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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 15, 1997
ZYCAD CORPORATION
-----------------
(Exact name of registrant as specified in its charter)
Commission file number 0-13244
DELAWARE 41-1404495
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
47100 BAYSIDE PARKWAY, FREMONT, CALIFORNIA 94538
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 623-4400
NOT APPLICABLE
--------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE>
ITEM 5. OTHER EVENTS
(a) Disposition of the LightSpeed product family
On April 15, 1997, Zycad Corporation (the Company), agreed to sell its
technology relating to its LightSpeed product family to IKOS Systems, Inc.
(IKOS). The purchase price was $5.0 million and under the terms of the
agreement, IKOS paid $2.5 million to Zycad upon execution of the agreement.
An additional $2.5 million will be paid out upon completion of customer
transition milestones. The agreement called for IKOS to buy all of the
software and hardware simulation technology related to the LightSpeed product,
and for Zycad to promote IKOS' logic verification products to its customers.
Both companies will work closely to develop a product transition program for
Zycad's current logic simulation customers and IKOS' Voyager Fault Simulation
customers. Zycad will retain its fault simulation products in addition to its
GateField division. Information contained in the April 15, 1997 press release
shown as Item 7, Exhibit 20.01 on the Company's Form 8-K filed on April 30,
1997 further describes the LightSpeed product family.
(b) Sale of Quality Systems Software, Inc.
In January 1996, Zycad Corporation (the Company) and Quality Systems
Software, Ltd. (QSS Ltd.), a U.K. company and owner of the DOORS technology,
established a joint venture, QSS Inc., to continue the distribution
operations of the DOORS technology and other products in the North American
market. In January 1997, QSS Inc. was restructured so that QSS Ltd. became
a subsidiary of QSS Inc. The Company's ownership as a result of the QSS Inc.
restructuring became 22% or approximately 2,420,000 shares. On April 14, 1997,
the Company signed an agreement to sell its ownership in QSS Inc. for
$3.5 million cash. The agreement was approved and finalized by the QSS Board of
Directors' on May 12, 1997. The Company received full payment on May 13, 1997.
(c) Conversion of $3.5 million of Subordinated Convertible Debentures to
Preferred Stock
In anticipation of meeting the Company's 1997 cash requirements, in February
1997, the Company completed a $3.5 million private placement with investors
whereby the Company issued 6% Subordinated Convertible Debentures (the
Debentures) and Common Stock Purchase Warrants. On May 15, 1997, the
Debentures were converted into 100,000 shares of the Company's Convertible
Preferred Stock having an aggregate stated value of $3.5 million and warrants
to purchase Convertible Preferred Stock having an aggregate stated value of
$1.5 million. Discount expense relating to the Subordinated Convertible
Debentures is approximately $0.9 million and will be amortized over the first
and second quarter of 1997. The Convertible Preferred Stock is convertible at
the option of the stockholder (subject to certain maximum share limitations)
into the Company's Common Stock at a price equal to 78% to 83% of the average
low trade price for the Common Stock on the Nasdaq National Market for the
five trading days prior to the date of conversion. The warrants to purchase
Convertible Preferred Stock are exercisable only when the market price of the
Company's Common Stock is at least $1.50 per share. Upon exercise of the $1.5
million of Convertible Preferred Stock warrants the Company will accrue
approximately $375,000 of dividends over 360 days after the date of exercise
of the warrants.
(d) 1996 Subordinated Convertible Debentures
In May 1996, the Company sold a total of $10.0 million of Subordinated
Convertible Debentures (the Debentures) to institutional investors as part of
a private placement. The Debentures accrue interest at an annual rate of 6%,
beginning on the date of issue, with the principal due and payable three
years from the date of issue, if and to the extent that the Debentures are
not previously converted. The Debentures are convertible at the option of the
noteholders (subject to the maximum share limitations set forth below) into
Common Stock at a price equal to 80% of the average low trade price for the
Common Stock on the Nasdaq National Market for the five trading days prior to
the date of conversion. In addition, the investors received warrants to
purchase up to 100,000 additional shares of the Company's Common Stock at
$10.00 per share, subject to certain conditions. In April and May 1997, an
additional $1.1 million of original principal amount and $0.3 million of
accrued interest was converted into approximately 1,656,000 shares of the
Company's Common Stock. At May 15, 1997 approximately $1,388,000 of principle
and interest remains to be converted into the Company's Common Stock.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
Not applicable.
(b) Pro Forma Financial Information
(1) Zycad Corporation pro forma condensed income statement
(unaudited) for the quarter ended March 31, 1997 (see
page 4).
(2) Zycad Corporation pro forma condensed balance sheet
(unaudited) for the quarter ended March 31, 1997 (see
page 4).
(c) Exhibits
3.4 Certificate of Designation of Zycad Corporation of Series
A-1 Convertible Preferred Stock, Series A-2 Convertible
Preferred Stock, Series A-3 Convertible Preferred Stock,
Series A-4 Convertible Preferred Stock, and Series A-5
Convertible Preferred Stock
4.30 Convertible Securities Exchange Agreement, dated May 15,
1997 between Zycad Corporation and Halifax Fund L.P.
4.31 Convertible Securities Exchange Agreement, dated May 15,
1997 between Zycad Corporation and Capital Ventures
International
4.32 Convertible Securities Exchange Agreement, dated May 15,
1997 between Zycad Corporation and Heracles Fund
4.33 Convertible Securities Exchange Agreement, dated May 15,
1997 between Zycad Corporation and Lewis A. Fraser
4.34 Convertible Securities Exchange Agreement, dated May 15,
1997 between Zycad Corporation and Joseph A. Umbach
4.35 Preferred Stock Purchase Warrant, dated May 15, 1997
issued to Halifax Fund L.P.
4.36 Preferred Stock Purchase Warrant, dated May 15,
1997 issued to Capital Ventures International
4.37 Preferred Stock Purchase Warrant, dated May 15, 1997
issued to Heracles Fund
4.38 Preferred Stock Purchase Warrant, dated May 15, 1997
issued to Lewis A. Fraser
4.39 Preferred Stock Purchase Warrant, dated May 15, 1997
issued to Joseph A. Umbach
10.26 Stock Purchase Agreement dated April 14, 1997 between the
Company and Edison Venture Fund III, L.P. for the
purchase of 2,420,000 shares of QSS, Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZYCAD CORPORATION
BY /s/ Phillips W. Smith
---------------------
Phillips W. Smith
President and Chief Executive Officer
May 15, 1997
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
EFFECTS OF EFFECTS OF EFFECTS OF
SALE OF CONVERSION OF CONVERSION OF
LIGHTSPEED 1997 $3.5M 1996 $10.0M TOTAL
DISCLOSED EFFECTS OF SUBORDINATED SUBORDINATED PRO FORMA
3 MONTHS IN 8-K SALE OF DEBENTURE DEBENTURE 3 MONTHS
ENDED FILED INVESTMENT OFFERING TO OFFERING TO ENDED
3/31/97 4/30/97 IN QSS PREFERRED STOCK COMMON STOCK 3/31/97
-------- ---------- ---------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 4,084 $ -- $ -- $ -- $ -- $ 4,084
Cost of Revenues 3,201 3,201
-------- ---------- ---------- ------- ------------- ---------
Gross Profit 883 883
Total operating expenses 6,426 -- -- -- -- 6,426
-------- ---------- ---------- ------- ------------- ---------
Operating loss (5,543) -- -- -- -- (5,543)
-------- ---------- ---------- ------- ------------- ---------
Other income (expense)
Interest expense (444) (829) (20) (1,289)
Other income (expense) 377 1,000 3,200 4,573
-------- ---------- ---------- ------- ------------- ---------
Total other income (expense) (67) 1,000 3,200 (829) (20) 3,284
-------- ---------- ---------- ------- ------------- ---------
Net income (loss) $(5,610) $1,000 $3,200 $ (829) $ (20) $(2,259)
-------- ---------- ---------- ------- ------------- ---------
Net loss per share $ (0.09)
---------
Weighted average common shares 25,258
---------
</TABLE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 1,928 $2,500 $3,500 $ -- $ -- $ 7,928
Accounts receivable, net 5,827 1,888 7,745
Inventories, net 2,524 (1,317) 1,207
Other current assets 1,187 (110) 1,077
-------- ---------- ---------- ------- ------------- ---------
Total current assets 11,496 2,961 3,500 17,957
Property and equipment, net 4,864 (250) 4,614
Purchased technology, net 2,570 -- 2,570
Other assets 3,530 (761) (300) 2,469
-------- ---------- ---------- ------- ------------- ---------
Total assets $22,460 $1,950 $3,200 $ -- $ -- $27,610
-------- ---------- ---------- ------- ------------- ---------
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities
Current portion of long-term
obligations $ 2,459 $ -- $ -- $ -- $ -- $ 2,459
Accounts payable 5,083 5,083
Accrued expenses 4,370 950 5,320
Deferred revenues 2,177 2,177
-------- ---------- ---------- ------- ------------- ---------
Total current liabilities 14,089 950 -- -- -- 15,039
Long-term obligations 522 522
Convertible debenture notes 6,998 (3,646) (1,388) 1,964
-------- ---------- ---------- ------- ------------- ---------
Total liabilities 21,609 950 -- (3,646) (1,388) 17,525
Stockholders' equity 851 1,000 3,200 3,646 1,388 10,085
-------- ---------- ---------- ------- ------------- ---------
Total liabilities and
stockholders' equity $22,460 $1,950 $3,200 $ -- $ -- $27,610
-------- ---------- ---------- ------- ------------- ---------
</TABLE>
<PAGE>
CERTIFICATE OF DESIGNATION OF
SERIES A-1 CONVERTIBLE PREFERRED STOCK,
SERIES A-2 CONVERTIBLE PREFERRED STOCK,
SERIES A-3 CONVERTIBLE PREFERRED STOCK,
SERIES A-4 CONVERTIBLE PREFERRED STOCK
AND SERIES A-5 CONVERTIBLE PREFERRED STOCK
OF
ZYCAD CORPORATION
The undersigned, Phillips W. Smith and Douglas E. Klint, hereby certify
that:
I. They are the duly elected and acting President and Secretary,
respectively, of Zycad Corporation, a Delaware corporation (the
"Company").
II. The Certificate of Incorporation of the Company authorizes 2,000,000
shares of preferred stock, par value $0.10 per share, of which none
are issued and outstanding.
III. The following is a true and correct copy of resolutions duly adopted
by the Board of Directors at a meeting duly held on May 14, 1997,
which constituted all requisite action on the part of the Company
for adoption of such resolutions.
RESOLUTIONS
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") is authorized to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the
designations, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof;
WHEREAS, the Board of Directors desires, pursuant to its authority
as aforesaid, to designate five new series of preferred stock, set the
number of shares constituting each such series and fix the rights,
preferences, privileges and restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates five new series of preferred stock and the number of shares
constituting each such series and fixes the rights, preferences, privileges and
restrictions relating to such series as set forth on Exhibit A hereto.
RESOLVED FURTHER, that the President and Chief Executive Officer and the
Secretary or any Assistant Secretary of the Company be, and they hereby are,
authorized and directed to prepare, execute, verify, and file in Delaware, a
Certificate of Designation in accordance with these resolutions and as required
by law.
<PAGE>
IN WITNESS WHEREOF, Zycad Corporation has caused its corporate seal to
be hereunto affixed and this certificate to be signed by Phillips W. Smith, its
President and Chief Executive Officer, and attested by Douglas E. Klint, its
Secretary, this 14th day of May, 1997.
ATTEST: ZYCAD CORPORATION
By: /s/ Douglas E. Klint By: /s/ Phillips W. Smith
-------------------------- --------------------------------------
Douglas E. Klint Phillips W. Smith
Secretary President and Chief Executive Officer
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EXHIBIT A
TERMS OF
CERTIFICATE OF DESIGNATION OF
SERIES A-1 CONVERTIBLE PREFERRED STOCK,
SERIES A-2 CONVERTIBLE PREFERRED STOCK,
SERIES A-3 CONVERTIBLE PREFERRED STOCK,
SERIES A-4 CONVERTIBLE PREFERRED STOCK
AND SERIES A-5 CONVERTIBLE PREFERRED STOCK
OF
ZYCAD CORPORATION
SECTION 1. DESIGNATION, AMOUNT AND PAR VALUE.
The series of preferred stock shall be designated as the Series A-1
Convertible Preferred Stock (the "Series A-1 Preferred"), the Series A-2
Convertible Preferred Stock (the "Series A-2 Preferred"), the Series A-3
Convertible Preferred Stock (the "Series A-3 Preferred"), the Series A-4
Convertible Preferred Stock (the "Series A-1 Preferred") and the Series A-5
Convertible Preferred Stock (the "Series A-5 Preferred"). The Series A-1
Preferred, the Series A-2 Preferred, the Series A-3 Preferred, the Series A-4
Preferred and the Series A-5 Preferred are collectively referred to herein as
the "Preferred Stock". The number of shares so designated shall be 70,000
shares of Series A-1 Preferred, 70,000 shares of Series A-2 Preferred, 20,000
shares of Series A-3 Preferred, 20,000 shares of Series A-4 Preferred and 20,000
shares of Series A-5 Preferred. The par value of each share of Preferred Stock
shall be $0.10. Each share of Preferred Stock shall have a stated value of
$35.00 per share (the "Stated Value").
SECTION 2. PREMIUM.
(a) A premium ("Premium") shall accrue daily on each share of Preferred
Stock beginning on the Original Issue Date (as defined in Section 7) of such
share of Preferred Stock at a rate per share (as a percentage of the Stated
Value per share) equal to six (6%) per annum.
(b) Upon the occurrence of a Conversion Deficiency (as defined in Section
7), until such securities have been duly converted (including any such
conversion after a Post Deficiency Conversion (as defined in Section 6) or
redeemed as provided herein or sufficient shares are made available for full
conversion of the outstanding Preferred Stock, the rate at which Premium accrues
upon all shares of Preferred Stock shall be increased (i) immediately upon the
occurrence thereof, to 8%; (ii) on the 31st day after the occurrence thereof, to
11%; (iii) on the 61st day after the occurrence thereof, to 14%; and after the
passage of each additional thirty (30) day period thereafter, by an additional
one percentage point; provided, that notwithstanding any cure of a Conversion
Deficiency, the increase or increases in the rate at which Premium accrues which
took place prior to such cure shall remain in effect after such cure. The
Company shall provide prompt notice of any change in the rate at which Premium
accrues to each holder of record of Preferred Stock as of the date of such
change at such holder's address on the Company's books.
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SECTION 3. VOTING RIGHTS; ADDITIONAL SERIES OF PREFERRED STOCK.
Except as otherwise provided herein and as otherwise provided by law, the
Preferred Stock shall have no voting rights. However, so long as any shares of
a series of Preferred Stock are outstanding, the Company shall not, without the
affirmative vote of the holders of a majority of the shares of such series of
the Preferred Stock then outstanding, (i) alter or change the powers,
preferences or rights given to such series of Preferred Stock, (ii) authorize or
create any class of stock ranking as to dividends or distribution of assets upon
a Liquidation (as defined below) senior to, prior to or pari passu with such
series of Preferred Stock, or (iii) issue any shares of Preferred Stock other
than pursuant to the Exchange Agreements or pursuant to the Preferred Stock
Purchase Warrants issued by the Company to the initial holders of Preferred
Stock.
SECTION 4. LIQUIDATION; MERGER, CONSOLIDATION.
Upon any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary (a "Liquidation"), the holders of shares of Preferred
Stock shall be entitled to receive out of the assets of the Company, whether
such assets are capital or surplus, for each share of Preferred Stock an amount
equal to the Stated Value, plus an amount equal to accrued Premium, per share,
whether declared or not, before any distribution or payment shall be made to the
holders of any Junior Securities, and if the assets of the Company shall be
insufficient to pay in full such amounts together with any amounts payable to
holders of Parity Securities, then the entire assets to be distributed shall be
distributed among the holders of Preferred Stock and holders of Parity
Securities ratably in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in full. A
sale, conveyance or disposition of all or substantially all of the assets of the
Company shall be deemed a Liquidation. The Company shall mail written notice of
any such Liquidation, not less than 30 days prior to the payment date stated
therein, to each record holder of Preferred Stock.
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 "Merger Transaction"), the
Preferred Stock shall be deemed converted into Common Stock immediately prior to
the effectiveness of such Merger Transaction at the Conversion Rate in effect on
the business day prior to the effective date of such Merger Transaction;
PROVIDED, HOWEVER, that if a Merger Transaction or the record date for
determination of the Company's stockholders entitled to participate in such
Merger Transaction shall occur at any time before the expiration of a period in
which there were in the aggregate one hundred eighty (180) days on which no
Conversion Deficiency existed following the effectiveness of the registration
statement contemplated by the Registration Rights Agreements, dated as of
February 13, 1997, between the Company and each initial holder of Preferred
Stock, then at the option of each holder of Preferred Stock, such holder may
elect to require the Company to redeem all of the Preferred Stock held by such
holder as of the effective date of such Merger Transaction in accordance with
the provisions set forth in Section 6. Such holder shall be entitled to make
such election at any time up to ten (10) trading days after the effective date
of the Merger Transaction. Nothing in this Section 4 shall prohibit a holder of
Preferred Stock from converting Preferred Stock into Common Stock in accordance
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with the terms of Section 5 hereof, up to and including the effective time and
date of the Merger Transaction.
SECTION 5. CONVERSION.
(a) HOLDER'S RIGHT TO CONVERT. Subject to the provisions of Section 5(d),
each share of Preferred Stock shall be convertible into fully paid, validly
issued and nonassessable shares of Common Stock at the Conversion Rate (as
defined in Section 7) at the option of the holder in whole or in part at any
time.
(b) AUTOMATIC CONVERSION. Subject to the provisions of Section 5(d), each
share of the Preferred Stock shall convert automatically into fully paid,
validly issued and nonassessable shares of Common Stock at the Conversion Rate
on February 13, 2000.
(c) MECHANICS OF CONVERSION. A holder of Preferred Stock shall effect
conversions by surrendering the certificate or certificates representing the
shares of Preferred Stock to be converted to the Company, together with the form
of conversion notice attached hereto as Attachment 1 (the "Conversion Notice")
by either overnight courier or two-day courier to the principal office of the
Company. Each Conversion Notice shall specify the number of shares of Preferred
Stock to be converted and the date on which such conversion is to be effected
(the "Conversion Date"), which date may not be prior to the date the holder
delivers such Conversion Notice by facsimile (with the original of such notice
forwarded with the foregoing courier) to the Company at such office. Except as
set forth below in this Section 5(c), each Conversion Notice, once given, shall
be irrevocable. Each Conversion Notice shall provide for the holder's election
to convert either (i) shares of Preferred Stock having an aggregate Stated Value
of at least $50,000, or (ii) if all of the shares of Preferred Stock held by
such holder have an aggregate Stated Value of less than $50,000, all shares of
Preferred Stock then held by such holder. Upon receipt of such Conversion
Notice, the Company shall immediately verify the holder's calculation of the
Conversion Rate and shall use its best effort to issue and deliver within three
business days after delivery to the Company of the certificates representing the
shares of Preferred Stock to be converted to the holder at the address of such
holder on the Company's books, or to its designee, (i) a certificate or
certificates, representing the number of shares of Common Stock being acquired
upon the conversion of shares of Preferred Stock and (ii) one or more
certificates representing the number of shares of Preferred Stock not submitted
for conversion; PROVIDED, HOWEVER, that the Company shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon
conversion of any shares of Preferred Stock until certificates evidencing such
shares of Preferred Stock are either delivered for conversion to the Company or
any transfer agent for the Preferred Stock or Common Stock, or the holder
notifies the Company that such certificates have been lost, stolen or destroyed
and provides an agreement reasonably satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection therewith. If after
delivery of a Conversion Notice, such certificate or certificates are not
delivered by the date required under this Section 5(c), the holder shall be
entitled by written notice to the Company at any time on or before such holder's
receipt of such certificate or certificates thereafter, to rescind such
conversion, in which event the Company shall immediately return the certificates
representing the shares of Preferred Stock tendered for conversion.
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(d) LIMITATION ON CONVERSION. Until such time as the holders of Common
Stock of the Company shall approve the issuance of shares of Common Stock upon
conversion of the Preferred Stock representing in excess of 20% of the issued
and outstanding shares of Common Stock of the Company: (i) no share of Series
A-1 Preferred may be converted into Common Stock pursuant to Sections 5(a) or
5(b) if the number of shares of Common Stock to be issued upon such conversion
when aggregated with the number of shares of Common Stock previously issued upon
conversion of the Series A-1 Preferred would exceed 1,765,638 (as such number
may be adjusted to account for stock splits, combinations, stock dividends or
similar transactions); (ii) no share of Series A-2 Preferred may be converted
into Common Stock pursuant to Sections 5(a) or 5(b) if the number of shares of
Common Stock to be issued upon such conversion when aggregated with the number
of shares of Common Stock previously issued upon conversion of the Series A-2
Preferred would exceed 1,765,638 (as such number may be adjusted to account for
stock splits, combinations, stock dividends or similar transactions); (iii) no
share of Series A-3 Preferred may be converted into Common Stock pursuant to
Sections 5(a) or 5(b) if the number of shares of Common Stock to be issued upon
such conversion when aggregated with the number of shares of Common Stock
previously issued upon conversion of the Series A-3 Preferred would exceed
504,468 (as such number may be adjusted to account for stock splits,
combinations, stock dividends or similar transactions); (iv) no share of Series
A-4 Preferred may be converted into Common Stock pursuant to Sections 5(a) or
5(b) if the number of shares of Common Stock to be issued upon such conversion
when aggregated with the number of shares of Common Stock previously issued upon
conversion of the Series A-4 Preferred would exceed 504,468 (as such number may
be adjusted to account for stock splits, combinations, stock dividends or
similar transactions); and (v) no share of Series A-5 Preferred may be converted
into Common Stock pursuant to Sections 5(a) or 5(b) if the number of shares of
Common Stock to be issued upon such conversion when aggregated with the number
of shares of Common Stock previously issued upon conversion of the Series A-5
Preferred would exceed 504,468 (as such number may be adjusted to account for
stock splits, combinations, stock dividends or similar transactions). In
addition, no share of Preferred Stock may be converted into Common Stock if,
after giving effect to the conversion of such share of Preferred Stock, the
total number of shares of the Company's Common Stock deemed beneficially owned
by the holder of such share of Preferred Stock, together with all shares of
Common Stock deemed beneficially owned by the such holder's "affiliates" as
defined in Rule 144 of the Securities Act of 1933, as amended, would exceed 4.9%
of the total issued and outstanding shares of the Company's Common Stock. For
purposes hereof, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, but shall be
determined exclusive of shares of Common Stock issuable upon conversion of the
unconverted portion of the shares of Preferred Stock and the unexercised or
unconverted portion of any other securities of the Company subject to a
limitation on conversion or exercise analogous to the limitation contained
herein.
