Securities issuable upon the exercise of such
Options shall be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For
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purposes of this Section 2(d)(i)(A), the "price per share for which
Common Stock is issuable upon exercise of such Options or upon
conversion or exchange of such Convertible Securities" is determined by
dividing (I) the total amount, if any, received or receivable by the
Company as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus in the case of such
Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable to the Company upon
the issuance or sale of such Convertible Securities and the conversion
or exchange thereof, by (II) the total maximum number of shares of
Common Stock issuable upon exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. No further adjustment of the Fixed
Conversion Price shall be made upon the actual issuance of such Common
Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion
or exchange of such Convertible Securities. Upon the expiration of any
such Options which shall not have been exercised, the Fixed Conversion
Price computed upon the original issue thereof, and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as
if: (i) in the case Options for Common Stock, the only shares of Common
Stock issued were shares of Common Stock, if any, actually issued upon
the exercise of such Options and the consideration received therefor was
the consideration actually received by the Company for the issue of all
such Options, whether or not exercised, plus the consideration actually
received by the Company upon such exercise, and (ii) in the case of
Options for Convertible Securities, only the Convertible Securities, if
any, actually issued upon the exercise thereof were issued at the time
of issue of such Options, and the consideration received by the Company
for the shares of Common Stock deemed to have been then issued was the
consideration actually received by the Company for the issue of all such
Options, whether or not exercised, plus the consideration deemed to have
been received by the Company upon the issue of the Convertible
Securities with respect to which such Options were actually exercised.
(B) Issuance of Convertible Securities. If on or after
the Effective Date the Company in any manner issues or sells any
Convertible Securities and the price per share for which Common Stock is
issuable upon such conversion or exchange of such Convertible Securities
is less than the Applicable Price, then the maximum number of shares of
Common Stock issuable upon conversion or exchange of such Convertible
Securities shall be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For the purposes of this
Section 2(d)(i)(B), the "price per share for which Common Stock is
issuable upon such conversion or exchange" is determined by dividing (I)
the total amount received or receivable by the Company as consideration
for the issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (II) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment of
the Fixed Conversion Price shall be made upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible
Securities, and if any such issuance or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of
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the Fixed Conversion Price had been or are to be made pursuant to other
provisions of this Section 2(d)(i), no further adjustment of the
Conversion Price shall be made by reason of such issuance or sale. Upon
the expiration of any rights of conversion or exchange under such
Convertible Securities which shall not have been exercised, the Fixed
Conversion Price computed upon the original issue thereof, and any
subsequent adjustments based thereon, shall, upon such expiration, be
recomputed as if the only shares of Common Stock issued were shares of
Common Stock, if any, actually issued upon the conversion or exchange of
such Convertible Securities and the consideration received therefor was
the consideration actually received by the Company for the issue of all
such Convertible Securities which were actually converted or exchanged,
plus the additional consideration, if any, actually received by the
Company upon such conversion or exchange.
(C) Change in Option Price or Rate of Conversion. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issuance, conversion or exchange
of any Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock changes
at any time, the Fixed Conversion Price in effect at the time of such
change shall be readjusted to the Fixed Conversion Price which would
have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold; provided that no
adjustment shall be made if such adjustment would result in an increase
of the Conversion Price then in effect.
(D) Certain Definitions. For purposes of determining the
adjusted Conversion Price under this Section 2(d)(i), the following
terms have the meanings set forth below:
(I) "APPROVED STOCK PLAN" shall mean any contract,
plan or agreement which has been approved by the Board of Directors of
the Company, pursuant to which (a) the Company's securities may be
issued to any employee, officer, director, consultant or other service
provider, or (b) Purchase Rights (as defined below) are or may be
issued.
(II) "DISCRETIONARY SHARES" means shares of Common
Stock (A) which have been issued or sold, or deemed to have been issued
or sold, by the Company (i) in connection with a merger or
consolidation, (ii) in connection with any strategic partnership or
joint venture (the primary purpose of which is not to raise equity
capital) or (iii) in connection with the acquisition of a business,
product, license or other assets by the Company, for a consideration per
share (based on the Closing Bid Price of such Common Stock on the date
of the issuance or sale, or deemed issuance or sale) less than the
Applicable Price (as defined above) ("ACQUISITION SHARES") and (B) the
issuance or sale, or deemed issuance or sale, of which was not in
violation of the applicable Discretionary Share Cap (as defined below).
For the purposes hereof, "DISCRETIONARY SHARE CAP" shall mean that
amount with respect to a Discretionary Share Measurement Period (as
defined below) as calculated from time to time as of the date
("MEASUREMENT DATE") of a given issuance or sale, or deemed issuance or
sale, of Acquisition Shares which is equal to (A) the product of
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<PAGE> 8
(x) the number of shares of Common Stock actually outstanding on the
last day of the Discretionary Share Measurement Period, multiplied by
the Closing Bid Price of the Common Stock on the Measurement Date and
(y) .05, less (B) the number of Acquisition Shares issued or sold, or
deemed to have been issued or sold, by the Company during the
Discretionary Share Measurement Period, multiplied by the Closing Bid
Price of the Common Stock on each applicable Measurement Date with
respect to such Acquisition Shares. A given issuance or sale, or deemed
issuance or sale, of Acquisition Shares shall be deemed to violate the
Discretionary Share Cap if the product of (x) the number of such
Acquisition Shares, multiplied by (y) the Closing Bid Price of the
Common Stock on the Measurement Date exceeds the Discretionary Share
Cap. The "DISCRETIONARY SHARE MEASUREMENT PERIOD" shall mean with
respect to a given issuance or sale, or deemed issuance or sale, of
Acquisition Shares, that 364-day period ending on and including the date
immediately prior to the date of the issuance or sale, or deemed
issuance or sale, of such Acquisition Shares.
(III) "COMMON STOCK DEEMED OUTSTANDING" means, at
any given time, the number of shares of Common Stock actually
outstanding at such time, plus the number of shares of Common Stock
deemed to be outstanding pursuant to Sections 2(d)(i)(A) and 2(d)(i)(B)
hereof regardless of whether the Options or Convertible Securities are
actually exercisable at such time.
(E) Effect on Fixed Conversion Price of Certain Events.
For purposes of determining the adjusted Fixed Conversion Price under
this Section 2(d)(i), the following shall be applicable:
(I) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the amount received by the Company
therefor, before deduction of commissions, underwriting discounts or
allowances or placement agent or finder fees (but only to the extent
that such commissions, discounts, allowances and fees do not exceed, in
the aggregate, 6% of the gross proceeds to the Company) and other
reasonable expenses paid or incurred by the Company in connection with
such issuance or sale, provided that any amounts paid to the purchasers
of such Common Stock, Options or Convertible Securities or to any
affiliates of such purchasers in connection with such issuance or sale
shall be deducted from the amount of consideration received by the
Company. In case any Common Stock, Options or Convertible Securities are
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Company will be the average of the Closing Bid Prices of such securities
for the five consecutive trading days immediately preceding the date of
receipt. The fair value of any consideration other than cash or
securities will be determined jointly by the Company and the holders of
a majority of the Preferred Shares then outstanding. If such parties are
unable to reach agreement within ten (10) days after the occurrence of
an event requiring valuation (the "VALUATION EVENT"), the fair value of
such
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<PAGE> 9
consideration will be determined within five (5) Business Days of the
tenth (10th) day following the Valuation Event by an independent,
reputable appraiser selected by the Company. The determination of such
appraiser shall be binding upon all parties absent manifest error.
(II) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties
thereto, the Options will be deemed to have been issued for a
consideration of $.01.
(III) Treasury Shares. The number of shares of
Common Stock outstanding at any given time does not include shares owned
or held by or for the account of the Company, and the disposition of any
shares so owned or held will be considered an issue or sale of Common
Stock.
(IV) Record Date. If the Company takes a record of
the holders of Common Stock for the purpose of entitling them (1) to
receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities, or (2) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date will be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as
the case may be.
(ii) Adjustment of Fixed Conversion Price upon
Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock
into a greater number of shares, the Fixed Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced.
If the Company at any time combines (by combination, reverse stock split
or otherwise) one or more classes of its outstanding shares of Common
Stock into a smaller number of shares, the Fixed Conversion Price in
effect immediately prior to such combination will be proportionately
increased.
(iii) Holder's Right of Alternative Floating Conversion
Price Following Issuance of Convertible Securities. If on or after the
Effective Date the Company in any manner issues or sells Convertible
Securities (other than the Preferred Shares) that are convertible into
or exchangeable for Common Stock at a price which may vary (including by
way of periodic adjustments to a fixed conversion price) with the market
price of the Common Stock (the formulation for such variable price being
herein referred to as, the "VARIABLE PRICE") and such Variable Price is
not calculated using the same formula used to calculate any adjustment
to the Fixed Conversion Price in effect immediately prior to the time of
such issue or sale, the Company shall provide written notice thereof via
facsimile and overnight courier to each holder of the Preferred Shares
("VARIABLE NOTICE") on the date of
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<PAGE> 10
issuance of such Convertible Securities. From and after the date the
Company issues any such Convertible Securities with a Variable Price, a
holder of Preferred Shares shall have the right, but not the obligation,
in its sole discretion to substitute the Variable Price for the
Conversion Price upon conversion of any Preferred Shares by designating
in the Conversion Notice delivered upon conversion of such Preferred
Shares that solely for purposes of such conversion the holder is relying
on the Variable Price rather than the Conversion Price then in effect. A
holder's election to rely on a Variable Price for a particular
conversion of Preferred Shares shall not obligate the holder to rely on
a Variable Price for any future conversions of Preferred Shares.
(iv) Reorganization, Reclassification,
Consolidation, Merger or Sale. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially
all of the Company's assets to another Person (as defined below) or
other transaction which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange
for Common Stock is referred to herein as "ORGANIC CHANGE." Prior to the
consummation of any Organic Change, the Company will make appropriate
provision (in form and substance satisfactory to the holders of a
majority of the Preferred Shares then outstanding) to insure that each
of the holders of the Preferred Shares will thereafter have the right to
acquire and receive in lieu of or in addition to (as the case may be)
the shares of Common Stock otherwise acquirable and receivable upon the
conversion of such holder's Preferred Shares, such shares of stock,
securities or assets that would have been issued or payable in such
Organic Change with respect to or in exchange for the number of shares
of Common Stock which would have been acquirable and receivable upon the
conversion of such holder's Preferred Shares had such Organic Change not
taken place (without taking into account any limitations or restrictions
on the timing or amount of conversions). In any such case, the Company
will make appropriate provision (in form and substance satisfactory to
the holders of a majority of the Preferred Shares then outstanding) with
respect to such holders' rights and interests to insure that all of the
provisions of this Certificate of Designations, including the provisions
of this Section 2(d) and Section 2(e), will thereafter be applicable to
the Preferred Shares. The Company will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof,
the successor entity (if other than the Company) resulting from
consolidation or merger or the entity purchasing such assets and, if an
entity different from the successor entity, the entity whose capital
stock or assets the holders of the Common Stock are entitled to receive
as a result of such Organic Change, assumes, by written instrument (in
form and substance reasonably satisfactory to the holders of a majority
of the Preferred Shares then outstanding), all of the obligations of the
Company under this Certificate of Designations including the obligations
to deliver to each holder of Preferred Shares such shares of stock,
securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire. "PERSON" shall mean an
individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.
(v) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 2(d) but not expressly
provided for by such provisions
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<PAGE> 11
(including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then
the Company's Board of Directors will make an appropriate adjustment in
the Conversion Price so as to protect the rights of the holders of the
Preferred Shares; provided, however, that no such adjustment will
increase the Conversion Price as otherwise determined pursuant to this
Section 2(d).
(vi) Notices.
(A) Immediately upon any adjustment of the
Conversion Price, the Company will give written notice thereof to each
holder of the Preferred Shares, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(B) The Company will give written notice to each
holder of the Preferred Shares at least ten (10) days prior to the date
on which the Company closes its books or takes a record (I) with respect
to any dividend or distribution upon the Common Stock, (II) with respect
to any pro rata subscription offer to holders of Common Stock, or (III)
for determining rights to vote with respect to any Organic Change,
dissolution or liquidation and in no event shall such notice be provided
to such holder prior to such information being made known to the public.
(C) The Company will also give written notice to
each holder of the Preferred Shares at least ten (10) days prior to the
date on which any Organic Change, dissolution or liquidation will take
place and in no event shall such notice be provided to such holder prior
to such information being made known to the public.
(e) Purchase Rights. In addition to any adjustments of the
Conversion Price pursuant to Section 2(d), if at any time after the
Effective Date the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities
or other property pro rata to the record holders of any class of Common
Stock (the "PURCHASE RIGHTS"), then the holders of the Preferred Shares
will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock
acquirable upon complete conversion of the Preferred Shares (without
taking into account any limitations or restrictions on the timing or
amount of conversions) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no
such record is taken, the date as of which the record holders of the
Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
(f) Mechanics of Conversion. Subject to the Company's
inability to fully satisfy its obligations under a Conversion Notice (as
defined below) as provided for in Section 4:
(i) Holder's Delivery Requirements. To convert Preferred
Shares into full shares of Common Stock on any date (the "CONVERSION
DATE"), the holder thereof shall (A) transmit by facsimile (or otherwise
deliver), for receipt on or prior to 11:59 p.m.
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<PAGE> 12
Eastern Time, on such date, a copy of a fully executed notice of
conversion in the form attached hereto as Exhibit I (the "CONVERSION
NOTICE") to the Company and its designated transfer agent (the "TRANSFER
AGENT"), and (B) surrender to a common carrier, for delivery to the
Company or the Transfer Agent as soon as practicable following such
date, the original certificate(s) representing the Preferred Shares
being converted (or an indemnification undertaking with respect to such
shares in the case of their loss, theft or destruction) (the "PREFERRED
STOCK CERTIFICATE(S)") and the originally executed Conversion Notice.
(ii) Company's Response. Upon receipt by the Company
of a facsimile copy of a Conversion Notice, the Company shall as soon as
practicable, but in any event not later than the next Business Day,
send, via facsimile, a confirmation of receipt of such Conversion Notice
to such holder. Upon receipt by the Company or the Transfer Agent of the
Preferred Stock Certificate(s) to be converted pursuant to a Conversion
Notice, together with the originally executed Conversion Notice, the
Company or the Transfer Agent (as applicable) shall, subject to Section
2(f)(iii) below, on the next Business Day following the date of receipt
of such Preferred Stock Certificate(s), (I) issue and surrender to a
common carrier for overnight delivery to the address specified in the
Conversion Notice, a certificate, registered in the name of the holder
or its designee, for the number of shares of Common Stock to which the
holder shall be entitled, or (II) credit such aggregate number of shares
of Common Stock to which the holder shall be entitled to the holder's or
its designee's balance account with The Depository Trust Company. If the
number of Preferred Shares represented by the Preferred Stock
Certificate(s) submitted for conversion is greater than the number of
Preferred Shares being converted, then the Company or Transfer Agent, as
the case may be, shall, subject to Section 2(f)(iii) below, as soon as
practicable and in no event later than two (2) Business Days after
receipt of the Preferred Stock Certificate(s) and at its own expense,
issue and deliver to the holder a new Preferred Stock Certificate
representing the number of Preferred Shares not converted.
(iii) Dispute Resolution. In the case of a dispute
as to the determination of the fair market value of the Common Stock
(pursuant to Section 2(b)(vii)) or the arithmetic calculation of the
Conversion Rate, the Company shall promptly issue to the holder the
number of shares of Common Stock that is not disputed and shall submit
the disputed determinations or arithmetic calculations to the holder via
facsimile within one (1) Business Day of receipt of such holder's
Conversion Notice. If such holder and the Company are unable to agree
upon the determination of the fair market value of the Common Stock
(pursuant to Section 2(b)(vii)) or arithmetic calculation of the
Conversion Rate within one (1) Business Day of such disputed
determination or arithmetic calculation being submitted to the holder,
then the Company shall within one (1) Business Day submit via facsimile
(A) the disputed determination of the fair market value of the Common
Stock to an independent, reputable investment bank, or (B) the disputed
arithmetic calculation of the Conversion Rate to its independent,
outside accountant. The Company shall cause the investment bank or the
accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the holder of the results no
later than two (2) Business Days from the time it receives the disputed
determinations or calculations. Such investment bank's or accountant's
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determination or calculation, as the case may be, shall be binding upon
all parties absent manifest error.
(iv) Record Holder. The person or persons entitled
to receive the shares of Common Stock issuable upon a conversion of
Preferred Shares shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on the Conversion Date.
(v) Company's Failure to Timely Convert. If within
five (5) Business Days after the Company's or the Transfer Agent's
receipt of the Preferred Stock Certificate(s) to be converted and the
Conversion Notice the Company shall fail (I) to issue a certificate for
the number of shares of Common Stock to which a holder is entitled or to
credit the holder's balance account with The Depository Trust Company
for such number of shares of Common Stock to which the holder is
entitled upon such holder's conversion of the Preferred Shares, pursuant
to Section 2(f)(ii), or (II) to issue a new Preferred Stock Certificate
representing the number of Preferred Shares to which such holder is
entitled, pursuant to Section 2(f)(ii), in addition to all other
available remedies which such holder may pursue hereunder and under the
Exchange Agreement (including indemnification pursuant to Section 8
thereof), the Company shall pay additional damages to such holder on
each date after such fifth (5th) Business Day that such conversion or
delivery of such Preferred Stock Certificates, as the case may be, is
not timely effected in an amount equal to 0.5% of the product of (A) the
sum of the number of shares of Common Stock not issued to the holder on
a timely basis pursuant to Section 2(f)(ii) and to which such holder is
entitled and, in the event the Company has failed to deliver a Preferred
Stock Certificate to the holder on a timely basis pursuant to Section
2(f)(ii), the number of shares of Common Stock issuable upon conversion
of the Preferred Shares represented by such Preferred Stock Certificate
as of the last possible date which the Company could have issued such
Preferred Stock Certificate to such holder without violating Section
2(f)(ii); and (B) the average of the Closing Bid Prices of the Common
Stock for the three (3) consecutive trading days immediately preceding
the last possible date which the Company could have issued such Common
Stock and the Preferred Stock Certificate, as the case may be, to such
holder without violating Section 2(f)(ii).
(g) Mandatory Conversion or Redemption at Maturity.
If any Preferred Shares remain outstanding on the Maturity Date (as
defined below), then all such Preferred Shares, at the Company's option,
either (i) shall be converted as of such date in accordance with this
Section 2 as if the holders of such Preferred Shares had given the
Conversion Notice on the Maturity Date (a "MATURITY DATE MANDATORY
CONVERSION") or (ii) shall be redeemed as of such date for an amount in
cash per Preferred Share (the "MATURITY DATE REDEMPTION PRICE") equal to
the product of (A) the Conversion Rate on the Maturity Date and (B) the
Closing Bid Price of the Common Stock on the date immediately preceding
the Maturity Date (a "MATURITY DATE MANDATORY REDEMPTION"); provided,
however, that if the Company has elected a Maturity Date Mandatory
Conversion and a Triggering Event (other than a Triggering Event
resulting from Section 3(d)(vi) due to the Company' breach of a
representation) has occurred and is continuing on the Maturity Date,
then the Company
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shall, within five (5) Business Days following the Maturity Date (unless
otherwise notified in writing by the holder of its request to have the
Preferred Shares converted into Common Stock), pay to each holder of
Preferred Shares then outstanding, in immediately available funds, an
amount equal to the Maturity Date Redemption Price. The Company shall be
deemed to have elected a Maturity Date Mandatory Conversion unless it
delivers written notice to each holder of Preferred Shares at least
fifteen (15) Business Days prior to the Maturity Date of its election to
effect a Maturity Date Mandatory Redemption. If the Company elects a
Maturity Date Mandatory Redemption, then on the Maturity Date the
Company shall pay to each holder of Preferred Shares outstanding on the
Maturity Date, by wire transfer of immediately available funds, an
amount per Preferred Share equal to the Maturity Date Redemption Price.
All holders of Preferred Shares shall thereupon surrender all Preferred
Stock Certificates, duly endorsed for cancellation, to the Company or
the Transfer Agent, provided that the Company has complied with its
obligations under this Section 2(g). Notwithstanding the foregoing, if
on the Maturity Date the Common Stock is not designated for quotation on
The Nasdaq National Market or listed on The American Stock Exchange,
Inc. or The New York Stock Exchange, Inc., then the Company shall be
deemed to have elected a Maturity Date Mandatory Redemption. "MATURITY
DATE" means the date which is three (3) years after the Effective Date,
subject to extension pursuant to Section 3(f) of the Registration Rights
Agreement, which extension shall be equal to one and one-half (1 1/2)
days for each number of days in excess of the Allowable Grace Period (as
defined in Section 3(f) of the Registration Rights Agreement).
(h) Fractional Shares. The Company shall not issue any
fraction of a share of Common Stock upon any conversion. All shares of
Common Stock (including fractions thereof) issuable upon conversion of
more than one Preferred Share by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the
issuance of a fraction of a share of Common Stock. If, after the
aforementioned aggregation, the issuance would result in the issuance of
a fraction of a share of Common Stock, the Company shall round such
fraction of a share of Common Stock down to the nearest whole share.
(i) Taxes. The Company shall pay any and all taxes which
may be imposed upon it other than income and franchise taxes of the
holder of Preferred Shares, with respect to the issuance and delivery of
shares of Common Stock upon the conversion of the Preferred Shares.
(3) Redemption at Option of Holders.
(a) Redemption Option Upon Major Transaction. In
addition to all other rights of the holders of Preferred Shares
contained herein, simultaneous with or after the occurrence of a Major
Transaction (as defined below), each holder of Preferred Shares shall
have the right, at such holder's option, to require the Company to
redeem all or a portion of such holder's Preferred Shares at a price per
Preferred Share equal to the greater of (i) 125% of the Liquidation
Value (as defined in Section 11); and (ii) the product of (A) the
Conversion Rate at such time, and (B) the Closing Bid Price on the date
of the public
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<PAGE> 15
announcement of such Major Transaction or the next date on which the
exchange or market on which the Common Stock is traded is open if such
public announcement is made (X) after 12:00 p.m. Eastern Time, on such
date or (Y) on a date on which the exchange or market on which the
Common Stock is traded is closed (the "MAJOR TRANSACTION REDEMPTION
PRICE"). Notwithstanding anything to the contrary contained herein, none
of the holders of Preferred Shares shall have the right to require the
Company to redeem any Preferred Shares with respect to any particular
Major Transaction if: (i) the Company shall have delivered a Notice of
Redemption at Company's Election (as defined below), with respect to
such Major Transaction; and (ii) the Company has satisfied the
Conditions to Redemption at the Company's Election, with respect to such
Major Transaction.
(b) Redemption Option Upon Triggering Event. In addition
to all other rights of the holders of Preferred Shares contained herein,
simultaneous with or after the occurrence of a Triggering Event (as
defined below), each holder of Preferred Shares shall have the right, at
such holder's option, to require the Company to redeem all or a portion
of such holder's Preferred Shares at a price per Preferred Share equal
to (I) in the case of a Triggering Event under subparagraphs (i), (ii),
(iii), (iv) or (v) of Section 3(d), the greater of (i) 130% of the
Liquidation Value; and (ii) the product of (A) the Conversion Rate on
the date of such holder's delivery of a Notice of Redemption at Option
of Holder Upon Triggering Event (as defined in Section 3(f)), and (B)
the greater of (x) the Closing Bid Price on the trading day immediately
preceding such Triggering Event or (y) the Closing Bid Price on the date
of the holder's delivery to the Company of a Notice of Redemption at
Option of Buyer Upon Triggering Event (as defined below) or, if such
date of delivery is not a trading day, the next date on which the
exchange or market on which the Common Stock is traded is open, or (II)
in the case of a Triggering Event under subparagraph (vi) of Section
3(d), 130% of the Liquidation Value (collectively, the "TRIGGERING EVENT
REDEMPTION PRICE" and, collectively with the Major Transaction
Redemption Price, the "REDEMPTION PRICE").
