1
Exhibit 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of June 24,
1998, by and among General Magic, Inc., a Delaware corporation, with
headquarters located at ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"COMPANY"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");
B. The Company has authorized the following new series of its Preferred
Stock, par value $.001 per share (the "PREFERRED STOCK"): the Company's Series C
Convertible Preferred Stock (the "PREFERRED SHARES"), which shall be convertible
into shares of the Company's Common Stock, par value $.001 per share (the
"COMMON STOCK") (as converted, the "CONVERSION SHARES"), in accordance with the
terms of the Company's Certificate of Designations, Preferences and Rights of
the Preferred Shares, substantially in the form attached hereto as Exhibit A
(the "CERTIFICATE OF DESIGNATIONS");
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement an aggregate of 3,000 of the Preferred Shares in the respective
amounts set forth opposite each Buyer's name on the Schedule of Buyers and one
warrant for each Preferred Share purchased, in substantially the form attached
hereto as Exhibit E (the "WARRANT"), to acquire 50 shares of Common Stock (the
"WARRANT SHARES") (the Preferred Shares, the Conversion Shares, the Warrants,
the Warrant Shares and any shares of Common Stock (the "REGISTRATION DELAY
PAYMENT SHARES") issued as payment of Registration Delay Payments (as defined in
the Registration Rights Agreement referred to below) are collectively referred
to in this Agreement as the "SECURITIES"); and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit B (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
2
'
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. Subject to satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7, the Company shall issue
and sell to the Buyers and the Buyers severally shall purchase from the Company
an aggregate of 3,000 Preferred Shares, along with the related Warrants, in the
respective amounts set forth opposite each Buyer's name on the Schedule of
Buyers (the "CLOSING"). The purchase price (the "PURCHASE PRICE") of each
Preferred Share and the related Warrant at the Closing shall be $10,000.
b. The Closing Date. The date and time of the Closing (the
"CLOSING DATE") shall be 10:00 a.m. Central Time within three (3) business days
following the date hereof, subject to satisfaction (or waiver) of the conditions
to the Closing set forth in Sections 6 and 7 (or such later date as is mutually
agreed to by the Company and the Buyers). The Closing shall occur on the Closing
Date at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Zavis, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ or at such other place as the Company and the
Buyers may mutually agree.
c. Form of Payment. On the Closing Date, (i) each Buyer shall pay
the Purchase Price to the Company for the Preferred Shares and the related
Warrants to be issued and sold to such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions; and (ii) the Company shall deliver to each Buyer (A) stock
certificates (in the denominations as such Buyer shall request) (the "STOCK
CERTIFICATES") representing such number of Preferred Shares which such Buyer is
then purchasing, and (B) the related Warrants which the Buyer is then purchasing
at the Closing, duly executed on behalf of the Company and registered in the
name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is acquiring the Preferred
Shares and the Warrants, (ii) upon conversion of the Preferred Shares, will
acquire the Conversion Shares then issuable, and (iii) upon exercise of the
Warrants, will acquire the Warrant Shares for its own account for investment
only and not with a view towards, or for resale in connection with, the public
sale or distribution thereof, except pursuant to sales registered or exempted
under the 1933 Act; provided, however, that by making the representations
herein, such Buyer does not agree to hold any of the Securities for any minimum
or other specific term, except as may be otherwise provided in Section 2(j) of
the Certificate of Designations, and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
-2-
3
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
d. Information. Such Buyer 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 Securities
which have been requested by such Buyer. Such Buyer 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 such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Sections 3 and 9(m). Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer 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 Securities.
e. No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that, except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in form and substance reasonably satisfactory to
the Company, to the effect that the Securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) such Buyer provides the Company with reasonable
assurance that the Securities can be sold, assigned or transferred pursuant to
Rule 144 promulgated under the 1933 Act (or a successor rule thereto)("RULE
144"); (ii) any sale of the Securities made in reliance on Rule 144 may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the ▇▇▇▇ ▇▇▇) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any
-3-
4
obligation to register such Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder. Notwithstanding the foregoing, the Securities may be pledged in
connection with a bona fide margin account.
g. Legends. Such Buyer understands that the certificates or other
instruments representing the Preferred Shares and the Warrants and, until such
time as the sale of the Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if (i) such Securities are registered for sale under the 1933 Act, (ii)
in connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in form and substance reasonably acceptable to the Company,
to the effect that a public sale, assignment or transfer of such Securities may
be made without registration under the 1933 Act, or (iii) such holder provides
the Company with reasonable assurances that such Securities can be sold without
restriction pursuant to Rule 144(k). Each Buyer acknowledges, covenants and
agrees to sell the Securities represented by a certificate(s) from which the
legend has been removed, only pursuant to (i) a registration statement effective
under the 1933 Act, or (ii) advice of counsel that such sale is exempt from
registration required by Section 5 of the 1933 Act.
h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Buyer and constitute valid and binding
agreements of such Buyer enforceable against such Buyer
-4-
5
in accordance with their terms, subject as to enforceability to general
principles of equity and to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that country or
jurisdiction specified on the Schedule of Buyers.
j. No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by such Buyer and the
consummation by such Buyer of the transactions contemplated hereby and thereby
will not result in a violation of the certificate of incorporation, by-laws or
other documents of organization of such Buyer.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. Set forth in Schedule 3(a) is
a complete list of each entity in which the Company, directly or indirectly,
owns any capital stock or holds an equity or similar interest. The Company and
its "Subsidiaries" (which for purposes of this Agreement means any entity in
which the Company, directly or indirectly, owns more than 20% of the outstanding
capital stock or holds an equity or similar interest representing at least 20%
of the outstanding equity or similar interests of such entity) (a complete list
of which is set forth in Schedule 3(a)) are corporations duly organized and
validly existing in good standing under the laws of the jurisdiction in which
they are incorporated, and have the requisite corporate power and authorization
to own their properties and to carry on their business as now being conducted.
