EXHIBIT 99.1
CONVERSION AND EXCHANGE AGREEMENT
CONVERSION AND EXCHANGE AGREEMENT (this "AGREEMENT"), dated as of
October 15, 2001, by and among General Magic, Inc., a Delaware corporation, with
headquarters located at 000 X. Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000 (the
"COMPANY"), and the investors listed on the Schedule of Investors attached
hereto (individually, an "INVESTOR" and collectively, the "INVESTORS").
WHEREAS:
A. The Company has entered into that certain securities purchase
agreement, dated as of March 30, 1999, with each of the Investors (including
XxXX Convertible Arbitrage Fund, Ltd., which became a party to such agreement
through assignment) and each of certain other entities (the "OTHER INVESTORS")
(as amended by the Series F Exchange Agreement (as defined below) and subject to
that certain waiver agreement, made and entered into as of September 9, 1999, by
and among the Company, the Investors and certain other entities (the "WAIVER
AGREEMENT"), the "SERIES D SECURITIES PURCHASE AGREEMENT"), pursuant to which
each of the Investors and each of the Other Investors purchased from the Company
(I) shares of the Company's Series D Convertible Preferred Stock, par value
$0.001 per share (the "SERIES D PREFERRED STOCK"), which are convertible into
shares of the Company's common stock, par value $0.001 per share (the "COMMON
STOCK"), in accordance with the terms of the Company's Certificate of
Designations, Preferences and Rights of Series D Convertible Preferred Stock
filed with the Secretary of State of the State of Delaware on March 30, 1999
(the "SERIES D CERTIFICATE OF DESIGNATIONS") and (II) warrants (the "SERIES D
WARRANTS") to purchase shares of Common Stock (as exercised, collectively, the
"SERIES D WARRANT SHARES");
B. The Company has entered into that certain securities purchase
agreement, dated as of March 3, 1998, with each of the Investors (including XxXX
Convertible Arbitrage Fund, Ltd., which became a party to such agreement through
assignment) and each of the Other Investors (the "SERIES B SECURITIES PURCHASE
AGREEMENT"), pursuant to which each of the Investors and each of the Other
Investors purchased from the Company (I) shares of the Company's Series B
Convertible Preferred Stock, par value $0.001 per share (the "SERIES B PREFERRED
STOCK"), which are or were convertible into shares of the Common Stock, and (II)
warrants (the "SERIES B WARRANTS") to purchase shares of Common Stock (as
exercised, collectively, the "SERIES B WARRANT SHARES");
C. The Company has entered into that certain exchange agreement, dated
as of September 9, 1999, with each of the Investors (including XxXX Convertible
Arbitrage Fund, Ltd., which became a party to such agreement through assignment)
and each of the Other Investors (the "SERIES F EXCHANGE AGREEMENT"), pursuant to
which each of the Investors and each of the Other Investors acquired from the
Company, in exchange for certain shares of Series D Preferred Stock, shares of
the Company's Series F Convertible Preferred Stock, par value $0.001 per share
(the "SERIES F PREFERRED STOCK"), which are convertible into shares of Common
Stock, in accordance with the terms of the Company's Certificate of
Designations, Preferences and Rights of Series F Convertible Preferred
Stock filed with the Secretary of State of the State of Delaware on September 9,
1999 (the "SERIES F CERTIFICATE OF DESIGNATIONS");
D. The Company has entered into that certain securities purchase
agreement, dated as of March 29, 2000, with each of the Investors and each of
certain other entities named therein (the "SERIES H SECURITIES PURCHASE
AGREEMENT"), pursuant to which each of the Investors purchased from the Company
(I) shares of the Company's Series H Convertible Preferred Stock, par value
$0.001 per share, which are convertible into shares of Common Stock in
accordance with the terms of the Company's Certificate of Designations,
Preferences and Rights of Series H Convertible Preferred Stock filed with the
Secretary of State of the State of Delaware on April 18, 2000 (the "SERIES H
CERTIFICATE OF DESIGNATIONS") and (II) warrants (the "SERIES H WARRANTS" and,
collectively with the Series B Warrants and Series D Warrants, the "WARRANTS")
to purchase shares of Common Stock (as exercised, collectively, the "SERIES H
WARRANT SHARES" and, collectively with the Series B Warrant Shares and Series D
Warrant Shares, the "WARRANT SHARES");
E. The Company wishes (i) to have each Investor convert that respective
number of shares of Series D Preferred Stock and Series F Preferred Stock set
forth opposite its name on the Schedule of Investors (collectively among all the
Investors, the "PREFERRED SHARES") at the Closing (as defined below) into that
respective aggregate number of shares of Common Stock set forth opposite its
name on the Schedule of Investors (collectively among all the Investors as
converted, the "CONVERSION SHARES") and (ii) to issue to each such Investor a 5%
Secured Note due April 15, 2003 (each a "NOTE", and collectively, the "NOTES")
in the form of Exhibit A hereto in the original principal amount set forth
opposite each such Investor's name on the Schedule of Investors (which original
principal amounts in the aggregate shall equal $1,250,000) (the "CONVERSION
PAYMENT") in exchange for (a) that respective aggregate number of shares of
Common Stock set forth opposite its name on the Schedule of Investors and (b)
the Warrants representing the right to purchase that number of Warrant Shares
set forth opposite each such Investor's name on the Schedule of Investors; and
F. Contemporaneously with the execution and delivery of this Agreement,
the Company is entering in a Security Agreement ("SECURITY AGREEMENT") in favor
of the Investors pursuant to which the obligations under the Secured Notes will
be secured by a lien on all the assets of the Company;
NOW THEREFORE, the Company and the Investors hereby agree as follows:
1. CONVERSION OF PREFERRED SHARES AND EXCHANGE OF CONVERSION SHARES AND
WARRANTS.
a. Conversion of Preferred Shares and Exchange of Conversion
Shares and Warrants. Subject to satisfaction (or waiver) of the conditions set
forth in Sections 5 and 6, at and as of the consummation of the transactions
contemplated hereunder (the "CLOSING"):
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(i) each Investor hereby elects to convert that number of
shares of Series D Preferred Stock and Series F Preferred Stock set forth
opposite each such Investor's name on the Schedule of Investors into Conversion
Shares, and the Company shall issue and deliver to the Investors that number of
Conversion Shares set forth opposite each such Investor's name on the Schedule
of Investors; and
(ii) the Company shall issue and deliver to each Investor
that original principal amount of Notes set forth opposite each Investor's name
on the Schedule of Investors (which amounts in the aggregate shall equal
$1,250,000) in exchange for each Investor's surrender and tender to the Company
of that number of Conversion Shares and Warrants representing the right to
purchase that number of Warrant Shares set forth opposite each such Investor's
name on the Schedule of Investors.