(e) CERTAIN LIMITATIONS AND ADJUSTMENTS
(i) 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) business days of a Merger Transaction.
(ii) CERTAIN DIVIDENDS AND DISTRIBUTIONS. The Company shall not
make, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or
6
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other distribution payable in additional shares of Common Stock, with an
effective date within five (5) trading days of the effective date of a
Merger Transaction.
(iii) ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Company at any time or from time to time 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 each holder of Preferred Stock shall
receive upon conversion thereof, 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 Conversion Date, retained such securities,
subject to all other adjustments called for during such period under this
Section 5(e) with respect to the rights of the holders of Preferred Stock.
For purposes of this Section 5(e)(iii), the number of shares of Common
Stock so receivable upon conversion by a holder shall be deemed to be that
number which such holder would have received upon conversion of all shares
of Preferred Stock held by such holder if such holder's Conversion Date had
been the day preceding the date upon which the Company announced the making
of such dividend or other distribution.
(iv) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
In the event that at any time or from time to time, the Common Stock
issuable upon the conversion of the Preferred Stock 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 Section 5(e) or a merger or consolidation,
provided for in Section 4), then and in each such event each holder of
Preferred Stock shall have the right thereafter to convert such Preferred
Stock 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 therein 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 determination the
Market Price for Shares of Common Stock) issued in connection with the
above-described transaction.
(v) REORGANIZATIONS. If at any time or from time to time 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 Section 5(e)) than, as a part of such
reorganization, provision shall be made so that the holders of the
Preferred Stock shall thereafter be entitled to receive upon conversion of
the Preferred Stock 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
7
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Section 5(e) with respect to the rights of the holders of Preferred Stock
after the reorganization to the end that the provisions of this Section
5(e) 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.
(vi) In the event of a reasonable, good faith dispute between a
holder of Preferred Stock and the Company with respect to the adjustment
required by Sections 5(e)(iv) or 5(e)(v), 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 shares fifty percent
(50%) by the holder or holders involved in the dispute and fifty percent
(50%) by the Company, except that each party shall bear its own legal and
other expenses.
(f) RESERVATION OF COMMON STOCK. The Company covenants that it will at
all times reserve and keep available out of its authorized and unissued Common
Stock solely for the purpose of issuance upon conversion of each series of
Preferred Stock as herein provided, free from preemptive rights or any other
actual contingent purchase rights of persons other than the holders of Preferred
Stock, such number of shares of Common Stock as shall be issuable (taking into
account the restrictions of Section 5(d) hereof, if applicable) upon the
conversion of all outstanding shares of Preferred Stock; provided, that the
number of shares reserved for each series of the Preferred Stock shall not be
less than (i) 2,115,638 shares of Common Stock for issuance upon the conversion
of the Series A-1 Preferred; (ii) 2,115,638 shares of Common Stock for issuance
upon the conversion of the Series A-2 Preferred; (iii) 604,468 shares of Common
Stock for issuance upon the conversion of the Series A-3 Preferred; (iv) 604,468
shares of Common Stock for issuance upon the conversion of the Series A-4
Preferred; (v) 604,468 shares of Common Stock for issuance upon the conversion
of the Series A-5 Preferred; provided, however, that each such reserved amount
shall be deemed to include each holder's pro rata portion of 500,000 shares of
Common Stock previously reserved for issuance upon the exercise of the Company's
Common Stock Purchase Warrants issued pursuant to the Subscription Agreements,
which pro rata portion of such 500,000 shares may be issued either upon
conversion of a holder's Preferred Stock or upon the exercise of such holder's
Common Stock Purchase Warrants, at the option of such holder. Each specified
number of shares reserved under this Section 5(f) shall be adjusted to account
for stock splits, combinations, stock dividends or similar transactions. The
Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid and
nonassessable.
(g) FRACTIONAL SHARES. Upon a conversion hereunder the Company shall not
be required to issue stock certificates representing fractions of shares of
Common Stock. The number of shares of Common Stock issuable upon conversion
shall be rounded up or down to the nearest whole share..
(h) STOCK CERTIFICATES. The issuance of certificates for shares of Common
Stock on conversion of Preferred Stock shall be made without charge to the
holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificate,
8
<PAGE>
provided that the Company shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate upon conversion in a name other than that of the holder of such
shares of Preferred Stock so converted and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
(i) CONVERTED SHARES. Shares of Preferred Stock converted into Common
Stock shall be canceled and shall have the status of authorized but unissued
shares of preferred stock.
Section 6. REDEMPTION.
(a) If (whether or not a Conversion Notice shall have been given with
respect thereto) all outstanding shares of Preferred Stock cannot be fully
converted pursuant into Common Stock pursuant to Sections 5(a) or 5(b) by reason
of the limitation set forth in Section 5(d) (in either case a "Conversion
Deficiency"), from and after the fifth (5th) day following a Conversion
Deficiency, each holder shall have the right to demand in writing (a "Redemption
Notice") from the Company immediate redemption of any portion of such holder's
Preferred Stock with respect to which the Company does not have sufficient
shares of Common Stock available due to the limitation under Section 5(d) (which
portion shall be determined on a pro rata basis as if all holders of Preferred
Stock had given redemption notices on such date), at a redemption price per
share equal to the greater of (A) the dollar amount which is the product of (x)
the Conversion Rate and (y) the last reported sales price of the Common Stock on
the date when the Redemption Notice was delivered or (B) 110% of the Stated
Value per share of Preferred Stock plus accrued Premium; PROVIDED, HOWEVER, that
no holder may deliver a Redemption Notice subsequent to receipt by such holder
of notice from the Company (sent by overnight or two-day courier) with a copy
sent by facsimile) of availability of sufficient shares of Common Stock to
effect conversion (a "Post Deficiency Conversion") of all shares of Preferred
Stock; 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
Section 5(b) hereof within five business days of delivery of the notice of Post
Deficiency Conversion.
(b) If an Event of Noncompliance shall exist, then each holder of
Preferred Stock may deliver a Redemption Notice to the Company demanding
immediate redemption of any or all of such holder's shares of Preferred Stock at
a redemption price per share equal to the greater of (A) the dollar amount which
is the product of (x) the Conversion Rate and (y) the last reported sales price
of the Common Stock on the date when the Redemption Notice was delivered or (B)
110% of the Stated Value per share of Preferred Stock plus accrued Premium.
(c) If on February 13, 2000, any shares of Preferred Stock cannot be
converted into Common Stock pursuant to Section 5(b) by reason of the limitation
set forth in Section 5(d), the Company shall redeem such remaining shares at a
redemption price per share equal to the greater of (i) 120% of the Stated Value
per share of Preferred Stock plus accrued Premium, or (ii) the dollar amount
which is the product of (x) the Conversion Rate and (y) the last reported sale
price of the Common Stock on such date.
9
<PAGE>
(d) The Corporation shall have the right, in its sole discretion, upon
receipt of a Notice of Conversion pursuant to Section 5(c) or upon an automatic
conversion pursuant to Section 5(b), to redeem any portion of the accrued
Premium subject to such conversion for a sum of cash equal to the amount of the
Premium being so redeemed. All cash redemption payments hereunder shall be paid
in lawful money of the United States of America at such address for the holder
as appears on the books of the Company (or at such other address as such holder
shall hereafter give to the Company by written notice). In the event the
Company elects, pursuant to this Section 6(d), to redeem all or any portion of
the Premium in cash and fails to pay such holder the applicable redemption
amount to which such holder is entitled by depositing a check in the United
States mail to such holder within three (3) business days of receipt by the
Company of a Conversion Notice (in the case of a conversion pursuant to Section
5(a)) or of February 13, 2000 (in the case of a conversion pursuant to Section
5(b)), the Company shall thereafter forfeit its right to redeem such Premium in
cash and such Premium shall thereafter by converted into shares of Common Stock
in accordance with Section 5 hereof.
(e) Each holder of Preferred Stock shall have the right to require the
Company to provide advance notice to such holder stating whether the Company
will elect to redeem all or any portion of the Premium in cash pursuant to the
Company's redemption rights discussed in Section 5(d). A holder may exercise
such right from time to time by sending notice (an "Election Notice") to the
Company, by facsimile, requesting that the Company disclose to such holder
whether the Company would elect to redeem any portion of the Premium for cash in
lieu of issuing Common Stock in accordance with Section 5(a). The Company
shall, no later than the close of business on the next business day following
receipt of an Election Notice, disclose to such holder whether the Company would
elect to redeem any portion of a Premium in connection with a conversion
pursuant to a Conversion Notice delivered over the subsequent five (5) business
day period. If the Company does not respond to such holder within such one (1)
business day period via facsimile, the Company shall, with respect to any
conversion pursuant to the a Conversion Notice delivered within the subsequent
five (5) business day period, forfeit its right to redeem such Premium in
accordance with Section 5(d) and shall be required to convert such Premium into
shares of Common Stock in accordance with Section 5 hereof.
SECTION 7. DEFINITIONS.
For the purposes hereof, the following terms shall have the following
meanings:
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
California are authorized or required by law or other government actions to
close.
"Common Stock" means shares now or hereafter authorized of the class of
Common Stock, par value $.10, of the Company and stock of any other class into
which such shares may hereafter have been reclassified or changed.
"Conversion Date" has the meaning given in Section 5(c).
10
<PAGE>
"Conversion Date Market Price" means for each time period set forth below
the average of the Market Price for Shares of Common Stock on the five (5)
trading days immediately preceding the Conversion Date multiplied by the
percentage set forth opposite such time period:
CONVERSION DATE PERCENTAGE
Prior to May 15, 1997 100.0%
May 15, 1997 through June 13, 1997 85.0%
June 14, 1997 through July 13, 1997 84.0%
July 14, 1997 through August 12, 1997 83.0%
August 13, 1997 through September 11, 1997 82.0%
September 12, 1997 through October 11, 1997 81.0%
On or after October 12, 1997 80.0%
Each percentage set forth in the foregoing table will be reduced by two
percentage points, if the effective date of a registration statement filed with
the Securities and Exchange Commission relating to the resale of the Common
Stock issuable upon conversion of the Preferred Stock occurs on or after May 15,
1997; by an additional three percentage points (on a pro-rated basis for each
day during such period until effectiveness), if the effective date of such
registration statement occurs after May 15, 1997 and prior to June 14, 1997; by
an additional three percentage points (on a pro-rated basis for each day during
such period until effectiveness), if the effective date of such registration
statement occurs on or after June 14, 1997, and prior to July 14, 1997; by an
additional three percentage points (on a pro-rated basis for each day during
such period until effectiveness), if the effective date of such registration
statement occurs on or after July 14, 1997, and prior to August 12, 1997.
"Conversion Deficiency" has the meaning given in Section 6(a).
"Conversion Rate" means, at any time, a fraction, of which the numerator is
the Stated Value of a share of Preferred Stock plus accrued Premium for the
period from the Original Issue Date of such share of Preferred Stock through the
Conversion Date, and of which the denominator is the Conversion Date Market
Price at such time.
"Event of Noncompliance" means the occurrence of one or more of the
following events:
(a) The Company shall default (i) in making any redemption of Preferred
Stock as required hereunder or (ii) any payment under Section 4.1 of
an Exchange Agreement; or
(b) Any of the representations of warranties made by the Company herein,
in the Subscription Agreements, in the Exchange Agreements, 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 the
Subscription Agreements or the Exchange Agreements 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
11
<PAGE>
(c) The Company shall fail to perform or observe any covenant or
agreement in the Subscription Agreements or the Exchange Agreements,
or any other covenant, term, provision, condition, agreement or
obligations of the Company under the terms hereof and such failure
shall continue uncured for a period of ten (10) business days after
notice from any holder of Preferred Stock of such failure; or
(d) The Company shall (i) become insolvent; (ii) admit in writing its
inability to pay its debts generally as they mature; (iii) make a
general assignment for the benefit of creditors or commence
proceedings for its dissolution; or (iv) 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; or
(i) If prior to February 13, 2000, trading in the shares of the Common
Stock shall be suspended on the Exchange 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.
(j) If on or prior to February 14, 1998, the Company has not caused a
registration statement relating to the resale of the Common Stock
issuable upon conversion of the Preferred Stock to be declared
effective by the Securities and Exchange Commission.
"Exchange" means the Nasdaq Stock Market.
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<PAGE>
"Exchange Agreements" means the several Convertible Securities Exchange
Agreements, each dated as of May 15, 1997, between the Company and each of the
original holders of the Preferred Stock.
"Junior Securities" means the Common Stock and all other equity securities
of the Company other than the Preferred Stock.
"Liquidation" has the meaning given in Section 4.
"Market Price for Shares of Common Stock" shall mean the price of one share
of Common Stock determined as follows: (a) if the Common Stock is listed on the
Exchange, the lowest reported sales price on the date of valuation; or (b) if
the Common Stock is listed on a national securities exchange, the lowest
reported sales price on the date of valuation; or (c) if neither of clauses (a)
nor (b) applies but the Common Stock is quoted in the over-the-counter market on
the "pink sheets" or bulletin board, the lesser of (i) the lowest reported sales
price or (ii) the last reported "bid" price on the date of valuation, or (d) if
none of clauses (i), (ii) or (iii) above applies, the market value as determined
by a 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.
"Original Issue Date" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock; PROVIDED,
HOWEVER, that in the case of Preferred Stock issued in exchange for the
Company's 6% Convertible Subordinated Debentures due February 13, 2000, such
term shall mean February 13, 1997.
"Parity Securities" means any series of the Company's preferred stock
designated as having rights upon Liquidation in parity with the rights of the
holders of the Preferred Stock, the issuance of which was approved by the
holders of a majority interest of each series of the Preferred Stock..
"Person" means a corporation, an association, a partnership, organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"Preferred Stock" has the meaning given in Section 1.
"Redemption Notice" has the meaning given in Section 6(a).
"Stated Value" has the meaning given in Section 1.
"Subscription Agreements" means the several Convertible Securities
Subscription Agreements, each dated as of February 13, 1997, between the Company
and each of the original holders of the Preferred Stock.
13
<PAGE>
ATTACHMENT 1
(To Be Executed by Registered Holder
in order to Convert Series A Convertible Preferred Stock)
CONVERSION NOTICE
FOR
SERIES A CONVERTIBLE PREFERRED STOCK
The undersigned, as Holder of _______ shares of Series A Convertible
Preferred Stock, represented by certificate No[s]. ____ the ("Preferred Stock"),
hereby irrevocably elects to convert ____________ shares of Preferred Stock and
U.S. $_____ of accrued Premium under the Preferred Stock into shares of Common
Stock, par value $.10 per share (the "Common Stock"), of Zycad Corporation
according Certificate of Designation relating to the Preferred Stock, as of the
date written below. The undersigned hereby requests that share certificates for
the Common Stock to be issued to the undersigned pursuant to this Conversion
Notice be issued in the name of, and delivered to, the undersigned or its
designee as indicated below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto. No fee will be charged to the Holder for any conversion,
except for transfer taxes, if any.
The undersigned represents and warrants that, after giving effect to the
shares of the Company's Common Stock to be issued pursuant to this Conversion
Notice, the total number of shares of the Company's Common Stock deemed
beneficially owned by the undersigned, together with all shares of the Company's
Common Stock deemed beneficially owned by the undersigned'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. For purposes hereof,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, but shall be determined exclusive
of shares of Common Stock issuable upon conversion of the unconverted portion of
the shares of Preferred Stock and the unexercised or unconverted portion of any
other securities of the Company subject to a limitation on conversion or
exercise analogous to the limitation contained herein.
Accompanying this Conversion Notice is a Conversion Rate Computation
Schedule setting forth the determination by the undersigned of the number of
shares of Common Stock issuable pursuant to this Conversion Notice.
Conversion Information: NAME OF HOLDER:
---------------------------------------
By:
---------------------------------------------------
Print Name:
Print Title:
Print Address of Holder:
------------------------------------------------------
------------------------------------------------------
Issue Common Stock to:
--------------------------------
at:
---------------------------------------------------
Date of Conversion
------------------------------------------------------
Application Conversion Rate
------------------------------------------------------
14
<PAGE>
CONVERSION RATE COMPUTATION SCHEDULE
MARKET PRICE FOR SHARES OF COMMON STOCK on the five (5) trading days immediately
preceding the date of this Conversion Notice:
TRADING DAY LOW PRICE
CONVERSION DATE MARKET PRICE:
Average of Low Prices listed above: $
-----------
Applicable percentage thereof: %
------------
Conversion Date Market Price $
------------
STATED VALUE OF SHARES TO BE CONVERTED:
plus
PREMIUM TO BE CONVERTED: $
DIVIDED BY CONVERSION DATE
MARKET PRICE per above:
------------
Shares of Common Stock to be
issued on conversion: ------------
------------
Remaining Shares of Preferred Stock to be Issued
as New Certificate:
------------
15
<PAGE>
CONVERTIBLE SECURITIES EXCHANGE AGREEMENT
This Convertible Securities Exchange Agreement (the "Agreement") dated as
of May 15, 1997, is entered into by and between Zycad Corporation, a Delaware
corporation (the "Company") and the undersigned (the "Holder") and relates to
the exchange of a $1,225,000 principal amount 6% Subordinated Convertible
Debenture due February13, 2000 (the "Debenture") issued pursuant to that certain
Convertible Securities Subscription Agreement, dated as of February 13, 1997,
between the Company and the Holder, for 35,000 shares of the Company's Series
A-1 Convertible Preferred Stock ("Preferred Stock") which is convertible into
Common Stock of the Company, and a warrant in the form of Exhibit A hereto to
purchase 15,000 shares of Preferred Stock at an exercise price of $35.00 per
share (the "Warrant"). The term "Preferred Stock" as used herein shall also
refer to the Series A-1 Convertible Preferred Stock issuable upon exercise of
the Warrant. The Preferred Stock, the Warrant and the Common Stock issuable
upon conversion of the Preferred Stock are sometimes collectively referred to in
this Agreement as the "Securities." The Common Stock issuable upon conversion
of the Preferred Stock is sometimes referred to as the "Underlying Stock", and
the Common Stock issuable upon conversion of the Preferred Stock issuable upon
the exercise of the Warrant is sometimes referred to as the "Warrant Stock."
Notwithstanding the conversion of the Debenture into Preferred Stock and the
Warrant, the representations and warranties set forth in the Convertible
Securities Subscription Agreement, dated as of February 13, 1997, between the
Company and Holder, shall remain in full force and effect. In consideration of
the mutual promises, representations, warrants and conditions set forth herein,
and intending to be legally bounded hereby, the Company and the Holder agree as
follows:
1. THE EXCHANGE.
Upon the execution and delivery of this Agreement and the delivery to the
Holder or its representatives of (a) evidence that the Board of Directors of the
Company has approved (i) the exchange contemplated hereunder, (ii) the
reservation of shares of Common Stock as contemplated herein, and (iii) the
recommendation to the shareholders of the Company that they approve the issuance
of in excess of 20% of the outstanding Common Stock of the Company pursuant to
the transactions contemplated hereby and by the other Convertible Securities
Exchange Agreements and (b) an opinion of the general counsel of the Company in
form and substance satisfactory to the Holder or its representatives, the
Debenture shall be deemed, without further action on the part of either party,
exchanged for 35,000 shares of Preferred Stock and the Warrant. The Company
shall issue and deliver to the Holder on the date hereof a certificate
representing the shares of Preferred Stock and the Warrant. The Holder shall
promptly return the original Debenture to the Company for cancellation. The
Company shall cause an opinion of its outside counsel in form and substance
satisfactory to the Holder or its representatives to be delivered to the Holder
by May 31, 1997.
2. REGISTRATION STATEMENT.
The Company covenants and agrees that it will file a registration statement
on Form S-3
<PAGE>
relating to the resale of the Underlying Stock and the Warrant Stock pursuant to
the requirements of the Registration Rights Agreement (as defined in Section
4.1) within two (2) business days of the execution and delivery of this
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Holder that:
3.1 COMPANY STATUS. The Company has registered its Common Stock
pursuant to Section12(b) or 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), 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 Company's latest proxy statement
and Annual Report on Form 10-K sent to the Company's stockholders and all
documents filed by the Company with the Securities and Exchange Commission (the
"Commission") since December 31, 1996, pursuant to Sections 13(a), 13(c) 14 or
15(d) of the Exchange Act (excluding preliminary proxy statement filings) (such
documents being collectively referred to in this Agreement as the "Exchange Act
Reports") are the only filings made by the Company with the Commission since
December 31, 1996.