Each of the Company and its Subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse
effect on the business, properties, assets, operations, results of operations,
financial condition or prospects of the Company and its Subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or on the
authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below) or the Certificate of Designations.
b. Authorization; Enforcement; Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement, the Warrants, the Registration
Rights Agreement, and the Irrevocable Transfer Agent Instructions (as defined in
Section 5) and each of the other agreements entered into by the parties hereto
in connection with the transactions contemplated by this Agreement
(collectively, the "TRANSACTION DOCUMENTS"), and to issue the Securities in
-5-
6
accordance with the terms hereof and thereof; (ii) the execution and delivery of
the Transaction Documents and the Certificate of Designations by the Company and
the consummation by it of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Preferred Shares and the
Warrants and the reservation for issuance and the issuance of the Conversion
Shares and the Warrant Shares issuable upon conversion or exercise, as the case
may be) 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, 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 Closing Date; (iii) the
Transaction Documents have been duly executed and delivered by the Company; (iv)
the Transaction Documents constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies; and (v) prior to the Closing Date, the Certificate of
Designations will have been filed with the Secretary of State of the State of
Delaware and will be in full force and effect, enforceable against the Company
in accordance with its terms.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 60,000,000 shares of Common Stock, of which
as of the date hereof, 29,074,669 shares were issued and outstanding, 5,204,894
shares are issuable and reserved for issuance pursuant to the Company's stock
option and purchase plans and 5,723,942 shares are issuable and reserved for
issuance pursuant to securities (other than the Preferred Shares and the
Warrants) 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, 50,000 shares of Series A Preferred Stock and 5,000 shares of Series B
Preferred Stock were issued and outstanding. All of such outstanding shares have
been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company; (ii)
there are no outstanding debt securities; (iii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries; (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under 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
-6-
7
any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement; and (vii) the Company
does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement. The Company has furnished to the
Buyers true and correct copies of the Company's Certificate of Incorporation, as
amended and as in effect on the date hereof (the "CERTIFICATE OF
INCORPORATION"), and the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Preferred Shares and the Warrants
are duly authorized and, upon issuance in accordance with the terms hereof,
shall be (i) validly issued, fully paid and non-assessable, (ii) free from all
taxes, liens and charges with respect to the issue thereof and (iii) entitled to
the rights and preferences set forth in the Certificate of Designations and the
Warrants. At least that number of shares of common required to be reserved by
the Company pursuant to Section 4(f) (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(f) below) have been duly authorized
and reserved for issuance upon conversion of the Preferred Shares and upon
exercise of the Warrants. Upon conversion or exercise in accordance with the
Certificate of Designations or the Warrants (as the case may be) the Conversion
Shares and the Warrant Shares, and upon issuance, the Registration Delay Payment
Shares, will be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock and entitled
to be traded on the Nasdaq National Market, The New York Stock Exchange, Inc.
("NYSE") or The American Stock Exchange, Inc. ("AMEX"). The issuance by the
Company of the Securities is exempt from registration under the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Certificate of
Designations and the Warrants and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
reservation for issuance and issuance of the Conversion Shares and the Warrant
Shares) will not (i) result in a violation of the Certificate of Incorporation,
any Certificate of Designations, Preferences and Rights of any outstanding
series of Preferred Stock of the Company or the By-laws; (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party; or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the principal market or exchange on which the Common Stock is
traded or listed) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected. Except as disclosed in Schedule 3(e), neither the Company nor its
Subsidiaries is in violation of any term of or in default under (x) its
Certificate of Incorporation, any Certificate of
-7-
8
Designation, Preferences and Rights of any outstanding series of Preferred Stock
or By-laws or their organizational charter or by-laws, respectively, or (y) any
contract, agreement, mortgage, 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, and shall not be
conducted, in violation of any law, ordinance or regulation of any governmental
entity, except for any violations which individually or in the aggregate will
not have a Material Adverse Effect. Except as specifically contemplated by this
Agreement and as required under the 1933 Act, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents or the
Certificate of Designations in accordance with the terms hereof or thereof.