b. Closing Mechanics. The date and time of the Closing (the
"CLOSING DATE") shall be October 16, 2001, subject to satisfaction (or waiver)
of the conditions to the Closing set forth in Sections 5 and 6 (or such later
date as is mutually agreed to by the Company and each of the Investors). On the
Closing Date:
(i) affidavits of lost stock certificates representing the
Preferred Shares and the documents representing the Warrants shall have been
delivered to counsel for the Investors to surrender to the Company upon Closing;
(ii) the Company shall have executed and delivered the
Secured Notes to counsel for the Company for forwarding to the Investors upon
Closing (so long as such counsel agrees that it shall be holding such Notes on
behalf of the Investors upon consummation of the Closing);
(iii) the Company shall cause its transfer agent to
transmit the Conversion Shares which are not being exchanged hereunder
electronically through the Deposit Withdrawal Agent Commission System to the
Investors by crediting the account of the Investors set forth opposite each
Investor's name on the Schedule of Investors on the Closing Date; and
(iv) the Conversion Shares which are being exchanged
hereunder shall be issued to the Investors upon Closing and immediately
thereafter exchanged by the Company for the Notes, without certificates therefor
being issued except to the extent required by law or to the extent otherwise
necessary or desirable. If certificates for such shares are required to be
delivered, such certificates shall be promptly returned to the Company for
cancellation.
c. The Preferred Shares shall not be deemed converted and shall
remain outstanding unless and until the Company shall have delivered the Notes
to counsel for the Company for forwarding to the Investors upon Closing in
accordance with clause (b)(ii) above.
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2. INVESTOR'S REPRESENTATIONS AND WARRANTIES.
Each Investor represents and warrants with respect to only itself
that:
a. Authorization; Enforcement. (i) Such Investor has the
requisite power and authority to enter into and perform its obligations under
this Agreement and each of the other agreements entered into by the parties
hereto in connection with the transactions contemplated by this Agreement; and
(ii) this Agreement has been duly and validly authorized, executed and delivered
on behalf of such Investor and constitutes valid and binding agreements of such
Investor enforceable against such Investor in accordance with its terms.
b. No Conflicts. The execution, delivery and performance of this
Agreement by such Investor and the consummation by such Investor of the
transactions contemplated hereby will not result in a violation of the
certificate of incorporation, by-laws or other documents of organization of such
Investor. Such Investor is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement in accordance with the terms hereof.
c. Ownership of Preferred Shares and Warrants. Such Investor is
the sole beneficial owner of the number of shares of Series D Preferred Stock
and Series F Preferred Stock and the Warrants representing a number of Warrant
Shares, in each case, set forth opposite such Investor's name on the Schedule of
Investors; assuming that the Company issued such shares of Series D Preferred
Stock and Series F Preferred Stock and such Warrants to such Investor free and
clear of any Encumbrance (as defined below), other than restrictions imposed by
securities laws, then such Investor's shares of Series D Preferred Stock and
Series F Preferred Stock and such Investor's Warrants are free and clear of any
Encumbrance, other than restrictions imposed by securities laws. Such Investor
does not own or have any interest in any shares of Series D Preferred Stock or
Series F Preferred Stock or in any Warrants except for that number of shares of
Series D Preferred Stock and Series F Preferred Stock and Warrants to purchase
that number of Warrant Shares, in each case, set forth opposite such Investor's
name on the Schedule of Investors. For purpose of this Section 2(c),
"ENCUMBRANCE" means any security interest, pledge, mortgage, lien, charge,
encumbrance, adverse claim or restriction of any kind, including without
limitation, any restriction on use, transfer or receipt of income, options,
pledges, rights of first refusal, voting trusts, proxies or stockholder, member
or similar agreements or other restrictions of any nature whatsoever.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Investors
that:
a. Organization and Qualification. The Company is a corporation
duly organized and validly existing in good standing under the laws of the State
of Delaware and has the requisite corporate power and authorization to own its
properties and to carry
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on its business as now being conducted. The Company 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 this
Agreement, the Notes, the Security Agreement and Affidavit of Loss and Indemnity
Agreement (collectively, the "TRANSACTION DOCUMENTS").
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 and the other Transaction
Documents, and to issue the Conversion Shares and the Notes and to exchange the
Warrants and the Conversion Shares being exchanged hereunder in accordance with
the terms hereof and thereof; (ii) the execution and delivery of this Agreement
and the other Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by
the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders; (iii) this
Agreement and the other Transaction Documents have been duly executed and
delivered by the Company; and (iv) this Agreement and the other Transaction
Documents constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with its terms.
c. No Conflicts. The execution, delivery and performance of this
Agreement and the other 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 Company's Certificate of
Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of Preferred Stock of the Company or the Company's By-laws;
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party; or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the principal market or
exchange on which the Common Stock is traded or listed) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected. The Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement or the other Transaction
Documents in accordance with the terms hereof and thereof. Neither the Company
nor any of its
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Subsidiaries or any of their officers, directors, agents or employees have
provided the Investors with any material, nonpublic information.
d. Acknowledgment Regarding Investors' Entering into this
Agreement. The Company acknowledges and agrees that each of the Investors is
acting solely in the capacity of arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that each Investor is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby, and any advice given by any
of the Investors or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to such Investor's entering into this Agreement. The Company
further represents to each Investor that the Company's decision to enter into
this Agreement and the other Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
e. Solvency. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings. Subject to the qualifications set forth below, the
Company is not, and will not become upon consummation of the transactions
contemplated hereby, insolvent within the meaning of any bankruptcy law, the
Delaware General Corporation Law or any law relating to fraudulent conveyance or
fraudulent transfer. Based on the financial condition of the Company as of the
Closing Date (i) the Company's fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities and
the obligations under the Secured Notes) as they mature, and (ii) the Company's
assets do not constitute unreasonably small capital to carry out its business
through January 31, 2001 as now conducted and as proposed to be conducted
including the capital needs through January 31, 2001 taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof. The Company is
currently able to pay its debts as they become due. Based on the financial
condition of the Company as of the Closing Date, if the Company were to
liquidate all of its assets, the Company would have sufficient amounts of cash
to pay all of its debts (including the Notes).
f. Impairment. The capital of the Company is not currently
impaired nor will it become impaired as a result of the transactions
contemplated hereby, including without limitation the Exchange of Conversion
Shares in exchange for the Notes.
g. Issuance of Securities. The Conversion Shares are duly
authorized and reserved for issuance and, upon issuance in accordance with the
terms of this Agreement, the Conversion Shares will be validly issued, fully
paid and non-assessable, free and clear of any and all liens, claims and
encumbrances, freely tradeable under the Securities Act of 1933, as amended, and
listed for trading and quoted on the Nasdaq National Market.
