CONVERTIBLE SECURITIES SUBSCRIPTION AGREEMENT
This Convertible Securities Subscription Agreement (the "Agreement")
dated as of February 13, 1997 has been executed by the undersigned (the
"Subscriber") in connection with (a) the sale of 6% Subordinated Convertible
Debentures due February 13, 2000 (the "Debentures") of Zycad Corporation, a
Delaware corporation (the "Company"), convertible into shares of Common Stock,
par value $0.10 per share, (the "Common Stock") of the Company, and (b) the
issuance by the Company of its warrants to purchase up to 500,000 shares of
Common Stock (the "Warrants"). The Company is offering an aggregate amount
of up to $5,000,000 of Debentures, together with the Warrants, at an
aggregate price of $5,000,000 (the "Offering"). The form of the Debentures,
including the terms on which the Debentures may be converted into Common
Stock, is attached hereto as Exhibit A. The form of the Warrants, including
the terms upon which the Warrants may be exercised, is attached hereto as
Exhibit B. The solicitation of this Agreement and, if accepted by the
Company, the offer and sale of the Debentures and the Warrants, are being
made in reliance upon the provisions of Regulation D ("Regulation D")
promulgated by the Securities and Exchange Commission ("SEC") under the
United States Securities Act of 1933, as amended (the "Securities Act") or
upon the provisions of Section 4(2) of the Securities Act. The Debentures,
the Warrants and the Common Stock issuable upon conversion or exercise
thereof are sometimes collectively referred to in this Agreement as the
"Securities." The Common Stock issuable upon conversion of the Debentures
is sometimes referred to as the "Underlying Stock", and the Common Stock
issuable upon the exercise of the Warrants is sometimes referred to as the
"Warrant Stock." The Subscriber wishes to subscribe for, and the Company
wishes to issue, the principal amount of Debentures and the number of
Warrants at the aggregate purchase price set forth in Section 14 and in
accordance with the other terms and conditions of this Agreement. In
consideration of the mutual promises, representations, warranties and
conditions set forth herein, and intending to be legally bounded hereby, the
Company and the Subscriber agree as follows:
1. PURCHASE AND SALE OF SECURITIES; CLOSING CONDITIONS
1.1 PURCHASE AND SALE OF SECURITIES.
(a) PURCHASE OF DEBENTURES AND WARRANTS. The Subscriber hereby
subscribes for the principal amount of Debentures and for the number of Warrants
and at the aggregate purchase price set forth in Section 14. The closing of the
purchase of such Debentures and Warrants (the "Closing Dates") shall take place
in two (2) separate closings, the first of which is hereinafter referred to as
the "First Closing", and the second of which is hereinafter referred to as the
"Second Closing". Subject to the satisfaction (or waiver) of the conditions
thereto set forth in Section 1.2 and 1.3 below: (i) at the First Closing, the
Company shall issue and sell to the Subscriber, and the Subscriber shall
purchase from the Company, seven-tenths of the aggregate principal amount of
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Debentures and all of the Warrants which the Subscriber is purchasing hereunder
for consideration equal to seven-tenths of the Purchase Price, and (ii) at the
Second Closing, the Company shall issue and sell to the Subscriber and the
Subscriber shall purchase from the Company the remainder of the aggregate
principal amount of Debentures which the Subscriber is purchasing hereunder for
a price equal to the remainder of the Purchase Price.
(b) FORM OF PAYMENT. On each Closing Date (as defined below), (i)
the Subscriber shall pay the portion of the Purchase Price for the Securities to
be issued and sold at the applicable Closing by wire transfer to the Company, in
accordance with the Company's written instructions, against delivery of duly
executed Debentures and Warrants which the Subscriber is then purchasing and
(ii) the Company shall deliver to Subscriber such Debentures and Warrants
against delivery of such Purchase Price.
