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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
- ------ THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
- ------ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to __________________________
Commission File Number: 0-13244
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ZYCAD CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 41-1404495
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
47100 Bayside Parkway, Fremont, California 94538
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: 510-623-4400
- -------------------------------------
Indicate by check mark whether Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
On June 30, 1996 there were 20,361,190 shares of the Registrant's common stock
outstanding.
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PART 1 - FINANCIAL INFORMATION
Item 1: Financial Statements
ZYCAD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
June 30,1996 December 31, 1995
------------ -----------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 7,091 $ 3,722
Short-term investments 221 224
Accounts receivable, net 10,223 12,123
Inventories 2,583 1,788
Other current assets 1,204 765
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Total current assets 21,322 18,622
Property and equipment, net 5,291 5,598
Purchased technology 3,454 1,129
Other assets 4,568 3,631
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Total assets $34,635 $28,980
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------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
obligations $ 1,217 $ 1,028
Accounts payable 4,214 3,968
Accrued expenses 4,744 3,955
Deferred revenues 3,506 2,930
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Total current liabilities 13,681 11,881
Long-term obligations 1,182 1,420
Convertible debenture notes 10,000 --
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Total liabilities 24,863 13,301
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Stockholders' equity:
Common stock, par value $.10 2,036 1,975
Additional paid-in capital 50,562 47,837
Accumulated translation adjustments (173) (19)
Accumulated deficit (42,653) (34,114)
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Total stockholders' equity 9,772 15,679
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Total liabilities and
stockholders' equity $34,635 $28,980
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------- -------
See accompanying notes to condensed consolidated financial statements.
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ZYCAD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER-SHARE AMOUNTS)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------
1996 1995 1996 1995
-------- ------- ------- -------
Revenues:
Product $ 5,727 $ 7,412 $ 8,811 $14,745
Service 3,823 5,236 7,717 10,467
------- ------- ------- -------
Total revenues 9,550 12,648 16,528 25,212
------- ------- ------- -------
Cost of revenues:
Product 1,695 1,661 2,930 3,469
Service 2,183 2,655 4,477 5,253
------- ------- ------- -------
Total cost of revenues 3,878 4,316 7,407 8,722
------- ------- ------- -------
Gross profit 5,672 8,332 9,121 16,490
------- ------- ------- -------
Operating expenses:
Sales and marketing 4,121 4,205 7,419 7,986
Research and development 4,099 2,585 8,429 5,306
General and administrative 891 705 1,711 1,424
------- ------- ------- -------
Total operating expenses 9,111 7,495 17,559 14,716
------- ------- ------- -------
Operating income (loss) (3,439) 837 (8,438) 1,774
------- ------- ------- -------
Other income (expense):
Interest income 68 59 108 117
Interest expense (184) (124) (284) (315)
Other income (expense) 33 (31) 75 (155)
------- ------- ------- -------
Other, net (83) (96) (101) (353)
------- ------- ------- -------
Net income (loss) ($3,522) $ 741 ($8,539) $ 1,421
------- ------- ------- -------
------- ------- ------- -------
Net income (loss) per share ($ .18) $ .04 ($ .43) $ .07
------- ------- ------- -------
------- ------- ------- -------
Shares used in computation 20,026 20,318 19,914 20,392
------- ------- ------- -------
------- ------- ------- -------
See accompanying notes to condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
Six Months Ended
June 30, June 30,
1996 1995
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $(8,539) $ 1,421
Adjustments to reconcile net income
(loss) to net cash generated by (used in)
operating activities:
Depreciation and amortization 2,086 2,314
Sales under capital leases, net (242) (904)
Changes in certain assets and liabilities:
Accounts receivable 1,634 2,095
Inventories (795) 108
Other assets (513) 10
Accounts payable and accrued expenses 1,080 (1,708)
Deferred revenues 636 355
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Net cash generated by (used in)
operations (4,653) 3,691
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CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment purchases (1,375) (541)
Decrease in other assets 264 502
Increase in capitalized software (1,279) (400)
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Net cash used in investing activities (2,390) (439)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of convertible
debenture notes 10,000 --
Net proceeds from issuance of common stock 387 450
Decrease in debt obligation (48) (590)
Repayment of bank debt -- (2,000)
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Net cash generated by (used in)
financing activities 10,339 (2,140)
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Effect of exchange rate changes on cash
and cash equivalents 73 70
------- -------
Net increase in cash and cash equivalents 3,369 1,182
Cash and cash equivalents at
beginning of period 3,722 2,861
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,091 $ 4,043
------- -------
------- -------
See accompanying notes to condensed consolidated financial statements.
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ZYCAD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Financial Statements:
The unaudited condensed consolidated financial statements of Zycad
Corporation for the three-month and six-month periods ended June 30, 1996
and 1995 reflect, in the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to fairly state the
results of operations for the interim period. The results of operations
for any interim period are not necessarily indicative of results for the
full year. The unaudited condensed consolidated interim financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto contained in the Company's December 31, 1995
Annual Report on Form 10-K.
2. Net Income (Loss) Per Share:
Net income per share is computed using the weighted average number of
common shares outstanding during each period including dilutive common
share equivalents (Common Stock options and warrants).
Net loss per share is computed using the weighted average number of common
shares outstanding. Common share equivalents have not been included in the
net loss per share calculation because the effect would be anti-dilutive.
3. Inventories consisted of (in thousand's):
June 30, 1996 December 31, 1995
------------- -----------------
Finished goods $ 745 $ 753
Raw materials and
work in process 1,838 1,035
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$2,583 $1,788
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4. Convertible debenture notes
During the second quarter of 1996, the Company completed a private
placement financing agreement with the Palladin Group, whereby the Company
issued 6% Convertible Debentures, which can be converted into the
Company's common shares to be registered under Regulation D of the
Securities Act of 1933. Conversion rights may be exercised at various
dates, beginning on August 24, 1996, at discounts that range from 15 to 20
percent below the market price at date of conversion. In addition,
Palladin received warrants to purchase up to 100,000 additional shares of
the Company's stock at $10.00 per share, subject to certain conditions.
5. Purchased Technology
During the second quarter of 1996, the Company issued approximately
387,000 shares of the Company's common stock valued at approximately
$2,400,000, for the acquisition of all the outstanding shares of Attest
Software, Inc., a software-based fault simulation and automatic test
generation (ATG) tools vendor.
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Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The 1995 second quarter and year-to-date results included revenue and costs
related to the Company's DOORS requirements management solution sales as
summarized below. In January 1996 the Company formed a joint venture with
the U.K. based owner of the DOORS technology to market and distribute the
technology in North America. Accordingly, the results of the joint venture
will now be reported on an equity basis rather than on the operating basis
that had been the reporting method in 1995. For the three-month and six-
month periods ended June 30, 1996 the Company's 40% equity share of the joint
venture profits was not material. ($ in millions):
Three Month Six Month
Period Period
Ended Ended
June 30, June 30,
1995 1995
Service Revenue $1.1 $2.2
Cost of service revenue .4 .8
---- ----
Gross profit .7 1.4
Sales and marketing expenses .5 .9
---- ----
Operating income $ .2 $ .5
---- ----
---- ----
Effective June 1, 1996 the Company acquired Attest Software Inc. ("Attest").
The revenues and expenses related to Attest which were included in the
Company's results of operations for the three-month and six-month periods
ended June 30, 1996 were $.3 million and $.1 million respectively.
REVENUES
Revenues for the quarter ended June 30, 1996 were $9.5 million, a decrease of
$3.1 million compared to the comparable period in 1995. Product revenues
decreased by approximately $2.0 million as two separate $1.0 million customer
purchases in the 1995 quarter were not duplicated in 1996. Additionally, the
Company is transitioning from its current generation accelerator products for
logic simulation to its next generation, faster LightSpeed accelerator
product. The LightSpeed product will be available for shipment in quantity
in September 1996. As a result of this transition, some customers are
waiting for the availability of LightSpeed before purchasing accelerators for
their engineering projects.
This $2.0 million decline in product revenues was partially offset by $.3
million of revenues from new software products, which resulted from the
acquisition of Attest.
The $5.9 million decline in product revenues for the six-month period ended
June 30, 1996 was also due to large purchases in 1995 not being repeated in
1996 and to the product transition from PXP to LightSpeed as previously
described.
Service revenues decreased $1.4 million and $2.8 million, respectively for
the three-month and six-month periods ended June 30, 1996. The primary
reason for the
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decreases is that revenues from the DOORS technology amounting to $1.1
million and $2.2 million in the respective 1995 reporting periods are no
longer included in 1996 (See Results of Operations). The remaining portion of
the decrease was due to reduced maintenance revenue related to the older
generation XP and PXP products.
GROSS PROFIT
Second quarter 1996 gross profit was $5.7 million, a decrease of $2.7 million
compared to the second quarter in 1995.
Gross profit from product revenues decreased $1.7 million related to the
revenue decline. The gross profit percentage was 70% in 1996 compared to 78%
in 1995. This decline was due to both product mix and to higher discounts in
1996 as the PXP product technology is one year older and in the last stages
of its product life cycle for logic simulation.
Gross profit from service revenues decreased $1.0 million of which $.7
million related to the amount of gross profit contributed from the DOORS
technology in 1995 that is not included in 1996. The remaining $.3 million is
principally related to the decline in maintenance revenue. Excluding the
impact of DOORS in 1995, service gross profit in 1996 was 42% compared to 44%
in 1995.
Year-to-date service gross profit was 42% in 1996 compared to 46% in 1995,
excluding the impact of DOORS in 1995. This decrease is due to lower product
maintenance revenues due to the PXP to LightSpeed product transition without
a commensurate decrease in costs.
OPERATING EXPENSES
SALES AND MARKETING
Sales and Marketing expenses in the 1996 second quarter decreased by $.1
million compared to the 1995 second quarter. This decrease was principally
related to the impact of including $.5 million DOORS expenses in 1995 and not
in 1996 and lower commission expense related to lower revenue levels
partially offset by higher marketing expenses related to the introduction of
the LightSpeed product.
Year-to-date sales and marketing expenses were $.6 million lower in 1996 for
the same reasons used to explain the second quarter comparison.
RESEARCH AND DEVELOPMENT
Research and development expenses increased $1.5 million in the 1996 second
quarter over the comparable quarter in 1995 and increased $3.1 million for
the comparable six-month period ended June 30. These increases are due to
additional staffing levels and a much higher level of engineering project
activity associated with the introduction of both the LightSpeed product and
the high-density FPGA products, which became available in quantities during
the 1996 second quarter.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $.2 million higher in the 1996
second quarter than in the 1995 second quarter and $.3 million higher in the
six-month period
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ended June 30, 1996 compared to June 30, 1995. These increases are
principally related to higher legal and accounting costs associated with
completion of the $10 million debenture offering and the acquisition of
ATTEST during the second quarter 1996.
OTHER INCOME/EXPENSES, NET
Other expenses, net were essentially the same in the second quarter 1996
compared to 1995. Such expenses were $.3 million lower for the comparable
six-month period ended June 30, 1996 vs. 1995 principally due to fluctuations
in foreign currencies which favorably impacted 1996 results and adversely
impacted 1995 results.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996 the Company's working capital was $7.6 million compared
to $6.7 million at December 31, 1995. The $.9 million increase results
from the cash proceeds from the $10 million convertible debenture
offering, completed in May 1996, partially offset by the net loss from
operations for the six-month period ended June 30, 1996 and the changes in
current assets and current liabilities during that period.
Management believes that the current level of working capital, together
with the funds expected to be generated from operations and the
availability of funds of under its $5 million bank line-of-credit will be
adequate to finance the Company's operating needs in the foreseeable
future.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit 4.1 Convertible Securities Subscription Agreement dated May 23,
1996 between the Company and Halifax Fund, L.P.
Exhibit 4.2 Convertible Securities Subscription Agreement dated May 23,
1996 between the Company and Capital Ventures International.
Exhibit 4.3 6% Convertible Subordinated Debenture due May 24, 1999 issued
to Halifax Fund, L.P.
Exhibit 4.4 6% Convertible Subordinated Debenture due May 24, 1999 issued
to Capital Ventures International.
Exhibit 4.5 Registration Rights Agreement dated May 23, 1996 between the
Company and Halifax Fund, L.P.
Exhibit 4.6 Registration Rights Agreement dated May 23, 1996 between the
Company and Capital Ventures International.
Exhibit 4.7 Common Stock Purchase Warrant dated May 23, 1996 issued to
Halifax Fund, L.P.
Exhibit 4.8 Common Stock Purchase Warrant dated May 23, 1996 issued to
Capital Ventures International.
Exhibit 11 Computation of Net Income Per Share.
(b) Reports on Form 8-K:
The Company's Current Report on Form 8-K dated May 24, 1996
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ZYCAD CORPORATION
------------------------------------
Peter J. Cassidy
Executive Vice President and
Chief Financial Officer
Authorized Officer of the Registrant
Dated: August 14, 1996
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Exhibit 4.1
CONVERTIBLE SECURITIES SUBSCRIPTION AGREEMENT
This Convertible Securities Subscription Agreement (the "Agreement") dated
as of May 23, 1996 has been executed by the undersigned (the "Subscriber")
in connection with (a) the sale of 6% Subordinated Convertible Debentures due
May 24, 1999 (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 100,000 shares of Common Stock (the
"Warrants"). The Company is offering an aggregate amount of up to
$10,000,000 of Debentures, together with the Warrants, at an aggregate price
of $10,000,000 (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. AGREEMENT TO SUBSCRIBE; THE SUBSCRIBER
1.1 PURCHASE AND ISSUANCE 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") shall
occur on May 24, 1996 or such other date as the Company and the Subscriber
shall agree and shall be deemed to occur ("Closing Date") when (i) this
Agreement has been executed and delivered by both the Subscriber and the
Company, (ii) the purchase price has been delivered by the Subscriber to the
Company, a mutually acceptable escrow agent or as otherwise agreed between
the parties (in same day funds via wire transfer pursuant to instructions
previously delivered for such purpose) and (iii) the Debentures and Warrants
subscribed for hereby have been executed, issued and delivered by the Company
to Subscriber, a mutually acceptable escrow agent or as otherwise agreed
between the parties.
1.2 [Omitted]
1.3 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 is subject to
the satisfaction, at or before the 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 Closing Date as though
made at each such time.
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(b) PERFORMANCE BY THE SUBSCRIBER. The Subscriber shall have performed,
satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the 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.
1.4 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 is subject to the
satisfaction, at or before the 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) 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 Closing Date as though made at
each such time.
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all respects with covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by the Company at or prior to the 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) 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 press release of April 18, 1996,
a copy of which has been furnished to the Subscriber.
(e) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. 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.
(f) THE LEGAL OPINION. The Company shall have delivered to the Subscriber
the opinion of Wilson, Sonsini, Goodrich & Rosati, independent counsel
to the Company, in form and substance reasonably satisfactory to the
Subscriber.
(g) 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 and to the effect that all the
conditions to the Closing shall have been satisfied.
(h) REGISTRATION RIGHTS AGREEMENT. The Company and the Subscriber shall
have entered into the Registration Rights Agreement contemplated by
Section 4.1.
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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 information or representations made by third parties or 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")
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 complete and satisfactory answers to all inquiries it has made
with respect to the Company and the Securities. The Company has not provided
to the Subscriber any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the
date hereof but which has not been so disclosed, other than with respect to
the transactions contemplated by this Agreement. 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
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<PAGE>
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:
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 30,000,000 shares of Common Stock,
par value $0.10 and 2,000,000 shares of Preferred Stock, par value $0.10, a
warrant outstanding for 135,000 shares of Common Stock, and stock options
granted to employees as described in the Exchange Act Reports. The Company
has issued and outstanding 19,860,969 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
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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 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. (1) 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 regulation, no representation
is made herein with respect to any of the same applicably 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 the 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
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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 press release of April 18, 1996, 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 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, not exceed 3,970,000 shares, of
which 100,000 shares shall be so reserved, first, for issuance upon the
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exercise of the Warrants and, second, for issuance upon conversion of the
Debentures if and to the extent the Warrants expire without exercise. 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 rights under
unexercised Warrants) and the number of shares so reserved shall be increased
to reflect stock splits and stock dividends and distributions.
4.3 LISTING OF UNDERLYING SHARES. The Company hereby agrees, promptly
following the 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 Closing. 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
the Subscriber and in such denominations (but no less than $200,000 each) to
be specified by the Subscriber prior to (or from time to time subsequent to)
Closing. 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 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 Closing or from and
after the issuance thereof to any such substitute or replacement transfer
agent, as the case may
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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 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 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 expiring 180 calendar days
following the Closing Date, the Company will not make any Equity Offerings,
as defined in the Debentures, 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
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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.
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 COST AND EXPENSES. The Company shall be responsible for the
Subscriber's costs and expenses (including legal fees) incurred in entering
into this Agreement, but not to exceed $10,000.
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.
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<PAGE>
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 the 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
The undersigned hereby subscribes for U.S. $5,000,000 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 Million Dollars (U.S.
$5,000,000).
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:
PALLADIN GROUP, L.P. HALIFAX FUND, L.P.
ATTN: ANDREW KAPLAN By The Palladin Group, L.P.
Its Investment Manager
____________________________
Name By Palladin Capital
Management, LLC
Its General Manager
By__________________________
Name: Andrew Kaplan
Title: Authorized Representative
40 West 57th Street, Suite 1500
New York, New York 10019
_______________________________ Date of Subscription: May , 1996
Address
Place of Execution: _____________
(212)______________________
Telephone Place of Organization or Citizenship:
____________________________________
(212)______________________
Place of Residency and/or Principal Place of Business:
c/o Citco Fund Services Ltd.
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
(Telephone) _________________________
(Fax) _________________________
Registration Instructions: __________
(Name) (Please Print) _______________
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE _____ DAY OF MAY, 1996
ZYCAD CORPORATION
By: _____________________________
Print Name
Its
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Exhibit 4.2
CONVERTIBLE SECURITIES SUBSCRIPTION AGREEMENT
This Convertible Securities Subscription Agreement (the "Agreement") dated as of
May 23, 1996 has been executed by the undersigned (the "Subscriber") in
connection with (a) the sale of 6% Subordinated Convertible Debentures due May
24, 1999 (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 100,000 shares of Common Stock (the "Warrants"). The
Company is offering an aggregate amount of up to $10,000,000 of Debentures,
together with the Warrants, at an aggregate price of $10,000,000 (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. AGREEMENT TO SUBSCRIBE; THE SUBSCRIBER
1.1 PURCHASE AND ISSUANCE 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") shall
occur on May 24, 1996 or such other date as the Company and the Subscriber
shall agree and shall be deemed to occur ("Closing Date") when (i) this
Agreement has been executed and delivered by both the Subscriber and the
Company, (ii) the purchase price has been delivered by the Subscriber to the
Company, a mutually acceptable escrow agent or as otherwise agreed between the
parties (in same day funds via wire transfer pursuant to instructions previously
delivered for such purpose) and (iii) the Debentures and Warrants subscribed for
hereby have been executed, issued and delivered by the Company to Subscriber, a
mutually acceptable escrow agent or as otherwise agreed between the parties.
1.2 [Omitted]
1.3 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 is subject to
the satisfaction, at or before the 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 Closing Date as though
made at each such time.
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(b) PERFORMANCE BY THE SUBSCRIBER. The Subscriber shall have performed,
satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the 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.
1.4 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 is subject to the satisfaction, at or
before the 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) 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 Closing Date as though
made at each such time.
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all respects with covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by the Company at or prior to the 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) 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 press release of April 18, 1996,
a copy of which has been furnished to the Subscriber.
(e) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. 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.
(f) THE LEGAL OPINION. The Company shall have delivered to the Subscriber
the opinion of Wilson, Sonsini, Goodrich & Rosati, independent counsel
to the Company, in form and substance reasonably satisfactory to the
Subscriber.
(g) 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 and to the effect that all the
conditions to the Closing shall have been satisfied.
(h) REGISTRATION RIGHTS AGREEMENT. The Company and the Subscriber shall
have entered into the Registration Rights Agreement contemplated by
Section 4.1.
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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
information or representations made by third parties or 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") 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 complete and satisfactory answers to all inquiries it has made with
respect to the Company and the Securities. The Company has not provided to the
Subscriber any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the date
hereof but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement. 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
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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:
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 30,000,000 shares of Common Stock, par
value $0.10 and 2,000,000 shares of Preferred Stock, par value $0.10, a warrant
outstanding for 135,000 shares of Common Stock, and stock options granted to
employees as described in the Exchange Act Reports. The Company has issued and
outstanding 19,860,969 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
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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 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. (1) 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 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
the 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
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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 press release
of April 18, 1996, 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 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, not exceed 3,970,000 shares, of which 100,000 shares
shall be so reserved, first, for issuance upon the
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exercise of the Warrants and, second, for issuance upon conversion of the
Debentures if and to the extent the Warrants expire without exercise. 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 rights under unexercised
Warrants) and the number of shares so reserved shall be increased to reflect
stock splits and stock dividends and distributions.
