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As filed with the Securities and Exchange Commission on August 29, 1996.
Registration No. 333-7369
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NUMBER 1
TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SYQUEST TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2793941
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
47071 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
(510) 226-4000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
------------------------------
EDWIN L. HARPER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SYQUEST TECHNOLOGY, INC.
47071 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
(510) 226-4000
(Name, address, including zip code and telephone number,
including area code of agent for service)
------------------------------
COPIES TO:
TWILA L. FOSTER
JACKSON TUFTS COLE & BLACK, LLP
650 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94108
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans please check the following
box.|_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement of the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box . |_|
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
- -------------------------- ------------------------ ---------------- ----------------- --------------------
Proposed Maximum Proposed Maximum
Title of Securities Offering Price Aggregate Amount of
to be Registered Amount to be Registered Per Share(1) Offering Price(1) Registration Fee(2)
- -------------------------- ------------------------ ---------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Common Stock $.001 par
value . . . . . . . . . . 2,691,891(3) $7.3099899 $19,677,696.125 $6,785.42
- -------------------------- ------------------------ ---------------- ----------------- --------------------
<FN>
(1) The proposed maximum offering price is calculated in accordance with (i)
Rule 457(a) for 2,291,891 shares included herein and is based upon the
average of the high and low prices of the Common Stock, as reported by the
Nasdaq National Market on June 26, 1996 and Rule 457(i) for the additional
400,000 shares included herein based upon the conversion price for the
convertible debenture pursuant to which those shares may be issued at a
price of $6.9375 per share. The proposed maximum offering price per share
is based upon the proposed maximum aggregate offering price divided by the
amount to be registered.
(2) Of this amount, $5,828.52 was paid on July 2, 1996.
(3) Constitutes (i) 2,291,891 shares issuable upon conversion of the
Registrant's 7% Cumulative Convertible Preferred Stock, Series 1, and (ii)
400,000 shares issuable upon conversion of $2,775,000 of Registrant's 6%
Convertible Subordinated Debenture, as such numbers may be adjusted in
accordance with Rule 416.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
SYQUEST TECHNOLOGY, INC.
2,691,891 Shares
Common Stock
(par value $.001 per share)
----------------
This Prospectus relates to 2,691,891 shares of Common Stock, par value
$.001 (the "Common Stock"), of SyQuest Technology, Inc. ("SyQuest" or the
"Company") which are being offered and sold by certain stockholders of the
Company (the "Selling Stockholders"), consisting of (i) up to 2,291,891 shares
(as such number may be adjusted in the event of stock splits or stock dividends)
issuable upon conversion of the 20,000 shares of the Company's 7% Cumulative
Convertible Preferred Stock, Series 1, par value $.001 (the "Preferred Stock"),
which are presently outstanding and (ii) up to 400,000 shares (as such number
may be adjusted in the event of stock splits or stock dividends) issuable upon
conversion of up to $2,775,000 of the Company's 6% Convertible Subordinated
Debenture (the "Debenture") which is presently outstanding. The Preferred Stock
has a conversion price which is the lesser of (i) seventy-seven percent (77%) of
the average market price for the Common Stock for the five trading days prior to
conversion or (ii) $11.00, subject to adjustment. (See "Changes - Preferred
Stock" for a further description of the conversion price for the Preferred
Stock.) The Debenture has a conversion price of $6.9375 per share of Common
Stock. The Selling Stockholders, directly or through agents, broker-dealers or
underwriters, may sell the Common Stock offered hereby from time to time on
terms to be determined at the time of sale, in transactions on the Nasdaq
National Market or in privately negotiated transactions. The Selling
Stockholders and any agents, broker-dealers or underwriters that participate in
the distribution of the Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended (the "Act"), and any
commission received by them and any profit on the resale of the Common Stock
purchased by them may be deemed to be underwriting discounts or commissions
under the Act. See "Selling Stockholders" and "Plan of Distribution." The
Company will not receive any proceeds from the sale of shares by the Selling
Stockholders. See "Plan of Distribution."
The Common Stock of the Company is quoted on the Nasdaq National Market
under the symbol "SYQT." The last reported sales price of the Company's Common
Stock on the Nasdaq National Market on August 23, 1996 was $6 3/8 per share.
-----------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE
A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
AT PAGE 6 OF THIS PROSPECTUS.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
No underwriting commissions or discounts will be paid by the Company in
connection with this offering. Estimated expenses payable by the Company in
connection with this offering are approximately $68,000. See "Plan of
Distribution." The aggregate proceeds to the Selling Stockholders from the
Common Stock will be the purchase price of the Common Stock sold less the
aggregate agents' commissions and underwriters' discounts, if any.
The Company has agreed to indemnify the Selling Stockholders and certain
other persons against certain liabilities, including liabilities under the Act.
The date of this Prospectus is August __, 1996
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY
STATE OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH STATE OR JURISDICTION.
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information may be inspected and copied at
the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Common Stock of the Company is quoted on the Nasdaq
National Market. Reports and other information concerning the Company may be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006.
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer or solicitation by anyone in any state
in which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation. The delivery of this
Prospectus at any time does not imply that information herein is correct as of
any time subsequent to the date hereof.
ADDITIONAL INFORMATION
A registration statement on Form S-3 with respect to the Common Stock
offered hereby (the "Registration Statement") has been filed with the Commission
under the Act. This Prospectus does not contain all of the information contained
in such Registration Statement and the exhibits and schedules thereto, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus
regarding the contents of any contract or any other document are not necessarily
complete and, in each instance, reference is hereby made to the copy of such
contract or document filed as an exhibit to the Registration Statement. The
Registration Statement, including exhibits thereto, may be inspected without
charge at the Commission's principal office in Washington, D.C., and copies of
all or any part thereof may be obtained from the Public Reference Section,
Securities and Exchange Commission, Washington, D.C., 20549, upon payment of the
prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed or to be filed with the Commission under
the Exchange Act are hereby incorporated by reference into this Prospectus:
(i) The Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1995, as amended by Form 10-K/A, including
all material incorporated by reference therein.
(ii) The Company's Current Report on Form 8-K dated October 27, 1995.
(iii) The Company's Current Report on Form 8-K dated November 21,
1995.
(iv) The Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1995.
(v) The Company's Current Report on Form 8-K dated January 23, 1996.
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<PAGE>
(vi) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996.
(vii) The Company's Current Report on Form 8-K dated June 14, 1996.
(viii) The Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996.
(ix) The Company's Registration Statement on Form 8-A registering the
Common Stock under Section 12(g) of the Exchange Act.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14, or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in this Prospectus or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently-filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
incorporated by reference herein (not including exhibits to such documents
unless such exhibits are specifically incorporated by reference herein or into
such documents). Such request may be directed to SyQuest Technology, Inc., 47071
Bayside Parkway, Fremont, California 94538, telephone (510) 226-4000, Attn: John
W. Luhtala, Senior Vice President, Finance and Chief Financial Officer.
-------------------
"SyQuest" is a registered trademark of the Company, "EZ135," and "EZ
Flyer" and "SyJet" are trademarks of the Company. This Prospectus also includes
trademarks of companies other than SyQuest Technology, Inc.
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<PAGE>
THE COMPANY
The Company designs, develops, manufactures, and markets removable hard
disk cartridges, the associated disk drives and free-standing storage systems.
The Company's products combine the advantages of fixed hard disk drives with the
benefits of removability, which include unlimited incremental expansion of data
storage capacity, transfer and sharing of data and software among personal
computers, and backup, archival storage and physical security of data. The
Company's principal products have been 5.25 inch and 3.5 inch cartridges, drives
and storage systems used with personal computers and work stations manufactured
and sold by manufacturers of such products. These products are typically
purchased by distributors, mail order firms, national retail chains, value added
resellers, original equipment manufacturers ("OEMs") for integration into their
equipment, government contractors and others for resale to the end users.
The Company's principal executive offices are located at 47071 Bayside
Parkway, Fremont, California 94538, telephone (510) 226-4000.
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<PAGE>
RISK FACTORS
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. THE FOLLOWING
RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE OTHER INFORMATION
IN THIS PROSPECTUS BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY.
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE DISCUSSION IN THIS
PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, SUCH AS STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES,
EXPECTATIONS AND INTENTIONS. THE CAUTIONARY STATEMENTS MADE IN THIS PROSPECTUS
SHOULD BE READ AS BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS
WHEREVER THEY APPEAR IN THIS PROSPECTUS. THE COMPANY'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE DISCUSSED HERE. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW, AS WELL AS THOSE
DISCUSSED ELSEWHERE HEREIN OR IN THE DOCUMENTS INCORPORATED BY REFERENCE INTO
THIS PROSPECTUS.
Need for Additional Financing; Future Capital Needs.
The Company has incurred losses in its most recent fiscal year ended
September 30, 1995 and its fiscal quarters ended December 31, 1995, March 31,
1996 and June 30, 1996. The Company announced in its Form 10-Q for the quarter
ended June 30, 1996 that it did not expect to be profitable for the quarter
ended September 30, 1996.
The Company is presently in need of additional cash to meet its working
capital needs. On June 14, 1996 the Company closed the sale of 20,000 shares of
its Preferred Stock for $20 million in gross proceeds. On July 15, 1996 the
Company issued the Debenture to one of its suppliers, of which a portion is
convertible into Common Stock of the Company. The Company is presently
negotiating other possible equity investments into the Company and the Company
continues to work with its suppliers to negotiate satisfactory repayment
arrangements but there can be no assurance that any of such negotiations will be
successful.
As of June 30, 1996, the Company had $6.8 million in unrestricted cash
and cash equivalents and $10.78 million in restricted cash held in an escrow
account. During the nine months ended June 30, 1996, the Company used $32.7
million in operating activities and an additional $13.3 million in the purchase
of equipment and leasehold improvements. The Company believes that, based on a
number of events occurring, the current sources of financing available to the
Company will be sufficient to fund only the Company's operations through the end
of its fiscal year; however, the Company will need additional funds for new
product introduction, to increase production capacity and to pay suppliers
through the end of the Company's current fiscal year. The Company will require
additional funds during its first quarter in the next fiscal year or thereafter
to finance its operations. The precise amount and timing of the Company's
funding needs cannot be determined at this time, and will depend upon a number
of factors, including the market demand for the Company's products, the progress
of the Company's product development efforts, the availability of critical
components, the Company's strategic alliances, if any, for the manufacture of
its products, and the Company's inventory management. There can be no assurance
that funds required by the Company in the future will be available on terms
satisfactory to the Company. The inability to obtain needed funding on
satisfactory terms would have a material adverse effect on the Company's
business and financial results.
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<PAGE>
Restructuring.
In the second quarter of fiscal 1996 the Company announced a
restructuring plan to relocate its manufacturing capabilities from Singapore to
Penang, Malaysia. The Company accrued $1.6 million for write-off of capital
assets as well as $2.0 million for severance compensation and other benefits for
the affected employees and for the closure of the Singapore facilities. The
Company completed this restructuring plan during its third quarter. In the
quarter ended June 30, 1996 the Company recorded a $1.9 million charge for
restructuring costs associated with the consolidation and closure of several of
its administrative support locations. The charge represented costs associated
with the write-off of fixed assets as well as severance compensation and other
benefits for the approximately 30 people affected by the restructuring. There
can be no assurance that the goals of the restructuring will be accomplished.
Uncertainty of Market Acceptance of Products.
The Company's future success will depend upon market acceptance of its
new products and upon the Company's ability to establish its new products as
industry standards. The Company introduced its EZ Flyer 230 in June 1996. The EZ
Flyer 230 is a newly designed product for the Company with 230 megabyte capacity
which has only been shipped in low volume, and the Company can not yet
accurately assess the market acceptance the EZ Flyer 230 will achieve due to
uncertainties regarding the market for the EZ Flyer 230 and the competition it
will face. The Company is still continuing to refine the EZ Flyer 230 and there
can be no assurance that the Company will not experience problems or delays as
it attempts to manufacture and ship the EZ Flyer 230 in higher volumes.