(c) CLOSING DATES. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 1.2 and 1.3 below, the date and time of
the issuance and sale of the Debentures and Warrants pursuant to this Agreement
( the "Closing Dates") shall be (i) in the case of the First Closing, 12:00 noon
Eastern Standard Time on February 13, 1997 ("First Closing Date"), and (ii) in
the case of the Second Closing, 12:00 noon Eastern Standard Time, three business
days following notification of satisfaction (or waiver) of the condition to such
Closing set forth in Section 1.3(b)(viii) below ("Second Closing Date")
(subject, in each case, to a two (2) business day grace period at either party's
option), or, in each case, at such mutually agreed upon time. Provided however,
if pursuant to Section 6(e) of the Registration Rights Agreement, the Subscriber
has the right (whether or not exercised) to have the Debentures issued at the
First Closing redeemed by the Company, the Subscriber shall no longer be
obligated to, but may at its option exercised in its sole discretion, purchase
any part or all of the remainder of the aggregate principal amount of Debentures
otherwise issuable at the Second Closing. ____________
1.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE AND
SELL THE DEBENTURES AND WARRANTS. The obligation hereunder of the Company to
issue and/or sell the Debentures and Warrants to the Subscriber at each Closing
is subject to the satisfaction, at or before such Closing, of each of the
conditions set forth below. These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion.
(a) ACCURACY OF THE SUBSCRIBER'S REPRESENTATION AND WARRANTIES. The
representations and warranties of the Subscriber shall be true and
correct as of the date when made and as of the applicable Closing Date
as though made at each such time.
(b) PERFORMANCE BY THE SUBSCRIBER. The Subscriber shall have
performed, satisfied and complied in all respects with all covenants,
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agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the
applicable Closing.
(c) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits or adversely effects any of the
transactions contemplated by this Agreement, and no proceeding shall
have been commenced which may have the effect of prohibiting or
adversely affecting any of the transactions contemplated by this
Agreement.
(d) PAYMENT OF PURCHASE PRICE. The Subscriber shall have delivered
to the Company that portion of the Purchase Price payable by the
Subscriber at the applicable Closing.
1.3 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE SUBSCRIBER TO ACQUIRE
THE DEBENTURES AND WARRANTS. The obligation of Subscriber hereunder to acquire
and pay for the Debentures and Warrants at each of the First Closing and the
Second Closing, as applicable, is subject to the satisfaction, at or before the
Closing Date in respect of such Closing, of each of the following conditions.
Each of these conditions is for Subscriber's sole benefit and may be waived by
Subscriber at any time in its sole discretion.
(a) As to the First Closing:
(i) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company shall be true and
correct as of the date when made and as of the First Closing Date as
though made at each such time.
(ii) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all respects with covenants,
agreements and conditions required by this Agreement and by all other
agreements related to this agreement to be performed, satisfied or
complied with by the Company at or prior to the First Closing.
(iii) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits or adversely effects any of the
transactions contemplated by this Agreement, and no proceeding shall
have been commenced which may have the effect of prohibiting or
adversely affecting any of the transactions contemplated by this
Agreement.
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(iv) ADVERSE CHANGES. Since December 31, 1995, no event which
had or is likely to have a material adverse effect on the Company has
occurred, except as described in the Company's form 10-Q's for the
quarterly periods ended March 31, June 30, September 30, 1996, as well
as the Company's press release of February 5, 1997, a copy of which
has been furnished to the Subscriber.
(v) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK.
As of the First Closing Date, the trading of the Common Stock shall
not have been suspended by the SEC, the Nasdaq Stock Market (the
"Exchange") or the National Association of Securities Dealers, Inc.
(the "NASD") and the Common Stock shall not have been delisted from
the Exchange.
(vi) THE LEGAL OPINION. The Company shall have delivered to the
Subscriber the opinion of Wilson, Sonsini, Xxxxxxxx & Xxxxxx,
independent counsel to the Company, in form and substance reasonably
satisfactory to the Subscriber.
(vii) OFFICER'S CERTIFICATE. The Company shall have
delivered to the Subscriber a certificate in substantially the form
and substance of the Officer's Certificate Exhibit which is annexed
hereto and hereby made a part hereof or in such other form and
substance as shall be reasonably satisfactory to the Subscriber,
executed in either case by an executive officer of the Company as of
the First Closing Date, to the effect that all the conditions to the
First Closing shall have been satisfied.
(viii) REGISTRATION RIGHTS AGREEMENT. The Company and the
Subscriber shall have entered into the Registration Rights Agreement
contemplated by Section 4.1.