4.3 LISTING OF UNDERLYING SHARES. The Company hereby agrees, promptly
following the 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 Closing. 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
the Subscriber and in such denominations (but no less than $200,000 each) to be
specified by the Subscriber prior to (or from time to time subsequent to)
Closing. 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 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 Closing or from and after the issuance thereof to any
such substitute or replacement transfer agent, as the case may
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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 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 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 expiring 180 calendar days
following the Closing Date, the Company will not make any Equity Offerings, as
defined in the Debentures, 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
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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.
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 COST AND EXPENSES. The Company shall be responsible for the
Subscriber's costs and expenses (including legal fees) incurred in entering into
this Agreement, but not to exceed $10,000.
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.
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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 the 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
The undersigned hereby subscribes for U.S. $5,000,000 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 Million Dollars (U.S. $5,000,000).
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:
BALSA INTERNATIONAL CAPITAL VENTURES
Attn: Steve Katznelson INTERNATIONAL
By________________________________
Name:
Title:
1900 Market Street, Suite 600
Philadelphia, Pennsylvania 19103 Date of Subscription: ___________
- --------------------------------
Address
Place of Execution: _____________
_____________________________
Telephone Place of Organization or Citizenship:
__________________________________
(215) 963-3379
- --------------
Fax Place of Residency and/or Principal
Place of Business:
1 Capital Place
P.O. Box 1787GT
Grand Cayman, Cayman Islands
(Telephone) ______________________
(Fax) ____________________________
Registration Instructions: _______
(Name)(Please Print) _____________
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE _____ DAY OF MAY, 1996
ZYCAD CORPORATION
By: ______________________________
Print Name
Its
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Exhibit 4.3
THIS SUBORDINATED DEBENTURE HAS BEEN ISSUED PURSUANT TO REGULATION D PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAS NOT BEEN
REGISTERED UNDER THE ACT. THE DEBENTURES MAY NOT BE TRANSFERRED, OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE AND CURRENT REGISTRATION STATEMENT UNDER
THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
NO. 1 $5,000,000
6% CONVERTIBLE SUBORDINATED DEBENTURE DUE MAY 24, 1999
THIS CONVERTIBLE SUBORDINATED DEBENTURE ("Debenture") is one of a duly
authorized issue of Debentures of Zycad Corporation, a corporation duly
organized and existing under the laws of the State of Delaware (the "Company"),
designated as its 6% Convertible Subordinated Debentures Due May 24, 1999 in an
aggregate principal amount not exceeding Ten Million U.S. Dollars (U.S.
$10,000,000) (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to Halifax Fund, L.P.,
having an address c/o Citco Fund Services Ltd., Corporate Centre, West Bay Road,
P.O. Box 31106 SMB, Grand Cayman, Cayman Islands, the holder hereof, or its
order (the "Holder"), the principal sum of Five Million Dollars United States
Dollars (U.S. $5,000,000) on May 24, 1999 (the "Maturity Date") and to pay
interest on the principal sum outstanding under this Debenture ("Outstanding
Principal Amount"), at the rate of 6% per annum due and payable semi-annually in
arrears on the 20th day of May and November of each year (each an "Interest
Payment Date"), with the first such payment due on November 20, 1996. Accrual
of interest shall commence on the first business day to occur after the date
hereof and shall continue until payment in full of the principal sum has been
made. The interest so payable will be paid to the person in whose name this
Debenture is registered on the records of the Company regarding registration and
transfers of the Debentures (the "Debenture Register"); provided, however, that
the Company's obligation to a transferee of this Debenture arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions of the Convertible Securities Subscription Agreement dated as of May
23, 1996 between the Company and Halifax Fund, L.P. (the "Subscription
Agreement"). The principal of and interest on this Debenture are payable in
such coin or currency of the United States of America as of the time of payment
is legal tender for payment of public and private debts, at the address last
appearing on the Debenture Register of the Company as designated in writing by
the Holder hereof from time to time, provided, however, that, in lieu of paying
such interest in coin or currency, the Company may, at its option, pay interest
on this Debenture for any Interest Payment Date by adding the amount of such
interest to the Outstanding Principal Amount due under this Debenture ("PIK
Interest") pursuant to a statement in the form of Exhibit 2 hereto ("PIK
Statement") delivered by the Company to the Holder on or prior to the applicable
Interest Payment Date. If the cash interest due hereunder is not paid to the
Holder by the applicable Interest Payment Date, then the Holder shall be
entitled to the addition of PIK Interest hereunder and to the delivery of a PIK
Statement with respect thereto. Any PIK Interest when so added to the
Outstanding Principal Amount due under this Debenture shall, for all purposes of
this Debenture, be deemed to have been part of the principal indebtedness
originally evidenced by this Debenture including, without limitation, for
purposes of determining interest thereafter payable hereunder and amounts
thereafter convertible into Common Stock hereunder. The Company will pay the
principal of and all accrued and unpaid interest due upon this Debenture on the
Maturity Date, to the Holder of this Debenture as of the tenth (10th) day prior
to the Maturity Date and addressed to such Holder at the last address appearing
on the Debenture Register.
Payment of the principal indebtedness evidenced from time to time by this
Debenture, and interest accrued thereon, shall be subject and subordinate, as
provided in Exhibit 3 hereto, to the Company's Senior Debt.
This Debenture is subject to the following additional provisions:
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1. EXCHANGE. The Debentures are exchangeable for an equal aggregate
principal amount of Debentures of different denominations, of not less than
$200,000 each as requested by the Holder surrendering the same. No service
charge will be made for such registration or transfer or exchange.
2. TRANSFERS. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the United States only in compliance with the Securities Act of
1933, as amended (the "Act") and applicable state securities laws and in
accordance with other applicable provisions hereof. Prior to due presentment
for transfer of this Debenture, the Company may treat the person in whose name
this Debenture is duly registered on the Company's Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and all
other purposes, whether or not this Debenture be overdue, and the Company shall
not be affected by notice to the contrary.
3. DEFINITIONS. For purposes hereof the following definitions shall
apply:
"CLOSING DATE" shall mean the date of original issuance of the
Debenture.
"COMMON STOCK" shall mean the Common Stock, par value $0.10 per share
of the Company.
"CONVERSION DATE MARKET PRICE" shall mean, (as set forth in the
schedule below,) an amount that is equal to X%, as set forth in the schedule
below, (the "X Percentage") of the average of the Market Price for Shares of
Common Stock on each of the five trading days immediately preceding the Holder
Conversion Date, subject to adjustment from time to time as set forth in
Paragraph 7 hereof and in Section 6 of the Registration Rights Agreement.
Conversion Date
(Days from Closing Date) X
------------------------ --
0 to 90 100%
91 to 120 85%
121 to 150 84%
151 to 180 83%
181 to 210 82%
211 to 240 81%
241 to Maturity 80%
"CONVERSION DEFICIENCY" shall have the meaning set forth in Paragraph
9(b).
"CONVERSION NOTICE" shall have the meaning set forth in Paragraph
5(c).
"CONVERSION RATE" shall have the meaning set forth in Paragraph 5(b).
"EQUITY OFFERINGS" shall mean the issuance or sale by the Company of
any Common Stock or securities which are convertible into or exchangeable for
its Common Stock or any convertible securities, or any warrants or other rights
to subscribe for or to purchase or any options for the purchase of its Common
Stock or any such convertible securities (other than shares or options issued or
which may be issued pursuant to the Company's employee or director option plans
or shares issued upon exercise of options, warrants or rights outstanding on the
Closing Date and listed in the Exchange Act Reports).
"HOLDER CONVERSION DATE" shall have the meaning set forth in Paragraph
5(c).
"MARKET PRICE FOR SHARES OF COMMON STOCK" shall mean the price of one
share of Common Stock determined as follows:
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(i) If the Common Stock is listed on the Exchange (as defined
in the Subscription Agreement), the lowest reported sales price on the date of
valuation;
(ii) If the Common Stock is listed on a national securities
exchange, the lowest reported sales price on the date of valuation;
(iii) If neither (i) nor (ii) apply but the Common stock is
quoted in the over-the-counter market on the pink sheets or bulletin board, the
lesser of (A) the lowest sales price or (B) the last reported "bid" price on the
date of valuation; and
(iv) If neither clause (i), (ii) or (iii) above applies, the
market value as determined by a nationally recognized investment banking firm or
other nationally recognized financial advisor retained by the Company for such
purpose, taking into consideration, among other factors, the earnings history,
book value and prospects for the Company, and the prices at which shares of
Common Stock recently have been traded. Such determination shall be conclusive
and binding on all persons.
"PARAGRAPH 4 TRANSACTION" shall mean a merger, consolidation, or other
transaction referred to in Paragraph 4.
"POST-DEFICIENCY CONVERSION" shall have the meaning set forth in
Paragraph 9(b).
"REDEMPTION DATE" shall have the meaning set forth in Paragraph 6(c).
"SUBSCRIPTION AGREEMENT" shall mean the Convertible Securities
Subscription Agreement dated May __, 1996, between the Company and the
Subscriber or Subscribers to the original issue of the Debentures and the
Warrants.
"WARRANTS" shall have the meaning provided in the Subscription
Agreement.
4. MERGER, CONSOLIDATION. If at any time there occurs any consolidation
or merger of the Company with or into any other corporation or other entity or
person (whether or not the Company is the surviving corporation) or any other
corporate reorganization or transaction or series of related transactions, in
any of which in excess of 50% of the Company's voting power is transferred (a
"Paragraph 4 Transaction"), the Holders of this Debenture, to the extent then
outstanding and notwithstanding anything in Paragraph 5(a) to the contrary,
shall participate in any such transaction as a class with common stockholders of
the Company on the same basis as if this Debenture had been converted one day
prior the effective date of such transaction, provided, however, that if a
Paragraph 4 Transaction or the record date for determination of the Company's
stockholders entitled to participate in such Transaction shall occur at any time
before the expiration of two (2) months following the effectiveness of the
Registration Statement contemplated by the Registration Rights Agreement, both
of which are referred to in the Subscription Agreement, then, at the option of
the Holder of this Debenture, such Holder may treat the effective date of such
Paragraph 4 Transaction as a Redemption Date and shall be entitled to receive
the redemption price with respect to such Redemption Date as is provided in
Paragraph 6(b)(i). Such Holder shall be entitled to make such election at any
time up to ten (10) trading days after the effective date of the Paragraph 4
Transaction. Nothing in this Section 4 shall prohibit the Holder from
converting any part or all of this Debenture in accordance with the terms
hereof, up to and including the effective time and date of the Paragraph 4
Transaction.
5. CONVERSION. This Debenture is subject to conversion as follows:
(a) (i) HOLDER'S RIGHT TO CONVERT. This Debenture shall be
convertible at any time, in whole or in part, at the option of the Holder
hereof, into fully paid, validly issued and nonassessable shares of Common
Stock; provided, however, that prior to the 90th calendar day following the
Closing Date, the Holder may not convert any portion of the Debenture at a
Conversion Date Market Price of less than $6.00 per share. During the period
which is 91 to 120 calendar days, inclusive, from the Closing Date, Holder may
convert up to 33 1/3% of the Outstanding Principal Amount of this Debenture
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outstanding on the 90th calendar day following the Closing Date (the "90th Day
Amount"). During the period which is 121 to 150 calendar days, inclusive, from
the Closing Date, Holder may convert up to 66 2/3% of the 90th Day Amount.
After 150 calendar days from the Closing Date to maturity, Holder may convert up
to 100% of the 90th Day Amount.
(ii) AUTOMATIC CONVERSION. At maturity of this Debenture, the
90th Day Amount then outstanding shall automatically be converted into fully
paid, validly issued and nonassessable shares of Common Stock and, except for
the Holder's right to receive the Common Stock into which this Debenture is
automatically so converted and except for any portion of this Debenture which
cannot be so converted by reason of the limitations provided or referred to in
Paragraphs 5(d) and 9(b) hereof, this Debenture shall be deemed to have been
cancelled whether or not surrendered upon such automatic conversion.
(iii) ACCRUED BUT UNPAID INTEREST. Notwithstanding anything in
this Debenture to the contrary, the conversion of any part or all of the
Outstanding Principal Amount of this Debenture shall include, without
limitation, the conversion of all the accrued but unpaid interest on the
Outstanding Principal Amount so converted.
(b) CONVERSION PRICE FOR HOLDER CONVERTED SHARES. Subject to Section
5(a), the Outstanding Principal Amount of this Debenture that is converted into
shares of Common Stock shall be convertible into the number of shares of Common
Stock which results from application of the following formula:
P + I
-----------------------------
Conversion Date Market Price
P = principal amount of this Debenture submitted for conversion
I = accrued but unpaid interest on P as of the Holder Conversion Date
The number of shares of Common Stock into which the Outstanding
Principal Amount of this Debenture, and interest accrued thereon, may be
converted pursuant to this paragraph is hereafter referred to the "Conversion
Rate."
(c) MECHANICS OF CONVERSION. In order to convert this Debenture (in
whole or in part) into full shares of Common Stock, the Holder shall surrender
this Debenture, duly endorsed, by either overnight courier or 2-day courier, to
the principal office of the Company, and shall give written notice in the form
of EXHIBIT 1 hereto (the "Conversion Notice") by facsimile (with the original of
such notice forwarded with the foregoing courier) to the Company at such office
that the Holder elects to convert the principal amount specified therein, which
such notice and election shall be irrevocable by the Holder; PROVIDED, HOWEVER,
that the Company shall not be obligated to issue certificates evidencing the
shares of the Common Stock issuable upon such conversion unless either the
Debenture evidencing the principal amount is delivered to the Company as
provided above, or the Holder notifies the Company that such Debenture(s) have
been lost, stolen or destroyed and promptly executes an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
its connection with such Debentures; and provided further that each Conversion
Notice shall provide for the Holder's election to convert either (i) at least
$200,000 of the Outstanding Principal Amount of the Debenture or Debentures so
to be converted, or (ii) if such Outstanding Principal Amount shall then be less
than $200,000, the entire amount thereof.
Upon receipt of such Conversion Notice, the Company shall
immediately verify the Holder's calculation of the Conversion Rate and shall use
its best efforts to issue and deliver within three business days after delivery
to the Company of such Debenture(s), or after receipt of such agreement and
indemnification, to such Holder of Debenture(s) at the address of the Holder, or
to its designee, a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled as aforesaid, together with a
Debenture or Debentures for the principal amount of Debentures not submitted for
conversion. The date on which the Conversion Notice is given (the
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"Holder Conversion Date") shall be deemed to be the date the Company received by
facsimile the Conversion Notice, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock on
such date.
(d) LIMITATION IN CONVERSION. Notwithstanding anything herein
contained to the contrary, the number of shares of Common Stock to be issued
pursuant to a Conversion Notice or pursuant to the automatic conversion provided
in Paragraph 5(a)(ii) hereof shall not exceed the number of such shares which,
together with the Common Stock (i) theretofore issued upon conversion of
Debentures and exercise of the Warrants and (ii) reserved for issuance pursuant
to then unexpired and unexercised Warrants, would exceed 3,970,000 shares of
Common Stock, as theretofore adjusted pursuant to the provisions hereof. If
Conversion Notices issued on the same Holder Conversion Date by Holders of this
and other Debentures or if the automatic conversion of this and other Debentures
would, in the aggregate, result in the issuance of Common Stock exceeding the
limitation provided in this Paragraph 5(d), then the conversion that would then
be permitted within such limitation shall be made pro rata according to the
number of shares which, but for such limitation, would be issued pursuant to
such Conversion Notices or upon such automatic conversion, as the case may be.
6. REDEMPTION. The Company shall have the following redemption rights.
(a) COMPANY'S RIGHT TO REDEEM. This Debenture shall be redeemable,
in whole or in part, by the Company at the option of the Company at any time
after the first anniversary date of the Closing Date, for cash consideration to
be paid by the Company to each Holder of the Debentures being redeemed, provided
that (subject to Paragraph 6(c) below) no Conversion Notice is then in effect
with respect to the Debentures (or part thereof) being redeemed. In the event
at any time less than all the outstanding Debentures are redeemed, the Company
shall redeem from each Holder a pro rata amount of Debentures based upon the
Outstanding Principal Amount of Debentures held by such Holder in relationship
to the aggregate Outstanding Principal Amount of all Debentures.
(b) REDEMPTION PRICE. The redemption price per Debenture being
redeemed pursuant to Paragraph 6(a) hereof shall equal (i) for the period
commencing on the first anniversary of the Closing Date and ending on the day
before the third anniversary of the Closing Date, 120% of the Outstanding
Principal Amount of this Debenture, plus accrued but unpaid interest on this
Debenture, and (ii) on the third anniversary of the Closing Date, for any
portion of this Debenture which, by reason of the limitation provided in
Paragraph 5(d), cannot be automatically converted pursuant to Paragraph
5(a)(ii), 100% of the Outstanding Principal Amount of this Debenture, plus
accrued but unpaid interest on this Debenture.
(c) MECHANICS OF REDEMPTION. In the event the Company determines to
redeem any part or all of the Outstanding Principal Amount of the Debentures,
the Company shall send by either overnight courier or 2-day courier (with a copy
sent by facsimile) notice of such determination to the record Holders of the
Debentures being redeemed (the "Redemption Debentures"). If the Company so
determines to redeem less then the Outstanding Principal Amount of all
Debentures, such redemption shall be made from each Holder, pro rata according
to the portion of the total Outstanding Principal Amount of all Debentures then
held by each Holder. The notice shall provide that the redemption shall occur
on a date (the "Redemption Date") that is at least 20 trading days after the
date such notice was sent by confirmed facsimile to such record Holders. Each
Holder may, at the Holder's option, convert any or all of the Outstanding
Principal Amount of its Debentures remaining outstanding (including the
Redemption Debentures) in accordance with Section 5 hereof at any time prior to
the Redemption Date. On the Redemption Date the Redemption Debentures then
remaining outstanding and not so converted shall be redeemed automatically
without any further action by the Holders of such Debentures and whether or not
the Debentures are surrendered to the Company; PROVIDED, that the Company shall
be obligated to pay the cash consideration due to a Holder of such Debentures
upon redemption when such Debentures are either delivered to the principal
office of the Company or the Holder notifies the Company that such Debentures
have been lost, stolen or destroyed and executes an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such Debenture. Thereupon, there shall be promptly issued
and delivered to such Holder, within three
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business days after the Redemption Date and delivery to the Company of such
Debentures, or after receipt of such agreement and indemnification, at the
address of such Holder on the books of the Company, payment in immediately
available funds to the name as shown on such surrendered Debenture in the
amount of the redemption price as calculated as set forth in Paragraph 6(b).
7. STOCK SPLITS: DIVIDENDS, ADJUSTMENTS, REORGANIZATIONS.
(a) STOCK SPLITS AND COMBINATIONS. The Company shall not effect or
fix a record date for any stock split, subdivision or combination with an
effective date within five (5) trading days of a Redemption Date or the
effective date of a Paragraph 4 Transaction.
(b) CERTAIN DIVIDENDS AND DISTRIBUTION. The Company shall not make,
or fix a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in additional shares of
Common Stock, with an effective date within five (5) trading days of a
Redemption Date or the effective date of a Paragraph 4 Transaction.
(c) ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the event
the Company at any time or from time to time after the Closing Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than shares of Common Stock (including, without limitation, rights to
acquire Common Stock or such other securities), then and in each such event
provision shall be made so that the Holders of Debentures shall receive upon
conversion thereof pursuant to Paragraph 5 hereof, in addition to the number of
shares of Common Stock receivable thereupon, the amount of such other securities
of the Company to which a Holder on the relevant record or payment date, as
applicable, of the number of shares of Common Stock so receivable upon
conversion would have been entitled, plus any dividends or other distributions
which would have been received with respect to such securities had such Holder
thereafter, during the period from the date of such event to and including the
Holder Conversion Date, retained such securities, subject to all other
adjustments called for during such period under this Paragraph 7 with respect to
the rights of the Holders of the Debentures. For purposes of this Paragraph
7(c), the number of shares of Common Stock so receivable upon conversion by the
Holder shall be deemed to be that number which the Holder would have received
upon conversion of the entire Outstanding Principal Amount hereof if the Holder
Conversion Date had been the day preceding the date upon which the Company
announced the making of such dividend or other distribution.
(d) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. In
the event that at any time or from time to time after the Closing Date, the
Common Stock issuable upon the conversion of the Debentures is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or reorganization provided for elsewhere
in this Paragraph 7 or a merger or consolidation, provided for in Paragraph 4),
then and in each such event each Holder of Debentures shall have the right
thereafter to convert such Debenture into the kind of stock receivable upon such
recapitalization, reclassification or other change by holders of shares of
Common Stock all subject to further adjustment as provided herein. In such
event, the formulae set forth herein for conversion and redemption shall be
equitably adjusted to reflect such change in number of shares or, if shares of a
new class of stock are issued, to reflect the market price of the class or
classes of stock (applying the same factors used in determining the Market Price
for Shares of Common Stock) issued in connection with the above described
transaction.
