Page 1 of 60 Pages.
Exhibit Index is on page 6.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant of Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 14, 1996
SYQUEST TECHNOLOGY, INC.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-19674 94-2793941
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(State or Other Jurisdiction (Commission File Number) IRS Employer
of Incorporation) Identification No.)
47071 Bayside Parkway, Fremont, California 94538
------------------------------------------------
(Address of Principal Executive Offices)
(510) 226-4000
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
--------------
(Former Name or Former Address, if Changed Since Last Report)
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<PAGE>
Item 5. Other Events
On June 14, 1996, Registrant issued 20,000 shares of its 7% Cumulative
Convertible Preferred Stock, $1.00 par value (the "Preferred Stock"), at a price
f $1,000 per share. The aggregate proceeds (after payment of finders' fees but
before payment of legal expenses and other costs incurred in the placement) to
the Company were approximately $19,000,000.
As described in greater detail below, the Preferred Stock is
convertible into the Common Stock of Registrant. The holders of the Preferred
Stock were granted registration rights for the resale of the underlying shares
of Common Stock.
Of the $20,000,000 in gross sales proceeds, $15,000,000 were placed in
an escrow account at First Union National Bank. The terms of the Escrow
Agreement provide that the monies in the escrow account may be used by
Registrant solely for Registrant's operating expenses (including payments for
goods delivered, services rendered and payroll) incurred after June 7, 1996. In
order to withdraw monies from the escrow account Registrant's Chief Executive
Officer or Chief Financial Officer must request the withdrawal and certify as to
the use of the proceeds. The escrow account shall terminate upon the earlier of
the withdrawal of all of the monies in the account or upon agreement between
Registrant and the holders of the Preferred Stock.
The rights, preferences and privileges of the Preferred Stock are set
forth in a Certificate of Designations, Preferences and Rights as filed with the
Delaware Secretary of State and are summarized below:
Dividends. 7% cumulative payable quarterly in cash (or, at Registrant's
option, stock, except when the number of shares to be issued would cause the
holders of the Preferred Stock to beneficially own a number of shares of Common
Stock in excess of certain numeric limits).
Conversion. Convertible into Common Stock commencing August 28, 1996 or
the date when the registration statement registering the Common Stock for resale
is declared effective, whichever is earlier, at a conversion price which is the
lesser of $11 or 77% of the average market price of the Common Stock on the five
trading days prior to the conversion. The Preferred Stock cannot be converted if
the converting holder and its respective affiliates would beneficially own more
than 4.9% of Registrant's Common Stock at the time of conversion (excluding from
the calculation shares of Common Stock issuable upon conversion of the Preferred
Stock). If a registration statement registering the resale of the Common Stock
is not effective by September 3, 1996, the 23% discount increases (and therefore
the 77% factor decreases) at the rate of three percentage points per month of
delay.
If the Common Stock is trading below $5 when the Preferred Stock
converts, Registrant can redeem that Preferred at 130% of the original purchase
price, except that the redemption price is reduced to 110% of the original
purchase price to the extent that the original purchase price of the amount of
Preferred Stock being redeemed (plus one half the amount previously converted by
the holders) exceeds $10 million.
Registrant can force conversion after one year after the registration
statement becomes effective, so long as the Common Stock is still listed on the
Nasdaq Electronic Bulletin Board, Small Cap or
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National Market, and subject to the 4.9% limit on the Preferred holders
beneficially owning shares of the Common.
Merger. The holders of Preferred Stock are entitled to receive its
share of merger consideration if Registrant merges, on an as converted basis.
Registrant must give 75 days notice of merger or reclassification.
Nonvoting. The Preferred Stock is nonvoting, except as required by law.
Redemption. Registrant must redeem (at 100% of original purchase price)
all Preferred remaining outstanding on May 31, 1999 with cash or (at
Registrant's option) Common Stock. If Common Stock is to be issued the
redemption would be based on the market price of the Common Stock for the five
trading days before May 31, 1999. Registrant must redeem the Preferred Stock at
130% of original purchase price if the Common Stock is not listed on Nasdaq
National Market, Small Cap or Electronic Bulletin Board (or NYSE or AMEX).
Registrant may redeem any or all Preferred Stock at 130% of the original
purchase price with 20 days prior notice if the average market price of the
Common Stock for five trading days is less than $14. Registrant may redeem any
or all Preferred Stock if the market price for the last five trading days is
above $14 for that market price multiplied by the number of shares of the Common
Stock into which the Preferred Stock being redeemed is then convertible.
Example: To redeem $1,000,000 worth of Preferred Stock when the market price is
at $20, Registrant would have to pay $1,818,181.80 plus unpaid dividends
($1,000,000 divided by the maximum conversion price of $11 times $20).
Under no circumstance may more than 2,291,891 shares of Common Stock be
issued on conversion of the Preferred Stock or for dividends, unless
Registrant's stockholders vote to increase that number and that vote does not
violate the Nasdaq National Market rule concerning below market value
financings. If the Preferred holders attempt a conversion which would exceed the
limit, Registrant must redeem all Preferred Stock remaining at 130% of original
purchase price (110% to the extent more than half of all of the Preferred Stock
is redeemed under this provision).
Liquidation Preference. In liquidation, the holders of the Preferred
Stock receive original purchase price, plus dividends, before the holders of
Common Stock receive any cash or assets on liquidation.
Other Preferred. Registrant can issue preferred to others with equal or
inferior liquidation preference.
Vote to Amend Preferred. Holders of two-thirds of the outstanding
shares of Preferred Stock must approve any amendment.
Item 7. Financial Statements, Proforma Financial Information and Exhibits
(c) Exhibits
3.1 Restated Certificate of Incorporation of Registrant.
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3.2 Corrected Certificate of Designations, Preferences and Rights of 7%
Cumulative Convertible Preferred Stock, Series 1.
10.1 Securities Purchase Agreement, dated as of May 31, 1996, by and among
Registrant and holders of the Preferred Stock.
10.2 Registration Rights Agreement, dated as of May 31, 1996, by and among
Registrant and holders of the Preferred Stock.
10.3 Escrow Agreement, dated as of June 7, 1996, by and among Registrant,
holders of Preferred Stock and ODTAA, Inc.
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<PAGE>
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 hereunto duly authorized.
DATE: June 26, 1996 SYQUEST TECHNOLOGY, INC.
(Registrant)
By: /s/ Edwin L. Harper
------------------------------
Edwin L. Harper, President and
Chief Executive Officer
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<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Number Page Number
-------------- -----------
3.1 7
3.2 11
10.1 25
10.2 39
10.3 55
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EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
SYQUEST TECHNOLOGY, INC.
Pursuant to Section 245 of the Delaware General Corporation Law,
SYQUEST TECHNOLOGY, INC., a Delaware corporation (the "Corporation"), hereby
certifies:
FIRST: The name of the corporation is SyQuest Technology, Inc. SyQuest
Technology, Inc. was originally incorporated under the name SyQuest Delaware,
Inc., and the original Certificate of Incorporation of the corporation was filed
with the Secretary of State of the State of Delaware on October 3, 1991.
SECOND: Pursuant to Section 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation of this Corporation as heretofore amended or supplemented, and
there is no discrepancy between those provisions and the provisions of this
restated certificate.
THIRD: This Restated Certificate of Incorporation was duly adopted by
unanimous written consent of the Board of Directors of the Corporation, filed
with the minutes of the Board of Directors, in accordance with the applicable
provisions of Section 245 of the Delaware General Corporation Law.
FOURTH: The text of the Certificate of Incorporation is as set forth on
Exhibit A attached hereto.
IN WITNESS WHEREOF, SYQUEST TECHNOLOGY, INC. has caused this Restated
Certificate of Incorporation to be signed by Syed H. Iftikar, its President, and
attested by Michael J. Perez, its Secretary, as of the 22nd day of January,
1992.
SYQUEST TECHNOLOGY, INC.
By: /s/ Syed H. Iftikar
----------------------------
Syed H. Iftikar
President
ATTEST:
By: /s/ Michael J. Perez
---------------------------
Michael J. Perez
Secretary
<PAGE>
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
SYQUEST TECHNOLOGY, INC.
ARTICLE I
The name of the corporation is SyQuest Technology, Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle,
and the name of the registered agent at that address is The Corporation Trust
Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
(A) Classes of Stock. This corporation is authorized to issue
following classes of stock: Common Stock ("Common Stock" or "Common") and
Preferred Stock ("Preferred Stock" or "Preferred"). The total number of shares
which the corporation is authorized to issue is Twenty-Four Million
(24,000,000). Twenty Million (20,000,000) shares shall be Common Stock and Four
Million (4,000,000) shares shall be Preferred Stock. Each share of Common and
Preferred Stock shall have a par value of $0.001.
(B) Rights, Preferences and Restrictions of Preferred Stock. The Board
of Directors is authorized, subject to limitations prescribed by law and the
provisions of Article IV(A), 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 or alter the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
1. The number of shares constituting that series (which may
thereafter in the same manner be increased or decreased, but not below the
number of shares of such series then outstanding) and the distinctive
designation of that series;
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2. The dividend rate on the shares of that series, if any,
whether dividends shall be cumulative, and, if so, from which date or dates, and
the relative rights of priority, if any, of payment of dividends on shares of
that series;
3. Whether that series shall have voting rights, in addition
to the voting rights provided by law, and if so, the terms of such voting
rights;
4. Whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors shall
determine;
5. Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
6. Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
7. The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution, or winding up of the
corporation, and the relative rights of priority, if any, of the payment of
shares of that series; and
8. Any other relative rights, preferences and limitations of
that series.
ARTICLE V
The corporation is to have perpetual existence.
ARTICLE VI
The election of directors need not be by written ballot unless a
stockholder demands election by written ballot at a meeting of stockholders and
before voting begins.
ARTICLE VII
The number of directors which constitute the whole Board of Directors
of the corporation shall be designated in the By-laws of the corporation.
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the By-laws of the corporation.
