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
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5.1 LEGENDS. The Company will issue one or more Debentures in the name
of 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
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such Underlying or Warrant Stock pursuant to and in accordance with
the 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
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Debentures, except for an offering of rights to subscribe for shares of the
Company's 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
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such disclosure is required by law or applicable regulation, and then only to
the extent of such requirement.
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.
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14. AMOUNT
The undersigned hereby subscribes for U.S. $500,000 in principal amount
of Debentures and Warrants to purchase 50,000 shares of Common Stock and
agrees to pay therefor funds in the amount of Five Hundred Thousand Dollars
(U.S. $ 500,000).
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.
Xxxxxx X. Xxxxxx
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 Xxxxxx Xxxxxxx Wines
0000 Xxxxxx Xxxxxx
Xxx Xxxxxxxx, Xxx Xxxx 00000
(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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