(ix) IRREVOCABLE LETTER OF INSTRUCTION. The Company shall have
issued to the transfer agent for its Common Stock (and to any
substitute or replacement transfer agent for it's Common Stock
coterminous with the Company's appointment of any such substitute or
replacement transfer agent) instructions in substantially the form and
substance of the Transfer Agent Irrevocable Instruction Exhibit which
is annexed hereto and hereby made a part hereof.
(b) As to the Second Closing:
(i) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Second Closing Date as
though made at each such time.
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(ii) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement and by all other
agreements related to this Agreement to be performed, satisfied or
complied with by the Company at or prior to the Second Closing.
(iii) ADVERSE CHANGES. Since December 31, 1995, no event
which had or is likely to have a material adverse effect on the
Company has occurred, except as described in the Company's form 10-Q's
for the quarterly periods ended March 31, June 30, September 30, 1996,
as well as the Company's press release of February 5, 1997, a copy of
which has been furnished to the Subscriber.
(iv) NO SUSPENSION OF TRADING OR DELISTING OF COMMON STOCK. As
of the Second Closing Date, the trading of the Common Stock shall not
have been suspended by the SEC, the Exchange or the NASD, and the
Common Stock shall not have been delisted from the Exchange.
(v) THE LEGAL OPINION. The Company shall have delivered to the
Subscriber the opinion of Wilson, Sonsini, Xxxxxxxx & Xxxxxx,
independent counsel to the Company, dated as of the Second Closing
Date, in form and substance reasonably satisfactory to the Subscriber.
(vi) OFFICER'S CERTIFICATE. The Company shall have delivered to
the Subscriber a certificate in substantially the form and substance
of the Officer's Certificate Exhibit which is annexed hereto and
hereby made a part hereof or in such other form and substance as shall
be reasonably satisfactory to the Subscriber, executed in either case
by an executive officer of the Company as of the Second Closing Date,
to the effect that all the conditions to the Second Closing shall have
been satisfied.
(vii) REGISTRATION STATEMENT. The registration statement
filed by the Company pursuant to Section 2 of the Registration Rights
Agreement covering the resale of the Registrable Securities (as
defined in the Registration Rights Agreement) underlying (i) the
Debentures issued at the First Closing and to be issued at the Second
Closing and (ii) the Warrants issued at the First Closing (the
"Registration Statement") shall be effective, and no stop order shall
have been issued in respect thereof and the registration statement
and use of the related prospectus have not been suspended and there is
no reason or basis for such suspension in either case pursuant to
Section 8 of the Registration Rights Agreement.
(viii) FORM OF DEBENTURE. The form of Debenture to be
executed and delivered on the Second Closing Date pursuant to this
Agreement
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shall be in the same form and substance as the Debentures
issued at the First Closing, but dated as at the Second Closing Date,
completed to reflect the appropriate principal amounts thereof, and
otherwise amended only to reflect adjustments to the Applicable
Percentages (as defined in the Debentures) pursuant to the
Registration Rights Agreement prior to the Second Closing Date, as
though such Debentures had been issued on the First Closing Date.
2. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER
The Subscriber represents and warrants to the Company that:
2.1 NO GOVERNMENT RECOMMENDATION OR APPROVAL. The Subscriber understands
that no United States federal or state agency or similar agency of any other
country, has passed upon or made any recommendation or endorsement of the
Company or the offering of the Securities.
2.2 INTENT. The Subscriber is purchasing the Securities for its own
account and not with a view towards distribution and the Subscriber has no
present arrangement (whether or not legally binding) at any time to sell the
Securities to or through any person or entity; provided, however, that by making
the representations herein, the Subscriber does not agree to hold the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with federal and state securities laws
applicable to such disposition. The Subscriber understands that the Securities
must be held indefinitely unless such Securities are subsequently registered
under the Securities Act of 1933 or an exemption from registration is available.
The Subscriber has been advised or is aware of the provisions of Rule 144
promulgated under the Act.