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x. Xxxx Priority. Except for Permitted Liens (as defined in the
Security Agreement), none of the Company or any subsidiary of the Company has
entered into or granted any security agreements, or permitted the filing or
attachment of any security interests on or affecting any of the Collateral (as
defined in the Security Agreement) directly or indirectly securing repayment of
the Company's indebtedness under the Note or other Transaction Documents, that
would be prior or that may in any way be superior to the Investors' security
interests and rights in and to such Collateral, and upon Closing the Investors
shall have a valid security interest in such Collateral. Subject to Permitted
Liens now existing or hereafter attaching to any of the Collateral, upon the
proper filing of a UCC Financing Statement in the form attached hereto as
Exhibit C with the Secretary of State of the State of Delaware, all the security
interests in such Collateral which may be perfected by a filing of a UCC
Financing Statement will have been perfected and will have priority, at the time
of such filing of the UCC Financing Statement with the Secretary of State of the
State of Delaware, over any other security interests in such property perfected
by filing after such time.
i. Security Interest. The Company represents and agrees that (1)
the security interest created by the Security Agreement does not and shall not
constitute a preferential transfer within the meaning of any bankruptcy or
insolvency law, and (2) in exchange for the issuance of the Notes and the
granting of the security interest created by the Security Agreement, the Company
is receiving fair consideration and reasonably equivalent value within the
meaning of any laws regarding fraudulent conveyances or transfers.
j. SEC Documents. The Common Stock of the Company is registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT" or "1934 ACT"), and the Company and its subsidiaries have
filed all reports, schedules, forms, statements and other documents required to
be filed by them with the Securities and Exchange Commission ("SEC") since
December 31, 2000 pursuant to the reporting requirements of the Exchange Act,
including all such proxy information, solicitation statement and registration
statements, and any amendments thereto required to have been filed as of the
Closing Date (all of the foregoing including filings incorporated by reference
therein, together with all registration statements filed under the Securities
Act, being referred to herein as the "SEC DOCUMENTS"), except where the failure
to do so could not reasonably be expected to have a Material Adverse Effect. As
of their respective filing dates, the SEC Documents (subject to the proviso
contained in the following sentence) complied in all material respects with the
requirements of the Exchange Act and the Securities Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder and other federal,
state and local laws, rules and regulations applicable to such SEC Documents,
and none of the SEC Documents 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. To the Company's knowledge, the SEC
Documents contain all material information concerning the Company and its
subsidiaries required to be disclosed therein as of the dates thereof (provided
that the parties acknowledge that the SEC may require additional disclosures by
the Company in its Registration Statement (and/or the documents
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incorporated therein by reference) which was initially filed on Form S-3 on July
27, 2001 and was amended pursuant to a Form S-3/A filed September 20, 2001 to
comply with comments made or to be made by the SEC to such filings in connection
with its review thereof), and no event or circumstance has occurred prior to the
date hereof or will have occurred on or prior to the Closing Date which would
require the Company to disclose such event or circumstance in order to make the
statements in the SEC Documents not misleading but which has not, or will have
not, been so disclosed. Except as disclosed in the SEC Documents, since December
31, 2000, no Material Adverse Effect has occurred or exists, and no event or
circumstance has occurred that with notice or the passage of time or both is
reasonably likely to result in a Material Adverse Effect with respect to the
Company or its subsidiaries on a consolidated basis.
k. Financial Statements. (i) The financial statements (including
any related notes) of the Company and its subsidiaries included in the SEC
Documents complied as to form and substance in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto and (ii)
such financial statements were prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis 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 not include footnotes, may be condensed or
summary statements) and fairly presented in all material respects the financial
position of the Company and its subsidiaries as of the respective dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments) (provided that the parties acknowledge that the SEC may require
additional disclosures by the Company in its Registration Statement (and/or the
documents incorporated therein by reference) which was initially filed on Form
S-3 on July 27, 2001 and was amended pursuant to a Form S-3/A filed September
20, 2001 to comply with comments made or to be made by the SEC to such filings
in connection with its review thereof).
l. Principal Market. The principal market on which the Common
Stock is currently quoted is the Nasdaq National Market. The Company is, and
will immediately following Closing be, listed and quoted on the Nasdaq National
Market, and is not aware of any event or circumstance that would materially
adversely effect the transactions contemplated hereby.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely to
satisfy the conditions to be satisfied by it as provided in Sections 5 and 6 of
this Agreement.
b. Expenses. At the Closing, the Company shall pay a legal
expense allowance of up to $12,500 in the aggregate to the Investors by wire
transfer of immediately available funds in accordance with Halifax Fund, L.P.'s
written wire instructions, such amount to be apportioned by the Investors as may
be agreed upon by the Investors.
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c. Disclosure of Transaction and Other Material Information. On
or before the second (2nd) Business Day (as defined below) following the Closing
Date, the Company shall file a Form 8-K with the SEC describing the terms of the
transactions contemplated by this Agreement and consummated at the Closing, in
the form required by the Exchange Act, and attaching as exhibits to such Form
8-K a copy of this Agreement and the other Transaction Documents (the "8-K
FILING"). From and after the 8-K Filing, no Investor shall be in possession of
any material nonpublic information received from the Company, any of its
subsidiaries or any of its respective officers, directors, employees or agents,
that is not disclosed in the 8-K Filing. The Company shall not, and shall cause
each of its subsidiaries and its and each of their respective officers,
directors, employees and agents, not to, provide any Investor with any material
nonpublic information regarding the Company or any of its subsidiaries from and
after the filing of the 8-K Filing with the SEC without the express written
consent of such Investor. In the event of a breach of the foregoing covenant by
the Company, any of its subsidiaries, or any of its or their respective
officers, directors, employees and agents, in addition to any other remedy
provided herein, an Investor shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such
material nonpublic information without the prior approval by the Company, its
subsidiaries, or any of its or their respective officers, directors, employees
or agents. No Investor shall have any liability to the Company, its
subsidiaries, or any of its or their respective officers, directors, employees,
shareholders or agents for any such disclosure. "BUSINESS DAY" means any day
other than Saturday, Sunday or other day on which commercial banks in the city
of New York are authorized or required by law to remain closed.
d. Rule 144 Availability for Conversion Shares; No Legend on
Conversion Shares. The Company shall not, directly or indirectly, dispute or
otherwise interfere with any claim by the Investor that the Investor's holding
period of any Conversion Shares for purposes of Rule 144 relates back (i.e.,
tacks) to the holding period for the shares of Series D Preferred Stock. The
Company acknowledges and agrees that, so long as the Investor is not an
Affiliate (as defined in Rule 144(a)(1) of the Securities Act of 1933 (the "1933
ACT" or "SECURITIES ACT")) of the Company and has not been an Affiliate of the
Company at any time during the prior three (3) months, the Investor can offer
and sell the Conversion Shares without registration under the 1933 Act pursuant
to Rule 144(k) under the 1933 Act. The Company agrees that any certificate
representing the Conversion Shares shall not bear any restrictive legend.
5. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The obligation of
the Company to pay the Conversion Payment to an Investor and to exchange such
Investor's Warrants and a portion of the Conversion Shares at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion by
providing each Investor with prior written notice thereof:
1) Such Investor shall have duly executed this Agreement and
delivered the same to the Company.
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(ii) Such Investor shall have duly executed and delivered
to the Company (A) a Conversion Notice (as defined in the Series D Certificate
of Designations) for the conversion at the Closing of that number of Series D
Preferred Shares set forth opposite its name on the Schedule of Investors and
(B) a Conversion Notice (as defined in the Series F Certificate of Designations)
for the conversion at the Closing of that number of Series F Preferred Shares
set forth opposite its name on the Schedule of Investors.
(iii) Such Investor shall have delivered to the Company or
its designee an Affidavit of Loss and Indemnity Agreement with respect to (a)
the certificates representing that number of Series D Preferred Shares and
Series F Preferred Shares set forth opposite such Investor's name on the
Schedule of Investors and (b) the Warrants representing the right to purchase
that number of Warrant Shares set forth opposite such Investor's name on the
Schedule of Investors.
(iv) The representations and warranties of such Investor
shall be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date), and such Investor shall have performed, satisfied and
complied with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Investor at or
prior to the Closing Date.
6. CONDITIONS TO EACH INVESTOR'S OBLIGATION TO CONVERT. The obligation
of each Investor hereunder to convert the Preferred Shares held by it from the
Company and to permit the Company to exchange such Investor's Warrants and a
portion of such Investor's Conversion Shares at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Investor's sole benefit
and may be waived by such Investor at any time in its sole discretion by
providing the Company with prior written notice thereof:
(i) The Company shall have duly executed this Agreement
and the Security Agreement and delivered the same to such Investor; by execution
of the Security Agreement, the Company authorizes the execution and filing of a
UCC Financing Statement in the form attached hereto as Exhibit C by the
Investors or the Collateral Agent.
(ii) The Company (A) shall have caused its transfer agent
to transmit the Conversion Shares (free of any restrictions on transfer) to be
issued to such Investor at the Closing (as set forth in Section 1(a))
electronically through the Deposit Withdrawal Agent Commission System to such
Investor by crediting the account of such Investor set forth opposite such
Investor's name on the Schedule of Investors, and (B) shall have issued and
delivered the duly executed respective Note to such Investor (as set forth in
Section 1).
(iii) The Company shall have delivered to the Investors
the amount set forth in Section 4(b) by wire transfer of immediately available
funds.
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(iv) The Common Stock shall be authorized for quotation on
the Nasdaq National Market and trading in the Common Stock on the Nasdaq
National Market shall not have been suspended by the SEC or The Nasdaq Stock
Market, Inc.
(v) The representations and warranties of the Company
shall be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied with the covenants, agreements and conditions required by this
Agreement and the Security Agreement to be performed, satisfied or complied with
by the Company at or prior to the Closing Date.
(vi) Such Investor shall have received the opinion of
Xxxxxx, Xxxx & Xxxxxxxx LLP, dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to such Investor and in substantially the form
of Exhibit B attached hereto.
(vii) The Board of Directors of the Company shall have
adopted resolutions consistent with Section 3(b)(ii) above and in a form
reasonably acceptable to such Investor (the "RESOLUTIONS").
7. INDEMNIFICATION. In consideration of each Investor's execution and
delivery of this Agreement and in addition to all of the Company's other
obligations under this Agreement, the Company shall defend, protect, indemnify
and hold harmless each Investor and all of their stockholders, officers,
directors, employees and direct or indirect investors and any of the foregoing
person's agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement, the Security
Agreement, the Note 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 this Agreement, the Security Agreement,
the Note or any other certificate, instrument or document contemplated hereby or
thereby, (c) any cause of action, suit or claim brought or made against such
Indemnitee (other than a cause of action, suit or claim by another Investor) and
arising out of or resulting from (i) the execution, delivery, performance,
breach by the Company or enforcement of this Agreement, the Security Agreement,
the Note or any other certificate, instrument or document contemplated hereby or
thereby, or (ii) solely the status of such Investor or holder of the Conversion
Shares as an investor in the Company. Notwithstanding the foregoing, Indemnified
Liabilities shall not include any liability of any Indemnitee to the extent such
liability arises out of such Indemnitee's willful misconduct or fraudulent
action(s). To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible
11
under applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 7 shall
be the same as those set forth in Sections 6(a) and (d) of the Registration
Rights Agreement (as defined in the Series F Exchange Agreement), including,
without limitation, those procedures with respect to the settlement of claims
and Company's right to assume the defense of claims.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. The corporate laws of
the State of Delaware shall govern all issues concerning the relative rights of
the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and interpreted in accordance with the laws of the State of New
York without regard to the principles of conflict of laws. Each party hereby
irrevocably submits to the 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. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
12
e. Entire Agreement; Amendments. This Agreement, together with
the Security Agreement and Notes and the instruments referenced herein,
supersedes all other prior oral or written agreements between the Investors, the
Company, their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement, together with the Security
Agreement and Notes and the instruments referenced herein, contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. Notwithstanding the foregoing, the
Series D Securities Purchase Agreement, the Waiver Agreement, the Series F
Exchange Agreement, the Series H Securities Purchase Agreement, the Series B
Securities Purchase Agreement, the Warrants, the Series D Certificate of
Designations, the Series F Certificate of Designations, that certain
registration rights agreement, dated as of March 30, 1999, among the Company,
the Investors and the Other Investors relating to the Series D Securities
Purchase Agreement (the "SERIES D REGISTRATION RIGHTS AGREEMENT"), that certain
registration rights agreement, dated as of September 9, 1999, among the Company,
the Investors and certain other investors relating to the Series F Exchange
Agreement (the "SERIES F REGISTRATION RIGHTS AGREEMENT"), that certain
registration rights agreement, dated as of March 3, 1998, among the Company and
certain buyers (including the Investors) named therein relating to the
Securities Purchase Agreement (the "SERIES B REGISTRATION RIGHTS AGREEMENT"),
that certain registration rights agreement, dated as of March 29, 2000, among
the Company and certain buyers (including the Investors) named therein relating
to the Series H Securities Purchase Agreement (the "SERIES H REGISTRATION RIGHTS
AGREEMENT") and the two letter agreements between the Company and the Investors,
dated March 31, 1999 and September 9, 1999, respectively, relating to the Series
D Preferred Stock and the Series F Preferred Stock, respectively (collectively,
the "SIDE LETTER AGREEMENTS") shall remain in full force and effect and, prior
to the Closing, the Warrants shall remain in full force and effect. No provision
of this Agreement may be amended other than by an instrument in writing signed
by the Company and each Investor, and no provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement is
sought.