(e) REORGANIZATIONS. If at any time or from time to time after the
Closing Date there is a capital reorganization of the Common Stock (other than a
recapitalization, subdivision, combination, reclassification or exchange of
shares provided for elsewhere in this Paragraph 7) then, as a part of such
reorganization, provision shall be made so that the Holders of the Debentures
shall thereafter be entitled to receive upon conversion of the Debentures the
number of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Paragraph
7 with respect to the rights of the Holders of the Debentures after the
reorganization to the end that the provisions of this Paragraph 7 shall be
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applicable after that event and be as nearly equivalent as may be practicable,
including, by way of illustration and not limitation, by equitably adjusting the
formulae set forth herein for conversion and redemption to reflect the market
price of the securities or property (applying the same factors used in
determining the Market Price for Shares of Common Stock) issued in connection
with the above described transaction.
(f) In the event of a reasonable, good faith dispute between a Holder
of Debentures and the Company with respect to the adjustment required by
Paragraph 7(d) or 7(e), then, at the option of either the Holder or the Company,
the dispute shall be submitted to the American Arbitration Association for
resolution according to the then applicable rules thereof. The cost of such
proceeding shall be shared 50% by the Holder or Holders involved in the dispute
and 50% by the Company, except that each party shall bear its own legal and
other expenses.
8. FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issuable hereunder. The
number of shares of Common Stock that are issuable upon any conversion shall be
rounded up or down to the nearest whole share.
9. RESERVATION OF STOCK ISSUABLE UPON CONVERSION
(a) RESERVATION REQUIREMENT. 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 or upon exercise of Warrants; provided, however,
that the number of shares so reserved shall at all times be at least 3,970,000
shares, of which 100,000 shares shall be so reserved, first, for issuance upon
the exercise of any Warrants issued hereunder and, second, for issuance upon the
conversion of Debentures if and to the extent none or less than all of the
Warrants are so issued or, if issued, expire without exercise. The number of
shares so reserved may be reduced by the number of shares actually delivered
pursuant to conversion of Debentures and exercise of Warrants (provided that, in
no event shall the number of shares so reserved be less than the maximum number
required to satisfy remaining conversion rights on the unconverted Debentures
and remaining exercise rights under any Warrants issued hereunder,) and the
number of shares so reserved shall be increased to reflect stock splits and
stock dividends and distributions.
(b) CONVERSION DEFICIENCY. If the Company does not have a sufficient
number of shares of Common Stock available to satisfy the Company's obligations
to a Holder of Debentures upon receipt of a Conversion Notice or if one or more
Debentures cannot be fully converted pursuant to Paragraphs 5(a)(i) or (ii) by
reason of the limitation provided in Section 5(d) (in either case, a "CONVERSION
DEFICIENCY"), from and after the fifth (5th) day following a Conversion
Deficiency (which for all purposes shall be deemed to have occurred upon the
Company's receipt of the applicable Conversion Notice), each Holder of the
Debentures shall have the right to demand from the Company immediate redemption
of any portion of the Debentures with respect to which the Company does not have
a sufficient number of shares available so to satisfy such obligations of the
Company or with respect to which conversion is limited by Paragraph 5(d), as the
case may be, in either case in cash at a redemption price per Debenture equal to
the dollar amount which is the product of (x) the Conversion Rate then
applicable to the Debentures so to be redeemed pursuant to this Paragraph 9(b)
and (y) the closing market price on the Exchange of the Company's Common Stock
on the date on which the Conversion Notice was delivered; PROVIDED HOWEVER, that
no notice of redemption may be delivered by a Holder subsequent to receipt by
such Holder of notice from the Company (sent by overnight or 2-day courier with
a copy sent by facsimile) of availability of sufficient shares of Common Stock
to perfect conversion (a "POST DEFICIENCY CONVERSION") of all the Debentures;
provided further that such right shall be reinstated if the Company shall
thereafter fail to perfect such Post-Deficiency Conversion by delivery of Common
Stock certificates in accordance with the applicable provisions of Paragraph
5(b) hereof and, to the extent not so converted, payment of all accrued and
unpaid interest in cash with respect thereto within five business days of
delivery of the notice of Post-Deficiency Conversion. In addition to the
foregoing, upon a Conversion Deficiency, the rate of interest on all of the
Debentures shall, to the maximum extent permitted by applicable law, be
increased by two percent (2%) (i.e. from 6% to 8%) commencing on the first day
of the thirty (30) day periods (or part thereof) following a Conversion
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Deficiency, an additional three percent (3%) commencing on the first day of each
of the second and third such thirty (30) day period (or part thereof), and an
additional one percent (1%) on the first day of each consecutive thirty (30) day
period (or part thereof) thereafter until such securities have been duly
converted or redeemed as herein provided. Any such interest which is not paid
when due shall, to the maximum extent permitted by law, accrue interest until
paid at the rate from time to time applicable to interest on the Debentures as
to which the Conversion Deficiency has occurred.
10. [Omitted]
11. NO IMPAIRING. The Company shall not intentionally take any action
which would impair the contractual rights and privileges of the Debentures set
forth herein or of the Holders thereof.
12. HOLDERS' RIGHTS IF SHARES ARE DELISTED OR IF TRADING IN COMMON STOCK
IS SUSPENDED. In the event that at anytime on or after the date hereof and
prior to the third anniversary of the Closing Date, trading in the shares of the
Company's Common Stock is suspended on the Exchange for such shares for a period
of five consecutive trading days, other than as a result of the suspension of
trading in securities in general, or if such Shares are delisted and not
relisted within ten (10) days thereafter, then, at a Holder's option, the
Company shall redeem such Holder's Debentures at a Redemption Date designated by
such Holder, and at the redemption price provided in Paragraph 6(b)(i) or
Paragraph 9(b), whichever is greater.
13. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT. Notwithstanding anything to
the contrary contained herein, each Conversion Notice shall contain a
representation that, after giving effect to the shares of the Company's Common
Stock to be issued pursuant to such conversion notice, the total number of
shares of the Company's Common Stock deemed beneficially owned by the Holder,
together with all shares of the Company's Common Stock deemed beneficially owned
by the Holder's "affiliates" as defined in Rule 144 of the Act, will not exceed
4.9% of the total issued and outstanding shares of the Company's Common Stock.
14. RIGHTS OF FIRST REFUSAL. The Holders shall have a right of first
refusal pro rata according to the Holders' ownership of Debentures on the date
on which the Company's notice pursuant to this Paragraph 14 is given on any
Equity Offerings for a period of one (1) year from the date hereof, so long as
the Holders still hold any Debentures and provided such Equity Offerings are
made pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended, including without limitation Regulations D
and S thereunder. The Company shall give the Holders written notice of its
proposal to make such an Equity Offering and shall provide with such notice
copies of the documentation, with the economic terms of the transaction
specified, pursuant to which the Equity Offering is to be effected. Such
Holders shall have ten (10) business days from receipt of such notice to deliver
a written notice to the Company that such Holders wish to exercise their right
of first refusal with respect to the entire Equity Offering or a part thereof.
Failure by such Holders to respond within such period shall be deemed an
irrevocable waiver of their right of first refusal with respect to such Equity
Offering, provided that such offering is completed upon such terms and with such
documentation within sixty (60) calendar days after said ten (10)-day period.
If such Holders exercise their right of first refusal with respect to any Equity
Offering, they must close the transactions contemplated by the proposed issuance
within ten (10) business days of the exercise of their right hereunder on the
same economic terms and using the same documentation provided in the Company's
notice to the Holders. If the Holders fail to close the transaction for any
reason other than a breach by the Company of its obligations hereunder, such
Holders' right of first refusal shall irrevocably terminate with respect to such
Equity Offering.
15. OBLIGATIONS ABSOLUTE. No provision of this Debenture, other than
conversion as provided herein, shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the time, place and rate, and in the manner,
herein prescribed.
16. WAIVERS OF DEMAND, ETC. The Company hereby expressly waives demand
and presentment for payment, notice of nonpayment, protest, notice of protest,
notice of dishonor, notice of
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intent to accelerate, prior notice of bringing of suit and diligence in taking
any action to collect amounts called for hereunder and will be directly and
primarily liable for the payments of all sums owing and to be owing hereon,
regardless of and without any notice (except as required by law), diligence, act
or omission as or with respect to the collection of any amount called for
hereunder.
17. REPLACEMENT DEBENTURES. In the event that any Holder notifies the
Company that its Debenture(s) have been lost, stolen or destroyed, replacement
Debenture(s) identical in all respects to the original Debenture(s) (except for
registration number and Outstanding Principal Amount, if different than that
shown on the original Debenture(s)) shall be issued to the Holder, provided that
the Holder executes and delivers to the Company an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such Debenture(s).
18. PAYMENT OF EXPENSES. The Company agrees to pay all debts and
expenses, including reasonable attorneys' fees, which may be incurred by the
Holder in enforcing the provisions of this Debenture and/or collecting any
amount due under this Debenture, the Subscription Agreement or the Registration
Rights Agreement dated May __, 1996, among the Company and Holders of
Debentures.
19. DEFAULTS. If one or more of the following described "Events of
Default" shall occur:
(a) The Company shall default in the payment of (i) interest on this
Debenture, and such default shall continue for five (5) business
days after the due date thereof, or (ii) the principal of this
Debenture; or
(b) Any of the representations or warranties made by the Company
herein, in the Subscription Agreement, or in any certificate or
financial or other written statements of the Company heretofore
or hereafter furnished by or on behalf of the Company in
connection with the execution and delivery of this Debenture or
the Subscription Agreement shall be false or (when taken together
with other information furnished by or on behalf of the Company,
including Exchange Act Reports) misleading in any material
respect at the time made; or
(c) The Company shall fail to perform or observe any covenant or
agreement in the Subscription Agreement, or any other covenant,
term, provision, condition, agreement or obligation of the
Company under this Debenture and such failure shall continue
uncured for a period of ten (10) business days after notice from
the Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in writing its
inability to pay its debts generally as they mature; (3) make a
general assignment for the benefit of creditors or commence
proceedings for its dissolution; or (4) apply for or consent to
the appointment of a trustee, liquidator or receiver for it or
for a substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within forty-five
(45) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties
or assets of the Company and shall not be dismissed within forty-
five (45) days thereafter, or
(g) Any money judgment, writ or warrant of attachment, or similar
process in excess of Five Hundred Thousand Dollars ($500,000) in
the aggregate shall be entered or filed against the Company or
any of its properties or other assets and shall remain unpaid,
unvacated, unbonded and unstayed for a period of forty-five (45)
days or
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in any event later than ten (10) days prior to the date of any
proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings, or relief under any bankruptcy
law or any law for the relief of debt shall be instituted by or
against the Company and, if instituted against the Company, shall
not be dismissed within forty-five (45) days after such
institution or the Company shall by any action or answer approve
of, consent to, or acquiesce in any such proceedings or admit to
any material allegations of, or default in answering a petition
filed in, any such proceeding;
then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may, by notice to the
Company declare the Debenture immediately due and payable, and the Holder may
immediately, and without expiration of any period of grace, enforce any and all
of the Holder's rights and remedies provided herein or any other rights or
remedies afforded by law. In such event, the Debenture shall be redeemed at a
redemption price per Debenture equal to the redemption price provided in
Paragraph 6(b)(i) or Paragraph 9(b), whichever is greater.
20. SAVINGS CLAUSE. In case any provision of this Debenture is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will not in any way
be affected or impaired thereby.
21. ENTIRE AGREEMENT. This Debenture and the agreements referred to in
this Debenture constitute the full and entire understanding and agreement
between the Company and the Holder with respect to the subject hereof. Neither
this Debenture nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and a
majority-in-interest of the Holders.
22. ASSIGNMENT, ETC. The Holder may, subject to compliance with the
Subscription Agreement, without notice, transfer or assign this Debenture or any
interest herein and may mortgage, encumber or transfer any of its rights or
interest in and to this Debenture or any part hereof and, without limitation,
each assignee, transferee and mortgagee (which may include any affiliate of the
Holder) shall have the right to transfer or assign its interest; provided,
however, that before the Registration Statement contemplated by the Registration
Rights Agreement becomes effective, (i) each such assignee, transferee and
mortgagee shall be a sophisticated investor as contemplated by Section 2.3 of
the Subscription Agreement and each such assignment, transfer, mortgagee or
other encumbrance shall comply with Regulation D under the Securities Act as
though such transaction has been a part of the original offer and sale of the
Debentures by the Company and Regulation D was applicable thereto, or (ii) the
holder will furnish the Company with an opinion of counsel to the effect that
such assignment, transfer, mortgage or other encumbrance is otherwise exempt
from the registration requirements under the Securities Act. Each such
assignee, transferee and mortgagee shall have all of the rights and obligations
of the Holder under this Debenture. The Company agrees that, subject to
compliance with the Subscription Agreement, after receipt by the Company of
written notice of assignment from the Holder or from the Holders' assignee, all
principal, interest, and other amounts which are then due and thereafter become
due under this Debenture shall be paid to such assignee at the place of payment
designated in such notice. This Debenture shall be binding upon the Company and
its successors and shall inure to the benefit of the Holder and its successors
and assigns.
23. NO WAIVER. No failure on the part of the Holder to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder
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or allowed it by law or other agreement shall be cumulative and not exclusive of
any other, and may be exercised by the Holder from time to time.
24. MISCELLANEOUS. Unless otherwise provided herein, any notice or other
communication to a party hereunder shall be sufficiently given if in writing and
personally delivered or mailed to said party by certified mail, return receipt
requested, at its address set forth herein or such other address as either may
designate for itself in such notice to the other and communications shall be
deemed to have been received when delivered personally or, if sent by mail or
facsimile, then when actually received by the party to whom it is addressed.
Whenever the sense of this Debenture requires, words in the singular shall be
deemed to include the plural and words in the plural shall be deemed to include
the singular. If more than one Company is named herein, the liability of each
shall be joint and several. Paragraph headings are for convenience only and
shall not affect the meaning of this document.
25. CHOICE OF LAW AND VENUE: WAIVER OF JURY TRIAL. THIS DEBENTURE 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 Company hereby agrees that
all actions or proceedings arising directly or indirectly from or in connection
with this Debenture shall, at the Holder's sole option, be litigated only in the
United States District Court for the Southern District of New York located in
New York County, New York. The Company consents to the jurisdiction and venue
of the foregoing courts and consents 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 Company at its
address set forth in this Debenture (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.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: May , 1996
ZYCAD CORPORATION
By:_________________________________
Print Name:__________________________
Print Title:___________________________
Print Address:________________________
ATTEST
_____________________________
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Exhibit 4.4
THIS SUBORDINATED DEBENTURE HAS BEEN ISSUED PURSUANT TO REGULATION D PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAS NOT BEEN
REGISTERED UNDER THE ACT. THE DEBENTURES MAY NOT BE TRANSFERRED, OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE AND CURRENT REGISTRATION STATEMENT UNDER
THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
NO. 2 $5,000,000
6% CONVERTIBLE SUBORDINATED DEBENTURE DUE MAY 24, 1999
THIS CONVERTIBLE SUBORDINATED DEBENTURE ("Debenture") is one of a duly
authorized issue of Debentures of Zycad Corporation, a corporation duly
organized and existing under the laws of the State of Delaware (the "Company"),
designated as its 6% Convertible Subordinated Debentures Due May 24, 1999 in an
aggregate principal amount not exceeding Ten Million U.S. Dollars (U.S.
$10,000,000) (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to Capital Ventures
International, having an address at 1 Capital Place, P.O. Box 1787GT, Grand
Cayman, Cayman Islands, the holder hereof, or its order (the "Holder"), the
principal sum of Five Million Dollars United States Dollars (U.S. $5,000,000) on
May 24, 1999 (the "Maturity Date") and to pay interest on the principal sum
outstanding under this Debenture ("Outstanding Principal Amount"), at the rate
of 6% per annum due and payable semi-annually in arrears on the 20th day of May
and November of each year (each an "Interest Payment Date"), with the first such
payment due on November 20, 1996. Accrual of interest shall commence on the
first business day to occur after the date hereof and shall continue until
payment in full of the principal sum has been made. The interest so payable
will be paid to the person in whose name this Debenture is registered on the
records of the Company regarding registration and transfers of the Debentures
(the "Debenture Register"); provided, however, that the Company's obligation to
a transferee of this Debenture arises only if such transfer, sale or other
disposition is made in accordance with the terms and conditions of the
Convertible Securities Subscription Agreement dated as of May 23, 1996 between
the Company and Capital Ventures International (the "Subscription Agreement").
The principal of and interest on this Debenture are payable in such coin or
currency of the United States of America as of the time of payment is legal
tender for payment of public and private debts, at the address last appearing on
the Debenture Register of the Company as designated in writing by the Holder
hereof from time to time, provided, however, that, in lieu of paying such
interest in coin or currency, the Company may, at its option, pay interest on
this Debenture for any Interest Payment Date by adding the amount of such
interest to the Outstanding Principal Amount due under this Debenture ("PIK
Interest") pursuant to a statement in the form of Exhibit 2 hereto ("PIK
Statement") delivered by the Company to the Holder on or prior to the applicable
Interest Payment Date. If the cash interest due hereunder is not paid to the
Holder by the applicable Interest Payment Date, then the Holder shall be
entitled to the addition of PIK Interest hereunder and to the delivery of a PIK
Statement with respect thereto. Any PIK Interest when so added to the
Outstanding Principal Amount due under this Debenture shall, for all purposes of
this Debenture, be deemed to have been part of the principal indebtedness
originally evidenced by this Debenture including, without limitation, for
purposes of determining interest thereafter payable hereunder and amounts
thereafter convertible into Common Stock hereunder. The Company will pay the
principal of and all accrued and unpaid interest due upon this Debenture on the
Maturity Date, to the Holder of this Debenture as of the tenth (10th) day prior
to the Maturity Date and addressed to such Holder at the last address appearing
on the Debenture Register.
Payment of the principal indebtedness evidenced from time to time by this
Debenture, and interest accrued thereon, shall be subject and subordinate, as
provided in Exhibit 3 hereto, to the Company's Senior Debt.
This Debenture is subject to the following additional provisions:
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1. EXCHANGE. The Debentures are exchangeable for an equal aggregate
principal amount of Debentures of different denominations, of not less than
$200,000 each as requested by the Holder surrendering the same. No service
charge will be made for such registration or transfer or exchange.
2. TRANSFERS. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the United States only in compliance with the Securities Act of
1933, as amended (the "Act") and applicable state securities laws and in
accordance with other applicable provisions hereof. Prior to due presentment
for transfer of this Debenture, the Company may treat the person in whose name
this Debenture is duly registered on the Company's Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and all
other purposes, whether or not this Debenture be overdue, and the Company shall
not be affected by notice to the contrary.
3. DEFINITIONS. For purposes hereof the following definitions shall
apply:
"CLOSING DATE" shall mean the date of original issuance of the
Debenture.
"COMMON STOCK" shall mean the Common Stock, par value $0.10 per share
of the Company.
"CONVERSION DATE MARKET PRICE" shall mean, (as set forth in the
schedule below,) an amount that is equal to X Percentage, as set forth in the
schedule below, (the "X Percentage") of the average of the Market Price for
Shares of Common Stock on each of the five trading days immediately preceding
the Holder Conversion Date, subject to adjustment from time to time as set forth
in Paragraph 7 hereof and in Section 6 of the Registration Rights Agreement.
Conversion Date
(Days from Closing Date) X
------------------------ -
0 to 90 100%
91 to 120 85%
121 to 150 84%
151 to 180 83%
181 to 210 82%
211 to 240 81%
241 to Maturity 80%
"CONVERSION DEFICIENCY" shall have the meaning set forth in Paragraph
9(b).
"CONVERSION NOTICE" shall have the meaning set forth in Paragraph
5(c).
"CONVERSION RATE" shall have the meaning set forth in Paragraph 5(b).
"EQUITY OFFERINGS" shall mean the issuance or sale by the Company of
any Common Stock or securities which are convertible into or exchangeable for
its Common Stock or any convertible securities, or any warrants or other rights
to subscribe for or to purchase or any options for the purchase of its Common
Stock or any such convertible securities (other than shares or options issued or
which may be issued pursuant to the Company's employee or director option plans
or shares issued upon exercise of options, warrants or rights outstanding on the
Closing Date and listed in the Exchange Act Reports).
"HOLDER CONVERSION DATE" shall have the meaning set forth in Paragraph
5(c).
"MARKET PRICE FOR SHARES OF COMMON STOCK" shall mean the price of one
share of Common Stock determined as follows:
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(i) If the Common Stock is listed on the Exchange (as defined in
the Subscription Agreement), the lowest reported sales price on the date of
valuation;
(ii) If the Common Stock is listed on a national securities
exchange, the lowest reported sales price on the date of valuation;
(iii) If neither (i) nor (ii) apply but the Common stock
is quoted in the over-the-counter market on the pink sheets or bulletin board,
the lesser of (A) the lowest sales price or (B) the last reported "bid" price on
the date of valuation; and
(iv) If neither clause (i), (ii) or (iii) above
applies, the market value as determined by a nationally recognized investment
banking firm or other nationally recognized financial advisor retained by the
Company for such purpose, taking into consideration, among other factors, the
earnings history, book value and prospects for the Company, and the prices at
which shares of Common Stock recently have been traded. Such determination
shall be conclusive and binding on all persons.
"PARAGRAPH 4 TRANSACTION" shall mean a merger, consolidation, or other
transaction referred to in Paragraph 4.
"POST-DEFICIENCY CONVERSION" shall have the meaning set forth in
Paragraph 9(b).