Except as disclosed in Schedule 3(e), all consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date
hereof. The Company complies with and is not in violation of the listing
requirements of the Nasdaq National Market as in effect on the date hereof and
the Closing Date and is not aware of any facts which would reasonably lead to
delisting or suspension of the Common Stock by the Nasdaq National Market in the
foreseeable future.
f. SEC Documents; Financial Statements. Since December 31, 1996,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). The Company has delivered to or made available for review by the
Buyers or their respective representatives true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
-8-
9
No other written information provided by or on behalf of the Company to the
Buyers which is not included in the SEC Documents, including, without
limitation, the information referred to in Section 2(d) 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, agents
or employees have provided the Buyers with any material, nonpublic information.
g. Absence of Certain Changes. Except as disclosed in Schedule
3(g) or the SEC Documents filed on ▇▇▇▇▇ at least five business days prior to
the date hereof, since December 31, 1997, there has been no adverse change and
no adverse development in the business, properties, operations, financial
condition, prospects, liabilities or results of operations of the Company or its
Subsidiaries which has had or, to the knowledge of the Company or its
Subsidiaries, may have a Material Adverse Effect. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Company or any of its Subsidiaries
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
except as set forth in Schedule 3(h).
i. Acknowledgment Regarding Buyers' Purchase of Preferred Shares.
The Company acknowledges and agrees that each of the Buyers is acting solely in
the capacity of arm's length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges that
each Buyer is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to the Transaction Documents and the
Certificate of Designations and the transactions contemplated thereby and any
advice given by any of the Buyers or any of their respective representatives or
agents in connection with the Transaction Documents and the Certificate of
Designations and the transactions contemplated thereby is merely incidental to
such Buyer's purchase of the Securities. The Company further represents to each
Buyer 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
-9-
10
laws on a registration statement filed with the SEC relating to an issuance and
sale by the Company of its Common Stock and which has not been publicly
disclosed.
k. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company (other than the offer and sale by
the Company of its 5 1/2% Cumulative Convertible Series B Preferred Stock) for
purposes of the 1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of The Nasdaq
Stock Market, Inc., nor will the Company or any of its Subsidiaries take any
action or steps that would require registration of the Securities under the 1933
Act or cause the offering of the Securities to be integrated with other
offerings.
m. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any material union labor dispute nor, to the
knowledge of the Company or any of its Subsidiaries, is any such dispute
threatened. Neither the Company nor any of its Subsidiaries is a party to a
collective bargaining agreement. The Company and its Subsidiaries believe that
relations between the Company and its Subsidiaries and their respective
employees are good. No executive officer (as defined in Rule 501(f) of the ▇▇▇▇
▇▇▇) has notified the Company that such officer intends to leave the Company or
otherwise terminate such officer's employment with the Company.
n. Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service ▇▇▇▇ 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 ▇▇▇▇ 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 years from the date of this Agreement, where the result of
such expiration or termination would have, individually or in the aggregate, a
Material Adverse Effect. The Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of trademarks,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service ▇▇▇▇ registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secret or technical information by others which infringement could have a
Material Adverse
-10-
11
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 ▇▇▇▇ registrations, trade secrets or other
infringement. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties.
o. Environmental Laws. The Company and its Subsidiaries (i) are
in compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, where such noncompliance or
failure to receive permits, licenses or approvals referred to in clauses (i),
(ii) and (iii) above could have, individually or in the aggregate, a Material
Adverse Effect.
p. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(p) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company or any of
its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
q. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries, taken as a whole.
r. Regulatory Permits. The Company and its Subsidiaries possess
all material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company
-11-
12
nor any such Subsidiary has received any notice of proceedings relating to the
revocation or a modification of any such certificate, authorization or permit.
s. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
t. Foreign Corrupt Practices Act. To the knowledge of the
Company, neither the Company, nor any director, officer, agent, employee or
other person acting on behalf of the Company or any Subsidiary has, in the
course of acting for, or on behalf of, the Company, used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
u. Tax Status. Except as set forth on Schedule 3(u), the Company
and each of its Subsidiaries has made or filed all federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its Subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
v. Certain Transactions. Except as set forth on Schedule 3(v) and
in the SEC Documents filed on ▇▇▇▇▇ at least five 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
-12-
13
or from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
w. Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Preferred Shares
will increase in certain circumstances. The Company further acknowledges that
its obligation to issue Conversion Shares upon conversion of the Preferred
Shares in accordance with this Agreement and the Certificate of Designations is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.
x. No Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
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. Form D. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to
each Buyer promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Buyers at the Closing pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date. The Company shall make all filings and reports relating to the
offer and sale of the Securities required under applicable securities or "Blue
Sky" laws of the states of the United States following the Closing Date.
c. Reporting Status. Until the earlier of (i) the date which is
one year after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares and the
Warrant Shares without restriction pursuant to Rule 144(k) promulgated under the
1933 Act (or successor thereto); or (ii) the date on which (A) the Investors
shall have sold all the Conversion Shares and the Warrant Shares, and (B) none
of the Preferred Shares or Warrants is outstanding (the "REGISTRATION PERIOD");
the Company (I) shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and (II) except as a result of a Major Transaction (as
defined in the Certificate of Designations) (provided that the Company has
complied with Sections 2(d)(iv) and 3(g) of the Certificate of Designations and
Section 9(f) of the Warrants), shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would otherwise permit such termination.
