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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): JULY 30, 1999
GENERAL MAGIC, INC.
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(Exact name of registrant as specified in its charter)
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DELAWARE 77-0250147
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
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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
Effective July 30, 1999, we entered into a common stock investment
agreement with Cripple Creek Securities, LLC. The investment agreement provides
for an equity line of credit arrangement. The equity line of credit will be
available to us during the period beginning August 25, 1999 and ending August
24, 2001. During that period, we may require Cripple Creek to purchase, from
time to time, an aggregate of up to $20,000,000 of common stock. In addition,
Cripple Creek will have a right, at its sole discretion, to purchase up to an
additional $6,000,000 of common stock during the term of the equity line of
financing.
Draw downs. We may draw down on the equity line beginning on August 25,
1999 and approximately every 31 business days thereafter by providing a written
notice to Cripple Creek. The draw down notice must set forth a dollar amount of
shares we intend to sell to Cripple Creek. The dollar amount may not exceed
$5,000,000. In addition, we may, at our sole discretion, specify a minimum
purchase price per share in the draw down notice. However, the minimum price may
not be less than $2.00.
Conditions to draw downs and Cripple Creek's obligation to purchase. Our
right to draw down on the equity line and Cripple Creek's obligation to purchase
shares of common stock is subject to conditions. These conditions include:
o the closing bid price of the common stock on the business day
immediately preceding a draw down notice must be at least $2.00 per
share;
o a registration statement, together with the required prospectus
supplement, must be available for the sale of the shares of common
stock to be issued and sold;
o the common stock must be listed on The American Stock Exchange, Inc.,
The New York Stock Exchange, Inc., the Nasdaq National Market or the
Nasdaq SmallCap Market and we must not have been notified of any
delisting action;
o there shall not have occurred any of the following:
o a consolidation, merger or other business resulting in a change of
control;
o sale of all or substantially all of our assets; or
o a purchase, tender or exchange offer accepted by holders of more
than 50% of our common stock;
o we must be in compliance with all of our obligations under the
investment agreement and a related registration rights agreement;
o there shall be no event outstanding that would trigger the redemption
rights of the holders of the Series D Convertible Preferred Stock
under the certificate of designations; and
o Cripple Creek shall have received a legal opinion from our
independent counsel and a letter from our independent auditors.
Amount required to be purchased by Cripple Creek on each draw down. Upon
receipt of a draw down notice, Cripple Creek will be required to purchase an
amount, referred to as the required amount, equal to the lesser of:
o the dollar amount specified in such draw down notice, as reduced in
the manner specified below;
o 10% of the sum of the daily trading dollar volume during the 20
consecutive business days immediately following the receipt of the
draw down notice; and
o 7.5% of the sum of the daily trading dollar volume during the 25
consecutive business days immediately preceding the date of the sale
and purchase of shares.
The dollar amount specified in any draw down notice will be decreased by
1/20th of such specified amount for each business day:
o during the 20 business days immediately following Cripple Creeks'
receipt of the draw down notice on which the weighted average price
of the common stock is less than 103.093% of the greater of:
o the minimum price designated by us in the draw down notice, if
any, and
o $2.00.
o during the 25 business days following the receipt of the draw down
notice that a registration statement is not available for the
issuance and sale of the shares.
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In addition, Cripple Creek will not be obligated to purchase shares if
the number of shares which Cripple Creek has a right to purchase, along with the
number of shares beneficially owned by it and its affiliates, would exceed 4.99%
of the number of shares of common stock outstanding.
Timing of the purchase of shares by Cripple Creek pursuant to any draw
down notice. Cripple Creek may purchase portions of the required amount for any
draw down from time to time during a purchase period of 25 business days after
it receives a draw down notice by providing a written notice to us. However, if
Cripple Creek has not elected to purchase the full required amount for such draw
down by the end of the 25th business day, it will be deemed to have provided a
notice to purchase the remaining amounts on the 25th business day.
During the purchase period for any draw down, Cripple Creek will have a
right to purchase up to an additional 30% of the amount requested by us in the
draw down notice, for an aggregate of $6,000,000 throughout the term of the
equity line.
Purchase Price. The purchase price of the shares of common stock will be
set at the greater of:
o 97% of the weighted average price of the common stock for the five
consecutive trading days ending and including the date of Cripple
Creek's notice to purchase shares,
o the minimum price designated by us in the draw down notice, if any,
or
o $2.00.
Cripple Creek's repurchase right upon certain events. Cripple Creek will
have a right to require us to repurchase all or any of the shares of common
stock issued to Cripple Creek within the 40 business days immediately preceding
the exercise of this repurchase option. This repurchase right is triggered if
during the 25 business days after Cripple Creek receives our first draw down
notice, or 35 business days after each subsequent draw down notice,
o a registration statement is not available for the sale of the shares,
or
o the common stock is not listed on AMEX, NYSE, the Nasdaq National
Market or the Nasdaq SmallCap Market
The repurchase option must be exercised within 30 days of any of these
events. The repurchase price will be equal to the highest closing bid price
during the period beginning on the date of such event and ending on the date
Cripple Creek exercises its repurchase option.
Termination of the equity line. The equity line will automatically
terminate upon the earlier of the date on which Cripple Creek has purchased an
aggregate of $20,000,000 in common stock, apart from the additional $6,000,000
which may be purchased by Cripple Creek at its sole discretion, and August 24,
2001. In addition, Cripple Creek may terminate the equity line at any time the
common stock is not listed on AMEX, NYSE, the Nasdaq National Market or the
Nasdaq SmallCap Market.
The foregoing description is qualified in its entirety by the Common
Stock Investment Agreement, dated as of July 30, 1999, and the exhibits thereto,
and by the Registration Rights Agreement, dated as of July 30, 1999, and the
exhibits thereto, copies of which are attached as exhibits to this Current
Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION. Not applicable.
(c) EXHIBITS.
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Exhibit No. Description
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4.1 Common Stock Investment Agreement, dated as of
July 30, 1999, by and between Registrant and
Cripple Creek Securities, LLC
4.2 Registration Rights Agreement, dated as of July
30, 1999, by and between Registrant and Cripple
Creek Securities, LLC
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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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August 3, 1999 Mary E. Doyle
General Counsel and Secretary
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EXHIBIT INDEX
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Exhibit No. Description
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4.1 Common Stock Investment Agreement, dated as of July 30, 1999, by and
among Registrant and Cripple Creek Securities, LLC
4.2 Registration Rights Agreement, dated as of July 30, 1999, by and
between Registrant and Cripple Creek Securities, LLC
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EXHIBIT 4.1
PROPRIETARY AND CONFIDENTIAL
COMMON STOCK
INVESTMENT AGREEMENT
between
CRIPPLE CREEK SECURITIES, LLC
and
General Magic, Inc.
Dated as of July 30, 1999
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COMMON STOCK INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of July
30, 1999, by and among General Magic, Inc., a Delaware corporation with
headquarters located at 420 North Mary Avenue, Sunnyvale, California 94086 (the
"COMPANY"), and Cripple Creek Securities, LLC, a limited liability company
organized and existing under the laws of the State of Delaware (together with
its successors in interest and assigns or its designees, the "INVESTOR").
WHEREAS:
A. The Company and the Investor are executing and delivering this
Agreement pursuant to an effective registration statement of the Company (such
registration statement, as amended and supplemented, the "REGISTRATION
STATEMENT");
B. The parties desire that, upon the terms and subject to the
conditions contained herein, the Investor shall invest up to $20,000,000
(subject to increase up to $26,000,000 as set forth in Section 1(d)) in shares
(including the Commitment Shares (as defined in Section 10(b)(i)), the "SHARES")
of the Company's Common Stock, par value $0.001 per share (the "COMMON STOCK");
and
C. 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 A (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.
NOW THEREFORE, the Company and the Investor hereby agree as follows:
1. PURCHASE AND SALE OF COMMON STOCK
a. Purchase and Sale of Common Stock. Upon the terms and conditions
set forth herein, the Company shall issue and sell to the Investor, and the
Investor shall purchase from the Company, up to those number of Shares having an
aggregate Purchase Price (as defined in Section 1(g)) of $20,000,000 (subject to
increase up to $26,000,000 as set forth in Section 1(d)).
b. Delivery of Put Notices . Subject to the satisfaction of the
conditions set forth in this Section 1, at any time and from time to time during
the period beginning on and including August 25, 1999 (the "EFFECTIVE DATE") and
ending on the earlier of (i) the date which is 24 months after the Effective
Date and (ii) termination of this Agreement in accordance with Section 8 (the
"OPEN PERIOD"), the Company may, in its sole discretion, deliver a written
notice to the Investor (each such notice hereinafter referred to as a "PUT
NOTICE") stating a dollar amount (the "DOLLAR AMOUNT") of Shares which the
Company intends to sell to the Investor during the period beginning on the
Business Day immediately following the date which the
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Investor receives the Put Notice (such date of receipt referred to herein as the
"PUT NOTICE DATE") and ending on and including the date which is 25 Business
Days after such Put Notice Date (the "PURCHASE PERIOD"). The Dollar Amount
designated by the Company in a Put Notice shall be in increments of $100,000 and
shall not exceed $5,000,000. The Company may, at its option, designate in a Put
Notice a minimum purchase price per Share, which in no event shall be less than
$2.00, at which the Investor may purchase Shares pursuant to such Put Notice
during the related Purchase Period (a "COMPANY DESIGNATED MINIMUM PRICE"). For
each Business Day where either (i) during the twenty (20) Business Days
immediately following the Put Notice Date on which the Weighted Average Price
(as defined below) of the Common Stock is less than the Trigger Price or (ii)
during the Purchase Period that the Registration Statement or any prospectus
supplement is not available for the issuance or sale of the Shares, the Dollar
Amount shall be reduced by 1/20th of the original Dollar Amount. For purposes of
this Agreement, "BUSINESS DAY" shall mean any day other than a Saturday, Sunday
or a day on which commercial banks in the City of New York are authorized or
required by law or executive order to remain closed or on which the Principal
Market (as defined in Section 1(f)) for the Common Stock is not open for
trading. For purposes of this Agreement, "TRIGGER PRICE" for any Purchase Period
shall mean 103.093% of the greater of (i) the Company Designated Minimum Price,
if any, for such Purchase Period and (ii) $2.00 (equitably adjusted for stock
splits, stock dividends, combinations and similar transactions). Contemporaneous
with the delivery of a Put Notice, the Company shall deliver to the Investor a
prospectus supplement to the Registration Statement in accordance with the rules
and regulations under the 1933 Act, including disclosure of the Dollar Amount
and timing of the Purchase Period, as well as the other documents required to be
delivered pursuant to Sections 7(c), (d), (g) and (k).