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) upon receipt, when
delivered by a delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
13
If to the Company:
General Magic, Inc.
000 X. Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
If to an Investor, to:
c/o The Palladin Group, L.P.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxxx Xxxxxxx
with a copy to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-986-8866
Attention: Xxxxxxx Xxxxxxx, Esq.
Each party shall provide five (5) days' prior written notice to the other party
of any change in address or facsimile number. Written confirmation of receipt
(A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender's
facsimile machine containing the time, date, recipient facsimile number and an
image of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, overnight or courier
delivery or transmission by facsimile in accordance with clause (i), (ii) or
(iii) above, respectively.
14
g. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each Investor,
including by merger, consolidation or otherwise. An Investor may assign some or
all of its rights hereunder without the consent of the Company; provided,
however, that any such assignment shall not release such Investor from its
obligations hereunder unless such obligations are assumed by such assignee and
the Company has consented to such assignment and assumption.
h. No Third Party Beneficiaries. Except for Section 8(q), this
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
8(l), the representations and warranties of the Company and the Investors
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4 and 8, and the indemnification provisions set forth in Section 7,
shall survive the Closing. Each Investor shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Investor shall have the right
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Investor, to
make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations (although each
Investor shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
k. Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
occurred with respect to an Investor on or before three (3) Business Days from
the date hereof due to the Company's or such Investor's failure to satisfy the
conditions set forth in Sections 5 and 6 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party.
m. Placement Agent. The Company acknowledges that it has not
engaged any placement agent in connection with the conversion of the Preferred
Shares. The Company shall be responsible for the payment of any placement
agent's fees or brokers'
15
commissions relating to or arising out of the transactions contemplated hereby.
The Company shall pay, and hold each Investor harmless against, any liability,
loss or expense (including, without limitation, attorney's fees and
out-of-pocket expenses) arising in connection with any such claim.
n. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. Remedies. Each Investor shall have all rights and remedies set
forth in this Agreement and all rights and remedies which such holders have been
granted at any time under any other agreement or contract relating to the
subject matter hereof and all of the rights which such holders have under any
law. Any person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a
payment or payments to the Investors hereunder or under the Notes or Security
Agreement or the Investors enforce or exercise their rights hereunder or under
the Notes or Security Agreement, 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.
q. Mutual General Release.
(i) In consideration of the release set forth in Section
8(q)(ii), effective as of the Closing (the "EFFECTIVE TIME") each Investor,
severally and not jointly, on behalf of itself and its heirs, executors,
administrators, devisees, trustees, partners, directors, officers, shareholders,
employees, consultants, representatives, predecessors, principals, agents,
parents, associates, affiliates, subsidiaries, attorneys, accountants,
successors, successors-in-interest and assignees (collectively, the "INVESTOR
RELEASING PERSONS"), hereby waives and releases, to the fullest extent permitted
by law, but subject to Section 8(q)(iii) below, any and all claims, rights and
causes of action, whether known or unknown (collectively, the "INVESTOR
CLAIMS"), that any of the Investor Releasing Persons had or currently has
against (i) the Company, (ii) any of the Company's current or former parents,
shareholders, affiliates, subsidiaries, predecessors or assigns, or (iii) any of
the Company's or such other persons' or entities' current or former officers,
directors, employees, agents, principals, investors, signatories, advisors,
consultants, spouses, heirs, estates, executors, attorneys, auditors and
associates and members of their immediate families (collectively, the "COMPANY
RELEASED PERSONS"),
16
including, without limitation, Investor Claims arising out of or relating to the
Series D Securities Purchase Agreement, the Waiver Agreement, the Series F
Exchange Agreement, the Series B Securities Purchase Agreement, the Series H
Securities Purchase Agreement, the Warrants, the Series D Certificate of
Designations, the Series F Certificate of Designations, the Series D
Registration Rights Agreement, the Series F Registration Rights Agreement, the
Series B Registration Rights Agreement, the Series H Registration Rights
Agreement or any of the Side Letter Agreements (collectively, the "RELEASED
DOCUMENTS") other than Investor Claims arising after the Effective Time.
(ii) In further consideration of the Investors
entering into this Agreement, effective as of the Effective Time, the Company on
behalf of itself and its heirs, executors, administrators, devisees, trustees,
partners, directors, officers, shareholders, employees, consultants,
representatives, predecessors, principals, agents, parents, associates,
affiliates, subsidiaries, attorneys, accountants, successors,
successors-in-interest and assignees (collectively, the "COMPANY RELEASING
PERSONS"), hereby waives and releases, to the fullest extent permitted by law,
but subject to Section 8(q)(iii) below, any and all claims, rights and causes of
action, whether known or unknown (collectively, the "COMPANY CLAIMS"), that any
of the Company Releasing Persons had or currently has against (i) the Investors,
(ii) any of the Investors' respective current or former parents, shareholders,
affiliates, subsidiaries, partners, predecessors or assigns, or (iii) any of the
Investors' or such other persons' or entities' current or former officers,
directors, employees, agents, principals, investors, signatories, advisors,
consultants, spouses, heirs, estates, executors, attorneys, auditors and
associates and members of their immediate families (collectively, the "INVESTOR
RELEASED PERSONS"), including, without limitation, any Company Claims arising
out of or relating to the Released Documents.