-13-
14
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Preferred Shares and the Warrants for general corporate purposes.
e. Financial Information. The Company agrees to send the
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Registration Period: (i) within two business days after
the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements or amendments (other than on Form S-8) filed pursuant to
the 1933 Act; (ii) using the Company's reasonable best efforts to deliver on the
same day as the release thereof, facsimile copies of all press releases issued
by the Company or any of its Subsidiaries, and (iii) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 200% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares and 150% of the number of
shares of Common Stock needed to provide for the issuance of the Warrant Shares
(without regard to any limitations on conversions or exercises).
g. No Discounted Convertible Offerings. Notwithstanding any other
provision of the Transaction Documents or the Certificate of Designations, until
the earlier of (x) the date which is one year after the Closing Date, (y) the
date on which in excess of 1,800 Preferred Shares have been converted and (z)
the date which is the last day during a period of 60 consecutive trading days
beginning after the Registration Statement (as defined in the Registration
Rights Agreement) has been declared effective by the SEC provided that the
Closing Bid Price (as defined in the Certificate of Designations) on each
trading day during such 60 trading day period is at least 120% of the Fixed
Conversion Price (as defined in the Certificate of Designations) on the Closing
Date (subject to adjustment for stock splits, stock dividends, combinations and
other similar events), the Company will not without the consent of Buyers
holding at least two-thirds (2/3) of the Preferred Shares then outstanding offer
or sell any securities convertible into or exercisable or exchangeable for
Common Stock where the conversion, exercise and/or exchange price of such
security is a function of or varies with (i) the market price of the underlying
security at or during some period of time prior to such conversion or (ii) the
price at which any holder of the underlying security sells that security on or
about the date of such conversion, exercise or exchange.
h. Listing. The Company shall promptly secure the listing of all
of the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system (including
The Nasdaq SmallCap Market and the Nasdaq National Market), if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance)
and shall maintain, so long as any other shares of Common
-14-
15
Stock shall be so listed, such listing of all Registrable Securities from time
to time issuable under the terms of the Transaction Documents and the
Certificate of Designations. The Company shall maintain the Common Stock's
authorization for listing on the Nasdaq National Market, AMEX or NYSE. Neither
the Company nor any of its Subsidiaries shall take any action which may result
in the delisting or suspension of the Common Stock on the Nasdaq National
Market, AMEX or NYSE (other than to switch listings from the Nasdaq National
Market to AMEX or NYSE or from AMEX to the Nasdaq National Market or NYSE). The
Company shall promptly provide to each Buyer copies of any notices it receives
from the Nasdaq National Market, AMEX or NYSE regarding the continued
eligibility of the Common Stock for listing on such automated quotation system
or securities exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(h).
i. Expenses. Subject to Section 9(l) below, following the
Closing, the Company shall reimburse the Buyers for the Buyers' expenses
(including attorneys' fees and expenses) in connection with negotiating and
preparing the Transaction Documents and consummating the transactions
contemplated thereby up to an aggregate of $40,000.
j. Transactions With Affiliates. So long as any Preferred Shares
are outstanding the Company shall not, and shall cause each of its Subsidiaries
not to, enter into, amend, modify or supplement, or permit any Subsidiary to
enter into, amend, modify or supplement, any agreement, transaction, commitment
or arrangement with any of its or any Subsidiary's officers, directors, person
who were officers or directors at any time during the previous two years,
stockholders who beneficially own 5% or more of the Common Stock, or affiliates
or with any individual related by blood, marriage or adoption to any such
individual or with any entity in which any such entity or individual owns a 5%
or more beneficial interest (each a "RELATED PARTY"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
agreement, transaction, commitment or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, or (c) any agreement, transaction,
commitment or arrangement which is approved by a majority of the disinterested
directors of the Company. For purposes hereof, any director who is also an
officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "AFFILIATE" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity. "CONTROL" or
"CONTROLS" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
k. Filing of Form 8-K. On or before the second business day
following the Closing Date, the Company shall file a Form 8-K with the SEC
describing the terms of the transaction contemplated by the Transaction
Documents and consummated at the Closing, in the form required by the 1934 Act.
-15-
16
l. Proxy Statement. Upon the earlier to occur of (i) any date
after the Closing Date on which the sum of (A) the number of Conversion Shares
and Warrant Shares issued and (B) the number of Conversion Shares and Warrant
Shares issuable as of such date pursuant to the conversion of all outstanding
Preferred Shares and the exercise of all outstanding Warrants, respectively,
(without regard to any limitations on conversions or exercises), exceeds 15% of
the number of shares of Common Stock outstanding immediately prior to the
Closing and (ii) May 1, 1999 (the earlier of such dates being referred to herein
as the "PROXY STATEMENT TRIGGER DATE"), the Company shall provide each
stockholder entitled to vote at the next meeting of stockholders of the Company,
which meeting shall not be later than 60 days after the Proxy Statement Trigger
Date (the "STOCKHOLDER MEETING DEADLINE"), a proxy statement, which has been
previously reviewed by the Buyers and a counsel of their choice, soliciting each
such stockholder's affirmative vote at such stockholder meeting for approval of
the Company's issuance of all of the Securities as described in this Agreement,
and the Company shall use its reasonable best efforts to solicit its
stockholders' approval of such issuance of the Securities and cause the Board of
Directors of the Company to recommend to the stockholders that they approve such
proposal. If the Company fails to hold a meeting of its stockholders by the
Stockholder Meeting Deadline, then, as partial relief (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company
shall pay to each holder of Preferred Shares an amount in cash per Preferred
Share equal to the product of (i) $10,000; multiplied by (ii) .02; multiplied by
(iii) the quotient of (x) the number of days after the Stockholder Meeting
Deadline that a meeting of the Company's stockholders is not held, divided by
(y) 30. The Company shall make the payments referred to in the immediately
preceding sentence within five days of the earlier of (I) the holding of the
meeting of the Company's stockholders, the failure of which resulted in the
requirement to make such payments, and (II) the last day of each 30-day period
beginning on the Stockholder Meeting Deadline. In the event the Company fails to
make such payments in a timely manner, such payments shall bear interest at the
rate of 1.5% per month (pro rated for partial months) until paid in full.