(c) "Major Transaction". Subject to the Excluded
Redemption Events (as defined below) pursuant to Section 3(h), a "MAJOR
TRANSACTION" shall be deemed to have occurred at such time as any of the
following events:
(i) the consolidation, merger or other business
combination of the Company with or into another Person (other than (A) a
consolidation, merger or other business combination in which holders of
the Company's voting power immediately prior to the transaction continue
after the transaction to hold, directly or indirectly, the voting power
of the surviving entity or entities necessary to elect a majority of the
members of the board of directors (or their equivalent if other than a
corporation) of such entity or entities, or (B) pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company) (a "CHANGE OF CONTROL TRANSACTION");
(ii) the sale or transfer of all or substantially
all of the Company's assets; or
(iii) a purchase, tender or exchange offer made to
and accepted by the holders of more than 50% of the outstanding shares
of Common Stock.
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<PAGE> 16
(d) "Triggering Event". Subject to the Excluded
Redemption Events (as defined below) pursuant to Section 3(h), a
"TRIGGERING EVENT" shall be deemed to have occurred at such time as any
of the following events:
(i) the failure of the Registration Statement to be
filed by the Company pursuant to the Registration Rights Agreement on or
before the date which is 60 days after the Issuance Date or the failure
of the Registration Statement to be declared effective by the SEC on or
prior to the date which is 60 days after the Scheduled Effective Date
(as defined in the Registration Rights Agreement) with respect to a
particular holder of Preferred Shares;
(ii) while the Registration Statement is required to
be maintained effective pursuant to the terms of the Registration Rights
Agreement, the effectiveness of the Registration Statement lapses for
any reason (including, without limitation, the issuance of a stop order)
or is unavailable (other than on days during an Allowable Grace Period
(as defined in Section 3(f) of the Registration Rights Agreement)) to
the holder of the Preferred Shares for sale of the Registrable
Securities (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, and such
lapse or unavailability continues for a period of at least five (5)
consecutive days (other than on any days during any Allowable Grace
Period) or for an aggregate of at least 10 days (other than on any days
during any Allowable Grace Period);
(iii) suspension from listing or delisting of the
Common Stock from The Nasdaq National Market, The American Stock
Exchange, Inc. or The New York Stock Exchange, Inc. for a period of 15
consecutive days or for an aggregate of at least 45 days in any 365-day
period;
(iv) the Company's notice to any holder of Preferred
Shares, including by way of public announcement, at any time, of its
intention not to comply with proper requests for conversion of any
Preferred Shares into shares of Common Stock, including due to any of
the reasons set forth in Section 4(a) below (other than clause (y) of
Section 4(a)), or, subject to Section 2(f)(iii), the Company's failure
to deliver Conversion Shares within five (5) days of the Conversion
Date;
(v) the Company shall have failed to make any
Excluded Redemption Event Daily Payment (as defined below) in a timely
manner in accordance with Section 3(i) or the Company shall have failed
to give an Excluded Redemption Option Election Notice (as defined below)
within one (1) day of receipt of the Holders' Excluded Redemption Event
Notice (as defined below); or
(vi) any representation or warranty by the Company
contained in the Exchange Agreement was not true and correct at the time
made (including the Issuance Date) or the Company breaches any covenant
or other term or condition of the Exchange Agreement, the Registration
Rights Agreement, this Certificate of Designations, the
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<PAGE> 17
Irrevocable Transfer Agent Instructions (as defined in the Exchange
Agreement), or any other agreement, document, certificate or other
instrument delivered in connection with the transactions contemplated
thereby or hereby, except (i) to the extent that such breach would not
have a Material Adverse Effect (as defined in Section 3(a) of the
Exchange Agreement), (ii) in the case of a breach of a covenant which is
curable, such breach continues for a period of less than ten days, and
(iii) any breach regarding any action or inaction described in Section
3(d)(i)-(v) above.
(e) Mechanics of Redemption at Option of Buyer Upon
Major Transaction. No sooner than 15 days nor later than 10 days prior
to the consummation of a Major Transaction, but not prior to the public
announcement of such Major Transaction, the Company shall deliver
written notice thereof via facsimile and overnight courier (a "NOTICE OF
MAJOR TRANSACTION") to each holder of Preferred Shares. At any time
after receipt of a Notice of Major Transaction (or, in the event a
Notice of Major Transaction is not delivered at least 10 days prior to a
Major Transaction, at any time on or after the date which is 10 days
prior to a Major Transaction), any holder of the Preferred Shares then
outstanding may require the Company to redeem all or a portion of the
holder's Preferred Shares, which redemption shall be effective
concurrent with the consummation of the Major Transaction, then
outstanding by delivering written notice thereof via facsimile and
overnight courier (a "NOTICE OF REDEMPTION AT OPTION OF BUYER UPON MAJOR
TRANSACTION") to the Company, which Notice of Redemption at Option of
Buyer Upon Major Transaction shall indicate (i) the number of Preferred
Shares that such holder is submitting for redemption, and (ii) the
applicable Major Transaction Redemption Price, as calculated pursuant to
Section 3(a).
(f) Mechanics of Redemption at Option of Buyer Upon
Triggering Event. Within one (1) Business Day after the occurrence of a
Triggering Event, the Company shall deliver written notice thereof via
facsimile and overnight courier (a "NOTICE OF TRIGGERING EVENT") to each
holder of Preferred Shares. At any time after the earlier of a holder's
receipt of a Notice of Triggering Event and such holder becoming aware
of a Triggering Event, any holder of Preferred Shares then outstanding
may require the Company to redeem all or a portion of the holder's
Preferred Shares then outstanding by delivering written notice thereof
via facsimile and overnight courier (a "NOTICE OF REDEMPTION AT OPTION
OF HOLDER UPON TRIGGERING EVENT") to the Company, which Notice of
Redemption at Option of Holder Upon Triggering Event shall indicate (i)
the number of Preferred Shares that such holder is submitting for
redemption, and (ii) the applicable Triggering Event Redemption Price,
as calculated pursuant to Section 3(b).
(g) Payment of Redemption Price. Upon the Company's
receipt of a Notice(s) of Redemption at Option of Holder Upon Triggering
Event or a Notice(s) of Redemption at Option of Holder Upon Major
Transaction from any holder of Preferred Shares, the Company shall
immediately notify each holder of Preferred Shares by facsimile of the
Company's receipt of such Notice(s) of Redemption at Option of Holder
Upon Triggering Event or Notice(s) of Redemption at Option of Holder
Upon Major Transaction and each holder which has sent such a notice
shall promptly submit to the Company or its Transfer Agent such holder's
Preferred Stock Certificates which such holder has elected to have
redeemed. The Company shall deliver the applicable Triggering Event
Redemption
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<PAGE> 18
Price, in the case of a redemption pursuant to Section 3(f), to such
holder within five (5) Business Days after the Company's receipt of a
Notice of Redemption at Option of Holder Upon Triggering Event and, in
the case of a redemption pursuant to Section 3(e), the Company shall
deliver the applicable Major Transaction Redemption Price concurrent
with the consummation of the Major Transaction; provided that a holder's
Preferred Stock Certificates shall have been so delivered to the
Company; and provided further that if the Company is unable to redeem
all of the Preferred Shares to be redeemed, the Company shall redeem an
amount from each holder of Preferred Shares being redeemed equal to such
holder's pro-rata amount (based on the number of Preferred Shares held
by such holder relative to the number of Preferred Shares outstanding)
of all Preferred Shares being redeemed. If the Company shall fail to
redeem all of the Preferred Shares submitted for redemption, in addition
to any remedy such holder of Preferred Shares may have under this
Certificate of Designations, the Exchange Agreement and the Registration
Rights Agreement, the applicable Redemption Price payable in respect of
such unredeemed Preferred Shares shall bear interest at the rate of 1.5%
per month (pro rated for partial months) until paid in full. Until the
Company pays such unpaid applicable Redemption Price in full to a holder
of Preferred Shares submitted for redemption, such holder shall have the
option (the "VOID OPTIONAL REDEMPTION OPTION") to, in lieu of
redemption, require the Company to promptly return to such holder(s) all
of the Preferred Shares that were submitted for redemption by such
holder(s) under this Section 3 and for which the applicable Redemption
Price has not been paid, by sending written notice thereof to the
Company via facsimile (the "VOID OPTIONAL REDEMPTION NOTICE"). Upon the
Company's receipt of such Void Optional Redemption Notice(s) and prior
to payment of the full applicable Redemption Price to such holder, (i)
the Notice(s) of Redemption at Option of Holder Upon Triggering Event or
the Notice(s) of Redemption at Option of Holder Upon Major Transaction,
as the case may be, shall be null and void with respect to those
Preferred Shares submitted for redemption and for which the applicable
Redemption Price has not been paid and (ii) the Company shall
immediately return any Preferred Shares submitted to the Company by each
holder for redemption under this Section 3(g) and for which the
applicable Redemption Price has not been paid. Notwithstanding the
foregoing, in the event of a dispute as to the determination of the
Closing Bid Price or the arithmetic calculation of the Redemption Price,
such dispute shall be resolved pursuant to Section 2(f)(iii) above with
the term "Closing Bid Price" being substituted for the term "fair market
value" and the term "Redemption Price" being substituted for the term
"Conversion Rate". A holder's delivery of a Void Optional Redemption
Notice and exercise of its rights following such notice shall not affect
the Company's obligations to make any payments (other than payments of
the Redemption Price with respect to such redemption) which have accrued
prior to the date of such notice. Payments provided for in this Section
3 shall have priority to payments to other stockholders in connection
with a Major Transaction.
(h) Events Excluded from Redemption Provisions.
Notwithstanding anything to the contrary set forth in Section 3 or
Section 4(a), the following events shall be excluded from the
definitions of Major Transaction and Triggering Event (individually, an
"EXCLUDED REDEMPTION EVENT" and, collectively, the "EXCLUDED REDEMPTION
EVENTS"):
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<PAGE> 19
(i) the failure of the Registration Statement to be
declared effective by the SEC on or prior to the date which is 60 days
after the Scheduled Effective Date with respect to a particular holder
of Preferred Shares, provided that the Company has used its reasonable
best efforts to have such Registration Statement declared effective by
the SEC;
(ii) while the Registration Statement is required to
be maintained effective pursuant to the terms of the Registration Rights
Agreement, the effectiveness of the Registration Statement lapses for
any reason (including, without limitation, the issuance of a stop order)
or is unavailable (other than on days during an Allowable Grace Period)
to the holder of the Preferred Shares for sale of the Registrable
Securities in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of at
least five (5) consecutive days (other than on any days during any
Allowable Grace Period) or for an aggregate of at least 10 days (other
than on any days during any Allowable Grace Period), provided that the
Company has used its best efforts to maintain the effectiveness of such
Registration Statement and has not taken voluntary action or voluntarily
failed to take any action which has directly or indirectly caused the
Registration Statement to lapse or become unavailable for the sale of
all the Registrable Securities pursuant to the terms of the Registration
Rights Agreement;
(iii) suspension from listing or delisting of the
Common Stock from The Nasdaq National Market, The American Stock
Exchange, Inc., or The New York Stock Exchange, Inc. for a period of 15
consecutive days or for an aggregate of at least 45 days in any 365-day
period, provided that the Company has used its reasonable best efforts
to maintain the listing of the Common Stock on such exchange and has not
taken any voluntary action or has voluntarily failed to take any action
which the Company knew or should have known would result in the
delisting of the Common Stock or the suspension of the Common Stock from
trading; and
(iv) a purchase, tender or exchange offer made to
and accepted by the holders of more than 50% of the outstanding shares
of Common Stock which is not approved or recommended by the Company's
Board of Directors.
As soon as practicable but in no event later than one (1) day after the
occurrence of an Excluded Redemption Event, the Company shall deliver
written notice thereof via facsimile and overnight courier (a "COMPANY'S
EXCLUDED REDEMPTION EVENT NOTICE") to each holder of Preferred Shares.
At any time during the period beginning after the earlier of the
holders' receipt of a Company's Excluded Redemption Event Notice and
such holders becoming aware of an Excluded Redemption Event and ending
on the date which is thirty (30) days after the holders' receipt of a
Company's Excluded Redemption Event Notice, the holders of at least
two-thirds (2/3) of the Preferred Shares then outstanding may require
the Company to satisfy its obligations under Section 3(i) by delivering
written notice thereof via facsimile and overnight courier (a "HOLDERS'
EXCLUDED REDEMPTION EVENT NOTICE") to the Company, which notice shall
specify the option which such holders have elected pursuant to and in
accordance with Section 3(i), if applicable. The Company shall within
one (1) day of its receipt of the Holders' Excluded Redemption Event
Notice provide each holder with written notice via facsimile and
overnight courier (a "EXCLUDED REDEMPTION OPTION ELECTION NOTICE") which
notice shall specify the option which the Company has elected to
exercise pursuant to and in accordance with Section 3(i).
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<PAGE> 20
(i) Rights of the Holders of the Preferred Shares upon the
Occurrence of an Excluded Redemption Event. In addition to any other
remedies the holders of the Preferred Shares may have at law or in
equity, if an Excluded Redemption Event occurs and the holders of the
Preferred Shares have provided the Company with a Holders' Excluded
Redemption Event Notice, then the Company, at its option, shall either
(A) pay to each holder of Preferred Shares the Redemption Price for each
outstanding share of Preferred Stock held by such holder pursuant to and
in accordance with Section 3(g) or (B) if:
(i) the Excluded Redemption Event is pursuant to
Section 3(h)(i), then immediately upon the occurrence of such an
Excluded Redemption Event (and from time to time as applicable), the
Fixed Conversion Price of the Preferred Shares shall be adjusted to
either, at the option of the holders' of at least two-thirds (2/3) of
the Preferred Shares then outstanding, as set forth in the Holders'
Excluded Redemption Event Notice, (I) 90% of the lowest Closing Bid
Price on any trading day during the period beginning on and including
the date which is ten (10) trading days prior to the Effective Date and
ending on and including the earlier of (a) the date the Registration
Statement is declared effective by the SEC and (b) the Conversion Date
with respect to the Preferred Share for which this determination is
being made, or (II) the Conversion Percentage in effect immediately
prior to such Excluded Redemption Event shall be reduced by 25
percentage points;
(ii) the Excluded Redemption Event is pursuant to
Section 3(h)(ii), then (A) beginning on and including the first day
following the receipt by the Company of a Holders' Excluded Redemption
Event Notice, the Company shall pay to each holder of Preferred Shares
an Excluded Redemption Event Daily Payment (as defined below) on each
day that such Excluded Redemption Event continues, provided, however,
that the Company shall not be obligated to make an Excluded Redemption
Event Daily Payment pursuant to this Section 3(i) for more than 20 days
in any 365 day period and (B) immediately upon the occurrence of such an
Excluded Redemption Event (and from time to time as applicable), the
Fixed Conversion Price of the Preferred Shares shall be adjusted to
either, at the option of the holders of at least two-thirds (2/3) of the
Preferred Shares as set forth in the Holders' Excluded Redemption Event
Notice, (I) 90% of the lowest Closing Bid Price on any trading day
following the occurrence of such Excluded Redemption Event (excluding
any days during an Allowable Grace Period) that the Registration
Statement lapses or is unavailable for sale of all Registrable
Securities, or (II) the Conversion Percentage in effect immediately
prior to such Excluded Redemption Event shall be reduced by 25
percentage points; or
(iii) the Excluded Redemption Event is other than
pursuant to Section 3(h)(i) or 3(h)(ii), then (A) beginning on and
including the first day following the receipt by the Company of a
Holders' Excluded Redemption Event Notice, the Company shall pay to each
holder of Preferred Shares an Excluded Redemption Event Daily Payment on
each day that such Excluded Redemption Event continues, provided,
however, that the Company shall not be obligated to make an Excluded
Redemption Event Daily Payment pursuant to this Section 3(i) for more
than 20 days in any 365 day period, and (B) immediately upon the
occurrence of such Excluded Redemption Event (and from time to time as
applicable) the Conversion Percentage in effect immediately prior to
such Excluded Redemption Event shall be reduced by 25 percentage points.
"EXCLUDED REDEMPTION EVENT DAILY PAYMENT" shall mean the payment to each
holder of Preferred
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<PAGE> 21
Shares, by the Company, of an amount in cash per Preferred Share equal
to one percent (1%) of the Liquidation Value.
(4) Inability to Fully Convert.
(a) Holder's Option if Company Cannot Fully Convert. If,
upon the Company's receipt of a Conversion Notice or on the Maturity
Date, the Company can not issue shares of Common Stock registered for
resale under the Registration Statement (or which are exempt from the
registration requirements under the 1933 Act pursuant to Rule 144(k)
under the 1933 Act) for any reason, including, without limitation,
because the Company (x) does not have a sufficient number of shares of
Common Stock authorized and available, (y) is otherwise prohibited by
applicable law or by the rules or regulations of any stock exchange,
interdealer quotation system or other self-regulatory organization with
jurisdiction over the Company or its Securities from issuing all of the
Common Stock which is to be issued to a holder of Preferred Shares
pursuant to a Conversion Notice or (z) fails to have a sufficient number
of shares of Common Stock registered for resale under the Registration
Statement, then the Company shall issue as many shares of Common Stock
as it is able to issue in accordance with such holder's Conversion
Notice and pursuant to Section 2(f) and, with respect to the unconverted
Preferred Shares, the holder, solely at such holder's option, can elect
to:
(i) if the Company's inability to fully convert
Preferred Shares is pursuant to Section 4(a)(z), require the Company to
issue restricted shares of Common Stock in accordance with such holder's
Conversion Notice and pursuant to Section 2(f); or
(ii) void its Conversion Notice and retain or have
returned, as the case may be, the nonconverted Preferred Shares that
were to be converted pursuant to such holder's Conversion Notice
(provided that a holder's voiding its Conversion Notice shall not effect
the Company's obligations to make any payments which have accrued prior
to the date of such notice); or
(b) Mechanics of Fulfilling Holder's Election. The
Company shall immediately send via facsimile to a holder of Preferred
Shares, upon receipt of a facsimile copy of a Conversion Notice from
such holder which cannot be fully satisfied as described in Section
4(a), a notice of the Company's inability to fully satisfy such holder's
Conversion Notice (the "INABILITY TO FULLY CONVERT NOTICE"). Such
Inability to Fully Convert Notice shall indicate (i) the reason why the
Company is unable to fully satisfy such holder's Conversion Notice, and
(ii) the number of Preferred Shares which cannot be converted. Such
holder shall notify the Company of its election pursuant to Section 4(a)
above by delivering written notice via facsimile to the Company.
(c) Pro Rata Conversion and Redemption. In the event the
Company receives a Conversion Notice, Notice of Redemption at Option of
Buyer Upon Major Transaction or Notice of Redemption at Option of Buyer
Upon Triggering Event from more than one holder of Preferred Shares on
the same day and the Company can convert and/or
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<PAGE> 22
redeem some, but not all, of the Preferred Shares pursuant to this
Section 4, the Company shall convert and/or redeem from each holder of
Preferred Shares electing to have Preferred Shares converted and/or
redeemed at such time an amount equal to such holder's pro-rata amount
(based on the number of Preferred Shares held by such holder relative to
the number of Preferred Shares outstanding) of all Preferred Shares
being converted and redeemed at such time.
(5) Conversion at the Company's Election. At any time or times during
the period beginning on the Issuance Date and ending on and including the date
which is two (2) years after the Effective Date, the Company shall have the
right, in its sole discretion, to require that any or all of such outstanding
Preferred Shares be converted ("CONVERSION AT COMPANY'S ELECTION") at the
Conversion Rate; provided that the Conditions to Conversion at the Company's
Election (as set forth below) are satisfied. The Company shall exercise its
right to Conversion at Company's Election by providing each holder of Preferred
Shares written notice (by facsimile and overnight courier) ("NOTICE OF
CONVERSION AT COMPANY'S ELECTION") at least ten trading days prior to the date
selected by the Company for conversion ("COMPANY'S ELECTION CONVERSION DATE").
If the Company elects to require conversion of some, but not all, of such
Preferred Shares, the Company shall convert an amount from each holder of
Preferred Shares equal to such holder's pro rata amount (based on the number of
such Preferred Shares held by such holder relative to the number of such
Preferred Shares outstanding on the date of the Company's delivery of the Notice
of Conversion at Company's Election) of all Preferred Shares the Company is
requiring to be converted. The Notice of Conversion at Company's Election shall
indicate (x) the number of Preferred Shares the Company has selected for
conversion, (y) the Company's Election Conversion Date, which date shall be not
less than ten or more than 30 trading days after each holder's receipt of such
notice, and (z) each holder's pro rata share of outstanding Preferred Shares
which the Company is requiring to be converted. All Preferred Shares selected
for conversion in accordance with the provision of this Section 5 shall be
converted as of the Company's Election Conversion Date in accordance with
Section 2 as if the holders of such Preferred Shares selected by the Company to
be converted had given the Conversion Notice on the Company's Election
Conversion Date. All holders of Preferred Shares shall thereupon and within two
(2) Business Days after the Company's Election Conversion Date surrender all
Preferred Stock Certificates selected for conversion, duly endorsed for
cancellation, to the Company. "CONDITIONS TO CONVERSION AT THE COMPANY'S
ELECTION" means the following conditions: (i) on each day during the period
beginning 60 trading days prior to the Company's Election Conversion Date and
ending on and including the Company's Election Conversion Date, no Grace Period
(as defined in Section 3(f) of the Registration Rights Agreement) shall be in
effect and the Registration Statement shall have been effective and available
for the sale of no less than 125% of the Registrable Securities; (ii) on each
day during the period beginning 60 trading days prior to the date of the
Company's Election Conversion Date and ending on and including the Company's
Election Conversion Date, the Common Stock is designated for quotation on The
Nasdaq National Market or listed on The New York Stock Exchange, Inc. or the
American Stock Exchange, Inc. and is not suspended from trading; (iii) on each
day during the 20 consecutive trading days immediately preceding the Company's
Election Conversion Date, the Closing Bid Price of the Common Stock is at least
$5.89875 (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions); (iv) during the period beginning
on the Issuance Date of any Preferred Shares and ending on and including the
Company's Election Conversion Date,
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<PAGE> 23
the Company shall have delivered Conversion Shares upon conversion of the
Preferred Shares to the Buyers on a timely basis as set forth in Section
2(f)(ii) of this Certificate of Designations; and (v) the Company otherwise has
satisfied its obligations and is not in default under this Certificate of
Designations, the Exchange Agreement and the Registration Rights Agreement.
Notwithstanding the above, any holder of Preferred Shares may convert such
shares (including Preferred Shares selected for conversion) into Common Stock
pursuant to Section 2(a) on or prior to the date immediately preceding the
Company's Election Conversion Date.