"REDEMPTION DATE" shall have the meaning set forth in Paragraph 6(c).
"SUBSCRIPTION AGREEMENT" shall mean the Convertible Securities
Subscription Agreement dated May __, 1996, between the Company and the
Subscriber or Subscribers to the original issue of the Debentures and the
Warrants.
"WARRANTS" shall have the meaning provided in the Subscription
Agreement.
4. MERGER, CONSOLIDATION. If at any time there occurs any consolidation
or merger of the Company with or into any other corporation or other entity or
person (whether or not the Company is the surviving corporation) or any other
corporate reorganization or transaction or series of related transactions, in
any of which in excess of 50% of the Company's voting power is transferred (a
"Paragraph 4 Transaction"), the Holders of this Debenture, to the extent then
outstanding and notwithstanding anything in Paragraph 5(a) to the contrary,
shall participate in any such transaction as a class with common stockholders of
the Company on the same basis as if this Debenture had been converted one day
prior the effective date of such transaction, provided, however, that if a
Paragraph 4 Transaction or the record date for determination of the Company's
stockholders entitled to participate in such Transaction shall occur at any time
before the expiration of two (2) months following the effectiveness of the
Registration Statement contemplated by the Registration Rights Agreement, both
of which are referred to in the Subscription Agreement, then, at the option of
the Holder of this Debenture, such Holder may treat the effective date of such
Paragraph 4 Transaction as a Redemption Date and shall be entitled to receive
the redemption price with respect to such Redemption Date as is provided in
Paragraph 6(b)(i). Such Holder shall be entitled to make such election at any
time up to ten (10) trading days after the effective date of the Paragraph 4
Transaction. Nothing in this Section 4 shall prohibit the Holder from
converting any part or all of this Debenture in accordance with the terms
hereof, up to and including the effective time and date of the Paragraph 4
Transaction.
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5. CONVERSION. This Debenture is subject to conversion as follows:
(a) (i) HOLDER'S RIGHT TO CONVERT. This Debenture shall be
convertible at any time, in whole or in part, at the option of the Holder
hereof, into fully paid, validly issued and nonassessable shares of Common
Stock; provided, however, that prior to the 90th calendar day following the
Closing Date, the Holder may not convert any portion of the Debenture at a
Conversion Date Market Price of less than $6.00 per share. During the period
which is 91 to 120 calendar days, inclusive, from the Closing Date, Holder may
convert up to 33 1/3% of the Outstanding Principal Amount of this Debenture
outstanding on the 90th calendar day following the Closing Date (the "90th Day
Amount"). During the period which is 121 to 150 calendar days, inclusive, from
the Closing Date, Holder may convert up to 66 2/3% of the 90th Day Amount.
After 150 calendar days from the Closing Date to maturity, Holder may convert up
to 100% of the 90th Day Amount.
(ii) AUTOMATIC CONVERSION. At maturity of this Debenture, the
90th Day Amount then outstanding shall automatically be converted into fully
paid, validly issued and nonassessable shares of Common Stock and, except for
the Holder's right to receive the Common Stock into which this Debenture is
automatically so converted and except for any portion of this Debenture which
cannot be so converted by reason of the limitations provided or referred to in
Paragraphs 5(d) and 9(b) hereof, this Debenture shall be deemed to have been
cancelled whether or not surrendered upon such automatic conversion.
(iii) ACCRUED BUT UNPAID INTEREST. Notwithstanding anything in
this Debenture to the contrary, the conversion of any part or all of the
Outstanding Principal Amount of this Debenture shall include, without
limitation, the conversion of all the accrued but unpaid interest on the
Outstanding Principal Amount so converted.
(b) CONVERSION PRICE FOR HOLDER CONVERTED SHARES. Subject to Section
5(a), the Outstanding Principal Amount of this Debenture that is converted into
shares of Common Stock shall be convertible into the number of shares of Common
Stock which results from application of the following formula:
P + I
----------------------------
Conversion Date Market Price
P = principal amount of this Debenture submitted for conversion
I = accrued but unpaid interest on P as of the Holder Conversion Date
The number of shares of Common Stock into which the Outstanding
Principal Amount of this Debenture, and interest accrued thereon, may be
converted pursuant to this paragraph is hereafter referred to the "Conversion
Rate."
(c) MECHANICS OF CONVERSION. In order to convert this Debenture (in
whole or in part) into full shares of Common Stock, the Holder shall surrender
this Debenture, duly endorsed, by either overnight courier or 2-day courier, to
the principal office of the Company, and shall give written notice in the form
of EXHIBIT 1 hereto (the "Conversion Notice") by facsimile (with the original of
such notice forwarded with the foregoing courier) to the Company at such office
that the Holder elects to convert the principal amount specified therein, which
such notice and election shall be irrevocable by the Holder; PROVIDED, HOWEVER,
that the Company shall not be obligated to issue certificates evidencing the
shares of the Common Stock issuable upon such conversion unless either the
Debenture evidencing the principal amount is delivered to the Company as
provided
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above, or the Holder notifies the Company that such Debenture(s) have been lost,
stolen or destroyed and promptly executes an agreement reasonably satisfactory
to the Company to indemnify the Company from any loss incurred by its connection
with such Debentures; and provided further that each Conversion Notice shall
provide for the Holder's election to convert either (i) at least $200,000 of the
Outstanding Principal Amount of the Debenture or Debentures so to be converted,
or (ii) if such Outstanding Principal Amount shall then be less than $200,000,
the entire amount thereof.
Upon receipt of such Conversion Notice, the Company shall
immediately verify the Holder's calculation of the Conversion Rate and shall use
its best efforts to issue and deliver within three business days after delivery
to the Company of such Debenture(s), or after receipt of such agreement and
indemnification, to such Holder of Debenture(s) at the address of the Holder, or
to its designee, a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled as aforesaid, together with a
Debenture or Debentures for the principal amount of Debentures not submitted for
conversion. The date on which the Conversion Notice is given (the "Holder
Conversion Date") shall be deemed to be the date the Company received by
facsimile the Conversion Notice, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock on
such date.
(d) LIMITATION IN CONVERSION. Notwithstanding anything herein
contained to the contrary, the number of shares of Common Stock to be issued
pursuant to a Conversion Notice or pursuant to the automatic conversion provided
in Paragraph 5(a)(ii) hereof shall not exceed the number of such shares which,
together with the Common Stock (i) theretofore issued upon conversion of
Debentures and exercise of the Warrants and (ii) reserved for issuance pursuant
to then unexpired and unexercised Warrants, would exceed 3,970,000 shares of
Common Stock, as theretofore adjusted pursuant to the provisions hereof. If
Conversion Notices issued on the same Holder Conversion Date by Holders of this
and other Debentures or if the automatic conversion of this and other Debentures
would, in the aggregate, result in the issuance of Common Stock exceeding the
limitation provided in this Paragraph 5(d), then the conversion that would then
be permitted within such limitation shall be made pro rata according to the
number of shares which, but for such limitation, would be issued pursuant to
such Conversion Notices or upon such automatic conversion, as the case may be.
6. REDEMPTION. The Company shall have the following redemption rights.
(a) COMPANY'S RIGHT TO REDEEM. This Debenture shall be redeemable,
in whole or in part, by the Company at the option of the Company at any time
after the first anniversary date of the Closing Date, for cash consideration to
be paid by the Company to each Holder of the Debentures being redeemed, provided
that (subject to Paragraph 6(c) below) no Conversion Notice is then in effect
with respect to the Debentures (or part thereof) being redeemed. In the event
at any time less than all the outstanding Debentures are redeemed, the Company
shall redeem from each Holder a pro rata amount of Debentures based upon the
Outstanding Principal Amount of Debentures held by such Holder in relationship
to the aggregate Outstanding Principal Amount of all Debentures.
(b) REDEMPTION PRICE. The redemption price per Debenture being
redeemed pursuant to Paragraph 6(a) hereof shall equal (i) for the period
commencing on the first anniversary of the Closing Date and ending on the day
before the third anniversary of the Closing Date, 120% of the Outstanding
Principal Amount of this Debenture, plus accrued but unpaid interest on this
Debenture, and (ii) on the third anniversary of the Closing Date, for any
portion of this Debenture which, by reason of the limitation provided
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in Paragraph 5(d), cannot be automatically converted pursuant to Paragraph
5(a)(ii), 100% of the Outstanding Principal Amount of this Debenture, plus
accrued but unpaid interest on this Debenture.
(c) MECHANICS OF REDEMPTION. In the event the Company determines to
redeem any part or all of the Outstanding Principal Amount of the Debentures,
the Company shall send by either overnight courier or 2-day courier (with a copy
sent by facsimile) notice of such determination to the record Holders of the
Debentures being redeemed (the "Redemption Debentures"). If the Company so
determines to redeem less then the Outstanding Principal Amount of all
Debentures, such redemption shall be made from each Holder, pro rata according
to the portion of the total Outstanding Principal Amount of all Debentures then
held by each Holder. The notice shall provide that the redemption shall occur
on a date (the "Redemption Date") that is at least 20 trading days after the
date such notice was sent by confirmed facsimile to such record Holders. Each
Holder may, at the Holder's option, convert any or all of the Outstanding
Principal Amount of its Debentures remaining outstanding (including the
Redemption Debentures) in accordance with Section 5 hereof at any time prior to
the Redemption Date. On the Redemption Date the Redemption Debentures then
remaining outstanding and not so converted shall be redeemed automatically
without any further action by the Holders of such Debentures and whether or not
the Debentures are surrendered to the Company; PROVIDED, that the Company shall
be obligated to pay the cash consideration due to a Holder of such Debentures
upon redemption when such Debentures are either delivered to the principal
office of the Company or the Holder notifies the Company that such Debentures
have been lost, stolen or destroyed and executes an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such Debenture. Thereupon, there shall be promptly issued
and delivered to such Holder, within three business days after the Redemption
Date and delivery to the Company of such Debentures, or after receipt of such
agreement and indemnification, at the address of such Holder on the books of the
Company, payment in immediately available funds to the name as shown on such
surrendered Debenture in the amount of the redemption price as calculated as set
forth in Paragraph 6(b).
7. STOCK SPLITS: DIVIDENDS, ADJUSTMENTS, REORGANIZATIONS.
(a) STOCK SPLITS AND COMBINATIONS. The Company shall not effect or
fix a record date for any stock split, subdivision or combination with an
effective date within five (5) trading days of a Redemption Date or the
effective date of a Paragraph 4 Transaction.
(b) CERTAIN DIVIDENDS AND DISTRIBUTION. The Company shall not make,
or fix a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in additional shares of
Common Stock, with an effective date within five (5) trading days of a
Redemption Date or the effective date of a Paragraph 4 Transaction.
(c) ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the event
the Company at any time or from time to time after the Closing Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than shares of Common Stock (including, without limitation, rights to
acquire Common Stock or such other securities), then and in each such event
provision shall be made so that the Holders of Debentures shall receive upon
conversion thereof pursuant to Paragraph 5 hereof, in addition to the number of
shares of Common Stock receivable thereupon, the amount of such other securities
of the Company to which a Holder on the relevant record or payment date, as
applicable, of
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the number of shares of Common Stock so receivable upon conversion would have
been entitled, plus any dividends or other distributions which would have been
received with respect to such securities had such Holder thereafter, during the
period from the date of such event to and including the Holder Conversion Date,
retained such securities, subject to all other adjustments called for during
such period under this Paragraph 7 with respect to the rights of the Holders of
the Debentures. For purposes of this Paragraph 7(c), the number of shares of
Common Stock so receivable upon conversion by the Holder shall be deemed to be
that number which the Holder would have received upon conversion of the entire
Outstanding Principal Amount hereof if the Holder Conversion Date had been the
day preceding the date upon which the Company announced the making of such
dividend or other distribution.
(d) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. In
the event that at any time or from time to time after the Closing Date, the
Common Stock issuable upon the conversion of the Debentures is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or reorganization provided for elsewhere
in this Paragraph 7 or a merger or consolidation, provided for in Paragraph 4),
then and in each such event each Holder of Debentures shall have the right
thereafter to convert such Debenture into the kind of stock receivable upon such
recapitalization, reclassification or other change by holders of shares of
Common Stock all subject to further adjustment as provided herein. In such
event, the formulae set forth herein for conversion and redemption shall be
equitably adjusted to reflect such change in number of shares or, if shares of a
new class of stock are issued, to reflect the market price of the class or
classes of stock (applying the same factors used in determining the Market Price
for Shares of Common Stock) issued in connection with the above described
transaction.
(e) REORGANIZATIONS. If at any time or from time to time after the
Closing Date there is a capital reorganization of the Common Stock (other than a
recapitalization, subdivision, combination, reclassification or exchange of
shares provided for elsewhere in this Paragraph 7) then, as a part of such
reorganization, provision shall be made so that the Holders of the Debentures
shall thereafter be entitled to receive upon conversion of the Debentures the
number of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Paragraph
7 with respect to the rights of the Holders of the Debentures after the
reorganization to the end that the provisions of this Paragraph 7 shall be
applicable after that event and be as nearly equivalent as may be practicable,
including, by way of illustration and not limitation, by equitably adjusting the
formulae set forth herein for conversion and redemption to reflect the market
price of the securities or property (applying the same factors used in
determining the Market Price for Shares of Common Stock) issued in connection
with the above described transaction.
(f) In the event of a reasonable, good faith dispute between a Holder
of Debentures and the Company with respect to the adjustment required by
Paragraph 7(d) or 7(e), then, at the option of either the Holder or the Company,
the dispute shall be submitted to the American Arbitration Association for
resolution according to the then applicable rules thereof. The cost of such
proceeding shall be shared 50% by the Holder or Holders involved in the dispute
and 50% by the Company, except that each party shall bear its own legal and
other expenses.
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8. FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issuable hereunder. The
number of shares of Common Stock that are issuable upon any conversion shall be
rounded up or down to the nearest whole share.
9. RESERVATION OF STOCK ISSUABLE UPON CONVERSION
(a) RESERVATION REQUIREMENT. 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 or upon exercise of Warrants; provided, however,
that the number of shares so reserved shall at all times be at least 3,970,000
shares, of which 100,000 shares shall be so reserved, first, for issuance upon
the exercise of any Warrants issued hereunder and, second, for issuance upon the
conversion of Debentures if and to the extent none or less than all of the
Warrants are so issued or, if issued, expire without exercise. The number of
shares so reserved may be reduced by the number of shares actually delivered
pursuant to conversion of Debentures and exercise of Warrants (provided that, in
no event shall the number of shares so reserved be less than the maximum number
required to satisfy remaining conversion rights on the unconverted Debentures
and remaining exercise rights under any Warrants issued hereunder,) and the
number of shares so reserved shall be increased to reflect stock splits and
stock dividends and distributions.
(b) CONVERSION DEFICIENCY. If the Company does not have a sufficient
number of shares of Common Stock available to satisfy the Company's obligations
to a Holder of Debentures upon receipt of a Conversion Notice or if one or more
Debentures cannot be fully converted pursuant to Paragraphs 5(a)(i) or (ii) by
reason of the limitation provided in Section 5(d) (in either case, a "CONVERSION
DEFICIENCY"), from and after the fifth (5th) day following a Conversion
Deficiency (which for all purposes shall be deemed to have occurred upon the
Company's receipt of the applicable Conversion Notice), each Holder of the
Debentures shall have the right to demand from the Company immediate redemption
of any portion of the Debentures with respect to which the Company does not have
a sufficient number of shares available so to satisfy such obligations of the
Company or with respect to which conversion is limited by Paragraph 5(d), as the
case may be, in either case in cash at a redemption price per Debenture equal to
the dollar amount which is the product of (x) the Conversion Rate then
applicable to the Debentures so to be redeemed pursuant to this Paragraph 9(b)
and (y) the closing market price on the Exchange of the Company's Common Stock
on the date on which the Conversion Notice was delivered; PROVIDED HOWEVER, that
no notice of redemption may be delivered by a Holder subsequent to receipt by
such Holder of notice from the Company (sent by overnight or 2-day courier with
a copy sent by facsimile) of availability of sufficient shares of Common Stock
to perfect conversion (a "POST DEFICIENCY CONVERSION") of all the Debentures;
provided further that such right shall be reinstated if the Company shall
thereafter fail to perfect such Post-Deficiency Conversion by delivery of Common
Stock certificates in accordance with the applicable provisions of Paragraph
5(b) hereof and, to the extent not so converted, payment of all accrued and
unpaid interest in cash with respect thereto within five business days of
delivery of the notice of Post-Deficiency Conversion. In addition to the
foregoing, upon a Conversion Deficiency, the rate of interest on all of the
Debentures shall, to the maximum extent permitted by applicable law, be
increased by two percent (2%) (i.e. from 6% to 8%) commencing on the first day
of the thirty (30) day periods (or part thereof) following a Conversion
Deficiency, an additional three percent (3%) commencing on the first day of each
of the second and third such thirty (30) day period (or part thereof), and an
additional one percent (1%) on the first day of each consecutive thirty (30) day
period (or part thereof) thereafter until such securities have been duly
converted or redeemed as herein
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provided. Any such interest which is not paid when due shall, to the maximum
extent permitted by law, accrue interest until paid at the rate from time to
time applicable to interest on the Debentures as to which the Conversion
Deficiency has occurred.
10. [Omitted]
11. NO IMPAIRING. The Company shall not intentionally take any action
which would impair the contractual rights and privileges of the Debentures set
forth herein or of the Holders thereof.
12. HOLDERS' RIGHTS IF SHARES ARE DELISTED OR IF TRADING IN COMMON STOCK
IS SUSPENDED. In the event that at anytime on or after the date hereof and
prior to the third anniversary of the Closing Date, trading in the shares of the
Company's Common Stock is suspended on the Exchange for such shares for a period
of five consecutive trading days, other than as a result of the suspension of
trading in securities in general, or if such Shares are delisted and not
relisted within ten (10) days thereafter, then, at a Holder's option, the
Company shall redeem such Holder's Debentures at a Redemption Date designated by
such Holder, and at the redemption price provided in Paragraph 6(b)(i) or
Paragraph 9(b), whichever is greater.
13. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT. Notwithstanding anything to
the contrary contained herein, each Conversion Notice shall contain a
representation that, after giving effect to the shares of the Company's Common
Stock to be issued pursuant to such conversion notice, the total number of
shares of the Company's Common Stock deemed beneficially owned by the Holder,
together with all shares of the Company's Common Stock deemed beneficially owned
by the Holder's "affiliates" as defined in Rule 144 of the Act, will not exceed
4.9% of the total issued and outstanding shares of the Company's Common Stock.
14. RIGHTS OF FIRST REFUSAL. The Holders shall have a right of first
refusal pro rata according to the Holders' ownership of Debentures on the date
on which the Company's notice pursuant to this Paragraph 14 is given on any
Equity Offerings for a period of one (1) year from the date hereof, so long as
the Holders still hold any Debentures and provided such Equity Offerings are
made pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended, including without limitation Regulations D
and S thereunder. The Company shall give the Holders written notice of its
proposal to make such an Equity Offering and shall provide with such notice
copies of the documentation, with the economic terms of the transaction
specified, pursuant to which the Equity Offering is to be effected. Such
Holders shall have ten (10) business days from receipt of such notice to deliver
a written notice to the Company that such Holders wish to exercise their right
of first refusal with respect to the entire Equity Offering or a part thereof.
Failure by such Holders to respond within such period shall be deemed an
irrevocable waiver of their right of first refusal with respect to such Equity
Offering, provided that such offering is completed upon such terms and with such
documentation within sixty (60) calendar days after said ten (10)-day period.
If such Holders exercise their right of first refusal with respect to any Equity
Offering, they must close the transactions contemplated by the proposed issuance
within ten (10) business days of the exercise of their right hereunder on the
same economic terms and using the same documentation provided in the Company's
notice to the Holders. If the Holders fail to close the transaction for any
reason other than a breach by the Company of its obligations hereunder, such
Holders' right of first refusal shall irrevocably terminate with respect to such
Equity Offering.
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15. OBLIGATIONS ABSOLUTE. No provision of this Debenture, other than
conversion as provided herein, shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the time, place and rate, and in the manner,
herein prescribed.
16. WAIVERS OF DEMAND, ETC. The Company hereby expressly waives demand
and presentment for payment, notice of nonpayment, protest, notice of protest,
notice of dishonor, notice of intent to accelerate, prior notice of bringing of
suit and diligence in taking any action to collect amounts called for hereunder
and will be directly and primarily liable for the payments of all sums owing and
to be owing hereon, regardless of and without any notice (except as required by
law), diligence, act or omission as or with respect to the collection of any
amount called for hereunder.
17. REPLACEMENT DEBENTURES. In the event that any Holder notifies the
Company that its Debenture(s) have been lost, stolen or destroyed, replacement
Debenture(s) identical in all respects to the original Debenture(s) (except for
registration number and Outstanding Principal Amount, if different than that
shown on the original Debenture(s)) shall be issued to the Holder, provided that
the Holder executes and delivers to the Company an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such Debenture(s).
18. PAYMENT OF EXPENSES. The Company agrees to pay all debts and
expenses, including reasonable attorneys' fees, which may be incurred by the
Holder in enforcing the provisions of this Debenture and/or collecting any
amount due under this Debenture, the Subscription Agreement or the Registration
Rights Agreement dated May __, 1996, among the Company and Holders of
Debentures.