On August 7, 1996 the Company announced that it had commenced taking
orders for its new 3 1/2 inch, 1.3 gigabyte SyJet system products which the
Company intends to start limited shipping in September. Though the Company
intends to ship product in September and begin volume production there can be no
assurance that the Company will be able to introduce this new product
successfully and in a timely manner or that the product will be accepted in the
marketplace.
The SyQuest technology is different from the most widely used data
storage devices today (hard disk drives, floppy disk drives and CD-ROM drives).
No new type of read/writable data storage device has achieved widespread market
acceptance in recent years and there can be no assurance that the Company's new
products will achieve widespread market acceptance. The extent to which the
Company's new products achieve a significant market presence will depend upon a
number of factors, including the price, performance and other characteristics of
competing solutions introduced by other vendors, the timing of the introduction
of such products, and the success of the Company in establishing OEM
arrangements for the Company's new products. "See Risk Factors - Competition"
and "Shortage of Critical Components; Absence of Supply Contracts; Dependence on
Suppliers." There can be no assurance that the Company will be successful in
satisfying any of these factors. In addition, the two formats of removable-media
storage which have gained widespread market acceptance to date--floppy disk
drives and CD-ROM drives--are both used by software manufacturers as a means of
software distribution. The Company's products are not currently used for
software distribution. The failure of the Company's new products to achieve
widespread commercial acceptance would have a material adverse effect on the
Company's business.
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<PAGE>
Introduction of EZ135 and EZ Flyer 230.
The Company's EZ135 products accounted for 16% of the Company's sales in
the last quarter of fiscal 1995, 42% in the first quarter of fiscal 1996, 46% in
the second quarter of fiscal 1996 and 45% in the third quarter of fiscal 1996.
The Company expects that sales of the EZ135 products will account for a less
significant percentage of its sales for the balance of the 1996 fiscal year. The
Company's EZ135 products commenced commercial shipment in September 1995.
Although sales of EZ135 products contributed significantly to the Company's
revenue during the last quarter of the 1995 fiscal year and the first half of
fiscal year 1996, the Company lost money on the EZ135 due to design-related
issues impacting the cost of manufacturing the product (which could not be
corrected as the Company originally anticipated), and due to competitive
pressures requiring the price to be lower than cost. The Company presently
expects to cease selling the EZ135 during the fourth quarter of calendar 1996.
The Company introduced its EZ Flyer 230 on June 3, 1996. Commercial
shipments of the EZ Flyer 230 commenced on June 1, 1996. There can be no
assurance that the EZ Flyer 230 will be accepted in the marketplace or achieve
significant sales (see "Risk Factors-Uncertainty of Market Acceptance of
Products") or that the Company will be able to sell the EZ230 at a price in
excess of the cost of manufacturing the EZ230.
Risk of Losing Nasdaq Listing.
As of June 30, 1996 the Company did not meet the continued listing
requirements for the Nasdaq National Market. The Company did not meet the net
tangible asset requirement or the capital and surplus requirement. The Company
has been notified by Nasdaq that it will be delisted but is appealing this
decision. The Company has been in discussions with the NASD concerning the steps
it is taking to attempt to comply with the Nasdaq National Market and The Nasdaq
Stock Market listing requirements. Should the Company not be successful in its
discussions or in its appeal, it will be delisted from The Nasdaq Stock Market.
Trading, if any, in the listed securities would thereafter be conducted on the
Electronic Bulletin Board or in what is commonly referred to as the "pink
sheets." As a result, an investor may find it difficult to dispose of, or to
obtain accurate quotations as to the price of, the Company's securities, and
this would affect the Company's ability to raise additional capital.
Shortages of Critical Components; Absence of Supply Contracts;
Dependence on Suppliers.
Many components incorporated in, or used in the manufacture of, the
Company's products are currently only available from sole source suppliers.
Moreover, the Company has experienced difficulty in the past, and expects to
continue to experience difficulty in the future, in obtaining a sufficient
supply of many key components (due to the shortage of cash to pay suppliers and
other reasons). During the fourth quarter of the 1995 fiscal year and the first
quarter of the 1996 fiscal year, the Company experienced vendor-related
component supply and quality problems which limited the Company's ability to
fill its open customer backlog on the EZ135. During the 1996 fiscal year, the
Company has experienced disruption in its supply of certain components (due to
the shortage of cash to pay suppliers). In addition, the Company has been
advised by certain sole source suppliers, including the manufacturers of
critical components, that they will not supply any additional components, which
in most circumstances will be resolved once SyQuest reduces its payables to such
suppliers to below 90 days or negotiates appropriate terms to defer past due
payments to such suppliers. Component shortages due to limited cash availability
affected the Company's ability to produce EZ Flyer 230 products and limited the
Company's ability to implement certain cost reduction and productivity
improvement plans, and the Company expects that the shortage of components may
limit production of its products for the foreseeable future.
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<PAGE>
The Company purchases all of its sole and limited source components and
equipment pursuant to purchase orders placed from time to time and has no
guaranteed supply arrangements. The inability to obtain sufficient components
and equipment, to obtain or develop alternative sources of supply at competitive
prices and quality, or to avoid manufacturing delays could prevent the Company
from producing sufficient quantities of its products to satisfy market demand,
result in delays in product shipments, increase the Company's material or
manufacturing costs, or cause an imbalance in the inventory level of certain
components. Moreover, difficulties in obtaining sufficient components may cause
the Company to modify the design of its products to use a more readily available
component, and such design modifications may result in product performance
problems. Any or all of these problems could in turn result in the loss of
customers, provide an opportunity for competing products to achieve market
acceptance and otherwise adversely effect the Company's business and financial
results.
Competition.
The data storage industry is highly competitive. The Company believes
that its products compete most directly with other removable-media data storage
devices, such as disk drives offered by Iomega Corporation and magneto optical
disk drives. Although the Company believes that its products offer performance
and certain other advantages over most other removable-media storage devices
available today, the Company believes that the price/performance levels of
existing removable-media products will improve and that other companies will
introduce new removable-media storage devices. Accordingly, the Company believes
its products will face increasingly intense competition. In particular, a
consortium comprised of Compaq Computer, 3M, Insite and Matsushita-Kotobuki
Electronics Industries Ltd. has announced and is selling the LS120, a
high-capacity floptical drive that is compatible with conventional floppy disks.
Each of Mitsubishi Electric Corp. and Mitsumi has also announced that it plans
to manufacture a high capacity, floppy drive that is downward compatible with
existing floppy diskettes. If successfully marketed, these drives would compete
with the Company's EZ products. The Iomega Zip drive, a high capacity floppy
disk drive, is a competitor to the SyQuest EZ 135 and EZ Flyer 230. The JAZ
drive is Iomega's first removable hard drive and competes directly with
SyQuest's products. In addition, to the extent that SyQuest drives are used for
incremental primary storage capacity, they also compete with conventional hard
disk drives. Also, the leading suppliers of conventional hard disk drives could
at any time determine to enter the removable-media storage market.
As new and competing removable-media storage solutions are introduced,
it is possible that the first such solution to achieve a significant market
presence will emerge as an industry standard and achieve a dominant market
position. If such is the case, there can be no assurance that the Company's
products would achieve significant market acceptance, particularly given the
Company's size and market position vis-a-vis other competitors.
Technological Change and New Products.
The Company operates in an industry that is subject to both rapid
technological change and rapid change in consumer demands. For example, over the
last 10 years the typical hard disk drive included in a new personal computer
has increased in capacity from approximately 40 megabytes (MBs) to 1 gigabyte
(GB) or more, while the price of a hard disk drive has remained constant or even
decreased. The Company's future success will depend in significant part on its
ability to continually develop and introduce, in a timely manner, new removable
disk drives products with improved features, and to develop and manufacture
those new products within a cost structure that enables the Company to sell such
products at lower prices than those of comparable products today. In addition
the Company is dependent upon technological developments from other vendors for
the components in its products (i.e., heads, semiconductor devices and media).
The Company has recently introduced its EZ Flyer 230 which
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<PAGE>
is targeted for sale to the Company's traditional customer base in the desktop
publishing, prepress and service bureau segments. The SyJet 1.3 GB removable
cartridge hard drive is targeted towards computer, audio and video OEMs, as well
as retail and the Company's traditional customer base. The Company believes that
this product will compete with the Iomega Jaz. There can be no assurance that
the Company will be successful in developing, manufacturing and marketing new
and enhanced products (including the EZ Flyer 230 and the SyJet 1.3 GB) that
meet both the performance and price demands of the data storage market.
Dependence on Strategic Marketing Alliance.
The Company's business strategy depends in significant part on
establishing successful strategic alliances with a variety of key companies
within the computer, audio and video industries. Among the types of alliances
contemplated by the Company's business strategy are: OEM arrangements with
personal computer, audio and video manufacturers that will include SyQuest
products as a standard feature or factory-installed option in their personal
computers; reseller arrangements (including private and co-branding
arrangements) with major vendors of computer products covering the resale of the
Company's products by such companies; and licensing arrangements under which the
Company grants certain computer manufacturers on a royalty-bearing basis the
right to manufacture and sell its drives or media. Moreover, the Company
believes that establishing strategic alliances (especially OEM arrangements) is
critical to the success of its business, and there can be no assurance that the
Company will be successful in doing so. In addition, the Company's strategic
alliances are generally not covered by binding contracts and may be subject to
unilateral termination by the Company's strategic partners, and also may require
the Company to share control over its manufacturing and marketing programs and
technologies.
Reliance on Manufacturing Relationships.
The Company plans to use independent parties to manufacture for the
Company, a portion of the Company's components. The Company currently has
manufacturing relationships with Nomai for cartridges and others for manufacture
and subassembly of components, but the Company has filed a lawsuit against Nomai
in France alleging copyright and patent infringement and is in arbitration with
Nomai in the United States regarding royalty payments owed by Nomai under a
previous arrangement. There can be no assurance that the Company will be
successful in maintaining its relationships with Nomai or in establishing
additional relationships in the future, or in managing such manufacturing
relationships. The Company's manufacturing relationships are generally not
covered by binding contracts and may be subject to unilateral termination by the
Company's manufacturing partner. Moreover, there can be no assurance that
third-party manufacturers will be able to meet the Company's quantity or quality
requirements for manufactured products.
Quarterly Fluctuations in Operating Results.
The Company has experienced and in the future may continue to experience
significant fluctuations in its quarterly operating results. Factors such as
price reductions, the introduction and market acceptance of new products,
product returns, the availability of critical components and the lower gross
margins associated with the Company's newly introduced products could contribute
to this quarterly variability. Moreover, the Company's expense levels are based
in part on expectations of future sales levels, and a shortfall in expected
sales could therefore result in a disproportionate decrease in the Company's
results of operations. As a result of these and other factors, it is likely that
the Company's operating results in some future period will be below the
expectations of investors, which would be likely to result in a significant
reduction in the market price of the Common Stock.
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Dependence on Proprietary Technology.
The Company's success is heavily dependent upon the establishment and
maintenance of proprietary technologies. The Company relies on a combination of
patent, copyright and trade secret law to protect the technology in its drives
and cartridges. Although the Company has filed over 136 U.S. and foreign patent
applications relating to its drives and hard disk cartridges, more than 64
patents have been issued but there can be no assurance that additional patents
will issue in the future. There can be no assurance that the steps taken by the
Company to protect its technology will be adequate to prevent misappropriation
of its technology by third parties, or that third parties will not be able to
independently develop similar technology. In particular, the Company's sales
have been and will continue to be materially adversely affected when parties
develop cartridges compatible with the Company's disk drives. Moreover, because
the Company's cartridges have historically had higher gross margins than the
relevant drives, the Company's results of operations have been and will continue
to be disproportionately affected by any such sales shortfall.