m. Right of First Refusal. Subject to the exceptions described
below, the Company and its Subsidiaries shall not contract with any party for
any equity financing (including any debt financing with an equity component) or
issue any equity securities of the Company or any Subsidiary or securities
convertible or exchangeable into or for equity securities of the Company or any
Subsidiary (including debt securities with an equity component) in any form
("FUTURE OFFERINGS") during the period beginning on the Closing Date and ending
on and including the date which is 365 days after the date the Registration
Statement is declared effective by the SEC, unless it shall have first delivered
to each Buyer or a designee appointed by such Buyer written notice (the "FUTURE
OFFERING NOTICE") describing the proposed Future Offering, including the terms
and conditions thereof, and providing each Buyer an option to purchase up to its
Aggregate Percentage (as defined below), as of the date of delivery of the
Future Offering Notice, of an amount of the Future Offering (the "RIGHT OF FIRST
REFUSAL AMOUNT") equal to the greater of (x) 50% of the Future Offering and (y)
the Conversion Amount (as defined in the Certificate of Designations) of the
Preferred Stock outstanding on the date the Company delivers
-16-
17
such Future Offering Notice (the limitations referred to in this sentence are
collectively referred to as the "CAPITAL RAISING LIMITATION"). For purposes of
this Section 4(m), "AGGREGATE PERCENTAGE" at any time with respect to any Buyer
shall mean the percentage obtained by dividing (i) the aggregate number of
Preferred Shares purchased by such Buyer at the Closing by (ii) the aggregate
number of Preferred Shares purchased by all Buyers at the Closing. A Buyer can
exercise its option to participate in a Future Offering by delivering written
notice thereof to participate to the Company within ten (10) business days of
receipt of a Future Offering Notice, which notice shall state the quantity of
securities being offered in the Future Offering that such Buyer will purchase,
up to its Aggregate Percentage of the Right of First Refusal Amount, and that
number of securities it is willing to purchase in excess of its Aggregate
Percentage of the Right of First Refusal Amount. In the event that one or more
Buyers fail to elect to purchase up to each such Buyer's Aggregate Percentage of
the Right of First Refusal Amount then each Buyer which has indicated that it is
willing to purchase a number of securities in excess of its Aggregate Percentage
of the Right of First Refusal Amount shall be entitled to purchase its pro rata
portion (determined in the same manner as described in the preceding sentence)
of the securities in the Future Offering which one or more Buyers have not
elected to purchase. In the event the Buyers fail to elect to fully participate
in the Future Offering within the periods described in this Section 4(m), the
Company shall have 45 days thereafter to sell the securities of the Future
Offering that the Buyers did not elect to purchase, upon terms and conditions
(including the amount thereof), no more favorable to the purchasers thereof than
specified in the Future Offering Notice. In the event the Company has not sold
such securities of the Future Offering within such 45 day period, the Company
shall not thereafter issue or sell such securities without first offering such
securities to the Buyers in the manner provided in this Section 4(m). The
Capital Raising Limitation shall not apply to (i) a loan from a bank or
institutional lender which does not have any equity feature other than warrants
exercisable at an exercise price greater than 50% of the market price of the
Common Stock at the time of such loan and exercisable for a number of shares of
Common Stock which does not exceed the quotient of (I) 10% of the proceeds to
the Company from such loan, divided by (II) the market price of the Common Stock
at the time of such loan, (ii) any transaction involving the Company's issuances
of securities (A) as consideration in a merger or consolidation, (B) in
connection with any strategic partnership or joint venture (the primary purpose
of which is not to raise equity capital), or (C) as consideration for the
acquisition of a business, product or license or other assets by the Company,
(iii) the issuance of Common Stock in a firm commitment, underwritten public
offering, (iv) the issuance of securities upon exercise or conversion of the
Company's options, warrants or other convertible securities outstanding as of
the date hereof, (v) the grant of additional options or warrants, or the
issuance of additional securities, under any contract, plan or agreement which
has been approved by the board of directors of the Company pursuant to which the
Company's securities may be issued to any employee, officer, director,
consultant or other service providers or (vi) the issuance of securities
pursuant to an offering by the Company in reliance upon Rule 144A under the 1933
Act with proceeds to the Company of at least $75,000,000. The Buyers shall not
be required to participate or exercise their right of first refusal with respect
to a particular Future Offering in order to exercise their right of first
refusal with respect to later Future Offerings.