c. Delivery of Preliminary Put Notices. At least (i) ten (10)
Business Days but not more than 20 Business Days prior to the Company's delivery
of a Put Notice to the Investor under this Agreement, if there has not been a
Put Notice delivered to the Investor during the prior 180 calendar days and (ii)
five (5) Business Days but not more than 20 Business Days prior to the Company's
delivery of any Put Notice to the Investor, if there has been a Put Notice
delivered to the Investor during the prior 180 calendar days, the Company shall
deliver written notice to the Investor a notice (a "PRELIMINARY PUT NOTICE")
stating that the Company may deliver a Put Notice to the Investor. The Company
may deliver the Put Notice at least ten (10) Business Days but not more than
twenty (20) Business Days following delivery of a Preliminary Put Notice
described in clause (i) above, and at least five (5) Business Days but not more
than ten (10) Business Days following delivery of a Preliminary Put Notice
described in clause (ii) above. No Preliminary Put Notice shall be delivered
during any Purchase Period. The Company shall not be obligated to deliver a Put
Notice following its delivery of a Preliminary Put Notice; provided, however,
that if on two occasions the Company fails to deliver a Put Notice after its
delivery of a Preliminary Put Notice within the time periods set forth in the
preceding sentence, then on each subsequent occasion that the Company delivers a
Preliminary Put Notice, the Company shall be obligated to deliver a Put Notice
within 20 Business Days after its delivery of such Preliminary Put Notice. The
Company shall reimburse the Investor for reasonable due diligence costs
(including reasonable legal due diligence costs) of the Investor up to $10,000
on
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each occasion that the Company delivers a Preliminary Put Notice. Investor shall
be responsible for its due diligence costs in excess of $10,000 on each occasion
that the Company delivers a Preliminary Put Notice.
d. Investor Obligation and Right to Purchase Shares. Subject to the
conditions set forth in this Agreement, following the Investor's receipt of a
validly delivered Put Notice, the Investor shall be required to purchase from
the Company during the related Purchase Period a number of Shares having an
aggregate Purchase Price equal to the lesser of (i) the Dollar Amount set forth
in the Put Notice (subject to reduction during the Purchase Period as provided
in Section 1(b)) and (ii) 10% of the sum of the Daily Trading Dollar Volume (as
defined below) of the Common Stock during the 20 consecutive Business Days
immediately following the Put Notice Date (the lesser of (i) or (ii) above shall
be referred to herein as the "REQUIRED DOLLAR AMOUNT"); provided, however, that
in no event shall the Investor be required to purchase a number of Shares which
is greater than 7.5% of the sum of the Daily Trading Volume (as defined below)
of the Common Stock during the 25 consecutive Business Days immediately
preceding the Closing Date. In addition, the Investor shall have the right, but
not the obligation, solely at its election to purchase during each and any such
Purchase Period a number of Shares from the Company having an aggregate Purchase
Price equal to up to 30% of the Dollar Amount set forth in the Put Notice. The
Investor shall not in any event be required to purchase pursuant to this
Agreement a number of Shares having an aggregate Purchase Price which is greater
than $20,000,000 (excluding additional purchases which may be made at the
election or option of the Investor pursuant to the immediately preceding
sentence). For purposes of this Agreement, "DAILY TRADING DOLLAR VOLUME" shall
mean the number of shares of Common Stock traded on such day on the Principal
Market on which the Common Stock is traded multiplied by such day's Weighted
Average Price of the Common Stock (as reported by Bloomberg Financial Markets
("Bloomberg"), provided that individual trades of at least 20,000 shares of
Common Stock on any trading day shall, for this purpose, be treated as a trade
of 20,000 shares of Common Stock). "DAILY TRADING VOLUME" shall mean the number
of shares of common stock traded on such day on the Principal Market on which
the Common Stock is traded. "WEIGHTED AVERAGE PRICE" means, for any security as
of any date, the dollar volume-weighted average price for such security on the
Principal Market (as reported by Bloomberg through its "Volume at Price"
function) or, if the Principal Market is not the principal securities exchange
or trading market for such security, the dollar volume-weighted average price of
such security on the principal securities exchange or trading market where such
security is listed or traded (as reported by Bloomberg through its "Volume at
Price" function), or if the foregoing do not apply, the dollar volume-weighted
average 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 dollar
volume-weighted average 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 Weighted Average
Price cannot be calculated for such security on such date on any of the
foregoing bases, the Weighted Average Price of such security on such date shall
be the fair market value as mutually determined by the Company and the Investor.
All such
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determinations to be appropriately adjusted for any stock dividend, stock split
or other similar transaction during such period.
e. Limitation on Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, in no event shall
the Investor be required to purchase, and a Required Dollar Amount may not
include, an amount, which when added to the sum of (i) the additional number of
Shares which the Investor has the right to purchase with respect to such
Required Dollar Amount (as set forth in the second sentence of Section 1(d)),
(ii) the number of shares of Common Stock beneficially owned within the meaning
of Section 13(d) of the 1934 Act as hereinafter defined by the Investor or by
any affiliate of the Investor as of the Put Notice Date with respect to which
this determination is being made, would exceed 4.99% of the number of shares of
Common Stock outstanding on the Put Notice Date for such Purchase Period, as
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "1934 ACT"). For purposes of the foregoing sentence, the
shares of Common Stock beneficially owned by the Investor and its affiliates
shall exclude the shares of Common Stock that would be issuable upon exercise or
conversion of the unexercised or unconverted portion of any securities of the
Company beneficially owned by the Investor or its affiliates (including, without
limitation, the Series D Convertible Preferred Stock and any warrants for
purchase of the Company's securities) that are subject to a limitation on
conversion or exercise analogous to the limitation contained in the proviso set
forth in the first sentence of Section 2(a) of the Series D Certificate of
Designations (as defined below). Each Put Notice shall include a representation
of the Company as to the number of shares of Common Stock outstanding on the
related Put Notice Date as determined in accordance with Section 13(d) of the
1934 Act. In the event that the number of shares of Common Stock outstanding as
determined in accordance with Section 13(d) of the 1934 Act is different on any
date during a Purchase Period than on the Put Notice Date associated with such
Purchase Period, then the number of shares of Common Stock outstanding on such
date during such Purchase Period shall govern for purposes of determining
whether the Investor would have acquired more than 4.99% of the number of shares
of Common Stock outstanding during such period.
f. Conditions to Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, unless waived by the
Investor, the Company shall not be entitled to deliver a Put Notice and require
the Investor to purchase any Shares at a Closing (as defined in Section 1(h))
unless each of the following conditions are satisfied: (i) the Applicable
Trading Price of the Common Stock on the Business Day immediately preceding the
Put Notice Date shall not be less than $2.00 (equitably adjusted for stock
splits, stock dividends, combinations and similar transactions); (ii) a
Registration Statement shall have been declared effective and such Registration
Statement, together with the required prospectus supplement, shall remain
effective and available for issuance and sale of all the Shares at all times
during the period beginning on the date of delivery of the related Preliminary
Put Notice and ending on and including the related Closing Date (as defined in
Section 1(h)); (iii) at all times during the period beginning on the date that
the Company delivers the related Preliminary Put Notice and ending on and
including the related Closing Date, the Common Stock shall have been listed on
The
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American Stock Exchange, Inc. or The New York Stock Exchange, Inc. or designated
on the Nasdaq National Market or The Nasdaq SmallCap Market (each a "PRINCIPAL
MARKET") and shall not have been suspended from trading thereon and the Company
shall not have been notified of any pending or threatened (except as set forth
in the letters to the Company dated April 15, 1999 and July 1, 1999 from The
Nasdaq Stock Market, Inc., provided that the Company has satisfied the
requirements set forth in the letter dated July 1, 1999) proceeding or other
action to delist or suspend the Common Stock on the Principal Market on which
the Common Stock is then traded or listed; (iv) during the period beginning on
the date of this Agreement and ending on and including the applicable Closing
Date, there shall not have occurred a Major Transaction (as defined below) or
the public announcement of a pending Major Transaction which has not been
abandoned or terminated; (v) the Company has complied with its obligations and
is otherwise not in breach of, or in default under, this Agreement and the
Registration Rights Agreement; (vi) during the period beginning on the date of
this Agreement and ending on and including the applicable Closing Date, so long
as any of the Company's Series D Convertible Preferred Stock remain outstanding,
there shall not have occurred a Triggering Event or an Excluded Redemption Event
(each such terms are defined in the Company's Certificate of Designations,
Preferences and Rights of its Series D Convertible Preferred Stock (the "SERIES
D CERTIFICATE OF DESIGNATIONS")), unless such Triggering Event or Excluded
Redemption Event, as the case may be, has been waived in writing by each holder
of the Company's Series D Convertible Preferred Stock, and (vii) a number of
shares of Common Stock equal to at least 150% of the aggregate number of shares
issuable during the Purchase Period, based on the Purchase Price (as defined
below) per Share on the date of the Put Notice and including any additional
shares of Common Stock which the Investor may elect to purchase pursuant to
Section 1(d) (regardless of any limitation on the timing or amount of such
purchases) have been duly authorized and reserved for issuance. The Company's
delivery of a Put Notice shall constitute a representation by the Company that
the shares of Common Stock referred to in clause (vii) above have been reserved
for issuance as required pursuant to this Section 1(f). If any of the events
described in clauses (ii) through (vii) above occurs after an effective Put
Notice is so delivered, and if any such circumstance described above so occurs
before the entire Required Dollar Amount of Common Stock covered by such Put
Notice shall have been purchased during the Purchase Period, then the Investor
shall have no further obligation to purchase the balance of such Required Dollar
Amount of Common Stock during such Purchase Period; provided, however, that on
any day during the balance of such Purchase Period upon which such events
described in clauses (ii) through (vii) above do not exist, the Investor may, in
its sole discretion, but shall not be required to, give the Company one or more
Purchase Notices (as defined in Section 1(h)) covering some or all of such
balance of the Required Dollar Amount, as well as some or all of the additional
amounts of Common Stock which the Investor may elect to purchase during such
Purchase Period pursuant to Section 1(d) above. The "APPLICABLE TRADING PRICE"
with respect to the Common Stock on any Business day, shall mean the Closing Bid
Price (as defined below) of the Common Stock on such Business Day. "CLOSING BID
PRICE" means, for any security as of any date, the last closing bid price for
such security on the Principal Market (as reported by Bloomberg), or, if the
Principal Market is not the principal securities exchange or trading market for
such security, the last closing bid price of such security on the
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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 Investor. All such determinations
to be appropriately adjusted for any stock dividend, stock split or other
similar transaction during such period.