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ARTICLE IX
The personal liability of the directors of the corporation for monetary
damages for breach of fiduciary duty as a director shall be eliminated to the
fullest extent permissible under Delaware law as the same exists or as may
hereafter be amended. Neither any amendment nor repeal of this Article, nor the
adoption of any provision of this Certificate of Incorporation inconsistent with
this Article, shall eliminate or reduce the effect of this Article in respect of
any matter occurring, or any cause of action, suit or claim that, but for this
Article would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
ARTICLE X
The corporation is authorized to provide indemnification of officers,
directors, employees or agents of the corporation for breach of duty to the
corporation and its stockholders through By-law provisions or through agreements
with such officers, directors, employees or agents, or both, in excess of the
indemnification otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject to the limits on such excess indemnification set forth
in Section 102(b)(7) of the Delaware General Corporation Law.
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EXHIBIT 3.2
CORRECTED CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF 7% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES 1
OF
SYQUEST TECHNOLOGY, INC.
SyQuest Technology, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the Board of Directors of the
Company by the Certificate of Incorporation, as amended, of the Company, and
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
the Board of Directors of the Company at a meeting duly held, adopted
resolutions providing for the designations, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions thereof, of Twenty Thousand (20,000) shares of 7% Cumulative
Convertible Preferred Stock, Series 1, of the Company, as follows:
RESOLVED, that the Company is authorized to issue 20,000 shares of 7%
Cumulative Convertible Preferred Stock, Series 1, $.001 par value (the
"Preferred Shares"), which shall have the following powers, designations,
preferences and other special rights:
(1) Dividends. The holders of the Preferred Shares shall be
entitled to a cash dividend of seven percent (7%) per annum of the Stated
Value (as defined below), on a cumulative basis with quarterly compounding
(prorated for any portion of the applicable period during which the
Preferred Shares are outstanding). Dividends shall accrue from the date of
issuance of the Preferred Shares and shall be payable quarterly commencing
August 31, 1996, through and including the date on which the Preferred
Shares are converted or redeemed. Dividends may be paid at the Company's
option in cash or, except in the case of a redemption pursuant to Section
5(d) or Section 6, Common Stock valued based on the Average Market Price
(as defined below) of the Common Stock for the period of five (5)
consecutive trading days ending on the trading day before the dividend
payment dates or the date of conversion, as the case may be; provided,
however, that in no event shall accrued dividends be paid in shares of
Common Stock if, after giving effect to such distribution, the number of
shares of Common Stock beneficially owned by such holder and all other
holders whose holdings would be aggregated with such holder
<PAGE>
for purposes of calculating beneficial ownership in accordance with
Sections 13(d) and 16 of the Securities Exchange Act of 1934, as amended,
and the regulations thereunder ("Section 13(d) and 16"), including, without
limitation, any person serving as an adviser to any holder (collectively,
the "Related Persons"), would exceed four and nine-tenths percent (4.9%) of
the outstanding shares of Common Stock (calculated in accordance with
Sections 13(d) and 16) (Common Stock issuable upon conversion of the
Preferred Shares shall not be deemed beneficially owned by such holder or
the Related Persons for this purpose) and cash shall be paid in lieu of any
shares which cannot be issued pursuant to this proviso. The Company shall
not issue any fraction of a share of Common Stock in payment of a dividend,
but shall pay cash therefor. The Company shall, so long as any of the
Preferred Shares are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, such number of shares of Common Stock
as shall from time to time be sufficient to pay dividends hereunder. Every
reference herein to the Common Stock of the Company (unless a different
intention is expressed) shall be to the shares of the Common Stock of the
Company, $.001 par value, as such stock exists immediately after the
issuance of the Preferred Shares provided for hereunder, or to stock into
which such Common Stock may be changed from time to time thereafter.
"Average Market Price" of any security for any period shall be
computed as the arithmetic average of the closing bid prices for such
security for each trading day in such period on the National Market of the
National Association of Securities Dealers Automated Quotation System (the
"NASDAQ-NM"), or, if the NASDAQ-NM is not the principal trading market for
such security, on the principal trading market for such security, or, if
market value cannot be calculated for such period on any of the foregoing
bases, the Average Market Price shall be the average fair market value
during such period as reasonably determined in good faith by the Board of
Directors of the Company (all as appropriately adjusted for any stock
dividend, stock split or other similar transaction during such period or
between the end of such period and the date of conversion of dividend
payment, as applicable.)
(2) Conversion of Preferred Shares. The holders of the Preferred
Shares shall have the right, at their option, to convert the Preferred
Shares into shares of Common Stock on the following terms and conditions:
(a) Conversion Right. Each Preferred Share shall be
convertible, at any time after the earlier of (i) the seventy-fifth (75th)
day following the date of issuance or (ii) the date on which the
Registration Statement (as defined below) is declared effective by the U.S.
Securities and Exchange Commission (or, if such Preferred Share is called
for conversion pursuant to Section 3 hereof or for redemption pursuant to
Sections 5(c) or 5(d) hereof, at any time up to and including, but not
after, the close of business on the fifth (5th) full trading day prior to
the date fixed for the conversion or redemption, as the case may be) into
fully paid and nonassessable shares (calculated to the nearest whole share)
of Common Stock, at the conversion price (the "Conversion Price") in effect
at the time of conversion determined as hereinafter provided; provided,
however, that in no event shall any holder be entitled to convert Preferred
Shares if, after giving
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effect to such conversion, the number of shares of Common Stock
beneficially owned by such holder and all Related Persons, would exceed
four and nine-tenths percent (4.9%) of the outstanding shares of Common
Stock (calculated in accordance with Sections 13(d) and 16). Common Stock
issuable upon conversion of the Preferred Shares shall not be deemed to be
beneficially owned by such holder or the Related Persons for this purpose.
Each Preferred Share shall have a value of One Thousand Dollars ($1,000)
(the "Stated Value") for the purpose of such conversion and the number of
shares of Common Stock issuable upon conversion of each of the Preferred
Shares shall be determined by dividing the Stated Value thereof by the
Conversion Price then in effect.
(b) Conversion Price. The Conversion Price shall be the
lesser of (i) seventy-seven percent (77%) (the "Conversion Percentage") of
the Average Market Price for the Common Stock for the five (5) consecutive
trading days ending one trading day prior to the date of the Conversion
Notice (as defined below), subject to adjustment as provided herein, or
(ii) $11.00 (the "Fixed Conversion Price"), subject to adjustment as
provided herein.
(c) Adjustment to Conversion Percentage and Fixed Conversion
Price. If the registration statement (the "Registration Statement")
covering the shares of Common Stock issuable hereunder and required to be
filed by the Company pursuant to the Registration Rights Agreement between
the Company and the initial holders of the Preferred Shares (the
"Registration Rights Agreement") has not been declared effective by the
U.S. Securities and Exchange Commission ("SEC") within eighty (80) days
after the date of issuance of the Preferred Shares (provided, however, that
such 80 day period shall be extended, with the holders' prior written
consent, which consent shall not be unreasonably withheld, as may be
reasonable in the event that the effectiveness of the Registration
Statement is delayed by reason of a force majeure), or if, after the
Registration Statement has been declared effective by the SEC, sales cannot
be made pursuant to the Registration Statement by reason of stop order, the
Company's failure to update the Registration Statement in accordance with
the rules and regulations of the SEC or otherwise, then, as partial relief
for the damages to the holder by reason of any such delay in or reduction
of its ability to sell the underlying shares of Common Stock (which remedy
shall not be exclusive of any other remedies available at law or in
equity):
(i) The Conversion Percentage shall be reduced by a
number of percentage points equal to three (3) multiplied by the sum of:
(i) the number of months (prorated for partial months) after the end of
such 80 day period (or for such extension of such period as to which the
holders have consented) and prior to the date the Registration Statement is
declared effective by the SEC; and (ii) the number of months (prorated for
partial months) that sales cannot be made pursuant to the Registration
Statement (by reason of stop order, the Company's failure to update the
Registration or otherwise) after the Registration Statement has been
declared effective. (For example, if the Registration Statement becomes
effective one and one-half (1 1/2) months after the end of such 80 day
period (or for such extension of such period as to which the holders have
consented), the Conversion Percentage would be 72.5% until any subsequent
adjustment; if thereafter sales could not be made pursuant to the
Registration Statement for a period of
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two (2) additional months, the Conversion Percentage would then be 66.5%.)
If the holder converts Preferred Shares into Common Stock and an adjustment
to the Conversion Percentage is required subsequent to such conversion, but
prior to the sale of such Common Stock by such holder, the Company shall
pay to such holder, within five (5) days after receipt of a notice of the
sale of such Common Stock from such holder, an amount equal to the Average
Market Price of the Common Stock obtained upon conversion of such Preferred
Shares for the five (5) trading days ending one (1) trading day prior to
the date of conversion multiplied by three-hundredths (.03) times the
number of months (prorated for partial months) for which an adjustment was
required. Such amount may be paid at the Company's option in cash or Common
Stock whose value is based on the Average Market Price of the Common Stock
for the period of five (5) consecutive trading days ending on the date of
the sale of such Common Stock; provided, however, that in no event shall
shares be issued hereunder if, after giving effect to such issuance, the
number of shares of Common Stock beneficially owned by such holder and all
Related Persons would exceed four and nine tenths percent (4.9%) of the
outstanding shares of Common Stock (calculated in accordance with Sections
13(d) and 16); cash shall be paid in lieu of any shares which cannot be
issued pursuant to this proviso. Common Stock issuable upon conversion of
Preferred Shares held by such holder or the Related Persons shall not be
deemed to be beneficially owned by such holder or the Related Persons for
this purpose. (For example, if the Conversion Percentage was 72.5% at the
time of conversion of $1,000,000 in Stated Value of Preferred Shares (such
that the Preferred Shares were converted into Common Stock having an
Average Market Price for the applicable period in aggregate of
$1,379,310.30) and subsequent to conversion there was a further two (2)
month delay in the Registration Statement's being declared effective, and
such Common Stock was sold at the end of such two (2) month period, the
Company would pay to the holder $82,758.62 in cash or Common Stock) and
(ii) The Fixed Conversion Price shall be reduced by a
number of percentage points equal to three (3) multiplied by the sum of:
(i) the number of months (prorated for partial months) after the end of
such 80 day period (or for such extension of such period as to which the
holders have consented) and prior to the date the Registration Statement is
declared effective by the SEC; and (ii) the number of months (prorated for
partial months) that sales cannot be made pursuant to the Registration
Statement (by reason of stop order, the Company's failure to update the
Registration or otherwise) after the Registration Statement has been
declared effective. (For example, if the Registration Statement becomes
effective one and one-half (1 1/2) months after the end of such 80 day
period (or for such extension of such period as to which the holders have
consented), the Fixed Conversion Price would be $10.51 until any subsequent
adjustment; if thereafter sales could not be made pursuant to the
Registration Statement for a period of two (2) additional months, the Fixed
Conversion Price would then be $9.85.) If the holder converts Preferred
Shares into Common Stock and an adjustment to the Fixed Conversion Price is
required subsequent to such conversion, but prior to the sale of such
Common Stock by such holder, the Company shall pay to such holder, within
five (5) days after receipt of a notice of the sale of such Common Stock
from such holder, an amount
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equal to the Fixed Conversion Price then in effect multiplied by
three-hundredths times the number of months (prorated for partial months)
for which an adjustment was required. Such amount may be paid at the
Company's option in cash or Common Stock whose value is based on the
Average Market Price of the Common Stock for the period of five (5)
consecutive trading days ending on the date of the sale of such Common
Stock; provided, however, that in no event shall shares be issued hereunder
if, after giving effect to such issuance, the number of shares of Common
Stock beneficially owned by such holder and all Related Persons would
exceed four and nine tenths percent (4.9%) of the outstanding shares of
Common Stock (calculated in accordance with Sections 13(d) and 16); cash
shall be paid in lieu of any shares which cannot be issued pursuant to this
proviso. Common Stock issuable upon conversion of Preferred Shares held by
such holder or the Related Persons shall not be deemed to be beneficially
owned by such holder or the Related Persons for this purpose.