(6) Redemption at the Company's Election Upon Change of Control. At any
time or times on or after the date the Company publicly discloses a Change of
Control Transaction, the Company shall have the right, in its sole discretion,
to require that all of the outstanding Preferred Shares be redeemed ("REDEMPTION
AT COMPANY'S ELECTION") at a price per Preferred Share equal to (1) 115% of the
Liquidation Value (as defined in Section 11), provided that the Registration
Statement shall have been effective and available for sale of all the
Registrable Securities at all times during the 60 consecutive trading days
immediately preceding the Company's Election Redemption Date (as defined below),
or (2) if the Registration Statement is not effective and available for sale of
all the Registrable Securities at all times during the 60 consecutive trading
days immediately preceding the Company's Election Redemption Date, then the
greater of (a) 115% of the Liquidation Value and (b) the product of (I) the
Conversion Rate at such time, and (II) the Closing Bid Price on the date of the
public announcement of such Change of Control Transaction or the next date on
which the exchange or market on which the Common Stock is traded is open if such
public announcement is made (x) after 12:00 p.m. Eastern Time, on such date or
(y) on a date on which the exchange or market on which the Common Stock is
traded is closed (the "CHANGE OF CONTROL REDEMPTION PRICE"); provided that the
Conditions to Redemption at the Company's Election (as set forth below) are
satisfied. The Company shall exercise its right to Redemption at Company's
Election by providing each holder of Preferred Shares written notice ("NOTICE OF
REDEMPTION AT COMPANY'S ELECTION") after the public disclosure of a Change of
Control Transaction and at least 10 trading days ("REDEMPTION AT COMPANY'S
ELECTION NOTICE PERIOD") prior to the date of consummation of the Change of
Control Transaction ("COMPANY'S ELECTION REDEMPTION DATE"). The Notice of
Redemption at Company's Election shall indicate the anticipated Company's
Election Redemption Date. If the Company has exercised its right of Redemption
at Company's Election and the conditions to such Redemption at Company's
Election have been satisfied, then all Preferred Shares outstanding at the time
of the consummation of the Change of Control Transaction shall be redeemed as of
the Company's Election Redemption Date by payment by the Company to each holder
of Preferred Shares of the Change of Control Redemption Price concurrent with
the closing of the Change of Control Transaction. All holders of Preferred
Shares shall thereupon and within two (2) Business Days after the Company's
Election Redemption Date, or such earlier date as the Company and each holder of
Preferred Shares mutually agree, surrender all outstanding Preferred Stock
Certificates, duly endorsed for cancellation, to the Company. If the Company
fails to pay the full Change of Control Redemption Price with respect to any
Preferred Shares concurrently with the closing of the Change of Control
Transaction, then the Redemption at Company's Election shall be null and void
with respect to such Preferred Shares and the holder of such Preferred Shares
shall be entitled to all the rights of a holder of outstanding Preferred Shares
set forth in this Certificate of Designations. "CONDITIONS TO REDEMPTION AT THE
COMPANY'S ELECTION" means the following conditions: (i) on each day during the
period beginning 60 trading days prior to the date of the
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<PAGE> 24
Company's Election Redemption Date and ending on and including the Company's
Election Redemption Date, the Common Stock is designated for quotation on The
Nasdaq National Market or listed on The New York Stock Exchange, Inc. and is not
suspended from trading; (ii) during the period beginning on the Issuance Date
and ending on and including the Company's Election Redemption Date, the Company
shall have delivered Conversion Shares upon conversion of the Preferred Shares
to the Buyers on a timely basis as set forth in Section 2(f)(ii) of this
Certificate of Designations; and (iii) the Company otherwise has satisfied its
obligations and is not in default under this Certificate of Designations, the
Exchange Agreement and the Registration Rights Agreement. Notwithstanding the
above, any holder of Preferred Shares may convert such shares (including
Preferred Shares selected for redemption) into Common Stock pursuant to Section
2(a) on or prior to the date immediately preceding the Company's Election
Redemption Date.
(7) Redemption at the Company's Election Upon Decrease in Stock
Price. In the event that at any time the Fixed Conversion Price immediately
following a Pricing Period is less than $1.96625 (subject to adjustment for
stock splits, stock dividends, stock combinations and other similar
transactions) the Company shall have the right, in its sole discretion, to
require that all, but not less than all, of the outstanding Preferred Shares be
redeemed ("COMPANY'S RESET REDEMPTION ELECTION") at the Liquidation Value
("COMPANY'S RESET REDEMPTION PRICE"); provided that the Conditions to the
Company's Reset Redemption Election (as set forth below) are satisfied. The
Company shall exercise the Company's Reset Redemption Election by providing each
holder of Preferred Shares written notice ("NOTICE OF COMPANY'S RESET REDEMPTION
ELECTION") on any date during the period beginning on and including the last day
of a Pricing Period and ending on and including the date which is 20 days after
the last day of such Pricing Period. The Notice of Company's Reset Redemption
Election shall set forth the date on which the Company's Reset Redemption
Election shall be consummated, which date shall be not less than 20 trading days
and not more than 30 trading days after the date each holder of Preferred Shares
receives the Company's Notice of Company's Reset Redemption Election (the
"COMPANY'S RESET REDEMPTION DATE"). If the Company has exercised the Company's
Reset Redemption Election and the Conditions to Redemption at the Company's
Reset Redemption Election have been satisfied, then all Preferred Shares
outstanding at the time of the Company's Reset Redemption Election shall be
redeemed as of the Company's Reset Redemption Election Date by payment by the
Company to each holder of Preferred Shares of the Company's Reset Redemption
Price. All holders of Preferred Shares shall thereupon and within two (2)
Business Days after the Company's Reset Redemption Election Date, or such
earlier date as the Company and each holder of Preferred Shares mutually agree,
surrender all outstanding Preferred Stock Certificates, duly endorsed for
cancellation, to the Company. If the Company fails to pay the full Company's
Reset Redemption Price with respect to any Preferred Shares, then the Company's
Reset Redemption Election shall be null and void with respect to such Preferred
Shares and the holder of such Preferred Shares shall be entitled to all the
rights of a holder of outstanding Preferred Shares set forth in this Certificate
of Designations. "CONDITIONS TO REDEMPTION AT THE COMPANY'S RESET REDEMPTION
ELECTION" means the following conditions: (i) on each day during the period
beginning 20 trading days prior to the Company's Election Redemption Date and
ending on and including the Company's Election Redemption Date, no Grace Period
(as defined in Section 3(f) of the Registration Rights Agreement) shall be in
effect and the Registration Statement shall have been effective and available
for the sale of no less than 125% of the Registrable Securities; (ii) on each
day during the period beginning 20 trading days prior to the
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<PAGE> 25
date of the Company's Election Redemption Date and ending on and including the
Company's Election Redemption Date, the Common Stock is designated for quotation
on The Nasdaq National Market or listed on The New York Stock Exchange, Inc. or
the American Stock Exchange, Inc. and is not suspended from trading; (iii)
during the period beginning on the first Issuance Date of any Preferred Shares
and ending on and including the Company's Election Redemption Date, the Company
shall have delivered Conversion Shares upon conversion of the Preferred Shares
to the Buyers on a timely basis as set forth in Section 2(f)(ii) of this
Certificate of Designations; (iv) the Company otherwise has satisfied its
obligations and is not in default under this Certificate of Designations, the
Exchange Agreement and the Registration Rights Agreement; and (vi) during the
period beginning on the Effective Date and ending on and including the Company
Election Redemption Date, there shall not have occurred a Major Transaction or
the announcement of a pending or proposed Major Transaction. Notwithstanding the
above, any holder of Preferred Shares may convert such shares (including
Preferred Shares selected for conversion) into Common Stock pursuant to Section
2(a) on or prior to the date immediately preceding the Company's Election
Redemption Date.
(8) Reissuance of Certificates. In the event of a conversion or
redemption pursuant to this Certificate of Designations of less than all of the
Preferred Shares represented by a particular Preferred Stock Certificate, the
Company shall promptly cause to be issued and delivered to the holder of such
Preferred Shares a preferred stock certificate representing the remaining
Preferred Shares which have not been so converted or redeemed.
(9) Reservation of Shares. The Company shall, so long as any of the
Preferred Shares are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Preferred Shares, such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all of the
Preferred Shares then outstanding (without regard to any limitations on
conversions); provided that the number of shares of Common Stock so reserved
shall at no time be less than 200% of the number of shares of Common Stock for
which the Preferred Shares are at any time convertible. The initial number of
shares of Common Stock reserved for conversion of the Preferred Shares and each
increase in the number of shares so reserved shall be allocated pro rata among
the holders of the Preferred Shares based on the number of Preferred Shares held
by each holder at the time of issuance of the Preferred Shares or increase in
the number of reserved shares, as the case may be. In the event a holder shall
sell or otherwise transfer any of such holder's Preferred Shares, each
transferee shall be allocated a pro rata portion of the number of reserved
shares of Common Stock reserved for such transferor. Any shares of Common Stock
reserved and which remain allocated to any person or entity which does not hold
any Preferred Shares shall be allocated to the remaining holders of Preferred
Shares, pro rata based on the number of Preferred Shares then held by such
holder.
(10) Voting Rights. Holders of Preferred Shares shall have no voting
rights, except as required by law, including but not limited to the General
Corporation Law of the State of Delaware, and as expressly provided in this
Certificate of Designations.
(11) Liquidation, Dissolution, Winding-Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the holders of the Preferred
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<PAGE> 26
Shares shall be entitled to receive in cash out of the assets of the Company,
whether from capital or from earnings available for distribution to its
stockholders (the "PREFERRED FUNDS"), before any amount shall be paid to the
holders of any of the capital stock of the Company of any class junior in rank
to the Preferred Shares in respect of the preferences as to the distributions
and payments on the liquidation, dissolution and winding up of the Company, an
amount per Preferred Share equal to the sum of (i) $10,000 and (ii) the
Additional Amount (such sum being referred to as the "LIQUIDATION VALUE");
provided that, if the Preferred Funds are insufficient to pay the full amount
due to the holders of Preferred Shares and holders of shares of other classes or
series of preferred stock of the Company that are of equal rank with the
Preferred Shares as to payments of Preferred Funds (the "PARI PASSU SHARES"),
then each holder of Preferred Shares and Pari Passu Shares shall receive a
percentage of the Preferred Funds equal to the full amount of Preferred Funds
payable to such holder as a liquidation preference, in accordance with their
respective Certificate of Designations, Preferences and Rights, as a percentage
of the full amount of Preferred Funds payable to all holders of Preferred Shares
and Pari Passu Shares. The purchase or redemption by the Company of stock of any
class, in any manner permitted by law, shall not, for the purposes hereof, be
regarded as a liquidation, dissolution or winding up of the Company. Neither the
consolidation or merger of the Company with or into any other Person, nor the
sale or transfer by the Company of less than substantially all of its assets,
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Company. No holder of Preferred Shares shall be entitled to
receive any amounts with respect thereto upon any liquidation, dissolution or
winding up of the Company other than the amounts provided for herein; provided
that a holder of Preferred Shares shall be entitled to all amounts previously
accrued with respect to amounts owed hereunder.
(12 Preferred Rank; Participation.
(i) All shares of Common Stock shall be of junior rank to all
Preferred Shares in respect to the preferences as to distributions and
payments upon the liquidation, dissolution and winding up of the
Company. The rights of the shares of Common Stock shall be subject to
the preferences and relative rights of the Preferred Shares. The shares
of the Series A Convertible Preferred Stock, the Series D Convertible
Preferred Stock and the Series E Preferred Stock shall rank pari passu
with the Preferred Shares. Without the prior express written consent of
the holders of not less than two-thirds (2/3) of the then outstanding
Preferred Shares, the Company shall not hereafter authorize or issue
additional or other capital stock that is senior to the Preferred Shares
in respect of the preferences as to distributions and payments upon the
liquidation, dissolution and winding up of the Company. Without the
prior express written consent of the holders of not less than two-thirds
(2/3) of the then outstanding Preferred Shares, the Company shall not
hereafter authorize or make any amendment to the Company's Certificate
of Incorporation or bylaws, or file any resolution of the board of
directors of the Company with the Secretary of State of the State of
Delaware containing any provisions that would adversely affect or
otherwise impair the rights or relative priority of the holders of the
Preferred Shares relative to the holders of the Common Stock or the
holders of any other class of capital stock. In the event of the merger
or consolidation of the Company with or into another corporation, the
Preferred Shares shall maintain their relative powers, designations and
preferences provided for herein and no merger shall result inconsistent
therewith.
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<PAGE> 27
(ii) Subject to the rights of the holders, if any, of the Pari Passu
Shares, the holders of the Preferred Shares shall, as holders of
Preferred Stock, be entitled to such dividends paid and distributions
made to the holders of Common Stock to the same extent as if such
holders of Preferred Shares had converted the Preferred Shares into
Common Stock (without regard to any limitations on conversion herein or
elsewhere) and had held such shares of Common Stock on the record date
for such dividends and distributions. Payments under the preceding
sentence shall be made concurrently with the dividend or distribution to
the holders of Common Stock.
(13 Restriction on Redemption and Cash Dividends with respect to
Other Capital Stock. Until all of the Preferred Shares have been converted or
redeemed as provided herein, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, its Common Stock
without the prior express written consent of the holders of not less than
two-thirds (2/3) of the then outstanding Preferred Shares.
(14 Vote to Change the Terms of or Issue Preferred Shares. The
affirmative vote at a meeting duly called for such purpose, or the written
consent without a meeting, of the holders of not less than two-thirds (2/3) of
the then outstanding Preferred Shares shall be required for (a) any change to
this Certificate of Designations or the Company's Certificate of Incorporation
that would amend, alter, change or repeal any of the powers, designations,
preferences and rights of the Preferred Shares, or (b) any issuance of Preferred
Shares other than pursuant to the Exchange Agreement.
(15 Lost or Stolen Certificates. Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the Preferred
Shares, and, in the case of loss, theft or destruction, of an indemnification
undertaking by the holder to the Company and, in the case of mutilation, upon
surrender and cancellation of the Preferred Stock Certificate(s), the Company
shall execute and deliver new preferred stock certificate(s) of like tenor and
date; provided, however, the Company shall not be obligated to re-issue
preferred stock certificates if the holder contemporaneously requests the
Company to convert such Preferred Shares into Common Stock.
(16 Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Certificate of Designations
shall be cumulative and in addition to all other remedies available under this
Certificate of Designations, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designations. The Company covenants to each holder of Preferred Shares that
there shall be no characterization concerning this instrument other than as
expressly provided herein. Amounts set forth or provided for herein with respect
to payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations
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<PAGE> 28
hereunder will cause irreparable harm to the holders of the Preferred Shares and
that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holders of the Preferred Shares shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
(17) Specific Shall Not Limit General; Construction. No specific
provision contained in this Certificate of Designations shall limit or modify
any more general provision contained herein. This Certificate of Designations
shall be deemed to be jointly drafted by the Company and the initial holders of
the Preferred Shares and shall not be construed against any person as the
drafter hereof.
(18) Failure or Indulgence Not Waiver. No failure or delay on the
part of a holder of Preferred Shares in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof (except to the extent that
such power, right or privilege must, in accordance with the terms of this
Certificate of Designations, be exercised within a specified period of time and
such period of time has lapsed without such power, right or privilege being
exercised), nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
(19) Notices. Any notice required to be delivered pursuant to the
terms of this Certificate of Designations shall be delivered, unless otherwise
provided in this Certificate of Designations, in accordance with the terms, and
subject to the notice provisions of, the Exchange Agreement.
* * * * * *
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<PAGE> 29
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations to be signed by Steven Markman, its Chief Executive Officer and
President, as of September __, 1999.
GENERAL MAGIC, INC.
By:
--------------------------------
Name: Steven Markman
------------------------------
Its: Chief Executive Officer and
President
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<PAGE> 30
EXHIBIT I
GENERAL MAGIC, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and Rights of
Series D Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATIONS"). In
accordance with and pursuant to the Certificate of Designations, the undersigned
hereby elects to convert the number of shares of Series D Convertible Preferred
Stock, par value $.001 per share (the "PREFERRED SHARES"), of General Magic,
Inc., a DELAWARE corporation (the "COMPANY"), indicated below into shares of
Common Stock, par value $.001 per share (the "COMMON STOCK"), of the Company, by
tendering the stock certificate(s) representing the Preferred Shares specified
below as of the date specified below.
Date of Conversion:
----------------------------------------------------
Number of Preferred Shares to be converted:
----------------------------
Stock certificate no(s). of Preferred Shares to be converted:
----------
Please confirm the following information:
Conversion Price:
------------------------------------------------------
Number of shares of Common Stock
to be issued:
------------------------------------------------------
Is the alternative Conversion Price being relied on pursuant to Section
2(d)(iii) of the Certificate of Designations? (check one) YES _____ NO
_____
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issue to:
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Facsimile Number:
------------------------------------------------------
Authorization:
------------------
By:
--------------------------------
Title:
-----------------------------
Dated:
------------------
Account Number:
(if electronic book entry transfer):
---------------------------------
Transaction Code Number
(if electronic book entry transfer):
---------------------------------
THIS NOTICE MUST BE DELIVERED TO COMPANY AND TRANSFER AGENT.
<PAGE> 1
EXHIBIT 4.1
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (the "AGREEMENT"), dated as of September 9, 1999, by
and among General Magic, Inc., a Delaware corporation, with headquarters located
at 420 N. Mary Avenue, Sunnyvale, California 94086 (the "COMPANY"), and the
investors listed on the Schedule of Investors attached hereto (individually, an
"INVESTOR" and collectively, the "INVESTORS").
WHEREAS:
A. Each of the Investors owns shares of Series D Convertible Preferred
Stock, par value $.001 per share (the "SERIES D PREFERRED STOCK"), of the
Company;
B. The Company has agreed and each of the Investors, severally and not
jointly, has agreed that, subject to the terms and conditions of this Agreement,
each Investor will tender to the Company that number of shares of Series D
Preferred Stock set forth opposite such Investor's name on the Schedule of
Investors and the Company will exchange the Series D Preferred Stock for an
equal number of shares of a newly created series of preferred stock, par value
$.001 per share, designated Series F Convertible Preferred Stock (the "PREFERRED
SHARES"), which shall be convertible into shares of the Company's Common Stock,
par value $.001 per share (the "COMMON STOCK") (as converted, the "CONVERSION
SHARES"), in accordance with the terms of the Company's Certificate of
Designations, Preferences and Rights of the Series F Convertible Preferred Stock
(the "CERTIFICATE OF DESIGNATIONS"), substantially in the form attached hereto
as Exhibit A.
C. The execution and delivery of this Agreement by the Company and the
Investors and the offer and issuance by the Company of Preferred Shares is being
made in reliance upon the provisions of Section 3(a)(9) of the Securities Act of
1933, as amended (the "1933 Act"). The Preferred Shares and the Conversion
Shares issuable upon conversion thereof are sometimes collectively referred to
in this Agreement as the "SECURITIES"; and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit B (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
<PAGE> 2
NOW THEREFORE, the Company and the Investors hereby agree as follows:
1 AGREEMENT TO EXCHANGE.
(a) Exchange. Each Investor, severally and not jointly, hereby
agrees that at the Closing (as defined below) it will exchange shares of Series
D Preferred Stock for shares of Series F Convertible Preferred Stock in the
amounts set forth in the Schedule of Investors and on the terms and conditions
set forth herein. At the Closing, the Company shall issue to each Investor one
Preferred Share for each share of Series D Preferred Stock being exchanged by
such Investor, in the denominations as such Investor shall request and in the
name of such Investor or its designee.
(b) The Closing Date. The date and time of the Closing (the
"CLOSING Date") shall be 10:00 a.m. Central Time within three (3) business days
following the date hereof, subject to satisfaction (or waiver) of the conditions
to the Closing set forth in Sections 6 and 7 (or such later date as is mutually
agreed to by the Company and the Investors). The Closing shall occur on the
Closing Date at the offices of Katten Muchin & Zavis, 525 West Monroe Street,
Suite 1600, Chicago, Illinois 60661-3693 or at such other place as the Company
and the Investors may mutually agree.
2 INVESTOR'S REPRESENTATIONS AND WARRANTIES.
Each Investor represents and warrants with respect to only itself
that:
(a) Reliance on Exemptions. Such Investor understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of such
Investor to acquire the Securities.
(b) No Governmental Review. Such Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(c) Transfer or Resale. Such Investor understands that, except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Investor shall have delivered to
the Company an opinion of counsel, in form and substance reasonably satisfactory
to the Company, to the effect that the Securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) such Investor provides the Company with reasonable
assurance that the Securities can be sold, assigned or transferred pursuant to
Rule 144 promulgated under the 1933 Act (or a successor rule thereto) ("RULE
144"); (ii) any sale of the
2
<PAGE> 3
Securities made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder. Notwithstanding the foregoing, the
Securities may be pledged in connection with a bona fide margin account.
(d) Legends. Such Investor understands that the certificates or
other instruments representing the Preferred Shares and, until such time as the
sale of the Conversion Shares have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares, except as set forth below, shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT.
The legend set forth above shall be removed and the Company shall issue a
certificate or other instrument without such legend to the holder of the
Securities upon which it is stamped, if (i) such Securities are registered for
sale under the 1933 Act, (ii) in connection with a sale transaction, such holder
provides the Company with an opinion of counsel, in form and substance
reasonably acceptable to the Company, to the effect that a public sale,
assignment or transfer of such Securities may be made without registration under
the 1933 Act, or (iii) such holder provides the Company with reasonable
assurances that such Securities can be sold without restriction pursuant to Rule
144(k). Each Investor acknowledges, covenants and agrees to sell the Securities
represented by a certificate(s) or other instruments from which the legend has
been removed, only pursuant to (i) a registration statement effective under the
1933 Act, or (ii) advice of counsel that such sale is exempt from registration
required by Section 5 of the 1933 Act. Notwithstanding anything to the contrary
contained herein, if the legend is removed from any certificate representing any
of the Securities due to the availability of an effective registration statement
relating to the resale thereof, and such registration statement is no longer
effective, upon the reasonable request of the Company, each Investor who is a
holder of such Securities agrees to return certificates representing the
affected Securities, provided such Securities have not been sold pursuant to
such registration statement, to
3
<PAGE> 4
the Company's transfer agent in order that the legend set forth above may be
re-imposed on such Securities.
(e) Authorization; Enforcement. This Agreement, the Registration
Rights Agreement and the Waiver Agreement, which is attached hereto as Exhibit E
(the "Waiver Agreement") have been duly and validly authorized, executed and
delivered on behalf of such Investor and constitute valid and binding agreements
of such Investor enforceable against such Investor in accordance with their
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(f) Residency. Such Investor is a resident of that country or
jurisdiction specified on the Schedule of Investors.
(g) No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Waiver Agreement by such
Investor and the consummation by such Investor of the transactions contemplated
hereby and thereby will not result in a violation of the certificate of
incorporation, by-laws or other documents of organization of such Investor.
3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Investors that:
(a) Organization and Qualification. Set forth in Schedule 3(a) is a
complete list of each entity in which the Company, directly or indirectly, owns
any capital stock or holds an equity or similar interest. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns more than 50% of the outstanding
capital stock or holds an equity or similar interest representing at least 50%
of the outstanding equity or similar interests of such entity) (a complete list
of which is set forth in Schedule 3(a)) are corporations duly organized and
validly existing in good standing under the laws of the jurisdiction in which
they are incorporated, and have the requisite corporate power and authorization
to own their properties and to carry on their business as now being conducted.
Each of the Company and its Subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse
effect on the business, properties, assets, operations, results of operations,
financial condition or prospects of the Company and its Subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or on the
authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below) or the Certificate of Designations.
(b) Authorization; Enforcement; Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform its obligations
4
<PAGE> 5
under this Agreement, the Registration Rights Agreement, the Waiver Agreement
and the Irrevocable Transfer Agent Instructions (as defined in Section 5) and
each of the other agreements entered into by the parties hereto in connection
with the transactions contemplated by this Agreement (collectively, the
"TRANSACTION DOCUMENTS"), and to issue the Securities in accordance with the
terms hereof and thereof; (ii) the execution and delivery of the Transaction
Documents and the Certificate of Designations by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Preferred Shares and the
reservation for issuance and the issuance of the Conversion Shares issuable upon
conversion) have been duly authorized by the Company's Board of Directors and no
further consent or authorization is required by the Company, its Board of
Directors or its stockholders; (iii) the Transaction Documents have been duly
executed and delivered by the Company; (iv) the Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies; and (v)
prior to the Closing Date, the Certificate of Designations will have been filed
with the Secretary of State of the State of Delaware and will be in full force
and effect, enforceable against the Company in accordance with its terms.