For purposes of this Agreement, a "MAJOR TRANSACTION" shall be deemed to
have occurred at the closing of 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 the holders of the Company's voting power immediately prior
to such 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 purposes of changing the jurisdiction
of incorporation of the Company); (ii) the sale or transfer of all or
substantially all of the Company's assets; or (iii) the consummation of a
purchase, tender or exchange offer made to, and accepted by, the holders of more
than 50% of the outstanding shares of Common Stock.
g. Purchase Price Per Share. For purposes of this Agreement, the
"PURCHASE PRICE" for each Share purchased by the Investor shall be equal to the
greater of (i) the product of (A) 97% and (B) the lowest Weighted Average Price
of the Common Stock for the five (5) consecutive trading days ending on and
including the Purchase Notice Date (as defined in Section 1(h)) and (ii) the
greater of (A) the Company Designated Minimum Price, if any, for the applicable
Purchase Period and (B) $2.00 (equitably adjusted for stock splits, stock
dividends, combinations and similar transactions). The number of Shares so to be
purchased pursuant to each Purchase Notice shall be rounded to the nearest whole
number so as to avoid the issuance of fractional shares.
h. Mechanics of Purchase of Shares by Investor. To effect a
purchase of Shares during a Purchase Period, the Investor shall deliver one or
more written notices to the Company (each a "PURCHASE NOTICE") at any time and
from time to time during the Purchase Period. Each Purchase Notice shall set
forth (i) the aggregate Purchase Price for the Shares being purchased by the
Investor pursuant to such Purchase Notice, (ii) the Purchase Price per Share as
of the date of delivery of such Purchase Notice and (iii) the number of Shares
being purchased pursuant to such Purchase Notice. The "PURCHASE NOTICE DATE"
with respect to a Purchase Notice shall be
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the date on which the Investor delivers a copy of such Purchase Notice to the
Company by facsimile transmission prior to 11:59 p.m. Eastern Time on such date.
If prior to the last day of a Purchase Period the Investor shall not have
delivered Purchase Notices covering the purchase of a number of Shares with an
aggregate Purchase Price equal to at least the Required Dollar Amount with
respect to such Purchase Period, then the Investor shall be deemed to have
delivered a Purchase Notice on the last day of such Purchase Period covering the
purchase of a number of Shares with an aggregate Purchase Price equal to the
difference of (x) the Required Dollar Amount with respect to such Purchase
Period minus (y) the aggregate Purchase Price of the Shares covered by Purchase
Notices delivered by the Investor to the Company during such Purchase Period.
Subject to the satisfaction of the conditions set forth in Sections 1(f), 6 and
7, the closing of the purchase by the Investor of Shares (a "CLOSING") shall
occur at 10:00 a.m. Central Time, on the date which is three (3) Business Days
following the applicable Purchase Notice Date (or such other time or later date
as is mutually agreed to by the Company and the Investor) (a "CLOSING DATE") at
the offices of Kleinberg, Kaplan, Wolff & Cohen, P.C., 551 Fifth Avenue, 18th
Floor, New York, New York 10176. On each Closing Date, (A) the Company shall
deliver to the Investor certificates representing the Shares to be issued and
sold to the Investor on such date and registered in the name of the Investor or
deposit such Shares into the account(s) (with the Investor receiving
confirmation that the Shares are in such account(s)) designated by the Investor
for the benefit of the Investor and (B) the Investor shall deliver to the
Company the Purchase Price to be paid for such Shares (after receipt of
confirmation of delivery of such Shares), determined as aforesaid, by cashier's
check or wire transfer in immediately available funds to such account as shall
be designated in writing by the Company. In addition, each of the Company and
the Investor shall deliver all documents, instruments and writings required to
be delivered by either of them pursuant to this Agreement at or prior to each
Closing. In the alternative to physical delivery of certificates for Common
Stock, if delivery of the Shares may be effectuated by electronic book-entry
through The Depository Trust Company ("DTC"), then delivery of the Shares
pursuant to such purchase shall, unless requested otherwise by such Investor (or
holder of such Shares), settle by book-entry transfer through DTC by the third
(3rd) Business Day following the Investor's delivery of a Purchase Notice to the
Company. The parties agree to coordinate with DTC to accomplish this objective.
i. Effect of Failure to Satisfy Closing Obligations. Subject to the
Investor's compliance with all of the terms and conditions of this Agreement,
with respect to each Closing, if the Company shall fail to deliver to the
Investor the Shares to be issued and sold to the Investor by the third Business
Day following delivery of a Purchase Notice, whether by physical delivery of
certificates or by book-entry transfer through DTC for such Shares, the Company
shall, in addition to any other remedies under this Agreement, pay as additional
damages in cash to the Investor, by the eighth (8th) Business Day following the
delivery of a Purchase Notice an amount equal to one percent (1%), and on each
succeeding fifth (5th) Business Day thereafter until the Shares are delivered,
an amount equal to two percent (2%), of the value of the Shares not delivered to
the Investor by the third (3rd) Business Day following the delivery of a
Purchase Notice.
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j. Certain Adjustments. Daily Trading Dollar Volume, Applicable
Trading Price, Purchase Price per Share, the Company Designated Minimum Price,
the Trigger Price and the $2.00 amounts provided in Sections 1(b), 1(f) and 1(g)
hereof shall be adjusted appropriately to reflect stock splits, stock dividends,
combinations and like transactions affecting the Common Stock.
k. Delisting; Suspension. If at any time during a Purchase Period
or, except for the first such Purchase Period, within 10 Business Days after the
end of such Purchase Period, (i) the Registration Statement, after it has been
declared effective, together with the required prospectus supplement, shall not
remain effective and available for sale of all the Shares, or (ii) the Common
Stock shall not be listed on the Principal Market or shall have been suspended
from trading thereon (excluding suspensions of not more than one trading day
resulting from business announcements by the Company) the Investor shall have
the right (the "REPURCHASE OPTION"), as partial relief for the damages to the
Investor by reason of the occurrence of the events listed in clauses (i) or (ii)
above (which remedy shall not be exclusive of any other remedies available at
law or equity), in its sole discretion, which right shall be exercised within 30
days of such event or occurrence (a "REPURCHASE EVENT"), to sell to the Company,
and the Company agrees to buy, promptly upon the exercise of such right by the
Investor, but in any event within 10 calendar days of the exercise of such
right, and subject to the limitations imposed by the Delaware General
Corporation Law, all or any part of the Shares issued to the Investor within the
40 Business Days preceding the Investor's exercise of the Repurchase Option and
then held by the Investor at a price per Share equal to the highest Applicable
Trading Price during the period beginning on the date of the Repurchase Event
and ending on and including the date on which the Investor exercises its
Repurchase Option (the "PAYMENT AMOUNT"). If the Company fails to pay to the
Investor the full aggregate Payment Amount within 10 calendar days of the
Investor's exercise of the Repurchase Option hereunder, the Company shall pay to
the Investor, on the first Business Day following such tenth calendar day, in
addition to and not in lieu of the Payment Amount payable by the Company to the
Investor upon exercise of the Repurchase Option, an amount equal to 1.25% per
month (pro rated for partial months) until paid in full.
l. Overall Limit on Common Stock Issuable. Notwithstanding anything
contained herein to the contrary, the number of Shares issuable by the Company
and purchasable by the Investor hereunder shall not exceed 19.99% of the shares
of Common Stock outstanding as of the date hereof, subject to appropriate
adjustment for stock splits, stock dividends, combinations or other similar
recapitalization affecting the Common Stock (the "MAXIMUM COMMON STOCK
ISSUANCE"), unless the issuance of Shares hereunder in excess of the Maximum
Common Stock Issuance shall first be approved by the Company's shareholders in
accordance with applicable law and the By-laws and Articles of Incorporation of
the Company. Without limiting the generality of the foregoing, such
shareholders' approval must duly authorize the issuance by the Company of shares
of Common Stock totaling 19.99% or more of the shares of Common Stock
outstanding on the date hereof. The parties understand and agree that the
Company's failure to seek or obtain such shareholder approval shall in no way
adversely affect the validity and due authorization of the issuance and sale of
Shares hereunder, and that such approval pertains only
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<PAGE> 10
to the applicability of the Maximum Common Stock Issuance limitation provided in
this Section 1(l).
2. INVESTOR'S REPRESENTATIONS AND WARRANTIES.
The Investor represents and warrants to the Company that:
a. Accredited Investor Status; Sophisticated Investor. The
Investor is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D under the 1933 Act.
b. Information. The Investor and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Shares which have been requested by the Investor. The Investor and its advisors,
if any, have been afforded the opportunity to ask questions of the Company.
Neither such inquiries nor any other due diligence investigations conducted by
the Investor or its advisors, if any, or its representatives shall modify, amend
or affect the Investor's right to rely on the Company's representations and
warranties contained in Section 3 below. The Investor understands that its
investment in the Shares involves a high degree of risk. The Investor has sought
such accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Shares.
c. No Governmental Review. The 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 Shares or
the fairness or suitability of the investment in the Shares nor have such
authorities passed upon or endorsed the merits of the offering of the Shares.
d. Legends. The Company shall issue certificates for the
Shares without any legend to the Investor. The Investor covenants that, in
connection with any transfer of Shares by the Investor, it will comply with the
applicable prospectus delivery requirements of the 1933 Act, provided that
copies of a current prospectus relating to such effective registration statement
are or have been supplied to the Investor.
f. Authorization; Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of the Investor and is
a valid and binding agreement of the Investor enforceable against the Investor
in accordance with its 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.
g. Residency. The Investor is a resident of the State of
New Jersey.
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h. No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Investor and the
consummation by the 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 the Investor.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Investor 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 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 in Section 3(b)).
b. Authorization; Enforcement; Compliance with Other
Instruments. (i) The Company has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement, the Registration
Rights Agreement, 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 Shares in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation the
reservation for issuance and the issuance of the Shares pursuant to this
Agreement, 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 shareholders, except for, if required by the Nasdaq Stock
Market, Inc., approval by its stockholders prior to the issuance of a number of
shares of Common Stock equal to or in excess of 20% of the number of shares of
Common Stock outstanding immediately prior to the date hereof, (iii) the
Transaction
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Documents have been duly executed and delivered by the Company and (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.
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, 41,146,428 shares are issued and outstanding,
9,965,572 shares are issuable and reserved for issuance pursuant to the
Company's stock option and purchase plans and 11,395,451 shares are issuable and
reserved for issuance pursuant to securities 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 Series D Preferred Stock and 2,000 shares of Series D Preferred Stock were
issued and outstanding and (E) 699 shares were designated Series E Preferred
Stock and 599 shares of Series E Preferred Stock were issued and outstanding.