19. DEFAULTS. If one or more of the following described "Events of
Default" shall occur:
(a) The Company shall default in the payment of (i) interest on this
Debenture, and such default shall continue for five (5) business
days after the due date thereof, or (ii) the principal of this
Debenture; or
(b) Any of the representations or warranties made by the Company
herein, in the Subscription Agreement, or in any certificate or
financial or other written statements of the Company heretofore
or hereafter furnished by or on behalf of the Company in
connection with the execution and delivery of this Debenture or
the Subscription Agreement shall be false or (when taken together
with other information furnished by or on behalf of the Company,
including Exchange Act Reports) misleading in any material
respect at the time made; or
(c) The Company shall fail to perform or observe any covenant or
agreement in the Subscription Agreement, or any other covenant,
term, provision, condition, agreement or obligation of the
Company under this Debenture and such failure shall continue
uncured for a period of ten (10) business days after notice from
the Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in writing its
inability to pay its debts generally as they mature; (3) make a
general assignment for the benefit of creditors or commence
proceedings for
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its dissolution; or (4) apply for or consent to the appointment
of a trustee, liquidator or receiver for it or for a substantial
part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within forty-five
(45) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties
or assets of the Company and shall not be dismissed within forty-
five (45) days thereafter, or
(g) Any money judgment, writ or warrant of attachment, or similar
process in excess of Five Hundred Thousand Dollars ($500,000) in
the aggregate shall be entered or filed against the Company or
any of its properties or other assets and shall remain unpaid,
unvacated, unbonded and unstayed for a period of forty-five (45)
days or in any event later than ten (10) days prior to the date
of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings, or relief under any bankruptcy
law or any law for the relief of debt shall be instituted by or
against the Company and, if instituted against the Company, shall
not be dismissed within forty-five (45) days after such
institution or the Company shall by any action or answer approve
of, consent to, or acquiesce in any such proceedings or admit to
any material allegations of, or default in answering a petition
filed in, any such proceeding;
then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may, by notice to the
Company declare the Debenture immediately due and payable, and the Holder may
immediately, and without expiration of any period of grace, enforce any and all
of the Holder's rights and remedies provided herein or any other rights or
remedies afforded by law. In such event, the Debenture shall be redeemed at a
redemption price per Debenture equal to the redemption price provided in
Paragraph 6(b)(i) or Paragraph 9(b), whichever is greater.
20. SAVINGS CLAUSE. In case any provision of this Debenture is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will not in any way
be affected or impaired thereby.
21. ENTIRE AGREEMENT. This Debenture and the agreements referred to in
this Debenture constitute the full and entire understanding and agreement
between the Company and the Holder with respect to the subject hereof. Neither
this Debenture nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and a
majority-in-interest of the Holders.
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22. ASSIGNMENT, ETC. The Holder may, subject to compliance with the
Subscription Agreement, without notice, transfer or assign this Debenture or any
interest herein and may mortgage, encumber or transfer any of its rights or
interest in and to this Debenture or any part hereof and, without limitation,
each assignee, transferee and mortgagee (which may include any affiliate of the
Holder) shall have the right to transfer or assign its interest; provided,
however, that before the Registration Statement contemplated by the Registration
Rights Agreement becomes effective, (i) each such assignee, transferee and
mortgagee shall be a sophisticated investor as contemplated by Section 2.3 of
the Subscription Agreement and each such assignment, transfer, mortgagee or
other encumbrance shall comply with Regulation D under the Securities Act as
though such transaction has been a part of the original offer and sale of the
Debentures by the Company and Regulation D was applicable thereto, or (ii) the
holder will furnish the Company with an opinion of counsel to the effect that
such assignment, transfer, mortgage or other encumbrance is otherwise exempt
from the registration requirements under the Securities Act. Each such
assignee, transferee and mortgagee shall have all of the rights and obligations
of the Holder under this Debenture. The Company agrees that, subject to
compliance with the Subscription Agreement, after receipt by the Company of
written notice of assignment from the Holder or from the Holders' assignee, all
principal, interest, and other amounts which are then due and thereafter become
due under this Debenture shall be paid to such assignee at the place of payment
designated in such notice. This Debenture shall be binding upon the Company and
its successors and shall inure to the benefit of the Holder and its successors
and assigns.
23. NO WAIVER. No failure on the part of the Holder to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.
24. MISCELLANEOUS. Unless otherwise provided herein, any notice or other
communication to a party hereunder shall be sufficiently given if in writing and
personally delivered or mailed to said party by certified mail, return receipt
requested, at its address set forth herein or such other address as either may
designate for itself in such notice to the other and communications shall be
deemed to have been received when delivered personally or, if sent by mail or
facsimile, then when actually received by the party to whom it is addressed.
Whenever the sense of this Debenture requires, words in the singular shall be
deemed to include the plural and words in the plural shall be deemed to include
the singular. If more than one Company is named herein, the liability of each
shall be joint and several. Paragraph headings are for convenience only and
shall not affect the meaning of this document.
25. CHOICE OF LAW AND VENUE: WAIVER OF JURY TRIAL. THIS DEBENTURE 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 Company hereby agrees that
all actions or proceedings arising directly or indirectly from or in connection
with this Debenture shall, at the Holder's sole option, be litigated only in the
United States District Court for the Southern District of New York located in
New York County, New York. The Company consents to the jurisdiction and venue
of the foregoing courts and consents 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 Company at its
address set forth in this Debenture
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(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.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: May , 1996
ZYCAD CORPORATION
By:_________________________________
Print Name:__________________________
Print Title:___________________________
Print Address:________________________
ATTEST
_____________________________
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Exhibit 4.5
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT ("Registration Rights Agreement"),
entered into as of May 23, 1996, between Halifax Fund, L.P., with offices at c/o
Citco Fund Services Ltd., Corporate Centre, West Bay Road, P.O. Box 31106 SMB,
Grand Cayman, Cayman Islands (the "Purchaser"), and ZYCAD CORPORATION, a
Delaware corporation with offices at 47100 Bayside Parkway, Fremont, California
94538 (the "Company")
W I T N E S S E T H:
WHEREAS, pursuant to a Convertible Securities Subscription Agreement, dated
as of May 23, 1996 (the "Agreement"), by and between the Company and the
Purchaser, the Company has agreed to sell and the Purchaser has agreed to
purchase Five Million Dollars (U.S.$5,000,000) of the Company's 6% Convertible
Subordinated Debenture due May 24, 1999 (the "Debentures") convertible into
shares of the Company's Common Stock, $.10 par value. The Company has further
agreed, pursuant to the Agreement and under the circumstances provided therein,
to issue Warrants to purchase additional shares of such Common Stock. The
shares of such Common Stock issuable upon conversion of the Debentures and
exercise of such Warrants are collectively referred to herein as the "Shares".
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Purchaser's agreement to enter into the Agreement, the Company has agreed to
provide the Purchaser with certain registration rights with respect to the
Shares under certain circumstances set forth in the Agreement;
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Agreement and this
Registration Rights Agreement, the Company and the Purchaser agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall
have the following respective meanings. Other terms used herein which are
defined in the Agreement, the Debentures or the Warrants shall have the same
meanings herein as they do in such other documents.
"Commission" or "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean: (i) Shares issued to Purchaser or its
designee upon conversion of the Debentures, upon exercise of the Warrants or
upon any stock split, stock dividend, recapitalization or similar event with
respect to such Shares; and (ii) any securities issued or issuable to Purchaser
or any Holder upon the conversion or exercise or exchange of any Debentures,
Warrants or Shares.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
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"Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with Purchaser's exercise of its registration rights under
this Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, reasonable fees and disbursements of counsel to Holder for a
"due diligence" examination of the Company, and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions, if any, applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for Holder not included within "Registration
Expenses."
"Holder" shall include the Purchaser and any transferee of Debentures,
Warrants, Shares or Registrable Securities which have not been sold to the
public to whom the registration rights conferred by this Agreement have been
transferred in compliance with Section 10 of this Agreement.
"Registration Statement" shall have the meaning set forth in Section 2(a)
herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities Act" shall mean the Securities Act of 1933, as amended.
2. THE REGISTRATION REQUIREMENTS. The Company shall file and use its best
efforts to cause to become effective, as promptly as possible and in any event
by the ninetieth (90th) calendar day after the Closing Date in the case of the
registration of the Underlying Stock and by the two hundred seventieth (270th)
calendar day after the Closing Date in the case of the registration of the
Warrant Stock, (a) a registration statement on Form S-3 under the Securities Act
or, if Form S-3 is not then available, another appropriate form covering the
resale of the Underlying Stock issuable on conversion of the Debentures and (b)
another such registration statement covering the resale of the Warrant Stock
issuable upon the exercise of the Warrants, and shall take all action necessary
to qualify the Underlying Stock and the Warrant Stock under state "blue sky"
laws as hereinafter provided. The Company shall use its diligent best efforts
to effect the registrations contemplated by the foregoing (including, without
limitation, the execution of an undertaking to file amendments and post-
effective amendments, appropriate qualification under and compliance with
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) and as would permit
or facilitate the sale and distribution of all the Registrable Securities in all
states reasonably requested by the Holder for purposes of maximizing the
proceeds realizable by the Holder from such sale and distribution. Such best
efforts by the Company shall include, without limitation, the following:
(a) The Company shall file (i) registration statements with the Commission
pursuant to Rule 415 under the Securities Act on Form S-3 under the
Securities Act and the Company shall use its best efforts to qualify for
the use of such Form (or in the event that the Company is ineligible to use
such form, such other form as the Company is eligible to use under the
Securities Act) covering the Registrable Securities so to be registered
(each, a "Registration Statement"); (ii) such blue sky filings as shall be
reasonably requested to permit such sales PROVIDED, HOWEVER, that the
Company shall not be required to register the Registrable Securities in any
jurisdiction that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to
any tax in any
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such jurisdiction where it is not then so subject or require the Company to
qualify to do business in any jurisdiction where it is not then so
qualified; and (iii) any required filings with the National Association of
Securities Dealers, Inc. ("NASD") or exchange where the Shares are traded;
all as soon as practicable after the date hereof. The Company shall use
its best efforts to have the Registration Statements and other filings
declared effective as soon thereafter as may be practicable.
(b) The Company shall enter into such customary agreements (including a
customary underwriting agreement with the underwriter or underwriters, if
any) and take all such other reasonable actions in connection therewith in
order to expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not the Registrable
Securities are to be sold in an underwritten offering, the Company shall:
(i) make such representations and warranties to the Holder
and the underwriter or underwriters, if any, in form and substance and
scope as are customarily made by issuers to underwriters in secondary
underwritten offerings:
(ii) cause to be delivered to the sellers of Registrable
Securities and the underwriter or underwriters, if any, opinions of
counsel to the Company, dated the effective day (or in the case of an
underwritten offering, dated the date of delivery of any Registrable
Securities sold pursuant thereto) of the applicable registration
statement (which counsel, and opinions (in form, scope and substance),
shall be reasonably satisfactory to the managing underwriter or
underwriters, if any, and the appointed representative or counsel of
the Holder, addressed to the Holder and each underwriter, if any,
covering the matters customarily covered in opinions requested in
secondary underwritten offerings and, in the case of any underwritten
offering, such other matters as may be reasonably requested by the
Holder;
(iii) cause to be delivered, immediately prior to the
effectiveness of the applicable Registration Statement (and, in the
case of an underwritten offering, at the time of delivery of any
Registrable Securities sold pursuant thereto), letters from the
Company's independent certified public accountants addressed to the
Holder and each underwriter, if any, stating that such accountants are
independent public accountants within the meaning of the Securities
Act and the applicable published rules and regulations thereunder, and
otherwise in customary form and covering such financial and accounting
matters as are customarily covered by letters of the independent
certified public accountants delivered in connection with secondary
underwritten public offerings;
(iv) if an underwriting agreement is entered into, cause the same
to set forth indemnification and contribution provisions and
procedures which are no less favorable to the Holder and the Company
than those contemplated by sections 9 and 10 with respect to all
parties to be indemnified pursuant to such sections;
(v) deliver such documents and certificates as may be reasonably
requested by the Holder of the Registrable Securities being sold or
the managing underwriter or underwriters, if any, to evidence
compliance with clause (i) above and with any customary conditions
contained in the
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underwriting agreement, if any, or other agreement entered into by the
Company;
the foregoing in this paragraph 2(b) shall be done at each closing under
any such underwriting or similar agreement or as and to the extent required
thereunder; provided, however, the foregoing in paragraph 2(b) shall not be
required on more than two (2) occasions.
(c) The Company shall make available for inspection and review by the
Holder, a representative or representatives of the Holder, any underwriter
participating in any disposition pursuant to a Registration Statement, and
any attorney or accountant retained by such Holder or underwriter, any such
registration statement or amendment or supplement or any blue sky, NASD or
other filing, all financial and other records, pertinent corporate
documents and properties of the Company as they may reasonably request for
the purpose, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with such Registration
Statement; PROVIDED, HOWEVER, that the Holder shall first agree in writing
with the Company that any information that is reasonably and in good faith
designated by the Company in writing as confidential at the time of
delivery of such information shall be kept confidential by the Holder and
that the Holder will use reasonable efforts to cause its representatives
and such other persons so to keep such information confidential, unless (i)
disclosure of such information is required by court or administrative order
or is necessary to respond to inquiries of regulatory authorities, (ii)
disclosure of such information is required by law (including any disclosure
requirements pursuant to Federal securities laws in connection with the
filing of any Registration Statement or the use of any prospectus referred
to in this Agreement), (iii) such information becomes generally available
to the public other than as a result of a disclosure or failure to
safeguard by any such person, (iv) such information becomes available to
any such person from a source other than the Company and such source, to
the knowledge of such persons, is not bound by a confidentiality agreement
with the Company, or (v) such information was known to or is developed by
such persons without reference to such confidential information of the
Company.
3. UNDERWRITTEN DISTRIBUTION. If the Holder intends to distribute the
Registrable Securities covered by a Registration Statement by means of an
underwriting, the Holder shall so advise the Company and, within 30 days of the
date thereof and without limiting the generality of other provisions hereof, the
Company will prepare and file such amendment or amendments to the Registration
Statement and make such other filings as may be necessary or appropriate to
effect any such underwritten distribution.
4. MULTIPLE HOLDERS. If there is more than one Holder, such Holders shall act
with respect to their rights under this Agreement according to the vote of a
majority-in-interest.
5. EXPENSES OF REGISTRATION. All Registration Expenses incurred in connection
with any registration, qualification or compliance pursuant to this Agreement
shall be borne by the Company, and all Selling Expenses shall be borne by the
Holder.
6. REGISTRATION DELAY OR FAILURE. The Company acknowledges that its failure
to register the Registrable Securities in accordance with the Agreement and this
Registration Rights Agreement will cause the Holder to suffer damages and
undertake risks in amounts that will be difficult to ascertain and were not
anticipated in negotiating the terms hereof or of the Agreement, the Debentures
or the Warrants. Accordingly the parties agree that it is
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appropriate to include herein a provision for liquidated damages and to
compensate the Holder fairly for the additional risk undertaken by the Holder
resulting from the Company's delay or failure to effect such registrations. The
parties acknowledge and agree that the provisions hereinafter set forth in this
Paragraph 6 represent the parties' good faith effort to quantify such damages
and to compensate for such additional risk and, as such, agree that the form and
amount of damages and risk compensation are reasonable and will not constitute a
penalty.
(a) If the Registration Statement covering the resale of the Underlying
Stock and the Warrant Stock is not effective by the ninetieth (90th) calender
day after the Closing, then, with respect to the 33 1/3% of the Debentures
outstanding on such ninetieth day (the "Ninetieth Day Debentures") and which,
pursuant to Paragraph 5(a) of the Debentures, may be converted following such
ninetieth day, each of the X%s (as defined in the Debentures) used in determing
the Conversion Date Market Price (as defined in the Debentures) shall be reduced
by two (2) percentage points, and the X%s as so reduced shall then and
thereafter be applicable to and upon the conversion of such 33 1/3% of the
Ninetieth Day Debentures, in lieu and in place of the X%s provided in the
Debentures but subject to further reduction as hereinafter provided in this
Paragraph 6.
(b) If such Registration Statement still has not become effective by the
one hundred twentieth (120th) calendar day after the Closing, then:
(i) each of the X%s applicable to the Ninetieth Day Debentures to
which Paragraph 6(a) hereof shall be applicable (the "6(a) Ninetieth Day
Debentures"), as theretofore reduced pursuant to Paragraph 6(a) hereof,
shall be further reduced by three (3) percentage points and, as further so
reduced, shall then and thereafter be applicable to and upon conversion of
the 6(a) Ninetieth Day Debentures, but subject to further reduction as
hereinafter provided; and
(ii) each of the X%s originally provided in the Debentures and
applicable to the additional 33 1/3% of the Ninetieth Day Debentures
becoming convertible following such 120th day pursuant to Paragraph 5(a) of
the Debentures (the "6(b) Ninetieth Day Debentures") shall be reduced by
five (5) percentage points, and the X%s, as so reduced, shall then and
thereafter be applicable to and upon the conversion of the 6(b) Ninetieth
Day Debentures, in lieu and in place of the X%s provided in the Debentures
but subject to further reduction as hereafter provided in this Paragraph 6.
(c) If such Registration Statement still has not become effective by the
one hundred fiftieth (150th) calendar day after the Closing, then:
(i) each of the X%s applicable to the 6(a) Ninetieth Day Debentures
and the 6(b) Nineties Day Debentures, as theretofore reduced pursuant to
Paragraphs 6(a) and (b) hereof, shall be further reduced by three (3)
percentage points on such 150th calendar day, and the X%s applicable to the
6(a) and the 6(b) Ninetieth Day Debentures, as so reduced, shall then and
thereafter be applicable to and upon the conversion of such Debentures; and
(ii) each of the X%s originally provided in the Debentures and
applicable to the final 33 1/3% of the Ninetieth Day Debentures becoming
convertible following such 150th day pursuant to Paragraph 5(a) of the
Debentures (the "6(c) Ninetieth Day Debentures") shall be reduced by eight
(8) percentage points on such 150th calendar day, and the X%s, as so
reduced, shall then and
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thereafter be applicable to and upon the conversion of the 6(c) Ninetieth
Day Debentures, in lieu and in place of the X%s provided in the Debentures.
(d) If such Registration Statement still has not become effective by the
one hundred eightieth (180th) calendar day after the Closing, then there shall
be paid to each Holder by the Company, in cash, on such 180th day and on each
succeeding 30th day thereafter upon which such Registration Statement still has
not become effective, an amount equal to 3% of the Outstanding Principal Amount
of the Debentures held by the Holder on such 180th day or succeeding 30th day,
as the case may be, (each such payment, a "30 Day Delay Payment") and if such
Registration Statement shall become effective after the one hundred fiftieth
(150th) calendar day after the Closing but before such 180th day or any such
succeeding 30th day, there shall also be paid to the Holder, in cash, on the
effective date of the Registration Statement a 30 Day Delay Payment pro-rated
according to the portion of the then current 30 day period ending on such
effective date.
(e) If such Registration Statement still has not become effective by the
first anniversary of the Closing, then, at the Holder's option exercised at any
time thereafter, the Company shall redeem the Holder's Debentures at a
Redemption Date designated by such Holder, and at the redemption price provided
in Paragraph 6(b)(i) of the Debentures.
7. REGISTRATION PROCEDURES. In the case of each registration effected by the
Company pursuant to this Agreement, the Company will keep the Holder advised in
writing as to initiation of each registration and as to the completion thereof.
At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for the period ending (i) thirty-six
(36) months after initial issuance of the Debentures, (ii) when the Holder has
completed the distribution of the Registrable Securities described in the
registration statement relating thereto, or (iii) the date on which the
Registrable Securities are distributed to the public pursuant to Rule 144(k) or
are saleable pursuant to Rule 144(k) promulgated under the Securities Act,
whichever first occurs.
(b) Furnish such number of prospectuses and other documents incident
thereto as the Holder from time to time may reasonably request.
8. SUSPENSION OF USE OF REGISTRATION STATEMENT. The Holder agrees that, upon
receipt of any notice from the Company of (A) the happening of any event which
makes any statements made in the registration statement(s) or related
prospectus(es) filed pursuant to this Registration Rights Agreement, or any
document incorporated or deemed to be incorporated therein by reference, untrue
in any material respect or which requires the making of any changes in such
registration statement(s) or prospectus(es) so that, in the case of such
registration statement(s), it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstance under
which they were made, not misleading or (B) that, in the judgment of the
Company's Board of Directors, it is advisable to suspend use of the
prospectus(es) for a discrete period of time due to pending corporate
developments which are or may be material to the Company but have not been
disclosed in the Registration Statement(s) or in relevant public filings with
the SEC, or (C) the SEC has issued a stop order suspending the effectiveness of
the Registration Statement(s), the Holder will forthwith discontinue disposition
of such Shares covered by such Registration Statement(s) or prospectus(es) until
it is advised in writing by the Company that use of the applicable prospectus
may be resumed, and has received copies of any additional or supplemented
filings that are incorporated or deemed to be incorporated by reference in such
prospectus(es). The Company shall use all reasonable best efforts to
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insure that the use of the prospectus(es) may be resumed as soon as practicable,
and in any event shall not be entitled to require the Holder to suspend use of
the prospectus(es) for more than thirty (30) consecutive days on any one
occasion, more than forty-five (45) consecutive days in the aggregate on two
occasions which are not at least 90 days apart or more than an aggregate of
sixty (60) days in any twelve month period.