(c) Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 100,000,000 shares of Common Stock, of
which as of the date hereof, 41,219,797 shares were issued and outstanding,
9,953,234 shares are issuable and reserved for issuance pursuant to the
Company's stock option and purchase plans and 805,000 shares are issuable and
reserved for issuance pursuant to securities (other than the Preferred Shares)
exercisable or exchangeable for, or convertible into, shares of Common Stock;
and (ii) 500,000 shares of Preferred Stock, of which as of the date hereof, (A)
50,000 shares were designated as Series A Preferred Stock and 50,000 shares of
Series A Preferred Stock were issued and outstanding, (B) 12,000 shares were
designated as Series B Preferred Stock and no shares of Series B Preferred Stock
were issued and outstanding, (C) 3,000 shares were designated as Series C
Preferred Stock and no shares of Series C Preferred Stock were issued and
outstanding, (D) 2,000 shares were designated as the Series D Preferred Stock
and 2,000 shares of Series D Preferred Stock were issued and outstanding, and
(E) 699 shares were designated as the Series E Preferred Stock and 599 shares of
Series E Preferred Stock were issued and outstanding and 100 shares are issuable
and reserved for issuance pursuant to securities exercisable for shares of
Series E Preferred Stock. All of such outstanding shares have been, or upon
issuance will be, validly issued and fully paid and nonassessable. Except as
disclosed in Schedule 3(c), (i) no shares of the Company's capital stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company; (ii) there are no outstanding
debt securities; (iii) there are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries; (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under
5
<PAGE> 6
the 1933 Act (except the Registration Rights Agreement); (v) there are no
outstanding securities of the Company or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to the Investors true and
correct copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "CERTIFICATE OF INCORPORATION"), and the
Company's By-laws, as in effect on the date hereof (the "BY-LAWS"), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
(d) Issuance of Securities. The Preferred Shares are duly authorized
and, upon issuance in accordance with the terms hereof, shall be (i) validly
issued, fully paid and non-assessable, (ii) free from all taxes, liens and
charges with respect to the issue thereof and (iii) entitled to the rights and
preferences set forth in the Certificate of Designations. At least that number
of shares of Common Stock required to be reserved by the Company pursuant to
Section 4(e) have been duly authorized and reserved for issuance upon conversion
of the Preferred Shares. Upon conversion in accordance with the Certificate of
Designations, the Conversion Shares, and upon issuance, the Registration Delay
Payment Shares, will be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock and,
except as disclosed in Schedule 3(d), entitled to be traded on the Nasdaq
National Market, The New York Stock Exchange, Inc. ("NYSE") or The American
Stock Exchange, Inc. ("AMEX"). Based in part upon the representations of
Investors in Section 2 hereof, the issuance by the Company of the Securities is
exempt from registration under the 1933 Act.
(e) No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Certificate of
Designations 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) 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; (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, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company or any of its Subsidiaries 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 any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected. Except as
disclosed in Schedule 3(e), neither the Company nor its Subsidiaries is in
violation of any term of or in default under (x) its Certificate of
Incorporation, any Certificate of Designation, Preferences and Rights of any
outstanding series of Preferred Stock or By-laws or their organizational charter
or by-laws, respectively, or (y) any contract, agreement, mortgage,
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indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries, except for
such violations which have not had and, to the knowledge of the Company, will
not have a Material Adverse Effect. The business of the Company and its
Subsidiaries 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 1933
Act, the Company is not 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 the Transaction
Documents or the Certificate of Designations in accordance with the terms hereof
or thereof. Except as disclosed in Schedule 3(e), 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.
(f) SEC Documents; Financial Statements. Since December 31, 1996,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). The Company has delivered to or made available for review by the
Investors or their respective representatives true and complete copies of the
SEC Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of 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 year-end audit
adjustments). No other written information provided by or on behalf of the
Company to the Investors which is not included in the SEC Documents, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading. Neither the
Company nor any of its Subsidiaries or any of their officers, directors, agents
or employees have provided the Investors with any material, nonpublic
information.
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(g) Absence of Certain Changes. Except as disclosed in Schedule 3(g)
or the SEC Documents filed on EDGAR at least five (5) business days prior to the
date hereof, since December 31, 1998, there has been no adverse change and no
adverse development in the business, properties, operations, financial
condition, prospects, liabilities or results of operations of the Company or its
Subsidiaries which has had or, to the knowledge of the Company or its
Subsidiaries, may have a Material Adverse Effect. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Company or any of its Subsidiaries
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.
(h) Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
except as set forth in Schedule 3(h).
(i) Acknowledgment Regarding Investors' Purchase of Securities. The
Company acknowledges and agrees that each of the Investors is acting solely in
the capacity of arm's length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges that
each Investor is not acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and the
Certificate of Designations and the transactions contemplated thereby, and any
advice given by any of the Investors or any of their respective representatives
or agents in connection with the Transaction Documents and the Certificate of
Designations and the transactions contemplated thereby is merely incidental to
such Investor's purchase of the Securities. The Company further represents to
each Investor that the Company's decision to enter into the Transaction
Documents has been based solely on the independent evaluation by the Company and
its representatives.
(j) No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
business, properties, prospects, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws on a
registration statement filed with the SEC relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly disclosed.
(k) No Solicitation. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has been paid or given, either
directly or indirectly, a commission or other remuneration for soliciting the
exchange of the securities.
(l) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable
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stockholder approval provisions, including, without limitation, under the rules
and regulations of The Nasdaq Stock Market, Inc., nor will the Company or any of
its Subsidiaries take any action or steps that would require registration of the
Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
(m) Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any material union labor dispute nor, to the
knowledge of the Company or any of its Subsidiaries, is any such dispute
threatened. Neither the Company nor any of its Subsidiaries is a party to a
collective bargaining agreement. The Company and its Subsidiaries believe that
relations between the Company and its Subsidiaries and their respective
employees are good. No executive officer (as defined in Rule 501(f) of the 1933
Act) has notified the Company that such officer intends to leave the Company or
otherwise terminate such officer's employment with the Company.
(n) Intellectual Property Rights. The Company and its Subsidiaries
own or possess 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 their respective
businesses as now conducted. Except as set forth on Schedule 3(n), 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 and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries 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(n), there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its Subsidiaries 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 and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.
(o) Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, where such noncompliance or
failure to receive permits, licenses or approvals referred to in clauses (i),
(ii) and (iii) above could have, individually or in the aggregate, a Material
Adverse Effect.
(p) Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them
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which is material to the business of the Company and its Subsidiaries, in each
case free and clear of all liens, encumbrances and defects except such as are
described in Schedule 3(p) or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such
property by the Company or any of its Subsidiaries. Any real property and
facilities held under lease by the Company or any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its Subsidiaries.
(q) Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries, taken as a whole.
(r) Regulatory Permits. The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or a modification
of any such certificate, authorization or permit.
(s) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(t) Foreign Corrupt Practices Act. To the knowledge of the Company,
neither the Company, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any Subsidiary has, in the course of acting
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
(u) Tax Status. Except as set forth on Schedule 3(u), the Company
and each of its Subsidiaries has made or filed all federal and state income and
all other tax returns, reports and
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declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the Company is not
aware of any basis for any such claim.
(v) Certain Transactions. Except as set forth on Schedule 3(v) and
in the SEC Documents filed on EDGAR at least five (5) business days prior to the
date hereof and except for arm's length transactions pursuant to which the
Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other than the
grant of stock options disclosed on Schedule 3(c), none of the officers,
directors, or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
(w Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Preferred Shares
will increase in certain circumstances. The Company further acknowledges that
its obligation to issue Conversion Shares upon conversion of the Preferred
Shares in accordance with this Agreement and the Certificate of Designations is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.
(x Application of Takeover Protections. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable Section 203 of the Delaware General Corporation Law, or any other
similar anti-takeover provision under applicable California law, contained in
the Company's Certificate of Incorporation, or otherwise which is or could
become applicable to the Investors as a result of the transactions contemplated
by this Agreement, including, without limitation, the Company's issuance of the
Securities and the Investor's ownership of the Securities.
(y No Other Agreements. The Company has not, directly or indirectly,
made any agreements with any Investors relating to the terms or conditions of
the transactions contemplated by the Transaction Documents except as set forth
in the Transaction Documents.
(z Rights Plan. Neither the Company nor any of its Subsidiaries has
adopted a shareholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company.
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(aa Stockholder Approval. At a meeting held on June 24, 1999, the
Company held a special meeting of its stockholders, at which meeting the
Company's stockholders approved the Company's issuance of all of the Common
Stock issuable upon conversion of the Series D Preferred Stock and exercise of
the warrants issued pursuant to the terms of the Securities Purchase Agreement
dated March 30, 1999 by and between the Company and the purchasers listed on the
execution pages thereof (the "WARRANTS"). The Company further represents that no
further stockholder approval is required, pursuant to Nasdaq rule or otherwise,
for the issuance of all of the Securities as described in this Agreement,
including without limitation, the issuance of the Conversion Shares upon
conversion of the Preferred Shares.
4. COVENANTS.
(a Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
(b Blue Sky. The Company shall, on or before the Closing Date, take
such action as the Company shall reasonably determine is necessary to qualify
the Securities for, or obtain exemption for the Securities for, sale to the
Investors at the Closing pursuant to this Agreement under applicable securities
or "Blue Sky" laws of the states of the United States, and shall provide
evidence of any such action so taken to the Investors on or prior to the Closing
Date. The Company shall make all filings and reports relating to the offer and
sale of the Securities required under applicable securities or "Blue Sky" laws
of the states of the United States following the Closing Date.
(c Reporting Status. Until the earlier of (i) the date which is one
(1) year after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto); or (ii) the date on which (A) the Investors shall have sold all the
Conversion Shares, and (B) none of the Preferred Shares is outstanding (the
"REPORTING PERIOD"); the Company (I) shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and (II) except as a result of a Major
Transaction (as defined in the Certificate of Designations) (provided that the
Company has complied with Sections 2(d)(iv) and 3(g) of the Certificate of
Designations), shall not terminate its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would otherwise permit such termination.
(d Financial Information. The Company agrees to send the following
to each Investor (as that term is defined in the Registration Rights Agreement)
during the Reporting Period: (i) within two (2) business days after the filing
thereof with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly
Reports on Form 10-Q, any Current Reports on Form 8-K and any registration
statements or amendments (other than on Form S-8) filed pursuant to the 1933
Act; (ii) using the Company's reasonable best efforts, on the same day as the
release thereof, facsimile copies of all press releases issued by the Company or
any of its Subsidiaries, and (iii) copies of any notices and other information
made available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.
(e Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than the greater of (I) the
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sum of (A) 200% of the number of shares of Common Stock needed to provide for
the issuance of the Conversion Shares (without regard to any limitations on
conversions) as of the Closing Date (based on the Conversion Price (as defined
in the Certificate of Designations) on the Closing Date) plus (B) 7,000,000
additional shares of Common Stock (as adjusted for stock dividends, stock
splits, stock combinations and similar transactions) and (II) 200% of the number
of shares of Common Stock needed to provide for the issuance of the Conversion
Shares (without regard to any limitations on conversions) , based on the then
current Conversion Price.
(f) No Discounted Convertible Offerings. Notwithstanding any other
provision of the Transaction Documents or the Certificate of Designations, until
March 30, 2000, the Company will not, without the consent of Investors holding
at least two-thirds (2/3) of the Preferred Shares then outstanding, offer or
sell any securities convertible into or exercisable or exchangeable for Common
Stock where the conversion, exercise and/or exchange price of such security is a
function of or varies or may vary with or as a result of (other than upon stock
splits, stock dividends and the like) (i) the market price of the underlying
security at or during some period of time prior to such conversion or (ii) the
price at which any holder of the underlying security sells that security on or
about the date of such conversion, exercise or exchange.
(g) Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system (including
The Nasdaq SmallCap Market and the Nasdaq National Market), if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance)
and shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all Registrable Securities from time to time issuable
under the terms of the Transaction Documents and the Certificate of
Designations. The Company shall use its best efforts to maintain the Common
Stock's authorization for listing on the Nasdaq National Market, AMEX or NYSE.
Neither the Company nor any of its Subsidiaries shall take any action which
would reasonably be expected to result in the delisting or suspension of the
Common Stock on the Nasdaq National Market, AMEX or NYSE (other than to switch
listings from the Nasdaq National Market to AMEX or NYSE or from AMEX to the
Nasdaq National Market or NYSE). The Company shall promptly offer to provide to
each Investor copies of any notices it receives from the Nasdaq National Market,
AMEX or NYSE regarding the continued eligibility of the Common Stock for listing
on such automated quotation system or securities exchange. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 4(g).
(h) Expenses. Subject to Section 9(l) below, following the Closing,
the Company shall reimburse the Investors for the Investors' expenses (including
attorneys' fees and expenses) in connection with negotiating and preparing the
Transaction Documents and consummating the transactions contemplated thereby up
to an aggregate of $25,000.
(i) Transactions With Affiliates. So long as any Preferred Shares
are outstanding the Company shall not, and shall cause each of its Subsidiaries
not to, enter into, amend, modify or supplement, or permit any Subsidiary to
enter into, amend, modify or supplement, any agreement, transaction, commitment
or arrangement with any of its or any Subsidiary's officers, directors, persons
who were officers or directors at any time during the previous two (2) years,
stockholders who beneficially own 5% or more of the Common Stock, or affiliates
or with any individual related by blood, marriage or adoption to any such
individual or with any entity in which any such entity or
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individual owns a 5% or more beneficial interest (each a "RELATED PARTY"),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, or (c) any agreement,
transaction, commitment or arrangement which is approved by a majority of the
disinterested directors of the Company. For purposes hereof, any director who is
also an officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "AFFILIATE" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity. "CONTROL" or
"CONTROLS" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
(j Filing of Form 8-K. On or before the second business day
following the Closing Date, the Company shall file a Form 8-K with the SEC
describing the terms of the transaction contemplated by the Transaction
Documents and consummated at the Closing, in the form required by the 1934 Act.
(k Intentionally Left Blank.
(l Right of First Refusal. Subject to the exceptions described
below, the Company and its Subsidiaries shall not contract with any party for
any (i) convertible securities (other than the Preferred Shares) that are
convertible into or exchangeable for Common Stock at a price which may vary
(including by way of periodic adjustments to a fixed conversion price) with the
market price of the Common Stock (the formulation for such variable price being
herein referred to as, the "VARIABLE PRICE"), (ii) shares of Common Stock issued
at a price which is less than 93% of the Closing Bid Price on the issuance date
of such shares, or (iii) convertible securities (other than the Preferred
Shares) that are convertible into or exchangeable for Common Stock at a price
which is less than 93% of the Closing Bid Price on the issuance date ("FUTURE
OFFERINGS") during the period (the "RIGHT OF FIRST REFUSAL Period") beginning on
the Closing Date and ending on and including the date which is 365 days after
the date the Registration Statement (as defined in the Registration Rights
Agreement) is declared effective by the SEC, unless it shall have first
delivered to each Investor or a designee appointed by such Investor written
notice (the "FUTURE OFFERING NOTICE") describing the proposed Future Offering,
including the terms and conditions thereof, and providing each Investor an
option to purchase up to its Aggregate Percentage (as defined below), as of the
date of delivery of the Future Offering Notice, of the Future Offering (the
limitations referred to in this sentence are collectively referred to as the
"CAPITAL RAISING Limitation"). For purposes of this Section 4(l), "AGGREGATE
PERCENTAGE" at any time with respect to any Investor shall mean the percentage
obtained by dividing (i) the aggregate number of Preferred Shares received by
such Investor at the Closing by (ii) the aggregate number of Preferred Shares
received by all Investors at the Closing, provided, however, that an Investor's
Aggregate Percentage will be reduced by and to the extent that such Investor
exercised its rights to participate in such Future Offering pursuant to Section
4(m) of the Securities Purchase Agreement between the Company and the holders of
the Series D Preferred Stock dated March 31, 1999. An Investor can exercise its
option to participate in a Future Offering by delivering written notice thereof
to participate to the Company within 10
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business days of receipt of a Future Offering Notice, which notice shall state
the quantity of securities being offered in the Future Offering that such
Investor will purchase, up to its Aggregate Percentage of the Future Offering,
and that number of securities it is willing to purchase in excess of its
Aggregate Percentage of the Future Offering. In the event that one or more
Investors fail to elect to purchase up to each such Investor's Aggregate
Percentage of the Future Offering, then each Investor which has indicated that
it is willing to purchase a number of securities in excess of its Aggregate
Percentage of the Future Offering shall be entitled to purchase its pro rata
portion (determined in the same manner as described in the preceding sentence)
of the securities in the Future Offering which one or more Investors have not
elected to purchase. In the event the Investors fail to elect to fully
participate in the Future Offering within the periods described in this Section
4(l), the Company shall have 45 days thereafter to sell the securities of the
Future Offering that the Investors did not elect to purchase, upon terms and
conditions (including the amount thereof), no more favorable to the purchasers
thereof than specified in the Future Offering Notice. In the event the Company
has not sold such securities of the Future Offering within such 45 day period,
the Company shall not thereafter issue or sell such securities during the Right
of First Refusal Period without first offering such securities to the Investors
in the manner provided in this Section 4(l). The Capital Raising Limitation
shall not apply to (i) a loan from a bank or institutional lender which does not
have any equity feature other than warrants exercisable at an exercise price
greater than 50% of the market price of the Common Stock at the time of such
loan and exercisable for a number of shares of Common Stock which does not
exceed the quotient of (I) 10% of the proceeds to the Company from such loan,
divided by (II) the market price of the Common Stock at the time of such loan,
(ii) any transaction involving the Company's issuances of securities (A) as
consideration in a merger or consolidation, (B) in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or (C) as consideration for the acquisition of a business,
product or license or other assets by the Company, (iii) the issuance of Common
Stock in a firm commitment, underwritten public offering, (iv) the issuance of
securities upon exercise or conversion of the Company's options, warrants or
other convertible securities outstanding as of the date hereof, (v) the grant of
additional options or warrants, or the issuance of additional securities, under
any contract, plan or agreement which has been approved by the board of
directors of the Company pursuant to which the Company's securities may be
issued to any employee, officer, director, consultant or other service providers
or (vi) the issuance of securities pursuant to an offering by the Company in
reliance upon Rule 144A under the 1933 Act with proceeds to the Company of at
least $75,000,000. The Investors shall not be required to participate or
exercise their right of first refusal with respect to a particular Future
Offering in order to exercise their right of first refusal with respect to later
Future Offerings.
(m Corporate Existence. So long as a Investor beneficially owns any
Preferred Shares, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except in the event
of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose common stock is listed for trading on the Nasdaq National
Market, NYSE or AMEX.
(n Rule 144. The Company shall not, directly or indirectly, dispute
or otherwise interfere with any claim by a holder of Preferred Shares that such
holder's holding period of any
15
<PAGE> 16
Security for purposes of Rule 144 promulgated under the 1933 Act (or a successor
rule thereto) ("RULE 144") relates back (i.e., tacks) to the holding period for
the Series D Preferred Stock. The Company acknowledges and agrees that under
Rule 144 and no-action letters issued by the SEC, such tacking is permitted.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Investor or its respective nominee(s), for the Conversion
Shares in such amounts as specified from time to time by each Investor to the
Company upon conversion of the Preferred Shares (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS"). Prior to registration of the Conversion Shares under the 1933
Act, all such certificates shall bear the restrictive legend specified in
Section 2(d) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions and stop transfer instructions
permitted by the Irrevocable Transfer Agent Instructions or to give effect to
Section 2(c) (in the case of the Conversion Shares, prior to registration of the
Conversion Shares under the 1933 Act) will be given by the Company to its
transfer agent and that the Securities shall otherwise be freely transferable on
the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement. Nothing in this Section 5 shall
affect in any way each Investor's obligations and agreements set forth in
Section 2(d) to comply with all applicable prospectus delivery requirements, if
any, upon resale of the Securities. If an Investor provides the Company with an
opinion of counsel, in form and substance generally acceptable to the Company,
that registration of resale by such Investor of any Securities is not required
under the 1933 Act, the Company shall permit the transfer, and, in the case of
the Conversion Shares promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such
Investor and without any restrictive legends. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Investors by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 5, that the Investors shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO EXCHANGE.
The obligation of the Company hereunder to consummate the exchange
as contemplated hereby at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by providing each Investor with prior
written notice thereof:
(i Each Investor shall have executed each of this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
16
<PAGE> 17
(ii The Certificate of Designations shall have been filed with the
Secretary of State of the State of Delaware.
(iii Each Investor shall have delivered to the Company certificates
representing that number of shares of Series D Preferred Stock being
tendered by such Investor as set forth on the Schedule of Investors.
(iv The representations and warranties of each Investor shall be
true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date), and such Investor shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or
complied with by such Investor at or prior to the Closing Date.
7. CONDITIONS TO EACH INVESTOR'S OBLIGATION TO EXCHANGE.
The obligation of each Investor hereunder to consummate the
exchange as contemplated hereby at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for each Investor's sole benefit and may be waived by
such Investor at any time in its sole discretion:
(i The Company shall have executed each of the Transaction
Documents, and delivered the same to such Investor.
(ii The Certificate of Designations shall have been filed with the
Secretary of State of the State of Delaware, and a copy thereof
certified by such Secretary of State shall have been delivered to such
Investor.
(iii The Common Stock shall be authorized for quotation on the
Nasdaq National Market or listing on AMEX or NYSE, trading in the Common
Stock issuable upon conversion of the Preferred Shares to be traded on
the Nasdaq National Market, AMEX or NYSE shall not have been suspended
by the SEC, The Nasdaq Stock Market, Inc., AMEX or NYSE and all of the
Conversion Shares issuable upon conversion of the Preferred Shares to be
exchanged at the Closing shall be listed upon the Nasdaq National
Market, AMEX or NYSE.
(iv The representations and warranties of the Company shall be true
and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents or Certificate of Designations to
be performed, satisfied or complied with by the Company at or prior to
the Closing Date. Such Investor shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the
Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such Investor including, without
limitation, an update as of the Closing Date regarding the
representation contained in Section 3(c) above.
17
<PAGE> 18
(v Such Investor shall have received the opinion of Cooley Godward
LLP, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to such Investor and in substantially the form
of Exhibit C attached hereto.
(vi The Company shall have executed and delivered to such Investor
the Stock Certificates (in such denominations as such Investor shall
request) for the Preferred Shares.
(vii The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form
reasonably acceptable to such Investor (the "RESOLUTIONS").
(viii As of the Closing Date, the Company shall have reserved out of
its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Preferred Shares, at least that number
of shares of Common Stock required to be reserved by the Company
pursuant to Section 4(e).
(ix The Irrevocable Transfer Agent Instructions, in the form of
Exhibit D attached hereto, shall have been delivered to and acknowledged
in writing by the Company's transfer agent.
(x The Company shall have delivered to such Investor a certificate
evidencing the incorporation and good standing of the Company and each
Subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within
ten days of the Closing Date.
(xi The Company shall have delivered to such Investor a secretary's
certificate certifying as to (A) the Resolutions, (B) certified copies
of its Certificate of Incorporation and (C) By-laws, each as in effect
at the Closing.