All of such outstanding shares have been, or upon issuance will be, validly
issued are fully paid and nonassessable. As of the date hereof, 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 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 Shares 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 Investor true
and correct copies of the Company's Certificate of Incorporation, as amended and
as in effect on the date hereof (the "CERTIFICATE OF
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<PAGE> 13
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 Shares. Upon issuance in accordance with
this Agreement, the 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.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby 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 United States federal and state securities laws and regulations and
the rules and regulations of the Principal Market or principal securities
exchange or trading market 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 Designations, 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,
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, 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 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 Principal Market
as in effect on the date hereof and on each of the Closing Dates and is not
aware of any facts which would reasonably lead to delisting or suspension of the
Common Stock by the Principal Market in the foreseeable future.
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<PAGE> 14
f. SEC Documents; Financial Statements. Since December 31,
1997, 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 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 the Investor
or its 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 Investor which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(b) of this Agreement, 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, employees or agents have provided the Investor
with any material, nonpublic information which was not publicly disclosed prior
to the date hereof. Except as otherwise provided for in the Registration Rights
Agreement, the Company shall not provide the Investor with any material,
non-public information.
g. Absence of Certain Changes. Except as disclosed in
Schedule 3(g) or the SEC Documents filed at least five (5) days prior to the
date hereof, since December 31, 1998 there has been no adverse change or adverse
development in the business, properties, assets, 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 its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
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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 Investor's Purchase of Shares.
The Company acknowledges and agrees that the Investor is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby. The Company further
acknowledges that the 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 transactions contemplated hereby and thereby, and any advice
given by the Investor or any of its respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to the Investor's purchase of the
Shares. The Company further represents to the 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. Intentionally Omitted.
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 cause this offering of Shares
to the Investor to be integrated with prior offerings by the Company for
purposes of the 1933 Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of the Principal
Market, nor will the Company or any of its Subsidiaries take any action or steps
that would cause the offering of the Shares 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
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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, government 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 trademark,
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 secrets 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) or (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 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
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<PAGE> 17
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 have 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
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 United States federal
and state income and all other tax returns, reports and 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
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<PAGE> 18
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 provisions 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 Shares issuable upon purchases pursuant to this
Agreement will increase in certain circumstances. The Company further
acknowledges that, subject to such limitations as are expressly set forth in the
Transaction Documents, its obligation to issue Shares upon purchases pursuant to
this Agreement is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other shareholders 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 Investor as a result of the transactions contemplated
by this Agreement, including, without limitation, the Company's issuance of the
Shares and the Buyer's ownership of the Shares.
y. 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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z. Market Capitalization. As of the date hereof, and at the
time of the filing of the Registration Statement, the aggregate market value of
the voting common equity of the Company held by non-affiliates of the Company
is, and was, greater than $100 million.
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 each of the
Put Notice Dates, take such action as the Company shall reasonably determine is
necessary to qualify the Shares for, or obtain exemption for the Shares for,
sale to the Investor at each of the Closings pursuant to this Agreement under
applicable securities or "Blue Sky" laws of all the states of the United States,
and shall provide evidence of any such action so taken, if any such action is
required, to the Investor on or prior to the Put Notice Date. The Company shall
make all filings and reports relating the offer and sale of the Shares required
under the applicable securities or "Blue Sky" laws of all the states of the
United States following each of the Put Notice Dates.
c. Intentionally omitted.
d. Use of Proceeds. The Company will use the proceeds from
the sale of the Shares for general corporate and working capital purposes.
e. Financial Information. The Company agrees to send the
following to the Investor during the Open 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 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 shareholders of the Company
generally, contemporaneously with the making available or giving thereof to the
shareholders.
f. Intentionally Omitted.
g. Listing. The Company shall promptly secure the listing
of all of the Shares upon the Principal Market and each other national
securities exchange and automated quotation system, 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 Shares from time to time issuable under the terms of the
Transaction Documents. The Company shall use its best efforts to maintain the
Common Stock's authorization for quotation on a Principal Market. Neither the
Company nor any of its Subsidiaries shall take any action which would be
reasonably expected to result in the delisting
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<PAGE> 20
or suspension of the Common Stock on a Principal Market (excluding suspensions
of not more than one trading day resulting from business announcements by the
Company). The Company shall promptly provide to the Investor copies of any
notices it receives from a Principal Market 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. Transactions With Affiliates. 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, shareholders 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 individual owns a 5% or more beneficial interest (each a "RELATED
PARTY"), except for (i) customary employment arrangements and benefit programs
on reasonable terms, (ii) 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 (iii) 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.
i. Filing of Form 8-K. On or before the date which is two
Business Days after the date hereof, the Company shall file with the SEC (a) a
Current Report on Form 8-K describing the terms of the transaction contemplated
by the Transaction Documents and including this Agreement as an exhibit thereto
in the form required by the 1934 Act and (b) a prospectus supplement to the
Registration Statement (the "PROSPECTUS SUPPLEMENT"), which form of Prospectus
Supplement shall be acceptable to the Investor.
j. Corporate Existence. The Company will take all steps
reasonably necessary to preserve and continue the corporate existence of the
Company.
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 the Investor or its
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<PAGE> 21
respective nominee(s), for the Shares in such amounts as specified from time to
time by the Investor to the Company upon delivery of a Purchase Notice (the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Irrevocable Transfer Agent
Instructions shall have been delivered by the Company to, and acknowledged in
writing by, the Company's transfer agent prior to the Company's delivery of the
first Preliminary Put Notice hereunder. The Company warrants that no instruction
relating to the Shares other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5 will be given by the Company to its transfer agent
and that the Shares shall be freely transferable on the books and records of the
Company. Nothing in this Section 5 shall affect in any way the 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 Shares.
The Company shall instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by the Investor and without
any restrictive legends. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Investor 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
Investor 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 OF THE COMPANY'S OBLIGATION TO SELL.
The obligation hereunder of the Company to issue and sell the
Shares to the Investor is further subject to the satisfaction, at or before each
Closing, of each of the following conditions set forth below. These conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion.
a. The Investor shall have executed each of this Agreement
and the Registration Rights Agreement and delivered the same to
the Company.
b. The Investor shall have delivered to the Company the
Purchase Price for the Shares being purchased by the Investor at
the Closing (after receipt of confirmation of delivery of such
Shares) by cashier's check or wire transfer of immediately
available funds pursuant to the wire instructions provided by
the Company.
c. The representations and warranties of the Investor shall
be true and correct as of the date when made and as of the
applicable Closing Date as though made at that time (except for
representations and warranties that speak as of a specific
date), and the Investor shall have performed, satisfied and
complied with the covenants, agreements and conditions required
by the Transaction Documents to
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<PAGE> 22
be performed, satisfied or complied with by the Investor at or
prior to such Closing Date.
d. 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 the consummation of
any of the transactions contemplated by this Agreement.
7. CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.
The obligation of the Investor hereunder to purchase Shares is
subject to the satisfaction, at or before each Closing, of each of the following
conditions set forth below. These conditions are for the Investor's sole benefit
and may be waived by the Investor at any time in its sole discretion.
a. The Company shall have executed each of the Transaction
Documents and delivered the same to the Investor.
b. The Common Stock shall be authorized for quotation on a
Principal Market and trading in the Common Stock shall not have
been suspended by the SEC or the Principal Market on which the
Company's Common Stock is then traded or listed, at any time
beginning on the date hereof and through and including the
respective Closing Date (excluding suspensions of not more than
one trading day resulting from business announcements by the
Company, provided that such suspensions occur prior to the
Company's delivery of the Preliminary Put Notice related to such
Closing).
c. The representations and warranties of the Company shall
be true and correct as of the date when made and as of the
applicable Closing Date as though made at that time (except for
(i) representations and warranties that speak as of a specific
date and (ii) with respect to the representations made in
Sections 3(h), (j), (m), (v) and the first sentence of Section
3(g) and the third sentence of Section 3(n) hereof, events which
occur on or after the date of this Agreement and are disclosed
in SEC filings made by the Company at least ten Business Days
prior to the applicable Put Notice Date) and the Company 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 the Company at or
prior to such Closing Date. The Investor shall have received a
certificate, executed by the Chief Executive Officer and Chief
Financial Officer of the Company, dated as of the applicable Put
Notice Date and Closing Date, in the form of Exhibit B attached
hereto, to the foregoing effect and as to such other matters as
may be reasonably requested by the Investor including, without
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limitation, an update as of such Closing Date regarding the
representation contained in Section 3(c) above.
d. Such Investor shall have received the opinion of the
Company's independent counsel, which counsel shall be
satisfactory to the Investor, dated as of such Put Notice Date
and Closing Date, in the form and substance of Exhibit C hereto,
with amendments acceptable to the Investor in its sole
discretion.
e. The Company shall have executed and delivered to the
Investor the certificates representing, or have executed
electronic book-entry transfer of, the Shares (in such
denominations as such Investor shall request) being purchased by
the Investor at such Closing.
f. 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 the Investor (the "RESOLUTIONS") and
such Resolutions shall not have been amended or rescinded prior
to such Closing Date.
g. At the Put Notice Date with respect to which the Shares
being purchased relate, the Investor shall have received a
letter of the type, in the form and with the substance of the
letter described in Section 3(o) of the Registration Rights
Agreement from the Company's auditors; and at the applicable
Closing Date, the Investor shall have received a "bring-down" of
such letter.
h. 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.
i. The Company shall have delivered to the Investor a
certificate evidencing the due 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 20 Business Days of such
Closing Date.
j. The Company shall have delivered to the Investor a copy
of its Certificate of Incorporation, as amended and in effect on
such Closing Date, certified by the Secretary of State of the
State of Delaware within 20 Business Days of such Closing Date.
k. The Company shall have delivered to the Investor a
secretary's certificate, dated as of such Put Notice Date and
Closing Date, in the form of Exhibit E attached hereto, as to
(i) the Resolutions described in Section 7(f), (ii) the
Certificate of Incorporation and (iii) the Bylaws, each as in
effect at such dates.
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l. 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 the consummation of
any of the transactions contemplated by this Agreement.
m. The Registration Statement shall be effective at the
time of each Closing and no stop order suspending the
effectiveness of the Registration Statement shall be in effect
or shall be pending or threatened.
n. At the time of each Closing, the Registration Statement
(including information or documents incorporated by reference
therein) and any amendments or supplements thereto shall not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading.
o. There shall have been no filing of a petition in
bankruptcy, either voluntarily or involuntarily, with respect to
the Company and there shall not have been commenced any
proceedings under any bankruptcy or insolvency laws, or any laws
relating to the relief of debtors, readjustment of indebtedness
or reorganization of debtors, and there shall have been no
calling of a meeting of creditors of the Company or appointment
of a committee of creditors or liquidating agents or offering of
a composition or extension to creditors by, for, with or without
the consent or acquiescence of the Company.
p. If applicable, the shareholders of the Company shall
have approved the issuance of any Shares in excess of the
Maximum Common Stock Issuance Shares in accordance with Section
1(1).
q. The conditions to such Closing set forth in Section 1(f)
shall have been satisfied.
r. The Company shall have delivered to the Investor a
letter from the Transfer Agent certifying the number of shares
of Common Stock outstanding as of a date within five days of
such Closing Date.
s. The Company shall have delivered to such Investor such
other documents relating to the transactions contemplated by
this Agreement as such Investor or its counsel may reasonably
request.