From time to time the Company receives notices alleging that the
Company's products infringe third party proprietary rights. A third party has
recently notified the Company that it believes the Company infringes on six of
its U.S. patents. It is the Company's belief that the claims are without merit
or that the infringement claims relate to component parts purchased from
vendors. The Company also believes that in the event the third party prevails on
its claims, the Company will be indemnified by its vendor for any liability
arising from the alleged infringements and that this matter will not have a
material effect upon its financial condition or results of operations.
Patent and similar litigation frequently is complex and expensive and
its outcome can be difficult to predict. There can be no assurance that the
Company will prevail in any proceedings that may be commenced against the
Company. In addition, certain technology used in the Company's products is
licensed from third parties. The termination of any such license arrangements
could have a material adverse effect on the Company's business and financial
results.
International Operations.
International sales generated a significant portion of the Company's
revenues in fiscal year 1995 and to date in fiscal year 1996 and the Company
expects international sales to continue to comprise a significant percentage of
its total sales in the future. The international portion of the Company's
business is subject to a number of inherent risks, including difficulties in
building and managing foreign operations and foreign reseller networks, the
differing product needs of foreign customers, fluctuations in the value of
foreign currencies, import-export duties and quotas, and unexpected regulatory,
economic or political changes in foreign markets. Moreover, the Company relies
on foreign companies for the supply of certain critical components and is
increasingly relying on foreign companies for the manufacture of certain of its
products and these relationships may be subject to some of the same risks
affecting its international sales. There can be no assurance that these factors
will not adversely affect the Company's international sales or its overall
financial performance.
The Company's international sales are predominantly denominated in U.S.
dollars. Accordingly, a significant increase in the valuation of the U.S. dollar
and the resultant increase in the price of the Company's foreign currency priced
products could have a negative effect on the Company's sales.
Management Changes; Dependence On Key Personnel.
The Chairman of the Board, the President and Chief Executive Officer,
the Chief Financial Officer, the Executive Vice President-Sales, the Chief
Technical Officer and the Executive Vice President-Operations, have all just
recently joined the Company. Syed Iftikar, the
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Company's former Chairman of the Board, President and Chief Executive Officer,
ceased to be an officer of the Company on June 13, 1996 and resigned as a
director on August 15, 1996.
The Company's success will depend in large part upon the capabilities of
the new management team. The inability of such individuals to become familiar
with the wide spread operations of the Company and its subsidiaries and turn
around the financial situation of the Company could have a material adverse
effect on the Company. The Company's success will also depend in significant
part upon its ability to attract and retain highly-skilled management and other
personnel. Competition for such personnel in the computer industry is intense,
and the Company has from time to time experienced difficulty in finding
sufficient numbers of qualified professional and production personnel. The
Company has had a number of other executive officers leave the Company over the
last six months. There can be no assurance that the Company will be successful
in attracting and retaining the quantity and quality of personnel that it needs.
Supplier Workouts.
As a result of the Company's current cash position, the Company is in the
process of working out certain repayment terms with certain of its suppliers.
The Company and its subsidiaries are negotiating agreements with suppliers
pursuant to which shares of Common Stock could be issued to the suppliers (which
shares will be required to be registered for resale). On July 15, 1996 the
Company issued a 6% Convertible Subordinated Debenture to one of its suppliers
pursuant to which up to 400,000 shares of Common Stock could be issued to such
supplier at a conversion price of $6.9375 per share. See "Plan of Distribution."
SyQuest has also been negotiating with other suppliers to extend the
payment dates on the amounts owing to the suppliers. If a supplier does not
agree to extend the date of payment the supplier may bring legal action to
collect on the receivable. Certain suppliers may also choose to not continue to
do business with SyQuest due to the delays in receiving payment in the amounts
due.
Preferred Stock Financing.
On June 14, 1996, the Company issued 20,000 shares of its Preferred
Stock for aggregate net proceeds (after payment of finders' fees but before
payment of legal expenses and other costs incurred in the placement) to the
Company of approximately $19,000,000. The Preferred Stock bears cumulative
dividends at the rate of 7% per year and is convertible into SyQuest Common
Stock at a conversion price equal to the lesser of (i) seventy-seven percent
(77%) of the average market price of SyQuest Common Stock for the five
consecutive trading days ending one day prior to the date of the Conversion
Notice or (ii) $11.00. The conversion prices will be adjusted if the
Registration Statement registering the underlying Common Stock is not declared
effective by the Commission by September 3, 1996 based on a three percentage
point reduction in the adjusting conversion percentage and a three percent
reduction in the fixed conversion price for each month thereafter for which the
Registration Statement is not declared effective. The conversion price as of
August 26, 1996 was $4.754596 per share. The conversion price for the Preferred
Stock is also similarly adjusted for each month that the Registration Statement
is not current or during which a stop order has been issued.
The Company must redeem the Preferred Stock by May 31, 1999 with cash
(or at the Company's option with stock subject to limits on the number of shares
issuable in lieu of cash). The Company must redeem the Preferred Stock at 130%
of its original sales price if the Company's Common Stock ceases to be a Nasdaq
National Market security or ceases to be reported on Nasdaq SmallCap or the
Nasdaq Electronic Bulletin Board. The Company has optional redemption rights
under certain circumstances with payment of certain premiums.
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The Company may not issue more than 2,291,891 shares of Common Stock
upon conversion of the Preferred unless the Company's stockholders approve the
issuance of additional shares. In the event the Preferred stockholders desire to
convert the Preferred Stock into Common Stock and the share limit precludes a
full conversion, the Company is required to redeem the remaining Preferred at
130% of the original Preferred sales price unless more than $10,000,000 in
Preferred Stock is to be redeemed as a result of this limit in which event the
redemption price is 110% of the sales price. The Company has scheduled a Special
Meeting of Stockholders on September 26, 1996 to obtain stockholder approval of
the issuance of more than 2,291,891 shares of Common Stock to the holders of
Preferred Stock. There can be no assurances that such approval will be obtained.
There can be no assurances that the Company will not be required to
issue significant amounts of its Common Stock upon conversion of the Preferred
Stock or be required to redeem shares of stock for which it has limited cash to
accomplish. The conversion price as of August 26, 1996 would, but for the
limitation, require the issuance of 4,206,456 shares of Common Stock.
See "Changes - Preferred Stock" for further information concerning the
Company's Preferred Stock.
Volatility of Stock Price; Shares Available for Future Sale;
Absence of Dividends.
The market prices for high technology companies including the securities
of SyQuest, have been volatile. Announcements of technological innovations or
new products by SyQuest or its competitors, as well as period-to-period
fluctuations in revenues and financial results, may have a significant impact on
the market price of the Company's Common Stock. The Company has not paid any
cash dividends since its inception, and it does not anticipate paying cash
dividends in the foreseeable future.
The Company's Common Stock has recently experienced substantial levels
of short selling, which has also affected the volatility of the market price of
the Company's Common Stock. Factors such as announcements of new products by the
Company or its competitors, variations in the Company's quarterly operating
results, continued high levels of short selling of the Common Stock, or general
economic or stock market conditions unrelated to the Company's operating
performance may have a significant impact on the market price of the Common
Stock. In addition, the Company believes that electronic bulletin board postings
regarding the Company on America Online and other similar services, certain of
which have in the past contained false information about Company developments,
have in the past and may in the future contribute to volatility in the market
price of the Common Stock. Any information concerning the Company, including
without limitation projections of future operating results, appearing in such
on-line bulletin boards or otherwise emanating from a source other than the
Company should not be relied upon as having been supplied or endorsed by the
Company.
As of June 30, 1996, the Company had approximately 11,509,508 shares of
Common Stock outstanding. As of August 26, 1996, the Preferred Stock was
convertible into 4,206,456 shares of Common Stock, subject to adjustment based
upon adjustments in the conversion price (and limited to 2,291,891 shares as a
result of the terms of the Preferred Stock currently in effect). (See "Risk
Factors - Preferred Stock Financing" above.) As of July 15, 1996 the Company had
issued the Debenture pursuant to which the Company may issue up to an additional
400,000 shares of Common Stock upon the conversion of up to $2,775,000 of the
Debenture. As of June 30, 1996 the Company also has options outstanding to
purchase approximately 3,187,244 shares of Common Stock. Pursuant to this
Registration Statement, the Company is registering for resale 2,691,891 shares
issuable upon conversion of the Preferred Stock and the Debenture. These shares
may be sold into the public securities markets after this Registration Statement
becomes effective. Future sales of Common Stock in the public securities markets
may cause substantial fluctuations (including substantial price reductions) in
the price of the Company's Common Stock over short time
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periods. Additionally, the price of the Company's Common Stock will be sensitive
to the performance and prospects of the Company and other factors.
Certain Marketing and Sales Risks.
As is common practice in its industry, the Company's arrangements with
its customers generally allow customers, in the event of a price decrease,
credit equal to the difference between the price originally paid and the new
decreased price on units in the customers' inventories on the date of the price
decrease. When a price decrease is anticipated, the Company establishes reserves
for amounts estimated to be reimbursed to qualifying customers. There can be no
assurance that these reserves will be sufficient or that any future returns or
price protection charges will not have a material adverse effect on the
Company's results of operations, particularly because future results will be
heavily dependent on recently introduced products for which the Company has
little or no operating history. In addition, customers generally have the right
to return excess inventory within specified time periods. Any build up of
inventory at the Company or in its distribution channels that does not sell
through to end users could have a material adverse effect on the Company's
operating results and financial condition.
As is typical in the industry, from time to time the Company experiences
product defects and product returns. There can be no assurance that the Company
will not experience quality or reliability problems in the future which have an
adverse effect on the Company's business or financial results.
The Company markets its products primarily through computer product
distributors and retailers. Distribution channels for personal computers and
accessories have been characterized by rapid change, including consolidation and
financial difficulties of distributors. The loss or ineffectiveness of any of
the Company's major distributors could have a material adverse effect on the
Company's results of operations. In addition, since the Company grants credit to
its customers, a substantial portion of outstanding accounts receivable are due
from computer product distributors and certain large retailers. At June 30,
1996, the customers with the three highest outstanding accounts receivable
balances totaled $5.48 million, or 18.54%, of gross accounts receivable. If any
one or a group of these customers' receivable balances should be deemed
uncollectible, it would have a material adverse effect on the Company's results
of operations and financial condition.
Class Action and Shareholder Derivative Lawsuits.
The Company has been named as a defendant in three putative class action
lawsuits. Two of the actions, Ravens, et al. v. Iftikar, et al. (filed April 2,
1996) and Bellezza, et al. v. Iftikar, et al. (filed May 24, 1996) have been
brought in the United States District Court for the Northern District of
California and have been assigned to the Honorable Vaughn Walker (collectively,
the "Federal Lawsuit"). Certain current and former officers and
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directors also have been named as defendants in the Federal Lawsuit. Plaintiffs
have petitioned the Court to consolidate the foregoing complaints into one
consolidated action. That request, as well as other procedural matters which
arose during a July 18,1996 case management conference, is under consideration.
The plaintiffs in the Federal Lawsuit purport to represent a class of all
persons who purchased the Company's Common Stock between October 21,1994 and
February 1, 1996. The Federal Lawsuit alleges that the defendants violated the
federal securities laws through material misrepresentations and omissions. The
purported class action entitled Gary S. Kaufman v. SyQuest Technology Inc., et
al. was filed on March 25, 1996 in the Superior Court of the State of California
for the County of Alameda (the "State Lawsuit"). Certain current and former
executive officers and directors of the Company are also named as defendants in
the lawsuit. The plaintiffs in the State Lawsuit purport to represent a class of
all persons who purchased the Company's Common Stock between May 2, 1995 and
February 2, 1996. The complaint in the State Lawsuit alleges that defendants
violated various California laws and statutes through material
misrepresentations and omissions.