(xii The Company shall have delivered to such Investor a certified
copy of its Certificate of Incorporation as certified by the Secretary
of State of the State of Delaware within ten days of the Closing Date.
(xiii The Company shall have delivered to such Investor a letter
from the Company's transfer agent certifying the number of shares of
Common Stock outstanding as of a date within five (5) days of the
Closing Date.
(xiv No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which
prohibits or adversely affects any of the transactions contemplated by
this Agreement, nor shall any proceeding have been commenced which may
have the effect of prohibiting or adversely affecting any of the
transactions contemplated by this Agreement.
18
<PAGE> 19
(xv The Company shall have delivered to such Investor such other
documents relating to the transactions contemplated by the Transaction
Documents as such Investor or its counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Investor's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents and the Certificate of Designations, the Company shall defend,
protect, indemnify and hold harmless each Investor and each other holder of the
Securities and all of their stockholders, officers, directors, employees and
direct or indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or the Certificate of Designations or any
other certificate, instrument or document contemplated hereby or thereby, (b)
any breach of any covenant, agreement or obligation of the Company contained in
the Transaction Documents or the Certificate of Designations or any other
certificate, instrument or document contemplated hereby or thereby, (c) any
cause of action, suit or claim brought or made against such Indemnitee (other
than a cause of action, suit or claim by another Investor) and arising out of or
resulting from (i) the execution, delivery, performance, breach by the Company
or enforcement of the Transaction Documents or the Certificate of Designations,
or any other certificate, instrument or document contemplated hereby or thereby,
(ii) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, excluding
losses resulting solely from a decline in the market value of the Company's
securities, or (iii) the status of such Investor or holder of the Securities as
an investor in the Company. Notwithstanding the foregoing, Indemnified
Liabilities shall not include any liability of any Indemnitee arising solely out
of such Indemnitee's willful misconduct or fraudulent action(s). To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 8 shall
be the same as those set forth in Sections 6(a) and (d) of the Registration
Rights Agreement, including, without limitation, those procedures with respect
to the settlement of claims and Company's right to assume the defense of claims.
9. GOVERNING LAW; MISCELLANEOUS.
(a Governing Law; Jurisdiction; Jury Trial. The corporate laws of
the State of Delaware shall govern all issues concerning the relative rights of
the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and interpreted in accordance with the laws of the State of New
York without regard to the principles of conflict of laws. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of (i) the state and
federal courts sitting in the City of New York,
19
<PAGE> 20
borough of Manhattan and (ii) the state and federal courts sitting in the State
of California, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
(b Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Investors, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. The Warrants and
the Securities Purchase Agreement dated March 30, 1999, by and among the Company
and the Investors and certain other investors, shall remain in full force and
effect with respect to the securities and transactions contemplated thereby. The
Registration Rights Agreement dated March 30, 1999, by and among the Company and
RGC International Investors, LDC ("RGC") and certain other investors, as
amended, shall remain in full force and effect between RGC and the Company with
respect to the transactions contemplated thereby. No provision of this Agreement
may be amended other than by an instrument in writing signed by the Company and
the holders of at least two-thirds (2/3) of the Preferred Shares and the
Conversion Shares held by holders or former holders of the Preferred Shares
(determined on an as converted to Common Stock basis at the time of such
determination) then outstanding, and no provision hereof may be waived other
than by an
20
<PAGE> 21
instrument in writing signed by the party against whom enforcement is sought. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Preferred Shares then outstanding. No consideration shall
be offered or paid to any person to amend or consent to a waiver or modification
of any provision of any of the Transaction Documents or the Certificate of
Designations unless the same consideration also is offered to all of the parties
to the Transaction Documents or holders of the Preferred Shares, as the case may
be.
(f Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) upon receipt, when delivered by a
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
General Magic, Inc.
420 N. Mary Avenue
Sunnyvale, California 94086
Telephone: (408) 774-4000
Facsimile: (408) 774-4033
Attention: President
With a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306
Telephone: (650)843-5000
Facsimile: (650)857-0663
Attention: Timothy J. Moore, Esq.
If to the Transfer Agent:
EquiServe LP
150 Royall Street
Canton, Massachusetts 06321
Telephone: (781) 575-0044
Facsimile: (781) 575-2549
Attention: Sandra Burgess
If to an Investor, to its address and facsimile number on the Schedule
of Investors, with copies to such Investor's representatives as set forth on the
Schedule of Investors. Each party shall provide five (5) days' prior written
notice to the other party of any change in address or facsimile
21
<PAGE> 22
number. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of such transmission or (C)
provided by a courier or overnight courier service shall be rebuttable evidence
of personal service, overnight or courier delivery or transmission by facsimile
in accordance with clause (i), (ii) or (iii) above, respectively.
(g Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Preferred Shares. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the holders of two-thirds (2/3) of the Preferred Shares then
outstanding, including by merger or consolidation, except pursuant to a Major
Transaction with respect to which the Company is in compliance with Sections
2(d)(iv) and 3 of the Certificate of Designations. A Investor may assign some or
all of its rights hereunder without the consent of the Company; provided,
however, that any such assignment shall not release such Investor from its
obligations hereunder unless such obligations are assumed by such assignee and
the Company has consented to such assignment and assumption. Notwithstanding
anything to the contrary contained in the Transaction Documents, each Investor
shall be entitled to pledge the Securities in connection with a bona fide margin
account.
(h No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i Survival. Unless this Agreement is terminated under Section 9(l),
the representations and warranties of the Company and the Investors contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in Section 8, shall survive the
Closing. Each Investor shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
(j Publicity. The Company and each Investor shall have the right to
approve before issuance any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Investor, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although each Investor shall
be consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
(k Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l Termination. In the event that the Closing shall not have
occurred with respect to a Investor on or before three (3) business days from
the date hereof due to the Company's
22
<PAGE> 23
or such Investor's failure to satisfy the conditions set forth in Sections 6 and
7 above (and the nonbreaching party's failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on such
date without liability of any party to any other party; provided, however, that
if this Agreement is terminated pursuant to this Section 9(l), the Company shall
remain obligated to reimburse the Investors for expenses up to the amount
described in Section 4(h), provided that no Investor has failed to satisfy the
conditions set forth in Section 7.
(m Placement Agent. The Company acknowledges that it has not engaged
a placement agent in connection with the exchange. The Company shall be
responsible for the payment of any placement agent's fees or broker's
commissions relating to or arising out of the transactions contemplated hereby.
The Company shall pay, and hold each Investor harmless against, any liability,
loss or expense (including, without limitation, attorneys' fees and out of
pocket expenses) arising in connection with any such claim.
(n No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
(o Remedies. Each Investor and each holder of Preferred Shares or
Conversion Shares shall have all rights and remedies set forth in the
Transaction Documents and the Certificate of Designations and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract relating to the subject matter hereof and all of the
rights which such holders have under any law. Any person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
(p Payment Set Aside. To the extent that the Company makes a payment
or payments to the Investors hereunder or pursuant to the Certificate of
Designations or the Investors enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
* * * * * *
23
<PAGE> 24
IN WITNESS WHEREOF, the Investors and the Company have caused this
Exchange Agreement to be duly executed as of the date first written above.
COMPANY: INVESTORS:
GENERAL MAGIC, INC. HFTP INVESTMENT LLC
By: Promethean Asset Management, L.L.C.
Its: Investment Manager
By:
------------------------------
Name:
Its: By:
-------------------------------------
Name: James F. O'Brien, Jr.
Its: President
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management,L.P.
Its: Investment Manager
By: RGC General Partner Corp.
Its: General Partner
By:
-------------------------------------
Name: Wayne Bloch
Its: Managing Director
HALIFAX FUND, L.P.
By: The Palladin Group, L.P.
Its: Attorney-in-Fact
By:
-------------------------------------
Name: Robert Chender
Title: Managing Director
<PAGE> 25
[PAGE 2 OF 3 OF THE EXCHANGE AGREEMENT SIGNATURE PAGES]
PALLADIN PARTNERS I, L.P.
By: Palladin Asset Management,
L.L.C.
Its: General Partner
By:
-------------------------------------
Name: Robert Chender
Title: Managing Director
PALLADIN OVERSEAS FUND
LIMITED
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By:
-------------------------------------
Name: Robert Chender
Title: Managing Director
THE GLENEAGLES FUND COMPANY
By: The Palladin Group L.P
Its: Attorney-in-Fact
By:
-------------------------------------
Name: Robert Chender
Title: Managing Director
LANCER SECURITIES LTD.
By: The Palladin Group L.P
Its: Attorney-in-Fact
By:
-------------------------------------
Name: Robert Chender
Title: Managing Director
<PAGE> 26
[PAGE 3 OF 3 OF THE EXCHANGE AGREEMENT SIGNATURE PAGES]
FISHER CAPITAL LTD.
By:
-------------------------------------
Name: Daniel Hopkins
Its: Authorized Signatory
WINGATE CAPITAL LTD.
By:
-------------------------------------
Name: Daniel Hopkins
Its: Authorized Signatory
CONSECO DIRECT LIFE
By:
-------------------------------------
Name:
Its:
<PAGE> 27
<TABLE>
<CAPTION>
SCHEDULE OF INVESTORS
NUMBER OF
INVESTOR NAME INVESTOR ADDRESS SERIES D INVESTOR'S REPRESENTATIVES' ADDRESS
AND FACSIMILE NUMBER PREFERRED AND FACSIMILE NUMBER
SHARES
EXCHANGED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HFTP Investment LLC _Promethean Asset Management, L.L.C. 350 Katten Muchin & Zavis
750 Lexington Avenue, 22nd Floor 525 West Monroe, Suite 1600
New York, New York 10022 Chicago, Illinois 60661-3693
Attn: James F. O'Brien, Jr. Attn: Robert J. Brantman, Esq.
Facsimile: 212-758-9334 Facsimile: 312-902-1061
Telephone: 212-702-5200 Telephone: 312-902-5200
Residence: New York
RGC International Investors, c/o Rose Glen Capital Management, L.P. 125 Rose Glen Capital Management, L.P.
LDC 3 Bala Plaza East, Suite 200 3 Bala Plaza East, Suite 200
Bala Cynwyd, Pennsylvania Bala Cynwyd, Pennsylvania
Attn: Gary Kaminsky Attn: Gary Kaminsky
Facsimile: 610-617-0570 Facsimile: 610-617-0570
Telephone: 610-617-5900 Telephone: 610-617-5900
Residence: Cayman Islands
Palladin Partners I, L.P. c/o The Palladin Group L.P. 17 The Palladin Group L.P.
195 Maplewood Avenue As Investment Advisor
Maplewood, New Jersey 07040 195 Maplewood Avenue
Attn: Kevin Gerlitz Maplewood, New Jersey 07040
Facsimile: 973-313-6490 Attn: Kevin Gerlitz
Telephone: 973-313-6420 Facsimile: 973-313-6490
Telephone: 973-313-6420
Residence: New York
Halifax Fund, L.P. c/o Citco Fund Services (Cayman 285 The Palladin Group L.P.
Islands) Ltd. As Investment Advisor
Corporate Centre, West Bay Road 195 Maplewood Avenue
P.O. Box 31106 SMB Maplewood, New Jersey 07040
Grand Cayman, Cayman Islands Attn: Kevin Gerlitz
Facsimile: 345-949-3877 Facsimile: 973-313-6490
Telephone: 345-949-3977 Telephone: 973-313-6420
Residence: Cayman Islands
The Gleneagles Fund Company c/o Citco Fund Services (Cayman 30 The Palladin Group L.P.
Islands) Ltd. As Investment Advisor
Corporate Centre, West Bay Road 195 Maplewood Avenue
P.O. Box 31106 SMB Maplewood, New Jersey 07040
Grand Cayman, Cayman Islands Attn: Kevin Gerlitz
Facsimile: 345-949-3877 Facsimile: 973-313-6490
Telephone: 345-949-3977 Telephone: 973-313-6420
Residence: Cayman Islands
Palladin Overseas Fund Limited c/o Citco Fund Services (Cayman 10 The Palladin Group L.P.
Islands) Ltd. As Investment Advisor
Corporate Centre, West Bay Road 195 Maplewood Avenue
P.O. Box 31106 SMB Maplewood, New Jersey 07040
Grand Cayman, Cayman Islands Attn: Kevin Gerlitz
Facsimile: 345-949-3877 Facsimile: 973-313-6490
Telephone: 345-949-3977 Telephone: 973-313-6420
Residence: Cayman Islands
Lancer Securities Ltd. c/o The Palladin Group L.P.
</TABLE>
<PAGE> 28
<TABLE>
<S> <C> <C> <C>
195 Maplewood Avenue 10 The Palladin Group L.P.
Maplewood, New Jersey 07040 As Investment Advisor
Attn: Kevin Gerlitz 195 Maplewood Avenue
Facsimile: 973-313-6490 Maplewood, New Jersey 07040
Telephone: 973-313-6420 Attn: Kevin Gerlitz
Facsimile: 973-313-6490
Residence: New York Telephone: 973-313-6420
Fisher Capital Ltd. _Citadel Investment Group, L.L.C. 90 Katten Muchin & Zavis
225 West Washington Street 525 W. Monroe Street
Chicago, Illinois 60606 Chicago, Illinois 60661-3693
Attention: Daniel Hopkins Attention: Robert J. Brantman, Esq.
Kenneth A. Simpler Facsimile: (312) 902-1061
Facsimile: (312) 338-0780 Telephone: (312) 902-5200
Telephone: (312) 338-7800
Residence: Illinois
Wingate Capital Ltd. _Citadel Investment Group, L.L.C. 60 Katten Muchin & Zavis
225 West Washington Street 525 W. Monroe Street
Chicago, Illinois 60606 Chicago, Illinois 60661-3693
Attention: Daniel Hopkins Attention: Robert J. Brantman, Esq.
Kenneth A. Simpler Facsimile: (312) 902-1061
Facsimile: (312) 338-0780 Telephone: (312) 902-5200
Telephone: (312) 338-7800
Residence: Illinois
Conseco Direct Life c/o The Palladin Group L.P. 23 The Palladin Group L.P.
195 Maplewood Avenue As Investment Advisor
Maplewood, New Jersey 07040 195 Maplewood Avenue
Attn: Kevin Gerlitz Maplewood, New Jersey 07040
Facsimile: 973-313-6490 Attn: Kevin Gerlitz
Telephone: 973-313-6420 Facsimile: 973-313-6490
Telephone: 973-313-6420
Residence: New York
</TABLE>
<PAGE> 29
LIST OF SCHEDULES
SCHEDULE 3(a) Subsidiaries
SCHEDULE 3(c) Capitalization
SCHEDULE 3(e) Conflicts
SCHEDULE 3(g) Material Changes
SCHEDULE 3(h) Litigation
SCHEDULE 3(n) Intellectual Property
SCHEDULE 3(p) Liens
SCHEDULE 3(u) Tax Status
SCHEDULE 3(v) Certain Transactions
LIST OF EXHIBITS
EXHIBIT A Form of Certificate of Designations, Preferences and Rights of
the Series F Preferred Stock
EXHIBIT B Form of Registration Rights Agreement
EXHIBIT C Form of Company Counsel Opinion
EXHIBIT D Form of Irrevocable Transfer Agent Instructions
<PAGE> 1
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of September
9, 1999, by and among GENERAL MAGIC, INC., a Delaware corporation, with
headquarters located at 420 N. Mary Avenue, Sunnyvale, California 94086 (the
"COMPANY"), and the undersigned Holders (each, a "HOLDER" and collectively, the
"HOLDERS").
WHEREAS:
A. In connection with the Exchange Agreement by and among the parties
of even date herewith (the "EXCHANGE AGREEMENT"), the Company has agreed, upon
the terms and subject to the conditions of the Exchange Agreement, to exchange
shares of the Company's Series D Convertible Preferred Stock (the "SERIES D
PREFERRED SHARES"), which are convertible into shares of the Company's Common
Stock, par value $.001 per share (the "COMMON STOCK") (as converted and held by
the Investors, the "SERIES D CONVERSION SHARES"), for shares of a newly created
series of preferred stock designated Series F Convertible Preferred Stock (the
"SERIES F PREFERRED SHARES"), which will be convertible into shares of the
Company's Common Stock (as converted and held by the Investors, the "SERIES F
CONVERSION SHARES"), in accordance with the terms of the Company's Certificate
of Designations, Preferences and Rights of Series F Convertible Preferred Stock
(the "CERTIFICATE OF DESIGNATIONS"); and
B. In connection with the Securities Purchase Agreement by and among
the Company, the Holders and certain other signatories thereto, dated March 30,
1999 (the "SECURITIES PURCHASE AGREEMENT"), the Company agreed, among other
things, to issue to the Holders warrants to acquire shares of Common Stock (as
issued to a Holder, the "WARRANTS") (the shares of Common Stock issuable upon
exercise of the Warrants are referred to herein as the "WARRANT SHARES"); and
C. To induce the Holders to execute and deliver the Exchange Agreement,
the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the "1933 ACT"), and applicable
state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Holders hereby agree as follows:
<PAGE> 2
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means a Holder and any transferee or assignee thereof
to whom a Holder assigns its rights under this Agreement in accordance with
Section 9 and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9.
b. "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means the Series D Conversion Shares,
the Series F Conversion Shares and the Warrant Shares issued or issuable upon
conversion of the Series D Preferred Shares or the Series F Preferred Shares or
the exercise of the Warrants, as the case may be, the Registration Delay Payment
Shares (as defined in Section 2(h)) and any shares of capital stock issued or
issuable with respect to the Series D Conversion Shares, the Series F Conversion
Shares, the Series D Preferred Shares, the Series F Preferred Shares, the
Warrant Shares, the Warrants or the Registration Delay Payment Shares as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event or otherwise, regardless of any limitation on conversions of Series D
Preferred Shares or the Series F Preferred Shares or on exercise of the
Warrants; provided, however, that the term Registrable Securities, Series D
Conversion Shares and Warrant Shares shall not include any security which has
been included on a Registration Statement that has been declared effective by
the SEC and which was not filed pursuant to this Agreement.
e. "REGISTRATION STATEMENT" means a registration statement of the
Company filed under the 1933 Act.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, as soon
as practicable but in no event later than 60 days after the Issuance Date (as
defined in the Certificate of Designations), file with the SEC a Registration
Statement or Registration Statements (as is necessary) on Form S-3 (or, if such
form is unavailable for such a registration, on such other form as is available
for such a registration, subject to the consent of the Holders holding a
majority of the Registrable Securities and the provisions of Section 2(c), which
consent will not be unreasonably
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withheld), covering the resale of all of the Registrable Securities. Such
Registration Statement shall initially register for resale a number of shares of
Common Stock equal to at least 200% of the sum of the number of Series D
Conversion Shares and the Series F Conversion Shares issued and issuable and
150% of the number of Warrant Shares issued and issuable as of the business day
immediately preceding the date the Company files the Registration Statement
(without regard to any limitations on conversions or exercises), subject to
adjustment as provided in Section 3(b). Such registered shares of Common Stock
shall be allocated among the Investors pro rata based on the total number of
Registrable Securities issued or issuable as of each date that a Registration
Statement, as amended, relating to the resale of the Registrable Securities is
declared effective by the SEC. The Company shall use its best efforts to have
the Registration Statement(s) declared effective by the SEC as soon as
practicable, but in no event later than the Scheduled Effective Date (as defined
in Section 2(h)).
b. Allocation of Registrable Securities. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time of such establishment or increase, as the case may be.
In the event an Investor shall sell or otherwise transfer any of such holder's
Registrable Securities, each transferee shall be allocated a pro rata portion of
the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any person or entity
which does not hold any Registrable Securities shall be allocated to the
remaining Investors, pro rata based on the number of Registrable Securities then
held by such Investors. For the avoidance of doubt, the number of Registrable
Securities held by any Investor shall be determined as if all Series D Preferred
Shares, Series F Preferred Shares and Warrants then outstanding were converted
into or exercised for Registrable Securities, without regard to any limitations
on conversions or exercises.
c. Counsel. Subject to Section 5 hereof, in connection with any
offering pursuant to this Section 2, the Investors shall have the right to
select one legal counsel, which counsel shall be selected by the Investors
holding a majority of the Registrable Securities. The Company shall reasonably
cooperate with any such counsel.
d. Piggy-Back Registrations. If at any time prior to the expiration
of the Registration Period (as hereinafter defined) the number of shares of
Common Stock available for sale under an effective Registration Statement is
insufficient to cover all of the Registrable Securities (in accordance with
Section 3(b)) and the Company proposes to file with the SEC a Registration
Statement relating to an offering for its own account or the account of others
under the 1933 Act of any shares of Common Stock (other than on Form S-4 or Form
S-8 or their then equivalents relating to securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit plans), the
Company shall promptly send to each Investor who is entitled to registration
rights under this Section 2(d) written notice of the Company's intention to file
a Registration Statement and of such Investor's rights under this Section 2(d)
and, if within twenty (20) days after receipt of such notice, such
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<PAGE> 4
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, subject to the priorities set forth in
Section 2(e) below. No right to registration of Registrable Securities under
this Section 2(d) shall be construed to limit any registration required under
Section 2(a). The obligations of the Company under this Section 2(d) may be
waived by Investors holding a majority of the Registrable Securities. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(d) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
e. Priority in Piggy-Back Registration Rights in connection with
Registrations for Company Account. If the registration referred to in Section
2(d) is to be an underwritten public offering and the managing underwriter(s)
advise the Company in writing that, in their reasonable good faith opinion,
marketing or other factors dictate that a limitation on the number of shares of
Common Stock which may be included in the Registration Statement is necessary to
facilitate and not adversely affect the proposed offering, then the Company
shall include in such registration: (1) first, all securities the Company
proposes to sell for its own account, (2) second, up to the full number of
securities proposed to be registered for the account of the holders of
securities entitled to inclusion of their securities in the Registration
Statement by reason of demand registration rights, and (3) third, the securities
requested to be registered by the Investors and other holders of securities
entitled to participate in the registration, as of the date hereof, drawn from
them pro rata based on the number each has requested to be included in such
registration.
f. Eligibility for Form S-3. The Company represents and warrants
that on the date hereof it currently meets the requirements for the use of Form
S-3 for registration of the sale by the Investors of the Registrable Securities
and the Company has filed all reports required to be filed by the Company with
the SEC in a timely manner so as to obtain and maintain such eligibility for the
use of Form S-3. The Company covenants that on and after the date hereof it will
use its best efforts to meet the requirements for the use of Form S-3 for
registration of the sale by the Investors of the Registrable Securities and
shall file all reports required to be filed by the Company with the SEC in a
timely manner so as to maintain such eligibility for the use of Form S-3. In the
event that Form S-3 is not available for sale by the Investors of the
Registrable Securities, then the Company (i) with the consent of the Investors
holding a majority of the Registrable Securities pursuant to Section 2(a), shall
register the sale of the Registrable Securities on another appropriate form, and
(ii) the Company shall undertake to register the Registrable Securities on Form
S-3 as soon as such form is available, provided that the Company shall maintain
the effectiveness of the Registration Statement then in effect until such time
as a Registration Statement on Form S-3 covering the Registrable Securities has
been declared effective by the SEC.