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8. TERMINATION.
a. Optional Termination. This Agreement may be terminated
at any time (i) by the mutual written consent of the Company and the Investor or
(ii) by the Investor if at any time the Common Stock is not listed on a
Principal Market.
b. Automatic Termination. This Agreement shall
automatically terminate without any further action of either party hereto upon
the earlier of (i) when the Investor has purchased an aggregate of $20,000,000
in the Common Stock of the Company pursuant to this Agreement, apart from
additional amounts which may be purchased pursuant to Section 1(d) and (ii) on
the date which is 24 months after the date hereof.
c. Survival. The representations, warranties and covenants
contained in or incorporated into this Agreement, insofar as applicable to the
transactions consummated hereunder prior to the termination of this Agreement,
shall survive its termination and any Closing for the period of any applicable
statute of limitations.
9. INDEMNIFICATION.
In consideration of the Investor's execution and delivery of the
this Agreement and the Registration Rights Agreement and acquiring the Shares
hereunder and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless the Investor and all of their shareholders, officers, directors,
employees, members 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
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 any other certificate, instrument or document
contemplated hereby or thereby, (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party and arising out of or resulting
from (i) the execution, delivery, performance, breach by the Company or
enforcement of the Transaction Documents 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 Shares or (iii) the status of the Investor or holder of the
Shares as an investor in the Company and (d) the enforcement of this Section 9.
Notwithstanding the foregoing, Indemnified Liabilities shall not include any
liability of any Indemnitee arising solely out of such Indemnitee's willful
misconduct or fraudulent
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<PAGE> 26
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 9 shall be the same as those set forth in Section 6 (other than Section
6(b)) 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.
10. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. 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 the state and federal courts sitting in the
City of New York, borough of Manhattan, 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. EACH PARTY HERETO IRREVOCABLY WAIVES ANY
RIGHT TO TRIAL BY JURY.
b. Fees and Expenses. (i) As an inducement to the Investor
to enter into this Agreement, the Company shall deliver to the Investor pursuant
to the Registration Statement not later than the date which is seven (7)
Business Days after the date hereof 62,031 shares of Common Stock (the
"COMMITMENT SHARES").
(ii) As a further inducement to the Investor to enter into
this Agreement and in addition to the reimbursement of due diligence costs
pursuant to Section 1(c), the Company agrees to reimburse the Investor or its
designees or clients, as applicable, for reasonable expenses (including
reasonable legal expenses) relating to the initial due diligence and the
negotiation and execution of the Transaction Documents and any Closings
hereunder and the filing of the Registration Statement and the Prospectus
Supplement up to $100,000 in the aggregate. Such amounts are to be paid promptly
upon submission of evidence thereof by the Investor to the Company.
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(iii) Except as otherwise set forth in Section 10(b), Section
9 and Section 1(c), each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of the transactions contemplated by the Transaction Documents. Any
attorneys' fees and expenses incurred by either the Company or by the Investor
in connection with the preparation, negotiation, execution and delivery of any
amendments to this Agreement or relating to the enforcement of the rights of any
party, after the occurrence of any breach of the terms of this Agreement by
another party or any default by another party in respect of the transactions
contemplated hereunder, shall be paid on demand by the party which breached the
Agreement and/or defaulted, as the case may be. The Company shall pay all stamp
and other taxes and duties levied in connection with the issuance of any Shares
issued pursuant hereto.
c. 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.
d. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
e. 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.
f. Entire Agreement; Amendments. This Agreement supersedes
all other prior oral or written agreements between the Investor, 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
(including the other Transaction Documents) 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 the
Investor 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 the Investor, and no
provision hereof may be waived other than by an instrument in writing signed by
the party against whom enforcement is sought.
g. 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,
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when sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
(1) day after deposit with a nationally recognized overnight 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 North Mary Avenue
Sunnyvale, California 94086
Telephone: 407-774-4000
Facsimile: 4087-774-4033
Attention: President
With a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 E1 Camino Real
Palo Alto, California 94306
Telephone: (650) 843-5000
Facsimile: (650) 857-0663
Attention: Timothy J. Moore, Esq.
If to the Transfer Agent:
Boston EquiServe LP
150 Royall Street
Canton, Massachusetts 06321
Telephone: (781) 575-0044
Facsimile: (781) 575-2549
Attention: Paul Lyons
If to the Investor:
Cripple Creek Securities LLC
195 Maplewood Avenue
Maplewood, New Jersey 07040
Telephone: 973-313-6420
Facsimile: 973-313-6490
Attention: Robert L. Chender
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<PAGE> 29
With a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
18th Floor
New York, New York 10176
Telephone: 212-986-6000
Facsimile: 212-986-8866
Attention: Stephen M. Schultz
Each party shall provide five (5) days prior written notice to the other
party of any change in address, telephone number 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 the first page of such transmission or (C) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
g. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns, including any Permitted
Assignee (as defined below). The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Investor, including by merger or consolidation. The Investor may assign some or
all of its rights hereunder to an affiliate or associate of the Investor or an
entity or fund which has the same principal investment adviser as the Investor,
without the consent of the Company, and to others, with the written consent of
the Company (in each case, a "PERMITTED ASSIGNEE"); provided, however, that any
such assignment shall not release the 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, the Investor shall be entitled
to pledge the Shares 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. The representations and warranties of the
Company and the Investor contained in Sections 2 and 3, the agreements and
covenants set forth in Sections 4, 5 and 10, and the indemnification provisions
set forth in Section 9, shall survive each of the Closings.
j. Publicity. The Company and the Investor shall have the
right to approve before issuance any press releases or any other public
statements with respect to the transactions
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contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of the Investor, to make any press release or other
public disclosure with respect to such transactions as is required by applicable
law and regulations (although the 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. Placement Agent. The Investor and the Company each
acknowledges and warrants that it has not engaged any placement agent in
connection with the sale of the Shares. The Company and the Investor shall each
be responsible for the payment of any fees or commissions of placement agents or
brokers engaged, directly or indirectly, by the Company or the Investor,
respectively, in connection with the purchase of the Shares by the Investor. The
Company and the Investor shall pay, and hold the other party harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorneys' fees and out-of-pocket expenses) arising in connection with any such
claim.
m. 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.
n. Remedies. The Investor and each Permitted Assignee shall
have all rights and remedies set forth in this Agreement and the Registration
Rights Agreement and all rights and remedies which such holders have been
granted at any time under any other agreement or contract 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.
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o. Payment Set Aside. To the extent that the Company makes
a payment or payments to the Investor hereunder or the Registration Rights
Agreement or the Investor enforces or exercises its 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.
p. Days. Unless the context refers to "Business Days" or
"trading days", all references herein to "days" shall mean calendar days.
* * * * * *
30
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have caused this Common Stock
Investment Agreement to be duly executed as of the date and year first above
written.
COMPANY: INVESTOR:
GENERAL MAGIC, INC. CRIPPLE CREEK SECURITIES LLC
By: /s/ Steven Markman By: /s/ Robert Chender
--------------------------------- -------------------------------------
Name: Steven Markman Name: Robert Chender
Its: Chief Executive Its: Principal
Officer and President
31
<PAGE> 33
LIST OF SCHEDULES
Schedule 3(a) Organization and Qualification
Schedule 3(c) Capitalization
Schedule 3(e) No Conflicts
Schedule 3(g) Absence of Certain Changes
Schedule 3(h) Absence of Litigation
Schedule 3(n) Intellectual Property Rights
Schedule 3(p) Title
Schedule 3(u) Tax Status
Schedule 3(v) Certain Transactions
LIST OF EXHIBITS
EXHIBIT A Registration Rights Agreement
EXHIBIT B Officers' Certificate
EXHIBIT C Opinion of Counsel
EXHIBIT D Irrevocable Transfer Agent Instructions
EXHIBIT E Secretary's Certificate
<PAGE> 34
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
(See Exhibit 4.2 filed herewith)
1.
<PAGE> 35
EXHIBIT B
GENERAL MAGIC, INC.
COMPLIANCE CERTIFICATE OF
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
Pursuant to Section 7(c) of that certain Common Stock Investment
Agreement between GENERAL MAGIC, INC. (the "COMPANY") and Cripple Creek
Securities LLC dated July 30, 1999 (the "Investment Agreement"), the
undersigned, Steven Markman, Chief Executive Officer of the Company, solely in
his capacity as such, and James P. McCormick, Chief Financial Officer of the
Company, solely in his capacity as such, each do hereby certify as follows:
1. They are the duly elected and qualified Chairman of the Board,
President and Chief Executive Officer of the Company, and the Chief Financial
Officer of the Company, respectively.
2. The representations and warranties of the Company set forth in
the Investment Agreement are true and correct when made and as of the date
hereof, except for (i) representations and warranties that speak as of a
specific date, which representations and warranties were true and correct as of
such date, and (ii) with respect to the representations made in Sections 3(h),
(j), (m), (v) and the first sentence of Section 3(g) and the third sentence of
Section 3(n) of the Investment Agreement, events which occur on or after the
date of the Investment Agreement and are disclosed in SEC filings made by the
Company at least ten Business Days prior to the applicable Put Notice Date.
3. The Company 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 the Company at or prior to such
Closing Date.
4. We have carefully examined the Registration Statement and
prospectus, and any amendments thereof or supplements thereto (including any
term sheet within the meaning of Rule 434 of the Rules and Regulations), and
(A) such documents contain all statements and information
required to be included therein; neither the Registration Statement, nor any
amendment thereof, contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading; and the prospectus, as amended or
supplemented, does not include any untrue statement of material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(B) since the effective date of the Registration Statement,
there has occurred no event required to be set forth in an amended or
supplemented prospectus which has not been so set forth.
<PAGE> 36
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Investment Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
this ___ day of _______, 1999.
----------------------------------------
STEVEN MARKMAN,
Chairman of the Board, President and
Chief Executive Officer
----------------------------------------
JAMES P. MCCORMICK,
Chief Operating Officer and
Chief Financial Officer
2.