(iii) The Company and each of the Investors
acknowledge that the release set forth in Sections 8(q)(i) and 8(q)(ii) above
does not affect (I) any claim which any Company Releasing Person or Investor
Releasing Person may have under this Agreement, the Security Agreement, the
Notes, Section 8 of the Series D Securities Purchase Agreement, Section 8 of the
Series F Exchange Agreement, Section 8 of the Series H Securities Purchase
Agreement, Section 7.5 of the Series B Securities Purchase Agreement, Sections 6
and 7 of the Series D Registration Rights Agreement, Sections 6 and 7 of the
Series H Registration Rights Agreement, Sections 6 and 7 of the Series B
Registration Rights Agreement, and Sections 6 and 7 of the Series F Registration
Rights Agreement, Section 8 of Series C Securities Purchase Agreement entered
into between the Company and the Investors on or about June 24, 1998 and
Sections 6 and 7 of the related registration rights agreement, or (II) subject
to the release of claims pursuant to this Section 8(q), the enforceability or
effectiveness of any of the foregoing documents. For clarification purposes, the
Series H Securities Purchase Agreement, Series H Registration Rights Agreement,
Series H Certificate of Designations and all documents entered into in
connection therewith other than the Series H Warrants are and shall remain in
full force and effect.
(iv) It is the intention of each party that this
Section 8(q) shall be effective as a final accord and satisfaction and release
of each and every Investor Claim and Company Claim, except as otherwise
specifically provided in this Section 8(q). In
17
furtherance of this intention, each party acknowledges that it is familiar with
Section 1542 of the California Civil Code which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT NOW KNOW
OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
Each party hereby waives and relinquishes every right or benefit which it may
have under Section 1542 or the California Civil Code to the extent that it may
lawfully waive such right or benefit pertaining to the subject matter of this
Agreement. Each party acknowledges that the foregoing waiver was separately
bargained for and is a key element of the Agreement of which this release is a
part.
* * * * * *
18
IN WITNESS WHEREOF, the Investors and the Company have caused this
Conversion and Exchange Agreement to be duly executed as of the date first
written above.
COMPANY: INVESTORS:
GENERAL MAGIC, INC. HALIFAX FUND, L.P.
By: /s/ Xxxxx X. Russian By: /s/ Xxxxxxx Xxxxxxx
-------------------- -------------------
Name: Xxxxx X. Russian Name: Xxxxxxx Xxxxxxx
Its: Chief Financial Officer Its: Authorized Signatory
PALLADIN PARTNERS I, L.P.
By: /s/ Xxxxxxx Xxxxxxx
-------------------
Name: Xxxxxxx Xxxxxxx
Its: Authorized Signatory
PALLADIN OVERSEAS FUND, LTD.
By: /s/ Xxxxxxx Xxxxxxx
-------------------
Name: Xxxxxxx Xxxxxxx
Its: Authorized Signatory
XxXX CONVERTIBLE ARBITRAGE FUND, LTD.
By: /s/ Xxxxxxx Xxxxxxx
-------------------
Name: Xxxxxxx Xxxxxxx
Its: Authorized Signatory
LANCER SECURITIES (CAYMAN) LTD.
By: /s/ Xxxxxxx Xxxxxxx
-------------------
Name: Xxxxxxx Xxxxxxx
Its: Authorized Signatory
19
SCHEDULE OF INVESTORS
NUMBER OF NUMBER OF NUMBER OF ORIGINAL
SERIES D SERIES F NUMBER OF NUMBER OF CONVERSION PRINCIPAL
PREFERRED PREFERRED CONVERSION WARRANT SHARES TO BE AMOUNT OF
INVESTOR NAME DWAC INSTRUCTIONS SHARES SHARES SHARES SHARES EXCHANGED NOTES
------------- ----------------- --------- --------- ---------- --------- ------------ ---------
HALIFAX FUND, L.P. DTC#: 355 (CSFB) 61 230 3,813,434 872,088 400,425 $1,042,264
Account#: 700250
PALLADIN PARTNERS I, DTC#: 355 (CSFB) 2 12 186,705 36,734 19,605 $ 50,143
L.P. Account#: 700370
PALLADIN OVERSEAS DTC#: 355 (CSFB) 1 7 107,181 20,990 11,254 $ 28,653
FUND, LTD. Account#: 700390
XxXX CONVERTIBLE DTC#: 355 (CSFB) 6 22 366,521 62,974 38,486 $ 100,287
ARBITRAGE FUND, LTD. Account#: 702600
LANCER SECURITIES DTC#: 355 (CSFB) 1 7 107,181 20,990 11,254 $ 28,653
(CAYMAN) LTD. Account#: 700710
20
LIST OF EXHIBITS
EXHIBIT A Form of Secured Note
EXHIBIT B Form of Company Counsel Opinion
EXHIBIT C UCC Financing Statement
21
EXHIBIT A
5% SECURED NOTE DUE APRIL 15, 2003
OF
GENERAL MAGIC, INC.
NOTE NO.: ORIGINAL PRINCIPAL AMOUNT: $___________
ISSUANCE DATE: OCTOBER 15, 0000 XXX XXXX, XXX XXXX
THIS SECURED NOTE ("NOTE") is one of a duly authorized issue of Secured
Notes of GENERAL MAGIC, INC., a corporation duly organized and existing under
the laws of the State of Delaware (the "MAKER"), designated as the Maker's 5%
Secured Notes Due April 15, 2003 (the "MATURITY DATE") in an aggregate principal
amount of up to One Million Two Hundred Fifty Thousand U.S. Dollars (U.S.
$1,250,000) (the "NOTES").
FOR VALUE RECEIVED, the Maker hereby promises to pay to the order of
[PALLADIN ENTITY] or its registered assigns or successors-in-interest (the
"HOLDER") the principal sum of [____________________________] Dollars (U.S.
[$___________]), together with all accrued but unpaid interest thereon, if any,
on or prior to the Maturity Date, in accordance with the terms hereof, and to
pay interest on the unpaid principal balance hereof at the rate of 5% per annum
from the date of original issuance hereof (the "ISSUANCE DATE") until the same
becomes due and payable on the Maturity Date, or such earlier date upon
acceleration or redemption in accordance with the terms hereof or of the other
Transaction Documents. Interest on this Note shall accrue daily commencing on
the Issuance Date, shall be compounded quarterly at the end of each calendar
quarter and shall be computed on the basis of a 360-day year, 30-day months and
actual days elapsed and shall be payable in accordance with Section 1 hereof.
Notwithstanding anything contained herein, this Note shall bear interest from
and after the occurrence and during the continuance of a default pursuant to
Section 4(a), at the per annum rate (the "DEFAULT RATE") equal to 7.0% above the
rate otherwise applicable thereto. Unless otherwise agreed or required by
applicable law, payments will be applied first to any unpaid collection costs,
then to unpaid interest and fees and any remaining amount to principal (against
the latest scheduled principal repayment).