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<PAGE> 5
g. Intentionally omitted.
h. Effect of Failure to Obtain and Maintain Effectiveness of
Registration Statement. If (i) the Registration Statement is not declared
effective by the SEC on or before the Scheduled Effective Date (as defined
below); or (ii) after the Registration Statement has been declared effective by
the SEC, sales cannot be made (other than on any days during any Allowable Grace
Period (as defined in Section 3(f))) pursuant to the Registration Statement
(whether because of a failure to keep the Registration Statement effective, to
disclose such information as is necessary for sales to be made pursuant to the
Registration Statement, to register sufficient shares of Common Stock or
otherwise); then, as partial relief for the damages to any holder by reason of
any such delay in or reduction of its ability to sell any of the Registrable
Securities (which remedy shall not be exclusive of any other remedies available
at law or in equity), the Company shall pay to each holder of Series D Preferred
Shares or Series F Preferred Shares an amount in cash per Series D Preferred
Share and Series F Preferred Share held equal to the product of (i) $10,000
multiplied by (ii) the sum of (A) .00033, for each day, up to and including the
30th day, that the Registration Statement is not declared effective by the SEC
after the Scheduled Effective Date, plus, (B) beginning on and including the
31st day after the Scheduled Effective Date, .0005, for each day that the
Registration Statement is not declared effective by the SEC after the 30th day
after the Scheduled Effective Date, plus (C) the product of (I) .0005 multiplied
by (II) the number of days after the date the Registration Statement has been
declared effective by the SEC that the Registration Statement is not available
(other than on any days during any Allowable Grace Period) for sales of at least
all of the Registrable Securities. The payments to which a holder shall be
entitled pursuant to this Section 2(h) are referred to herein as "REGISTRATION
DELAY PAYMENTS." Registration Delay Payments shall be paid within five (5)
business days of the earlier of (A) the first day of the month following the
occurrence of the event resulting in the requirement to make Registration Delay
Payments, or (B) the date on which the event resulting in the requirement to
make Registration Delay Payments is cured. In the event the Company fails to
make Registration Delay Payments in a timely manner, such Registration Delay
Payments shall bear interest at the rate of 1.5% per month (or the maximum rate
permitted by law), prorated for partial months, until paid in full. Registration
Delay Payments, and any interest thereon, shall be paid in cash, unless an
Investor elects to have such amounts included in the Additional Amount (as
defined in the Certificate of Designations) by providing the Company written
notice of such election at any time prior to the Company's payment of such
amounts. If the Company fails to pay the Registration Delay Payments, including
any interest thereon, within 15 business days of the applicable payment date,
then the holder entitled to such payments shall have the right at any time, so
long as the Company continues to fail to make such payments, to require the
Company, upon written notice, to immediately issue, in lieu of the Registration
Delay Payments, including any interest thereon, the number of shares of Common
Stock (the "REGISTRATION DELAY PAYMENT SHARES") equal to the quotient of (X) the
sum of the Registration Delay Payments and all interest accrued thereon, divided
by (Y) the lowest Closing Bid Price on any day during the period beginning on
and including the date the Registration Delay Payments were due and payable and
ending on and including the date the holder delivers written notice to the
Company of its election to receive shares of Common Stock in lieu of the
Registration Delay Payments. "SCHEDULED EFFECTIVE DATE" means 120 days after the
Issuance Date; provided, however, that if the Registration Statement could be
declared effective on or prior to the Scheduled Effective Date but for the
written objection (an "INVESTOR OBJECTION NOTICE") of one or more Investors to
either (i) the inclusion or exclusion of
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<PAGE> 6
language or statements in such Registration Statement which the SEC, pursuant to
a comment letter addressed to the Company, is requiring the Company to include
or exclude in such Registration Statement or (ii) a comment by the SEC, pursuant
to a comment letter addressed to the Company, which relates to such Investor or
effects such Investors' rights in the Registration Statement, then the Scheduled
Effective Date, subject to Section 3(e), shall be extended with respect to only
such Investor or Investors who have delivered an Investor Objection Notice to
the later of 120 days after the Issuance Date or 3 business days after the Cure
Date (as defined below).
3. RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(d) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or prior
to the sixtieth day after the Issuance Date for the registration of Registrable
Securities pursuant to Section 2(a)) and use its best efforts to cause such
Registration Statement relating to the Registrable Securities to become
effective as soon as possible after such filing (but in no event later than the
Scheduled Effective Date applicable to the registration of such Registrable
Securities pursuant to Section 2(a)), and keep such Registration Statement
effective pursuant to Rule 415 at all times until the earlier of (i) the date as
of which the Investors may sell all of the Registrable Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have sold all the
Registrable Securities and (B) none of the Series D Preferred Shares, Series F
Preferred Shares or Warrants is outstanding (the "REGISTRATION PERIOD"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading. The Company shall submit to the SEC, within
three business days after the Company learns that no review of the Registration
Statement will be made by the staff of the SEC or that the staff of the SEC has
no further comments on the Registration Statement, as the case may be, a request
for acceleration of effectiveness of the Registration Statement to a time and
date not later than 48 hours after the submission of such request.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration
Statement. In the event the number of shares available under all Registration
Statements filed pursuant to this Agreement is insufficient to cover all of the
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Registrable Securities, the Company shall amend the appropriate Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover all of the Registrable
Securities for all Investors, in each case, as soon as practicable, but in any
event within 15 days after the necessity therefore arises. The Company shall use
its best efforts to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof. For
purposes of the foregoing provision, the number of shares available under all
Registration Statements shall be deemed "insufficient to cover all of the
Registrable Securities" if at any time the number of Registrable Securities
issued upon conversion of the Series D Preferred Shares or the Series F
Preferred Shares or upon exercise of the Warrants or issuable upon conversion of
the then outstanding Series D Preferred Shares or Series F Preferred Shares or
upon exercise of the then outstanding Warrants is greater than the quotient
determined by dividing (i) the number of shares of Common Stock available for
resale under such Registration Statements by (ii) 1.5. For purposes of the
calculation set forth in the foregoing sentence, any restrictions on the
convertibility of the Series D Preferred Shares or the Series F Preferred Shares
or on the exercisability of the Warrants shall be disregarded and such
calculation shall assume that the Series D Preferred Shares, the Series F
Preferred Shares and Warrants are then convertible and exercisable,
respectively, into shares of Common Stock at the then prevailing Conversion Rate
(as defined in the Certificate of Designations) or Warrant Exercise Price (as
defined in the Warrants), as the case may be.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement and its legal counsel
without charge (i) promptly after the same is prepared and filed with the SEC at
least one copy of such Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits, the prospectus included in such Registration
Statement (including each preliminary prospectus) and, with regards to such
Registration Statement(s), any correspondence by or on behalf of the Company to
the SEC or the staff of the SEC (other than unredacted versions of supplemental
correspondence for which confidential treatment has been requested) and any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives, (ii) promptly after the effectiveness of any Registration
Statement, ten copies of the prospectus included in such Registration Statement
and all amendments and supplements thereto (or such other number of copies as
such Investor may reasonably request), and (iii) such other documents, including
copies of any preliminary or final prospectus, as such Investor may reasonably
request from time to time in order to facilitate the disposition of the
Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify, to the extent required under applicable law, the Registrable Securities
covered by a Registration Statement under such other securities or "blue sky"
laws of such jurisdictions in the United States as any Investor reasonably
requests, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times
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during the Registration Period, and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (x) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
e. In the event that a Registration Statement could be declared
effective but for the Investor Objection Notice of one or more Investors, then
any Investor that has either (A) not given an Investor Objection Notice or (B)
given an Investor Objection Notice which has subsequently been revoked may, upon
written notification to the Company (the "EFFECTIVENESS NOTICE"), require the
Company to cause the Registration Statement registering such Investor's
Registrable Securities to be declared effective within five (5) business days of
the Company's receipt of such Effectiveness Notice. The Company shall provide
written notice (an "OPT-OUT NOTICE"), within one (1) business day of its receipt
of an Effectiveness Notice from an Investor pursuant to this Section 3(e), to
all other Investors that it has received an Effectiveness Notice. Each Investor
within two (2) business days of its receipt of the Opt-Out Notice will provide
written notice to the Company if it elects to opt-out of the current
Registration Statement. If an Investor provides an Effectiveness Notice pursuant
to this Section 3(e), then (i) the Company shall be obligated to amend the
Registration Statement to remove each Investor who (A) provided an Investor
Objection Notice and has not provided a written notice of the revocation of such
Investor Objection Notice within two (2) business days of such Investor's
receipt of an Opt-Out Notice or (B) elected to opt-out of such Registration
Statement and (ii) the Scheduled Effective Date, for purposes of Section 2(h),
as it applies to any Investor who has elected to opt-out of such Registration
Statement shall be extended until such time as such Investor provides written
notice to the Company to register such Investor's Registrable Securities,
whereupon, the Company shall register such Investor's Registrable Securities in
accordance with the terms of this Agreement (with the exception that the Company
shall have 15 days after the receipt of such request to file such new
Registration Statement and the Scheduled Effective Date for such Registration
Statement will be the later of (i) 120 days after the Issuance Date and (ii) 60
days after the receipt of such written request). In the event that the Company
is required to remove from any Registration Statement the Registrable Securities
of those Investors who provided an Investor Objection Notice in order to comply
with this Section 3(e), then on such date as the SEC no longer requires such
language, statements or comments which were objected to in the Investor
Objection Notice or such Investors, by written notification, waive their prior
objection to such language, statements or comments (the "CURE DATE") the Company
shall register such Investor's or Investors' Registrable Securities in
accordance with the terms of this Agreement (with the exception that the Company
shall have 15 days after the Cure Date to file such new Registration Statement
and the Scheduled Effective Date for such Registration Statement will be the
later of (i) 120 days after the Issuance Date or (ii) 60 days after the Cure
Date). Any Registration Statement
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required pursuant to Section 2(a), 3(b) or 3(e) shall be deemed to constitute a
"Registration Statement" for purposes of the Certificate of Designations, the
Exchange Agreement and this Agreement.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor in writing of the happening of any event
as a result of which the prospectus included in a Registration Statement, as
then in effect, includes an untrue statement of a material fact or omission to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten copies of such supplement or amendment to each Investor (or such other
number of copies as such Investor may reasonably request). The Company shall
also promptly notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness and by overnight mail), (ii) of
any request by the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information, and (iii) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate. Notwithstanding anything to the contrary in this
Section 3(f), at any time after the Registration Statement has been declared
effective, the Company may delay the disclosure of material non-public
information concerning the Company, the disclosure of which at the time is not,
in the good faith opinion of the Board of Directors of the Company and its
counsel, in the best interest of the Company and, in the opinion of counsel to
the Company, otherwise required (a "GRACE PERIOD"); provided, that the Company
shall promptly (I) notify the Investors in writing of the existence of (but in
no event, without the prior written consent of an Investor, shall the Company
disclose to such Investor any of the facts or circumstances regarding) material
non-public information giving rise to a Grace Period and the date on which the
Grace Period will begin, and (II) notify the Investors in writing of the date on
which the Grace Period ends; and, provided further, that no Grace Period shall
exceed 15 consecutive calendar days and during any consecutive 365-day period,
the Grace Period shall not exceed 45 calendar days in the aggregate (an
"ALLOWABLE GRACE PERIOD"). For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date which is the
later of the date specified in the notice or the date the holders receive the
notice referred to in clause (I) and shall end on and include the date which is
the later of the date specified in the notice or the date the holders receive
the notice referred to in clause (II). The provisions of Section 2(h) of this
Agreement shall not be applicable during the period of any Allowable Grace
Period. Upon expiration of the Allowable Grace Period, the Company shall again
be bound by the first sentence of this Section 3(f) with respect to the
information giving rise thereto. In the event a Grace Period exceeds the
Allowable Grace Period, the Maturity Date (as defined in the Certificate of
Designations) shall be delayed one and one-half (1 1/2) days for each day in
excess of the Allowable Grace Period as provided in Section 2(g) of the
Certificate of Designations.
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g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Investor who holds Registrable Securities being sold
(and, in the event of an underwritten offering, the managing underwriters) of
the issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
h. The Company shall permit each Investor and a single counsel,
initially Katten Muchin & Zavis or such other counsel as thereafter designated
as selling stockholders' counsel by the Investors who hold a majority of the
Registrable Securities being sold, to review and comment upon a Registration
Statement and all amendments and supplements thereto at least five business days
prior to their filing with the SEC, and shall not file any document in a form to
which such counsel reasonably objects. The Company shall not submit a request
for acceleration of the effectiveness of a Registration Statement or any
amendment or supplement thereto without the prior approval of such counsel,
which consent shall not be unreasonably withheld.
i. At the request of any Investor and at such Investor's expense,
the Company shall use its best efforts to furnish to such Investor, on the date
of the effectiveness of the Registration Statement and thereafter from time to
time on such dates as an Investor may reasonably request (i) a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and the Investors and (ii) an opinion, dated as of such
date, of independent counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the underwriters, if any, and the
Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall hold in strict confidence and shall
not make any disclosure (except to an Investor) or use of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally
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<PAGE> 11
available to the public other than by disclosure in violation of this or any
other agreement of which the Inspector has knowledge. Each Investor agrees that
it shall, upon learning that disclosure of such Records is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential.
k. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement of which the Company has knowledge. The Company agrees that it shall,
upon learning that disclosure of such information concerning an Investor is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt written notice to such Investor and allow such
Investor, at the Investor's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
l. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq SmallCap Market, or the Nasdaq National
Market, The American Stock Exchange, Inc. or The New York Stock Exchange, Inc.,
as the case may be, and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(l).
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request.
n. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement during the Registration Period.
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<PAGE> 12
o. The Company shall provide a transfer agent and registrar for all
such Registrable Securities not later than the effective date of such
Registration Statement.
p. If reasonably requested by the managing underwriters or an
Investor, the Company shall (i) immediately incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriters and the Investors agree should be included therein relating to the
sale and distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold to
such underwriters, the purchase price being paid therefor by such underwriters
and any other terms of the underwritten (or best efforts underwritten) offering
of the Registrable Securities to be sold in such offering; (ii) make all
required filings of such prospectus supplement or post-effective amendment as
soon as notified of the matters to be incorporated in such prospectus supplement
or post-effective amendment; and (iii) supplement or make any reasonable
amendments to any Registration Statement or the related prospectus if requested
by an Investor or any underwriter of such Registrable Securities.
q. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities during
the Registration Period.
r. The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
s. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
t. Within two (2) business days after the Registration Statement
which includes the Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) confirmation that the Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
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<PAGE> 13
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven days prior to the first anticipated filing date of
a Registration Statement, the Company shall notify each Investor in writing of
the information the Company requires from each such Investor if such Investor
elects to have any of such Investor's Registrable Securities included in such
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
c. In the event any Investor elects to participate in an
underwritten public offering pursuant to Section 2, each such Investor agrees to
enter into and perform such Investor's obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations (only with respect to violations
which occur in reliance upon and in conformity with information furnished in
writing to the Company by such Investor expressly for use in the Registration
Statement for such underwritten public offering), with the managing underwriter
of such offering and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Registrable Securities, unless
such Investor notifies the Company in writing of such Investor's election to
exclude all of such Investor's Registrable Securities from such Registration
Statement.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g) or
the first sentence of Section 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of Section 3(f), or until, in the case of a Grace Period, after
the date on which the Allowable Grace Period ended.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
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<PAGE> 14
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company and fees and disbursements of
one counsel for the Investors selected by the Investors holding a majority of
the Registrable Securities, shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
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<PAGE> 15
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor who holds such
Registrable Securities, the directors, officers, partners, employees, agents of,
and each Person, if any, who controls, any Investor within the meaning of the
1933 Act or the Securities Exchange Act of 1934, as amended (the "1934 ACT"),
and any underwriter (as defined in the 1933 Act) for the Investors, and the
directors and officers of, and each Person, if any, who controls, any such
underwriter within the meaning of the 1933 Act or the 1934 Act (each, an
"INDEMNIFIED PERSON"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several, (collectively, "CLAIMS") incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered
("BLUE SKY FILING"), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"VIOLATIONS"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse each
Indemnified Person promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto if such prospectus was timely made available by the Company
pursuant to Section 3(c); (ii) with respect to any prospectus, shall not inure
to the benefit of any Indemnified Person or any such person from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained in the prospectus was
corrected in a subsequent prospectus that was delivered to the Indemnified
Person prior to the pertinent sale or sales by the Indemnified
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<PAGE> 16
Person, and the Indemnified Person was promptly advised in writing not to use
the incorrect prospectus prior to the use giving rise to a violation and such
Indemnified Person, notwithstanding such advice, used it, (iii) shall not be
available to the extent such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the
Company; and (iv) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer or disposition of the
Registrable Securities by the Investors.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers, each Person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act (collectively and together with an
Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim or Indemnified
Damages to which any of them may become subject, under the 1933 Act, the 1934
Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or
are based upon any Violation, in each case to the extent, and only to the
extent, that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and, subject to Section 6(d),
such Investor will reimburse any legal or other expenses reasonably incurred by
them promptly as such expenses are incurred and are due and payable in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) and the agreement
with respect to contribution contained in Section 7 shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as does
not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any prospectus shall not inure to
the benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the prospectus was corrected in a subsequent
prospectus that was delivered to the purchaser or purchasers prior to the
pertinent sale or sales by such Investors.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
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<PAGE> 17
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
selected by the indemnifying party and approved by the Indemnified Person or the
Indemnified Party, as the case may be, which approval shall not be unreasonably
withheld; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates, if the Investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The Indemnified Party or Indemnified
Person shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all nonprivileged information reasonably
available to the Indemnified Party or Indemnified Person which relates to such
action or claim. The indemnifying party shall keep the Indemnified Party or
Indemnified Person fully apprised at all times as to the status of the defense
or any settlement negotiations with respect thereto. No indemnifying party
shall, without the consent of the Indemnified Party or Indemnified Person (as
the case may be), consent to entry of any judgment or enter into any settlement
or other compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party or Indemnified
Person of a release from all liability in respect to such claim or litigation.
Following indemnification as provided for hereunder, the indemnifying party
shall be subrogated to all rights of the Indemnified Party or Indemnified Person
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is materially prejudiced in its ability to
defend such action.
e. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the
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<PAGE> 18
indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant to
the Registration Statement.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Exchange Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
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<PAGE> 19
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company promptly
after such assignment; (ii) the Company is promptly furnished with written
notice of (a) the name, address and fax number of such transferee or assignee,
and (b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Exchange Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold two-thirds (_) of the Registrable Securities.
Notwithstanding the above, the provisions of Sections 2(h), 3(e) and 10 hereof
may only be amended or the observance thereof waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
consent of the Company and each of the Investors. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company. No such amendment shall be effective to the extent that it
applies to less than all of the holders of the Registrable Securities. No
consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
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<PAGE> 20
b. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) upon receipt, when delivered by a delivery service, in
each case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
General Magic, Inc.
420 N. Mary Avenue
Sunnyvale, California 94086
Telephone: (408) 774-4000
Facsimile: (408) 774-4033
Attention: President
With a copy to:
Cooley, Godward LLP
Five Palo Alto Square
Palo Alto, California 94306
Telephone: (650) 843-5000
Facsimile: (650) 857-0663
Attention: Timothy J. Moore, Esq.
If to a Holder, to its address and facsimile number on the Schedule of
Holders attached hereto, with copies to such Holder's representatives as set
forth on the Schedule of Holders. Each party shall provide five (5) days' prior
written notice to the other party of any change in address or facsimile number.
If to another Investor, to its address and facsimile number set forth on the
Notice of Transfer. Written confirmation of receipt (A) given by the recipient
of such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of such transmission or (C)
provided by a courier or overnight courier service shall be rebuttable evidence
of personal service, overnight or courier delivery or transmission by facsimile
in accordance with clause (i), (ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. The corporate laws of the State of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and
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interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws. Each party hereby irrevocably submits to
the non-exclusive jurisdiction of (i) the state and federal courts sitting in
the City of New York, borough of Manhattan and (ii) the state and federal courts
sitting in the State of California, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. This Agreement, the Exchange Agreement, the Certificate of
Designations and the Warrants constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement, the Exchange Agreement, the
Certificate of Designations and the Warrants supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
-21-
<PAGE> 22
j. All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by Investors holding a majority of the Registrable
Securities, determined as if all of the Series D Preferred Shares, the Series F
Preferred Shares and Warrants then outstanding have been converted into or
exercised for, as the case may be, Registrable Securities (without regard to any
limitations on conversions or exercises).
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
l. The Holders (other than RGC International Investors, LDC) and
the Company agree to waive all of each party's rights, title and claims and the
other's obligations under the Registration Rights Agreement by and among the
Company, the Holders and certain other signatories thereto, dated March 30,
1999, as amended.
-22-
<PAGE> 23
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: HOLDERS:
GENERAL MAGIC, INC. HFTP INVESTMENT LLC
By: Promethean Asset Management, L.L.C.
By: Its: Investment Manager
----------------------------
Name:
Its:
By:
---------------------------------
Name: James F. O'Brien, Jr.
Its: President
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Its: Investment Manager
By: RGC General Partner Corp.
Its: General Partner
By:
----------------------------------
Name: Wayne Bloch
Its: Managing Director
HALIFAX FUND, L.P.
By: The Palladin Group, L.P.
Its: Attorney-in-Fact
By:
----------------------------------
Name: Robert Chender
Title: Managing Director
<PAGE> 24
PALLADIN PARTNERS I, L.P.
By: Palladin Asset Management, L.L.C.
Its: General Partner
By:
----------------------------------
Name: Robert Chender
Title: Managing Director
PALLADIN OVERSEAS FUND LIMITED
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By:
----------------------------------
Name: Robert Chender
Title: Managing Director
THE GLENEAGLES FUND COMPANY
By: The Palladin Group L.P
Its: Attorney-in-Fact
By:
----------------------------------
Name: Robert Chender
Title: Managing Director
LANCER SECURITIES LTD.
By: The Palladin Group L.P
Its: Attorney-in-Fact
By:
----------------------------------
Name: Robert Chender
Title: Managing Director
[PAGE 2 OF 3 OF REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGES]
<PAGE> 25
FISHER CAPITAL LTD.
By:
----------------------------------
Name: Daniel Hopkins
Its: Authorized Signatory
WINGATE CAPITAL LTD.
By:
----------------------------------
Name: Daniel Hopkins
Its: Authorized Signatory
CONSECO DIRECT LIFE
By:
----------------------------------
Name:
Its:
[PAGE 3 OF 3 OF REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGES]
<PAGE> 26
SCHEDULE OF HOLDERS
<TABLE>
<CAPTION>
INVESTOR'S REPRESENTATIVES'
INVESTOR ADDRESS ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER AND FACSIMILE NUMBER
- -------------------------------- -------------------------------------------- --------------------------------
<S> <C> <C>
HFTP Investment LLC _Promethean Asset Management, L.L.C. Katten Muchin & Zavis
750 Lexington Avenue, 22nd Floor 525 West Monroe, Suite 1600
New York, New York 10022 Chicago, Illinois 60661-3693
Attn: James F. O'Brien, Jr. Attn: Robert J. Brantman, Esq.
Facsimile: 212-758-9334 Facsimile: 312-902-1061
Facsimile: 212-702-5200 Telephone: 312-902-5200
Residence: New York
RGC International Investors, LDC c/o Rose Glen Capital Management, L.P. Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200 3 Bala Plaza East, Suite 200
Bala Cynwyd, Pennsylvania Bala Cynwyd, Pennsylvania
Attn: Gary Kaminsky Attn: Gary Kaminsky
Facsimile: 610-617-0570 Facsimile: 610-617-0570
Telephone: 610-617-5900 Telephone: 610-617-5900
Residence: Cayman Islands
Palladin Partners I, L.P. c/o The Palladin Group L.P. The Palladin Group L.P.
195 Maplewood Avenue As Investment Advisor
Maplewood, New Jersey 07040 195 Maplewood Avenue
Attn: Kevin Gerlitz Maplewood, New Jersey 07040
Facsimile: 973-313-6490 Attn: Kevin Gerlitz
Telephone: 973-313-6420 Facsimile: 973-313-6490
Residence: New York Telephone: 973-313-6420
Halifax Fund, L.P. c/o Citco Fund Services (Cayman Islands) Ltd. The Palladin Group L.P.