-17-
18
o. Corporate Existence. So long as a Buyer beneficially owns any
Preferred Shares or Warrants, the Company shall maintain its corporate existence
and shall not sell all or substantially all of the Company's assets, except in
the event of a merger or consolidation or sale of all or substantially all of
the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose common stock is listed for trading on the
Nasdaq National Market, NYSE or AMEX.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for the Conversion Shares
and the Warrant Shares in such amounts as specified from time to time by each
Buyer to the Company upon conversion of the Preferred Shares or exercise of the
Warrants, as the case may be (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS").
Prior to registration of the Conversion Shares and the Warrant Shares under the
1933 Act, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions and stop transfer instructions
permitted by the Irrevocable Transfer Agent Instructions or to give effect to
Section 2(f) (in the case of the Conversion Shares and the Warrant Shares, prior
to registration of the Conversion Shares and the Warrant Shares under the ▇▇▇▇
▇▇▇) will be given by the Company to its transfer agent and that the Securities
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Registration Rights
Agreement. Nothing in this Section 5 shall affect in any way each Buyer's
obligations and agreements set forth in Section 2(g) to comply with all
applicable prospectus delivery requirements, if any, upon resale of the
Securities. If a Buyer provides the Company with an opinion of counsel, in form
and substance generally acceptable to the Company, that registration of a resale
by such Buyer of any of such Securities is not required under the 1933 Act, the
Company shall permit the transfer, and, in the case of the Conversion Shares or
the Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer
and without any restrictive legends. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the Buyers 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 Buyers shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
-18-
19
The obligation of the Company hereunder to issue and sell the
Preferred Shares and the related Warrants to each Buyer 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 Buyer with prior written notice thereof:
(a) Each Buyer shall have executed each of this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(b) The Certificate of Designations shall have been filed with
the Secretary of State of the State of Delaware.
(c) All of the Buyers shall have delivered to the Company the
Purchase Price for the Preferred Shares and the related Warrants being
purchased by the Buyers at the Closing by wire transfer of immediately
available funds pursuant to the wire instructions provided by the
Company.
(d) The representations and warranties of each Buyer 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 Buyer shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or
complied with by such Buyer at or prior to the Closing Date.
(e) Each Buyer shall have executed the Amendment and Conversion
Agreement, dated as of the date hereof, and delivered the same to the
Company and shall have performed, satisfied and complied with the
covenants, agreements and conditions required by such Amendment and
Conversion Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Preferred
Shares and the related Warrants 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 Buyer's sole benefit and may be waived by
such Buyer at any time in its sole discretion:
(a) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
(b) The Certificate of Designations, shall have been filed with
the Secretary of State of the State of Delaware, and a copy thereof
certified by such Secretary of State shall have been delivered to such
Buyer.
-19-
20
(c) The Common Stock shall be authorized for quotation on the
Nasdaq National Market or listing on AMEX or NYSE, trading in the Common
Stock issuable upon conversion of the Preferred Shares to be traded on
the Nasdaq National Market, AMEX or NYSE shall not have been suspended
by the SEC, The Nasdaq Stock Market, Inc., AMEX or NYSE and all of the
Conversion Shares and Warrant Shares issuable upon conversion of the
Preferred Shares or exercise of the Warrants, as the case may be, to be
sold at the Closing shall be listed upon the Nasdaq National Market,
AMEX or NYSE.
(d) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents or Certificate of Designations to
be performed, satisfied or complied with by the Company at or prior to
the Closing Date. Such Buyer shall have received a certificate, executed
by the Chief Executive Officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer including, without limitation, an
update as of the Closing Date regarding the representation contained in
Section 3(c) above.
(e) Such Buyer shall have received the opinion of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
& Freidenrich, dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to such Buyer and in substantially the
form of Exhibit C attached hereto.
(f) The Company shall have executed and delivered to such Buyer
(i) the Stock Certificates (in such denominations as such Buyer shall
request) for the Preferred Shares, and (ii) the Warrants being purchased
by such Buyer at the Closing.
(g) 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 Buyer (the "RESOLUTIONS").
(h) As of the Closing Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Preferred Shares and exercise of the
Warrants, at least that number of shares of Common Stock required to be
reserved by the Company pursuant to Section 4(f).
(i) 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.
-20-
21
(j) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
Subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within
ten days of the Closing Date.
(k) The Company shall have delivered to such Buyer a secretary's
certificate certifying as to (A) the Resolutions, (B) certified copies
of its Certificate of Incorporation and (C) By-laws, each as in effect
at the Closing.
(l) The Company shall have delivered to such Buyer a certified
copy of its Certificate of Incorporation as certified by the Secretary
of State of the State of Delaware within ten days of the Closing Date.
(m) The Company shall have delivered to such Buyer a letter from
the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the Closing Date.
(n) The Company shall have executed the Amendment and Conversion
Agreement, dated as of the date hereof, and delivered the same to such
Buyer and shall have performed, satisfied and complied with the
covenants, agreements and conditions required by such Amendment and
Conversion Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date.