9. INDEMNIFICATION.
(a) COMPANY INDEMNITY. The Company will indemnify the Holder, each of its
officers, directors and partners, and each person controlling Holder within the
meaning of Section 15 of the Securities Act and the rules and regulations
thereunder with respect to which registration, qualification or compliance has
been effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls, within the meaning of Section 15 of the Securities Act and
the rules and regulations thereunder, any underwriter, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other document (including
any related registration statement, notification or the like) incident to any
such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of the Securities Act or any state securities law or in either case,
any rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse the Holder, each
of its officers, directors and partners, and each person controlling such
Holder, each such underwriter and each person who controls any such underwriter,
for any legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission (or alleged untrue statement or omission) based
upon written information furnished to the Company by Holder or the underwriter
and stated to be specifically for use therein. The Indemnity agreement
contained in this Section 9(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent will not be unreasonably
withheld).
(b) HOLDER INDEMNITY. The Holder will, if Registrable Securities held by
it are included in the securities as to which such registration, qualification
or compliance is being effected, indemnify the Company, each of its directors,
officers, partners, and each underwriter, if any, of the Company's securities
covered by such a registration statement, each person who controls the Company
or such underwriter within the meaning of Section 15 of the Securities Act and
the rules and regulations thereunder, each other Holder (if any), and each of
their officers, directors and partners, and each person controlling such other
Holder against all claims, losses, damages and liabilities (or actions in
respect thereof arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statement therein not misleading, and will reimburse
the Company and such other Holders and their directors, officers and partners,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in
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conformity with written information furnished to the Company by Holder and
stated to be specifically for use therein; provided, however, that the
obligations of Holder shall not apply to amounts paid in settlement of any such
claims, losses, damages or liabilities if such settlement is effected without
the consent of Holder (which consent shall not be unreasonably withheld).
(c) PROCEDURE. Each party entitled to indemnification under this Article
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim in any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Article except to the extent
that the Indemnifying Party is actually prejudiced by such failure to provide
notice. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
10. CONTRIBUTION. If the indemnification provided for in Section 9 herein is
unavailable to the Indemnified Parties in respect of any losses, claims, damages
or liabilities referred to herein, then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) as between the Company on the one hand and the Indemnified
Parties on the other, in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Indemnified
Parties, as the case may be, on the other from the offering of the Registrable
Securities, or (ii) if such allocation is not permitted by applicable law, in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company on the one hand and of the Indemnified
Parties, as the case may be, on the other, in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Indemnified Parties, as the case may be, on the other shall be deemed to be in
the same proportion as the proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
from the initial sale of the Debentures by the Company pursuant to the Agreement
bear to the gain realized by the Holder or the total underwriting discounts and
commissions received by the underwriters as set forth in the table on the cover
page of the prospectus, as the case may be. The relative fault of the Company
on the one hand and of the Holder or underwriters, as the case may be, on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission to state a
material fact relates to information supplied by the Company, by the Holder or
by the underwriters.
In no event shall the obligation of any Indemnifying Party to contribute
under this Section 10 exceed the amount that such Indemnifying Party would have
been obligated to
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pay by way of indemnification if the indemnification provided for under Section
9(a) or 9(b) hereof had been available under the circumstances.
The Company and the Holder agree that it would not be just and equitable if
contribution pursuant to this Section 10 were determined by pro rata allocation
(even if the Indemnified Parties were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraphs. The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraphs
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Indemnified Party shall be
required to contribute any amount in excess of the amount by which (i) in the
case of the Holder, the net proceeds received by the Holder from the sale of
Registrable Securities or (ii) in the case of an underwriter, the total price at
which the Registrable Securities purchased by it and distributed to the public
were offered to the public exceeds, in any such case, the amount of any damages
that the Holder or underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
11. SURVIVAL. The indemnity and contribution agreements contained in Sections 9
and 10 and the representations and warranties of the Company referred to in
Section 2(b)(i) shall remain operative and in full force and effect regardless
of (i) any termination of the Agreement or any underwriting agreement, (ii) any
investigation made by or on behalf of any Indemnified Party or by or on behalf
of the Company and (iii) the consummation of the sale or successive resales of
the Registrable Securities.
12. INFORMATION BY HOLDER AND ANY UNDERWRITERS. The Holder and the
underwriters, if any, shall furnish to the Company, within 20 business days of
the Company's request therefor, such information regarding such Holder or
underwriters, as the case may be, and the distribution proposed by such Holder
or underwriters as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement.
13. TRANSFER OF ASSIGNMENT OF REGISTRATION RIGHTS: The rights, granted to
Holder by the Company under this Registration Rights Agreement, to cause the
Company to register Registrable Securities, may be transferred or assigned to a
transferee or assignee of any of not less than $200,000 in principal amount of
Debentures and any Warrants, provided that the Company is given written notice
by Holder at the time of or within a reasonable time after said transfer or
assignment, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned, and provided further that the transferee or
assignee of such rights is not deemed by the board of directors of the Company,
in its reasonable judgment, to be a competitor of the Company; and provided
further that the transferee or assignee of such rights agrees to be bound by
this Registration Rights Agreement.
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14. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Registration Rights Agreement contains the
entire understanding and agreement of the parties with respect to the subject
matter hereof, and may not be modified or terminated except by a written
agreement signed by both parties.
(b) NOTICES: Any notice or other communication given or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given
if personally delivered or sent by registered or certified mail, return receipt
requested, postage prepaid with a copy in each case sent on the same day to the
addressee by facsimile, Federal Express or other such expedited means, (a) if to
Purchaser, at its address hereinabove set forth, (b) if to the Company, at its
address hereinabove set forth, (c) if, to a Holder other than the Purchaser, at
the address thereof furnished by like notice to the Company, or (d) to any such
addressee at such other address or addresses as shall be so furnished to the
other parties hereto by like notice.
(c) GENDER OF TERMS. All terms used herein shall be deemed to include the
feminine and the neuter, and the singular and the plural, as the context
required.
(d) GOVERNING LAW; CONSENT OF JURISDICTION. This Registration Rights
Agreement and the validity and performance of the terms hereof shall be governed
by and construed in accordance with the laws of the State of New York, except to
the extent that the law of Delaware regulates the Company's issuance of
securities. The parties hereto hereby consent to, and waive any objection to
the exercise of, personal jurisdiction in the State of New York with respect to
any action or proceeding arising out of this Registration Rights Agreement.
(e) TITLE. The titles used in this Registration Rights Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.
IN WITNESS WHEREOF, the parties hereto have cause this Registration Rights
Agreement to be duly executed as of the date first above written.
HALIFAX FUND, L.P.
By: The Palladin Group, L.P.
Its Investment Manager
By: Palladin Capital Management LLC
Its General Partner
By:_____________________
Andrew Kaplan
Its Authorized Representataive
ZYCAD CORPORATION
a Delaware Corporation
By: ______________________________
Name:
Title:
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Exhibit 4.6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Registration Rights Agreement"),
entered into as of May 23, 1996, between CAPITAL VENTURES INTERNATIONAL, with
offices at 1 Capital Place, P.O. Box 1787GT, Grand Cayman, Cayman Islands
(the "Purchaser"), and ZYCAD CORPORATION, a Delaware corporation with offices
at 47100 Bayside Parkway, Fremont, California 94538 (the "Company")
W I T N E S S E T H:
WHEREAS, pursuant to a Convertible Securities Subscription Agreement,
dated as of May 23, 1996 (the "Agreement"), by and between the Company and
the Purchaser, the Company has agreed to sell and the Purchaser has agreed to
purchase Five Million Dollars (U.S.$5,000,000) of the Company's 6%
Convertible Subordinated Debenture due May 24, 1999 (the "Debentures")
convertible into shares of the Company's Common Stock, $.10 par value. The
Company has further agreed, pursuant to the Agreement and under the
circumstances provided therein, to issue Warrants to purchase additional
shares of such Common Stock. The shares of such Common Stock issuable upon
conversion of the Debentures and exercise of such Warrants are collectively
referred to herein as the "Shares".
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Purchaser's agreement to enter into the Agreement, the Company has agreed to
provide the Purchaser with certain registration rights with respect to the
Shares under certain circumstances set forth in the Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Agreement and this Registration Rights Agreement, the Company and the
Purchaser agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings. Other terms used herein which
are defined in the Agreement, the Debentures or the Warrants shall have the
same meanings herein as they do in such other documents.
"Commission" or "SEC" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean: (i) Shares issued to Purchaser or
its designee upon conversion of the Debentures, upon exercise of the Warrants
or upon any stock split, stock dividend, recapitalization or similar event
with respect to such Shares; and (ii) any securities issued or issuable to
Purchaser or any Holder upon the conversion or exercise or exchange of any
Debentures, Warrants or Shares.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
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"Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with Purchaser's exercise of its registration rights
under this Agreement, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, reasonable fees and disbursements of
counsel to Holder for a "due diligence" examination of the Company, and the
expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions, if any, applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for Holder not included within
"Registration Expenses."
"Holder" shall include the Purchaser and any transferee of Debentures,
Warrants, Shares or Registrable Securities which have not been sold to the
public to whom the registration rights conferred by this Agreement have been
transferred in compliance with Section 10 of this Agreement.
"Registration Statement" shall have the meaning set forth in Section
2(a) herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities Act" shall mean the Securities Act of 1933, as amended.
2. THE REGISTRATION REQUIREMENTS. The Company shall file and use its best
efforts to cause to become effective, as promptly as possible and in any
event by the ninetieth (90th) calendar day after the Closing Date in the case
of the registration of the Underlying Stock and by the two hundred seventieth
(270th) calendar day after the Closing Date in the case of the registration
of the Warrant Stock, (a) a registration statement on Form S-3 under the
Securities Act or, if Form S-3 is not then available, another appropriate
form covering the resale of the Underlying Stock issuable on conversion of
the Debentures and (b) another such registration statement covering the
resale of the Warrant Stock issuable upon the exercise of the Warrants, and
shall take all action necessary to qualify the Underlying Stock and the
Warrant Stock under state "blue sky" laws as hereinafter provided. The
Company shall use its diligent best efforts to effect the registrations
contemplated by the foregoing (including, without limitation, the execution
of an undertaking to file amendments and post-effective amendments,
appropriate qualification under and compliance with applicable blue sky or
other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) and as would permit or
facilitate the sale and distribution of all the Registrable Securities in all
states reasonably requested by the Holder for purposes of maximizing the
proceeds realizable by the Holder from such sale and distribution. Such best
efforts by the Company shall include, without limitation, the following:
(a) The Company shall file (i) registration statements with the
Commission pursuant to Rule 415 under the Securities Act on Form S-3 under
the Securities Act and the Company shall use its best efforts to qualify
for the use of such Form (or in the event that the Company is ineligible
to use such form, such other form as the Company is eligible to use under
the Securities Act) covering the Registrable Securities so to be
registered (each, a "Registration Statement"); (ii) such blue sky filings
as shall be reasonably requested to permit such sales PROVIDED, HOWEVER,
that the Company shall not be required to register the Registrable
Securities in any jurisdiction that would subject it to general service
of process in any such jurisdiction where it is not then so subject or
subject the Company to any tax in any
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such jurisdiction where it is not then so subject or require the Company
to qualify to do business in any jurisdiction where it is not then so
qualified; and (iii) any required filings with the National Association
of Securities Dealers, Inc. ("NASD") or exchange where the Shares are
traded; all as soon as practicable after the date hereof. The Company
shall use its best efforts to have the Registration Statements and other
filings declared effective as soon thereafter as may be practicable.
(b) The Company shall enter into such customary agreements (including a
customary underwriting agreement with the underwriter or underwriters, if
any) and take all such other reasonable actions in connection therewith in
order to expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not the Registrable
Securities are to be sold in an underwritten offering, the Company shall:
(i) make such representations and warranties to the Holder and the
underwriter or underwriters, if any, in form and substance and scope as
are customarily made by issuers to underwriters in secondary underwritten
offerings:
(ii) cause to be delivered to the sellers of Registrable Securities
and the underwriter or underwriters, if any, opinions of counsel to the
Company, dated the effective day (or in the case of an underwritten
offering, dated the date of delivery of any Registrable Securities sold
pursuant thereto) of the applicable registration statement (which counsel,
and opinions (in form, scope and substance), shall be reasonably
satisfactory to the managing underwriter or underwriters, if any, and the
appointed representative or counsel of the Holder, addressed to the Holder
and each underwriter, if any, covering the matters customarily covered in
opinions requested in secondary underwritten offerings and, in the case
of any underwritten offering, such other matters as may be reasonably
requested by the Holder;
(iii) cause to be delivered, immediately prior to the effectiveness
of the applicable Registration Statement (and, in the case of an
underwritten offering, at the time of delivery of any Registrable
Securities sold pursuant thereto), letters from the Company's independent
certified public accountants addressed to the Holder and each underwriter,
if any, stating that such accountants are independent public accountants
within the meaning of the Securities Act and the applicable published
rules and regulations thereunder, and otherwise in customary form and
covering such financial and accounting matters as are customarily covered
by letters of the independent certified public accountants delivered in
connection with secondary underwritten public offerings;
(iv) if an underwriting agreement is entered into, cause the same to
set forth indemnification and contribution provisions and procedures which
are no less favorable to the Holder and the Company than those
contemplated by sections 9 and 10 with respect to all parties to be
indemnified pursuant to such sections;
(v) deliver such documents and certificates as may be reasonably
requested by the Holder of the Registrable Securities being sold or the
managing underwriter or underwriters, if any, to evidence compliance with
clause (i) above and with any customary conditions contained in the
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underwriting agreement, if any, or other agreement entered into by the
Company;
the foregoing in this paragraph 2(b) shall be done at each closing under
any such underwriting or similar agreement or as and to the extent
required thereunder; provided, however, the foregoing in paragraph 2(b)
shall not be required on more than two (2) occasions.
(c) The Company shall make available for inspection and review by
the Holder, a representative or representatives of the Holder, any
underwriter participating in any disposition pursuant to a Registration
Statement, and any attorney or accountant retained by such Holder or
underwriter, any such registration statement or amendment or supplement or
any blue sky, NASD or other filing, all financial and other records,
pertinent corporate documents and properties of the Company as they may
reasonably request for the purpose, and cause the Company's officers,
directors and employees to supply all information reasonably requested by
any such representative, underwriter, attorney or accountant in connection
with such Registration Statement; PROVIDED, HOWEVER, that the Holder shall
first agree in writing with the Company that any information that is
reasonably and in good faith designated by the Company in writing as
confidential at the time of delivery of such information shall be kept
confidential by the Holder and that the Holder will use reasonable
efforts to cause its representatives and such other persons so to keep
such information confidential, unless (i) disclosure of such information
is required by court or administrative order or is necessary to respond
to inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure requirements
pursuant to Federal securities laws in connection with the filing of any
Registration Statement or the use of any prospectus referred to in this
Agreement), (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard by
any such person, (iv) such information becomes available to any such
person from a source other than the Company and such source, to the
knowledge of such persons, is not bound by a confidentiality agreement
with the Company, or (v) such information was known to or is developed
by such persons without reference to such confidential information of the
Company.
3. UNDERWRITTEN DISTRIBUTION. If the Holder intends to distribute the
Registrable Securities covered by a Registration Statement by means of an
underwriting, the Holder shall so advise the Company and, within 30 days of
the date thereof and without limiting the generality of other provisions
hereof, the Company will prepare and file such amendment or amendments to the
Registration Statement and make such other filings as may be necessary or
appropriate to effect any such underwritten distribution.
4. MULTIPLE HOLDERS. If there is more than one Holder, such Holders shall
act with respect to their rights under this Agreement according to the vote
of a majority-in-interest.
5. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
this Agreement shall be borne by the Company, and all Selling Expenses shall
be borne by the Holder.
6. REGISTRATION DELAY OR FAILURE. The Company acknowledges that its
failure to register the Registrable Securities in accordance with the
Agreement and this Registration Rights Agreement will cause the Holder to
suffer damages and undertake risks in amounts that will be difficult to
ascertain and were not anticipated in negotiating the terms hereof or of the
Agreement, the Debentures or the Warrants. Accordingly the parties agree
that it is
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appropriate to include herein a provision for liquidated damages and to
compensate the Holder fairly for the additional risk undertaken by the Holder
resulting from the Company's delay or failure to effect such registrations.
The parties acknowledge and agree that the provisions hereinafter set forth
in this Paragraph 6 represent the parties' good faith effort to quantify such
damages and to compensate for such additional risk and, as such, agree that
the form and amount of damages and risk compensation are reasonable and will
not constitute a penalty.
(a) If the Registration Statement covering the resale of the Underlying
Stock and the Warrant Stock is not effective by the ninetieth (90th) calender
day after the Closing, then, with respect to the 33 1/3% of the Debentures
outstanding on such ninetieth day (the "Ninetieth Day Debentures") and which,
pursuant to Paragraph 5(a) of the Debentures, may be converted following such
ninetieth day, each of the X%s (as defined in the Debentures) used in
determing the Conversion Date Market Price (as defined in the Debentures)
shall be reduced by two (2) percentage points, and the X%s as so reduced
shall then and thereafter be applicable to and upon the conversion of such 33
1/3% of the Ninetieth Day Debentures, in lieu and in place of the X%s
provided in the Debentures but subject to further reduction as hereinafter
provided in this Paragraph 6.
(b) If such Registration Statement still has not become effective by
the one hundred twentieth (120th) calendar day after the Closing, then:
(i) each of the X%s applicable to the Ninetieth Day Debentures to
which Paragraph 6(a) hereof shall be applicable (the "6(a) Ninetieth Day
Debentures"), as theretofore reduced pursuant to Paragraph 6(a) hereof,
shall be further reduced by three (3) percentage points and, as further
so reduced, shall then and thereafter be applicable to and upon conversion
of the 6(a) Ninetieth Day Debentures, but subject to further reduction as
hereinafter provided; and
(ii) each of the X%s originally provided in the Debentures and
applicable to the additional 33 1/3% of the Ninetieth Day Debentures
becoming convertible following such 120th day pursuant to Paragraph 5(a)
of the Debentures (the "6(b) Ninetieth Day Debentures") shall be reduced
by five (5) percentage points, and the X%s, as so reduced, shall then and
thereafter be applicable to and upon the conversion of the 6(b) Ninetieth
Day Debentures, in lieu and in place of the X%s provided in the
Debentures but subject to further reduction as hereafter provided in this
Paragraph 6.
(c) If such Registration Statement still has not become effective by
the one hundred fiftieth (150th) calendar day after the Closing, then:
(i) each of the X%s applicable to the 6(a) Ninetieth Day Debentures
and the 6(b) Nineties Day Debentures, as theretofore reduced pursuant to
Paragraphs 6(a) and (b) hereof, shall be further reduced by three (3)
percentage points on such 150th calendar day, and the X%s applicable to
the 6(a) and the 6(b) Ninetieth Day Debentures, as so reduced, shall then
and thereafter be applicable to and upon the conversion of such
Debentures; and
(ii) each of the X%s originally provided in the Debentures and
applicable to the final 33 1/3% of the Ninetieth Day Debentures becoming
convertible following such 150th day pursuant to Paragraph 5(a) of the
Debentures (the "6(c) Ninetieth Day Debentures") shall be reduced by eight
(8) percentage points on such 150th calendar day, and the X%s, as so
reduced, shall then and
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thereafter be applicable to and upon the conversion of the 6(c) Ninetieth
Day Debentures, in lieu and in place of the X%s provided in the
Debentures.
(d) If such Registration Statement still has not become effective by
the one hundred eightieth (180th) calendar day after the Closing, then there
shall be paid to each Holder by the Company, in cash, on such 180th day and
on each succeeding 30th day thereafter upon which such Registration Statement
still has not become effective, an amount equal to 3% of the Outstanding
Principal Amount of the Debentures held by the Holder on such 180th day or
succeeding 30th day, as the case may be, (each such payment, a "30 Day Delay
Payment") and if such Registration Statement shall become effective after the
one hundred fiftieth (150th) calendar day after the Closing but before such
180th day or any such succeeding 30th day, there shall also be paid to the
Holder, in cash, on the effective date of the Registration Statement a 30 Day
Delay Payment pro-rated according to the portion of the then current 30 day
period ending on such effective date.
(e) If such Registration Statement still has not become effective by
the first anniversary of the Closing, then, at the Holder's option exercised
at any time thereafter, the Company shall redeem the Holder's Debentures at a
Redemption Date designated by such Holder, and at the redemption price
provided in Paragraph 6(b)(i) of the Debentures.