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 Preferred Stock or the Warrant
nor has the Company conducted any general solicitation (as the term is used in
RegulationD) 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
Securities Act of 1933, as amended (the "Securities Act").
3.4 VALID ISSUANCE OF CAPITAL STOCK. The Company has an authorized
capitalization consisting of 40,000,000 shares of Common Stock, par value $0.10
and 2,000,000 shares of preferred stock, par value $0.10, warrants outstanding
for 254,000 shares of Common Stock, and stock options granted to employees as
described in the Exchange Act Reports. As of May 8, 1997, the Company has
issued and outstanding 26,999,643 shares of Common Stock and, immediately prior
to the exchange contemplated hereby, no shares of preferred stock are issued and
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;
the shares of Common Stock issuable upon conversion of the Preferred Stock and
the Preferred Stock issuable upon exercise of the Warrant, 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 issuance of the Securities, except
for the rights of first refusal set forth herein and in the other
-2-
<PAGE>
Convertible Securities Exchange Agreements of the Company entered into
contemporaneously herewith. The exchange of the Debentures for the Preferred
Stock and the Warrant is exempt, and the issuance of the Underlying Stock and
Warrant Stock shall be exempt, from the registration requirements of the
Securities Act pursuant to Section 3(a)(9) thereof or other applicable
exemption. The Certificate of Designation relating to the Preferred Stock has
been duly filed with the Secretary of State of the State of Delaware, is in full
force and effect and the Holder is entitled to the rights, preferences and
privileges set forth therein.
3.5 ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries, except for those listed on the Subsidiary Exhibit annexed hereto
and hereby made a part hereof. The Company and each such subsidiary, if any, is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "Material
Adverse Effect" means any effect on the business, operations, properties,
prospects, or financial condition of the entity with respect to which such term
is used and which is material and adverse to such entity or to other entities
controlling or controlled by such entity, and/or any condition or situation
which would prohibit or otherwise interfere with the ability of the entity with
respect to which said term is used to enter into and perform its obligations
under this Agreement.
3.6 AUTHORIZATION; ENFORCEMENT. (i)The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
exchange and issue the Securities in accordance with the terms hereof and
thereof, (ii)the execution, issuance and delivery of this Agreement, the
Preferred Stock and the Warrant 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 constitutes, and upon execution, issuance and
delivery thereof the Warrant 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 Holder 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 Warrant 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
-3-
<PAGE>
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 Holder 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 Commission, National Association of Securities Dealers, Inc. ("NASD")
or state securities filings which may be required to be made by the Company
subsequent to the date hereof and other than 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 Holder herein.
3.9 EXCHANGE ACT REPORTS. The Company has delivered or made
available to the Holder true and complete copies of the Exchange Act Reports
(including, without limitation, proxy information and solicitation materials).
The Company has not provided to the Holder any information which, according to
applicable law, rule or regulation, should have been disclosed publicly prior to
the date hereof by the Company but which has not been so disclosed. As of their
respective dates, the Exchange Act Reports complied in all material respects
with the requirements of the Exchange Act and rules and regulations of the
Commission 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 and none of the other information concerning the Company
provided to the Holder in connection with the transactions contemplated hereby
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
Commission 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
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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 December31, 1996, the date
through which the most recent annual report of the Company on Form10-K which has
been prepared and filed with the Commission, 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 Exchange Act
Reports.
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 December31, 1996, 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 Securities 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 Holder relating to this Agreement for the transactions
contemplated hereby.
4. COVENANTS OF THE COMPANY
4.1 REGISTRATION RIGHTS. The Company agrees that the Registration
Rights Agreement, dated as of February 13, 1997, between the Holder and the
Company (the "Registration Rights Agreement"), remains in full force and effect,
but shall be deemed amended so that (i) each reference therein to "Debentures"
shall be deemed to refer to the "Preferred Stock" or the Certificate of
Designation relating to the Preferred Stock, as applicable, (ii) each reference
to the "Subscription Agreement" shall be deemed to refer to this Agreement and
(iii) Section 6 thereof shall be deleted. The Company acknowledges that its
failure to register the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with this Agreement and the Registration Rights
Agreement will cause the Holder to suffer damages and undertake risks in amounts
that will be
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difficult to ascertain and were not anticipated in negotiating the terms of this
Agreement and the related documents. Accordingly the parties agree that it is
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
Section 4 and in the provisions of the Certificate of Designation related to the
Preferred Stock 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. If a registration statement filed with the Securities
and Exchange Commission pursuant to the Registration Rights Agreement has not
become effective prior to July 14, 1997, the Company shall make a cash payment
to each holder of Preferred Stock for each day after July 14, 1997, and prior to
August 13, 1997 that the registration statement is not effective equal to
one-thirtieth of three percent (3%) of the Stated Value of the Preferred Stock
originally issued to the Holder. If the registration statement has not become
effective prior to August 13, 1997, on August 13, 1997, the Company shall make
an additional payment in cash to each holder of Preferred Stock equal to three
percent (3%) of the Stated Value of the Preferred Stock originally issued to
such holder and shall make an additional three percent (3%) payment at the end
of each full 30 day period thereafter until the earlier of the date the
registration statement becomes effective or February 14, 1997. If the
registration statement has not become effective prior to February 14, 1998, the
Holder shall have the redemption right set forth in the Certificate of
Designation related to the Preferred Stock.
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 Preferred Stock and Preferred Stock upon exercise
of the Warrant; provided, however, that the number of shares so reserved shall,
except as hereinafter and in the Preferred Stock (and in the Certificate of
Designation related thereto) provided, shall be 6,044,680 shares, subject to
reduction and increase as hereinafter provided. The number of shares so
reserved may be reduced by the number of shares actually delivered pursuant to
conversion of Preferred Stock or exercise of the Warrant (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 Preferred
Stock and the remaining exercise rights under unexercised portion of the
Warrant) and the number of shares so reserved shall be increased to reflect
stock splits and stock dividends and distributions. In the event the number of
shares so reserved shall be insufficient for issuance upon the conversion of the
Preferred Stock and exercise of the Warrant, or if the Holders of the Preferred
Stock would at any time upon conversion thereof be entitled to the issuance of
shares of Common Stock in excess of the limitation in Section 5(d) of the
Certificate of Designation relating to the Preferred Stock, then in either case
the Company shall use its best efforts and all due diligence to obtain the
approval by its shareholders of this Agreement and all transactions contemplated
hereunder, including the authorization of such additional shares as may be
required to issue such shares in excess of the number so reserved or in excess
of such limitation, as the case may be. The Board of Directors of the Company
shall recommend such approval to the shareholders. The Company shall, on or
before August 31, 1997, hold a meeting of its stockholders and use its
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best efforts to obtain at such meeting such approvals of the Company's
stockholders as may be required to issue all of the shares of Common Stock
issuable upon conversion of, or otherwise with respect to, the Preferred Stock
(including the Preferred Stock issuable upon exercise of the Warrants) without
violating NASD Rule 4460(i) or any successor rule thereto which may then be in
effect). The Company shall comply with the filing and disclosure requirements
of Section 14 promulgated under the Exchange Act in connection with the
solicitation, acquisition and disclosure of such stockholder approval. The
Company represents and warrants that its Board of Directors has unanimously
recommended that the Company's stockholders approve the proposals contemplated
by this Section 4.2 and shall so indicate such recommendation in the proxy
statement used to solicit such stockholder approval. The Company represents and
warrants that it has reserved an additional approximately 1,800,000 shares of
Common Stock for issuance upon conversion of the Company's 6% Subordinated
Convertible Debentures and exercise of its Common Stock Purchase Warrants issued
in May 1996. The Company agrees to maintain such reserve for such purposes
(except to the extent that such shares are issued upon any such conversion or
exercise).
4.3 LISTING OF UNDERLYING SHARES. The Company hereby agrees,
promptly to take such action to cause the Underlying Stock and the Warrant Stock
to be listed on the Exchange contemporaneously with the effectiveness of the
registration statement. 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
the Exchange Act, and will not take any action or file any document (whether or
not permitted by the Exchange Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and filing
obligations under the Exchange 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 Section5.1
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.
4.7 INCURRENCE OF INDEBTEDNESS. The Company shall not incur any
indebtedness for borrowed money other than indebtedness which would have been
deemed Senior Indebtedness under the terms of the Debenture.
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<PAGE>
5. LEGENDS
5.1 LEGENDS. The certificates representing shares of Preferred Stock,
the Warrant, 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 Section5.1, certificates
evidencing shares of Common Stock issued upon conversion of the Preferred Stock,
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.
The Company will promptly 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 issuance thereof to any such substitute or
replacement transfer agent, as the case may be, except as otherwise expressly
provided in the Registration Rights Agreement. It is the intent and purpose of
such instructions, as provided therein, to require the transfer agent for the
Common Stock from time to time to issue certificates evidencing Underlying Stock
or Warrant Stock free of the Legend during the following periods and under the
following circumstances and without consultation by the transfer agent with
Company or its counsel and without the need for any further advice or
instruction to the transfer agent by or from the Company or its counsel:
(a) At any time from and after the effectiveness of the Registration
Statement except during a Suspension Period (as defined in the Registration
Rights Agreement):
(i) upon any surrender of the Preferred Stock or Warrant
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 Preferred Stock or Warrant 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
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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 date hereof, 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 dispose thereof pursuant to Rule 144(k) under the Securities 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
Securities Act, or (iii) such Holder is not then subject to such requirements.
In addition, and if applicable, the Company shall reissue the Preferred
Stock and Warrant without the Legend set forth above at such time as (i)
Holder thereof is permitted to dispose thereof pursuant to Rule 144(k) under
the Securities 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 Securities 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 HOLDER'S COMPLIANCE. Nothing in this section shall affect in any
way the Holder's obligations under and agreement to comply with all applicable
securities laws upon resale of the Securities.
6. OTHER ISSUANCES OF SECURITIES
6.1 OTHER EQUITY OFFERINGS. During the period beginning on the date
hereof and expiring 180 calendar days following the effectiveness of the
Registration Statement, the Company will not make any Equity Offerings, except
for an offering of rights to subscribe for shares of the Company's Common Stock
pursuant to any exemption from the registration requirements of the Securities
Act, including without limitation the exemption provided by RegulationsD and S
promulgated thereunder. "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 as of February 13, 1997 and listed in the Exchange Act
reports).
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<PAGE>
6.2 RIGHTS OF FIRST REFUSAL. The Holder shall have a right of first
refusal pro rata according to the Holder's ownership of Preferred Stock on the
date on which the Company's notice pursuant to this Section 6.2 is given on any
Equity Offerings (except for an offering of rights to subscribe for shares of
the Company's Common Stock, provided the Holders in such case are given the
right to subscribe for the number of shares to which they would have been
entitled if they then held the shares of Common Stock into which the Preferred
Stock may have been converted), until February 13, 1998, so long as the Holder
still holds any Preferred Stock and provided such Equity Offerings are made
pursuant to an exemption from the registration requirements of the Securities
Act, as amended, including without limitation Regulation D and Regulation S
thereunder. The Company shall give the Holder 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. The Holder shall have ten (10)
business days from receipt of such notice to deliver a written notice to the
Company that the Holder wishes to exercise its right of first refusal with
respect to such Equity Offering, provided that such offering is completed upon
such terms and with such documentation within thirty (30) calendar days after
said ten (10) day period. If the Holder exercises its right of first refusal
with respect to such Equity Offering, it must close the transactions
contemplated by the proposed issuance within ten (10) business days of the
exercise of its right hereunder on the same economic terms and using the same
documentation provided in the Company's notice to the Holder. If the Holder
fails to close the transaction for any reason other than a breach by the Company
of its obligations hereunder, such Holder's right of first refusal shall
irrevocably terminate with respect to such Equity Offering, provided that such
offering is completed upon such terms and with such documentation within thirty
(30) calendar days after said ten (10) day period.
7. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT. Notwithstanding anything to the
contrary contained herein, each Conversion Notice (as defined in the Certificate
of Designation related to the Preferred Stock) delivered by the Holder 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
Securities Act, will not exceed 4.9% of the total issued and outstanding shares
of the Company's Common Stock. For purposes hereof, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, but shall be determined exclusive of shares of Common Stock
issuable upon conversion of the unconverted portion of the shares of Preferred
Stock and the unexercised or unconverted portion of any other securities of the
Company subject to a limitation on conversion or exercise analogous to the
limitation contained herein or in the Certificate of Designation relating to the
Preferred Stock.
8. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL
THIS AGREEMENT SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE
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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.
9. ASSIGNMENT; ENTIRE AGREEMENT; AMENDMENT
9.1 ASSIGNMENT OF SUBSCRIPTION AGREEMENT. Neither this Agreement nor
any rights of the Holder 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 Holder hereunder with respect to the
Securities held by such person.
9.2 ASSIGNMENT OF PREFERRED STOCK The Holder may, subject to
compliance with the other provisions of this Agreement, without notice, transfer
or assign the Preferred Stock and may mortgage, encumber or transfer any of its
rights or interest in and to the Preferred Stock 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" 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 Agreement. A "sophisticated investor"
shall mean a sophisticated investor (as described in Rule 506(b)(2)(ii) of
Regulation D promulgated under the Securities Act
9.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Preferred
Stock, the Warrant, 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.
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10. TRANSFERS. The Preferred Stock has been issued subject to investment
representations of the Holder and may be transferred or exchanged in the United
States only in compliance with the Securities Act and applicable state
securities laws and in accordance with other applicable provisions hereof.
Prior to due presentment for transfer of shares of Preferred Stock, the Company
may treat the person in whose name the Preferred Stock is duly registered on the
Company's stock register as the owner thereof for the purpose of receiving
payment as therein provided and all other purposes, and the Company shall not be
affected by notice to the contrary.
11. PAYMENT OF EXPENSES. The Company agrees to pay all debts and expenses,
including attorneys' fees, which may be incurred by the Holder in connection
with the negotiation, execution and delivery of this Agreement and the documents
executed and delivered in connection herewith and the enforcement of the rights,
preferences and privileges of the Preferred Stock, the Warrants and the
provisions of this Agreement, and the Registration Rights Agreement.
12. PUBLICITY
The Company agrees that it will not disclose, and will not include in any
public announcement, the name of the Holder without its consent, unless and
until such disclosure is required by law or applicable regulation, and then only
to the extent of such requirements.
13. NO IMPAIRING. The Company shall not intentionally take any action which
would impair the rights and privileges of the Preferred Stock set forth herein
or in the Certificate of Designation relating to the Preferred Stock or of the
holders thereof.
14. NOTICES, ETC.; EXPENSES; INDEMNITY
14.1 NOTICES. Any notice, demand or request required or permitted to
be given by either the Company or the Holder 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 Holder shall be sent to its
designee or representative.
14.2 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.
15. 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.
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16. SURVIVAL; SEVERABILITY
The representations, warranties, covenants and agreements of the parties
hereto shall survive the execution and delivery of this Agreement. 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.
17. 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.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF,
Holder's Representative Name of Holder:
The Palladin Group
---------------------------- HALIFAX FUND, L.P.
By: Andrew Kaplan By: The Palladin Group, L.P.
Its: Vice President
By /s/ Andrew Kaplan
--------------------------------
Name: Andrew Kaplan
Title: Vice President
Address
Halifax Fund, L.P.
c/o Citco Fund Services Ltd.
Corporate Centre, West Bay Road,
P.O. Box 31106, SMB,
Grand Cayman, Cayman Islands
ZYCAD CORPORATION
By: /s/ Phillips W. Smith
---------------------------------------
Print Name: Phillips W. Smith
-------------------------------
Its: President and Chief Executive Officer
--------------------------------------
<PAGE>
EXHIBIT A
WARRANT
See Exhibit 4.35
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CONVERTIBLE SECURITIES EXCHANGE AGREEMENT
This Convertible Securities Exchange Agreement (the "Agreement") dated as
of May 15, 1997, is entered into by and between Zycad Corporation, a Delaware
corporation (the "Company") and the undersigned (the "Holder") and relates to
the exchange of a $1,225,000 principal amount 6% Subordinated Convertible
Debenture due February 13, 2000 (the "Debenture") issued pursuant to that
certain Convertible Securities Subscription Agreement, dated as of February 13,
1997, between the Company and the Holder, for 35,000 shares of the Company's
Series A-2 Convertible Preferred Stock ("Preferred Stock") which is convertible
into Common Stock of the Company, and a warrant in the form of Exhibit A hereto
to purchase 15,000 shares of Preferred Stock at an exercise price of $35.00 per
share (the "Warrant"). The term "Preferred Stock" as used herein shall also
refer to the Series A-2 Convertible Preferred Stock issuable upon exercise of
the Warrant. The Preferred Stock, the Warrant and the Common Stock issuable
upon conversion of the Preferred Stock are sometimes collectively referred to in
this Agreement as the "Securities." The Common Stock issuable upon conversion
of the Preferred Stock is sometimes referred to as the "Underlying Stock", and
the Common Stock issuable upon conversion of the Preferred Stock issuable upon
the exercise of the Warrant is sometimes referred to as the "Warrant Stock."
Notwithstanding the conversion of the Debenture into Preferred Stock and the
Warrant, the representations and warranties set forth in the Convertible
Securities Subscription Agreement, dated as of February 13, 1997, between the
Company and Holder, shall remain in full force and effect. In consideration of
the mutual promises, representations, warrants and conditions set forth herein,
and intending to be legally bounded hereby, the Company and the Holder agree as
follows:
1. THE EXCHANGE.
Upon the execution and delivery of this Agreement and the delivery to the
Holder or its representatives of (a) evidence that the Board of Directors of the
Company has approved (i) the exchange contemplated hereunder, (ii) the
reservation of shares of Common Stock as contemplated herein, and (iii) the
recommendation to the shareholders of the Company that they approve the issuance
of in excess of 20% of the outstanding Common Stock of the Company pursuant to
the transactions contemplated hereby and by the other Convertible Securities
Exchange Agreements and (b) an opinion of the general counsel of the Company in
form and substance satisfactory to the Holder or its representatives, the
Debenture shall be deemed, without further action on the part of either party,
exchanged for 35,000 shares of Preferred Stock and the Warrant. The Company
shall issue and deliver to the Holder on the date hereof a certificate
representing the shares of Preferred Stock and the Warrant. The Holder shall
promptly return the original Debenture to the Company for cancellation. The
Company shall cause an opinion of its outside counsel in form and substance
satisfactory to the Holder or its representatives to be delivered to the Holder
by May 31, 1997.
2. REGISTRATION STATEMENT.
The Company covenants and agrees that it will file a registration statement
on Form S-3 relating to the resale of the Underlying Stock and the Warrant Stock
pursuant to the requirements of
<PAGE>
the Registration Rights Agreement (as defined in Section 4.1) within two (2)
business days of the execution and delivery of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Holder that:
3.1 COMPANY STATUS. The Company has registered its Common Stock pursuant
to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), 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 Company's latest proxy statement and
Annual Report on Form 10-K sent to the Company's stockholders and all documents
filed by the Company with the Securities and Exchange Commission (the
"Commission") since December 31, 1996, pursuant to Sections 13(a), 13(c) 14 or
15(d) of the Exchange Act (excluding preliminary proxy statement filings) (such
documents being collectively referred to in this Agreement as the "Exchange Act
Reports") are the only filings made by the Company with the Commission since
December 31, 1996.
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 Preferred Stock or the Warrant nor has the Company
conducted any general solicitation (as the 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 Securities Act of 1933,
as amended (the "Securities Act").
3.4 VALID ISSUANCE OF CAPITAL STOCK. The Company has an authorized
capitalization consisting of 40,000,000 shares of Common Stock, par value $0.10
and 2,000,000 shares of preferred stock, par value $0.10, warrants outstanding
for 254,000 shares of Common Stock, and stock options granted to employees as
described in the Exchange Act Reports. As of May 8, 1997, the Company has
issued and outstanding 26,999,643 shares of Common Stock and, immediately prior
to the exchange contemplated hereby, no shares of preferred stock are issued and
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;
the shares of Common Stock issuable upon conversion of the Preferred Stock and
the Preferred Stock issuable upon exercise of the Warrant, 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 issuance of the Securities, except
for the rights of first refusal set forth herein and in the other Convertible
Securities Exchange Agreements of the Company entered into contemporaneously
herewith. The exchange of the Debentures for the Preferred Stock and the
Warrant is exempt, and the issuance of the Underlying
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Stock and Warrant Stock shall be exempt, from the registration requirements of
the Securities Act pursuant to Section 3(a)(9) thereof or other applicable
exemption. The Certificate of Designation relating to the Preferred Stock has
been duly filed with the Secretary of State of the State of Delaware, is in full
force and effect and the Holder is entitled to the rights, preferences and
privileges set forth therein.
3.5 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries, except for those listed on the Subsidiary Exhibit annexed hereto
and hereby made a part hereof. The Company and each such subsidiary, if any, is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "Material
Adverse Effect" means any effect on the business, operations, properties,
prospects, or financial condition of the entity with respect to which such term
is used and which is material and adverse to such entity or to other entities
controlling or controlled by such entity, and/or any condition or situation
which would prohibit or otherwise interfere with the ability of the entity with
respect to which said term is used to enter into and perform its obligations
under this Agreement.
3.6 AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
exchange and issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution, issuance and delivery of this Agreement, the
Preferred Stock and the Warrant 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 constitutes, and upon execution, issuance and
delivery thereof the Warrant 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 Holder 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 Warrant 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,
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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 Holder 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 Commission, National Association of Securities Dealers, Inc. ("NASD")
or state securities filings which may be required to be made by the Company
subsequent to the date hereof and other than 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 Holder herein.