2.3 SOPHISTICATED INVESTOR. The Subscriber is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D promulgated under the
Securities Act ("Regulation D")) and an accredited investor (as defined in Rule
501 of Regulation D), and Subscriber has such experience in business and
financial matters that it is capable of evaluating the merits and risks of an
investment in Securities. The Subscriber acknowledges that the Securities are
speculative and involve a high degree of risk.
2.4 INDEPENDENT INVESTIGATION. The Subscriber, in making its decision to
purchase the Securities subscribed for hereunder, has relied upon an independent
investigation made by it and/or its representatives and has not relied /^/ on
any oral or written representations or assurances from the Company or any
representative or agent of the Company, other than as set forth in this
Agreement, in the public filings of the Company and in the documents described
below. Prior to the date hereof, the Subscriber has been furnished with and has
reviewed the Company's latest proxy statement and Annual Report on Form 10-K
sent to the Company's shareholders and all documents filed by the Company with
the Securities and Exchange Commission (the "Commission")
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since December 31, 1995, pursuant to sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
(excluding preliminary proxy statement filings) (such documents are
collectively referred to in this Agreement as the "Exchange Act Reports").
The Subscriber has had a reasonable opportunity to ask questions of and
receive answers from the Company concerning the Company and the Offering and
has received satisfactory answers to all inquiries it has made with respect
to the Company and the Securities. The Subscriber acknowledges the price
and terms of the Securities offered hereby has been determined by
negotiation based, in part on the market price for the Common Stock, and
does not necessarily bear any relationship to the assets, book value or
potential performance of the Company or any other recognized criteria of value.
2.5 AUTHORITY. This Agreement has been duly authorized and validly
executed, and delivered by the Subscriber and is a valid and binding agreement
enforceable in accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement of creditors'
rights generally.
2.6 NO LEGAL ADVICE FROM COMPANY. The Subscriber acknowledges that it has
had the opportunity to review this Agreement and the transactions contemplated
by this Agreement with his or its own legal counsel and tax advisors. Except
for any statements or representations of the Company made in this Agreement and
in the Exchange Act Reports, the Subscriber is relying solely on such counsel
and advisors and not on any statements or representations of the Company or any
of its representative or agents for legal, tax or investment advice with respect
to this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
2.7 NO BROKERS. The Subscriber has taken no action which would give rise
to any claim by any person for brokerage commission, finder's fees or similar
payments by the Company relating to this Agreement or the transactions
contemplated hereby, except for dealings with Promethean Investment Group,
L.L.C., whose fees will be paid for by the Subscriber.
2.8 NOT AN AFFILIATE. The Subscriber is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
2.9 RELIANCE ON REPRESENTATIONS AND WARRANTIES. The Subscriber
understands that the Securities are being offered and sold to it in reliance on
specific provisions of United States federal and state securities laws and that
the Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Subscriber set
forth in this Agreement in order to determine the applicability of such
provisions.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Subscriber that:
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3.1 COMPANY STATUS. The Company has registered its Common Stock pursuant
to Section 12(b) or 12(g) of the Exchange Act of 1934, is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing of its common stock, and
such common stock is currently listed on the Exchange.
3.2 CURRENT PUBLIC INFORMATION. The Exchange Act Reports are the only
filings made by the Company since December 31, 1995, pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act.
3.3 NO DIRECTED SELLING EFFORTS OR GENERAL SOLICITATION IN REGARD TO this
TRANSACTION. Neither the Company nor any of its affiliates nor any distributor
or any person acting on its or their behalf has conducted any "directed selling
efforts" with respect to the Debentures or the Warrants nor has the Company
conducted any general solicitation (as that term is used in Regulation D) with
respect to any of the Securities, nor have they made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration of the Securities under the Act.
3.4 VALID ISSUANCE OF DEBENTURES AND CAPITAL STOCK. The Company has an
authorized capitalization consisting of 40,000,000 shares of Common Stock, par
value $0.10 and 2,000,000 shares of Preferred Stock, par value $0.10, warrant
outstanding for 194,500 shares of Common Stock, and stock options granted to
employees as described in the Exchange Act Reports. The Company has issued and
outstanding 25,223,412 shares of Common Stock. None of such Preferred Stock
has been issued or is outstanding. All of the issued shares of Common Stock
of the Company have been duly and validly authorized and issued and are
fully paid and non-assessable; upon issuance of the Securities, the
Securities will be duly and validly issued, fully paid and non-assessable;
the shares of Common Stock issuable upon conversion of the Debentures and
exercise of the Warrants, when issued and delivered in accordance with the
terms of the Debentures and the Warrants respectively, will be duly and
validly issued, fully paid and non-assessable; and the holders of
outstanding Capital Stock of the Company are not and shall not be entitled
to preemptive or other rights afforded by the Company to subscribe for the
capital stock or other securities of the Company as a result of the sale of
the Securities or the issuance of Common Stock upon the conversion or
exercise thereof.