7. REGISTRATION PROCEDURES. In the case of each registration effected by
the Company pursuant to this Agreement, the Company will keep the Holder
advised in writing as to initiation of each registration and as to the
completion thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for the period ending (i)
thirty-six (36) months after initial issuance of the Debentures, (ii) when
the Holder has completed the distribution of the Registrable Securities
described in the registration statement relating thereto, or (iii) the date
on which the Registrable Securities are distributed to the public pursuant to
Rule 144(k) or are saleable pursuant to Rule 144(k) promulgated under the
Securities Act, whichever first occurs.
(b) Furnish such number of prospectuses and other documents incident
thereto as the Holder from time to time may reasonably request.
8. SUSPENSION OF USE OF REGISTRATION STATEMENT. The Holder agrees that,
upon receipt of any notice from the Company of (A) the happening of any event
which makes any statements made in the registration statement(s) or related
prospectus(es) filed pursuant to this Registration Rights Agreement, or any
document incorporated or deemed to be incorporated therein by reference,
untrue in any material respect or which requires the making of any changes in
such registration statement(s) or prospectus(es) so that, in the case of such
registration statement(s), it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstance under which they were made, not misleading or (B) that, in the
judgment of the Company's Board of Directors, it is advisable to suspend use
of the prospectus(es) for a discrete period of time due to pending corporate
developments which are or may be material to the Company but have not been
disclosed in the Registration Statement(s) or in relevant public filings with
the SEC, or (C) the SEC has issued a stop order suspending the effectiveness
of the Registration Statement(s), the Holder will forthwith discontinue
disposition of such Shares covered by such Registration Statement(s) or
prospectus(es) until it is advised in writing by the Company that use of the
applicable prospectus may be resumed, and has received copies of any
additional or supplemented filings that are incorporated or deemed to be
incorporated by reference in such prospectus(es). The Company shall use all
reasonable best efforts to
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insure that the use of the prospectus(es) may be resumed as soon as
practicable, and in any event shall not be entitled to require the Holder to
suspend use of the prospectus(es) for more than thirty (30) consecutive days
on any one occasion, more than forty-five (45) consecutive days in the
aggregate on two occasions which are not at least 90 days apart or more than
an aggregate of sixty (60) days in any twelve month period.
9. INDEMNIFICATION.
(a) COMPANY INDEMNITY. The Company will indemnify the Holder, each of
its officers, directors and partners, and each person controlling Holder
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each
underwriter, if any, and each person who controls, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder,
any underwriter, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any state securities law or in either case,
any rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse the Holder,
each of its officers, directors and partners, and each person controlling
such Holder, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission (or alleged
untrue statement or omission) based upon written information furnished to the
Company by Holder or the underwriter and stated to be specifically for use
therein. The Indemnity agreement contained in this Section 9(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent will not be unreasonably withheld).
(b) HOLDER INDEMNITY. The Holder will, if Registrable Securities held
by it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, officers, partners, and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person
who controls the Company or such underwriter within the meaning of Section 15
of the Securities Act and the rules and regulations thereunder, each other
Holder (if any), and each of their officers, directors and partners, and each
person controlling such other Holder against all claims, losses, damages and
liabilities (or actions in respect thereof arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statement therein
not misleading, and will reimburse the Company and such other Holders and
their directors, officers and partners, underwriters or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in
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conformity with written information furnished to the Company by Holder and
stated to be specifically for use therein; provided, however, that the
obligations of Holder shall not apply to amounts paid in settlement of any
such claims, losses, damages or liabilities if such settlement is effected
without the consent of Holder (which consent shall not be unreasonably
withheld).
(c) PROCEDURE. Each party entitled to indemnification under this
Article (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim in any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
any litigation resulting therefrom, shall be approved by the Indemnified
Party (whose approval shall not be unreasonably withheld), and the
Indemnified Party may participate in such defense at such party's expense,
and provided further that the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its
obligations under this Article except to the extent that the Indemnifying
Party is actually prejudiced by such failure to provide notice. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably
request in writing and as shall be reasonably required in connection with the
defense of such claim and litigation resulting therefrom.
10. CONTRIBUTION. If the indemnification provided for in Section 9 herein
is unavailable to the Indemnified Parties in respect of any losses, claims,
damages or liabilities referred to herein, then each such Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (i) as between the Company on the one hand and
the Indemnified Parties on the other, in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Indemnified Parties, as the case may be, on the other from the offering of
the Registrable Securities, or (ii) if such allocation is not permitted by
applicable law, in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand
and of the Indemnified Parties, as the case may be, on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations.
The relative benefits received by the Company on the one hand and the
Indemnified Parties, as the case may be, on the other shall be deemed to be
in the same proportion as the proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the
Company from the initial sale of the Debentures by the Company pursuant to
the Agreement bear to the gain realized by the Holder or the total
underwriting discounts and commissions received by the underwriters as set
forth in the table on the cover page of the prospectus, as the case may be.
The relative fault of the Company on the one hand and of the Holder or
underwriters, as the case may be, on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission to state a material fact relates to
information supplied by the Company, by the Holder or by the underwriters.
In no event shall the obligation of any Indemnifying Party to contribute
under this Section 10 exceed the amount that such Indemnifying Party would
have been obligated to
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pay by way of indemnification if the indemnification provided for under
Section 9(a) or 9(b) hereof had been available under the circumstances.
The Company and the Holder agree that it would not be just and equitable
if contribution pursuant to this Section 10 were determined by pro rata
allocation (even if the Indemnified Parties were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraphs. The amount paid or payable by an Indemnified Party as
a result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred
by such Indemnified Party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this section, no
Indemnified Party shall be required to contribute any amount in excess of the
amount by which (i) in the case of the Holder, the net proceeds received by
the Holder from the sale of Registrable Securities or (ii) in the case of an
underwriter, the total price at which the Registrable Securities purchased by
it and distributed to the public were offered to the public exceeds, in any
such case, the amount of any damages that the Holder or underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
11. SURVIVAL. The indemnity and contribution agreements contained in
Sections 9 and 10 and the representations and warranties of the Company
referred to in Section 2(b)(i) shall remain operative and in full force and
effect regardless of (i) any termination of the Agreement or any underwriting
agreement, (ii) any investigation made by or on behalf of any Indemnified
Party or by or on behalf of the Company and (iii) the consummation of the
sale or successive resales of the Registrable Securities.
12. INFORMATION BY HOLDER AND ANY UNDERWRITERS. The Holder and the
underwriters, if any, shall furnish to the Company, within 20 business days
of the Company's request therefor, such information regarding such Holder or
underwriters, as the case may be, and the distribution proposed by such
Holder or underwriters as the Company may reasonably request in writing and
as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
13. TRANSFER OF ASSIGNMENT OF REGISTRATION RIGHTS: The rights, granted to
Holder by the Company under this Registration Rights Agreement, to cause the
Company to register Registrable Securities, may be transferred or assigned to
a transferee or assignee of any of not less than $200,000 in principal amount
of Debentures and any Warrants, provided that the Company is given written
notice by Holder at the time of or within a reasonable time after said
transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned, and provided further
that the transferee or assignee of such rights is not deemed by the board of
directors of the Company, in its reasonable judgment, to be a competitor of
the Company; and provided further that the transferee or assignee of such
rights agrees to be bound by this Registration Rights Agreement.
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14. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Registration Rights Agreement contains the
entire understanding and agreement of the parties with respect to the subject
matter hereof, and may not be modified or terminated except by a written
agreement signed by both parties.
(b) NOTICES: Any notice or other communication given or permitted
under this Agreement shall be in writing and shall be deemed to have been
duly given if personally delivered or sent by registered or certified mail,
return receipt requested, postage prepaid with a copy in each case sent on
the same day to the addressee by facsimile, Federal Express or other such
expedited means, (a) if to Purchaser, at its address hereinabove set forth,
(b) if to the Company, at its address hereinabove set forth, (c) if, to a
Holder other than the Purchaser, at the address thereof furnished by like
notice to the Company, or (d) to any such addressee at such other address or
addresses as shall be so furnished to the other parties hereto by like notice.
(c) GENDER OF TERMS. All terms used herein shall be deemed to include
the feminine and the neuter, and the singular and the plural, as the context
required.
(d) GOVERNING LAW; CONSENT OF JURISDICTION. This Registration Rights
Agreement and the validity and performance of the terms hereof shall be
governed by and construed in accordance with the laws of the State of New
York, except to the extent that the law of Delaware regulates the Company's
issuance of securities. The parties hereto hereby consent to, and waive any
objection to the exercise of, personal jurisdiction in the State of New York
with respect to any action or proceeding arising out of this Registration
Rights Agreement.
(e) TITLE. The titles used in this Registration Rights Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
IN WITNESS WHEREOF, the parties hereto have cause this Registration
Rights Agreement to be duly executed as of the date first above written.
CAPITAL VENTURES INTERNATIONAL
By: ______________________________
ZYCAD CORPORATION
a Delaware Corporation
By: ______________________________
Name:
Title:
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EXHIBIT 4.7
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR THE SECURITIES LAWS OF ANY STATE. THIS WARRANT MAY NOT
BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER PROVISIONS OF
THE FEDERAL ACT AND ALL APPLICABLE STATE SECURITIES LAWS.
Right to Purchase Shares of Common Stock
of Zycad Corporation
_________________________
Common Stock Purchase Warrant
ZYCAD CORPORATION, a Delaware corporation (the "Company"), hereby
certifies that for $10.00 and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Halifax Fund, L.P.,
having an address c/o Citco Fund Services Ltd., Corporate Centre, West Bay
Road, P.O. Box 31106 SMB, Grand Cayman, Cayman Islands ("Purchaser") or any
other Warrant Holder is entitled, on the terms and conditions set forth
below, to purchase from the Company at any time beginning six (6) months
after the date hereof and ending thirty (30) months after the date hereof
that number of fully paid and nonassessable shares of Common Stock, $.10 par
value, of the Company (the "Common Stock") as shall be determined by dividing
the Outstanding Principal Amount (as defined below) of the Related Debenture
(as defined below) on the date six (6) months after the date hereof by
$100.00, at a purchase price per share of $10.00 (the "Purchase Price"), as
the same may be adjusted pursuant to Section 5 herein.
1. DEFINITIONS.
(a) the term "Warrant Holder" shall mean the Purchaser or any
assignee of all or any portion of this Warrant at any given time who,
at the time of assignment, acquired the right to purchase at least
2000 Warrant Shares, (such number being subject to adjustment after
the date hereof pursuant to Section 5 herein.)
(b) the term "Warrant Shares" shall mean the Shares of Common Stock or
other securities issuable upon exercise of this Warrant.
(c) the term "Related Debenture" shall mean the Debenture of even date
herewith issued to the initial Holder hereof pursuant to the Agreement
(as defined below) and the term "Outstanding Principal Amount" shall
have the meaning given in such Debenture.
(d) other terms used herein which are defined in the Convertible
Securities Subscription Agreement (the "Agreement") or the Registration
Rights Agreement (the "Registration Rights Agreement"), both of even
date and delivery between the Company and the Purchaser, or in the
Debentures issued by the Company to the Purchaser pursuant to the
Agreement (the "Debentures"), shall have the same meanings herein as
therein.
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2. EXERCISE OF WARRANT.
This Warrant may be exercised by the Warrant Holder, in whole or in part,
at any time and from time to time by surrender of this Warrant, together with
the form of subscription at the end hereof duly executed by Warrant Holder,
to the Company at its principal office. In the event that the Warrant is not
exercised in full, the number of Warrant Shares shall be reduced by the
number of such Warrant Shares for which this Warrant is exercised, and the
Company, at its expense, shall forthwith issue and deliver to or upon the
order of Warrant Holder a new Warrant of like tenor in the name of Warrant
Holder or as Warrant Holder (upon payment by Warrant Holder of any applicable
transfer taxes) may request, reflecting such adjusted Warrant Shares.
Notwithstanding the foregoing, this Warrant may be exercised only if the fair
market value (as herein defined) of the Common Stock shall exceed the
Purchase Price on the date of exercise.
3. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within five (5) days thereafter, the Company at its expense (including,
without limitation, the payment by it of any applicable issue taxes) will
cause to be issued in the name of and delivered to Warrant Holder, or as
Warrant Holder (upon payment by Warrant Holder of any applicable transfer
taxes) may lawfully direct, a certificate or certificates for the number of
fully paid and non-assessable shares of Common Stock to which Warrant Holder
shall be entitled on such exercise, together with any other stock or other
securities or property (including cash, where applicable) to which Warrant
Holder is entitled upon such exercise.
(b) This Warrant may not be exercised as to fractional shares of
Common Stock. In the event that the exercise of this Warrant, in full or in
part, would result in the issuance of any fractional share of Common Stock,
then in such event Warrant Holder shall be entitled to cash equal to the fair
market value of such fractional share. For purposes of this Warrant, fair
market value shall equal the closing trading price of the Common Stock on the
Nasdaq Stock Market, the American Stock Exchange or the New York Stock
Exchange, whichever is the principal trading exchange or market for the
Common Stock (the "Principal Market") on the date of determination or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange or quoted in the Nasdaq Stock Market, the average of the closing bid
and asked prices on the over-the-counter market as furnished by any New York
Stock Exchange member firm reasonably selected from time to time by the
Company for that purpose, or, if the Common Stock is not listed or admitted
to trading on any national securities exchange or quoted on the Nasdaq Stock
Market or traded over-the-counter and the average price cannot be determined
a contemplated above, the fair market value of the Common Stock shall be as
reasonably determined in good faith by the Company's Board of Directors.
4. COVENANTS OF THE COMPANY.
(a) The Company shall use its reasonable best efforts to insure that
a Registration Statement under the Act covering the issuance of the Warrant
Shares and the resale or other disposition thereof by Warrant Holder is
effective as provided in its Registration Rights Agreement.
(b) The Company shall take all necessary action and proceedings as
may be required and permitted by applicable law, rule and regulation,
including, without
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limitation the notification of the Nasdaq Stock Market, for the legal and
valid issuance of this Warrant and the Warrant Shares to the Warrant Holder
under this Warrant.
(c) From the date hereof through the last date on which this
Warrant is exercisable, the Company shall take all steps reasonably necessary
and within its control to insure that the Common Stock remains listed on the
Principal Market and shall not amend its Certificate of Incorporation or
Bylaws so as to adversely affect any rights of the Warrant Holder under this
Warrant.
(d) The Company shall at all times reserve and keep available,
solely for issuance and delivery as Warrant Shares hereunder, such shares of
Common Stock as shall from time to time be issuable.
(e) The Warrant Shares, when issued in accordance with the terms
hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and
non-assessable. The Company has authorized and reserved for issuance to
Warrant Holder the requisite number of shares of Common Stock to be issued
pursuant to this Warrant.
(f) With a view to making available to Warrant Holder the
benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the SEC that may at any time permit Warrant Holder to sell
securities of the Company to the public without registration, the Company
agrees to use its reasonable best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
(ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Exchange Act; and
(iii) furnish to any Warrant Holder forthwith upon request a
written statement by the Company that it has complied with the reporting
requirements of Rule 144 and of the Act and the Exchange Act, a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents so filed by the Company as may be reasonably
requested to permit any such Warrant Holder to take advantage of any rule
or regulation of the SEC permitting the selling of any such securities
without registration.
5. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number of and
kind of securities purchasable upon exercise of this Warrant and the Purchase
Price shall be subject to adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the Company
shall at any time after the date hereof but prior to the expiration of this
Warrant subdivide its outstanding securities as to which purchase rights under
this Warrant exist, by split-up, spin-off, or otherwise, or combine its
outstanding securities as to which purchase rights under this Warrant exist,
the number of Warrant Shares as to which this Warrant is exercisable as of
the date of such subdivision, split-up, spin-off or combination shall
forthwith be proportionately increased in the case of a subdivision, or
proportionately decreased in the case of a combination. Appropriate
adjustments shall also be made to the purchase price payable per share, but
the aggregate purchase price payable for the total number of Warrant Shares
purchasable under this Warrant as of such date shall remain the same.
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(b) STOCK DIVIDEND. If at any time after the date hereof the Company
declares a dividend or other distribution on Common Stock payable in Common
Stock or other securities or rights convertible into Common Stock ("Common
Stock Equivalents") without payment of any consideration by holders of Common
Stock for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
exercise or conversion thereof), then the number of shares of Common Stock
for which this Warrant may be exercised shall be increased as of the record
date (or the date of such dividend distribution if no record date is set) for
determining which holders of Common Stock shall be entitled to receive such
dividends, in proportion to the increase in the number of outstanding shares
(and shares of Common Stock issuable upon conversion of all such securities
convertible into Common Stock) of Common Stock as a result of such dividend,
and the Purchase Price shall be adjusted so that the aggregate amount payable
for the purchase of all the Warrant Shares issuable hereunder immediately
after the record date (or on the date of such distribution, if applicable),
for such dividend shall equal the aggregate amount so payable immediately
before such record date (or on the date of such distribution, if applicable).
(c) OTHER DISTRIBUTIONS. If at any time after the date hereof the
Company distributes to holders of its Common Stock, other than as part of its
dissolution, liquidation or the winding up of its affairs, any shares of its
capital stock, any evidence of indebtedness or any of its assets (other than
cash, Common Stock or securities convertible into Common Stock), then the
Company shall decrease the per share Purchase Price of this Warrant by an
appropriate amount based upon the value distributed on each share of Common
Stock as determined in good faith by the Company's Board of Directors.
(d) MERGER, ETC. If at any time after the date hereof there shall
be a merger or consolidation of the Company with or into or a transfer of all
or substantially all of the assets of the Company to another entity, then the
Warrant Holder shall be entitled to receive upon such transfer, merger or
consolidation becoming effective, and upon payment of the aggregate Purchase
Price then in effect, the number of shares or other securities or property of
the Company or of the successor corporation resulting from such merger or
consolidation, which would have been received by Warrant Holder for the
shares of stock subject to this Warrant had this Warrant been exercised just
prior to such transfer, merger or consolidation becoming effective or to the
applicable record date thereof, as the case may be.
(e) RECLASSIFICATION, ETC. If at any time after the date hereof
there shall be a reorganization or reclassification of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Warrant Holder
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Purchase Price then in
effect, the number of shares or other securities or property resulting from
such reorganization or reclassification, which would have been received by
the Warrant Holder for the shares of stock subject to this Warrant had this
Warrant at such time been exercised.
(f) PURCHASE PRICE ADJUSTMENT. In the event that the Company issues
or sells any Common Stock or securities which are convertible into or
exchangeable for its Common Stock or any convertible securities, or any
warrants or other rights to subscribe for or to purchase or any options for
the purchase of its Common Stock or any such convertible securities (other
than shares or options issued or which may be issued pursuant to the
Company's employee or director option plans or shares issued upon exercise of
options, warrants or rights outstanding on the date of the Agreement and
listed in the Exchange Act Reports) at an effective purchase price per share
which is less than the Purchase Price then in effect or the fair market value
(as hereinabove defined) of the
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Common Stock on the trading day next preceding such issue or sale, then in
each such case, the Purchase Price in effect immediately prior to such issue
or sale shall be reduced effective concurrently with such issue or sale to an
amount determined by multiplying the Purchase Price then in effect by a
fraction, (x) the numerator of which shall be the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or sale,
including, without duplication, those deemed to have been issued under any
provision of the Debentures and the Warrants plus (2) the number of shares of
Common Stock which the aggregate consideration received by the Company for
such additional shares would purchase at such fair market value or Purchase
Price, as the case may be, then in effect; and (y) the denominator of which
shall be the number of shares of Common Stock of the Company outstanding
immediately after such issue or sale including, without duplication, those
deemed to have been issued under any provision of the Debentures and
Warrants. For purposes of the foregoing fraction, Common Stock outstanding
shall include, without limitation, any Equity Offerings (as defined in the
Debentures) then outstanding, whether or not they are exercisable or
convertible when such fraction is to be determined.
In the event of any such issuance for a consideration which is less
than such fair market value and also less than the Purchase Price then in
effect, then there shall be only one such adjustment by reason of such
issuance, such adjustment to be that which results in the greatest reduction
of the Purchase Price computed as aforesaid. The number of shares which may
be purchased hereunder shall be increased proportionately to any reduction in
Purchase Price pursuant to this paragraph 5(f), so that after such
adjustments the aggregate Purchase Price payable hereunder for the increased
number of shares shall be the same as the aggregate Purchase Price in effect
just prior to such adjustments.
6. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the Warrant Holder against impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase the par value
of any Warrant Shares above the amount payable therefor on such exercise, and
(b) will take all such action as may be reasonably necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares on the exercise of this Warrant.
7. NOTICE OF ADJUSTMENTS; NOTICES. Whenever the Purchase Price or
number of Shares purchasable hereunder shall be adjusted pursuant to Section
5 hereof, the Company shall execute and deliver to the Warrant Holder a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated and the Purchase Price and number of shares purchasable
hereunder after giving effect to such adjustment, and shall cause a copy of
such certificate to be mailed (by first class mail, postage prepaid) to the
Warrant Holder.
