1
EXHIBIT 4.2
General Motors Corporation
OnStar
0000 Xxxxxxxxx Xxxxxxx
Xxxx, Xxxxxxxx 00000
As of December 9, 1999
General Magic, Inc.
000 X. Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
Reference is made to the Series G Preferred Stock and Warrant Purchase
Agreement, dated November 9, 1999 (the "STOCK PURCHASE AGREEMENT"), by and
between General Magic, Inc., a Delaware corporation (the "COMPANY"), and General
Motors Corporation, a Delaware corporation ("GENERAL MOTORS"), by and through
its Onstar Division and the Warrant for the Purchase of Shares of Series G
Convertible Preferred Stock dated December 9, by and among the Company and
General Motors. All capitalized terms used in this letter agreement have the
meaning defined for them in the Stock Purchase Agreement unless otherwise
defined in this letter agreement.
This letter will confirm the agreement of the Company and General Motors
as follows:
1. LIMITATION ON NUMBER OF CONVERSION SHARES. Notwithstanding any
provision of the Stock Purchase Agreement, the Warrant or the Certificate of
Designations, General Motors shall not exercise, and will not permit any
subsequent transferee holding shares of the Series G Stock (A "TRANSFEREE") to
exercise, the right to convert shares of the Series G Stock into shares of the
Company's Common Stock to the extent that the shares of Common Stock issuable
upon conversion would exceed 19.99% of the outstanding shares of the Company's
Common Stock as of December 9, 1999 (the "EXCHANGE CAP"), except that such
limitation shall not apply in the event that the Company (i) obtains the
approval of its stockholders as required by Rule 4460(i) (attached) and
applicable regulations of NASDAQ for issuance of Common Stock (or securities
convertible into or exercisable for Common Stock) in excess of the Exchange Cap
or (ii) obtains a written opinion from outside counsel to the Company that such
approval is not required, which opinion shall be reasonably satisfactory to
General Motors.
2. LIMITATION ON EXERCISE OF WARRANT. Notwithstanding any provision of
the Warrant, General Motors shall not exercise, and will not permit any
Transferee to exercise, the Warrant unless the Company (i) obtains the approval
of its stockholders as required by Rule 4460(i) (attached) and applicable
regulations of NASDAQ for issuance of Common Stock (or securities convertible
into or exercisable for Common Stock) in excess of 19.99% of the outstanding
shares or voting power of the Company's Common Stock as of December 9, 1999 or
(ii) obtains a written opinion from outside counsel to the Company that such
approval is not required, which opinion shall be reasonably satisfactory to
General Motors.
3. STOCKHOLDER APPROVAL. The Company shall, at its 2000 Annual Meeting
of Stockholders (or any Special Meeting of Stockholders called for other
purposes prior to such
2
General Magic, Inc.
December 9, 1999
Annual Meeting), seek and use reasonable best efforts to obtain stockholder
approval, as required by the applicable rules and regulations of NASDAQ, for the
issuance by the Company of (a) that portion of the Series G Stock that may not
be converted without exceeding the Exchange Cap, (b) the Warrant and (c) shares
of Common Stock (or securities convertible into or exercisable for Common Stock)
issuable upon conversion of such portion of the Series G Stock or upon exercise
of the Warrant.
4. FAILURE TO OBTAIN STOCKHOLDER APPROVAL OR OPINION. In the event that
the Company shall fail to obtain the approval of its stockholders as set forth
in paragraph 3 above or an opinion of counsel as contemplated by paragraphs 1
and 2 above, the Company shall, in full satisfaction of any claims of General
Motors that may arise in connection with such failure under this side letter
agreement, the Stock Purchase Agreement, the Warrant, the Certificate of
Designations, or any related documents, remit to General Motors $7 million to be
distributed, at the sole option of the Company, in one of the following two
forms: (i) the Company may pay (or cause to be paid) to General Motors $7
million in cash, or (ii) the Company may pay (or cause to be paid) to General
Motors $3.5 million in cash and credit $3.5 million against amounts then owed or
next owing to the Company, including amounts due or owing under or in connection
with the Development and License Agreement dated effective November 9, 1999, by
and among the Company and General Motors. In the event that the Company shall
fail to obtain such stockholder approval or such opinion of counsel, General
Motors shall return to the Company for cancellation (i) the Warrant and (ii) a
stock certificate or stock certificates (duly endorsed or accompanied by duly
executed stock powers) representing that portion of the Series G Stock that may
not be converted without exceeding the Exchange Cap.