(d) Adjustment to Conversion Price. In case the Company shall
(i) declare a dividend or make a distribution on the outstanding shares of
its Common Stock in shares of its Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, or
(iii) combine its outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect at the time of the record date
for such dividend or distribution or the effective date of such subdivision
or combination shall be proportionately adjusted so that the holder of any
Preferred Shares surrendered for conversion after such time shall be
entitled to receive the aggregate number of shares of Common Stock which
the holder would have owned or been entitled to receive had such Preferred
Shares been converted immediately prior to such record date or effective
date and the resulting Common Stock had been subject to such dividend,
distribution, subdivision or combination. Such adjustment shall be made
successively whenever any event specified above shall occur.
(e) Conversion Notice. On presentation and surrender to the
Company (or at any office or agency maintained for the transfer of the
Preferred Shares) of the certificates of Preferred Shares so to be
converted, duly endorsed in blank for transfer or accompanied by proper
instruments of assignment or transfer in blank and written notice of
conversion (a "Conversion Notice"), the holder of such Preferred Shares
shall be entitled, subject to the limitations herein contained, to receive
in exchange therefor a certificate or certificates for fully paid and
nonassessable shares, which certificates shall be delivered by the second
trading day after the date of delivery of the Conversion Notice, and cash
for fractional shares, of Common Stock on the foregoing basis. The
Preferred Shares shall be deemed to have been converted, and the person
converting the same to have become the holder of record of Common Stock,
for all purposes as of the date of delivery of the Conversion Notice.
(f) Special Conversion.
(i) If on the date of the Conversion Notice the Average
Market Price for the Common Stock for the five (5) consecutive trading days
ending one trading day before the date of the Conversion Notice is $5.00 or
less, then for the first
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$10,000,000 in Stated Value of Preferred Shares converted or redeemed
pursuant to the provisions of this Section 2(f) the Company may (A) issue
to the holder giving the Conversion Notice (the "Exercising Holder") Common
Stock for the Preferred Shares to be converted pursuant to the Conversion
Notice (the Stated Value dollar equivalent of the Preferred Shares to be
converted pursuant to the Conversion Notice is hereinafter referred to as
the "Exercise Amount") at the Conversion Price then in effect, plus all
accrued and unpaid dividends on the Exercise Amount (which payment of
dividends may be paid in shares of Common Stock if the requirements of
Section 1 are satisfied), or (B) convert all or a portion of the Exercise
Amount into shares of Common Stock based upon a $5.00 conversion price
therefor and pay in cash to the Exercising Holder an amount (the
"Redemption Amount") equal to the sum of (I) the product of (x) the number
of shares of Common Stock which the holder would have been entitled to
receive for the total Exercise Amount based upon the Conversion Price then
in effect less the number of shares of Common Stock actually issued
pursuant to this clause (B), if any, multiplied by (y) the Average Market
Price for the Common Stock for the five (5) consecutive trading days ending
one trading day before the date of the Conversion Notice plus (II) all
accrued and unpaid dividends on the Exercise Amount (which payment of
dividends may be paid in shares of Common Stock if the requirements of
Section 1 are satisfied). (For example, if the Average Market Price for the
Common Stock for the five (5) consecutive trading days ending one trading
day before the date of the Conversion Notice was $3.00 (and the Conversion
Price then in effect was $2.31) and the Exercise Amount was $1,000,000,
then the Company could (A) issue to the Exercising Holder 432,900 shares of
Common Stock or (B) issue to the Exercising Holder up to 200,000 shares of
Common Stock and pay in cash to the Exercising Holder the amount of
$698,700 (assuming issuance of 200,000 shares of Common Stock), plus
accrued and unpaid dividends.)
(ii) If on the date of the Conversion Notice the Average
Market Price for the Common Stock for the five (5) consecutive trading days
ending one trading day before the date of the Conversion Notice is $5.00 or
less, then for any additional amount of Stated Value of Preferred Shares in
excess of $10,000,000 converted or redeemed pursuant to the provisions of
this Section 2(f) the Company may (A) issue to the Exercising Holder Common
Stock for the Exercise Amount at the Conversion Price then in effect, plus
all accrued and unpaid dividends on the Exercise Amount (which payment of
dividends may be paid in shares of Common Stock if the requirements of
Section 1 are satisfied), or (B) convert all or a portion of the Exercise
Amount into shares of Common Stock based upon a $5.00 conversion price
therefor and pay in cash to the Exercising Holder a Redemption Amount equal
to the sum of (I) the difference between (y) the product of (1) the
Exercise Amount multiplied by (2) 110% and (z) an amount equal to the
aggregate Average Market Price for the Common Stock for the five (5)
consecutive trading days ending one trading day before the date of the
Conversion Notice for the number of shares of Common Stock actually issued
pursuant to this clause (B), if any, plus (II) all accrued and unpaid
dividends on the total Exercise Amount (which payment of dividends may be
paid in shares of Common Stock if the requirements of Section 1 are
satisfied). (For example, if on the date of the Conversion Notice the
Average Market Price for the Common Stock for the five (5) consecutive
trading days
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<PAGE>
ending one trading day before the date of the Conversion Notice was $3.00
(and the Conversion Price then in effect was $2.31) and the Exercise Amount
was $1,000,000, then the Company could (A) issue to the Exercising Holder
432,900 shares of Common Stock or (B) issue to the Exercising Holder up to
200,000 shares of Common Stock and pay in cash to the Exercising Holder the
amount of $500,000 (assuming issuance of 200,000 shares of Common Stock),
plus accrued and unpaid dividends.)
(iii) For the purpose of determining whether the
provisions of subsection (i) or (ii) above apply, one-half (1/2) the amount
of Stated Value of Preferred Shares which has been converted or redeemed
pursuant to any section of this Certificate other than in exercise of the
clause (B) options above (the "Clause B Options") shall be treated as
though it had been converted or redeemed pursuant to the provisions of this
Section 2(f). (For example, if at the time the Company exercises the Clause
B Option, $5,000,000 in Stated Value of Preferred Shares has been converted
or redeemed and the Exercise Amount is $10,000,000, then the provisions of
subsection (i) would apply to $7,500,000 of the Exercise Amount and the
provisions of subsection (ii) would apply to the $2,500,000 balance of the
Exercise Amount.) Within five (5) business days of delivery of the
Conversion Notice, the Company shall either deliver stock certificates
representing the full amount of shares of Common Stock to be issued
pursuant to the Conversion Notice or effect exercise of the Clause B
Options by giving written notice by facsimile and U.S. mail (the
"Redemption Notice") to the Exercising Holder. Within (i) ninety (90) days
of the date of the Redemption Notice, the Company shall remit the
Redemption Amount, plus 3% interest per month from the date of the
Conversion Notice until the date of payment, and (ii) five (5) trading days
of the date of the Redemption Notice deliver certificates for the shares of
Common Stock to the Exercising Holder. In the event that during such 90 day
period, the Company receives a bone fide commitment from an outside
investor to contribute capital to the Company, then such 90 day period
shall be extended for an additional 30 days with the prior written consent
of the Exercising Holder, which consent shall not be unreasonably withheld.
If the Redemption Amount is not timely delivered as provided herein (or if
the Company shall give the holders written notice by facsimile and U.S.
mail that it is withdrawing the Redemption Notice prior to the 90th or
120th day, as the case may be), then the Redemption Notice shall be null
and void and the Company shall immediately convert the Redemption Amount at
a Conversion Price which shall be the lesser of (i) the product of (x) the
Average Market Price for the Common Stock for the five (5) consecutive
trading days ending one trading day prior to the 90th or 120th day or the
date on which the Company withdraws the Redemption Notice, as the case may
be, multiplied by (y) the Conversion Percentage then in effect reduced by
an amount equal to the product three percentage points times the number of
months (prorated for partial months) from the date of the Conversion Notice
to the date of conversion or (ii) the Fixed Conversion Price then in effect
reduced by three-hundredths times the number of months (prorated for
partial months) from the date of the Conversion Notice to the date of
conversion, and shall deliver certificates for the Common Stock by the
second trading day thereafter.
(g) Major Transactions. If the Company shall consolidate with
or merge into any corporation or reclassify its outstanding shares of
Common Stock
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<PAGE>
(other than by way of subdivision or reduction of such shares) (each a
"Major Transaction"), then each Preferred Share shall thereafter be
convertible into the number of shares of stock or securities (the
"Resulting Securities") or property of the Company, or of the entity
resulting from such consolidation or merger, to which a holder of the
number of shares of Common Stock delivered upon conversion of such
Preferred Share would have been entitled upon such Major Transaction had
the holder of such Preferred Share exercised its right of conversion and
had such Common Stock been issued and outstanding and had such holder been
the holder of record of such Common Stock at the time of such Major
Transaction, and the Company shall make lawful provision therefor as a part
of such consolidation, merger or reclassification; provided, however, that
the Company shall give the holders of the Preferred Shares written notice
of any Major Transaction promptly upon the execution of any agreement
whether or not binding in connection therewith (including without
limitation a letter of intent or agreement in principle) and in no event
shall a Major Transaction be consummated prior to seventy-five (75) days
after such notice.