8. RIGHTS AS STOCKHOLDER. Prior to exercise of this Warrant, the
Warrant Holder shall not be entitled to any rights as a stockholder of the
Company with respect to the Warrant Shares, including (without limitation)
the right to vote such shares, receive dividends or other distributions
thereon or be notified of stockholder meetings. However, in the event of any
taking by the Company of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other distribution, any
right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to receive any other right,
the Company shall mail to each Warrant Holder, at
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least 10 days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
9. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
the Warrant and, in the case of any such loss, theft or destruction of the
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
10. SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION.
(a) The Company and the Warrant Holder acknowledge and agree
that irreparable damage would occur in the event that any of the provisions
of this Warrant were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Warrant and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which either
of them may be entitled by law or equity.
(b) Each of the Company and the Warrant Holder (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States
District Court for the Southern District of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Warrant and
(ii) hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Warrant Holder consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address in effect for notices to it under this Warrant
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing in this paragraph shall affect or limit
any right to serve process in any other manner permitted by law.
11. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Exhibits hereto
and the provisions contained in the Agreement, the Registration Rights
Agreement or the Debentures and incorporated into this Warrant and the
Warrant Shares contain the entire understanding of the parties with respect
to the matters covered hereby and thereby and, except as specifically set
forth herein and therein, neither the Company nor the Warrant Holder makes
any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than
by a written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
12. RESTRICTED SECURITIES. Sections 4.5, 5.1, 5.2 and 5.3 of the
Agreement are incorporated herein by reference and hereby made a part hereof.
13. NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be effective (a) upon
hand delivery or delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated below (if delivered
on a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice
is to be received) or (b) on the second business day following the date of
mailing by express
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courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
to the Company:
Zycad Corporation
47100 Bayside Parkway
Fremont, California 94538
Attn:
Fax:
with copies to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attn:
Fax:
to the Warrant Holder:
Halifax Fund, L.P.
c/o Citco Fund Services Ltd.
Corporate Centre
West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
Attn:
Fax:
with copies to:
Palladin Group L.P.
40 West 57th Street
Suite 1500
New York, New York 10019
Attn: Andrew Kaplan
Fax: (212) 698-0599
Either party hereto may from time to time change its address for notices
under this Section 13 by giving at least 10 days prior written notice of such
changed address to the other party hereto.
14. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of New York. The
headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity
or enforceability of any other provision.
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15. EXPIRATION. The right to exercise this Warrant shall expire
thirty (30) months after the date hereof or if, before such expiration, the
fair market value of the Common Stock, determined as hereinabove provided,
shall have been not less than $12 per share for ten (10) consecutive trading
days, but only to the extent that the Warrant Holder shall have failed to
exercise this Warrant within twenty (20) days after notice thereof from the
Company.
[The remainder of this page has intentionally been left blank.]
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Dated: May 23, 1996 ZYCAD CORPORATION
By:___________________________________
Title:
[CORPORATE SEAL]
Attest:
By:_______________________
Its:
HALIFAX FUND, L.P.
By The Palladin Group, L.P.
Its Investment Manager
By Palladin Capital Management LLC
Its General Partner
By: _______________________
Andrew Kaplan
Authorized Representative
FORM OF WARRANT EXERCISE
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO _________________________
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, _________
shares of Common Stock of ZYCAD CORPORATION, a Delaware corporation (the
"Company"), and herewith makes payment of $__________ therefor, and requests
that the certificates for such shares be issued in the name of, and delivered
to _________________, whose address is __________________.
Dated: ___________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
(Address)
Tax Identification Number:_____________
_____________________
FORM OF ASSIGNMENT
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(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers unto
_________________ the right represented by the within Warrant to purchase
_____________ shares of Common stock of ZYCAD CORPORATION, a Delaware
corporation, to which the within Warrant relates, and appoints
_________________ Attorney to transfer such right on the books of ZYCAD
CORPORATION, a Delaware corporation, with full power of substitution the
premises.
Dated: _________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
(Address)
Signed in the presence of:
____________________________
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EXHIBIT 4.8
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR THE SECURITIES LAWS OF ANY STATE. THIS WARRANT MAY
NOT BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER PROVISIONS
OF THE FEDERAL ACT AND ALL APPLICABLE STATE SECURITIES LAWS.
Right to Purchase Shares of Common Stock
of Zycad Corporation
_________________________
Common Stock Purchase Warrant
ZYCAD CORPORATION, a Delaware corporation (the "Company"), hereby
certifies that for $10.00 and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, CAPITAL VENTURES
INTERNATIONAL, having an address at 1 Capital Place, P.O. Box 1787GT, Grand
Cayman, Cayman Islands ("Purchaser") or any other Warrant Holder is entitled,
on the terms and conditions set forth below, to purchase from the Company at
any time beginning six (6) months after the date hereof and ending thirty
(30) months after the date hereof that number of fully paid and nonassessable
shares of Common Stock, $.10 par value, of the Company (the "Common Stock")
as shall be determined by dividing the Outstanding Principal Amount (as
defined below) of the Related Debenture (as defined below) on the date six
(6) months after the date hereof by $100.00, at a purchase price per share of
$10.00 (the "Purchase Price"), as the same may be adjusted pursuant to
Section 5 herein.
1. DEFINITIONS.
(a) the term "Warrant Holder" shall mean the Purchaser or any
assignee of all or any portion of this Warrant at any given time
who, at the time of assignment, acquired the right to purchase at
least 2000 Warrant Shares, (such number being subject to adjustment
after the date hereof pursuant to Section 5 herein.)
(b) the term "Warrant Shares" shall mean the Shares of Common Stock
or other securities issuable upon exercise of this Warrant.
(c) the term "Related Debenture" shall mean the Debenture of even
date herewith issued to the initial Holder hereof pursuant to the
Agreement (as defined below) and the term "Outstanding Principal
Amount" shall have the meaning given in such Debenture.
(d) other terms used herein which are defined in the Convertible
Securities Subscription Agreement (the "Agreement") or the
Registration Rights Agreement (the "Registration Rights Agreement"),
both of even date and delivery between the Company and the
Purchaser, or in the Debentures issued by the Company to the
Purchaser pursuant to the Agreement (the "Debentures"), shall have
the same meanings herein as therein.
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2. EXERCISE OF WARRANT.
This Warrant may be exercised by the Warrant Holder, in whole or in
part, at any time and from time to time by surrender of this Warrant,
together with the form of subscription at the end hereof duly executed by
Warrant Holder, to the Company at its principal office. In the event that
the Warrant is not exercised in full, the number of Warrant Shares shall be
reduced by the number of such Warrant Shares for which this Warrant is
exercised, and the Company, at its expense, shall forthwith issue and deliver
to or upon the order of Warrant Holder a new Warrant of like tenor in the
name of Warrant Holder or as Warrant Holder (upon payment by Warrant Holder
of any applicable transfer taxes) may request, reflecting such adjusted
Warrant Shares. Notwithstanding the foregoing, this Warrant may be exercised
only if the fair market value (as herein defined) of the Common Stock shall
exceed the Purchase Price on the date of exercise.
3. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as soon
as practicable after the exercise of this Warrant in full or in part, and in
any event within five (5) days thereafter, the Company at its expense
(including, without limitation, the payment by it of any applicable issue
taxes) will cause to be issued in the name of and delivered to Warrant
Holder, or as Warrant Holder (upon payment by Warrant Holder of any
applicable transfer taxes) may lawfully direct, a certificate or certificates
for the number of fully paid and non-assessable shares of Common Stock to
which Warrant Holder shall be entitled on such exercise, together with any
other stock or other securities or property (including cash, where
applicable) to which Warrant Holder is entitled upon such exercise.
(b) This Warrant may not be exercised as to fractional shares of
Common Stock. In the event that the exercise of this Warrant, in full or in
part, would result in the issuance of any fractional share of Common Stock,
then in such event Warrant Holder shall be entitled to cash equal to the fair
market value of such fractional share. For purposes of this Warrant, fair
market value shall equal the closing trading price of the Common Stock on the
Nasdaq Stock Market, the American Stock Exchange or the New York Stock
Exchange, whichever is the principal trading exchange or market for the
Common Stock (the "Principal Market") on the date of determination or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange or quoted in the Nasdaq Stock Market, the average of the closing bid
and asked prices on the over-the-counter market as furnished by any New York
Stock Exchange member firm reasonably selected from time to time by the
Company for that purpose, or, if the Common Stock is not listed or admitted
to trading on any national securities exchange or quoted on the Nasdaq Stock
Market or traded over-the-counter and the average price cannot be determined
a contemplated above, the fair market value of the Common Stock shall be as
reasonably determined in good faith by the Company's Board of Directors.
4. COVENANTS OF THE COMPANY.
(a) The Company shall use its reasonable best efforts to insure
that a Registration Statement under the Act covering the issuance of the
Warrant Shares and the resale or other disposition thereof by Warrant Holder
is effective as provided in its Registration Rights Agreement.
(b) The Company shall take all necessary action and proceedings
as may be required and permitted by applicable law, rule and regulation,
including, without
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limitation the notification of the Nasdaq Stock Market, for the legal and
valid issuance of this Warrant and the Warrant Shares to the Warrant Holder
under this Warrant.
(c) From the date hereof through the last date on which this
Warrant is exercisable, the Company shall take all steps reasonably necessary
and within its control to insure that the Common Stock remains listed on the
Principal Market and shall not amend its Certificate of Incorporation or
Bylaws so as to adversely affect any rights of the Warrant Holder under this
Warrant.
(d) The Company shall at all times reserve and keep available,
solely for issuance and delivery as Warrant Shares hereunder, such shares of
Common Stock as shall from time to time be issuable.
(e) The Warrant Shares, when issued in accordance with the terms
hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and
non-assessable. The Company has authorized and reserved for issuance to
Warrant Holder the requisite number of shares of Common Stock to be issued
pursuant to this Warrant.
(f) With a view to making available to Warrant Holder the
benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the SEC that may at any time permit Warrant Holder to sell
securities of the Company to the public without registration, the Company
agrees to use its reasonable best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
(ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Exchange Act; and
(iii) furnish to any Warrant Holder forthwith upon request a
written statement by the Company that it has complied with the reporting
requirements of Rule 144 and of the Act and the Exchange Act, a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents so filed by the Company as may be reasonably
requested to permit any such Warrant Holder to take advantage of any rule
or regulation of the SEC permitting the selling of any such securities
without registration.
5. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number of
and kind of securities purchasable upon exercise of this Warrant and the
Purchase Price shall be subject to adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the Company
shall at any time after the date hereof but prior to the expiration of this
Warrant subdivide its outstanding securities as to which purchase rights
under this Warrant exist, by split-up, spin-off, or otherwise, or combine its
outstanding securities as to which purchase rights under this Warrant exist,
the number of Warrant Shares as to which this Warrant is exercisable as of
the date of such subdivision, split-up, spin-off or combination shall
forthwith be proportionately increased in the case of a subdivision, or
proportionately decreased in the case of a combination. Appropriate
adjustments shall also be made to the purchase price payable per share, but
the aggregate purchase price payable for the total number of Warrant Shares
purchasable under this Warrant as of such date shall remain the same.
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(b) STOCK DIVIDEND. If at any time after the date hereof the
Company declares a dividend or other distribution on Common Stock payable in
Common Stock or other securities or rights convertible into Common Stock
("Common Stock Equivalents") without payment of any consideration by holders
of Common Stock for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
exercise or conversion thereof), then the number of shares of Common Stock
for which this Warrant may be exercised shall be increased as of the record
date (or the date of such dividend distribution if no record date is set) for
determining which holders of Common Stock shall be entitled to receive such
dividends, in proportion to the increase in the number of outstanding shares
(and shares of Common Stock issuable upon conversion of all such securities
convertible into Common Stock) of Common Stock as a result of such dividend,
and the Purchase Price shall be adjusted so that the aggregate amount payable
for the purchase of all the Warrant Shares issuable hereunder immediately
after the record date (or on the date of such distribution, if applicable),
for such dividend shall equal the aggregate amount so payable immediately
before such record date (or on the date of such distribution, if applicable).
(c) OTHER DISTRIBUTIONS. If at any time after the date hereof the
Company distributes to holders of its Common Stock, other than as part of its
dissolution, liquidation or the winding up of its affairs, any shares of its
capital stock, any evidence of indebtedness or any of its assets (other than
cash, Common Stock or securities convertible into Common Stock), then the
Company shall decrease the per share Purchase Price of this Warrant by an
appropriate amount based upon the value distributed on each share of Common
Stock as determined in good faith by the Company's Board of Directors.
(d) MERGER, ETC. If at any time after the date hereof there shall
be a merger or consolidation of the Company with or into or a transfer of all
or substantially all of the assets of the Company to another entity, then the
Warrant Holder shall be entitled to receive upon such transfer, merger or
consolidation becoming effective, and upon payment of the aggregate Purchase
Price then in effect, the number of shares or other securities or property of
the Company or of the successor corporation resulting from such merger or
consolidation, which would have been received by Warrant Holder for the
shares of stock subject to this Warrant had this Warrant been exercised just
prior to such transfer, merger or consolidation becoming effective or to the
applicable record date thereof, as the case may be.
(e) RECLASSIFICATION, ETC. If at any time after the date hereof
there shall be a reorganization or reclassification of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Warrant Holder
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Purchase Price then in
effect, the number of shares or other securities or property resulting from
such reorganization or reclassification, which would have been received by
the Warrant Holder for the shares of stock subject to this Warrant had this
Warrant at such time been exercised.
(f) PURCHASE PRICE ADJUSTMENT. In the event that the Company
issues or sells any Common Stock or securities which are convertible into or
exchangeable for its Common Stock or any convertible securities, or any
warrants or other rights to subscribe for or to purchase or any options for
the purchase of its Common Stock or any such convertible securities (other
than shares or options issued or which may be issued pursuant to the
Company's employee or director option plans or shares issued upon exercise of
options, warrants or rights outstanding on the date of the Agreement and
listed in the Exchange Act Reports) at an effective purchase price per share
which is less than the Purchase Price then in effect or the fair market value
(as hereinabove defined) of the
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<PAGE>
Common Stock on the trading day next preceding such issue or sale, then in
each such case, the Purchase Price in effect immediately prior to such issue
or sale shall be reduced effective concurrently with such issue or sale to an
amount determined by multiplying the Purchase Price then in effect by a
fraction, (x) the numerator of which shall be the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or sale,
including, without duplication, those deemed to have been issued under any
provision of the Debentures and the Warrants plus (2) the number of shares of
Common Stock which the aggregate consideration received by the Company for
such additional shares would purchase at such fair market value or Purchase
Price, as the case may be, then in effect; and (y) the denominator of which
shall be the number of shares of Common Stock of the Company outstanding
immediately after such issue or sale including, without duplication, those
deemed to have been issued under any provision of the Debentures and
Warrants. For purposes of the foregoing fraction, Common Stock outstanding
shall include, without limitation, any Equity Offerings (as defined in the
Debentures) then outstanding, whether or not they are exercisable or
convertible when such fraction is to be determined.
In the event of any such issuance for a consideration which is less than
such fair market value and also less than the Purchase Price then in effect,
then there shall be only one such adjustment by reason of such issuance, such
adjustment to be that which results in the greatest reduction of the Purchase
Price computed as aforesaid. The number of shares which may be purchased
hereunder shall be increased proportionately to any reduction in Purchase
Price pursuant to this paragraph 5(f), so that after such adjustments the
aggregate Purchase Price payable hereunder for the increased number of shares
shall be the same as the aggregate Purchase Price in effect just prior to
such adjustments.
6. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the Warrant Holder against impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase the par value
of any Warrant Shares above the amount payable therefor on such exercise, and
(b) will take all such action as may be reasonably necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares on the exercise of this Warrant.
7. NOTICE OF ADJUSTMENTS; NOTICES. Whenever the Purchase Price or
number of Shares purchasable hereunder shall be adjusted pursuant to Section
5 hereof, the Company shall execute and deliver to the Warrant Holder a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated and the Purchase Price and number of shares purchasable
hereunder after giving effect to such adjustment, and shall cause a copy of
such certificate to be mailed (by first class mail, postage prepaid) to the
Warrant Holder.
8. RIGHTS AS STOCKHOLDER. Prior to exercise of this Warrant, the
Warrant Holder shall not be entitled to any rights as a stockholder of the
Company with respect to the Warrant Shares, including (without limitation)
the right to vote such shares, receive dividends or other distributions
thereon or be notified of stockholder meetings. However, in the event of any
taking by the Company of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other distribution, any
right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to receive any other right,
the Company shall mail to each Warrant Holder, at
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<PAGE>
least 10 days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
9. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
the Warrant and, in the case of any such loss, theft or destruction of the
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
10. SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION.
(a) The Company and the Warrant Holder acknowledge and agree
that irreparable damage would occur in the event that any of the provisions
of this Warrant were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Warrant and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which either
of them may be entitled by law or equity.
(b) Each of the Company and the Warrant Holder (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States
District Court for the Southern District of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Warrant and
(ii) hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Warrant Holder consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address in effect for notices to it under this Warrant
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing in this paragraph shall affect or limit
any right to serve process in any other manner permitted by law.
11. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Exhibits hereto
and the provisions contained in the Agreement, the Registration Rights
Agreement or the Debentures and incorporated into this Warrant and the
Warrant Shares contain the entire understanding of the parties with respect
to the matters covered hereby and thereby and, except as specifically set
forth herein and therein, neither the Company nor the Warrant Holder makes
any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than
by a written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
12. RESTRICTED SECURITIES. Sections 4.5, 5.1, 5.2 and 5.3 of the
Agreement are incorporated herein by reference and hereby made a part hereof.
13. NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be effective (a) upon
hand delivery or delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated below (if delivered
on a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice
is to be received) or (b) on the second business day following the date of
mailing by express
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<PAGE>
courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
to the Company:
Zycad Corporation
47100 Bayside Parkway
Fremont, California 94538
Attn:
Fax: (510) 623-4575
with copies to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attn:
Fax:
to the Warrant Holder:
Capital Ventures International
1 Capital Place
P.O. Box 1787GT
Grand Cayman, Cayman Islands
Attn:
Fax:
with copies to:
Bala International
1900 Market Street
Suite 600
Philadelphia, Pennsylvania 19103
Attn: Steve Katznelson
Fax: (215) 963-3379
Either party hereto may from time to time change its address for notices
under this Section 13 by giving at least 10 days prior written notice of such
changed address to the other party hereto.
14. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of New York. The
headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity
or enforceability of any other provision.
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<PAGE>
15. EXPIRATION. The right to exercise this Warrant shall expire
thirty (30) months after the date hereof or if, before such expiration, the
fair market value of the Common Stock, determined as hereinabove provided,
shall have been not less than $12 per share for ten (10) consecutive trading
days, but only to the extent that the Warrant Holder shall have failed to
exercise this Warrant within twenty (20) days after notice thereof from the
Company.
[Signatures on next page.]
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<PAGE>
Dated: May 23, 1996 ZYCAD CORPORATION
By: _________________________
Title:
[CORPORATE SEAL]
Attest:
By:_______________________
Its:
CAPITAL VENTURES INTERNATIONAL
By: ______________________________
By: __________________________
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<PAGE>
FORM OF WARRANT EXERCISE
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO _________________________
The undersigned, the holder of the within Warrant, hereby irrevocably elects
to exercise this Warrant for, and to purchase thereunder, _________ shares of
Common Stock of Zycad Corporation, a Delaware corporation (the "Company"),
and herewith makes payment of $__________ therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to
_________________, whose address is __________________.
Dated: ___________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
___________________________________
(Address)
Tax Identification Number:_____________
_____________________
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers unto
_________________ the right represented by the within Warrant to purchase
_____________ shares of Common stock of ZYCAD CORPORATION, a Delaware
corporation, to which the within Warrant relates, and appoints
_________________ Attorney to transfer such right on the books of ZYCAD
CORPORATION, a Delaware corporation, with full power of substitution the
premises.
Dated: ___________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
___________________________________
(Address)
Signed in the presence of:
____________________________
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<PAGE>
Exhibit (11)
ZYCAD CORPORATION
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares outstanding 20,026 19,083 19,914 19,181
Effect of dilutive stock options and
warrants based on treasury stock method -- 1,235 -- 1,211
------- ------ ------ ------
Average common and common equivalent shares 20,026 20,318 19,914 20,392
------- ------ ------ ------
------- ------ ------ ------
Net income (loss) $(3,522) $ 741 $(8,539) $1,421
------- ------ ------ ------
------- ------ ------ ------
Net income (loss) per share $ (0.18) $ 0.04 $(0.43) $ 0.07
------- ------ ----- ------
------- ------ ----- ------
</TABLE>
97
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 7091
<SECURITIES> 221
<RECEIVABLES> 10088
<ALLOWANCES> 0
<INVENTORY> 2583
<CURRENT-ASSETS> 21322
<PP&E> 5291
<DEPRECIATION> 0
<TOTAL-ASSETS> 34635
<CURRENT-LIABILITIES> 13681
<BONDS> 10000
0
0
<COMMON> 2036
<OTHER-SE> 7736
<TOTAL-LIABILITY-AND-EQUITY> 34635
<SALES> 8811
<TOTAL-REVENUES> 16528
<CGS> 2930
<TOTAL-COSTS> 7407
<OTHER-EXPENSES> 17559
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101
<INCOME-PRETAX> (8539)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8539)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8539)
<EPS-PRIMARY> (0.43)
<EPS-DILUTED> (0.43)
</TABLE>