Corporate Centre, West Bay Road As Investment Advisor
P.O. Box 31106 SMB 195 Maplewood Avenue
Grand Cayman, Cayman Islands Maplewood, New Jersey 07040
Facsimile: 345-949-3877 Attn: Kevin Gerlitz
Telephone: 345-949-3977 Facsimile: 973-313-6490
Residence: Cayman Islands Telephone: 973-313-6420
The Gleneagles Fund Company c/o Citco Fund Services (Cayman Islands) Ltd. The Palladin Group L.P.
Corporate Centre, West Bay Road As Investment Advisor
P.O. Box 31106 SMB 195 Maplewood Avenue
Grand Cayman, Cayman Islands Maplewood, New Jersey 07040
Facsimile: 345-949-3877 Attn: Kevin Gerlitz
Telephone: 345-949-3977 Facsimile: 973-313-6490
Residence: Cayman Islands Telephone: 973-313-6420
Palladin Overseas Fund Limited c/o Citco Fund Services (Cayman Islands) Ltd. The Palladin Group L.P.
Corporate Centre, West Bay Road As Investment Advisor
P.O. Box 31106 SMB 195 Maplewood Avenue
Grand Cayman, Cayman Islands Maplewood, New Jersey 07040
Facsimile: 345-949-3877 Attn: Kevin Gerlitz
Telephone: 345-949-3977 Facsimile: 973-313-6490
Residence: Cayman Islands Telephone: 973-313-6420
Lancer Securities Ltd. c/o The Palladin Group L.P. The Palladin Group L.P.
195 Maplewood Avenue As Investment Advisor
Maplewood, New Jersey 07040 195 Maplewood Avenue
Attn: Kevin Gerlitz Maplewood, New Jersey 07040
Facsimile: 973-313-6490 Attn: Kevin Gerlitz
Telephone: 973-313-6420 Facsimile: 973-313-6490
Residence: New York Telephone: 973-313-6420
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
INVESTOR'S REPRESENTATIVES'
INVESTOR ADDRESS ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER AND FACSIMILE NUMBER
- -------------------------------- -------------------------------------------- --------------------------------
<S> <C> <C>
Fisher Capital Ltd. _Citadel Investment Group, L.L.C. Katten Muchin & Zavis
225 West Washington Street 525 W. Monroe Street
Chicago, Illinois 60606 Chicago, Illinois 60661-3693
Attention: Daniel Hopkins Attention: Robert J. Brantman, Esq.
Kenneth A. Simpler Facsimile: (312) 902-1061
Facsimile: (312) 338-0780 Telephone: (312) 902-5200
Telephone: (312) 338-7800
Residence: Illinois
Wingate Capital Ltd. _Citadel Investment Group, L.L.C. Katten Muchin & Zavis
225 West Washington Street 525 W. Monroe Street
Chicago, Illinois 60606 Chicago, Illinois 60661-3693
Attention: Daniel Hopkins Attention: Robert J. Brantman, Esq.
Kenneth A. Simpler Facsimile: (312) 902-1061
Facsimile: (312) 338-0780 Telephone: (312) 902-5200
Telephone: (312) 338-7800
Residence: Illinois
Conseco Direct Life c/o The Palladin Group L.P. The Palladin Group L.P.
195 Maplewood Avenue As Investment Advisor
Maplewood, New Jersey 07040 195 Maplewood Avenue
Attn: Kevin Gerlitz Maplewood, New Jersey 07040
Facsimile: 973-313-6490 Attn: Kevin Gerlitz
Telephone: 973-313-6420 Facsimile: 973-313-6490
Residence: New York Telephone: 973-313-6420
</TABLE>
<PAGE> 28
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn: ___________________
RE: GENERAL MAGIC, INC.
Ladies and Gentlemen:
We are counsel to GENERAL MAGIC, INC., a Delaware corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Exchange Agreement (the "EXCHANGE AGREEMENT") entered into by and among the
Company and the Holders named therein (collectively, the "HOLDERS") pursuant to
which the Company issued to the Holders shares of its Series F Convertible
Preferred Stock, par value $.001 per share (the "PREFERRED SHARES") convertible
into shares of the Company's common stock, par value $.001 per share (the
"COMMON STOCK"). Pursuant to the Exchange Agreement, the Company also has
entered into a Registration Rights Agreement with the Holders (the "REGISTRATION
RIGHTS AGREEMENT") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon conversion of the
Preferred Shares and the Company's Series D Convertible Preferred Stock held by
the Holders and the exercise of certain warrants held by the Holders, under the
Securities Act of 1933, as amended (the "1933 ACT"). In connection with the
Company's obligations under the Registration Rights Agreement, on ____________
___, 1999, the Company filed a Registration Statement on Form S-3 (File No.
333-_____________) (the "REGISTRATION STATEMENT") with the Securities and
Exchange Commission (the "SEC") relating to the Registrable Securities which
names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge as
of the date hereof, after telephonic inquiry of a member of the SEC's staff,
that any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC.
Very truly yours,
[COMPANY COUNSEL]
By:
-------------------------------
cc: [LIST NAMES OF HOLDERS]
<PAGE> 1
EXHIBIT 4.5
AMENDMENT #1 TO
REGISTRATION RIGHTS AGREEMENT
This Amendment (the "Amendment") to the Registration Rights Agreement,
dated as of March 30, 1999 (the "Agreement"), by and among General Magic, Inc.,
a Delaware corporation (the "Company") and the undersigned buyers (the
"Buyers"), is made as of June 25, 1999 among the Company and the Buyers.
RECITAL
WHEREAS, Section 3(a) of the Agreement provides that the Company shall
use its best efforts to cause the Registration Statement (as defined in the
Agreement) to become effective no later than June 28, 1999 (the "Effectiveness
Deadline") and Section 2(h) of the Agreement provides that if the Registration
Statement is not declared effective by the SEC by the Effectiveness Deadline,
the Company must pay to each of the undersigned the Registration Delay Payments
(as defined in the Agreement);
WHEREAS, the Registration Statement was filed on April 28, 1999 and the
Securities and Exchange Commission (the "SEC") delivered a comment letter on the
Registration Statement on June 2, 1999 (the "Comment Letter");
WHEREAS, the undersigned Buyers object to Comment #3 of the Comment
Letter and acknowledge that such a position could delay the date of the
effectiveness of the Registration Statement beyond June 28, 1999;
NOW, THEREFORE, in consideration of the foregoing:
1. WAIVER. Each of the undersigned Buyers hereby agrees to extend the
Effectiveness Deadline to July 12, 1999 and waive any and all of its rights
relating to a delay of the effectiveness of the Registration Statement prior to
July 12, 1999. Each of the undersigned Buyers acknowledges that such rights
include, without limitation, the right to receive Registration Delay Payments
pursuant to Section 2(h) of the Agreement.
2. AMENDMENT TO THE AGREEMENT. The parties hereby agree that the
Agreement shall be amended as follows:
2.1 Amendment to Section 2(a). The last sentence of Section 2(a)
shall be deleted in its entirety and the following substituted in lieu thereof:
<PAGE> 2
"The Company shall use its best efforts to have the Registration
Statement(s) declared effective by the SEC as soon as practicable,
but in no event later than July 12, 1999."
2.2 Amendment to clause (i) to Section 2(h). Clause (i) to Section
2(h) shall be deleted in its entirety and the following substituted in lieu
thereof:
"(i) the Registration Statement is not declared effective by the SEC
on or before July 12, 1999;"
3. MISCELLANEOUS.
3.1 Other Provisions. All other provisions of the Agreement shall
remain in full force and effect.
3.2 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
<PAGE> 3
IN WITNESS WHEREOF, the undersigned has caused this amendment to be
duly executed and delivered by its proper and duly authorized officers.
HFTP INVESTMENT LLC
By:Promethean Investment Group L.L.C.
Its:Investment Manager
By: /s/ John Floegel
------------------------------------
Name: John Floegel
Its: Authorized Signatory
RGC INTERNATIONAL INVESTORS, LDC
By:Rose Glen Capital Management,L.P.
Its:Investment Advisor
By: RGC General Partner Corp.
Its: General Partner
By: /s/ Wayne Bloch
------------------------------------
Name: Wayne Bloch
Its: Managing Director
<PAGE> 4
HALIFAX FUND, L.P.
By: The Palladin Group, L.P.
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
PALLADIN PARTNERS I, L.P.
By:Palladin Asset Management, L.L.C.
Its:General Partner
By: /s/ Robert Chender
Name: Robert Chender
Title: Managing Director
PALLADIN OVERSEAS FUND LIMITED
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
THE GLENEAGLES FUND COMPANY
By: The Palladin Group L.P
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
<PAGE> 5
CONSECO DIRECT LIFE
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
FISHER CAPITAL LTD.
By: /s/ Kenneth Simpler
------------------------------------
Name: Kenneth Simpler
Title: Vice President
WINGATE CAPITAL LTD.
By: /s/ Kenneth Simpler
------------------------------------
Name: Kenneth Simpler
Title: Vice President
<PAGE> 6
GENERAL MAGIC, INC.
By: /s/ James P. McCormick
------------------------------------
Name: James P. McCormick
Title: Chief Operating Officer
and Chief Financial Officer
<PAGE> 1
EXHIBIT 4.6
AMENDMENT #2 TO
REGISTRATION RIGHTS AGREEMENT
This Amendment #2 (the "Amendment") to the Registration Rights
Agreement, dated as of March 30, 1999, by and among General Magic, Inc., a
Delaware corporation (the "Company") and the undersigned buyers (the "Buyers"),
as amended on June 25, 1999 (the "Agreement"), is made as of July 9, 1999 among
the Company and the Buyers.
RECITAL
WHEREAS, Section 3(a) of the Agreement provides that the Company shall
use its best efforts to cause the Registration Statement (as defined in the
Agreement) to become effective no later than July 12, 1999 (the "Effectiveness
Deadline") and Section 2(h) of the Agreement provides that if the Registration
Statement is not declared effective by the SEC by the Effectiveness Deadline,
the Company must pay to each of the undersigned the Registration Delay Payments
(as defined in the Agreement);
WHEREAS, the Registration Statement was filed on April 28, 1999; the
Securities and Exchange Commission (the "SEC") delivered a comment letter on the
Registration Statement on June 2, 1999 (the "June 2 Comment Letter"); an
Amendment #2 in response to the June 2 Comment Letter was filed on June 16,
1999; and the SEC delivered a subsequent comment letter on June 22, 1999 (the
"June 22 Comment Letter");
WHEREAS, the undersigned Buyers objected to Comment #3 of the June 2
Comment Letter and Comment #1 to the June 22 Comment Letter and acknowledge that
such a position could delay the date of the effectiveness of the Registration
Statement beyond July 12, 1999;
NOW, THEREFORE, in consideration of the foregoing:
1. WAIVER. Each of the undersigned Buyers hereby agrees to extend the
Effectiveness Deadline to July 26, 1999 and waive any and all of its rights
relating to a delay of the effectiveness of the Registration Statement prior to
July 26, 1999. Each of the undersigned Buyers acknowledges that such rights
include, without limitation, the right to receive Registration Delay Payments
pursuant to Section 2(h) of the Agreement.
2. AMENDMENT TO THE AGREEMENT. The parties hereby agree that the
Agreement shall be amended as follows:
2.1 Amendment to Section 2(a). The last sentence of Section 2(a)
shall be deleted in its entirety and the following substituted in lieu thereof:
<PAGE> 2
"The Company shall use its best efforts to have the Registration
Statement(s) declared effective by the SEC as soon as practicable,
but in no event later than July 26, 1999."
2.2 Amendment to clause (i) to Section 2(h). Clause (i) to Section
2(h) shall be deleted in its entirety and the following substituted in lieu
thereof:
"(i) the Registration Statement is not declared effective by the SEC
on or before July 26, 1999;"
3. MISCELLANEOUS.
3.1 Other Provisions. All other provisions of the Agreement shall
remain in full force and effect.
3.2 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
<PAGE> 3
IN WITNESS WHEREOF, the undersigned has caused this amendment to be
duly executed and delivered by its proper and duly authorized officers.
HFTP INVESTMENT LLC
By:Promethean Investment Group L.L.C.
Its:Investment Manager
By: /s/ James F. O'Brien
------------------------------------
Name: James F. O'Brien, Jr.
Its: President
RGC INTERNATIONAL INVESTORS, LDC
By:Rose Glen Capital Management,L.P.
Its:Investment Advisor
By: RGC General Partner Corp.
Its: General Partner
By:
------------------------------------
Name: Wayne Bloch
Its: Managing Director
[Amendment #2 to Registration Rights Agreement]
<PAGE> 4
HALIFAX FUND, L.P.
By: The Palladin Group, L.P.
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
PALLADIN PARTNERS I, L.P.
By:Palladin Asset Management, L.L.C.
Its:General Partner
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
PALLADIN OVERSEAS FUND LIMITED
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
THE GLENEAGLES FUND COMPANY
By: The Palladin Group L.P
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
[Amendment #2 to Registration Rights Agreement]
<PAGE> 5
CONSECO DIRECT LIFE
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
FISHER CAPITAL LTD.
By: /s/ Kenneth Simpler
------------------------------------
Name: Kenneth Simpler
Title: Vice President
WINGATE CAPITAL LTD.
By: /s/ Kenneth Simpler
------------------------------------
Name: Kenneth Simpler
Title: Vice President
[Amendment #2 to Registration Rights Agreement]
<PAGE> 6
GENERAL MAGIC, INC.
By: /s/ James P. McCormick
------------------------------------
Name: James P. McCormick
Title: Chief Operating Officer
and Chief Financial Officer
[Amendment #2 to Registration Rights Agreement]
<PAGE> 1
EXHIBIT 4.7
AMENDMENT #3 TO
REGISTRATION RIGHTS AGREEMENT
This Amendment #3 (the "Amendment") to the Registration Rights
Agreement, dated as of March 30, 1999, by and among General Magic, Inc., a
Delaware corporation (the "Company") and the undersigned buyers (the "Buyers"),
as amended on June 25, 1999 and July 9, 1999 (the "Agreement"), is made as of
July 23, 1999 among the Company and the Buyers.
RECITAL
WHEREAS, Section 3(a) of the Agreement provides that the Company shall
use its best efforts to cause the Registration Statement (as defined in the
Agreement) to become effective no later than July 26, 1999 (the "Effectiveness
Deadline") and Section 2(h) of the Agreement provides that if the Registration
Statement is not declared effective by the SEC by the Effectiveness Deadline,
the Company must pay to each of the undersigned the Registration Delay Payments
(as defined in the Agreement);
WHEREAS, the Registration Statement was filed on April 28, 1999; the
Securities and Exchange Commission (the "SEC") delivered a comment letter on the
Registration Statement on June 2, 1999 (the "June 2 Comment Letter"); an
Amendment #2 in response to the June 2 Comment Letter was filed on June 16,
1999; and the SEC delivered a subsequent comment letter on June 22, 1999 (the
"June 22 Comment Letter");
WHEREAS, the undersigned Buyers (other than RGC International
Investors, LDC) objected to Comment #3 of the June 2 Comment Letter and Comment
#1 to the June 22 Comment Letter and acknowledge that such a position could
delay the date of the effectiveness of the Registration Statement beyond July
26, 1999;
NOW, THEREFORE, in consideration of the foregoing:
1. WAIVER. Each of the undersigned Buyers hereby agrees to extend the
Effectiveness Deadline to August 9, 1999 and waive any and all of its rights
relating to a delay of the effectiveness of the Registration Statement prior to
August 9, 1999. Each of the undersigned Buyers acknowledges that such rights
include, without limitation, the right to receive Registration Delay Payments
pursuant to Section 2(h) of the Agreement.
2. AMENDMENT TO THE AGREEMENT. The parties hereby agree that the
Agreement shall be amended as follows:
<PAGE> 2
2.1 Amendment to Section 2(a). The last sentence of Section 2(a)
shall be deleted in its entirety and the following substituted in lieu thereof:
"The Company shall use its best efforts to have the Registration
Statement(s) declared effective by the SEC as soon as practicable,
but in no event later than August 9, 1999."
2.2 Amendment to clause (i) to Section 2(h). Clause (i) to Section
2(h) shall be deleted in its entirety and the following substituted in lieu
thereof:
"(i) the Registration Statement is not declared effective by the SEC
on or before August 9, 1999;"
3. MISCELLANEOUS.
3.1 Other Provisions. All other provisions of the Agreement shall
remain in full force and effect.
3.2 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
<PAGE> 3
IN WITNESS WHEREOF, the undersigned has caused this amendment to be
duly executed and delivered by its proper and duly authorized officers.
HFTP INVESTMENT LLC
By:Promethean Investment Group L.L.C.
Its:Investment Manager
By: /s/ James F. O'Brien
------------------------------------
Name: James F. O'Brien, Jr.
Its: President
RGC INTERNATIONAL INVESTORS, LDC
By:Rose Glen Capital Management,L.P.
Its:Investment Manager
By: RGC General Partner Corp.
Its: General Partner
By: /s/ Wayne Bloch
------------------------------------
Name: Wayne Bloch
Its: Managing Director
[Amendment #3 to Registration Rights Agreement]
<PAGE> 4
HALIFAX FUND, L.P.
By: The Palladin Group, L.P.
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
PALLADIN PARTNERS I, L.P.
By:Palladin Asset Management, L.L.C.
Its:General Partner
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
PALLADIN OVERSEAS FUND LIMITED
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
THE GLENEAGLES FUND COMPANY
By: The Palladin Group L.P
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
[Amendment #3 to Registration Rights Agreement]
<PAGE> 5
CONSECO DIRECT LIFE
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
FISHER CAPITAL LTD.
By: /s/ Kenneth Simpler
------------------------------------
Name: Kenneth Simpler
Title: Vice President
WINGATE CAPITAL LTD.
By: /s/ Kenneth Simpler
------------------------------------
Name: Kenneth Simpler
Title: Vice President
[Amendment #3 to Registration Rights Agreement]
<PAGE> 6
GENERAL MAGIC, INC.
By: /s/ James P. McCormick
------------------------------------
Name: James P. McCormick
Title: Chief Operating Officer
and Chief Financial Officer
[Amendment #3 to Registration Rights Agreement]
<PAGE> 1
EXHIBIT 4.8
AMENDMENT #4 TO
REGISTRATION RIGHTS AGREEMENT
This Amendment #4 (the "Amendment") to the Registration Rights
Agreement, dated as of March 30, 1999, by and among General Magic, Inc., a
Delaware corporation (the "Company") and the undersigned buyers (the "Buyers"),
as amended on June 25, 1999, July 9, 1999 and July 23, 1999 (the "Agreement"),
is made as of August 6, 1999 among the Company and the Buyers.
RECITAL
WHEREAS, Section 3(a) of the Agreement provides that the Company shall
use its best efforts to cause the Registration Statement (as defined in the
Agreement) to become effective no later than August 9, 1999 (the "Effectiveness
Deadline") and Section 2(h) of the Agreement provides that if the Registration
Statement is not declared effective by the SEC by the Effectiveness Deadline,
the Company must pay to each of the undersigned the Registration Delay Payments
(as defined in the Agreement);
WHEREAS, the Registration Statement was filed on April 28, 1999; the
Securities and Exchange Commission (the "SEC") delivered a comment letter on the
Registration Statement on June 2, 1999 (the "June 2 Comment Letter"); an
Amendment #2 in response to the June 2 Comment Letter was filed on June 16,
1999; and the SEC delivered a subsequent comment letter on June 22, 1999 (the
"June 22 Comment Letter");
WHEREAS, the undersigned Buyers objected to Comment #3 of the June 2
Comment Letter and Comment #1 to the June 22 Comment Letter and acknowledge that
such a position could delay the date of the effectiveness of the Registration
Statement beyond August 9, 1999;
NOW, THEREFORE, in consideration of the foregoing:
1. WAIVER. Each of the undersigned Buyers hereby agrees to extend the
Effectiveness Deadline to August 23, 1999 and waive any and all of its rights
relating to a delay of the effectiveness of the Registration Statement prior to
August 23, 1999. Each of the undersigned Buyers acknowledges that such rights
include, without limitation, the right to receive Registration Delay Payments
pursuant to Section 2(h) of the Agreement.
2. AMENDMENT TO THE AGREEMENT. The parties hereby agree that the
Agreement shall be amended as follows:
2.1 Amendment to Section 2(a). The last sentence of Section 2(a)
shall be deleted in its entirety and the following substituted in lieu thereof:
<PAGE> 2
"The Company shall use its best efforts to have the Registration
Statement(s) declared effective by the SEC as soon as practicable,
but in no event later than August 23, 1999."
2.2 Amendment to clause (i) to Section 2(h). Clause (i) to Section
2(h) shall be deleted in its entirety and the following substituted in lieu
thereof:
"(i) the Registration Statement is not declared effective by the SEC
on or before August 23, 1999 (the "SCHEDULED EFFECTIVE DATE");"
3. MISCELLANEOUS.
3.1 Other Provisions. All other provisions of the Agreement shall
remain in full force and effect.
3.2 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
<PAGE> 3
IN WITNESS WHEREOF, the undersigned has caused this amendment to be
duly executed and delivered by its proper and duly authorized officers.
HFTP INVESTMENT LLC
By:Promethean Investment Group L.L.C.
Its:Investment Manager
By: /s/ James F. O'Brien
------------------------------------
Name: James F. O'Brien, Jr.
Its: President
RGC INTERNATIONAL INVESTORS, LDC
By:Rose Glen Capital Management,L.P.
Its:Investment Advisor
By: RGC General Partner Corp.
Its: General Partner
By: /s/ Wayne Bloch
------------------------------------
Name: Wayne Bloch
Its: Managing Director
[Amendment #4 to Registration Rights Agreement]
<PAGE> 4
HALIFAX FUND, L.P.
By: The Palladin Group, L.P.
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
PALLADIN PARTNERS I, L.P.
By:Palladin Asset Management, L.L.C.
Its:General Partner
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
PALLADIN OVERSEAS FUND LIMITED
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
THE GLENEAGLES FUND COMPANY
By: The Palladin Group L.P
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
[Amendment #4 to Registration Rights Agreement]
<PAGE> 5
CONSECO DIRECT LIFE
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By: /s/ Robert Chender
------------------------------------
Name: Robert Chender
Title: Managing Director
FISHER CAPITAL LTD.
By: /s/ Kenneth Simpler
------------------------------------
Name: Kenneth Simpler
Title: Vice President
WINGATE CAPITAL LTD.
By: /s/ Kenneth Simpler
------------------------------------
Name: Kenneth Simpler
Title: Vice President
[Amendment #4 to Registration Rights Agreement]
<PAGE> 6
GENERAL MAGIC, INC.
By: /s/ James P. McCormick
------------------------------------
Name: James P. McCormick
Title: Chief Operating Officer and
Chief Financial Officer
[Amendment #4 to Registration Rights Agreement]
<PAGE> 1
EXHIBIT 4.9
WAIVER AGREEMENT
This Waiver Agreement (the "Agreement") is made and entered into as of
September 9, 1999, by and among General Magic, Inc., a Delaware corporation
(the "Company") and the stockholders listed on the Schedule of Stockholders
attached hereto (each a "Stockholder," and collectively, the "Stockholders"),
which include all of holders of the issued and outstanding shares of the Series
D Convertible Preferred Stock of the Company (the "Series D Stock").
WHEREAS, as of March 30, 1999, the Company issued and sold to the
Stockholders a total of 2,000 shares of its Series D Stock pursuant to a
Securities Purchase Agreement, dated as of March 30, 1999, by and among the
Company and the Stockholders (the "Series D Agreement") and in connection
therewith the Company filed a Certificate of Designations, Preferences and
Rights with respect to the Series D Stock with the Secretary of State of
Delaware (the "Series D COD").