(h) Reservation of Shares. The Company shall, so long as any
of the Preferred Shares are outstanding, reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Preferred Shares, such number of shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Shares then outstanding.
(i) Fractional Shares. The Company shall not issue any
fraction of a share of Common Stock upon any conversion, but shall pay in
cash therefor at the Conversion Price then in effect multiplied by such
fraction.
(j) Taxes. The Company shall pay any and all taxes which may
be imposed upon it with respect to the issuance and delivery of Common
Stock upon the conversion of the Preferred Shares as herein provided. The
Company shall not be required in any event to pay any transfer or other
taxes by reason of the issuance of such Common Stock in names other than
those in which the Preferred Shares surrendered for conversion are
registered on the Company's records, and no such conversion or issuance of
Common Stock shall be made unless and until the person requesting such
issuance has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company and its transfer agent, if
any, that such tax has been paid.
(3) Conversion at the Company's Option. The Company may, at any
time subsequent to twelve (12) months after the date the Registration
Statement is declared effective by the SEC, require the holders of the then
outstanding Preferred Shares to convert all, but not less than all, of such
Preferred Shares into Common Stock by delivering written notice by
facsimile and U.S. mail to such holder (the "Mandatory Conversion Notice")
in accordance with the terms hereof; provided, however, that in no event
shall the Company be entitled to require any holder to convert its
Preferred Shares if, and no such conversion shall be effective to the
extent that, after giving effect to such conversion, the number of shares
of Common Stock issued in such conversion and otherwise beneficially owned
by such holder and all Related Persons, would exceed four
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<PAGE>
and nine-tenths percent (4.9%) of the outstanding shares of Common Stock
(calculated in accordance with Sections 13(d) and 16). The Conversion Price
for the purposes of this Section 3 shall be the lesser of (i) the product
obtained by multiplying the Average Market Price for the Common Stock for
the five (5) consecutive trading days ending one trading day prior to the
conversion date specified in the Mandatory Conversion Notice by the
Conversion Percentage then in effect, or (ii) the Fixed Conversion Price
then in effect. Any Mandatory Conversion Notice shall be given by mail to
the holders of the then outstanding Preferred Shares at least fifteen (15)
trading days prior to the date fixed as the date for the conversion thereof
and shall state that the then outstanding Preferred Shares shall be
converted at the Conversion Price in effect on the date fixed for the
conversion, upon the surrender, at the time and place designated in such
notice, of the certificates therefor. Within two (2) business days after
the date fixed for conversion, the Company shall deliver to the holders (i)
that number of shares of Common Stock for the Preferred Shares converted as
shall be determined in accordance herewith, and (ii) payment of the accrued
and unpaid dividends thereon (which payment of dividends may be paid in
shares of Common Stock if the requirements of Section 1 are satisfied).
Notwithstanding the foregoing, if, at the time fixed for such conversion,
the Common Stock to be issued pursuant thereto is not listed or included
for quotation on the NASDAQ-NM, NYSE, AMEX, NASDAQ SmallCap or NASDAQ
Bulletin Board, then the Mandatory Conversion Notice shall be null and
void.
(4) Voting Rights. Holders of Preferred Shares shall have no
voting rights, except as required by law and by Section 9 hereof.
(5) Redemption.
(a) Mandatory Redemption After Three Years. The Company shall
be obligated to redeem all Preferred Shares outstanding as of May 31, 1999
at a redemption price of the Stated Value thereof, plus accrued and unpaid
dividends, in cash or, at the Company's option, shares of Common Stock
whose value is based on the Average Market Price of the Common Stock for a
period of five (5) consecutive trading days ending one trading day before
May 31, 1999. Notice of every redemption under this Section 5(a) shall be
given by mail to every holder of record of any Preferred Shares then to be
redeemed at least thirty (30), but no more than ninety (90) days, prior to
May 31, 1999, at the respective addresses of such holders as the same shall
appear on the stock transfer books of the Company. The notice shall state
that the Preferred Shares shall be redeemed by the Company at the
redemption price specified above, upon the surrender for cancellation, at
the time and place designated in such notice, of the certificates
representing the Preferred Shares to be redeemed, properly endorsed in
blank for transfer, or accompanied by proper instruments of assignment and
transfer in blank, and bearing all necessary transfer tax stamps thereto
affixed and canceled. On May 31, 1999, each holder of Preferred Shares
called for redemption shall be entitled to receive therefor the specified
redemption price upon presentation and surrender at the place designated in
such notice of the certificates for Preferred Shares called for redemption,
properly endorsed in blank for transfer or accompanied by proper
instruments of assignment or transfer in blank, and bearing all necessary
transfer tax stamps thereto affixed and canceled. If the Company
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<PAGE>
shall give notice of redemption as aforesaid (and unless the Company shall
fail to pay the redemption price of the Preferred Shares presented for
redemption in accordance with such notice), all Preferred Shares called for
redemption shall be deemed to have been redeemed on May 31, 1999, whether
or not the certificates for such Preferred Shares shall be surrendered for
redemption, and such Preferred Shares so called for redemption shall from
and after such date cease to represent any interest whatsoever in the
Company or its property, and the holders thereof shall have no rights other
than the right to receive such redemption price without any interest
therein from and after such date.
(b) Mandatory Redemption in the Event of Delisting of the
Common Stock. Notwithstanding the foregoing, the Company shall be obligated
to redeem the Preferred Shares immediately at any time that the Common
Stock is suspended from trading on any of, or is not listed for trading on
at least one of, the New York Stock Exchange, American Stock Exchange,
NASDAQ-NM, NASDAQ Small Cap Market or NASDAQ Electronic Bulletin Board
(each, a "Delisting Event"). In the event of a Delisting Event, the
redemption price shall equal $1,298.70 per Preferred Share, payable in cash
only. The redemption price under this Section 5(b) shall be remitted to the
holders of the outstanding Preferred Shares within five (5) trading days of
the occurrence a Delisting Event.
(c) Optional Redemption. The Company may redeem some or all
of the outstanding Preferred Shares at any time the Average Market Price
for the Common Stock for a period of five (5) consecutive trading days is
less than $14.00, at a redemption price equal to $1,298.70 per Preferred
Share. Notice of every redemption under this Section 5(c) shall be given by
facsimile and U.S. mail to every holder of record of any Preferred Shares
then to be redeemed at least twenty (20) trading days, but not more than
thirty (30) trading days, before the date of redemption at the respective
addresses of such holders as the same shall appear on the stock transfer
books of the Company. The notice shall state that the Preferred Shares
shall be redeemed by the Company at the redemption price specified above,
upon the surrender for cancellation, at the time and place designated in
such notice, of the certificates representing the Preferred Shares to be
redeemed, properly endorsed in blank for transfer, or accompanied by proper
instruments of assignment and transfer in blank, and bearing all necessary
transfer tax stamps thereto affixed and canceled. On the redemption date
specified in the notice each holder of Preferred Shares called for
redemption shall be entitled to receive therefor the specified redemption
price in cash upon presentation and surrender at the place designated in
such notice of the certificates for Preferred Shares called for redemption
and outstanding on the redemption date, properly endorsed in blank for
transfer or accompanied by proper instruments of assignment or transfer in
blank, and bearing all necessary transfer tax stamps thereto affixed and
canceled.
(d) Optional Redemption. The Company may redeem some or all
of the outstanding Preferred Shares if all of the following conditions are
met:
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<PAGE>
(i) At least ninety (90) days have elapsed following the
issuance of the Preferred Shares (and provided that the Registration
Statement has been declared effective by the SEC at that time);
(ii) The Average Market Price for the Common Stock for a
period of five (5) consecutive trading days is greater than $14.00; and
(iii) The Company has provided the holders of the
Preferred Shares with a term sheet, letter of intent or other summary of
principal terms of a bona fide offer of financing to be provided by third
party investors or underwriters.
The redemption price shall be paid in cash and shall be equal to the
Average Market Price for the five (5) trading days ending one trading day
before the date of redemption for the Common Stock into which the Preferred
Shares called for redemption would otherwise be convertible based upon the
Conversion Price in effect on the date of redemption, plus accrued and
unpaid dividends. (For example, if the Average Market Price for the Common
Stock for the five (5) trading days ending one trading day before the date
of redemption was $20 per share and the Conversion Price was $11, and if
the Company elected to redeem Preferred Shares having a Stated Value of
$1,000,000, the total redemption price would be $1,818,181.80, plus accrued
and unpaid dividends.) Notice of every redemption under this Section 5(d)
shall be given by facsimile and U.S. mail to every holder of record of any
Preferred Shares then to be redeemed at least twenty (20) trading days
before the date of redemption at the respective addresses of such holders
as the same shall appear on the stock transfer books of the Company. The
notice shall state that the Preferred Shares shall be redeemed by the
Company at the redemption price specified above, upon the surrender for
cancellation, at the time and place designated in such notice, of the
certificates representing the Preferred Shares to be redeemed, properly
endorsed in blank for transfer, or accompanied by proper instruments of
assignment and transfer in blank, and bearing all necessary transfer tax
stamps thereto affixed and canceled. On the redemption date specified in
the notice each holder of Preferred Shares called for redemption shall be
entitled to receive therefor the specified redemption price in cash upon
presentation and surrender at the place designated in such notice of the
certificates for Preferred Shares called for redemption and outstanding on
the redemption date, properly endorsed in blank for transfer or accompanied
by proper instruments of assignment or transfer in blank, and bearing all
necessary transfer tax stamps thereto affixed and canceled.
(6) Notwithstanding anything contained herein to the contrary, in
no event shall the aggregate number of shares of Common Stock issuable upon
conversion or otherwise issuable with respect to all of the Preferred
Shares exceed 2,291,891 (subject to equitable adjustments from time to time
pursuant to the anti-dilution provisions of Section 3(d) above) unless the
Company shall have obtained the approval of its stockholders for issuance
in excess of such amount and such approval is permitted under the
anti-dilution rule promulgated by the National Association of Securities
Dealers Bylaws, Schedule D, Part III, Section 6(i) ( or successor rule or
regulation). In the event the Company is prohibited from issuing shares of
Common Stock as a result of the operation of this
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<PAGE>
Section 6, the Company shall redeem for cash those Preferred Shares which
cannot be converted or otherwise issued. The redemption price shall be as
follows: (i) for the first $10 million in Stated Value of Preferred Shares
redeemed pursuant to this Section 6, the redemption price shall be
$1,298.70 per Preferred Share, plus all accrued and unpaid dividends, and
(ii) for any additional amount of Stated Value in excess of $10 million
redeemed pursuant to this Section 6, the redemption price shall be
$1,100.00 per Preferred Share, plus all accrued and unpaid dividends. The
redemption price under this Section 6 shall be remitted to the holders of
the Preferred Shares within five (5) trading days of delivery of the
Conversion Notice.