<PAGE> 37
EXHIBIT C
FORM OF COMPANY COUNSEL OPINION
Based on the foregoing, and subject to the assumptions and
qualifications set forth below, we are of the opinion that:
1. The Company and each of its Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has the requisite corporate power and
authority to conduct its business, and to own, lease and operate its properties,
as described in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998. The Company and each of its Subsidiaries is duly qualified as
a foreign corporation to do business and is in good standing in each
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary and in which the failure to
be so qualified or be in good standing would have a Material Adverse Effect (as
defined in the Common Stock Investment Agreement).
2. The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Common Stock Investment
Agreement, the Registration Rights Agreement and the Irrevocable Transfer Agent
Instructions (collectively, the "TRANSACTIONS DOCUMENTS"), including issuance of
the Shares in accordance with the terms thereof. The execution and delivery of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated therein have been duly authorized by the Company's
Board of Directors and no further consent or authorization of the Company, its
Board of Directors or its shareholders is required therefor. The Transaction
Documents have been duly executed and delivered by the Company. The Transaction
Documents constitute the valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms,
except as (i) 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 (ii) rights to indemnity under Section 6 of the
Registration Rights Agreement may be limited by applicable law.
3. The issuance and sale of the Shares has been duly authorized
and, assuming the Company's receipt of payment of the purchase price therefor in
accordance with the terms of the Common Stock Investment Agreement, are validly
issued, fully paid and non-assessable and free of all taxes, liens, charges and
preemptive rights with respect to the issue thereof.
4. As of the date hereof, the authorized capital stock of the
Company consists of (i) 100,000,000 shares of Common Stock, $.001 par value per
share, of which, as of the date hereof, (a)_______ shares are issued and
outstanding, (b) _____ shares are reserved for issuance pursuant to certain
securities of the Company exercisable or exchangeable for, or convertible into,
shares of Common Stock and (c) _______ shares are reserved for issuance upon the
exercise of options granted pursuant to certain stock option and purchase plans
of the Company,
<PAGE> 38
(ii) 500,000 shares of Preferred Stock, of which, as of the date hereof, (A)
50,000 shares are designated as Series A Preferred Stock and ____ shares of
Series A Preferred Stock are issued and outstanding, (B) 12,000 shares are
designated as Series B Preferred Stock and no shares of Series B Preferred Stock
are issued and outstanding, (C) 3,000 shares are designated as Series C
Preferred Stock and no shares of Series C Preferred Stock are issued and
outstanding, (D) 2,000 shares are designated as Series D Preferred Stock and
_______ shares of Series D Preferred Stock are issued and outstanding and (E)
699 shares are designated Series E Preferred Stock and 599 shares of Series E
Preferred Stock are issued and outstanding. To our knowledge, there are no other
outstanding shares of capital stock or other securities convertible into, or
exchangeable or exercisable for, shares of the capital stock of the Company.
There are no preemptive rights of any shareholder of the Company, as such, to
acquire any such Common Stock, or Preferred Stock of the Company.
5. No authorization, approval, consent, filing or other order of
any Federal or state governmental body, regulatory agency, self-regulatory
organization or stock exchange or market, or the shareholders of the Company, or
any court, or, to our knowledge, any third party, is required to be obtained by
the Company to enter into and perform its obligations under the Transaction
Documents or for the issuance and sale of the Shares as contemplated by the
Transaction Documents, except for such authorizations, approvals, consents,
filings or other orders which have already been obtained.
6. To our knowledge, and except as disclosed in the Common Stock
Investment Agreement or SEC filings made by the Company prior to the date hereof
(the "SEC Documents"), there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body or any governmental
agency or self-regulatory organization or threatened against the Company or any
of its subsidiaries or any of the properties of the Company or any of its
subsidiaries which might reasonably be expected to have a Material Adverse
Effect.
7. The execution, delivery and performance by the Company of the
Transaction Documents, the consummation by the Company of the transactions
contemplated thereby and the compliance by the Company with the terms thereof
does not (a) violate, conflict with or constitute a default (or an event which,
with the giving of notice or lapse of time or both, constitutes or would
constitute a default) under (i) the Company's Certificate of Incorporation or
By-laws, or (ii) any agreement, note, lease, mortgage, deed or other instrument
to which the Company is a party or by which the Company is bound; or (b) result
in any violation of any statute, law, rule or regulation applicable to the
Company or, to the best of our knowledge, any order, writ, injunction or decree,
if such violation would have a Material Adverse Effect.
8. The Company is not an "investment company" or any entity
controlled by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended.
9. The Registration Statement has become effective under the 1933
Act and, to the best of our knowledge, after due inquiry, no stop order
suspending the effectiveness thereof has
<PAGE> 39
been issued and no proceedings for that purpose have been instituted or are
pending or threatened by the SEC. Any required filing of the Prospectus (as
defined below) and any supplement thereto pursuant to Rule 424(b) promulgated
under the 1933 Act has been made in the manner and within the time period
required by such Rule 424(b).
10. The Shares have been approved for listing on the Nasdaq National
Market.
11. The Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective effective, issue or
filing dates, as applicable, complied as to form in all material respects with
the requirements of the 1933 Act or 1934 Act, as applicable.
12. The statements in the Prospectus, or any amendment or supplement
thereto, under the captions "Description of Capital Stock," "The
Company--Litigation," "The Company-Government Regulations, "The Company--Patents
and Proprietary Rights," "Certain Relationships and Related Transactions" and
"Shares Eligible for Future Sale" [OR SUCH SIMILAR CAPTIONS USED BY THE COMPANY]
insofar as such statements constitute a summary of legal matters, documents or
proceedings referred to therein, fairly present the information called for with
respect to such legal matters, documents and proceedings.
13. To the best of our knowledge, there are no contracts or
documents of a character required to be described in the Registration Statement
or Prospectus, or any amendment or supplement thereto, or to be filed as
exhibits to the Registration Statement or the Prospectus, or any amendment or
supplement thereof, which are not described and filed as required, and the
descriptions in the Registration Statement and Prospectus, or any amendment or
supplement thereto, of such contracts and other documents are accurate in all
material respects and such descriptions fairly present in all material respects
the information required to be shown.
In addition, we have reviewed and participated in the preparation of the
Registration Statement and the related prospectus filed with the SEC (the
"PROSPECTUS") (including any amendments or supplements thereto) and in
conferences with officers and other representatives of the Company, and
representatives of the independent public accountants for the Company, at which
the contents of the Registration Statement and the Prospectus and related
matters were discussed, and although we have not engaged in any independent
investigation and do not assume any responsibility for the accuracy or
completeness of the information contained therein, nothing has come to our
attention that would lead us to believe (A) that the Registration Statement, as
amended, at the time it became effective, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, (B) that the
Prospectus, as supplemented, as of its date or as of the date hereof, contained
or contains any untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, or (C) that since
the effective date of the Registration Statement, there has occurred any event
required to be set forth in an
<PAGE> 40
amendment or supplement to the Registration Statement or Prospectus which has
not been so set forth.
All references in this opinion to (i) amendments or supplements to the
Registration Statement or Prospectus or (ii) the Registration Statement or
Prospectus, as amended or supplemented, shall be deemed to refer to and include
any SEC Document which is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be, pursuant to Form
S-3 under the 1933 Act.
<PAGE> 41
EXHIBIT D
TRANSFER AGENT INSTRUCTIONS
GENERAL MAGIC, INC.
JULY __, 1999
Boston EquiServe LP
150 Rayall Street
Canton, Massachusetts 06321
ATTN: PAUL LYONS
Ladies and Gentlemen:
Reference is made to that certain Common Stock Investment Agreement (the
"Investment Agreement") dated effective July 30, 1999 by and among General
Magic, Inc., a Delaware corporation (the "COMPANY"), and Cripple Creek
Securities LLC (the "INVESTOR"), pursuant to which the Company may, from time to
time, issue to the Investor shares of the Company's common stock, par value
$.001 per share (the "COMMON STOCK"). This letter shall serve as our irrevocable
authorization and direction to you (provided that you are the transfer agent of
the Company at such time) to issue shares of Common Stock upon surrender to you
of a completed and duly executed Purchase Notice, in the form attached hereto as
EXHIBIT I, that has been acknowledged by the Company as indicated by the
signature of a duly authorized officer of the Company thereon, and so long as
you have previously received (i) written confirmation from counsel to the
Company that a registration statement covering the issuance and sale of the
shares of Common Stock has been declared effective by the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 ACT"), and (ii) a copy of such registration statement, certificates
representing the shares of Common Stock shall not bear any legend restricting
transfer of the shares of Common Stock thereby and should not be subject to any
stop-transfer restriction; provided, however, that the Company may from time to
time notify you to place stop-transfer restrictions on the certificates for the
shares of Common Stock in the event a registration statement covering the shares
of Common Stock is subject to amendment for events then current.
A form of written confirmation from counsel to the Company that a
registration statement covering the issuance and sale of the shares of Common
Stock has been declared effective by the SEC under the 1933 Act is attached
hereto as EXHIBIT II.
Please be advised that the Investor is relying upon this letter as an
inducement to enter into the Investment Agreement and, accordingly, the Investor
is a third party beneficiary to these instructions.
<PAGE> 42
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at (408) 774-4235.
Very truly yours,
GENERAL MAGIC, INC.
By:
-------------------------------------
MARY E. DOYLE
General Counsel and Secretary
ACKNOWLEDGED AND AGREED:
BOSTON EQUISERVE LP
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Date:
-------------------------------
<PAGE> 43
EXHIBIT I
PURCHASE NOTICE
The undersigned has purchased ________ shares of Common Stock of General
Magic, Inc., a Delaware corporation (the "COMPANY") pursuant to the Common Stock
Investment Agreement (the "Investment Agreement") dated July __, 1999 by and
between the Company and Cripple Creek Securities LLC (the "INVESTOR").
Capitalized terms used herein not otherwise defined shall have the respective
meanings set forth in the Investment Agreement.
1. The aggregate Purchase Price for the Shares being purchased by
the Investor pursuant to this Purchase Notice is $_________.
2. The Purchase Price per Share as of the date of delivery of this
Purchase Notice is $________.
3. The number of Shares being purchased pursuant to this Purchase
Notice is ___________.
Date: ACKNOWLEDGED BY:
------------------------------
CRIPPLE CREEK SECURITIES LLC GENERAL MAGIC, INC.
By: By:
-------------------------------- -------------------------------------
Title: Title:
----------------------------- ----------------------------------
THIS NOTICE MUST BE DELIVERED TO COMPANY AND TRANSFER AGENT.
EXHIBIT II
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Boston EquiServe LP
150 Rayall Street
Canton, Massachusetts 06321
Attn: Paul Lyons
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
Common Stock Investment Agreement (the "Investment Agreement") dated July __,
1999 entered into by and among the Company and Cripple
<PAGE> 44
Creek Securities LLC (the "INVESTOR") pursuant to which the Company may, from
time to time, issue to the Investor shares (the "SHARES") of the Company's
common stock, par value $.001 per share. On ____________ ___, 1999, the Company
filed a Registration Statement on Form S-3 (File No. 333-79857) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the Shares.