3.5 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries, except for those listed on the Subsidiary Exhibit annexed hereto
and hereby made a part hereof. The Company and each such subsidiary, if any, is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
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failure so to qualify would not have a Material Adverse Effect. "Material
Adverse Effect" means any effect on the business, operations, properties,
prospects, or financial condition of the entity with respect to which such term
is used and which is material and adverse to such entity or to other entities
controlling or controlled by such entity, and/or any condition or situation
which would prohibit or otherwise interfere with the ability of the entity with
respect to which said term is used to enter into and perform its obligations
under this Agreement.
3.6 AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue the Securities in accordance with the terms hereof and thereof, (ii) the
execution, issuance and delivery of this Agreement, the Debentures and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the issuance of
Common Stock upon the conversion or exercise thereof, have been duly authorized
by all necessary corporate action, and no further consent or authorization of
the Company or its Board of Directors or stockholders is required, (iii) this
Agreement has been duly executed and delivered by the Company, and (iv) this
Agreement and the Debentures and Warrants constitute, and upon execution,
issuance and delivery thereof the Debentures and Warrants shall be, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
3.7 CORPORATE DOCUMENTS. The Company has furnished or made available to
the Subscriber true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof (the "Certificate"), and the
Company's By-Laws, as in effect on the date hereof (the "By-Laws").
3.8 NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Debentures and the Warrants by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including without limitation the issuance of Common Stock upon the conversion or
exercise thereof, do not and will not (i) result in a violation of the Company's
Certificate of Incorporation or By-Laws or (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 result in a
violation of any federal, state, local or foreign law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations)
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 for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect); provided that, for purposes of such representation as to
federal, state, local or foreign law, rule or
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regulation, no representation is made herein with respect to any of the same
applicable solely to the Subscriber and not to the Company. The business of
the Company is not being conducted in violation of any law, ordinance or
regulations of any governmental entity, except for possible violations which
either singly or in the aggregate do not and will not have a Material
Adverse Effect. The Company is not required under federal, state or local
law, rule or regulation in the United States to obtain any consent,
authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement or issue and sell the Securities
in accordance with the terms hereof and thereof (other than any SEC, NASD or
state securities filings which may be required to be made by the Company
subsequent to either the First Closing or the Second Closing, and any
registration statement which may be filed pursuant hereto); provided that,
for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Subscriber herein.
3.9 EXCHANGE ACT REPORTS. The Company has delivered or made available to
the Subscriber true and complete copies of the Exchange Act Reports (including,
without limitation, proxy information and solicitation materials). The Company
has not provided to the Subscriber any information which, according to
applicable law, rule or regulation, should have been disclosed publicly prior to
the date hereof by the Company but which has not been so disclosed. As of their
respective dates, the Exchange Act Reports complied in all material respects
with the requirements of the Exchange Act and rules and regulations of the SEC
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such Exchange Act Reports, and none of the Exchange
Act Reports 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. The financial statements of the Company included in the
Exchange Act Reports comply as to form 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. Such financial
statements have been prepared in accordance with 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 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 operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
3.10 NO MATERIAL ADVERSE CHANGE. Since December 31, 1995, the date through
which the most recent annual report of the Company on Form 10-K which has been
prepared and filed with the SEC, a copy of which is included in the Exchange Act
Reports, no Material Adverse Effect has occurred or exists with respect to the
Company or its subsidiaries, except as described in the Company's form 10-Q's
for the quarterly
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periods ended March 31, June 30, September 30, 1996 as well as the Company's
press release of February 5, 1997, a copy of which has been furnished to the
Subscriber.