3.9 EXCHANGE ACT REPORTS. The Company has delivered or made available to
the Holder true and complete copies of the Exchange Act Reports (including,
without limitation, proxy information and solicitation materials). The Company
has not provided to the Holder any information which, according to applicable
law, rule or regulation, should have been disclosed publicly prior to the date
hereof by the Company but which has not been so disclosed. As of their
respective dates, the Exchange Act Reports complied in all material respects
with the requirements of the Exchange Act and rules and regulations of the
Commission 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 and none of the other information concerning the Company
provided to the Holder in connection with the transactions contemplated hereby
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
Commission 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).
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3.10 NO MATERIAL ADVERSE CHANGE. Since December 31, 1996, the date through
which the most recent annual report of the Company on Form 10-K which has been
prepared and filed with the Commission, 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 Exchange Act
Reports.
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, 1996, 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 Securities 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 Holder relating to this Agreement for the transactions
contemplated hereby.
4. COVENANTS OF THE COMPANY
4.1 REGISTRATION RIGHTS. The Company agrees that the Registration Rights
Agreement, dated as of February 13, 1997, between the Holder and the Company
(the "Registration Rights Agreement"), remains in full force and effect, but
shall be deemed amended so that (i) each reference therein to "Debentures" shall
be deemed to refer to the "Preferred Stock" or the Certificate of Designation
relating to the Preferred Stock, as applicable, (ii) each reference to the
"Subscription Agreement" shall be deemed to refer to this Agreement and (iii)
Section 6 thereof shall be deleted. The Company acknowledges that its
failure to register the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with this Agreement and the 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 of this Agreement and the related documents. Accordingly the parties
agree that it is 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 Section 4 and in the provisions of the Certificate
of Designation related to the Preferred Stock represent the parties' good faith
effort
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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. If a registration statement
filed with the Securities and Exchange Commission pursuant to the Registration
Rights Agreement has not become effective prior to July 14, 1997, the Company
shall make a cash payment to each holder of Preferred Stock for each day after
July 14, 1997, and prior to August 13, 1997 that the registration statement is
not effective equal to one-thirtieth of three percent (3%) of the Stated Value
of the Preferred Stock originally issued to the Holder. If the registration
statement has not become effective prior to August 13, 1997, on August 13, 1997,
the Company shall make an additional payment in cash to each holder of Preferred
Stock equal to three percent (3%) of the Stated Value of the Preferred Stock
originally issued to such holder and shall make an additional three percent (3%)
payment at the end of each full 30 day period thereafter until the earlier of
the date the registration statement becomes effective or February 14, 1997. If
the registration statement has not become effective prior to February 14, 1998,
the Holder shall have the redemption right set forth in the Certificate of
Designation related to the Preferred Stock.
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 Preferred Stock and Preferred Stock upon exercise
of the Warrant; provided, however, that the number of shares so reserved shall,
except as hereinafter and in the Preferred Stock (and in the Certificate of
Designation related thereto) provided, shall be 6,044,680 shares, subject to
reduction and increase as hereinafter provided. The number of shares so
reserved may be reduced by the number of shares actually delivered pursuant to
conversion of Preferred Stock or exercise of the Warrant (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 Preferred
Stock and the remaining exercise rights under unexercised portion of the
Warrant) and the number of shares so reserved shall be increased to reflect
stock splits and stock dividends and distributions. In the event the number of
shares so reserved shall be insufficient for issuance upon the conversion of the
Preferred Stock and exercise of the Warrant, or if the Holders of the Preferred
Stock would at any time upon conversion thereof be entitled to the issuance of
shares of Common Stock in excess of the limitation in Section 5(d) of the
Certificate of Designation relating to the Preferred Stock, then in either case
the Company shall use its best efforts and all due diligence to obtain the
approval by its shareholders of this Agreement and all transactions contemplated
hereunder, including the authorization of such additional shares as may be
required to issue such shares in excess of the number so reserved or in excess
of such limitation, as the case may be. The Board of Directors of the Company
shall recommend such approval to the shareholders. The Company shall, on or
before August 31, 1997, hold a meeting of its stockholders and use its best
efforts to obtain at such meeting such approvals of the Company's stockholders
as may be required to issue all of the shares of Common Stock issuable upon
conversion of, or otherwise with respect to, the Preferred Stock (including the
Preferred Stock issuable upon exercise of the Warrants) without violating NASD
Rule 4460(i) or any successor rule thereto which may then be in effect). The
Company shall comply with the filing and disclosure requirements of Section 14
promulgated under the Exchange Act in connection with the solicitation,
acquisition and disclosure of such stockholder approval. The Company represents
and warrants that its Board of Directors has unanimously
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recommended that the Company's stockholders approve the proposals contemplated
by this Section 4.2 and shall so indicate such recommendation in the proxy
statement used to solicit such stockholder approval. The Company represents and
warrants that it has reserved an additional approximately 1,800,000 shares of
Common Stock for issuance upon conversion of the Company's 6% Subordinated
Convertible Debentures and exercise of its Common Stock Purchase Warrants issued
in May 1996. The Company agrees to maintain such reserve for such purposes
(except to the extent that such shares are issued upon any such conversion or
exercise).
4.3 LISTING OF UNDERLYING SHARES. The Company hereby agrees, promptly to
take such action to cause the Underlying Stock and the Warrant Stock to be
listed on the Exchange contemporaneously with the effectiveness of the
registration statement. 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 the
Exchange Act, and will not take any action or file any document (whether or not
permitted by the Exchange Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange 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.
4.7 INCURRENCE OF INDEBTEDNESS. The Company shall not incur any
indebtedness for borrowed money other than indebtedness which would have been
deemed Senior Indebtedness under the terms of the Debenture.
5. LEGENDS
5.1 LEGENDS. The certificates representing shares of Preferred Stock, the
Warrant, 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 of the Preferred
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Stock, 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.
The Company will promptly 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 issuance thereof to any such substitute or
replacement transfer agent, as the case may be, except as otherwise expressly
provided in the Registration Rights Agreement. It is the intent and purpose of
such instructions, as provided therein, to require the transfer agent for the
Common Stock from time to time to issue certificates evidencing Underlying Stock
or Warrant Stock free of the Legend during the following periods and under the
following circumstances and without consultation by the transfer agent with
Company or its counsel and without the need for any further advice or
instruction to the transfer agent by or from the Company or its counsel:
(a) At any time from and after the effectiveness of the Registration
Statement except during a Suspension Period (as defined in the Registration
Rights Agreement):
(i) upon any surrender of the Preferred Stock or Warrant 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 Preferred Stock or Warrant 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 date hereof, 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
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permitted dispose thereof pursuant to Rule 144(k) under the Securities 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
Securities Act, or (iii) such Holder is not then subject to such requirements.
In addition, and if applicable, the Company shall reissue the Preferred
Stock and Warrant without the Legend set forth above at such time as (i) Holder
thereof is permitted to dispose thereof pursuant to Rule 144(k) under the
Securities 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 Securities 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 HOLDER'S COMPLIANCE. Nothing in this section shall affect in any way
the Holder's obligations under and agreement to comply with all applicable
securities laws upon resale of the Securities.
6. OTHER ISSUANCES OF SECURITIES
6.1 OTHER EQUITY OFFERINGS. During the period beginning on the date
hereof and expiring 180 calendar days following the effectiveness of the
Registration Statement, the Company will not make any Equity Offerings, except
for an offering of rights to subscribe for shares of the Company's Common Stock
pursuant to any exemption from the registration requirements of the Securities
Act, including without limitation the exemption provided by Regulations D and S
promulgated thereunder. "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 as of February 13, 1997 and listed in the Exchange Act
reports).
6.2 RIGHTS OF FIRST REFUSAL. The Holder shall have a right of first
refusal pro rata according to the Holder's ownership of Preferred Stock on the
date on which the Company's notice pursuant to this Section 6.2 is given on any
Equity Offerings (except for an offering of rights to subscribe for shares of
the Company's Common Stock, provided the Holders in such case are given the
right to subscribe for the number of shares to which they would have been
entitled if they then held the shares of Common Stock into which the Preferred
Stock may have been converted), until February 13, 1998, so long as the Holder
still holds any Preferred Stock and provided such Equity Offerings are made
pursuant to an exemption from the registration requirements of the Securities
Act, as amended, including without limitation Regulation D and Regulation S
thereunder. The Company
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shall give the Holder 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. The Holder shall have ten (10) business days from
receipt of such notice to deliver a written notice to the Company that the
Holder wishes to exercise its right of first refusal with respect to such Equity
Offering, provided that such offering is completed upon such terms and with such
documentation within thirty (30) calendar days after said ten (10) day period.
If the Holder exercises its right of first refusal with respect to such Equity
Offering, it must close the transactions contemplated by the proposed issuance
within ten (10) business days of the exercise of its right hereunder on the same
economic terms and using the same documentation provided in the Company's notice
to the Holder. If the Holder fails to close the transaction for any reason
other than a breach by the Company of its obligations hereunder, such Holder's
right of first refusal shall irrevocably terminate with respect to such Equity
Offering, provided that such offering is completed upon such terms and with such
documentation within thirty (30) calendar days after said ten (10) day period.
7. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT. Notwithstanding anything to the
contrary contained herein, each Conversion Notice (as defined in the Certificate
of Designation related to the Preferred Stock) delivered by the Holder 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
Securities Act, will not exceed 4.9% of the total issued and outstanding shares
of the Company's Common Stock. For purposes hereof, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, but shall be determined exclusive of shares of Common Stock
issuable upon conversion of the unconverted portion of the shares of Preferred
Stock and the unexercised or unconverted portion of any other securities of the
Company subject to a limitation on conversion or exercise analogous to the
limitation contained herein or in the Certificate of Designation relating to the
Preferred Stock.
8. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL
THIS AGREEMENT SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. The parties
hereby agree that all actions or proceedings arising directly or indirectly from
or in connection with this Agreement shall, at the option of either party, be
litigated only in the United States District Court for the Southern District of
New York located in New York County, New York. The parties consent to the
jurisdiction and venue of the foregoing courts and consent that any process or
notice of motion or other application to either of said courts or a judge
thereof may be served inside or outside the State of New York or the Southern
District of New York by registered mail, return receipt requested, directed to
the party for which it is intended at its address set forth in this Agreement
(and service so made shall be deemed complete five (5) days after the same has
been posted as aforesaid) or by personal service or in such other manner as may
be permissible under the rules of said courts.
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9. ASSIGNMENT; ENTIRE AGREEMENT; AMENDMENT
9.1 ASSIGNMENT OF SUBSCRIPTION AGREEMENT. Neither this Agreement nor any
rights of the Holder 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 Holder hereunder with respect to the
Securities held by such person.
9.2 ASSIGNMENT OF PREFERRED STOCK The Holder may, subject to compliance
with the other provisions of this Agreement, without notice, transfer or assign
the Preferred Stock and may mortgage, encumber or transfer any of its rights or
interest in and to the Preferred Stock 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" 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 Agreement. A "sophisticated investor"
shall mean a sophisticated investor (as described in Rule 506(b)(2)(ii) of
Regulation D promulgated under the Securities Act
9.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Preferred Stock, the
Warrant, 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.
10. TRANSFERS. The Preferred Stock has been issued subject to investment
representations of the Holder and may be transferred or exchanged in the United
States only in compliance with the Securities Act and applicable state
securities laws and in accordance with other applicable provisions hereof.
Prior to due presentment for transfer of shares of Preferred Stock, the Company
may treat the person in whose name the Preferred Stock is duly registered on the
Company's stock register as the owner thereof for the purpose of receiving
payment as therein provided and all other purposes, and the Company shall not be
affected by notice to the contrary.
11. PAYMENT OF EXPENSES. The Company agrees to pay all debts and expenses,
including attorneys' fees, which may be incurred by the Holder in connection
with the negotiation, execution and delivery of this Agreement and the documents
executed and delivered in connection herewith and
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the enforcement of the rights, preferences and privileges of the Preferred
Stock, the Warrants and the provisions of this Agreement, and the Registration
Rights Agreement.
12. PUBLICITY
The Company agrees that it will not disclose, and will not include in any
public announcement, the name of the Holder without its consent, unless and
until such disclosure is required by law or applicable regulation, and then only
to the extent of such requirements.
13. NO IMPAIRING. The Company shall not intentionally take any action which
would impair the rights and privileges of the Preferred Stock set forth herein
or in the Certificate of Designation relating to the Preferred Stock or of the
holders thereof.
14. NOTICES, ETC.; EXPENSES; INDEMNITY
14.1 NOTICES. Any notice, demand or request required or permitted to be
given by either the Company or the Holder 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 Holder shall be sent to its
designee or representative.
14.2 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.
15. 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.
16. SURVIVAL; SEVERABILITY
The representations, warranties, covenants and agreements of the parties
hereto shall survive the execution and delivery of this Agreement. 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.
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<PAGE>
17. 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.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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<PAGE>
IN WITNESS WHEREOF,
Holder's Representative Name of Holder:
Bala International CAPITAL VENTURES INTERNATIONAL
- ----------------------------
By: Andrew Frost By: Bala International Inc. as agent
Its: Director
By /s/ Andrew Frost
--------------------------------
Name: Andrew Frost
Title: Director
Address
c/o Bala International Inc.
401 City Avenue
Bala, Cynwyd, PA 19001
ZYCAD CORPORATION
By: /s/ Phillips W. Smith
---------------------------------------
Print Name: Phillips W. Smith
--------------------------------
Its: President and Chief Executive Officer
--------------------------------------
<PAGE>
EXHIBIT A
WARRANT
See Exhibit 4.36
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<PAGE>
CONVERTIBLE SECURITIES EXCHANGE AGREEMENT
This Convertible Securities Exchange Agreement (the "Agreement") dated as
of May 15, 1997, is entered into by and between Zycad Corporation, a Delaware
corporation (the "Company") and the undersigned (the "Holder") and relates to
the exchange of a $350,000 principal amount 6% Subordinated Convertible
Debenture due February 13, 2000 (the "Debenture") issued pursuant to that
certain Convertible Securities Subscription Agreement, dated as of February 13,
1997, between the Company and the Holder, for 10,000 shares of the Company's
Series A-3 Convertible Preferred Stock ("Preferred Stock") which is convertible
into Common Stock of the Company, and a warrant in the form of Exhibit A hereto
to purchase 4,286 shares of Preferred Stock at an exercise price of $35.00 per
share (the "Warrant"). The term "Preferred Stock" as used herein shall also
refer to the Series A-3 Convertible Preferred Stock issuable upon exercise of
the Warrant. The Preferred Stock, the Warrant and the Common Stock issuable
upon conversion of the Preferred Stock are sometimes collectively referred to in
this Agreement as the "Securities." The Common Stock issuable upon conversion
of the Preferred Stock is sometimes referred to as the "Underlying Stock", and
the Common Stock issuable upon conversion of the Preferred Stock issuable upon
the exercise of the Warrant is sometimes referred to as the "Warrant Stock."
Notwithstanding the conversion of the Debenture into Preferred Stock and the
Warrant, the representations and warranties set forth in the Convertible
Securities Subscription Agreement, dated as of February 13, 1997, between the
Company and Holder, shall remain in full force and effect. In consideration of
the mutual promises, representations, warrants and conditions set forth herein,
and intending to be legally bounded hereby, the Company and the Holder agree as
follows:
1. THE EXCHANGE.
Upon the execution and delivery of this Agreement and the delivery to the
Holder or its representatives of (a) evidence that the Board of Directors of the
Company has approved (i) the exchange contemplated hereunder, (ii) the
reservation of shares of Common Stock as contemplated herein, and (iii) the
recommendation to the shareholders of the Company that they approve the issuance
of in excess of 20% of the outstanding Common Stock of the Company pursuant to
the transactions contemplated hereby and by the other Convertible Securities
Exchange Agreements and (b) an opinion of the general counsel of the Company in
form and substance satisfactory to the Holder or its representatives, the
Debenture shall be deemed, without further action on the part of either party,
exchanged for 35,000 shares of Preferred Stock and the Warrant. The Company
shall issue and deliver to the Holder on the date hereof a certificate
representing the shares of Preferred Stock and the Warrant. The Holder shall
promptly return the original Debenture to the Company for cancellation. The
Company shall cause an opinion of its outside counsel in form and substance
satisfactory to the Holder or its representatives to be delivered to the Holder
by May 31, 1997.
2. REGISTRATION STATEMENT.
The Company covenants and agrees that it will file a registration statement
on Form S-3 relating to the resale of the Underlying Stock and the Warrant Stock
pursuant to the requirements of
<PAGE>
the Registration Rights Agreement (as defined in Section 4.1) within two (2)
business days of the execution and delivery of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Holder that:
3.1 COMPANY STATUS. The Company has registered its Common Stock pursuant
to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), 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 Company's latest proxy statement and
Annual Report on Form 10-K sent to the Company's stockholders and all documents
filed by the Company with the Securities and Exchange Commission (the
"Commission") since December 31, 1996, pursuant to Sections 13(a), 13(c) 14 or
15(d) of the Exchange Act (excluding preliminary proxy statement filings) (such
documents being collectively referred to in this Agreement as the "Exchange Act
Reports") are the only filings made by the Company with the Commission since
December 31, 1996.
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 Preferred Stock or the Warrant nor has the Company
conducted any general solicitation (as the 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 Securities Act of 1933,
as amended (the "Securities Act").
3.4 VALID ISSUANCE OF CAPITAL STOCK. The Company has an authorized
capitalization consisting of 40,000,000 shares of Common Stock, par value $0.10
and 2,000,000 shares of preferred stock, par value $0.10, warrants outstanding
for 254,000 shares of Common Stock, and stock options granted to employees as
described in the Exchange Act Reports. As of May 8, 1997, the Company has
issued and outstanding 26,999,643 shares of Common Stock and, immediately prior
to the exchange contemplated hereby, no shares of preferred stock are issued and
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;
the shares of Common Stock issuable upon conversion of the Preferred Stock and
the Preferred Stock issuable upon exercise of the Warrant, 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 issuance of the Securities, except
for the rights of first refusal set forth herein and in the other Convertible
Securities Exchange Agreements of the Company entered into contemporaneously
herewith. The exchange of the Debentures for the Preferred Stock and the
Warrant is exempt, and the issuance of the Underlying
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<PAGE>
Stock and Warrant Stock shall be exempt, from the registration requirements of
the Securities Act pursuant to Section 3(a)(9) thereof or other applicable
exemption. The Certificate of Designation relating to the Preferred Stock has
been duly filed with the Secretary of State of the State of Delaware, is in full
force and effect and the Holder is entitled to the rights, preferences and
privileges set forth therein.
3.5 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries, except for those listed on the Subsidiary Exhibit annexed hereto
and hereby made a part hereof. The Company and each such subsidiary, if any, is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "Material
Adverse Effect" means any effect on the business, operations, properties,
prospects, or financial condition of the entity with respect to which such term
is used and which is material and adverse to such entity or to other entities
controlling or controlled by such entity, and/or any condition or situation
which would prohibit or otherwise interfere with the ability of the entity with
respect to which said term is used to enter into and perform its obligations
under this Agreement.
3.6 AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
exchange and issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution, issuance and delivery of this Agreement, the
Preferred Stock and the Warrant 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 constitutes, and upon execution, issuance and
delivery thereof the Warrant 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 Holder 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 Warrant 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,
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<PAGE>
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 Holder 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 Commission, National Association of Securities Dealers, Inc. ("NASD")
or state securities filings which may be required to be made by the Company
subsequent to the date hereof and other than 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 Holder herein.
3.9 EXCHANGE ACT REPORTS. The Company has delivered or made available to
the Holder true and complete copies of the Exchange Act Reports (including,
without limitation, proxy information and solicitation materials). The Company
has not provided to the Holder any information which, according to applicable
law, rule or regulation, should have been disclosed publicly prior to the date
hereof by the Company but which has not been so disclosed. As of their
respective dates, the Exchange Act Reports complied in all material respects
with the requirements of the Exchange Act and rules and regulations of the
Commission 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 and none of the other information concerning the Company
provided to the Holder in connection with the transactions contemplated hereby
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
Commission 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).
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<PAGE>
3.10 NO MATERIAL ADVERSE CHANGE. Since December 31, 1996, the date through
which the most recent annual report of the Company on Form 10-K which has been
prepared and filed with the Commission, 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 Exchange Act
Reports.
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, 1996, 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 Securities 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 Holder relating to this Agreement for the transactions
contemplated hereby.
4. COVENANTS OF THE COMPANY
4.1 REGISTRATION RIGHTS. The Company agrees that the Registration Rights
Agreement, dated as of February 13, 1997, between the Holder and the Company
(the "Registration Rights Agreement"), remains in full force and effect, but
shall be deemed amended so that (i) each reference therein to "Debentures" shall
be deemed to refer to the "Preferred Stock" or the Certificate of Designation
relating to the Preferred Stock, as applicable, (ii) each reference to the
"Subscription Agreement" shall be deemed to refer to this Agreement and (iii)
Section 6 thereof shall be deleted. The Company acknowledges that its
failure to register the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with this Agreement and the 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 of this Agreement and the related documents. Accordingly the parties
agree that it is 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 Section 4 and in the provisions of the Certificate
of Designation related to the Preferred Stock represent the parties' good faith
effort
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<PAGE>
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. If a registration statement
filed with the Securities and Exchange Commission pursuant to the Registration
Rights Agreement has not become effective prior to July 14, 1997, the Company
shall make a cash payment to each holder of Preferred Stock for each day after
July 14, 1997, and prior to August 13, 1997 that the registration statement is
not effective equal to one-thirtieth of three percent (3%) of the Stated Value
of the Preferred Stock originally issued to the Holder. If the registration
statement has not become effective prior to August 13, 1997, on August 13, 1997,
the Company shall make an additional payment in cash to each holder of Preferred
Stock equal to three percent (3%) of the Stated Value of the Preferred Stock
originally issued to such holder and shall make an additional three percent (3%)
payment at the end of each full 30 day period thereafter until the earlier of
the date the registration statement becomes effective or February 14, 1997. If
the registration statement has not become effective prior to February 14, 1998,
the Holder shall have the redemption right set forth in the Certificate of
Designation related to the Preferred Stock.