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 and
the Shares are available for issuance and sale under the 1933 Act pursuant to
the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By:
-------------------------------------
cc: Cripple Creek Securities LLC
2
<PAGE> 45
EXHIBIT E
GENERAL MAGIC, INC.
SECRETARY'S CERTIFICATE
I, Mary E. Doyle, Secretary of GENERAL MAGIC, INC. (the "COMPANY"),
solely in my capacity as such, hereby certify as follows:
1. Attached hereto as EXHIBIT A is a true, correct and complete
copy of the resolutions of the Board of Directors of the Company approved by
unanimous written consent of the Board, effective July 16, 1999, relating to the
execution and delivery of the Common Stock Investment Agreement (the "Investment
Agreement"), the form of which was delivered to the Board, and the consummation
by it of the transactions contemplated thereby (collectively the "Agreements"),
including without limitation the reservation for issuance and the issuance of
the shares of Common Stock of the Company pursuant to the Investment Agreement,
and no further consent or authorization is required by the Company, its Board of
Directors or its shareholders, except for, if required by the Nasdaq Stock
Market, Inc., approval by its stockholders prior to the issuance of a number of
shares of Common Stock equal to or in excess of 20% of the number of shares of
Common Stock outstanding immediately prior to the date hereof. Such resolutions
have not been amended or rescinded and continue in full force and effect on and
as of the date hereof.
2. The resolutions of the Board of Directors attached hereto
constitute the only action taken by the Company's Board of Directors or any
committee thereof or any stockholders of the Company pertaining to the
execution, delivery and performance of the Transaction Agreements.
3. The following persons authorized in the above mentioned
resolutions of the Board of Directors to execute and deliver the Agreements
were, at the respective times of signing and delivery of any of the Agreements
heretofore delivered, and are, on and as of the date hereof, the duly appointed
officers of the Company holding the respective offices or titles set forth
opposite their names below, and the signatures set forth opposite their names
below are their true and genuine signatures:
<TABLE>
<CAPTION>
NAME TITLE OR OFFICE SIGNATURE
- ---- --------------- ---------
<S> <C> <C>
Steven Markman Chairman of the Board, President
and Chief Executive Officer ________________________
James P. McCormick Chief Operating Officer and Chief
Financial Officer ________________________
</TABLE>
1.
<PAGE> 46
4. Attached hereto as EXHIBIT B is a true, correct and complete
copy of the Certificate of Incorporation of the Company, together with any
amendments thereto, as currently in effect on and as of the date hereof.
5. Attached hereto as EXHIBIT C is a true, correct and complete
copy of the Second Amended and Restated Bylaws of the Company as currently in
effect on and as of the date hereof.
This Certificate is made and delivered by the undersigned in accordance
with the Agreements. Capitalized terms used and not otherwise defined herein
have the same meanings assigned in the Investment Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as
Secretary of the Company this ___ day of ____________.
----------------------------------------
MARY E. DOYLE
Secretary
I, Steven Markman, Chairman of the Board, President and Chief Executive
Officer of the Company do hereby certify that (i) Mary E. Doyle is the duly
elected, qualified and acting Secretary of the Company and (ii) the signature
set forth above is her true and genuine signature.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as
Chairman of the Board, President and Chief Executive Officer of the Company this
___ day of _____________.
----------------------------------------
STEVEN MARKMAN
Chairman of the Board, President
and Chief Executive Officer
2.
<PAGE> 47
EXHIBIT A
RESOLUTIONS OF THE BOARD OF DIRECTORS
OF
GENERAL MAGIC, INC.
<PAGE> 48
EXHIBIT B
CERTIFICATE OF INCORPORATION
<PAGE> 49
EXHIBIT C
AMENDED AND RESTATED BYLAWS
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of July 30,
1999, by and among General Magic, Inc., a Delaware corporation, with
headquarters located at 420 North Mary Avenue, Sunnyvale, California 94086 (the
"COMPANY"), and Cripple Creek Securities LLC (the "INVESTOR").
WHEREAS:
A. In connection with the Common Stock Investment Agreement by and
among the Company and the Investor of even date herewith (the "INVESTMENT
AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions of the Investment Agreement, to issue and sell to the Investor
certain shares of the Company's common stock, par value $0.001 per share (the
"COMMON STOCK"), pursuant to an effective Registration Statement (as defined
below);
B. The Company has filed a registration statement (Registration No.
333-79857) on Form S-3 with the Securities and Exchange Commission (the "SEC"),
which was declared effective on July 15, 1999, and a Post-Effective Amendment
No. 1 was filed with the SEC on July 26, 1999, all in compliance with the 1933
Act (as defined below) and Rule 415(a)(x) thereunder; and
C. To induce the Investor to execute and deliver the Investment
Agreement, the Company has agreed to provide certain rights with respect to the
Registration Statement 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
Investor hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(a) "HOLDER" means the Investor and any transferee or assignee
thereof to whom the Investor assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 8.
(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.
<PAGE> 2
(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 SEC.
(d) "REGISTERED SECURITIES" means the shares of Common Stock
issued or issuable pursuant to the Investment Agreement and any shares of
capital stock issued or issuable with respect to the such shares of Common Stock
as a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, regardless of any limitation on the Investor's right
to exercise to purchase the maximum number of shares of Common Stock provided
for under the Investment Agreement, in each case as issued pursuant the
Registration Statement.
(e) "REGISTRATION STATEMENT" shall have the meaning set
forth in the Investment Agreement.
2. REGISTRATION.
(a) Mandatory Registration. The Company represents and
warrants that it has filed a registration statement on Form S-3 with the SEC,
which was declared effective on July 15, 1999, and that a Post-Effective
Amendment No. 1 was filed with the SEC on July 26, 1999, and has not yet been
declared effective, all in compliance with the 1933 Act and Rule 415(a)(x)
thereunder, covering the issuance and sale to the Investor of the Registered
Securities.
(b) Counsel. Subject to Section 5 hereof, in connection with
any offering of the Registered Securities to the Holders under the Registration
Statement, the Holders shall have the right to select one legal counsel to
administer their interest in the offering. The Company shall reasonably
cooperate with any such counsel.
3. RELATED OBLIGATIONS.
At all times as the Company is obligated to maintain the Registration
Statement effective, the Company will use its best efforts to effect the
registration of the Registered Securities in accordance with the intended method
of disposition thereof and, pursuant thereto, the Company shall have the
following obligations:
(a) The Company shall keep the Registration Statement
effective pursuant to Rule 415 at all times during (i) the period beginning on
the date hereof and ending on the date which is 45 days after the date hereof
and (ii) the period beginning on and including the date the Company delivers a
Put Notice (as defined in the Investment Agreement) pursuant to the terms of the
Investment Agreement and ending on and including the date which is 10 business
days after the end of the Purchase Period (as defined in the Investment
Agreement) relating to such Put Notice (collectively, the "REGISTRATION
PERIOD"), which Registration Statement (including
<PAGE> 3
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.
(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 Registered Securities of the Company covered by such
Registration Statement until such time as all of such Registered Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement.
(c) The Company shall furnish to each Holder of Registered
Securities and its legal counsel without charge (i) other than the Registration
Statement and the amendments thereto that were filed prior to the date hereof,
promptly after the same is prepared and filed with the SEC such number of copies
as such Holder may reasonably request (but in any event at least one copy) of
such Registration Statement and any amendment(s) and thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits, the prospectus included in such Registration
Statement (including each prospectus supplement) 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 and any correspondence from the SEC or the staff
of the SEC to the Company or its representatives and (ii) such other documents,
including copies of any final prospectus and supplements thereto, as such Holder
may reasonably request from time to time in order to facilitate the disposition
of the Registered Securities owned by such Holder.
(d) As promptly as practicable after becoming aware of such
event, the Company shall notify each Holder 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 (which, if such Registration Statement is on Form S-3,
may consist of a document to be filed by the Company with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and to be
incorporated by reference in the prospectus) to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to each
Holder (or such other number of copies as such Holder may reasonably request).
The Company shall also promptly notify each Holder 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, other than the Registration Statement and the amendments
thereto that were filed prior to the date hereof (notification of
<PAGE> 4
such effectiveness shall be delivered to each Holder 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.
(e) 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
Registered 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 Holder who holds Registered
Securities being sold 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.
(f) The Company shall permit each Holder and a single firm
of counsel, initially Kleinberg, Kaplan, Wolff & Cohen, P.C. or such other
counsel as thereafter designated by the Holders who hold a majority of the
Registered Securities being sold, to review and comment upon a Registration
Statement and all amendments and supplements thereto at least five (5) business
days prior to their filing with the SEC, and not file any document in a form to
which such counsel reasonably objects. The Company shall not submit to the SEC
any amendment or supplement thereto without the prior approval of such counsel,
which consent shall not be unreasonably withheld.
(g) The Company shall make available for inspection by (i)
any Holder and (ii) one firm of attorneys and one firm of accountants or other
agents retained by the Holders (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 a Holder) 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 available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. Each Holder 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.
<PAGE> 5
(h) Due Diligence Review. The Company shall make available,
during normal business hours, for inspection and review by the Investor,
advisors to and representatives of the Investor (who may or may not be
affiliated with the Investor and who are reasonably acceptable to the Company),
any underwriter participating in any disposition of Common Stock on behalf of
the Investor pursuant to the Registration Statement or amendments or supplements
thereto or any blue sky, NASD or other filing, all financial and other records,
all SEC Documents and other filings with the SEC, and all other corporate
documents and properties of the Company as may be reasonably necessary for the
purpose of such review, and cause the Company's officers, directors and
employees, within a reasonable time period, to supply all such information
reasonably requested by the Investor or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investor and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
The Company shall not disclose nonpublic information to the Investor,
advisors to or representatives of the Investor unless prior to disclosure of
such information the Company identifies such information as being nonpublic
information and provides the Investor, such advisors and representatives with
the opportunity to accept or refuse to accept such nonpublic information for
review. The Company may, as a condition to disclosing any nonpublic information
hereunder, require the Investor's advisors and representatives to enter into a
confidentiality agreement (including an agreement with such advisors and
representatives prohibiting them from trading in Common Stock during such period
of time as they are in possession of nonpublic information) in form reasonably
satisfactory to the Company and the Investor.