WHEREAS, pursuant to an Exchange Agreement, dated as of the date
hereof, by and among the Company and certain of the Stockholders (the "Exchange
Agreement"), the Company has offered and certain of the Stockholders have agreed
to exchange an aggregate of 1,000 shares of the Series D Stock for the Company's
Series F Convertible Preferred Stock (the "Series F Stock") on a share for share
basis.
WHEREAS, the Stockholders desire to waive their rights under Sections
2(d)(i) and 2(d)(iii) of the Series D COD, Section 4(g) and 4(m) of the Series D
Agreement, Section 8(a) of the warrants issued in connection with the Series C
Convertible Preferred Stock (the "Series C Warrants") and Section 8(a) of the
warrants issued in connection with the Series D Stock (the "Series D Warrants"
and collectively with the Series C Warrants, the "Warrants") with respect to the
issuance of the Series F Stock in connection with the Exchange Agreement;
WHEREAS, the Stockholders desire to waive certain rights under Sections
3(d)(i) and 3(h)(i) of the Series D COD;
WHEREAS, the Stockholders (other than RGC International Investors, LDC
("RGC")) desire to waive all rights relating to the Registration Rights
Agreement, dated as of March 30, 1999, by and among certain of the Stockholders
and the Company, as amended (the "Series D Registration Rights Agreement") under
the Series D COD;
WHEREAS, the Stockholders desire to waive their rights under Section
2(d)(i) of the Series D COD, Section 8(a) of the Series C Warrants and Section
8(a) of the Series D Warrants with respect to the issuance of Common Stock under
that certain Common Stock Investment Agreement, dated as of July 30, 1999, by
and between the Company and Cripple Creek Securities, LLC., as in effect on July
30, 1999 (the "Investment Agreement"), provided there are no amendments or
waivers of provisions thereof (i) relating to (A) the aggregate dollar amount of
the shares of Common Stock issuable under the Investment Agreement, (B) the per
share purchase price or the $2.00 per share minimum purchase price or (C)
additional consideration to be received or costs or expenses recoverable by the
Investor thereunder or (ii) which would result in a larger number of shares of
Common Stock being issued or available for issuance under
<PAGE> 2
the Investment Agreement than was contemplated on July 30, 1999 by the
Investment Agreement (collectively, the "Prohibited Amendments or Waivers").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Agreement Upon Transfer; Legend.
(a) Each Stockholder agrees not to transfer, sell or exchange
(collectively, "Transfer") any shares of Series D Stock (other than the exchange
for Series F Stock pursuant to the Exchange Agreement) or the Warrants to any
transferee unless such transferee agrees in writing to be bound by the terms and
provisions of this Agreement.
(b) Each certificate representing any shares of Series D Stock or
any Warrants shall be endorsed by the Company with a legend reading
substantially as follows:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN A WAIVER AGREEMENT, DATED
SEPTEMBER 9, 1999, AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NO
REGISTRATION OR TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS
OF THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN
COMPLIED WITH.
2. Rights Under the Series D COD.
(a) Each Stockholder agrees that the issuance of the Series F Stock
as contemplated by the Exchange Agreement and any issuance of Common Stock under
the Investment Agreement, provided there are no Prohibited Amendments or
Waivers, shall not result in any adjustment to the Fixed Conversion Price (as
defined in the Series D COD). Each Stockholder agrees to waive any and all
rights under Section 2(d)(i) of the Series D COD with respect to the issuance of
the Series F Stock and the issuance of the Common Stock under the Investment
Agreement, provided there are no Prohibited Amendments or Waivers.
(b) Each Stockholder agrees that the Ratchet Date, as defined in
Section 2(d)(i)(A) of the Series D COD, shall be the earlier of (i) the date on
which an aggregate of at least 600 Preferred Shares (as defined in the Series D
COD) have been converted pursuant to Section 2 of the Series D COD and (ii) the
date which is one year after the date the Registration Statement (as defined by
and filed pursuant to the Registration Rights Agreement dated September 9, 1999
by and among certain of the Stockholders and the Company (the "Series F
Registration Rights Agreement")) is declared effective by the SEC.
(c) Each Stockholder agrees not to exercise its rights under Section
2(d)(iii) of the Series D COD with respect to the issuance of the Series F Stock
and agrees to waive any and
<PAGE> 3
all its rights under Section 2(d)(iii) of the Series D COD with respect to
issuance of the Series F Stock.
(d) Each Stockholder (other than RGC as to the shares of Common
Stock issuable upon conversion of the Series D Stock not exchanged by RGC
pursuant to the Exchange Agreement) agrees that the failure of the Registration
Statement (as defined in the Series D COD) to be declared effective within 180
days after the Issuance Date (as defined in the Series D COD) shall not
constitute a Triggering Event (as defined in the Series D COD) under Section
3(d)(i) of the Series D COD or an Excluded Redemption Event (as defined in the
Series D COD) under Section 3(h)(i) of the Series D COD and agrees to waive any
and all rights relating to the failure of such Registration Statement to be
declared effective within such time period, but only to the extent that the
following proviso is enforceable against the Company; provided, however, that
the Company agrees that a Triggering Event (as defined in the Certificate of
Designations, Preferences and Rights of the Series F Stock (the "Series F COD"))
under Section 3(d)(i) of the Series F COD shall constitute a Triggering Event
under Section 3(d)(i) of the Series D COD as of the date of such Triggering
Event under the Series F COD and an Excluded Redemption Event (as defined in the
Series F COD) under Section 3(h)(i) of the Series F COD shall constitute an
Excluded Redemption Event under Section 3(h)(i) of the Series D COD as of the
date of such Excluded Redemption Event under the Series F COD.
(e) Each Stockholder (other than RGC as to the shares of Common
Stock issuable upon conversion of the Series D Stock not exchanged by RGC
pursuant to the Exchange Agreement) agrees that the lapses for any reason in the
effectiveness of or the unavailability of a Registration Statement (as defined
in the Series D COD) shall not constitute a Triggering Event (as defined in the
Series D COD) under Section 3(d)(ii) of the Series D COD or an Excluded
Redemption Event (as defined in the Series D COD) under Section 3(h)(ii) of the
Series D COD and agrees to waive any and all rights relating to the lapses for
any reason in the effectiveness of or the unavailability of such Registration
Statement (but only to the extent that the following proviso is enforceable
against the Company); provided, however, that the Company agrees that a
Triggering Event (as defined in the Series F COD) under Section 3(d)(ii) of the
Series F COD shall constitute a Triggering Event (as defined in the Series D
COD) under Section 3(d)(ii) of the Series D COD as of the date of such
Triggering Event under the Series F COD and an Excluded Redemption Event (as
defined in the Series F COD) under Section 3(h)(ii) of the Series F COD shall
constitute an Excluded Redemption Event (as defined in the Series D COD) under
Section 3(h)(ii) of the Series D COD as of the date of such Excluded Redemption
Event under the Series F COD.
(f) Each Stockholder (other than RGC as to the shares of Common
Stock issuable upon conversion of the Series D Stock not exchanged by RGC
pursuant to the Exchange Agreement) agrees to waive all rights to an extension
to the Maturity Date (as defined by the Series D COD) pursuant to Section 2(g)
of the Series D COD (but only to the extent that the following proviso is
enforceable against the Company); provided, however, that the Company agrees
that an extension to the Maturity Date (as defined in the Series F COD) pursuant
to Section 2(g) of the Series F COD shall result in an equivalent extension to
the Maturity Date (as defined by the Series D COD) under Section 2(g) of the
Series D COD.
<PAGE> 4
(g) Each Stockholder (other than RGC as to the shares of Common
Stock issuable upon conversion of the Series D Stock not exchanged by RGC
pursuant to the Exchange Agreement) agrees to waive all rights pursuant to
Section 5(i) of the Series D COD (but only to the extent that the following
proviso is enforceable against the Company); provided, however, that the Company
agrees that it will not exercise its rights under Section 5 of the Series D COD
unless on each day during the period beginning 60 trading days prior to the
Company's Election Conversion Date (as defined in the Series D COD) and ending
on and including the Company's Election Conversion Date (as defined in the
Series D COD), no Grace Period (as defined in Section 3(f) of the Series F
Registration Rights Agreement) shall be in effect and the Registration Statement
(as defined in the Series F Registration Rights Agreement) shall have been
effective and available for the sale of no less than 125% of the Registrable
Securities (as defined in the Series F Registration Rights Agreement).
(h) Each Stockholder (other than RGC as to the shares of Common
Stock issuable upon conversion of the Series D Stock not exchanged by RGC
pursuant to the Exchange Agreement) agrees to waive all rights pursuant to
Section 7(i) of the Series D COD (but only to the extent that the following
proviso is enforceable against the Company); provided, however, that the Company
agrees that it will not exercise its rights under Section 7 of the Series D COD
unless on each day during the period beginning 20 trading days prior to the
Company's Reset Redemption Date (as defined in the Series D COD) and ending on
and including the Company's Reset Redemption Date (as defined in the Series D
COD), no Grace Period (as defined in Section 3(f) of the Series F Registration
Rights Agreement) shall be in effect and the Registration Statement (as defined
in the Series F Registration Rights Agreement) shall have been effective and
available for the sale of no less than 125% of the Registrable Securities (as
defined in the Series F Registration Rights Agreement).
(i) The Company and each Stockholder (other than RGC as to the
shares of Common Stock issuable upon conversion of the Series D Stock not
exchanged by RGC pursuant to the Exchange Agreement) agree that (I) the term
"Registration Rights Agreement" as such term is used in Sections 2(b)(xvi),
3(d)(vii), 3(g), 5(v), 6 and 7(iv) of the Series D COD shall mean and refer to
the Series F Registration Rights Agreement; (II) the term "Registration
Statement" as such term is used in Sections 3(i)(i), 3(i)(ii), 4(a) and 6 of
the Series D COD shall mean and refer to the Registration Statement (as defined
in the Series F Registration Rights Agreement); and (III) the term "Registrable
Securities" as such term is used in Sections 3(i)(ii) and 6 of the Series D COD
shall mean and refer to the Registrable Securities (as defined in the Series F
Registration Rights Agreement).
3. Rights under Series D Agreement.
(a) Each of the Stockholders consents, under Section 4(g) of the
Series D Agreement, to the issuance of the Series F Stock as contemplated by the
Exchange Agreement.
<PAGE> 5
(b) Each of the Stockholders agrees to waive any and all its rights
under Section 4(m) of the Series D Agreement with respect to the issuance of the
Series F Stock as contemplated by the Exchange Agreement.
4. Rights under Series C Warrants and Series D Warrants.
(a) Each Stockholder agrees to exclude the issuance of the Series F
Stock as contemplated by the Exchange Agreement and any issuance of Common Stock
under the Investment Agreement, assuming there are no Prohibited Amendments or
Waivers, from Section 8(a) of the Series C Warrants and agrees that such
issuances shall not result in any adjustment to the Warrant Exercise Price (as
defined in the Series C Warrants). Each Stockholder agrees to waive any and all
rights under Section 8(a) of the Series C Warrants with respect to the issuance
of the Series F Stock and the Common Stock under the Investment Agreement,
assuming there are no Prohibited Amendments or Waivers.
(b) Each Stockholder agrees to exclude the issuance of the Series F
Stock as contemplated by the Exchange Agreement and any issuance of Common Stock
under the Investment Agreement, assuming there are no Prohibited Amendments or
Waivers, from Section 8(a) of the Series D Warrants and agrees that such
issuances shall not result in any adjustment to the Warrant Exercise Price (as
defined in the Series D Warrants). Each Stockholder agrees to waive any and all
rights under Section 8(a) of the Series D Warrants with respect to the issuance
of the Series F Stock and the Common Stock under the Investment Agreement,
assuming there are no Prohibited Amendments or Waivers.
5. Governing Law; Miscellaneous.
(a) Governing Law; Jurisdiction; Jury Trial. The corporate laws of
the State of Delaware shall govern all issues concerning the relative rights of
the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and interpreted in accordance with the laws of the State of New
York without regard to the principles of conflict of laws. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of (i) the state and
federal courts sitting in the City of New York, borough of Manhattan and (ii)
the state and federal courts sitting in the State of California, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
<PAGE> 6
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Stockholders, the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and, except as specifically set forth herein, neither the
Company nor any Stockholder makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and holders
of the Series D Stock, the Series F Stock and the Warrants representing at least
2/3 of the shares of the Common Stock issuable upon conversion or exercise of
the Series D Stock, the Series F Stock and the Warrants held by the Stockholders
(determined on an as converted to Common Stock basis at the time of such
determination, without regard to any limitations on conversions or exercises),
and no provision hereof may be waived other than by an instrument in writing
signed by the party against whom enforcement is sought. No such amendment shall
be effective to the extent that it applies to less than all of the holders of
the Series D Stock, the Series F Stock and the Warrants then outstanding. No
consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement or holders
of the Series D Stock, the Series F Stock and the Warrants. Notwithstanding the
foregoing, this last sentence of this Section 5(e) and the provisions relating
to RGC in Sections 2(d), 2(e), 2(f), 2(g), 2(h) and 2(i) shall not be deleted or
otherwise amended without the written consent of RGC.
<PAGE> 7
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) upon receipt, when delivered by a
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
General Magic, Inc.
420 N. Mary Avenue
Sunnyvale, California 94086
Telephone:(408) 774-4000
Facsimile:(408) 774-4033
Attention:President
With a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306
Telephone:(650)843-5000
Facsimile:(650)857-0663
Attention: Timothy J. Moore, Esq.
If to a Stockholder, to its address and facsimile number on the
Schedule of Stockholders, with copies to such Stockholder's representatives as
set forth on the Schedule of Stockholders. Each party shall provide five (5)
days' prior written notice to the other party of any change in address or
facsimile number. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of such transmission or (C)
provided by a courier or overnight courier service shall be rebuttable evidence
of personal service, overnight or courier delivery or transmission by facsimile
in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective permitted successors
and assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of the
Series D Stock, the Series F Stock and the Warrants representing at least
two-thirds (2/3) of Common Stock issuable upon conversion or exercise of the
Series D Stock, the Series F Stock and the Warrants held by the Stockholders
(determined on an as converted to Common Stock basis at the time of such
determination, without regard to any limitations on conversions or exercises),
including by merger or consolidation, except pursuant to a Major Transaction
with respect to which the Company is in compliance with Sections 2(d)(iv) and 3
of the Series D COD.
<PAGE> 8
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(j) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
(k) Remedies. Each Stockholder and each holder of the Series D Stock
shall have all rights and remedies set forth in this Agreement and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract relating to the subject matter hereof and all of the
rights which such holders have under any law. Any person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
<PAGE> 9
IN WITNESS WHEREOF, the Stockholders and the Company have caused this
Waiver Agreement to be duly executed as of the date first written above.
COMPANY: INVESTORS:
GENERAL MAGIC, INC. HFTP INVESTMENT LLC
By: Promethean Asset Management, L.L.C.
Its: Investment Manager
By:
----------------------------
Name: Steven Markman
Its: Chief Executive Officer and
President By:
------------------------------------
Name: James F. O'Brien, Jr.
Its: President
THEMIS PARTNERS L.P.
By: Promethean Asset Management, L.L.C.
Its: General Partner
By:
------------------------------------
Name: James F. O'Brien, Jr.
Its: President
HERACLES FUND
By: Promethean Asset Management, L.L.C.
Its: Investment Advisor
By:
------------------------------------
Name: James F. O'Brien, Jr.
Its: President
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management,L.P.
Its: Investment Manager
By: RGC General Partner Corp.
Its: General Partner
By:
------------------------------------
Name: Steven Katznelson
Its: Managing Director
<PAGE> 10
HALIFAX FUND, L.P.
By: The Palladin Group, L.P.
Its: Attorney-in-Fact
By:
------------------------------------
Name: Robert Chender
Title: Managing Director
PALLADIN PARTNERS I, L.P.
By: Palladin Asset Management, L.L.C.
Its: General Partner
By:
------------------------------------
Name: Robert Chender
Title: Managing Director
PALLADIN OVERSEAS FUND LIMITED
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By:
------------------------------------
Name: Robert Chender
Title: Managing Director
THE GLENEAGLES FUND COMPANY
By: The Palladin Group L.P
Its: Attorney-in-Fact
By:
------------------------------------
Name: Robert Chender
Title: Managing Director
LANCER SECURITIES LTD.
By: The Palladin Group L.P
Its: Attorney-in-Fact
By:
------------------------------------
Name: Robert Chender
Its: Managing Director
<PAGE> 11
CONSECO DIRECT LIFE
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By:
------------------------------------
Name: Robert Chender
Its: Managing Director
PALLADIN SECURITIES, LLC
By:
------------------------------------
Name: Robert Chender
Its: Principal
FISHER CAPITAL LTD.
By:
------------------------------------
Name:
Its: Vice President
WINGATE CAPITAL LTD.
By:
------------------------------------
Name:
Its: Vice President
<PAGE> 12
SCHEDULE OF STOCKHOLDERS
<TABLE>
<CAPTION>
INVESTOR ADDRESS INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER AND FACSIMILE NUMBER
- --------------------------- ----------------------------------------- -----------------------------------
<S> <C> <C>
HFTP Investment LLC Promethean Asset Management, L.L.C. Katten Muchin & Zavis
750 Lexington Avenue, 22nd Floor 525 West Monroe, Suite 1600
New York, New York 10022 Chicago, Illinois 60661-3693
Attn: James F. O'Brien, Jr. Attn: Robert J. Brantman, Esq.
Facsimile: 212-758-9334 Facsimile: 312-902-1061
Telephone: 212-702-5200 Telephone: 312-902-5200
Residence: New York
Themis Partners, L.P. Promethean Asset Management, L.L.C. Katten Muchin & Zavis
750 Lexington Avenue, 22nd Floor 525 West Monroe, Suite 1600
New York, New York 10022 Chicago, Illinois 60661-3693
Attn: James F. O'Brien, Jr. Attn: Robert J. Brantman, Esq.
Facsimile: 212-758-9334 Facsimile: 312-902-1061
Telephone: 212-702-5200 Telephone: 312-902-5200
Residence: New York
Heracles Fund Bank of Bermuda (Cayman) Limited Katten Muchin & Zavis
P.O. Box 513 525 West Monroe, Suite 1600
3rd Floor British American Center Chicago, Illinois 60661-3693
Dr. Roy's Drive Attn: Robert J. Brantman, Esq.
Georgetown, Grand Cayman Facsimile: 312-902-1061
Cayman Island, BWI Telephone: 312-902-5200
Attn: Allen J. Bernardo
Facsimile: 809-949-7802
Residence: Cayman Islands
RGC International Investors, c/o Rose Glen Capital Management, L.P. Rose Glen Capital Management, L.P.
LDC 3 Bala Plaza East, Suite 200 3 Bala Plaza East, Suite 200
Bala Cynwyd, Pennsylvania Bala Cynwyd, Pennsylvania
Attn: Gary Kaminsky Attn: Gary Kaminsky
Facsimile: 610-617-0570 Facsimile: 610-617-0570
Telephone: 610-617-5900 Telephone: 610-617-5900
Residence: Cayman Islands
Palladin Partners I, L.P. c/o The Palladin Group L.P. The Palladin Group L.P.
195 Maplewood Avenue As Investment Advisor
Maplewood, New Jersey 07040 195 Maplewood Avenue
Attn: Kevin Gerlitz Maplewood, New Jersey 07040
Facsimile: 973-313-6490 Attn: Kevin Gerlitz
Telephone: 973-313-6420 Facsimile: 973-313-6490
Residence: New York Telephone: 973-313-6420
Halifax Fund, L.P. c/o Citco Fund Services (Cayman Islands) Ltd. The Palladin Group L.P.
Corporate Centre, West Bay Road As Investment Advisor
P.O. Box 31106 SMB 195 Maplewood Avenue
Grand Cayman, Cayman Islands Maplewood, New Jersey 07040
Facsimile: 345-949-3877 Attn: Kevin Gerlitz
Telephone: 345-949-3977 Facsimile: 973-313-6490
Residence: Cayman Islands Telephone: 973-313-6420
The Gleneagles Fund Company c/o Citco Fund Services (Cayman Islands) Ltd. The Palladin Group L.P.
Corporate Centre, West Bay Road As Investment Advisor
P.O. Box 31106 SMB 195 Maplewood Avenue
Grand Cayman, Cayman Islands Maplewood, New Jersey 07040
Facsimile: 345-949-3877 Attn: Kevin Gerlitz
Telephone: 345-949-3977 Facsimile: 973-313-6490
Residence: Cayman Islands Telephone: 973-313-6420
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
INVESTOR ADDRESS INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER AND FACSIMILE NUMBER
- --------------------------- ----------------------------------------- -----------------------------------
<S> <C> <C>
Palladin Overseas Fund Limited c/o Citco Fund Services (Cayman Islands) Ltd. The Palladin Group L.P.
Corporate Centre, West Bay Road As Investment Advisor
P.O. Box 31106 SMB 195 Maplewood Avenue
Grand Cayman, Cayman Islands Maplewood, New Jersey 07040
Facsimile: 345-949-3877 Attn: Kevin Gerlitz
Telephone: 345-949-3977 Facsimile: 973-313-6490
Residence: Cayman Islands Telephone: 973-313-6420
Fisher Capital Ltd. Citadel Investment Group, L.L.C. Katten Muchin & Zavis
225 West Washington Street 525 W. Monroe Street
Chicago, Illinois 60606 Chicago, Illinois 60661-3693
Attention: Daniel Hopkins Attention: Robert J. Brantman, Esq.
Kenneth A. Simpler Facsimile: (312) 902-1061
Facsimile: (312) 338-0780 Telephone: (312) 902-5200
Telephone: (312) 338-7800
Residence: Illinois
Wingate Capital Ltd. Citadel Investment Group, L.L.C. Katten Muchin & Zavis
225 West Washington Street 525 W. Monroe Street
Chicago, Illinois 60606 Chicago, Illinois 60661-3693
Attention: Daniel Hopkins Attention: Robert J. Brantman, Esq.
Kenneth A. Simpler Facsimile: (312) 902-1061
Facsimile: (312) 338-0780 Telephone: (312) 902-5200
Telephone: (312) 338-7800
Residence: Illinois
Lancer Securities Ltd. c/o The Palladin Group L.P. The Palladin Group L.P.
195 Maplewood Avenue As Investment Advisor
Maplewood, New Jersey 07040 195 Maplewood Avenue
Attn: Kevin Gerlitz Maplewood, New Jersey 07040
Facsimile: 973-313-6490 Attn: Kevin Gerlitz
Telephone: 973-313-6420 Facsimile: 973-313-6490
Residence: New York Telephone: 973-313-6420
Conseco Direct Life c/o The Palladin Group L.P. The Palladin Group L.P.
195 Maplewood Avenue As Investment Advisor
Maplewood, New Jersey 07040 195 Maplewood Avenue
Attn: Kevin Gerlitz Maplewood, New Jersey 07040
Facsimile: 973-313-6490 Attn: Kevin Gerlitz
Telephone: 973-313-6420 Facsimile: 973-313-6490
Residence: New York Telephone: 973-313-6420
Palladin Securities, LLC c/o The Palladin Group L.P. The Palladin Group L.P.
195 Maplewood Avenue As Investment Advisor
Maplewood, New Jersey 07040 195 Maplewood Avenue
Attn: Kevin Gerlitz Maplewood, New Jersey 07040
Facsimile: 973-313-6490 Attn: Kevin Gerlitz
Telephone: 973-313-6420 Facsimile: 973-313-6490
Residence: New York Telephone: 973-313-6420
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