3.11 NO UNDISCLOSED LIABILITIES. The Company and its subsidiaries have no
liabilities or obligations which are material, individually or in the aggregate,
and are not disclosed in the Exchange Act Reports, other than those incurred in
the ordinary course of the Company's or its subsidiaries' respective businesses
since December 31, 1995, and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company and its subsidiaries
taken as a whole.
3.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or circumstance has
occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed.
3.13 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 the
Securities under the Act.
3.14 NO BROKERS. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by the Subscriber relating to this Agreement for the transactions
contemplated hereby, except for dealings with Promethean Investment Group,
L.L.C., whose fees will be paid for by the Subscriber.
4. COVENANTS OF THE COMPANY
4.1 REGISTRATION RIGHTS. The Company agrees that, at the First Closing,
it will enter into a Registration Rights Agreement with the Subscriber, in the
form and substance of the Registration Rights Agreement Exhibit which is annexed
hereto and hereby made a part hereof.
4.2 RESERVATION OF COMMON STOCK. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to satisfy any obligation to issue shares of its Common
Stock upon conversion of the Debentures; and exercise of the Warrants; provided,
however, that the number of shares so reserved shall, except as hereinafter and
in the Debentures provided, shall be 1,750,000 shares, subject to reduction and
increase as hereinafter provided. The number of shares so reserved may be
reduced by the number of shares actually delivered pursuant to conversion of
Debentures or exercise of the Warrants (provided that in no event shall the
number of shares so reserved be less than the maximum number required to satisfy
the remaining conversion rights on the unconverted Debentures and the remaining
exercise
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rights under unexercised Warrants) and the number of shares so reserved
shall be increased to reflect stock splits and stock dividends and
distributions. In the event the number of shares so reserved shall be
insufficient for issuance upon the conversion of the Debentures and exercise
of the Warrants, or if the Holders of the Debentures would at any time upon
conversion thereof be entitled to the issuance of shares of Common Stock in
excess of the limitation in Paragraph 5(d) of the Debentures, then in either
case the Company shall use its best efforts and all due diligence to obtain the
approval by its shareholders of this Subscription Agreement and all transactions
contemplated hereunder, including the authorization of such additional shares as
may be required to issue such shares in excess of the number so reserved or in
excess of such limitation, as the case may be.
4.3 LISTING OF UNDERLYING SHARES. The Company hereby agrees, promptly
following the First Closing of the transactions contemplated by this Agreement,
to take such action to cause the Underlying Stock and the Warrant Stock to be
listed on the Exchange as promptly as possible but no later than 90 days
following the First Closing Date. The Company further agrees, if the Company
applies to have the Common Stock traded on any principal stock exchange or
market, it will include in such application the Underlying Stock and the Warrant
Stock and will take such other action as is necessary or desirable to cause the
Underlying Stock and the Warrant Stock to be listed on such other exchange or
market as promptly as possible.
4.4 EXCHANGE ACT REGISTRATION. The Company will cause its Common Stock to
continue to be registered under Section 12(g) or 12(b) of the Exchange Act, will
comply in all respects with its reporting and filing obligations under said Act,
and will not take any action or file any document (whether or not permitted by
said Act or the rules thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under said Act.
The Company will take all action under its control to continue the listing and
trading of its Common Stock on the Exchange and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the NASD and the Exchange.
4.5 LEGENDS. The Underlying Stock and the Warrant Stock and certificates
evidencing the same shall, upon the effectiveness of the Registration Statement
be free of legends (except as provided in Section 5.1 below), "stop transfers,"
so-called, "stock transfer restrictions," so-called, or other restrictions.