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 Preferred Stock and Preferred Stock upon exercise
of the Warrant; provided, however, that the number of shares so reserved shall,
except as hereinafter and in the Preferred Stock (and in the Certificate of
Designation related thereto) provided, shall be 6,044,680 shares, subject to
reduction and increase as hereinafter provided. The number of shares so
reserved may be reduced by the number of shares actually delivered pursuant to
conversion of Preferred Stock or exercise of the Warrant (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 Preferred
Stock and the remaining exercise rights under unexercised portion of the
Warrant) and the number of shares so reserved shall be increased to reflect
stock splits and stock dividends and distributions. In the event the number of
shares so reserved shall be insufficient for issuance upon the conversion of the
Preferred Stock and exercise of the Warrant, or if the Holders of the Preferred
Stock would at any time upon conversion thereof be entitled to the issuance of
shares of Common Stock in excess of the limitation in Section 5(d) of the
Certificate of Designation relating to the Preferred Stock, then in either case
the Company shall use its best efforts and all due diligence to obtain the
approval by its shareholders of this Agreement and all transactions contemplated
hereunder, including the authorization of such additional shares as may be
required to issue such shares in excess of the number so reserved or in excess
of such limitation, as the case may be. The Board of Directors of the Company
shall recommend such approval to the shareholders. The Company shall, on or
before August 31, 1997, hold a meeting of its stockholders and use its best
efforts to obtain at such meeting such approvals of the Company's stockholders
as may be required to issue all of the shares of Common Stock issuable upon
conversion of, or otherwise with respect to, the Preferred Stock (including the
Preferred Stock issuable upon exercise of the Warrants) without violating NASD
Rule 4460(i) or any successor rule thereto which may then be in effect). The
Company shall comply with the filing and disclosure requirements of Section 14
promulgated under the Exchange Act in connection with the solicitation,
acquisition and disclosure of such stockholder approval. The Company represents
and warrants that its Board of Directors has unanimously
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recommended that the Company's stockholders approve the proposals contemplated
by this Section 4.2 and shall so indicate such recommendation in the proxy
statement used to solicit such stockholder approval. The Company represents and
warrants that it has reserved an additional approximately 1,800,000 shares of
Common Stock for issuance upon conversion of the Company's 6% Subordinated
Convertible Debentures and exercise of its Common Stock Purchase Warrants issued
in May 1996. The Company agrees to maintain such reserve for such purposes
(except to the extent that such shares are issued upon any such conversion or
exercise).
4.3 LISTING OF UNDERLYING SHARES. The Company hereby agrees, promptly to
take such action to cause the Underlying Stock and the Warrant Stock to be
listed on the Exchange contemporaneously with the effectiveness of the
registration statement. 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 the
Exchange Act, and will not take any action or file any document (whether or not
permitted by the Exchange Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange 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.
4.7 INCURRENCE OF INDEBTEDNESS. The Company shall not incur any
indebtedness for borrowed money other than indebtedness which would have been
deemed Senior Indebtedness under the terms of the Debenture.
5. LEGENDS
5.1 LEGENDS. The certificates representing shares of Preferred Stock, the
Warrant, 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 of the Preferred
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<PAGE>
Stock, 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.
The Company will promptly 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 issuance thereof to any such substitute or
replacement transfer agent, as the case may be, except as otherwise expressly
provided in the Registration Rights Agreement. It is the intent and purpose of
such instructions, as provided therein, to require the transfer agent for the
Common Stock from time to time to issue certificates evidencing Underlying Stock
or Warrant Stock free of the Legend during the following periods and under the
following circumstances and without consultation by the transfer agent with
Company or its counsel and without the need for any further advice or
instruction to the transfer agent by or from the Company or its counsel:
(a) At any time from and after the effectiveness of the Registration
Statement except during a Suspension Period (as defined in the Registration
Rights Agreement):
(i) upon any surrender of the Preferred Stock or Warrant 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 Preferred Stock or Warrant 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 date hereof, 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
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permitted dispose thereof pursuant to Rule 144(k) under the Securities 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
Securities Act, or (iii) such Holder is not then subject to such requirements.
In addition, and if applicable, the Company shall reissue the Preferred
Stock and Warrant without the Legend set forth above at such time as (i) Holder
thereof is permitted to dispose thereof pursuant to Rule 144(k) under the
Securities 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 Securities 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 HOLDER'S COMPLIANCE. Nothing in this section shall affect in any way
the Holder's obligations under and agreement to comply with all applicable
securities laws upon resale of the Securities.
6. OTHER ISSUANCES OF SECURITIES
6.1 OTHER EQUITY OFFERINGS. During the period beginning on the date
hereof and expiring 180 calendar days following the effectiveness of the
Registration Statement, the Company will not make any Equity Offerings, except
for an offering of rights to subscribe for shares of the Company's Common Stock
pursuant to any exemption from the registration requirements of the Securities
Act, including without limitation the exemption provided by Regulations D and S
promulgated thereunder. "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 as of February 13, 1997 and listed in the Exchange Act
reports).
6.2 RIGHTS OF FIRST REFUSAL. The Holder shall have a right of first
refusal pro rata according to the Holder's ownership of Preferred Stock on the
date on which the Company's notice pursuant to this Section 6.2 is given on any
Equity Offerings (except for an offering of rights to subscribe for shares of
the Company's Common Stock, provided the Holders in such case are given the
right to subscribe for the number of shares to which they would have been
entitled if they then held the shares of Common Stock into which the Preferred
Stock may have been converted), until February 13, 1998, so long as the Holder
still holds any Preferred Stock and provided such Equity Offerings are made
pursuant to an exemption from the registration requirements of the Securities
Act, as amended, including without limitation Regulation D and Regulation S
thereunder. The Company
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<PAGE>
shall give the Holder 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. The Holder shall have ten (10) business days from
receipt of such notice to deliver a written notice to the Company that the
Holder wishes to exercise its right of first refusal with respect to such Equity
Offering, provided that such offering is completed upon such terms and with such
documentation within thirty (30) calendar days after said ten (10) day period.
If the Holder exercises its right of first refusal with respect to such Equity
Offering, it must close the transactions contemplated by the proposed issuance
within ten (10) business days of the exercise of its right hereunder on the same
economic terms and using the same documentation provided in the Company's notice
to the Holder. If the Holder fails to close the transaction for any reason
other than a breach by the Company of its obligations hereunder, such Holder's
right of first refusal shall irrevocably terminate with respect to such Equity
Offering, provided that such offering is completed upon such terms and with such
documentation within thirty (30) calendar days after said ten (10) day period.
7. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT. Notwithstanding anything to the
contrary contained herein, each Conversion Notice (as defined in the Certificate
of Designation related to the Preferred Stock) delivered by the Holder 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
Securities Act, will not exceed 4.9% of the total issued and outstanding shares
of the Company's Common Stock. For purposes hereof, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, but shall be determined exclusive of shares of Common Stock
issuable upon conversion of the unconverted portion of the shares of Preferred
Stock and the unexercised or unconverted portion of any other securities of the
Company subject to a limitation on conversion or exercise analogous to the
limitation contained herein or in the Certificate of Designation relating to the
Preferred Stock.
8. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL
THIS AGREEMENT SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. The parties
hereby agree that all actions or proceedings arising directly or indirectly from
or in connection with this Agreement shall, at the option of either party, be
litigated only in the United States District Court for the Southern District of
New York located in New York County, New York. The parties consent to the
jurisdiction and venue of the foregoing courts and consent that any process or
notice of motion or other application to either of said courts or a judge
thereof may be served inside or outside the State of New York or the Southern
District of New York by registered mail, return receipt requested, directed to
the party for which it is intended at its address set forth in this Agreement
(and service so made shall be deemed complete five (5) days after the same has
been posted as aforesaid) or by personal service or in such other manner as may
be permissible under the rules of said courts.
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<PAGE>
9. ASSIGNMENT; ENTIRE AGREEMENT; AMENDMENT
9.1 ASSIGNMENT OF SUBSCRIPTION AGREEMENT. Neither this Agreement nor any
rights of the Holder 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 Holder hereunder with respect to the
Securities held by such person.
9.2 ASSIGNMENT OF PREFERRED STOCK The Holder may, subject to compliance
with the other provisions of this Agreement, without notice, transfer or assign
the Preferred Stock and may mortgage, encumber or transfer any of its rights or
interest in and to the Preferred Stock 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" 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 Agreement. A "sophisticated investor"
shall mean a sophisticated investor (as described in Rule 506(b)(2)(ii) of
Regulation D promulgated under the Securities Act
9.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Preferred Stock, the
Warrant, 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.
10. TRANSFERS. The Preferred Stock has been issued subject to investment
representations of the Holder and may be transferred or exchanged in the United
States only in compliance with the Securities Act and applicable state
securities laws and in accordance with other applicable provisions hereof.
Prior to due presentment for transfer of shares of Preferred Stock, the Company
may treat the person in whose name the Preferred Stock is duly registered on the
Company's stock register as the owner thereof for the purpose of receiving
payment as therein provided and all other purposes, and the Company shall not be
affected by notice to the contrary.
11. PAYMENT OF EXPENSES. The Company agrees to pay all debts and expenses,
including attorneys' fees, which may be incurred by the Holder in connection
with the negotiation, execution and delivery of this Agreement and the documents
executed and delivered in connection herewith and
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the enforcement of the rights, preferences and privileges of the Preferred
Stock, the Warrants and the provisions of this Agreement, and the Registration
Rights Agreement.
12. PUBLICITY
The Company agrees that it will not disclose, and will not include in any
public announcement, the name of the Holder without its consent, unless and
until such disclosure is required by law or applicable regulation, and then only
to the extent of such requirements.
13. NO IMPAIRING. The Company shall not intentionally take any action which
would impair the rights and privileges of the Preferred Stock set forth herein
or in the Certificate of Designation relating to the Preferred Stock or of the
holders thereof.
14. NOTICES, ETC.; EXPENSES; INDEMNITY
14.1 NOTICES. Any notice, demand or request required or permitted to be
given by either the Company or the Holder 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 Holder shall be sent to its
designee or representative.
14.2 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.
15. 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.
16. SURVIVAL; SEVERABILITY
The representations, warranties, covenants and agreements of the parties
hereto shall survive the execution and delivery of this Agreement. 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.
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17. 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.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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<PAGE>
IN WITNESS WHEREOF,
Holder's Representative Name of Holder:
Promethean Investment Group, L.L.C. HERACLES FUND
- -----------------------------------
By: James F. O'Brien By: Promethean Investment Group, L.L.C.
Its: President Its: Investment Advisor
By /s/ James F. O'Brien
--------------------------------
Name: James F. O'Brien
Title: President
Address
c/o Bank of Bermuda (Cayman) Limited,
P.O. Box 513, Third Floor
British American Tower,
Dr. Roy's Drive
Georgetown, Grand Cayman, Cayman Islands,
BWI
ZYCAD CORPORATION
By: /s/ Phillips W. Smith
---------------------------------------
Print Name: Phillips W. Smith
--------------------------------
Its: President and Chief Executive Officer
--------------------------------------
<PAGE>
EXHIBIT A
WARRANT
See Exhibit 4.37
<PAGE>
CONVERTIBLE SECURITIES EXCHANGE AGREEMENT
This Convertible Securities Exchange Agreement (the "Agreement") dated as
of May 15, 1997, is entered into by and between Zycad Corporation, a Delaware
corporation (the "Company") and the undersigned (the "Holder") and relates to
the exchange of a $350,000 principal amount 6% Subordinated Convertible
Debenture due February 13, 2000 (the "Debenture") issued pursuant to that
certain Convertible Securities Subscription Agreement, dated as of February 13,
1997, between the Company and the Holder, for 10,000 shares of the Company's
Series A-4 Convertible Preferred Stock ("Preferred Stock") which is convertible
into Common Stock of the Company, and a warrant in the form of Exhibit A hereto
to purchase 4,286 shares of Preferred Stock at an exercise price of $35.00 per
share (the "Warrant"). The term "Preferred Stock" as used herein shall also
refer to the Series A-4 Convertible Preferred Stock issuable upon exercise of
the Warrant. The Preferred Stock, the Warrant and the Common Stock issuable
upon conversion of the Preferred Stock are sometimes collectively referred to in
this Agreement as the "Securities." The Common Stock issuable upon conversion
of the Preferred Stock is sometimes referred to as the "Underlying Stock", and
the Common Stock issuable upon conversion of the Preferred Stock issuable upon
the exercise of the Warrant is sometimes referred to as the "Warrant Stock."
Notwithstanding the conversion of the Debenture into Preferred Stock and the
Warrant, the representations and warranties set forth in the Convertible
Securities Subscription Agreement, dated as of February 13, 1997, between the
Company and Holder, shall remain in full force and effect. In consideration of
the mutual promises, representations, warrants and conditions set forth herein,
and intending to be legally bounded hereby, the Company and the Holder agree as
follows:
1. THE EXCHANGE.
Upon the execution and delivery of this Agreement and the delivery to the
Holder or its representatives of (a) evidence that the Board of Directors of the
Company has approved (i) the exchange contemplated hereunder, (ii) the
reservation of shares of Common Stock as contemplated herein, and (iii) the
recommendation to the shareholders of the Company that they approve the issuance
of in excess of 20% of the outstanding Common Stock of the Company pursuant to
the transactions contemplated hereby and by the other Convertible Securities
Exchange Agreements and (b) an opinion of the general counsel of the Company in
form and substance satisfactory to the Holder or its representatives, the
Debenture shall be deemed, without further action on the part of either party,
exchanged for 35,000 shares of Preferred Stock and the Warrant. The Company
shall issue and deliver to the Holder on the date hereof a certificate
representing the shares of Preferred Stock and the Warrant. The Holder shall
promptly return the original Debenture to the Company for cancellation. The
Company shall cause an opinion of its outside counsel in form and substance
satisfactory to the Holder or its representatives to be delivered to the Holder
by May 31, 1997.
2. REGISTRATION STATEMENT.
The Company covenants and agrees that it will file a registration statement
on Form S-3 relating to the resale of the Underlying Stock and the Warrant Stock
pursuant to the requirements of
<PAGE>
the Registration Rights Agreement (as defined in Section 4.1) within two (2)
business days of the execution and delivery of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Holder that:
3.1 COMPANY STATUS. The Company has registered its Common Stock pursuant
to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), 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 Company's latest proxy statement and
Annual Report on Form 10-K sent to the Company's stockholders and all documents
filed by the Company with the Securities and Exchange Commission (the
"Commission") since December 31, 1996, pursuant to Sections 13(a), 13(c) 14 or
15(d) of the Exchange Act (excluding preliminary proxy statement filings) (such
documents being collectively referred to in this Agreement as the "Exchange Act
Reports") are the only filings made by the Company with the Commission since
December 31, 1996.
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 Preferred Stock or the Warrant nor has the Company
conducted any general solicitation (as the 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 Securities Act of 1933,
as amended (the "Securities Act").
3.4 VALID ISSUANCE OF CAPITAL STOCK. The Company has an authorized
capitalization consisting of 40,000,000 shares of Common Stock, par value $0.10
and 2,000,000 shares of preferred stock, par value $0.10, warrants outstanding
for 254,000 shares of Common Stock, and stock options granted to employees as
described in the Exchange Act Reports. As of May 8, 1997, the Company has
issued and outstanding 26,999,643 shares of Common Stock and, immediately prior
to the exchange contemplated hereby, no shares of preferred stock are issued and
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;
the shares of Common Stock issuable upon conversion of the Preferred Stock and
the Preferred Stock issuable upon exercise of the Warrant, 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 issuance of the Securities, except
for the rights of first refusal set forth herein and in the other Convertible
Securities Exchange Agreements of the Company entered into contemporaneously
herewith. The exchange of the Debentures for the Preferred Stock and the
Warrant is exempt, and the issuance of the Underlying
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<PAGE>
Stock and Warrant Stock shall be exempt, from the registration requirements of
the Securities Act pursuant to Section 3(a)(9) thereof or other applicable
exemption. The Certificate of Designation relating to the Preferred Stock has
been duly filed with the Secretary of State of the State of Delaware, is in full
force and effect and the Holder is entitled to the rights, preferences and
privileges set forth therein.
3.5 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries, except for those listed on the Subsidiary Exhibit annexed hereto
and hereby made a part hereof. The Company and each such subsidiary, if any, is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "Material
Adverse Effect" means any effect on the business, operations, properties,
prospects, or financial condition of the entity with respect to which such term
is used and which is material and adverse to such entity or to other entities
controlling or controlled by such entity, and/or any condition or situation
which would prohibit or otherwise interfere with the ability of the entity with
respect to which said term is used to enter into and perform its obligations
under this Agreement.
3.6 AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
exchange and issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution, issuance and delivery of this Agreement, the
Preferred Stock and the Warrant 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 constitutes, and upon execution, issuance and
delivery thereof the Warrant 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 Holder 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 Warrant 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,
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<PAGE>
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 Holder 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 Commission, National Association of Securities Dealers, Inc. ("NASD")
or state securities filings which may be required to be made by the Company
subsequent to the date hereof and other than 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 Holder herein.
3.9 EXCHANGE ACT REPORTS. The Company has delivered or made available to
the Holder true and complete copies of the Exchange Act Reports (including,
without limitation, proxy information and solicitation materials). The Company
has not provided to the Holder any information which, according to applicable
law, rule or regulation, should have been disclosed publicly prior to the date
hereof by the Company but which has not been so disclosed. As of their
respective dates, the Exchange Act Reports complied in all material respects
with the requirements of the Exchange Act and rules and regulations of the
Commission 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 and none of the other information concerning the Company
provided to the Holder in connection with the transactions contemplated hereby
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
Commission 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).
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<PAGE>
3.10 NO MATERIAL ADVERSE CHANGE. Since December 31, 1996, the date through
which the most recent annual report of the Company on Form 10-K which has been
prepared and filed with the Commission, 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 Exchange Act
Reports.
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, 1996, 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 Securities 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 Holder relating to this Agreement for the transactions
contemplated hereby.
4. COVENANTS OF THE COMPANY
4.1 REGISTRATION RIGHTS. The Company agrees that the Registration Rights
Agreement, dated as of February 13, 1997, between the Holder and the Company
(the "Registration Rights Agreement"), remains in full force and effect, but
shall be deemed amended so that (i) each reference therein to "Debentures" shall
be deemed to refer to the "Preferred Stock" or the Certificate of Designation
relating to the Preferred Stock, as applicable, (ii) each reference to the
"Subscription Agreement" shall be deemed to refer to this Agreement and (iii)
Section 6 thereof shall be deleted. The Company acknowledges that its
failure to register the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with this Agreement and the 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 of this Agreement and the related documents. Accordingly the parties
agree that it is 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 Section 4 and in the provisions of the Certificate
of Designation related to the Preferred Stock represent the parties' good faith
effort
-5-
<PAGE>
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. If a registration statement
filed with the Securities and Exchange Commission pursuant to the Registration
Rights Agreement has not become effective prior to July 14, 1997, the Company
shall make a cash payment to each holder of Preferred Stock for each day after
July 14, 1997, and prior to August 13, 1997 that the registration statement is
not effective equal to one-thirtieth of three percent (3%) of the Stated Value
of the Preferred Stock originally issued to the Holder. If the registration
statement has not become effective prior to August 13, 1997, on August 13, 1997,
the Company shall make an additional payment in cash to each holder of Preferred
Stock equal to three percent (3%) of the Stated Value of the Preferred Stock
originally issued to such holder and shall make an additional three percent (3%)
payment at the end of each full 30 day period thereafter until the earlier of
the date the registration statement becomes effective or February 14, 1997. If
the registration statement has not become effective prior to February 14, 1998,
the Holder shall have the redemption right set forth in the Certificate of
Designation related to the Preferred Stock.
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 Preferred Stock and Preferred Stock upon exercise
of the Warrant; provided, however, that the number of shares so reserved shall,
except as hereinafter and in the Preferred Stock (and in the Certificate of
Designation related thereto) provided, shall be 6,044,680 shares, subject to
reduction and increase as hereinafter provided. The number of shares so
reserved may be reduced by the number of shares actually delivered pursuant to
conversion of Preferred Stock or exercise of the Warrant (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 Preferred
Stock and the remaining exercise rights under unexercised portion of the
Warrant) and the number of shares so reserved shall be increased to reflect
stock splits and stock dividends and distributions. In the event the number of
shares so reserved shall be insufficient for issuance upon the conversion of the
Preferred Stock and exercise of the Warrant, or if the Holders of the Preferred
Stock would at any time upon conversion thereof be entitled to the issuance of
shares of Common Stock in excess of the limitation in Section 5(d) of the
Certificate of Designation relating to the Preferred Stock, then in either case
the Company shall use its best efforts and all due diligence to obtain the
approval by its shareholders of this Agreement and all transactions contemplated
hereunder, including the authorization of such additional shares as may be
required to issue such shares in excess of the number so reserved or in excess
of such limitation, as the case may be. The Board of Directors of the Company
shall recommend such approval to the shareholders. The Company shall, on or
before August 31, 1997, holder a meeting of its stockholders and use its best
efforts to obtain at such meeting such approvals of the Company's stockholders
as may be required to issue all of the shares of Common Stock issuable upon
conversion of, or otherwise with respect to, the Preferred Stock (including the
Preferred Stock issuable upon exercise of the Warrants) without violating NASD
Rule 4460(i) 9or any successor rule threto which may then be in effect). The
Company shall comply with the filing and disclosure requirements of Section 14
promulgated under the Exchange Act in connection with the solicitation,
acquisition and disclosure of such stockholder approval. The Company represents
and warrants that its Board of Directors has unanimously
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<PAGE>
recommended that the Company's stockholders approve the proposals contemplated
by this Section 4.2 and shall so indicate such recommendation in the proxy
statement used to solicit such stockholder approval. The Company represents and
warrants that it has reserved an additional approximately 1,800,000 shares of
Common Stock for issuance upon conversion of the Company's 6% Subordinated
Convertible Debentures and exercise of its Common Stock Purchase Warrants issued
in May 1996. The Company agrees to maintain such reserve for such purposes
(except to the extent that such shares are issued upon any such conversion or
exercise).