(7) Liquidation, Dissolution, Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Company, the holders of the Preferred Shares shall be entitled to receive
in cash out of the assets of the Company, whether from capital or from
earnings available for distribution to its stockholders (the "Preferred
Funds"), before any amount shall be paid to the holders of the Common
Stock, an amount equal to the Stated Value per Preferred Share plus any
accrued and unpaid dividends, provided that, if the Preferred Funds are
insufficient to pay the full amount due to the holders of Preferred Shares
and holders of shares of other classes or series of preferred stock of the
Company that are of equal rank with the Preferred Shares as to payments of
Preferred Funds (the "Pari Passu Shares"), then each holder of Preferred
Shares and Pari Passu Shares shall receive a percentage of the Preferred
Funds equal to the full amount of Preferred Funds payable to such holder as
a percentage of the full amount of Preferred Funds payable to all holders
of Preferred Shares and Pari Passu Shares. The purchase or redemption by
the Company of stock of any class, in any manner permitted by law, shall
not, for the purposes hereof, be regarded as a liquidation, dissolution or
winding up of the Company. Neither the consolidation nor merger of the
Company with or into any other corporation or corporations, nor the sale or
transfer by the Company of less than substantially all of its assets,
shall, for the purposes hereof, be deemed to be a liquidation, dissolution
or winding up of the Company. No holder of Preferred Shares shall be
entitled to receive any amounts with respect thereto upon any liquidation,
dissolution or winding up of the Company other than the amounts provided
for herein.
(8) Preferred Rank. All shares of Common Stock shall be of junior
rank to all Preferred Shares in respect to the preferences as to
distributions and payments upon the liquidation, dissolution or winding up
of the Company. The rights of the shares of Common Stock shall be subject
to the preferences and relative rights of the Preferred Shares. The Company
may only authorize and issue additional or other preferred stock which is
equal to, or of junior rank with the Preferred Shares in respect of the
preferences as to distributions and payments upon the liquidation,
dissolution or winding up of the Company, provided, however, that no shares
of preferred stock which rank equal to the Preferred Shares in respect of
the preferences as to distributions and payments upon the liquidation,
dissolution, or winding up of the Company may be issued until August 29,
1996. In the event of the merger or consolidation of the Company with or
into another corporation, the Preferred Shares shall maintain their
relative powers, designations and preferences provided for herein.
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<PAGE>
(9) Vote to Change the Terms of Preferred Shares. The affirmative
vote at a meeting duly called for such purpose or the written consent
without a meeting of the holders of not less than two-thirds (2/3) of the
then outstanding Preferred Shares shall be required to amend, alter, change
or repeal any of the powers, designations, preferences and rights of the
Preferred Shares.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Syed Iftikar, its Chief Executive Officer as of the 7th day of June 1996.
SYQUEST TECHNOLOGY, INC.
By: /s/ Syed Iftikar
---------------------------
Chief Executive Officer
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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of May 31, 1996
by and among SyQuest Technology, Inc., a Delaware corporation, with headquarters
located at 47071 Bayside Parkway, Fremont, CA 94538 (the "Company"), and the
undersigned (collectively, the "Buyer").
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
B. The Buyer wishes to purchase, in the amounts and upon the terms and
conditions stated in this Agreement, shares (the "Preferred Shares") of the
Company's 7% Cumulative Convertible Preferred Stock, Series 1, $.001 par value
per share (the "Preferred Stock"), which shall be convertible into shares of the
Company's Common Stock (the "Common Stock"), $.001 par value, (as converted, the
"Conversion Shares"), and pursuant to which certain shares of Common Stock may
be issued to the Buyer in payment of dividends (the "Dividend Shares"); and
C. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws;
NOW THEREFORE, the Company and the Buyer hereby agrees as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. The Company shall issue and sell to the
Buyer and the Buyer shall purchase 20,000 Preferred Shares which shall be
convertible into Conversion Shares in accordance with the terms of the
Certificate of Designations, Preferences and Rights of 7% Cumulative Convertible
Preferred Stock, Series 1 in the form attached hereto as Exhibit A (the
"Certificate of Designation"). The per share purchase price of the Preferred
Shares shall be $1,000. The Preferred Shares shall be allocated among each of
the entities constituting the Buyer as specified on their respective counterpart
signature pages.
b. Form of Payment. The Buyer shall pay the purchase price for the
Preferred Shares (the "Purchase Price") by wire transfer of immediately
available United States Dollars on the Closing Date (as defined below) as
follows: $5,000,000 shall be wired to the Company in
<PAGE>
accordance with its wiring instructions and $15,000,000 shall be deposited into
an escrow account established at First Union National Bank, Reston, Virginia
(Account No. 4310244824) pursuant to a certain Escrow Agreement of even date
herewith. The Company shall promptly deliver stock certificates, duly executed
on behalf of the Company, representing the Preferred Shares (the "Stock
Certificates") to the Buyer.
c. Closing Date. The date and time of the issuance and sale of the
Preferred Shares shall be 5:00 p.m. Eastern Standard Time on June 14, 1996 (the
"Closing Date").
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants to the Company as to itself, severally,
and not jointly, that:
a. Investment Purpose. The Buyer is purchasing the Preferred Shares for its
own account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof except pursuant to
sales registered under the 1933 Act. The Buyer is not purchasing the Preferred
Shares for the purpose of covering short sale positions in the Common Stock
established on or prior to the date of this Agreement.
b. Accredited Investor Status. The Buyer is an "accredited investor" as
that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that the Preferred Shares
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Preferred Shares.
d. Information. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Preferred Shares
which have been requested by the Buyer. The Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. The Buyer understands
that its investment in the Preferred Shares involves a high degree of risk. The
Buyer has sought such accounting, legal and tax advice as it has considered
necessary to an informed investment decision with respect to its acquisition of
the Preferred Shares.
e. Governmental Review. The Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Preferred Shares or the fairness
or suitability of the investment in the Preferred Shares, nor have such
authorities passed upon or endorsed the merits of the offering of the Preferred
Shares.
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<PAGE>
f. Transfer or Resale. The Buyer understands that (i) except as provided in
the Registration Rights Agreement, the Preferred Shares, the Conversion Shares,
and the Dividend Shares have not been and are not being registered under the
1933 Act or any state securities laws, and may not be transferred unless (a)
subsequently registered thereunder, or (b) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (ii) any sale of such securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
g. Legends. The Buyer understands that the Preferred Shares and, until such
time as the Conversion Shares and the Dividend Shares (collectively, the
"Registrable Securities") have been sold pursuant to a registration under the
1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Registrable Securities shall bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE
BORROWER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. ANY SUCH SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH
APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Preferred Shares or any
Registrable Securities upon which it is stamped, if, unless otherwise required
by state securities laws, (a) the Registrable Securities are
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<PAGE>
sold pursuant to a sale that is registered under the 1933 Act, or (b) in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in form, substance and scope reasonably acceptable to the
Company, to the effect that a public sale or transfer of the Debenture or such
Registrable Securities may be made without registration under the 1933 Act, or
(c) such holder provides the Company with reasonable assurances that the
Preferred Shares or such Registrable Securities can be sold pursuant to Rule 144
under the 1933 Act (or a successor rule thereto) without any restriction as to
the number of securities acquired as of a particular date that can then be
immediately sold.
h. Authorization; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
i. Residency. The Buyer is a resident of that country specified in its
address on the signature page hereof.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and its subsidiaries are
corporations duly organized and existing in good standing under the laws of the
jurisdiction in which they are incorporated, except, in the case of any such
subsidiaries, as would not have a Material Adverse Effect (as defined below),
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. Each of the Company and its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted by
it makes such qualification necessary and where the failure so to qualify would
have a Material Adverse Effect. "Material Adverse Effect" means any material
adverse effect on the operations, properties or financial condition of the
Company and its subsidiaries taken as a whole.
b. Authorization; Enforcement. (i) The Company has the requisite corporate
power and authority to enter into and perform this Agreement and the
Registration Rights Agreement, and to issue the Preferred Shares and the
Registrable Securities in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement by the Company and the consummation by
it of the transactions contemplated hereby have been duly authorized by the
Company's Board of Directors and no further consent or authorization of the
Company, its Board of Directors, or its stockholders is required, (iii) this
Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Company, and (iv) this Agreement and the Registration Rights
Agreement constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
-4-
<PAGE>
c. Capitalization. As of May 31, 1996, the authorized capital stock of the
Company consists of (i) 20,000,000 shares of Common Stock of which ___________
shares were issued and outstanding, and (ii) 4,000,000 shares of Preferred Stock
of which no shares were issued and outstanding. All of such outstanding shares
have been validly issued and are fully paid and nonassessable. No shares of
Common Stock or Preferred Stock are subject to preemptive rights or any other
similar rights of the stockholders of the Company or any liens or encumbrances.
Except as disclosed in Schedule 3(c), as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or arrangements by which the Company or any
of its subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its subsidiaries, (ii) there are no outstanding
debt securities, and (iii) there are no agreements or arrangements under which
the Company or any of its subsidiaries is obligated to register the sale of any
of its or their securities under the 1933 Act (except the Registration Rights
Agreement). The Company has furnished to the Buyer true and correct copies of
the Company's Articles of Incorporation, as amended, as in effect on the date
hereof ("Articles of Incorporation") and the Company's Bylaws, as in effect on
the date hereof (the "Bylaws"). The Company shall provide the Buyer with a
written update of this representation signed by the Company's Chief Executive or
Chief Financial Officer on behalf of the Company as of the Closing Date.
d. Issuance of Securities. The Registrable Securities and Preferred Shares
are duly authorized and, upon issuance in accordance with the terms hereof and
thereof, shall be validly issued, fully paid and non-assessable, and free from
all taxes, liens and charges with respect to the issue thereof.
e. No Conflicts. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Articles of
Incorporation or Bylaws 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 agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any 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). The business of the Company and its
subsidiaries is not being conducted, and shall not be conducted through the
Registration Period (as defined herein), in violation of any law, ordinance,
regulation of any governmental entity, except for possible violations which
either singly or in the aggregate do not have a Material Adverse Effect. Except
as required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement in accordance with the terms hereof.