4.6 CORPORATE EXISTENCE. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
5. LEGENDS
5.1 LEGENDS. The Company will issue one or more Debentures in the name of
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the Subscriber and in such denominations (but no less than $50,000 each) to be
specified by the Subscriber prior to (or from time to time subsequent to) the
Closings. The Debentures, the Warrants, certificates evidencing any shares of
Common Stock issued upon conversion or exercise thereof prior to the
effectiveness of the Registration Statement and, except as hereinafter provided
in this Section 5.1, certificates evidencing shares of Common Stock issued upon
conversion or exercise of the Debentures or Warrants, as the case may be, after
effectiveness of the Registration Statement, will bear the following legend (the
"Legend"):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
Prior to the First Closing, the Company will issue to the transfer
agent for its Common Stock (and to any substitute or replacement transfer agent
for its Common Stock coterminous with the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
and substance of the Transfer Agent Irrevocable Instruction Exhibit which is
annexed hereto and hereby made a part hereof. Such instructions shall be
irrevocable by the Company from and after the First Closing or from and after
the issuance thereof to any such substitute or replacement transfer agent, as
the case may be, except as otherwise expressly provided in the Registration
Rights Agreement. It is the intent and purpose of such instructions, as
provided therein, to require the transfer agent for the Common Stock from time
to time to issue certificates evidencing Underlying Stock or Warrant Stock free
of the Legend during the following periods and under the following circumstances
and without consultation by the transfer agent with Company or its counsel and
without the need for any further advice or instruction to the transfer agent by
or from the Company or its counsel:
(a) At any time from and after the effectiveness of the
Registration Statement except during a Suspension Period (as defined in the
Registration Rights Agreement):
(i) upon any surrender of one or more Debentures or Warrants
for conversion or exercise into Underlying Stock or Warrant Stock, as
the case may be, to the extent such surrender is accompanied by a
Conversion or Exercise Notice requesting the issuance of certificates
evidencing such Stock free of the Legend and either containing or also
accompanied by representations to the effect that the Holder of the
surrendered Debentures or Warrants intends to effect one or more sales
of such Underlying or Warrant Stock pursuant to and in accordance with
the
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Registration Statement, including the prospectus delivery
requirements applicable thereto; and
(ii) upon any surrender of one or more certificates
evidencing Underlying Stock or Warrant Stock and which bear the
Legend, to the extent accompanied by a notice requesting the issuance
of new certificates free of the Legend to replace those surrendered
and containing or also accompanied by representations by the Holder of
the surrendered Stock to the effect of those described in Section
5.1(a)(i) above; and
(b) At any time from and after the First Closing Date, upon any
surrender of one or more certificates evidencing Underlying Stock or
Warrant Stock and which bear the Legend, to the extent accompanied by a
notice requesting the issuance of new certificates free of the Legend to
replace those surrendered and containing or also accompanied by
representations that (i) the Holder thereof is permitted to dispose thereof
pursuant to Rule 144(k) under the Act or (ii) the Holder intends to effect
the sale or other disposition of such Stock, whether or not pursuant to the
Registration Statement, to a purchaser or purchasers who will not be
subject to the registration requirements of the Act, or (iii) such Holder
is not then subject to such requirements.
In addition, and if applicable, the Company shall reissue the Debentures
and Warrants without the Legend set forth above at such time as (i) the Holder
thereof is permitted to dispose thereof pursuant to Rule 144(k) under the Act or
(ii) the Holder intends to effect a sale thereof to a purchaser or purchasers
who will not be subject to the registration requirements of the Act, or (iii)
the Holder is not then subject to such requirements.
5.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No Legend has been or
shall be placed on the share certificates representing the Securities and no
instructions or "stop transfers," so called, "stock transfer restrictions," so
called, or other restrictions have been or shall be given to the Company's
transfer agent with respect thereto other than as set forth in this Section 5.
5.3 SUBSCRIBER'S COMPLIANCE. Nothing in this section shall affect in any
way the Subscriber's obligations under and agreement to comply with all
applicable securities laws upon resale of the Securities.
6. OTHER ISSUANCES OF SECURITIES
6.1 OTHER EQUITY OFFERINGS. During the period beginning on the First
Closing Date and expiring 180 calendar days following the effectiveness of the
Registration Statement, the Company will not make any Equity Offerings, as
defined in the Debentures, except for an offering of rights to subscribe for
shares of the Company's
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Common Stock pursuant to any exemption from the registration requirements of
the Securities Act of 1933, as amended, including without limitation the
exemption provided by Regulations D and S promulgated thereunder.
7. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL
THIS AGREEMENT SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. The parties
hereby agree that all actions or proceedings arising directly or indirectly from
or in connection with this Agreement shall, at the option of either party, be
litigated only in the United States District Court for the Southern District of
New York located in New York County, New York. The parties consent to the
jurisdiction and venue of the foregoing courts and consent that any process or
notice of motion or other application to either of said courts or a judge
thereof may be served inside or outside the State of New York or the Southern
District of New York by registered mail, return receipt requested, directed to
the party for which it is intended at its address set forth in this Agreement
(and service so made shall be deemed complete five (5) days after the same has
been posted as aforesaid) or by personal service or in such other manner as may
be permissible under the rules of said courts.
8. ASSIGNMENT; ENTIRE AGREEMENT; AMENDMENT
8.1 ASSIGNMENT. Neither this Agreement nor any rights of the Subscriber
hereunder may be assigned by either party to any other person. Notwithstanding
the foregoing, the provisions of this Agreement shall inure to the benefit of,
and be enforceable by, any transferee of any of the Securities purchased or
acquired by the Subscriber hereunder with respect to the Securities held by such
person.
8.2 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Debentures, the
Warrants, the Registration Rights Agreement, and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof, and no party
shall be liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth in this Agreement
or therein. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought.
9. PUBLICITY
The Company agrees that it will not disclose, and will not include in
any public announcement, the name of the Subscriber without its consent, unless
and until such disclosure is required by law or applicable regulation, and then
only to the extent of such requirement.
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10. NOTICES, ETC.; EXPENSES; INDEMNITY
10.1 NOTICES. Any notice, demand or request required or permitted to be
given by either the Company or the Subscriber pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or by facsimile, with a hard copy to follow by two day courier
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing. Copies of all notices to the Subscriber shall be sent to its
designee or representative.
10.2 COSTS AND EXPENSES. The Company shall be responsible for the
Subscriber's costs and expenses (including reasonable attorney's fees) incurred
in entering into this Agreement, but not to exceed $5,000 in the aggregate for
all Subscribers.
10.3 INDEMNIFICATION. Each party shall indemnify the other against any
loss, cost or damages (including reasonable attorney's fees) incurred as a
result of such parties' breach of any representation, warranty, covenant or
agreement in this Agreement.
11. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
12. SURVIVAL; SEVERABILITY
The representations, warranties, covenants and agreements of the parties
hereto shall survive both the First Closing and the Second Closing. In the
event that any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision; provided that
such severability shall be effective if it materially changes the economic
benefit of this Agreement to any party.
13. TITLE AND SUBTITLES
The titles and subtitles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
14. AMOUNT
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The undersigned hereby subscribes for U.S. $1,750,000 in principal amount
of Debentures and Warrants to purchase 175,000 shares of Common Stock and
agrees to pay therefor funds in the amount of One Million Seven Hundred Fifty
Thousand Dollars (U.S. $1,750,000).
The undersigned acknowledges that this subscription shall not be effective
unless accepted by the Company as indicated below.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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Subscriber's Representative Name of Subscriber:
Promethean Investment Group, L.L.C.
Heracles Fund
By: Promethean Investment Group, L.L.C.
Its: Investment Advisor
By /s/ Xxxxx X. X'Xxxxx
-----------------------------
Name: Xxxxx X. X'Xxxxx
Title: President
00 Xxxx 00xx Xxxxxx, #0000
Xxx Xxxx, XX 00000 Date of Subscription: February 13, 1997
-----------------------------
Address
Place of Execution: U.S.
(000) 000-0000
Telephone Place of Organization or Citizenship:
_____________________________________
(000) 000-0000
Fax Place of Residency and/or Principal
Place of Business:
c/o Bank of Bermuda (Cayman) Limited
P.O. Box 513, Third Floor, British
American Tower, Xx. Xxx'x Drive,
Gerogetown, Grand Cayman, Cayman Islands,
BWI
(Telephone) _________________________
(Fax) _________________________
Registration Instructions: _____________
(Name) (Please Print) ___________________
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY AS OF THE 13TH DAY OF
FEBRUARY, 1997.
ZYCAD CORPORATION
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------------------
Print Name: Xxxxxxxx X. Xxxxx
-------------------------------
Its: President and Chief Executive Officer
--------------------------------------
ATTEST
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________________________
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