On May 14, 1996, the Company was served with a shareholder's derivative
action filed in Alameda County, California, Superior Court entitled John Nitti,
et al. v. Syed Iftikar, et al. On July 22,1996 plaintiffs filed an amended
complaint. The action seeks to recover unspecified damages and punitive damages
on behalf of the Company from current and former officers and directors of the
Company for alleged breach of fiduciary duty, unjust enrichment and waste of
corporate assets. The Company is a nominal defendant in the action. The
complaint alleges that the officers and directors issued false and misleading
information and sold shares of the Company's stock at artificially inflated
prices. The allegations are essentially the same as those in the putative class
actions.
While the Company intends to defend the lawsuits, there can be no
assurance as to what financial impact the pending litigation may have on the
Company.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
by the Selling Stockholders in the offering. However, when shares of Common
Stock are issued upon conversion of the Debenture, certain of the Company's
indebtedness will be canceled. See "Selling Stockholders."
CHANGES
Preferred Stock.
On June 14, 1996 the Company issued 20,000 shares of its Preferred Stock
at a price of $1,000 per share. 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 Company'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).
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Conversion. Convertible into Common Stock commencing August 28, 1996 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, as such
amount may be adjusted. The Preferred Stock cannot be converted if the
converting holder and its respective affiliates would beneficially own more than
4.9% of the 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 $11.00 per share amount decreases and
the 23% discount increases (and therefore the 77% factor decreases) at the rate
of three percentage points (or three percent with respect to the fixed
conversion price) per month of delay.
If the Common Stock is trading below $5 when the Preferred Stock
converts, the Company can redeem that Preferred Stock 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.
The Company can force conversion after one year after the registration
statement becomes effective, so long as the Common Stock is still listed a
Nasdaq National Market security or is reported on the Nasdaq SmallCap Market or
Electronic Bulletin Board, and subject to the 4.9% limit on the Preferred
holders beneficially owning shares of the Common.
Merger. The Preferred Stock is entitled to receive its share of the
merger price if the Company merges, on an as converted basis. The Company must
give 75 days notice of merger or reclassification.
Nonvoting. The Preferred Stock is nonvoting, except as required by
operation of law.
Redemption. The Company must redeem (at 100% of original purchase price
plus all accrued but unpaid dividends) all Preferred Stock remaining outstanding
on May 31, 1999 with cash or (at Company'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. The Company must redeem the
Preferred Stock at 130% of original price if the Common Stock is not listed a
Nasdaq National Market security or is not reported on the Nasdaq SmallCap Market
or Electronic Bulletin Board (or New York Stock Exchange or the American Stock
Exchange). The Company 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. The Company may redeem
any or all of the Preferred Stock under certain limited circumstances if the
market price for the last five trading days is above $14 for that market price
multiplied by the number of the Common shares into which the Preferred Stock
being redeemed is then convertible. For example, to redeem $1,000,000 worth of
Preferred Stock when the market price is at $20, the Company 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 circumstances may more than 2,291,891 shares of Common Stock be
issued on conversion of the Preferred Stock or for dividends, unless the
Company'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 Stock holders attempt a conversion which would
exceed the limit, the Company must redeem all Preferred Stock remaining at 130%
of original purchase price, except it is 110% to the extent more than half of
all of the Preferred Stock ($10 million worth) is redeemed under this provision.
The Company has scheduled a Special Meeting of Stockholders for September 26,
1996 to solicit approval to issue more than such limit upon conversion of the
Preferred Stock.
Liquidation Preference. In liquidation, the Preferred Stock receives
$1,000 per share of Preferred Stock, plus dividends, before the holders of
Common Stock receive any cash or assets on liquidation.
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Other Preferred. The Company may issue preferred stock to others with
equal or inferior liquidation preference.
Vote to Amend Preferred. Two-thirds of the outstanding shares of
Preferred Stock must approve any amendment.
EZ135 Price Reduction.
On June 13, 1996 the Company reduced the suggested retail price on its
EZ135 drive to $119.95 from a suggested retail price of $199 for the SCSI
configuration and $229 for the Parallel Port configuration. The Company incurred
certain costs as a result of this pricing action, which were reflected in the
Company's results for the quarter ended June 30, 1996.
Debenture Issuance
On July 15, 1996 the Company issued the Debenture to one of its
suppliers in the aggregate amount $7,678,578.65 (subject to adjustment in
amount), of which $2,775,000 in the principal amount is convertible into Common
Stock at a price of $6.9375 per share, for a maximum of 400,000 shares of Common
Stock issuable upon conversion of the Debenture. The Debenture holder was given
registration rights for the shares of Common Stock issuable upon conversion of
the Debenture.
Special Meeting of Stockholders
The Company has scheduled a Special Meeting of Stockholders for
September 26, 1996. The matters to be considered by the stockholders at the
Special Meeting are (i) to approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of the Company's
Common Stock from 20,000,000 to 60,000,000; (ii) to approve the issuance of more
than 2,291,891 shares of Common Stock to the holders of the Company's Preferred
Stock; (iii) to approve an amendment to the Company's 1991 Stock Option Plan to
increase the number of shares issuable to 6,000,000 shares; (iv) to approve an
amendment to the Company's 1992 Non-Employee Director Stock Option Plan to
increase the number of shares issuable under the Plan to 500,000 shares and (v)
to approve an amendment to the 1992 Non-Employee Director Stock Option Plan to
increase the number of shares subject to options to be granted annually to each
outside director to 10,000 shares and to approve a one-time grant of options to
purchase 30,000 shares to each new outside director at the time he or she
becomes a member of the Board (with such 30,000 share option also to be granted
to each current outside director).
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SELLING STOCKHOLDERS
The following table sets forth the names of the Selling Stockholders,
the number of shares of Common Stock owned beneficially by each of the Selling
Stockholders as of August 26, 1996, and the number of shares which may be
offered for resale pursuant to this Prospectus. This information is based upon
information provided by the Selling Stockholders. Because the Selling
Stockholders may offer all, some or none of their Common Stock, no definitive
estimate as to the number of shares thereof that will be held by the Selling
Stockholders after such offering can be provided and the following table has
been prepared on the assumption that all shares of Common Stock offered under
this Prospectus will be sold.
Shares Beneficially Shares Beneficially
Owned Prior to Owned After
Offering(1)(2) Offering(3)
------------------- -------------------
Shares
Name Number Being Offered Number
---- --------- ------------- ------
GFL Performance Fund Ltd.(4) 1,145,945 1,145,945 0
GFL Advantage Fund Ltd. (4) 572,973 572,973 0
GFL Portfolio B(4) 572,973 572,973 0
WISRS (Malaysia) SND.BHD(5) 400,000 400,000 0
- ---------------------
(1) Unless otherwise indicated in the footnotes to this table, the persons
and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to
community property laws where applicable.
(2) As required by regulations of the Securities and Exchange Commission,
the number of shares in the table includes shares which can be
purchased within 60 days after the date of this table.
(3) Assumes the sale of all shares offered hereby.
(4) The Selling Stockholder holds shares of Preferred Stock of the Company
which are convertible into shares of Common Stock. The number of shares
included within the table is based on a conversion price of $4.754596
per share (which was the conversion price on August 26, 1996) and has
been reduced on a pro rata basis to reflect the limit on the number of
shares into which the Preferred Stock may be converted. The conversion
price is adjustable and the number of shares beneficially owned by the
stockholder will vary based upon the changes in the conversion price.
See "Risk Factors -- Preferred Stock Financing" and "Changes -
Preferred Stock."
(5) The listed Selling Stockholder has the right to convert the Debenture
into 400,000 shares of Common Stock at a conversion price of $6.9375
per share. See "Changes - Debenture Issuance."
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PLAN OF DISTRIBUTION
The Company is registering the shares of Common Stock offered by the
Selling Stockholders hereunder pursuant to contractual registration rights
contained in a registration rights agreement entered into as of May 31, 1996,
with the holders of the Preferred Stock and a registration rights agreement
entered into as of July 15, 1996 with the holder of the Debenture.
The shares of Common Stock offered hereunder may be sold from time to
time by the Selling Stockholders, or by pledgees, donees, transferees or other
successors in interest. Such sales may be made on the Nasdaq National Market or
in the over-the-counter market or otherwise at prices and on terms then
prevailing or related to the then current market price, or in negotiated
transactions. The shares of Common Stock may be sold to or through one or more
broker-dealers, acting as agent or principal in underwriting offerings, block
trades, agency placements, exchange distributions, brokerage transactions or
otherwise, or in any combination of transactions.
In connection with any transaction involving the Common Stock,
broker-dealers or others may receive from the Selling Stockholders, and may in
turn pay to other broker-dealers or others, compensation in the form of
commissions, discounts or concessions in amounts to be negotiated at the time.
Broker-dealers and any other persons participating in a distribution of the
Common Stock may be deemed to be "underwriters' within the meaning of the Act in
connection with such distribution, and any such commissions, discounts or
concessions may be deemed to be underwriting discounts or commissions under the
Act.
Any or all of the sales or other transactions involving the Common Stock
described above, whether effected by the Selling Stockholders, any broker dealer
or others, may be made pursuant to this Prospectus. In addition, any shares of
Common Stock that qualify for sale pursuant to Rule 144 under the Act may be
sold under Rule 144 rather than pursuant to this Prospectus.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, shares of Common Stock
may not be sold unless they have been registered or qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with under applicable state securities laws.
The Company and the Selling Stockholders have agreed, and hereafter may
further agree, to indemnify certain persons, including broker-dealers or others,
against certain liabilities in connection with any offering of the Common Stock,
including liabilities arising under the Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Jackson Tufts Cole & Black, LLP, San Francisco, California.
EXPERTS
The consolidated financial statements of SyQuest Technology, Inc.
appearing in the SyQuest Technology, Inc. Annual Report (Form 10-K, as amended
by Form 10-K/A) for the fiscal year ended September 30, 1995, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates except
for the registration fee.
Registration fee $ 6,785.42
Blue sky qualification fees and expenses 2,500.00
Printing and engraving expenses 1,000.00
Legal fees and expenses 25,000.00
Accounting fees and expenses 30,000.00
Miscellaneous 2,500.00
---------
Total $67,785.42
Item 15. Indemnification of Officers and Directors.
The Company has the power, pursuant to Section 102(7) of the Delaware
General Corporation Law, to limit the liability of directors of the Company for
certain breaches of fiduciary duty and, pursuant to Section 145 of the Delaware
General Corporation Law, to indemnify its officers and directors and other
persons for certain acts.
The Company's Restated Certificate of Incorporation includes the following
provisions:
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.
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.
Pursuant to Section 145 of the Delaware General Corporation Law, a
corporation generally has the power to indemnify its present and former
directors, officers, employees and agents against expenses incurred by them in
connection with any suit to which they are, or are threatened to be made, a
party by reason of their serving in such positions so long as they acted in good
faith and in a manner they
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reasonably believed to be in, or not opposed to, the best interests of a
corporation, and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful.
The Company believes that these provisions are necessary to attract and
retain qualified persons as directors and officers. These provisions do not
eliminate liability for breach of the director's duty of loyalty to the Company
or its stockholders, for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, for any transaction from
which the director derived an improper personal benefit or for any willful or
negligent payment of any unlawful dividend or any unlawful stock purchase
agreement or redemption.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act.
Article VI of the Company's Bylaws provides that the Company, by action of
the Board of Directors, shall, to the fullest extent permitted by the General
Corporation Law of Delaware, indemnify any and all persons who it shall have
power to indemnify against any and all of the expenses, liabilities or other
matters.