All payments of principal, interest and any other sums payable under
this Note shall be made to such account as the Holder may from time to time
designate by written notice in accordance with the provisions of this Note. All
such payments due under this Note shall be made in lawful money of the United
States of America by Maker check or by wire transfer of immediately available
funds, free and clear of, and without deduction or offset for, any present or
future taxes, levies, imposts, charges, withholdings or liabilities with respect
thereto, and there shall not be any other defenses, offsets, set-offs, claims,
counterclaims, recoupments, credits or deductions of any kind. The Maker may
prepay at any time and from time to time without penalty all or a portion of the
amount owed hereunder. Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a Business Day (as defined below), the
same shall instead be due on the next succeeding day which is a Business Day.
For purposes of this Note, "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.
After all of the principal amount and accrued but unpaid interest at
any time owed on this Note have been paid in full, this Note shall automatically
be deemed canceled.
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Conversion and Exchange Agreement dated on or about
the Issuance Date pursuant to which the Notes were originally issued (the
"EXCHANGE AGREEMENT").
The following terms and conditions shall apply to this Note:
SECTION 1. PAYMENTS OF INTEREST AND PRINCIPAL.
(a) Interest. The Maker shall pay the accrued but unpaid
interest due hereunder in cash quarterly in arrears commencing on January 15,
2002 and on each April 15, July 15, October 15 and January 15 thereafter and on
the Maturity Date.
(b) Principal. The Maker shall repay the original principal
amount of this Note in cash in quarterly installments in the amounts and on the
repayment dates indicated below, together with the interest payments due
pursuant to subsection (a) above:
PERCENTAGE OF ORIGINAL PRINCIPAL
AMOUNT HEREUNDER TO BE REPAID REPAYMENT DATE
-------------------------------- --------------
12% January 15, 2002
12% April 15, 2002
12% July 15, 2002
12% October 15, 2002
24% January 15, 2003
Entire remaining outstanding amount April 15, 2003
SECTION 2. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS. So long as any
principal amount of Notes is outstanding, the Maker and its subsidiaries shall
not, without the affirmative vote of the holders of at least 75% of the
principal amount of the Notes then outstanding, incur any additional
indebtedness for borrowed money which is senior to the Notes other than
Permitted Senior Indebtedness (as such term is defined in the Security
Agreement).
SECTION 3. SECURITY AGREEMENT. The Maker's obligations under this Note
are secured by the Collateral (as defined in the Security Agreement) pursuant to
the terms of the Security Agreement. This Note is issued pursuant to the
Exchange Agreement and is subject to the terms and conditions set forth in the
Exchange Agreement and Security Agreement.
SECTION 4. DEFAULTS AND REMEDIES.
(a) Events of Default. An "EVENT OF DEFAULT" is:
(i) a default in payment of the principal amount or accrued
but unpaid interest thereon of any of the Notes on the date such
payment is due and which such default
2
continues for ten (10) days after notice of such non-payment;
(ii) failure by the Maker for twenty (20) days after written
notice to it to comply with any material provision or covenant of any
of the Notes, the Exchange Agreement, the Security Agreement, or any
other agreement between the Maker and Holder;
(iii) any warranty, representation or statement made or
furnished by Maker to Holder, or the Collateral Agent (as defined in
the Security Agreement) on behalf thereof, under this Note, the
Security Agreement, the Exchange Agreement, or any other agreement
between the Maker and the Holder or any certificate or schedule
required thereby is false or misleading in any material respect, when
made;
(iv) if the Maker is subject to any Bankruptcy Event (as
defined below);
(v) the Security Agreement ceases to be in full force and
effect (including failure to create a valid and perfected security
interest or lien in the Collateral (except to the extent the perfection
of deposit accounts or cash is qualified in Sections 2.2(a) and 2.2(p)
of the Security Agreement)) at any time and for any reason;
(vi) a material adverse change has occurred in the condition,
value or operation of a material portion of the Collateral;
(vii) commencement of foreclosure, whether by judicial
proceeding, self-help, repossession or any other method, by any
creditor of Maker against the Collateral or any other collateral
securing the Indebtedness in excess of $50,000 individually or in the
aggregate. This includes a garnishment of any of Maker's accounts,
including without limitation deposit accounts. However, this Event of
Default shall not apply if there is a good faith dispute by Maker as to
the validity or reasonableness of the claim which is the basis of the
creditor proceeding and if Maker gives the Collateral Agent written
notice of the creditor proceeding and deposits with the Collateral
Agent monies or a surety bond for the creditor proceeding, in an amount
determined by the Collateral Agent, in its reasonable discretion, as
being an adequate reserve or bond for the dispute;
(viii) the dissolution or termination of the Maker's existence
as a going concern; or
(ix) any default after any cure period under, or acceleration
prior to maturity of, any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Maker or for money borrowed the
repayment of which is guaranteed by the Maker, whether such
indebtedness or guarantee now exists or shall be created hereafter.
For purposes hereof, "BANKRUPTCY EVENT" means any of the
following events: (a) the Maker or any subsidiary commences a case or other
proceeding under any bankruptcy, reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency, or liquidation or similar law
of any jurisdiction relating to the Maker or any subsidiary thereof; (b) there
is commenced against the Maker or any subsidiary any such case or proceeding
that is not dismissed within 60 days after commencement; (c) the Maker or any
subsidiary is adjudicated insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding
3
is entered; (d) the Maker or any subsidiary suffers any appointment of any
custodian or the like for it or any substantial part of its property that is not
discharged or stayed within 60 days; (e) the Maker or any subsidiary makes a
general assignment for the benefit of creditors; (f) the Maker or any subsidiary
fails to pay, or states that it is unable to pay or is unable to pay, its debts
generally as they become due; (g) the Maker or any subsidiary calls a meeting of
its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (h) the Maker or any subsidiary, by any act or
failure to act, expressly indicates its consent to, approval of or acquiescence
in any of the foregoing or takes any corporate or other action for the purpose
of effecting any of the foregoing.
(b) Remedies. If an Event of Default occurs and is continuing
with respect to any of the Notes, the Holder may declare all of the then
outstanding principal amount of this Note and all other Notes held by the
Holder, including any interest due thereon, to be due and payable immediately,
except that in the case of an Event of Default arising from events described in
clause (iv) of Section 4(a), this Note shall become due and payable without
further action or notice. The Maker shall pay interest on such amount at the
Default Rate to the Holder if such amount is not paid within 7 days of Holder's
request. The remedies under this Note shall be cumulative. Holder may hire or
pay a reputable collection agent to help collect this Note if the Maker does not
pay. The Maker will pay the Holder the reasonable costs of any such collection.
SECTION 5. GENERAL.