-5-
<PAGE>
f. SEC Documents, Financial Statements. Since September 30, 1992, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being hereinafter referred to herein as the
"SEC Documents"). The Company has delivered to the Buyer true and complete
copies of the SEC Documents, except for such exhibits, schedules and
incorporated documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer and referred to in Section 2(d) of this Agreement contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in Schedule 3(g), since
March 31, 1996 there has been no material adverse change and no material adverse
development in the business, properties, operations, financial condition,
results of operations or prospects of the Company. The Company has not taken any
steps, and does not expect to take any steps in the foreseeable future, to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. Absence of Litigation. Except as set forth in its Form 10-Q for the
quarter ended March 31, 1996 or in Schedule 3(h), there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company, wherein an unfavorable decision, ruling or finding would
have a Material Adverse Effect or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein.
-6-
<PAGE>
i. Purpose of Investment. The Company recognizes that the Buyer's
investment in the Company is being made in order to provide financing for the
Company's ongoing operations and especially for the development and introduction
of new products.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts timely to satisfy
each of the conditions described in Section 6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to the
Preferred Shares as required under Regulation D and to provide a copy thereof to
the Buyer promptly after such filing.
c. Reporting Status. Until the earlier of (i) the date as of which the
Investors (as that term is defined in the Registration Rights Agreement) may
sell all of the Registrable Securities without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the date
on which (A) the Investors have sold all the Registrable Securities and (B) none
of the Preferred Shares is outstanding (the "Registration Period"), the Company
shall file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the sale of the
Preferred Shares for the Company's internal working capital purposes and shall
not, directly or indirectly, use such proceeds for any loan to or investment in
any other corporation, partnership, enterprise or other person or for repayment
of any existing debt obligations, except that the Company may use up to an
aggregate of $5,000,000 for repayment of existing debt obligations.
e. Financial Information. The Company agrees to send the following reports
to the Buyer during the Registration Period: (i) within five (5) days after the
filing thereof with the SEC, a copy of its Annual Report on Form 10-K, its
Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; and (ii)
within one day after release thereof, copies of all press releases issued by the
Company or any of its subsidiaries.
f. Reservation of Shares. The Company shall at times have authorized, and
reserved for the purpose of issuance, a sufficient number of shares of Common
Stock to provide for the issuance of the Conversion Shares and the Dividend
Shares.
g. Listing. The Company shall promptly secure the listing of the
Registrable Securities upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares of
Registrable Securities from time to time issuable under the terms of this
Agreement and the Registration Rights Agreement.
-7-
<PAGE>
h. Expenses. The Company shall pay all expenses incurred in connection with
the negotiation, preparation, execution, delivery and performance of this
Agreement and the Registration Rights Agreement, including, without limitation,
Buyer's attorneys' fees and expenses up to an aggregate amount of Ten Thousand
Dollars ($10,000).
i. Additional Financing. If during the Registration Period, the Company
shall determine to seek additional equity financing, the Company shall, before
soliciting or discussing any such financing with third parties, negotiate in
good faith with the Buyer the provision by the Buyer of such financing on such
terms as may be mutually agreed upon by the Company and the Buyer. If the Buyer,
in its sole discretion, elects not to provide any such additional financing and
the Company thereafter, but in no event until at least ninety days after the
Closing Date (and provided the Registration Statement required to be filed by
the Company pursuant to Section 2(a) of the Registration Rights Agreement has
been declared effective by the SEC at that time), provides the Buyer with a term
sheet, letter of intent or other summary of principal terms of a bona fide offer
of financing to be provided or underwritten by third party investors or
underwriters, and if such investors or underwriters shall request certain
reasonable accommodations from the Buyer as a condition of providing such
financing, the Buyer agrees to negotiate in good faith with the Company and any
such investors or underwriters regarding such requested accommodations.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the Conversion Shares
and Dividend Shares in such amounts as specified from time to time by the Buyer
to the Company. Prior to registration of the Registrable Securities pursuant to
an effective registration statement, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
shall provide instructions and opinions of counsel to its transfer agent in
accordance with Section 3(p) of the Registration Rights Agreement. The Company
warrants that no instruction other than such instructions referred to in this
Section 5, and stop transfer instructions to give effect to Section 2(f) hereof,
in the case of the Registrable Securities, prior to registration of the
Registrable Securities under the 1933 Act, will be given by the Company to its
transfer agent and that the Preferred Shares and the Registrable Securities
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Registration Rights
Agreement. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Registrable Securities. If the Buyer provides the Company with an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, that registration of a resale by the Buyer of any of the Preferred
Shares or the Registrable Securities is not required under the 1933 Act, the
Company shall permit the transfer, and promptly instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by the Buyer.
-8-
<PAGE>
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to sell the Preferred Shares is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion:
a. The parties shall have executed this Agreement and the Registration
Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been accepted for filing with
the Secretary of State of Delaware.
c. The Buyer shall have delivered the Purchase Price to the Company by wire
transfer of immediately available funds pursuant to the wiring instructions
provided by the Company.
d. The representations and warranties of each Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer to purchase the Preferred Shares is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion:
a. The parties shall have executed this Agreement and the Registration
Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been accepted for filing with
the Secretary of State of Delaware, and a copy thereof certified by such
Secretary of State shall have been delivered to the Buyer.
c. Until the Closing Date, the Common Stock shall be authorized for
quotation on the National Market of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ-NM") and trading in the Common Stock
on NASDAQ-NM shall not have been suspended by the SEC or NASDAQ.
d. The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company
-9-
<PAGE>
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the Closing Date. The
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by the Buyer.
e. The Buyer shall have received the opinion of the Company's counsel dated
as of the Closing Date, in form, scope and substance reasonably satisfactory to
the Buyer and in substantially the same form as Exhibit B.
f. The Buyer shall have received the officer's certificate described in
Section 3(c) above, dated as of the Closing Date.
g. The Company shall have executed and delivered the Stock Certificates to
the Buyer.
h. The Board of Directors of the Company shall have adopted the resolutions
in substantially the same form as Exhibit C.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws.
b. Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
(4) additional original executed signature pages to be physically delivered to
the other party within five (5) days of the execution and delivery hereof.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
-10-
<PAGE>
f. Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by mail or delivered personally or by courier
and shall be effective five days after being placed in the mail, if mailed,
certified or registered, return receipt requested, or upon receipt, if delivered
personally or by courier or by telefacsimile, in each case addressed to a party.
The addresses for such communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Telecopy:
Attention: Syed H. Iftikar
With copy to:
Jackson Tufts Cole & Black, L.L.P
650 California Street
San Francisco, CA 94108
Telephone: (415) 433-1950
Telecopy: (415) 392-3494
Attention:
Templeton C. Peck, Esq.
If to the Buyer, at the addresses on the signature pages.
With copy to:
Genesee Advisers
12007 Sunrise Valley Drive, Suite 460
Reston, VA 22091
Telephone: (703) 476-5898
Telecopy: (703) 476-7720
Attention: Neil T. Chau
And:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telephone: (215) 568-6060
Telecopy: (215) 568-6603
Attention: Stephen T. Burdumy, Esq.
Each party shall provide notice to the other party of any change in address.
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<PAGE>
g. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. Neither the
Company nor the Buyer shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other (which consent may be
withheld for any reason in the sole discretion of the party from whom consent is
sought). Notwithstanding the foregoing, a Buyer may assign its rights hereunder
to any of its "affiliates," as that term is defined under the 1934 Act, without
the consent of the Company, provided, however, that any such assignment shall
not release such Buyer of its obligations hereunder unless such obligations are
assumed by such affiliate and the Company has consented to such assignment and
assumption.
h. Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
i. Survival. The representations and warranties of the Company and the
Buyer contained in Sections 2 and 3 and the agreements and covenants set forth
in Sections 4, 5, 8(g), 8(h), 8(k) and 8(l), and this subsection shall survive
the closing. Each party which constitutes the Buyer shall be responsible only
for its own representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and the Buyer shall have the right to approve
before issuance any press releases or any other public statements with respect
to the transactions contemplated hereby; provided, however, that the Company
shall be entitled, without the prior approval of the Buyer, to make any press
release with respect to such transactions as is required by applicable law and
regulations (although the Buyer shall be consulted by the Company in connection
with any such press release prior to its release and shall be provided with a
copy thereof).
k. Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
l. Termination. In the event that the closing shall not have occurred on or
before five (5) days from the date hereof, this Agreement shall terminate at the
close of business on such date.
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<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
SYQUEST TECHNOLOGY, INC.
By: /s/Edwin L. Harper
----------------------------
Name: Edwin L. Harper
----------------------------
Its: President and CEO
----------------------------
GFL PERFORMANCE FUND LTD.
By: /s/A.P. de Groot
----------------------------
Name: A.P. de Groot
----------------------------
Its: President
----------------------------
Address: Genesee Fund Limited
CITCO Building
Wickhams Cay
P.O. Box 662
Road Town, Tortola
British Virgin Islands
Administrator
Curacao International Trust Co. N.V.
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherland Antilles
Allocated Portion of Preferred Shares: 10,000 Preferred Shares
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<PAGE>
GFL ADVANTAGE FUND LTD.
By: /s/A.P. de Groot
----------------------------
Name: A.P. de Groot
----------------------------
Its: President
----------------------------
Address: Genesee Fund Limited
CITCO Building
Wickhams Cay
P.O. Box 662
Road Town, Tortola
British Virgin Islands
Administrator
Curacao International Trust Co. N.V.
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherland Antilles
Allocated Portion of Preferred Shares: 5,000 Preferred Shares
GFL PORTFOLIO B
By: /s/A.P. de Groot
-----------------------------
Name: A.P. de Groot
-----------------------------
Its:
-----------------------------
Address: Genesee Fund Limited
CITCO Building
Wickhams Cay
P.O. Box 662
Road Town, Tortola
British Virgin Islands
Administrator
Curacao International Trust Co. N.V.