The Company has entered into indemnification agreements with each of its
directors and executive officers which provide for mandatory indemnification and
advancement of legal expenses so long as the individual is entitled to
indemnification as determined in the manner provided in the agreement. The
burden is on the Company to establish the individual is not so entitled.
The Company has purchased and maintains an insurance policy covering the
officers and directors of the Company with respect to certain liabilities
arising under the Act or otherwise. Under the Registration Rights Agreements the
Selling Stockholders may be obligated to indemnify the Company and its directors
and officers under certain circumstances for liabilities under the Act.
Item 16. Exhibits.
(a) Exhibits.
Exhibit
Number Description of Document
------- -----------------------
5.1 Opinion of Jackson Tufts Cole & Black, LLP.
10.1 Securities Purchase Agreement dated as of May 31, 1996 by
and among Registrant and holders of Preferred Stock.(1)
10.2 Registration Rights Agreement dated as of May 31, 1996
among Registrant and holders of Preferred Stock.(1)
10.3 6% Convertible Subordinated Debenture dated July 15, 1996.
10.4 Registration Agreement dated July 15, 1996 among
Registrant and WISRs (Malaysia) SDN.BHD.
- ----------------------
(1) Incorporated by reference from Form 8-K dated as of June 14, 1996.
-21-
<PAGE>
Exhibit
Number Description of Document
------- -----------------------
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Jackson Tufts Cole & Black, LLP. Reference is
made to Exhibit 5.1
24.1 Power of Attorney.*
- --------------------
*Previously filed
-22-
<PAGE>
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Company pursuant to provisions described in Item 15,
or otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
Provided however, that paragraphs (1) and (1)(ii) do not apply if the
information required or to be included in a post effective amendment by these
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Act, each
filing of the Company's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
-23-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Fremont, State of California, on the 28th day of
August, 1996.
SYQUEST TECHNOLOGY, INC.
By: /s/ Edwin L. Harper
-------------------------------------------
Edwin L. Harper,
President and Chief Executive Officer
(Principal Executive Officer)
-24-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Edwin L. Harper President, Chief Executive Officer August 28, 1996
- -------------------------- and Director
Edwin L. Harper (Principal Executive Officer)
/s/ John W. Luhtala Senior Vice President, Finance August 28, 1996
- -------------------------- and Chief Financial Officer
John W. Luhtala (Principal Financial and
Accounting Officer)
/s/ Edward L. Marinaro** Chairman of the Board and August 28, 1996
- -------------------------- Director
Edward L. Marinaro
Director _________, 1996
- --------------------------
C. Richard Kramlich
/s/ David I. Caplan** Director August 28, 1996
- --------------------------
David I. Caplan
/s/ John W. Luhtala
- --------------------------
**By John W. Luhtala his attorney in fact
-25-
<PAGE>
INDEX TO EXHIBITS
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------- ----------- ----------
5.1 Opinion of Jackson Tufts Cole & Black, LLP 27
10.3 Securities Purchase Agreement 28
10.4 Registration Rights Agreement 41
23.1 Consent of Ernst & Young LLP, independent auditors 48
23.2 Consent of Jackson Tufts Cole & Black, LLP. Reference 27
is made to Exhibit 5.1
- --------------------------------------------------------------------------------
-26-
EXHIBIT 5.1
OPINION OF JACKSON TUFTS COLE & BLACK, LLP
August 28, 1996
SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, CA 94538
Ladies and Gentlemen:
With reference to the Registration Statement on Form S-3 (the
"Registration Statement") to be filed by SyQuest Technology, Inc., a Delaware
corporation (the "Company"), with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, relating to 2,691,891 shares of Common
Stock, par value $.001 per share, of the Company (the "Common Stock"), it is our
opinion that the shares of Common Stock to be offered and sold pursuant to the
Registration Statement, when issued upon conversion of the Preferred Stock or
conversion of up to $2,775,000 in aggregate principal amount of the 6%
Convertible Subordinated Debenture dated July 15, 1996, each in accordance with
the respective terms thereof, will be legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as Exhibit 5.1 to the Registration Statement.
Very truly yours,
JACKSON TUFTS COLE & BLACK, LLP
EXHIBIT 10.3
SYQUEST TECHNOLOGY, INC.
47071 Bayside Parkway
Fremont, California 94538
July 15, 1996
WISRS (MALAYSIA) SDN. BHD.
891 Maude Avenue
Mountain View, California 94043
Re: 6% Convertible Subordinated Debenture
The undersigned, Syquest Technology, Inc., a Delaware corporation (herein
called the "Company"), hereby agrees with you ("you" or the "Purchaser") as
follows:
1. Debenture.
1.1. Terms. The 6% Convertible Subordinated Debenture (the "Debenture"),
which shall be substantially in the form of Appendix A attached hereto, shall be
dated July 15, 1996, with the principal amount of the Debenture to be repaid in
thirty-six (36) equal monthly installments, subject to adjustment as provided in
the Agreement between WISRS and the Company dated July 15, 1996 with the first
such payment to be made on August 15, 1996, which is one month after the date of
issuance of the Debenture. The principal payments shall be paid on each such
date to the holder of record of the Debenture on the business day immediately
preceding such principal payment date. The Debenture shall bear interest at the
rate of six percent (6%) per annum, simple interest, on the unpaid principal
balance. Accrued interest shall be payable six months from the date hereof and
each six months thereafter, and the interest to be paid on each such interest
payment date shall be paid to the holder of record of the relevant Debenture on
the business day immediately preceding such interest payment date.
1.2. Early Repayment. The provisions of Section 1.1 of this Agreement
notwithstanding, the Company shall have the right to prepay the Debenture as
provided in the Master Agreement dated the date hereof and incorporated by
reference herein (the "Master Agreement").
1.3. Debenture Issuance Procedure. In order to acquire the Debenture,
you must signify your agreement to the terms of this Agreement by executing a
copy hereof and delivering it to the Company debentures may be issued to you
under the terms of this Agreement upon the mutual agreement of you and the
Company and such Debentures shall be governed by the terms of the Agreement,
with the principal amount thereof entered on Appendix B.
1.4. Limitation on Interest. In no event shall you be entitled to
receive interest under the Debenture at an effective rate in excess of the
maximum rate permitted by applicable law. In the event that a court of competent
jurisdiction shall determine that the stated interest payable under the
Debenture, and the conversion feature of the Debenture, results in payment to
you of an effective interest rate in excess of the maximum rate permitted by
applicable law measured over the stated term of the Debenture, the stated
interest rate shall automatically be reduced to a rate which when added to
value, if any, of the conversion feature, results in an effective interest rate
under the Debenture equal to the maximum rate permitted by applicable law,
measured over the stated term thereof, and you shall immediately repay to the
Company an amount equal to all interest received by you under the Debenture in
excess of the amount of interest you would have received had the effective rate
of interest payable
<PAGE>
under the Debenture been equal to the maximum rate permitted by applicable law,
measured over the stated term of the Debenture.
2. Issuance of Debenture.
Subject to the terms and conditions hereof, the Company agrees to issue to
you, and you agree to acquire from the Company, a Debenture in the aggregate
principal amount set forth in Appendix B, as such Appendix B may be amended from
time to time upon the mutual agreement of you and the Company, as provided in
the Master Agreement.
3. Representations and Warranties of the Purchaser.
You represent and warrant to the Company that the Debenture being acquired
by you hereunder and the stock issuable to you upon conversion of the Debenture
(the "Conversion Stock") are being purchased for your own account, for
investment and not with the view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities Act
of 1933, as amended (the "Securities Act"). By reason of your knowledge and
experience in financial and business matters in general, and investments in
particular, you are able to evaluate the merits and risks of an investment in
the Debenture and Conversion Stock and you are able to bear the economic risk of
an investment in the Debenture and the Conversion Stock. You are an "accredited
investor" as that term is defined in Section 501(a) of Regulation D as
promulgated by the Securities and Exchange Commission under the Securities Act.
An "accredited investor" includes, among other persons and entities, a
corporation, partnership or similar business entity, not formed for the specific
purpose of acquiring the securities, with total assets in excess of $5,000,000.
You understand that the Debenture and Conversion Stock have not been registered
under the Securities Act by reason of their issuance (or, in the case of the
Conversion Stock, contemplated issuance) in transactions exempt from the
registration and prospectus delivery requirements of the Securities Act, and
that they must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from registration.
You further represent and warrant to the Company that you are not subject
to back up withholding under the Internal Revenue Code of 1986, as amended.
4. Restrictions on Transfer.
4.1. Transfers. None of the Debenture or the Conversion Stock shall be
sold, transferred, assigned, pledged, hypothecated or otherwise disposed of
unless and until the following events shall have occurred:
(a) Such securities are disposed of pursuant to and in conformity with
an effective registration statement filed pursuant to the Securities Act, or
pursuant to Rule 144 promulgated thereunder, and the Company shall have received
an appropriate order of the Department of Corporations of the State of
California, or of the securities authorities of such other state or states as
may be applicable; or
(b) The seller shall have delivered to the Company a written opinion
of counsel which is reasonably acceptable to the Company to the effect that the
proposed transfer is exempt from the registration requirements of the Securities
Act, the California securities laws and such provisions of the securities laws
of such other state or states as may be applicable.
4.2. Legends. Any certificate evidencing the Debenture or the Conversion
Stock shall bear the following legends:
(a) Federal Securities Laws. THE SECURITIES EVIDENCED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR
<PAGE>
OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF
1933 AND THE RULES AND REGULATIONS THEREUNDER. IF THE SECURITIES ARE TRANSFERRED
WITHOUT REGISTRATION PURSUANT TO AN EXEMPTION, AN OPINION BY COUNSEL
SATISFACTORY TO THE COMPANY SHALL BE DELIVERED IF REQUESTED BY THE COMPANY.
(b) State Securities Laws. Such legends as may be imposed pursuant to
the securities laws of any state in which the Debenture or the Conversion Stock
have been sold.
4.3. Removal of Legend. The Company shall, within 10 days after the request
of any holder of a certificate bearing the foregoing legend and the surrender of
such certificate, issue a new certificate without the legends specified in
Sections 4.2(a) and 4.2(b) above if (i) the security evidenced by such
certificate shall have been effectively registered under the Securities Act and
sold by the holder thereof in accordance with such registration or sold by the
holder thereof pursuant to Rule 144 promulgated under the Securities Act,
accompanied by an appropriate order of the applicable state securities
authorities, or (ii) such holder shall have delivered to the Company a written
legal opinion reasonably acceptable to the Company to the effect that the
restriction set forth herein is no longer required under any state or federal
law or regulation.
4.4. Compliance With Securities Laws. You acknowledge that the Debenture
and the shares of Conversion Stock to be issued upon conversion thereof are
being acquired solely for your own account and not as nominee for any other
party, and for investment, and that you will not offer, sell or otherwise
dispose of the Debenture or any shares of Conversion Stock to be issued upon
conversion thereof, except under circumstances that will not result in a
violation of the Securities Act or any state securities laws. Upon conversion of
the Debenture, you shall, if requested by the Company, confirm in writing, in a
form satisfactory to the Company, that the shares of Conversion Stock so
acquired are being acquired solely for your own account and not as a nominee for
any other party, for investment, and not with a view toward distribution or
resale and that you are an "accredited investor" as such term is defined in Rule
501(a) of Regulation D as promulgated by the Securities and Exchange Commission
under the Securities Act. If you cannot make such representations because they
would be factually incorrect, it shall be a condition to your conversion of any
Debenture that the Company receive such other representations as shall be
reasonably necessary to assure the Company that the issuance of its securities
upon conversion of any Debenture shall not violate the United States' or any
state's securities laws.