4.3 LISTING OF UNDERLYING SHARES. The Company hereby agrees, promptly to
take such action to cause the Underlying Stock and the Warrant Stock to be
listed on the Exchange contemporaneously with the effectiveness of the
registration statement. 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 the
Exchange Act, and will not take any action or file any document (whether or not
permitted by the Exchange Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange 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.
4.7 INCURRENCE OF INDEBTEDNESS. The Company shall not incur any
indebtedness for borrowed money other than indebtedness which would have been
deemed Senior Indebtedness under the terms of the Debenture.
5. LEGENDS
5.1 LEGENDS. The certificates representing shares of Preferred Stock, the
Warrant, 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 of the Preferred
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<PAGE>
Stock, 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.
The Company will promptly 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 issuance thereof to any such substitute or
replacement transfer agent, as the case may be, except as otherwise expressly
provided in the Registration Rights Agreement. It is the intent and purpose of
such instructions, as provided therein, to require the transfer agent for the
Common Stock from time to time to issue certificates evidencing Underlying Stock
or Warrant Stock free of the Legend during the following periods and under the
following circumstances and without consultation by the transfer agent with
Company or its counsel and without the need for any further advice or
instruction to the transfer agent by or from the Company or its counsel:
(a) At any time from and after the effectiveness of the Registration
Statement except during a Suspension Period (as defined in the Registration
Rights Agreement):
(i) upon any surrender of the Preferred Stock or Warrant 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 Preferred Stock or Warrant 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 date hereof, 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
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<PAGE>
permitted dispose thereof pursuant to Rule 144(k) under the Securities 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
Securities Act, or (iii) such Holder is not then subject to such requirements.
In addition, and if applicable, the Company shall reissue the Preferred
Stock and Warrant without the Legend set forth above at such time as (i) Holder
thereof is permitted to dispose thereof pursuant to Rule 144(k) under the
Securities 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 Securities 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 HOLDER'S COMPLIANCE. Nothing in this section shall affect in any way
the Holder's obligations under and agreement to comply with all applicable
securities laws upon resale of the Securities.
6. OTHER ISSUANCES OF SECURITIES
6.1 OTHER EQUITY OFFERINGS. During the period beginning on the date
hereof and expiring 180 calendar days following the effectiveness of the
Registration Statement, the Company will not make any Equity Offerings, except
for an offering of rights to subscribe for shares of the Company's Common Stock
pursuant to any exemption from the registration requirements of the Securities
Act, including without limitation the exemption provided by Regulations D and S
promulgated thereunder. "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 as of February 13, 1997 and listed in the Exchange Act
reports).
6.2 RIGHTS OF FIRST REFUSAL. The Holder shall have a right of first
refusal pro rata according to the Holder's ownership of Preferred Stock on the
date on which the Company's notice pursuant to this Section 6.2 is given on any
Equity Offerings (except for an offering of rights to subscribe for shares of
the Company's Common Stock, provided the Holders in such case are given the
right to subscribe for the number of shares to which they would have been
entitled if they then held the shares of Common Stock into which the Preferred
Stock may have been converted), until February 13, 1998, so long as the Holder
still holds any Preferred Stock and provided such Equity Offerings are made
pursuant to an exemption from the registration requirements of the Securities
Act, as amended, including without limitation Regulation D and Regulation S
thereunder. The Company
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<PAGE>
shall give the Holder 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. The Holder shall have ten (10) business days from
receipt of such notice to deliver a written notice to the Company that the
Holder wishes to exercise its right of first refusal with respect to such Equity
Offering, provided that such offering is completed upon such terms and with such
documentation within thirty (30) calendar days after said ten (10) day period.
If the Holder exercises its right of first refusal with respect to such Equity
Offering, it must close the transactions contemplated by the proposed issuance
within ten (10) business days of the exercise of its right hereunder on the same
economic terms and using the same documentation provided in the Company's notice
to the Holder. If the Holder fails to close the transaction for any reason
other than a breach by the Company of its obligations hereunder, such Holder's
right of first refusal shall irrevocably terminate with respect to such Equity
Offering, provided that such offering is completed upon such terms and with such
documentation within thirty (30) calendar days after said ten (10) day period.
7. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT. Notwithstanding anything to the
contrary contained herein, each Conversion Notice (as defined in the Certificate
of Designation related to the Preferred Stock) delivered by the Holder 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
Securities Act, will not exceed 4.9% of the total issued and outstanding shares
of the Company's Common Stock. For purposes hereof, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, but shall be determined exclusive of shares of Common Stock
issuable upon conversion of the unconverted portion of the shares of Preferred
Stock and the unexercised or unconverted portion of any other securities of the
Company subject to a limitation on conversion or exercise analogous to the
limitation contained herein or in the Certificate of Designation relating to the
Preferred Stock.
8. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL
THIS AGREEMENT SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. The parties
hereby agree that all actions or proceedings arising directly or indirectly from
or in connection with this Agreement shall, at the option of either party, be
litigated only in the United States District Court for the Southern District of
New York located in New York County, New York. The parties consent to the
jurisdiction and venue of the foregoing courts and consent that any process or
notice of motion or other application to either of said courts or a judge
thereof may be served inside or outside the State of New York or the Southern
District of New York by registered mail, return receipt requested, directed to
the party for which it is intended at its address set forth in this Agreement
(and service so made shall be deemed complete five (5) days after the same has
been posted as aforesaid) or by personal service or in such other manner as may
be permissible under the rules of said courts.
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<PAGE>
9. ASSIGNMENT; ENTIRE AGREEMENT; AMENDMENT
9.1 ASSIGNMENT OF SUBSCRIPTION AGREEMENT. Neither this Agreement nor any
rights of the Holder 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 Holder hereunder with respect to the
Securities held by such person.
9.2 ASSIGNMENT OF PREFERRED STOCK The Holder may, subject to compliance
with the other provisions of this Agreement, without notice, transfer or assign
the Preferred Stock and may mortgage, encumber or transfer any of its rights or
interest in and to the Preferred Stock 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" 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 Agreement. A "sophisticated investor"
shall mean a sophisticated investor (as described in Rule 506(b)(2)(ii) of
Regulation D promulgated under the Securities Act
9.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Preferred Stock, the
Warrant, 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.
10. TRANSFERS. The Preferred Stock has been issued subject to investment
representations of the Holder and may be transferred or exchanged in the United
States only in compliance with the Securities Act and applicable state
securities laws and in accordance with other applicable provisions hereof.
Prior to due presentment for transfer of shares of Preferred Stock, the Company
may treat the person in whose name the Preferred Stock is duly registered on the
Company's stock register as the owner thereof for the purpose of receiving
payment as therein provided and all other purposes, and the Company shall not be
affected by notice to the contrary.
11. PAYMENT OF EXPENSES. The Company agrees to pay all debts and expenses,
including attorneys' fees, which may be incurred by the Holder in connection
with the negotiation, execution and delivery of this Agreement and the documents
executed and delivered in connection herewith and
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<PAGE>
the enforcement of the rights, preferences and privileges of the Preferred
Stock, the Warrants and the provisions of this Agreement, and the Registration
Rights Agreement.
12. PUBLICITY
The Company agrees that it will not disclose, and will not include in any
public announcement, the name of the Holder without its consent, unless and
until such disclosure is required by law or applicable regulation, and then only
to the extent of such requirements.
13. NO IMPAIRING. The Company shall not intentionally take any action which
would impair the rights and privileges of the Preferred Stock set forth herein
or in the Certificate of Designation relating to the Preferred Stock or of the
holders thereof.
14. NOTICES, ETC.; EXPENSES; INDEMNITY
14.1 NOTICES. Any notice, demand or request required or permitted to be
given by either the Company or the Holder 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 Holder shall be sent to its
designee or representative.
14.2 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.
15. 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.
16. SURVIVAL; SEVERABILITY
The representations, warranties, covenants and agreements of the parties
hereto shall survive the execution and delivery of this Agreement. 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.
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<PAGE>
17. 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.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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<PAGE>
IN WITNESS WHEREOF,
Holder's Representative Name of Holder:
Promethean Investment Group, L.L.C.
- -----------------------------------
By: James F. O'Brien Lewis A. Fraser
Its: President By: Promethean Investment Group, L.L.C.
Its: Investment Advisor
By: /s/ James F. O'Brien
----------------------
Name: James F. O'Brien
Title: President
Address
c/o 100 South Biscayne Blvd.
Suite 700
Miami, Florida 33131
ZYCAD CORPORATION
By: /s/ Phillips W. Smith
-------------------------------
Print Name: Phillips W. Smith
-----------------------
Its: President and Chief Executive Officer
------------------------------
<PAGE>
EXHIBIT A
WARRANT
See Exhibit 4.38
<PAGE>
CONVERTIBLE SECURITIES EXCHANGE AGREEMENT
This Convertible Securities Exchange Agreement (the "Agreement") dated as
of May 15, 1997, is entered into by and between Zycad Corporation, a Delaware
corporation (the "Company") and the undersigned (the "Holder") and relates to
the exchange of a $350,000 principal amount 6% Subordinated Convertible
Debenture due February 13, 2000 (the "Debenture") issued pursuant to that
certain Convertible Securities Subscription Agreement, dated as of February 13,
1997, between the Company and the Holder, for 10,000 shares of the Company's
Series A-5 Convertible Preferred Stock ("Preferred Stock") which is convertible
into Common Stock of the Company, and a warrant in the form of Exhibit A hereto
to purchase 4,286 shares of Preferred Stock at an exercise price of $35.00 per
share (the "Warrant"). The term "Preferred Stock" as used herein shall also
refer to the Series A-5 Convertible Preferred Stock issuable upon exercise of
the Warrant. The Preferred Stock, the Warrant and the Common Stock issuable
upon conversion of the Preferred Stock are sometimes collectively referred to in
this Agreement as the "Securities." The Common Stock issuable upon conversion
of the Preferred Stock is sometimes referred to as the "Underlying Stock", and
the Common Stock issuable upon conversion of the Preferred Stock issuable upon
the exercise of the Warrant is sometimes referred to as the "Warrant Stock."
Notwithstanding the conversion of the Debenture into Preferred Stock and the
Warrant, the representations and warranties set forth in the Convertible
Securities Subscription Agreement, dated as of February 13, 1997, between the
Company and Holder, shall remain in full force and effect. In consideration of
the mutual promises, representations, warrants and conditions set forth herein,
and intending to be legally bounded hereby, the Company and the Holder agree as
follows:
1. THE EXCHANGE.
Upon the execution and delivery of this Agreement and the delivery to the
Holder or its representatives of (a) evidence that the Board of Directors of the
Company has approved (i) the exchange contemplated hereunder, (ii) the
reservation of shares of Common Stock as contemplated herein, and (iii) the
recommendation to the shareholders of the Company that they approve the issuance
of in excess of 20% of the outstanding Common Stock of the Company pursuant to
the transactions contemplated hereby and by the other Convertible Securities
Exchange Agreements and (b) an opinion of the general counsel of the Company in
form and substance satisfactory to the Holder or its representatives, the
Debenture shall be deemed, without further action on the part of either party,
exchanged for 35,000 shares of Preferred Stock and the Warrant. The Company
shall issue and deliver to the Holder on the date hereof a certificate
representing the shares of Preferred Stock and the Warrant. The Holder shall
promptly return the original Debenture to the Company for cancellation. The
Company shall cause an opinion of its outside counsel in form and substance
satisfactory to the Holder or its representatives to be delivered to the Holder
by May 31, 1997.
2. REGISTRATION STATEMENT.
The Company covenants and agrees that it will file a registration statement
on Form S-3 relating to the resale of the Underlying Stock and the Warrant Stock
pursuant to the requirements of
<PAGE>
the Registration Rights Agreement (as defined in Section 4.1) within two (2)
business days of the execution and delivery of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Holder that:
3.1 COMPANY STATUS. The Company has registered its Common Stock
pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), 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 Company's latest proxy statement
and Annual Report on Form 10-K sent to the Company's stockholders and all
documents filed by the Company with the Securities and Exchange Commission (the
"Commission") since December 31, 1996, pursuant to Sections 13(a), 13(c) 14 or
15(d) of the Exchange Act (excluding preliminary proxy statement filings) (such
documents being collectively referred to in this Agreement as the "Exchange Act
Reports") are the only filings made by the Company with the Commission since
December 31, 1996.
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 Preferred Stock or the Warrant
nor has the Company conducted any general solicitation (as the 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
Securities Act of 1933, as amended (the "Securities Act").
3.4 VALID ISSUANCE OF CAPITAL STOCK. The Company has an authorized
capitalization consisting of 40,000,000 shares of Common Stock, par value $0.10
and 2,000,000 shares of preferred stock, par value $0.10, warrants outstanding
for 254,000 shares of Common Stock, and stock options granted to employees as
described in the Exchange Act Reports. As of May 8, 1997, the Company has
issued and outstanding 26,999,643 shares of Common Stock and, immediately prior
to the exchange contemplated hereby, no shares of preferred stock are issued and
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;
the shares of Common Stock issuable upon conversion of the Preferred Stock and
the Preferred Stock issuable upon exercise of the Warrant, 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 issuance of the Securities, except
for the rights of first refusal set forth herein and in the other Convertible
Securities Exchange Agreements of the Company entered into contemporaneously
herewith. The exchange of the Debentures for the Preferred Stock and the
Warrant is exempt, and the issuance of the Underlying
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Stock and Warrant Stock shall be exempt, from the registration requirements of
the Securities Act pursuant to Section 3(a)(9) thereof or other applicable
exemption. The Certificate of Designation relating to the Preferred Stock has
been duly filed with the Secretary of State of the State of Delaware, is in full
force and effect and the Holder is entitled to the rights, preferences and
privileges set forth therein.
3.5 ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries, except for those listed on the Subsidiary Exhibit annexed hereto
and hereby made a part hereof. The Company and each such subsidiary, if any, is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "Material
Adverse Effect" means any effect on the business, operations, properties,
prospects, or financial condition of the entity with respect to which such term
is used and which is material and adverse to such entity or to other entities
controlling or controlled by such entity, and/or any condition or situation
which would prohibit or otherwise interfere with the ability of the entity with
respect to which said term is used to enter into and perform its obligations
under this Agreement.
3.6 AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
exchange and issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution, issuance and delivery of this Agreement, the
Preferred Stock and the Warrant 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 constitutes, and upon execution, issuance and
delivery thereof the Warrant 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 Holder 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 Warrant 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,
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<PAGE>
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 Holder 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 Commission, National Association of Securities Dealers, Inc. ("NASD")
or state securities filings which may be required to be made by the Company
subsequent to the date hereof and other than 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 Holder herein.
3.9 EXCHANGE ACT REPORTS. The Company has delivered or made
available to the Holder true and complete copies of the Exchange Act Reports
(including, without limitation, proxy information and solicitation materials).
The Company has not provided to the Holder any information which, according to
applicable law, rule or regulation, should have been disclosed publicly prior to
the date hereof by the Company but which has not been so disclosed. As of their
respective dates, the Exchange Act Reports complied in all material respects
with the requirements of the Exchange Act and rules and regulations of the
Commission 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 and none of the other information concerning the Company
provided to the Holder in connection with the transactions contemplated hereby
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
Commission 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).
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<PAGE>
3.10 NO MATERIAL ADVERSE CHANGE. Since December 31, 1996, the date
through which the most recent annual report of the Company on Form 10-K which
has been prepared and filed with the Commission, 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 Exchange Act
Reports.
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, 1996, 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 Securities 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 Holder relating to this Agreement for the transactions
contemplated hereby.
4. COVENANTS OF THE COMPANY
4.1 REGISTRATION RIGHTS. The Company agrees that the Registration
Rights Agreement, dated as of February 13, 1997, between the Holder and the
Company (the "Registration Rights Agreement"), remains in full force and effect,
but shall be deemed amended so that (i) each reference therein to "Debentures"
shall be deemed to refer to the "Preferred Stock" or the Certificate of
Designation relating to the Preferred Stock, as applicable, (ii) each reference
to the "Subscription Agreement" shall be deemed to refer to this Agreement and
(iii) Section 6 thereof shall be deleted. The Company acknowledges that its
failure to register the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with this Agreement and the 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 of this Agreement and the related documents. Accordingly the parties
agree that it is 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 Section 4 and in the provisions of the Certificate
of Designation related to the Preferred Stock represent the parties' good faith
effort
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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. If a registration statement
filed with the Securities and Exchange Commission pursuant to the Registration
Rights Agreement has not become effective prior to July 14, 1997, the Company
shall make a cash payment to each holder of Preferred Stock for each day after
July 14, 1997, and prior to August 13, 1997 that the registration statement is
not effective equal to one-thirtieth of three percent (3%) of the Stated Value
of the Preferred Stock originally issued to the Holder. If the registration
statement has not become effective prior to August 13, 1997, on August 13, 1997,
the Company shall make an additional payment in cash to each holder of Preferred
Stock equal to three percent (3%) of the Stated Value of the Preferred Stock
originally issued to such holder and shall make an additional three percent (3%)
payment at the end of each full 30 day period thereafter until the earlier of
the date the registration statement becomes effective or February 14, 1997. If
the registration statement has not become effective prior to February 14, 1998,
the Holder shall have the redemption right set forth in the Certificate of
Designation related to the Preferred Stock.
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 Preferred Stock and Preferred Stock upon exercise
of the Warrant; provided, however, that the number of shares so reserved shall,
except as hereinafter and in the Preferred Stock (and in the Certificate of
Designation related thereto) provided, shall be 6,044,680 shares, subject to
reduction and increase as hereinafter provided. The number of shares so
reserved may be reduced by the number of shares actually delivered pursuant to
conversion of Preferred Stock or exercise of the Warrant (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 Preferred
Stock and the remaining exercise rights under unexercised portion of the
Warrant) and the number of shares so reserved shall be increased to reflect
stock splits and stock dividends and distributions. In the event the number of
shares so reserved shall be insufficient for issuance upon the conversion of the
Preferred Stock and exercise of the Warrant, or if the Holders of the Preferred
Stock would at any time upon conversion thereof be entitled to the issuance of
shares of Common Stock in excess of the limitation in Section 5(d) of the
Certificate of Designation relating to the Preferred Stock, then in either case
the Company shall use its best efforts and all due diligence to obtain the
approval by its shareholders of this Agreement and all transactions contemplated
hereunder, including the authorization of such additional shares as may be
required to issue such shares in excess of the number so reserved or in excess
of such limitation, as the case may be. The Board of Directors of the Company
shall recommend such approval to the shareholders. The Company shall, on or
before August 31, 1997, hold a meeting of its stockholders and use its best
efforts to obtain at such meeting such approvals of the Company's stockholders
as may be required to issue all of the shares of Common Stock issuable upon
conversion of, or otherwise with respect to, the Preferred Stock (including the
Preferred Stock issuable upon exercise of the Warrants) without violating NASD
Rule 4460(i) or any successor rule thereto which may then be in effect). The
Company shall comply with the filing and disclosure requirements of Section 14
promulgated under the Exchange Act in connection with the solicitation,
acquisition and disclosure of such stockholder approval. The Company represents
and warrants that its Board of Directors has unanimously
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recommended that the Company's stockholders approve the proposals contemplated
by this Section 4.2 and shall so indicate such recommendation in the proxy
statement used to solicit such stockholder approval. The Company represents and
warrants that it has reserved an additional approximately 1,800,000 shares of
Common Stock for issuance upon conversion of the Company's 6% Subordinated
Convertible Debentures and exercise of its Common Stock Purchase Warrants issued
in May 1996. The Company agrees to maintain such reserve for such purposes
(except to the extent that such shares are issued upon any such conversion or
exercise).
4.3 LISTING OF UNDERLYING SHARES. The Company hereby agrees,
promptly to take such action to cause the Underlying Stock and the Warrant Stock
to be listed on the Exchange contemporaneously with the effectiveness of the
registration statement. 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
the Exchange Act, and will not take any action or file any document (whether or
not permitted by the Exchange Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and filing
obligations under the Exchange 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.
4.7 INCURRENCE OF INDEBTEDNESS. The Company shall not incur any
indebtedness for borrowed money other than indebtedness which would have been
deemed Senior Indebtedness under the terms of the Debenture.
5. LEGENDS
5.1 LEGENDS. The certificates representing shares of Preferred Stock,
the Warrant, 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 of the Preferred
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Stock, 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.
The Company will promptly 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 issuance thereof to any such substitute or
replacement transfer agent, as the case may be, except as otherwise expressly
provided in the Registration Rights Agreement. It is the intent and purpose of
such instructions, as provided therein, to require the transfer agent for the
Common Stock from time to time to issue certificates evidencing Underlying Stock
or Warrant Stock free of the Legend during the following periods and under the
following circumstances and without consultation by the transfer agent with
Company or its counsel and without the need for any further advice or
instruction to the transfer agent by or from the Company or its counsel:
(a) At any time from and after the effectiveness of the Registration
Statement except during a Suspension Period (as defined in the Registration
Rights Agreement):
(i) upon any surrender of the Preferred Stock or Warrant 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 Preferred Stock or Warrant 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 date hereof, 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
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permitted dispose thereof pursuant to Rule 144(k) under the Securities 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
Securities Act, or (iii) such Holder is not then subject to such requirements.