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherland Antilles
Allocated Portion of Preferred Shares: 5,000 Preferred Shares
-14-
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 31, 1996
by and among SyQuest Technology, Inc., a Delaware corporation, with headquarters
located at 47071 Bayside Parkway, Fremont, CA 94538 (the "Company"), and the
undersigned (collectively, the "Buyer").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties of even date herewith (the "Securities Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement to issue and sell to the Buyer shares of the Company's 7%
Cumulative Convertible Preferred Stock, Series 1, $.001 par value per share (the
"Preferred Shares") which will be convertible into shares of the Company's
common stock (the "Common Stock"), par value $.001 per share, (as converted, the
"Conversion Shares"), and pursuant to which certain shares of Common Stock may
be issued to the Buyer in in payment of dividends (the "Dividend Shares"); and
B. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Buyer hereby
agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the following
meanings:
i. "Investor" means the Buyer and any transferee or assignee thereof who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 hereof.
ii. "register," "registered," and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the "SEC").
iii. "Registrable Securities" means the Conversion Shares and the
Dividend Shares.
<PAGE>
iv. "Registration Statement" means a registration statement of the
Company under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on or before
July 1, 1996, file with the SEC a Registration Statement on Form S-3 (or, if
such form is unavailable for such a registration, on such other form as is
available for such a registration) covering the resale of the Registrable
Securities, which Registration Statement shall state that, in accordance with
Rule 416 promulgated under the 1933 Act, such Registration Statement also covers
such indeterminate number of additional shares of Common Stock as may become
issuable upon conversion of the Preferred Shares to prevent dilution resulting
from stock splits, stock dividends or similar transactions. The Registration
Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided to and approved by the
Buyer and its counsel prior to its filing or other submission, such approval not
to be unreasonably withheld.
b. Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors who hold a majority in interest of the Registrable Securities subject
to such underwritten offering shall have the right to select one legal counsel
and an investment banker or bankers and manager or managers to administer their
interest in the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company.
c. Piggy-Back Registrations. If at any time prior to the expiration of the
Registration Period (as hereinafter defined) the Company shall file with the SEC
a Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee
benefit plans and other than the Registration Statement on Form S-3 to be filed
by the Company within 90 days hereof) the Company shall send to each Investor
who is entitled to registration rights under this Section 2(c) written notice of
such determination and, if within twenty (20) days after receipt of such notice,
such Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' reasonable good faith judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder; provided that no portion of the
equity securities which the Company is offering for its own account shall be
excluded; provided, further
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that the Company shall be entitled to exclude Registrable Securities to the
extent necessary to avoid breaching obligations existing prior to the date
hereof to other stockholders of the Company. Any exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Investors; provided, however, that the Company
shall not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities, the holders of which are not entitled to
inclusion of such securities in such Registration Statement or are not entitled
to pro rata inclusion with the Registrable Securities; and provided, further,
however, that, after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with holders of other
securities having the right to include such securities in the Registration
Statement other than holders of securities entitled to inclusion of their
securities in such Registration Statement by reason of demand registration
rights. No right to registration of Registrable Securities under this Section
2(c) shall be construed to limit any registration required under Section 2(a)
hereof. The obligations of the Company under this Section 2(c) may be waived by
Investors holding a majority in interest of the Registrable Securities. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(c) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
d. Eligibility for Form S-3. The Company represents and warrants that it
meets the requirements for the use of Form S-3 for registration of the sale by
the Buyer and any other Investor of the Registrable Securities and the Company
shall file all reports required to be filed by the Company with the SEC in a
timely manner so as to maintain such eligibility for the use of Form S-3. In the
event that Form S-3 is not available for sale by the Investors of the
Registrable Securities, the Company shall register the sale on another
appropriate form.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC not later than
July 1, 1996, a Registration Statement with respect to the number of Registrable
Securities provided in Section 2(a), and thereafter to use its best efforts to
cause such Registration Statement relating to Registrable Securities to become
effective as soon as possible after such filing, and keep the Registration
Statement effective pursuant to Rule 415 at all times until the earlier of (i)
the date as of which the Investors may sell all of the Registrable Securities
without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto), or (ii) the date on which (A) the Investors have sold all
the Registrable Securities and (B) none of the Preferred Shares is outstanding
(the "Registration Period"), which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to
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make the statements therein, in light of the circumstances in which they
were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until such time
as all of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement.
c. The Company shall furnish to each Investor whose Registrable Securities
are included in the Registration Statement and its legal counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and (ii) such number of copies of a prospectus, including
a preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor.
d. In the case of the Registration Statement referred to in Section 2(a),
the Company shall furnish to the counsel of each Investor each letter written by
or on behalf of the Company to the SEC or the staff of the SEC, and each item of
correspondence from the SEC or the staff of the SEC, in each case relating to
such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential treatment).
e. The Company shall use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or "blue sky" laws of such jurisdictions in the United States as the
Investors who hold a majority in interest of the Registrable Securities being
offered reasonably request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(e), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause more than nominal expense
or burden to the Company, or (e) make any change in its charter or bylaws, which
in each case the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders.
f. In the event Investors who hold a majority in interest of the
Registrable Securities being offered in the offering select underwriters for the
offering, the Company shall enter into and
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perform its obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification and
contribution obligations, with the underwriters of such offering.
g. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
h. The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
i. The Company shall permit a single firm of counsel, designated as selling
stockholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold, to review and comment upon the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC, and not file any document in a form to which
such counsel reasonably objects.
j. The Company shall make generally available to its security holders as
soon as practicable, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
k. At the request of the Investors who hold a majority in interest of the
Registrable Securities being sold, the Company shall furnish, on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) if required by an underwriter, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) an opinion, dated as of such date, from
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors.
l. The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors") all pertinent
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financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other final, non-appealable order
from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(l). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
m. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
n. The Company shall use its best efforts either to (i) cause all the
Registrable Securities covered by the Registration Statement to be listed on a
national securities exchange and on each additional national securities exchange
on which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) secure designation and quotation of
all the Registrable Securities covered by the Registration Statement on the
National Market of the National Association of Securities Dealers Automated
Quotation ("NASDAQ") System or, if, despite the Company's best efforts to
satisfy the preceding clause (i) or (ii), the Company is unsuccessful in
satisfying the preceding clause (i) or (ii), to secure the inclusion for
quotation on the NASDAQ SmallCap Market for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National
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Association of Securities Dealers, Inc. ("NASD") as such with respect to
such Registrable Securities.
o. The Company shall provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities, and shall provide CUSIP numbers
for the Registrable Securities, not later than the effective date of the
Registration Statement.
p. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, any managing underwriter
or underwriters, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or, if there is no managing
underwriter or underwriters, the Investors may reasonably request and registered
in such names as the managing underwriter or underwriters, if any, or the
Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
unlegended securities in a timely fashion that complies with then mandated
securities settlement procedures for regular way market transactions.
q. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. At least five (5) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor if such Investor elects
to have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
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<PAGE>
c. In the event Investors holding a majority in interest of the Registrable
Securities being registered determine to engage the services of an underwriter,
each Investor agrees to enter into and perform such Investor's obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(g) or 3(h),
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(g) or 3(h) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration hereunder
unless such Investor (i) agrees to sell such Investor's Registrable Securities
on the basis provided in any underwriting arrangements approved by the Investors
entitled hereunder to approve such arrangements, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company and fees and disbursements of counsel for the Investors
shall be borne by the Company, subject, with respect to expenses incurred by the
Investors, to the limit stated in Section 4(h) of the Securities Purchase
Agreement.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities,
(ii) the directors, officers and each person who controls any Investor within
the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), if any, and (iii) any underwriter (as defined in the 1933 Act)
for the Investors; and the directors, officers and each person who controls any
such
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underwriter within the meaning of the 1933 Act or the 1934 Act, if any,
(each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact in
a Registration Statement or the omission or alleged omission to state a material
fact therein required to be stated or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (ii) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; (iii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available by
the Company; and (iv) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify, hold harmless and defend,
to the same extent and in the same manner set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs the Registration
Statement, each person, if any, who controls the Company within the meaning of
the 1933 Act or the 1934 Act, any underwriter and any other
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stockholder selling securities pursuant to the Registration Statement or
any of its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement or to the extent such Claim is based upon any violation or alleged
violation by the Investor of the 1933 Act, 1934 Act or any other law; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim as does not
exceed the net proceeds to such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in any distribution, to the same extent as provided above, with
respect to information such persons so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates; provided, that legal
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fees of such firm shall be reasonable. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the investors to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the investors to
sell such securities pursuant to Rule 144 without registration.
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9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the 1933 Act
and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (vi) such transferee shall be an "accredited investor" as that term
defined in Rule 501 of Regulation D promulgated under the 1933 Act; and (vi) in
the event the assignment occurs subsequent to the date of effectiveness of the
Registration Statement required to be filed pursuant to Section 2(a), the
transferee agrees to pay its all reasonable expenses of amending or
supplementing such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and Investors
who hold a majority in interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
b. Any notices required or permitted to be given under the terms of this
Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier or telefacsimile, in each case addressed to a party.
The addresses for such communications shall be:
If to the Company:
47071 Bayside Parkway
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<PAGE>
Fremont, CA 94538
Telephone: (510) 226-4000
Telecopy:
Attention: Syed H. Iftikar
With copy to:
Jackson Tufts Cole & Black, L.L.P
650 California Street
San Francisco, CA 94108
Telephone: (415) 433-1950
Telecopy: (415) 392-3494
Attention: Templeton C. Peck, Esq.
If to the Buyer, at the addresses on the signature page.
With copy to:
Genesee Advisers
12007 Sunrise Valley Drive, Suite 460
Reston, VA 22091
Telephone: (703) 476-5898
Telecopy: (703) 476-7720
Attention: Neil T. Chau
And:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telephone: (215) 568-6060
Telecopy: (215) 568-6603
Attention: Stephen T. Burdumy, Esq.
Each party shall provide notice to the other party of any change in address.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or
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<PAGE>
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
e. This Agreement and the Securities Purchase Agreement constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Securities Purchase Agreement supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
g. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
SYQUEST TECHNOLOGY, INC.
By: /s/ Edwin L. Harper
-----------------------------------
Name: Edwin L. Harper
Its: President and CEO
GFL PERFORMANCE FUND LTD.