4.5. Registration Rights. As of the date of this Agreement the Company is
entering into a Registration Agreement with you pursuant to which the shares of
Conversion Stock shall be registered for resale with the Securities and Exchange
Commission.
5. Representations and Warranties of the Company.
The Company represents and warrants to you as of the date of this Agreement
that:
5.1. Organization, Standing, Etc. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, its state of incorporation, and the Company has all corporate power
and authority to carry on its business and to own its properties. The Company
has all requisite corporate power and authority to enter into this Agreement, to
issue the Debenture and the Conversion Stock and to carry out the provisions of
this Agreement.
5.2. Debenture and Conversion Stock. The Debenture, when issued and paid
for pursuant to the terms of this Agreement, will be duly authorized, validly
issued and enforceable against the Company in accordance with their terms and
will be binding obligations of the Company in accordance with their terms and
the terms of this Agreement (except as limited by bankruptcy, reorganization,
insolvency or other similar laws of general application affecting the
enforcement of creditors' rights); and
<PAGE>
the shares of Conversion Stock issuable upon conversion of the Debenture have
been reserved for issuance upon such conversion and when issued upon such
conversion will be duly authorized, validly issued and outstanding, fully paid,
nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions created by the Company, except for the restrictions on transfer
which may be imposed pursuant to Section 4 hereof.
5.3. Corporate Acts and Proceedings. The execution and delivery of this
Agreement and the Debenture, the issuance of the Debenture and Conversion Stock
and the performance of this Agreement and the Debenture by the Company have been
duly authorized by the Board of Directors of the Company, and all of the
corporate acts and proceedings required of the Company for the due and valid
authorization, execution, issuance and performance of this Agreement, the
Debenture and the Conversion Stock by the Company have been appropriately taken.
6. Covenants of the Company.
The Company will duly and punctually pay or cause to be paid the principal
amount of the Debenture and the interest thereon at the times and places and in
the manner specified in the Debenture and this Agreement. Anything in this
Agreement or the Debenture to the contrary notwithstanding the Company will pay
installments of interest and principal thereon without presentment thereof or
notation of payment of principal on such Debenture.
7. Agreement of Subordination.
The indebtedness evidenced by the Debenture, including the principal
thereof and interest thereon, shall be subordinate and subject in right of
payment, to the extent and in the manner hereinafter set forth, to the prior
payment in full of all Senior Indebtedness. "Senior Indebtedness" shall mean the
principal of, and interest and premium, if any, on all indebtedness of the
Company for all amounts owed to secured creditors of the Company which are
either (i) financial institutions or similar types of creditors or (ii) turnkey
contractors who provide manufacturing service and/or financing to the Company
before and after the date of this Agreement and all renewals, extensions and
refunding thereof or (iii) employee payment obligations.
7.1. Extent of Subordination. The term "subordinate" as used in this
Section 7 shall mean that:
(a) In the event of any liquidation, dissolution or other winding up
of the Company or any receivership, insolvency, bankruptcy, liquidation,
readjustment, reorganization or other similar proceeding relating to the Company
or its creditors or its property, all principal and interest due and premium, if
any, on all Senior Indebtedness shall first be paid in full before any payment
is made upon the indebtedness evidenced by the Debenture. If at any time while
the Debenture is outstanding there exists Senior Indebtedness, the holders of
the Debenture shall forever be subrogated to the rights of the holders of the
Senior Indebtedness.
(b) In the event and during the continuation of any default under any
indenture or other agreement securing or evidencing Senior Indebtedness, no
payment of principal or interest shall be made on the Debenture if notice of
such default, in writing or by telegram, has been given to the Company. If
notice shall be given to it pursuant to this paragraph (b), the Company shall
forthwith upon receipt of such notice send a copy thereof to the holders of the
Debenture.
(c) In the event the Debenture shall be declared due and payable
pursuant to Section 8 hereof, (i) all principal and interest due on all Senior
Indebtedness shall first be paid in full to the holders of such Senior
Indebtedness (or to a bank or trust company in good standing, organized and
doing business under the laws of the United States or the State of California,
and having a combined capital, surplus and undivided profits of not less than
$50,000,000, as trustee or agent for the holders of
<PAGE>
such Senior Indebtedness) before any payment is made upon the indebtedness
evidenced by the Debenture, and (ii) the Company will give prompt notice thereof
in writing to the holders of Senior Indebtedness.
7.2. Unconditional Obligation of the Company. The provisions of this
Section 7 are included herein solely for the purpose of defining the relative
rights of the holders of Senior Indebtedness, on the one hand, and the holders
of the Debenture, on the other hand, and nothing herein shall impair, as between
the Company and the holders of the Debenture, the obligation of the Company,
which is unconditional and absolute, to pay the holders of the Debenture the
principal and interest due thereon or prevent the holders of the Debenture from
exercising all remedies permitted by applicable law upon default thereunder,
subject to the rights, if any, under Section 7, of holders of Senior
Indebtedness in respect of cash, property or securities received upon exercise
of such remedies.
7.3. Enforceability of Subordination Provisions. No right of any present or
future holder of any Senior Indebtedness of the Company to enforce subordination
as herein provided shall at any time and in any way be prejudiced or impaired by
any act or failure to act on the part of the Company or by any act or failure to
act in good faith, by any such holder, or by any noncompliance by the Company,
with the terms, provisions and covenants of the Debenture, regardless of any
knowledge thereof any such holder may have or with which such holder may be
otherwise charged.
8. Default.
8.1. Events of Default. If any of the events of default elsewhere herein
specified or any of the following events (all of said events are herein called
"Events of Default") shall occur:
(a) If default shall be made in the due and punctual payment of any
principal of or interest on the Debenture when and as the same shall become due
and payable, and such default shall have continued for a period of ten (10) days
after written notice thereof to the Company by any holder of a Debenture;
(b) If default shall be made in the due and punctual performance of
any covenant or agreement in any Senior Indebtedness of the Company, which
default permits the holder of such Senior Indebtedness to accelerate or
otherwise require the immediate payment in full of such Senior Indebtedness and
such default shall continue for more than the period of notice and/or grace, if
any, therein specified, and shall not have been waived;
(c) If (i) default shall be made in the due and punctual performance
or observance of any material term or condition contained in this Agreement or
the Debenture (other than defaults referred to in subsection (a) or (b) of this
Section 8.1), or (ii) if any material breach of any representations or
warranties of the Company contained in this Agreement shall have occurred, and
such default or breach shall have continued for a period of 30 days after
written notice thereof to the Company by any holder of a Debenture; provided,
however, that if the default is such that it cannot, in the exercise of
reasonable diligence be corrected within such period, it shall not constitute an
Event of Default hereunder if corrective action is instituted promptly by the
Company within said period and is diligently pursued until the default is
corrected;
(d) If the Company shall (i) admit in writing its inability to pay its
debts generally as they become due, (ii) file a petition in bankruptcy or a
petition to take advantage of any insolvency act or other act for the relief or
aid of debtors, (iii) make an assignment for the benefit of its creditors, (iv)
consent to or acquiesce in the appointment of a receiver, liquidator or trustee
of itself or of the whole or any substantial part of its properties and assets,
(v) file a petition or answer seeking for itself reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
<PAGE>
the federal bankruptcy laws or any other applicable law, or (vi) on a petition
in bankruptcy filed against it, be adjudicated a bankrupt;
(e) If a court of competent jurisdiction shall enter an order,
judgment or decree appointing, without the consent or acquiescence of the
Company, as a receiver, liquidator or trustee of the Company, or of the whole or
any substantial part of its properties and assets, or approving a petition filed
against it seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the federal bankruptcy laws or
any other applicable law, and such order, judgment or decree shall remain
unvacated or not set aside or unstayed for an aggregate of 60 days (whether or
not consecutive) from the date of the entry thereto; or
(f) If, under the provisions of any other law for the relief or aid of
debtors, any court of competent jurisdiction shall assume custody or control of
the Company or the whole or any substantial part of its operations and assets
and such custody and control shall remain unterminated or unstayed for an
aggregate of sixty days (whether or not consecutive) from the date of assumption
of such custody or control:
THEN, the Debenture, together with the interest accrued thereon, shall forthwith
become due and payable.
8.2. Suits For Enforcement. In case any one or more Events of Default shall
have occurred and be continuing, unless such Events of Default shall have been
waived, the holder of a Debenture, subject to the provisions of Section 7 of
this Agreement, may proceed to protect and enforce such holder's right by suit
in equity or action at law, whether for the specific performance of any term
contained in this Agreement or in a Debenture or for an injunction against any
breach of any such term or in aid of the exercise of any power granted in this
Agreement or in a Debenture, or may proceed to enforce the payment of a
Debenture or to enforce any other legal or equitable right of the holder of a
Debenture, or may take any one or more of such actions.
8.3. Remedies Cumulative. Subject to the provisions of Section 7 of this
Agreement, no right, power or remedy conferred upon any holder of a Debenture
shall be exclusive, and each such right, power or remedy shall be cumulative and
in addition to every other right, power or remedy, whether conferred hereby or
by the Debenture or now or hereafter available at law or in equity or by statute
or otherwise.
8.4. Remedies Not Waived. No course of dealing between the Company and you
or the holder of any Debenture, and no delay in exercising any right, power or
remedy conferred hereby or by any Debenture or now or hereafter existing at law
or in equity or by statute, or otherwise, shall operate as a waiver of or
otherwise prejudice any such right, power or remedy.
9. Waivers and Amendments.
The obligations of the Company under this Agreement may be waived (either
generally or in a particular instance, either retroactively or prospectively
and/or either conditionally or absolutely) and, with the same consent, the
Company may enter into a supplementary agreement for the purpose of adding any
provision to or changing in any manner or eliminating any of the provisions of
this Agreement or of any supplemental agreement or modifying in any manner the
rights and obligations of the holders of the Debenture or Conversion Stock.
10. Notices.
All notices, requests, consents and other communications required or
permitted hereunder shall be in writing and shall be delivered or mailed first
class postage prepaid, registered or certified mail:
<PAGE>
(a) If to the holders of a Debenture or Conversion Stock, addressed to
such holder at the address as shown on the books of the Company, or at such
other address as such holder may specify by written notice to the Company; and
(b) If to the Company, at 47071 Bayside Parkway, Fremont, California
94538, Attention: Michael C. Field, Esq., or at such other address as the
Company may specify by written notice to the holders of a Debenture or
Conversion Stock; and such notices and other communications shall for all
purposes of this Agreement be treated as being effective or having been given if
delivered personally, when delivered, or if sent by mail, 48 hours after the
same has been deposited in a regularly maintained receptacle for the deposit of
United States mail, addressed and postage prepaid as aforesaid.
11. Conversion.
Subject to the terms of the Agreement between WISRS and the Company dated
July 15, 1996, the holders of Debenture shall have conversion rights as follows
(the "Conversion Rights"):
11.1. Right to Convert.
(a) Conversion Ratio. The Debenture shall be convertible, at the
option of the holder thereof, at any time on or before the close of business on
the fifth business day prior to each monthly payment due date, at the office of
the Company into such number of fully paid and nonassessable shares of Company
Common Stock as is determined by dividing the principal amount of the Debenture
being converted by the Debenture Conversion Price (as hereinafter defined). The
price at which shares of Common Stock shall be deliverable upon conversion of a
Debenture (the "Debenture Conversion Price") shall be the closing sales price of
the Company's Common Stock as quoted on the Nasdaq National Market on July 12,
1996.
(b) Conversions Permitted. A Debenture holder may convert a monthly
payment or portion of the principal amount as provided in the Master Agreement.
11.2. Mechanics of Conversion. Before any holder of a Debenture shall be
entitled to convert the same into shares of Common Stock, the holder shall
surrender the Debenture, duly endorsed, at the office of the Company, and shall
give written notice to the Company at such office that the holder elects to
convert the same and shall state therein the name or names in which the holder
wishes the certificate or certificates for shares of Common Stock to be issued.