In addition, and if applicable, the Company shall reissue the Preferred
Stock and Warrant without the Legend set forth above at such time as (i) Holder
thereof is permitted to dispose thereof pursuant to Rule 144(k) under the
Securities 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 Securities 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 HOLDER'S COMPLIANCE. Nothing in this section shall affect in any
way the Holder's obligations under and agreement to comply with all applicable
securities laws upon resale of the Securities.
6. OTHER ISSUANCES OF SECURITIES
6.1 OTHER EQUITY OFFERINGS. During the period beginning on the date
hereof and expiring 180 calendar days following the effectiveness of the
Registration Statement, the Company will not make any Equity Offerings, except
for an offering of rights to subscribe for shares of the Company's Common Stock
pursuant to any exemption from the registration requirements of the Securities
Act, including without limitation the exemption provided by Regulations D and S
promulgated thereunder. "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 as of February 13, 1997 and listed in the Exchange Act
reports).
6.2 RIGHTS OF FIRST REFUSAL. The Holder shall have a right of first
refusal pro rata according to the Holder's ownership of Preferred Stock on the
date on which the Company's notice pursuant to this Section 6.2 is given on any
Equity Offerings (except for an offering of rights to subscribe for shares of
the Company's Common Stock, provided the Holders in such case are given the
right to subscribe for the number of shares to which they would have been
entitled if they then held the shares of Common Stock into which the Preferred
Stock may have been converted), until February 13, 1998, so long as the Holder
still holds any Preferred Stock and provided such Equity Offerings are made
pursuant to an exemption from the registration requirements of the Securities
Act, as amended, including without limitation Regulation D and Regulation S
thereunder. The Company
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shall give the Holder 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. The Holder shall have ten (10) business days from
receipt of such notice to deliver a written notice to the Company that the
Holder wishes to exercise its right of first refusal with respect to such Equity
Offering, provided that such offering is completed upon such terms and with such
documentation within thirty (30) calendar days after said ten (10) day period.
If the Holder exercises its right of first refusal with respect to such Equity
Offering, it must close the transactions contemplated by the proposed issuance
within ten (10) business days of the exercise of its right hereunder on the same
economic terms and using the same documentation provided in the Company's notice
to the Holder. If the Holder fails to close the transaction for any reason
other than a breach by the Company of its obligations hereunder, such Holder's
right of first refusal shall irrevocably terminate with respect to such Equity
Offering, provided that such offering is completed upon such terms and with such
documentation within thirty (30) calendar days after said ten (10) day period.
7. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT. Notwithstanding anything to the
contrary contained herein, each Conversion Notice (as defined in the Certificate
of Designation related to the Preferred Stock) delivered by the Holder 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
Securities Act, will not exceed 4.9% of the total issued and outstanding shares
of the Company's Common Stock. For purposes hereof, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, but shall be determined exclusive of shares of Common Stock
issuable upon conversion of the unconverted portion of the shares of Preferred
Stock and the unexercised or unconverted portion of any other securities of the
Company subject to a limitation on conversion or exercise analogous to the
limitation contained herein or in the Certificate of Designation relating to the
Preferred Stock.
8. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL
THIS AGREEMENT SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. The parties
hereby agree that all actions or proceedings arising directly or indirectly from
or in connection with this Agreement shall, at the option of either party, be
litigated only in the United States District Court for the Southern District of
New York located in New York County, New York. The parties consent to the
jurisdiction and venue of the foregoing courts and consent that any process or
notice of motion or other application to either of said courts or a judge
thereof may be served inside or outside the State of New York or the Southern
District of New York by registered mail, return receipt requested, directed to
the party for which it is intended at its address set forth in this Agreement
(and service so made shall be deemed complete five (5) days after the same has
been posted as aforesaid) or by personal service or in such other manner as may
be permissible under the rules of said courts.
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9. ASSIGNMENT; ENTIRE AGREEMENT; AMENDMENT
9.1 ASSIGNMENT OF SUBSCRIPTION AGREEMENT. Neither this Agreement nor
any rights of the Holder 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 Holder hereunder with respect to the
Securities held by such person.
9.2 ASSIGNMENT OF PREFERRED STOCK The Holder may, subject to
compliance with the other provisions of this Agreement, without notice, transfer
or assign the Preferred Stock and may mortgage, encumber or transfer any of its
rights or interest in and to the Preferred Stock 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" 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 Agreement. A "sophisticated investor"
shall mean a sophisticated investor (as described in Rule 506(b)(2)(ii) of
Regulation D promulgated under the Securities Act
9.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Preferred
Stock, the Warrant, 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.
10. TRANSFERS. The Preferred Stock has been issued subject to investment
representations of the Holder and may be transferred or exchanged in the United
States only in compliance with the Securities Act and applicable state
securities laws and in accordance with other applicable provisions hereof.
Prior to due presentment for transfer of shares of Preferred Stock, the Company
may treat the person in whose name the Preferred Stock is duly registered on the
Company's stock register as the owner thereof for the purpose of receiving
payment as therein provided and all other purposes, and the Company shall not be
affected by notice to the contrary.
11. PAYMENT OF EXPENSES. The Company agrees to pay all debts and expenses,
including attorneys' fees, which may be incurred by the Holder in connection
with the negotiation, execution and delivery of this Agreement and the documents
executed and delivered in connection herewith and
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the enforcement of the rights, preferences and privileges of the Preferred
Stock, the Warrants and the provisions of this Agreement, and the Registration
Rights Agreement.
12. PUBLICITY
The Company agrees that it will not disclose, and will not include in any
public announcement, the name of the Holder without its consent, unless and
until such disclosure is required by law or applicable regulation, and then only
to the extent of such requirements.
13. NO IMPAIRING. The Company shall not intentionally take any action which
would impair the rights and privileges of the Preferred Stock set forth herein
or in the Certificate of Designation relating to the Preferred Stock or of the
holders thereof.
14. NOTICES, ETC.; EXPENSES; INDEMNITY
14.1 NOTICES. Any notice, demand or request required or permitted to
be given by either the Company or the Holder 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 Holder shall be sent to its
designee or representative.
14.2 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.
15. 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.
16. SURVIVAL; SEVERABILITY
The representations, warranties, covenants and agreements of the parties
hereto shall survive the execution and delivery of this Agreement. 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.
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17. 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.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF,
Holder's Representative Name of Holder:
Promethean Investment Group, L.L.C.
By: James F. O'Brien Joseph A. Umbach
Its: President By: Promethean Investment Group, L.L.C.
Its: Investment Advisor
By: /s/ James F. O'Brien
----------------------
Name: James F. O'Brien
Title: President
Address
c/o Joseph Victori Wines
2525 Palmer Avenue
New Rochelle, New York 10801
ZYCAD CORPORATION
By: /s/ Phillips W. Smith
-------------------------
Print Name: Phillips W. Smith
---------------------
Its: President and Chief Executive Officer
--------------------------------------
<PAGE>
EXHIBIT A
WARRANT
See Exhibit 4.39
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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 Series A-1
Convertible Preferred Stock of Zycad
Corporation
May 15, 1997
---------------------------
Preferred 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 at 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 after the date hereof and ending sixty (60)
months after the date hereof Fifteen Thousand (15,000) shares of fully paid and
nonassessable shares of Series A-1 Convertible Preferred Stock, $.10 par value,
of the Company (the "Preferred Stock"), at a purchase price per share of
Thirty-Five Dollars (U.S. $35.00) per share (the "Purchase Price"), as the same
may be adjusted pursuant to Section and 5 herein; provided, however, that this
Warrant shall only be exercisable on days when the last reported sales price of
the Common Stock of the Company on the most recent trading day is equal to or
greater than $1.50 per share.
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 500 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 Preferred
Stock or other securities issuable upon exercise of this Warrant.
(c) other terms used herein which are defined in the Convertible
Securities Exchange Agreement (the "Agreement") of even date and delivery
between the Company, and the Purchaser, or the Registration Rights Agreement (as
defined in the Agreement), or in the Debentures (as defined in the Agreement),
shall have the same meanings herein as therein.
<PAGE>
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.
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 Preferred 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
Preferred Stock. In the event that the exercise of warrant, in full or in part,
would result in the issuance of any fractional share of Preferred Stock, then in
such event Warrant Holder shall be entitled to cash equal to the Stated Value of
one share of Preferred Stock multiplied by such fraction.
4. COVENANTS OF THE COMPANY.
(a) The Company shall use its reasonable best efforts to insure that
a Registration Statement under the Securities Act covering the resale or other
disposition of the Common Stock issuable upon conversion of the Warrant Shares
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, 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 Exchange and
shall not amend its Certificate of Incorporation or Bylaws so as to adversely
affect any rights of the Warrant Holder under this Warrant.
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(d) The Company shall at all times reserve and keep available,
solely for issuance and delivery as Warrant Shares hereunder, such shares of
Preferred 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 Preferred 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 Securities 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) 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.
-3-
<PAGE>
(b) 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.
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 Warrant, but, shall at all times in good faith assist in the
carrying out of all such 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 Warrant Shares purchasable hereunder 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 holder, 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 least 10 days prior to the date specified herein, 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
-4-
<PAGE>
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 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 arc 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 band
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
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:
-5-
<PAGE>
to the Company:
Zycad Corporation
47100 Bayside Parkway
Fremont, California 94538
Attn: Chief Financial Officer
Fax: (510) 623-4575
to the Warrant Holder:
Halifax Fund
c/o Citco Fund Services Ltd.
Corporate Centre, West Bay Road,
P.O. Box 31106, SMB,
Grand Cayman, Cayman Islands
Attn:
Fax:
Copies of all notices to the Company or to the Warrant Holder shall also be
provided to:
Promethean Investment Group, L.L.C.
40 West 57th Street, Suite 1520
New York, NY 10019
Attn: James F. O'Brien, Jr.
Fax: (212) 698-0505
GOULSTON & STORRS
400 Atlantic Avenue
Boston, MA 02110-3333
Attn: Richard Langerman, Esq.
Fax: (617) 574-4112
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.
-6-
<PAGE>
15. EXPIRATION. The right to exercise this Warrant shall expire sixty
(60) months after the date hereof.
Dated as of: May 15, 1997 ZYCAD CORPORATION
By: /s/ Phillips W. Smith
--------------------------
Title: President and Chief
Executive Officer
[CORPORATE SEAL]
Attest:
By: /s/ Douglas E. Klint
-----------------------------
Its: Corporate Secretary
HALIFAX FUND, L.P.
By: The Palladin Group, L.P.
By: /s/ Andrew Kaplan
--------------------------
Its: Vice President
--------------------------
-7-
<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 Preferred 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 fare 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 Preferred 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:
- ----------------------------------
-8-
<PAGE>
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 Series A-2
Convertible Preferred Stock of Zycad
Corporation
May 15, 1997
---------------------------
Preferred 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
after the date hereof and ending sixty (60) months after the date hereof Fifteen
Thousand (15,000) shares of fully paid and nonassessable shares of Series A-2
Convertible Preferred Stock, $.10 par value, of the Company (the "Preferred
Stock"), at a purchase price per share of Thirty-Five Dollars (U.S. $35.00) per
share (the "Purchase Price"), as the same may be adjusted pursuant to Section
and 5 herein; provided, however, that this Warrant shall only be exercisable on
days when the last reported sales price of the Common Stock of the Company on
the most recent trading day is equal to or greater than $1.50 per share.
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 500 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 Preferred
Stock or other securities issuable upon exercise of this Warrant.
(c) other terms used herein which are defined in the Convertible
Securities Exchange Agreement (the "Agreement") of even date and delivery
between the Company, and the Purchaser, or the Registration Rights Agreement (as
defined in the Agreement), or in the Debentures (as defined in the Agreement),
shall have the same meanings herein as therein.
<PAGE>
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.
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 Preferred 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
Preferred Stock. In the event that the exercise of warrant, in full or in part,
would result in the issuance of any fractional share of Preferred Stock, then in
such event Warrant Holder shall be entitled to cash equal to the Stated Value of
one share of Preferred Stock multiplied by such fraction.
4. COVENANTS OF THE COMPANY.
(a) The Company shall use its reasonable best efforts to insure that
a Registration Statement under the Securities Act covering the resale or other
disposition of the Common Stock issuable upon conversion of the Warrant Shares
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, 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 Exchange and
shall not amend its Certificate of Incorporation or Bylaws so as to adversely
affect any rights of the Warrant Holder under this Warrant.
-2-
<PAGE>
(d) The Company shall at all times reserve and keep available,
solely for issuance and delivery as Warrant Shares hereunder, such shares of
Preferred 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 Preferred 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 Securities 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) 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.
-3-
<PAGE>
(b) 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.
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 Warrant, but, shall at all times in good faith assist in the
carrying out of all such 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 Warrant Shares purchasable hereunder 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 holder, 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 least 10 days prior to the date specified herein, 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
-4-
<PAGE>
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 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 band
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
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:
-5-
<PAGE>
to the Company:
Zycad Corporation
47100 Bayside Parkway
Fremont, California 94538
Attn: Chief Financial Officer
Fax: (510) 623-4575
to the Warrant Holder:
Capital Ventures International
1 Capital Place, P.O. Box 1787GT
Grand Cayman, Cayman Islands
Attn:
Fax:
Copies of all notices to the Company or to the Warrant Holder shall also be
provided to:
Promethean Investment Group, L.L.C.
40 West 57th Street, Suite 1520
New York, NY 10019
Attn: James F. O'Brien, Jr.
Fax: (212) 698-0505
GOULSTON & STORRS
400 Atlantic Avenue
Boston, MA 02110-3333
Attn: Richard Langerman, Esq.
Fax: (617) 574-4112
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.
-6-
<PAGE>
15. EXPIRATION. The right to exercise this Warrant shall expire sixty
(60) months after the date hereof.
Dated as of: May 15, 1997 ZYCAD CORPORATION
By: /s/ Phillips W. Smith
-----------------------
Title: President and Chief
Executive Officer
[CORPORATE SEAL]
Attest:
By: /s/ Douglas E. Klint
----------------------
Its: Corporate Secretary
CAPITAL VENTURES INTERNATIONAL
By: Bala International Inc.
Its: Agent
By: /s/ Andrew Frost
--------------------
Its: Director
-------------------
-7-
<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 Preferred 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 fare 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 Preferred 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:
_______________________________
-8-
<PAGE>
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 Series A-3
Convertible Preferred Stock of Zycad
Corporation
May 15, 1997
-----------------------------
Preferred 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, Heracles Fund, having an address
at c/o Bank of Bermuda (Cayman) Limited, P.O. Box 513, Third Floor, British
American Tower, Dir. Roy's Drive, Georgetown, Grand Cayman, Cayman Islands, BWI
("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
after the date hereof and ending sixty (60) months after the date hereof Four
Thousand Two Hundred Eighty-Six (4,286) shares of fully paid and nonassessable
shares of Series A-3 Convertible Preferred Stock, $.10 par value, of the Company
(the "Preferred Stock"), at a purchase price per share of Thirty-Five Dollars
(U.S. $35.00) per share (the "Purchase Price"), as the same may be adjusted
pursuant to Section and 5 herein; provided, however, that this Warrant shall
only be exercisable on days when the last reported sales price of the Common
Stock of the Company on the most recent trading day is equal to or greater than
$1.50 per share.
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 500 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 Preferred
Stock or other securities issuable upon exercise of this Warrant.
(c) other terms used herein which are defined in the Convertible
Securities Exchange Agreement (the "Agreement") of even date and delivery
between the Company, and the Purchaser, or the Registration Rights Agreement (as
defined in the Agreement), or in the Debentures (as defined in the Agreement),
shall have the same meanings herein as therein.
<PAGE>
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.
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 Preferred 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
Preferred Stock. In the event that the exercise of warrant, in full or in part,
would result in the issuance of any fractional share of Preferred Stock, then in
such event Warrant Holder shall be entitled to cash equal to the Stated Value of
one share of Preferred Stock multiplied by such fraction.
4. COVENANTS OF THE COMPANY.
(a) The Company shall use its reasonable best efforts to insure that
a Registration Statement under the Securities Act covering the resale or other
disposition of the Common Stock issuable upon conversion of the Warrant Shares
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, 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 Exchange and
shall not amend its Certificate of Incorporation or Bylaws so as to adversely
affect any rights of the Warrant Holder under this Warrant.
-2-
<PAGE>
(d) The Company shall at all times reserve and keep available,
solely for issuance and delivery as Warrant Shares hereunder, such shares of
Preferred 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 Preferred 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 Securities 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) 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.
-3-
<PAGE>
(b) 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.
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 Warrant, but, shall at all times in good faith assist in the
carrying out of all such 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 Warrant Shares purchasable hereunder 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 holder, 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 least 10 days prior to the date specified herein, 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
-4-
<PAGE>
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 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 arc 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 band
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
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:
-5-
<PAGE>
to the Company:
Zycad Corporation
47100 Bayside Parkway
Fremont, California 94538
Attn: Chief Financial Officer
Fax: (510) 623-4575
to the Warrant Holder:
Heracles Fund
c/o Bank of Bermuda (Cayman) Limited,
P.O. Box 513, Third Floor, British American Tower,
Dr. Roy's Drive,
Georgetown, Grand Cayman, Cayman Islands,
BWI
Attn:
Fax:
Copies of all notices to the Company or to the Warrant Holder shall also be
provided to:
Promethean Investment Group, L.L.C.
40 West 57th Street, Suite 1520
New York, NY 10019
Attn: James F. O'Brien, Jr.
Fax: (212) 698-0505
GOULSTON & STORRS
400 Atlantic Avenue
Boston, MA 02110-3333
Attn: Richard Langerman, Esq.
Fax: (617) 574-4112
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
-6-
<PAGE>
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE>
15. EXPIRATION. The right to exercise this Warrant shall expire sixty
(60) months after the date hereof.
Dated as of: May 15, 1997 ZYCAD CORPORATION
By: /s/ Phillips W. Smith
-------------------------------
Title: President and Chief
Executive Officer
[CORPORATE SEAL]
Attest:
By: /s/ Douglas E. Klint
--------------------------------
Its: Corporate Secretary
HERACLES FUND
By: Promethean Investment Group, L.L.C.
Its: Investment Advisor
By: /s/ James F. O'Brien
-------------------------------
Its: President
------------------------------
-8-
<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 Preferred 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 fare 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 Preferred 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:
- -----------------------------------
-9-
<PAGE>
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 Series A-4
Convertible Preferred Stock of Zycad
Corporation
May 15, 1997
-----------------------------
Preferred 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, Lewis A. Fraser, having an address
at c/o 100 South Biscayne Blvd., Suite 700, Miami, Florida 33131 ("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 after the date hereof
and ending sixty (60) months after the date hereof Four Thousand Two Hundred
Eighty-Six (4,286) shares of fully paid and nonassessable shares of Series A-4
Convertible Preferred Stock, $.10 par value, of the Company (the "Preferred
Stock"), at a purchase price per share of Thirty-Five Dollars (U.S. $35.00) per
share (the "Purchase Price"), as the same may be adjusted pursuant to Section
and 5 herein; provided, however, that this Warrant shall only be exercisable on
days when the last reported sales price of the Common Stock of the Company on
the most recent trading day is equal to or greater than $1.50 per share.
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 500 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 Preferred
Stock or other securities issuable upon exercise of this Warrant.
(c) other terms used herein which are defined in the Convertible
Securities Exchange Agreement (the "Agreement") of even date and delivery
between the Company, and the Purchaser, or the Registration Rights Agreement (as
defined in the Agreement), or in the Debentures (as defined in the Agreement),
shall have the same meanings herein as therein.
<PAGE>
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.
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 Preferred 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
Preferred Stock. In the event that the exercise of warrant, in full or in part,
would result in the issuance of any fractional share of Preferred Stock, then in
such event Warrant Holder shall be entitled to cash equal to the Stated Value of
one share of Preferred Stock multiplied by such fraction.
4. COVENANTS OF THE COMPANY.
(a) The Company shall use its reasonable best efforts to insure that
a Registration Statement under the Securities Act covering the resale or other
disposition of the Common Stock issuable upon conversion of the Warrant Shares
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, 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 Exchange and
shall not amend its Certificate of Incorporation or Bylaws so as to adversely
affect any rights of the Warrant Holder under this Warrant.
-2-
<PAGE>
(d) The Company shall at all times reserve and keep available,
solely for issuance and delivery as Warrant Shares hereunder, such shares of
Preferred 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 Preferred 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 Securities 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) 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.
-3-
<PAGE>
(b) 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.
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 Warrant, but, shall at all times in good faith assist in the
carrying out of all such 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 Warrant Shares purchasable hereunder 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 holder, 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 least 10 days prior to the date specified herein, 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
-4-
<PAGE>
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 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 arc 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 band
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
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:
-5-
<PAGE>
to the Company:
Zycad Corporation
47100 Bayside Parkway
Fremont, California 94538
Attn: Chief Financial Officer
Fax: (510) 623-4575
to the Warrant Holder:
Lewis A. Fraser
c/o 100 South Biscayne Blvd., Suite 700
Miami, Florida 33131
Copies of all notices to the Company or to the Warrant Holder shall also be
provided to:
Promethean Investment Group, L.L.C.
40 West 57th Street, Suite 1520
New York, NY 10019
Attn: James F. O'Brien, Jr.
Fax: (212) 698-0505
GOULSTON & STORRS
400 Atlantic Avenue
Boston, MA 02110-3333
Attn: Richard Langerman, Esq.
Fax: (617) 574-4112
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-6-
<PAGE>
15. EXPIRATION. The right to exercise this Warrant shall expire sixty
(60) months after the date hereof.