By: /s/ A.P. de Groot
-----------------------------------
Name: A.P. de Groot
Its: President
Address: Genesee Fund Limited
CITCO Building
Wickhams Cay
P.O. Box 662
Road Town, Tortola
British Virgin Islands
Administrator
Curacao International Trust Co. N.V.
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherland Antilles
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<PAGE>
GFL ADVANTAGE FUND LTD.
By: /s/ A.P. de Groot
----------------------------------
Name: A.P. de Groot
Its: President
Address: Genesee Fund Limited
CITCO Building
Wickhams Cay
P.O. Box 662
Road Town, Tortola
British Virgin Islands
Administrator
Curacao International Trust Co. N.V.
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherland Antilles
GFL PORTFOLIO B
By: /s/ A.P. de Groot
-----------------------------------
Name: A.P. de Groot
Its: President
Address: Genesee Fund Limited
CITCO Building
Wickhams Cay
P.O. Box 662
Road Town, Tortola
British Virgin Islands
Administrator
Curacao International Trust Co. N.V.
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherland Antilles
-16-
EXHIBIT 10.3
ESCROW AGREEMENT
ESCROW AGREEMENT (the "Agreement") dated as of June 7, 1996 among GFL
Performance Fund Ltd., GFL Advantage Fund Ltd., and GFL Portfolio B
(collectively, the "Buyer'), SyQuest Technology, Inc., a Delaware corporation
(the "Company"), and ODTAA, Inc., a Delaware corporation, as Escrow Agent (the
"Escrow Agent").
W I T N E S S E T H
WHEREAS, the Buyer and the Company have entered into a Securities Purchase
Agreement dated as of May 31, 1996 (the "Purchase Agreement") pursuant to which
the Company has agreed to sell, and the Buyer has agreed to purchase, 20,000
shares of the Company's 7% Cumulative Convertible Preferred Stock, Series 1,
$1.00 par value per share (the "Preferred Shares"); and
WHEREAS, the Buyer and the Company have agreed to place into escrow
$15,000,000 of the purchase price for the Preferred Shares to be available for
disbursements to the Company for its business operations and product development
on and after the date hereof; and
WHEREAS, it is a condition of the Company obligation to sell, and the
Buyer's obligation to purchase, the Preferred Shares that this Escrow Agreement
be executed and delivered; and
WHEREAS, the Escrow Agent is willing to act hereunder on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth below, the parties hereto hereby agree as follows:
ARTICLE 1.
ESCROW ACCOUNT
On the Closing Date under, and to the extent required by, the Purchase
Agreement, the Buyer shall cause to be wire transferred to the Escrow Agent
$15,000,000 (the "Escrow"), to be held by the Escrow Agent in a separate account
interest bearing money market account established at First Union National Bank
(the "Bank"), Reston, Virginia Account No. 4310244824 (the "Escrow Account")
subject to the terms and provisions contained herein. Interest shall accrue on
the Escrow Account at the highest rate paid by the Bank on accounts which permit
multiple withdrawals from an account within any particular monthly period. The
Escrow Agent shall provide the Company with all Bank statements, notices and
other writings which it receives from the Bank in connection with the Escrow
Account. The Escrow monies, together with all interest thereon, shall at all
times remain (until disbursed in accordance with
<PAGE>
Article 2) the property of the Company, subject only to the restrictions as
to the use of such monies expressly provided in this Escrow Agreement.
ARTICLE 2.
DISBURSEMENTS
2.1. Disbursements. If at any time, or from time to time during the term of
this Agreement, the Company shall deliver to the Escrow Agent a request in
writing signed by the Company for a disbursement from the Escrow accompanied by
a certification, in the form attached hereto as Exhibit A, executed by the
Company's Chief Executive Officer or Chief Financial Officer stating that the
monies to be disbursed shall be used by the Company solely for the Company's
operating expenses (including payments for goods delivered, services rendered,
and payroll) incurred after the date hereof, the Escrow Agent shall pay the
monies in the Escrow as specified in such request within 48 hours of receipt of
such request by the Escrow Agent by wire transfer as directed in such request.
2.2. Controversies. If any controversy arises between one or more of the
parties hereto, or between any of the parties hereto and any person not a party
hereto, as to whether or not or to whom the Escrow Agent shall deliver the
Escrow or any portion of any thereof or as to any other matter arising out of or
relating to this Escrow Agreement, the Escrow Agent shall not be required to
determine the same and need not make any delivery of the Escrow concerned or any
portion thereof but may retain the same until the rights of the parties to the
dispute shall have been finally determined be agreement or by final judgment of
a court of competent jurisdiction after all appeals have been finally determined
or the time for further appeals has expired without an appeal having been made).
The Escrow Agent shall deliver that portion of the Escrow concerned covered by
such agreement or final order within five days after the Escrow Agent has
received a copy thereof. The Escrow Agent shall be entitled to assume that no
such controversy has arisen unless it has received written notice from the Buyer
or the Company that such controversy has arisen which refers specifically to
this Agreement and identifies the adverse claimants to the controversy.
2.3. No Other Disbursements. No portion of the Escrow monies shall be
disbursed or otherwise transferred except in accordance with Article 2, Section
4.3 and Section 5.1(b) hereof. Without limiting the foregoing, neither Escrow
Agent nor Buyer shall be entitled to any right of offset against the Escrow or
otherwise entitled to receive any portion of the Escrow monies.
ARTICLE 3.
ESCROW AGENT
The acceptance by the Escrow Agent of its duties hereunder is subject to
the following terms and conditions which the parties to this Agreement hereby
agree shall govern and control with respect to the rights, duties, liabilities
and immunities of the Escrow Agent:
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<PAGE>
(a) it shall not be responsible or liable in any manner whatever for
the sufficiency, correctness, genuineness or validity of any cash,
investments or other amounts deposited with or held by it;
(b) it shall be protected in acting upon any written notice,
certificate, instruction, request or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(c) it shall not be liable for any act done hereunder except in the
case of its gross negligence, willful misconduct or bad faith.
(d) it shall not be obligated or permitted to investigate the
correctness or accuracy of any statement made in the certificate presented
pursuant to Section 2 or to require documentation or evidence
substantiating any such certificate; and
(e) it shall have no duties as Escrow Agent except those which are
expressly set forth herein, and in any modification or amendment hereof;
provided, however, that no such modification or amendment hereof shall
affect its duties unless it shall have given its written consent thereto
ARTICLE 4.
TERMINATION
4.1. Termination Events. This Agreement shall terminate on the earlier of
(i) the date on which all monies held in escrow hereunder have been disbursed in
accordance with the terms and conditions of this Agreement, and (ii) any other
date agreed to by the Buyer and the Company. The Escrow Agent shall be entitled
to assume that no claim is pending under Article 2 of this Agreement unless the
Escrow Agent shall have received from the Buyer and the Company written notice
of such claim.
4.2. Termination of Each Escrow Account. The Escrow shall terminate when
the monies therein are paid out in full as provided in Section 2.1.
4.3. Return of Moneys Held Upon Termination Event. In the event of a
termination event described in clause (ii) of Section 4.1, all investments and
moneys then held in each Escrow Account shall be disbursed to the Company.
ARTICLE 5.
MISCELLANEOUS
5.1. (a) Indemnification of Escrow Agent. The Company agrees to indemnify
the Escrow Agent for, and to hold it harmless against, any loss incurred without
gross negligence, willful misconduct or bad faith on its part, arising out of or
in connection with the administration of this Agreement, including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or
-3-
<PAGE>
duties hereunder. This indemnification shall not apply to any direct claim
against the Escrow Agent by the Company alleging a breach of this Agreement.
(b) In the event of any dispute as to the nature of the rights or
obligations of Buyer, Company or Escrow Agent hereunder, the Escrow Agent may at
any time or from time to time interplead, deposit and/or pay all or any part of
the Escrow Funds with or to a court of competent jurisdiction in Reston,
Virginia (including the nearest federal courts thereto) in accordance with the
procedural rules thereof. The Escrow Agent shall give notice of such action to
the Company and the Buyer. Upon such interpleader, deposit or payment, the
Escrow Agent shall be immediately and automatically be relieved and discharged
from all further obligations and responsibilities hereunder, including the
decision to interplead, deposit or pay such funds.
5.2. Amendments. This Agreement may be modified or amended only by a
written instrument executed by each of the parties hereto.
5.3. Notices. All communications required or permitted to be given under
this Agreement to any party hereto shall be sent by first class mail or telecopy
to such party at the address, except in the case of the Escrow Agent, of such
party set forth in the Purchase Agreement and, in the case of the Escrow Agent,
at 12007 Sunrise Valley Drive, Suite 460, Reston, VA 22091
5.4. Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns; provided, however, that the Escrow Agent shall not assign its duties
under this Agreement.
5.5. Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Delaware.
5.6. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SYQUEST TECHNOLOGY, INC.
By: /s/ Edwin L. Harper
-------------------------------
Name: Edwin L. Harper
Title: President & CEO
GFL PERFORMANCE FUND LTD.
By: /s/ A.P. de Groot
-------------------------------
Name: A.P. de Groot
Title: President
GFL ADVANTAGE FUND LTD.
By: /s/ A.P. de Groot
-------------------------------
Name: A.P. de Groot
Title: President
GFL PORTFOLIO B
By:/s/ A.P. de Groot
--------------------------------
Name: A.P. de Groot
Title: President
ODTAA, INC.
By: /s/
-------------------------------
Name:
Title: President
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<PAGE>
EXHIBIT A
CERTIFICATION
Reference is made to the Escrow Agreement dated June 7, 1996 by and among
GFL Performance Fund Ltd., GFL Advantage Fund Ltd., GFL Portfolio B, SyQuest
Technology, Inc. and ODTAA, Inc. (the "Escrow Agreement"). All terms not
otherwise defined herein shall have the meanings attributed to them in the
Escrow Agreement.
The undersigned hereby certifies to the Escrow Agent that the attached
request for disbursement from the Escrow has been duly authorized by the Company
and that the proceeds from the disbursement requested therein by the Company
shall be used by the Company solely for the Company's operating expenses
(including payments for goods delivered, services rendered, and payroll )
incurred after the date of the Escrow Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certification as this
____ day of ___________, 199__.
-------------------------------------------
Name:
Title:
SyQuest Technology, Inc.
Exhibit A-Page 1