(o) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by the Transaction
Documents as such Buyer or its counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents and the Certificate of Designations, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each other holder of the
Securities and all of their stockholders, officers, directors, employees and
direct or indirect investors and any of the forgoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or the Certificate of Designations or any
other certificate, instrument or document contemplated hereby or thereby, (b)
any breach
-21-
22
of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or the Certificate of Designations or any other
certificate, instrument or document contemplated hereby or thereby, (c) any
cause of action, suit or claim brought or made against such Indemnitee (other
than a cause of action, suit or claim by another Buyer) and arising out of or
resulting from the execution, delivery, performance, breach or enforcement of
the Transaction Documents or the Certificate of Designations, (d) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, excluding
losses resulting solely from a decline in the market value of the Company's
securities, or (e) the status of such Buyer or holder of the Securities as an
investor in the Company. Notwithstanding the foregoing, Indemnified Liabilities
shall not include any liability of any Indemnitee arising solely out of such
Indemnitee's willful misconduct or fraudulent action(s). To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
Except as otherwise set forth herein, the mechanics and procedures with respect
to the rights and obligations under this Section 8 shall be the same as those
set forth in Sections 6(a) and (d) of the Registration Rights Agreement,
including, without limitation, those procedures with respect to the settlement
of claims and Company's right to assume the defense of claims.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. The corporate laws of the State of Delaware
shall govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws. Each party hereby irrevocably submits to
the non-exclusive jurisdiction of (i) the state and federal courts sitting in
the City of New York, borough of Manhattan and (ii) the state and federal courts
sitting in the State of California, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law.
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
-22-
23
the signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
c. Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer 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 holders of at least two-thirds (2/3) of the Preferred Shares and
the Conversion Shares held by holders or former holders of the Preferred Shares
(determined on an as converted to Common Stock basis at the time of such
determination) then outstanding, and no provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement is
sought. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the Preferred Shares then outstanding. No
consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents or
the Certificate of Designations unless the same consideration also is offered to
all of the parties to the Transaction Documents or holders of the Preferred
Shares, as the case may be.
-23-
24
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 generated and kept on
file by the sending party); or (iii) upon receipt, when delivered by a delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
General Magic, Inc.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
With a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to the Transfer Agent:
Boston EquiServe LP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers.
Each party shall provide five days' prior written notice to the other
party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers
-24-
25
of the Preferred Shares. The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the holders
of two-thirds (2/3) of the Preferred Shares then outstanding, including by
merger or consolidation, except pursuant to a Major Transaction with respect to
which the Company is in compliance with Section 4(o) of this Agreement and
Sections 2(d)(iv) and 3 of the Certificate of Designations. A Buyer 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 Buyer from
its obligations hereunder unless such obligations are assumed by such assignee
and the Company has consented to such assignment and assumption. Notwithstanding
anything to the contrary contained in the Transaction Documents, each Buyer
shall be entitled to pledge the Securities in connection with a bona fide margin
account.
h. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive the
Closing. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Buyer 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 Buyer, to make any
press release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
occurred with respect to a Buyer on or before three business days from the date
hereof due to the Company's or such Buyer's failure to satisfy the conditions
set forth in Sections 6 and 7 above (and the nonbreaching party's failure to
waive such unsatisfied condition(s)), the nonbreaching party shall have the
option to terminate this Agreement with respect to such breaching party at the
close of business on such date without liability of any party to any other
party; provided, however, that if this Agreement is terminated pursuant to this
Section 9(l), the Company shall remain obligated to
-25-
26
reimburse the Buyers for expenses up to the amount described in Section 4(i),
provided that no Buyer has failed to satisfy the conditions set forth in Section
7.
m. Placement Agent. Each Buyer, severally and not jointly,
acknowledges that it has engaged AFO Capital Advisors, LLC as placement agent in
connection with the purchase of the Preferred Shares and the related Warrants,
which placement agent may have formally or informally engaged other agents on
its behalf. Each Buyer, severally and not jointly, shall be responsible for the
payment of AFO Capital Advisors, LLC's placement agent's fees or brokers
commissions relating to or arising out of the transactions contemplated hereby.
Each Buyer, severally and not jointly, shall pay, and hold the Company harmless
against, any liability, loss or expense (including, without limitation,
attorneys' fees and out of pocket expenses) arising in connection with any such
claim by AFO Capital Advisors, LLC. The Company acknowledges that it has not
engaged any placement agent in connection with the sale of the Preferred Shares
and the related Warrants. The Company shall be responsible for the payment of
any placement agent's fees or brokers commissions (other than those of AFO
Capital Advisors, LLC in connection with the Buyers' engagement of AFO Capital
Advisors, LLC as placement agent in connection with the purchase of the
Preferred Shares and Warrants) relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold each Buyer harmless
against, any liability, loss or expense (including, without limitation,
attorneys' fees and out of pocket expenses) arising in connection with any such
claim.
n. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. Remedies. Each Buyer and each holder of Preferred Shares or
Conversion Shares shall have all rights and remedies set forth in the
Transaction Documents and the Certificate of Designations and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract relating to the subject matter hereof and all of the
rights which such holders have under any law. Any person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to the Certificate of
Designations or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
-26-
27
force and effect as if such payment had not been made or such enforcement or
setoff had not occurred.