Dated as of: May 15, 1997 ZYCAD CORPORATION
By: /s/ Phillips W. Smith
-----------------------------------------
Title: President and Chief Executive Officer
[CORPORATE SEAL]
Attest:
By: Douglas E. Klint
---------------------------
Its: Corporate Secretary
Lewis A. Fraser
By: Promethean Investment Group, L.L.C.
Its: Investment Advisor
By: /s/ James F. O'Brien
-----------------------
Its: President
-7-
<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 Preferred 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 fare 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 Preferred 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:
- ------------------------------
-8-
<PAGE>
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 Series A-5
Convertible Preferred Stock of Zycad
Corporation
May 15, 1997
---------------------------
Preferred 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, Joseph A. Umbach, having an
address at c/o Joseph Victori Wines, 2525 Palmer Avenue, New Rochelle, New York
10801 ("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
after the date hereof and ending sixty (60) months after the date hereof Four
Thousand Two Hundred Eighty-Six (4,286) shares of fully paid and nonassessable
shares of Series A-5 Convertible Preferred Stock, $.10 par value, of the Company
(the "Preferred Stock"), at a purchase price per share of Thirty-Five Dollars
(U.S. $35.00) per share (the "Purchase Price"), as the same may be adjusted
pursuant to Section and 5 herein; provided, however, that this Warrant shall
only be exercisable on days when the last reported sales price of the Common
Stock of the Company on the most recent trading day is equal to or greater than
$1.50 per share.
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 500 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 Preferred
Stock or other securities issuable upon exercise of this Warrant.
(c) other terms used herein which are defined in the Convertible
Securities Exchange Agreement (the "Agreement") of even date and delivery
between the Company, and the Purchaser, or the Registration Rights Agreement (as
defined in the Agreement), or in the Debentures (as defined in the Agreement),
shall have the same meanings herein as therein.
<PAGE>
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.
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 Preferred 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
Preferred Stock. In the event that the exercise of warrant, in full or in part,
would result in the issuance of any fractional share of Preferred Stock, then in
such event Warrant Holder shall be entitled to cash equal to the Stated Value of
one share of Preferred Stock multiplied by such fraction.
4. COVENANTS OF THE COMPANY.
(a) The Company shall use its reasonable best efforts to insure that
a Registration Statement under the Securities Act covering the resale or other
disposition of the Common Stock issuable upon conversion of the Warrant Shares
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, 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 Exchange and
shall not amend its Certificate of Incorporation or Bylaws so as to adversely
affect any rights of the Warrant Holder under this Warrant.
-2-
<PAGE>
(d) The Company shall at all times reserve and keep available,
solely for issuance and delivery as Warrant Shares hereunder, such shares of
Preferred 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 Preferred 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 Securities 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) 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.
-3-
<PAGE>
(b) 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.
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 Warrant, but, shall at all times in good faith assist in the
carrying out of all such 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 Warrant Shares purchasable hereunder 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 holder, 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 least 10 days prior to the date specified herein, 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
-4-
<PAGE>
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 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. ESTRICTED SECURITIES. Sections 4.5, 5.1, 5.2 and 5.3 of the Agreement
arc 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 band
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
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:
-5-
<PAGE>
to the Company:
Zycad Corporation
47100 Bayside Parkway
Fremont, California 94538
Attn: Chief Financial Officer
Fax: (510) 623-4575
to the Warrant Holder:
Joseph A. Umbach
c/o Joseph Victori Wines
2525 Palmer Avenue
New Rochelle, New York 10801
Copies of all notices to the Company or to the Warrant Holder shall also be
provided to:
Promethean Investment Group, L.L.C.
40 West 57th Street, Suite 1520
New York, NY 10019
Attn: James F. O'Brien, Jr.
Fax: (212) 698-0505
GOULSTON & STORRS
400 Atlantic Avenue
Boston, MA 02110-3333
Attn: Richard Langerman, Esq.
Fax: (617) 574-4112
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-6-
<PAGE>
15. EXPIRATION. The right to exercise this Warrant shall expire sixty
(60) months after the date hereof.
Dated as of: May 15, 1997 ZYCAD CORPORATION
By: /s/ Phillips W. Smith
-------------------------------
Title: President and Chief
Executive Officer
[CORPORATE SEAL]
Attest:
By: /s/ Douglas E. Klint
--------------------------------
Its: Corporate Secretary
Joseph A. Umbach
By: Promethean Investment Group, L.L.C.
Its: Investment Advisors
By: /s/ James F. O'Brien
-----------------------
Its: President
-7-
<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 Preferred 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 fare 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 Preferred 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:
- ------------------------------
-8-
<PAGE>
EXHIBIT 10.26
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as of
the 14th day of April, 1997 by and between ZYCAD CORPORATION, a Delaware
corporation ("Zycad"), and EDISON VENTURE FUND III, L.P., a Delaware limited
partnership ("Edison"), for the purchase of 2,420,000 shares of the common stock
of QSS, INC., a Delaware corporation ("QSS").
RECITALS
WHEREAS, Zycad is a corporation duly organized and existing under the laws
of the State of Delaware and is the owner and holder of 2,420,000 shares of the
issued and outstanding shares of the common stock of QSS ("The Zycad Shares");
and
WHEREAS, QSS is a corporation duly organized and existing under the laws of
the State of Delaware with authorized capital stock consisting of 15,000,000
shares of common stock, $.01 par value ("Common Stock"), of which 11,000,000
shares are issued and outstanding and 3,000,000 shares of undesignated preferred
stock; $.01 par value ("Preferred Stock"), of which no shares are issued and
outstanding.
WHEREAS, Edison is a partnership duly organized and existing under the laws
of the State of Delaware; and
WHEREAS, the Board of Directors of Zycad and the Partners of Edison have
determined that it is advisable that The Zycad Shares of QSS be sold to Edison
on the terms and conditions set forth herein and such Board and Partners have,
by resolution, duly adopted, approved and authorized the execution and delivery
of this Agreement; and
WHEREAS, Zycad and Edison reach an agreement in principle in March 1997 for
the respective sale and purchase of The Zycad Shares and QSS subject only to the
completion of due diligence; and
WHEREAS, Zycad and Edison deem it advisable to set forth in this Agreement
the representations and warranties of each party and certain other undertakings
and understandings in connection with the stock purchase.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1
<PAGE>
ARTICLE ONE
AGREEMENT TO SELL AND BUY
Zycad agrees to sell and Edison agrees to purchase all of The Zycad Shares
of QSS free from all liens and encumbrances, together with all dividends and
rights thereof, for the purchase price specified in Article Two.
ARTICLE TWO
PURCHASE PRICE AND MANNER OF PAYMENT
Edison shall pay to Zycad for the QSS Stock the sum of Three Million Five
Hundred Thousand Dollars ($3,500,000) for all 2,420,000 shares of QSS common
stock, payable by wire transfer in next day federal funds to the bank account
specified in writing by Zycad on the Closing Date as hereinafter defined.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF ZYCAD
As inducement to the execution of this Agreement by the parties hereto,
Zycad represents and warrants that the following statements are true and correct
on the date hereof:
3.1 Organization and Standing of QSS
QSS is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. QSS has the corporate
power and authority to own, operate and dispose of its properties and to
conduct its business as now being conducted.
3.2 Organization and Standing of Zycad
Zycad is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Zycad has the corporate
power and authority to own, operate and dispose of its properties and to
conduct its business as now being conducted.
3.3 Capitalization
QSS's authorized capital stock consists of 15,000,000 shares of QSS Common
Stock, $.01 par value, of which 11,000,000 shares are issued and
outstanding and 3,000,000 shares of undesignated preferred stock, $.01 par
value of which no shares are issued and outstanding. No QSS Stock is held
in the treasury of QSS. All outstanding shares of QSS Stock are duly and
validly authorized and issued, fully paid and nonassessable, and the
issuance and sale of all such QSS securities has been in compliance with
all federal and state securities laws.
2
<PAGE>
3.4 Share Ownership
Zycad is the beneficial and record owner and holder of 2,420,000 shares of
the common stock of QSS, which shares will be sold to Edison free and clear
of any claims, liens, charges, equities and encumbrances or other
restrictions.
3.5 Authority of Zycad
Zycad has the legal power and authority to enter into and perform this
Agreement and the transactions contemplated herein. The execution, delivery
and performance of this Agreement and the other agreements contemplated
herein by Zycad have been duly authorized by Zycad's Board of Directors.
Zycad has the corporate power and authority to consummate the sale of the
QSS Stock pursuant to this Agreement. This Agreement has been duly and
validly authorized by all necessary corporate action of Zycad and will
constitute the legal, valid and binding obligation of Zycad, enforceable in
accordance with its terms. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated herein,
will violate any statute, regulation or ordinance of any governmental
authority, herein, or conflict with or result in the breach of any term,
condition or provision of the Certificate of Incorporation or By-Laws of
QSS or Zycad, or of any agreement, deed, contract, mortgage, indenture,
writ, order, decree, legal obligation or instrument to which QSS or Zycad
is a party or by which Zycad or QSS or any of their respective assets or
properties are or may be bound, or constitute a default (or an event which,
with the lapse of time or the giving of notice, or both, would constitute a
default) thereunder, or result in the creation or imposition of any lien,
charge or encumbrance, or restriction of any nature whatsoever with respect
to any properties or assets of either QSS or Zycad, or give to others any
interest or rights, including rights of termination, acceleration or
cancellation in or with respect to any of the properties, assets, contracts
or business of QSS, except for such violations, conflicts, breaches,
defaults, liens, restrictions, interests and rights that are cured, waived
or terminated prior to the Closing Date. QSS and other stockholders of QSS
have rights of first refusal which must be satisfied prior to the Closing.
No consent, approval, authorization, order, registration or qualification
of or with any court or any regulatory authority or any other governmental
body is required for the consummation by Zycad and which have not been
obtained of the transactions contemplated by this Agreement except those
contemplated by this Agreement.
3.6 Title to The Zycad Shares of QSS
Zycad has good and marketable title to The Zycad Shares of QSS, free and
clear of all easements, mortgages, pledges, liens, encumbrances, security
interests, equities, charges, clouds and restrictions of any nature
whatsoever. By virtue of the deliveries made at the Closing, Edison will
obtain good and marketable title to The Zycad Shares of QSS, free and clear
of all easements, mortgages, pledges, liens, encumbrances, security
interests, charges, equities, clouds and restrictions of any nature
whatsoever.
3
<PAGE>
3.7 Brokers
Neither Edison nor anyone acting on their behalf has or will have, as a
result of any act or omission of QSS or Zycad, any liability to any broker,
finder, agent or other person (other than legal and accounting advisors) in
connection with the transactions contemplated hereby, nor has Zycad or
anyone acting on its behalf, agreed to pay any brokerage, finder's,
consulting or investment banking fee or commission, whether payable in
cash, securities or in any other form with any person, firm or entity with
respect to the transactions contemplated hereby.
3.8 Disclosure
No representation or warranty by Zycad in this Agreement, nor any statement
or certificate furnished or to be furnished to Edison pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein not misleading.
3.9 Representations and Warranties
Zycad's representations and warranties contained in this Agreement shall be
true at the time of closing as though such representations and warranties
were made at closing.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF EDISON
As inducement to the execution of this Agreement by the parties hereto,
Edison represents and warrants that the following statements are true and
correct on the date hereof:
4.1 Organization and Standing of Edison
Edison is a limited partnership duly domiciled, validly existing and in
good standing under the laws of the state of Delaware. Edison has the
power and authority to own, operate and dispose of its properties, to
conduct its business as now being conducted, to enter into, deliver and
perform its obligations and undertakings under this Agreement and to
complete the transactions contemplated herein.
4.2 Authority of Edison
Edison has the legal power and authority to enter into and perform this
Agreement and the transactions contemplated herein. The execution,
delivery and performance of this Agreement and the other agreements
contemplated herein by Edison have been duly authorized by Edison's
partners. Edison has the power
4
<PAGE>
and authority to consummate the purchase of The Zycad Shares of QSS
pursuant to this Agreement. This Agreement has been duly and validly
authorized by all necessary partner action of Edison and constitutes
the legal, valid and binding obligation of Edison, enforceable in
accordance with its terms. Neither the execution and delivery of
this Agreement, nor the consummation of the transactions contemplated
herein, will violate any statute, regulation or ordinance of any
governmental authority, or conflict with or result in the breach of any
term, condition or provision of the Edison Limited Partnership Agreement,
or of any agreement, deed, contract, mortgage, indenture, writ, order,
decree, legal obligation or instrument to which Edison is a party or by
which Edison or any of its assets or properties are or may be bound, or
constitute a default (or an event which, with the lapse of time or the
giving of notice, or both, would constitute a default) thereunder, or
result in the creation or imposition of any lien, charge or encumbrance, or
restriction of any nature whatsoever with respect to any properties or
assets of Edison, or give to others any interest or rights, including
rights of termination, acceleration or cancellation in or with respect to
any of the properties, assets, contracts or business of Edison, except for
such violations, conflicts, breaches, defaults, liens, restrictions,
interests and rights that are cured, waived or terminated prior to the
Closing Date. No consent, approval, authorization, order, registration or
qualification of or with any court or any regulatory authority or any other
governmental body is required for the consummation by Edison of the
transactions contemplated by this Agreement except those contemplated by
this Agreement.
4.3 Purchase for Investment
Edison is acquiring The Zycad Shares of QSS solely for its own account, for
investment, and not with a view to any further distribution thereof.
4.4 Access to Information
Edison has been provided with all information about QSS requested by it; it
has had an opportunity to perform a due diligence investigation of QSS and
its business and it has been provided the opportunity to ask questions of
and receive answers from QSS and its management and has been supplied all
information and documentary material deemed necessary by it to verify the
accuracy of such information. Edison (and its staff, attorneys,
accountants, consultants and other representatives) shall hold all such
information and documents received from QSS or any of its affiliates in
strictest confidence, pursuant to the terms and conditions of the
Confidentiality and Nondisclosure Agreement between QSS and Edison. All
such information in written form and all such documents shall be returned
to QSS in the event the transactions contemplated by this Agreement are not
completed.
4.5 Brokers
Neither Zycad nor anyone acting on their behalf has or will have as a
result of any act or omission by Edison any liability to any broker,
finder, agent or other person
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(other than legal and accounting advisors) in connection with the
transactions contemplated thereby, nor has Edison or anyone acting on
its behalf agreed to pay any brokerage, finder's, consulting or
investment banking fee or commission, whether payable in cash,
securities or in any other form with any person, firm or entity with
respect to the transactions contemplated hereby.
ARTICLE FIVE
COVENANTS OF ZYCAD
5.1 No Further Negotiations
Until the Closing Date, or the earlier termination of this Agreement, Zycad
will not sell, offer to sell or solicit offers to purchase any of The Zycad
Shares of QSS.
5.2 Public Disclosure
Neither Zycad nor Edison, nor any of its affiliates shall make any public
announcement or issue any press release concerning the proposed stock sale
without the prior consent of Edison, except as may be otherwise required by
Law.
ARTICLE SIX
CLOSING
The closing of the sale (the "Closing") of the 2,420,000 shares of common
stock of QSS shall take place on or before April 30, 1997 (the "Closing Date")
at a mutually agreeable time and place (or such other time and place as may be
mutually agreeable).
6.1 At the Closing, Zycad shall deliver to Edison, free and clear of all
encumbrances or restrictions, certificates for 2,420,000 shares of QSS
Stock in negotiable form, endorsed in blank with all transfer stamps
required by government authorities attached thereto subject to any legends
required by federal securities laws. Upon such delivery, Edison shall
transfer to Zycad the purchase price for the shares as provided for in
Article Two of this Agreement.
ARTICLE SEVEN
CONDITIONS TO EDISON'S OBLIGATION TO CLOSE
The obligation of Edison to consummate the purchase of The Zycad Shares of
QSS Stock is subject to satisfaction , on or prior to the Closing Date, of the
following conditions:
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7.1 Zycad shall have delivered to Edison:
a. a certified copy of the resolution or resolutions duly adopted by the
Board of Directors of Zycad authorizing execution of this Agreement
and the consummation by Zycad of the transactions contemplated
thereby.
b. Stock certificate for 2,420,000 shares of QSS Stock with a stockpower
duly endorsed.
c. A form of waiver of first rights of refusal signed by QSS and
stockholders of QSS.
d. Side letter of agreement relative to a board seat for Edison on the
Board of Directors of QSS.
7.2 The sale of QSS Stock pursuant to this Agreement shall not violate any
order, decree or judgment of any court or government body having competent
jurisdiction, and no law, rule, regulation or order shall have been
adopted, by any such body, prohibiting or enjoining the transactions
contemplated by this Agreement or which would, in the reasonable judgment
of Edison, render it impossible or inadvisable for Edison to consummate the
transactions contemplated hereby or to own, operate or control the assets,
properties or business of QSS.
ARTICLE EIGHT
CONDITIONS TO ZYCAD'S OBLIGATION TO CLOSE
The obligation of Zycad to consummate the Stock Purchase is subject to the
satisfaction, on or prior to the Closing Date, of the following conditions:
8.1 Edison shall have delivered to Zycad:
a. a certified copy of the resolution or resolutions duly adopted by the
Partners of Edison authorizing the execution of this Agreement and
the consummation by Edison of the transactions contemplated thereby.
ARTICLE NINE
TERMINATION
9.1 Termination by Mutual Consent
At any time on or prior to the Closing Date, this Agreement may be
terminated by mutual written consent of the Board of Directors of Zycad and
Partners of Edison, without liability on the part of any party.
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9.2 Additional Rights of Termination
In addition to the other terms of this Article Nine, this Agreement may be
terminated by written notice from either the Partners of Edison or the
Board of Directors of Zycad to the other parties hereto, without liability
on the part of either party, if the purchase of The Zycad Shares of QSS
Stock has not been consummated by April 30, 1997 for any reason whatsoever.
9.3 Expenses on Termination
Upon termination for any reason pursuant to this Article Nine, each party
shall bear all of its out-of-pocket expenses incurred in connection with
the transactions contemplated by this Agreement, including without
limitation all legal, accounting, printing, travel and other similar fees
and expenses.
ARTICLE TEN
MISCELLANEOUS
10.1 Amendment
This Agreement may be amended, modified or supplemented in whole or in part
at any time by an instrument in writing executed in the same manner as this
Agreement after due authorization by the respective Board of Directors or
the Partners of the parties hereto.
10.2 Headings
The Article and Section headings in this Agreement and in the Index are
solely for the convenience and reference of the parties hereto, and are not
intended to be descriptive of the entire contents of any such Articles or
Sections and shall not limit or otherwise affect any of the terms or
provisions hereof.
10.3 Entire Agreement
This Agreement and the documents, schedules and exhibits described herein
or attached or delivered pursuant hereto set forth the entire agreement
between the parties hereto with respect to the transactions contemplated
hereby and supersede all prior agreements, arrangements and understandings
relating to the subject matter hereof. Except as expressly set forth
herein, no party is entitled to rely on any statement not contained herein
or any writing not specifically furnished pursuant hereto.
10.4 Counterparts
This Agreement may be executed in one or more counterparts each of which
shall be deemed to constitute an original and shall become effective when
each of the
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parties hereto has signed and delivered to the other parties a copy
of this Agreement, whether or not all parties have signed the same
copy.
10.5 Notices
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given when received, or when sent by
certified or registered mail, return receipt requested, or by prepaid telex
or telegram, as follows:
a. If to Zycad:
Zycad Corporation
Attention: General Counsel
47100 Bayside Parkway
Fremont, CA 94538
b. If to Edison:
Edison Venture Fund
Attention: John H. Martinson
997 Lenox Drive, #3
Lawrenceville, NJ 08648
or to such other address as shall be designated by any of such parties to
the others by such a notice.
10.7 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware. Any litigation commenced by Zycad or Edison
concerning this Agreement shall be brought in Mercer County or Morris
County, New Jersey. The prevailing party shall be entitled to reasonable
attorneys' fees and costs incurred in connection with such litigation.
10.8 Waiver
No waiver of any provision of this Agreement or any rights or obligations
of either party hereunder shall be effective, except pursuant to a written
instrument signed by the party or parties waiving compliance, and any such
waiver shall be effective only in the specific instance and for the
specific purpose stated in such writing.
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IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed in its corporate or partner name by its duly authorized officers or
partners all as of the date first above written.
ZYCAD CORPORATION
By /s/ Phillips W. Smith
------------------------------
Phillips W. Smith
President and CEO
EDISON VENTURE FUND III, L.P.
General Partner
By /s/ John H. Martinson
------------------------------
John H. Martinson
Managing Partner
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AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 dated as of April 16, 1997 (the "Amendment") to the
Stock Purchase Agreement dated as of April 14, 1997 (the "Agreement"), by and
between Zycad Corporation, a Delaware Corporation ("Zycad") and Edison Venture
Fund III, L.P., a Delaware Corporation ("Edison").
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. AMENDMENT. Any and all references in the Agreement to the date of
April 30, 1997 are hereby revised to reference a date of May 31, 1997.
2. EFFECT ON THE AGREEMENT. Except as expressly amended by this
Amendment, the Agreement shall remain in full force and effect.
3. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware. Any litigation commenced by
Zycad or Edison concerning this Amendment shall be brought in Mercer County or
Morris County, New Jersey. The prevailing party shall be entitled to reasonable
attorneys' fees and costs incurred in connection with such litigation.
4. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
as of the date first above written.
ZYCAD CORPORATION
By: /s/ Phillips W. Smith
------------------------------
Phillips W. Smith
President and Chief Executive Officer
EDISON VENTURE FUND III, L.P.
GENERAL PARTNER
By: /s/ John H. Martinson
------------------------------
John H. Martinson
Managing Partner