5. GOVERNING LAW. This letter agreement shall be construed and enforced
in accordance with, and governed by, the internal laws of the State of
California, without regard to its conflict of laws rules.
6. COUNTERPARTS. This letter agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Very truly yours,
GENERAL MOTORS CORPORATION
by and through its Onstar Division
By: /s/ X. X. Xxxxx
------------------------------------
Name: X. X. Xxxxx
-------------------------------
Title: Executive Director
------------------------------
Agreed and Accepted:
GENERAL MAGIC, INC.
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
-------------------------------
Title: Chairman, President and CEO
------------------------------
3
Attachment to Letter Agreement dated December 9, 1999
NASD Rule 4460(i)
(i) Shareholder Approval
(1) Each NNM issuer shall require shareholder approval of a plan or
arrangement under subparagraph (A) below, or prior to the issuance of
designated securities under subparagraph (B), (C), or (D) below:
(A) when a stock option or purchase plan is to be established or
other arrangement made pursuant to which stock may be acquired by officers
or directors, except for warrants or rights issued generally to security
holders of the company or broadly based plans or arrangements including
other employees (e.g. ESOPs). In a case where the shares are issued to a
person not previously employed by the company, as an inducement essential
to the individual's entering into an employment contract with the company,
shareholder approval will generally not be required. The establishment of a
plan or arrangement under which the amount of securities which may be
issued does not exceed the lesser of 1% of the number of shares of common
stock, 1% of the voting power outstanding, or 25,000 shares will not
generally require shareholder approval;
(B) when the issuance will result in a change of control of the
issuer;
(C) in connection with the acquisition of the stock or assets of
another company if:
(i) any director, officer or substantial shareholder of the
issuer has a 5% or greater interest (or such persons collectively have
a 10% or greater interest), directly or indirectly, in the company or
assets to be acquired or in the consideration to be paid in the
transaction or series of related transactions and the present or
potential issuance of common stock, or securities convertible into or
exercisable for common stock, could result in an increase in
outstanding common shares or voting power of 5% or more; or
(ii) where, due to the present or potential issuance of common
stock, or securities convertible into or exercisable for common stock,
other than a public offering for cash:
a. the common stock has or will have upon issuance voting
power equal to or in excess of 20% of the voting power
outstanding before the issuance of stock or securities
convertible into or exercisable for common stock; or
b. the number of shares of common stock to be issued is or
will be equal to or in excess of 20% of the number of shares or
common stock outstanding before the issuance of the stock or
securities; or
(D) in connection with a transaction other than a public offering
involving:
4
(i) the sale or issuance by the issuer of common stock
(or securities convertible into or exercisable for common
stock) at a price less than the greater of book or market value
which together with sales by officers, directors or substantial
shareholders of the company equals 20% or more of common stock
or 20% or more of the voting power outstanding before the
issuance; or
(ii) the sale or issuance by the company of common stock
(or securities convertible into or exercisable common stock)
equal to 20% or more of the common stock or 20% or more of the
voting power outstanding before the issuance for less than the
greater of book or market value of the stock.
(2) Exceptions may be made upon application to Nasdaq when:
(A) the delay in securing stockholder approval would seriously
jeopardize the financial viability of the enterprise; and
(B) reliance by the company on this exception is expressly
approved by the Audit Committee or a comparable body of the Board of
Directors.
A company relying on this exception must mail to all
shareholders not later than ten days before issuance of the securities a
letter alerting them to its omission to seek the shareholder approval
that would otherwise be required and indicating that the Audit Committee
of the Board or a comparable body has expressly approved the exception.
(3) Only shares actually issued and outstanding (excluding treasury
shares or shares held by a subsidiary) are to be used in making any calculation
provided for in this paragraph (i). Unissued shares reserved for issuance upon
conversion of securities or upon exercise of options or warrants will not be
regarded as outstanding.
(4) Voting power outstanding as used in this Rule refers to the
aggregate number of votes which may be cast by holders of those securities
outstanding which entitle the holders thereof to vote generally on all matters
submitted to the company's security holders for a vote.
(5) An interest consisting of less than either 5% of the number of
shares of common stock or 5% of the voting power outstanding of an issuer or
party shall not be considered a substantial interest or cause the holder of
such an interest to be regarded as a substantial security holder.
(6) Where shareholder approval is required, the minimum vote which will
constitute shareholder approval shall be a majority of the total votes cast on
the proposal in person or by proxy.