Nothing herein shall require the Company to disclose nonpublic
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate nonpublic information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
nonpublic information (whether or not requested of the Company specifically or
generally during the course of due diligence by any such persons or entities),
which, if not disclosed in the Prospectus included in the Registration
Statement, would cause such Prospectus to include a material misstatement or to
omit a material fact required to be stated therein in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading. Nothing contained in this Section 3(h) shall be construed to mean
that such persons or entities other than the Investor (without the written
consent of the Investor prior to disclosure of such information) may not obtain
nonpublic information in the course of conducting due diligence in accordance
with the
<PAGE> 6
terms of this Agreement and the Investment Agreement; provided, however, that in
no event shall the Investor's advisors or representatives disclose to the
Investor the nature of the specific event or circumstances constituting any
nonpublic information discovered by such advisors or representatives in the
course of their due diligence without the written consent of the Investor prior
to disclosure of such information. The Investor's advisors or representatives
shall make complete disclosure to the Investor's independent counsel of all
events or circumstances constituting nonpublic information discovered by such
advisors or representatives in the course of their due diligence upon which such
advisors or representatives form the opinion that the Registration Statement
contains an untrue statement of a material fact or omits a material fact
required to be stated in the Registration Statement or necessary to make the
statements contained therein, in the light of the circumstances in which they
were made, not misleading. Upon receipt of such disclosure, the Investor's
independent counsel shall consult with the Company's independent counsel in
order to address the concern raised as to the existence of a material
misstatement or omission and to discuss appropriate disclosure with respect
thereto; provided, however, that such consultation shall not constitute the
advice of the Company's independent counsel to the Investor as to the accuracy
of the Registration Statement and related Prospectus. In the event after such
consultation the Investor's independent counsel reasonably believes that the
Registration Statement contains an untrue statement or a material fact or omits
a material fact required to be stated in the Registration Statement or necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading, (a) the Company shall file with the SEC an
amendment to the Registration Statement responsive to such alleged untrue
statement or omission and provide the Investor, as promptly as practicable, with
copies of the Registration Statement and related Prospectus, as so amended, (b)
if the Company disputes the existence of any such material misstatement or
omission, (i) the Company's independent counsel shall provide the Investor's
independent counsel with an opinion stating that nothing has come to their
attention that would lead them to believe that the Registration Statement or the
related Prospectus, as of the date of such opinion, contains an untrue statement
of a material fact or omits a material fact required to be stated in the
Registration Statement or the related Prospectus or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading and (ii) in the event the dispute relates to the adequacy
of financial disclosure and the Investor shall reasonably request, the Company's
independent auditors shall provide to the Company a letter outlining the
performance of such "agreed upon procedures" as shall be reasonably requested by
the Investor and the Company shall provide the Investor with a copy of such
letter, or (c) if the Company disputes the existence of any such material
misstatement or omission, and the dispute relates to the timing of disclosure of
a material event and the Company's independent counsel is unable to provide the
opinion referenced in clause (b)(i) above to the Investor, then the Investment
Agreement shall be suspended for a period of up to thirty (30) days, at the end
of which, if the dispute still exists between the Company's independent counsel
and the Investor's independent counsel, the Company shall either (i) amend the
Registration Statement as provided above, (ii) provide to the Investor the
Company's independent counsel opinion and a copy of the letter of the Company's
independent auditors referenced above, or (iii) the obligation of the Investor
to purchase shares of Common Stock pursuant to the Investment Agreement shall
terminate.
<PAGE> 7
(i) The Company shall cooperate with the Holders who hold
Registered Securities being offered to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registered 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 Holders may reasonably request and registered in such names of the
Persons who shall acquire such Registered Securities from the Holders, as the
Holders may request.
(j) If requested by the Holders holding a majority of the
Registered Securities, the Company shall (i) as soon as practical incorporate in
a prospectus supplement or post-effective amendment such information as such
Holders reasonably determine should be included therein relating to the sale and
distribution of Registered Securities, including, without limitation,
information with respect to the offering of the Registered 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 amendments to any Registration Statement if reasonably
requested by such Holders.
(k) The Company shall use its best efforts to cause the
Registered 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 Registered Securities.
(l) 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 any Registration Statement.
(m) 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.
(n) Within two (2) business days after the date hereof the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registered Securities (with copies to the Holders
whose Registered Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.
(o) Contemporaneously with the delivery of any Put Notice
and at such other times as the Holders may reasonably request, the Company shall
cause to be delivered, letters from the Company's independent certified public
accountants (i) addressed to the Holders that such accountants are independent
public accountants within the meaning of the 1933 Act and the applicable
published rules and regulations thereunder, and (ii) in customary form and
covering
<PAGE> 8
such financial and accounting matters as are customarily covered by letters of
independent certified public accountants delivered to underwriters in connection
with public offerings.
(p) The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Holders of Registered
Securities pursuant to a Registration Statement.
(q) The Company shall hold in confidence and not make any
disclosure of information concerning a Holder 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. The Company agrees that it shall, upon learning that disclosure of
such information concerning a Holder is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Holder and allow such Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(r) The Company shall provide a transfer agent and registrar
for all the Registered Securities not later than the effective date of the first
Registration Statement filed pursuant hereto.
4. OBLIGATIONS OF THE HOLDERS.
Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
the first sentence of 3(d), such Holder will immediately discontinue disposition
of Registered Securities pursuant to any prospectus in the Registration
Statement(s) covering such Registered Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
3(e) or the first sentence of 3(d).
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 reasonable fees and
disbursements of one counsel for the Holders (which fees of counsel for the
Holders shall be (i) part of the expenses subject to the $100,000 limitation set
forth in Section 10(b)(ii) of the Investment Agreement with respect to the
initial Registration Statement filed pursuant hereto and (ii) part of the costs
subject to the $10,000 limitation set forth in Section 1(c) of the Investment
Agreement with respect to all other actions hereunder), shall be paid by the
Company.
<PAGE> 9
6. INDEMNIFICATION.
(a) To the fullest extent permitted by law, the Company
will, and hereby does, indemnify, hold harmless and defend each Holder who holds
such Registered Securities, the directors, officers, partners, employees,
members, agents, representatives of, and each Person, if any, who controls, any
Holder within the meaning of the 1933 Act or the Securities Exchange Act of
1934, as amended (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 Registered 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, in light of the circumstances under
which the statements therein were made, not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact 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 Registered 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(c) with
respect to the number of legal counsel, the Company shall reimburse the Holders
and each such controlling person, promptly as such expenses are incurred and are
due and payable, for any reasonable 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
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) shall not be available to the extent such Claim is based on (a) a failure
of the Holder to deliver or to cause to be delivered the prospectus made
available by the Company or (b) the Indemnified Person's use of an incorrect
prospectus despite being promptly advised in advance by the Company in writing
<PAGE> 10
not to use such incorrect prospectus; and (iii) 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 of the Registered Securities by the Holders pursuant to Section 8.
(b) In connection with any Registration Statement in which a
Holder is participating, each such Holder agrees, severally and not jointly, to
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 who signs the Registration Statement, 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 Holder
expressly for use in connection with such Registration Statement; and, subject
to Section 6(c), such Holder will reimburse any legal or other expenses
reasonably incurred by them 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 Holder, which consent
shall not be unreasonably withheld; provided, further, however, that the Holder
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 Holder as a
result of the sale of Registered Securities under 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 Registered Securities by the Holders pursuant to Section 8.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
(c) 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 mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; 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
<PAGE> 11
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 Holders holding a
majority-in-interest of the Registered Securities included in the Registration
Statement to which the Claim relates, if the Holders 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 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 be
liable for any settlement of any action, claim or proceeding effected without
its written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the Indemnified Party or Indemnified Person,
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. 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 prejudiced in its ability to defend such action.
(d) 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.
(e) 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 indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
<PAGE> 12
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 Registered 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 Registered Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registered Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registered Securities under such
Registration Statement.
8. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically
assignable by the Holders to any transferee of all or any portion of Registered
Securities if: (i) the Holder agrees in writing with the transferee or assignee
to assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment; (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (a) the name and address of such transferee or assignee, and (b) the
Registered 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 Registered Securities by the transferee or
assignee may only be made pursuant to the delivery of a prospectus under the
1933 Act; (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 Investment Agreement.
9. 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 Holders who hold two-thirds (2/3) of the Registered Securities. Any
amendment or waiver effected in accordance with this Section 9 shall be binding
upon each Holder and the Company.
10. MISCELLANEOUS.
(a) A Person is deemed to be a Holder of Registered
Securities whenever such Person owns of record such Registered Securities. If
the Company receives conflicting instructions, notices or elections from two or
more Persons with respect to the same Registered
<PAGE> 13
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registered Securities.
(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 a
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) day after deposit with a
nationally recognized overnight 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 North Mary Avenue
Sunnyvale, California 94086
Telephone: 407-774-4000
Facsimile: 407-774-4033
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: 650-847-0663
Attention: Timothy J. Moore, Esq.
If to the Investor:
Cripple Creek Securities LLC
195 Maplewood Avenue
Maplewood, New Jersey 07040
Telephone: 973-313-6420
Facsimile: 973-313-6490
Attention: Robert L. Chender
<PAGE> 14
With a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
18th Floor
New York, New York 10176
Telephone: 212-986-6000
Facsimile: 212-986-8866
Attention: Stephen M. Schultz
Each party shall provide five (5) days prior written notice to the other party
of any change in address, telephone number 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 the first page of such transmission or (C) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service 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) 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 the state and federal courts sitting in the City
of New York, borough of Manhattan 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 and the Investment Agreement constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There
<PAGE> 15
are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Investment
Agreement 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 8, 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.
(j) All consents and other determinations to be made by the
Holders pursuant to this Agreement shall be made, unless otherwise specified in
this Agreement, by Holders holding a majority of the Registered Securities.
(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.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: INVESTOR:
GENERAL MAGIC, INC. CRIPPLE CREEK SECURITIES LLC
By: /s/ Steven Markman By: /s/ Robert Chender
-------------------------------- -------------------------------------
Name: Steven Markman Name: Robert Chender
------------------------------ -----------------------------------
Its: Chief Executive Officer Its: Principal
------------------------------ ------------------------------------
<PAGE> 16
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Boston EquiServe LP
150 Rayall Street
Canton, Massachusetts 06321
Attn: Paul Lyons
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
Common Stock Investment Agreement (the "Investment Agreement") dated July __,
1999 entered into by and among the Company and Cripple Creek Securities LLC (the
"INVESTOR") pursuant to which the Company may, from time to time, issue to the
Investor shares (the "SHARES") of the Company's common stock, par value $.001
per share. On ____________ ___, 1999, the Company filed a Registration Statement
on Form S-3 (File No. 333-79857) (the "REGISTRATION STATEMENT") with the
Securities and Exchange Commission (the "SEC") relating to the Shares.
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 and
the Shares are available for issuance and sale under the 1933 Act pursuant to
the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By:
-------------------------------------
cc: Cripple Creek Securities LLC
2.