The Company shall, as soon as practicable thereafter, issue and deliver at such
office to the holder of the Debenture a certificate or certificates for the
number of shares of Common Stock to which the holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of surrender of the Debenture to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date. In the
event of a partial conversion, a new Debenture will be issued to the Debenture
holder reflecting the remaining principal balance of the Debenture and the
remaining payment dates.
11.3. Adjustments to Conversion Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock. In the event the Company at any
time or from time to time after the date of this Agreement shall declare or pay,
without consideration, any dividend on the Common Stock payable in Common Stock
or in any right to acquire Common Stock for no consideration, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock split, reclassification or otherwise than by
payment of a dividend in Common Stock or in any right to acquire Common Stock),
or in the event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock, then the Debenture Conversion Price in effect immediately prior
to such event shall, concurrently
<PAGE>
with the effectiveness of such event, be proportionately decreased or increased
as appropriate. In the event that the Company shall declare or pay, without
consideration, any dividend on the Common Stock payable in any right to acquire
Common Stock for no consideration, then for purposes of this Section 11.3 the
Company shall be deemed to have made a dividend payable in Common Stock in an
amount of shares equal to the maximum number of shares issuable upon exercise of
such rights to acquire Common Stock.
11.4. Adjustments for Reclassification, Reorganization and Merger. If the
Common Stock issuable upon conversion of the Debenture shall be changed into the
same or a different number of shares of any other class or classes of stock of
the Company or any other company, whether by capital reorganization,
reclassification, consolidation or merger of the Company with or into another
corporation (other than a consolidation or a merger in which the Company is the
continuing corporation and which does not result in any reclassification,
capital reorganization or other change in the outstanding shares of Common
Stock), or in the case of any sale or conveyance to another corporation of the
property of the Company as, or substantially as, an entity (other than a
sale/leaseback, mortgage, or other financing transaction), or otherwise (other
than a subdivision or combination of shares provided for in Section 11.3 above),
the Conversion Rights of the Debenture then in effect shall, concurrently with
the effectiveness of such reorganization, reclassification, merger, sale of
assets or other transaction, be proportionately adjusted so that the Debenture
shall be convertible into, in lieu of the number of shares of Common Stock which
the holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the Debenture holders
upon conversion of the Debenture, immediately before the reorganization,
reclassification, merger, sale of assets or other transaction.
11.5. Issue Taxes. The Company shall pay any and all issue and other taxes
that may be payable in respect of any issue or delivery of shares of Common
Stock on conversion of the Debenture pursuant hereto; provided, however, that
the Company shall not be obligated to pay any transfer taxes resulting from any
transfer requested by any holder in connection with any such conversion.
11.6. Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
Debenture, such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all of the Debenture; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all the outstanding Debenture, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose, including,
without limitation, engaging in best efforts to obtain the requisite stockholder
approval of any necessary amendment to the Company's Certificate of
Incorporation.
11.7. Fractional Shares. No fractional share shall be issued upon the
conversion of any Debenture. If a conversion would result in the issuance of a
fraction of a share of Common Stock, the Company shall, in lieu of issuing any
fractional share, pay the holder otherwise entitled to such fraction a sum in
cash equal to the fair market value of such fraction on the date of conversion
(as determined in good faith by the Board of Directors).
11.8. Notification to Holder. After a calculation or adjustment pursuant to
this Section 11, the Company will promptly prepare a certificate of the Company
setting forth: (i) the number of shares of Common Stock purchasable upon
conversion of the Debenture after such adjustment and the adjustment in the
Debenture Conversion Price, resulting therefrom, and (ii) a brief statement of
the facts accounting
<PAGE>
for such adjustment. The Company will cause a brief summary thereof to be sent
by ordinary first class mail to each Debenture holder.
11.9. Binding Determination by Board of Directors. Any determination as to
whether an adjustment is required pursuant to this Section 11, or as to the
amount of any such adjustment, if required, shall be binding upon the Debenture
holders and the Company if made in good faith by the Board of Directors of the
Company.
11.10. No Voting or Dividend Rights. Nothing contained in this Agreement
shall be construed as conferring upon any Debenture holder hereof the right to
vote or to consent or to receive notice as a stockholder in respect of meetings
of stockholders for the election of directors of the Company or any other
matters or any rights whatsoever as a stockholder of the Company. Except for the
adjustment pursuant to Section 11.3 in the event of a stock dividend or a split
of the Common Stock, no dividends shall be payable or accrued in respect of the
Debenture or the interest represented hereby or the shares purchasable hereunder
until, and only to the extent that, the Debenture shall have been converted.
12. Redemption.
12.1. Redemption Right. The Debenture shall be subject to redemption for
the sum (the "redemption price") of the principal amount of the Debenture then
outstanding and any accrued interest thereon through the Redemption Date (as
hereinafter defined) on at least 10 days prior written notice from the Company
("Notice of Redemption) but not more than 60 days.
12.2. Notice. If the Company desires to exercise its right to redeem the
Debenture, it shall mail a Notice of Redemption to the holders of the Debenture
to be redeemed, first class, postage prepaid, not later than the tenth day
before the date fixed for redemption, to such holder at the holder's address as
shown on the books of the Company. The Notice of Redemption shall specify (i)
the redemption date ("Redemption Date"), (ii) the place where the Debenture
shall be delivered and the redemption price paid, and (iii) that the right of a
holder to exercise the Conversion Rights shall terminate at 5:00 p.m.
(California time) on the business day immediately preceding the Redemption Date.
No failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity of the proceedings for such redemption except as to a
holder (a) to whom notice was not mailed, or (b) whose notice was defective. An
affidavit of the Secretary or an Assistant Secretary of the Company that a
Notice of Redemption has been mailed shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.
12.3. Conversion Rights. Any right to convert the Debenture shall terminate
at 5:00 p.m. (California time) on the business day immediately preceding the
Redemption Date. On and after the Redemption Date, the Debenture holders shall
have no further rights except to receive, upon surrender of the Debenture, the
redemption price.
12.4. Payment. From and after the Redemption Date, the Company shall, at
the place specified in the Notice of Redemption, upon presentation and surrender
of a Debenture to the Company, redeem, deliver or cause to be delivered to or
upon the written order of such holder a sum in cash equal to the redemption
price of the Debenture. From and after the Redemption Date and upon the deposit
or setting aside by the Company of a sum sufficient to redeem the Debenture
called for in the Redemption, the Debenture shall expire and become void and all
rights thereunder, except the right to receive payment of the redemption price,
shall cease.
13. Survival of Representations and Warranties.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement, any investigation at any time made by
you or the Company or on your or its behalf, and the sale and purchase of the
Debenture and payment therefor.
<PAGE>
14. Parties In Interest.
Except as specifically provided herein, all the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and permitted assigns of the parties
hereto, and, in particular, shall inure to the benefit of and be enforceable by
the holders of the Debenture or Conversion Stock.
15. Headings and References.
The headings of the Sections and paragraphs of this Agreement have been
inserted for convenience of reference only and do not constitute a part of this
Agreement.
16. Choice of Law.
It is the intention of the parties that the laws of the State of California
applicable to residents of California shall govern the validity of this
Agreement and construction of its terms and the interpretation of the rights and
duties of the parties.
17. One Agreement: Counterparts.
This Agreement may be executed concurrently in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
If you are in agreement with the foregoing, please sign the form of acceptance
on the enclosed counterpart of this letter agreement and return the same to the
undersigned, whereupon this letter agreement shall become a binding contract
between you and the undersigned.
Very truly yours,
SYQUEST TECHNOLOGY, INC.
By: /s/ John W. Luhtala
--------------------------------
Name: John W. Luhtala
--------------------------------
Title: Sr. Vice President and CFO
--------------------------------
The foregoing Agreement is hereby
accepted as of the date first above written.
PURCHASER:
WISRS (MALAYSIA) SDN. BHD.
By: /s/ Lawrence Tan
------------------------------------
Name: Lawrence Tan
----------------------------------
<PAGE>
Title: Vice President, on behalf of WISRS
pursuant to the power of attorney
Appendices
A Convertible Subordinated Debenture
B Amount of Debenture Issued Under Agreement
<PAGE>
SYQUEST TECHNOLOGY, INC.
a Delaware corporation
Convertible Subordinated Debenture (Non-Negotiable)
No. R.___________________________ $7,678,578.65
Dated: July 15, 1996
1. Principal and Interest.
Except as provided in Section 3 below, Syquest Technology, Inc., a Delaware
corporation (the "Company"), for value received, hereby promises to pay to WISRS
(Malaysia) Sdn. Dhd ("WISRS"), or registered assigns, the sum of $7,678,578.65
Dollars at the office of the Company in the City of Fremont, California and to
pay interest on the unpaid balance thereof at the rate of 6% per annum, simple
interest, from the date hereof. The principal balance of this debenture
("Debenture") shall be repaid in thirty-six (36) equal monthly installments,
with the first such payment to be made on August 15, 1996, the date which is one
month after the date of this Debenture. Accrued interest on this Debenture shall
be due and payable six months from the date hereof and each six months
thereafter. Principal and interest payments shall be made to the person in whose
name this Debenture is registered at the close of business on the regular record
date for such installment; such person shall be WISRS or an affiliate of WISRS.
Such regular record date shall be the business day immediately preceding the
payment date.
2. Subordination.
The payment of the principal and interest under this Debenture is
subordinated to the rights of the holders of Senior Indebtedness as such term is
provided in the Debenture Agreement.
3. Convertible.
At the option of the holder, this Debenture is convertible into shares of
Common Stock of the Company as provided in the Debenture Agreement and the
Agreement dated as of the date hereof.
4. Redeemable.
This Debenture is redeemable by the Company as provided in the Debenture
Agreement.
5. Transferable.
This Debenture may be transferred to any affiliate of WISRS.
This Debenture has been executed and delivered by the Company pursuant to
that certain Agreement, dated July 15, 1996, among the Company, its subsidiary
and WISRS. The Company herein agrees with the holder of this Debenture that it
will perform and discharge each of its covenants and agreements contained in
said Agreement as from time to time amended and supplemented, the provisions of
which Agreement are hereby incorporated herein by reference with the effect as
if they were set forth in full herein.
SYQUEST TECHNOLOGY, INC.,
a Delaware corporation
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
<PAGE>
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER
THE SECURITIES ACT OF 1933 AND THE RULES AND REGULATIONS THEREUNDER. IF THE
SECURITIES ARE TRANSFERRED WITHOUT REGISTRATION PURSUANT TO AN EXEMPTION, AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY SHALL BE DELIVERED IF REQUESTED
BY THE COMPANY.
<PAGE>
Appendix B
Amount of Debenture Issued Under Agreement
Debenture Face Amount of
Number Debentures Date of Issuance
- --------- -------------- ----------------
$7,678,578.65
EXHIBIT 10.4
REGISTRATION AGREEMENT
THIS REGISTRATION AGREEMENT (this "Agreement") is made as of the 15th
day of July, 1996 by and between SYQUEST TECHNOLOGY, INC., a Delaware
corporation ("SyQuest"), and WISRS (MALAYSIA) SDN. BHD., a Malaysia limited
liability company ("WISRS").
A. On the date hereof, SyQuest is issuing to WISRS a 6% convertible
subordinated debenture (the "Debenture") which shall be convertible in part into
shares of SyQuest Common Stock (the "Shares"); as contemplated by that certain
Agreement, dated as of the date hereof, between SyQuest, SyQuest Technology,
International and WISRS (the "Agreement").