* * * * * *
-27-
28
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
GENERAL MAGIC, INC. THEMIS PARTNERS L.P.
By: Promethean Investment Group L.L.C.
Its: General Partner
By: /s/
--------------------------------
Name:
Its: By: /s/
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
Its: President
HERACLES FUND
By: Promethean Investment Group L.L.C.
Its: Investment Advisor
By: /s/
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
Its: President
RGC INTERNATIONAL INVESTORS, LDC
By: ▇▇▇▇ ▇▇▇▇ Capital Management, L.P.
Its: Investment Advisor
By: RGC General Partner Corp.
Its: General Partner
By: /s/
----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Its: Managing Director
29
HALIFAX FUND, L.P.
By: The Palladin Group, L.P.
Its: Attorney-in-Fact
By: /s/
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
PALLADIN PARTNERS I, L.P.
By: Palladin Asset Management, L.L.C.
Its: General Partner
By: /s/
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
PALLADIN OVERSEAS FUND LIMITED
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By: /s/
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
THE GLENEAGLES FUND COMPANY
By: The Palladin Group L.P
Its: Attorney-in-Fact
By: /s/
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
30
PALLADIN SECURITIES, LLC
By: /s/
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Principal
COLONIAL PENN LIFE INSURANCE COMPANY
By: The Palladin Group L.P.
Its: Attorney-in-Fact
By: /s/
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
31
SCHEDULE OF BUYERS
INVESTOR NAME INVESTOR ADDRESS NUMBER INVESTOR'S
AND FACSIMILE NUMBER OF REPRESENTATIVES' ADDRESS
PREFERRED AND FACSIMILE NUMBER
SHARES
---------------------- --------------------------------- -------- -----------------------------------
Themis Partners L.P. Promethean Investment Group, L.L.C. 250 Promethean Investment Group, L.L.C.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Suite 1520
Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇. ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
Residence: New York E. ▇▇▇▇ ▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: 312-902-1061
Heracles Fund Bank of Bermuda (Cayman) Limited 550 Promethean Investment
▇.▇. ▇▇▇ ▇▇▇ Group, L.L.C.
3rd Floor British American ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇'▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Georgetown, Grand Cayman Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
Cayman Island, BWI E. ▇▇▇▇ ▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: ▇▇▇▇▇▇ Islands ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: 312-902-1061
RGC International c/o ▇▇▇▇ ▇▇▇▇ Capital 1,200 ▇▇▇▇ ▇▇▇▇ Capital
Investors, LDC Management, L.P. Management, L.P.
▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ 3 Bala Plaza East, Suite 200
Bala Cynwyd, Pennsylvania Bala Cynwyd, Pennsylvania
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇ Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: Pennsylvania
Palladin Partners I, c/o The Palladin Group L.P. 100 The Palladin Group L.P.
L.P. ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ As Investment Advisor
15th Floor ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ 15th Floor
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: New York
Halifax Fund, L.P. c/o Citco Fund Services (Cayman 700 The Palladin Group L.P.
Islands) Ltd. As Investment Advisor
Corporate Centre, ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
P.O. Box 31106 SMB 15th Floor
Grand Cayman, Cayman Islands ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: Cayman Islands
32
INVESTOR NAME INVESTOR ADDRESS NUMBER INVESTOR'S
AND FACSIMILE NUMBER OF REPRESENTATIVES' ADDRESS
PREFERRED AND FACSIMILE NUMBER
SHARES
---------------------- --------------------------------- -------- -----------------------------------
The Gleneagles Fund c/o Citco Fund Services (Cayman 50 The Palladin Group L.P.
Company Islands) Ltd. As Investment Advisor
Corporate Centre, ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
P.O. Box 31106 SMB 15th Floor
Grand Cayman, Cayman Islands ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: Cayman Islands
Palladin Overseas c/o Citco Fund Services (Cayman 50 The Palladin Group L.P.
Fund Limited Islands) Ltd. As Investment Advisor
Corporate Centre, ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
P.O. Box 31106 SMB 15th Floor
Grand Cayman, Cayman Islands ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: Cayman Islands
Colonial Penn Life Colonial Penn Life Insurance 50 The Palladin Group L.P.
Insurance Company Company As Investment Advisor
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Residence: Pennsylvania Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Palladin Securities, c/o The Palladin Group L.P. 50 The Palladin Group L.P.
LLC ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ As Investment Advisor
15th Floor ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ 15th Floor
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: New York
33
LIST OF SCHEDULES
SCHEDULE 3(a) Subsidiaries
SCHEDULE 3(c) Capitalization
SCHEDULE 3(e) Conflicts
SCHEDULE 3(g) Material Changes
SCHEDULE 3(h) Litigation
SCHEDULE 3(n) Intellectual Property
SCHEDULE 3(p) Liens
SCHEDULE 3(u) Tax Status
SCHEDULE 3(v) Certain Transactions
LIST OF EXHIBITS
EXHIBIT A Form of Certificate of Designations, Preferences and Rights of
the Preferred Shares
EXHIBIT B Form of Registration Rights Agreement
EXHIBIT C Form of Company Counsel Opinion
EXHIBIT D Form of Irrevocable Transfer Agent Instructions
EXHIBIT E Form of Warrant