(a) Payment of Expenses. The Maker agrees to pay all
reasonable charges and expenses which may be incurred by the Holder in
successfully enforcing this Note and/or collecting any amount due under this
Note. This includes, without limitation and subject to any limits under
applicable law, Holder's reasonable collection costs under Section 4(b) and
Holder's reasonable attorneys' fees and legal expenses whether or not there is a
lawsuit, including reasonable attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals and any anticipated post-judgment collection services. If
not prohibited by applicable law, the Maker also will pay any court costs, in
addition to all other sums provided by law.
(b) Savings Clause. In case any provision of this Note is held
by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not in
any way be affected or impaired thereby. In no event shall the amount of
interest paid hereunder exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected in
excess of the applicable maximum rate, the excess collected shall be applied to
reduce the principal debt. If the interest actually collected hereunder is still
in excess of the applicable maximum rate, the interest rate shall be reduced so
as not to exceed the maximum allowable under law.
(c) Amendment. Neither this Note nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the Maker and Holder.
(d) Assignment, Etc. The Holder may assign or transfer this
Note to any transferee. The Holder shall notify the Maker of any such assignment
or transfer prior to or within a
4
reasonable time after such assignment or transfer. This Note shall be binding
upon the Maker and its successors and shall inure to the benefit of the Holder
and its successors and assigns.
(e) Waiver.
(i) No failure on the part of the Holder to exercise, and
no delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time. The release of any party liable under this Note shall not
operate to release any other party liable under this Note.
(ii) Except as otherwise provided herein, the Maker and
any other person who signs, guarantees or endorses this Note, to the extent
allowed by law, hereby expressly waives demand and presentment for payment,
notice of nonpayment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, all other notices whatsoever and bringing
of suit and diligence in taking any action to collect amounts called for
hereunder, and will be directly and primarily liable for the payment of all sums
owing and to be owing hereon, regardless of and without any notice, diligence,
act or omission as or with respect to the collection of any amount called for
hereunder.
(f) Governing Law; Jurisdiction.
(i) Governing Law. THIS NOTE WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
ANY CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE
APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.
(ii) Jurisdiction. The Maker irrevocably submits to the
exclusive jurisdiction of any State or Federal Court sitting in the State of New
York, County of New York, over any suit, action, or proceeding arising out of or
relating to this Note. The Maker irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action, or proceeding brought in such a court and
any claim that suit, action, or proceeding has been brought in an inconvenient
forum.
The Maker agrees that the service of process upon it
mailed by certified or registered mail (and service so made shall be deemed
complete three days after the same has been posted as aforesaid) or by personal
service shall be deemed in every respect effective service of process upon it in
any such suit or proceeding. Nothing herein shall affect Holder's right to serve
process in any other manner permitted by law. The Maker agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
(iii) NO JURY TRIAL. THE MAKER HERETO KNOWINGLY AND
VOLUNTARILY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS NOTE.
5
(g) Replacement Notes. This Note may be exchanged by the
Holder at any time and from time to time for a Note or Notes with different
denominations representing an equal aggregate outstanding principal amount, as
reasonably requested by Holder, upon surrendering the same. No service charge
will be made for such registration or exchange. In the event that Holder
notifies the Maker that this Note has been lost, stolen or destroyed, a
replacement Note identical in all respects to the original Note (except for
registration number and Principal amount, if different than that shown on the
original Note), shall be issued to the Holder, provided that the Holder executes
and delivers to the Maker an agreement reasonably satisfactory to the Maker to
indemnify the Maker from any loss incurred by it in connection with the Note.
(h) Notices Procedures. All notices shall be delivered in
accordance with Section 4.5 of the Security Agreement.
[Signature Page Follows]
6
IN WITNESS WHEREOF, the Maker has caused this Note to be duly
executed on the day and in the year first above written.
GENERAL MAGIC, INC.
By:________________________
Name:
Title:
Attest:
Sign:________________________
Print Name:
EXHIBIT C
UCC FINANCING STATEMENT
FOLLOW INSTRUCTIONS (front and back) CAREFULLY
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A. NAME & PHONE OF CONTACT AT FILER (optional)
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B. SEND ACKNOWLEDGMENT TO: (Name and Address)
THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY
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1. DEBTOR'S EXACT FULL LEGAL NAME - Insert only one name (1a or 1b) - do not abbreviate or combine names
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1a. ORGANIZATION'S NAME
OR General Magic, Inc.
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1b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
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1c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY
000 Xxxxx Xxxx Xxxxxx Xxxxxxxxx XX 00000 XXX
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1d. TAX ID #: SSN OR EIN ADD'L INFO RE 1e. TYPE OF ORGANIZATION 1f. JURISDICTION OF 1g. ORGANIZATIONAL ID #, if any
ORGANIZATION ORGANIZATION
XXXXXX
Xxxxxxxxxxx Xxxxxxxx 0000000 [ ] NONE
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2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b) - do not abbreviate or combine names
--------------------------------------------------------------------------------------------------------------------------------
2a. ORGANIZATION'S NAME
OR
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2b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
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2c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY
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2d. TAX ID #: SSN OR EIN ADD'L INFO RE 2e. TYPE OF ORGANIZATION 2f. JURISDICTION OF 2g. ORGANIZATIONAL ID #, if any
ORGANIZATION ORGANIZATION
DEBTOR
[ ] NONE
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3. SECURED PARTY'S NAME (or NAME OF TOTAL ASSIGNEE OF ASSIGNOR S/P) - insert only one secured party name (3a or 3b)
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3a. ORGANIZATION'S NAME
OR Halifax Fund, L.P., as Collateral Agent
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3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
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3c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY
000 Xxxxxxxxx Xxxxxx Xxxxxxxxx XX 00000 XXX
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4. This FINANCING STATEMENT covers the following collateral:
All Assets of Debtor
No. of additional sheets presented: 0
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5. ALTERNATIVE DESIGNATION (if applicable): [ ] LESSEE/LESSOR [ ] CONSIGNEE/CONSIGNOR [ ] BAILEE/XXXXXX
[ ] SELLER/BUYER [ ] AG. LIEN [ ] NON-UCC FILING
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6. [ ] This FINANCING STATEMENT is to be filed (for record) (or recorded) in the REAL ESTATE RECORDS.
Attach Addendum (if applicable)
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7. Check to REQUEST SEARCH REPORT(S) on Debtor(s) [ ] All Debtors [ ] Debtor 1 [ ] Debtor 2
(ADDITIONAL FEE)
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8. OPTIONAL FILER REFERENCE DATA
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FILING OFFICE COPY - NATIONAL UCC FINANCING STATEMENT (FORM UCC1) (REV. 07/29/98)