B. To induce WISRS to enter into the Agreement, SyQuest has undertaken
to register for resale under the Securities Act of 1933, as amended, and the
rules and regulations thereunder (collectively, the "Securities Act"), the
Shares that may be acquired by WISRS. This Agreement sets forth the terms and
conditions of such undertaking.
SyQuest and WISRS covenant and agree as follows:
1. Definitions. For purposes of this Agreement:
(a) The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement or
statements or similar documents in compliance with the Securities Act and
pursuant to Rule 415 under the Securities 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 or document by the
Securities and Exchange Commission (the "SEC"); and
(b) The term "Registrable Securities" means (i) the Shares, and
(ii) any Common Stock of SyQuest issued as (or issuable upon the conversion or
exercise of any convertible security, warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of such Shares.
2. Effective Registration. Not later than ninety (90) days after the
date hereof, SyQuest shall have an effective registration statement covering all
Registrable Securities under the Securities Act or shall be pursuing
effectiveness of such registration statement diligently and in good faith in the
opinion of WISRS and SyQuest.
3. Obligations of SyQuest. In connection with the registration of the
Registrable Securities, SyQuest shall, as expeditiously as reasonably possible:
(a) As soon as possible and in no event later than thirty (30) days
after the date hereof use its best efforts to amend its registration statement
filed with the Securities Exchange Commission on July 2, 1996 or if such
amendment cannot be made, file a new registration statement within such thirty
(30) day period (in either case, the "Registration Statement") to add the
Registrable Securities and use its best efforts to cause the Registration
Statement to become effective as soon as practicable after the date of filing
and keep the Registration Statement effective pursuant to Rule 415 at all times
until the earlier of (i) the second anniversary of the date hereof, (ii) when
all of the Shares have been sold or (iii) the date of repayment or satisfaction
in full of the Debenture (the "Expiration Date"), which Registration Statement
(including any amendments or supplements thereto and any prospectuses
<PAGE>
contained and any documents incorporated by reference 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 make the statements therein, in
light of the circumstances in which they were made, not misleading.
(b) 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, complete and accurate at
all times until the Expiration Date and comply with the provisions of the
Securities Act and with the Securities Exchange Act of 1934, as amended (the
"1934 Act") with respect to the disposition of all securities covered by the
Registration Statement.
(c) Furnish promptly to WISRS such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as WISRS may reasonably request in order to facilitate
the disposition of Registrable Securities.
(d) If exemptions are not available, use its best efforts to: (i)
register and qualify the securities covered by the Registration Statement under
the securities or Blue Sky laws of California and up to nine other states of the
United States specified by WISRS; (ii) prepare and file in all such
jurisdictions such amendments (including post effective amendments) and
supplements and to take such other actions as may be necessary to maintain such
registration and qualification in effect at all times until the Expiration Date;
and (iii) take all other actions necessary or advisable to enable the
disposition of such securities in all such states, provided that SyQuest shall
not be required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any such state
or jurisdiction or to provide any undertaking or make any change in its charter
or bylaws which the Board of Directors of SyQuest determines in good faith to be
contrary to the best interest of SyQuest and its stockholders.
(e) In the event WISRS selects underwriters for the offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the underwriters of such offering. WISRS shall also enter
into and perform the customary obligations of a selling shareholder under any
such agreement.
(f) Notify WISRS at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then in effect
(including the documents incorporated by reference therein), includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing. SyQuest shall promptly amend or
supplement the Registration Statement to correct any such untrue statement or
omission.
(g) Notify WISRS of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose, or the initiation of any inquiry or
investigation by the SEC, or the taking of any similar action by the securities
regulators of any state or other jurisdiction. SyQuest will make every
reasonable effort to prevent the issuance of any stop order or the taking of any
similar action and, if any stop order is issued or similar action is taken, to
obtain the lifting thereof at the earliest possible time.
(h) Permit counsel for WISRS to review the Registration Statement
and all amendments and supplements thereto a reasonable period of time prior to
their filing with the SEC and state authorities, and not file any document in a
form to which such counsel reasonably objects.
<PAGE>
(i) In the event an underwriter is utilized, at the request of
WISRS, furnish on the date that any Registrable Securities are first delivered
to the underwriters for sale in connection with a registration pursuant to this
Agreement (i) an opinion, dated such date, of the counsel representing SyQuest
for the purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to the
underwriters and (ii) a letter dated such date, from the independent certified
public accountants of SyQuest, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters.
(j) Make available for inspection by WISRS, any underwriters
participating in the offering and the counsel, accountants or other agents
retained by WISRS or any such underwriter, all pertinent financial and other
records, corporate documents and properties of SyQuest, and cause SyQuest's
officers, directors and employees to supply all information reasonably requested
by WISRS or any such underwriters in connection with the registration.
(k) If the Common Stock is then listed on a national securities
exchange or reported on the National Association of Securities Dealers Automated
Quotation System ("Nasdaq"), use reasonable efforts to cause the Registrable
Securities to be listed on such exchange or reported on Nasdaq. If the Common
Stock is not then listed on a national securities exchange or reported on
Nasdaq, use reasonable efforts to facilitate the reporting of the Common Stock
on Nasdaq.
(l) Take all actions reasonably necessary to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be sold pursuant to the Registration
Statement and to enable such certificates to be in such denominations and
registered in such names as WISRS or any underwriters may reasonably request.
(m) Take other reasonable actions necessary to expedite and
facilitate disposition by WISRS of the Registrable Securities pursuant to the
Registration Statement.
4. Furnish Information. It shall be a condition precedent to the
obligations of SyQuest to take any action pursuant to this Agreement that WISRS
shall furnish to SyQuest at such time as SyQuest shall reasonably request such
information regarding itself, the Registrable Securities, and the intended
method of disposition of such securities as shall be reasonably required to
effect the registration of the Registrable Securities and shall execute such
documents in connection with such registration as SyQuest may reasonably request
and as may be required by applicable law. All such information furnished to
SyQuest by WISRS 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 make
the statements therein, in light of the circumstances in which they were made,
not misleading.
5. Expenses of Registration. All expenses other than underwriting
discounts and commissions incurred in connection with registration, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing, filing and qualification fees, printers and accounting
fees, and the fees and disbursements of counsel for SyQuest shall be borne by
SyQuest.
6. Indemnification.
(a) To the extent permitted by law, SyQuest will indemnify and hold
harmless WISRS, each person, if any, who controls WISRS, any underwriter (as
defined in the Securities Act) for WISRS and each person, if any, who controls
any such underwriter within the meaning of the 1934 Act, against any losses,
claims, damages, expenses or liabilities (joint or several) to which any of them
may become subject under the Securities Act, the 1934 Act or otherwise, insofar
as such losses, claims, damages, expenses or liabilities (or actions or
proceedings, whether commenced or threatened, in respect
<PAGE>
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto or any documents incorporated
by reference therein; (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
or (iii) any violation or alleged violation by SyQuest of the Securities Act,
the 1934 Act or any state securities law; and SyQuest will reimburse WISRS, such
underwriters or such controlling persons, promptly as such expenses are
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that the indemnity agreement
contained in this subsection 6(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, action or proceeding if such
settlement is effected without the consent of SyQuest, which consent shall not
be unreasonably withheld, nor shall SyQuest be liable in any such case for any
such loss, claim, damage, liability, action or proceeding to the extent that it
arises out of or is based upon or occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by WISRS or any such officer, director, underwriter or controlling
person of WISRS. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of WISRS or any such officer,
director, underwriter or controlling person.
(b) To the extent permitted by law, WISRS will indemnify and hold
harmless SyQuest, each of its directors, each of its officers who have signed
the Registration Statement and each person, if any, who controls SyQuest within
the meaning of the Securities Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any
person who controls such holder or underwriter, against any losses, claims,
damages, expenses or liabilities (joint or several) to which any of them may
become subject, under the Securities Act, the 1934 Act or otherwise, insofar as
such losses, claims, damages, expenses or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon or occurs in reliance upon and in conformity with written
information furnished by WISRS expressly for use in connection with such
registration; and WISRS will reimburse promptly, as such expenses are incurred,
any legal or other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability, action
or proceeding; provided, however, that the indemnity agreement contained in this
subsection 6(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, action or proceeding if such settlement is effected
without the consent of WISRS, which consent shall not be unreasonably withheld;
and provided further, that WISRS shall be liable under this paragraph for only
that amount of losses, claims, damages and liabilities as does not exceed the
proceeds to WISRS as a result of the sale of Registrable Securities pursuant to
such registration. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of SyQuest or any such
officer, director, underwriter or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be 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 parties; provided, however, that an 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
for the indemnified party, representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests
<PAGE>
between such indemnified party and any other party represented by such counsel
in such proceeding. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 6 only to the extent prejudicial to its ability to defend such
action, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 6. 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, promptly as such expense, loss, damage
or liability is incurred.
(d) 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 this Section 6 to the extent permitted by law, provided 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 this
Section 6, (ii) no shareholder selling securities under the Regulation Statement
guilty of fraudulent misrepresentation (within the meaning of section 11(f) of
the Securities Act) shall be entitled to contribution from any indemnifying
party 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.
7. Assignment of Registration Rights. The rights to have SyQuest
register Registrable Securities pursuant to this Agreement may be assigned by
WISRS to a transferee or assignee of all the Registrable Securities held by
WISRS provided (i) SyQuest is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned (ii) the transfer occurs prior to filing the Registration
Statement; and (iii) such transferee or assignee confirms the representations
and warranties of WISRS in the Settlement Agreement and the Debenture and agrees
to be bound by the terms thereof and provided further, that such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act. The term WISRS as used in this Agreement shall include
permitted assignees.
8. Amendment of Registration Rights. Any provision 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 SyQuest and WISRS. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon WISRS and SyQuest.
9. Termination of Registration Rights. SyQuest's obligations pursuant to
Sections 2 and 3 of this Agreement shall terminate on the Expiration Date.
10. Miscellaneous.
(a) All notices hereunder shall be in writing and shall be given to
the respective parties by U.S. mail, personal delivery, or facsimile
transmission to their respective addresses as follows:
If to SyQuest: SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, California 94538
Attention: Michael C. Field, Esq.
Telecopier: (510) 226-4100
<PAGE>
If to WISRS: c/o Patrick Lam
WISRS
891 Maude Avenue
Mountain View, CA 94043
Telecopier: (415) 964-7077
All such notices shall be deemed effective upon receipt.
(b) 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,
will not operate as a waiver thereof. No waiver will be effective unless and
until it is in writing and signed by the party giving the waiver.
(c) This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of California as such laws are
applied by California courts to agreements entered into and to be performed
entirely in California by and between residents of California. 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 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.
(d) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof.
(e) This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
(f) Attorney Fees. In the event of litigation or other proceeding
in connection with or related to this Agreement, the prevailing party in such
litigation or proceeding shall be entitled to reimbursement from the opposing
party of all reasonable expenses, including without limitation reasonable
attorney fees and expenses of investigation in connection with such litigation
or proceeding.
SYQUEST TECHNOLOGY, INC.
By /s/ John W. Luhtala
--------------------------------
Title Sr. Vice President and CFO
--------------------------------
<PAGE>
WISRS (MALAYSIA) SDN. BHD.
By /s/ Lawrence Tan
--------------------------------------
Title Vice President, On behalf of WISRS
-----------------------------------
pursuant to the power of attorney
-----------------------------------
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-7369) and
related Prospectus of SyQuest Technology, Inc. for the registration of 2,691,891
shares of its common stock and to the incorporation by reference therein of our
report dated October 26, 1995 (except for Note 4, as to which the date is
December 27, 1995 and Note 12, as to which the date is June 26, 1996), with
respect to the consolidated financial statements and schedule of SyQuest
Technology, Inc. included in its Annual Report (Form 10-K , as amended by Form
10-K/A) for the year ended September 30, 1995, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
August 28, 1996
